Regional Management Corp. Announces Fourth Quarter 2016 Results

- Net income of $6.5 million; diluted earnings per share of $0.55 -

- Finance receivable growth of 14.2% from the prior year -

- Portfolio grows to $717.8 million as of December 31, 2016 -

GREENVILLE, S.C.--()--Regional Management Corp. (NYSE:RM), a diversified consumer finance company, today announced results for the fourth quarter and full year ended December 31, 2016.

“Total finance receivables increased 14% from the prior year, helping us to generate 16% year-over-year growth in our interest and fee income. We also were successful in the quarter keeping our overall operating expenses stable with the prior-year period.”

Fourth Quarter 2016 Highlights

  • Net income for the fourth quarter of 2016 was $6.5 million, a decline of 12.2% from the prior-year period, while non-GAAP net income was $6.6 million, an increase of 4.8% from the prior-year period. Non-GAAP net income excludes $0.1 million of after-tax non-operating system implementation costs in the fourth quarters of 2016 and 2015, as well as $1.2 million in after-tax proceeds from the bulk sale of charged-off loans (“bulk sale”) in the fourth quarter of 2015. Diluted earnings per share for the fourth quarter of 2016 were $0.55, and on a non-GAAP basis, diluted earnings per share were $0.56.
  • Total finance receivables as of December 31, 2016 were $717.8 million, an increase of 14.2%, or $89.3 million, from the prior year and up 3.1%, or $21.6 million, sequentially:
    • Seventh consecutive quarter that total finance receivables have increased at least 10% over the prior-year period.
    • Large loan finance receivables of $235.3 million increased $88.8 million, or 60.6%, from the prior-year period and now represent nearly 33% of the total loan portfolio.
  • Total revenue for the fourth quarter of 2016 was $64.0 million, a $7.3 million, or 12.9%, increase from the prior-year period, and a $1.5 million, or 2.5%, increase sequentially.
    • Strong interest and fee income increase of 16.2% driven by 14.2% increase in receivables.
    • Overall yield declined 70 basis points on a year-over-year basis and 80 basis points sequentially. The yield declines are primarily due to higher insurance claims, partially from the impact of Hurricane Matthew.
  • Net credit losses for the fourth quarter of 2016 were $17.3 million, an increase of $5.5 million versus the prior-year period (an increase of $3.5 million excluding the bulk sale in the fourth quarter of 2015). Annualized net credit losses as a percentage of finance receivables were 9.8%, up 210 basis points compared to the prior-year period (up 80 basis points excluding the bulk sale).
  • Total delinquencies as a percentage of total finance receivables as of December 31, 2016 were 18.1%, a slight decline from 18.2% as of September 30, 2016 and an improvement from 20.3% as of December 31, 2015.
    • 30+ day contractual delinquencies were 7.4%, an increase sequentially from 7.1% as of September 30, 2016 – consistent with the seasonality of Regional Management’s business – and up from 7.2% as of December 31, 2015.

“We completed 2016 with another strong quarterly performance from our core small and large loan portfolios,” said Peter R. Knitzer, Chief Executive Officer of Regional Management Corp. “Total finance receivables increased 14% from the prior year, helping us to generate 16% year-over-year growth in our interest and fee income. We also were successful in the quarter keeping our overall operating expenses stable with the prior-year period.”

“The combination of strong growth, a corresponding build of allowance, and high late stage delinquencies at the end of the third quarter resulted in an increased provision in the fourth quarter versus the prior-year period,” added Mr. Knitzer. “While early stage delinquencies were stable at the end of the fourth quarter, our late stage delinquencies remained elevated, and as a result, we expect net credit losses in the first quarter of 2017 to be slightly higher sequentially compared to the fourth quarter of 2016. To address this, we are eliminating lending to specific segments that roll to losses at higher rates.”

“We continue to make progress in converting to our new operating platform,” continued Mr. Knitzer. “The NLS system is already providing richer, more actionable information on our customers, as well as improved workflows in our sales and servicing processes. After successfully completing three states, we assessed our plans and determined to build enhanced functionality into the system prior to converting additional states. As a result, we will spend the first quarter completing this build and plan to resume conversions in the second quarter. While this will cause us to move back our timeline to complete the conversion to the end of the year, we believe that it is important to build these better capabilities earlier on to improve the customer experience and contribute to our long-term success.”

“Finally, we continue to see the opportunity in the new year to further grow our receivables and bottom line through our current branch network, as we did in 2016. After successful testing in the fourth quarter, we are ready to roll out improved targeting and segmentation in our direct mail campaigns to drive traffic to our existing branches. We also expect to expand our branch network in 2017 in Virginia. We believe this hybrid approach of de novo expansion, coupled with a focus on growth within our existing footprint, will help to drive long-term value for the Company,” concluded Mr. Knitzer.

Fourth Quarter 2016 Results

Finance receivables outstanding at December 31, 2016 were $717.8 million, a 14.2% increase from $628.4 million in the prior year. Finance receivables increased primarily due to an increase in both the small and large loan portfolios resulting from Regional Management’s marketing efforts and the net addition of 8 branches since December 31, 2015. On a sequential basis, finance receivables increased by $21.6 million from the third quarter.

For the fourth quarter ended December 31, 2016, the Company reported total revenue of $64.0 million, a 12.9% increase from $56.7 million in the prior-year period. Interest and fee income for the fourth quarter of 2016 was $59.7 million, a 16.2% increase from $51.3 million in the prior-year period, primarily due to an increase in the portfolios of both small and large loans compared to the prior-year period. Insurance income, net for the fourth quarter of 2016 was $1.6 million, a decline of $1.3 million from the prior-year period due primarily to increased claims expense (non-filing claims, life claims, and property claims were all elevated in the quarter, with most property claims stemming from Hurricane Matthew). Other income for the fourth quarter of 2016 was $2.8 million, a 10.7% increase from the prior-year period and consistent with portfolio growth.

The provision for credit losses in the fourth quarter of 2016 was $19.4 million versus $11.4 million in the prior-year period. Excluding the gain on bulk sale, the provision for credit losses in the fourth quarter of 2015 was $13.4 million. The $6.0 million increase in the provision for credit losses, excluding the bulk sale, was due to an increase in net credit losses of $3.5 million and an increase in the estimated allowance for credit losses of $2.5 million.

Net credit losses were $17.3 million in the fourth quarter of 2016 versus $11.8 million in the prior-year period ($13.7 million excluding the bulk sale). Annualized net credit losses as a percentage of average finance receivables in the fourth quarter of 2016 were 9.8%, an increase from 7.7% in the prior-year period (9.0% excluding the bulk sale). In the fourth quarter of 2015, the Company released $0.3 million of allowance for credit losses compared to building allowance of $2.2 million in the fourth quarter of 2016.

General and administrative expenses for the fourth quarter of 2016 were $28.8 million, an increase of 1.0%, or $0.3 million, from the prior-year period. Home office expenses increased $0.9 million from the prior-year period, while operations expenses in the fourth quarter of 2016 improved $0.7 million from the prior-year period. Sequentially, general and administrative expenses declined $1.6 million, or 5.3%, from the third quarter of 2016. Loan system conversion costs in both the fourth quarters of 2016 and 2015 were $0.2 million.

GAAP net income for the fourth quarter of 2016 was $6.5 million, a decrease from $7.4 million in the prior-year period. Excluding the aforementioned non-operating expenses in the fourth quarters of 2016 and 2015, as well as the bulk sale in the fourth quarter of 2015, non-GAAP net income in the fourth quarter of 2016 would have been $6.6 million versus non-GAAP net income of $6.3 million in the prior-year period. GAAP diluted earnings per share for the fourth quarter of 2016 were $0.55, a slight reduction from $0.56 in the prior-year period. Non-GAAP diluted earnings per share for the fourth quarter of 2016 were $0.56, an increase from $0.48 in the prior-year period. For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measure, please refer to the reconciliation tables accompanying this release.

Full Year 2016 Results

For the full year ended December 31, 2016, the Company reported total revenue of $240.5 million, a 10.7% increase from $217.3 million in the prior year. Interest and fee income for the full year ended December 31, 2016 was $221.0 million, a 12.9% increase from $195.8 million in the prior-year period, primarily due to a significant increase in the portfolios of both small and large loans compared to the prior year. Insurance income, net for the full year ended December 31, 2016 was $9.5 million, an 18.9% decrease from the prior year, primarily attributable to increased claims expense. Other income for the full year ended December 31, 2016 was $10.1 million, an increase of 2.4% from the prior year.

The provision for credit losses for the full year ended December 31, 2016 was $63.0 million versus $47.3 million in the prior year. Excluding the gain on bulk sale, the provision for credit losses for 2015 was $49.3 million. The $13.7 million increase in the provision for credit losses, excluding the bulk sale, was due to an increase in net credit losses of $6.8 million and an increase in the estimate allowance of $6.9 million, primarily due to portfolio growth.

Net credit losses for the full year ended December 31, 2016 were $59.2 million compared to $50.4 million in the prior year ($52.4 million excluding the bulk sale). Net credit losses as a percentage of average finance receivables for the full year ended December 31, 2016 was 9.0%, a slight increase from 8.8% in the prior year (and a slight decrease from 9.1% excluding the bulk sale). In 2015, the Company released $3.1 million of allowance compared to an increase in the estimated allowance of $3.8 million in 2016.

General and administrative expenses for the full year ended December 31, 2016 were $118.6 million, an increase of $3.0 million, or 2.6%, from $115.6 million in the prior year. The full year 2016 results included $1.6 million in loan system conversion costs versus $0.8 million in 2015. Full year 2015 results also included $1.5 million in non-operating expenses associated with a CEO stock grant.

GAAP net income for the full year ended December 31, 2016 was $24.0 million, a 2.9% increase compared to GAAP net income of $23.4 million in the prior year, and diluted earnings per share for the full year ended December 31, 2016 were $1.99 compared to $1.79 in the prior year. Excluding the aforementioned non-operating expenses and the bulk sale, non-GAAP net income for the full year ended December 31, 2016 totaled $25.0 million, a 4.6% increase compared to non-GAAP net income of $23.9 million in the prior year, and non-GAAP diluted earnings per share were $2.07, compared to $1.83 in the prior year.

2017 De Novo Outlook

As of December 31, 2016, the Company’s branch network consisted of 339 locations. For the full year 2017, the Company plans to generate receivable growth through improved efficiency and marketing efforts at its current branch network, as well as focus its efforts on fully implementing its new loan management system. As a result, the Company plans to open between 10 and 15 de novo branches during 2017.

Liquidity and Capital Resources

As of December 31, 2016, the Company had finance receivables of $717.8 million and outstanding long-term debt of $491.7 million (consisting of $452.8 million of long-term debt on its $585.0 million senior revolving credit facility and $38.8 million of long-term debt on its $75.7 million amortizing loan).

Conference Call Information

Regional Management Corp. will host a conference call and webcast today at 5:00 PM ET to discuss these results.

The dial-in number for the conference call is (855) 590-2959 (toll-free) or (503) 343-6651 (direct), passcode 59594761. Please dial the number 10 minutes prior to the scheduled start time.

*** A supplemental slide presentation will be made available on Regional Management’s website prior to the earnings call at www.RegionalManagement.com. ***

In addition, a live webcast of the conference call will also be available on Regional Management’s website at www.RegionalManagement.com.

A replay will be available following the end of the call through Tuesday, February 14, 2017, by telephone at (855) 859-2056 (toll-free) or (404) 537-3406 (direct), passcode 59594761. A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which represent Regional Management Corp.’s expectations or beliefs concerning future events. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following: changes in general economic conditions, including levels of unemployment and bankruptcies; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; changes in interest rates; the risk that Regional Management’s existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; the timing and amount of revenues that may be recognized by Regional Management; changes in current revenue and expense trends (including trends affecting delinquencies and credit losses); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management); changes in the competitive environment in which Regional Management operates or in the demand for its products; risks related to acquisitions; changes in operating and administrative expenses; and the departure, transition, or replacement of key personnel. Such factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not update the information contained in this press release beyond the publication date, except to the extent required by law, and is not responsible for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. Regional Management began operations in 1987 with four branches in South Carolina and has since expanded its branch network across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma, New Mexico, Georgia and Virginia. Each of its loan products is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Management’s loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, retailers and its consumer website. For more information, please visit www.RegionalManagement.com.

                       

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

 
    Better (Worse) Better (Worse)
4Q’16 4Q’15   $       % YTD’16 YTD’15  

$

      %
Revenue
Interest and fee income $ 59,654 $ 51,320 $ 8,334 16.2 % $ 220,963 $ 195,794 $ 25,169 12.9 %
Insurance income, net 1,570 2,838 (1,268 ) (44.7

)%

9,456 11,654 (2,198 ) (18.9

)%

Other income   2,797     2,527     270   10.7 %   10,099     9,858     241   2.4 %
 
Total revenue   64,021     56,685     7,336   12.9 %   240,518     217,306     23,212   10.7 %
 
Expenses
Provision for credit losses 19,427 11,449 (7,978 )

(69.7

)%

63,014 47,348 (15,666 ) (33.1

)%

 
Personnel 16,998 17,283 285 1.6 % 68,979 69,247 268 0.4 %
Occupancy 5,251 4,522 (729 ) (16.1

)%

20,059 17,313 (2,746 ) (15.9

)%

Marketing 1,474 1,403 (71 ) (5.1

)%

6,837 7,017 180 2.6 %
Other   5,103     5,342     239   4.5 %   22,757     22,021     (736 ) (3.3

)%

 
Total general and administrative 28,826 28,550 (276 ) (1.0

)%

118,632 115,598 (3,034 ) (2.6

)%

 
Interest expense   5,287     4,350     (937 ) (21.5

)%

  19,924     16,221     (3,703 ) (22.8

)%

 
Income before income taxes 10,481 12,336 (1,855 ) (15.0

)%

38,948 38,139 809 2.1 %
Income taxes   4,014     4,969     955   19.2 %   14,917     14,774     (143 ) (1.0

)%

 
Net income $ 6,467   $ 7,367   $ (900 ) (12.2

)%

$ 24,031   $ 23,365   $ 666   2.9 %
 
Net income per common share:
Basic $ 0.57   $ 0.57   $   0.0 % $ 2.03   $ 1.82   $ 0.21   11.5 %
 
Diluted $ 0.55   $ 0.56   $ (0.01 ) (1.8

)%

$ 1.99   $ 1.79   $ 0.20   11.2 %
 
Weighted-average shares outstanding:
Basic   11,408     12,891     1,483   11.5 %   11,824     12,849     1,025   8.0 %
 
Diluted   11,763     13,105     1,342   10.2 %   12,085     13,074     989   7.6 %
 
 
Return on average assets (annualized)   3.7 %   4.9 %   3.7 %   4.2 %
 
Return on average equity (annualized)   12.7 %   14.6 %   12.0 %   12.2 %
 
           

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)

 
Increase (Decrease)
4Q’16 4Q’15   $       %
Assets
Cash $ 4,446 $ 7,654 $ (3,208 ) (41.9

)%

Gross finance receivables 916,954 785,042 131,912 16.8 %
Unearned finance charges and insurance premiums   (199,179 )   (156,598 )   (42,581 ) (27.2

)%

 
Finance receivables 717,775 628,444 89,331 14.2 %
Allowance for credit losses   (41,250 )   (37,452 )   (3,798 ) (10.1

)%

 
Net finance receivables 676,525 590,992 85,533 14.5 %
Property and equipment 11,693 9,049 2,644 29.2 %
Restricted cash 8,297 10,506 (2,209 ) (21.0

)%

Intangible assets 6,448 3,023 3,425 113.3 %
Deferred tax asset 33 1,982 (1,949 ) (98.3

)%

Other assets   4,782     3,167     1,615   51.0 %
 
Total assets $ 712,224   $ 626,373   $ 85,851   13.7 %
 
Liabilities and Stockholders’ Equity
Liabilities:
Long-term debt $ 491,678 $ 411,177 $ 80,501 19.6 %
Unamortized debt issuance costs   (2,152 )   (2,692 )   540   20.1 %
 
Net long-term debt 489,526 408,485 81,041 19.8 %
Accounts payable and accrued expenses   15,223     12,661     2,562   20.2 %
 
Total liabilities 504,749 421,146 83,603 19.9 %
Commitments and Contingencies
Stockholders’ equity:

Preferred stock, $0.10 par value, 100,000 shares authorized, no shares
  issued or outstanding

Common stock, $0.10 par value, 1,000,000 shares authorized, 12,996
  shares issued and 11,450 shares outstanding at December 31, 2016
  and 12,914 shares issued and outstanding at December 31, 2015

1,300 1,291 9 0.7 %
Additional paid-in-capital 92,432 89,178 3,254 3.6 %
Retained earnings 138,789 114,758 24,031 20.9 %
Treasury stock, 1,546 shares at December 31, 2016   (25,046 )       (25,046 ) (100.0

)%

 
Total stockholders’ equity   207,475     205,227     2,248   1.1 %
 
Total liabilities and stockholders’ equity $ 712,224   $ 626,373   $ 85,851   13.7 %
 
   

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands, except per share amounts)

 
Averages and Yields
4Q’16     3Q’16     4Q’15
Average Finance
Receivables
    Average Yield

(Annualized)

Average Finance
Receivables
    Average Yield

(Annualized)

Average Finance
Receivables
    Average Yield

(Annualized)

Small loans $ 354,276 42.6 % $ 337,674 43.3 % $ 332,378 42.2 %
Large loans 225,786 29.0 % 206,437 29.0 % 133,457 28.0 %
Automobile loans 93,866 17.0 % 99,113 17.8 % 122,049 18.4 %
Retail loans   33,013 19.0 %   31,317 19.4 %   26,453 19.4 %
 
Total interest and fee yield $ 706,941 33.8 % $ 674,541 34.0 % $ 614,337 33.4 %
 
Total revenue yield $ 706,941 36.2 % $ 674,541 37.0 % $ 614,337 36.9 %
 
   
Components of Increase in Interest and Fee Income

4Q’16 Compared to 4Q’15

Increase (Decrease)

Volume     Rate     Net
Small loans $ 2,330 $ 346 $ 2,676
Large loans 6,676 326 7,002
Automobile loans (1,224 ) (401 ) (1,625 )
Retail loans   312     (31 )   281  
 
Total increase in interest and fee income $ 8,094   $ 240   $ 8,334  
 
   
Net Loans Originated (1)
4Q’16     3Q’16     QoQ $

Inc (Dec)

    QoQ %

Inc (Dec)

    4Q’15     YoY $

Inc (Dec)

    YoY %

Inc (Dec)

Small loans $ 152,868 $ 160,642 $ (7,774 ) (4.8

)%

$ 164,304 $ (11,436 ) (7.0

)%

Large loans 67,273 62,846 4,427 7.0 % 52,686 14,587 27.7 %
Automobile loans 8,099 11,099 (3,000 ) (27.0

)%

7,563 536 7.1 %
Retail loans   8,043   9,258   (1,215 ) (13.1

)%

  8,978   (935 ) (10.4

)%

 
Total net loans originated $ 236,283 $ 243,845 $ (7,562 ) (3.1

)%

$ 233,531 $ 2,752   1.2 %
 
      (1) Represents the balance of loan origination and refinancing net of unearned finance charges
 
   
Other Key Metrics
4Q’16     3Q’16     4Q’15
Net credit losses $ 17,277 $ 13,510 $ 11,783
Percentage of average finance receivables (annualized) 9.8 % 8.0 % 7.7 %
Bulk sale           1,964  
 
Net credit losses (excluding bulk sale) $ 17,277 $ 13,510 $ 13,747
Percentage of average finance receivables (annualized) 9.8 % 8.0 % 9.0 %
 
Provision for credit losses $ 19,427 $ 16,410 $ 11,449
Bulk sale           1,964  
 
Provision for credit losses (excluding bulk sale) $ 19,427 $ 16,410 $ 13,413
Percentage of average finance receivables (annualized) 11.0 % 9.7 % 8.7 %
Percentage of total revenue 30.3 % 26.3 % 23.7 %
 
General and administrative expenses $ 28,826 $ 30,453 $ 28,550
Percentage of average finance receivables (annualized) 16.3 % 18.1 % 18.6 %
Percentage of total revenue 45.0 % 48.7 % 50.4 %
 
Same store results:
Finance receivables at period-end $ 697,004 $ 676,931 $ 609,294
Finance receivable growth rate 11.0 % 12.7 % 11.6 %
Number of branches in calculation 321 315 296
 
   
Finance Receivables by Product
4Q’16     3Q’16     QoQ $

Inc (Dec)

    QoQ %

Inc (Dec)

    4Q’15     YoY $

Inc (Dec)

    YoY %

Inc (Dec)

Small loans $ 358,471 $ 349,390 $ 9,081 2.6 % $ 338,157 $ 20,314 6.0 %
Large loans   235,349   217,102   18,247   8.4 %   146,553   88,796   60.6 %
 
Total core loans 593,820 566,492 27,328 4.8 % 484,710 109,110 22.5 %
Automobile loans 90,432 97,141 (6,709 ) (6.9

)%

116,109 (25,677 ) (22.1

)%

Retail loans   33,523   32,516   1,007   3.1 %   27,625   5,898   21.4 %
 
Total finance receivables $ 717,775 $ 696,149 $ 21,626   3.1 % $ 628,444 $ 89,331   14.2 %
 
 
Number of branches at period end 339 338 1 0.3 % 331 8 2.4 %
Average finance receivables per branch $ 2,117 $ 2,060 $ 57   2.8 % $ 1,899 $ 218   11.5 %
 
   
Contractual Delinquency by Aging
4Q’16     3Q’16     4Q’15
Allowance for credit losses $ 41,250     5.7 % $ 39,100     5.6 % $ 37,452     6.0 %
 
Current 587,202 81.9 % 569,412 81.8 % 500,591 79.7 %
1 to 29 days past due   77,106 10.7 %   77,097 11.1 %   82,589 13.1 %
 
Delinquent accounts:
30 to 59 days 16,727 2.3 % 17,323 2.4 % 15,654 2.5 %
60 to 89 days 11,641 1.6 % 10,966 1.6 % 9,858 1.6 %
90 to 119 days 10,021 1.4 % 8,363 1.3 % 7,696 1.1 %
120 to 149 days 8,205 1.1 % 7,215 1.0 % 6,678 1.1 %
150 to 179 days   6,873 1.0 %   5,773 0.8 %   5,378 0.9 %
 
Total contractual delinquency $ 53,467 7.4 % $ 49,640 7.1 % $ 45,264 7.2 %
 
Total finance receivables $ 717,775 100.0 % $ 696,149 100.0 % $ 628,444 100.0 %
 
1 day and over past due $ 130,573 18.1 % $ 126,737 18.2 % $ 127,853 20.3 %
 
   
Contractual Delinquency by Product
4Q’16     3Q’16     4Q’15
Small loans $ 32,955     9.2 % $ 30,169     8.6 % $ 30,185     8.9 %
Large loans 12,114 5.1 % 10,142 4.7 % 4,945 3.4 %
Automobile loans 6,300 7.0 % 7,459 7.7 % 8,713 7.5 %
Retail loans   2,098 6.3 %   1,870 5.8 %   1,421 5.1 %
 
Total contractual delinquency $ 53,467 7.4 % $ 49,640 7.1 % $ 45,264 7.2 %
 
   
Quarterly Trend
4Q’15     1Q’16     2Q’16     3Q’16     4Q’16     QoQ $

B(W)

   

YoY $

B(W)

Revenue
Interest and fee income $ 51,320 $ 51,300 $ 52,589 $ 57,420 $ 59,654 $ 2,234 $ 8,334
Insurance income, net 2,838 2,939 2,601 2,346 1,570 (776 ) (1,268 )
Other income   2,527   2,458   2,135   2,709   2,797   88     270  
 
Total revenue   56,685   56,697   57,325   62,475   64,021   1,546     7,336  
 
Expenses
Provision for credit losses 11,449 13,791 13,386 16,410 19,427 (3,017 ) (7,978 )
 
Personnel 17,283 17,127 16,674 18,180 16,998 1,182 285
Occupancy 4,522 4,863 4,770 5,175 5,251 (76 ) (729 )
Marketing 1,403 1,515 2,062 1,786 1,474 312 (71 )
Other   5,342   6,300   6,042   5,312   5,103   209     239  
 
Total general and administrative 28,550 29,805 29,548 30,453 28,826 1,627 (276 )
 
Interest expense   4,350   4,710   4,811   5,116   5,287   (171 )   (937 )
 
Income before income taxes 12,336 8,391 9,580 10,496 10,481 (15 ) (1,855 )
Income taxes   4,969   3,215   3,668   4,020   4,014   6     955  
 
Net income $ 7,367 $ 5,176 $ 5,912 $ 6,476 $ 6,467 $ (9 ) $ (900 )
 
Net income per common share:
Basic $ 0.57 $ 0.41 $ 0.50 $ 0.57 $ 0.57 $   $  
 
Diluted $ 0.56 $ 0.40 $ 0.49 $ 0.56 $ 0.55 $ (0.01 ) $ (0.01 )
 
Weighted-average shares outstanding:
Basic   12,891   12,756   11,756   11,384   11,408   (24 )   1,483  
 
Diluted   13,105   12,949   11,974   11,664   11,763   (99 )   1,342  
 
 
Net interest margin $ 52,335 $ 51,987 $ 52,514 $ 57,359 $ 58,734 $ 1,375   $ 6,399  
 
Net credit margin $ 40,886 $ 38,196 $ 39,128 $ 40,949 $ 39,307 $ (1,642 ) $ (1,579 )
 
 
4Q’15 1Q’16 2Q’16 3Q’16 4Q’16 QoQ $

Inc (Dec)

YoY $

Inc (Dec)

Total assets $ 626,373 $ 609,707 $ 642,803 $ 691,329 $ 712,224 $ 20,895   $ 85,851  
 
Finance receivables $ 628,444 $ 607,363 $ 645,744 $ 696,149 $ 717,775 $ 21,626   $ 89,331  
 
Allowance for credit losses $ 37,452 $ 36,230 $ 36,200 $ 39,100 $ 41,250 $ 2,150   $ 3,798  
 
Long-term debt $ 411,177 $ 396,543 $ 441,147 $ 481,766 $ 491,678 $ 9,912   $ 80,501  
 
   
FTE Headcount Trend (1)
4Q’15     1Q’16     2Q’16     3Q’16     4Q’16     QoQ

Inc (Dec)

    YoY

Inc (Dec)

Legacy operations headcount 1,350 1,270 1,217 1,224 1,221 (3 ) (129 )
2016 new branch headcount   17 17 17 18 1   18  
 
Total operations headcount 1,350 1,287 1,234 1,241 1,239 (2 ) (111 )
Home office headcount 95 100 105 104 103 (1 ) 8  
 
Total headcount 1,445 1,387 1,339 1,345 1,342 (3 ) (103 )
 
 
Number of branches 331 339 338 338 339 1   8  
 
      (1) Based on 40 hours per week full-time equivalent
 
    General & Administrative Expenses Trend
4Q’15     1Q’16     2Q’16     3Q’16     4Q’16     QoQ $

B(W)

    YoY $

B(W)

Legacy operations expenses $ 19,542 $ 19,665 $ 17,511 $ 18,946 $ 18,197 $ 749 $ 1,345
2016 new branch expenses     548   606   619   652   (33 )   (652 )
 
Total operations expenses 19,542 20,213 18,117 19,565 18,849 716 693
Marketing expenses 1,403 1,515 2,062 1,786 1,474 312 (71 )
Home office expenses   7,605   8,077   9,369   9,102   8,503   599     (898 )
 
Total G&A expenses $ 28,550 $ 29,805 $ 29,548 $ 30,453 $ 28,826 $ 1,627   $ (276 )
 
   
Averages and Yields
YTD’16     YTD’15
Average Finance
Receivables
    Average Yield Average Finance
Receivables
    Average Yield
Small loans $ 334,152 42.5 % $ 316,945 43.9 %
Large loans 190,855 28.8 % 93,243 27.6 %
Automobile loans 102,023 17.7 % 137,249 19.0 %
Retail loans   30,321 19.2 %   25,392 18.8 %
 
Total interest and fee yield $ 657,351 33.6 % $ 572,829 34.2 %
 
Total revenue yield $ 657,351 36.6 % $ 572,829 37.9 %
 
   
Components of Increase in Interest and Fee Income

YTD’16 Compared to YTD’15

Increase (Decrease)

Volume     Rate     Net
Small loans $ 7,406 $ (4,546 ) $ 2,860
Large loans 28,073 1,186 29,259
Automobile loans (6,339 ) (1,641 ) (7,980 )
Retail loans   943     87     1,030  
 
Total increase (decrease) in interest and fee income $ 30,083   $ (4,914 ) $ 25,169  
 
   
Net Loans Originated (1)
YTD’16     YTD’15     YTD $

Inc (Dec)

    YTD %

Inc (Dec)

Small loans $ 580,936 $ 592,211 $ (11,275 ) (1.9

)%

Large loans 250,862 173,560 77,302 44.5 %
Automobile loans 37,038 41,621 (4,583 ) (11.0 )%
Retail loans   34,629   31,710   2,919   9.2 %
 
Total net loans originated $ 903,465 $ 839,102 $ 64,363   7.7 %
 
      (1) Represents the balance of loan origination and refinancing net of unearned finance charges
 
    Other Key Metrics
YTD’16     YTD’15
Net credit losses $ 59,216 $ 50,407
Percentage of average finance receivables 9.0 % 8.8 %
Bulk sale       1,964  
 
Net credit losses (excluding bulk sale) $ 59,216 $ 52,371
Percentage of average finance receivables 9.0 % 9.1 %
 
Provision for credit losses $ 63,014 $ 47,348
Bulk sale       1,964  
 
Provision for credit losses (excluding bulk sale) $ 63,014 $ 49,312
Percentage of average finance receivables 9.6 % 8.6 %
Percentage of total revenue 26.2 % 22.7 %
 
General and administrative expenses $ 118,632 $ 115,598
Percentage of average finance receivables 18.0 % 20.2 %
Percentage of total revenue 49.3 % 53.2 %
 

Because it adjusts for certain non-operating and non-cash items, the Company believes that non-GAAP measures are useful to investors as supplemental financial measures that, when viewed with its GAAP financial information, provide information regarding trends in the Company’s results of operations and credit metrics, which is intended to help investors meaningfully evaluate and compare the Company’s results of operations and credit metrics between periods.

   
Non-GAAP Reconciliation
4Q‘16     Adjustments(1)     Non-GAAP
General and administrative expenses $ 28,826 $ (153 ) $ 28,673
Income taxes $ 4,014 $ 59 $ 4,073
Net income $ 6,467 $ 94 $ 6,561
Diluted net income per common share $ 0.55 $ 0.01 $ 0.56
 
   
Non-GAAP Reconciliation
4Q‘15     Adjustments(1)     Non-GAAP
General and administrative expenses $ 28,550 $ (180 ) $ 28,370
Provision for credit losses $ 11,449 $ 1,964 $ 13,413
Income taxes $ 4,969 $ (678 ) $ 4,291
Net income $ 7,367 $ (1,106 ) $ 6,261
Diluted net income per common share $ 0.56 $ (0.08 ) $ 0.48
 
   
Non-GAAP Reconciliation
YTD’16     Adjustments(1)     Non-GAAP
General and administrative expenses $ 118,632 $ (1,593 ) $ 117,039
Income taxes $ 14,917 $ 610 $ 15,527
Net income $ 24,031 $ 983 $ 25,014
Diluted net income per common share $ 1.99 $ 0.08 $ 2.07
 
   
Non-GAAP Reconciliation
YTD’15     Adjustments(1)     Non-GAAP
General and administrative expenses $ 115,598 $ (2,856 ) $ 112,742
Provision for credit losses $ 47,348 $ 1,964 $ 49,312
Income taxes $ 14,774 $ 339 $ 15,113
Net income $ 23,365 $ 553 $ 23,918
Diluted net income per common share $ 1.79 $ 0.04 $ 1.83
 
      (1) Non-GAAP adjustment details are listed below
 
    Non-GAAP Adjustments
4Q’16     4Q’15     YTD’16     YTD’15
Loan system conversion $ 153 $ 180 $ 1,593 $ 793
Bulk sale (1,964 ) (1,964 )
Executive retirement 533
CEO stock award               1,530  
 
Total adjustments $ 153 $ (1,784 ) $ 1,593 $ 892
Tax effect of adjustments   (59 )   678     (610 )   (339 )
 
Adjustment to net income $ 94   $ (1,106 ) $ 983   $ 553  

 

Adjustment to diluted net income per common share $ 0.01   $ (0.08 ) $ 0.08   $ 0.04  

Contacts

Regional Management Corp.
Investor Relations
Garrett Edson, 203-682-8331

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