Regional Management (RM) came out with quarterly earnings of $0.86 per share, beating the Zacks Consensus Estimate of $0.59 per share. This compares to earnings of $0.63 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 45.76%. A quarter ago, it was expected that this financial services company would post earnings of $0.87 per share when it actually produced earnings of $1.56, delivering a surprise of 79.31%. Over the last four ...

Regional Management Corp. (NYSE:RM) Q1 2024 Earnings Call Transcript May 1, 2024 5:00 PM ET Company Participants Garrett Edson - IR Rob Beck - President and CEO Harp Rana - CFO Conference Call Participants John Hecht - Jefferies Matt Dhane - Tieton Capital Management Operator Greetings and welcome to the Regional Management's First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this ...

May 1, 2024 Legal Disclosures This document contains summarized information concerning Regional Management Corp. (the "Company") and the Company's business, operations, financial performance, and trends. No representation is made that the information in this document is complete. For additional financial, statistical, and business information, please see the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission (the "SEC"), ...

[GLOSSARY](index=3&type=section&id=GLOSSARY) The glossary defines key terms and abbreviations used throughout the report, including company-specific plans, regulatory bodies, financial metrics, and debt-related entities - The glossary defines key terms and abbreviations used throughout the report, including company-specific plans (e.g., 2007 Plan, 2011 Plan, 2015 Plan), regulatory bodies (CFPB, SEC, FASB), financial metrics (Efficiency ratio, Net credit loss ratio, PD, LGD), and debt-related entities (RMIT, RMR, SPE)[8](index=8&type=chunk) [PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the quarter [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Regional Management Corp. and its subsidiaries for the quarter ended March 31, 2024, including balance sheets, statements of comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, financial instruments, and other relevant disclosures [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets (March 31, 2024 vs. December 31, 2023) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total assets | $1,756,748 | $1,794,527 | | Net finance receivables | $1,744,286 | $1,771,410 | | Allowance for credit losses | $(187,100) | $(187,400) | | Total liabilities | $1,420,288 | $1,472,254 | | Debt | $1,358,795 | $1,399,814 | | Total stockholders' equity | $336,460 | $322,273 | - Total assets decreased by **$37.78 million** from December 31, 2023, to March 31, 2024, primarily driven by a decrease in net finance receivables[11](index=11&type=chunk) - Total stockholders' equity increased by **$14.19 million**, from **$322.27 million** to **$336.46 million**, during the three months ended March 31, 2024[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's revenues, expenses, and net income over a specific reporting period Consolidated Statements of Comprehensive Income (Three Months Ended March 31, 2024 vs. 2023) | Metric (in thousands, except per share) | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------ | :---------- | :---------- | :---------- | :---------- | | Total revenue | $144,308 | $135,378 | $8,930 | 6.6% | | Provision for credit losses | $46,423 | $47,668 | $(1,245) | (2.6%) | | Total general and administrative expenses | $60,448 | $59,323 | $1,125 | 1.9% | | Interest expense | $17,504 | $16,782 | $722 | 4.3% | | Income before income taxes | $19,933 | $11,605 | $8,328 | 71.8% | | Net income | $15,205 | $8,689 | $6,516 | 75.0% | | Basic EPS | $1.59 | $0.93 | $0.66 | 70.9% | | Diluted EPS | $1.56 | $0.90 | $0.66 | 73.3% | - Net income significantly increased by **75.0%** year-over-year, driven by higher total revenue and a decrease in the provision for credit losses[14](index=14&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement tracks changes in the company's equity accounts, including common stock, retained earnings, and comprehensive income Consolidated Statements of Stockholders' Equity (Three Months Ended March 31, 2024) | Metric (in thousands) | Balance, Dec 31, 2023 | Cash Dividends | Issuance of Restricted Stock Awards | Shares Withheld | Share-Based Compensation | Net Income | Other Comprehensive Income | Balance, Mar 31, 2024 | | :-------------------- | :-------------------- | :------------- | :-------------------------------- | :-------------- | :----------------------- | :--------- | :------------------------- | :-------------------- | | Common Stock (Amount) | $1,457 | — | $11 | — | — | — | — | $1,468 | | Additional Paid-In Capital | $121,752 | — | $(11) | $(10) | $1,832 | — | — | $123,563 | | Retained Earnings | $349,579 | $(2,993) | — | — | — | $15,205 | — | $361,791 | | Accumulated Other Comprehensive Income (Loss) | $(372) | — | — | — | — | — | $153 | $(219) | | Treasury Stock | $(150,143) | — | — | — | — | — | — | $(150,143) | | Total | $322,273 | $(2,993) | — | $(10) | $1,832 | $15,205 | $153 | $336,460 | - Total stockholders' equity increased by **$14.19 million**, primarily due to net income of **$15.21 million** and share-based compensation of **$1.83 million**, partially offset by cash dividends of **$2.99 million**[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Three Months Ended March 31, 2024 vs. 2023) | Cash Flow Activity (in thousands) | 2024 | 2023 | Change ($) | | :-------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $58,471 | $52,649 | $5,822 | | Net cash used in investing activities | $(20,329) | $(20,200) | $(129) | | Net cash used in financing activities | $(44,406) | $(29,962) | $(14,444) | | Net change in cash and restricted cash | $(6,264) | $2,487 | $(8,751) | | Cash and restricted cash at end of period | $122,409 | $134,286 | $(11,877) | - Operating activities provided more cash in Q1 2024 (**$58.47 million**) compared to Q1 2023 (**$52.65 million**), primarily due to higher net income and provision for credit losses[19](index=19&type=chunk) - Net cash used in financing activities increased significantly by **$14.44 million**, mainly due to higher net payments on debt instruments[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the consolidated financial statements [Note 1. Nature of Business](index=11&type=section&id=Note%201.%20Nature%20of%20Business) This note describes the company's business operations, product offerings, and seasonal trends - Regional Management Corp. is a consumer finance company offering large loans, small loans, and related insurance products in **19 states**. The company ceased accepting applications for retail loans in November 2022 to focus on core loan products[21](index=21&type=chunk) - Loan volume and contractual delinquency exhibit seasonal trends, with demand highest in Q2-Q4 and lowest in Q1 due to tax refunds. Delinquencies typically rise in the second half of the year, though macroeconomic factors like inflation and rising interest rates have impacted these trends[23](index=23&type=chunk) [Note 2. Basis of Presentation and Significant Accounting Policies](index=11&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the accounting principles, consolidation policies, and key estimates used in preparing the financial statements - The financial statements are prepared in accordance with SEC regulations and GAAP for interim information, including normal recurring adjustments. The company consolidates wholly-owned subsidiaries and Variable Interest Entities (VIEs) where it is the primary beneficiary[24](index=24&type=chunk)[26](index=26&type=chunk)[29](index=29&type=chunk) - Key accounting policies include classifying finance receivables as held for investment, suspending interest accrual on loans **90 days delinquent**, and estimating the allowance for credit losses using a PD/LGD model based on historical experience, current conditions, and economic forecasts[35](index=35&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - The FASB issued ASU 2023-07 and ASU 2023-09, effective for annual periods beginning after December 15, 2023, and December 15, 2024, respectively, which will enhance disclosures for reportable segments and income taxes. The Company is currently evaluating their impact[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses](index=14&type=section&id=Note%203.%20Finance%20Receivables%2C%20Credit%20Quality%20Information%2C%20and%20Allowance%20for%20Credit%20Losses) This note details the composition of finance receivables, credit quality metrics, and the methodology for the allowance for credit losses Net Finance Receivables by Product (March 31, 2024 vs. December 31, 2023) | Product (in thousands) | March 31, 2024 | December 31, 2023 | | :--------------------- | :------------- | :---------------- | | Large loans | $1,250,647 | $1,274,137 | | Small loans | $490,830 | $493,473 | | Retail loans | $2,809 | $3,800 | | Total | $1,744,286 | $1,771,410 | Allowance for Credit Losses Reconciliation (Three Months Ended March 31, 2024 vs. 2023) | Metric (in thousands) | 2024 | 2023 | | :-------------------- | :---------- | :---------- | | Beginning balance | $187,400 | $178,800 | | Provision for credit losses | $46,423 | $47,668 | | Credit losses | $(49,193) | $(44,609) | | Recoveries | $2,470 | $1,941 | | Ending balance | $187,100 | $183,800 | | Allowance as % of net finance receivables | 10.7% | 11.0% | - Contractual delinquency (**30+ days past due**) as a percentage of total net finance receivables was **7.1%** at March 31, 2024, a slight decrease from **6.9%** at December 31, 2023[53](index=53&type=chunk) - The company uses loan modification programs (payment deferrals, refinancing, settlements, principal forgiveness, interest rate reduction, term extension) as a loss mitigation strategy for borrowers experiencing financial difficulties[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) [Note 4. Restricted Available-for-Sale Investments](index=21&type=section&id=Note%204.%20Restricted%20Available-for-Sale%20Investments) This note describes the company's restricted available-for-sale investments, their valuation, and credit quality Restricted Available-for-Sale Investments (March 31, 2024 vs. December 31, 2023) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Amortized Cost | $22,873 | $23,211 | | Gross Unrealized Losses | $(277) | $(472) | | Estimated Fair Value | $22,596 | $22,740 | - These investments consist of highly rated U.S. Treasuries, carried at fair value, with unrealized gains and losses reported in other comprehensive income. No allowance for credit losses has been recorded due to their high credit quality[46](index=46&type=chunk)[61](index=61&type=chunk) [Note 5. Debt](index=22&type=section&id=Note%205.%20Debt) This note provides a detailed breakdown of the company's debt instruments, including revolving credit facilities and securitizations Summary of Debt (March 31, 2024 vs. December 31, 2023) | Debt Type (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------- | :------------- | :---------------- | | Senior revolving credit facility | $154,208 | $195,462 | | RMR IV revolving warehouse credit facility | $22,133 | $3,197 | | RMR V revolving warehouse credit facility | $51,276 | $26,718 | | RMR VI revolving warehouse credit facility | $20,640 | $15,953 | | RMR VII revolving warehouse credit facility | $5,309 | $4,216 | | RMIT 2020-1 securitization | $113,089 | $145,290 | | RMIT 2021-1 securitization | $232,078 | $248,915 | | RMIT 2021-2 securitization | $200,191 | $200,192 | | RMIT 2021-3 securitization | $125,202 | $125,202 | | RMIT 2022-1 securitization | $250,374 | $250,374 | | RMIT 2022-2B securitization | $184,295 | $184,295 | | Total Debt | $1,358,795 | $1,399,814 | - The Company's senior revolving credit facility was amended in February 2024, reducing availability from **$420 million** to **$355 million** and extending maturity to September 2025. The effective interest rate was **8.43%** at March 31, 2024[64](index=64&type=chunk)[65](index=65&type=chunk) - The Company utilizes asset-backed financing through Variable Interest Entities (VIEs) and securitizations, with debts secured by underlying finance receivables. As of March 31, 2024, the Company was in compliance with all debt covenants[66](index=66&type=chunk)[67](index=67&type=chunk)[86](index=86&type=chunk) [Note 6. Stockholders' Equity](index=27&type=section&id=Note%206.%20Stockholders'%20Equity) This note details changes in stockholders' equity, including common stock, retained earnings, and dividends declared Dividends Declared Per Common Share | Period | 2024 | 2023 | | :----- | :---- | :---- | | 1Q | $0.30 | $0.30 | - The Board declared a quarterly cash dividend of **$0.30 per share** for the three months ended March 31, 2024, consistent with the prior-year period[87](index=87&type=chunk) [Note 7. Disclosure About Fair Value of Financial Instruments](index=27&type=section&id=Note%207.%20Disclosure%20About%20Fair%20Value%20of%20Financial%20Instruments) This note provides information on the fair value measurements of the company's financial assets and liabilities - The Company estimates fair values for financial instruments like cash, restricted cash, restricted available-for-sale investments, net finance receivables, and debt using various methodologies, including discounted cash flows and external pricing services[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities (March 31, 2024) | Metric (in thousands) | Carrying Amount | Estimated Fair Value | | :-------------------- | :-------------- | :------------------- | | Cash | $4,215 | $4,215 | | Restricted cash | $118,194 | $118,194 | | Net finance receivables, less unearned insurance premiums and allowance for credit losses | $1,511,511 | $1,565,165 | | Debt | $1,358,795 | $1,271,525 | [Note 8. Income Taxes](index=28&type=section&id=Note%208.%20Income%20Taxes) This note details the components of the company's income tax provision and effective tax rates Components of Income Taxes (Three Months Ended March 31, 2024 vs. 2023) | Metric (in thousands) | 2024 | 2023 | | :-------------------- | :------ | :------ | | Provision for corporate taxes | $4,786 | $2,901 | | Discrete tax (benefits) deficiencies | $(58) | $15 | | Total income taxes | $4,728 | $2,916 | - Total income taxes increased by **$1.81 million** year-over-year, primarily due to higher income before income taxes[93](index=93&type=chunk) [Note 9. Earnings Per Share](index=29&type=section&id=Note%209.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (Three Months Ended March 31, 2024 vs. 2023) | Metric (in thousands, except per share) | 2024 | 2023 | | :------------------------------------ | :------ | :------ | | Net income | $15,205 | $8,689 | | Basic EPS | $1.59 | $0.93 | | Diluted EPS | $1.56 | $0.90 | | Weighted-average basic shares outstanding | 9,569 | 9,325 | | Weighted-average diluted shares outstanding | 9,746 | 9,622 | - Basic EPS increased by **$0.66** (**70.9%**) and Diluted EPS increased by **$0.66** (**73.3%**) year-over-year, reflecting the significant increase in net income[94](index=94&type=chunk) [Note 10. Share-Based Compensation](index=29&type=section&id=Note%2010.%20Share-Based%20Compensation) This note describes the company's share-based incentive programs and related compensation expenses - The Company recorded **$1.8 million** in share-based compensation expense for the three months ended March 31, 2024, down from **$2.1 million** in the prior-year period. Unrecognized expense of **$9.1 million** will be recognized over a weighted-average period of **1.4 years**[96](index=96&type=chunk) - Share-based incentive programs include Long-Term Incentive Program (LTIP) with PRSUs and RSAs, Key Team Member Incentive Program with performance-based RSAs, Inducement and Retention Program, and Non-Employee Director Compensation Program[98](index=98&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) Restricted Stock Award (RSA) Activity (Three Months Ended March 31, 2024) | Metric (in thousands) | Shares | Weighted-Average Grant Date Fair Value Per Share | | :-------------------- | :----- | :--------------------------------------------- | | Non-vested shares at January 1, 2024 | 190 | $35.89 | | Granted | 111 | $29.61 | | Vested | (2) | $44.39 | | Forfeited | (1) | $47.49 | | Non-vested shares at March 31, 2024 | 298 | $33.49 | [Note 11. Commitments and Contingencies](index=32&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) This note discloses the company's legal proceedings, commitments, and potential contingent liabilities - The Company is involved in various legal proceedings in the normal course of business. While some losses are reasonably estimable and accrued, many are difficult to quantify in early stages. Management does not believe current matters will have a material adverse effect on financial condition, liquidity, or results of operations[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Note 12. Subsequent Events](index=32&type=section&id=Note%2012.%20Subsequent%20Events) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - In May 2024, the Board declared a quarterly cash dividend of **$0.30 per share**, payable on June 12, 2024, to shareholders of record on May 22, 2024[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2024, compared to the prior-year period [Overview](index=33&type=section&id=Overview) This section provides a general description of the company's business, operations, and product offerings - Regional Management Corp. is a diversified consumer finance company providing installment loans, primarily to customers with limited credit access. As of March 31, 2024, it operated in **19 states** with **343 branch locations** and **540,600 active accounts**[117](index=117&type=chunk) - The company's core products are large loans (>**$2,500**) and small loans (≤**$2,500**), which are the drivers of future growth. Retail loan applications ceased in November 2022[119](index=119&type=chunk) Loan Products and Net Finance Receivables (March 31, 2024) | Product | Loans Outstanding (thousands) | Net Finance Receivables (millions) | | :------------ | :---------------------------- | :--------------------------------- | | Large Loans | 245.7 | $1.3 | | Small Loans | 292.9 | $490.8 | | Retail Loans | 2.0 | $2.8 | [Outlook](index=34&type=section&id=Outlook) This section discusses management's perspective on future business conditions, macroeconomic factors, and strategic responses - The company continues to assess the macroeconomic environment, including inflationary pressures, rising interest rates, and geopolitical events, which may affect its business. Proactive credit tightening since Q4 2021 has focused on higher quality originations[120](index=120&type=chunk)[121](index=121&type=chunk) - Allowance for credit losses was **10.7%** of net finance receivables as of March 31, 2024, with contractual delinquency at **7.1%**, down from **7.2%** in the prior year. Future changes in macroeconomic assumptions could impact reserve rates and provision for credit losses[122](index=122&type=chunk) - The company maintains a strong liquidity profile with **$169.4 million** of available liquidity (unrestricted cash and immediate revolving credit facility availability) and **$478.4 million** of unused capacity as of March 31, 2024[123](index=123&type=chunk) [Factors Affecting Our Results of Operations](index=34&type=section&id=Factors%20Affecting%20Our%20Results%20of%20Operations) This section identifies key internal and external factors that influence the company's financial performance - The business experiences seasonal fluctuations in loan demand and delinquencies, though macroeconomic factors have recently altered typical trends. Revenue is largely driven by loan portfolio growth, with average net finance receivables at **$1.8 billion** for Q1 2024[124](index=124&type=chunk)[125](index=125&type=chunk) - Product mix, asset quality, and the allowance for credit losses are critical, influenced by underwriting standards, servicing diligence, and economic conditions. The provision for credit losses is determined by these factors, delinquency trends, and loan portfolio growth[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - Costs of funds are affected by variable interest rates, with **81%** of funding at a fixed rate as of March 31, 2024, to manage interest rate risk. Operating costs, included in general and administrative expenses, also impact financial results[130](index=130&type=chunk)[131](index=131&type=chunk) [Components of Results of Operations](index=36&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the various revenue and expense categories that constitute the company's financial results - Interest and fee income is primarily from outstanding loans, with accrual suspended for accounts **90 days delinquent**. Loan origination and maintenance fees are recognized over the loan's life[132](index=132&type=chunk)[133](index=133&type=chunk) - Insurance income, net, is derived from optional payment and collateral protection insurance products, net of direct costs like claims and premium taxes. Restricted reserves are maintained for life insurance claims[134](index=134&type=chunk)[135](index=135&type=chunk) - Other income includes late charges, interest income from restricted cash, and commissions. Provision for credit losses is based on lifetime expected credit losses, influenced by credit experience, economic forecasts, and portfolio growth[136](index=136&type=chunk)[137](index=137&type=chunk) - General and administrative expenses comprise personnel, occupancy, marketing, and other costs. Personnel is the largest component, while marketing expenses increased due to direct mail campaigns[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the reporting period Key Financial Results (Three Months Ended March 31, 2024 vs. 2023) | Metric (in thousands) | 1Q 24 | 1Q 23 | YoY Change ($) | YoY Change (%) | | :-------------------- | :---------- | :---------- | :------------- | :------------- | | Total revenue | $144,308 | $135,378 | $8,930 | 6.6% | | Net income | $15,205 | $8,689 | $6,516 | 75.0% | | Basic EPS | $1.59 | $0.93 | $0.66 | 70.9% | | Diluted EPS | $1.56 | $0.90 | $0.66 | 73.3% | | Provision for credit losses | $46,423 | $47,668 | $(1,245) | (2.6%) | | Total G&A expenses | $60,448 | $59,323 | $1,125 | 1.9% | | Interest expense | $17,504 | $16,782 | $722 | 4.3% | Net Finance Receivables by Product (March 31, 2024 vs. 2023) | Product (in thousands) | 1Q 24 | 1Q 23 | YoY Change ($) | YoY Change (%) | | :--------------------- | :------------ | :------------ | :------------- | :------------- | | Large loans | $1,250,647 | $1,211,836 | $38,811 | 3.2% | | Small loans | $490,830 | $456,313 | $34,517 | 7.6% | | Retail loans | $2,809 | $8,081 | $(5,272) | (65.2%) | | Total | $1,744,286 | $1,676,230 | $68,056 | 4.1% | - Total originations increased by **7.6%** to **$326.4 million** in Q1 2024, driven by a **29.0%** increase in small loan originations, while large loan originations decreased by **4.4%**[153](index=153&type=chunk) - Net credit losses increased by **9.5%** to **$46.7 million**, with the annualized net credit loss ratio rising to **10.6%** from **10.1%**. Contractual delinquency improved slightly to **7.1%** from **7.2%** year-over-year[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - General and administrative expenses increased by **1.9%**, primarily due to higher marketing expenses (**27.7%** increase) and other expenses (**7.9%** increase), partially offset by a **2.0%** decrease in personnel expenses[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and funding strategies - The company's primary cash needs are for lending activities, technology infrastructure, and branch expansion/maintenance, financed through operations and debt facilities. As of March 31, 2024, the funded debt-to-equity ratio was **4.0 to 1.0**, and the stockholders' equity ratio was **19.2%**[168](index=168&type=chunk) - Cash and cash equivalents decreased to **$4.2 million**. Immediate availability from revolving credit facilities was **$165.1 million**, with unused capacity of **$478.4 million**. Total debt remained at **$1.4 billion**[169](index=169&type=chunk) - Net cash provided by operating activities increased by **$5.8 million** to **$58.5 million**. Net cash used in investing activities remained stable at **$20.3 million**. Net cash used in financing activities increased by **$14.4 million** to **$44.4 million**, mainly due to higher net debt payments[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) Revolving Credit Facilities Summary (March 31, 2024) | Facility | Capacity (thousands) | Debt Balance (thousands) | Effective Interest Rate | | :---------------- | :------------------- | :----------------------- | :---------------------- | | Senior | $355,000 | $154,208 | 8.43% | | RMR IV warehouse | $125,000 | $22,133 | 8.23% | | RMR V warehouse | $100,000 | $51,276 | 8.28% | | RMR VI warehouse | $75,000 | $20,640 | 7.93% | | RMR VII warehouse | $75,000 | $5,309 | 8.43% | [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights accounting policies and estimates that require significant judgment and can materially impact financial results - The allowance for credit losses is a critical estimate, based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The company uses a PD/LGD model and segments its portfolio by product type, FICO score, and delinquency status[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Macroeconomic forecasts, particularly unemployment rates, are crucial inputs for the allowance model and involve significant judgment and estimation uncertainty. A hypothetical **10%** increased weighting towards slower near-term growth would have increased reserves by **$1.3 million** as of March 31, 2024[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Regulatory Developments](index=47&type=section&id=Regulatory%20Developments) This section outlines recent regulatory changes and their potential impact on the company's operations and financial reporting - The CFPB established supervisory authority over the company for **two years**, ending January 8, 2026, following a Consent Agreement dated January 4, 2024. This does not constitute an admission of engaging in conduct posing risks to consumers[191](index=191&type=chunk) - The SEC adopted a final rule on climate-related disclosures on March 6, 2024, but its effectiveness was stayed on April 4, 2024, pending judicial review. The company will monitor the outcome[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk, and how it manages these risks - The company is exposed to interest rate risk because its fixed-rate finance receivables' ability to react to market rate changes depends on customer payoff/renewal speed. A majority (**81.3%**) of its debt was fixed-rate as of March 31, 2024[193](index=193&type=chunk)[194](index=194&type=chunk) Variable-Rate Revolving Credit Facilities (March 31, 2024) | Revolving Credit Facility | Balance (in thousands) | Effective Interest Rate | | :------------------------ | :--------------------- | :---------------------- | | Senior | $154,208 | 8.43% | | RMR IV Warehouse | $22,133 | 8.23% | | RMR V Warehouse | $51,276 | 8.28% | | RMR VI Warehouse | $20,640 | 7.93% | | RMR VII Warehouse | $5,309 | 8.43% | | Total | $253,566 | | - A **100 basis point** increase in variable rates on revolving credit facilities would result in approximately **$2.5 million** of increased annual interest expense[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and any changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[197](index=197&type=chunk)[198](index=198&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[199](index=199&type=chunk) [PART II – OTHER INFORMATION](index=50&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, other information, and a list of exhibits [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an update on legal proceedings the company is involved in - The company is involved in various legal proceedings in the ordinary course of business but does not believe these matters will have a material adverse effect on its financial condition, liquidity, or results of operations[201](index=201&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the company's annual report - There have been no material changes to the risk factors from those included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[202](index=202&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section provides other relevant information not covered elsewhere - No officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2024[203](index=203&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q - The report includes various exhibits, such as amendments to credit agreements (e.g., Eighth Amendment to Seventh Amended and Restated Loan and Security Agreement, Omnibus Amendment to Credit Agreement and Account Control Agreement and Consent), and certifications (Rule 13a-14(a) / 15(d)-14(a) Certifications, Section 1350 Certifications)[204](index=204&type=chunk) [SIGNATURE](index=54&type=section&id=SIGNATURE) The report is formally signed by the company's Chief Financial Officer - The report was signed on May 3, 2024, by Harpreet Rana, Executive Vice President and Chief Financial Officer of Regional Management Corp[209](index=209&type=chunk)

Exhibit 99.1 Regional Management Corp. Announces First Quarter 2024 Results Greenville, South Carolina – May 1, 2024 – Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the first quarter ended March 31, 2024. "We had a very strong start to 2024, as we outperformed our outlook on both the top and bottom lines," said Robert W. Beck, President and Chief Executive Officer of Regional Management Corp. "We generated net income of $15.2 million and diluted ea ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35477 Regional Management Corp. (Exact name of registrant as specified in its charter) Delaware 57-0847115 (State or other jurisdiction of inco ...

Regional Management Corp. (NYSE:RM) Q4 2023 Earnings Conference Call February 7, 2024 5:00 PM ET Company Participants Garrett Edson - Managing Director, ICR Robert Beck - President and CEO Harp Rana - EVP and CFO Conference Call Participants John Hecht - Jefferies Zachary Oster - JMP Securities William Dezellem - Tieton Capital John Rowan - Janney Operator Thank you for standing by. This is the conference operator. Welcome to the Regional Management Fourth Quarter 2023 Earnings Call. As a reminder, all part ...

Legal Disclosures Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: managing growth effectively, implementing Regional Management's growth strategy, and opening new branches as planned; Regional Management's convenience check strategy; Regional Management's policies and procedures for underwriting, processing, and servicing loans; Regional Management's ability to collect on ...

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements and detailed notes on business, accounting policies, and financial instruments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | **Assets** | | | | | Cash | $7,413 | $3,873 | $3,540 | | Net finance receivables | $1,751,009 | $1,699,393 | $51,616 | | Allowance for credit losses | $(184,900) | $(178,800) | $(6,100) | | Total assets | $1,765,340 | $1,724,987 | $40,353 | | **Liabilities & Stockholders' Equity** | | | | | Debt | $1,372,748 | $1,355,359 | $17,389 | | Total liabilities | $1,434,755 | $1,416,354 | $18,401 | | Total stockholders' equity | $330,585 | $308,633 | $21,952 | - Net finance receivables increased by **$51.6 million (3.0%)** from December 31, 2022, to September 30, 2023, reaching **$1.75 billion**[9](index=9&type=chunk) - Total stockholders' equity increased by **$22.0 million (7.1%)** from December 31, 2022, to September 30, 2023, primarily due to an increase in retained earnings[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Total revenue | $140,878 | $131,452 | $9,426 | 7.2% | | Provision for credit losses | $50,930 | $48,071 | $2,859 | 5.9% | | Total G&A expenses | $62,104 | $58,164 | $3,940 | 6.8% | | Interest expense | $16,947 | $11,863 | $5,084 | 42.9% | | Net income | $8,820 | $10,068 | $(1,248) | (12.4)% | | Basic EPS | $0.94 | $1.09 | $(0.15) | (13.8)% | | Diluted EPS | $0.91 | $1.06 | $(0.15) | (14.2)% | | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Total revenue | $409,740 | $375,171 | $34,569 | 9.2% | | Provision for credit losses | $151,149 | $124,329 | $26,820 | 21.6% | | Total G&A expenses | $178,323 | $167,385 | $10,938 | 6.5% | | Interest expense | $49,953 | $19,368 | $30,585 | 157.9% | | Net income | $23,532 | $48,833 | $(25,301) | (51.8)% | | Basic EPS | $2.51 | $5.23 | $(2.72) | (52.0)% | | Diluted EPS | $2.45 | $5.01 | $(2.56) | (51.1)% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) - Total stockholders' equity increased from **$308.6 million** at December 31, 2022, to **$330.6 million** at September 30, 2023[15](index=15&type=chunk) - For the nine months ended September 30, 2023, net income contributed **$23.5 million** to retained earnings, and share-based compensation added **$7.8 million** to additional paid-in capital[15](index=15&type=chunk) - Cash dividends of **$8.9 million** were paid during the nine months ended September 30, 2023[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash provided by operating activities | $182,273 | $164,263 | $18,010 | | Net cash used in investing activities | $(194,109) | $(295,697) | $101,588 | | Net cash provided by financing activities | $4,479 | $99,250 | $(94,771) | | Net change in cash and restricted cash | $(7,357) | $(32,184) | $24,827 | - The decrease in net cash used in investing activities was primarily due to decreased originations of finance receivables[215](index=215&type=chunk) - The significant decrease in net cash provided by financing activities was mainly due to a **$115.5 million** decrease in net advances on debt instruments and no common stock repurchases in 2023 compared to **$20.6 million** in 2022[216](index=216&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1. Nature of Business](index=10&type=section&id=Note%201.%20Nature%20of%20Business) - Regional Management Corp. (Regional Finance) operates in **19 states**, offering small loans, large loans, and related insurance products[21](index=21&type=chunk) - The company ceased accepting applications for retail loan products in **November 2022** to focus on core loan portfolio growth[21](index=21&type=chunk)[137](index=137&type=chunk) - Loan demand is typically highest in **Q2-Q4** (vacation, back-to-school, holiday spending) and lowest in **Q1** (tax refunds). Delinquencies generally rise in the second half of the year. Macroeconomic factors (inflation, rising interest rates, geopolitical conflict) have impacted these seasonal trends[23](index=23&type=chunk)[142](index=142&type=chunk) [Note 2. Basis of Presentation and Significant Accounting Policies](index=10&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) - Consolidated financial statements include wholly-owned subsidiaries and Variable Interest Entities (VIEs), with the Company as the primary beneficiary[26](index=26&type=chunk)[30](index=30&type=chunk) - The Company adopted **ASU 2022-02** on **January 1, 2023**, eliminating separate accounting for Troubled Debt Restructurings (TDRs), which did not materially impact financial statements[34](index=34&type=chunk)[35](index=35&type=chunk)[48](index=48&type=chunk) - The allowance for credit losses is estimated using a **Probability of Default (PD) / Loss Given Default (LGD) model**, considering historical experience, current conditions, and macroeconomic forecasts, segmented by product type, FICO score, and delinquency status[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Accrual of interest income on finance receivables is suspended when an account becomes **90 days delinquent**[49](index=49&type=chunk) [Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses](index=14&type=section&id=Note%203.%20Finance%20Receivables%2C%20Credit%20Quality%20Information%2C%20and%20Allowance%20for%20Credit%20Losses) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Small loans | $474,181 | $481,605 | $(7,424) | | Large loans | $1,271,891 | $1,208,185 | $63,706 | | Retail loans | $4,937 | $9,603 | $(4,666) | | Net finance receivables | $1,751,009 | $1,699,393 | $51,616 | - The allowance for credit losses increased to **$184.9 million** at September 30, 2023, from **$178.8 million** at December 31, 2022. As a percentage of net finance receivables, it was **10.6%** at September 30, 2023, down from **11.2%** at September 30, 2022[63](index=63&type=chunk)[177](index=177&type=chunk)[197](index=197&type=chunk) - Total contractual delinquency as a percentage of net finance receivables increased slightly to **7.3%** at September 30, 2023, from **7.2%** at September 30, 2022[62](index=62&type=chunk)[179](index=179&type=chunk)[199](index=199&type=chunk) - Loan modification programs for borrowers experiencing financial difficulty included principal forgiveness, interest rate reductions, and term extensions, totaling **$13.95 million** in amortized cost basis for the nine months ended September 30, 2023[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 4. Restricted Available-for-Sale Investments](index=22&type=section&id=Note%204.%20Restricted%20Available-for-Sale%20Investments) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Amortized Cost | $23,014 | $21,158 | | Gross Unrealized Losses | $(504) | $(742) | | Estimated Fair Value | $22,510 | $20,416 | - The investments consist of highly rated U.S. Treasuries, and unrealized losses are attributed to increases in interest rates by the Federal Reserve[70](index=70&type=chunk) | Contractual Maturity | Amortized Cost (in thousands) | Estimated Fair Value (in thousands) | | :-------------------------- | :---------------------------- | :-------------------------- | | Due in one year | $20,854 | $20,430 | | Due within one to five years | $2,160 | $2,080 | | Total | $23,014 | $22,510 | [Note 5. Interest Rate Caps](index=23&type=section&id=Note%205.%20Interest%20Rate%20Caps) - The Company no longer maintained interest rate cap protections as of **September 30, 2022**[73](index=73&type=chunk) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Balance at beginning of period | $0 | $5,081 | | Sales | $0 | $(5,033) | | Fair value adjustment | $0 | $(48) | | Balance at end of period | $0 | $0 | [Note 6. Debt](index=23&type=section&id=Note%206.%20Debt) | Debt Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Senior revolving credit facility | $131,325 | $147,547 | | RMR IV revolving warehouse credit facility | $3,152 | $18,144 | | RMR V revolving warehouse credit facility | $26,628 | $286 | | RMR VI revolving warehouse credit facility | $18,123 | $0 | | RMR VII revolving warehouse credit facility | $4,327 | $0 | | RMIT 2020-1 securitization | $180,214 | $180,214 | | RMIT 2021-1 securitization | $248,916 | $248,916 | | RMIT 2021-2 securitization | $200,192 | $200,192 | | RMIT 2021-3 securitization | $125,202 | $125,202 | | RMIT 2022-1 securitization | $250,374 | $250,374 | | RMIT 2022-2B securitization | $184,295 | $184,295 | | Total Debt | $1,372,748 | $1,355,359 | - The RMR II Revolving Warehouse Credit Facility was fully repaid and terminated in **March 2023**[84](index=84&type=chunk) - New warehouse facilities (**RMR VI** and **RMR VII**) were established in **February** and **April 2023**, respectively, each for **$75 million**[89](index=89&type=chunk)[90](index=90&type=chunk) - As of September 30, 2023, **87%** of total debt was held at a fixed rate, managing interest rate risk[148](index=148&type=chunk) - The Company was in compliance with all debt covenants as of **September 30, 2023**[98](index=98&type=chunk)[239](index=239&type=chunk) [Note 7. Stockholders' Equity](index=27&type=section&id=Note%207.%20Stockholders%27%20Equity) - The company completed a **$20.0 million** stock repurchase program in **May 2022**, repurchasing **426 thousand shares**. No common stock was repurchased during the three or nine months ended September 30, 2023[100](index=100&type=chunk)[101](index=101&type=chunk) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Dividends declared per common share | $0.30 | $0.30 | $0.90 | $0.90 | - A quarterly cash dividend of **$0.30 per share** was declared in **November 2023**, payable on **December 13, 2023**[132](index=132&type=chunk) [Note 8. Disclosure About Fair Value of Financial Instruments](index=28&type=section&id=Note%208.%20Disclosure%20About%20Fair%20Value%20of%20Financial%20Instruments) - Cash and restricted cash are recorded at cost, approximating fair value (**Level 1**)[102](index=102&type=chunk)[104](index=104&type=chunk) - Restricted available-for-sale investments (U.S. Treasury securities) are valued using external pricing services and classified as **Level 2**[103](index=103&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk) - Net finance receivables and debt fair values are estimated using discounted cash flow methodologies with unobservable inputs, classifying them as **Level 3**[103](index=103&type=chunk)[104](index=104&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk) [Note 9. Income Taxes](index=29&type=section&id=Note%209.%20Income%20Taxes) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total income taxes | $2,077 | $3,286 | $6,783 | $15,256 | - The effective tax rate decreased to **19.1%** for Q3 2023 (from **24.6%** in Q3 2022) and to **22.4%** for YTD 2023 (from **23.8%** in YTD 2022), mainly due to discrete tax benefits from re-establishing deferred tax assets for state net operating losses[109](index=109&type=chunk)[187](index=187&type=chunk)[207](index=207&type=chunk) [Note 10. Earnings Per Share](index=30&type=section&id=Note%2010.%20Earnings%20Per%20Share) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.94 | $1.09 | $2.51 | $5.23 | | Diluted EPS | $0.91 | $1.06 | $2.45 | $5.01 | - Anti-dilutive securities, totaling **0.3 million shares** for Q3 2023 and **0.4 million shares** for YTD 2023, were excluded from diluted EPS computation[111](index=111&type=chunk) [Note 11. Share-Based Compensation](index=30&type=section&id=Note%2011.%20Share-Based%20Compensation) - Share-based compensation expense was **$3.4 million** for Q3 2023 (vs. **$3.3 million** in Q3 2022) and **$7.8 million** for YTD 2023 (vs. **$8.1 million** in YTD 2022)[113](index=113&type=chunk) - Unrecognized share-based compensation expense was approximately **$16.0 million** as of September 30, 2023, to be recognized over a weighted-average period of **1.8 years**[113](index=113&type=chunk) - The company's incentive programs include **Performance Restricted Stock Units (PRSUs)**, **Restricted Stock Awards (RSAs)**, and previously Non-Qualified Stock Options, with PRSUs and RSAs being the primary current long-term incentives[115](index=115&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - As of September 30, 2023, **0.3 million shares** were available for grant under the **2015 Long-Term Incentive Plan**[112](index=112&type=chunk) [Note 12. Commitments and Contingencies](index=33&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) - The Company is a defendant in various legal actions arising in the ordinary course of business[127](index=127&type=chunk) - Management accrues estimated losses when probable and reasonably estimable, but many legal actions are difficult to assess due to early stages or indeterminate damages[128](index=128&type=chunk)[129](index=129&type=chunk) - The Company does not believe, based on current knowledge, that such losses will have a material adverse effect on its consolidated financial statements[130](index=130&type=chunk) [Note 13. Subsequent Events](index=34&type=section&id=Note%2013.%20Subsequent%20Events) - In **November 2023**, the Board declared a quarterly cash dividend of **$0.30 per share**, payable on **December 13, 2023**[132](index=132&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, and liquidity, including business overview, outlook, and performance comparisons [Overview](index=35&type=section&id=Overview) - Regional Management Corp. operates under "Regional Finance" in **347 branch locations** across **19 states**, serving **530,400 active accounts**[135](index=135&type=chunk) - Core products are small (**≤$2,500**) and large (**>$2,500**) installment loans, with retail loan applications ceased in **November 2022**[137](index=137&type=chunk) | Loan Type | Net Finance Receivables (Sep 30, 2023) | Number of Loans Outstanding (Sep 30, 2023) | | :---------------- | :------------------------------------- | :----------------------------------------- | | Small Loans | $474.2 million | 282.6 thousand | | Large Loans | $1.3 billion | 244.8 thousand | | Retail Loans | $4.9 million | 3.0 thousand | [Outlook](index=36&type=section&id=Outlook) - Proactively tightened credit models since **Q4 2021**, focusing on higher-risk customer segments due to inflationary pressures and rising interest rates[139](index=139&type=chunk) - Allowance for credit losses was **10.6%** of net finance receivables as of **September 30, 2023**. Contractual delinquency was **7.3%**, up from **7.2%** in the prior year[140](index=140&type=chunk) - Maintained strong liquidity with **$179.2 million** available (unrestricted cash + immediate credit facility availability) and **$613.1 million** in unused revolving credit capacity as of **September 30, 2023**[141](index=141&type=chunk) [Factors Affecting Our Results of Operations](index=36&type=section&id=Factors%20Affecting%20Our%20Results%20of%20Operations) - Loan volume and contractual delinquency follow seasonal trends, with demand highest in **Q2-Q4** and lowest in **Q1**, and delinquencies rising in the second half of the year. Macroeconomic factors have impacted these trends[142](index=142&type=chunk) - Revenue is driven by loan portfolio balance; the company expanded to **19 states** (Arizona in **March 2023**) and optimizes its branch network[143](index=143&type=chunk) - Asset quality and allowance for credit losses are critical, influenced by underwriting, servicing, economic conditions, and portfolio growth[145](index=145&type=chunk)[146](index=146&type=chunk) - Costs of funds are affected by variable interest rates on credit facilities, though **87%** of funding was fixed-rate as of **September 30, 2023**[148](index=148&type=chunk) [Components of Results of Operations](index=37&type=section&id=Components%20of%20Results%20of%20Operations) - Interest and fee income is primarily from outstanding loans, with fees recognized over the loan life using the **constant yield method**. Accrual is suspended for loans **90+ days delinquent**[150](index=150&type=chunk)[151](index=151&type=chunk) - Insurance income, net, is from optional payment and collateral protection insurance, net of claims, reserves, ceding fees, and premium taxes[152](index=152&type=chunk) - Other income includes late charges, loan extension fees, returned check charges, auto club commissions, and interest/investment income from restricted cash/securities[154](index=154&type=chunk) - Provision for credit losses is charged to income to maintain an adequate allowance for lifetime expected credit losses, influenced by credit experience, economic forecasts, and portfolio growth[155](index=155&type=chunk) - General and administrative expenses comprise personnel (largest component), occupancy, marketing, and other expenses (legal, compliance, tech investment)[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) | Metric | 3Q 23 (in thousands) | 3Q 22 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :------------------- | :------------------- | :------------------------ | :------------- | | Total revenue | $140,878 | $131,452 | $9,426 | 7.2% | | Provision for credit losses | $50,930 | $48,071 | $2,859 | 5.9% | | Total G&A expenses | $62,104 | $58,164 | $3,940 | 6.8% | | Interest expense | $16,947 | $11,863 | $5,084 | 42.9% | | Net income | $8,820 | $10,068 | $(1,248) | (12.4)% | | Basic EPS | $0.94 | $1.09 | $(0.15) | (13.8)% | | Diluted EPS | $0.91 | $1.06 | $(0.15) | (14.2)% | | Metric | YTD 23 (in thousands) | YTD 22 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :------------------- | :------------------- | :------------------------ | :------------- | | Total revenue | $409,740 | $375,171 | $34,569 | 9.2% | | Provision for credit losses | $151,149 | $124,329 | $26,820 | 21.6% | | Total G&A expenses | $178,323 | $167,385 | $10,938 | 6.5% | | Interest expense | $49,953 | $19,368 | $30,585 | 157.9% | | Net income | $23,532 | $48,833 | $(25,301) | (51.8)% | | Basic EPS | $2.51 | $5.23 | $(2.72) | (52.0)% | | Diluted EPS | $2.45 | $5.01 | $(2.56) | (51.1)% | | Key Metric | 3Q 23 | 3Q 22 | YoY Change | | :-------------------------- | :------ | :------ | :--------- | | Interest and fee yield (annualized) | 29.0% | 29.6% | (0.6)% | | Efficiency ratio | 44.1% | 44.2% | (0.1)% | | Operating expense ratio | 14.4% | 14.9% | (0.5)% | | 30+ contractual delinquency | 7.3% | 7.2% | 0.1% | | Net credit loss ratio (annualized) | 11.0% | 9.1% | 1.9% | | Book value per share | $33.61 | $32.18 | $1.43 | [Comparison of September 30, 2023, Versus September 30, 2022 (Net Finance Receivables)](index=40&type=section&id=Comparison%20of%20September%2030%2C%202023%2C%20Versus%20September%2030%2C%202022%20%28Net%20Finance%20Receivables%29) | Loan Type | Sep 30, 2023 (in thousands) | Sep 30, 2022 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :------------------------ | :------------- | | Small loans | $474,181 | $480,199 | $(6,018) | (1.3)% | | Large loans | $1,271,891 | $1,116,455 | $155,436 | 13.9% | | Retail loans | $4,937 | $10,944 | $(6,007) | (54.9)% | | Total net finance receivables | $1,751,009 | $1,607,598 | $143,411 | 8.9% | - The number of branches increased by **9 (2.7%)** to **347**, and net finance receivables per branch grew by **6.1%** to **$5,046 thousand**[167](index=167&type=chunk) [Comparison of the Three Months Ended September 30, 2023, Versus the Three Months Ended September 30, 2022](index=40&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202023%2C%20Versus%20the%20Three%20Months%20Ended%20September%2030%2C%202022) - Net income decreased by **$1.2 million (12.4%)** to **$8.8 million**, driven by increased interest expense (**$5.1 million**), G&A expenses (**$3.9 million**), and provision for credit losses (**$2.9 million**), partially offset by revenue growth (**$9.4 million**) and lower income taxes (**$1.2 million**)[168](index=168&type=chunk) - Total revenue increased by **$9.4 million (7.2%)** to **$140.9 million**, with interest and fee income up **7.8%** due to a **10.0%** increase in average net finance receivables, despite a **0.6%** decrease in annualized average yield[169](index=169&type=chunk)[170](index=170&type=chunk) | Metric | 3Q 23 (in thousands) | 3Q 22 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :------------------- | :------------------- | :------------------------ | :------------- | | Small loans (Avg. NFR) | $459,320 | $466,087 | $(6,767) | (1.5)% | | Large loans (Avg. NFR) | $1,257,168 | $1,089,225 | $167,943 | 15.4% | | Retail loans (Avg. NFR) | $5,647 | $10,935 | $(5,288) | (48.4)% | | Total Avg. Net Finance Receivables | $1,722,135 | $1,566,247 | $155,888 | 10.0% | - Provision for credit losses increased by **$2.9 million (5.9%)** to **$50.9 million**, primarily due to an **$11.7 million** increase in net credit losses, partially offset by a lower allowance build. Annualized net credit losses as a percentage of average net finance receivables rose to **11.0%** from **9.1%**[175](index=175&type=chunk)[178](index=178&type=chunk) - Interest expense surged by **$5.1 million (42.9%)** to **$16.9 million**, driven by a **1.07%** increase in the average cost of debt (to **5.00%**) and a higher average debt balance[185](index=185&type=chunk)[186](index=186&type=chunk) [Comparison of the Nine Months Ended September 30, 2023, Versus the Nine Months Ended September 30, 2022](index=43&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%2C%20Versus%20the%20Nine%20Months%20Ended%20September%2030%2C%202022) - Net income decreased by **$25.3 million (51.8%)** to **$23.5 million**, mainly due to increased interest expense (**$30.6 million**), provision for credit losses (**$26.8 million**), and G&A expenses (**$10.9 million**), partially offset by revenue growth (**$34.6 million**) and lower income taxes (**$8.5 million**)[188](index=188&type=chunk) - Total revenue increased by **$34.6 million (9.2%)** to **$409.7 million**, with interest and fee income up **9.0%** due to a **13.8%** increase in average net finance receivables, despite a **1.2%** decrease in annualized average yield[189](index=189&type=chunk)[190](index=190&type=chunk) | Metric | YTD 23 (in thousands) | YTD 22 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :------------------- | :------------------- | :------------------------ | :------------- | | Small loans (Avg. NFR) | $456,893 | $448,175 | $8,718 | 1.9% | | Large loans (Avg. NFR) | $1,232,170 | $1,032,273 | $199,897 | 19.4% | | Retail loans (Avg. NFR) | $7,252 | $10,796 | $(3,544) | (32.8)% | | Total Avg. Net Finance Receivables | $1,696,315 | $1,491,244 | $205,071 | 13.8% | - Provision for credit losses increased by **$26.8 million (21.6%)** to **$151.1 million**, driven by a **$41.2 million** increase in net credit losses, partially offset by a lower allowance build. Annualized net credit losses as a percentage of average net finance receivables rose to **11.4%** from **9.3%**[196](index=196&type=chunk)[198](index=198&type=chunk) - Interest expense soared by **$30.6 million (157.9%)** to **$50.0 million**, due to a **2.73%** increase in the average cost of debt (to **4.98%**) and a higher average debt balance[206](index=206&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary cash needs are for lending activities, technology infrastructure, and branch expansion/maintenance[208](index=208&type=chunk) - Funding comes from cash flows from operations and debt facilities (senior revolving credit, warehouse credit, securitizations)[208](index=208&type=chunk) - As of September 30, 2023, the company had **$179.2 million** of available liquidity (unrestricted cash + immediate credit facility availability) and **$613.1 million** of unused capacity on revolving credit facilities[141](index=141&type=chunk)[209](index=209&type=chunk) - Funded debt-to-equity ratio was **4.2 to 1.0**, and stockholders' equity ratio was **18.7%** as of September 30, 2023[208](index=208&type=chunk) [Dividends](index=46&type=section&id=Dividends) | Period | Dividends Declared Per Common Share | | :----- | :-------------------------------- | | 1Q 23 | $0.30 | | 2Q 23 | $0.30 | | 3Q 23 | $0.30 | | Total | $0.90 | - Total cash dividends paid for the nine months ended September 30, 2023, were **$8.9 million**[212](index=212&type=chunk) [Cash Flow](index=46&type=section&id=Cash%20Flow) - Net cash provided by operating activities increased by **$18.0 million** to **$182.3 million** for the nine months ended September 30, 2023, compared to the prior-year period[214](index=214&type=chunk) - Net cash used in investing activities decreased by **$101.6 million** to **$194.1 million**, primarily due to decreased originations of finance receivables[215](index=215&type=chunk) - Net cash provided by financing activities decreased by **$94.8 million** to **$4.5 million**, mainly due to a **$115.5 million** decrease in net advances on debt instruments and no common stock repurchases[216](index=216&type=chunk) [Financing Arrangements](index=46&type=section&id=Financing%20Arrangements) - Senior revolving credit facility: **$131.3 million** outstanding as of **Sep 30, 2023**, matures **Sep 2024**, effective interest rate **8.43%**[217](index=217&type=chunk)[219](index=219&type=chunk) - RMR II Revolving Warehouse Credit Facility was fully repaid and terminated in **March 2023**[226](index=226&type=chunk) - New warehouse facilities (**RMR VI** and **RMR VII**) were established in **February** and **April 2023**, respectively, each for **$75 million**[230](index=230&type=chunk)[231](index=231&type=chunk) - Securitizations (**RMIT series**) represent significant fixed-rate debt, with revolving periods ending between **Sep 2023** and **Oct 2026**, and final maturities between **Oct 2030** and **Nov 2031**[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - All debt covenants were in compliance as of **September 30, 2023**[239](index=239&type=chunk) [Restricted Cash Reserve Accounts](index=49&type=section&id=Restricted%20Cash%20Reserve%20Accounts) - Restricted cash collection accounts for VIE debt totaled **$102.6 million** as of **September 30, 2023**[222](index=222&type=chunk) - Warehouse credit facilities (**RMR IV, V, VI, VII**) require **1%** cash reserves based on finance receivables balance, ranging from **$0.1 million** to **$0.6 million** as of **September 30, 2023**[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Securitizations (**RMIT series**) have restricted cash reserve accounts ranging from **$1.5 million** to **$2.6 million** as of **September 30, 2023**[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - RMC Reinsurance maintains **$0.3 million** in cash reserves for life insurance policies[250](index=250&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Preparation of financial statements requires estimates and assumptions, especially for the allowance for credit losses[251](index=251&type=chunk)[252](index=252&type=chunk) - The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts, using a **Probability of Default (PD) / Loss Given Default (LGD) model**[252](index=252&type=chunk)[254](index=254&type=chunk) - Macroeconomic forecasts, particularly unemployment rates, are critical inputs, and changes in these assumptions or credit loss performance outlook could lead to significant adjustments in the allowance[257](index=257&type=chunk)[258](index=258&type=chunk) - A hypothetical **10%** increased weighting towards slower near-term growth would have increased reserves by **$1.1 million** as of September 30, 2023, demonstrating sensitivity to macroeconomic conditions[259](index=259&type=chunk) [Regulatory Developments](index=51&type=section&id=Regulatory%20Developments) - On **March 7, 2023**, the **CFPB** notified the Company of its intent to establish supervisory authority due to potential risks to consumers[261](index=261&type=chunk) - The Company disagrees with the CFPB's determination and has submitted a response, awaiting resolution[261](index=261&type=chunk) - If the CFPB establishes supervisory authority, the Company would be subject to examinations by the CFPB[261](index=261&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk due to its fixed-rate finance receivables and variable-rate borrowings. While **86.6%** of its debt is fixed-rate, an increase of **100 basis points** in variable rates would increase annual interest expense by approximately **$1.8 million** - Interest rate risk arises from fixed-rate finance receivables and variable-rate borrowings[262](index=262&type=chunk) - As of **September 30, 2023**, **86.6%** of the company's debt (securitizations) was fixed-rate[263](index=263&type=chunk) | Revolving Credit Facility | Balance (in thousands) | Effective Interest Rate (Sep 30, 2023) | | :-------------------------- | :--------------------- | :------------------------------------- | | Senior | $131,325 | 8.43% | | RMR IV Warehouse | $3,152 | 8.23% | | RMR V Warehouse | $26,628 | 8.31% | | RMR VI Warehouse | $18,123 | 7.93% | | RMR VII Warehouse | $4,327 | 8.43% | | Total Variable Debt | $183,555 | | - A **100 basis point** increase in variable rates would result in approximately **$1.8 million** of increased annual interest expense[263](index=263&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures with no material changes in internal control [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, evaluated disclosure controls and procedures as of **September 30, 2023**[265](index=265&type=chunk) - They concluded that the disclosure controls and procedures were **effective**[266](index=266&type=chunk) [Changes in Internal Control](index=53&type=section&id=Changes%20in%20Internal%20Control) - No material changes in internal control over financial reporting were identified during the period[267](index=267&type=chunk) [PART II. OTHER INFORMATION](index=54&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, not expected to materially impact financials - The Company is involved in various legal proceedings in the ordinary course of business[269](index=269&type=chunk) - Management does not believe these matters will have a material adverse effect on its financial condition, liquidity, or results of operations[269](index=269&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the prior fiscal year's Annual Report on Form 10-K - No material changes to risk factors from the Annual Report on Form 10-K for the fiscal year ended **December 31, 2022**[270](index=270&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors - No officers or directors adopted or terminated **Rule 10b5-1** or non-Rule 10b5-1 trading arrangements during the three months ended **September 30, 2023**[271](index=271&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Quarterly Report, including certifications and XBRL documents - Includes **Rule 13a-14(a) / 15(d)-14(a) Certifications** of Principal Executive Officer and Principal Financial Officer[272](index=272&type=chunk) - Contains **Section 1350 Certifications** and various **Inline XBRL Taxonomy Extension Documents**[272](index=272&type=chunk) [SIGNATURE](index=56&type=section&id=SIGNATURE) - Report signed by **Harpreet Rana**, Executive Vice President and Chief Financial Officer, on **November 3, 2023**[276](index=276&type=chunk)

Financial Data and Key Metrics Changes - The company generated net income of $8.8 million and diluted earnings per share of $0.91, driven by high-quality portfolio and revenue growth [16][22] - Total revenue grew 7% to $141 million, with total revenue yield and interest and fee yield at 32.7% and 29% respectively, although year-over-year yield declined due to a shift towards larger, higher quality loans [51][52] - The allowance for credit losses increased slightly, with a reserve rate expected to end the year between 10.4% and 10.6% [54] Business Line Data and Key Metrics Changes - Direct mail originations increased by 12%, while branch and digital originations decreased by 1% and 10% respectively, reflecting a deliberate reduction in originations to enhance credit quality [23] - The small loan portfolio grew by $30 million or 7% in the third quarter, supporting future revenue yield despite higher expected net credit losses [24] Market Data and Key Metrics Changes - The company ended the third quarter with a 30-plus-day delinquency rate of 7.3%, up 40 basis points from the second quarter, but consistent with normal seasonal trends [18] - The net credit loss rate in the third quarter was 11%, with expectations for approximately $52 million in net credit losses in the fourth quarter [52][27] Company Strategy and Development Direction - The company is focused on maintaining a conservative credit posture while preparing to lean back into growth when economic conditions improve [8][46] - Investments in technology, digital initiatives, and data analytics, including artificial intelligence, are seen as critical for achieving strategic objectives and sustainable growth [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2024, hoping for a stronger economic environment while remaining cautious due to uncertainties such as student loan repayments and geopolitical events [3][17] - The company plans to navigate the challenging economic environment by focusing on strong execution of its core business and maintaining a tight credit box [10][60] Other Important Information - The company has $613 million of unused capacity on its credit facility and $179 million of available liquidity, demonstrating its ability to protect against short-term disruptions [32] - A dividend of $0.30 per common share was declared for the fourth quarter, to be paid on December 13, 2023 [114] Q&A Session Summary Question: What are the expected losses in the fourth quarter? - Management anticipates consistent roll rates from prior quarters with a normal seasonal lift, despite elevated levels [63] Question: How does the loss experience differ between new and recurring customers? - The company has shifted its focus to present and former borrowers, which historically perform better than new borrowers [66][82] Question: What is the outlook for the fourth quarter and 2024? - The fourth quarter will serve as a basis for projecting 2024, with expectations of stress from earlier vintages but good performance from more recent vintages [90] Question: Will the trend of high-quality loans continue? - The company plans to continue leaning into auto-secured loans and maintaining a mix of high-quality loans [94] Question: How are expenses being managed? - The company is focused on ensuring that every dollar spent drives the business forward while maintaining profitability [71]