Regional Management(RM) - 2025 Q1 - Quarterly Report

GLOSSARY PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Regional Management Corp., covering Balance Sheets, Income, Equity, and Cash Flows Consolidated Balance Sheets Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------ | :----------------------------- | :------------------------------ | | Assets | | | | Cash | $4,158 | $3,951 | | Net finance receivables | $1,890,351 | $1,892,535 | | Total assets | $1,900,683 | $1,909,109 | | Liabilities | | | | Debt | $1,477,860 | $1,478,336 | | Total liabilities | $1,542,807 | $1,552,031 | | Stockholders' Equity | | | | Total stockholders' equity | $357,876 | $357,078 | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenue | | | | Interest and fee income | $136,553 | $128,818 | | Total revenue | $152,967 | $144,308 | | Expenses | | | | Provision for credit losses | $57,992 | $46,423 | | Total general and administrative expenses | $66,043 | $60,448 | | Interest expense | $19,771 | $17,504 | | Income before income taxes | $9,161 | $19,933 | | Income taxes | $2,154 | $4,728 | | Net income | $7,007 | $15,205 | | Basic EPS | $0.73 | $1.59 | | Diluted EPS | $0.70 | $1.56 | | Total comprehensive income | $6,774 | $15,358 | - Net income decreased by 53.9% YoY, from $15.2 million in Q1 2024 to $7.0 million in Q1 2025, primarily due to increased provision for credit losses and general and administrative expenses[14][146] Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (in thousands) | Item | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Beginning balance | $357,078 | $322,273 | | Cash dividends | $(2,957) | $(2,993) | | Repurchase of common stock | $(6,527) | — | | Share-based compensation | $3,588 | $1,832 | | Net income | $7,007 | $15,205 | | Other comprehensive loss (income) | $(233) | $153 | | Ending balance | $357,876 | $336,460 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $63,665 | $58,471 | | Net cash used in investing activities | $(60,267) | $(20,329) | | Net cash used in financing activities | $(12,563) | $(44,406) | | Net change in cash and restricted cash | $(9,165) | $(6,264) | | Cash and restricted cash at end of period | $126,470 | $122,409 | - Net cash provided by operating activities increased by $5.2 million YoY, primarily due to loan portfolio growth[174] - Net cash used in investing activities increased by $39.9 million YoY, mainly driven by increased originations of finance receivables[175] - Net cash used in financing activities decreased by $31.8 million YoY, primarily due to increased net advances on debt instruments, partially offset by higher common stock repurchases and debt issuance costs[176] Notes to Consolidated Financial Statements These notes provide detailed disclosures and explanations for the consolidated financial statements, covering business operations, accounting policies, and financial instruments Note 1. Nature of Business - The Company is engaged in the consumer finance business, offering large loans, small loans, and related insurance products, operating in 19 states under the name 'Regional Finance'[23] - The Company ceased accepting applications for retail loan products in November 2022 to focus on core loan portfolio growth, but continues to service existing retail loans[23][117] - Loan volume and contractual delinquency follow seasonal trends, with demand highest in Q2-Q4 and lowest in Q1, and delinquencies generally rising in the second half of the year, though macroeconomic factors have impacted these trends[25][123] Note 2. Basis of Presentation and Significant Accounting Policies - Financial statements are prepared in accordance with SEC regulations and GAAP for interim financial information, including normal recurring adjustments[26] - The Company consolidates Variable Interest Entities (VIEs) when it is the primary beneficiary, treating these transactions as secured borrowings, with pooled receivables and related debts remaining on the consolidated balance sheet[28][31][32] - Key estimates susceptible to change include the allowance for credit losses, valuation of deferred tax assets/liabilities, and fair value of financial instruments[34] - Recent accounting pronouncements (ASU 2023-09 on income tax disclosures and ASU 2024-03 on expense disclosures) are being evaluated for their impact on consolidated financial statements[35][36] Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses Net Finance Receivables by Loan Type (in thousands) | Loan Type | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------- | :----------------------------- | :------------------------------ | | Large loans | $1,345,825 | $1,336,780 | | Small loans | $543,824 | $554,686 | | Retail loans | $702 | $1,069 | | Total Net Finance Receivables | $1,890,351 | $1,892,535 | - The allowance for credit losses is estimated using a PD/LGD model, considering historical credit experience, current conditions, and reasonable economic forecasts, segmented by product type, FICO score, and delinquency status[42][43][44] Allowance for Credit Losses (in thousands) | Metric | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance (Allowance for credit losses) | $199,500 | $187,400 | | Provision for credit losses | $57,992 | $46,423 | | Credit losses | $(61,709) | $(49,193) | | Recoveries | $3,317 | $2,470 | | Ending balance (Allowance for credit losses) | $199,100 | $187,100 | | Allowance as percentage of net finance receivables | 10.5% | 10.7% | Delinquency Status of Net Finance Receivables | Delinquency Category | March 31, 2025 | December 31, 2024 | | :------------------- | :-------------