Regional Management(US:RM)2023-11-02 01:15Financial 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]