EX-99.1 2 d715982dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Regional Management Corp. Announces First Quarter 2014 Results

Greenville, South Carolina – April 29, 2014 – Regional Management Corp. (NYSE: RM), a diversified specialty consumer finance company, today announced results for the first quarter ended March 31, 2014.

First Quarter 2014 Highlights

 

  •   Total first quarter 2014 revenue was $49.6 million, a 28.4% increase from the prior-year period. Same-store1 revenue growth for the first quarter of 2014 was 16.8%.

 

  •   Finance receivables as of March 31, 2014 were $501.7 million, an increase of 16.0% from the prior-year period. Same-store finance receivables growth for the first quarter of 2014 was 5.7%.

 

  •   GAAP net income for the first quarter of 2014 was $5.6 million, a 17.1% decrease from the prior-year period. Diluted earnings per share were $0.43 based on a diluted share count of 13.0 million. Excluding $1.4 million of pre-tax benefit related to a one-time reversal of vacation pay liability, non-GAAP net income for the first quarter of 2014 was $4.7 million and diluted earnings per share were $0.36. For a reconciliation of non-GAAP to GAAP measures, please review the disclosures and table included with this release.

 

  •   Annualized net charge-offs as a percentage of average finance receivables for the first quarter of 2014 was 9.7%, an increase from 6.4% in the prior-year period. Provision for credit losses for the first quarter of 2014 was 34.2% of revenue, an increase from 20.9% in the prior-year period.

 

  •   Regional Management opened 17 new branches in the first quarter of 2014; as of March 31, 2014, Regional Management’s branch network consisted of 281 locations.

“While we continued to see significant top-line and same-store sales growth, our provision for credit losses was well above our estimate for the quarter, causing our net income to fall short of our first quarter goals,” said Thomas Fortin, Chief Executive Officer of Regional Management Corp. “For the first quarter 2014, our annualized net charge-offs were 9.7% of average finance receivables, necessitating a significant increase in our provision for credit losses. Contractually delinquent accounts decreased sequentially in the quarter from 8.0% to 7.3%, but we expect that

 

1  Defined as stores open for at least 13 months.

the increased level of net charge-offs will continue for several months. As a result, we have already made, and are actively making, a number of operational changes to reduce the level of fluctuation in our delinquencies and net charge-offs going forward. Overall, while we are very disappointed with our performance in the first quarter, our branch growth trajectory and our long-term strategy remains unchanged.”

First Quarter 2014 Results

For the first quarter ended March 31, 2014, Regional Management reported total revenue of $49.6 million, a 28.4% increase from $38.6 million in the prior-year period. Interest and fee income for the first quarter of 2014 was $44.1 million, a 29.5% increase from $34.0 million in the prior-year period, primarily due to a 16.0% year-over-year increase in finance receivables. Insurance income, net for the first quarter of 2014 was $3.3 million, an 11.2% increase from the prior-year period. Same-store revenue growth for the first quarter of 2014 was 16.8%.

Finance receivables outstanding at March 31, 2014 were $501.7 million, a 16.0% increase from $432.3 million in the prior-year period. Finance receivables increased due to the addition of 47 de novo branches and 2 acquired branches since March 31, 2013, as well as the increase in same-store finance receivables, which grew 5.7% in the first quarter.

Provision for credit losses in the first quarter of 2014 was $16.9 million versus $8.1 million in the prior-year period, primarily due to increased net charge-offs combined with elevated delinquency levels. Annualized net charge-offs as a percentage of average finance receivables for the first quarter of 2014 was 9.7%, an increase from 6.4% in the prior-year period. The higher delinquency level and downstream net charge-offs are primarily the result of elevated accounts per employee through the last five months of 2013 and most of the first quarter, which caused challenges in properly servicing the growth in accounts. While Regional Management was able to reduce its accounts per employee by the end of the quarter, it expects higher net charge-off levels will continue for several months primarily due to the previously elevated accounts-per-employee level.

General and administrative expenses for the first quarter of 2014 were $19.9 million, an increase of 19.2% from $16.7 million in the prior-year period, primarily due to increased personnel costs from opening and acquiring an additional 49 branches since March 31, 2013 and partially offset by a $1.4 million one-time benefit in the first quarter of 2014 related to the reversal of vacation pay liability. Regional Management’s efficiency ratio (the percentage of general and administrative expenses compared to total revenue) in the first quarter of 2014 was 40.1%, an improvement of 310 basis points from 43.2% in the prior-year period; excluding the one-time benefit, Regional Management’s efficiency ratio for the first quarter of 2014 would have been 42.9%.

GAAP net income for the first quarter of 2014 was $5.6 million, a 17.1% decrease compared to the prior-year period. Diluted earnings per share for the first quarter of 2014 were $0.43, a decrease from $0.53 in the prior-year period. Excluding $1.4 million of pre-tax benefit related to a one-time reversal of vacation pay liability, non-GAAP net income for the first quarter of 2014 was $4.7 million and diluted earnings per share were $0.36.

2014 De Novo Update

As of March 31, 2014, Regional Management’s branch network consisted of 281 locations. Regional Management opened 17 de novo branches in the first quarter of 2014 and plans to have an additional 11 de novo branches open by the end of the second quarter.

Liquidity and Capital Resources

As of March 31, 2014, Regional Management had finance receivables of $501.7 million and outstanding debt of $310.3 million on its $500.0 million senior revolving credit facility and on its $1.5 million cash management line of credit.

Conference Call Information

Regional Management Corp. will host a conference call and webcast today at 4:30 PM Eastern. Both the call and webcast are open to the general public.

The dial-in number for the conference call is (866) 318-8612, passcode 55336134. Please dial the number 10 minutes prior to the scheduled start time. A live webcast of the conference call will also be available on Regional Management’s website at www.RegionalManagement.com.

A replay of the call will be available two hours following the end of the call through midnight Eastern on Tuesday, May 6, 2014 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 75244588.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, which represent Regional Management Corp.’s expectations or beliefs concerning future events. 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: the continuation or worsening of adverse conditions in the global and domestic credit markets and uncertainties regarding, or the impact of, governmental responses to those conditions; changes in interest rates; risks related to acquisitions and new branches; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; recently-enacted or proposed legislation; 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 charge-offs); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management). Such factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not and is not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified specialty 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 and Georgia. 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, furniture and appliance retailers and its consumer website. For more information, please visit http://www.RegionalManagement.com.

Contacts:

Investor Relations

Garrett Edson, (203) 682-8331

Media Relations

Kim Paone, (646) 277-1216

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
March 31,		  
     2014      2013  

Revenue

      

Interest and fee income

    $ 44,078       $ 34,046   

Insurance income, net

      3,295         2,964   

Other income

      2,208         1,590   
  

 

 

     

 

 

  

Total revenue

      49,581         38,600   
  

 

 

     

 

 

  

Expenses

      

Provision for credit losses

      16,945         8,071   

General and administrative expenses

      

Personnel

      11,174         10,223   

Occupancy

      3,420         2,516   

Marketing

      982         505   

Other

      4,322         3,442   

Interest expense

      3,763         3,081   
  

 

 

     

 

 

  

Total expenses

      40,606         27,838   
  

 

 

     

 

 

  

Income before income taxes

      8,975         10,762   

Income taxes

      3,365         3,998   
  

 

 

     

 

 

  

Net income

    $ 5,610       $ 6,764   
  

 

 

     

 

 

  

Net income per common share:

      

Basic

    $ 0.44       $ 0.54   
  

 

 

     

 

 

  

Diluted

    $ 0.43       $ 0.53   
  

 

 

     

 

 

  

Weighted average common shares outstanding:

      

Basic

      12,654,927         12,502,378   
  

 

 

     

 

 

  

Diluted

      13,005,639         12,780,508   
  

 

 

     

 

 

  

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except per share amounts)

(Unaudited)

 

     March 31, 2014     December 31, 2013  

Assets

     

Cash

    $ 6,265      $ 4,121   

Gross finance receivables

      601,514        658,176   

Less unearned finance charges, insurance premiums, and commissions

      (99,780 )      (113,492 ) 
  

 

 

    

 

 

  

Finance receivables

      501,734        544,684   

Allowance for credit losses

      (34,325 )      (30,089 ) 
  

 

 

    

 

 

  

Net finance receivables

      467,409        514,595   

Property and equipment, net of accumulated depreciation

      7,370        7,100   

Repossessed assets at net realizable value

      806        548   

Goodwill

      716        716   

Intangible assets, net

      1,219        1,386   

Other assets

      4,826        5,422   
  

 

 

    

 

 

  

Total assets

    $ 488,611      $ 533,888   
  

 

 

    

 

 

  

Liabilities and Stockholders’ Equity

     

Liabilities:

     

Deferred tax liability, net

    $ 1,802      $ 2,653   

Accounts payable and accrued expenses

      9,320        7,312   

Senior revolving credit facility

      310,315        362,750   
  

 

 

    

 

 

  

Total liabilities

      321,437        372,715   

Commitments and Contingencies

     

Stockholders’ equity:

     

Preferred stock, $0.10 par value, 100,000,000 shares authorized, no shares issued and outstanding at March 31, 2014 and December 31, 2013

      —         —    

Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,668,577 and 12,652,197 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

      1,267        1,265   

Additional paid-in-capital

      83,706        83,317   

Retained earnings

      82,201        76,591   
  

 

 

    

 

 

  

Total stockholders’ equity

      167,174        161,173   
  

 

 

    

 

 

  

Total liabilities and stockholders’ equity

    $ 488,611      $ 533,888   
  

 

 

    

 

 

  

Regional Management Corp.

Selected Financial Data

Three Months Ended March 31, 2014 and 2013

(Unaudited)

(in thousands)

 

     Three Months Ended March 31,  
     2014     2013  
     Average
Finance
Receivables		      Average
Yield
(Annualized)		     Average
Finance
Receivables		      Average
Yield
(Annualized)		  

Small installment loans

    $ 274,787         45.3 %    $ 187,658         43.9 % 

Large installment loans

      42,607         26.7 %      49,017         27.3 % 

Automobile purchase loans

      177,962         19.7 %      171,411         20.4 % 

Retail purchase loans

      30,466         17.9 %      30,650         18.0 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Total interest and fee yield

    $ 525,822         33.5 %    $ 438,736         31.0 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Total revenue yield

    $ 525,822         37.7 %    $ 438,736         35.2 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

 

     Components of Increase in Interest and Fee Income
Three Months Ended March 31, 2014
Compared to Three Months Ended March 31, 2013
Increase (Decrease)		  
     Volume     Rate     Net  

Small installment loans

    $ 9,848      $ 684      $ 10,532   

Large installment loans

      (447 )      (61 )      (508 ) 

Automobile purchase loans

      328        (299 )      29   

Retail purchase loans

      (8 )      (13 )      (21 ) 
  

 

 

    

 

 

    

 

 

  

Total increase in interest and fee income

    $ 9,721      $ 311      $ 10,032   
  

 

 

    

 

 

    

 

 

  

 

    

Loans Originated (1)

Three Months Ended March 31,

  
     2014      2013  

Small installment loans

    $ 128,244       $ 101,710   

Large installment loans

      13,583         12,508   

Automobile purchase loans

      23,696         34,934   

Retail purchase loans

      8,547         8,923   
  

 

 

     

 

 

  

Total finance receivables

    $ 174,070       $ 158,075   
  

 

 

     

 

 

  

 

(1) Represents gross balance of loan originations, including unearned finance charges

 

     Three Months Ended March 31,  
     2014     2013  
     Amount      Percentage of
Average Finance
Receivables
(Annualized)		     Amount      Percentage of
Average Finance
Receivables
(Annualized)		  

Net charge-offs as a percentage of average finance receivables

    $ 12,709         9.7 %    $ 7,057         6.4 % 
     Amount      Percentage of
Total Revenue		     Amount      Percentage of
Total Revenue		  

Provision for credit losses

    $ 16,945         34.2 %    $ 8,071         20.9 % 

General and administrative expenses

    $ 19,898         40.1 %    $ 16,686         43.2 % 
     Amount      Growth Rate     Amount      Growth Rate  

Same store finance receivables at period-end/growth rate

    $ 446,814         5.7 %    $ 373,563         28.7 % 

Same store revenue during period/growth rate

    $ 44,583         16.8 %    $ 34,066         14.4 % 

Number of branches in calculation

      221           168      

     Finance Receivables as of March 31,  
     2014      2013  

Small installment loans

    $ 255,061       $ 180,386   

Large installment loans

      41,868         46,023   

Automobile purchase loans

      175,152         175,299   

Retail purchase loans

      29,653         30,636   
  

 

 

     

 

 

  

Total finance receivables

    $ 501,734       $ 432,344   
  

 

 

     

 

 

  

Number of branches at period end

      281         232   

Average finance receivables per branch

    $ 1,786       $ 1,864   
  

 

 

     

 

 

  

 

     March 31, 2014     December 31, 2013     March 31, 2013  
     Amount      Percentage of
Total Finance
Receivables		     Amount      Percentage of
Total Finance
Receivables		     Amount      Percentage of
Total Finance
Receivables		  

Allowance for credit losses

    $ 34,325         6.8 %    $ 30,089         5.5 %    $ 24,630         5.7 % 

Delinquent accounts:

                

30 to 59 days

    $ 12,034         2.4 %    $ 17,088         3.1 %    $ 9,961         2.3 % 

60 to 89 days

      7,479         1.5 %      9,267         1.7 %      5,451         1.3 % 

90 to 119 days

      5,653         1.1 %      6,842         1.3 %      3,767         0.9 % 

120 to 149 days

      4,242         0.8 %      5,108         0.9 %      2,464         0.6 % 

150 to 179 days

      3,557         0.7 %      3,409         0.6 %      1,876         0.4 % 

180 days and over

      3,700         0.7 %      2,096         0.4 %      2,986         0.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Total contractual delinquency

    $ 36,665         7.3 %    $ 43,810         8.0 %    $ 26,505         6.1 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Regional Management Corp. and Subsidiaries

Unaudited Non-GAAP Reconciliation of Selected Financial Data

For the Three Months Ended March 31, 2014

(in thousands, except per share amounts)

 

     Three Months Ended March 31, 2014  
     Actual     Adjustments     Non-GAAP  

General and administrative expenses

    $ 19,898      $ 1,388 (1)    $ 21,286   

Income taxes

    $ 3,365      $ (521 )(2)    $ 2,844   

Net income

    $ 5,610      $ (867 )    $ 4,743   

Diluted net income per common share

    $ 0.43        $ 0.36   

Diluted weighted average common shares outstanding

      13,005,639          13,005,639   

Efficiency ratio

      40.1 %        42.9 % 

 

(1) Benefit related to the reversal of vacation pay liability
(2) Tax effect of the reversal of vacation pay liability