UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2016
Regional Management Corp.
(Exact name of registrant as specified in its charter)
Delaware | 001-35477 | 57-0847115 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
509 West Butler Road
Greenville, South Carolina 29607
(Address of principal executive offices) (zip code)
(864) 422-8011
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On July 26, 2016, Regional Management Corp. (the Company) issued a press release announcing financial results for the quarter and six months ended June 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. On July 26, 2016, the Company will host a conference call to discuss financial results for the quarter and six months ended June 30, 2016. A copy of the presentation to be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
All information in the press release and the presentation is furnished under Item 2.02 of Form 8-K, Results of Operations and Financial Condition, and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit No. |
Description | |
99.1 | Press Release issued by Regional Management Corp. on July 26, 2016, announcing financial results for Regional Management Corp. for the quarter and six months ended June 30, 2016. | |
99.2 | Presentation of Regional Management Corp., dated July 26, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Regional Management Corp. | ||||||
Date: July 26, 2016 |
By: | /s/ Donald E. Thomas | ||||
Donald E. Thomas | ||||||
Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Description of Exhibit | |
99.1 | Press Release issued by Regional Management Corp. on July 26, 2016, announcing financial results for Regional Management Corp. for the quarter and six months ended June 30, 2016. | |
99.2 | Presentation of Regional Management Corp., dated July 26, 2016. |
Exhibit 99.1
Regional Management Corp. Announces Second Quarter 2016 Results
- Net income of $5.9 million; diluted earnings per share of $0.49 -
- Non-GAAP net income of $6.3 million; non-GAAP diluted earnings per share of $0.53 -
- Total finance receivables of $646 million, up 12.8% compared to prior-year period -
Greenville, South Carolina July 26, 2016 Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the second quarter ended June 30, 2016.
Second Quarter 2016 Highlights
| Net income for the second quarter of 2016 was $5.9 million, an increase of $0.5 million, or 9.3%, from the prior-year period; non-GAAP net income was $6.3 million, an increase of 16.5% from the prior-year period. Diluted earnings per share were $0.49, and on a non-GAAP basis, diluted earnings per share were $0.53, each calculated on a diluted share count of 12.0 million. Non-GAAP net income excludes $0.6 million of non-operating system implementation costs. |
| Total finance receivables as of June 30, 2016 were $646 million, an increase of 12.8% from the prior year and up 6.3% sequentially: |
| Fifth consecutive quarter that total finance receivables have increased at least 10% over the prior-year period. |
| Large loan finance receivables of $195 million increased $102 million, or 109%, from the prior-year period and now represent over 30% of the total loan portfolio. |
| Total revenue for the second quarter of 2016 was $57.3 million, a $4.3 million, or 8.2%, increase from the prior-year period. Revenue growth over the prior-year period was driven by a 12.8% increase in receivables, partially offset by an overall yield decline of 180 basis points. On a sequential basis, total yield was comparable to the prior two quarters. |
1
| Net charge-offs for the second quarter of 2016 were $13.4 million, an increase of $0.5 million versus the prior-year period. Annualized net charge-offs of 8.6% of average finance receivables were down 80 basis points compared to the prior-year period. |
| Total delinquencies as a percentage of total finance receivables as of June 30, 2016 were 18.3%, an increase from the seasonally low 16.7% as of March 31, 2016 and an improvement from 20.6% as of June 30, 2015. |
| 30+ day contractual delinquencies were 6.8%, an increase sequentially from 6.2% as of March 31, 2016 and from 6.4% as of June 30, 2015. |
The second quarter was a very solid quarter for the company across a number of important dimensions, said Michael R. Dunn, Chief Executive Officer of Regional Management Corp. Non-GAAP net income of $6.3 million was up 17% versus the prior-year period, driven by the combined dynamic of volume-driven revenue, strong credit performance and a relatively flat expense base. This is the operating model that we have been building over the last six quarters, and it continues to produce improved operating performance.
Earlier this month, we converted our second state, New Mexico, to our new operating platform, continued Mr. Dunn. The system continues to perform up to our expectations, and we remain on track to convert all of our remaining states by year end. Finally, we also announced the appointment of our new CEO, Peter R. Knitzer, effective August 1st. Given Peters background, I am confident that he will successfully lead the company going forward and believe that he will fully leverage the companys market opportunities.
I would also like to thank the entire Regional team for their collective efforts in helping to re-establish Regional on the right track over the past couple of years. We are now in a much better position than when I first became CEO, and that is in large measure due to their hard work and commitment to what we needed to do. I know they will continue to support Peter with the same energy and commitment with which they supported me, concluded Mr. Dunn.
Second Quarter 2016 Results
Finance receivables outstanding at June 30, 2016 were $645.7 million, a 12.8% increase from $572.5 million in the prior year. Finance receivables increased primarily due to an increase in both the small and large loan portfolios and the net addition of 22 de novo branches since June 30, 2015.
For the second quarter ended June 30, 2016, the Company reported total revenue of $57.3 million, an 8.2% increase from $53.0 million in the prior-year period. Interest and fee income for the second quarter of 2016 was $52.6 million, a 10.3% increase from $47.7 million in the prior-year period, primarily due to an increase in the portfolios of both small and large loans compared to the prior-year period and partially offset by lower interest and fee yield, primarily in the convenience check portfolio. Insurance income, net for the second quarter of 2016 was $2.6 million, a decline of $0.5 million from the prior-year period. Other income for the second quarter of 2016 was $2.1 million, a 3.5% decline from the prior-year period reflective of lower late fee charges from the improving credit quality of the portfolio.
2
The provision for credit losses in the second quarter of 2016 was $13.4 million versus $12.1 million in the prior-year period. Net charge-offs were $13.4 million in the second quarter of 2016 versus $12.9 million in the prior-year period. Annualized net charge-offs as a percentage of average finance receivables in the second quarter of 2016 were 8.6%, an improvement from 9.4% in the prior-year period.
On a sequential basis, net charge-offs of $13.4 million were a reduction of $1.6 million from the first quarter of 2016, consistent with the smaller dollar amount of accounts in the last three delinquency buckets at March 31, 2016 compared to December 31, 2015.
General and administrative expenses for the second quarter of 2016 were $29.5 million, an increase of 4.6%, or $1.3 million, from the prior-year period, driven in part by $0.6 million in loan system conversion costs. Branch expenses in the second quarter of 2016 slightly increased $0.2 million from the prior-year period, even with 22 net new branches added since June 30, 2015. Excluding the loan system conversion costs in the second quarter of 2016, general and administrative expenses for the second quarter of 2016 would have been $28.9 million versus $28.2 million in the prior-year period.
GAAP net income for the second quarter of 2016 was $5.9 million, a 9.3% increase compared to GAAP net income of $5.4 million in the prior-year period. Diluted earnings per share for the second quarter of 2016 were $0.49, an increase from $0.41 in the prior-year period. Excluding the aforementioned non-operating expense in the second quarter of 2016, non-GAAP net income in the second quarter of 2016 would have been $6.3 million and diluted earnings per share would have been $0.53. For a reconciliation of non-GAAP financial measures to the nearest comparable GAAP financial measure, please refer to the reconciliation table accompanying this release.
First Half 2016 Results
For the six months ended June 30, 2016, the Company reported total revenue of $114.0 million, an 8.1% increase from $105.5 million in the prior-year period. Interest and fee income for the six months ended June 30, 2016 was $103.9 million, a 9.7% increase from $94.7 million in the prior-year period, primarily due to a significant increase in the portfolios of both small and large installment loans compared to the prior-year period. Insurance income for the six months ended June 30, 2016 was $5.5 million, an 8.4% decrease from the prior-year period. Other income for the six months ended June 30, 2016 was $4.6 million, a 3.2% decline from the prior-year period reflective of lower late fee charges from the improving credit quality of the portfolio.
The provision for credit losses for the six months ended June 30, 2016 was $27.2 million versus $21.8 million in the prior-year period. Net charge-offs for the six months ended June 30, 2016 were $28.4 million compared to $26.2 million in the prior-year period. Annualized net charge-offs as a percentage of average finance receivables for the six months ended June 30, 2016 was 9.1%, a decline from 9.6% in the prior-year period.
3
General and administrative expenses for the six months ended June 30, 2016 were $59.4 million, a decrease of $1.5 million, or 2.5%, from $60.9 million in the prior-year period. Included in the six months 2016 results were a total of $1.0 million in loan system conversion costs, while the six months 2015 results included $2.7 million in non-operating expenses. Branch expenses include changes in staffing and incentive plans for all branches as well as the expenses associated with 38 net branches added since December 31, 2014.
GAAP net income for the six months ended June 30, 2016 was $11.1 million, a 16.8% increase compared to GAAP net income of $9.5 million in the prior-year period, and diluted earnings per share for the six months ended June 30, 2016 were $0.89 compared to $0.73 in the prior-year period. Excluding the aforementioned non-operating expenses, non-GAAP net income for the six months ended June 30, 2016 totaled $11.7 million and non-GAAP diluted earnings per share were $0.94, compared to non-GAAP net income of $11.2 million and non-GAAP diluted earnings per share of $0.86 in the prior-year period.
2016 De Novo Outlook
As of June 30, 2016, the Companys branch network consisted of 338 locations. The Company closed one branch in the second quarter of 2016. For the full year 2016, due to its focus on implementing its new loan system, the Company is now projecting to open approximately 15 de novo branches.
Liquidity and Capital Resources
As of June 30, 2016, the Company had finance receivables of $645.7 million and outstanding long-term debt of $441.1 million (consisting of $386.6 million of long-term debt on its $538.0 million senior revolving credit facility and $54.6 million of long-term debt on its $75.7 million amortizing loan).
Conference Call Information
Regional Management Corp. will host a conference call and webcast today at 5:00 PM ET to discuss these results.
The dial-in number for the conference call is (855) 590-2959 (toll-free) or (503) 343-6651 (direct), passcode 47978795. Please dial the number 10 minutes prior to the scheduled start time.
*** A supplemental slide presentation will be made available on Regional Managements website prior to the earnings call at www.RegionalManagement.com. ***
In addition, a live webcast of the conference call will also be available on Regional Managements website at www.RegionalManagement.com.
A replay will be available following the end of the call through Tuesday, August 2, 2016, by telephone at (855) 859-2056 (toll-free) or (404) 537-3406 (direct), passcode 47978795. A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.
4
Forward-Looking Statements
This press release may contain various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which represent Regional Management Corp.s expectations or beliefs concerning future events. Words such as may, will, should, likely, anticipates, expects, intends, plans, projects, believes, estimates, outlook and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following: 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; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; 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 Managements markets and general changes in the economy (particularly in the markets served by Regional Management); changes in operating and administrative expenses; and the departure, transition or replacement of key personnel. Such factors and others are discussed in greater detail in Regional Managements filings with the Securities and Exchange Commission. Regional Management will not update the information contained in this press release beyond the publication date, except to the extent required by law, and is not responsible for changes made to this document by wire services or Internet services.
About Regional Management Corp.
Regional Management Corp. (NYSE: RM) is a diversified consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. Regional Management began operations in 1987 with four branches in South Carolina and has since expanded its branch network across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma, New Mexico, Georgia and Virginia. Each of its loan products is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Managements loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, retailers and its consumer website. For more information, please visit www.RegionalManagement.com.
Contact:
Investor Relations
Garrett Edson, (203) 682-8331
5
Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Better (Worse) | Better (Worse) | |||||||||||||||||||||||||||||||
2Q16 | 2Q15 | $ | % | YTD16 | YTD15 | $ | % | |||||||||||||||||||||||||
Revenue |
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Interest and fee income |
$ | 52,589 | $ | 47,668 | $ | 4,921 | 10.3 | % | $ | 103,889 | $ | 94,733 | $ | 9,156 | 9.7 | % | ||||||||||||||||
Insurance income, net |
2,601 | 3,120 | (519 | ) | (16.6 | )% | 5,540 | 6,049 | (509 | ) | (8.4 | )% | ||||||||||||||||||||
Other income |
2,135 | 2,213 | (78 | ) | (3.5 | )% | 4,593 | 4,743 | (150 | ) | (3.2 | )% | ||||||||||||||||||||
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Total revenue |
57,325 | 53,001 | 4,324 | 8.2 | % | 114,022 | 105,525 | 8,497 | 8.1 | % | ||||||||||||||||||||||
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Expenses |
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Provision for credit losses |
13,386 | 12,102 | (1,284 | ) | (10.6 | )% | 27,177 | 21,814 | (5,363 | ) | (24.6 | )% | ||||||||||||||||||||
Personnel |
16,674 | 16,211 | (463 | ) | (2.9 | )% | 33,801 | 35,971 | 2,170 | 6.0 | % | |||||||||||||||||||||
Occupancy |
4,770 | 4,227 | (543 | ) | (12.8 | )% | 9,633 | 8,333 | (1,300 | ) | (15.6 | )% | ||||||||||||||||||||
Marketing |
2,062 | 2,009 | (53 | ) | (2.6 | )% | 3,577 | 4,480 | 903 | 20.2 | % | |||||||||||||||||||||
Other |
6,042 | 5,796 | (246 | ) | (4.2 | )% | 12,342 | 12,082 | (260 | ) | (2.2 | )% | ||||||||||||||||||||
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Total general and administrative |
29,548 | 28,243 | (1,305 | ) | (4.6 | )% | 59,353 | 60,866 | 1,513 | 2.5 | % | |||||||||||||||||||||
Interest expense |
4,811 | 3,932 | (879 | ) | (22.4 | )% | 9,521 | 7,536 | (1,985 | ) | (26.3 | )% | ||||||||||||||||||||
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Income before income taxes |
9,580 | 8,724 | 856 | 9.8 | % | 17,971 | 15,309 | 2,662 | 17.4 | % | ||||||||||||||||||||||
Income taxes |
3,668 | 3,316 | (352 | ) | (10.6 | )% | 6,883 | 5,818 | (1,065 | ) | (18.3 | )% | ||||||||||||||||||||
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Net income |
$ | 5,912 | $ | 5,408 | $ | 504 | 9.3 | % | $ | 11,088 | $ | 9,491 | $ | 1,597 | 16.8 | % | ||||||||||||||||
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Net income per common share: |
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Basic |
$ | 0.50 | $ | 0.42 | $ | 0.08 | 19.0 | % | $ | 0.90 | $ | 0.74 | $ | 0.16 | 21.6 | % | ||||||||||||||||
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Diluted |
$ | 0.49 | $ | 0.41 | $ | 0.08 | 19.5 | % | $ | 0.89 | $ | 0.73 | $ | 0.16 | 21.9 | % | ||||||||||||||||
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Weighted-average shares outstanding: |
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Basic |
11,756 | 12,845 | 1,089 | 8.5 | % | 12,256 | 12,812 | 556 | 4.3 | % | ||||||||||||||||||||||
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Diluted |
11,974 | 13,078 | 1,104 | 8.4 | % | 12,462 | 13,040 | 578 | 4.4 | % | ||||||||||||||||||||||
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Return on average assets (annualized) |
3.8 | % | 4.0 | % | 3.6 | % | 3.6 | % | ||||||||||||||||||||||||
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Return on average equity (annualized) |
12.0 | % | 11.5 | % | 11.1 | % | 10.3 | % | ||||||||||||||||||||||||
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6
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in thousands, except par value amounts)
Increase (Decrease) | ||||||||||||||||
2Q16 | 2Q15 | $ | % | |||||||||||||
Assets |
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Cash |
$ | 2,827 | $ | 4,793 | $ | (1,966 | ) | (41.0 | )% | |||||||
Gross finance receivables |
820,688 | 704,862 | 115,826 | 16.4 | % | |||||||||||
Unearned finance charges, insurance premiums, and commissions |
(174,944 | ) | (132,337 | ) | (42,607 | ) | (32.2 | )% | ||||||||
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Finance receivables |
645,744 | 572,525 | 73,219 | 12.8 | % | |||||||||||
Allowance for credit losses |
(36,200 | ) | (36,171 | ) | (29 | ) | (0.1 | )% | ||||||||
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Net finance receivables |
609,544 | 536,354 | 73,190 | 13.6 | % | |||||||||||
Property and equipment, net of accumulated depreciation |
9,073 | 7,820 | 1,253 | 16.0 | % | |||||||||||
Restricted cash |
8,237 | 1,901 | 6,336 | 333.3 | % | |||||||||||
Intangible assets, net |
4,021 | 1,507 | 2,514 | 166.8 | % | |||||||||||
Goodwill |
716 | 716 | | 0.0 | % | |||||||||||
Repossessed assets at net realizable value |
488 | 407 | 81 | 19.9 | % | |||||||||||
Deferred tax asset, net |
| 2,305 | (2,305 | ) | (100.0 | )% | ||||||||||
Other assets |
7,897 | 4,548 | 3,349 | 73.6 | % | |||||||||||
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Total assets |
$ | 642,803 | $ | 560,351 | $ | 82,452 | 14.7 | % | ||||||||
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Liabilities and Stockholders Equity |
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Liabilities: |
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Long-term debt |
$ | 441,147 | $ | 359,491 | $ | 81,656 | 22.7 | % | ||||||||
Unamortized debt issuance costs |
(2,285 | ) | (630 | ) | (1,655 | ) | (262.7 | )% | ||||||||
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Net long-term debt |
438,862 | 358,861 | 80,001 | 22.3 | % | |||||||||||
Accounts payable and accrued expenses |
10,571 | 10,733 | (162 | ) | (1.5 | )% | ||||||||||
Deferred tax liability, net |
446 | | 446 | 100.0 | % | |||||||||||
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Total liabilities |
449,879 | 369,594 | 80,285 | 21.7 | % | |||||||||||
Commitments and Contingencies |
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Stockholders equity: |
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Preferred stock, $0.10 par value, 100,000 shares authorized, no shares issued or outstanding |
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Common stock, $0.10 par value, 1,000,000 shares authorized, 12,961 shares issued and 11,415 shares outstanding at June 30, 2016 and 12,889 shares issued and outstanding at June 30, 2015 |
1,296 | 1,289 | 7 | 0.5 | % | |||||||||||
Additional paid-in-capital |
90,828 | 88,584 | 2,244 | 2.5 | % | |||||||||||
Retained earnings |
125,846 | 100,884 | 24,962 | 24.7 | % | |||||||||||
Treasury stock, at cost, 1,546 shares at June 30, 2016 |
(25,046 | ) | | (25,046 | ) | (100.0 | )% | |||||||||
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Total stockholders equity |
192,924 | 190,757 | 2,167 | 1.1 | % | |||||||||||
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Total liabilities and stockholders equity |
$ | 642,803 | $ | 560,351 | $ | 82,452 | 14.7 | % | ||||||||
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7
Regional Management Corp. and Subsidiaries
Selected Financial Data
(Unaudited)
(in thousands, except per share amounts)
Averages and Yields | ||||||||||||||||||||||||
2Q16 | 1Q16 | 2Q15 | ||||||||||||||||||||||
Average Finance Receivables |
Average Yield (Annualized) |
Average Finance Receivables |
Average Yield (Annualized) |
Average Finance Receivables |
Average Yield (Annualized) |
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Branch small loans |
$ | 154,843 | 44.5 | % | $ | 153,516 | 43.1 | % | $ | 130,806 | 45.3 | % | ||||||||||||
Convenience checks |
158,545 | 41.5 | % | 172,133 | 40.8 | % | 171,323 | 45.0 | % | |||||||||||||||
Large loans |
178,683 | 28.8 | % | 152,938 | 28.2 | % | 79,756 | 27.7 | % | |||||||||||||||
Automobile loans |
103,626 | 17.9 | % | 111,008 | 18.2 | % | 143,659 | 19.3 | % | |||||||||||||||
Retail loans |
29,007 | 19.1 | % | 27,923 | 19.2 | % | 24,556 | 18.8 | % | |||||||||||||||
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Total interest and fee yield |
$ | 624,704 | 33.7 | % | $ | 617,518 | 33.2 | % | $ | 550,100 | 34.7 | % | ||||||||||||
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Total revenue yield |
$ | 624,704 | 36.7 | % | $ | 617,518 | 36.7 | % | $ | 550,100 | 38.5 | % | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
Components of Increase in Interest and Fee Income 2Q16 Compared to 2Q15 Increase (Decrease) |
||||||||||||
Volume | Rate | Net | ||||||||||
Branch small loans |
$ | 2,677 | $ | (258 | ) | $ | 2,419 | |||||
Convenience checks |
(1,382 | ) | (1,409 | ) | (2,791 | ) | ||||||
Large loans |
7,119 | 238 | 7,357 | |||||||||
Automobile loans |
(1,823 | ) | (472 | ) | (2,295 | ) | ||||||
Retail loans |
213 | 18 | 231 | |||||||||
|
|
|
|
|
|
|||||||
Total increase (decrease) in interest and fee income |
$ | 6,804 | $ | (1,883 | ) | $ | 4,921 | |||||
|
|
|
|
|
|
Net Loans Originated (1) | ||||||||||||||||||||||||||||
2Q16 | 1Q16 | QoQ $ Inc (Dec) |
QoQ % Inc (Dec) |
2Q15 | YoY $ Inc (Dec) |
YoY % Inc (Dec) |
||||||||||||||||||||||
Branch small loans |
$ | 83,276 | $ | 58,399 | $ | 24,877 | 42.6 | % | $ | 80,818 | $ | 2,458 | 3.0 | % | ||||||||||||||
Convenience checks |
69,773 | 55,978 | 13,795 | 24.6 | % | 90,745 | (20,972 | ) | (23.1 | )% | ||||||||||||||||||
Large loans |
72,174 | 48,569 | 23,605 | 48.6 | % | 46,134 | 26,040 | 56.4 | % | |||||||||||||||||||
Automobile loans |
9,355 | 8,485 | 870 | 10.3 | % | 11,802 | (2,447 | ) | (20.7 | )% | ||||||||||||||||||
Retail loans |
8,627 | 8,701 | (74 | ) | (0.9 | )% | 8,136 | 491 | 6.0 | % | ||||||||||||||||||
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|||||||||||||||
Total net loans originated |
$ | 243,205 | $ | 180,132 | $ | 63,073 | 35.0 | % | $ | 237,635 | $ | 5,570 | 2.3 | % | ||||||||||||||
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(1) | Represents the balance of loan origination and refinancing net of unearned finance charges |
8
Other Key Metrics | ||||||||||||
2Q16 | 1Q16 | 2Q15 | ||||||||||
Net charge-offs |
$ | 13,416 | $ | 15,013 | $ | 12,881 | ||||||
Percentage of average finance receivables (annualized) |
8.6 | % | 9.7 | % | 9.4 | % | ||||||
Provision for credit losses |
$ | 13,386 | $ | 13,791 | $ | 12,102 | ||||||
Percentage of average finance receivables (annualized) |
8.6 | % | 8.9 | % | 8.8 | % | ||||||
Percentage of total revenue |
23.4 | % | 24.3 | % | 22.8 | % | ||||||
General and administrative expenses |
$ | 29,548 | $ | 29,805 | $ | 28,243 | ||||||
Percentage of average finance receivables (annualized) |
18.9 | % | 19.3 | % | 20.5 | % | ||||||
Percentage of total revenue |
51.5 | % | 52.6 | % | 53.3 | % | ||||||
Same store results: |
||||||||||||
Finance receivables at period-end |
$ | 611,589 | $ | 552,313 | $ | 545,928 | ||||||
Finance receivable growth rate |
9.5 | % | 7.3 | % | 8.0 | % | ||||||
Number of branches in calculation |
306 | 300 | 281 |
Finance Receivables by Product | ||||||||||||||||||||||||||||
2Q16 | 1Q16 | QoQ $ Inc (Dec) |
QoQ % Inc (Dec) |
2Q15 | YoY $ Inc (Dec) |
YoY % Inc (Dec) |
||||||||||||||||||||||
Branch small loans |
$ | 162,562 | $ | 148,700 | $ | 13,862 | 9.3 | % | $ | 140,161 | $ | 22,401 | 16.0 | % | ||||||||||||||
Convenience checks |
157,515 | 161,802 | (4,287 | ) | (2.6 | )% | 174,786 | (17,271 | ) | (9.9 | )% | |||||||||||||||||
Large loans |
194,857 | 162,301 | 32,556 | 20.1 | % | 93,203 | 101,654 | 109.1 | % | |||||||||||||||||||
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|
|
|||||||||||||||
Total core loans |
514,934 | 472,803 | 42,131 | 8.9 | % | 408,150 | 106,784 | 26.2 | % | |||||||||||||||||||
Automobile loans |
100,721 | 106,297 | (5,576 | ) | (5.2 | )% | 139,593 | (38,872 | ) | (27.8 | )% | |||||||||||||||||
Retail loans |
30,089 | 28,263 | 1,826 | 6.5 | % | 24,782 | 5,307 | 21.4 | % | |||||||||||||||||||
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|
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|
|
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|
|
|
|
|
|
|
|||||||||||||||
Total finance receivables |
$ | 645,744 | $ | 607,363 | $ | 38,381 | 6.3 | % | $ | 572,525 | $ | 73,219 | 12.8 | % | ||||||||||||||
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|
|||||||||||||||
Number of branches at period end |
338 | 339 | (1 | ) | (0.3 | )% | 316 | 22 | 7.0 | % | ||||||||||||||||||
Average finance receivables per branch |
$ | 1,910 | $ | 1,792 | $ | 118 | 6.6 | % | $ | 1,812 | $ | 98 | 5.4 | % | ||||||||||||||
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|
9
Contractual Delinquency by Aging | ||||||||||||||||||||||||
2Q16 | 1Q16 | 2Q15 | ||||||||||||||||||||||
Allowance for credit losses |
$ | 36,200 | 5.6 | % | $ | 36,230 | 6.0 | % | $ | 36,171 | 6.3 | % | ||||||||||||
Current |
527,080 | 81.7 | % | 505,801 | 83.3 | % | 454,424 | 79.4 | % | |||||||||||||||
1 to 29 days past due |
74,439 | 11.5 | % | 63,686 | 10.5 | % | 81,275 | 14.2 | % | |||||||||||||||
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|||||||||||||
Delinquent accounts: |
||||||||||||||||||||||||
30 to 59 days |
16,710 | 2.5 | % | 11,986 | 1.9 | % | 14,665 | 2.5 | % | |||||||||||||||
60 to 89 days |
10,045 | 1.6 | % | 7,640 | 1.3 | % | 8,113 | 1.4 | % | |||||||||||||||
90 to 119 days |
7,237 | 1.1 | % | 7,099 | 1.1 | % | 5,633 | 1.0 | % | |||||||||||||||
120 to 149 days |
5,358 | 0.8 | % | 5,914 | 1.0 | % | 4,597 | 0.8 | % | |||||||||||||||
150 to 179 days |
4,875 | 0.8 | % | 5,237 | 0.9 | % | 3,818 | 0.7 | % | |||||||||||||||
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|
|
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|
|
|
|
|
|
|||||||||||||
Total contractual delinquency |
$ | 44,225 | 6.8 | % | $ | 37,876 | 6.2 | % | $ | 36,826 | 6.4 | % | ||||||||||||
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|
|
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|
|
|
|
|
|
|||||||||||||
Total finance receivables |
$ | 645,744 | 100.0 | % | $ | 607,363 | 100.0 | % | $ | 572,525 | 100.0 | % | ||||||||||||
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|||||||||||||
1 day and over past due |
$ | 118,664 | 18.3 | % | $ | 101,562 | 16.7 | % | $ | 118,101 | 20.6 | % | ||||||||||||
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|||||||||||||
Contractual Delinquency by Product | ||||||||||||||||||||||||
2Q16 | 1Q16 | 2Q15 | ||||||||||||||||||||||
Branch small loans |
$ | 14,096 | 8.7 | % | $ | 12,627 | 8.5 | % | $ | 10,804 | 7.7 | % | ||||||||||||
Convenience checks |
12,340 | 7.8 | % | 12,351 | 7.6 | % | 13,561 | 7.8 | % | |||||||||||||||
Large loans |
8,459 | 4.3 | % | 5,561 | 3.4 | % | 2,748 | 2.9 | % | |||||||||||||||
Automobile loans |
7,768 | 7.7 | % | 6,120 | 5.8 | % | 8,619 | 6.2 | % | |||||||||||||||
Retail loans |
1,562 | 5.2 | % | 1,217 | 4.3 | % | 1,094 | 4.4 | % | |||||||||||||||
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|
|||||||||||||
Total contractual delinquency |
$ | 44,225 | 6.8 | % | $ | 37,876 | 6.2 | % | $ | 36,826 | 6.4 | % | ||||||||||||
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10
Quarterly Trend | ||||||||||||||||||||||||||||
2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | QoQ $ B(W) |
YoY $ B(W) |
||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||
Interest and fee income |
$ | 47,668 | $ | 49,741 | $ | 51,320 | $ | 51,300 | $ | 52,589 | $ | 1,289 | $ | 4,921 | ||||||||||||||
Insurance income, net |
3,120 | 2,767 | 2,838 | 2,939 | 2,601 | (338 | ) | (519 | ) | |||||||||||||||||||
Other income |
2,213 | 2,588 | 2,527 | 2,458 | 2,135 | (323 | ) | (78 | ) | |||||||||||||||||||
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|||||||||||||||
Total revenue |
53,001 | 55,096 | 56,685 | 56,697 | 57,325 | 628 | 4,324 | |||||||||||||||||||||
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|||||||||||||||
Expenses |
||||||||||||||||||||||||||||
Provision for credit losses |
12,102 | 14,085 | 11,449 | 13,791 | 13,386 | 405 | (1,284 | ) | ||||||||||||||||||||
Personnel |
16,211 | 15,993 | 17,283 | 17,127 | 16,674 | 453 | (463 | ) | ||||||||||||||||||||
Occupancy |
4,227 | 4,458 | 4,522 | 4,863 | 4,770 | 93 | (543 | ) | ||||||||||||||||||||
Marketing |
2,009 | 1,134 | 1,403 | 1,515 | 2,062 | (547 | ) | (53 | ) | |||||||||||||||||||
Other |
5,796 | 4,597 | 5,342 | 6,300 | 6,042 | 258 | (246 | ) | ||||||||||||||||||||
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|||||||||||||||
Total general and administrative |
28,243 | 26,182 | 28,550 | 29,805 | 29,548 | 257 | (1,305 | ) | ||||||||||||||||||||
Interest expense |
3,932 | 4,335 | 4,350 | 4,710 | 4,811 | (101 | ) | (879 | ) | |||||||||||||||||||
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|||||||||||||||
Income before income taxes |
8,724 | 10,494 | 12,336 | 8,391 | 9,580 | 1,189 | 856 | |||||||||||||||||||||
Income taxes |
3,316 | 3,987 | 4,969 | 3,215 | 3,668 | (453 | ) | (352 | ) | |||||||||||||||||||
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|||||||||||||||
Net income |
$ | 5,408 | $ | 6,507 | $ | 7,367 | $ | 5,176 | $ | 5,912 | $ | 736 | $ | 504 | ||||||||||||||
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|||||||||||||||
Net income per common share: |
||||||||||||||||||||||||||||
Basic |
$ | 0.42 | $ | 0.51 | $ | 0.57 | $ | 0.41 | $ | 0.50 | $ | 0.09 | $ | 0.08 | ||||||||||||||
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Diluted |
$ | 0.41 | $ | 0.50 | $ | 0.56 | $ | 0.40 | $ | 0.49 | $ | 0.09 | $ | 0.08 | ||||||||||||||
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|||||||||||||||
Weighted-average shares outstanding: |
||||||||||||||||||||||||||||
Basic |
12,845 | 12,881 | 12,891 | 12,756 | 11,756 | 1,000 | 1,089 | |||||||||||||||||||||
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Diluted |
13,078 | 13,111 | 13,105 | 12,949 | 11,974 | 975 | 1,104 | |||||||||||||||||||||
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|||||||||||||||
Net interest margin |
$ | 49,069 | $ | 50,761 | $ | 52,335 | $ | 51,987 | $ | 52,514 | $ | 527 | $ | 3,445 | ||||||||||||||
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|||||||||||||||
Net credit margin |
$ | 36,188 | $ | 38,291 | $ | 40,552 | $ | 36,974 | $ | 39,098 | $ | 2,124 | $ | 2,910 | ||||||||||||||
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|||||||||||||||
2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | QoQ $ Inc (Dec) |
YoY $ Inc (Dec) |
||||||||||||||||||||||
Total assets |
$ | 560,351 | $ | 587,508 | $ | 626,373 | $ | 609,707 | $ | 642,803 | $ | 33,096 | $ | 82,452 | ||||||||||||||
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|||||||||||||||
Finance receivables |
$ | 572,525 | $ | 601,608 | $ | 628,444 | $ | 607,363 | $ | 645,744 | $ | 38,381 | $ | 73,219 | ||||||||||||||
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|
|||||||||||||||
Allowance for credit losses |
$ | 36,171 | $ | 37,786 | $ | 37,452 | $ | 36,230 | $ | 36,200 | $ | (30 | ) | $ | 29 | |||||||||||||
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|||||||||||||||
Long-term debt |
$ | 359,491 | $ | 379,617 | $ | 411,177 | $ | 396,543 | $ | 441,147 | $ | 44,604 | $ | 81,656 | ||||||||||||||
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11
Headcount Trend | ||||||||||||||||||||||||||||
2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | QoQ Inc (Dec) |
YoY Inc (Dec) |
||||||||||||||||||||||
Legacy branch headcount |
1,245 | 1,256 | 1,280 | 1,237 | 1,184 | (53 | ) | (61 | ) | |||||||||||||||||||
2016 new branches |
17 | 17 | | 17 | ||||||||||||||||||||||||
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|||||||||||||||
Total branch headcount |
1,245 | 1,256 | 1,280 | 1,254 | 1,201 | (53 | ) | (44 | ) | |||||||||||||||||||
Home office headcount |
120 | 129 | 133 | 137 | 140 | 3 | 20 | |||||||||||||||||||||
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|||||||||||||||
Total headcount |
1,365 | 1,385 | 1,413 | 1,391 | 1,341 | (50 | ) | (24 | ) | |||||||||||||||||||
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|||||||||||||||
Number of branches |
316 | 322 | 331 | 339 | 338 | (1 | ) | 22 | ||||||||||||||||||||
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|||||||||||||||
General & Administrative Expenses Trend | ||||||||||||||||||||||||||||
2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | QoQ $ B(W) |
YoY $ B(W) |
||||||||||||||||||||||
Legacy branch G&A expenses |
$ | 17,094 | $ | 18,794 | $ | 18,724 | $ | 18,822 | $ | 16,729 | $ | 2,093 | $ | 365 | ||||||||||||||
2016 new branches |
548 | 606 | (58 | ) | (606 | ) | ||||||||||||||||||||||
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|
|||||||||||||||
Total branch G&A expenses |
17,094 | 18,794 | 18,724 | 19,370 | 17,335 | 2,035 | (241 | ) | ||||||||||||||||||||
Marketing |
2,009 | 1,134 | 1,403 | 1,515 | 2,062 | (547 | ) | (53 | ) | |||||||||||||||||||
Home office G&A expenses |
9,140 | 6,254 | 8,423 | 8,920 | 10,151 | (1,231 | ) | (1,011 | ) | |||||||||||||||||||
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|
|||||||||||||||
Total G&A expenses |
$ | 28,243 | $ | 26,182 | $ | 28,550 | $ | 29,805 | $ | 29,548 | $ | 257 | $ | (1,305 | ) | |||||||||||||
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|
Averages and Yields | ||||||||||||||||
YTD16 | YTD15 | |||||||||||||||
Average Finance Receivables |
Average Yield (Annualized) |
Average Finance Receivables |
Average Yield (Annualized) |
|||||||||||||
Branch small loans |
$ | 154,962 | 43.6 | % | $ | 128,425 | 45.4 | % | ||||||||
Convenience checks |
165,844 | 41.0 | % | 177,283 | 45.2 | % | ||||||||||
Large loans |
166,312 | 28.4 | % | 66,663 | 27.1 | % | ||||||||||
Automobile loans |
107,463 | 18.1 | % | 146,905 | 19.3 | % | ||||||||||
Retail loans |
28,494 | 19.1 | % | 24,932 | 18.5 | % | ||||||||||
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|
|||||||||
Total interest and fee yield |
$ | 623,075 | 33.3 | % | $ | 544,208 | 34.8 | % | ||||||||
|
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|
|
|
|
|
|||||||||
Total revenue yield |
$ | 623,075 | 36.6 | % | $ | 544,208 | 38.8 | % | ||||||||
|
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|
|
|
|
|
Components of Increase in Interest and Fee Income YTD16 Compared to YTD15 Increase (Decrease) |
||||||||||||
Volume | Rate | Net | ||||||||||
Branch small loans |
$ | 5,825 | $ | (1,222 | ) | $ | 4,603 | |||||
Convenience checks |
(2,487 | ) | (3,544 | ) | (6,031 | ) | ||||||
Large loans |
14,148 | 456 | 14,604 | |||||||||
Automobile loans |
(3,605 | ) | (841 | ) | (4,446 | ) | ||||||
Retail loans |
339 | 87 | 426 | |||||||||
|
|
|
|
|
|
|||||||
Total increase (decrease) in interest and fee income |
$ | 14,220 | $ | (5,064 | ) | $ | 9,156 | |||||
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|
|
12
Net Loans Originated (1) | ||||||||||||||||
YTD16 | YTD15 | YTD $ Inc (Dec) |
YTD % Inc (Dec) |
|||||||||||||
Branch small loans |
$ | 141,675 | $ | 132,189 | $ | 9,486 | 7.2 | % | ||||||||
Convenience checks |
125,751 | 151,398 | (25,647 | ) | (16.9 | )% | ||||||||||
Large loans |
120,743 | 75,963 | 44,780 | 58.9 | % | |||||||||||
Automobile loans |
17,840 | 26,392 | (8,552 | ) | (32.4 | )% | ||||||||||
Retail loans |
17,328 | 14,863 | 2,465 | 16.6 | % | |||||||||||
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|
|
|
|
|
|
|
|||||||||
Total net loans originated |
$ | 423,337 | $ | 400,805 | $ | 22,532 | 5.6 | % | ||||||||
|
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|
|
|
|
(1) | Represents the balance of loan origination and refinancing net of unearned finance charges |
Other Key Metrics | ||||||||
YTD16 | YTD15 | |||||||
Net charge-offs |
$ | 28,429 | $ | 26,154 | ||||
Percentage of average finance receivables (annualized) |
9.1 | % | 9.6 | % | ||||
Provision for credit losses |
$ | 27,177 | $ | 21,814 | ||||
Percentage of average finance receivables (annualized) |
8.7 | % | 8.0 | % | ||||
Percentage of total revenue |
23.8 | % | 20.7 | % | ||||
General and administrative expenses |
$ | 59,353 | $ | 60,866 | ||||
Percentage of average finance receivables (annualized) |
19.1 | % | 22.4 | % | ||||
Percentage of total revenue |
52.1 | % | 57.7 | % |
13
Because it adjusts for certain non-operating and non-cash items, the Company believes that non-GAAP measures are useful to investors as supplemental financial measures that, when viewed with its GAAP financial information, provide information regarding trends in the Companys results of operations and credit metrics, which is intended to help investors meaningfully evaluate and compare the Companys results of operations and credit metrics between periods.
Non-GAAP Reconciliation | ||||||||||||
2Q16 | Adjustments | Non-GAAP | ||||||||||
General and administrative expenses |
$ | 29,548 | $ | (636 | )(1) | $ | 28,912 | |||||
Income taxes |
$ | 3,668 | $ | 244 | (5) | $ | 3,912 | |||||
Net income |
$ | 5,912 | $ | 392 | $ | 6,304 | ||||||
Diluted net income per common share |
$ | 0.49 | $ | 0.04 | $ | 0.53 | ||||||
Non-GAAP Reconciliation | ||||||||||||
2Q15 | Adjustments | Non-GAAP | ||||||||||
General and administrative expenses |
$ | 28,243 | $ | (4 | )(1) | $ | 28,239 | |||||
Income taxes |
$ | 3,316 | $ | 2 | (5) | $ | 3,318 | |||||
Net income |
$ | 5,408 | $ | 2 | $ | 5,410 | ||||||
Diluted net income per common share |
$ | 0.41 | $ | 0.00 | $ | 0.41 | ||||||
Non-GAAP Reconciliation | ||||||||||||
YTD16 | Adjustments | Non-GAAP | ||||||||||
General and administrative expenses |
$ | 59,353 | $ | (1,028 | )(2) | $ | 58,325 | |||||
Income taxes |
$ | 6,883 | $ | 394 | (5) | $ | 7,277 | |||||
Net income |
$ | 11,088 | $ | 634 | $ | 11,722 | ||||||
Diluted net income per common share |
$ | 0.89 | $ | 0.05 | $ | 0.94 | ||||||
Non-GAAP Reconciliation | ||||||||||||
YTD15 | Adjustments | Non-GAAP | ||||||||||
General and administrative expenses |
$ | 60,866 | $ | (2,676 | )(2)(3)(4) | $ | 58,190 | |||||
Income taxes |
$ | 5,818 | $ | 1,017 | (5) | $ | 6,835 | |||||
Net income |
$ | 9,491 | $ | 1,659 | $ | 11,150 | ||||||
Diluted net income per common share |
$ | 0.73 | $ | 0.13 | $ | 0.86 |
(1) | Exclude loan system conversion costs of $636 and $4 for 2Q16 and 2Q15 |
(2) | Exclude loan system conversion costs of $1,028 and $613 for YTD16 and YTD15 |
(3) | Exclude executive retirement agreement costs of $533 |
(4) | Exclude CEO equity award costs of $1,530 |
(5) | Tax effect of the adjustments |
14
2Q 2016 Earnings Call Presentation July 26, 2016 Exhibit 99.2
Safe Harbor Statement This presentation and the responses to various questions contain forward-looking statements, which reflect our current views with respect to, among other things, the Company’s operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors include but are not limited to those described under “Risk Factors” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We cannot guarantee future events, results, actions, levels of activity, performance or achievements. Neither the Company nor any of its respective agents, employees or advisors undertake any duty or obligation to supplement, amend, update or revise any forward-looking statement, whether as a result of new information or otherwise. This presentation also contains certain non-GAAP measures. Because they adjust for certain non-operating and non-cash items, the Company believes that non-GAAP measures are useful to investors as supplemental financial measures that, when viewed with the Company’s GAAP financial information, provide information regarding trends in the Company’s results of operations and credit metrics, which is intended to help investors meaningfully evaluate and compare the Company’s results of operations and credit metrics between periods. Please refer to the Appendix accompanying this presentation for a reconciliation of non-GAAP measures to the most comparable GAAP measure. The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any regulatory or supervisory authority.
2Q16 Highlights – A Solid Quarter GAAP Non-GAAP (in millions, except EPS) 2Q16 2Q15 $ Chg B/(W) % Chg B/(W) 2Q16 % Chg B/(W) Revenue $57.3 $53.0 $4.3 8% $57.3 8% Provision for credit losses $13.4 $12.1 ($1.3) (11%) $13.4 (11%) G&A expense $29.5 $28.2 ($1.3) (5%) $28.9 (2%) Interest expense $4.8 $3.9 ($0.9) (22%) $4.8 (22%) Net income $5.9 $5.4 $0.5 9% $6.3 17% Diluted EPS $0.49 $0.41 $0.08 20% $0.53 29% ROA 3.8% 4.0% (0.2%) (5%) 4.0% -- ROE 12.0% 11.5% 0.5% 4% 12.8% 11% Non-GAAP earnings exclude $0.6 million of non-operating system conversion costs. For a reconciliation of non-GAAP financial measures to the nearest comparable GAAP financial measure, please refer to the Appendix of this presentation.
Net Income Follows Seasonal Pattern of Portfolio Growth Return to normal pattern of seasonal portfolio-driven performance Non-GAAP NI YoY % (54.4%) 21.0% 22.6% 110.1% 42.9% (5.6%) 16.5% EPS (1) $0.33 $0.44 $0.41 $0.50 $0.47 $0.42 $0.53 (1) Calculated using diluted share count; non-GAAP net income adjusted for non-operating items Achieved double-digit portfolio growth over the prior-year period for the last five quarters
Sequential r (2.4%) 0.9% 4.0% 2.9% 0.0% 1.1% Year / Year r 5.9% 11.7% 2.2% 5.4% 7.9% 8.2% Revenue Growth Driven by Strong Portfolio Growth and Stabilizing Yields 8.2% revenue growth is the highest in last four quarters Revenue growth continues to converge with growth in average net receivables Stable yields Sequential r (0.4%) (0.9%) (1.1%) (0.5%) (0.2%) (0.0%) Year / Year r 1.7% 1.1% (2.7%) (2.9%) (2.7%) (1.8%) Sequential r (1.4%) 3.1% 7.0% 4.4% 0.5% 1.2% Year / Year r 1.5% 8.5% 9.4% 13.5% 15.7% 13.6%
Product Category Trends in millions Large loans continue to grow; now represent 30% of total loan portfolio Pace of automobile loan liquidation slowed in quarter Renewal of checks into small loans began during 2Q; reporting of convenience checks will change in 3Q Ending Net Receivables 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 1Q 2016 vs. 2Q 2015 Branch Small Loans $121.6 $140.1646459599998 $147.66758053000009 $157.75950184000004 $148.70284013999995 $162.56415031999995 $13.861310180000004 $22.399504360000151 Convenience Checks 170.0033838899997 174.78562260000001 180.5430278000002 180.40153074000006 161.80241350999998 157.51545330999988 -4.2869602000000953 -17.270169290000126 Large Loans 63.338204740000009 93.203060620000016 119.73079753000003 146.55286949000001 162.30127855000003 194.85732522000009 32.556046670000057 101.65426460000008 Core Loans $355.00021294999971 $408.15332917999984 $447.94140586000032 $484.71390207000013 $472.80653220000005 $514.93692884999996 $42.130396649999909 $106.78359967000011 Automobile Loans 146.72435383999996 139.59287564000002 128.13134901000009 116.10880075999999 106.29675753999997 100.72084720000002 -5.5759103399999503 -38.872028439999994 Retail Loans 24.182632870000006 24.781931650000022 25.539203579999995 27.624603759999989 28.263118810000009 30.089081610000004 1.8259627999999957 5.3071499599999825 Total $525.90719966000017 $572.52474473999973 $601.6081068899997 $628.44401102999984 $607.36256799000046 $645.74442963000001 $38.381861639999556 $73.219684890000281 Ending Net Receivables 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 1Q 2016 vs. 2Q 2015 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 .7% .7% Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 -2.2% -6.1% Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 3.5% 0.13896303742456731 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 -1.9% -8.8% Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7% 61780413328930972.6% .3% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 4Q 2015 vs. 1Q 2015 Branch Small Loans ,121,658,624.32000002 ,140,164,645.9599998 ,147,667,580.53000009 ,157,759,501.84000003 ,148,702,840.13999996 ,162,564,150.31999996 Convenience Checks ,170,003,383.88999969 ,174,785,622.60000002 ,180,543,027.80000019 ,180,401,530.74000007 ,161,802,413.50999999 ,157,515,453.30999988 Large Loans 63,338,204.74000001 93,203,060.62000002 ,119,730,797.53000003 ,146,552,869.49000001 ,162,301,278.55000004 ,194,857,325.22000009 Core loan products ,355,000,212.94999969 ,408,153,329.17999983 ,447,941,405.86000031 ,484,713,902.7000011 ,472,806,532.20000005 ,514,936,928.84999996 Automobile Loans ,146,724,353.83999997 ,139,592,875.64000002 ,128,131,349.1000008 ,116,108,800.75999999 ,106,296,757.53999998 ,100,720,847.20000002 Retail Loans 24,182,632.870000005 24,781,931.650000021 25,539,203.579999994 27,624,603.75999999 28,263,118.81000001 30,089,081.610000003 Total ,525,907,199.66000015 ,572,524,744.73999977 ,601,608,106.88999975 ,628,444,011.2999985 ,607,362,567.99000049 ,645,744,429.63 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7%
Net Charge-Offs Improve; Credit Quality Stable Excluding Bulk Charged-Off Debt Sale 2Q16 charge-offs reflect roll through of 1Q16 delinquency profile Sequential r (29.2%) (3.0%) (3.2%) (5.5%) 27.4% (10.6%) Year / Year r 4.4% (3.6%) (9.8%) (37.1%) 13.1% 4.2% Sequential r (4.0%) (0.5%) (0.9%) 0.5% 0.7% (1.1%) Year / Year r 0.2% (1.1%) (1.8%) (4.9%) (0.2%) (0.8%) NCO rate on improving trend line
2Q 2016 30+ day delinquency level increased to 6.8% Total delinquencies in 2Q 2016 remained low at 18.3% Current profile normally indicative of next two quarters of loss Last three delinquency buckets expected to roll through in third quarter Seasonal Pattern of Delinquency Slow File % 19.2% 20.6% 22.4% 20.3% 16.7% 18.3%
Good Sequential and Year-Over-Year Expense Management Relatively flat expense profile despite 22 net additional branches 2Q16 vs. 2Q15, ~ $1.2 million System conversion expense of $0.4 million in 1Q16 and $0.6 million in 2Q16 Sequential r 14.9% (13.4%) (7.3%) 9.0% 4.4% (0.9%) Year / Year r 64.0% 21.7% 3.6% 0.5% (8.6%) 4.6%
Estimated Incremental Costs From 2016 Initiatives in millions Actual 1Q16 Actual 2Q16 Estimated 3Q16 Estimated 4Q16 Loan system conversion costs $0.4 $0.6 $0.8 $0.5 After-tax impact $0.2 $0.4 $0.5 $0.3
Normalized Return Ratios Trends - Fluctuate with Seasonal Results
Strategic Updates Nortridge loan management system 8 Virginia branches on system Converted all 18 New Mexico branches in July Incurring higher IT costs in 2016 for system implementation Marketing / Online lending update LendingTree channel – call transfer extended to all markets in 3Q South Carolina online lending functionality test completed Adding new states in 3Q Adding new products to channel
CFPB Proposed “Small Dollar” Lending Rule – Highlights Certain key elements of the proposed rule include: The proposal requires underwriting of covered loans at the inception of the loan—an “ability to repay” determination. Lenders must make a reasonable determination that the consumer will have enough after-tax income during the loan term to repay the full amount of each payment of the covered loan, fulfill the consumer’s “major financial obligations” (e.g. housing, debt obligations, and child support), and meet basic living expenses. Definition of “covered loan” includes loans with a total cost of credit (or “all-in APR”) above 36% AND Collateral is a non-purchase money security interest in a vehicle, OR Lender obtains a “leveraged payment mechanism” (e.g. ability to initiate repayment through a consumer’s account or paycheck) The all-in APR includes the cost of credit insurance and other ancillary products, finance charges, and fees. Definition of “covered loan” excludes purchase money loans (e.g. RM’s automobile and retail loan portfolios) Estimated Effectiveness of Final Rule: 2018
CFPB Proposed “Small Dollar” Lending Rule – Impact RM’s business practices and estimated impact of proposed rule: RM estimates that 4% to 5% of its current portfolio would qualify as covered loans under the proposed rule based on an all-in APR above 36% and a non-purchase money security interest in a vehicle. RM does not obtain a “leveraged payment mechanism” through access to a consumer’s account or paycheck. RM currently underwrites all branch loans to a customer’s ability to repay. RM’s automobile and retail loan portfolios (purchase money loans) will not be covered by the proposed rule. RM’s rollout of electronic payment options will only support customer-initiated payment transactions in compliance with rules.
Appendix
Non-GAAP Reconciliation in millions in millions Because they adjust for certain non-operating and non-cash items, the Company believes that non-GAAP measures are useful to investors as supplemental financial measures that, when viewed with the Company’s GAAP financial information, provide information regarding trends in the Company’s results of operations and credit metrics, which is intended to help investors meaningfully evaluate and compare the Company’s results of operations and credit metrics between periods. Non-GAAP Reconciliation 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 GAAP net income $3.4 $4.0999999999999996 $5.4 $6.5 $7.4 $5.2 $5.9 Adjustments 1.5 2.7 — — -2 0.4 0.6 Tax effect -0.6 -1 — — 0.7 -0.2 -0.2 Non-GAAP net income $4.3000000000000007 $5.6999999999999993 $5.4 $6.5 $6.1 $5.4 $6.3 Ending Net Receivables 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 1Q 2016 vs. 2Q 2015 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 .7% .7% Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 -2.2% -6.1% Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 3.5% 0.13896303742456731 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 -1.9% -8.8% Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7% 61780413328930972.6% .3% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 4Q 2015 vs. 1Q 2015 Branch Small Loans ,121,658,624.32000002 ,140,164,645.9599998 ,147,667,580.53000009 ,157,759,501.84000003 ,148,702,840.13999996 ,162,564,150.31999996 Convenience Checks ,170,003,383.88999969 ,174,785,622.60000002 ,180,543,027.80000019 ,180,401,530.74000007 ,161,802,413.50999999 ,157,515,453.30999988 Large Loans 63,338,204.74000001 93,203,060.62000002 ,119,730,797.53000003 ,146,552,869.49000001 ,162,301,278.55000004 ,194,857,325.22000009 Core loan products ,355,000,212.94999969 ,408,153,329.17999983 ,447,941,405.86000031 ,484,713,902.7000011 ,472,806,532.20000005 ,514,936,928.84999996 Automobile Loans ,146,724,353.83999997 ,139,592,875.64000002 ,128,131,349.1000008 ,116,108,800.75999999 ,106,296,757.53999998 ,100,720,847.20000002 Retail Loans 24,182,632.870000005 24,781,931.650000021 25,539,203.579999994 27,624,603.75999999 28,263,118.81000001 30,089,081.610000003 Total ,525,907,199.66000015 ,572,524,744.73999977 ,601,608,106.88999975 ,628,444,011.2999985 ,607,362,567.99000049 ,645,744,429.63 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7% Adjustments 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 Loan system conversion $0.3 $0.6 $ — $ — $ — $0.4 $0.6 CEO separation 1.2 — — — — — — Executive retirement — 0.5 — — — — — CEO stock award — 1.5 — — — — — Bulk sale of charged-off loans — — — — -2 — — Total adjustments $1.5 $2.7 $ — $ — $-2 $0.4 $0.6 Ending Net Receivables 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 1Q 2016 vs. 2Q 2015 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 .7% .7% Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 -2.2% -6.1% Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 3.5% 0.13896303742456731 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 -1.9% -8.8% Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7% 61780413328930972.6% .3% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 vs. 4Q 2015 vs. 1Q 2015 Branch Small Loans ,121,658,624.32000002 ,140,164,645.9599998 ,147,667,580.53000009 ,157,759,501.84000003 ,148,702,840.13999996 ,162,564,150.31999996 Convenience Checks ,170,003,383.88999969 ,174,785,622.60000002 ,180,543,027.80000019 ,180,401,530.74000007 ,161,802,413.50999999 ,157,515,453.30999988 Large Loans 63,338,204.74000001 93,203,060.62000002 ,119,730,797.53000003 ,146,552,869.49000001 ,162,301,278.55000004 ,194,857,325.22000009 Core loan products ,355,000,212.94999969 ,408,153,329.17999983 ,447,941,405.86000031 ,484,713,902.7000011 ,472,806,532.20000005 ,514,936,928.84999996 Automobile Loans ,146,724,353.83999997 ,139,592,875.64000002 ,128,131,349.1000008 ,116,108,800.75999999 ,106,296,757.53999998 ,100,720,847.20000002 Retail Loans 24,182,632.870000005 24,781,931.650000021 25,539,203.579999994 27,624,603.75999999 28,263,118.81000001 30,089,081.610000003 Total ,525,907,199.66000015 ,572,524,744.73999977 ,601,608,106.88999975 ,628,444,011.2999985 ,607,362,567.99000049 ,645,744,429.63 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 Branch Small Loans 0.23133097321856883 0.24481849430569619 0.24545477170074134 0.25103191226444693 0.2448337253184957 0.25174688756223002 Convenience Checks 0.32325738076966271 0.30528920226736278 0.30010072293292972 0.28706062524858444 0.26640168827899169 0.24392847399435319 Large Loans 0.12043608602610548 0.16279306960317716 0.19901792572069188 0.2331995641899817 0.26722305111281097 0.30175610702774447 Automobile Loans 0.2789928602134702 0.24381981202121356 0.21298142020122093 0.18475599850128469 0.17501367904804768 0.15597633146864506 Retail Loans 4.6% 4.3% 4.2% 4.4% 4.7% 4.7%
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