17.5% year-over-year revenue growth and 18.9% average net finance receivables growth
GREENVILLE, SC – Regional Management Corp. (NYSE: RM), a diversified consumer finance company, announced results for the first quarter ended March 31, 2020.
“As we navigate through this unprecedented time, we are committed to supporting the overall health and well-being of our customers, employees, and communities,” said Robert W. Beck, President and Chief Executive Officer of Regional Management Corp. “Our omni-channel capabilities are serving our customers well and providing them with multiple safe avenues to make payments. We’ve also proactively implemented several borrower assistance programs to help our customers with any challenges, including offering payment deferrals and waiving late fees on deferred payments. Building on our stable 30+ day delinquency position as of March 31st, these programs and the impact from the government stimulus have positioned us well as we closed out the month of April. As of April 30th, our 30+ day contractual delinquencies stood at 5.4%, a reduction of 120 basis points from the end of March.”
“Over the past several years, we have significantly strengthened our balance sheet, our underwriting using custom scorecards, and our credit infrastructure in anticipation of a reversion in the credit cycle,” added Mr. Beck. “As a result, as of May 4, 2020, we have $110 million of available liquidity, and we believe we have more than ample liquidity to operate through 2021 without needing to access the securitization market. As we focus in the near term on our liquidity, our credit, and serving our customers, we believe we are fundamentally well-positioned and comfortably capitalized to manage through the current economic environment and to expand volumes and operating leverage as the economy rebounds.”
First Quarter 2020 Highlights
- Net loss for the first quarter of 2020 was $6.3 million and diluted loss per share was $0.56, compared to net income of $8.1 million and diluted earnings per share of $0.67 in the prior-year period. The net loss was due primarily to the build in the reserves related to the expected economic impact of the COVID-19 pandemic, including $23.9 million of allowance for credit losses and a $1.3 million reserve for unemployment insurance claims. Excluding the COVID-19 reserve build and $4.9 million of non-operating costs related to the executive transition and loan management system outage, the company generated non-GAAP net income of $12.8 million, or $1.14 per diluted share.
- Net finance receivables as of March 31, 2020 were $1.1 billion, an increase of 18.4%, or $171.4 million, from the prior-year period.
- Total core small and large loan net finance receivables increased $191.9 million, or 21.8%, compared to the prior-year period.
- Large loan net finance receivables of $632.6 million increased $177.5 million, or 39.0%, from the prior-year period and represented 57.4% of the total loan portfolio. Small loan net finance receivables as of March 31, 2020 were $440.3 million, an increase of 3.4% over the prior-year period.
- Total revenue for the first quarter of 2020 was $96.1 million, a $14.3 million, or 17.5%, increase from the prior-year period.
- Interest and fee income increased 17.1%, driven by an 18.9% increase in average net finance receivables compared to the prior-year period.
- Insurance income, net increased $1.8 million, driven by an increase in premium revenue and a decrease in non-file insurance claims expense (due to the previously disclosed change in business practice to lower the utilization of non-file insurance). Insurance income, net included a $1.3 million reserve for COVID-19 unemployment insurance claims.
- Provision for credit losses for the first quarter of 2020 was $49.5 million, an increase of $26.2 million, or 112.1%, from the prior-year period. The increase was primarily due to a build in the allowance for credit losses of $23.9 million related to the expected economic impact of the COVID-19 pandemic. The company ran several macroeconomic stress scenarios, and its final forecast included a 34% peak-to-trough decrease in GDP in the second quarter of 2020 and unemployment increasing to 20% in the second quarter of 2020, with a decline to 7% by mid-2021.
- Annualized net credit losses as a percentage of average net finance receivables were 10.5%, a 20 basis point improvement from 10.7% in the prior-year period.
- 30+ day contractual delinquencies as of March 31, 2020 were 6.6%, compared to 6.9% in the prior-year period. The delinquency rate in the first quarter of 2020 included 0.1% from the system outage in January, and the rate in the first quarter of 2019 included 0.4% related to hurricane-affected branches. 30+ day contractual delinquencies stood at 5.4% as of April 30, 2020, a decrease of 120 basis points from March 31, 2020.
- General and administrative expenses for the first quarter of 2020 were $46.2 million, an increase of $8.1 million, or 21.1%, from the prior-year period. The operating expense ratio (annualized general and administrative expenses as a percentage of average net finance receivables) was 16.5%, an increase of 30 basis points from the prior-year period. General and administrative expenses for the first quarter of 2020 included non-operating costs of $3.1 million related to the executive transition and $0.7 million due to the system outage. The first quarter of 2020 also included $0.7 million of incremental costs related to new branches that opened since the prior-year period.
- In March 2020, the company drew down $50 million on its senior revolving credit facility in a prudent measure to maintain additional cash on hand. As of March 31, 2020, the company had total unused capacity on its revolving credit facilities of approximately $400 million, subject to the borrowing base.
- As of May 4, 2020, the company has available liquidity of $110 million, including approximately $50 million of cash on hand.
– BUSINESS WIRE
About Regional Management Corp.
Regional Management Corp. (NYSE: RM) is a diversified consumer finance company that provides attractive, easy-to-understand installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Regional Management operates under the name “Regional Finance” in 368 branch locations across 11 states in the Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States, as of March 31, 2020. Most of its loan products are secured, and each is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. Regional Management sources loans through its multiple channel platform, which includes branches, centrally-managed direct mail campaigns, digital partners, retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.