Regional Management Corp. Announces Third Quarter 2018 Results

Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the third quarter ended September 30, 2018.

Third Quarter 2018 Highlights

  • Net income for the third quarter of 2018 was $7.4 million, an increase of 40.3% from the prior-year period, while non-GAAP net income was $10.3 million, an increase of 50.8% from the prior-year period. Non-GAAP net income for the third quarter of 2018 excludes an estimated $2.9 million of impact related to Hurricane Florence, while non-GAAP net income for the prior-year period excludes an estimated $2.2 million of impact related to the 2017 hurricanes and $0.6 million of proceeds related to the bulk sale of the Companys previously charged-off bankrupt accounts (bulk sale). Diluted earnings per share for the third quarter of 2018 was $0.61, while non-GAAP diluted earnings per share for the third quarter of 2018 was $0.85.
  • Total finance receivables as of September 30, 2018 were $888.1 million, an increase of 14.6%, or $113.2 million, from the prior-year period.
    • Fourteenth consecutive quarter of year-over-year double-digit finance receivables growth.
    • Total core small and large loan finance receivables increased $153.3 million, or 22.8%, compared to the prior-year period.
    • Large loan finance receivables of $410.8 million increased $102.2 million, or 33.1%, from the prior-year period and represented 46.3% of the total loan portfolio. Small loan finance receivables as of September 30, 2018 were $414.4 million, an increase of 14.1% over the prior-year period.
  • Total revenue for the third quarter of 2018 was $77.9 million, an $8.7 million, or 12.6%, increase from the prior-year period.
    • Ninth consecutive quarter of year-over-year double-digit revenue growth.
    • Interest and fee income increased 13.4%, driven by a 14.6% increase in finance receivables compared to the prior-year period.
  • Provision for credit losses for the third quarter of 2018 was $23.6 million, an increase of 17.3% from the prior-year period. The provision for credit losses for the third quarter of 2018 included $3.9 million of incremental hurricane allowance, while the provision for credit losses for the third quarter of 2017 included $3.0 million of incremental hurricane allowance and a $1.0 million benefit resulting from the bulk sale.
  • Annualized net credit losses as a percentage of finance receivables were 7.7%, a 10 basis point improvement from 7.8% in the prior-year period.
  • 30+ day contractual delinquencies as of September 30, 2018 were 7.1%, compared to 6.3% as of June 30, 2018 and 6.8% as of September 30, 2017.
  • Expanded operations into Missouri, the Companys tenth U.S. state, during the quarter.

We had a very strong third quarter and our performance drivers continue to be robust, said Peter R. Knitzer, President and Chief Executive Officer of Regional Management. We generated another quarter of year-over-year double-digit growth on our top and bottom lines as well as in our finance receivables. Credit performance remains stable, with the slight uptick in September 30 delinquencies on a year-over-year basis returning to year-ago levels as of the end of October.

In addition to another quarter of strong growth and stable credit, we continued to keep a firm control on our overall expenses, which should lead to additional margin expansion over time, continued Mr. Knitzer. We also began implementing custom scorecards in our branches, which we believe will further improve our credit profile in the mid- to long-term. Moving forward, we remain squarely focused on our hybrid growth strategy of increasing our receivables per branch within our existing network, coupled with de novo expansion in the Midwest. Overall, we remain well-positioned to generate long-term shareholder value.

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Third Quarter 2018 Results

Finance receivables outstanding at September 30, 2018 were $888.1 million, a 14.6% increase from $774.9 million in the prior year. Finance receivables increased from continued strong growth in both the core small and large loan portfolios.

For the third quarter ended September 30, 2018, the Company reported total revenue of $77.9 million, a 12.6% increase from $69.2 million in the prior-year period. Interest and fee income for the third quarter of 2018 was $72.1 million, a 13.4% increase from $63.6 million in the prior-year period, primarily due to increases in the small and large loan portfolios compared to the prior-year period.

The provision for credit losses in the third quarter of 2018 was $23.6 million, a 17.3% increase compared to $20.2 million in the prior-year period. The provision for credit losses for the third quarter of 2018 included $3.9 million of incremental hurricane allowance, while the provision for credit losses for the third quarter of 2017 included $3.0 million of incremental hurricane allowance and a $1.0 million benefit resulting from the bulk sale.

Net credit losses were $16.8 million in the third quarter of 2018, an increase of $2.0 million over the prior-year period. The increase over the prior-year period was primarily due to portfolio growth. Annualized net credit losses as a percentage of average finance receivables in the third quarter of 2018 were 7.7%, a 10 basis point improvement from 7.8% in the prior-year period.

General and administrative expenses for the third quarter of 2018 were $35.9 million, an increase of $2.0 million, or 6.0%, from the prior-year period. Annualized general and administrative expenses as a percentage of average finance receivables improved 150 basis points from the prior-year period to 16.5% for the third quarter of 2018. General and administrative expenses for the third quarter of 2018 included higher personnel costs related to staffing increases in information technology, centralized collections, and branches to support ongoing loan portfolio growth.

Interest expense was $8.7 million in the third quarter of 2018, compared to $6.7 million in the prior-year period. The increase in interest expense was due to larger long-term debt amounts outstanding from growth in finance receivables, federal funds rate increases, larger unused lines of credit, incremental debt issuance costs associated with upsizing the senior revolving credit facility and entering into the warehouse credit facility, and the Companys recently completed asset-based securitization. The Companys diversified sources of funding continue to position it for long-term growth.

Net income for the third quarter of 2018 was $7.4 million, an increase from $5.3 million in the prior-year period. Excluding the aforementioned non-operating items, non-GAAP net income for the third quarter of 2018 was $10.3 million, up from non-GAAP net income of $6.9 million for the prior-year period. Diluted earnings per share for the third quarter of 2018 was $0.61, an increase from $0.45 in the prior-year period. Non-GAAP diluted earnings per share for the third quarter of 2018 was $0.85, an increase from $0.58 in the prior-year period. For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measure, please refer to the reconciliation table accompanying this release.

2018 De Novo Outlook

As of September 30, 2018, the Companys branch network consisted of 346 locations. The Company opened six branches during the third quarter of 2018. For the fourth quarter 2018, the Company now plans to open an additional 15 to 18 de novo branches. Therefore, total branch openings in 2018 are now expected to be between 22 and 25, with the timing of the remaining branches that were initially expected to open in the fourth quarter now shifted to the first quarter of 2019.

Liquidity and Capital Resources

As of September 30, 2018, the Company had finance receivables of $888.1 million and outstanding long-term debt of $611.6 million (consisting of $352.7 million of long-term debt on its $638.0 million senior revolving credit facility, $82.0 million of long-term debt on its $125.0 million revolving warehouse credit facility, $26.7 million of long-term debt on its amortizing loan, and $150.2 million through its asset-backed securitization). The Company had a debt-to-equity ratio of 2.3 to 1.0 and a shareholder equity ratio of 29.9% as of September 30, 2018.

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) 327-6838 (toll-free) or (604) 235-2082 (direct). 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 Thursday, November 15, 2018, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (international), passcode 10005748. A webcast replay of the call will be available at http://www.RegionalManagement.com for one year following the call.

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: changes in general economic conditions, including levels of unemployment and bankruptcies; risks associated with Regional Managements transition to a new loan origination and servicing software system; 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; risks relating to our first asset-backed securitization; changes in interest rates; the risk that Regional Managements existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; the impact of changes in tax laws, guidance, and interpretations, including related to certain provisions of the Tax Cuts and Jobs Act; 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 credit losses); changes in Regional Managements markets and general changes in the economy (particularly in the markets served by Regional Management); changes in the competitive environment in which Regional Management operates or in the demand for its products; risks related to acquisitions; 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, Virginia, and Missouri. 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, online credit application networks, retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.

 
Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
           
Better (Worse) Better (Worse)
3Q 18 3Q 17 $   % YTD 18 YTD 17 $   %
Revenue

Interest and fee income

$ 72,128 $ 63,615 $ 8,513 13.4 % $ 205,108 $ 182,657 $ 22,451 12.3 %
Insurance income, net 2,898 3,095 (197 ) (6.4

)%

9,169 9,985 (816 ) (8.2

)%

Other income   2,890     2,484     406   16.3 %   8,680     7,710     970   12.6 %
 
Total revenue   77,916     69,194     8,722   12.6 %   222,957     200,352     22,605   11.3 %
 
Expenses
Provision for credit losses 23,640 20,152 (3,488 ) (17.3

)%

63,358 57,875 (5,483 ) (9.5

)%

 
Personnel 21,376 19,534 (1,842 ) (9.4

)%

61,994 56,089 (5,905 ) (10.5

)%

Occupancy 5,490 5,480 (10 ) (0.2

)%

16,586 16,184 (402 ) (2.5

)%

Marketing 2,132 2,303 171 7.4 % 5,843 5,287 (556 ) (10.5

)%

Other   6,863     6,523     (340 ) (5.2

)%

  19,245     19,376     131   0.7 %
 
Total general and administrative 35,861 33,840 (2,021 ) (6.0

)%

103,668 96,936 (6,732 ) (6.9

)%

 
Interest expense   8,729     6,658     (2,071 ) (31.1

)%

  23,821     17,092     (6,729 ) (39.4

)%

 
Income before income taxes 9,686 8,544 1,142 13.4 % 32,110 28,449 3,661 12.9 %
Income taxes   2,237     3,235     998   30.9 %   7,535     9,371     1,836   19.6 %
 
Net income $ 7,449   $ 5,309   $ 2,140   40.3 % $ 24,575   $ 19,078   $ 5,497   28.8 %
 
Net income per common share:
Basic $ 0.64   $ 0.46   $ 0.18   39.1 % $ 2.11   $ 1.65   $ 0.46   27.9 %
 
Diluted $ 0.61   $ 0.45   $ 0.16   35.6 % $ 2.03   $ 1.62   $ 0.41   25.3 %
 
Weighted-average shares outstanding:
Basic   11,672     11,563     (109 ) (0.9

)%

  11,649     11,537     (112 ) (1.0

)%

 
Diluted   12,133     11,812     (321 ) (2.7

)%

  12,101     11,752     (349 ) (3.0

)%

 
 
Return on average assets (annualized)   3.3 %   2.8 %   3.8 %   3.5 %
 
Return on average equity (annualized)   11.3 %   9.4 %   12.9 %   11.7 %
 
 
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in thousands, except par value amounts)
     
Increase (Decrease)
3Q 18 3Q 17 $   %
Assets
Cash $ 517 $ 5,191 $ (4,674 ) (90.0

)%

Gross finance receivables 1,175,797 1,002,630 173,167 17.3 %
Unearned finance charges and insurance premiums   (287,721 )   (227,774 )   (59,947 ) (26.3

)%

 
Finance receivables 888,076 774,856 113,220 14.6 %
Allowance for credit losses   (55,300 )   (47,400 )   (7,900 ) (16.7

)%

 
Net finance receivables 832,776 727,456 105,320 14.5 %
Restricted cash 29,327 13,849 15,478 111.8 %
Property and equipment 12,540 12,657 (117 ) (0.9

)%

Intangible assets 10,429 10,239 190 1.9 %
Deferred tax asset 5,121 (5,121 ) (100.0

)%

Other assets   7,690     5,337     2,353   44.1 %
 
Total assets $ 893,279   $ 779,850   $ 113,429   14.5 %
 
Liabilities and Stockholders Equity
Liabilities:
Long-term debt $ 611,593 $ 538,351 $ 73,242 13.6 %
Unamortized debt issuance costs   (7,216 )   (5,266 )   (1,950 ) (37.0

)%

 
Net long-term debt 604,377 533,085 71,292 13.4 %
Accounts payable and accrued expenses 19,510 18,950 560 3.0 %
Deferred tax liability   1,963         1,963   100.0 %
 
Total liabilities 625,850 552,035 73,815 13.4 %
Stockholders equity:
Preferred stock ($0.10 par value, 100,000 shares authorized, no shares issued or outstanding)
Common stock ($0.10 par value, 1,000,000 shares authorized, 13,336 shares issued and 11,790 shares outstanding at September 30, 2018 and 13,213 shares issued and 11,667 shares outstanding at September 30, 2017) 1,334 1,321 13 1.0 %
Additional paid-in-capital 97,814 93,673 4,141 4.4 %
Retained earnings 193,327 157,867 35,460 22.5 %

Treasury stock (1,546 shares at September 30, 2018 and 2017)

  (25,046 )   (25,046 )     0.0 %
 
Total stockholders equity   267,429     227,815     39,614   17.4 %
 
Total liabilities and stockholders equity $ 893,279   $ 779,850   $ 113,429   14.5 %
 
 
Regional Management Corp. and Subsidiaries
Selected Financial Data
(Unaudited)
(in thousands, except per share amounts)
 
Finance Receivables by Product
3Q 18   2Q 18  

QoQ $

Inc (Dec)

 

QoQ %

Inc (Dec)

  3Q 17  

YoY $

Inc (Dec)

 

YoY %

Inc (Dec)

Small loans $ 414,441 $ 384,690 $ 29,751 7.7 % $ 363,262 $ 51,179 14.1 %
Large loans   410,811   392,101   18,710   4.8 %   308,642   102,169   33.1 %
 
Total core loans 825,252 776,791 48,461 6.2 % 671,904 153,348 22.8 %
Automobile loans 32,322 39,414 (7,092 ) (18.0

)%

71,666 (39,344 ) (54.9

)%

Retail loans   30,502   31,033   (531 ) (1.7

)%

  31,286   (784 ) (2.5

)%

 
Total finance receivables $ 888,076 $ 847,238 $ 40,838   4.8 % $ 774,856 $ 113,220   14.6 %
 
 
Number of branches at period end 346 340 6 1.8 % 344 2 0.6 %
Average finance receivables per branch $ 2,567 $ 2,492 $ 75   3.0 % $ 2,252 $ 315   14.0 %
 
 
Averages and Yields
3Q 18   2Q 18   3Q 17

Average Finance Receivables

 

Average Yield (Annualized)

Average Finance Receivables

 

Average Yield (Annualized)

Average Finance Receivables

 

Average Yield (Annualized)

Small loans $ 401,132 40.4 % $ 366,647 40.1 % $ 358,380 42.7 %
Large loans 401,212 28.6 % 375,836 28.6 % 288,684 29.0 %
Automobile loans 35,845 15.6 % 43,980 16.0 % 75,984 16.2 %
Retail loans   30,861 19.3 %   31,530 18.8 %   30,788 17.8 %
 
Total interest and fee yield $ 869,050 33.2 % $ 817,993 32.7 % $ 753,836 33.8 %
 
Total revenue yield $ 869,050 35.9 % $ 817,993 35.4 % $ 753,836 36.7 %
 
 
Components of Increase in Interest and Fee Income

3Q 18 Compared to 3Q 17

Increase (Decrease)

Volume   Rate   Volume & Rate   Net
Small loans $ 4,564 $ (2,048 ) $ (244 ) $ 2,272
Large loans 8,153 (263 ) (102 ) 7,788
Automobile loans (1,622 ) (101 ) 53 (1,670 )
Retail loans 3 119 1 123
Product mix   (1,375 )   1,244     131      
 
Total increase in interest and fee income $ 9,723   $ (1,049 ) $ (161 ) $ 8,513  
 
 

 

Net Loans Originated (1)
3Q 18   2Q 18  

QoQ $ Inc (Dec)

 

QoQ %

Inc (Dec)

  3Q 17  

YoY $

Inc (Dec)

 

YoY %

Inc (Dec)

Small loans $ 162,644 $ 165,023 $ (2,379 ) (1.4

)%

$ 148,820 $ 13,824 9.3 %
Large loans 95,410 109,186 (13,776 ) (12.6

)%

105,460 (10,050 ) (9.5

)%

Automobile loans (2) 0.0 % 3,787 (3,787 ) (100.0

)%

Retail loans   5,971   6,713   (742 ) (11.1

)%

  7,905   (1,934 ) (24.5

)%

 
Total net loans originated $ 264,025 $ 280,922 $ (16,897 ) (6.0

)%

$ 265,972 $ (1,947 ) (0.7

)%

 
(1)   Represents the balance of loan origination and refinancing net of unearned finance charges.
(2) The Company ceased originating automobile loans in November 2017.
 
 

 

Other Key Metrics
3Q 18   2Q 18   3Q 17
Net credit losses $ 16,790 $ 19,503 $ 14,752
Percentage of average finance receivables (annualized) 7.7 % 9.5 % 7.8 %
 
Provision for credit losses (1) $ 23,640 $ 20,203 $ 20,152
Percentage of average finance receivables (annualized) 10.9 % 9.9 % 10.7 %
Percentage of total revenue 30.3 % 27.9 % 29.1 %
 
General and administrative expenses $ 35,861 $ 33,215 $ 33,840
Percentage of average finance receivables (annualized) 16.5 % 16.2 % 18.0 %
Percentage of total revenue 46.0 % 45.9 % 48.9 %
 
Same store results:
Finance receivables at period-end $ 886,104 $ 839,741 $ 768,794
Finance receivable growth rate 14.4 % 15.6 % 10.4 %
Number of branches in calculation 338 334 333
 
(1)   Includes incremental hurricane allowance for credit losses of $3,900 and $3,000 for 3Q 18 and 3Q 17, respectively.
 
 
Contractual Delinquency by Aging
3Q 18   2Q 18   3Q 17
Allowance for credit losses (1) $ 55,300   6.2 % $ 48,450   5.7 % $ 47,400   6.1 %
 
Current 726,003 81.8 % 704,770 83.1 % 638,696 82.5 %
1 to 29 days past due   99,008 11.1 %   89,510 10.6 %   83,230 10.7 %
 
Delinquent accounts:
30 to 59 days 22,215 2.5 % 18,886 2.3 % 18,621 2.4 %
60 to 89 days 15,360 1.7 % 12,103 1.4 % 11,631 1.5 %
90 to 119 days 10,183 1.1 % 8,373 1.0 % 9,653 1.2 %
120 to 149 days 8,476 1.0 % 6,857 0.8 % 6,799 0.9 %
150 to 179 days   6,831 0.8 %   6,739 0.8 %   6,226 0.8 %
 
Total contractual delinquency (2) $ 63,065 7.1 % $ 52,958 6.3 % $ 52,930 6.8 %
 
Total finance receivables $ 888,076 100.0 % $ 847,238 100.0 % $ 774,856 100.0 %
 
 
1 day and over past due $ 162,073 18.2 % $ 142,468 16.9 % $ 136,160 17.5 %
 
 
Contractual Delinquency by Product
3Q 18   2Q 18   3Q 17
Small loans $ 34,581  

8.3

%

$ 28,347  

7.4

%

$ 30,328  

8.3

%

Large loans 23,406

5.7

%

19,600

5.0

%

15,578

5.0

%

Automobile loans 2,686

8.3

%

2,909

7.4

%

5,280

7.4

%

Retail loans 2,392

7.8

%

2,102

6.8

%

1,744

5.6

%

 
Total contractual delinquency(2) $ 63,065

7.1

%

$ 52,958

6.3

%

$ 52,930

6.8

%

 
(1)   Includes incremental hurricane allowance for credit losses of $3,900 and $3,000 for 3Q 18 and 3Q 17, respectively.
(2) Delinquency was impacted 0.2% by hurricane-affected branches for both 3Q 18 and 3Q 17.
 
 
Quarterly Trend
3Q 17   4Q 17   1Q 18   2Q 18   3Q 18  

QoQ $ B(W)

 

YoY $ B(W)

Revenue
Interest and fee income $ 63,615 $ 66,377 $ 66,151 $ 66,829 $ 72,128 $ 5,299 $ 8,513
Insurance income, net 3,095 3,076 3,389 2,882 2,898 16

(197

)

Other income   2,484   2,654   3,085   2,705   2,890   185     406  
 
Total revenue   69,194   72,107   72,625   72,416   77,916   5,500     8,722  
 
Expenses
Provision for credit losses 20,152 19,464 19,515 20,203 23,640

(3,437

)

(3,488

)

 
Personnel 19,534 19,903 21,228 19,390 21,376

(1,986

)

(1,842

)

Occupancy 5,480 5,346 5,618 5,478 5,490

(12

)

(10

)

Marketing 2,303 1,841 1,453 2,258 2,132 126 171
Other   6,523   6,929   6,293   6,089   6,863  

(774

)

 

(340

)

 
Total general and administrative 33,840 34,019 34,592 33,215 35,861

(2,646

)

(2,021

)

 
Interest expense   6,658   6,816   7,177   7,915   8,729  

(814

)

 

(2,071

)

 
Income before income taxes 8,544 11,808 11,341 11,083 9,686

(1,397

)

1,142
Income taxes   3,235   923   2,697   2,601   2,237   364     998  
 
Net income $ 5,309 $ 10,885 $ 8,644 $ 8,482 $ 7,449

$

(1,033

)

$ 2,140  
 
Net income per common share:
Basic $ 0.46 $ 0.94 $ 0.74 $ 0.73 $ 0.64

$

(0.09

)

$ 0.18  
 
Diluted $ 0.45 $ 0.92 $ 0.72 $ 0.70 $ 0.61 $

(0.09

)

$ 0.16  
 
Weighted-average shares outstanding:
Basic   11,563   11,592   11,618   11,658   11,672  

(14

)

 

(109

)

 
Diluted   11,812   11,875   12,030   12,138   12,133   5    

(321

)

 
 
Net interest margin $ 62,536 $ 65,291 $ 65,448 $ 64,501 $ 69,187 $ 4,686   $ 6,651  
 
Net credit margin $ 42,384 $ 45,827 $ 45,933 $ 44,298 $ 45,547 $ 1,249   $ 3,163  
 
 
3Q 17 4Q 17 1Q 18 2Q 18 3Q 18

QoQ $ Inc (Dec)

YoY $ Inc (Dec)

Total assets $ 779,850 $ 829,483 $ 814,809 $ 868,220 $ 893,279 $ 25,059   $ 113,429  
 
Finance receivables $ 774,856 $ 817,463 $ 804,956 $ 847,238 $ 888,076 $ 40,838   $ 113,220  
 
Allowance for credit losses $ 47,400 $ 48,910 $ 47,750 $ 48,450 $ 55,300 $ 6,850   $ 7,900  
 
Long-term debt $ 538,351 $ 571,496 $ 550,377 $ 595,765 $ 611,593 $ 15,828   $ 73,242  
 
 
Finance Receivables by Product
3Q 18   2Q 18  

QoQ $

Inc (Dec)

 

QoQ %

Inc (Dec)

  3Q 17  

YoY $

Inc (Dec)

 

YoY %

Inc (Dec)

Small loans $ 414,441 $ 384,690 $ 29,751

7.7

%

$ 363,262 $ 51,179

14.1

%

Large loans   410,811   392,101   18,710  

4.8

%

  308,642   102,169  

33.1

%

 
Total core loans 825,252 776,791 48,461

6.2

%

671,904 153,348

22.8

%

Automobile loans 32,322 39,414

(7,092

)

(18.0

)%

71,666

(39,344

)

(54.9

)%

Retail loans   30,502   31,033  

(531

)

(1.7

)%

  31,286  

(784

)

(2.5

)%

 
Total finance receivables $ 888,076 $ 847,238 $ 40,838  

4.8

%

$ 774,856 $ 113,220  

14.6

%

 
 
Number of branches at period end 346 340 6

1.8

%

344 2

0.6

%

Average finance receivables per branch $ 2,567 $ 2,492 $ 75  

3.0

%

$ 2,252 $ 315  

14.0

%

 
 
Averages and Yields
YTD 18   YTD 17

Average Finance Receivables

 

Average Yield (Annualized)

Average Finance Receivables

 

Average Yield (Annualized)

Small loans $ 379,543

40.2

%

$ 351,204

42.4

%

Large loans 377,777

28.5

%

261,277

28.8

%

Automobile loans 45,041

15.7

%

82,313

16.4

%

Retail loans   31,676

18.9

%

  31,389

18.4

%

 
Total interest and fee yield $ 834,037

32.8

%

$ 726,183

33.5

%

 
Total revenue yield $ 834,037

35.6

%

$ 726,183

36.8

%

 
 
Components of Increase in Interest and Fee Income
YTD 18 Compared to YTD 17
Increase (Decrease)
Volume   Rate  

Volume & Rate

  Net
Small loans $ 9,019

$

(5,876

)

$

(474

)

$ 2,669
Large loans 25,145

(457

)

(204

)

24,484
Automobile loans

(4,596

)

(460

)

208

(4,848

)

Retail loans 40 105 1 146
Product mix  

(2,479

)

  2,615    

(136

)

   
 
Total increase in interest and fee income $ 27,129  

$

(4,073

)

$

(605

)

$ 22,451  
 
 
Net Loans Originated (1)
YTD 18   YTD 17  

YTD $ Inc (Dec)

 

YTD % Inc (Dec)

Small loans $ 451,423 $ 424,559 $ 26,864

6.3

%

Large loans 293,369 249,251 44,118

17.7

%

Automobile loans (2) 18,404

(18,404

)

(100.0

)%

Retail loans   19,986   20,522  

(536

)

(2.6

)%

 
Total net loans originated $ 764,778 $ 712,736 $ 52,042  

7.3

%

 
(1)   Represents the balance of loan origination and refinancing net of unearned finance charges.
(2) The Company ceased originating automobile loans in November 2017.
 
 
Other Key Metrics
YTD 18   YTD 17
Net credit losses $ 56,968 $ 51,725
Percentage of average finance receivables (annualized) 9.1 % 9.5 %
 
Provision for credit losses (1) $ 63,358 $ 57,875
Percentage of average finance receivables (annualized) 10.1 % 10.6 %
Percentage of total revenue 28.4 % 28.9 %
 
General and administrative expenses $ 103,668 $ 96,936
Percentage of average finance receivables (annualized) 16.6 % 17.8 %
Percentage of total revenue 46.5 % 48.4 %
 
(1)   Includes incremental hurricane allowance for credit losses of $3,900 and $3,000 for YTD 18 and YTD 17, respectively.
 

We utilize certain non-GAAP measures as additional metrics to aid in, and enhance, the understanding of our financial results and related measures. We believe that these non-GAAP measures provide useful information by excluding certain material items that may not be indicative of our core operating results. We have presented non-GAAP measures that adjust for the impact of the bulk sale of previously charged-off bankrupt accounts (2017) and natural disasters (2017 and 2018) because these types of events rarely occurred prior to 2017 and, we believe, will occur infrequently in the future. As a result, we believe that the non-GAAP measures that we have presented will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of our results in the current period to those in prior and future periods. The non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following table provides a reconciliation of GAAP measures to non-GAAP measures for the periods which include non-GAAP adjustments.

 
Non-GAAP Reconciliation
3Q 18   Adjustments (1)   Non-GAAP
Net income $ 7,449 $ 2,884 $ 10,333
Diluted net income per common share $ 0.61 $ 0.24 $ 0.85
 
 
Non-GAAP Reconciliation
3Q 17   Adjustments (1)   Non-GAAP
Net income $ 5,309 $ 1,541 $ 6,850
Diluted net income per common share $ 0.45 $ 0.13 $ 0.58
 
(1)   Non-GAAP adjustment details are listed below:
 
Non-GAAP Adjustments (2)
3Q 18   3Q 17
Estimated hurricane impact (3) $ 2,884 $ 2,173
Bulk sale of previously charged-off bankrupt accounts    

(632

)

 
Adjustment to net income $ 2,884 $ 1,541  
 
Adjustment to diluted net income per common share $ 0.24 $ 0.13  
 
(2)   The effective tax rates were 25.0% and 38.3% for 3Q 18 and 3Q 17, respectively.
(3) The estimated hurricane impact relates to an incremental pre-tax allowance for credit losses of $3.9 million (3Q 18) and $3.0 million (3Q 17), along with minor impacts to revenue and expenses.

Regional Management Corp.
Investor Relations
Garrett Edson,
(203) 682-8331

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