Regional Management Corp. Announces Second Quarter 2013 Results

Regional Management Corp. (NYSE: RM), a diversified specialty consumer finance company, today announced results for the second quarter and six-month period ended June 30, 2013.

Second Quarter 2013 Highlights
  • Total second quarter 2013 revenue was $39.4 million, a 23.0% increase from the prior-year period.
  • Net income for the second quarter of 2013 was $6.7 million, a 0.5% increase from net income of $6.6 million in the prior-year period. Diluted earnings per share was $0.52 based on a diluted share count of 12.9 million.
  • Finance receivables as of June 30, 2013 were $460.4 million, an increase of 33.3% from the prior-year period. Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2013 were 6.7%, an increase from 6.1% in the prior-year period.
  • Same-store revenue growth1 for the second quarter of 2013 was 17.2%. Same-store finance receivables growth for the second quarter of 2013 was 22.4%.
  • Opened 29 de novo branches and acquired 2 branches in the second quarter of 2013; as of June 30, 2013, Regional Management’s branch network consisted of 263 locations.
  • On May 14, 2013, Regional Management received an increase in the availability of the company’s senior revolving credit facility to $500 million from its previous amount of $325 million, with a maturity date of May 2016.

“We once again achieved strong top-line and same-store sales growth, a testament to the efforts of our entire Regional team,” said Thomas Fortin, Chief Executive Officer of Regional Management Corp. “Further, we had two other significant accomplishments in the quarter – the increase in our credit facility to $500 million, and the substantial completion of our 2013 de novo branch expansion strategy with the opening of 29 new branches. Our branch openings in the second quarter of 2013 far outpaced the 12 branch openings in the second quarter of 2012, which increased our new branch expenses by approximately $0.6 million from last year’s second quarter. When combined with a year-over-year decline in our total yield, our efficiency ratio remained higher than normal. We will be watching both our yield and efficiency ratio in the back half of the year to ensure that they align more closely with our historical levels and overall strategy.”

_____________________

1 Defined as stores open for at least 13 months.

Second Quarter 2013 Results

For the second quarter ended June 30, 2013, Regional Management reported total revenue of $39.4 million, a 23.0% increase from $32.0 million in the prior-year period. Interest and fee income revenue for the second quarter of 2013 was $34.9 million, a 23.9% increase from $28.2 million in the prior-year period, primarily due to a 33.3% year-over-year increase in finance receivables. Insurance and other income for the second quarter of 2013 was $4.5 million, a 16.2% increase from the prior-year period. Same-store revenue growth for the second quarter of 2013 was 17.2%.

Finance receivables outstanding at June 30, 2013 were $460.4 million, a 33.3% increase from $345.4 million in the prior-year period. Finance receivables increased due to the addition of 55 de novo branches and 2 acquired branches since June 30, 2012, as well as the increase in same-store finance receivables (stores open at least 13 months), which grew 22.4% in the second quarter.

Provision for credit losses in the second quarter of 2013 was $8.4 million versus $5.9 million in the prior-year period, primarily due to the increase in loan volume. Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2013 was 6.7%, an increase from 6.1% in the prior-year period.

General and administrative expenses for the second quarter of 2013 were $17.2 million, an increase of 29.5% from $13.3 million in the prior-year period, primarily due to increased personnel costs from opening and acquiring an additional 57 branches since June 30, 2012 and increased advertising costs. During the second quarter of 2013, Regional Management opened and acquired 31 new branches. Regional Management’s efficiency ratio – the percentage of general and administrative expenses compared to total revenue – in the second quarter of 2013 was 43.6%, an increase of 220 basis points from 41.4% in the prior-year period.

Net income for the second quarter of 2013 was $6.7 million, a 0.5% increase compared to net income of $6.6 million in the prior-year period. Diluted earnings per share for the second quarter of 2013 was $0.52, comparable with the prior-year period.

Six Month 2013 Results

For the six-month period ended June 30, 2013, Regional Management reported total revenue of $78.0 million, a 22.7% increase from $63.6 million in the prior-year period. Interest and fee income revenue for the six-month period ended June 30, 2013 was $69.0 million, a 24.8% increase from $55.2 million in the prior-year period. Insurance and other income for the six-month period ended June 30, 2013 was $9.0 million, an 8.1% increase from the prior-year period.

Provision for loan losses in the six-month period ended June 30, 2013 was $16.5 million versus $11.5 million in the prior-year period, primarily due to the increase in loan volume. Net charge-offs as a percentage of average finance receivables for the six-month period ended June 30, 2013 was 6.5%, an increase from 6.2% in the prior-year period.

General and administrative expenses for the six-month period ended June 30, 2013 were $33.6 million, an increase of 28.9% from $26.1 million in the prior-year period, primarily due to increased personnel costs from opening and acquiring an additional 57 branches since June 30, 2012. During the six months ended June 30, 2013, Regional Management opened and acquired 42 new branches. Regional Management’s efficiency ratio in the six-month period ended June 30, 2013 was 43.1%, an increase of 210 basis points from 41.0% in the prior-year period.

Net income for the six-month period ended June 30, 2013 was $13.6 million, a 15.7% increase compared to GAAP net income of $11.7 million in the prior-year period, and diluted earnings per share for the six-month period ended June 30, 2013 was $1.06 – based on a diluted share count of 12.8 million – compared to $1.05 in the prior-year period. On a pro forma basis, excluding one-time IPO expenses and applying the proceeds from the IPO to reduce outstanding debt, net income for the six-month period ended June 30, 2012 was $13.4 million and diluted earnings per share was $1.05 based on a diluted share count of 12.8 million.

Liquidity and Capital Resources

As of June 30, 2013, Regional Management had finance receivables of $460.4 million and outstanding debt of $302.3 million on its $500.0 million senior revolving credit facility and on its $1.5 million cash management line of credit.

Conference Call Information

The Company will host a conference call and webcast today at 5:00 PM Eastern. Both the call and webcast are open to the general public.

The dial-in number for the conference call is (866) 318-8612, passcode 18546184 – please dial the number 10 minutes prior to the scheduled start time. A live webcast of the conference call will also be available on Regional Management's website at www.RegionalManagement.com.

A replay of the call will be available two hours following the end of the call through midnight Eastern on Wednesday, August 7 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 70895712.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, which represent Regional Management’s expectations or beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following: the continuation or worsening of adverse conditions in the global and domestic credit markets and uncertainties regarding, or the impact of governmental responses to those conditions; changes in interest rates; risks related to acquisitions and new branches; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; recently-enacted or proposed legislation; the timing and amount of revenues that may be recognized by Regional Management; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management). Such factors are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management Corp. will not and is not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified specialty consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. Regional Management began operations in 1987 with four branches in South Carolina and has since expanded its branch network across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma, New Mexico and Georgia. Each of its loan products is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Management’s loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, furniture and appliance retailers and its consumer website. For more information, please visit http://www.RegionalManagement.com.
               

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

($ in thousands, except per share amounts)

(Unaudited)
 
Three Months Ended

June 30,
Six Months Ended

June 30,
2013 2012 2013 2012
Revenue
Interest and fee income $ 34,920 $ 28,175 $ 68,966 $ 55,244
Insurance income, net 2,973 2,680 5,906 5,316
Other income   1,490   1,161   3,080   2,996
Total revenue   39,383   32,016   77,952   63,556
 
Expenses
Provision for loan losses 8,405 5,908 16,476 11,535
General and administrative expenses
Personnel 9,787 8,273 19,820 16,270
Occupancy 2,697 2,086 5,213 3,980
Advertising 1,347 632 1,852 1,225
Other 3,341 2,268 6,707 4,576
Consulting and advisory fees 1,451
Interest expense
Senior revolving credit facility and other debt 3,241 2,341 6,322 4,851
Mezzanine debt-related parties         1,030
Total interest expense   3,241   2,341   6,322   5,881
Total expenses   28,818   21,508   56,390   44,918
Income before income taxes 10,565 10,508 21,562 18,638
Income taxes   3,909   3,888   7,978   6,896
Net income $ 6,656 $ 6,620 $ 13,584 $ 11,742
 
Net income per common share:
Basic $ 0.53 $ 0.53 $ 1.08 $ 1.08
Diluted $ 0.52 $ 0.52 $ 1.06 $ 1.05
 
Weighted average common shares outstanding:
Basic   12,584,942   12,452,112   12,543,888   10,894,419
Diluted   12,881,117   12,735,088   12,831,040   11,175,792
 
       

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

($ in thousands, except per share amounts)

(Unaudited)
 
June 30, 2013 December 31, 2012
Assets
Cash $ 2,931 $ 3,298
Gross finance receivables 552,283 529,583
Less unearned finance charges, insurance premiums, and commissions  

(91,841

)
 

(92,024

)
Finance receivables 460,442 437,559
Allowance for credit losses  

(25,619

)
 

(23,616

)

Net finance receivables
434,823 413,943
Property and equipment, net of accumulated depreciation 6,991 5,111
Repossessed assets at net realizable value 822 711
Goodwill 363 363
Intangible assets, net 1,890 1,815
Other assets   12,124     9,750  
Total assets $ 459,944   $ 434,991  
 
Liabilities and Stockholders’ Equity
Liabilities:
Deferred tax liability, net $ 7,280 $ 5,947
Accounts payable and accrued expenses 4,930 6,096
Senior revolving credit facility 302,279 292,379
Other notes payable        
Total liabilities 314,489 304,422
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, $0.10 par value, 100,000,000 shares authorized, no shares issued and outstanding at June 30, 2013 and December 31, 2012
Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,584,942 shares issued and outstanding at June 30, 2013; 1,000,000,000 shares authorized, 12,486,727 shares issued and outstanding at December 31, 2012 1,258 1,249
Additional paid-in-capital 81,451 80,158
Retained earnings   62,746     49,162  
Total stockholders’ equity   145,455     130,569  
Total liabilities and stockholders’ equity $ 459,944   $ 434,991  
 

           

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

($ in thousands)
 
Components of Increase in Interest and Fee IncomeThree Months Ended June 30, 2013Compared to Three Months Ended June 30, 2012Increase (Decrease)
Volume Rate Net
Small installment loans $ 8,834 $ (2,202 ) $ 6,632
Large installment loans (850 ) (600 ) (1,450 )
Automobile purchase loans 1,736 (746 ) 990
Retail purchase loans   573         573  
Total increase in interest and fee income $ 10,293  

$

(3,548

)
$ 6,745  
 
               
Three Months Ended June 30,
  2013     2012  
Total Yield 35.5 % 38.9 %
Average net finance receivables $ 444,347 $ 329,260
 
               
Loans Originated (1)

Three Months Ended June 30,
2013 2012
Small installment loans $ 160,291 $ 98,925
Large installment loans 14,621 20,423
Automobile purchase loans 34,872 35,404
Retail purchase loans   8,202   10,171
Total finance receivables $ 217,986 $ 164,923
 

(1) Represents gross balance of loan originations, including unearned finance charges
               
Three Months Ended June 30,
2013 2012
Amount Percentage ofAverage FinanceReceivables (Annualized) Amount Percentage ofAverage FinanceReceivables (Annualized)
Net charge-offs as a percentage of average finance receivables $ 7,416 6.7 % $ 4,988

6.1

%
 
Amount Percentage ofTotal Revenue Amount Percentage ofTotal Revenue
Provision for credit losses $ 8,405

21.3

%
$ 5,908

18.5

%
General and administrative expenses $ 17,172

43.6

%
$ 13,259

41.4

%
 
Amount Growth Rate Amount Growth Rate
Same store finance receivables at period-end/Growth rate $ 413,975

22.4

%
$ 291,233

16.3

%
Same store revenue growth rate

17.2

%

10.8

%
Number of branches in calculation 193 146
 
                   
 
 
Components of Increase in Interest and Fee IncomeSix Months Ended June 30, 2013Compared to Six Months Ended June 30, 2012Increase (Decrease)
Volume Rate Net
Small installment loans $ 16,440 $ (4,302 ) $ 12,138
Large installment loans (1,016 ) (1,026 ) (2,042 )
Automobile purchase loans 3,618 (1,341 ) 2,277
Retail purchase loans 1,380   (31 )   1,349  
Total increase in interest and fee income $ 20,422  

$ (6,700

)
$ 13,722  
 
       
Loans Originated (1)

Six Months Ended June 30,
2013 2012  
Small installment loans $ 262,001 $ 155,736
Large installment loans 29,357 32,940
Automobile purchase loans 67,578 65,544
Retail purchase loans 17,125 16,904  
Total finance receivables $ 376,061 $ 271,124  
 

(1) Represents gross balance of loan originations, including unearned finance charges
               
Six Months Ended June 30,
2013 2012
Amount Percentage ofAverage FinanceReceivables (Annualized) Amount Percentage ofAverage FinanceReceivables (Annualized)
Net charge-offs as a percentage of average finance receivables $ 14,472 6.5 % $ 10,055

6.2

%
 
Amount Percentage ofTotal Revenue Amount Percentage ofTotal Revenue
Provision for credit losses $ 16,476

21.1

%
$ 11,535

18.1

%
General and administrative expenses $ 33,592

43.1

%
$ 26,051

41.0

%
 
               
Finance Receivables

As of June 30,
2013 2012
Small installment loans $ 206,650 $ 120,675
Large installment loans 44,369 53,604
Automobile purchase loans 178,865 150,292
Retail purchase loans   30,558   20,840
 
Total finance receivables $ 460,442 $ 345,411
 
               
As of June 30,
2013 2012
Amount Percentage ofTotal FinanceReceivables Amount Percentage ofTotal FinanceReceivables
Allowance for credit losses $ 25,619

5.6

%
$ 20,780

6.0

%
Over 30 days contractually delinquent $ 28,830

6.3

%
$ 21,071

6.1

%
Over 90 days contractually delinquent $ 10,534

2.3

%
$ 7,063

2.0

%
Over 180 days contractually delinquent $ 2,763

0.6

%
$ 1,880

0.5

%
Number of branches at period end 263 206
 
           

Regional Management Corp. and Subsidiaries

Unaudited Pro Forma Consolidated Statements of Income

For the Six Months Ended June 30, 2012

($ in thousands except per share amounts)
 
Actual Pro FormaAdjustments Pro Forma
Revenue
Interest and fee income $ 55,244 $ $ 55,244
Insurance income 5,316 5,316
Other income   2,996       2,996
Total revenue   63,556       63,556
 
Expenses
Provision for credit losses 11,535 11,535
General and administrative expenses
Personnel 16,270

140

(1)

 
16,410
Occupancy 3,980 3,980
Advertising 1,225 1,225
Other 4,576 4,576
Consulting and advisory fees 1,451

(1,451

)(2)

 
Interest expense
Senior revolving credit facility and other debt 4,851

(247

)(3)

 
4,604
Mezzanine debt-related parties   1,030  

(1,030

)(4)

 
 
Total interest expense   5,881  

(1,277

)
  4,604
Total expenses   44,918  

(2,588

)
  42,330
Income before income taxes 18,638 2,588 21,226
Income taxes   6,896  

942

(5)

 
  7,838
Net income $ 11,742 $ 1,646   $ 13,388
 
Net income per common share
Basic $ 1.08 $ 1.07
Diluted $ 1.05 $ 1.05
 
Weighted average shares outstanding:
Basic   10,894,419   12,486,727
Diluted   11,175,792   12,768,100
 

(1)
 

Represents additional compensation expense associated with the grant of options upon consummation of the initial public offering.

(2)

Represents a termination fee of $1,125, combined with the $326 we paid our former majority stockholders and sponsors for the three months ended March 31, 2012. The agreements with the former majority stockholders and sponsors terminated with the completion of the initial public offering.

(3)

Reflects reduction in interest expense as a result of payment of $13,229 in aggregate principal amount of our senior revolving credit facility, offset in part by an unused line fee of 0.50%. Also reflects a reduction in the interest rate under our senior revolving credit facility from one month LIBOR (with a LIBOR floor of 1.00%) plus 3.25% to one month LIBOR (with a LIBOR floor of 1.00%) plus 3.00%.

(4)

Reflects reduction in interest expense as a result of the repayment of the $25,814 in aggregate principal amount of our mezzanine debt, which accrued interest at a rate of 15.25% per annum.

(5)

Reflects an increase in income taxes as a result of the increase in income before taxes.

Copyright Business Wire 2010

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