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Regional Management Corp. Announces Third Quarter 2016 Results

- Net income of $6.5 million; diluted earnings per share of $0.56 -

- Revenue increase of 13.4% on finance receivable growth of 15.7% -

- Portfolio growth of $50 million sequentially to $696 million as of September 30 -

GREENVILLE, S.C.--(BUSINESS WIRE)--Oct. 27, 2016-- Regional Management Corp. (NYSE:RM), a diversified consumer finance company, today announced results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

  • Net income for the third quarter of 2016 was $6.5 million, comparable with the prior-year period; non-GAAP net income was $6.7 million, an increase of 3.4% from the prior-year period. Diluted earnings per share were $0.56, and on a non-GAAP basis, diluted earnings per share were $0.58. Non-GAAP net income excludes $0.4 million of non-operating system implementation costs.
  • Total finance receivables as of September 30, 2016 were $696 million, an increase of 15.7%, or $95 million, from the prior year and up 7.8%, or $50 million, sequentially:
    • Sixth consecutive quarter that total finance receivables have increased at least 10% over the prior-year period.
    • Large loan finance receivables of $217 million increased $97 million, or 81.3%, from the prior-year period and now represent over 31% of the total loan portfolio.
  • Total revenue for the third quarter of 2016 was $62.5 million, a $7.4 million, or 13.4%, increase from the prior-year period, and a $5.2 million, or 9.0%, increase sequentially. Revenue growth over the prior-year period was driven by a 15.7% increase in receivables, partially offset by an overall yield decline of 40 basis points. On a sequential basis, overall yield increased by 30 basis points.
  • Net charge-offs for the third quarter of 2016 were $13.5 million, an increase of $1.0 million versus the prior-year period. Annualized net charge-offs of 8.0% of average finance receivables were down 50 basis points compared to the prior-year period.
  • Total delinquencies as a percentage of total finance receivables as of September 30, 2016 were 18.2%, a slight decline from 18.3% as of June 30, 2016 and an improvement from 22.4% as of September 30, 2015.
    • 30+ day contractual delinquencies were 7.1%, an increase sequentially from 6.8% as of June 30, 2016 – consistent with the seasonality of Regional Management’s business – but reduced from 7.3% as of September 30, 2015.
  • In August, Regional Management amended its senior revolving credit facility agreement, increasing the committed line to $585 million and extending the maturity date to August 2019. The upper limit of the accordion feature of the credit facility was also increased to $650 million.

“Our third quarter was marked by strong growth in our core small and large loan portfolios,” said Peter R. Knitzer, Chief Executive Officer of Regional Management Corp. “Total finance receivables increased nearly 16% from the prior year and grew almost 8% from June 30th of this year alone. Our interest and fee income increased over 15%, which tracks closely with our portfolio growth. As a result of strong portfolio growth, our provision for credit losses in the quarter increased $2.3 million over the prior-year period, but our net charge-offs as a percentage of average finance receivables improved from the prior-year period, once again showing the stability of our credit performance. While our personnel expense held mostly in line with previous quarters in 2016, it was elevated from the prior-year period due to lower incentive expense in the third quarter of 2015.”

“In addition to solid operating results for the quarter, the transition to our new operating platform continues to progress,” continued Mr. Knitzer. “We recently converted our third state, North Carolina, to the new system, and as we’ve continued the implementation process, we’ve learned that the most prudent course of action is to successfully convert one state at a time. As a result, we expect the system to be fully adopted in all of our states in the first half of 2017. We are pleased with the system’s performance thus far, and we continue to focus our efforts on converting our remaining states, which will allow us to enhance our opportunities for the long-term success of the Company.”

Third Quarter 2016 Results

Finance receivables outstanding at September 30, 2016 were $696.1 million, a 15.7% increase from $601.6 million in the prior year. Finance receivables increased primarily due to an increase in both the small and large loan portfolios resulting from Regional Management’s marketing efforts and the net addition of 16 de novo branches since September 30, 2015. On a sequential basis, finance receivables increased by $50.4 million from the second quarter.

For the third quarter ended September 30, 2016, the Company reported total revenue of $62.5 million, a 13.4% increase from $55.1 million in the prior-year period. Interest and fee income for the third quarter of 2016 was $57.4 million, a 15.4% increase from $49.7 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. Insurance income, net for the third quarter of 2016 was $2.3 million, a decline of $0.4 million from the prior-year period due primarily to increased claims expense. Other income for the third quarter of 2016 was $2.7 million, a 4.7% increase from the prior-year period.

The provision for credit losses in the third quarter of 2016 was $16.4 million versus $14.1 million in the prior-year period, primarily due to the growth of finance receivables in the quarter. In addition, the allowance for credit losses increased sequentially at the same rate as loan growth, resulting in the provision for credit losses increasing by approximately $3.0 million from the second quarter.

Net charge-offs were $13.5 million in the third quarter of 2016 versus $12.5 million in the prior-year period. On a sequential basis, net charge-offs in the third quarter of 2016 increased slightly from the second quarter of 2016. Annualized net charge-offs as a percentage of average finance receivables in the third quarter of 2016 were 8.0%, an improvement from 8.5% in the prior-year period and 8.6% in the second quarter of 2016.

General and administrative expenses for the third quarter of 2016 were $30.5 million, an increase of 16.3%, or $4.3 million, from the prior-year period. Home office expenses increased $3.7 million from the prior-year period primarily due to $2.2 million in increased incentive expense and $0.8 million in increased salary expense. Incentive expense increased due to reduced short- and long-term incentive plan accruals in the prior-year period that did not recur in the third quarter of 2016. Salaries increased primarily due to the addition of 13 employees in the home office. Branch expenses in the third quarter of 2016 improved $0.1 million from the prior-year period, despite the addition of 16 net new branches since September 30, 2015, as branch headcount decreased due to the 2015 phase-out of field calling as a collection activity. Sequentially, general and administrative expenses rose $0.9 million, or 3.1%, from the second quarter of 2016. Excluding $0.4 million in loan system conversion costs in the third quarter of 2016, general and administrative expenses for the third quarter of 2016 would have been $30.0 million versus $26.2 million in the prior-year period.

GAAP net income for the third quarter of 2016 was $6.5 million, comparable with the prior-year period. Diluted earnings per share for the third quarter of 2016 were $0.56, an increase from $0.50 in the prior-year period. Excluding the aforementioned non-operating expense in the third quarter of 2016, non-GAAP net income in the third quarter of 2016 would have been $6.7 million and diluted earnings per share would have been $0.58. For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measure, please refer to the reconciliation table accompanying this release.

Nine Months 2016 Results

For the nine months ended September 30, 2016, the Company reported total revenue of $176.5 million, a 9.9% increase from $160.6 million in the prior-year period. Interest and fee income for the nine months ended September 30, 2016 was $161.3 million, an 11.7% increase from $144.5 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, net for the nine months ended September 30, 2016 was $7.9 million, a 10.5% decrease from the prior-year period, primarily attributable to increased claims expense. Other income for the nine months ended September 30, 2016 was $7.3 million, comparable with the prior-year period.

The provision for credit losses for the nine months ended September 30, 2016 was $43.6 million versus $35.9 million in the prior-year period. Net charge-offs for the nine months ended September 30, 2016 were $41.9 million compared to $38.6 million in the prior-year period. Annualized net charge-offs as a percentage of average finance receivables for the nine months ended September 30, 2016 was 8.7%, a decline from 9.2% in the prior-year period.

General and administrative expenses for the nine months ended September 30, 2016 were $89.8 million, an increase of $2.8 million, or 3.2%, from $87.0 million in the prior-year period. The nine months 2016 results included $1.4 million in non-operating loan system conversion costs, while the nine months 2015 results included $2.7 million in non-operating expenses.

GAAP net income for the nine months ended September 30, 2016 was $17.6 million, a 9.8% increase compared to GAAP net income of $16.0 million in the prior-year period, and diluted earnings per share for the nine months ended September 30, 2016 were $1.44 compared to $1.22 in the prior-year period. Excluding the aforementioned non-operating expenses, non-GAAP net income for the nine months ended September 30, 2016 totaled $18.5 million and non-GAAP diluted earnings per share were $1.51, compared to non-GAAP net income of $17.7 million and non-GAAP diluted earnings per share of $1.35 in the prior-year period.

2016 De Novo Outlook

As of September 30, 2016, the Company’s branch network consisted of 338 locations. Due to its focus on implementing its new loan management system, the Company plans to return to opening additional de novo branches in early 2017.

Liquidity and Capital Resources

As of September 30, 2016, the Company had finance receivables of $696.1 million and outstanding long-term debt of $481.8 million (consisting of $435.4 million of long-term debt on its $585.0 million senior revolving credit facility and $46.4 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 95219899. Please dial the number 10 minutes prior to the scheduled start time.

*** A supplemental slide presentation will be made available on Regional Management’s 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 Management’s website at www.RegionalManagement.com.

A replay will be available following the end of the call through Thursday, November 3, 2016, by telephone at (855) 859-2056 (toll-free) or (404) 537-3406 (direct), passcode 95219899. A webcast replay of the call will be available at 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: 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 Management’s 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 Management’s 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 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, 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’16 3Q’15   $       % YTD’16 YTD’15   $       %
Revenue
Interest and fee income $ 57,420 $ 49,741 $ 7,679 15.4 % $ 161,309 $ 144,474 $ 16,835 11.7 %
Insurance income, net 2,346 2,767

(421

)

(15.2

)%

7,886 8,816

(930

)

(10.5

)%

Other income   2,709     2,588     121   4.7 %   7,302     7,331    

(29

)

(0.4

)%

Total revenue   62,475     55,096     7,379  

13.4

%

  176,497     160,621     15,876  

9.9

%

 
Expenses
Provision for credit losses 16,410 14,085

(2,325

)

(16.5

)%

43,587 35,899

(7,688

)

(21.4

)%

 
Personnel 18,180 15,993

(2,187

)

(13.7

)%

51,981 51,964

(17

)

(0.0

)%

Occupancy 5,175 4,458

(717

)

(16.1

)%

14,808 12,791

(2,017

)

(15.8

)%

Marketing 1,786 1,134

(652

)

(57.5

)%

5,363 5,614 251

4.5

%

Other   5,312     4,597    

(715

)

(15.6

)%

  17,654     16,679    

(975

)

(5.8

)%

Total general and administrative 30,453 26,182

(4,271

)

(16.3

)%

89,806 87,048

(2,758

)

(3.2

)%

 
Interest expense   5,116     4,335    

(781

)

(18.0

)%

  14,637     11,871    

(2,766

)

(23.3

)%

 
Income before income taxes 10,496 10,494 2 0.0 % 28,467 25,803 2,664 10.3 %
Income taxes   4,020     3,987    

(33

)

(0.8

)%

  10,903     9,805    

(1,098

)

(11.2

)%

Net income $ 6,476   $ 6,507  

$

(31

)

(0.5

)%

$ 17,564   $ 15,998   $ 1,566  

9.8

%

 
Net income per common share:
Basic $ 0.57   $ 0.51   $ 0.06   11.8 % $ 1.47   $ 1.25   $ 0.22  

17.6

%

Diluted $ 0.56   $ 0.50   $ 0.06  

12.0

%

$ 1.44   $ 1.22   $ 0.22  

18.0

%

 
Weighted-average shares outstanding:
Basic   11,384     12,881     1,497  

11.6

%

  11,963     12,835     872  

6.8

%

Diluted   11,664     13,111     1,447  

11.0

%

  12,194     13,063     869  

6.7

%

 
 
Return on average assets (annualized)   3.9 %   4.5 %   3.7 %  

3.9

%

Return on average equity (annualized)  

13.2

%

  13.4 %   11.7 %   11.4 %
 
           

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)

 
Increase (Decrease)
3Q’16 3Q’15 $     %
Assets
Cash $ 3,959 $ 4,922

$

(963

)

(19.6

)%

Gross finance receivables 887,316 743,003 144,313 19.4 %
Unearned finance charges, insurance premiums, and commissions  

(191,167

)

 

(141,395

)

 

(49,772

)

(35.2

)%

Finance receivables 696,149 601,608 94,541 15.7 %
Allowance for credit losses  

(39,100

)

 

(37,786

)

 

(1,314

)

(3.5

)%

Net finance receivables 657,049 563,822 93,227

16.5

%

Property and equipment, net of accumulated depreciation 10,701 8,250 2,451

29.7

%

Restricted cash 7,906 2,900 5,006

172.6

%

Intangible assets, net 4,608 1,697 2,911

171.5

%

Goodwill 716 716

0.0

%

Repossessed assets at net realizable value 429 343 86

25.1

%

Deferred tax asset, net 265

(265

)

(100.0

)%

Other assets   5,961     4,593     1,368  

29.8

%

Total assets $ 691,329   $ 587,508   $ 103,821  

17.7

%

 
Liabilities and Stockholders’ Equity
Liabilities:
Long-term debt $ 481,766 $ 379,617 $ 102,149

26.9

%

Unamortized debt issuance costs  

(2,403

)

 

(1,458

)

 

(945

)

(64.8

)%

Net long-term debt 479,363 378,159 101,204

26.8

%

Accounts payable and accrued expenses 11,436 11,754

(318

)

(2.7

)%

Deferred tax liability, net   432         432  

100.0

%

Total liabilities 491,231 389,913 101,318

26.0

%

Commitments and Contingencies
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, 12,984 shares issued and 11,438 shares outstanding at September 30, 2016 and 12,914 shares issued and outstanding at September 30, 2015 1,298 1,291 7

0.5

%

Additional paid-in-capital 91,524 88,913 2,611

2.9

%

Retained earnings 132,322 107,391 24,931

23.2

%

Treasury stock, at cost, 1,546 shares at September 30, 2016  

(25,046

)

     

(25,046

)

(100.0

)%

Total stockholders’ equity   200,098     197,595     2,503  

1.3

%

Total liabilities and stockholders’ equity $ 691,329   $ 587,508   $ 103,821  

17.7

%

 
   

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands, except per share amounts)

 
Averages and Yields
3Q’16     2Q’16     3Q’15
Average Finance
Receivables
    Average Yield

(Annualized)

Average Finance
Receivables
    Average Yield

(Annualized)

Average Finance
Receivables
    Average Yield

(Annualized)

Small loans $   337,674 43.3 % $   313,388 43.0 % $   323,491 43.2 %
Large loans 206,437 29.0 % 178,683 28.8 % 106,155 27.6 %
Automobile loans 99,113 17.7 % 103,626 17.9 % 133,857 18.8 %
Retail loans     31,317 19.4 %     29,007 19.1 %     25,022 19.1 %
Total interest and fee yield $   674,541 34.0 % $   624,704 33.7 % $   588,525 33.8 %
Total revenue yield $   674,541 37.0 % $   624,704 36.7 % $   588,525 37.4 %
 
    Components of Increase in Interest and Fee Income

3Q’16 Compared to 3Q’15

Increase (Decrease)

       
Volume Rate Net
Small loans $ 1,534 $ 93 $ 1,627
Large loans 7,262 391 7,653
Automobile loans

(1,556

)

(367

)

(1,923

)

Retail loans   305     17     322  
Total increase in interest and fee income $ 7,545   $ 134   $ 7,679  
 
   
Net Loans Originated (1)
3Q’16     2Q’16     QoQ $

Inc (Dec)

    QoQ %

Inc (Dec)

    3Q’15     YoY $

Inc (Dec)

    YoY %

Inc (Dec)

Small loans $ 160,642 $ 153,049 $ 7,593 5.0 % $ 144,322 $ 16,320 11.3 %
Large loans 62,846 72,174 (9,328 ) (12.9

)%

44,911 17,935 39.9 %
Automobile loans 11,099 9,355 1,744 18.6 % 7,665 3,434 44.8 %
Retail loans   9,258   8,627   631   7.3 %   7,868   1,390 17.7 %
Total net loans originated $ 243,845 $ 243,205 $ 640   0.3 % $ 204,766 $ 39,079 19.1 %
 

(1) Represents the balance of loan origination and refinancing net of unearned finance charges

 
    Other Key Metrics
3Q’16     2Q’16     3Q’15
Net charge-offs $ 13,510 $ 13,416 $ 12,470
Percentage of average finance receivables (annualized) 8.0% 8.6% 8.5%
 
Provision for credit losses $ 16,410 $ 13,386 $ 14,085
Percentage of average finance receivables (annualized) 9.7% 8.6% 9.6%
Percentage of total revenue 26.3% 23.4% 25.6%
 
General and administrative expenses $ 30,453 $ 29,548 $ 26,182
Percentage of average finance receivables (annualized) 18.1% 18.9% 17.8%
Percentage of total revenue 48.7% 51.5% 47.5%
 
Same store results:
Finance receivables at period-end $ 657,764 $ 611,589 $ 573,221
Finance receivable growth rate 12.3% 9.5% 7.1%
Number of branches in calculation 315 306 293
 
   
Finance Receivables by Product
3Q’16     2Q’16     QoQ $

Inc (Dec)

    QoQ %

Inc (Dec)

    3Q’15     YoY $

Inc (Dec)

    YoY %

Inc (Dec)

Small loans $ 349,390 $ 320,077 $ 29,313 9.2 % $ 328,207 $ 21,183 6.5 %
Large loans   217,102   194,857   22,245   11.4 %   119,731   97,371   81.3 %
Total core loans 566,492 514,934 51,558 10.0 % 447,938 118,554 26.5 %
Automobile loans 97,141 100,721 (3,580 ) (3.6

)%

128,131 (30,990 ) (24.2

)%

Retail loans   32,516   30,089   2,427   8.1 %   25,539   6,977   27.3 %
Total finance receivables $ 696,149 $ 645,744 $ 50,405   7.8 % $ 601,608 $ 94,541   15.7 %
 
 
Number of branches at period end 338 338 0.0 % 322 16 5.0 %
Average finance receivables per branch $ 2,060 $ 1,910 $ 150   7.9 % $ 1,868 $ 192   10.3 %
 
   
Contractual Delinquency by Aging
3Q’16     2Q’16     3Q’15
Allowance for credit losses $ 39,100     5.6 % $ 36,200     5.6 % $ 37,786     6.3 %
 
Current 569,412 81.8 % 527,080 81.7 % 466,847 77.6 %
1 to 29 days past due   77,097 11.1 %   74,439 11.5 %   90,626 15.1 %
 
Delinquent accounts:
30 to 59 days 17,323 2.4 % 16,710 2.5 % 17,094 2.8 %
60 to 89 days 10,966 1.6 % 10,045 1.6 % 9,952 1.7 %
90 to 119 days 8,363 1.3 % 7,237 1.1 % 6,874 1.1 %
120 to 149 days 7,215 1.0 % 5,358 0.8 % 5,766 1.0 %
150 to 179 days   5,773 0.8 %   4,875 0.8 %   4,449 0.7 %
Total contractual delinquency $ 49,640 7.1 % $ 44,225 6.8 % $ 44,135 7.3 %
Total finance receivables $ 696,149 100.0 % $ 645,744 100.0 % $ 601,608 100.0 %
 
1 day and over past due $ 126,737 18.2 % $ 118,664 18.3 % $ 134,761 22.4 %
 
   
Contractual Delinquency by Product
3Q’16     2Q’16     3Q’15
Small loans $ 30,169     8.6 % $ 26,436     8.3 % $ 29,771     9.1 %
Large loans 10,142 4.7 % 8,459 4.3 % 3,829 3.2 %
Automobile loans 7,459 7.7 % 7,768 7.7 % 9,327 7.3 %
Retail loans   1,870 5.8 %   1,562 5.2 %   1,208 4.7 %
Total contractual delinquency $ 49,640 7.1 % $ 44,225 6.8 % $ 44,135 7.3 %
 
   
Quarterly Trend
3Q’15     4Q’15     1Q’16     2Q’16     3Q’16     QoQ $

B(W)

    YoY $

B(W)

Revenue
Interest and fee income $ 49,741 $ 51,320 $ 51,300 $ 52,589 $ 57,420 $ 4,831 $ 7,679
Insurance income, net 2,767 2,838 2,939 2,601 2,346 (255 ) (421 )
Other income   2,588   2,527   2,458   2,135   2,709   574     121  
Total revenue   55,096   56,685   56,697   57,325   62,475   5,150     7,379  
 
Expenses
Provision for credit losses 14,085 11,449 13,791 13,386 16,410 (3,024 ) (2,325 )
 
Personnel 15,993 17,283 17,127 16,674 18,180 (1,506 ) (2,187 )
Occupancy 4,458 4,522 4,863 4,770 5,175 (405 ) (717 )
Marketing 1,134 1,403 1,515 2,062 1,786 276 (652 )
Other   4,597   5,342   6,300   6,042   5,312   730     (715 )
Total general and administrative 26,182 28,550 29,805 29,548 30,453 (905 ) (4,271 )
 
Interest expense   4,335   4,350   4,710   4,811   5,116   (305 )   (781 )
Income before income taxes 10,494 12,336 8,391 9,580 10,496 916 2
Income taxes   3,987   4,969   3,215   3,668   4,020   (352 )   (33 )
Net income $ 6,507 $ 7,367 $ 5,176 $ 5,912 $ 6,476 $ 564   $ (31 )
Net income per common share:
Basic $ 0.51 $ 0.57 $ 0.41 $ 0.50 $ 0.57 $ 0.07   $ 0.06  
Diluted $ 0.50 $ 0.56 $ 0.40 $ 0.49 $ 0.56 $ 0.07   $ 0.06  
 
Weighted-average shares outstanding:
Basic   12,881   12,891   12,756   11,756   11,384   372     1,497  
Diluted   13,111   13,105   12,949   11,974   11,664   310     1,447  
 
 
Net interest margin $ 50,761 $ 52,335 $ 51,987 $ 52,514 $ 57,359 $ 4,845   $ 6,598  
Net credit margin $ 36,676 $ 40,886 $ 38,196 $ 39,128 $ 40,949 $ 1,821   $ 4,273  
 
3Q’15 4Q’15 1Q’16 2Q’16 3Q’16 QoQ $

Inc (Dec)

YoY $

Inc (Dec)

Total assets $ 587,508 $ 626,373 $ 609,707 $ 642,803 $ 691,329 $ 48,526   $ 103,821  
Finance receivables $ 601,608 $ 628,444 $ 607,363 $ 645,744 $ 696,149 $ 50,405   $ 94,541  
 
Allowance for credit losses $ 37,786 $ 37,452 $ 36,230 $ 36,200 $ 39,100 $ 2,900   $ 1,314  
Long-term debt $ 379,617 $ 411,177 $ 396,543 $ 441,147 $ 481,766 $ 40,619   $ 102,149  
 
   
Headcount Trend
3Q’15     4Q’15     1Q’16     2Q’16     3Q’16     QoQ

Inc (Dec)

    YoY

Inc (Dec)

Legacy branch headcount 1,256 1,280 1,237 1,184 1,178 (6 ) (78 )
2016 new branch headcount     17 17 17   17  
Total branch headcount 1,256 1,280 1,254 1,201 1,195 (6 ) (61 )
Home office headcount 129 133 137 140 142 2   13  
Total headcount 1,385 1,413 1,391 1,341 1,337 (4 ) (48 )
 
Number of branches 322 331 339 338 338   16  
 
   
General & Administrative Expenses Trend
3Q’15     4Q’15     1Q’16     2Q’16     3Q’16     QoQ $

B(W)

    YoY $

B(W)

Legacy branch expenses $ 18,794 $ 18,724 $ 18,822 $ 16,689 $ 18,047 $ (1,358 ) $ 747
2016 new branch expenses       548   606   619   (13 )   (619 )
Total branch expenses 18,794 18,724 19,370 17,295 18,666 (1,371 ) 128
Marketing expenses 1,134 1,403 1,515 2,062 1,787 275 (653 )
Home office expenses   6,254   8,423   8,920   10,191   10,000   191     (3,746 )
Total G&A expenses $ 26,182 $ 28,550 $ 29,805 $ 29,548 $ 30,453 $ (905 ) $ (4,271 )
 
                                                             
   
Averages and Yields
YTD’16     YTD’15
Average Finance
Receivables
    Average Yield

(Annualized)

Average Finance
Receivables
    Average Yield

(Annualized)

Small loans $ 327,626 42.5 % $ 311,897 44.5 %
Large loans 179,508 28.7 % 79,806 27.4 %
Automobile loans 104,797 17.9 % 142,417 19.1 %
Retail loans   29,464 19.2 %   24,983 18.7 %
Total interest and fee yield $ 641,395 33.5 % $ 559,103 34.5 %
Total revenue yield $ 641,395 36.7 % $ 559,103 38.3 %
 
   
Components of Increase in Interest and Fee Income

YTD’16 Compared to YTD’15

Increase (Decrease)

Volume     Rate     Net
Small loans $ 5,126 $ (4,926 ) $ 200
Large loans 21,420 836 22,256
Automobile loans (5,124 ) (1,245 ) (6,369 )
Retail loans   643     105     748  
Total increase (decrease) in interest and fee income $ 22,065   $ (5,230 ) $ 16,835  
 
   
Net Loans Originated (1)
YTD’16     YTD’15     YTD $

Inc (Dec)

    YTD %

Inc (Dec)

Small loans $ 428,068 $ 427,909 $ 159 0.0 %
Large loans 183,589 120,874 62,715 51.9 %
Automobile loans 28,939 34,057 (5,118 ) (15.0

)%

Retail loans   26,586   22,731   3,855   17.0 %
Total net loans originated $ 667,182 $ 605,571 $ 61,611   10.2 %
 

(1) Represents the balance of loan origination and refinancing net of unearned finance charges

   
 
Other Key Metrics
YTD’16     YTD’15
Net charge-offs $ 41,939 $ 38,624
Percentage of average finance receivables (annualized) 8.7 % 9.2 %
 
Provision for credit losses $ 43,587 $ 35,899
Percentage of average finance receivables (annualized) 9.1 % 8.6 %
Percentage of total revenue 24.7 % 22.4 %
 
General and administrative expenses $ 89,806 $ 87,048
Percentage of average finance receivables (annualized) 18.7 % 20.8 %
Percentage of total revenue 50.9 % 54.2 %
 

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 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
3Q‘16     Adjustments     Non-GAAP
General and administrative expenses $ 30,453

$

(412

)(1)

$ 30,041
Income taxes $ 4,020

$

158

(5)

$ 4,178
Net income $ 6,476 $ 254 $ 6,730
Diluted net income per common share $ 0.56 $ 0.02 $ 0.58
 
 
       
    Non-GAAP Reconciliation
YTD’16     Adjustments     Non-GAAP
General and administrative expenses $ 89,806 $ (1,440 )(2) $ 88,366
Income taxes $ 10,903 $

552

(5)

$ 11,455
Net income $ 17,564 $ 888 $ 18,452
Diluted net income per common share $ 1.44 $ 0.07 $ 1.51
 
 
Non-GAAP Reconciliation
YTD’15 Adjustments     Non-GAAP
General and administrative expenses $ 87,048 $ (2,676 )(2)(3)(4) $ 84,372
Income taxes $ 9,805

$ 1,017

(5)

$ 10,822
Net income $ 15,998 $ 1,659 $ 17,657
Diluted net income per common share $ 1.22 $ 0.13 $ 1.35
 

(1) Exclude loan system conversion costs of $412 for 3Q’16
(2) Exclude loan system conversion costs of $1,440 and $613 for YTD’16 and YTD’15
(3) Exclude executive retirement agreement costs of $533
(4) Exclude CEO equity award costs of $1,530
(5) Tax effect of the adjustments

Source: Regional Management Corp.

Investor Relations
Garrett Edson, 203-682-8331