Attached files
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| 8-K - 8-K - Regional Management Corp. | d766859d8k.htm |
Exhibit 99.1
Regional Management Corp. Announces Second Quarter 2014 Results
Greenville, South Carolina – July 30, 2014 – 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, 2014.
Second Quarter 2014 Highlights
| • | Total second quarter 2014 revenue was $47.4 million, a 21.1% increase from the prior-year period. Same-store1 revenue growth for the second quarter of 2014 was 11.6%. |
| • | Finance receivables as of June 30, 2014 were $518.0 million, an increase of 12.0% from the prior-year period. Same-store finance receivables growth for the second quarter of 2014 was 2.5%. |
| • | Net income for the second quarter of 2014 was $4.4 million, a 31.1% decrease from the prior-year period. Diluted earnings per share were $0.34 based on a diluted share count of 12.9 million. |
| • | Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2014 were 10.5%, an increase from 6.6% in the prior-year period. Provision for credit losses for the second quarter of 2014 was 28.7% of revenue, an increase from 21.5% in the prior-year period. |
| • | Regional Management opened 12 new branches in the second quarter of 2014; as of June 30, 2014, Regional Management’s branch network consisted of 293 locations. |
“Our second quarter results were affected by the increased level of net charge-offs, which we had previously noted and expected would occur,” said Thomas Fortin, Chief Executive Officer of Regional Management Corp. “As such, we made it a priority in the quarter to further reduce our accounts per employee to diminish the volatility in our delinquencies, and as a result, we successfully reduced contractually delinquent accounts in the quarter sequentially from 7.3% to 6.6%. The delinquency rate is now more aligned with historical levels, and while we will need to remain vigilant, we expect that the lower delinquency rate will result in improved net charge-off performance in the second half of 2014. In addition, we opened 12 branches in the quarter – ahead of our expectations – and continued to see double-digit revenue and same-store revenue growth. 2014 will continue to be a year of growth and investment, and our overall branch growth trajectory and long-term strategy remain unchanged.”
| 1 | Defined as stores open for at least 13 months. |
Second Quarter 2014 Results
For the second quarter ended June 30, 2014, Regional Management reported total revenue of $47.4 million, a 21.1% increase from $39.2 million in the prior-year period. Interest and fee income for the second quarter of 2014 was $43.0 million, a 23.0% increase from $34.9 million in the prior-year period, primarily due to a 12.0% year-over-year increase in finance receivables. Insurance income for the second quarter of 2014 was $2.5 million, a 10.5% decrease from the prior-year period. Same-store revenue growth for the second quarter of 2014 was 11.6%.
Finance receivables outstanding at June 30, 2014 were $518.0 million, a 12.0% increase from $462.3 million in the prior-year period. Finance receivables increased due to the addition of 30 de novo branches since June 30, 2013, as well as the increase in same-store finance receivables, which grew 2.5% in the second quarter.
Provision for credit losses in the second quarter of 2014 was $13.6 million versus $8.4 million in the prior-year period, primarily due to increased net charge-offs from previously elevated delinquency levels. Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2014 were 10.5%, an increase from 6.6% in the prior-year period. The higher net charge-offs were primarily the result of elevated accounts per employee that caused challenges in properly servicing accounts from the latter portion of 2013 through the first quarter of 2014.
General and administrative expenses for the second quarter of 2014 were $23.2 million, an increase of 33.8% from $17.3 million in the prior-year period, primarily due to increased personnel costs from opening an additional 30 branches since June 30, 2013 and costs related to the implementation of the GOLDPoint loan management system platform. Regional Management’s efficiency ratio (the percentage of general and administrative expenses compared to total revenue) in the second quarter of 2014 was 48.9%, an increase of 460 basis points from 44.3% in the prior-year period.
Net income for the second quarter of 2014 was $4.4 million, a 31.1% decrease compared to net income of $6.4 million in the prior-year period. Diluted earnings per share for the second quarter of 2014 were $0.34, a decrease from $0.50 in the prior-year period.
Six Month 2014 Results
For the six-month period ended June 30, 2014, Regional Management reported total revenue of $97.0 million, a 24.7% increase from $77.8 million in the prior-year period. Interest and fee income for the six-month period ended June 30, 2014 was $87.0 million, a 26.2% increase from $69.0 million in the prior-year period. Insurance income for the six-month period ended June 30, 2014 was $5.8 million, a 0.7% increase from the prior-year period.
Provision for credit losses in the six-month period ended June 30, 2014 was $30.6 million versus $16.5 million in the prior-year period, primarily due to increased net charge-offs combined with elevated delinquency levels. Annualized net charge-offs as a percentage of average finance receivables for the six-month period ended June 30, 2014 was 10.1%, an increase from 6.5% in the prior-year period.
General and administrative expenses for the six-month period ended June 30, 2014 were $43.1 million, an increase of 26.7% from $34.0 million in the prior-year period, primarily due to increased personnel costs from opening an additional 30 branches since June 30, 2013. During the six months ended June 30, 2014, Regional Management opened 29 new branches. Regional Management’s efficiency ratio in the six-month period ended June 30, 2014 was 44.4%, an increase of 70 basis points from 43.7% in the prior-year period; excluding a $1.4 million pre-tax benefit related to a one-time reversal of vacation pay liability, Regional Management’s efficiency ratio for the six-month period ended June 30, 2014 would have been 45.9%.
GAAP net income for the six-month period ended June 30, 2014 was $10.0 million, a 23.9% decrease compared to GAAP net income of $13.2 million in the prior-year period. Diluted earnings per share for the six-month period ended June 30, 2014 were $0.77, a decrease from $1.03 in the prior-year period. Excluding $1.4 million of pre-tax benefit related to a one-time reversal of vacation pay liability, non-GAAP net income for the six-month period ended June 30, 2014 was $9.2 million and diluted earnings per share were $0.71. For a reconciliation of non-GAAP to GAAP measures, please review the disclosures and table included with this release.
Liquidity and Capital Resources
As of June 30, 2014, Regional Management had finance receivables of $518.0 million and outstanding debt of $324.6 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 (877) 474-9501, passcode 89177308 – 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 6 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 86978455.
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 Corp.’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 and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management 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.
Contacts:
Investor Relations
Garrett Edson, (203) 682-8331
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, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenue |
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| Interest and fee income |
$ | 42,959 | $ | 34,920 | $ | 87,037 | $ | 68,966 | ||||||||
| Insurance income, net |
2,481 | 2,772 | 5,776 | 5,736 | ||||||||||||
| Other income |
1,997 | 1,490 | 4,205 | 3,080 | ||||||||||||
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| Total revenue |
47,437 | 39,182 | 97,018 | 77,782 | ||||||||||||
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| Expenses |
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| Provision for credit losses |
13,620 | 8,405 | 30,564 | 16,476 | ||||||||||||
| General and administrative expenses |
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| Personnel |
13,068 | 9,882 | 24,242 | 20,105 | ||||||||||||
| Occupancy |
3,713 | 2,697 | 7,133 | 5,213 | ||||||||||||
| Marketing |
1,750 | 1,347 | 2,732 | 1,852 | ||||||||||||
| Other |
4,667 | 3,413 | 8,990 | 6,855 | ||||||||||||
| Interest expense |
3,556 | 3,241 | 7,319 | 6,322 | ||||||||||||
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| Total expenses |
40,374 | 28,985 | 80,980 | 56,823 | ||||||||||||
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| Income before income taxes |
7,063 | 10,197 | 16,038 | 20,959 | ||||||||||||
| Income taxes |
2,649 | 3,793 | 6,014 | 7,791 | ||||||||||||
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| Net income |
$ | 4,414 | $ | 6,404 | $ | 10,024 | $ | 13,168 | ||||||||
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| Net income per common share: |
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| Basic |
$ | 0.35 | $ | 0.51 | $ | 0.79 | $ | 1.05 | ||||||||
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| Diluted |
$ | 0.34 | $ | 0.50 | $ | 0.77 | $ | 1.03 | ||||||||
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| Weighted average common shares outstanding: |
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| Basic |
12,691,227 | 12,584,942 | 12,673,177 | 12,543,888 | ||||||||||||
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| Diluted |
12,915,673 | 12,881,117 | 12,957,976 | 12,831,040 | ||||||||||||
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Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share amounts)
(Unaudited)
| June 30, 2014 | December 31, 2013 | |||||||
| Assets |
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| Cash |
$ | 3,562 | $ | 4,121 | ||||
| Gross finance receivables |
622,854 | 658,176 | ||||||
| Less unearned finance charges, insurance premiums, and commissions |
(104,879 | ) | (113,492 | ) | ||||
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| Finance receivables |
517,975 | 544,684 | ||||||
| Allowance for credit losses |
(34,584 | ) | (30,089 | ) | ||||
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| Net finance receivables |
483,391 | 514,595 | ||||||
| Property and equipment, net of accumulated depreciation |
7,929 | 7,100 | ||||||
| Repossessed assets at net realizable value |
615 | 548 | ||||||
| Goodwill |
716 | 716 | ||||||
| Intangible assets, net |
1,068 | 1,386 | ||||||
| Other assets |
6,714 | 5,422 | ||||||
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| Total assets |
$ | 503,995 | $ | 533,888 | ||||
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| Liabilities and Stockholders’ Equity |
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| Liabilities: |
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| Deferred tax liability, net |
$ | 847 | $ | 2,653 | ||||
| Accounts payable and accrued expenses |
6,718 | 7,312 | ||||||
| Senior revolving credit facility |
324,570 | 362,750 | ||||||
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| Total liabilities |
332,135 | 372,715 | ||||||
| Commitments and Contingencies |
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| Stockholders’ equity: |
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| Preferred stock, $0.10 par value, 100,000,000 shares authorized, no shares issued and outstanding at June 30, 2014 and December 31, 2013 |
— | — | ||||||
| Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,701,821 and 12,652,197 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
1,270 | 1,265 | ||||||
| Additional paid-in-capital |
83,975 | 83,317 | ||||||
| Retained earnings |
86,615 | 76,591 | ||||||
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| Total stockholders’ equity |
171,860 | 161,173 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 503,995 | $ | 533,888 | ||||
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Regional Management Corp. and Subsidiaries
Selected Financial Data
(Unaudited)
(in thousands)
| Three Months Ended June 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Average Finance Receivables |
Average Yield (Annualized) |
Average Finance Receivables |
Average Yield (Annualized) |
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| Small installment loans |
$ | 262,159 | 46.0 | % | $ | 192,154 | 43.8 | % | ||||||||
| Large installment loans |
42,380 | 27.3 | % | 44,830 | 29.8 | % | ||||||||||
| Automobile purchase loans |
173,676 | 19.8 | % | 178,418 | 20.6 | % | ||||||||||
| Retail purchase loans |
28,810 | 18.4 | % | 30,832 | 17.9 | % | ||||||||||
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| Total interest and fee yield |
$ | 507,025 | 33.9 | % | $ | 446,234 | 31.3 | % | ||||||||
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| Total revenue yield |
$ | 507,025 | 37.4 | % | $ | 446,234 | 35.1 | % | ||||||||
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| Components of Increase in Interest and Fee Income Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013 Increase (Decrease) |
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| Volume | Rate | Net | ||||||||||
| Small installment loans |
$ | 8,005 | $ | 1,120 | $ | 9,125 | ||||||
| Large installment loans |
(188 | ) | (262 | ) | (450 | ) | ||||||
| Automobile purchase loans |
(248 | ) | (334 | ) | (582 | ) | ||||||
| Retail purchase loans |
(88 | ) | 34 | (54 | ) | |||||||
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| Total increase in interest and fee income |
$ | 7,481 | $ | 558 | $ | 8,039 | ||||||
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| Loans Originated (1) Three Months Ended June 30, |
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| 2014 | 2013 | |||||||
| Small installment loans |
$ | 198,047 | $ | 160,291 | ||||
| Large installment loans |
17,065 | 16,845 | ||||||
| Automobile purchase loans |
23,049 | 32,648 | ||||||
| Retail purchase loans |
7,360 | 8,202 | ||||||
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| Total finance receivables |
$ | 245,521 | $ | 217,986 | ||||
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| (1) | Represents gross balance of loan originations, including unearned finance charges |
| Three Months Ended June 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Amount | Percentage of Average Finance Receivables (Annualized) |
Amount | Percentage of Average Finance Receivables (Annualized) |
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| Net charge-offs as a percentage of average finance receivables |
$ | 13,361 | 10.5 | % | $ | 7,416 | 6.6 | % | ||||||||
| Amount | Percentage of Total Revenue |
Amount | Percentage of Total Revenue |
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| Provision for credit losses |
$ | 13,620 | 28.7 | % | $ | 8,405 | 21.5 | % | ||||||||
| General and administrative expenses |
$ | 23,198 | 48.9 | % | $ | 17,339 | 44.3 | % | ||||||||
| Amount | Growth Rate | Amount | Growth Rate | |||||||||||||
| Same store finance receivables at period-end/growth rate |
$ | 457,944 | 2.5 | % | $ | 416,889 | 22.6 | % | ||||||||
| Same store revenue during period/growth rate |
$ | 42,908 | 11.6 | % | $ | 36,311 | 17.4 | % | ||||||||
| Number of branches in calculation |
232 | 194 | ||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Average Finance Receivables |
Average Yield (Annualized) |
Average Finance Receivables |
Average Yield (Annualized) |
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| Small installment loans |
$ | 270,389 | 45.3 | % | $ | 191,266 | 43.5 | % | ||||||||
| Large installment loans |
42,583 | 26.9 | % | 47,052 | 28.4 | % | ||||||||||
| Automobile purchase loans |
175,915 | 19.7 | % | 174,860 | 20.5 | % | ||||||||||
| Retail purchase loans |
29,635 | 18.1 | % | 30,756 | 17.9 | % | ||||||||||
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| Total interest and fee yield |
$ | 518,522 | 33.6 | % | $ | 443,934 | 31.1 | % | ||||||||
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| Total revenue yield |
$ | 518,522 | 37.4 | % | $ | 443,934 | 35.0 | % | ||||||||
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| Components of Increase in Interest and Fee Income Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013 Increase (Decrease) |
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| Volume | Rate | Net | ||||||||||
| Small installment loans |
$ | 17,867 | $ | 1,790 | $ | 19,657 | ||||||
| Large installment loans |
(657 | ) | (300 | ) | (957 | ) | ||||||
| Automobile purchase loans |
107 | (660 | ) | (553 | ) | |||||||
| Retail purchase loans |
(100 | ) | 24 | (76 | ) | |||||||
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| Total increase in interest and fee income |
$ | 17,217 | $ | 854 | $ | 18,071 | ||||||
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| Loans Originated (1) Six Months Ended June 30, |
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| 2014 | 2013 | |||||||
| Small installment loans |
$ | 326,291 | $ | 262,001 | ||||
| Large installment loans |
30,648 | 29,353 | ||||||
| Automobile purchase loans |
46,745 | 67,582 | ||||||
| Retail purchase loans |
15,907 | 17,125 | ||||||
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| Total finance receivables |
$ | 419,591 | $ | 376,061 | ||||
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| (1) | Represents gross balance of loan originations, including unearned finance charges |
| Six Months Ended June 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Amount | Percentage of Average Finance Receivables (Annualized) |
Amount | Percentage of Average Finance Receivables (Annualized) |
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| Net charge-offs as a percentage of average finance receivables |
$ | 26,069 | 10.1 | % | $ | 14,473 | 6.5 | % | ||||||||
| Amount | Percentage of Total Revenue |
Amount | Percentage of Total Revenue |
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| Provision for credit losses |
$ | 30,564 | 31.5 | % | $ | 16,476 | 21.2 | % | ||||||||
| General and administrative expenses |
$ | 43,097 | 44.4 | % | $ | 34,024 | 43.7 | % | ||||||||
| As of June 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Finance Receivables |
Percentage of Total |
Finance Receivables |
Percentage of Total |
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| Small installment loans |
$ | 275,456 | 53.1 | % | $ | 206,915 | 44.8 | % | ||||||||
| Large installment loans |
42,996 | 8.3 | % | 44,143 | 9.5 | % | ||||||||||
| Automobile purchase loans |
171,777 | 33.2 | % | 180,349 | 39.0 | % | ||||||||||
| Retail purchase loans |
27,746 | 5.4 | % | 30,941 | 6.7 | % | ||||||||||
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| Total finance receivables |
$ | 517,975 | 100.0 | % | $ | 462,348 | 100.0 | % | ||||||||
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| Number of branches at period end |
293 | 263 | ||||||||||||||
| Average finance receivables per branch |
$ | 1,768 | $ | 1,758 | ||||||||||||
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| June 30, 2014 | December 31, 2013 | June 30, 2013 | ||||||||||||||||||||||
| Amount | Percentage of Total Finance Receivables |
Amount | Percentage of Total Finance Receivables |
Amount | Percentage of Total Finance Receivables |
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| Allowance for credit losses |
$ | 34,584 | 6.7 | % | $ | 30,089 | 5.5 | % | $ | 25,619 | 5.5 | % | ||||||||||||
| Delinquent accounts: |
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| 30 to 59 days |
$ | 14,984 | 2.9 | % | $ | 17,088 | 3.1 | % | $ | 12,512 | 2.6 | % | ||||||||||||
| 60 to 89 days |
6,772 | 1.3 | % | 9,267 | 1.7 | % | 5,783 | 1.3 | % | |||||||||||||||
| 90 to 119 days |
4,435 | 0.9 | % | 6,842 | 1.3 | % | 3,377 | 0.7 | % | |||||||||||||||
| 120 to 149 days |
3,206 | 0.6 | % | 5,108 | 0.9 | % | 2,598 | 0.6 | % | |||||||||||||||
| 150 to 179 days |
2,155 | 0.4 | % | 3,409 | 0.6 | % | 1,797 | 0.4 | % | |||||||||||||||
| 180 days and over |
2,833 | 0.5 | % | 2,096 | 0.4 | % | 2,763 | 0.6 | % | |||||||||||||||
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| Total contractual delinquency |
$ | 34,385 | 6.6 | % | $ | 43,810 | 8.0 | % | $ | 28,830 | 6.2 | % | ||||||||||||
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Regional Management Corp. and Subsidiaries
Unaudited Non-GAAP Reconciliation of Selected Financial Data
For the Six Months Ended June 30, 2014
(in thousands, except per share amounts)
| Six Months Ended June 30, 2014 | ||||||||||||
| Actual | Adjustments | Non-GAAP | ||||||||||
| General and administrative expenses |
$ | 43,097 | $ | 1,388 | (1) | $ | 44,485 | |||||
| Income taxes |
$ | 6,014 | $ | (521 | )(2) | $ | 5,493 | |||||
| Net income |
$ | 10,024 | $ | (867 | ) | $ | 9,157 | |||||
| Diluted net income per common share |
$ | 0.77 | $ | 0.71 | ||||||||
| Diluted weighted average common shares outstanding |
12,957,976 | 12,957,976 | ||||||||||
| Efficiency ratio |
44.4 | % | 45.9 | % | ||||||||
| (1) | Benefit related to the reversal of vacation pay liability |
| (2) | Tax effect of the reversal of vacation pay liability |