Regional Management Corp. · NYSE:RM
Regional Management — Q1 2020 Earnings Presentation
29 slides from Regional Management's earnings presentation, May 6, 2020
Slide 1: 1Q 2020 Earnings Call Supplemental Presentation
1Q 2020 Earnings Call Supplemental Presentation May 6, 2020
Slide 2: Legal Disclosures
Legal Disclosures This document contains summarized information concerning Regional Management Corp. (the “Company”) and the Company’s business, operations, financial performance, and trends. No representation is made that the information in this document is complete. For additional financial, stati
Slide 3: Proudly Supporting Our Customers and Employees
Proudly Supporting Our Customers and Employees Supporting Our Customers Supporting Our Employees • Our branches remain open and available to service the needs • Created an HR contact center designed to: of our customers ̶ Monitor employee exposure ̶ Substantially all of our branches are open, and we
Slide 4: Proven Operating Model and Well Positioned to Manage Through the COVID-19 Crisis
Proven Operating Model and Well Positioned to Manage Through the COVID-19 Crisis Our Proven Approach COVID-19 Response • Strong relationship-driven customer • Shifted branch focus toward servicing Customer-Centric interaction model allows us to customers and proactively deployed create responsible l
Slide 5: Monthly Lending and Collection Activity
Monthly Lending and Collection Activity Branch Originations 30+ Delinquencies $60.4 $61.6 7.5% $50.7 7.1% 6.6% in Millions $30.0 5.4% January February March April January February March April % Y/Y Change (0%) 20% 4% (63%) March 1H / 2H 32% / (20%) • January branch originations impacted by system Di
Slide 6: Significant Capacity to Absorb Losses
Significant Capacity to Absorb Losses Our balance sheet is in a strong position to absorb losses Absorption Capacity (in millions) 1Q 20 Total stockholders' equity $251.4 Allowance for credit losses $142.4 Total absorption capacity $393.8 Absorption capacity as % of net finance receivables 35.7% TTM
Slide 7: 1Q 20 Financial Highlights
1Q 20 Financial Highlights dollars in millions (except per share amounts) 1Q 20 1Q 19 $ Chg B/(W) % Chg B/(W) Average net finance receivables (ANR) $ 1,123.3 $ 944.8 $ 178.6 18.9% Interest & fee income 87.0 74.3 12.7 17.1% Total revenue 96.1 81.7 14.3 17.5% Provision for credit losses 49.5 23.3 (26.
Slide 8: 1Q 20 Adjustments to GAAP Results
1Q 20 Adjustments to GAAP Results in millions GAAP COVID-19 Non-Operating Non-GAAP (except per share amounts) Results Impact (1) Items (2) Results Total revenue $96.1 $1.3 $0.4 $97.8 Provision for credit losses 49.5 (23.9) (0.7) 24.9 G&A expense 46.2 - (3.8) 42.5 Interest expense 10.2 - - 10.2 Incom
Slide 9: 1Q 20 GAAP Results vs. 1Q 19
1Q 20 GAAP Results vs. 1Q 19 ($6.3) (1) Includes adjustments for $23.9 million of COVID-19 impacts, a $1.3 million reserve for unemployment insurance claims, costs of $3.1 million related to the executive transition, and $1.8 million related to the loan management system outage 9
Slide 10: 1Q 20 Non-GAAP Results Impacted by COVID-19
1Q 20 Non-GAAP Results Impacted by COVID-19 ($6.3) $1.70 (1) COVID-19 impact includes $23.9 million for allowance for credit losses and a $1.3 million reserve for unemployment claims (2) Non-operating items include $3.1 million of executive transition costs and $1.8 million related to the system out
Slide 11: Strong Portfolio Growth
Strong Portfolio Growth Ending Net Finance Receivables (ENR) vs. 4Q 19 vs. 1Q 19 in millions 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 $ Chg I/(D) % Chg I/(D) $ Chg I/(D) % Chg I/(D) Small loans (≤ $2,500) $380 $364 $389 $419 $442 $426 $435 $454 $468 $440 ($27) (5.8%) $14 3.4% Larg
Slide 12: Strong Revenue Growth Driven by Portfolio Growth
Strong Revenue Growth Driven by Portfolio Growth Revenue $98.0 $96.1 $100.0 $91.7 • Total revenue increased 17.5% vs. $90.0 $84.3 the prior-year period $83.7 $81.7 $77.9 $80.0 $72.6 $72.4 • Interest and fee yield decreased 50 $72.1 Millions basis points vs. the prior-year $70.0 period, as large loan
Slide 13: Recent Net Credit Loss Trends
Recent Net Credit Loss Trends • Annualized net credit loss rate decreased 20 basis points vs. the prior-year period. Net credit losses in 1Q 20 include 20 basis points of incremental non-file insurance claims (bankruptcy losses) that shifted to net credit losses following the business policy change
Slide 14: Seasonal Pattern of Delinquency
Seasonal Pattern of Delinquency • 1Q 20 delinquency is down from prior year ₋ 30+ days past due of 6.6% is 30 basis points lower than prior year ₋ 90+ days past due of 3.2% is 20 basis points lower than prior year 30+ & 90+ Delinquency Rates 12.0% $75.0 $35.5 $32.4 $35.0 $29.6 10.0% Delinquency in M
Slide 15: CECL Implementation with Related Stress from COVID-19
CECL Implementation with Related Stress from COVID-19 We ran several macroeconomic stress scenarios, and our final forecast contemplated the following: a 34% peak-to-trough decrease in GDP in the second quarter and unemployment increasing to 20% in the second quarter of 2020, with a decline to 7% by
Slide 16: Achieving Operating Leverage
Achieving Operating Leverage • 1Q 20 includes 135 basis points of non-operating costs; $3.1 million related to the executive transition and $0.7 million from the system outage $50.0 19.0% Operating Expense Ratio $46.2 $40.2 $40.9 $40.0 $38.2 $37.7 18.0% $35.9 $36.6 $34.0 $34.6 $33.2 $30.0 16.7% 17.0
Slide 17: Cost of Funds Trending Downward
Cost of Funds Trending Downward $12.0 12.0% $10.3 $10.3 $10.2 $10.0 $9.6 $9.7 $9.8 10.0% $8.7 $7.9 $8.0 8.0% $7.2 $6.8 % of ANR Millions $6.0 6.0% 4.0% 4.1% 4.1% 4.1% 4.0% 3.5% 3.7% 3.7% 3.6% $4.0 3.4% 4.0% $2.0 2.0% $- - 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 Interest Expense %
Slide 18: Strong Funding Profile
Strong Funding Profile Debt Capacity • As of March 31, 2020, total undrawn $500 capacity was $400 million (subject to borrowing base) $400 $94 $95 $70 • $130 million securitization in 4Q 19 $120 $74 $79 $300 $43 $34 increased capacity Millions $34 $200 $59 $339 • Fixed-rate debt represents 53% of $3
Slide 19: Appendix
CREGIONAL MANAGEMENT Appendix
Slide 20: Same Store Portfolio Growth
Same Store Portfolio Growth • Same store(1) portfolio growth in 1Q 20 of 17.6% vs. 12.0% in the prior-year period • Considerable growth opportunities in our existing branch footprint, particularly from branches opened within the last 3 years • Wisconsin de novo branches moved from <1 year to 1-3 yea
Slide 21: Digitally-Sourced Originations
Digitally-Sourced Originations • Digital originations are sourced from either our affiliate partnerships or directly from our website • All digitally-sourced loans are underwritten in our branches by our custom credit scorecards and serviced by our branches • As of 1Q 20, our digitally-sourced volum
Slide 22: Achieving Operating Leverage
Achieving Operating Leverage • 1Q 20 includes 470 basis points related to the impact of non-operating items, including the executive transition, loan management system outage, and unemployment insurance claim reserves related to COVID-19 50.0 Efficiency Ratio 60.0% $46.2 $40.2 $40.9 55.0% 40.0 $38.2
Slide 23: Diversified Liquidity Profile
Diversified Liquidity Profile Long history of liquidity support from a strong group of banking partners Diversified funding platform with a senior revolving facility, warehouse facility, and securitizations Senior Revolver Warehouse Facility Large Loan Securitizations Size: $640 million Size
Slide 24: Consolidated Income Statements
Consolidated Income Statements in thousands 1Q 20 1Q 19 2019 2018 2017 2016 Revenue Interest and fee income $ 86,997 $ 74,322 $ 321,169 $ 280,121 $ 249,034 $ 220,963 Insurance income, net 5,949 4,113 20,817 14,793 13,061 9,456 Other income 3,128 3,313 13,727 11,792 10,364 10,099 Total revenue 96,074
Slide 25: Consolidated Balance Sheets
Consolidated Balance Sheets in thousands 1Q 20 1Q 19 2019 2018 2017 2016 Cash $ 14,668 $ 2,331 $ 2,263 $ 3,657 $ 5,230 $ 4,446 Net finance receivables 1,102,285 930,844 1,133,404 951,183 834,045 729,161 Unearned insurance premiums (28,183) (18,594) (28,591) (18,940) (16,582) (11,386) Allowance for c
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non- GAAP financial measures. The company’s management utilizes non-GAAP measures as additional metrics to aid in, and enh
Slide 27: Non-GAAP Financial Measures (Cont'd)
Non-GAAP Financial Measures (Cont’d) in thousands 1Q 20 1Q 19 2019 2018 2017 2016 Total assets $ 1,078,890 $ 953,467 $ 1,158,540 $ 956,395 $ 829,483 $ 712,224 Less: Intangible assets 9,144 9,722 9,438 10,010 10,607 6,448 Tangible assets (non-GAAP) 1,069,746 943,745 1,149,102 946,385 818,876 705,776
Slide 28: Non-GAAP Financial Measures (Cont'd)
Non-GAAP Financial Measures (Cont’d) in thousands GAAP Non-Operating (1) (2) Non-GAAP G&A expense $ 46,243 $ (3,786) $ 42,457 Total revenue $ 96,074 $ 1,745 $ 97,819 Efficiency ratio 48.1% (4.7%) 43.4% G&A expense $ 46,243 $ (3,786) $ 42,457 Average net finance receivables $ 1,123,316 $ - $ 1,123,31
Slide 29: CREGIONAL
CREGIONAL MANAGEMENT @ REGIONAL MANAGEMENT L™*