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Regional Management Corp. Announces Fourth Quarter 2012 Results

GREENVILLE, S.C.--(BUSINESS WIRE)--Feb. 27, 2013-- Regional Management Corp. (NYSE: RM), a diversified specialty consumer finance company, today announced results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Highlights and Subsequent Events

  • Total fourth quarter 2012 revenue was $37.0 million, a 25.7% increase from the prior-year period.
  • Net income for the fourth quarter of 2012 was $6.6 million, a 3.7% increase from the prior-year period, and diluted earnings per share was $0.52 based on a diluted share count of 12.8 million.
  • Finance receivables as of December 31, 2012 were $437.6 million, an increase of 42.7% from the prior-year period. Net charge-offs as a percentage of average finance receivables for the fourth quarter of 2012 were 7.1%, an increase from 7.0% in the prior-year period.
  • Same-store revenue growth1 for the fourth quarter of 2012 was 17.0%.
  • Opened 8 new branches in the fourth quarter of 2012 and its first branch in Georgia in January 2013; as of December 31, 2012, Regional Management’s branch network consisted of 221 locations.

“2012 was a year of significant milestones and growth for our company, as we became a publicly traded entity, added 51 branches to our network and saw our finance receivables increase by over 40% from the prior year-end,” said Thomas Fortin, Chief Executive Officer of Regional Management Corp. “I am proud of the entire Regional Management team’s hard work and dedication that made 2012 such a success. In terms of our fourth quarter, while our bottom line numbers were ultimately below our expectations, we were very satisfied with our growth trajectory in the quarter, especially with our RMC Retail business unit and our live check campaign. We also saw a slight increase in our net charge-offs as a percentage of average finance receivables as well as a material increase of our efficiency ratio, and we are watching those figures carefully in 2013 to ensure they are aligned with our growth strategy.”

Fourth Quarter 2012 Results

For the fourth quarter ended December 31, 2012, Regional Management reported total revenue of $37.0 million, a 25.7% increase from $29.4 million in the prior-year period. Interest and fee income revenue for the fourth quarter of 2012 was $32.9 million, a 29.7% increase from $25.4 million in the prior-year period, primarily due to a 42.7% year-over-year increase in finance receivables. Insurance and other income for the fourth quarter of 2012 was $4.1 million, a 1.1% increase from the prior-year period. Same-store revenue growth for the fourth quarter of 2012 was 17.0%.

Finance receivables outstanding at December 31, 2012 were $437.6 million, a 42.7% increase from $306.6 million in the prior-year period. Finance receivables increased primarily due to the addition of 51 branches – including the 19 net new branches acquired in January 2012 in Alabama – since December 31, 2011, through both de novo openings and acquisitions. Same-store loans receivable (stores open at least 13 months) grew 26.6%.

Provision for loan losses in the fourth quarter of 2012 was $8.8 million versus $6.0 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 fourth quarter of 2012 was 7.1%, an increase from 7.0% in the prior-year period.

General and administrative expenses for the fourth quarter of 2012 were $14.9 million, an increase of 49.6% from $10.0 million in the prior-year period, primarily due to increased personnel costs from opening and acquiring an additional 51 branches since December 31, 2011. During the fourth quarter of 2012, Regional Management opened 8 new branches. Regional Management’s efficiency ratio – the percentage of general and administrative expenses compared to total revenue – in the fourth quarter of 2012 was 40.4%, an increase of 650 basis points from 33.9% in the prior-year period.

Net income for the fourth quarter of 2012 was $6.6 million, a 3.7% increase compared to net income of $6.4 million in the prior-year period, and diluted earnings per share for the fourth quarter of 2012 was $0.52 based on a diluted share count of 12.8 million.

Full Year 2012 Results

For the full year ended December 31, 2012, Regional Management reported total revenue of $136.0 million, a 29.3% increase from $105.2 million in the prior year. Interest and fee income revenue for the full year ended December 31, 2012 was $119.2 million, a 30.6% increase from $91.3 million in the prior year. Insurance and other income for the full year ended December 31, 2012 was $16.8 million, a 20.8% increase from the prior year.

Provision for loan losses in the full year ended December 31, 2012 was $27.8 million versus $17.9 million in the prior year, primarily due to the increase in loan volume. Net charge-offs as a percentage of average finance receivables for the full year ended December 31, 2012 was 6.5%, an increase from 6.3% in the prior year.

General and administrative expenses for the full year ended December 31, 2012 were $55.3 million, an increase of 36.1% from $40.6 million in the prior year, primarily due to increased personnel costs from opening and acquiring an additional 51 branches since December 31, 2011. Regional Management’s efficiency ratio in the full year ended December 31, 2012 was 40.6%, an increase of 200 basis points from 38.6% in the prior year.

GAAP net income for the full year ended December 31, 2012 was $25.4 million, a 19.4% increase compared to net income of $21.2 million in the prior year, and diluted earnings per share for the full year ended December 31, 2012 was $2.12 based on a diluted share count of 12.0 million. 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 full year ended December 31, 2012 was $27.0 million, a 27.2% increase from the prior year, and diluted earnings per share was $2.12 based on a diluted share count of 12.8 million.

Liquidity and Capital Resources

As of December 31, 2012, Regional Management had finance receivables of $437.6 million and outstanding debt of $292.4 million on its $325.0 million senior revolving credit facility and on its $1.5 million other notes payable 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 (800) 299-6183, passcode 55173070 – 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, March 6 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 33033172.

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 expanded its branch network to 221 locations with over 245,000 active accounts across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma and New Mexico as of December 31, 2012. Each of its loan products is secured, 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.

1 Defined as stores open for at least 13 months.

Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
For the Three and Twelve Months Ended December 31, 2012 and 2011
(Unaudited)
($ in Thousands except per share amounts)
       
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Revenue
Interest and fee income $ 32,902 $ 25,373 $ 119,235 $ 91,303
Insurance income, net 2,663 2,887 10,820 9,247
Other income   1,435   1,168   5,991   4,669
 
Total revenue   37,000   29,428   136,046   105,219
 
Expenses
Provision for loan losses 8,847 5,960 27,765 17,854
General and administrative expenses
Personnel 8,599 6,082 33,366 25,462
Occupancy 2,374 1,756 8,655 6,527
Advertising 910 357 2,767 2,056
Other 3,049 1,789 10,500 6,589
Consulting and advisory fees 180 1,451 975
Interest expense
Senior revolving credit facility and other notes payable 3,023 2,279 10,580 8,306
Mezzanine debt-related parties     1,018   1,030   4,037
 
Total interest expense   3,023   3,297   11,610   12,343
 
Total expenses   26,802   19,421   96,114   71,806
 
Income before income taxes 10,198 10,007 39,932 33,413
Income taxes   3,560   3,603   14,565   12,169
 
Net income $ 6,638 $ 6,404 $ 25,367 $ 21,244
 
Net income per common share:
Basic $ 0.53 $ 0.69 $ 2.17 $ 2.28
 
Diluted $ 0.52 $ 0.66 $ 2.12 $ 2.21
 
Weighted average common shares outstanding:
Basic   12,486,727   9,336,727   11,694,924   9,336,727
 
Diluted   12,779,515   9,759,916   11,980,748   9,620,967
 
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
December 31, 2012 and 2011
(Unaudited)
($ in Thousands except per share amounts)
   
 
2012 2011
Assets
Cash $ 3,298 $ 4,849
Gross finance receivables 529,583 387,494
Less unearned finance charges, insurance premiums, and commissions   (92,024 )   (80,900 )
 
Finance receivables 437,559 306,594
Allowance for loan losses   (23,616 )   (19,300 )
 
Net finance receivables 413,943 287,294
Property and equipment, net of accumulated depreciation 5,111 4,446
Deferred tax asset, net 15
Repossessed assets at net realizable value 711 409
Intangible assets 2,849 960
Other assets   5,296     6,177  
 
Total assets $ 431,208   $ 304,150  
 
 
Liabilities and Shareholders’ Equity
Liabilities:
Cash overdraft $ $ 1
Deferred tax liability, net 2,997
Accounts payable and accrued expenses 5,263 7,447
Senior revolving credit facility and other notes payable 292,379 206,009
Mezzanine debt-related parties       25,814  
 
Total liabilities 300,639 239,271
 
 

Commitments and Contingencies

Temporary equity 12,000
 
Shareholders’ equity:

Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,486,727 shares issued and outstanding at

December 31, 2012; 25,000,000 shares authorized, 9,336,727 shares issued and outstanding at December 31, 2011

1,249 934
Additional paid-in-capital 80,158 28,150
Retained earnings   49,162     23,795  
 
Total shareholders’ equity   130,569     52,879  
 
Total liabilities and shareholders’ equity $ 431,208   $ 304,150  
 
Regional Management Corp.
Selected Financial Data
As of and for the Three Months and Twelve Months ended December 31, 2012 and 2011
(Unaudited)
(Dollars in thousands)
     
Components of Increase in Interest Income
Three Months Ended December 31, 2012
Compared to Three Months Ended December 31, 2011
Increase (Decrease)
Volume Rate Net
Small installment loans $ 6,552 $ (2,787 ) $ 3,765
Large installment loans 1,446 (101 ) 1,345
Automobile purchase loans 1,710 (307 ) 1,403
Furniture and appliance purchase loans   965   51     1,016
Total increase in interest income $ 10,673 $ (3,144 ) $ 7,529
 
  Three Months Ended December 31,
Loans Originated (1) 2012   2011
Small installment loans $ 146,578 $ 105,758
Large installment loans 23,805 16,608
Automobile purchase loans 31,088 25,481
Furniture and appliance purchase loans   9,919     5,389  
Total finance receivables $ 211,390   $ 153,236  
Composite Yield   35.8 %  

40.2

%
 
  Three Months Ended December 31,
2012     2011
Amount     Percentage of
Average Finance
Receivables
(Annualized)
Amount     Percentage of
Average Finance
Receivables
(Annualized)
Net charge-offs as a percentage of average finance receivables $ 7,363 7.1 % $ 5,160 7.0 %
 
Amount Percentage of
Total Revenue
Amount Percentage of
Total Revenue
Provision for loan losses $ 8,847 23.9 % $ 5,960 20.3 %
General and administrative expenses $ 14,932 40.4 % $ 9,984 33.9 %
 
Amount Growth Rate Amount Growth Rate
Same store finance receivables at period-end/Growth rate $ 389,624 26.6 % $ 272,131 9.1 %
Same store revenue growth rate 17.0 % 13.2 %
Number of branches in calculation 167 132
 
  Components of Increase in Interest Income
Twelve Months Ended December 31, 2012
Compared to Twelve Months Ended December 31, 2011
Increase (Decrease)
Volume   Rate   Net
Small installment loans $ 12,675 $ (1,672 ) $ 11,003
Large installment loans 6,521 885 7,406
Automobile purchase loans 7,259 (803 ) 6,456
Furniture and appliance purchase loans   2,735   332     3,067
Total increase in interest income $ 29,190 $ (1,258 ) $ 27,932
 
  Twelve Months Ended December 31,
Loans Originated (1) 2012   2011
Small installment loans $ 438,154 $ 328,098
Large installment loans 83,094 58,155
Automobile purchase loans 127,922 118,856
Furniture and appliance purchase loans   36,611     14,518  
Total finance receivables $ 685,781   $ 519,627  
Composite Yield  

37.8

%   39.9 %
 
  Twelve months ended December 31,
2012     2011
Amount     Percentage of
Average Finance
Receivables
Amount     Percentage of
Average Finance
Receivables
Net charge-offs as a percentage of average finance receivables $ 23,449 6.5 % $ 16,554 6.3 %
       
Amount Percentage of
Total Revenue
Amount Percentage of
Total Revenue
Provision for loan losses $ 27,765 20.4 % $ 17,854 17.0 %
General and administrative expenses $ 55,288 40.6 % $ 40,634 38.6 %
 
   
As of December 31,
Finance Receivables 2012 2011
Small installment loans $ 190,339 $ 130,257
Large installment loans 57,428 36,938
Automobile purchase loans 159,837 128,660
Furniture and appliance purchase loans   29,955   10,739
Total finance receivables $ 437,559 $ 306,594
 
             
As of December 31,
2012 2011
Amount Percentage of
Total Finance
Receivables
Amount Percentage of
Total Finance
Receivables
Allowance for loan losses $ 23,616 5.4 % $ 19,300 6.3 %
Over 90 days contractually delinquent $ 11,101 2.5 % $ 5,753 1.9 %
Over 180 days contractually delinquent $ 1,989 0.5 % $ 1,346 0.4 %
Number of branches at period end (2) 221 170
 

(1) Represents gross balance of loan originations, including unearned finance charges

(2) Includes the 19 branches retained following the acquisition of the assets of two consumer loan companies in the state of Alabama

Unaudited Pro Forma Consolidated Statements of Income
For the Twelve Months Ended December 31, 2012
($ in Thousands except per share amounts)
     
Actual Pro Forma
Adjustments
Pro Forma
Revenue
Interest and fee income $ 119,235 $ $ 119,235
Insurance income 10,820 10,820
Other income   5,991       5,991
Total revenue   136,046       136,046
Expenses
Provision for loan losses 27,765 27,765
General and administrative expenses
Personnel 33,366

140

(1)

33,506
Occupancy 8,655 8,655
Advertising 2,767 2,767
Other 10,500 10,500
Consulting and advisory fees 1,451 (1,451 )(2)
Interest expense
Senior revolving credit facility and other debt 10,580 (247 )(3) 10,333
Mezzanine debt-related parties   1,030   (1,030

)(4)

 
Total interest expense   11,610   (1,277 )   10,333
Total expenses   96,114   (2,588 )   93,526
Income before income taxes 39,932 2,588 42,520
Income taxes   14,565  

942

(5)

  15,507
Net income $ 25,367 $ 1,646   $ 27,013
Net income per common share
Basic $ 2.17 $ 2.16
Diluted $ 2.12 $ 2.12
Weighted average shares outstanding:
Basic   11,694,924   12,486,727
Diluted   11,980,748   12,772,551
 

(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 shareholders and sponsors for the three months ended March 31, 2012. The agreements with the former majority shareholders 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.

Source: Regional Management Corp.

For Regional Management Corp.
Investor Relations
Garrett Edson, 203-682-8331
or
Media Relations
Kim Paone, 646-277-1216