Investor Presentation
November 14th, 2023
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, statistical, and business information, please see the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission (the "SEC"), as well as the Company's other reports filed with the SEC from time to time. Such reports are or will be available on the Company's website (www.regionalmanagement.com) and on the SEC's website (www.sec.gov). The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any regulatory or supervisory authority.
This presentation, the related remarks, and the responses to various questions may contain various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent the Company's expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning financial outlook or future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. 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 speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of the Company. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on such statements.
Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: managing growth effectively, implementing Regional Management's growth strategy, and opening new branches as planned; Regional Management's convenience check strategy; Regional Management's policies and procedures for underwriting, processing, and servicing loans; Regional Management's ability to collect on its loan portfolio; Regional Management's insurance operations; exposure to credit risk and repayment risk, which risks may increase in light of adverse or recessionary economic conditions; the implementation of evolving underwriting models and processes, including as to the effectiveness of Regional Management's custom scorecards; changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; the geographic concentration of Regional Management's loan portfolio; the failure of third-party service providers, including those providing information technology products; changes in economic conditions in the markets Regional Management serves, including levels of unemployment and bankruptcies; the ability to achieve successful acquisitions and strategic alliances; the ability to make technological improvements as quickly as competitors; security breaches, cyber-attacks, failures in information systems, or fraudulent activity; the ability to originate loans; reliance on information technology resources and providers, including the risk of prolonged system outages; changes in current revenue and expense trends, including trends affecting delinquencies and credit losses; any future public health crises (including the resurgence of COVID-19), including the impact of such crisis on our operations and financial condition; changes in operating and administrative expenses; the departure, transition, or replacement of key personnel; the ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support Regional Management's operations and initiatives; changes in interest rates; existing sources of liquidity may become insufficient or access to these sources may become unexpectedly restricted; exposure to financial risk due to asset-backed securitization transactions; risks related to regulation and legal proceedings, including changes in laws or regulations or in the interpretation or enforcement of laws or regulations; changes in accounting standards, rules, and interpretations and the failure of related assumptions and estimates; the impact of changes in tax laws and guidance, including the timing and amount of revenues that may be recognized; risks related to the ownership of Regional Management's common stock, including volatility in the market price of shares of Regional Management's common stock; the timing and amount of future cash dividend payments; and anti-takeover provisions in Regional Management's charter documents and applicable state law. The foregoing factors and others are discussed in greater detail in the Company's filings with the SEC. The Company will not update or revise forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law.
This presentation also contains certain non-GAAP measures. Please refer to the Appendix accompanying this presentation for a reconciliation of non-GAAP measures to the most comparable GAAP measures.
2
Strategic Imperatives
Focused on consistent execution of our core business, including:
Expand margins and maximize cash flows from loan portfolio
Closely manage expenses and drive improved operating efficiency
- Pricing increases, credit tightening, and improving economic conditions expected to drive higher future revenue yields
- Investment in data and analytics and improved credit decisioning will create better net credit loss outcomes
- Investment in digital initiatives, technology, data and analytics, artificial intelligence, and centralized support create more efficient operations
- Geographic expansion,higher-balance auto- secured lending, and portfolio growth initiatives drive scale
Execute on long-term growth strategies to increase revenues
Maintain a strong balance sheet, ample liquidity and borrowing capacity, and consistent capital return
- Geographic expansion has increased addressable market by 80% since 2020; significant opportunities for growth remain in existing 19 states and from future new state entry
- Digital investment widens the marketing funnel, improves the customer experience, and enhances theomni-channel operating model
- Diversified sources of funding with staggered revolving maturities support growth and protect againstshort-term disruptions in credit markets
- 87% of debt is at afixed-rate, with a weighted average coupon of 3.6% and a weighted average revolving duration of 1.3 years (1)
- Consistent capital return to shareholders through quarterly dividend and stock repurchases
- Originatinghigh-quality loans within tightened credit box
- Closely managing expenses
- Maintaining a strong balance sheet
Expect to emerge from current economic cycle as a stronger company:
- Larger,higher-quality portfolio
- Improved operating efficiencies
- Well-positionedfor future growth and delivery of attractive returns to shareholders
(1) As of 9/30/23
3
Excess Capital Consistently Returned to Shareholders
Proven business model capable of generating excess capital to return to shareholders and to reinvest in strategic initiatives that will generate sustainable, long-term profitable growth
Capital Generation, Net of Capital Return
Total Capital (1)
Book Value per Share
Net Tangible Book Value per Share (2)
In millions
$442.0
$423.2 $418.4$427.6
$515.5 | |||||
7.4% | $500.5 | $502.9 | |||
CAGR | $488.3 | $487.4 | |||
$457.5 | $466.1 | ||||
$33.06 | $33.61 | ||||
$32.18 | $32.41 | $32.71 | |||
$31.15 | |||||
$30.47 | |||||
Capital Return
In millions | $0.3 | |||||||
$0.30 | $0.30 | $0.30 | $0.30 | $0.30 | $0.30 | $0.30 | ||
$0.3 | ||||||||
$0.25 | $0.25 | $0.25 | $109.8 | $112.7 | $115.7 | $118.7 | ||
$103.9 | $106.8 | |||||||
$89.4 | $0.2 | |||||||
$0.20 | ||||||||
$77.4 | $0.2 | |||||||
$63.4 | ||||||||
$26.28
$26.93
$28.89
$27.73
$31.71 | $32.08 | |||
$31.00 | $31.14 | $31.29 | ||
$29.50 | $30.08 | |||
$38.9 |
$0.1 |
$25.45
$26.05
$26.81
$27.91
$14.0 | |||||||||||
$0.1 | |||||||||||
1Q 21 | 2Q 21 | 3Q 21 | 4Q 21 | 1Q 22 | 2Q 22 | 3Q 22 | 4Q 22 | 1Q 23 | 2Q 23 | 3Q 23 |
$ in millions(except per share amounts) | 1Q 2021 | 2Q 2021 | 3Q 2021 | 4Q 2021 | 1Q 2022 | 2Q 2022 | 3Q 2022 | 4Q 2022 | 1Q 2023 | 2Q 2023 | 3Q 2023 | |||||||||||
Capital Generation in Quarter: | ||||||||||||||||||||||
Stockholders' Equity | $ | 283.6 | $ | 279.0 | $ | 277.5 | $ | 282.7 | $ | 298.7 | $ | 298.6 | $ | 308.5 | $ | 308.6 | $ | 316.7 | $ | 321.5 | $ | 330.6 |
Allowance for Credit Losses | 139.6 | 139.4 | 150.1 | 159.3 | 158.8 | 167.5 | 179.8 | 178.8 | 183.8 | 181.4 | 184.9 | |||||||||||
Total Capital | $ | 423.2 | $ | 418.4 | $ | 427.6 | $ | 442.0 | $ | 457.5 | $ | 466.1 | $ | 488.3 | $ | 487.4 | $ | 500.5 | $ | 502.9 | $ | 515.5 |
B/ (W) vs Prior Quarter | ||||||||||||||||||||||
$ | (4.9) | $ | 9.2 | $ | 14.5 | $ | 15.5 | $ | 8.5 | $ | 22.2 | $ | (0.8) | $ | 13.1 | $ | 2.4 | $ | 12.6 | |||
Capital Return in Quarter: | ||||||||||||||||||||||
Dividends to Shareholders | $ | 2.2 | $ | 2.7 | $ | 2.6 | $ | 2.5 | $ | 3.0 | $ | 2.9 | $ | 2.9 | $ | 2.9 | $ | 2.9 | $ | 3.0 | $ | 3.0 |
Stock Repurchased | $ | 11.8 | $ | 22.2 | $ | 22.0 | $ | 11.4 | $ | 9.0 | $ | 11.6 | $ | - | $ | - | $ | - | $ | - | $ | - |
Book Value per Share | $ | 26.28 | $ | 26.93 | $ | 27.73 | $ | 28.89 | $ | 30.47 | $ | 31.15 | $ | 32.18 | $ | 32.41 | $ | 33.06 | $ | 32.71 | $ | 33.61 |
Net Tangible Book Value per Share (2) | $ | 25.45 | $ | 26.05 | $ | 26.81 | $ | 27.91 | $ | 29.50 | $ | 30.08 | $ | 31.00 | $ | 31.14 | $ | 31.71 | $ | 31.29 | ||
$ | 32.08 |
- Capital = Stockholders' Equity + Allowance for Credit Losses
- This is anon-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure.
Cumulative Stock Repurchase | Cumulative Dividends | |
Dividend Per Share | ||
Investors have an opportunity to build a position in RM while RM stock trades at a discount to net tangible book value per share
4
Investment Highlights
Strong balance sheet supports capital
returns
Geographic, product, and channel
expansion drive growth
High customer satisfaction and loyalty
Omni-channel growth strategy with
abundant market opportunity
Controlled growth with stable credit using
advanced credit tools
Modern infrastructure and digital
capabilities
Scale, digital capabilities, and lighter footprint will drive operating leverage
Proven experience through multiple
credit cycles
5
Company Overview
Diversified consumer finance company operating under the name "Regional Finance"
Provide installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders
Goal to consistently grow finance receivables and soundly manage portfolio risk, while providing customers with attractive, safe, easy-to-understand loan products serving their varied financial needs
Founded 1987 | 347 branches |
NYSE Listed: RM | 19 states |
Total receivables of | Multi-channel marketing: |
$1.8 billion | branches, digital, and direct mail |
1
2
6
16
1 9
104
Legacy States (prior to 2021)
2021 New States (IL, UT)
2022 New States (MS, IN, CA, LA)
2023 New States to Date (ID, AZ)
Potential Future State Expansion
Geographic footprint and net finance receivables as of 9/30/2023
10
8 5
16
21
1939
41
332 12
2
6
Abundant Total Addressable Market
Approximately 72 millionAmericans generally align with Regional's customer base (1)(3)$91 billionmarket opportunity - RM has less than 2% market share and increased its addressable market by over 80% since 2020; still significant runway for growth
$4.7 Trillion Consumer Finance Market (2) | 28% of US Population with FICO Between 550 & 700 (3) |
Personal Installment Loans Account for ~$91 billion (1)
100%
90%
80%
70%
60%
50%
Personal Lending (3%)
Other (11%)
Credit Cards (21%)
Auto Loans (34%)
300-549 | ||
800-850 | 8% | 550-599 |
23% | 7% |
600-649
9%
650-699
40%
750-799
24%
12%
30%
20%
10%
0%
Student Loans (31%)
700-749
17%
(1) | Adult US Population sourced from US Census Bureau www.census.gov/library/stories/2021/08/united-states-adult-population-grew-faster-than-nations-total-population-from- | |
2010-to-2020.html | 7 | |
(2) | Sourced from Equifax US National Consumer Credit Trends Report; June 2023, sourced from June 2023 publication | |
(3) | Sourced from Arkali, Can. "Average U.S. FICO® Score Stays Steady at 716" FICO.com, 30 Aug. 2022, www.fico.com/blogs/average-us-fico-score-stays-steady-716-missed- | |
payments-and-consumer-debt-rises
Serving Our Customers Best
90+% favorable ratings for key attributes (1):
- Loan process was quick, easy, and understandable
- People are professional, responsive, respectful, knowledgeable, helpful, and friendly
Continued investment in digital channels, remote servicing options, and focused on delivering positive customer experience has allowed us to maintain strong metrics
Excellent net promoter score of 64 (1)
92% of customers would apply to Regional Finance first the next time they need a loan
35% | ||||||||
21% | 11% | 10% | ||||||
8% | 8% | 7% | ||||||
Household bills | Debt | Auto-related | Home- related | Medical | Family event- | Other | ||
consolidation | related | |||||||
Average Age (2) | Annual Income (2) | |||||||
54 Years | $47,000 |
Some College or Advanced Degree
(1)
54%
(1) Fall 2023 Customer Satisfaction Survey (performed by third-party and commissioned by RM) | 8 |
(2) Data as of 9/30/2023
Product Offerings
Multi-Channel Acquisition
In Branch
$695.6MM Originated
69% Large/31% Small
Direct Mail
$303.0MM Originated
Convenience Check Loans
Digital
$128.4MM Originated
Digital Lead Generation
Partnership Affiliates
Small Loans
Customer Need | Characteristics | Portfolio |
Short-term cash needs | Size: $500 to $2,500 | Outstanding Balance: |
Bill payment | Average: ~$2,100 | $474.2MM |
# of Loans: 282,600 | ||
Back-to-school expenses | Average APR: 44.2% | |
Auto repair |
Large Loans
Customer Need | Characteristics | Portfolio |
Debt consolidation | Size: $2,501 to $25,000 | Outstanding Balance: |
Medical expenses | Average: ~$5,800 | $1.3B |
# of Loans: 244,800 | ||
Home repairs | Average APR: 29.4% | |
9
Originations and portfolio metrics are YTD and as of 9/30/2023, respectively.
Financial Overview: Originations
Total Originations | Digital Originations | |||||
$434.4 | $470.3 | $56.3 | ||||
$426.3 | $425.1 | $53.5 | ||||
$420.7 | $48.1 | $48.7 | $50.7 | |||
$364.0 | $377.7 | $418.7 | $399.0 | $47.7 | ||
$43.4 | ||||||
$326.0 | $303.2 | $36.0 | $40.3 | |||
$34.3 | ||||||
$234.8 |
$20.8
$16.1
4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q |
20 | 21 | 21 | 21 | 21 | 22 | 22 | 22 | 22 | 23 | 23 | 23 | 20 | 21 | 21 | 21 | 21 | 22 | 22 | 22 | 22 | 23 | 23 | 23 |
In millions | In millions |
Originations Impacted by Credit Tightening
Year-over-year growth rate reduced from credit tightening actions; originations more concentrated on programs to present and former borrowers, which perform better than new borrowers
3Q 23 direct mail originations were up 12.0% year-over- year and digital and branch originations were down 9.9% and 0.8%, respectively, from tightened credit and a focus on present and former borrowers
Digitally Sourced Originations
Net Finance Receivables
$1,699 | $1,751 |
$1,689 | |
$1,676 | |
$1,608 |
$1,526
$1,446
$1,426
$1,314
$1,183
$1,136 $1,106
4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q |
20 | 21 | 21 | 21 | 21 | 22 | 22 | 22 | 22 | 23 | 23 | 23 |
In millions
Portfolio Mix % of ENR
Small Loans Large Loans Automobile Loans Retail Loans
100 %
90% | |||||||
80% | |||||||
70% | |||||||
60% | |||||||
50% | |||||||
40% | |||||||
30% | |||||||
20% | |||||||
10% | |||||||
0% | |||||||
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 3Q 23 |
Digital originations are sourced from either our affiliate partnerships or directly from our website, underwritten by our custom credit scorecards, and serviced by our branches
Digital volume represented 28.3% of our total new borrower volume in 3Q 23
Large loans represented 73.0% of new borrower digitally sourced loans booked in 3Q 23
96% of 3Q 23 digital originations were 600+ FICO vs. 83% in 3Q 19
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Regional Management Corp. published this content on 13 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 November 2023 16:03:05 UTC.