Regional Management Corp. Announces Fourth Quarter 2019 Results

Feb 25, 2020 04:05 pm
GREENVILLE, S.C. -- 

Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the fourth quarter ended December 31, 2019.

Fourth Quarter 2019 Highlights

  • Net income for the fourth quarter of 2019 was $15.7 million, a 45.6% increase from the prior-year period. Diluted earnings per share for the fourth quarter of 2019 was $1.38, compared to $0.90 in the prior-year period.
  • Total finance receivables as of December 31, 2019 were $1.1 billion, an increase of 18.5%, or $172.6 million, from the prior-year period.

- 19th consecutive quarter of year-over-year double-digit finance receivables growth.

- Total core small and large loan finance receivables increased $195.4 million, or 22.3%, compared to the prior-year period.

- Large loan finance receivables of $608.6 million increased $170.6 million, or 39.0%, from the prior-year period and represented 55.1% of the total loan portfolio. Small loan finance receivables as of December 31, 2019 were $462.5 million, an increase of 5.7% over the prior-year period.

  • Total revenue for the fourth quarter of 2019 was $98.0 million, a $14.2 million, or 17.0%, increase from the prior-year period.

- 14th consecutive quarter of year-over-year double-digit revenue growth.

- Interest and fee income increased 17.0%, driven by a 17.4% increase in average finance receivables compared to the prior-year period.

- Insurance income, net increased $0.9 million, driven by an increase in premium revenue and a decrease in non-file insurance claims expense (due to the previously disclosed change in business practice to lower the utilization of non-file insurance).

  • Provision for credit losses for the fourth quarter of 2019 was $26.0 million, an increase of $2.3 million, or 9.9%, from the prior-year period. The increase was due to $4.0 million of higher net credit losses, primarily related to growth in finance receivables.
  • Annualized net credit losses as a percentage of average finance receivables were 9.2%, a 10 basis point increase from 9.1% in the prior-year period, due to incremental non-file insurance claims shifting from insurance income, net to credit losses as compared to the prior-year period.
  • 30+ day contractual delinquencies as of December 31, 2019 were 7.2%, compared to 7.7% as of December 31, 2018. 30+ day contractual delinquencies as of December 31, 2018 included 0.5% related to hurricane-affected branches. Additionally, 90+ day contractual delinquencies were 3.2%, compared to 3.5% in the prior-year-period.
  • In October 2019, the company completed a third asset-backed securitization, a $130 million note issuance (senior class rated “AA” by DBRS) with a weighted-average coupon of 3.17%.

“We are extremely proud of our terrific fourth quarter and full year 2019 performance,” said Peter R. Knitzer, President and Chief Executive Officer of Regional Management Corp. “Our team generated record results on both our top and bottom lines, and our finance receivables exceeded the $1.1 billion mark. The expansion of our core loan portfolio continues to fuel our substantial revenue growth, further validating our hybrid strategy of increasing receivables within existing branches while expanding our footprint.”

“Our credit performance also remained stable in the fourth quarter, as finance receivables that have passed our custom scorecard criteria continue to perform in line with our expectations,” added Mr. Knitzer. “In addition, we continued to invest in our business while also prudently managing our expenses, resulting in significant improvements in our efficiency and operating expense ratios. We exited 2019 in the strongest position in Regional’s history, and we remain primed to succeed and create value in 2020 and over the longer term.”

Fourth Quarter 2019 Results

Finance receivables outstanding at December 31, 2019 were $1.1 billion, an 18.5% increase from $932.2 million in the prior-year period. The increase was primarily due to continued strong growth in both the core small and large loan portfolios.

For the fourth quarter ended December 31, 2019, the company reported total revenue of $98.0 million, a 17.0% increase from $83.7 million in the prior-year period. Interest and fee income for the fourth quarter of 2019 was $87.8 million, a 17.0% increase from $75.0 million in the prior-year period, related to ongoing growth in the core small and large loan portfolios.

The provision for credit losses in the fourth quarter of 2019 was $26.0 million, a $2.3 million, or 9.9%, increase compared to $23.7 million in the prior-year period. The increase was primarily due to $4.0 million of higher net credit losses, including an additional $0.6 million related to the change in business practice to lower the utilization of non-file insurance. The change in business practice had no impact on net income.

Net credit losses were $24.7 million in the fourth quarter of 2019, an increase of $4.0 million over the prior-year period, primarily related to growth in finance receivables. Annualized net credit losses as a percentage of average finance receivables in the fourth quarter of 2019 were 9.2%, a 10 basis point increase from 9.1% in the prior-year period. This increase was due to incremental non-file insurance claims shifting from insurance income, net to credit losses as compared to the prior-year period.

General and administrative expenses for the fourth quarter of 2019 were $40.9 million, an increase of $4.3 million, or 11.7%, from the prior-year period. The operating expense ratio (annualized general and administrative expenses as a percentage of average finance receivables) was 15.3%, an 80 basis point improvement from the prior-year period. General and administrative expenses for the fourth quarter of 2019 included $0.6 million of incremental costs related to new branches that opened since the prior-year period.

Interest expense was $10.3 million in the fourth quarter of 2019, compared to $9.6 million in the prior-year period. The increase in interest expense was primarily due to larger long-term debt amounts outstanding from the ongoing growth in finance receivables.

Net income for the fourth quarter of 2019 was $15.7 million, an increase from $10.8 million in the prior-year period. Diluted earnings per share for the fourth quarter of 2019 was $1.38, an increase from $0.90 in the prior-year period.

First Quarter 2020 Developments

As previously disclosed, effective January 1, 2020, Regional replaced its previous incurred loss impairment model for estimating credit losses on financial assets with a current expected credit loss (“CECL”) model. As a result, on January 1, 2020, the company incurred an increase in its allowance for credit losses of $60 million and a one-time, cumulative reduction in retained earnings of approximately $46 million (net of $14 million in taxes). Regional’s allowance for credit losses as a percentage of finance receivables increased from 5.6% on December 31, 2019 to 10.8% on January 1, 2020. The adoption of CECL did not cause the company to violate any of its existing debt covenants and will not inhibit the company in funding its growth or returning capital to its shareholders.

In addition, in January 2020, Regional experienced an isolated information technology infrastructure event that caused an extended outage of its loan management system. The company has determined that an inadvertent operational failure in IT allowed a system back-up process to run concurrently and inappropriately with normal nightly processes, resulting in the event. The outage affected the company’s ability to originate branch loans and process certain types of payments. However, during that time, all branches remained open, serviced customers, and accepted payments via cash, personal check, money order, and certain electronic payment methods. The outage did not impact the security of customer information or the integrity of company and customer data. The event also did not involve an external breach or the compromise of data by any third party. Regional, with the assistance of third party experts, addressed and resolved the issue and is confident that it will not occur again. The loan management system has functioned normally since its restoration, and all branches have been fully operational.

While the event did not impact Regional’s fourth quarter 2019 financial results, the company expects that the outage will adversely impact net income by approximately $1.3 million in the first quarter of 2020 and by an additional $0.3 million throughout the remainder of the year. Management is also evaluating the event in relation to its 2019 year-end assessment of internal controls.

2020 De Novo Outlook

As of December 31, 2019, the company’s branch network consisted of 366 locations. The company continues to expect to open a total of between 25 and 30 de novo branches for the full year 2020.

Liquidity and Capital Resources

As of December 31, 2019, the company had finance receivables of $1.1 billion and outstanding long-term debt of $808.2 million ($805.8 million of outstanding debt and $2.4 million of interest payable), consisting of:

  • $349.3 million on its $640.0 million senior revolving credit facility,
  • $46.4 million on its $125.0 million revolving warehouse credit facility, and
  • $410.1 million through its asset-backed securitizations.

The company’s unused capacity on its revolving credit facilities (subject to the borrowing base) was $369.3 million, or 48.3%, as of December 31, 2019.

The company had a funded debt-to-equity ratio of 2.7 to 1.0 and a shareholder equity ratio of 26.1% as of December 31, 2019. On a non-GAAP basis, the company had a funded debt-to-tangible equity ratio of 2.8 to 1.0 as of December 31, 2019. Please refer to the reconciliations of non-GAAP measures to comparable GAAP measures included at the end of this press release.

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) 327-6837 (toll-free) or (631) 891-4304 (direct). Please dial the number 10 minutes prior to the scheduled start time.

*** A supplemental slide presentation will be made available on Regional’s website prior to the earnings call at www.RegionalManagement.com. ***

In addition, a live webcast of the conference call will be available on Regional’s website at www.RegionalManagement.com.

A replay will be available following the end of the call through Tuesday, March 3, 2020, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (international), passcode 10008628. A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified consumer finance company that provides attractive, easy-to-understand installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Regional Management operates under the name “Regional Finance” in 366 branch locations across 11 states in the Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States. Most of its loan products are secured, and each is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. Regional Management sources loans through its multiple channel platform, which includes branches, centrally-managed direct mail campaigns, digital partners, retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.

Forward-Looking Statements

This press release 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 Regional Management Corp.’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning 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 Regional Management. 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 forward-looking 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: changes in general economic conditions, including levels of unemployment and bankruptcies; risks associated with Regional Management’s ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support its operations and initiatives; risks associated with Regional Management’s loan origination and servicing software system, including the risk of prolonged system outages; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including credit risk, repayment risk, and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; risks associated with the implementation of new underwriting models and processes, including as to the effectiveness of new custom scorecards; risks relating to Regional Management’s asset-backed securitization transactions; changes in interest rates; the risk that Regional Management’s existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; changes in accounting standards, rules, and interpretations, and the failure of related assumptions and estimates, including those associated with the implementation of current expected credit loss (CECL) accounting; the impact of changes in tax laws, guidance, and interpretations; 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 credit losses); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management); changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; risks related to acquisitions; changes in operating and administrative expenses; and the departure, transition, or replacement of key personnel.

The foregoing factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not update or revise forward-looking statements to reflect events or circumstances after the date of this press release 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. Regional Management is not responsible for changes made to this document by wire services or Internet services.

             

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

             

 

 

 

 

 

 

Better (Worse) 

 

 

 

 

 

Better (Worse) 

 

 

4Q 19

 

4Q 18

 

$

 

%

 

FY 19

 

FY 18

 

$

 

%

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$

87,784

 

 

$

75,013

 

 

$

12,771

 

 

17.0

%

 

$

321,169

 

 

$

280,121

 

 

$

41,048

 

 

14.7

%

Insurance income, net

 

 

6,551

 

 

 

5,624

 

 

 

927

 

 

16.5

%

 

 

20,817

 

 

 

14,793

 

 

 

6,024

 

 

40.7

%

Other income

 

 

3,649

 

 

 

3,112

 

 

 

537

 

 

17.3

%

 

 

13,727

 

 

 

11,792

 

 

 

1,935

 

 

16.4

%

Total revenue

 

 

97,984

 

 

 

83,749

 

 

 

14,235

 

 

17.0

%

 

 

355,713

 

 

 

306,706

 

 

 

49,007

 

 

16.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

26,039

 

 

 

23,698

 

 

 

(2,341

)

 

(9.9

)%

 

 

99,611

 

 

 

87,056

 

 

 

(12,555

)

 

(14.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

 

25,305

 

 

 

22,074

 

 

 

(3,231

)

 

(14.6

) %

 

 

94,000

 

 

 

84,068

 

 

 

(9,932

)

 

(11.8

) %

Occupancy

 

 

5,876

 

 

 

5,933

 

 

 

57

 

 

1.0

%

 

 

24,618

 

 

 

22,519

 

 

 

(2,099

)

 

(9.3

) %

Marketing

 

 

1,897

 

 

 

1,902

 

 

 

5

 

 

0.3

%

 

 

8,206

 

 

 

7,745

 

 

 

(461

)

 

(6.0

) %

Other

 

 

7,813

 

 

 

6,707

 

 

 

(1,106

)

 

(16.5

) %

 

 

30,160

 

 

 

25,952

 

 

 

(4,208

)

 

(16.2

) %

Total general and administrative

 

 

40,891

 

 

 

36,616

 

 

 

(4,275

)

 

(11.7

) %

 

 

156,984

 

 

 

140,284

 

 

 

(16,700

)

 

(11.9

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

10,285

 

 

 

9,643

 

 

 

(642

)

 

(6.7

) %

 

 

40,125

 

 

 

33,464

 

 

 

(6,661

)

 

(19.9

) %

Income before income taxes

 

 

20,769

 

 

 

13,792

 

 

 

6,977

 

 

50.6

%

 

 

58,993

 

 

 

45,902

 

 

 

13,091

 

 

28.5

%

Income taxes

 

 

5,086

 

 

 

3,022

 

 

 

(2,064

)

 

(68.3

) %

 

 

14,261

 

 

 

10,557

 

 

 

(3,704

)

 

(35.1

) %

Net income

 

$

15,683

 

 

$

10,770

 

 

$

4,913

 

 

45.6

%

 

$

44,732

 

 

$

35,345

 

 

$

9,387

 

 

26.6

%

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.44

 

 

$

0.92

 

 

$

0.52

 

 

56.5

%

 

$

3.92

 

 

$

3.03

 

 

$

0.89

 

 

29.4

%

Diluted

 

$

1.38

 

 

$

0.90

 

 

$

0.48

 

 

53.3

%

 

$

3.80

 

 

$

2.93

 

 

$

0.87

 

 

29.7

%

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,893

 

 

 

11,672

 

 

 

779

 

 

6.7

%

 

 

11,401

 

 

 

11,655

 

 

 

254

 

 

2.2

%

Diluted

 

 

11,327

 

 

 

12,010

 

 

 

683

 

 

5.7

%

 

 

11,773

 

 

 

12,078

 

 

 

305

 

 

2.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (annualized)

 

 

5.6

%

 

 

4.6

%

 

 

 

 

 

 

4.3

%

 

 

4.0

%

 

 

 

 

Return on average equity (annualized)

 

 

21.1

%

 

 

15.7

%

 

 

 

 

 

 

15.4

%

 

 

13.6

%

 

 

 

 

               

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)

               

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

4Q 19

 

 

4Q 18

 

 

$

 

 

%

 

 

   

 

   

 

   

 

 

Assets

 

 

   

 

   

 

   

 

 

Cash

$

2,263

$

3,657

$

(1,394

)

(38.1

)%

Gross finance receivables

1,500,962

 

1,237,526

263,436

21.3

%

Unearned finance charges and insurance premiums

 

(396,149

)

 

(305,283

)

(90,866

)

(29.8

)%

Finance receivables

 

 

1,104,813

 

932,243

 

172,570

18.5

%

Allowance for credit losses

 

 

(62,200

)

 

(58,300

)

 

(3,900

)

(6.7

)%

Net finance receivables

 

 

1,042,613

 

 

 

873,943

 

 

 

168,670

 

 

19.3

%

Restricted cash

 

 

54,164

 

 

 

46,484

 

 

 

7,680

 

 

16.5

%

Lease assets

 

 

26,438

 

 

—

 

 

26,438

 

 

100.0

%

Property and equipment

15,301

13,926

 

1,375

9.9

%

Intangible assets

 

 

9,438

 

 

 

10,010

(572

)

(5.7

)%

Deferred tax asset

619

—

619

100.0

%

Other assets

 

 

7,704

 

 

 

8,375

 

(671

)

(8.0

)%

Total assets

 

$

1,158,540

 

 

$

956,395

 

 

$

202,145

 

 

21.1

%

Liabilities and Stockholders’ Equity

 

 

   

 

   

 

   

 

 

Liabilities:

 

 

   

 

   

 

   

 

 

Long-term debt

$

808,218

$

660,507

$

147,711

22.4

%

Unamortized debt issuance costs

 

 

(9,607

)

(9,158

)

 

(449

)

(4.9

)%

 

 

 

   

 

   

 

   

 

 

Net long-term debt

 

 

798,611

 

 

 

651,349

 

 

 

147,262

 

 

22.6

%

Accounts payable and accrued expenses

 

 

28,676

 

 

 

25,138

 

 

 

3,538

 

 

14.1

%

Lease liabilities

 

28,470

—

 

28,470

100.0

%

Deferred tax liability

 

—

 

 

747

 

 

(747

)

(100.0

)%

 

 

 

   

 

   

 

   

 

 

Total liabilities

 

 

855,757

 

 

 

677,234

 

 

 

178,523

 

 

26.4

%

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, 13,497 shares issued and 11,013 shares outstanding at December 31, 2019 and 13,323 shares issued and 11,777 shares outstanding at December 31, 2018)

 

 

1,350

 

 

 

1,332

 

 

 

18

 

 

1.4

%

Additional paid-in-capital

 

 

102,678

 

 

 

98,778

 

 

 

3,900

 

 

3.9

%

Retained earnings

 

248,829

204,097

 

44,732

21.9

%

Treasury stock (2,484 shares at December 31, 2019 and 1,546 shares at December 31, 2018)

 

 

(50,074

)

 

(25,046

)

 

(25,028

)

(99.9

)%

 

 

 

   

 

   

 

   

 

 

Total stockholders’ equity

 

 

302,783

 

 

 

279,161

 

 

 

23,622

 

 

8.5

%

Total liabilities and stockholders’ equity

 

$

1,158,540

 

 

$

956,395

 

 

$

202,145

 

 

21.1

%

   

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands, except per share amounts)

   

 

 

Finance Receivables by Product

 

 

 

 

 

 

QoQ $

 

QoQ %

 

 

 

YoY $

 

YoY %

 

4Q 19 

 

3Q 19 

 

Inc (Dec)

 

Inc (Dec)

 

4Q 18 

 

Inc (Dec)

 

Inc (Dec)

Small loans

 

$

462,499

 

$

449,416

 

$

13,083

 

 

2.9

%

 

$

437,662

 

$

24,837

 

 

5.7

%

Large loans

 

 

608,608

 

 

554,664

 

 

53,944

 

 

9.7

%

 

 

437,998

 

 

170,610

 

 

39.0

%

Total core loans

 

 

1,071,107

 

 

1,004,080

 

 

67,027

 

 

6.7

%

 

 

875,660

 

 

195,447

 

 

22.3

%

Automobile loans

 

 

9,623

 

 

12,121

 

 

(2,498

)

 

(20.6

)%

 

 

26,154

 

 

(16,531

)

 

(63.2

)%

Retail loans

 

 

24,083

 

 

25,985

 

 

(1,902

)

 

(7.3

)%

 

 

30,429

 

 

(6,346

)

 

(20.9

)%

Total finance receivables

 

$

1,104,813

 

$

1,042,186

 

$

62,627

 

 

6.0

%

 

$

932,243

 

$

172,570

 

 

18.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of branches at period end

 

 

366

 

 

358

 

 

8

 

 

2.2

%

 

 

359

 

 

7

 

 

1.9

%

Average finance receivables per branch

 

$

3,019

 

$

2,911

 

$

108

 

 

3.7

%

 

$

2,597

 

$

422

 

 

16.2

%

           
           
       

 

 

Averages and Yields

       

 

 

4Q 19

 

3Q 19

 

4Q 18

         

Average Finance

 

Average Yield

 

Average Finance

 

Average Yield

 

Average Finance

 

Average Yield

         

Receivables

 

(Annualized)

 

Receivables

 

(Annualized)

 

Receivables

 

(Annualized)

       

Small loans

 

$

453,490

 

38.5

%

 

$

442,137

 

38.8

%

 

$

426,901

 

39.5

%

       

Large loans

 

 

581,913

 

29.2

%

 

 

527,670

 

29.1

%

 

 

425,948

 

28.4

%

       

Automobile loans

 

 

10,734

 

14.8

%

 

 

13,806

 

15.0

%

 

 

29,114

 

15.0

%

       

Retail loans

 

 

25,128

 

19.4

%

 

 

26,902

 

19.1

%

 

 

30,555

 

19.1

%

       

Total interest and fee yield

 

$

1,071,265

 

32.8

%

 

$

1,010,515

 

32.9

%

 

$

912,518

 

32.9

%

       

Total revenue yield

 

$

1,071,265

 

36.6

%

 

$

1,010,515

 

36.3

%

 

$

912,518

 

36.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Increase in Interest and Fee Income

 

 

 

 

 

 

4Q 19 Compared to 4Q 18

 

 

 

 

 

 

Increase (Decrease)

 

 

 

 

 

 

Volume

 

Rate

 

Volume & Rate

 

Net

 

 

 

 

Small loans

 

$

2,628

 

 

$

(1,121

)

 

$

(70

)

 

$

1,437

 

 

 

 

 

Large loans

 

 

11,080

 

 

 

874

 

 

 

320

 

 

 

12,274

 

 

 

 

 

Automobile loans

 

 

(690

)

 

 

(19

)

 

 

12

 

 

 

(697

)

 

 

 

 

Retail loans

 

 

(259

)

 

 

20

 

 

 

(4

)

 

 

(243

)

 

 

 

 

Product mix

 

 

291

 

 

 

9

 

 

 

(300

)

 

—

 

 

 

 

 

Total increase in interest and fee income

 

$

13,050

 

 

$

(237

)

 

$

(42

)

 

$

12,771

           
           
       

 

 

Net Loans Originated (1) (2)

       

 

 

 

 

 

 

QoQ $

 

QoQ %

 

 

 

YoY $

 

YoY %

         

4Q 19 

 

 3Q 19

 

Inc (Dec)

 

Inc (Dec)

 

 4Q 18

 

Inc (Dec)

 

Inc (Dec)

             

 

 

 

   

 

 

 

       

Small loans

 

$

180,967

 

$

177,629

 

$

3,338

 

 

1.9

%

 

$

172,820

 

$

8,147

 

 

4.7

%

       

Large loans

 

 

174,341

 

 

166,835

 

 

7,506

 

 

4.5

%

 

 

115,805

 

 

58,536

 

 

50.5

%

       

Retail loans

 

 

3,833

 

 

4,421

 

 

(588

)

 

(13.3

)%

 

 

6,593

 

 

(2,760

)

 

(41.9

)%

       

Total net loans originated

 

$

359,141

 

$

348,885

 

$

10,256

 

 

2.9

%

 

$

295,218

 

$

63,923

 

 

21.7

%

         
       

(1)

Represents the balance of loan origination and refinancing net of unearned finance charges.

       

(2)

The company ceased originating automobile loans in November 2017.

           
           
       

 

 

Other Key Metrics

         

4Q 19

 

3Q 19

 

4Q 18

       

Net credit losses (1) (2)

 

$

24,739

 

 

$

20,815

 

 

$

20,698

 

       

Percentage of average finance receivables (annualized)

 

 

9.2

%

 

 

8.2

%

 

 

9.1

%

       

 

 

 

 

 

 

 

       

Provision for credit losses (3)

 

$

26,039

 

 

$

24,515

 

 

$

23,698

 

       

Percentage of average finance receivables (annualized)

 

 

9.7

%

 

 

9.7

%

 

 

10.4

%

       

Percentage of total revenue

 

 

26.6

%

 

 

26.7

%

 

 

28.3

%

       

 

 

 

 

 

 

 

       

General and administrative expenses

 

$

40,891

 

 

$

40,167

 

 

$

36,616

 

       

Percentage of average finance receivables (annualized)

 

 

15.3

%

 

 

15.9

%

 

 

16.1

%

       

Percentage of total revenue

 

 

41.7

%

 

 

43.8

%

 

 

43.7

%

       

 

 

 

 

 

 

 

       

Same store results (4):

 

 

 

 

 

 

       

Finance receivables at period-end

 

$

1,082,050

 

 

$

1,021,291

 

 

$

925,621

 

       

Finance receivable growth rate

 

 

16.7

%

 

 

15.9

%

 

 

13.7

%

       

Number of branches in calculation

 

 

337

 

 

 

332

 

 

 

337

 

       

(1)

Includes hurricane-related net credit losses of $117 for 4Q 18.

       

(2)

Includes net credit losses related to lower utilization of non-file insurance of $2,405, $1,791, and $1,781 for 4Q 19, 3Q 19, and 4Q 18, respectively.

       

(3)

Includes hurricane-related provision for credit losses of $(183) for 4Q 18.

       

(4)

Same store sales reflect the change in year-over-year sales for the comparable branch base. The comparable branch base includes those branches open for at least one year.

   

 

 

Contractual Delinquency by Aging

 

 

4Q 19

 

3Q 19

 

4Q 18

Allowance for credit losses (1)

 

$

62,200

 

5.6

%

 

$

60,900

 

5.8

%

 

$

58,300

 

6.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

921,856

 

83.4

%

 

 

872,246

 

83.7

%

 

 

754,162

 

80.9

%

1 to 29 days past due

 

 

103,925

 

9.4

%

 

 

101,412

 

9.7

%

 

 

105,920

 

11.4

%

Delinquent accounts:

 

 

 

 

 

 

 

 

 

 

 

 

30 to 59 days

 

 

25,110

 

2.3

%

 

 

22,919

 

2.3

%

 

 

22,529

 

2.3

%

60 to 89 days

 

 

18,665

 

1.7

%

 

 

16,148

 

1.5

%

 

 

17,382

 

1.9

%

90 to 119 days

 

 

13,836

 

1.3

%

 

 

11,736

 

1.1

%

 

 

12,279

 

1.3

%

120 to 149 days

 

 

11,595

 

1.0

%

 

 

9,676

 

0.9

%

 

 

10,890

 

1.2

%

150 to 179 days

 

 

9,826

 

0.9

%

 

 

8,049

 

0.8

%

 

 

9,081

 

1.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual delinquency (2)

 

$

79,032

 

7.2

%

 

$

68,528

 

6.6

%

 

$

72,161

 

7.7

%

Total finance receivables

 

$

1,104,813

 

100.0

%

 

$

1,042,186

 

100.0

%

 

$

932,243

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

1 day and over past due

 

$

182,957

 

16.6

%

 

$

169,940

 

16.3

%

 

$

178,081

 

19.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual Delinquency by Product

 

4Q 19

 

3Q 19

 

4Q 18

Small loans

 

$

42,265

 

9.1

%

 

$

36,620

 

8.1

%

 

$

40,663

 

9.3

%

Large loans

 

 

33,554

 

5.5

%

 

 

28,563

 

5.1

%

 

 

26,814

 

6.1

%

Automobile loans

 

 

754

 

7.8

%

 

 

1,153

 

9.5

%

 

 

2,083

 

8.0

%

Retail loans

 

 

2,459

 

10.2

%

 

 

2,192

 

8.4

%

 

 

2,601

 

8.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual delinquency (2)

 

$

79,032

 

7.2

%

 

$

68,528

 

6.6

%

 

$

72,161

 

7.7

%

(1)

Includes incremental hurricane allowance for credit losses of $3,600 in 4Q 18.

(2)

Includes 0.5% delinquency related to hurricane-affected branches in 4Q 18.

   

 

 

Income Statement Quarterly Trend

 

 

 

 

 

 

 

 

 

 

 

 

QoQ $

 

YoY $

 

 4Q 18

 

 1Q 19

 

2Q 19 

 

3Q 19 

 

4Q 19 

 

B(W)

 

B(W)

           

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$

75,013

 

$

74,322

 

$

75,974

 

$

83,089

 

$

87,784

 

$

4,695

 

 

$

12,771

 

Insurance income, net

 

 

5,624

 

 

4,113

 

 

5,066

 

 

5,087

 

 

6,551

 

 

1,464

 

 

 

927

 

Other income

 

 

3,112

 

 

3,313

 

 

3,234

 

 

3,531

 

 

3,649

 

 

118

 

 

 

537

 

Total revenue

 

 

83,749

 

 

81,748

 

 

84,274

 

 

91,707

 

 

97,984

 

 

6,277

 

 

 

14,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

23,698

 

 

23,343

 

 

25,714

 

 

24,515

 

 

26,039

 

 

(1,524

)

 

 

(2,341

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

 

22,074

 

 

22,393

 

 

22,511

 

 

23,791

 

 

25,305

 

 

(1,514

)

 

 

(3,231

)

Occupancy

 

 

5,933

 

 

6,165

 

 

6,210

 

 

6,367

 

 

5,876

 

 

491

 

 

 

57

 

Marketing

 

 

1,902

 

 

1,651

 

 

2,261

 

 

2,397

 

 

1,897

 

 

500

 

 

 

5

 

Other

 

 

6,707

 

 

7,974

 

 

6,761

 

 

7,612

 

 

7,813

 

 

(201

)

 

 

(1,106

)

Total general and administrative

 

 

36,616

 

 

38,183

 

 

37,743

 

 

40,167

 

 

40,891

 

 

(724

)

 

 

(4,275

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,643

 

 

9,721

 

 

9,771

 

 

10,348

 

 

10,285

 

 

63

 

 

 

(642

)

Income before income taxes

 

 

13,792

 

 

10,501

 

 

11,046

 

 

16,677

 

 

20,769

 

 

4,092

 

 

 

6,977

 

Income taxes

 

 

3,022

 

 

2,393

 

 

2,677

 

 

4,105

 

 

5,086

 

 

(981

)

 

 

(2,064

)

Net income

 

$

10,770

 

$

8,108

 

$

8,369

 

$

12,572

 

$

15,683

 

$

3,111

 

 

$

4,913

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.92

 

$

0.69

 

$

0.71

 

$

1.11

 

$

1.44

 

$

0.33

 

 

$

0.52

 

Diluted

 

$

0.90

 

$

0.67

 

$

0.70

 

$

1.08

 

$

1.38

 

$

0.30

 

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

11,672

 

 

11,712

 

 

11,706

 

 

11,302

 

 

10,893

 

 

409

 

 

 

779

 

Diluted

 

 

12,010

 

 

12,076

 

 

12,022

 

 

11,677

 

 

11,327

 

 

350

 

 

 

683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

$

74,106

 

$

72,027

 

$

74,503

 

$

81,359

 

$

87,699

 

$

6,340

 

 

$

13,593

 

Net credit margin

 

$

50,408

 

$

48,684

 

$

48,789

 

$

56,844

 

$

61,660

 

$

4,816

 

 

$

11,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Quarterly Trend

 

 

 

 

 

 

 

 

 

 

 

 

QoQ $

 

YoY $

 4Q 18

 

1Q 19 

 

2Q 19 

 

3Q 19 

 

4Q 19 

 

Inc (Dec)

 

Inc (Dec)

 

 

Total assets

 

$

956,395

 

$

953,467

 

$

1,019,316

 

$

1,086,172

 

$

1,158,540

 

$

72,368

 

 

$

202,145

 

Finance receivables

 

$

932,243

 

$

912,250

 

$

973,434

 

$

1,042,186

 

$

1,104,813

 

$

62,627

 

 

$

172,570

 

Allowance for credit losses

 

$

58,300

 

$

56,400

 

$

57,200

 

$

60,900

 

$

62,200

 

$

1,300

 

 

$

3,900

 

Long-term debt

 

$

660,507

 

$

628,786

 

$

689,310

 

$

743,835

 

$

808,218

 

$

64,383

 

 

$

147,711

 

   

 

 

Other Key Metrics Quarterly Trend

 

 

 

 

 

 

 

 

 

 

 

 

QoQ

 

YoY

 

 4Q 18

 

1Q 19 

 

2Q 19 

 

3Q 19 

 

4Q 19 

 

Inc (Dec)

 

Inc (Dec)

           

 

 

 

Interest and fee yield (annualized)

 

 

32.9

%

 

 

32.1

%

 

 

32.5

%

 

 

32.9

%

 

 

32.8

%

 

 

(0.1

)%

 

 

(0.1

)%

Efficiency ratio (1)

 

 

43.7

%

 

 

46.7

%

 

 

44.8

%

 

 

43.8

%

 

 

41.7

%

 

 

(2.1

)%

 

 

(2.0

)%

Operating expense ratio (2)

 

 

16.1

%

 

 

16.5

%

 

 

16.2

%

 

 

15.9

%

 

 

15.3

%

 

 

(0.6

)%

 

 

(0.8

)%

30+ contractual delinquency

 

 

7.7

%

 

 

7.0

%

 

 

6.4

%

 

 

6.6

%

 

 

7.2

%

 

 

0.6

%

 

 

(0.5

)%

Net credit loss ratio (3)

 

 

9.1

%

 

 

10.9

%

 

 

10.7

%

 

 

8.2

%

 

 

9.2

%

 

 

1.0

%

 

 

0.1

%

Book value per share

 

$

23.70

 

 

$

24.15

 

 

$

24.88

 

 

$

26.00

 

 

$

27.49

 

 

$

1.49

 

 

$

3.79

 

(1)

General and administrative expenses as a percentage of total revenue.

(2)

Annualized general and administrative expenses as a percentage of average finance receivables.

(3)

Annualized net credit losses as a percentage of average finance receivables.

   

 

 

Averages and Yields

 

 

FY 19

 

FY 18

 

 

Average Finance

 

 

 

Average Finance

 

 

 

Receivables

 

Average Yield

 

Receivables

 

Average Yield

Small loans

 

$

437,358

 

38.5

%

 

$

391,481

 

40.0

%

Large loans

 

 

504,302

 

28.8

%

 

 

389,919

 

28.5

%

Automobile loans

 

 

16,384

 

14.8

%

 

 

41,026

 

15.6

%

Retail loans

 

 

27,701

 

19.0

%

 

 

31,393

 

19.0

%

Total interest and fee yield

 

$

985,745

 

32.6

%

 

$

853,819

 

32.8

%

Total revenue yield

 

$

985,745

 

36.1

%

 

$

853,819

 

35.9

%

       
       

 

 

Components of Increase in Interest and Fee Income

 

FY 19 Compared to FY 18

 

Increase (Decrease)

 

 

Volume

 

Rate

 

Volume & Rate

 

Net

Small loans

 

$

18,356

 

 

$

(5,932

)

 

$

(695

)

 

$

11,729

 

Large loans

 

 

32,602

 

 

 

1,067

 

 

 

314

 

 

 

33,983

 

Automobile loans

 

 

(3,842

)

 

 

(315

)

 

 

189

 

 

 

(3,968

)

Retail loans

 

 

(700

)

 

 

4

 

 

—

   

 

(696

)

Product mix

 

 

(3,134

)

 

 

3,241

 

 

 

(107

)

 

—

 

Total increase in interest and fee income

 

$

43,282

 

 

$

(1,935

)

 

$

(299

)

 

$

41,048

 

   
   

 

 

Net Loans Originated (1) (2)

 

 

 

 

 

 

FY $

 

FY %

 

FY 19 

 

 FY 18

 

Inc (Dec)

 

Inc (Dec)

Small loans

 

$

662,281

 

$

624,243

 

$

38,038

 

 

6.1

%

Large loans

 

 

594,617

 

 

409,174

 

 

185,443

 

 

45.3

%

Retail loans

 

 

19,630

 

 

26,579

 

 

(6,949

)

 

(26.1

)%

Total net loans originated

 

$

1,276,528

 

$

1,059,996

 

$

216,532

 

 

20.4

%

(1)

Represents the balance of loan origination and refinancing net of unearned finance charges.

(2)

The company ceased originating automobile loans in November 2017.

   

 

 

Other Key Metrics

 

 

FY 19

 

FY 18

Net credit losses (1) (2)

 

$

95,711

 

 

$

77,666

 

Percentage of average finance receivables

 

 

9.7

%

 

 

9.1

%

 

 

 

 

 

Provision for credit losses (3)

 

$

99,611

 

 

$

87,056

 

Percentage of average finance receivables

 

 

10.1

%

 

 

10.2

%

Percentage of total revenue

 

 

28.0

%

 

 

28.4

%

 

 

 

 

 

General and administrative expenses

 

$

156,984

 

 

$

140,284

 

Percentage of average finance receivables

 

 

15.9

%

 

 

16.4

%

Percentage of total revenue

 

 

44.1

%

 

 

45.7

%

(1)

Includes hurricane-related net credit losses of $2,325 and $1,936 for FY 19 and FY 18, respectively.

(2)

Includes net credit losses related to lower utilization of non-file insurance of $7,575 and $3,362 for FY 19 and FY 18, respectively.

(3)

Includes hurricane-related provision for credit losses of $(1,275) and $2,736 for FY 19 and FY 18, respectively.

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 enhance, its understanding of the company’s financial results. Tangible equity and funded debt-to-tangible equity ratio are non-GAAP measures that adjust GAAP measures to exclude intangible assets. Management uses these non-GAAP measures to evaluate and manage the company’s capital and leverage position. The company also believes that these non-GAAP measures are commonly used in the financial services industry and provide useful information to users of the company’s financial statements in the evaluation of its capital and leverage position. This non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following table provides a reconciliation of GAAP measures to non-GAAP measures.

   

 

 

4Q 19

Long-term debt

 

$

808,218

 

 

 

Total stockholders’ equity

 

 

302,783

Less: Intangible assets

 

 

9,438

Tangible equity (non-GAAP)

 

$

293,345

 

 

 

Funded debt-to-equity ratio

 

2.67x

Funded debt-to-tangible equity ratio (non-GAAP)

 

2.76x

 

Investor Relations
Garrett Edson, (203) 682-8331
[email protected]