Overview of Regional Management Corp.’s Financial Performance

Regional Management Corp. is a consumer finance company that provides small and large loans, as well as retail loans, to customers. In 2024, the company reported strong financial results, with net income increasing by 158.3% to $41.2 million compared to the prior year.

The company’s total revenue grew by 6.7% to $588.5 million in 2024, driven by an 8.0% increase in interest and fee income to $528.9 million. This was due to a 4.5% increase in average net finance receivables and a 1.0% increase in average yield. The company’s insurance income, net, decreased by 8.6% to $40.7 million, while other income increased by 10.1% to $18.9 million.

Loan Portfolio Growth and Composition

Regional Management’s loan portfolio grew by 6.8% in 2024, with the large loan (>$2,500) and small loan (≤$2,500) segments increasing by 4.9% and 12.4%, respectively. The retail loan segment decreased by 71.9% as the company ceased accepting applications for this product to focus on its core loan portfolio.

The company’s average net finance receivables increased by 4.5% in 2024, with the average yield on the portfolio increasing by 1.0% to 29.6%. This was due to price increases, growth in the higher-margin small loan business, and improved credit performance.

Provision for Credit Losses and Asset Quality

The company’s provision for credit losses decreased by 3.6% to $212.2 million in 2024, primarily due to a decrease in net credit losses of $11.3 million, or 5.4%. The allowance for credit losses as a percentage of finance receivables decreased to 10.5% as of December 31, 2024, from 10.6% as of December 31, 2023, due to changes in estimated future macroeconomic impacts on credit losses.

The company’s delinquency rate increased to 7.7% as of December 31, 2024, from 6.9% as of December 31, 2023. The increase was partially offset by a 90 basis point reduction from a loan sale that occurred in 2023.

General and Administrative Expenses

Regional Management’s general and administrative expenses increased by 1.9% to $247.7 million in 2024. The increase was primarily driven by higher marketing expenses of $3.2 million, or 20.5%, due to increased activity in the company’s direct mail campaigns. Personnel expenses decreased by 2.0% to $153.8 million, primarily due to higher capitalized loan origination costs and a reduction in force expenses in 2023.

The company’s operating expense ratio, which measures general and administrative expenses as a percentage of average net finance receivables, decreased to 13.8% in 2024 from 14.2% in 2023, as the company was able to leverage its growing loan portfolio to control expense growth.

Interest Expense and Liquidity

Interest expense increased by 10.5% to $74.5 million in 2024, primarily due to an increase in the company’s cost of funds and an increase in the average balance of its debt facilities. The company’s cost of funds increased to 4.2% in 2024 from 3.9% in 2023.

As of December 31, 2024, the company had $136.9 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from its revolving credit facilities. The company also had $466.2 million of unused capacity on its revolving credit facilities (subject to the borrowing base) as of December 31, 2024.

Outlook and Risks

Regional Management continues to assess the macroeconomic environment and adapt its business accordingly. The company has prudently increased the growth in its small loan portfolio, while also originating higher-credit-quality, auto-secured loans to balance the risk.

The company’s allowance for credit losses was 10.5% of net finance receivables as of December 31, 2024. Going forward, changes in macroeconomic conditions or the company’s credit loss performance outlook could lead to further changes in the allowance for credit losses and provision for credit losses expense.

Factors that may affect the company’s results of operations include quarterly and seasonal trends in loan volume and delinquency, growth in the loan portfolio, product mix, asset quality, interest rates, and operating costs. The company also faces risks and uncertainties associated with the current regulatory environment, which could impact its future expenses, net income, and overall financial condition.

Conclusion

Regional Management Corp. delivered strong financial results in 2024, with significant growth in its loan portfolio and net income. The company has maintained a strong liquidity position and continues to adapt its business to the evolving macroeconomic environment. While the company faces various risks and uncertainties, its focus on prudent growth and risk management positions it well for the future.