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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ended

Commission File Number: 001-35477

 

Regional Management Corp.

(Exact name of registrant as specified in its charter)

 

Delaware

57-0847115

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

979 Batesville Road, Suite B

Greer, South Carolina

29651

(Address of principal executive offices)

(Zip Code)

(864) 448-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on Which Registered

Common Stock, $0.10 par value

 

RM

 

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 31, 2023, the registrant had outstanding 9,837,180 shares of Common Stock, $0.10 par value.

 


 

Page No.

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets Dated June 30, 2023 and December 31, 2022

3

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022

4

 

Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022

5

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022

7

 

Notes to Consolidated Financial Statements

9

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

 

Item 4.

Controls and Procedures

50

 

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

51

 

Item 1A.

Risk Factors

51

 

 

 

Item 5.

Other Information

51

 

Item 6.

Exhibits

52

 

SIGNATURE

54

2


ITEM 1. FINANCIAL STATEMENTS.

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except par value amounts)

 

 

June 30, 2023

 

 

 

 

 

 

(Unaudited)

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Cash

 

$

10,330

 

 

$

3,873

 

Net finance receivables

 

 

1,688,937

 

 

 

1,699,393

 

Unearned insurance premiums

 

 

(49,059

)

 

 

(51,008

)

Allowance for credit losses

 

 

(181,400

)

 

 

(178,800

)

Net finance receivables, less unearned insurance premiums and
 allowance for credit losses

 

 

1,458,478

 

 

 

1,469,585

 

Restricted cash

 

 

131,132

 

 

 

127,926

 

Lease assets

 

 

34,996

 

 

 

34,521

 

Restricted available-for-sale investments

 

 

20,298

 

 

 

20,416

 

Deferred tax assets, net

 

 

15,278

 

 

 

13,810

 

Property and equipment

 

 

14,689

 

 

 

14,526

 

Intangible assets

 

 

13,949

 

 

 

12,122

 

Other assets

 

 

24,466

 

 

 

28,208

 

Total assets

 

$

1,723,616

 

 

$

1,724,987

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Debt

 

$

1,344,855

 

 

$

1,355,359

 

Unamortized debt issuance costs

 

 

(6,923

)

 

 

(9,512

)

Net debt

 

 

1,337,932

 

 

 

1,345,847

 

Lease liabilities

 

 

37,150

 

 

 

36,712

 

Accounts payable and accrued expenses

 

 

27,032

 

 

 

33,795

 

Total liabilities

 

 

1,402,114

 

 

 

1,416,354

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock ($0.10 par value, 100,000 shares authorized, none issued or outstanding)

 

 

 

 

 

 

Common stock ($0.10 par value, 1,000,000 shares authorized, 14,636 shares issued and 9,829 shares outstanding at June 30, 2023 and 14,330 shares issued and 9,523 shares outstanding at December 31, 2022)

 

 

1,464

 

 

 

1,433

 

Additional paid-in capital

 

 

116,202

 

 

 

112,384

 

Retained earnings

 

 

354,346

 

 

 

345,545

 

Accumulated other comprehensive loss

 

 

(367

)

 

 

(586

)

Treasury stock (4,807 shares at June 30, 2023 and December 31, 2022)

 

 

(150,143

)

 

 

(150,143

)

Total stockholders’ equity

 

 

321,502

 

 

 

308,633

 

Total liabilities and stockholders’ equity

 

$

1,723,616

 

 

$

1,724,987

 

 

The following table presents the assets and liabilities of our consolidated variable interest entities:

 

Assets

 

 

 

 

 

 

Cash

 

$

404

 

 

$

439

 

Net finance receivables

 

 

1,311,107

 

 

 

1,296,078

 

Allowance for credit losses

 

 

(138,343

)

 

 

(134,708

)

Restricted cash

 

 

128,161

 

 

 

126,017

 

Other assets

 

 

3,417

 

 

 

1,706

 

Total assets

 

$

1,304,746

 

 

$

1,289,532

 

Liabilities

 

 

 

 

 

 

Net debt

 

$

1,233,509

 

 

$

1,199,404

 

Accounts payable and accrued expenses

 

 

187

 

 

 

167

 

Total liabilities

 

$

1,233,696

 

 

$

1,199,571

 

See accompanying notes to consolidated financial statements.

3


Regional Management Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$

118,083

 

 

$

109,771

 

 

$

238,490

 

 

$

217,402

 

Insurance income, net

 

 

11,203

 

 

 

10,220

 

 

 

22,162

 

 

 

20,764

 

Other income

 

 

4,198

 

 

 

2,880

 

 

 

8,210

 

 

 

5,553

 

Total revenue

 

 

133,484

 

 

 

122,871

 

 

 

268,862

 

 

 

243,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

52,551

 

 

 

45,400

 

 

 

100,219

 

 

 

76,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

 

36,419

 

 

 

33,941

 

 

 

75,016

 

 

 

69,595

 

Occupancy

 

 

6,158

 

 

 

6,156

 

 

 

12,446

 

 

 

11,964

 

Marketing

 

 

3,844

 

 

 

4,108

 

 

 

7,223

 

 

 

7,199

 

Other

 

 

10,475

 

 

 

9,916

 

 

 

21,534

 

 

 

20,463

 

Total general and administrative expenses

 

 

56,896

 

 

 

54,121

 

 

 

116,219

 

 

 

109,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

16,224

 

 

 

7,564

 

 

 

33,006

 

 

 

7,505

 

Income before income taxes

 

 

7,813

 

 

 

15,786

 

 

 

19,418

 

 

 

50,735

 

Income taxes

 

 

1,790

 

 

 

3,804

 

 

 

4,706

 

 

 

11,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,023

 

 

$

11,982

 

 

$

14,712

 

 

$

38,765

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.64

 

 

$

1.29

 

 

$

1.57

 

 

$

4.13

 

Diluted

 

$

0.63

 

 

$

1.24

 

 

$

1.53

 

 

$

3.94

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,399

 

 

 

9,261

 

 

 

9,363

 

 

 

9,396

 

Diluted

 

 

9,566

 

 

 

9,669

 

 

 

9,595

 

 

 

9,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized income on restricted available-for-sale investments

 

 

14

 

 

 

 

 

 

277

 

 

 

 

Other comprehensive income, before tax

 

 

14

 

 

 

 

 

 

277

 

 

 

 

Income taxes related to items of other comprehensive income

 

 

(3

)

 

 

 

 

 

(58

)

 

 

 

Other comprehensive income, net of tax

 

 

11

 

 

 

 

 

 

219

 

 

 

 

Total comprehensive income

 

$

6,034

 

 

$

11,982

 

 

$

14,931

 

 

$

38,765

 

See accompanying notes to consolidated financial statements.

4


Regional Management Corp. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)

 

 

 

Three Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-In

 

 

Retained

 

 

Other Comprehensive

 

 

Treasury

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock

 

 

Total

 

Balance, March 31, 2023

 

 

14,385

 

 

$

1,438

 

 

$

114,452

 

 

$

351,324

 

 

$

(378

)

 

$

(150,143

)

 

$

316,693

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(3,001

)

 

 

 

 

 

 

 

 

(3,001

)

Issuance of restricted stock awards

 

 

266

 

 

 

27

 

 

 

(27

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

18

 

 

 

2

 

 

 

287

 

 

 

 

 

 

 

 

 

 

 

 

289

 

Shares withheld related to net share settlement

 

 

(33

)

 

 

(3

)

 

 

(846

)

 

 

 

 

 

 

 

 

 

 

 

(849

)

Share-based compensation

 

 

 

 

 

 

 

 

2,336

 

 

 

 

 

 

 

 

 

 

 

 

2,336

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6,023

 

 

 

 

 

 

 

 

 

6,023

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Balance, June 30, 2023

 

 

14,636

 

 

$

1,464

 

 

$

116,202

 

 

$

354,346

 

 

$

(367

)

 

$

(150,143

)

 

$

321,502

 

 

 

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-In

 

 

Retained

 

 

Other Comprehensive

 

 

Treasury

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock

 

 

Total

 

Balance, March 31, 2022

 

 

14,360

 

 

$

1,436

 

 

$

105,989

 

 

$

329,878

 

 

$

 

 

$

(138,561

)

 

$

298,742

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(2,917

)

 

 

 

 

 

 

 

 

(2,917

)

Issuance of restricted stock awards

 

 

40

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,582

)

 

 

(11,582

)

Shares withheld related to net share settlement

 

 

(10

)

 

 

(1

)

 

 

(387

)

 

 

 

 

 

 

 

 

 

 

 

(388

)

Share-based compensation