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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2023

OR

 

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

For the transition period from to

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

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

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 (§ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

As of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was $245,832,349 based upon the closing sale price as reported on the New York Stock Exchange. See Part II, Item 5 of this Annual Report on Form 10-K for additional information.

As of February 20, 2024, there were 9,758,547 shares of the registrant’s common stock outstanding.

Documents Incorporated by Reference

Certain information required by Part III of this Annual Report on Form 10-K is incorporated herein by reference to the Proxy Statement for the registrant’s 2024 Annual Meeting of Stockholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2023.

 


 

Regional Management Corp.

Annual Report on Form 10-K

Fiscal Year Ended December 31, 2023

Table of Contents

 

 

 

Page

Forward-Looking Statements

 

1

 

 

 

 

PART I

 

 

 

 

 

 

 

ITEM 1.

 

Business

 

2

ITEM 1A.

 

Risk Factors

 

12

ITEM 1B.

 

Unresolved Staff Comments

 

37

ITEM 1C.

 

Cybersecurity

 

37

ITEM 2.

 

Properties

 

37

ITEM 3.

 

Legal Proceedings

 

38

ITEM 4.

 

Mine Safety Disclosures

 

38

 

 

 

 

PART II

 

 

 

 

 

 

 

ITEM 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

39

ITEM 6.

 

[Reserved]

 

41

ITEM 7.

 

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

 

42

ITEM 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

54

ITEM 8.

 

Financial Statements and Supplementary Data

 

55

ITEM 9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

96

ITEM 9A.

 

Controls and Procedures

 

96

ITEM 9B.

 

Other Information

 

96

ITEM 9C.

 

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

97

 

 

 

 

PART III

 

 

 

 

 

 

 

ITEM 10.

 

Directors, Executive Officers and Corporate Governance

 

98

ITEM 11.

 

Executive Compensation

 

98

ITEM 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

98

ITEM 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

98

ITEM 14.

 

Principal Accounting Fees and Services

 

98

 

 

 

 

PART IV

 

 

 

 

 

 

 

ITEM 15.

 

Exhibits, Financial Statement Schedules

 

99

ITEM 16.

 

Form 10-K Summary

 

104

 

 

Signatures

 

105

 

 

 


 

Forward-Looking Statements

Each of the terms “Regional,” the “Company,” “we,” “us,” and “our” as used herein refers collectively to Regional Management Corp. and its wholly-owned subsidiaries, unless otherwise stated.

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, certain statements and disclosures contained in Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, plans and objectives of management, representations, and contentions, and are not historical facts. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “would,” “should,” “could,” “intend,” “expect,” “plan,” “project,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and similar words, although some forward-looking statements are expressed differently. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. The forward-looking statements included herein reflect and contain management’s current judgment, and involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. We do not intend to update any of these forward-looking statements or publicly announce the results of or any revisions to these forward-looking statements, other than as is required under the federal securities laws.

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 1


 

Part I

ITEM 1. BUSINESS.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of December 31, 2023, we operated under the name “Regional Finance” online and in branch locations in 19 states across the United States, serving 538,400 active accounts. Most of our 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. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, and consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network with the support of centralized sales, underwriting, service, collections, and administrative teams. This provides us with frequent in-person contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Our core products are small and large installment loans. As a complement to our loan products, we offer our customers optional payment and collateral protection insurance.

Small Loans – We offer small installment loans with cash proceeds to customers ranging from $500 to $2,500, with terms of up to 48 months. Our small loans are typically secured by non-essential household goods and/or, to a lesser extent, a lien on a vehicle, which may be an automobile, motorcycle, boat, or all-terrain vehicle. As of December 31, 2023, we had 289,300 small loans outstanding representing $493.5 million in finance receivables, or an average of approximately $1,700 per loan. In 2023, 2022, and 2021, interest and fee income from small loans contributed $164.7 million, $160.4 million, and $150.6 million, respectively, to our total revenue.
Large Loans – We offer large installment loans with cash proceeds to customers ranging from $2,501 to $25,000, with terms between 18 and 60 months. Our large loans are typically secured by non-essential household goods and/or a vehicle. As of December 31, 2023, we had 246,600 large loans outstanding representing $1.3 billion in finance receivables, or an average of approximately $5,200 per loan. In 2023, 2022, and 2021, interest and fee income from large loans contributed $323.9 million, $288.5 million, and $229.9 million, respectively, to our total revenue.
Optional Payment and Collateral Protection Insurance Products – We offer our customers optional payment and collateral protection insurance relating to our loan products, including credit life insurance, accident and health insurance, involuntary unemployment insurance, and personal property insurance. In 2023, 2022, and 2021, insurance income, net contributed $44.5 million, $43.5 million, and $35.5 million, respectively, to our total revenue.

Through November 2022, we also offered indirect retail installment loans of up to $7,500. We ceased offering indirect retail installment loans in November 2022 to focus on growing our core loan portfolio, but we continue to own and service the loans that we previously originated. As of December 31, 2023, we had 2,500 retail loans outstanding representing $3.8 million in finance receivables, or an average of approximately $1,500 per loan.

Industry, Customers, and Purpose

We operate in the consumer finance industry, in which consumers are generally described as super-prime (most creditworthy), prime, near-prime, non-prime, subprime, or deep-subprime (least creditworthy). Our customers typically have less-than-perfect credit profiles and, for that reason, are generally considered subprime, non-prime, or near-prime consumers. As a result, our customers often do not qualify for prime financing from banks, thrifts, credit card providers, and other lenders. However, like prime consumers, our customers have a need and a desire to utilize credit.

Notwithstanding that many lenders are unwilling to serve our customers, we believe that responsible, transparent, and fairly priced credit products should be made available to our customers. We exist to serve that purpose, and accordingly, we offer our customers access to credit through our affordable, easy-to-understand small and large loan products, which we price on fair terms in consideration of the associated credit risk and servicing costs.

The average annual percentage rate (“APR”) of our small loans originated in 2023 was 45.2%. Our large loans, which are reserved for higher credit quality customers who meet more stringent underwriting requirements than those applied to small loan applicants, had an average APR of 29.7% for loans originated in 2023. We believe that the rates on our products are significantly

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 2


 

more attractive than many other credit options available to our customers, such as payday, pawn, and title loans, which often come with APRs over 300%. Our loans are also safer and more favorably structured than loans offered by alternative financial service providers. We underwrite our loans based on an applicant’s ability to repay, whereas payday, pawn, and title loans are typically underwritten based on an ability to collect, either through access to the borrower’s bank account or by repossession and sale of collateral. We also structure our loans on a fixed-rate, fixed-term basis with fully amortizing, equal monthly installment payments that are designed to be affordable for our customers and made over an average term of 23 months and 46 months for small and large loans, respectively (for loans originated in 2023). By comparison, payday, pawn, and title loans typically have balloon payments following short terms of 14 to 60 days.

Importantly, we further differentiate ourselves from alternative financial service providers by reporting our customers’ payment performance to credit bureaus. This practice provides our customers with the opportunity to improve their credit profile by establishing a responsible payment history with us and, ultimately, to gain access to a wider range of credit options, including our own. For example, in 2023, we worked with many of our deserving customers to refinance nearly 24,000 of our customers’ small loans into large loans, representing $133.6 million in finance receivables at origination, and resulting in a decrease in these customers’ average APR from 41.8% to 30.3%. We also believe that, over time, many of our customers transition away from our company to prime sources of credit.

Our diversity of loan products with competitive, safe, and transparent pricing and terms, combined with the opportunity for our customers to improve their credit history and profile, distinguishes us in the consumer finance market, provides us with a competitive advantage, and allows us to serve an important purpose that is mutually beneficial to our customers, communities, employees, and stockholders.

Business Model

Omni-Channel Platform. Our omni-channel platform, which includes our branches, direct mail campaigns, digital partners, and consumer website, enables us to offer a range of loan products to new, existing, and former customers throughout our markets. We began building our branch network over 30 years ago and have expanded the network to 346 branches in 19 states as of December 31, 2023. Our branch personnel market our products in a number of ways, including through customer referrals, direct telephone and mail solicitations of current and former customers, and by leveraging our direct mail program and leads generated by our digital affiliates and consumer website. Our direct mail campaigns include mailings of pre-screened convenience checks, pre-qualified offers, and invitations to apply, which enable us to market our products to millions of current and potential customers in a cost-effective manner. We have also developed our consumer website and partnered with digital lead generation sources to promote our products and facilitate loan applications and originations via the internet. We believe that our omni-channel platform provides us with a competitive advantage by giving us broad access to our existing and former customers and multiple avenues to attract new customers.

Attractive Products for Customers with Limited Access to Credit. Our flexible loan products, generally ranging from $500 to $25,000 with terms of up to 60 months, are competitively priced, easy to understand, and incorporate features designed to meet the varied financial needs and credit profiles of a broad range of consumers. This product diversity distinguishes us from monoline competitors and provides us with the ability to offer our customers new loan products as their credit profiles evolve, building customer loyalty and increasing the overall value of customer relationships.

Integrated Branch Model with Centralized Support. Our branch network serves as the foundation of our omni-channel platform and the primary point of contact with our customers. Nearly 73% of our loan originations in 2023 were facilitated by one of our branch locations, and nearly all loans, regardless of origination channel, are serviced through our branches, allowing us to maintain frequent, in-person contact with our customers. By integrating loan origination and loan servicing at the branch level, our employees are able to maintain a relationship with our customers throughout the life of a loan. We believe this frequent-contact, relationship-driven lending model provides greater insight into potential payment difficulties, reduces credit risk, and allows us to assess the borrowing needs of our customers, better enabling us to offer them new loan products as their credit profiles and needs evolve. In recent years, we have provided our branch network with increasing levels of centralized sales, underwriting, service, collections, and administrative support, and we plan to continue our investment in and testing of centralized support in the future.

Consistent Portfolio Performance. Over the past several years, we have maintained a sharp focus on credit quality by investing in highly qualified personnel, refining underwriting practices, developing custom credit scorecards, streamlining procedures, automating underwriting decisions, and improving reporting capabilities. These investments allow us to control the credit quality of our portfolio, maintain compliance with evolving state and federal law, and react quickly whenever market dynamics may change. We have also expanded our centralized collections department and provided our branches with improved collections tools, training,

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 3


 

and incentives. While the economic environment has challenged our customers and stressed our portfolio credit performance in recent years, we believe that our customers and business model have remained resilient.

Demonstrated Organic Growth. We have grown our total finance receivables by 86.2%, from $951.2 million at December 31, 2018 to $1.8 billion at December 31, 2023, a compound annual growth rate (“CAGR”) of 13.2%. More importantly, we have grown our small loan and large loan finance receivables by 92.0%, from $920.8 million at December 31, 2018 to $1.8 billion at December 31, 2023, a CAGR of 13.9%. This receivables growth has driven a revenue increase of 79.8%, from $306.7 million in 2018 to $551.4 million in 2023, a CAGR of 12.4%. Our portfolio growth has come from expanding our geographic presence, growing our finance receivable portfolios within existing branches, and developing new products and channels, including through digital lead generation. Between 2018 and 2023, we entered ten new states, and since 2020, we have introduced new technologies and marketing strategies to enable remote loan closings and to extend the geographic reach of our branches. Historically, our branches have rapidly increased their outstanding finance receivables during the early years of operations and generally achieved profitability within 18 months of opening.

Experienced Management Team. Our executive and senior operations management teams consist of individuals experienced in installment lending and other consumer finance services. Our Chief Executive Officer has over 30 years of experience in consumer financial services, our Chief Financial Officer has over 20 years of financial services experience, and our Chief Credit Risk Officer has 20 years of financial and consumer lending experience. As of December 31, 2023, our state operations vice presidents averaged nearly 30 years of industry experience and over 10 years of service at Regional, while our associate vice presidents and district supervisors averaged over 20 years of industry experience and nearly 10 years of service with Regional. Our executive and senior operations management team members intend to leverage their experience and expertise in consumer lending to grow our business, deliver high-quality service to our customers, and carefully manage our credit risk.

Strategies

Expand Our Geographic Presence. We expect to continue to grow the receivables, revenue, and profitability of our existing branches, to open new branches within our existing geographic footprint, and to expand our operations into new states. Establishing local contact with our customers through our branch network is a key to our frequent-contact, relationship-driven lending model. We believe that there remains substantial opportunity to grow the finance receivable portfolios of our existing branches by continuing our focus on large loan originations and by cross-selling new loan products to our existing customers. During 2022, we expanded into Mississippi, Indiana, California, Louisiana, and Idaho, and we further expanded into Arizona during 2023. We anticipate that as our newer branches mature, their revenue will grow faster than our overall same-store revenue growth rate. We believe there is sufficient demand for consumer finance services to continue new branch openings in certain of the states where we currently operate, allowing us to capitalize on our existing infrastructure and experience in these markets. We also intend to explore opportunities for growth in states outside of our existing geographic footprint that enjoy favorable operating environments, and over time, we expect to have a national presence.

Leverage Direct Mail Marketing. Direct mail campaigns are launched throughout the year but are weighted to coincide with seasonal consumer demand. In addition, we mail convenience checks in new markets as soon as new branches are open, which develops a customer base and builds finance receivables for these new branches. We plan to continue to invest in and to improve the targeting criteria, offer strategies, and testing protocols of our direct mail campaigns, which we believe will enable us to efficiently grow our receivables with improved credit performance. We expect that these efforts will allow us to increase volume at our branches by adding new customers, recapturing former customers, and creating opportunities to offer new loan products to our existing customers.

Improve Our Digital Capabilities. In order to better attract and serve customers who prefer to conduct business digitally, we make an online loan application available on our consumer website, generate customer leads through digital partners, and provide our customers with online account management capabilities. Over the past few years, we have invested heavily in our digital acquisition channel and servicing tools. For example, we rolled out an improved digital prequalification experience for our customers, including expanded integrations with existing and new digital affiliates and lead generators. We also began testing a digital origination product and channel for new customers (through which new loans can be fulfilled entirely online without intervention by our personnel), we launched an enhanced customer portal, and we deployed our mobile app. These efforts enabled us to maintain new digitally sourced volumes as a percentage of total new customer volumes at nearly 29% in 2023, compared to nearly 30% in 2022. In the future, we will continue our focus on the digital channel. We plan to expand the testing of our digital origination product and channel to new geographies and improve the customer experience. We also expect to complete enhancements to our customer portal and mobile app, allowing our customers easy access to payment functionality and additional

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 4


 

features. Our investment in our digital channel allows us to add capabilities, improve efficiencies, enhance the customer experience, and test new mechanisms for lead generation to diversify and expand our new business acquisition opportunities.

Enhance Our Products, Channels, and Services. Over time, we intend to improve our existing product offerings, to introduce new products and services, and to capture customers through new channels and partnerships. For example, in 2020, we introduced an enhanced auto-secured large loan product, through which we offer larger auto-secured loans to some of our highest credit quality customers. As of the end of 2023, this product represented $134.5 million in total portfolio. In the future, we will continue to assess new credit and non-credit products and services and expand the channels and partnerships through which we acquire customers.

Maintain Sound Underwriting and Credit Control. We have invested heavily in our credit and collections functions. We plan to continue to do so in the future by maintaining highly qualified employees dedicated to managing credit risk, refining our underwriting models, and improving our collection efforts through both our branch operations and our centralized collections department. In early 2018, we completed the implementation of our new loan origination and servicing software platform, which allows us to automate our underwriting decisions, among other benefits. In addition, we began to integrate custom credit models into our automated underwriting processes during the second half of 2018. We completed the rollout of our custom credit models to all of our states in 2019 and began seeing the impact in our results in late 2019. In 2022, we introduced our next generation custom credit model, a new proprietary model that we expect will provide significant advancements in underwriting capabilities by utilizing sophisticated modeling algorithms that leverage new alternative data sources to drive more predictable outcomes and make better credit decisions at the margin. Through these efforts and others, we plan to continue to carefully manage our credit exposure as we grow our business, offer new products, access new channels, and enter new markets.

Carefully Manage Our G&A Expenses. We have made significant investments in our business over the past several years, including by increasing our marketing spend to drive new business, expanding our branch network, hiring operations employees to service our growing finance receivable portfolio, and improving our credit, information technology, and data and analytics capabilities. However, during that time, we also remained keenly focused on driving operating leverage through the prudent management of our expenses. Between 2018 and 2023, our operating expense ratio (annualized general and administrative expenses as a percentage of average net finance receivables) decreased from 16.1% to 14.2%. As we grow our business, we will remain vigilant in our management of general and administrative expenses, with the goal of decreasing such expenses as a percentage of average net finance receivables over time.

Loan Products

We offer small and large installment loans to our customers. Our underwriting standards focus on our customers’ ability to affordably make loan payments out of their discretionary income, with the value of pledged collateral serving as a credit enhancement rather than the primary underwriting criterion. The interest rates, fees and other charges, maximum principal amounts, and maturities for our loans vary from state to state, depending on the competitive environment and relevant laws and regulations.

Small and large loans are originated by our branch network, by our centralized sales and service team, digitally through our consumer website, or through our convenience check direct mail campaigns. Our convenience check direct mail loan offers enable prospective customers to enter into a loan with us by cashing or depositing the check attached to the loan offer, thereby agreeing to the terms of the loan as prominently set forth on the check and accompanying disclosures. When a customer enters into a loan by cashing or depositing the convenience check, our personnel gather additional information on the borrower to assist in servicing the loan.

For loans originated by our branch network or centralized sales and service team, we consider numerous factors in evaluating a potential customer’s creditworthiness, such as unencumbered income, debt-to-income ratio, length of current employment, duration of residence, and a credit report detailing the applicant’s credit history. Our loan origination and servicing software platform guides our branch personnel through the credit application process and automates much of the underwriting, with underwriting exceptions generally subject to review and approval by a senior operations or centralized underwriting team member. For convenience check loans, each prospect that we solicit has been pre-screened through a major credit bureau against our underwriting criteria, which includes an evaluation of the recipient’s credit score, bankruptcy history, and a number of additional credit attributes relevant to the recipient’s likely ability and willingness to repay the offered convenience check loan.

Loan renewals are also an important part of our business. Our customers use renewals to extend and expand their lending relationships with us. We generally offer loan renewals to existing customers who have demonstrated an ability and willingness to repay amounts owed to us. Renewals typically refinance one or more of a customer’s loans into a single new loan, which in some

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 5


 

cases will be for a larger principal balance than the customer’s original loan, though we permit renewals of existing loans at or below the original loan amount. In evaluating a loan for renewal, in addition to our standard underwriting requirements, we are able to take into consideration the customer’s prior payment performance with us, which we believe is a very strong indicator of the customer’s future credit performance.

Small Loans. In 2023, the average originated principal balance and term for our small loans were $2,091 and 23 months, respectively. The average yield we earned on our portfolio of small loans was 35.6% in 2023. The following table sets forth the distribution of our small loan finance receivable portfolio by state as of the dates indicated.

 

 

 

At December 31,

 

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

Texas

 

 

39

%

 

 

37

%

 

 

35

%

 

 

33

%

 

 

30

%

North Carolina

 

 

15

%

 

 

17

%

 

 

16

%

 

 

16

%

 

 

13

%

Alabama

 

 

11

%

 

 

11

%

 

 

10

%

 

 

10

%

 

 

10

%

All Other States

 

 

35

%

 

 

35

%

 

 

39

%

 

 

41

%

 

 

47

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

The following table sets forth the total number of small loans, total small loan finance receivables, and average size per loan by state as of December 31, 2023.

 

 

 

Number
of Loans

 

 

Net Finance
Receivables

 

 

Average Size
Per Loan

 

 

 

(In thousands)

 

Texas

 

 

83,040

 

 

$

144,271

 

 

$

1,737

 

North Carolina

 

 

38,173

 

 

 

65,507

 

 

 

1,716

 

Alabama

 

 

27,480

 

 

 

49,305

 

 

 

1,794

 

All Other States

 

 

140,616

 

 

 

234,390

 

 

 

1,667

 

Total

 

 

289,309

 

 

$

493,473

 

 

$

1,706

 

 

Large Loans. In 2023, our average originated principal balance and term for large loans were $5,805 and 46 months, respectively. The average yield we earned on our portfolio of large loans was 26.1% for 2023. The following table sets forth the distribution of our large loan finance receivable portfolio by state as of the dates indicated.

 

 

 

At December 31,

 

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

Texas

 

 

27

%

 

 

29

%

 

 

31

%

 

 

33

%

 

 

32

%

North Carolina

 

 

15

%

 

 

14

%

 

 

15

%

 

 

15

%

 

 

16

%

South Carolina

 

 

19

%

 

 

18

%

 

 

15

%

 

 

12

%

 

 

11

%

All Other States

 

 

39

%

 

 

39

%

 

 

39

%

 

 

40

%

 

 

41

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

The following table sets forth the total number of large loans, total large loan finance receivables, and average size per loan by state as of December 31, 2023.

 

 

 

Number
of Loans

 

 

Net Finance
Receivables

 

 

Average Size
Per Loan

 

 

 

(In thousands)

 

Texas

 

 

71,560

 

 

$

409,998

 

 

$

5,729

 

North Carolina

 

 

43,304

 

 

 

209,490

 

 

 

4,838

 

South Carolina

 

 

25,938

 

 

 

136,713

 

 

 

5,271

 

All Other States

 

 

105,797

 

 

 

517,936

 

 

 

4,896

 

Total

 

 

246,599

 

 

$

1,274,137

 

 

$

5,167

 

Insurance and Ancillary Products

We also offer our customers various optional payment and collateral protection insurance products as a complement to our lending operations. Our primary insurance products include optional credit life insurance, accident and health insurance, involuntary unemployment insurance, and personal property insurance. These insurance products are optional and not a condition of the loan, and we do not sell insurance to non-borrowers. Our insurance products, including the types of products offered and their terms and

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 6


 

conditions, vary from state to state in compliance with applicable laws and regulations. Insurance policy premiums, claims, and expenses are included in our results of operations as insurance income, net in the consolidated statements of comprehensive income. In 2023, insurance income, net was $44.5 million, or 8.1% of our total revenue.

Credit life insurance provides for the payment in full of the borrower’s credit obligation to the lender in the event of the borrower’s death and, in some states, may provide a payment to a secondary beneficiary listed by the borrower. Credit accident and health insurance provides for the repayment of certain loan installments to the lender that come due during an insured’s period of income interruption resulting from disability from illness or injury. Credit involuntary unemployment insurance provides for repayment of certain loan installments in the event that the borrower is no longer employed as the result of a qualifying event, such as a layoff or reduction in workforce. Credit personal property insurance provides for payment following accidental loss of, or damage to, personal property collateral resulting from certain casualty events. We require that customers maintain property insurance on any personal property securing loans and offer customers the option of providing proof of such insurance purchased from a third party (such as homeowners or renters insurance) in lieu of purchasing property insurance from us. We also require proof of insurance on any vehicles securing loans, and in select markets, we offer vehicle single interest insurance on vehicles used as collateral on small and large loans.

All customers purchasing these types of insurance from us are required to sign multiple statements affirming that they understand that their purchase of insurance is optional and not a condition of the loan. In addition, a customer may cancel purchased insurance at any time during the life of the loan, including in connection with an early payoff or loan refinancing. Customers who cancel within thirty (30) days of the date of purchase receive a full refund of the insurance premium, and customers who cancel thereafter receive a refund of the unearned portion of the insurance premium.

Apart from the various optional payment and collateral protection insurance products that we offer to our customers, on certain loans, we also collect a fee from our customers and, in turn, purchase non-file insurance from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our security interest in personal property collateral. Non-file insurance protects us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such circumstances, non-file insurance generally will pay to us an amount equal to the lesser of the loan balance or the collateral value, with such claims payment lowering our net credit losses.

We market and sell insurance policies as an agent of an unaffiliated insurance company, within the limitations established by our agency contracts with the unaffiliated insurance company. We then remit to the unaffiliated insurance company the premiums we collect, net of refunds on prepaid loans and net of commission on new business. The unaffiliated insurance company then cedes to our wholly-owned insurance subsidiary, RMC Reinsurance, Ltd., the net insurance premium revenue and the associated insurance claims liability for all insurance products, including the non-file insurance that we purchase. Life insurance premiums are ceded as written, and non-life insurance premiums are ceded as earned. In accepting the premium revenue and associated claims liability, RMC Reinsurance, Ltd. acts as reinsurer for all insurance products that we sell to our customers and for the non-file insurance that we purchase. RMC Reinsurance, Ltd. pays the unaffiliated insurance company a ceding fee for the continued administration of all insurance products.

In addition, in select states, we offer home and auto club products that are administered and serviced through a third-party provider. The product generally provides certain automobile, home, travel, and other services and benefits to customers, including emergency towing and roadside assistance, emergency locksmith service, automobile repair reimbursement, stolen car expense benefit, automobile insurance deductible reimbursement, limited legal services, and various travel and other discounts. These products are not insurance, and therefore, they are not included in our results of operations as insurance income, net, but rather, they are included as part of revenue under other income. However, as with the optional insurance products that we offer, any customer purchasing these products acknowledges that the purchase is optional and not a condition of the loan and that the plan may be cancelled within 30 days for a full refund.

Branch Network

Our branches are generally located in visible, high-traffic locations, such as shopping centers or, to a lesser extent, commercial office buildings. We believe that our branches have an open, welcoming, and hospitable layout. In evaluating whether to locate a branch in a particular community, we examine several factors, including the demonstrated demand for consumer finance, the regulatory and political climate, and the availability of suitable employees to staff, manage, and supervise the new branch.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 7


 

The following table sets forth the net finance receivables per branch based on maturity:

 

Age of Branch
(As of December 31, 2023)

 

Net Finance Receivables
Per Branch as of December 31, 2023

 

 

Percentage
Increase
From Prior
Age Category

 

 

Number of
Branches

 

 

 

(In thousands)

 

 

 

 

 

 

 

Branches open less than one year

 

$

3,621

 

 

 

 

 

 

6

 

Branches open one to three years

 

$

5,782

 

 

 

59.7

%

 

 

35

 

Branches open three to five years

 

$

3,377

 

 

 

(41.6

)%

 

 

23

 

Branches open five years or more

 

$

5,212

 

 

 

54.3

%

 

 

282

 

All branches

 

$

5,120

 

 

 

 

 

 

346

 

 

The following table sets forth the average operating income contribution per branch for the year ended December 31, 2023, based on maturity of the branch.

 

Age of Branch
(As of December 31, 2023)

 

Average Branch
Operating Income
Contribution

 

 

Percentage Increase
From Prior Age Category

 

 

Number of
Branches

 

 

 

(In thousands)

 

 

 

 

 

 

 

Branches open less than one year

 

$

(220

)

 

 

 

 

 

6

 

Branches open one to three years

 

$

195

 

 

 

188.6

%

 

 

35

 

Branches open three to five years

 

$

194

 

 

 

(0.5

)%

 

 

23

 

Branches open five years or more

 

$

497

 

 

 

156.2

%

 

 

282

 

All branches

 

$

434

 

 

 

 

 

 

346

 

 

Historically, net finance receivables per branch and average branch operating income contribution have increased as our branches mature. Beginning in 2021 with our expansion to Illinois, we began to implement a lighter branch footprint strategy, pursuant to which we are leveraging our new technology and digital capabilities to service a wider geographic area in new branch locations. As a result, our new branches opened between 2021 and 2023 have on average grown their net finance receivables and operating income contribution at a faster pace than branches opened prior to 2021. As a result of this strategy, the net finance receivables per branch and the average branch operating income contribution of branches open one to three years exceed that of branches open three to five years in the tables above.

We calculate the average branch contribution as total revenues generated by the branch less the expenses directly attributable to the branch, including the provision for losses and operating expenses, such as personnel, lease, and interest expenses. General corporate overhead, including management salaries, is not attributed to any individual branch. Accordingly, the sum of branch contributions from all of our branches is greater than our income before taxes.

Human Capital

As of December 31, 2023, we had 2,081 employees. All of our employees are located within the United States, and none are covered by a collective bargaining agreement. We work diligently to attract the best talent in order to meet the current and future demands of our business, and we have demonstrated a history of investing in our workforce by offering competitive compensation, comprehensive benefits, and development opportunities. In addition, to ensure that we provide a rewarding experience for our employees, we engage independent third parties to conduct periodic employee engagement surveys, enabling us to regularly measure organizational culture and engagement and to improve upon the employee experience, which in turn drives a superior customer experience.

We are also committed to fostering, cultivating, and preserving a culture of diversity, equity, and inclusion (“DE&I”). We believe that the collective sum of the individual differences, life experiences, knowledge, inventiveness, self-expression, unique capabilities, and talent that our employees invest in their work represent a significant part of our culture, reputation, and achievement. We believe that an emphasis on DE&I drives value for our employees, customers, and stockholders, and that our DE&I commitment enables us to better serve our communities.

We also offer our employees a variety of training and development opportunities. New employees complete a comprehensive training curriculum that focuses on the company- and position-specific competencies needed to be successful. The training includes a blended approach utilizing eLearning modules, hands-on exercises, webinars, and assessments. Training content is focused on our operating policies and procedures, as well as several key compliance areas. Incentive compensation for new employees is contingent

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 8


 

upon the successful and timely completion of the required new hire training curriculum. All current employees are also required to complete annual compliance training and re-certification. Additional management and developmental training is provided for those employees seeking to advance within our company.

For additional information on the ways that we seek to empower our employees, please visit our corporate responsibility website at www.regionalfinance.com/corporate-responsibility. The information contained on our corporate responsibility website is not and should not be viewed as being incorporated by reference into this Annual Report on Form 10-K.

Payment and Loan Servicing

We have implemented company-wide payment and loan servicing policies and procedures, which are designed to maintain consistent portfolio performance and ensure regulatory compliance. Our district supervisors, associate vice presidents, state vice presidents, and compliance and internal audit teams regularly review servicing and collection records to ensure compliance with our policies and procedures. Our centralized management information system enables regular monitoring of branch portfolio metrics by management, and the compensation opportunities of our operations employees and senior management have a significant performance component that is closely tied to credit quality, among other defined performance targets.

The responsibility for the servicing and collection of each loan generally rests with the originating branch. Borrowers who have signed up for online account access have on-demand access to their account information through Regional’s website and mobile app. In addition, borrowers may elect to receive automated, one-way text messages with information regarding their account, including payment reminders. Borrowers have the option of making payments (i) in person at a branch where they may pay by cash, check, money order, debit card, or immediate, one-time future, or recurring ACH, (ii) through our customer portal via debit card or immediate, one-time future, or recurring ACH, or (iii) by immediate or one-time future debit card or ACH over the phone. In the fourth quarter of 2023, approximately 83% (by dollar amount) of customer payments were made by debit card or ACH.

If a loan becomes severely delinquent, a branch may receive co-collection assistance from our centralized servicing team or third-party collector. Our philosophy is to work with customers experiencing payment difficulties. If a customer is unable to make the required payments to bring his or her loan current, acceptable solutions to remedy a past due loan may include deferral of a payment, loan renewal, or settlement. All solutions are intended to enable the customer to meet his or her current and future obligations in a manner that we believe will mitigate our risk, while also complying with state and federal laws and regulations, as well as our policies and procedures.

In the past, customers have generally been limited to two deferrals of their monthly payment in a rolling twelve-month period unless it was determined that an exception was warranted (e.g. due to a natural disaster, pandemic, or other macroeconomic stressors). For example, since 2020 (due to the COVID-19 pandemic and subsequent difficult macroeconomic environment), we have been permitting up to three deferrals in a rolling twelve-month period. We generally limit the refinancing of delinquent loans to those customers who have made recent payments and for whom we have verified current employment, and we do not charge any origination fees on the refinancing of a severely delinquent loan. We believe that refinancing delinquent loans for certain deserving customers who have made periodic payments allows us to help customers resolve temporary financial setbacks and repair or sustain their credit. During 2023, we refinanced approximately $16.2 million of loans that were 60 or more days contractually past due, representing approximately 1.1% of our total loan originations in 2023. As of December 31, 2023, the outstanding balance of such refinanced loans was $14.6 million, or 0.8% of finance receivables as of such date. We may also agree to settle a past-due loan by accepting less than the full principal balance owed. A settlement is only used in certain limited cases and is only offered once we have determined that we are unlikely to collect the entire outstanding balance of the loan.

For seriously delinquent accounts, we may seek legal judgments or pursue repossession of collateral. We typically initiate repossession efforts only when we have exhausted other means of collection and, in the opinion of management, the customer is unlikely to make further payments. We sell substantially all repossessed collateral through sales conducted by independent auction organizations, after the required post-repossession waiting period. Generally, we charge off loans during the month that the loan becomes 180 days contractually delinquent. Accounts without a lien on a vehicle in a confirmed Chapter 7 or Chapter 13 bankruptcy are charged off at 60 days contractually delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the exception of borrowers with credit life insurance. We sell most of our charged-off accounts to third-party debt buyers.

Information Technology

We utilize a loan origination and servicing platform offered by Nortridge Software, LLC (“Nortridge”) both to originate loans and to service our loan portfolio. We have invested in customizing the Nortridge platform to meet our needs based upon our specific

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 9


 

products, processes, and reporting requirements. The Nortridge custom decision engine utilizes application information and a credit report detailing the applicant’s credit history to generate an initial credit decision and to guide our branch employees through the loan origination process to the final credit decision. Throughout the life of the loan, our employees utilize Nortridge to, among other things, enter payments, generate collection queues, and log collection activity. Nortridge also facilitates electronic and recurring payments, automated text messaging, and customer account access through a customer portal. Nortridge logs and maintains, within our centralized information systems, a permanent record of the loan origination and servicing approvals and processes, and permits all levels of branch and centralized management to review the individual and collective performance of all branches for which they are responsible on a daily basis. We intend to continue to enhance the Nortridge platform to further leverage its capabilities and to meet our evolving needs.

Competition

The consumer finance industry is highly fragmented, with numerous competitors. We compete with several national companies operating greater than 300 branch locations each, a handful of smaller, regionally-focused companies with between 100 and 300 branches in certain of the states in which we operate, and many independent operators with fewer than 100 branches. We believe that competition between installment consumer loan companies occurs primarily on the basis of price, breadth of loan product offerings, flexibility of loan terms offered, and the quality of customer service provided. While underbanked customers may also use alternative financial services providers, such as title lenders, payday lenders, and pawn shops, these providers’ products offer different terms and typically carry substantially higher interest rates and fees than our installment loans. Accordingly, we believe that alternative financial services providers are not an attractive option for customers who meet our underwriting standards, which are generally stricter than the underwriting standards of alternative financial services providers. Our loan products also compete with pure online lenders, peer-to-peer lenders, and issuers of non-prime credit cards.

Seasonality

Our loan volume and contractual delinquency follow seasonal trends. Demand for our loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation and larger provisions for credit losses in periods of portfolio growth. Consequently, we experience seasonal fluctuations in our operating results. However, changes in macroeconomic factors, including inflation, rising interest rates, and geopolitical conflict, have impacted our typical seasonal trends for loan volume and delinquency.

Government Regulation

Consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, regulations, and ordinances. Many of these laws impose detailed constraints on how we originate loans, offer optional products, collect on debt, and otherwise operate our business. The software that we use to originate loans is designed in part to aid in compliance with all applicable lending laws and regulations.

State Lending Regulation. We are regulated by state agencies that regularly audit our branches and operations. In general, most state statutes establish maximum loan amounts and interest rates, as well as the types and maximum amounts of fees and insurance premiums that we may charge. These specific allowable charges vary by state. In addition, state laws regulate the keeping of books and records and other aspects of the operation of consumer finance companies, and state and federal laws regulate account collection practices. State agency approval is required to open new branches, and each of our branches is separately licensed under the laws of the state in which the branch is located. Licenses granted by the regulatory agencies in these states are subject to annual renewal and revocation for failing to comply with applicable state and federal laws and regulations. In the states in which we currently operate, licenses may be revoked only after an administrative hearing. We believe we are in compliance with state laws and regulations applicable to our lending operations in each state.

State Insurance Regulation. Premiums and charges for optional collateral and credit protection insurance products are set at or below authorized statutory rates and are stated separately in our disclosures to customers, as required by the Truth in Lending Act and by various applicable state laws. We are also subject to state laws and regulations governing insurance agents in the states in which we sell insurance. State insurance regulations require that insurance agents be licensed and limit the premium amount charged for such insurance. Our captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies, where the subsidiary is organized and domiciled.

 

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Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). At the federal level, Congress enacted comprehensive financial regulatory reform legislation in 2010. A significant focus of the law, known as the Dodd-Frank Act, is heightened consumer protection. The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”), which has regulatory, supervisory, and enforcement powers over providers of consumer financial products and services, including explicit supervisory authority to examine and require registration of non-depository lenders and to promulgate rules that can affect the practices and activities of lenders.

The Dodd-Frank Act and the regulations promulgated thereunder may affect our operations through increased oversight of financial services products by the CFPB and the imposition of restrictions on the terms of certain loans. The CFPB has significant authority to implement and enforce federal consumer finance laws, including the protections established in the Dodd-Frank Act, as well as the authority to identify and prohibit unfair, deceptive, and abusive acts and practices. To that end, the Dodd-Frank Act gives the CFPB the authority to establish supervisory authority over a nonbank covered person that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers.

On March 7, 2023, the CFPB provided the Company with notice (the “Notice”) that it sought to establish supervisory authority over the Company pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010. Under that provision, the CFPB may establish supervisory authority over any non-bank covered person that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. The Company responded to the Notice by voluntarily consenting to the CFPB’s supervisory authority and entering into a Consent Agreement dated January 4, 2024 (the “Consent Agreement”). Pursuant to the Consent Agreement and related CFPB order, the CFPB will have supervisory authority over the Company for a period of two years ending January 8, 2026. The Consent Agreement does not constitute an admission by the Company that it is a nonbank covered person that is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.

In addition to the grant of certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations thereunder, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations of state law.

Other Federal Laws and Regulations. In addition to the Dodd-Frank Act and state and local laws, regulations, and ordinances, numerous other federal laws and regulations affect our lending operations. These laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Gramm-Leach-Bliley Act, and in each case the regulations thereunder, and the Federal Trade Commission’s Credit Practices Rule. These laws require us to provide complete disclosure of the principal terms of each loan to the borrower prior to the consummation of the loan transaction, prohibit misleading advertising, protect against discriminatory lending practices, govern the manner in which we report customer information to consumer reporting agencies, govern the terms of loans to servicemembers, and proscribe unfair credit practices.

Truth in Lending Act. Under the Truth in Lending Act and Regulation Z promulgated thereunder, we must disclose certain material terms related to a credit transaction, including, but not limited to, the annual percentage rate, finance charge, amount financed, total of payments, the number and amount of payments, and payment due dates to repay the indebtedness.
Equal Credit Opportunity Act. Under the Equal Credit Opportunity Act and Regulation B promulgated thereunder, we cannot discriminate against any credit applicant on the basis of any protected category, such as race, color, religion, national origin, sex, marital status, or age. We are also required to make certain disclosures regarding consumer rights and advise customers whose credit applications are not approved of the reasons for the denial.
Fair Credit Reporting Act. Under the Fair Credit Reporting Act, we must provide certain information to customers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency, promptly update any credit information reported to a credit reporting agency about a customer, and have a process by which customers may inquire about credit information furnished by us to a consumer reporting agency.
Servicemembers Civil Relief Act. The Servicemembers Civil Relief Act is designed to ease legal and financial burdens on military personnel and their families during active-duty status. We may be required to reduce interest rates on “pre-service” debts incurred by servicemembers, and we may be prohibited from pursuing certain forms of legal action against servicemembers, such as default judgments, during periods of active duty.

 

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Military Lending Act. The Military Lending Act applies to active duty servicemembers and their covered dependents. We are prohibited from charging a borrower covered under the Military Lending Act more than a 36% Military Annual Percentage Rate, which includes certain costs associated with the loan in calculating the rate.
Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, we must protect the confidentiality of our customers’ non-public personal information and disclose information on our privacy policy and practices, including with regard to the sharing of customers’ non-public personal information with third parties. This disclosure must be provided at the time the customer relationship is established and, in some cases, at least annually thereafter.
Credit Practices Rule. The Federal Trade Commission’s Credit Practices Rule limits the types of property we may accept as collateral to secure a consumer loan.

Violations of these statutes, laws, and regulations may result in actions for damages, claims for refund of payments made, certain fines and penalties, injunctions against certain practices, and the potential forfeiture of rights to repayment of loans. In addition, because we utilize third-party debt collectors, we are responsible for oversight of their procedures and controls, as they pertain to our collection activities. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part I, Item 1A, “Risk Factors.”

Additional Information

The Company’s principal internet address is www.regionalmanagement.com. The Company provides its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and all amendments to those reports, free of charge on www.regionalmanagement.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The Company’s consumer website is www.regionalfinance.com. The information contained on, or that can be accessed through, the Company’s websites is not incorporated by reference into this Annual Report on Form 10-K. The Company has included its website addresses as factual references and does not intend the website addresses to be active links to such websites.

ITEM 1A. RISK FACTORS.

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. The following discussion highlights some of the risks that may affect our future operating results. These are the risks and uncertainties that we believe are the most important for you to consider, but the risks described below are not the only risks facing our company. Additional risks and uncertainties not presently known to us, that we currently deem immaterial, or that are similar to those faced by other companies in our industry or in business in general, may also impair our business operations. If any of the following risks or uncertainties occurs, continues, or worsens, our business, financial condition, and operating results would likely suffer. You should carefully consider the risks described below together with the other information set forth in this Annual Report on Form 10-K.

Risk Factor Summary

Our business is subject to a number of material risks that may adversely affect our company. These risks are discussed in greater detail below, and include, but are not limited to, risks related to:

Risks related to our business and operations

Managing our growth effectively, implementing our growth strategy, and opening new branches as planned;
Our convenience check strategy;
Our policies and procedures for underwriting, processing, and servicing loans;
Our ability to collect on our loan portfolio;
Our 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 our custom scorecards;
Changes in the competitive environment in which we operate or a decrease in the demand for our products;
Geographic concentration of our loan portfolio;

 

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Failure of third-party service providers, including those providing information technology products;
Changes in economic conditions in the markets we serve, including levels of unemployment and bankruptcies;
Our ability to achieve successful acquisitions and strategic alliances;
Our ability to make technological improvements as quickly as our competitors;
Security breaches, cyber-attacks, failures in our information systems, or fraudulent activity;
Our ability to originate loans;
Our 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;
Our ability to identify and hire qualified personnel;
Our ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support our operations and initiatives;
Changes in interest rates;
Existing sources of liquidity become insufficient or access to these sources becomes unexpectedly restricted; and
Exposure to financial risk due to asset-backed securitization transactions.

Risks related to regulation and legal proceedings

Our products and activities are strictly and comprehensively regulated;
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; and
The impact of changes in tax laws and guidance, including the timing and amount of revenues that we may recognize.

Risks related to the ownership of our common stock

Volatility in the market price of shares of our common stock;
The timing and amount of future cash dividend payments; and
Anti-takeover provisions in our charter documents and applicable state law.

Risks Related to Our Business and Operations

We have grown significantly in recent years, and our delinquency, credit loss rates, and overall results of operations may be adversely affected if we do not manage our growth effectively.

We have experienced substantial growth in recent years, increasing the size of our finance receivable portfolio from $951.2 million at the beginning of 2019 to $1.8 billion at the end of 2023, a compound annual growth rate of 13.2%. We intend to continue our growth strategy in the future. As we increase the number of branches we operate, we will be required to find new, or relocate existing, employees to operate our branches and allocate resources to train and supervise those employees. The success of a branch depends significantly on the manager overseeing its operations and on our ability to enforce our underwriting standards and implement controls over branch operations. Recruiting suitable managers for new branches can be challenging, particularly in remote areas and in areas where we face significant competition. Furthermore, the annual turnover rate among our branch managers was approximately 23% in 2022 and 15% in 2023, and turnover rates of managers in our new branches may be similar or higher. Increasing the number of branches that we operate may divide the attention of our senior management or strain our ability to adapt our infrastructure and systems to accommodate our growth. If we are unable to promote, relocate, or recruit suitable managers, oversee their activities effectively, maintain our underwriting and loan servicing standards, and otherwise appropriately and effectively staff our branches, our delinquency and credit loss rates may increase and our overall results of operations may be adversely impacted.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 13


 

We face significant risks in implementing our growth strategy, some of which are outside of our control.

We intend to continue our growth strategy, which is based on opening and acquiring branches in existing and new markets, introducing new products and channels, and increasing the finance receivable portfolios of our existing branches. Our ability to execute this growth strategy is subject to significant risks, some of which are beyond our control, including:

the inherent uncertainty regarding general economic conditions, including the impact of recent elevated inflation and interest rates;
the prevailing laws and regulatory environment of each state in which we operate or seek to operate and federal laws and regulations, all of which are subject to change at any time;
the degree of competition in new markets and its effect on our ability to attract new customers;
our ability to identify attractive locations for new branches;
our ability to recruit qualified personnel, particularly in remote areas and in areas where we face a great deal of competition; and
our ability to obtain adequate financing for our expansion plans.

For example, certain states into which we may expand limit the number of lending licenses granted. For instance, Georgia and New Mexico require a “convenience and advantage” assessment of a new lending license and location prior to the granting of the license. This assessment adds time and expense to opening new locations and creates risk that our state regulator will deny an application for a new lending license due to a perceived oversaturation of existing licensed lenders in the area in which we seek to expand and operate. There can be no assurance that if we apply for a license for a new branch, whether in one of the states where we currently operate or in a state into which we would like to expand, we will be granted a license to operate. We also cannot be certain that any such license, even if granted, would be obtained in a timely manner or without burdensome conditions or limitations. In addition, we may not be able to obtain and maintain the regulatory approvals, government permits, or licenses that may be required to operate.

We are exposed to credit risk in our lending activities.

Our ability to collect on loans depends on the willingness and repayment ability of our borrowers. Any material adverse change in the effectiveness of our underwriting models, our implementation of such models (including through our loan origination software and processes), or the ability or willingness of a significant portion of our borrowers to meet their obligations to us, whether due to changes in general economic, political, or social conditions, the cost of consumer goods, interest rates, natural disasters, military conflict or acts of war or terrorism, a prolonged public health crisis, epidemic, or pandemic, or other causes over which we have no control, or to changes or events affecting our borrowers such as unemployment, major medical expenses, bankruptcy, divorce, or death, would have a material adverse impact on our earnings and financial condition. Further, a substantial majority of our borrowers are non-prime borrowers who are more likely to be affected, and more severely affected, by adverse macroeconomic conditions. We cannot be certain that our credit administration personnel, policies, and procedures will adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio.

Our convenience check strategy exposes us to certain risks.

A significant portion of the growth in our installment loans portfolio has been achieved through direct mail campaigns. One aspect of our direct mail campaigns involves mailing “convenience checks” to pre-screened recipients, which recipients can sign and cash or deposit, thereby agreeing to the terms of the proposed loan, which are disclosed on the front and back of the check and in the accompanying disclosures. We use convenience checks to seed new branch openings and to attract new customers to existing branches in our geographic footprint. In 2022 and 2023, loans initiated through convenience checks represented 27.2% and 27.3%, respectively, of the value of our originated installment loans. We expect that convenience checks will continue to represent a meaningful portion of our installment loan originations in the future. There are several risks associated with the use or origination of convenience checks, including the following:

it is more difficult to maintain sound underwriting standards with convenience check customers who historically have presented a higher risk of default than customers that originate loans in our branches, as we do not meet convenience check customers prior to soliciting them and extending a loan to them, and we may not be able to verify certain elements of their financial condition, including their current employment status, income, or life circumstances;
we rely on credit information from a third-party credit bureau that is more limited than a full credit report to pre-screen potential convenience check recipients, which may not be as effective as a full credit report or may be inaccurate or outdated;

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 14


 

we face limitations on the number of potential borrowers who meet our lending criteria within proximity to our branches;
we may not be able to continue to access the demographic and credit file information that we use to generate our mailing lists due to expanded regulatory or privacy restrictions;
convenience checks pose a risk of fraud;
any failure by the bank that issues and processes our convenience checks to properly process the convenience checks could limit the ability of a recipient to cash the check and enter into a loan with us;
customers may opt out of direct mail solicitations and solicitations based on their credit file or may otherwise prohibit us from soliciting them;
postal rates and production costs may continue to rise;
potential changes in federal or state laws may prohibit the practice of directly mailing convenience checks to potential borrowers; and
the bank that issues our convenience checks may exit the business, and we may be unable to find a replacement issuer bank.

In the future, we could experience one or more of these issues associated with our direct mail strategy. Any increase in the use of convenience checks will further increase our exposure to, and the magnitude of, these risks.

The loans that we generate are generally obligations of non-prime borrowers and will likely have higher default rates than loans constituting primarily obligations of prime borrowers.

The loans we generate are generally obligations of “non-prime” borrowers who do not qualify for, or have difficulty qualifying for, credit from traditional sources of consumer credit as result of, among other things, moderate income, limited assets, other adverse income characteristics, and/or a limited credit history or an impaired credit record, which may include a history of irregular employment, previous bankruptcy filings, repossessions of property, charged-off loans, and/or garnishment of wages.

The average interest rate charged to such “non-prime” borrowers generally is higher than that charged by commercial banks and other institutions providing traditional sources of consumer credit. These traditional sources of consumer credit typically impose more stringent credit requirements than the personal loan products that we provide. As a result of the general credit profile of our borrowers and the interest rates on the loans we make, the historical delinquency and default experience on our loans may be higher (and may be significantly higher) than those experienced by financial products arising from traditional sources of consumer credit. Additionally, delinquency and default experience on our loans is likely to be more sensitive to changes in the economic climate in the areas in which our borrowers reside.

Social and economic factors may affect repayment of the loans comprising our loan portfolio.

The ability of our borrowers to make payments on their loans, as well as the prepayment experience thereon, will be affected by a variety of social and economic factors. Economic factors include interest rates, unemployment levels, gasoline prices, the availability and cost of credit (including mortgages), upward adjustments in monthly mortgage payments and rents, real estate values, the rate of inflation, and consumer perceptions of economic conditions generally. Economic conditions may also be impacted by localized weather events and environmental disasters or adverse impacts from public health crises, epidemics, or pandemics. Social factors include changes in consumer confidence levels and attitudes toward incurring debt and changing attitudes regarding the stigma of personal bankruptcy.

Our policies and procedures for underwriting, processing, and servicing loans are subject to potential failure or circumvention, which may adversely affect our results of operations.

Except for loans originated by a centralized branch and serviced at a centralized location pursuant to a limited program we operate in select markets, a substantial portion of our underwriting activities and our credit extension decisions are made at our local branches. We rely on certain inputs and verifications in the underwriting process to be performed by individual personnel at the branch level or a centralized location. In addition, pursuant to our operations policies and procedures, exceptions to the general underwriting criteria can be approved by central underwriting employees and certain other senior employees. We train our employees individually onsite in the branch or at a centralized location and through online training modules to make loans that conform to our underwriting standards. Such training includes critical aspects of state and federal regulatory compliance, cash handling, account management, and customer relations. Although we have standardized employee manuals and online training modules, we primarily rely on our district supervisors, with oversight by our state vice presidents, branch auditors, and headquarters

 

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personnel, to train and supervise our branch employees, rather than centralized training programs. Therefore, the quality of training and supervision may vary from district to district and branch to branch depending on the amount of time apportioned to training and supervision and individual interpretations of our operations policies and procedures. There can also be no assurance that we will be able to attract, train, and retain qualified personnel to perform the tasks that are part of the underwriting process. If the training or supervision of our personnel fails to be effective, or if we are unable to attract and retain qualified employees, it is possible that our underwriting criteria would be improperly applied to a greater percentage of such applications. If such improper applications were to increase, delinquency and losses on our loan portfolio could increase and could increase significantly.

In addition, we rely on certain third-party service providers in connection with loan underwriting and origination. Any error or failure by a third-party service provider in providing loan underwriting and origination services may cause us to originate loans to borrowers that do not meet our underwriting standards. We cannot be certain that every loan is made in accordance with our underwriting standards and rules. We have experienced instances of loans extended that varied from our underwriting standards. Variances in underwriting standards and lack of supervision could expose us to greater delinquencies and credit losses than we have historically experienced. Due to the general decentralized nature in which the loan application process occurs, employee misconduct or error in the application or closing process could also result in the origination of loans that do not satisfy our underwriting standards, which could in turn have a material adverse effect on our results of operations and financial condition.

In addition, in deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely heavily on information provided by customers, counterparties, and other third parties, including credit bureaus and data aggregators, the inaccuracy or incompleteness of which may adversely affect our results of operations. We further rely on representations of customers and counterparties as to the accuracy and completeness of that information. If a significant percentage of our customers were to intentionally or negligently misrepresent any of this information, or provide incomplete information, and our internal processes were to fail to detect such misrepresentations in a timely manner, or any or all of the other components of the underwriting process described above were to fail, it could result in our approval of a loan that, based on our underwriting criteria, we would not have otherwise made. As a result, our earnings and our financial condition could be negatively impacted.

We may be limited in our ability to collect on our loan portfolio, and the security interests securing a significant portion of our loan portfolio are not perfected, which may increase our credit losses.

Legal and practical limitations may limit our ability to collect on our loan portfolio, resulting in increased credit losses, decreased revenues, and decreased earnings. State and federal laws and regulations restrict our collection efforts. The amounts that we are able to recover from the repossession and sale of collateral typically do not fully cover the outstanding loan balance and costs of recovery. In cases where we repossess a vehicle securing a loan, we generally sell our repossessed automobile inventory through sales conducted by independent automobile auction organizations after the required post-repossession waiting period. In certain instances, we may sell repossessed collateral other than vehicles through our branches after the required post-repossession waiting period and appropriate receipt of valid bids. In either case, such sales are made consistent with applicable state law. The proceeds we receive from such sales depend upon various factors, including the supply of, and demand for, used vehicles and other property at the time of sale. During periods of economic slowdown or recession, there may be less demand for used vehicles and other property that we desire to resell.

Most of our loan portfolio is secured, but a significant portion of such security interests have not been and will not be perfected, which means that we cannot be certain that such security interests will be given first priority over other creditors. The lack of perfected security interests is one of several factors that may make it more difficult for us to collect on our loan portfolio. Additionally, for those of our loans that are unsecured, borrowers may choose to repay obligations under other indebtedness before repaying loans to us because such borrowers may feel that they have no collateral at risk. In addition, given the relatively small size of our loans, the costs of collecting loans may be high relative to the amount of the loan. As a result, many collection practices that are legally available, such as litigation, may be financially impracticable. Lastly, there is an inherent risk that a portion of the retail installment loans that we hold will be subject to certain claims or defenses that the borrower may assert against the originator of the contract and, by extension, us as the holder of the contract. These factors may increase our credit losses, which would have a material adverse effect on our results of operations and financial condition.

Our insurance operations are subject to a number of risks and uncertainties.

We market and sell optional credit life, accident and health, personal property, involuntary unemployment, and vehicle single interest insurance to our borrowers in selected markets as an agent for an unaffiliated third-party insurance company. In addition, on certain loans, we collect a fee from our customers and use such fee to acquire non-file insurance from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our security interest in certain personal property collateral. The

 

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unaffiliated insurance company cedes to our wholly-owned insurance subsidiary, RMC Reinsurance, Ltd., all of these insurance policies, the related net insurance premium revenue and the associated insurance claims liability for such insurance products, including the non-file insurance that we purchase.

When purchased by a borrower, the optional credit insurance products benefit the borrower by insuring the borrower’s payment obligations on the associated loan in the event of the borrower’s inability to make monthly payments due to death, disability, or involuntary unemployment, or in the event of a casualty event associated with collateral. The borrower finances payment of the associated premium with the financed premium included in the principal balance of the applicable loan. A credit insurance product may be cancelled if, for example, (i) we request cancellation due to the borrower’s default on obligations under the associated loan, (ii) the borrower prepays the principal balance of the associated loan in full, or (iii) the borrower elects to terminate the credit insurance prior to the expiration of the term thereof (which the borrower may do at any time). Generally, upon any cancellation of credit insurance, the borrower will be entitled to a refund of the unearned premium for the cancelled insurance. We typically refund insurance premiums by reducing the principal balance of the associated loan by the required refund amount, following which the unaffiliated insurance company reimburses us for the refunded amount.

Our insurance operations are subject to a number of material risks and uncertainties, including changes in laws and regulations, borrower demand for insurance products, claims experience, and insurance carrier relationships; the manner in which we are permitted to offer such products; capital and reserve requirements; the frequency and type of regulatory monitoring and reporting to which we are subject; benefits or loss ratio requirements; insurance producer licensing or appointment requirements; and reinsurance operations. In addition, because our borrowers are not required to purchase the credit insurance products that we offer, we cannot be certain that borrower demand for credit insurance products will not decrease in the future. In addition to adversely impacting our insurance income, net, any decrease in the demand for credit insurance products would negatively impact our interest and fee income because we finance substantially all of our borrowers’ insurance premiums. Our insurance operations are also dependent on our lending operations as the sole source of business and product distribution. If our lending operations discontinue offering insurance products, our insurance operations would have no method of distribution. Insurance claims and policyholder liabilities are also difficult to predict and may exceed the related reserves set aside for claims and associated expenses for claims adjudication.

We are also dependent on the continued willingness of unaffiliated third-party insurance companies to participate in the credit insurance market and to offer non-file insurance to us. If our insurance provider is for any reason unable or unwilling to meet its claims and premium reimbursement payment obligations or its premium ceding obligations, we would experience increased net credit losses, regulatory scrutiny, litigation, and other losses and expenses.

Finally, in recent years, as large loans have become a greater percentage of our portfolio, the severity of non-file insurance claims has increased and non-file insurance claims expenses have exceeded non-file insurance premiums by a material amount. The resulting net loss from the non-file insurance product is reflected in our insurance income, net.

It is uncertain whether the non-file insurance product will be available to us in the future on the same terms as it is today, or at all. If the unaffiliated insurance company were to enforce limitations on our non-file loss ratios or otherwise change the terms under which it offers non-file insurance to us, our net credit losses, loss rates, and provision for credit losses could increase.

If any of these events, risks, or uncertainties were to occur or materialize, it could have a material adverse effect on our business, financial condition, and results of operations and cash flows.

A reduction in demand for our products and a failure by us to adapt to such reduction could adversely affect our business and results of operations.

The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products, or the availability of competing products, including through alternative or competing marketing channels. For example, we are highly dependent upon selecting and maintaining attractive branch locations. These locations are subject to local market conditions, including the employment available in the area, housing costs, traffic patterns, crime, and other demographic influences, any of which may quickly change, thereby negatively impacting demand for our products in the area. Should we fail to adapt to significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and our operations could be harmed. Even if we do make changes to existing products or introduce new products and channels to fulfill customer demand, customers may resist or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and by that time it may be too late to

 

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make further modifications to such product without causing further harm to our business, financial condition, and results of operations.

We face strong direct and indirect competition.

The consumer finance industry is highly competitive, and the barriers to entry for new competitors are relatively low in the markets in which we operate. We compete for customers, locations, employees, and other important aspects of our business with many other local, regional, national, and international financial institutions, many of which have greater financial resources than we do.

Our installment loan operations compete with other installment lenders, as well as with alternative financial services providers (such as payday and title lenders, check advance companies, and pawnshops), online or peer-to-peer lenders, issuers of non-prime credit cards, and other competitors. We believe that future regulatory developments in the consumer finance industry may cause lenders that focus on alternative financial services to begin to offer installment loans. In addition, if companies in the installment loan business attempt to provide more attractive loan terms than is standard across the industry, we may lose customers to those competitors. With respect to installment loans, we compete primarily on the basis of price, breadth of loan product offerings, flexibility of loan terms offered, and the quality of customer service provided.

We may attempt to pursue acquisitions or strategic alliances that may be unsuccessful.

We may attempt to achieve our business objectives through acquisitions and strategic alliances. We compete with other companies for these opportunities, including companies with greater financial resources, and we cannot be certain that we will be able to effect acquisitions or strategic alliances on commercially reasonable terms, or at all. Furthermore, most acquisition targets that we have pursued previously have been significantly smaller than us. We do not have extensive experience with integrating larger acquisitions. In pursuing these transactions, we may experience, among other things:

overvaluing potential targets;
difficulties in integrating any acquired companies, branches, or products into our existing business, including integration of account data into our information systems;
inability to realize the benefits we anticipate in a timely fashion, or at all;
attrition of key personnel from acquired businesses;
unexpected losses due to the acquisition of loan portfolios with loans originated using less stringent underwriting criteria;
significant costs, charges, or write-downs; or
unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development and expansion of our existing operations.

Geographic concentration of our loan portfolio may increase the risk of loss.

Any concentration of our loan portfolio in a state or region may present unique risk concentrations. Our branches in Texas, North Carolina, and South Carolina accounted for 32%, 16%, and 10%, respectively, of our finance receivables as of December 31, 2023. Further, as of December 31, 2023, all of our operations were across 19 states. As a result, we are highly susceptible to adverse economic conditions in these areas. The unemployment and bankruptcy rates in some states in our footprint are among the highest in the country. High unemployment rates may reduce the number of qualified borrowers to whom we will extend loans, which would result in reduced loan originations. In addition, some geographic regions of the United States will, from time to time, experience weaker regional economic conditions and consequently will experience higher rates of loss and delinquency. A regional economy may be affected by the loss of jobs in certain industries, by state and local taxes, or by other factors. A region’s economic condition may be directly, or indirectly, adversely affected by international events such as military conflicts or wars, prolonged public health crises, epidemics, or pandemics, national events such as civil disturbances, or natural disasters such as hurricanes, wildfires, earthquakes, and other extreme conditions (including an increase in frequency of such conditions and events as a result of climate change). These events and disasters may occur in any area of the country, even places where these events are considered unlikely. In the event that a significant portion of our loan portfolio is comprised of loans owed by borrowers residing in certain jurisdictions, economic conditions, elevated bankruptcy filings, natural disasters, or other factors affecting these jurisdictions in particular could adversely impact the delinquency and default experience of our loan portfolio, and, we could experience reduced or delayed payments on outstanding loans. Conversely, an improvement in economic conditions could result in prepayments by our borrowers of their payment obligations on our loans. As a result, we may receive principal payments on the outstanding loans earlier than anticipated, which would reduce our finance receivables and the interest income earned thereon. No prediction can be made and no

 

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assurance can be given as to the effect of economic conditions on the rate of delinquencies, prepayments, or losses on our loan portfolio with respect to any part of our geographic footprint.

Further, the concentration of our loan portfolio in one or more states would have a disproportionate effect on our business if governmental authorities in any of those states take action against us. In addition, the occurrence of any of the adverse regulatory or legislative events described in this “Risk Factors” section in states with a high concentration of our loan portfolio could materially and adversely affect our business, financial condition, and results of operations. For example, if interest rates in South Carolina, which currently are not capped, were to be capped, our business, financial condition, and results of operations would be materially and adversely affected.

Failure of third-party service providers upon which we rely could adversely affect our operations.

We rely on certain third-party service providers. In particular, we currently rely on two key vendors to print and mail our convenience check and other offers for direct mail marketing campaigns, and on certain other third-party service providers in connection with loan underwriting, origination, and servicing. Our reliance on these third parties can expose us to certain risks. If any of our third-party service providers, including those third parties providing services in connection with loan underwriting, origination, and servicing, are unable to provide their services timely, accurately, and effectively, or at all, it could have a material adverse effect on our business, financial condition, and results of operations and cash flows.

A failure of information technology products and services on which we rely could disrupt our business.

In the operation of our business, we are highly dependent upon a variety of information technology products, including our loan management system, which allows us to record, document, and manage our loan portfolio. We are party to an agreement with Nortridge pursuant to which Nortridge provides us with loan management software and related services.

We have tailored the Nortridge software to meet our specific needs. To a certain extent, we depend on the willingness and ability of Nortridge to continue to provide customized solutions and to support our evolving products and business model. In the future, Nortridge may not be willing or able to provide the services necessary to meet our loan management system needs. If this occurs, we may be forced to migrate to an alternative software package, which could cause an interruption in our operations.

Further, the Nortridge platform may in the future fail to perform in a manner consistent with our current expectations and may be inadequate for our needs. As we are dependent upon our ability to gather and promptly transmit accurate information to key decision makers, our business, financial condition, and results of operations may be adversely affected if our loan management system does not allow us to transmit accurate information, even for a short period of time. Failure to properly or adequately address these issues could materially impact our ability to perform necessary business operations.

Further, the Nortridge platform and other third-party software vendor products and applications are subject to damage or interruption from:

power loss, computer systems failures, and internet, telecommunications, or data network failures;
operator negligence or improper operation by, or supervision of, employees;
physical and electronic loss of data or security breaches, misappropriation, and similar events;
computer viruses;
cyberterrorism;
intentional acts of vandalism and similar events; and
hurricanes, fires, floods, and other natural disasters.

Any failure of the Nortridge platform or any other third-party software vendor product systems due to any of these causes, if it is not supported by our disaster recovery plan, could cause an interruption in operations. Though we have implemented contingency and disaster recovery processes in the event of one or several technology failures, any unforeseen failure, interruption, or compromise of these systems or security measures could affect our origination, servicing, and collection of loans. The risk of possible failures or interruptions may not be adequately addressed, and such failures or interruptions could occur.

For example, in January 2020, we experienced an information technology infrastructure event caused by a system backup that affected our ability to originate branch loans and process certain methods of payment. As a result, our loan management system was not fully operational for a total of approximately seven business days. The outage had an adverse impact on our results of

 

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operations. Although the Company, with the assistance of third-party experts, addressed and resolved the issue, there can be no assurance that a similar event will not occur in the future.

We also rely on third-party software vendors to provide access to loan applications and/or screen applications. There can be no assurance that these third-party providers will continue to provide us information in accordance with our lending guidelines or that they will continue to provide us lending leads at all.

We rely on Amazon Web Services, Microsoft Azure, and VMWare for our computing, storage, networking, and similar services. Any disruption of or interference with our use of the Amazon Web Services, Microsoft Azure, and VMWare products and services would negatively impact our operations and adversely affect our business.

Amazon Web Services (“AWS”), Microsoft Azure, and VMWare, Inc. (“VMWare”) provide the technology infrastructure we use to run our business operations. The technology infrastructure provided includes data center hosting facilities operated by AWS and Microsoft Azure and software defined data center technologies provided by VMWare. Any disruption of or interference with our use of AWS, Microsoft Azure, or VMWare products and services would negatively impact our operations and our business would be adversely affected. If our branches or customers encounter difficulties in accessing or are unable to access our platform, we may lose customers and revenue. Due to the nature of the AWS, Microsoft Azure, and VMWare products and services provided, we are unable to easily transition from these vendors to other providers, and any such transition could require business downtime that could negatively impact our business. AWS, Microsoft Azure, and VMWare also possess broad discretion to interpret and change their terms of services and other policies that apply to us, which may be unfavorable to our business.

Our technology platforms may not meet expectations, and we may not be able to make technological improvements as quickly as some of our competitors.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products, services, and marketing channels, including the use of artificial intelligence and machine-learning solutions to interact with customers, sell products and services, and support and grow a customer base. We rely on our integrated branch network as the foundation of our omni-channel platform and the primary point of contact with our active accounts. In order to serve consumers who want to reach us over the internet, we make an online loan application available on our consumer website, and we provide our customers an online customer portal, giving them online access to their account information and an electronic payment option. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demand for convenience, as well as to create additional efficiencies in our operations. We expect that new technologies and business processes applicable to the consumer finance industry will continue to emerge, and these new technologies and business processes may be more efficient than those that we currently use. We cannot ensure that we will be able to sustain our investment in new technology, and we may not be able to effectively implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could cause disruptions in our operations, harm our ability to compete with our competitors, and adversely affect our business, prospects, financial condition, results of operations, and liquidity.

Security breaches, cyber-attacks, failures in our information systems, or fraudulent activity could result in damage to our operations or lead to reputational damage.

We rely heavily on communications and information systems to conduct our business. Each branch is part of an information network that is designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis, and report revenues and expenses to our headquarters. Our computer systems, software, and networks may be vulnerable to breaches (including via computer hackings), unauthorized access, misuse, computer viruses, malware, phishing, employee error or malfeasance, or other failures or disruptions that could result in disruption to our business or the loss or theft of confidential information, including customer, employee, and business information. Any failure, interruption, or breach in security of these systems, including any failure of our back-up systems, hardware failures, or an inability to access data maintained offsite, could result in failures or disruptions in our customer relationship management, general ledger, loan, and other systems and could result in a loss of data (including loan portfolio data), a loss of customer business, or a violation of applicable privacy and other laws, subject us to additional regulatory scrutiny, or expose us to civil litigation, possible financial liability, and other adverse consequences, any of which could have a material adverse effect on our financial condition and results of operations. Furthermore, the techniques that are used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect for long periods of time. Accordingly, we may not be able to detect immediately any such breach, which may increase the losses that we would suffer. In addition, our existing insurance policies would not reimburse us for all of the damages that we might incur as a result of a breach.

 

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A security breach or cyber-attack on our computer systems could interrupt or damage our operations or harm our reputation. We have implemented systems and processes designed to protect against unauthorized access to or use of personal information, and rely on encryption and authentication technology to effectively secure transmission of confidential information, including customer bank account, credit card, and other personal information. Despite the implementation of these security measures, there is no guarantee that they are adequate to safeguard against all security breaches and our systems may still be vulnerable to data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems. We may also face new or heightened risks related to remote work among certain of our employees and use of digital operations, both of which have become more common in recent years. The continued evolution and increased usage of artificial intelligence technologies may further increase our cybersecurity risks. If we were to experience a security breach or cyber-attack, we could be required to incur substantial costs and liabilities, including, among other things, the following:

expenses to rectify the consequences of the security breach or cyber-attack;
liability for stolen assets or information;
costs of repairing damage to our systems;
lost revenue and income resulting from any system downtime caused by such breach or attack;
increased costs of cybersecurity protection;
costs of incentives we may be required to offer to our customers or business partners to retain their business; and
damage to our reputation causing customers and investors to lose confidence in our company.

Further, any compromise of security or cyber-attack could deter consumers from entering into transactions that require them to provide confidential information to us. In addition, if confidential customer information or information belonging to our business partners is misappropriated from our computer systems, we could be sued by those who assert that we did not take adequate precautions to safeguard our systems and confidential data belonging to our customers or business partners, which could subject us to liability and result in significant legal fees and expenses in defending these claims. As a result, any compromise of security of our computer systems or cyber-attack could have a material adverse effect on our business, financial condition, and results of operations.

As part of our business, and subject to applicable privacy laws, we may share confidential customer information and proprietary information with vendors, service providers, and business partners. The information systems of these third parties may also be vulnerable to security breaches, and we may not be able to ensure that these third parties have appropriate security controls in place to protect the information that we share with them. If our proprietary or confidential customer information is intercepted, stolen, misused, or mishandled while in possession of a third party, it could result in reputational harm to us, loss of customer business, and additional regulatory scrutiny, and it could expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, and liquidity. Although we maintain insurance that is intended to cover certain losses from such events, there can be no assurance that such insurance will be adequate or available.

Pandemics, epidemics, and similar public health crises could adversely impact our business, liquidity, financial condition, and results of operations.

The COVID-19 pandemic resulted in economic disruption and uncertainty within the United States and created significant long-term adverse social, economic, and financial effects in the United States and globally. As a result of the COVID-19 pandemic, governmental authorities took unprecedented actions in an attempt to limit the spread of the pandemic, including social distancing requirements, stay-at-home orders, mandatory quarantines, closure of non-essential businesses, face mask mandates, and building capacity limitations. While our business was generally classified by government authorities as essential and permitted to remain open during previous government-mandated COVID-19 business closures, we were required to temporarily close our branches in the state of New Mexico for approximately a month in 2020 when the governor issued an executive order to close non-essential businesses that excluded consumer finance companies like us from the definition of “essential businesses.” We also experienced temporary closure of certain locations due to company-initiated quarantine measures. If another public health crisis, epidemic, or pandemic arises, or there is a resurgence of the COVID-19 pandemic, governmental authorities could impose new or similar restrictions to those imposed previously during the COVID-19 pandemic. If a new public health crisis emerges, we could also deem it prudent to reinstate company-initiated quarantines or other restrictions. Any such government- or company-mandated restrictions could have a material and direct adverse consequence on our business. Any negative impacts to our loan growth, collections, and delinquencies caused by a future public health crisis could adversely impact our revenues and other results of operations.

 

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During the COVID-19 pandemic, we relied more heavily on online operations for customer access. Should there be a new public health crisis, epidemic, or pandemic, or a COVID-19 resurgence, and we experience disruptions in our online operations, including our remote origination capabilities, or are unable to timely expand our remote working infrastructure in response to government or company initiated restrictions, we may be unable to timely and effectively service accounts and perform key business functions. Disruptions in our business could also result from the inability of key personnel and/or a significant portion of our workforce to fulfill their duties due to illness or restriction. We maintain business continuity plans, but there is no assurance that such plans will effectively mitigate the risks posed by any pandemic, epidemic, or similar public health crisis in the future.

The extent to which any new public health crises, epidemics, or pandemics and/or COVID-19 resurgence will ultimately impact our business and financial condition will depend on future events that are difficult to forecast, including, but not limited to, the duration and severity of the event (including as a result of waves of outbreak or variant strains), the success of actions taken to contain, treat, and prevent the pathogen, and the speed at which normal economic and operating conditions return and are sustained.

Centralized headquarters’ functions and branch operations are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, financial condition, and results of operations.

Our headquarters are in an office building located in Greer, South Carolina, a town located outside of Greenville, South Carolina. Our administrative and management processes are primarily provided to our branches from this centralized location. Our primary data center facilities are located in Northern Virginia, and our backup data centers are located in Ohio. RMC business operations could be disrupted if a catastrophic event, such as a tornado, power outage, or act of terror, affected Greenville, Greer, Northern Virginia, or Ohio, or the nearby areas. Severe weather events that could cause damage to our facilities or the prolonged loss of power that would disrupt our ability to provide services are occurring more frequently, and there is no guarantee that our facilities will avoid such a weather event. Any such catastrophic event(s) or other unexpected disruption of our headquarters or data center facilities could have a material adverse effect on our business, financial condition, and results of operations.

The “decentralized” nature of our origination and servicing creates additional risks.

We utilize a centralized branch structure in certain markets with the intent that such centralized branch service our customer base; however, we conduct significant operations through our branch offices, including key parts of the underwriting process. There can be no assurance that we will be able to attract and retain qualified personnel to perform these tasks. Inadequate staffing may result in scenarios where fraud or noncompliance with applicable law is not as readily detected, and also may result in heightened exposure to potential employee misconduct, each of which could adversely affect the quality of the loans that we originate or otherwise acquire.

Our branches also serve as an important component of our ongoing servicing and collecting processes. Except for loans originated by a centralized branch and serviced at a centralized location in certain markets, the primary responsibility for the servicing and collections process generally resides with the applicable local branch, although in the future, we may direct borrowers to remit payments through one or more lockboxes. A certain minimum level of staffing is necessary in order to ensure an adequate level of servicing and collections. For example, we seek to contact our customers soon after a loan becomes delinquent because historically, when collection efforts begin at an earlier stage of delinquency, there is a greater likelihood that the applicable personal loan will not be charged off (though there is no assurance that such historical trend will continue). Consequently, during periods of increased delinquencies, it becomes extremely important that our branches are properly staffed and trained to take appropriate action in an effort to bring delinquent balances current and ultimately avoid a loan from becoming charged off. If we are unable to attract and retain a sufficient number of qualified credit and collection personnel, it could result in increased delinquencies and credit losses on our loan portfolio.

Additionally, the “decentralized” nature of our branch model may make it more difficult for us to ensure compliance with our origination, acquisition, and servicing procedures and standards than if our operations were centralized in a single location. Similarly, given the “decentralized” and largely manual processing of a significant portion of payment on our loans, the possibility of delay or misdirection of payments is greater than with payments through lockboxes or electronic channels.

The ability of our customers to make in-branch payments and any future inability to make in-branch payments may result in additional risks.

As of December 31, 2023, our integrated branch network consisted of 346 branches across 19 states. With respect to our managed portfolio of loan products, during fiscal year 2023, approximately 13% (by dollar amount) of our loan payments were made by cash or check and received in branch, although in the future we may direct borrowers to remit payments through one or more

 

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lockboxes. Despite a recent trend in favor of payments via electronic channels, a significant number of borrowers may continue to make payments in branches, including in cash, ACH, or by debit. While we cannot estimate the percentage of borrowers without a checking account, should one or more of the branches become unavailable for any reason for the acceptance of payments, the ability to collect payments from these borrowers who would otherwise make payments at such branch may be adversely affected. Such events could result in increased delinquencies and losses on our loan portfolio. Additionally, there can be no assurance that the number of borrowers that make cash payments or payments in person at our branches in the future will not increase over current levels. In the event that such cash payments are no longer accepted, there can be no assurance that the performance of our loan portfolio would not be adversely affected, resulting in increased delinquencies and losses on our loan portfolio.

Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our branches and increases our costs of operations, which could have an adverse effect on our business, financial condition, and results of operations.

Our workforce is comprised primarily of employees who work on an hourly basis. In certain areas where we operate, there is significant competition for employees. In the past, we have lost employees and candidates to competitors who have been willing to pay higher compensation. Our ability to continue to expand our operations depends on our ability to attract, train, and retain a large and growing number of qualified employees. The turnover among all of our branch employees has risen in each of our most recent fiscal years, from approximately 37% in 2019 to approximately 49% in 2023. This turnover increases our cost of operations and makes it more difficult to operate our branches. Our account executives and assistant manager roles have historically experienced high turnover. We may not be able to retain and cultivate personnel at these ranks for future promotion to branch manager. If our employee turnover rates continue to increase or remain above historical levels or if unanticipated problems arise from our high employee turnover and we are unable to readily replace such employees, our business, results of operations, financial condition, and ability to continue to expand could be adversely affected.

The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.

Our future success significantly depends on the continued service and performance of our key management personnel. Competition for these employees is intense. Our operating results could be adversely affected by higher employee turnover or increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, operational, finance, and administrative personnel. We have built our business on a set of core values, and we attempt to hire employees who are committed to these values. We want to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers. In order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior management, and operational positions. As our employees gain experience and develop their knowledge and skills, they become highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and competitive compensation and benefits. If costs to retain our skilled employees increase, then our business and financial results may be negatively affected.

Furthermore, we may not be successful in retaining the current members of our executive or senior management team or our other key employees. The loss of the services of any of our executive officers, senior management, or key team members, including state vice presidents, or the inability to attract additional qualified personnel as needed, could have an adverse effect on our business, financial condition, and results of operations. We also depend on our district supervisors to supervise, train, and motivate our branch employees. These supervisors have significant experience with our company and within our industry, and would be difficult to replace. If we lose a district supervisor to a competitor, we could also be at risk of losing other employees and customers.

A nationwide labor shortage may impede our ability to identify and hire new employees.

The United States currently faces a pronounced labor shortage. Our business relies on branch and headquarters personnel to oversee the initiation, review, and servicing of our loan products. Without sufficient staffing, our core business functions could be interrupted, which could affect our results of operations. Further, if we are unable to identify and hire qualified personnel, we may be unable to grow our business effectively in current or new markets.

Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting us to significant legal liability, regulatory scrutiny, and reputational harm.

Our reputation is critical to maintaining and developing relationships with our existing and potential customers and third parties with whom we do business. There is a risk that our employees or third-party contractors could engage in misconduct that

 

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adversely affects our business. For example, if an employee or third-party contractor were to engage—or be accused of engaging—in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships, and ability to attract future customers. Employee or third-party misconduct could prompt regulators to allege or to determine, based upon such misconduct, that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. It is not always possible to deter employee or third-party misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees or third-party contractors, or even unsubstantiated allegations, could result in a material adverse effect on our reputation and our business.

Security breaches in our branches or acts of theft, fraud, or violence could adversely affect our financial condition and results of operations.

A portion of our account payments occur at our branches, either in person or by mail, and often consist of cash payments, which we deposit at local banks each day. This business practice exposes us daily to the potential for employee theft of funds or, alternatively, to theft and burglary due to the cash we maintain in our branches. Despite controls and procedures to prevent such losses, we have sustained losses due to employee theft and fraud (including collusion), including from the origination of fraudulent loans. We are also susceptible to break-ins at our branches, where money or customer records necessary for day-to-day operations (which also contain extensive confidential information about our customers, including financial and personally identifiable information) could be taken. A breach in the security of our branches or in the safety of our employees could result in employee injury, loss of funds or records, and adverse publicity, and could result in a loss of customer business or expose us to additional regulatory scrutiny and penalties, civil litigation, and possible financial liability, any of which could have a material adverse effect on our reputation, financial condition, and results of operations.

Our branch offices have physical customer records necessary for day-to-day operations that contain extensive confidential information about our customers, including financial and personally identifiable information. The loss or theft of customer information and data from branch offices or other storage locations could subject us to additional regulatory scrutiny and penalties, and could expose us to civil litigation and possible financial liability, which could have a material adverse effect on our business, financial condition, and results of operations.

Our risk management efforts may not be effective.

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as regulatory and operational risks related to our business, assets, and liabilities. Our risk management policies, procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future.

We may be unsuccessful in maintaining effective internal controls over financial reporting and disclosure controls and procedures.

Controls and procedures are particularly important for consumer finance companies. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud or material error. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurance that the objectives of the system are met. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires management of public companies to develop and implement internal controls over financial reporting and evaluate the effectiveness thereof. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Any failure to maintain current internal controls or implement required new or improved controls, or difficulties encountered in their maintenance and/or implementation, could cause us to fail to meet our reporting obligations.

If material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future or if our controls and procedures fail or are circumvented, our consolidated financial statements may contain material misstatements, we could be required to restate our financial results, we may be unable to produce accurate and timely financial statements, and we may be unable to maintain compliance with applicable stock exchange listing requirements, any of which could

 

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have a material adverse effect on our business, results of operations, financial condition, and stock price. The discovery of a material weakness and the disclosure of that fact, even if quickly remediated, could reduce the market value of shares of our common stock. Additionally, the existence of any material weakness or significant deficiency requires management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiency, and management may not be able to remediate any such material weaknesses or significant deficiency in a timely manner. Undetected material weaknesses in our internal controls could lead to financial statement restatements, which could have a material adverse effect on our business, financial condition, and results of operations.

If our estimate of allowance for credit losses is not adequate to absorb actual losses, our provision for credit losses would increase, which would adversely affect our results of operations.

We maintain an allowance for credit losses for all loans we make. To estimate the appropriate level of credit loss reserves, we consider known and relevant internal and external factors that affect loan collectability, including the total amount of loans outstanding; delinquency levels, roll rates, and trends; historical credit losses; our current collection patterns; and economic trends. Our methodology for establishing our allowance for credit losses is based on models (probability of default, loss given default), our historical loss experience, and estimates of future macroeconomic environments. If customer behavior changes because of economic, political, social, or other conditions and if we are unable to predict how the unemployment rate and general economic uncertainty may affect our credit loss allowance, our provision for credit losses may be inadequate. As of December 31, 2022, our allowance for credit losses was $178.8 million, and we had net credit losses of $181.8 million during fiscal year 2023 that related to our portfolio as of December 31, 2022. The increase in net credit losses related to the December 31, 2022 portfolio was the result of sustained macroeconomic stress on our customers related to elevated inflation and interest rates during 2023. As of December 31, 2023, our allowance for credit losses was $187.4 million. Maintaining the adequacy of our allowance for credit losses may require significant and unanticipated changes in our provisions for credit losses, which would materially affect our results of operations. Our allowance for credit losses, however, is an estimate, and if actual credit losses are materially greater than our credit loss allowance, our financial condition and results of operations could be adversely affected. Neither state regulators nor federal regulators regulate our allowance for credit losses.

If assumptions or estimates we use in preparing our financial statements are incorrect or are required to change, our reported results of operations and financial condition may be adversely affected.

We are required to use certain assumptions and estimates in preparing our financial statements under U.S. Generally Accepted Accounting Principles (“GAAP”), including in determining allowances for credit losses, the fair value of financial instruments, asset impairment, reserves related to litigation and other legal matters, the fair value of share-based compensation, and other taxes and regulatory exposures. In addition, significant assumptions and estimates are involved in determining certain disclosures required under GAAP, including those involving the fair value of our financial instruments. If the assumptions or estimates underlying our financial statements are incorrect, the actual amounts realized on transactions and balances subject to those estimates will be different, and this could have a material adverse effect on our results of operations and financial condition.

In addition, the Financial Accounting Standards Board (“FASB”) may from time-to-time review or propose changes to financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required. As a result of any changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain of the assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition generally. For additional information on the key areas for which assumptions and estimates are used in preparing our financial statements, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

We depend to a substantial extent on borrowings under our senior revolving credit facility to fund our liquidity needs.

As of December 31, 2023, our senior revolving credit facility was committed through September 2024 and allowed us to borrow up to $420.0 million. The amount outstanding thereunder was $195.5 million ($194.0 million of outstanding debt and $1.5 million of interest payable) as of December 31, 2023, and we had $226.0 million of unused capacity on the credit facility (subject to certain covenants and conditions) at that time. During fiscal 2023, the maximum amount of borrowings outstanding under the facility at any one time was $227.6 million. In February 2024, we extended the facility to September 2025 with $355.0 million committed. The senior revolving credit facility is collateralized by certain of our assets, including substantially all of our finance receivables (other than those held by certain special purpose entities (each, an “SPE”), as described below) and equity interests of the majority of our subsidiaries. We use our senior revolving credit facility as a source of liquidity, including for working capital and

 

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to fund the loans we make to our customers. If our existing sources of liquidity become insufficient to satisfy our financial needs or our access to these sources becomes unexpectedly restricted, we may need to try to raise additional capital in the future. If such an event were to occur, we can give no assurance that such alternate sources of liquidity would be available to us on favorable terms or at all. In addition, we cannot be certain that we will be able to replace the senior revolving credit facility when it matures on favorable terms or at all. If any of these events occur, our business, financial condition, and results of operations could be adversely affected.

The credit agreements governing our debt contain restrictions and limitations that could affect our ability to operate our business.

The credit agreements governing our senior revolving credit facility and revolving warehouse credit facilities contain a number of covenants that could adversely affect our business and our flexibility to respond to changing business and economic conditions or opportunities. Among other things, these covenants limit our ability to:

incur or guarantee additional indebtedness;
purchase loan portfolios in bulk;
pay dividends or make distributions on our capital stock or make certain other restricted payments;
sell assets, including our loan portfolio or the capital stock of our subsidiaries;
enter into transactions with our affiliates;
create or incur liens; and
consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets.

The credit agreements also impose certain obligations on us relating to our underwriting standards, recordkeeping and servicing of our loans, and our loss reserves and charge-off policies, and they require us to maintain certain financial ratios, including an interest coverage ratio. If we were to breach any covenants or obligations under our credit agreements and such breaches were to result in an event of default, our lenders could cause all amounts outstanding to become due and payable, subject to applicable grace periods. An event of default in any one credit agreement could also trigger cross-defaults under other existing and future credit agreements and other debt instruments, and materially and adversely affect our financial condition and ability to continue operating our business as a going concern.

Our securitizations may expose us to financing and other risks, and there can be no assurance that we will be able to access the securitization market in the future, which may require us to seek more costly financing.

As of December 31, 2023, we have completed nine securitizations, and we may in the future securitize certain of our finance receivables to generate cash to originate new finance receivables or to pay our outstanding indebtedness. In such transactions, we typically convey a pool of finance receivables to a special purpose entity, which, in turn, conveys the finance receivables to a trust (the issuing entity). Concurrently, the issuing entity issues non-recourse notes or certificates pursuant to the terms of an indenture and/or amended and restated trust agreement, which then are transferred to the special purpose entity in exchange for the finance receivables. The securities issued by the issuing entity are secured by the pool of finance receivables. In exchange for the transfer of finance receivables to the issuing entity, we typically receive the cash proceeds from the sale of the securities issued by the issuing entity, all residual interests, if any, in the cash flows from the finance receivables after payment of the securities, and a 100% beneficial interest in the issuing entity.

Although we successfully completed securitizations during the past five years, we can give no assurances that we will be able to complete additional securitizations, including if, for example, the securitization markets become constrained or events within the Company cause investors to lack confidence in our ability to fulfill our obligations as servicer with respect to the securitizations. Further, the value of any subordinated securities that we may retain in our securitizations might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or other factors.

Regional Management Corp. currently acts as the servicer (in such capacity, the “Servicer”) with respect to each securitization. If the Servicer defaults in its servicing obligations, an early amortization event could occur under each securitization and the Servicer could be replaced as servicer. Servicer defaults include, but are not limited to, the failure of the Servicer to make any payment, transfer, or deposit in accordance with applicable securitization documents; breaches of representations, warranties, or certifications made by the Servicer under applicable securitization documents; and the occurrence of certain insolvency events with respect to the Servicer. Such an early amortization event could have materially adverse consequences on our liquidity and cost of funds.

 

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Rating agencies may also affect our ability to execute a securitization transaction or increase the costs we expect to incur from executing securitization transactions, not only by deciding not to issue ratings for our securitization transactions, but also by altering the processes and criteria they follow in issuing ratings. Rating agencies could alter their ratings processes or criteria after we have accumulated finance receivables for securitization in a manner that effectively reduces the value of those finance receivables by increasing our financing costs or otherwise requiring that we incur additional costs in order to comply with those processes and criteria. We have no ability to control or predict what actions the rating agencies may take.

Further, other matters, such as (i) accounting standards applicable to securitization transactions and (ii) capital and leverage requirements applicable to banks and other regulated financial institutions holding asset-backed securities, could result in decreased investor demand for securities issued through our securitization transactions or increased competition from other institutions that undertake securitization transactions. In addition, compliance with certain regulatory requirements, including the Dodd-Frank Act, may affect the type of securitization transactions that we are able to complete.

An inability to consummate further securitization transactions on terms similar to our existing securitization transactions, or at all, could require us to seek more costly financing and/or have a material adverse effect on our business, financial condition, and results of operations.

We may be required to indemnify, or repurchase certain finance receivables from, purchasers of finance receivables that we have sold or securitized, or which we will sell or securitize in the future, if our finance receivables fail to meet certain criteria or characteristics or under other circumstances, which could adversely affect our results of operations, financial condition, and liquidity.

We have entered into certain financing arrangements, including revolving warehouse credit facilities and securitizations, which are secured by certain retail installment contracts and promissory notes (the “Receivables”). We have securitized Receivables as follows: June 2018 (approximately $168.5 million); December 2018 (approximately $135.5 million); October 2019 (approximately $144.5 million); September 2020 (approximately $187.5 million); February 2021 (approximately $260.4 million); July 2021 (approximately $208.3 million); October 2021 (approximately $147.1 million); February 2022 (approximately $264.6 million); and October 2022 (approximately $232.6 million). The securitizations from June 2018, December 2018, and October 2019 have been redeemed and are no longer outstanding. Our operating subsidiaries originated the Receivables and subsequently transferred the Receivables to certain of our wholly-owned subsidiaries that were established for the special purpose of entering into the financing arrangements and the respective securitizations. The documents governing our financing arrangements and securitizations contain provisions that require us to repurchase the affected Receivables under certain circumstances. While our financing and securitization documents vary, they generally contain customary provisions that require us and the special purpose entities to make certain representations and warranties about the quality and nature of the Receivables. Together with the special purpose entities, we may be required to repurchase the Receivables if a representation or warranty is later determined to be inaccurate. In such a case, we will be required to pay a repurchase price for the release of the affected Receivables.

We believe that many purchasers of loans and other counterparties to transactions like those provided for in the revolving warehouse credit facilities, the securitizations, and other similar transactions are particularly aware of the conditions under which originators or sellers of such finance receivables must indemnify for or repurchase finance receivables, and may benefit from enforcing any available repurchase remedies. If we are required to repurchase Receivables that we have sold or pledged, it could adversely affect our results of operations, financial condition, and liquidity.

We are subject to interest rate risk resulting from general economic conditions and policies of various governmental and regulatory agencies.

Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. The Federal Reserve Board has increased interest rates materially since 2022 in an effort to combat elevated inflation. It remains uncertain what actions the Federal Reserve Board may take in 2024. Furthermore, market conditions or regulatory restrictions on interest rates we charge may prevent us from passing any increases in interest rates along to our customers. We originate finance receivables at either prevailing market rates or at statutory limits. Subject to statutory limits, our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market rates. Because our large loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, the rate of turnover of the loan portfolio may change as our large loans change as a percentage of our portfolio.

 

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In addition, elevated interest rates increase our cost of capital by influencing the amount of interest we pay on our senior revolving credit facility, our revolving warehouse credit facilities, or any other floating interest rate obligations that we may incur, which would increase our operating costs and decrease our operating margins. Interest payable on our senior revolving credit facility and our revolving warehouse credit facilities is variable and could increase in the future.

For additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

Our use of derivatives exposes us to credit and market risk.

From time to time, we may enter into derivative transactions for economic hedging purposes, such as managing our exposure to interest rate risk. By using derivative instruments, we are exposed to credit and market risk, including the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost, default risk, and the risk of insolvency or other inability of the counterparty to a particular derivative transaction to perform its obligations. For additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

Macroeconomic conditions could have a material adverse effect on our business, financial position, results of operations, and cash flows, and may increase loan defaults and affect the value and liquidity of your investment.

We are not insulated from the pressures and potentially negative consequences of financial crises and similar risks beyond our control that have in the past and may in the future affect the capital and credit markets, the broader economy, the financial services industry, or the segment of that industry in which we operate. Our financial performance generally, and in particular the ability of our borrowers to make payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we operate and in the United States as a whole.

The U.S. economy is undergoing a period of rapid change and significant uncertainty. Elevated inflation and interest rates, as well as changing U.S. consumer spending patterns are contributing to this change and uncertainty. Inflation hit a 40-year high in June 2022 at 9.1%. While the U.S. annual inflation rate was 3.4% for the twelve months ended December 31, 2023, inflation remains above the Federal Reserve Board's target of 2.0%. The Federal Reserve Board has increased rates materially since 2022 in an effort to combat elevated inflation. It remains uncertain what actions the Federal Reserve Board may take in 2024, and there is no guarantee that the Federal Reserve Board may not raise interest rates further in the future depending on economic conditions. The elevated levels of inflation and interest rates are changing lending and spending patterns, leading to fears that the U.S. is currently experiencing (or may soon experience) an economic downturn or period of slow economic growth.

During an economic downturn or recession, credit losses in the financial services industry generally increase and demand for credit products often decreases. Declining asset values, defaults on consumer loans, and the lack of market and investor confidence, as well as other factors, all combine to decrease liquidity during an economic downturn. As a result of these factors, some banks and other lenders have suffered significant losses during economic downturns, and the strength and liquidity of many financial institutions worldwide weakened during the most recent economic crisis. Additionally, during an economic downturn, our loan servicing costs and collection costs may increase as we may have to expend greater time and resources on these activities. Our underwriting criteria, policies and procedures, and product offerings may not sufficiently protect our growth and profitability during a sustained period of economic downturn or recession. Any renewed economic downturn will adversely affect the financial resources of our customers and may result in the inability of our customers to make principal and interest payments on, or refinance, the outstanding debt when due.

Should economic conditions worsen, they may adversely affect the credit quality of our loans. In the event of increased default by borrowers under the loans, and/or a decrease in the volume of the loans we originate, our business, financial condition, and results of operations could be adversely affected.

Failure to maintain, protect, and promote our brand may harm our business.

Maintaining, protecting, and promoting our brand is critical to our attracting and retaining customers, investors, and employees. Harm to our brand can arise from many sources, including employee misconduct, misconduct by outsourced service providers or other counterparties, litigation or regulatory actions, failure by us to meet minimum standards of service and quality, inadequate protection of customer information, and compliance failures. Recently, financial services companies have been experiencing increased reputational risk as consumers take issue with certain of their practices. Negative publicity regarding our company (or others engaged in a similar business or activities), whether or not accurate, may damage our reputation, which could have a material adverse effect on our business, financial condition, and results of operations.

Many of our stakeholders possess increased interest in our environmental, social, and governance responsibilities. Our absolute and relative progress, or lack thereof, on environmental, social, and governance matters, along with our disclosure (or lack

 

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of disclosure) related thereto, could impact our reputation, brand, and the willingness of individuals and institutions to hold our common stock. If we do not successfully maintain, protect, and promote our brand, we may be unable to maintain and/or expand our customer and/or investor base, which may materially harm our business.

Risks Related to Regulation and Legal Proceedings

Our business products and activities are strictly and comprehensively regulated at the local, state, and federal levels.

The consumer finance industry is extensively regulated by federal, state, and local consumer protection laws and regulations, including consumer protection laws and regulations relating to the creation, collection, and enforcement of consumer contracts, such as consumer loans. Personal loans that do not comply with consumer protection laws may not be enforceable against the borrowers of those loans. These laws and regulations impose significant costs and limitations on the way we conduct and expand our business, and these costs and limitations may increase in the future if such laws and regulations are changed. These laws and regulations govern or affect, among other things:

the interest rates and manner of calculating such rates that we may charge customers;
terms of loans, including fees, maximum amounts, and minimum durations;
origination practices;
disclosure requirements, including posting of fees;
solicitation and advertising practices;
currency and suspicious activity reporting;
recording and reporting of certain financial transactions;
privacy of personal customer information;
the types of products and services that we may offer;
servicing and collection practices;
approval of licenses; and
locations of our branches.

Due to the highly regulated nature of the consumer finance industry, we are required to comply with a wide array of federal, state, and local laws and regulations that affect, among other things, the manner in which we conduct our origination and servicing operations. These laws and regulations directly impact our business and require constant compliance, monitoring, and internal and external audits. Although we have an enterprise-wide compliance framework structured to continuously evaluate our activities, compliance with applicable law is costly and may create operational constraints.

At a federal level, these laws and their implementing regulations include, among others, the Truth in Lending Act and Regulation Z, the Consumer Financial Protection Act, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act and Regulation V, as amended by the Fair and Accurate Credit Transactions Act, the Gramm-Leach-Bliley Act, the Electronic Funds Transfer Act and Regulation E, the Federal Trade Commission Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Fair Debt Collection Practices Act and Regulation F, and the Telephone Consumer Protection Act, and requirements related to unfair, deceptive, or abusive acts or practices. Many states and local jurisdictions have consumer protection laws analogous to, or in addition to, those listed above, such as usury laws and state debt collection practices laws that apply to first-party lenders. These laws affect how loans are made, enforced, and collected. The U.S. government and states may pass new laws, or may amend existing laws, to further regulate the consumer finance industry, installment loans, or to reduce the finance charges or other fees applicable to personal loans.

Federal and state consumer protection laws impose requirements, including licensing requirements, and place restrictions on creditors in connection with extensions of credit and collections on personal loans and protection of sensitive customer data obtained in the origination and servicing thereof. Personal loans that do not comply with consumer protection laws may not be valid or enforceable under their terms against the borrowers of those loans. The federal and state consumer protection laws, rules, and regulations applicable to the solicitation and advertising for, underwriting of, granting, servicing, and collection of personal loans, and the protection of sensitive customer data, frequently provide for administrative penalties, as well as civil (and in some cases, criminal) liability resulting from their violation. An administrative proceeding or litigation relating to one or more allegations or findings of the violation of such laws by us could result in modifications to our methods of doing business, which could impair our ability to originate or otherwise acquire new loans or collect on our loan portfolio or result in us having to pay damages and/or

 

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cancel the balance or other amount owing under the loan associated with such violations. Our loans are subject to generally standard documentation. Thus, many borrowers may be similarly situated in so far as the provisions of their respective contractual obligations are concerned. Accordingly, allegations of violations of the provisions of applicable federal or state consumer protection laws could potentially result in a large class of claimants asserting claims against us. There is no assurance that such claims will not be asserted against us in the future.

Changes to statutes, regulations, or regulatory policies, including the interpretation, implementation, and enforcement of statutes, regulations, or policies, could affect us in substantial and unpredictable ways, including limiting the types of financial services and products that we may offer and increasing the ability of competitors to offer competing financial services and products. Compliance with laws and regulations requires us to invest increasingly significant portions of our resources in compliance planning and training, monitoring tools, and personnel, and requires the time and attention of management. These costs divert capital and focus away from efforts intended to grow our business. Because these laws and regulations are complex and often subject to interpretation, or because of a result of unintended errors, we may, from time to time, inadvertently violate these laws, regulations, and policies, as each is interpreted by our regulators. If we do not successfully comply with laws, regulations, or policies, we could be subject to fines, penalties, lawsuits, or judgments, our compliance costs could increase, our operations could be limited, and we may suffer damage to our reputation. If more restrictive laws, rules, and regulations are enacted or more restrictive judicial and administrative interpretations of current laws are issued, compliance with the laws could become more expensive or difficult. Furthermore, changes in these laws and regulations could require changes in the way we conduct our business, and we cannot predict the impact such changes would have on our profitability.

Our primary regulators are the state regulators for the states in which we operate. We operate each of our branches under licenses granted to us by these state regulators. State regulators may enter our branches and conduct audits of our records and practices at any time, with or without notice. If we fail to observe, or are not able to comply with, applicable legal requirements, we may be forced to discontinue certain product offerings, which could adversely affect our business, financial condition, and results of operations. In addition, violation of these laws and regulations could result in fines and other civil and/or criminal penalties, including the suspension or revocation of our branch licenses, rendering us unable to operate in one or more locations. All of the states in which we operate have laws governing the interest rates and fees that we can charge and required disclosure statements, among other restrictions. Violation of these laws could involve penalties requiring the forfeiture of principal and/or interest and fees that we have charged. Depending on the nature and scope of a violation, fines and other penalties for noncompliance of applicable requirements could be significant and could have a material adverse effect on our business, financial condition, and results of operations.

While we believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state, and local laws and regulations, we may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations. In addition, changes in laws or regulations applicable to us could subject us to additional licensing, registration, and other regulatory requirements in the future or could adversely affect our ability to operate or the manner in which we conduct business. Licenses to open new branches are granted in the discretion of state regulators. Accordingly, licenses may be denied unexpectedly or for reasons outside of our control. This could hinder our ability to implement our business plans in a timely manner or at all.

As we enter new markets and develop new products and services, we may become subject to additional local, state, and federal laws and regulations. For example, although we intend to expand into new states or markets, we may encounter unexpected regulatory or other difficulties in these new states, including as they relate to securing the necessary licenses to operate, which may inhibit our growth. As a result, we may not be able to successfully execute our strategies to grow our revenue and earnings.

We are also subject to potential enforcement, supervision, or other actions that may be brought by state attorneys general or other state enforcement authorities and other governmental agencies. For example, the CFPB, state and federal banking regulators, state attorneys general, the Federal Trade Commission, the U.S. Department of Justice, and federal government agencies have imposed sanctions on consumer loan originators for practices including, but not limited to, charging borrowers excessive fees, steering borrowers to loans with higher costs or more onerous terms, imposing higher interest rates than the borrower’s credit risk warrants, failing to disclose material terms of loans to borrowers, and otherwise engaging in discriminatory or unfair lending practices or unfair, deceptive, or abusive acts or practices. While we believe we are in substantial compliance with all applicable federal, state, and local laws and regulations, a contrary determination by a regulator, and any resulting action, could subject us to civil money penalties, customer remediation, and increased compliance costs, as well as damage to our reputation and brand and could limit or prohibit our ability to offer certain products and services or engage in certain business practices.

 

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Additionally, Congress, the states, and regulatory agencies could further regulate the consumer credit industry in ways that make it more difficult for us to conduct business. Further, changes in the regulatory application or judicial interpretation of the laws and regulations applicable to financial institutions also could impact the manner in which we conduct our business. The regulatory environment in which financial institutions operate has become increasingly complex and robust, and following the financial crisis of 2008, supervisory efforts to apply relevant laws, regulations, and policies have become more intense. Any of the events described above could have a material adverse effect on all aspects of our business, financial condition, and results of operations.

We may become involved in investigations, examinations, and proceedings by government and self-regulatory agencies, which may result in material adverse consequences to our business, financial condition, and results of operations.

From time to time, we may become involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by federal and state government and self-regulatory agencies. Should we become subject to such an investigation, examination, or proceeding, the matter could result in material adverse consequences to us, including, but not limited to, increased compliance costs, adverse judgments, significant settlements, fines, penalties, injunction, or other actions.

Changes in laws and regulations or interpretations of laws and regulations could negatively impact our business, financial condition, and results of operations.

The laws and regulations directly affecting our lending activities are constantly under review and are subject to change. In addition, consumer advocacy groups and various other media sources continue to advocate for governmental and regulatory action to prohibit or severely restrict various financial products, including the loan products we offer. Any changes in such laws and regulations, or the implementation, interpretation, or enforcement of such laws and regulations, could force us to modify, suspend, or cease part or, in the worst case, all of our existing operations. It is also possible that the scope of federal regulations could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities. The enactment of one or more of such regulatory changes could materially and adversely affect our business, results of operations, and prospects.

State and federal legislatures and regulators may also seek to impose new requirements or interpret or enforce existing requirements in new ways. Changes in current laws or regulations or the implementation of new laws or regulations in the future may restrict our ability to continue our current methods of operation or expand our operations. For example, in 2019, bills were introduced to Congress that sought to prohibit the practice of directly mailing convenience checks to potential borrowers and extend the Military Lending Act’s consumer protections to all consumers, including a 36 percent interest rate cap on all consumer loans. Similarly, in July 2021, the Veterans and Consumers Fair Credit Act was introduced in the Senate seeking to amend the Truth in Lending Act to effectively extend to all consumers the 36% interest rate cap that is currently only applicable to servicemembers and certain dependents under the Military Lending Act. While these bills have not become law, if similar bills were ultimately to become law, such legislation could materially and adversely affect our business, results of operations, and prospects.

Additionally, new laws and regulations could subject us to liability for prior operating activities or lower or eliminate the profitability of operations going forward by, among other things, reducing the amount of interest and fees we charge in connection with our loans or limiting the types of insurance and other ancillary products that we may offer to our customers. If these or other factors lead us to close our branches in a state, in addition to the loss of net revenues attributable to that closing, we would incur closing costs such as lease cancellation payments and we would have to write off assets that we could no longer use. If we were to suspend rather than permanently cease our operations in a state, we would also have continuing costs associated with maintaining our branches and our employees in that state, with little or no revenues to offset those costs.

In addition to state and federal laws and regulations, our business is subject to various local rules and regulations, such as local zoning regulations. Local zoning boards and other local governing bodies have been increasingly restricting the permitted locations of consumer finance companies. Any future actions taken to require special use permits for or impose other restrictions on our ability to provide products could adversely affect our ability to expand our operations or force us to attempt to relocate existing branches. If we were forced to relocate any of our branches, in addition to the costs associated with the relocation, we may be required to hire new employees in the new areas, which may adversely impact the operations of those branches. Relocation of an existing branch may also hinder our collection abilities, as our business model relies in part on the location of our branches being close to where our customers live in order to successfully collect on outstanding loans.

Changes in laws or regulations may have a material adverse effect on all aspects of our business in a particular state and on our overall business, financial condition, and results of operations, including our ability to generate new loans and the manner in which existing loans are serviced and collected.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 31


 

Financial regulatory reform has created uncertainty and could negatively impact our business, financial condition, and results of operations.

In response to the financial crisis in 2008, the Dodd-Frank Act was signed into law on July 21, 2010. The Dodd-Frank Act requires the creation of new federal regulatory agencies and grants additional authorities and responsibilities to existing regulatory agencies to identify and address emerging systemic risks posed by the activities of financial services firms. The Dodd-Frank Act also provides for enhanced regulation of derivatives and mortgage-backed securities offerings, restrictions on executive compensation, and enhanced oversight of credit rating agencies. The Dodd-Frank Act also limits the ability of federal laws to preempt state and local consumer laws.

Additionally, the Dodd-Frank Act established the CFPB, as a consumer protection regulator tasked with regulating consumer financial services and products. Since its creation, the CFPB has been the subject of lawsuits challenging its authority. Currently of note, the case of Community Financial Services Association of America, Limited v. Consumer Financial Protection Bureau, which involves whether the Fifth Circuit Court of Appeals erred in holding that the statute providing funding to the CFPB violates the appropriations clause of the Constitution, is awaiting decision by the U.S. Supreme Court. There have also been legislative proposals in Congress from time to time seeking to significantly reform the CFPB’s structure, authority, and/or mandate. As a result of these judicial and legislative actions, there is, and will continue to be, uncertainty regarding the future of the CFPB and the impact on the lending markets.

The Dodd-Frank Act impacts the offering, marketing and regulation of consumer financial products and services offered by financial institutions. The CFPB has supervision, examination, and enforcement authority over the consumer financial products and services offered by certain non-depository institutions and large insured depository institutions. For example, the CFPB may establish supervisory authority over a nonbank covered entity that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers. The CFPB also has broad rulemaking and enforcement authority over providers of credit, savings, and payment services and products and authority to prevent “unfair, deceptive or abusive” practices. The CFPB has the authority to write regulations under federal consumer financial protection laws, and to enforce those laws against and examine large financial institutions for compliance.

On March 7, 2023, the CFPB provided the Company with notice that it sought to establish supervisory authority over the Company pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010. Under that provision, the CFPB may establish supervisory authority over any non-bank covered person that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. The Company responded to the Notice by voluntarily consenting to the CFPB’s supervisory authority and entering into a Consent Agreement dated January 4, 2024. Pursuant to the Consent Agreement and related CFPB order, the CFPB will have supervisory authority over the Company for a period of two years ending January 8, 2026. Depending on how the CFPB functions and its areas of focus, including but not limited to the period of time covered by the Consent Agreement, our compliance costs could increase, our ability to respond to marketplace changes may be delayed, we may be required to alter products and services that would make them less attractive to consumers, and our ability to offer products and services profitably may be impaired.

The CFPB is also authorized to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties ranging from $6,813 per day for minor violations of federal consumer financial laws (including the CFPB’s own rules) to $34,065 per day for reckless violations and $1,362,567 per day for knowing violations. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). If the CFPB or one or more state officials find that we have violated the foregoing laws, they could exercise their enforcement powers in ways that would have a material adverse effect on Regional.

In addition to pre-existing enforcement rights for state attorneys general, the Dodd-Frank Act gives attorneys general authority to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank Act’s authority. In conducting an investigation, the CFPB or state attorneys general may issue a civil investigative demand requiring a target company to prepare and submit, among other items, documents, written reports, answers to interrogatories, and deposition testimony. If we become subject to investigation, the required response could result in substantial costs and a diversion of management’s attention and resources. In addition, the market price of our common stock could decline as a result of the initiation of a CFPB investigation of our company or even the perception that such an investigation could occur, even in the absence of any finding by the CFPB that we have violated any state or federal law.

Although many of the regulations implementing portions of the Dodd-Frank Act have been promulgated, we are still unable to predict how this significant legislation may be interpreted and enforced or the full extent to which implementing regulations and

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 32


 

supervisory policies may affect it. The President and current Congress may impact the extent to which new or revised legislation or regulations are adopted, and whether provisions of the Dodd-Frank Act and rules promulgated thereunder, including those provisions establishing the CFPB and the rules and regulations proposed and enacted by the CFPB, may be revised, repealed, or amended. There can be no assurance that future reforms will not significantly and adversely impact our business, financial condition, and results of operations.

We sell certain of our loans, including, in some instances, charged-off loans and loans where the borrower is in default, which could subject us to heightened regulatory scrutiny, expose us to legal action, cause us to incur losses, and/or limit or impede our collection activity.

As part of our business model, we have purchased and sold, and may in the future purchase and sell, some of our finance receivables, including loans that have been charged-off and loans where the borrower is in default. The CFPB and other regulators recently have significantly increased their scrutiny of debt buyers and sales, especially delinquent and charged-off debt. The CFPB has criticized and/or penalized sellers of debt for insufficient documentation to support and verify the validity or amount of the debt. It has also criticized and/or penalized debt collectors for, among other things, impermissible collection tactics, attempting to collect debts that are no longer valid, misrepresenting the amount of the debt, not having sufficient documentation to verify the validity or amount of the debt, and failing to obtain or maintain proper licenses. Accordingly, our sales of loans could expose us to lawsuits or fines by regulators if we do not have sufficient documentation to support and verify the validity and amount of the loans underlying the transactions, or if we or purchasers of our loans use collection methods that are viewed as unfair, deceptive, or abusive, or if purchasers of our loans fail to obtain or maintain proper licenses.

Our use of third-party vendors is subject to increasing regulatory attention.

The CFPB and other regulators have issued regulatory guidance that has focused on the need for financial institutions to oversee their business relationships with service providers in a manner that ensures such service providers comply with applicable law. This results in increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement and decreasing the benefit that we receive from using third-party vendors. Moreover, if regulators conclude that we have not met the heightened standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist, or other remedial actions, which could have an adverse effect on our business, financial condition, and results of operations.

We are subject to government regulations concerning our hourly and our other employees, including minimum wage, overtime, and health care laws.

We are subject to applicable rules and regulations relating to our relationship with our employees, including minimum wage and break requirements, pay transparency, leave requirements, health benefits, unemployment and sales taxes, overtime, and working conditions and immigration status. Legislated increases in the federal and state minimum wage and increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, compliance costs and fines, as well as the cost of litigation in connection with these regulations, would increase our labor costs. Unionizing and collective bargaining efforts have received increased attention nationwide in recent periods. Should our employees become represented by unions, we would be obligated to bargain with those unions with respect to wages, hours, and other terms and conditions of employment, which is likely to increase our labor costs. Moreover, as part of the process of union organizing and collective bargaining, strikes and other work stoppages may occur, which would cause disruption to our business. Similarly, many employers nationally in similar retail environments have been subject to actions brought by governmental agencies and private individuals under wage-hour laws on a variety of claims, such as improper classification of workers as exempt from overtime pay requirements and failure to pay overtime wages properly, with such actions sometimes brought as class actions. These actions can result in material liabilities and expenses. Should we be subject to employment litigation, such as actions involving wage-hour, overtime, break, and working time, it may distract our management from business matters and result in increased labor costs. In addition, we currently sponsor employer-subsidized premiums for major medical programs for eligible personnel who elect health care coverage through our insurance programs. As a result of regulatory changes, we may not be able to continue to offer health care coverage to our employees on affordable terms or at all and subsequently may face increased difficulty in hiring and retaining employees. If we are unable to locate, attract, train, or retain qualified personnel, or if our costs of labor increase significantly, our business, financial condition, and results of operations may be adversely affected.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 33


 

Our stock price or results of operations could be adversely affected by media and public perception of installment loans and of legislative and regulatory developments affecting activities within the installment lending sector.

Consumer advocacy groups and various media sources continue to criticize alternative financial services providers (such as payday and title lenders, check advance companies, and pawnshops). These critics frequently characterize such alternative financial services providers as predatory or abusive toward consumers. If these persons were to criticize the products that we offer, it could result in further regulation of our business and could negatively impact our relationships with existing borrowers and efforts to attract new borrowers. Furthermore, our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action in the alternative financial services sector may adversely impact our stock price and perceptions of our business even if such actions are not targeted at our operations and do not directly impact us.

Legal proceedings to which we may become subject may have a material adverse impact on our financial position and results of operations.

Like many companies in our industry, we are from time to time involved in various legal proceedings and subject to claims and other actions related to our business activities brought by borrowers and others. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation is often expensive, time-consuming, disruptive to our operations and resources, and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion, or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment, or settlement that may be entered against us, that such coverage will prove to be adequate, or that such coverage will continue to remain available on acceptable terms, if at all. If in any legal proceeding we incur liability or defense costs that exceed our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations.

Current and proposed regulations related to consumer privacy, data protection, and information security could increase our costs.

We are subject to a number of federal and state consumer privacy, data protection, and information security laws and regulations. Moreover, various federal and state regulatory agencies require us to notify customers in the event of a security breach. Federal and state legislators and regulators are increasingly pursuing new guidance, laws, and regulations in these areas. Compliance with current or future customer privacy, data protection, and information security laws and regulations could result in higher compliance, technology, or other operating costs. Any violations of these laws and regulations may require us to change our business practices or operational structure, and could subject us to legal claims, monetary penalties, sanctions, and the obligation to indemnify and/or notify customers or take other remedial actions.

Risks Related to the Ownership of Our Common Stock

The market price of shares of our common stock may continue to be volatile, which could cause the value of your investment to decline.

The market price of our common stock has been highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance. In addition, our operating results and the market price of our common stock could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies, speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments, adverse publicity about the industries we participate in, or individual scandals.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 34


 

There can be no assurance of our ability to declare and pay cash dividends in future periods.

On October 29, 2020, we announced that our Board of Directors (the “Board”) initiated and declared a quarterly cash dividend of $0.20 per share, which was increased by our Board to $0.25 per share on June 15, 2021 and to $0.30 per share on February 9, 2022. We intend to continue to pay a quarterly cash dividend for the foreseeable future; however, the declaration, amount, and payment of any future cash dividends on shares of our common stock will be at the discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions and such other factors as our Board may deem relevant. In addition, our ability to pay cash dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our senior revolving credit facility. A reduction or elimination of our dividend payments in the future could have a negative effect on our stock price.

Your stock ownership may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions, or otherwise.

We have approximately 985 million shares of common stock authorized but unissued, as of February 20, 2024. Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board in its discretion, whether in connection with acquisitions or otherwise. Our stockholders previously approved the Regional Management Corp. 2015 Long-Term Incentive Plan (as amended and/or restated, the “2015 Plan”). As of December 31, 2023, subject to adjustments as provided in the 2015 Plan, the maximum aggregate number of shares of our common stock that may be issued under the 2015 Plan may not exceed the sum of (a) 2,600,000 shares plus (b) any shares remaining available for the grant of awards as of the 2015 Plan effective date under the 2007 Management Incentive Plan (the “2007 Plan”) or the 2011 Stock Incentive Plan (the “2011 Plan”), plus (c) any shares subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cash-settled, cancelled, terminated, expires, or lapses for any reason without the issuance of shares or pursuant to which such shares are forfeited. We have 308,182 shares available for issuance under the 2015 Plan, as of February 20, 2024. In addition, our Board may recommend in the future that our stockholders approve new stock plans. Any common stock that we issue, including under our 2015 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our stockholders. In addition, the market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to issue equity securities in the future at a time and at a price that we deem appropriate.

Anti-takeover provisions in our charter documents and applicable state law might discourage or delay acquisition attempts for us that you might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our Board. Among other things, these provisions:

authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;
prohibit stockholder action by written consent, which will require all stockholder actions to be taken at a meeting of our stockholders;
provide that the Board is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all of the outstanding shares of our capital stock entitled to vote; and
establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, certain states require the approval of a state regulator for the acquisition, directly or indirectly, of more than a certain amount of the voting or common stock of a consumer finance company. The overall effect of these laws is to make it more difficult to acquire a consumer finance company than it might be to acquire control of a nonregulated corporation.

Furthermore, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 35


 

contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities identified by our non-employee directors and their affiliates.

Certain of our non-employee directors and their affiliates are in the business of providing buyout capital and growth capital to developing companies and may acquire interests in businesses that directly or indirectly compete with certain portions of our business. Our amended and restated certificate of incorporation provides for the allocation of certain corporate opportunities between us, on the one hand, and certain of our non-employee directors and their affiliates, on the other hand. As set forth in our amended and restated certificate of incorporation, such non-employee directors and their affiliates shall not have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Therefore, a non-employee director of our company may pursue certain acquisition opportunities that may be complementary to our business and, as a result, such acquisition opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations, or prospects if attractive corporate opportunities are allocated by such non-employee directors to themselves or their other affiliates instead of us.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 36


 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 1C. CYBERSECURITY.

We recognize the importance of maintaining the security of our electronic networks, information systems, and data. We face significant and persistent cybersecurity threats, including risks heightened by the numerous geographies that we serve; our reliance on complex information networks; remote work among certain of our employees; reliance on digital operations to service certain of our customers; and our use of third-party software and services. Our vendors and customers also face cybersecurity threats. A cybersecurity incident impacting our company or any of our vendors or customers could materially adversely affect our operations and/or financial condition. To protect against and prevent cybersecurity incidents, we employ a comprehensive approach where our Board and management teams work together to oversee our cybersecurity program. We are committed to maintaining robust cybersecurity oversight, controls, and strategies that are designed to help us assess, identify, and manage cybersecurity risks.

Our Board includes members with skills and experience in cybersecurity, technology, and innovation. The Board ultimately oversees cybersecurity risks and evaluates such risks as part of our enterprise risk management (“ERM”) program. As part of our ERM processes, we utilize a formal corporate risk and governance structure that sets out the roles, responsibilities, and expectations of the various parties involved throughout our company in risk mitigation and management. The Risk Committee of the Board is responsible for approving and periodically reviewing and assessing the effectiveness of our ERM policies and procedures. The Risk Committee also assists the Board in its oversight of risks related to cybersecurity by regularly engaging with management and/or third-party consultants to assess the cyber threat landscape; evaluate our information security program; review the results of penetration testing; and analyze the design, effectiveness, and ongoing enhancement of our capabilities to monitor, prevent, and respond to cyber threats and events. The Risk Committee generally meets with management and/or third-party consultants regarding cybersecurity matters on a quarterly basis. Any material developments are reported by the Risk Committee to the Board. Further, any cybersecurity incidents deemed to have a high impact on our business are also generally reported to the Board, regardless of materiality.

Our Senior Director of Information Security (the “SDIS”), who holds a graduate degree in cybersecurity and several industry leading cybersecurity certifications, is responsible for our overall information security program including strategy, security engineering, cyber threat detection, and response. The information security team managed by our SDIS contains certified cybersecurity professionals with broad experience and expertise in cybersecurity threat assessment and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats, and regulatory compliance, among other areas. The information security team continually evaluates our cybersecurity posture, which aligns with the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) industry standard, and makes on-going investments in our networks, in addition to performing regular testing of our environment.

In addition, we engage third-party consultants to conduct evaluations of the operational effectiveness of our security controls. These consultants perform penetration testing on our cybersecurity practices and procedures on an annual basis.

Third-party risk is assessed as part of our information security program and includes risk-tiered criteria for due diligence. Contractually, data handling third parties are required to uphold all applicable rules, laws, and regulations in addition to, when applicable, notifying us of cyber security events that may negatively impact us or our data.

We also require all employees to perform annual cybersecurity training. We expect our employees to follow our company-wide policies and procedures relating to cybersecurity matters, which include policies related to IT security, remote access, multifactor authentication, use of the internet and social media, and handling of confidential information, among other items. Additionally, while we have insurance coverage in place designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise.

While we have not, as of the date of this Form 10-K, experienced a cybersecurity incident that has materially affected our business strategy, results of operations, or financial condition, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us in the future. See Item 1A. “Risk Factors” for information about our cybersecurity risks.

ITEM 2. PROPERTIES.

Our headquarters operations are located in an approximately 51,700 square foot leased facility in Greer, South Carolina, a town located outside of Greenville, South Carolina. As of February 20, 2024, each of our 343 branches, which are located in 19 states throughout the United States, is leased under a fixed-term lease agreement. Our branches have an average branch size of approximately 1,853 square feet.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 37


 

In the opinion of management, our properties have been well-maintained, are in sound operating condition, and contain all equipment and facilities necessary to operate at present levels. We believe that all of our facilities are suitable and adequate for our present purposes. Our only reportable segment, which is our consumer finance segment, uses the properties described in this Part I, Item 2, “Properties.”

The Company is involved in various legal proceedings and related actions that have arisen in the ordinary course of its business that have not been fully adjudicated. The Company’s management does not believe that these matters, when ultimately concluded and determined, will have a material adverse effect on its financial condition, liquidity, or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 38


 

Part II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “RM.”

Holders

As of February 20, 2024, there were 15 registered holders of our common stock. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to determine the exact number of beneficial stockholders represented by those record holders, but we believe that there were approximately 3,480 beneficial owners of our common stock as of February 16, 2024.

Non-Affiliate Ownership

For purposes of calculating the aggregate market value of shares of our common stock held by non-affiliates, as set forth on the cover page of this Annual Report on Form 10-K, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors, and 5% or greater stockholders as of June 30, 2023. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors, and 5% or greater stockholders are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors, and principal stockholders is incorporated by reference in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K.

Dividends

In October 2020, we announced that our Board initiated and declared a quarterly cash dividend program. The following table sets forth the dividends declared and paid for the periods indicated:

Period

 

Declaration Date

 

Record Date

 

Payment Date

 

Dividends Declared Per
Common Share

 

1Q 23

 

February 8, 2023

 

February 22, 2023

 

March 15, 2023

 

$

0.30

 

2Q 23

 

May 3, 2023

 

May 24, 2023

 

June 14, 2023

 

$

0.30

 

3Q 23

 

August 2, 2023

 

August 23, 2023

 

September 14, 2023

 

$

0.30

 

4Q 23

 

November 1, 2023

 

November 22, 2023

 

December 13, 2023

 

$

0.30

 

Total

 

 

 

 

 

 

 

$

1.20

 

On February 7, 2024, the Board declared a quarterly dividend of $0.30, payable on March 14, 2024, to stockholders of record on February 22, 2024. We currently expect that comparable quarterly cash dividends will continue to be paid in the future. We anticipate that future dividend declarations will occur in February, May, August, and November, with payment being made in March, June, September, and December.

The declaration, amount, and payment of any future cash dividends on shares of common stock will be at the discretion of our Board. Our Board may take into account general and economic conditions; our financial condition and results of operations; our available cash and current and anticipated cash needs; capital requirements; contractual, legal, tax, and regulatory restrictions and implications on the payment of cash dividends by us to our stockholders or by our subsidiaries to us; and such other factors as our Board may deem relevant. Our amended and restated senior revolving credit facility includes a provision restricting our ability to pay dividends on our common stock based upon, among other things, our interest coverage ratio and hypothetical availability under the credit facility. Likewise, certain of our credit facilities restrict certain of our wholly owned subsidiaries from paying dividends to us, subject to certain exceptions.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 39


 

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933.

The following graph shows a comparison of the cumulative total return for our common stock, the NYSE Composite Index, and the NYSE Financial Index for the five years ended December 31, 2023. The graph assumes that $100 was invested at the market close on December 31, 2018, in the common stock of the Company, the NYSE Composite Index, and the NYSE Financial Index, and data for each assumes reinvestments of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

img243412240_0.jpg 

 

 

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 40


 

ITEM 6. [RESERVED].

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 41


 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and the related notes that appear in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. These discussions contain forward-looking statements that reflect our current expectations and that include, but are not limited to, statements concerning our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “predicts,” “will,” “would,” “should,” “could,” “potential,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. The forward-looking information we have provided in this Annual Report on Form 10-K pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or revise such statements, except as required by the federal securities laws.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of December 31, 2023, we operate under the name “Regional Finance” online and in 346 branch locations in 19 states across the United States, serving 538,400 active accounts. Most of our 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. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network with the support of centralized sales, underwriting, service, collections, and administrative teams. This model provides us with frequent contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Our products include:

Small Loans (≤$2,500) – As of December 31, 2023, we had 289.3 thousand small installment loans outstanding, representing $493.5 million in net finance receivables. This included 148.9 thousand small loan convenience checks, representing $221.8 million in net finance receivables.

Large Loans (>$2,500) – As of December 31, 2023, we had 246.6 thousand large installment loans outstanding, representing $1.3 billion in net finance receivables. This included 61.9 thousand large loan convenience checks, representing $194.3 million in net finance receivables.

• Retail Loans – As of December 31, 2023, we had 2.5 thousand retail purchase loans outstanding, representing $3.8 million in net finance receivables.

Optional Insurance Products – We offer optional payment and collateral protection insurance to our direct loan customers.

Small and large installment loans are our core products and will be the drivers of future growth. We ceased accepting applications for our retail loan product offering in November 2022, to focus on growing our core loan portfolio. We continue to own and service our existing portfolio of retail loans. Our primary sources of revenue are interest and fee income from our loan products, of which interest and fees relating to small and large installment loans are the largest component. In addition to interest and fee income from loans, we derive revenue from optional insurance products purchased by customers of our direct loan products.

For additional information regarding our business operations, see Part I, Item 1, “Business.”

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 42


 

Outlook

We continually assess the macroeconomic environment in which we operate in order to appropriately and timely adapt to current market conditions. Macroeconomic factors, including, but not limited to, inflationary pressures, interest rate trends, and impacts from current geopolitical events outside the U.S., may affect our business, liquidity, financial condition, and results of operations.

Ongoing inflationary pressures and interest rate trends have continued to create economic uncertainty. Recent geopolitical events outside of the U.S. have also contributed to volatility in U.S. markets. As inflation accelerated and geopolitical stability began to deteriorate in the fourth quarter of 2021, we began to proactively tighten our credit models. Through 2023, we have principally focused on tightening certain higher-risk, higher-rate customer segments that have been particularly adversely impacted by a more challenging economic environment.

In the fourth quarter of 2023, we undertook a sale of certain non-performing loans prior to the normal charge-off at 180 days past due. The non-performing loan sale allowed us to dispose of a distressed portion of our portfolio at an attractive price and enabled us to re-focus our personnel on earlier-stage delinquent accounts as we enter the first quarter, which historically has been our best quarter for collections. As a result of the loan sale, our net income was negatively impacted by $3.9 million in 2023, but net income will be positively impacted by between $2.0 million and $3.0 million in 2024. The loan sale impact on total revenue was a decrease of $1.9 million from revenue reversals, and the impact on the provision for credit losses was an increase of $3.1 million. The loan sale resulted in additional net credit losses of $13.9 million. Our allowance for credit losses decreased $10.8 million as a result of the loan sale.

Our allowance for credit losses was 10.6% of net finance receivables as of December 31, 2023. Our contractual delinquency as a percentage of net finance receivables was 6.9% as of December 31, 2023, down from 7.1% as of December 31, 2022. Going forward, we may experience changes to the macroeconomic assumptions within our forecast and to our credit loss performance outlook, either of which could lead to further changes in our allowance for credit losses, reserve rate, and provision for credit losses expense.

We proactively diversified our funding over the past few years and continue to maintain a strong liquidity profile. As of December 31, 2023, we had $112.6 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities. In addition, we had $551.5 million of unused capacity on our revolving credit facilities (subject to the borrowing base) as of December 31, 2023. We believe our liquidity position provides substantial runway to support the fundamental operations of our business and to fund future growth.

Factors Affecting Our Results of Operations

Our business is impacted by several factors affecting our revenues, costs, and results of operations, including the following:

Quarterly Information and Seasonality. Our loan volume and contractual delinquency follow seasonal trends. Demand for our loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation, and larger provisions for credit losses in periods of portfolio growth. Consequently, we experience seasonal fluctuations in our operating results. However, changes in macroeconomic factors, including inflation, rising interest rates, and geopolitical conflict, have impacted our typical seasonal trends for loan volume and delinquency.

Growth in Loan Portfolio. The revenue that we derive from interest and fees is largely driven by the balance of loans that we originate. Average net finance receivables were $1.7 billion in 2023 and $1.5 billion in 2022. We source our loans through our branches, centrally-managed direct mail program, digital partners, and our consumer website. The majority of our loans, regardless of origination channel, are serviced through our branches. Increasing the number of loans per branch and growing our state footprint allows us to increase the number of customers we are able to serve. We grew our state footprint from 18 to 19 states during 2023, expanding our operations to Arizona. We continue to assess our legacy branch network for clear opportunities to consolidate operations into larger branches within close geographic proximity. This branch optimization is consistent with our omni-channel strategy and builds upon our recent successes in entering new states with a lighter branch footprint, while still providing customers with best-in-class service. We plan to add additional branches in new and existing states where it is favorable for us to conduct business.

Product Mix. We are exposed to different credit risks and charge different interest rates and fees with respect to the various types of loans we offer. Our product mix also varies to some extent by state, and we may further diversify our product mix in the

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 43


 

future. The interest rates and fees vary from state to state, depending on the competitive environment and relevant laws and regulations.

Asset Quality and Allowance for Credit Losses. Our results of operations are highly dependent upon the credit quality of our loan portfolio. The credit quality of our loan portfolio is the result of our ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as we grow our loan portfolio.

The primary underlying factors driving the provision for credit losses for each loan type are our underwriting standards, delinquency trends, the general economic conditions in the areas in which we conduct business, loan portfolio growth, and the effectiveness of our servicing and collection efforts. We monitor these factors, and the amount and past due status of all loans, to identify trends that might require us to modify the allowance for credit losses.

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, a majority of our funding was held at a fixed rate as of December 31, 2023, representing 82% of total debt.

Operating Costs. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of comprehensive income.

Components of Results of Operations

Interest and Fee Income. Our interest and fee income consists primarily of interest earned on outstanding loans. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

Most states allow certain fees in connection with lending activities, such as loan origination fees, acquisition fees, and maintenance fees. Some states allow for higher fees while keeping interest rates lower. Loan fees are additional charges to the customer and generally are included in the annual percentage rate shown in the Truth in Lending disclosure that we make to our customers. The fees may or may not be refundable to the customer in the event of an early payoff, depending on state law. Fees are recognized as income over the life of the loan on the constant yield method.

Insurance Income, Net. Our insurance operations are a material part of our overall business and are integral to our lending activities. Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from us. Insurance income, net also includes the earned premiums and direct costs associated with the non-file insurance that we purchase to protect us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected. We do not sell insurance to non-borrowers. Direct costs included in insurance income, net are claims paid, claims reserves, ceding fees, and premium taxes paid. We do not allocate to insurance income, net, any other head office or branch administrative costs associated with management of insurance operations, management of our captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

As reinsurer, we maintain restricted reserves comprised of restricted cash and restricted available-for-sale investments for life insurance claims in an amount determined by the unaffiliated insurance company. As of December 31, 2023, the restricted reserves consisted of $21.9 million of unearned premium reserves and $1.2 million of unpaid claims reserves. The unaffiliated insurance company maintains the reserves for non-life claims.

Other Income. Our other income consists primarily of late charges assessed on customers who fail to make a payment within a specified number of days following the due date of the payment. In addition, fees for extending the due date of a loan, returned check charges, commissions earned from the sale of an auto club product, interest income from restricted cash, and investment income from restricted available-for-sale securities are included in other income.

Provision for Credit Losses. Provisions for credit losses are charged to income in amounts that we estimate as sufficient to maintain an allowance for credit losses at an adequate level to provide for lifetime expected credit losses on the related finance receivable portfolio. Credit loss experience, current conditions, reasonable and supportable economic forecasts, delinquency of finance receivables, loan portfolio growth, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. Substantial adjustments to the allowance may be necessary if there are significant changes in forecasted economic conditions or loan portfolio performance.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 44


 

General and Administrative Expenses. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of comprehensive income. Our general and administrative expenses are comprised of four categories: personnel, occupancy, marketing, and other. We measure our general and administrative expenses as a percentage of average net finance receivables, which we refer to as our operating expense ratio.

Our personnel expenses are the largest component of our general and administrative expenses and consist primarily of the salaries and wages, overtime, contract labor, relocation costs, incentives, benefits, and related payroll taxes associated with all of our operations and head office employees.

Our occupancy expenses consist primarily of the cost of renting our facilities, all of which are leased, and the utility, depreciation of leasehold improvements and furniture and fixtures, communication services, data processing, and other non-personnel costs associated with operating our business.

Our marketing expenses consist primarily of costs associated with our direct mail campaigns (including postage and costs associated with selecting recipients), digital marketing, maintaining our consumer website, and local marketing by branches. These costs are expensed as incurred.

Other expenses consist primarily of legal, compliance, audit, and consulting costs, as well as software maintenance and support, non-employee director compensation, electronic payment processing costs, bank service charges, office supplies, credit bureau charges, and the amortization of software, software licenses, and implementation costs. We frequently experience fluctuations in other expenses as we grow our loan portfolio and expand our market footprint. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part I, Item 1A, “Risk Factors.”

Interest Expense. Our interest expense consists primarily of paid and accrued interest for debt, unused line fees, and amortization of debt issuance costs on debt. Interest expense also includes changes in the fair value of interest rate caps.

Income Taxes. Income taxes consist of state and federal income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The change in deferred tax assets and liabilities is recognized in the period in which the change occurs, and the effects of future tax rate changes are recognized in the period in which the enactment of new rates occurs.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 45


 

Results of Operations

The following table summarizes our results of operations, both in dollars and as a percentage of average net finance receivables:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Dollars in thousands

 

Amount

 

 

% of
Average Net Finance
Receivables

 

 

Amount

 

 

% of
Average Net Finance
Receivables

 

 

Amount

 

 

% of
Average Net Finance
Receivables

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$

489,698

 

 

 

28.6

%

 

$

450,854

 

 

 

29.5

%

 

$

382,544

 

 

 

31.5

%

Insurance income, net

 

 

44,529

 

 

 

2.6

%

 

 

43,502

 

 

 

2.8

%

 

 

35,482

 

 

 

2.9

%

Other income

 

 

17,172

 

 

 

1.0

%

 

 

12,831

 

 

 

0.8

%

 

 

10,325

 

 

 

0.9

%

Total revenue

 

 

551,399

 

 

 

32.2

%

 

 

507,187

 

 

 

33.1

%

 

 

428,351

 

 

 

35.3

%

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

220,034

 

 

 

12.9

%

 

 

185,115

 

 

 

12.1

%

 

 

89,015

 

 

 

7.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

 

156,872

 

 

 

9.2

%

 

 

141,243

 

 

 

9.2

%

 

 

119,833

 

 

 

9.9

%

Occupancy

 

 

25,029

 

 

 

1.5

%

 

 

23,809

 

 

 

1.6

%

 

 

24,126

 

 

 

2.0

%

Marketing

 

 

15,774

 

 

 

0.9

%

 

 

15,378

 

 

 

1.0

%

 

 

14,405

 

 

 

1.2

%

Other

 

 

45,444

 

 

 

2.6

%

 

 

42,098

 

 

 

2.7

%

 

 

37,150

 

 

 

3.0

%

Total general and administrative

 

 

243,119

 

 

 

14.2

%

 

 

222,528

 

 

 

14.5

%

 

 

195,514

 

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

67,463

 

 

 

3.9

%

 

 

34,223

 

 

 

2.2

%

 

 

31,349

 

 

 

2.6

%

Income before income taxes

 

 

20,783

 

 

 

1.2

%

 

 

65,321

 

 

 

4.3

%

 

 

112,473

 

 

 

9.3

%

Income taxes

 

 

4,825

 

 

 

0.3

%

 

 

14,097

 

 

 

1.0

%

 

 

23,786

 

 

 

2.0

%

Net income

 

$

15,958

 

 

 

0.9

%

 

$

51,224

 

 

 

3.3

%

 

$

88,687

 

 

 

7.3

%

Information explaining the changes in our results of operations from year-to-year is provided in the following pages.

Comparison of December 31, 2023, Versus December 31, 2022

The following discussion and table describe the changes in finance receivables by product type:

Small Loans (≤$2,500) – Small loans outstanding increased by $11.9 million, or 2.5%, to $493.5 million at December 31, 2023, from $481.6 million at December 31, 2022. The increase was due to the growth of receivables in branches opened during 2022 and 2023, partially offset by credit tightening for disciplined growth and the transition of small loan customers to large loans.

Large Loans (>$2,500) – Large loans outstanding increased by $66.0 million, or 5.5%, to $1.3 billion at December 31, 2023, from $1.2 billion at December 31, 2022. The increase was due to the growth of receivables in branches opened during 2022 and 2023 and from the transition of small loan customers to large loans, partially offset by credit tightening for disciplined growth.

Retail Loans – Retail loans outstanding decreased $5.8 million, or 60.4%, to $3.8 million at December 31, 2023, from $9.6 million at December 31, 2022. We ceased accepting applications for our retail loan product offering as of November 2022 to focus on growing our core loan portfolio.

 

 

 

Net Finance Receivables by Product

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

 

YoY $
Inc (Dec)

 

 

YoY %
Inc (Dec)

 

Small loans

 

$

493,473

 

 

$

481,605

 

 

$

11,868

 

 

 

2.5

 %

Large loans

 

 

1,274,137

 

 

 

1,208,185

 

 

 

65,952

 

 

 

5.5

 %

Retail loans

 

 

3,800

 

 

 

9,603

 

 

 

(5,803

)

 

 

(60.4

)%

Total net finance receivables

 

$

1,771,410

 

 

$

1,699,393

 

 

$

72,017

 

 

 

4.2

 %

Number of branches at period end

 

 

346

 

 

 

345

 

 

 

1

 

 

 

0.3

 %

Net finance receivables per branch

 

$

5,120

 

 

$

4,926

 

 

$

194

 

 

 

3.9

 %

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 46


 

Comparison of the Year Ended December 31, 2023, Versus the Year Ended December 31, 2022

Net Income. Net income decreased $35.3 million, or 68.8%, to $16.0 million in 2023, from $51.2 million in 2022. The decrease was due to increases in provision for credit losses of $34.9 million, interest expense of $33.2 million, and general and administrative expenses of $20.6 million, partially offset by an increase in revenue of $44.2 million and a decrease in income taxes of $9.3 million.

Revenue. Total revenue increased $44.2 million, or 8.7%, to $551.4 million in 2023, from $507.2 million in 2022. The components of revenue are explained in greater detail below.

Interest and Fee Income. Interest and fee income increased $38.8 million, or 8.6%, to $489.7 million in 2023, from $450.9 million in 2022. The increase was due to an 11.8% increase in average net finance receivables, offset by a 0.9% decrease in average yield. Interest accrual reversals of charged-off loans from the 2023 and 2022 loan sales increased 2023 interest and fee income by $0.1 million on a net basis. Interest accrual reversal of charged-off loans from the 2022 loan sale decreased interest and fee income by $1.9 million and average yield by 10 basis points in 2022.

The following table sets forth the average net finance receivables balance and average yield for our loan products:

 

 

 

Average Net Finance Receivables
 for the Year Ended

 

 

Average Yields
for the Year Ended

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

 

YoY %
Inc (Dec)

 

 

December 31, 2023

 

 

December 31, 2022

 

 

YoY %
Inc (Dec)

 

Small loans

 

$

462,116

 

 

$

456,141

 

 

 

1.3

 %

 

 

35.6

%

 

 

35.2

%

 

 

0.4

 %

Large loans

 

 

1,242,529

 

 

 

1,063,365

 

 

 

16.8

 %

 

 

26.1

%

 

 

27.1

%

 

 

(1.0

)%

Retail loans

 

 

6,522

 

 

 

10,737

 

 

 

(39.3

)%

 

 

17.3

%

 

 

17.9

%

 

 

(0.6

)%

Total interest and fee yield

 

$

1,711,167

 

 

$

1,530,243

 

 

 

11.8

 %

 

 

28.6

%

 

 

29.5

%

 

 

(0.9

)%

Total originations decreased to $1.5 billion in 2023, from $1.6 billion in 2022, due to credit-tightening actions and the re-allocation of labor to collections in 2023. The following table represents the principal balance of loans originated and refinanced:

 

 

Loans Originated for the Year Ended

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

 

YoY $
Inc (Dec)

 

 

YoY %
Inc (Dec)

 

Small loans

 

$

606,412

 

 

$

653,155

 

 

$

(46,743

)

 

 

(7.2

)%

Large loans

 

 

928,499

 

 

 

979,557

 

 

 

(51,058

)

 

 

(5.2

)%

Retail loans

 

 

146

 

 

 

8,596

 

 

 

(8,450

)

 

 

(98.3

)%

Total loans originated

 

$

1,535,057

 

 

$

1,641,308

 

 

$

(106,251

)

 

 

(6.5

)%

The following table summarizes the components of the increase in interest and fee income:

 

 

Components of Increase in Interest and Fee Income
 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Increase (Decrease)

 

Dollars in thousands

 

Volume

 

 

Rate

 

 

Volume &
Rate

 

 

Net

 

Small loans

 

$

2,101

 

 

$

2,123

 

 

$

28

 

 

$

4,252

 

Large loans

 

 

48,611

 

 

 

(11,322

)

 

 

(1,907

)

 

 

35,382

 

Retail loans

 

 

(753

)

 

 

(60

)

 

 

23

 

 

 

(790

)

Product mix

 

 

3,346

 

 

 

(3,673

)

 

 

327

 

 

 

 

Total increase in interest and fee income

 

$

53,305

 

 

$

(12,932

)

 

$

(1,529

)

 

$

38,844

 

Insurance Income, Net. Insurance income, net increased $1.0 million, or 2.4%, to $44.5 million in 2023, from $43.5 million in 2022. In both 2023 and 2022, personal property insurance premiums represented the largest component of aggregate earned insurance premiums, and life insurance claims expense represented the largest component of direct insurance expenses.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 47


 

The following table summarizes the components of insurance income, net:

 

 

Insurance Premiums and Direct Expenses for the Year Ended

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

 

YoY $
B(W)

 

 

YoY %
B(W)

 

Earned premiums

 

$

59,830

 

 

$

60,190

 

 

$

(360

)

 

 

(0.6

)%

Claims, reserves, and certain direct expenses

 

 

(15,301

)

 

 

(16,688

)

 

 

1,387

 

 

 

8.3

%

Insurance income, net

 

$

44,529

 

 

$

43,502

 

 

$

1,027

 

 

 

2.4

%

Earned premiums during 2023 decreased by $0.4 million, and claims, reserves, and certain direct expenses decreased by $1.4 million compared to 2022. The decrease in earned premiums was primarily due to fewer active policies. The decrease in claims, reserves, and certain direct expenses was primarily due to a decrease in claims reserves.

Other Income. Other income increased $4.3 million, or 33.8%, to $17.2 million in 2023, from $12.8 million in 2022, primarily due to increases in interest income from cash reserves and investment income from securities of $3.7 million and $0.5 million, respectively.

Provision for Credit Losses. Our provision for credit losses increased $34.9 million, or 18.9%, to $220.0 million in 2023, from $185.1 million in 2022. The increase was due to an increase in net credit losses of $45.8 million, partially offset by a lower build in the allowance for credit losses of $10.9 million compared to 2022. The increase in the provision for credit losses is explained in greater detail below.

Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. During the years ended December 31, 2023, and December 31, 2022, we built the allowance for credit losses by $8.6 million (inclusive of a $10.8 million release associated with the loan sale during 2023 and a $9.3 million reserve build for the back-book portfolio) and $19.5 million (inclusive of a $11.8 million release associated with the loan sale during 2022), respectively. Loan loss reserves increased due to portfolio growth and a higher reserve rate which resulted in a net increase in the reserve. The allowance for credit losses as a percentage of finance receivables increased to 10.6% as of December 31, 2023, from 10.5% as of December 31, 2022 due to changes in estimated future macroeconomic impacts on credit losses, including increasing the reserve rate for loans originated in our back-book portfolio. We define "back book" as loans originated in the four quarters from the fourth quarter of 2021 through the third quarter of 2022 and the associated delinquent renewals for all loans originated prior to the fourth quarter of 2022. See Note 4, “Finance Receivables, Credit Quality Information, and Allowance for Credit Losses” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our allowance for credit losses.

Net Credit Losses. Net credit losses increased $45.8 million, or 27.7%, to $211.4 million in 2023, from $165.6 million in 2022. The increase was primarily due to higher average net finance receivables and the macroeconomic environment, partially offset by the net impact of the 2022 and 2023 loan sales. Net credit losses as a percentage of average net finance receivables were 12.4% in 2023, compared to 10.8% in 2022. The 2022 and 2023 loan sales resulted in a net increase of 10 basis points to our 2023 net credit loss ratio. The 2022 loan sale increased our net credit loss ratio by 80 basis points in 2022.

Delinquency Performance. Our contractual delinquency as a percentage of net finance receivables improved to 6.9% as of December 31, 2023, from 7.1% as of December 31, 2022. Both years ended 2023 and 2022 were inclusive of 90 basis point reductions in contractual delinquency resulting from the sale of certain non-performing loans.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 48


 

The following tables include delinquency balances by aging category and by product:

 

 

Contractual Delinquency by Aging

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

Current

 

$

1,493,341

 

 

 

84.3

%

 

$

1,431,502

 

 

 

84.2

%

1 to 29 days past due

 

 

155,196

 

 

 

8.8

%

 

 

148,048

 

 

 

8.7

%

Delinquent accounts:

 

 

 

 

 

 

 

 

 

 

 

 

30 to 59 days

 

 

34,756

 

 

 

1.9

%

 

 

36,208

 

 

 

2.2

%

60 to 89 days

 

 

31,212

 

 

 

1.8

%

 

 

31,352

 

 

 

1.8

%

90 to 119 days

 

 

27,107

 

 

 

1.5

%

 

 

24,293

 

 

 

1.4

%

120 to 149 days

 

 

15,317

 

 

 

0.9

%

 

 

16,257

 

 

 

1.0

%

150 to 179 days

 

 

14,481

 

 

 

0.8

%

 

 

11,733

 

 

 

0.7

%

Total contractual delinquency

 

$

122,873

 

 

 

6.9

%

 

$

119,843

 

 

 

7.1

%

Total net finance receivables

 

$

1,771,410

 

 

 

100.0

%

 

$

1,699,393

 

 

 

100.0

%

 

 

 

Contractual Delinquency by Product

 

Dollars in thousands

 

December 31, 2023

 

 

December 31, 2022

 

Small loans

 

$

42,151

 

 

 

8.5

%

 

$

43,703

 

 

 

9.1

%

Large loans

 

 

80,136

 

 

 

6.3

%

 

 

75,349

 

 

 

6.2

%

Retail loans

 

 

586

 

 

 

15.4

%

 

 

791

 

 

 

8.2

%

Total contractual delinquency

 

$

122,873

 

 

 

6.9

%

 

$

119,843

 

 

 

7.1

%

General and Administrative Expenses. Our general and administrative expenses increased $20.6 million, or 9.3%, to $243.1 million in 2023 from $222.5 million in 2022. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Personnel. The largest component of general and administrative expenses is personnel expense, which increased $15.6 million, or 11.1%, to $156.9 million in 2023, from $141.2 million in 2022. We had several offsetting increases and decreases in personnel expenses during 2023. Labor expenses and incentive costs increased $14.9 million and $1.7 million, respectively, compared to 2022. Additionally, 2023 included reduction in force expenses of $1.7 million. These increases were partially offset by lower recruiter fees and relocation expenses of $0.7 million and $0.3 million, respectively, compared to 2022. Capitalized loan origination costs, which reduce personnel expenses, increased by $1.5 million compared to 2022.

Occupancy. Occupancy expenses increased $1.2 million, or 5.1%, to $25.0 million in 2023, from $23.8 million in 2022. The increase was primarily due to the growth of our state footprint and the addition of new branches since 2022.

Marketing. Marketing expenses increased $0.4 million, or 2.6%, to $15.8 million in 2023, from $15.4 million in 2022 primarily due to higher digital marketing costs of $0.3 million.

Other Expenses. Other expenses increased $3.3 million, or 7.9%, to $45.4 million in 2023, from $42.1 million in 2022, primarily due to increased investment in digital and technological capabilities of $2.4 million. Additionally, we often experience increases in other expenses including legal expenses, collections expense, bank fees, and certain professional expenses as we grow our loan portfolio and expand our market footprint.

Operating Expense Ratio. Our operating expense ratio decreased by 0.3% to 14.2% during 2023, from 14.5% during 2022. Our operating expense ratio has improved as we have grown our loan portfolio and controlled expense growth.

Interest Expense. Interest expense increased $33.2 million, or 97.1%, to $67.5 million in 2023, compared to $34.2 million in 2022. The increase was primarily due to an increase in our average cost of debt as well as an increase in the average balance of our debt facilities. The average cost of debt increased to 5.00% in 2023, from 2.89% in 2022. The year-over-year increase was due to an increase in variable rate funding costs, inclusive of a prior-year increase in the fair value of our interest rate caps of $13.1 million. The average balance of our debt facilities increased to $1.3 billion in 2023, from $1.2 billion in 2022.

Income Taxes. Income taxes decreased $9.3 million, or 65.8%, to $4.8 million in 2023, from $14.1 million in 2022. The decrease was primarily due to a $44.5 million decrease in income before taxes compared to 2022. Our effective tax rate increased to 23.2% in 2023, compared to 21.6% in 2022. Fiscal 2023 was impacted by discrete tax deficiencies from the exercise and vesting of share-based awards. The effective tax rate for 2022 was impacted by the tax benefits from the exercise and vesting of share-based awards and a research and development tax credit.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 49


 

Comparison of the Year Ended December 31, 2022, Versus the Year Ended December 31, 2021

For a comparison of our results of operations for the years ended December 31, 2022 and December 31, 2021, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (which was filed with the Securities and Exchange Commission on February 24, 2023), which is incorporated by reference herein.

Liquidity and Capital Resources

Our primary cash needs relate to the funding of our lending activities and, to a lesser extent, expenditures relating to improving our technology infrastructure and expanding and maintaining our branch locations. We have historically financed, and plan to continue to finance, our short-term and long-term operating liquidity and capital needs through a combination of cash flows from operations and borrowings under our debt facilities, including our senior revolving credit facility, revolving warehouse credit facilities, and asset-backed securitization transactions, all of which are described below. We continue to seek ways to diversify our funding sources. As of December 31, 2023, we had a funded debt-to-equity ratio (debt divided by total stockholders’ equity) of 4.3 to 1.0 and a stockholders’ equity ratio (total stockholders’ equity as a percentage of total assets) of 18.0%.

Cash and cash equivalents increased to $4.5 million as of December 31, 2023, from $3.9 million as of December 31, 2022. As of December 31, 2023 and December 31, 2022 we had $108.1 million and $97.6 million, respectively, of immediate availability to draw down cash from our revolving credit facilities. Our unused capacity on our revolving credit facilities (subject to the borrowing base) was $551.5 million and $555.1 million as of December 31, 2023 and December 31, 2022, respectively. Our total debt was $1.4 billion as of both December 31, 2023 and the prior year-end.

A summary of the future material financial obligations requiring repayments as of December 31, 2023 is as follows:

 

 

Future Material Financial Obligations by Period

 

Dollars in thousands

 

Next Twelve Months

 

 

Beyond Twelve Months

 

 

Total

 

Principal payments on debt obligations

 

$

441,290

 

 

$

954,733

 

 

$

1,396,023

 

Interest payments on debt obligations

 

 

59,250

 

 

 

66,154

 

 

 

125,404

 

Operating lease obligations

 

 

9,681

 

 

 

33,285

 

 

 

42,966

 

Total

 

$

510,221

 

 

$

1,054,172

 

 

$

1,564,393

 

Based upon anticipated cash flows, we believe that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and operations over the next twelve months, as well as into the future.

From time to time, we have extended the maturity date of and increased the borrowing limits under our senior revolving credit facility. While we have successfully obtained such extensions and increases in the past, there can be no assurance that we will be able to do so if and when needed in the future. In addition, the revolving period maturities of our securitizations and warehouse credit facilities as of December 31, 2023 (each as described below within “Financing Arrangements”) range from February 2024 to September 2026. As of December 31, 2023, we did not exercise our right to redeem the notes of our RMIT 2020-1 securitization, for which the revolving period ended in September 2023. There can be no assurance that we will be able to secure an extension of the warehouse credit facilities or close additional securitization transactions if and when needed in the future. See Note 19, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding the amendment of the senior revolving credit facility following the end of the fiscal year.

Dividends.

The Board may in its discretion declare and pay cash dividends on our common stock. The following table sets forth the dividends declared and paid for 2023:

 

Period

 

Declaration Date

 

Record Date

 

Payment Date

 

Dividends Declared Per
Common Share

 

1Q 23

 

February 8, 2023

 

February 22, 2023

 

March 15, 2023

 

$

0.30

 

2Q 23

 

May 3, 2023

 

May 24, 2023

 

June 14, 2023

 

$

0.30

 

3Q 23

 

August 2, 2023

 

August 23, 2023

 

September 14, 2023

 

$

0.30

 

4Q 23

 

November 1, 2023

 

November 22, 2023

 

December 13, 2023

 

$

0.30

 

Total

 

 

 

 

 

 

 

$

1.20

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 50


 

The Board declared and paid $11.9 million of cash dividends on our common stock during 2023. See Note 19, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding our quarterly cash dividend following the end of the year.

While we intend to pay our quarterly dividend for the foreseeable future, all subsequent dividends will be reviewed and declared at the discretion of the Board and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that the Board deems relevant. Our dividend payments may change from time to time, and the Board may choose not to continue to declare dividends in the future.

Cash Flow.

Operating Activities. Net cash provided by operating activities in 2023 was $249.2 million, compared to $224.3 million provided by operating activities in 2022, an increase of $24.8 million. The increase was primarily due to the growth of our loan portfolio.

Investing Activities. Investing activities consist of originations and repayments of finance receivables, purchases of intangible assets, and purchases of property and equipment for new and existing branches. Net cash used in investing activities in 2023 was $278.7 million, compared to $447.3 million in 2022, a decrease of $168.6 million. The decrease was primarily due to decreased originations of finance receivables.

Financing Activities. Financing activities consist of borrowings and payments on our outstanding indebtedness. Net cash provided by financing activities in 2023 was $26.4 million, compared to $205.6 million in 2022, a decrease of $179.1 million. The decrease in cash provided was the result of a decrease in net advances on debt instruments of $202.5 million, partially offset by a decrease in the repurchases of common stock of $20.6 million and a decrease in payments for debt issuance costs of $2.9 million.

Financing Arrangements and Restricted Cash Reserve Accounts.

As of December 31, 2023, we have five credit facilities outstanding and, from time to time, engage in the private offering and sale of asset-backed notes. We had $108.1 million and $97.6 million of immediate availability to draw down cash from our revolving credit facilities as of December 31, 2023 and December 31, 2022, respectively. As part of our overall funding strategy, we have transferred certain finance receivables to affiliated variable interest entities (each, a “VIE”) for asset-backed financing transactions. Our debt arrangements described below, other than our senior revolving credit facility, are issued by each of our Regional Management Receivables (“RMR”) and Regional Management Issuance Trust (“RMIT”) SPEs, which are considered VIEs under GAAP. These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $109.9 million and $112.2 million as of December 31, 2023 and December 31, 2022, respectively. Our debt arrangements also contain various debt covenants. We were in compliance with all such debt covenants as of December 31, 2023.

Revolving Credit Facilities. The following is a summary of our revolving credit facilities as of December 31, 2023:

 

Dollars in thousands

 

Capacity

 

 

Debt Balance

 

 

Effective Interest Rate

 

Facility Cash Reserve Requirement

 

 

Restricted Cash Collection

 

 

Maturity Date

Senior (1)

 

$

420,000

 

 

$

195,462

 

 

8.44%

 

 

 

 

 

 

 

Sep 2024

RMR IV warehouse

 

$

125,000

 

 

$

3,197

 

 

8.24%

 

$

253

 

 

$

2,071

 

 

May 2026

RMR V warehouse

 

$

100,000

 

 

$

26,718

 

 

8.34%

 

$

524

 

 

$

4,288

 

 

Nov 2025

RMR VI warehouse

 

$

75,000

 

 

$

15,953

 

 

7.94%

 

$

198

 

 

$

1,621

 

 

Feb 2026

RMR VII warehouse

 

$

75,000

 

 

$

4,216

 

 

8.44%

 

$

52

 

 

$

487

 

 

Oct 2025

(1) See Note 19, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding the amendment of this facility following the end of the fiscal year.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 51


 

Securitizations. The following is a summary of our securitizations as of December 31, 2023:

 

Dollars in thousands

 

Issue Amount

 

 

Debt Balance

 

 

Effective Interest Rate

 

Restricted Cash Reserves

 

 

Restricted Cash Collection

 

 

Revolving Period Maturity

 

Final Maturity Date

RMIT 2020-1

 

$

180,000

 

 

$

145,290

 

 

2.97%

 

$

1,875

 

 

$

12,050

 

 

Sep 2023

 

Oct 2030

RMIT 2021-1

 

$

248,700

 

 

$

248,916

 

 

2.08%

 

$

2,604

 

 

$

20,812

 

 

Feb 2024

 

Mar 2031

RMIT 2021-2

 

$

200,000

 

 

$

200,192

 

 

2.30%

 

$

2,083

 

 

$

15,555

 

 

Jul 2026

 

Aug 2033

RMIT 2021-3

 

$

125,000

 

 

$

125,202

 

 

3.88%

 

$

1,471

 

 

$

15,866

 

 

Sep 2026

 

Oct 2033

RMIT 2022-1

 

$

250,000

 

 

$

250,374

 

 

3.59%

 

$

2,646

 

 

$

20,327

 

 

Feb 2025

 

Mar 2032

RMIT 2022-2B (1)

 

$

200,000

 

 

$

184,295

 

 

7.51%

 

$

2,326

 

 

$

16,790

 

 

Oct 2024

 

Nov 2031

(1) RMR III retained $16.3 million of Class C fixed-rate, asset-backed notes that may be sold in whole or in part on the closing date.

RMC Reinsurance. Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain reserves against life insurance policies ceded to it, as determined by the ceding company. These reserves are comprised of restricted cash and restricted available-for-sale investments, which totaled $0.3 million and $22.7 million, respectively, as of December 31, 2023.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP and conform to general practices within the consumer finance industry. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Allowance for Credit Losses.

The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining our estimate of expected credit losses, we evaluate information related to credit metrics, changes in our lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

We selected a Probability of Default (“PD”) / Loss Given Default (“LGD”) model to estimate our base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).

To enhance the precision of the allowance for credit loss estimate, we evaluate our finance receivable portfolio on a pool basis and segment each pool of finance receivables with similar credit risk characteristics. As part of our evaluation, we consider loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, we selected the following segmentation: product type, Fair Isaac Corporation score, and delinquency status.

As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). We use our segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. We also consider the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Macroeconomic forecasts are required for our allowance for credit loss model and require significant judgment and estimation uncertainty. We consider key economic factors, most notably unemployment rates, to incorporate into our estimate of the allowance for credit losses. We engaged a major rating service provider to assist with compiling a reasonable and supportable forecast which we use to support the adjustments of our historical loss experience.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 52


 

Due to the judgment and uncertainty in estimating the expected credit losses, we may experience changes to the macroeconomic assumptions within our forecast, as well as changes to our credit loss performance outlook, both of which could lead to further changes in our allowance for credit losses, allowance as a percentage of net finance receivables, and provision for credit losses. Potential macroeconomic changes have created conditions that increase the level of uncertainty associated with our estimate of the amount and timing of future credit losses from our loan portfolio.

Macroeconomic Sensitivity. To demonstrate the sensitivity of forecasting macroeconomic conditions, we stressed our macroeconomic model with 10% increased weighting towards slower near-term growth that would have increased our reserves as of December 31, 2023 by $1.2 million.

The macroeconomic scenarios are highly influenced by timing, severity, and duration of changes in the underlying economic factors. This makes it difficult to estimate how potential changes in economic factors affect the estimated credit losses. Therefore, this hypothetical analysis is not intended to represent our expectation of changes in our estimate of expected credit losses due to a change in the macroeconomic environment, nor does it consider management’s judgment of other quantitative and qualitative information which could increase or decrease the estimate.

Regulatory Developments.

On March 7, 2023, the CFPB provided us with the Notice seeking to establish supervisory authority over us pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010. Under that provision, the CFPB may establish supervisory authority over any non-bank covered person that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. We responded to the Notice by voluntarily consenting to the CFPB’s supervisory authority and entering into the Consent Agreement dated January 4, 2024. Pursuant to the Consent Agreement and related CFPB order, the CFPB will have supervisory authority over us for a period of two years ending January 8, 2026. The Consent Agreement does not constitute an admission by us that we are a nonbank covered person who is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. See “Government Regulation” in Part I, Item 1 “Business” and “Risks Related to Regulation and Legal Proceedings” in Part I, Item 1A “Risk Factors” for a further discussion of the regulation and regulatory risks to which we are subject.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 53


 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. We originate finance receivables either at prevailing market rates or at statutory limits. Our finance receivables are structured on a fixed-rate, fixed-term basis. Accordingly, subject to statutory limits, our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market rates. Because our large loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, our reaction time to changes may be affected as our large loans change as a percentage of our portfolio.

We also are exposed to changes in interest rates as a result of certain borrowing activities. As of December 31, 2023, the interest rates on 82% of our debt (the securitizations) were fixed. We maintain liquidity and fund our business operations in part through variable-rate borrowings under a senior revolving credit facility and multiple revolving warehouse credit facilities. As of December 31, 2023, the balances and key terms of the credit facilities were as follows:

Revolving Credit Facility

 

Balance
(in thousands)

 

 

Interest Payment Frequency

 

Rate Type

 

Floor

 

 

Margin

 

 

Effective Interest Rate

 

Senior

 

$

195,462

 

 

Monthly

 

1-month SOFR

 

 

0.50

%

 

 

3.00

%

 

 

8.44

%

RMR IV warehouse

 

 

3,197

 

 

Monthly

 

1-month SOFR

 

 

 

 

 

2.80

%

 

 

8.24

%

RMR V warehouse

 

 

26,718

 

 

Monthly

 

Conduit

 

 

 

 

 

2.75

%

 

 

8.34

%

RMR VI warehouse

 

 

15,953

 

 

Monthly

 

1-month SOFR

 

 

 

 

 

2.50

%

 

 

7.94

%

RMR VII warehouse

 

 

4,216

 

 

Monthly

 

1-month SOFR

 

 

 

 

 

3.00

%

 

 

8.44

%

Total

 

$

245,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Based on the underlying rates and the outstanding balances as of December 31, 2023, an increase of 100 basis points in the rates of our revolving credit facilities would result in approximately $2.5 million of increased interest expense on an annual basis, in the aggregate, under these borrowings.

The nature and amount of our debt may vary as a result of future business requirements, market conditions, and other factors.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 54


 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Regional Management Corp.

Index to Consolidated Financial Statements

Fiscal Year Ended December 31, 2023

 

 

Page

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 34)

 

56

Report of Independent Registered Public Accounting Firm (PCAOB ID: 49)

 

59

Consolidated Balance Sheets at December 31, 2023 and December 31, 2022

 

60

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021

 

62

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021

 

63

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, December 31, 2022, and
December 31, 2021

 

65

Notes to Consolidated Financial Statements

 

67

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 55


 

Report of Independent Registered Public Accounting Firm

 

To the stockholders and the Board of Directors of Regional Management Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Regional Management Corp. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes to consolidated financial statements (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years ended December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses — Refer to Notes 2 and 4 to the consolidated financial statements

The Company’s estimate of expected credit losses in the Company’s loan portfolio is recorded in the allowance for credit losses. The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining its estimate of expected credit losses, the Company evaluates information related to credit metrics, changes in its lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

The Company selected a pool Probability of Default (“PD”) / Loss Given Default (“LGD”) model to estimate its base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs). To enhance the precision of the allowance for credit loss estimate, the Company evaluates its finance receivable portfolio on a pool basis and segments each pool of finance receivables with similar credit risk characteristics. As part of its evaluation, the Company considers loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, the Company selected the following segmentation: product type, Fair Isaac Corporation (“FICO”) score, and delinquency status.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 56


 

Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the Company’s allowance for credit loss model. The Company engaged a major rating service to assist with compiling a reasonable and supportable forecast. The Company reviews macroeconomic forecasts to use in its allowance for credit losses. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations.

Given the size of the loan portfolio and the subjective nature of estimating the allowance for credit losses, auditing the allowance for credit losses involved a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the allowance for credit losses included the following, among others:

We tested the design and operating effectiveness of the relevant controls related to (i) selection of the macroeconomic forecasts, (ii) execution and monitoring of the PD/LGD model, (iii) adjustments made to the historical loss experience for qualitative factors, and (iv) overall calculation and disclosure of the allowance for credit losses.
We used credit specialists to assist us in (i) evaluating the reasonableness of the PD/LGD model and relevant assumptions, and (ii) evaluating the reasonableness of design, theory, and logic of the model for estimating expected credit losses.
We tested the completeness and accuracy of the data input into the models and assessed the reasonableness of the model’s calculations of probability of default and loss given default.
We (i) evaluated the reasonableness of management’s macroeconomic forecast selection, (ii) evaluated the appropriateness and relevance of adjustments made to the historical loss experience for qualitative factors, and (iii) tested the arithmetic accuracy of the calculation of these adjustments.
We tested the arithmetic accuracy of the calculation of the overall allowance for credit losses and assessed the reasonableness of the related disclosures.

 

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

February 22, 2024

 

We have served as the Company’s auditor since 2022.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 57


 

Report of Independent Registered Public Accounting Firm

 

To the stockholders and the Board of Directors of Regional Management Corp.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Regional Management Corp. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 22, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Auditor’s Unqualified Report on Financial Statements. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 22, 2024

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 58


 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and the Board of Directors of

Regional Management Corp. and Subsidiaries

 

Opinion on the Financial Statements
We have audited the accompanying consolidated statements of comprehensive income, stockholders’ equity and cash flows of Regional Management Corp. and its subsidiaries (the Company) for the year ended December 31, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

 

/s/ RSM US LLP

We served as the Company’s auditor from October 2, 2007 through March 4, 2022.

Raleigh, North Carolina

March 4, 2022

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 59


 

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

December 31, 2023 and 2022

(in thousands, except par value amounts)

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Cash

 

$

4,509

 

 

$

3,873

 

Net finance receivables

 

 

1,771,410

 

 

 

1,699,393

 

Unearned insurance premiums

 

 

(47,892

)

 

 

(51,008

)

Allowance for credit losses

 

 

(187,400

)

 

 

(178,800

)

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

 

 

1,536,118

 

 

 

1,469,585

 

Restricted cash

 

 

124,164

 

 

 

127,926

 

Lease assets

 

 

34,303

 

 

 

34,521

 

Restricted available-for-sale investments

 

 

22,740

 

 

 

20,416

 

Intangible assets

 

 

15,846

 

 

 

12,122

 

Property and equipment

 

 

13,787

 

 

 

14,526

 

Deferred tax assets, net

 

 

13,641

 

 

 

13,810

 

Other assets

 

 

29,419

 

 

 

28,208

 

Total assets

 

$

1,794,527

 

 

$

1,724,987

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Debt

 

$

1,399,814

 

 

$

1,355,359

 

Unamortized debt issuance costs

 

 

(4,578

)

 

 

(9,512

)

Net debt

 

 

1,395,236

 

 

 

1,345,847

 

Accounts payable and accrued expenses

 

 

40,442

 

 

 

33,795

 

Lease liabilities

 

 

36,576

 

 

 

36,712

 

Total liabilities

 

 

1,472,254

 

 

 

1,416,354

 

Commitments and contingencies (Notes 7, 17, and 18)

 

 

 

 

 

 

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, 14,566 shares issued and 9,759 shares outstanding at December 31, 2023 and 14,330 shares issued and 9,523 shares outstanding at December 31, 2022)

 

 

1,457

 

 

 

1,433

 

Additional paid-in capital

 

 

121,752

 

 

 

112,384

 

Retained earnings

 

 

349,579

 

 

 

345,545

 

Accumulated other comprehensive loss

 

 

(372

)

 

 

(586

)

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

 

 

(150,143

)

 

 

(150,143

)

Total stockholders’ equity

 

 

322,273

 

 

 

308,633

 

Total liabilities and stockholders’ equity

 

$

1,794,527

 

 

$

1,724,987

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 60


 

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

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Cash

 

$

378

 

 

$

439

 

Net finance receivables

 

 

1,278,568

 

 

 

1,296,078

 

Allowance for credit losses

 

 

(133,207

)

 

 

(134,708

)

Restricted cash

 

 

123,899

 

 

 

126,017

 

Other assets

 

 

2,880

 

 

 

1,706

 

Total assets

 

$

1,272,518

 

 

$

1,289,532

 

Liabilities

 

 

 

 

 

 

Net debt

 

$

1,200,380

 

 

$

1,199,404

 

Accounts payable and accrued expenses

 

 

218

 

 

 

167

 

Total liabilities

 

$

1,200,598

 

 

$

1,199,571

 

See accompanying notes to consolidated financial statements.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 61


 

Regional Management Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2023, 2022, and 2021

(in thousands, except per share amounts)

 

 

2023

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$

489,698

 

 

$

450,854

 

 

$

382,544

 

Insurance income, net

 

 

44,529

 

 

 

43,502

 

 

 

35,482

 

Other income

 

 

17,172

 

 

 

12,831

 

 

 

10,325

 

Total revenue

 

 

551,399

 

 

 

507,187

 

 

 

428,351

 

Expenses

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

220,034

 

 

 

185,115

 

 

 

89,015

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

 

156,872

 

 

 

141,243

 

 

 

119,833

 

Occupancy

 

 

25,029

 

 

 

23,809

 

 

 

24,126

 

Marketing

 

 

15,774

 

 

 

15,378

 

 

 

14,405

 

Other

 

 

45,444

 

 

 

42,098

 

 

 

37,150

 

Total general and administrative expenses

 

 

243,119

 

 

 

222,528

 

 

 

195,514

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

67,463

 

 

 

34,223

 

 

 

31,349

 

Income before income taxes

 

 

20,783

 

 

 

65,321

 

 

 

112,473

 

Income taxes

 

 

4,825

 

 

 

14,097

 

 

 

23,786

 

Net income

 

$

15,958

 

 

$

51,224

 

 

$

88,687

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.70

 

 

$

5.51

 

 

$

8.84

 

Diluted

 

$

1.66

 

 

$

5.30

 

 

$

8.33

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

9,398

 

 

 

9,296

 

 

 

10,034

 

Diluted

 

 

9,593

 

 

 

9,656

 

 

 

10,643

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Unrealized income (loss) on restricted available-for-sale investments

 

 

271

 

 

 

(742

)

 

 

 

Other comprehensive income (loss), before tax

 

 

271

 

 

 

(742

)

 

 

 

Income taxes related to items of other comprehensive income (loss)

 

 

(57

)

 

 

156

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

214

 

 

 

(586

)

 

 

 

Total comprehensive income

 

$

16,172

 

 

$

50,638

 

 

$

88,687

 

See accompanying notes to consolidated financial statements.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 62


 

Regional Management Corp. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2023, 2022, and 2021

(in thousands)

 

 

 

 

Year Ended December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Other Comprehensive

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock

 

 

Total

 

Balance, December 31, 2022

 

 

14,330

 

 

$

1,433

 

 

$

112,384

 

 

$

345,545

 

 

$

(586

)

 

$

(150,143

)

 

$

308,633

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(11,924

)

 

 

 

 

 

 

 

 

(11,924

)

Issuance of restricted stock awards

 

 

322

 

 

 

32

 

 

 

(32

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

18

 

 

 

2

 

 

 

287

 

 

 

 

 

 

 

 

 

 

 

 

289

 

Shares withheld related to net share settlement

 

 

(104

)

 

 

(10

)

 

 

(2,642

)

 

 

 

 

 

 

 

 

 

 

 

(2,652

)

Share-based compensation

 

 

 

 

 

 

 

 

11,755

 

 

 

 

 

 

 

 

 

 

 

 

11,755

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15,958

 

 

 

 

 

 

 

 

 

15,958

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

214

 

 

 

 

 

 

214

 

Balance, December 31, 2023

 

 

14,566

 

 

$

1,457

 

 

$

121,752

 

 

$

349,579

 

 

$

(372

)

 

$

(150,143

)

 

$

322,273

 

 

 

 

Year Ended December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Other Comprehensive

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Total

 

Balance, December 31, 2021

 

 

14,157

 

 

$

1,416

 

 

$

104,745

 

 

$

306,105

 

 

$

 

 

$

(129,530

)

 

$

282,736

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(11,784

)

 

 

 

 

 

 

 

 

(11,784

)

Issuance of restricted stock awards

 

 

224

 

 

 

22

 

 

 

(22

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

61

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,613

)

 

 

(20,613

)

Shares withheld related to net share settlement

 

 

(112

)

 

 

(11

)

 

 

(3,107

)

 

 

 

 

 

 

 

 

 

 

 

(3,118

)

Share-based compensation

 

 

 

 

 

 

 

 

10,768

 

 

 

 

 

 

 

 

 

 

 

 

10,768

 

Net income

 

 

 

 

 

 

 

 

 

 

 

51,224

 

 

 

 

 

 

 

 

 

51,224

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(586

)

 

 

 

 

 

(586

)

Balance, December 31, 2022

 

 

14,330

 

 

$

1,433

 

 

$

112,384

 

 

$

345,545

 

 

$

(586

)

 

$

(150,143

)

 

$

308,633

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 63


 

 

 

 

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Other Comprehensive

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Total

 

Balance, December 31, 2020

 

 

13,851

 

 

$

1,385

 

 

$

105,483

 

 

$

227,343

 

 

$

 

 

$

(62,088

)

 

$

272,123

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(9,925

)

 

 

 

 

 

 

 

 

(9,925

)

Issuance of restricted stock awards

 

 

219

 

 

 

22

 

 

 

(22

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

453

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(67,442

)

 

 

(67,442

)

Shares withheld related to net share settlement

 

 

(366

)

 

 

(37

)

 

 

(8,196

)

 

 

 

 

 

 

 

 

 

 

 

(8,233

)

Share-based compensation

 

 

 

 

 

 

 

 

7,399

 

 

 

 

 

 

 

 

 

 

 

 

7,399

 

Short-swing profit disgorgement

 

 

 

 

 

 

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

81

 

Net income

 

 

 

 

 

 

 

 

 

 

 

88,687

 

 

 

 

 

 

 

 

 

88,687

 

Balance, December 31, 2021

 

 

14,157

 

 

$

1,416

 

 

$

104,745

 

 

$

306,105

 

 

$

 

 

$

(129,530

)

 

$

282,736

 

See accompanying notes to consolidated financial statements.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 64


 

Regional Management Corp. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2023, 2022, and 2021

(in thousands)

 

 

2023

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

15,958

 

 

$

51,224

 

 

$

88,687

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

220,034

 

 

 

185,115

 

 

 

89,015

 

Depreciation and amortization

 

 

14,634

 

 

 

12,689

 

 

 

11,653

 

Amortization of deferred originations fees and costs

 

 

(14,644

)

 

 

(15,843

)

 

 

(15,776

)

Loss on disposal of property and equipment

 

 

867

 

 

 

143

 

 

 

161

 

Share-based compensation

 

 

11,755

 

 

 

10,768

 

 

 

7,399

 

Fair value adjustment on interest rate caps

 

 

 

 

 

 

 

 

(2,721

)

Deferred income taxes, net

 

 

112

 

 

 

4,766

 

 

 

(4,299

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Increase (decrease) in unearned insurance premiums

 

 

(3,116

)

 

 

3,171

 

 

 

13,292

 

(Increase) decrease in lease assets

 

 

218

 

 

 

(5,800

)

 

 

(1,605

)

Increase in other assets

 

 

(4,144

)

 

 

(13,271

)

 

 

(8,443

)

Increase (decrease) in accounts payable and accrued expenses

 

 

7,628

 

 

 

(14,642

)

 

 

10,153

 

Increase (decrease) in lease liabilities

 

 

(136

)

 

 

6,012

 

 

 

1,499

 

Net cash provided by operating activities

 

 

249,166

 

 

 

224,332

 

 

 

189,015

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Originations of finance receivables

 

 

(1,544,948

)

 

 

(1,643,537

)

 

 

(1,452,634

)

Repayments of finance receivables

 

 

1,280,134

 

 

 

1,228,495

 

 

 

1,104,437

 

Purchases of intangible assets

 

 

(7,378

)

 

 

(5,534

)

 

 

(3,273

)

Purchases of property and equipment

 

 

(4,692

)

 

 

(5,874

)

 

 

(3,588

)

Purchase of restricted available-for-sale investments

 

 

(5,900

)

 

 

(23,974

)

 

 

 

Proceeds from sale of restricted available-for-sale investments

 

 

 

 

 

3,130

 

 

 

 

Proceeds from maturities of restricted available-for-sale investments

 

 

4,061

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(278,723

)

 

 

(447,294

)

 

 

(355,058

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Advances on revolving credit facilities

 

 

1,645,346

 

 

 

1,832,412

 

 

 

1,901,870

 

Payments on revolving credit facilities

 

 

(1,566,736

)

 

 

(1,910,717

)

 

 

(1,985,601

)

Advances on securitizations

 

 

 

 

 

433,720

 

 

 

573,700

 

Payments on securitizations

 

 

(34,890

)

 

 

(109,228

)

 

 

(150,857

)

Payments for debt issuance costs

 

 

(2,769

)

 

 

(5,656

)

 

 

(8,907

)

Taxes paid related to net share settlement of equity awards

 

 

(2,923

)

 

 

(2,993

)

 

 

(9,951

)

Short-swing profit disgorgement

 

 

 

 

 

 

 

 

81

 

Cash dividends

 

 

(11,886

)

 

 

(11,353

)

 

 

(9,537

)

Repurchases of common stock

 

 

 

 

 

(20,613

)

 

 

(67,442

)

Proceeds from exercise of stock options

 

 

289

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

26,431

 

 

 

205,572

 

 

 

243,356

 

Net change in cash and restricted cash

 

 

(3,126

)

 

 

(17,390

)

 

 

77,313

 

Cash and restricted cash at beginning of period

 

 

131,799

 

 

 

149,189

 

 

 

71,876

 

Cash and restricted cash at end of period

 

$

128,673

 

 

$

131,799

 

 

$

149,189

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

60,083

 

 

$

40,475

 

 

$

29,428

 

Income taxes paid

 

$

3,050

 

 

$

26,963

 

 

$

23,077

 

Operating leases paid

 

$

10,193

 

 

$

9,071

 

 

$

9,729

 

Non-cash lease assets and liabilities acquired

 

$

8,084

 

 

$

13,493

 

 

$

9,717

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 65


 

The following table reconciles cash and restricted cash from the Consolidated Balance Sheets to the statements above:

 

 

December 31, 2023

 

 

December 31, 2022

 

 

December 31, 2021

 

Cash

 

$

4,509

 

 

$

3,873

 

 

$

10,507

 

Restricted cash

 

 

124,164

 

 

 

127,926

 

 

 

138,682

 

Total cash and restricted cash

 

$

128,673

 

 

$

131,799

 

 

$

149,189

 

See accompanying notes to consolidated financial statements.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 66


 

Regional Management Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business

Regional Management Corp. (the “Company”) was incorporated and began operations in 1987. The Company is engaged in the consumer finance business, offering small loans, large loans, and related payment and collateral protection insurance products. The Company formerly offered retail loans but ceased accepting applications for retail loan products effective November 2022. The Company continues to own and service its existing portfolio of retail loans. As of December 31, 2023, the Company operated under the name “Regional Finance” online and in branch locations in 19 states across the United States.

The Company’s small loan portfolio is comprised of branch small loan receivables and convenience check receivables. Branch small loan receivables are direct loans to customers and are secured by non-essential household goods and, in some instances, an automobile. Convenience checks are direct loans originated by mailing checks to customers based on a pre-screening process that includes a review of the prospective customer’s credit profile provided by national credit reporting bureaus or data aggregators. A recipient of a convenience check is able to enter into a loan by endorsing and depositing or cashing the check. Large loan receivables are direct loans to customers, some of which are convenience check receivables and the vast majority of which are secured by non-essential household goods, automobiles, and/or other vehicles. Retail loan receivables consist principally of retail installment sales contracts collateralized by the purchased furniture, appliances, and other retail items and are initiated by and purchased from retailers, subject to the Company’s credit approval.

The Company’s loan volume and contractual delinquency follow seasonal trends. Demand for the Company’s loans is typically highest during the second, third, and fourth quarters, which the Company believes is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which the Company believes is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation and larger provisions for credit losses in periods of portfolio growth. Consequently, the Company experiences seasonal fluctuations in its operating results. However, changes in macroeconomic factors, including inflation, rising interest rates, and geopolitical conflict, have impacted the Company’s typical seasonal trends for loan volume and delinquency.

Note 2. Significant Accounting Policies

The following is a description of significant accounting policies used in preparing the financial statements. The accounting and reporting policies of the Company are in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

Business segments: The Company has one reportable segment, which is the consumer finance segment.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company operates through a separate wholly owned subsidiary in each state. The Company also consolidates variable interest entities (each, a “VIE”) when it is considered to be the primary beneficiary of the VIE because it has (i) power over the significant activities of the VIE and (ii) the obligation to absorb losses or the right to receive returns that could be significant to the VIE.

Variable interest entities: The Company transfers pools of loans to wholly owned, bankruptcy-remote, special purpose entities (each, an “SPE”) to secure debt for general funding purposes. These entities have the limited purpose of acquiring finance receivables, in addition to holding and making payments on the related debts. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates. The Company continues to service the finance receivables transferred to the SPEs. The lenders and investors in the debt issued by the SPEs generally only have recourse to the assets of the SPEs and do not have recourse to the general credit of the Company.

The SPEs’ debt arrangements are structured to provide credit enhancements to the lenders and investors, which may include overcollateralization, subordination of interests, excess spread, and reserve funds. These enhancements, along with the isolated finance receivables pools, increase the creditworthiness of the SPEs above that of the Company as a whole. This increases the marketability of the Company’s collateral for borrowing purposes, leading to more favorable borrowing terms, improved interest rate risk management, and additional flexibility to grow the business.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 67


 

The SPEs are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. The Company is considered to be the primary beneficiary of the SPEs because it has (i) power over the significant activities through its role as servicer of the finance receivables under each debt arrangement, (ii) the obligation to absorb losses that could be significant through note investment, if applicable, and (iii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s interest in the monthly residual cash flows of the SPEs.

Consolidation of VIEs results in these transactions being accounted for as secured borrowings; therefore, the pooled receivables and the related debts remain on the consolidated balance sheet of the Company. Each debt is secured solely by the assets of the VIEs and not by any other assets of the Company. The assets of the VIEs are the only source of funds for repayment on each debt, and restricted cash held by the VIEs can only be used to support payments on the debt. The Company recognizes revenue and provision for credit losses on the finance receivables of the VIEs and interest expense on the related secured debt.

Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Actual results could differ from those estimates.

Estimates that are susceptible to change relate to the determination of the allowance for credit losses, the valuation of deferred tax assets and liabilities, and the fair value of financial instruments.

Recent accounting pronouncements: In March 2022, the Financial Accounting Standards Board (“FASB”) issued accounting standard update (“ASU”) 2022-02, eliminating the accounting for troubled debt restructurings (each, a “TDR”) by creditors while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amendment also requires disclosure of gross credit losses by year of origination for finance receivables. The amendments in this update are effective for annual and interim periods beginning after December 15, 2022. The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

The Company adopted the new standard on January 1, 2023 and elected to apply the new measurement and recognition guidance for TDRs under the modified retrospective transition method. Adoption did not have a material impact on the Company's consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, improving the disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. These enhanced disclosures require reporting of incremental segment information on an annual and interim basis for all public entities, including public entities with only one reportable segment, to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024, and early adoption is permitted. The segment reporting guidance should be applied retrospectively to all prior periods presented in the financial statements, and upon transition, the expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the potential impact of this update on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, enhancing the transparency and decision usefulness of income tax disclosures. The amendment, among other things, improves transparency of income tax disclosures by requiring more consistent categories and greater disaggregation of information in rate reconciliations, and disaggregation of income taxes paid by jurisdiction. The amendments in this update are effective for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The income tax guidance should be applied on a prospective basis, however, retrospective application is permitted. The Company is currently evaluating the potential impact of this update on its consolidated financial statements.

Treasury stock: The Company records the repurchase of shares of its common stock at cost on the settlement date of the transaction. These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Net finance receivables: Generally, the Company classifies finance receivables as held for investment based on management’s intent at the time of origination. The Company determines classification on a receivable-by-receivable basis. The Company classifies finance receivables as held for investment due to its ability and intent to hold them until their contractual maturities. Net finance

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 68


 

receivables consist of the Company’s installment loans. The Company carries net finance receivables at amortized cost, which includes remaining principal balance, accrued interest, and net unamortized deferred origination costs and unamortized fees.

Loan renewals are a significant piece of new volume and are considered a terminal event of the previous loan. The Company may renew delinquent secured or unsecured loan accounts if the customer meets the Company’s underwriting criteria and it does not appear the cause of past delinquency will affect the customer’s ability to repay the renewed loan.

Delinquency: The Company determines past due status using the contractual terms of the finance receivable. Delinquency is one of the primary credit quality indicators used to evaluate the allowance for credit losses for each class of finance receivables.

Finance receivable origination fees and costs: Non-refundable fees received and direct costs (personnel and digital loan origination costs) incurred for the origination of finance receivables are deferred and recognized to interest income over their contractual lives using the constant yield method. Unamortized amounts are recognized in interest income at the time that finance receivables are paid in full, renewed, or charged off.

Nonaccrual status: Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income. Interest received on such loans is accounted for on the cash-basis method, until qualifying for return to accrual. Under the cash-basis method, interest income is recorded when the payment is received. Loans resume accruing interest when the past due status is brought below 90 days. The Company made a policy election to not record an allowance for credit losses related to accrued interest because it has nonaccrual and charge-off policies that result in the timely suspension and reversal of accrued interest.

Allowance for credit losses: The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining its estimate of expected credit losses, the Company evaluates information related to credit metrics, changes in its lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

The Company selected a Probability of Default ("PD") / Loss Given Default ("LGD") model to estimate its base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).

To enhance the precision of the allowance for credit loss estimate, the Company evaluates its finance receivable portfolio on a pool basis and segments each pool of finance receivables with similar credit risk characteristics. As part of its evaluation, the Company considers loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, the Company selected the following segmentation: product type, Fair Isaac Corporation (“FICO”) score, and delinquency status.

As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). The Company uses its segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the Company’s allowance for credit loss model. The Company engaged a major rating service to assist with compiling a reasonable and supportable forecast. The Company reviews macroeconomic forecasts to use in its allowance for credit losses. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations. The Company does not require reversion adjustments, as the contractual lives of its portfolio are shorter than its available forecast periods.

The Company charges credit losses against the allowance for all products when an account reaches 180 days contractually delinquent, subject to certain exceptions. The Company’s customer accounts without a lien on a vehicle in a confirmed bankruptcy are charged off in the month following the bankruptcy notification or at 60 days contractually delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 69


 

exception of borrowers with credit life insurance. Subsequent recoveries of amounts charged off, if any, are credited to the allowance.

Troubled Debt Restructurings: Prior to January 1, 2023, the Company classified a finance receivable as a TDR when the Company modified the finance receivable’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and granted a concession that it would not have otherwise considered. Modifications primarily included an interest rate reduction and/or term extension to reduce the borrower’s monthly payment. Once a loan was classified as a TDR, it remained a TDR for the purpose of calculating the allowance for credit losses for the remainder of its contractual term.

The Company established its allowance for credit losses related to its TDRs by calculating the present value of all expected cash flows (discounted at the finance receivable’s effective interest rate prior to modification) less the amortized costs of the aggregated pool. The Company used the modified interest rates and certain assumptions, including expected credit losses and recoveries, to estimate the expected cash flows from its TDRs.

Following the adoption of ASU 2022-02 on January 1, 2023, as discussed above, the Company no longer separately measures the allowance for credit losses on TDRs, and the impact to the allowance for credit losses of loan modifications made to borrowers experiencing financial difficulties is incorporated into the overall portfolio assessment as further described in the allowance for credit losses significant accounting policy.

Property and equipment: Leasehold improvements are depreciated over the shorter of their useful lives or the remaining term of the lease. Furniture and equipment are depreciated on the straight-line method over their estimated useful lives, generally five to ten years. Maintenance and repairs are charged to expense as incurred.

Leases: The Company leases its current headquarters building. Branch offices are leased under non-cancellable leases of three to seven years with renewal options. The Company’s lease liability is based on the present value of the remaining minimum rental payments using a discount rate that is based on the Company’s incremental borrowing rate on its senior revolving credit facility. The Company’s lease asset includes right-of-use assets equaling the lease liability, net of prepaid rent and deferred rents that existed as of the adoption of the current lease accounting standard. The Company assesses its leased assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If a lease is impaired, the impairment loss is recognized in lease costs and the right-of-use asset is reduced to the impaired value.

Lease agreements with terms of twelve months or less are not capitalized as part of lease assets or liabilities and are expensed as incurred. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component for its branch leases. The Company has elected not to apply this policy in relation to the corporate headquarters lease. The Company has also determined that it is reasonably certain that the first option to extend lease contracts will be exercised for new branch locations; therefore, the first option to extend is included in the lease asset and liability calculation.

Restricted cash: Restricted cash includes cash and cash equivalents for which the Company’s ability to withdraw funds is contractually limited. The Company’s restricted cash consists of cash reserves that are maintained as collateral for potential credit life insurance claims and cash restricted for debt servicing of the Company’s revolving warehouse credit facilities and securitizations.

Restricted available-for-sale investments: The Company classifies its investments in debt securities that were purchased with the Company’s restricted cash as restricted available-for-sale investments and carries the investments at fair value. Unrealized gains and losses, net of taxes, are excluded from earnings and reported in other comprehensive income or loss until realized. The unrealized gains and losses, net of taxes, are recorded on the consolidated balance sheet in accumulated other comprehensive income or loss in stockholders’ equity. Realized gains and losses from the sale of available-for-sale investments are specifically identified and reclassified from accumulated other comprehensive income or loss and included within earnings on the consolidated statement of income.

Derivative instruments: The Company held derivative instruments in the form of interest rate caps for the purpose of mitigating a portion of its exposure to interest rate risk. Derivative instruments are recorded at fair value and included in other assets, with their resulting gains or losses recognized in interest expense. Changes in fair value are reported as an adjustment to net income in computing cash flows from operating activities.

Offsetting assets and liabilities: GAAP permits entities to present derivative receivables and derivative payables with the same counterparty and the related cash collateral receivables and payables on a net basis on the Consolidated Balance Sheet when a legally enforceable master netting agreement exists. GAAP also permits securities financing activities to be presented on a net basis when specified conditions are met, including the existence of a legally enforceable master netting agreement. The Company has elected to net such balances where it has determined that the specified conditions are met.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 70


 

Income recognition: Interest income is recognized using the interest method (constant yield method). Therefore, the Company recognizes revenue from interest at an equal rate over the term of the loan. Unearned finance charges on pre-compute contracts are rebated to customers utilizing statutory methods, which in many cases is the sum-of-the-years’ digits method. The difference between income recognized under the constant yield method and the statutory method is recognized as an adjustment to interest income at the time of rebate.

The Company recognizes income on credit life insurance, credit personal property insurance, and vehicle single interest insurance using the sum-of-the-years’ digits or straight-line methods over the terms of the policies. The Company recognizes income on credit accident and health insurance using the average of the sum-of-the-years’ digits and the straight-line methods over the terms of the policies. The Company recognizes income on credit involuntary unemployment insurance using the straight-line method over the terms of the policies. Rebates are computed using statutory methods, which in many cases match the GAAP method, and where it does not match, the difference between the GAAP method and the statutory method is recognized in income at the time of rebate. Fee income for non-file insurance is recognized using the sum-of-the-years’ digits method over the loan term.

Charges for late fees are recognized as income when collected.

Share-based compensation: The Company measures compensation cost for share-based awards at estimated fair value and recognizes compensation expense over the service period for awards expected to vest. The Company uses the closing stock price on the date of grant as the fair value of restricted stock awards and performance-contingent restricted stock units. The fair value of stock options is determined using the Black-Scholes valuation model, and the fair value of performance restricted stock units is determined using the Monte Carlo valuation model. The Black-Scholes and Monte Carlo models require the input of assumptions, including expected volatility, expected dividends, expected term, risk-free interest rate, and a discount associated with post-vest holding restrictions, changes to which can affect the fair value estimate. Expected volatility is based on the Company’s historical stock price volatility. Expected dividends are calculated using the expected dividend yield (annualized dividends divided by the grant date stock price). The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. The risk-free rate is based on the zero-coupon U.S. Treasury bond rate over the expected term of the awards. The estimated discount associated with post-vest holding restrictions is calculated using a blend of the Finnerty and Chaffe models. In addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

Marketing costs: Marketing costs are expensed as incurred.

Income taxes: The Company records a tax provision for the anticipated tax consequences of its reported operating results. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects of future tax rate changes are recognized in the period when the enactment of new rates occurs.

The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the consolidated financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority.

The Company recognizes the tax benefits or deficiencies from the exercise or vesting of share-based awards in the income tax line of the consolidated statements of comprehensive income, in the period of exercise or vesting.

Earnings per share: Earnings per share have been computed based on dividing net income by the weighted-average number of common shares outstanding during each reporting period presented. Common shares issuable upon the exercise of share-based compensation, which are computed using the treasury stock method, are included in the computation of diluted earnings per share. The Company uses the treasury stock method to calculate the effect of outstanding awards, by computing total employee proceeds as the sum of the amount employees must pay upon exercise of the awards and the amount of unearned share-based compensation costs attributable to future services.

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 71


 

Note 3. Concentrations of Credit Risk

Customers living in Texas, North Carolina, and South Carolina accounted for 32%, 16%, and 10%, respectively, of the Company’s net finance receivables as of December 31, 2023. Given the primary concentration of the Company’s portfolio of finance receivables in these states, such customers’ ability to honor their installment contracts may be affected by economic conditions in these states.

The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced losses in such accounts, which are maintained with large domestic banks. Management believes the Company’s exposure to credit risk is minimal for these accounts.

Note 4. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Net finance receivables for the periods indicated consisted of the following:

 

 

 

December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

Small loans

 

$

493,473

 

 

$

481,605

 

Large loans

 

 

1,274,137

 

 

 

1,208,185

 

Retail loans

 

 

3,800

 

 

 

9,603

 

Net finance receivables

 

$

1,771,410

 

 

$

1,699,393

 

 

Net finance receivables included net deferred origination fees of $15.1 million and $16.0 million as of December 31, 2023 and 2022, respectively.

The credit quality of the Company’s finance receivable portfolio is dependent on the Company’s ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as it grows its portfolio. The allowance for credit losses uses FICO scores and delinquency as key data points in estimating the allowance. The Company uses six FICO band categories to assess FICO scores. The first three FICO band categories include subprime FICO scores below 620. The fourth and fifth FICO band categories include near-prime FICO scores ranging from 620 to 659. The sixth FICO band category includes prime FICO scores of 660 or higher.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 72


 

Net finance receivables by product, FICO band at origination, origination year, and current period credit losses as of and for the year ended December 31, 2023 are as follows:

 

 

 

Net Finance Receivables by Origination Year

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total Net Finance Receivables

 

Small Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

64,664

 

 

$

10,459

 

 

$

1,625

 

 

$

172

 

 

$

68

 

 

$

18

 

 

$

77,006

 

2

 

 

31,289

 

 

 

5,886

 

 

 

724

 

 

 

36

 

 

 

11

 

 

 

9

 

 

 

37,955

 

3

 

 

51,222

 

 

 

8,099

 

 

 

717

 

 

 

31

 

 

 

6

 

 

 

1

 

 

 

60,076

 

4

 

 

65,743

 

 

 

10,074

 

 

 

679

 

 

 

19

 

 

 

10

 

 

 

3

 

 

 

76,528

 

5

 

 

74,207

 

 

 

13,838

 

 

 

632

 

 

 

14

 

 

 

4

 

 

 

1

 

 

 

88,696

 

6

 

 

126,400

 

 

 

25,679

 

 

 

1,111

 

 

 

15

 

 

 

5

 

 

 

2

 

 

 

153,212

 

Total small loans

 

$

413,525

 

 

$

74,035

 

 

$

5,488

 

 

$

287

 

 

$

104

 

 

$

34

 

 

$

493,473

 

Current period credit losses

 

$

14,484

 

 

$

60,298

 

 

$

10,244

 

 

$

599

 

 

$

60

 

 

$

7

 

 

$

85,692

 

Large Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

83,107

 

 

$

28,068

 

 

$

9,542

 

 

$

2,510

 

 

$

980

 

 

$

347

 

 

$

124,554

 

2

 

 

46,855

 

 

 

16,964

 

 

 

5,342

 

 

 

1,077

 

 

 

309

 

 

 

83

 

 

 

70,630

 

3

 

 

86,191

 

 

 

45,778

 

 

 

14,999

 

 

 

2,201

 

 

 

316

 

 

 

66

 

 

 

149,551

 

4

 

 

120,054

 

 

 

65,753

 

 

 

20,712

 

 

 

3,481

 

 

 

592

 

 

 

55

 

 

 

210,647

 

5

 

 

128,901

 

 

 

69,706

 

 

 

23,779

 

 

 

4,043

 

 

 

496

 

 

 

22

 

 

 

226,947

 

6

 

 

291,795

 

 

 

144,663

 

 

 

46,630

 

 

 

7,936

 

 

 

732

 

 

 

52

 

 

 

491,808

 

Total large loans

 

$

756,903

 

 

$

370,932

 

 

$

121,004

 

 

$

21,248

 

 

$

3,425

 

 

$

625

 

 

$

1,274,137

 

Current period credit losses

 

$

14,529

 

 

$

78,938

 

 

$

33,616

 

 

$

5,116

 

 

$

1,465

 

 

$

254

 

 

$

133,918

 

Retail Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

1

 

 

$

 

 

$

2

 

 

$

1

 

 

$

1

 

 

$

5

 

 

$

10

 

2

 

 

 

 

 

213

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

243

 

3

 

 

 

 

 

634

 

 

 

211

 

 

 

3

 

 

 

1

 

 

 

1

 

 

 

850

 

4

 

 

 

 

 

650

 

 

 

352

 

 

 

36

 

 

 

 

 

 

4

 

 

 

1,042

 

5

 

 

 

 

 

508

 

 

 

278

 

 

 

24

 

 

 

 

 

 

4

 

 

 

814

 

6

 

 

 

 

 

524

 

 

 

286

 

 

 

28

 

 

 

2

 

 

 

1

 

 

 

841

 

Total retail loans

 

$

1

 

 

$

2,529

 

 

$

1,159

 

 

$

92

 

 

$

4

 

 

$

15

 

 

$

3,800

 

Current period credit losses

 

$

 

 

$

776

 

 

$

431

 

 

$

88

 

 

$

24

 

 

$

4

 

 

$

1,323

 

Total Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

147,772

 

 

$

38,527

 

 

$

11,169

 

 

$

2,683

 

 

$

1,049

 

 

$

370

 

 

$

201,570

 

2

 

 

78,144

 

 

 

23,063

 

 

 

6,096

 

 

 

1,113

 

 

 

320

 

 

 

92

 

 

 

108,828

 

3

 

 

137,413

 

 

 

54,511

 

 

 

15,927

 

 

 

2,235

 

 

 

323

 

 

 

68

 

 

 

210,477

 

4

 

 

185,797

 

 

 

76,477

 

 

 

21,743

 

 

 

3,536

 

 

 

602

 

 

 

62

 

 

 

288,217

 

5

 

 

203,108

 

 

 

84,052

 

 

 

24,689

 

 

 

4,081

 

 

 

500

 

 

 

27

 

 

 

316,457

 

6

 

 

418,195

 

 

 

170,866

 

 

 

48,027

 

 

 

7,979

 

 

 

739

 

 

 

55

 

 

 

645,861

 

Total loans

 

$

1,170,429

 

 

$

447,496

 

 

$

127,651

 

 

$

21,627

 

 

$

3,533

 

 

$

674

 

 

$

1,771,410

 

Current period credit losses

 

$

29,013

 

 

$

140,012

 

 

$

44,291

 

 

$

5,803

 

 

$

1,549

 

 

$

265

 

 

$

220,933

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 73


 

Net finance receivables by product, FICO band, and origination year as of December 31, 2022 are as follows:

 

 

 

Net Finance Receivables by Origination Year

 

Dollars in thousands

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Total Net Finance Receivables

 

Small Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

63,362

 

 

$

10,842

 

 

$

1,388

 

 

$

246

 

 

$

47

 

 

$

7

 

 

$

75,892

 

2

 

 

41,683

 

 

 

6,785

 

 

 

664

 

 

 

56

 

 

 

26

 

 

 

2

 

 

 

49,216

 

3

 

 

53,444

 

 

 

7,659

 

 

 

520

 

 

 

39

 

 

 

 

 

 

1

 

 

 

61,663

 

4

 

 

62,609

 

 

 

8,980

 

 

 

544

 

 

 

33

 

 

 

 

 

 

1

 

 

 

72,167

 

5

 

 

71,448

 

 

 

10,650

 

 

 

505

 

 

 

22

 

 

 

 

 

 

 

 

 

82,625

 

6

 

 

119,199

 

 

 

19,886

 

 

 

929

 

 

 

28

 

 

 

 

 

 

 

 

 

140,042

 

Total small loans

 

$

411,745

 

 

$

64,802

 

 

$

4,550

 

 

$

424

 

 

$

73

 

 

$

11

 

 

$

481,605

 

Large Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

60,836

 

 

$

20,653

 

 

$

7,219

 

 

$

3,286

 

 

$

826

 

 

$

539

 

 

$

93,359

 

2

 

 

41,174

 

 

 

15,955

 

 

 

4,044

 

 

 

1,409

 

 

 

111

 

 

 

121

 

 

 

62,814

 

3

 

 

112,336

 

 

 

44,805

 

 

 

8,637

 

 

 

2,811

 

 

 

172

 

 

 

137

 

 

 

168,898

 

4

 

 

150,559

 

 

 

57,913

 

 

 

12,063

 

 

 

3,931

 

 

 

152

 

 

 

67

 

 

 

224,685

 

5

 

 

150,793

 

 

 

59,154

 

 

 

13,060

 

 

 

3,735

 

 

 

172

 

 

 

37

 

 

 

226,951

 

6

 

 

290,648

 

 

 

109,931

 

 

 

24,038

 

 

 

6,552

 

 

 

263

 

 

 

46

 

 

 

431,478

 

Total large loans

 

$

806,346

 

 

$

308,411

 

 

$

69,061

 

 

$

21,724

 

 

$

1,696

 

 

$

947

 

 

$

1,208,185

 

Retail Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

8

 

 

$

7

 

 

$

28

 

 

$

12

 

 

$

4

 

 

$

3

 

 

$

62

 

2

 

 

475

 

 

 

92

 

 

 

9

 

 

 

10

 

 

 

 

 

 

 

 

 

586

 

3

 

 

1,310

 

 

 

599

 

 

 

71

 

 

 

14

 

 

 

1

 

 

 

3

 

 

 

1,998

 

4

 

 

1,389

 

 

 

979

 

 

 

263

 

 

 

28

 

 

 

2

 

 

 

4

 

 

 

2,665

 

5

 

 

1,083

 

 

 

775

 

 

 

218

 

 

 

27

 

 

 

3

 

 

 

5

 

 

 

2,111

 

6

 

 

1,123

 

 

 

802

 

 

 

224

 

 

 

31

 

 

 

 

 

 

1

 

 

 

2,181

 

Total retail loans

 

$

5,388

 

 

$

3,254

 

 

$

813

 

 

$

122

 

 

$

10

 

 

$

16

 

 

$

9,603

 

Total Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Band

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

124,206

 

 

$

31,502

 

 

$

8,635

 

 

$

3,544

 

 

$

877

 

 

$

549

 

 

$

169,313

 

2

 

 

83,332

 

 

 

22,832

 

 

 

4,717

 

 

 

1,475

 

 

 

137

 

 

 

123

 

 

 

112,616

 

3

 

 

167,090

 

 

 

53,063

 

 

 

9,228

 

 

 

2,864

 

 

 

173

 

 

 

141

 

 

 

232,559

 

4

 

 

214,557

 

 

 

67,872

 

 

 

12,870

 

 

 

3,992

 

 

 

154

 

 

 

72

 

 

 

299,517

 

5

 

 

223,324

 

 

 

70,579

 

 

 

13,783

 

 

 

3,784

 

 

 

175

 

 

 

42

 

 

 

311,687

 

6

 

 

410,970

 

 

 

130,619

 

 

 

25,191

 

 

 

6,611

 

 

 

263

 

 

 

47

 

 

 

573,701

 

Total loans

 

$

1,223,479

 

 

$

376,467

 

 

$

74,424

 

 

$

22,270

 

 

$

1,779

 

 

$

974

 

 

$

1,699,393

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 74


 

The contractual delinquency of the net finance receivable portfolio by product and aging for the periods indicated are as follows:

 

 

 

December 31, 2023

 

 

 

Small

 

 

Large

 

 

Retail

 

 

Total

 

Dollars in thousands

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

Current

 

$

406,203

 

 

 

82.4

%

 

$

1,084,518

 

 

 

85.1

%

 

$

2,620

 

 

 

69.0

%

 

$

1,493,341

 

 

 

84.3

%

1 to 29 days past due

 

 

45,119

 

 

 

9.1

%

 

 

109,483

 

 

 

8.6

%

 

 

594

 

 

 

15.6

%

 

 

155,196

 

 

 

8.8

%

Delinquent accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 to 59 days

 

 

12,053

 

 

 

2.4

%

 

 

22,587

 

 

 

1.7

%

 

 

116

 

 

 

3.1

%

 

 

34,756

 

 

 

1.9

%

60 to 89 days

 

 

11,253

 

 

 

2.3

%

 

 

19,844

 

 

 

1.6

%

 

 

115

 

 

 

3.0

%

 

 

31,212

 

 

 

1.8

%

90 to 119 days

 

 

10,030

 

 

 

2.0

%

 

 

16,951

 

 

 

1.3

%

 

 

126

 

 

 

3.2

%

 

 

27,107

 

 

 

1.5

%

120 to 149 days

 

 

4,247

 

 

 

0.9

%

 

 

10,938

 

 

 

0.9

%

 

 

132

 

 

 

3.5

%

 

 

15,317

 

 

 

0.9

%

150 to 179 days

 

 

4,568

 

 

 

0.9

%

 

 

9,816

 

 

 

0.8

%

 

 

97

 

 

 

2.6

%

 

 

14,481

 

 

 

0.8

%

Total delinquency

 

$

42,151

 

 

 

8.5

%

 

$

80,136

 

 

 

6.3

%

 

$

586

 

 

 

15.4

%

 

$

122,873

 

 

 

6.9

%

Total net finance receivables

 

$

493,473

 

 

 

100.0

%

 

$

1,274,137

 

 

 

100.0

%

 

$

3,800

 

 

 

100.0

%

 

$

1,771,410

 

 

 

100.0

%

Net finance receivables in nonaccrual status

 

$

21,850

 

 

 

4.4

%

 

$

44,627

 

 

 

3.5

%

 

$

394

 

 

 

10.4

%

 

$

66,871

 

 

 

3.8

%

 

 

 

December 31, 2022

 

 

 

Small

 

 

Large

 

 

Retail

 

 

Total

 

Dollars in thousands

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

Current

 

$

388,978

 

 

 

80.7

%

 

$

1,034,981

 

 

 

85.7

%

 

$

7,543

 

 

 

78.6

%

 

$

1,431,502

 

 

 

84.2

%

1 to 29 days past due

 

 

48,924

 

 

 

10.2

%

 

 

97,855

 

 

 

8.1

%

 

 

1,269

 

 

 

13.2

%

 

 

148,048

 

 

 

8.7

%

Delinquent accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 to 59 days

 

 

13,144

 

 

 

2.8

%

 

 

22,712

 

 

 

1.8

%

 

 

352

 

 

 

3.7

%

 

 

36,208

 

 

 

2.2

%

60 to 89 days

 

 

12,251

 

 

 

2.5

%

 

 

18,828

 

 

 

1.6

%

 

 

273

 

 

 

2.8

%

 

 

31,352

 

 

 

1.8

%

90 to 119 days

 

 

8,714

 

 

 

1.8

%

 

 

15,427

 

 

 

1.3

%

 

 

152

 

 

 

1.6

%

 

 

24,293

 

 

 

1.4

%

120 to 149 days

 

 

5,572

 

 

 

1.2

%

 

 

10,675

 

 

 

0.9

%

 

 

10

 

 

 

0.1

%

 

 

16,257

 

 

 

1.0

%

150 to 179 days

 

 

4,022

 

 

 

0.8

%

 

 

7,707

 

 

 

0.6

%

 

 

4

 

 

 

0.0

%

 

 

11,733

 

 

 

0.7

%

Total delinquency

 

$

43,703

 

 

 

9.1

%

 

$

75,349

 

 

 

6.2

%

 

$

791

 

 

 

8.2

%

 

$

119,843

 

 

 

7.1

%

Total net finance receivables

 

$

481,605

 

 

 

100.0

%

 

$

1,208,185

 

 

 

100.0

%

 

$

9,603

 

 

 

100.0

%

 

$

1,699,393

 

 

 

100.0

%

Net finance receivables in nonaccrual status

 

$

20,810

 

 

 

4.3

%

 

$

39,039

 

 

 

3.2

%

 

$

212

 

 

 

2.2

%

 

$

60,061

 

 

 

3.5

%

The accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If a loan is charged off, the accrued interest is reversed as a reduction of interest and fee income. The Company reversed $24.2 million, $20.2 million, and $8.9 million of accrued interest as a reduction of interest and fee income for the years ended December 31, 2023, 2022, and 2021, respectively.

The following is a reconciliation of the allowance for credit losses by product for the years ended December 31, 2023, 2022, and 2021:

Dollars in thousands

 

Small

 

 

Large

 

 

Retail

 

 

Total

 

Beginning balance at January 1, 2023

 

$

57,915

 

 

$

119,592

 

 

$

1,293

 

 

$

178,800

 

Provision for credit losses

 

 

82,745

 

 

 

136,638

 

 

 

651

 

 

 

220,034

 

Credit losses

 

 

(85,692

)

 

 

(133,918

)

 

 

(1,323

)

 

 

(220,933

)

Recoveries

 

 

3,768

 

 

 

5,680

 

 

 

51

 

 

 

9,499

 

Ending balance at December 31, 2023

 

$

58,736

 

 

$

127,992

 

 

$

672

 

 

$

187,400

 

Net finance receivables at December 31, 2023

 

$

493,473

 

 

$

1,274,137

 

 

$

3,800

 

 

$

1,771,410

 

Allowance as percentage of net finance receivables at December 31, 2023

 

 

11.9

%

 

 

10.0

%

 

 

17.7

%

 

 

10.6

%

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 75


 

 

Dollars in thousands

 

Small

 

 

Large

 

 

Retail

 

 

Total

 

Beginning balance at January 1, 2022

 

$

61,294

 

 

$

96,494

 

 

$

1,512

 

 

$

159,300

 

Provision for credit losses

 

 

76,513

 

 

 

106,925

 

 

 

1,677

 

 

 

185,115

 

Credit losses

 

 

(82,842

)

 

 

(87,236

)

 

 

(1,985

)

 

 

(172,063

)

Recoveries

 

 

2,950

 

 

 

3,409

 

 

 

89

 

 

 

6,448

 

Ending balance at December 31, 2022

 

$

57,915

 

 

$

119,592

 

 

$

1,293

 

 

$

178,800

 

Net finance receivables at December 31, 2022

 

$

481,605

 

 

$

1,208,185

 

 

$

9,603

 

 

$

1,699,393

 

Allowance as percentage of net finance receivables at December 31, 2022

 

 

12.0

%

 

 

9.9

%

 

 

13.5

%

 

 

10.5

%

 

Dollars in thousands

 

Small

 

 

Large

 

 

Retail

 

 

Total

 

Beginning balance at January 1, 2021

 

$

59,410

 

 

$

88,058

 

 

$

2,532

 

 

$

150,000

 

Provision for credit losses

 

 

40,982

 

 

 

47,775

 

 

 

258

 

 

 

89,015

 

Credit losses

 

 

(40,922

)

 

 

(41,379

)

 

 

(1,351

)

 

 

(83,652

)

Recoveries

 

 

1,824

 

 

 

2,040

 

 

 

73

 

 

 

3,937

 

Ending balance at December 31, 2021

 

$

61,294

 

 

$

96,494

 

 

$

1,512

 

 

$

159,300

 

Net finance receivables at December 31, 2021

 

$

445,023

 

 

$

970,694

 

 

$

10,540

 

 

$

1,426,257

 

Allowance as percentage of net finance receivables at December 31, 2021

 

 

13.8

%

 

 

9.9

%

 

 

14.3

%

 

 

11.2

%

The Company uses certain loan modification programs for borrowers experiencing financial difficulties as a loss mitigation strategy to improve collectability of the loans and assist customers through financial setbacks. The programs consist of offering payment deferrals, refinancing, and, in limited instances, settlements. Customers may also pursue financial assistance through external sources, such as filing for bankruptcy protection. Modification programs available to our customers are described in more detail below:

Customers with temporary hardships may be offered payment deferrals related to past due payments. Such deferrals extend the customer’s maturity date and are generally considered insignificant delays. During the second quarter of 2023, the Company enhanced its policy for determining an insignificant delay in payment. The Company’s previous policy for an insignificant delay in payment was two or fewer deferrals in a rolling twelve-month period, which was updated to be three or fewer deferrals in a rolling twelve-month period. The change had no material impact to the Company's disclosures.
Customers with delinquent loans who have made recent payments and have verified current employment are allowed to refinance their loan with a reduced interest rate and/or term extension, making the monthly payments more affordable.
The Company may also agree to settle a past-due loan by accepting less than the full principal balance owed in certain limited cases once it is determined that collection of the entire outstanding balance is unlikely.
Customers who receive bankruptcy protection may receive principal forgiveness, interest rate reductions, and/or term extensions.

The information relating to modifications made to borrowers experiencing financial difficulty for the period indicated is as follows:

 

As of and for the Year Ended December 31, 2023

 

 

Principal Forgiveness, Interest Rate Reduction, & Term Extension

 

 

Interest Rate Reduction & Term Extension

 

 

Term Extension

 

 

Total

 

Dollars in thousands

Amortized Cost Basis

 

 

% of Net Finance Receivables

 

 

Amortized Cost Basis

 

 

% of Net Finance Receivables

 

 

Amortized Cost Basis

 

 

% of Net Finance Receivables

 

 

Amortized Cost Basis

 

 

% of Net Finance Receivables

 

Small loans

$

37

 

 

 

 

 

$

2,112

 

 

 

0.4

%

 

$

346

 

 

 

0.1

%

 

$

2,495

 

 

 

0.5

%

Large loans

 

288

 

 

 

 

 

 

12,687

 

 

 

1.0

%

 

 

930

 

 

 

0.1

%

 

 

13,905

 

 

 

1.1

%

Total

$

325

 

 

 

 

 

$

14,799

 

 

 

0.8

%

 

$

1,276

 

 

 

0.1

%

 

$

16,400

 

 

 

0.9

%

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 76


 

The financial effects of the modifications made to borrowers experiencing financial difficulty for the period indicated is as follows:

 

 

Year Ended December 31, 2023

Loan Modification

 

Product

 

Financial Effect

Principal forgiveness

 

Small loans

 

Reduced the amortized cost basis of the loans by $0.5 million.

 

 

Large loans

 

Reduced the amortized cost basis of the loans by $1.0 million.

Interest rate reduction

 

Small loans

 

Reduced the weighted-average contractual interest rate by 13.6%.

 

 

Large loans

 

Reduced the weighted-average contractual interest rate by 10.7%.

Term extension

 

Small loans

 

Added a weighted-average 1.4 years to the life of loans.

 

 

Large loans

 

Added a weighted-average 1.5 years to the life of loans.

The following table provides the amortized cost basis for modifications made to borrowers experiencing financial difficulty on or after January 1, 2023 that subsequently defaulted. The Company defines payment default as 90 days past due for this disclosure. The respective amounts for each modification for the period indicated is as follows:

 

 

As of and for the Year Ended December 31, 2023

 

Dollars in thousands

 

Principal Forgiveness, Interest Rate Reduction, & Term Extension

 

 

Interest Rate Reduction & Term Extension

 

 

Term Extension

 

 

Total

 

Small loans

 

$

3

 

 

$

248

 

 

$

3

 

 

$

254

 

Large loans

 

 

16

 

 

 

1,334

 

 

 

27

 

 

 

1,377

 

Total

 

$

19

 

 

$

1,582

 

 

$

30

 

 

$

1,631

 

The contractual delinquencies of loans that were modified to borrowers experiencing financial difficulty on or after January 1, 2023 for the period indicated is as follows:

 

 

December 31, 2023

 

Dollars in thousands

 

Current

 

 

30 - 89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

Small loans

 

$

1,993

 

 

$

325

 

 

$

177

 

 

$

2,495

 

Large loans

 

 

11,289

 

 

 

1,691

 

 

 

925

 

 

 

13,905

 

Total (1)

 

$

13,282

 

 

$

2,016

 

 

$

1,102

 

 

$

16,400

 

(1) Excludes modified finance receivables that subsequently charged off of $0.4 million and $1.8 million in small and large loans, respectively.

Prior to January 1, 2023, the Company classified a loan as a TDR finance receivable when the Company modified a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and granted a concession that it would not have otherwise considered.

The amount of TDR net finance receivables and the related TDR allowance for credit losses for the period indicated are as follows:

 

 

 

December 31, 2022

 

Dollars in thousands

 

TDR Net Finance Receivables

 

 

TDR Allowance for Credit Losses

 

Small loans

 

$

3,884

 

 

$

1,008

 

Large loans

 

 

16,421

 

 

 

4,118

 

Retail loans

 

 

46

 

 

 

16

 

Total

 

$

20,351

 

 

$

5,142

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 77


 

The following table provides the number and amount of net finance receivables modified and classified as TDRs during the periods presented:

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Dollars in thousands

 

Number of Loans

 

 

TDR Net Finance Receivables (1)

 

 

Number of Loans

 

 

TDR Net Finance Receivables (1)

 

Small loans

 

 

3,651

 

 

$

6,920

 

 

 

2,522

 

 

$

4,761

 

Large loans

 

 

3,554

 

 

 

20,537

 

 

 

2,123

 

 

 

11,303

 

Retail loans

 

 

15

 

 

 

37

 

 

 

7

 

 

 

14

 

Total

 

 

7,220

 

 

$

27,494

 

 

 

4,652

 

 

$

16,078

 

(1) Represents the post-modification net finance receivables balance of loans that have been modified during the period and resulted in a TDR.

The following table provides the number of accounts and amortized cost basis of finance receivables that subsequently defaulted within the periods indicated (that were modified as a TDR in the preceding 12 months). The Company defines payment default as 90 days past due for this disclosure. The respective amounts and activity for the periods indicated are as follows:

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Dollars in thousands

 

Number of Loans

 

 

TDR Net Finance Receivables (1)

 

 

Number of Loans

 

 

TDR Net Finance Receivables (1)

 

Small loans

 

 

1,365

 

 

$

2,712

 

 

 

950

 

 

$

1,740

 

Large loans

 

 

1,307

 

 

 

7,704

 

 

 

712

 

 

 

3,719

 

Retail loans

 

 

6

 

 

 

16

 

 

 

5

 

 

 

9

 

Total

 

 

2,678

 

 

$

10,432

 

 

 

1,667

 

 

$

5,468

 

(1) Only includes defaults occurring within 12 months of a loan being designated as a TDR. Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.

Note 5. Restricted Available-for-Sale Investments

The following tables reconcile the amortized cost, gross unrealized gains and losses included in accumulated other comprehensive income or loss, and estimated fair value of the Company’s restricted available-for-sale investments as of the periods indicated:

 

 

 

December 31, 2023

 

Dollars in thousands

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

Restricted investments

 

$

23,211

 

 

$

1

 

 

$

(472

)

 

$

22,740

 

 

 

 

December 31, 2022

 

Dollars in thousands

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

Restricted investments

 

$

21,158

 

 

$

 

 

$

(742

)

 

$

20,416

 

 

The following tables include the gross unrealized losses and estimated fair values of restricted available-for-sale investments that were in a continuous unrealized loss position, for which no allowance for credit loss has been recorded, as of the periods indicated:

 

 

December 31, 2023

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

Dollars in thousands

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

Restricted investments

 

$

 

 

$

 

 

$

18,633

 

 

$

(472

)

 

$

18,633

 

 

$

(472

)

 

 

 

December 31, 2022

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

Dollars in thousands

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Gross Unrealized Losses

 

Restricted investments

 

$

20,416

 

 

$

(742

)

 

$

 

 

$

 

 

$

20,416

 

 

$

(742

)

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 78


 

 

The restricted available-for-sale investments consist of U.S. Treasuries which are measured at fair value and include accrued interest receivables of $0.3 million as of December 31, 2023 and 2022. The investments consist of highly rated securities backed by the U.S. federal government. As a result, the Company has not recorded an allowance for credit losses related to the restricted available-for-sale investments. Changes in fair value are the result of recent increases in interest rates by the Federal Reserve that occurred after the purchase of the investments.

The following tables include the amortized cost and estimated fair values of restricted available-for-sale investments by contractual maturity as of the period indicated:

 

 

 

December 31, 2023

 

Dollars in thousands

 

Amortized Cost

 

 

Estimated Fair Value

 

Due in one year

 

$

21,035

 

 

$

20,614

 

Due within one year to five years

 

 

2,176

 

 

 

2,126

 

Due within five years to ten years

 

 

 

 

 

 

Due after ten years

 

 

 

 

 

 

Total restricted available-for-sale investments

 

$

23,211

 

 

$

22,740

 

The following table includes the proceeds from sold or matured restricted available-for-sale investments for the periods indicated:

 

 

 

Year Ended December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

Proceeds from sale of restricted available-for-sale investments

 

$

 

 

$

3,130

 

 

The Company had no gross realized gains or losses during the years ended December 31, 2023, 2022, and 2021, respectively. For additional information on the Company's restricted available-for-sale investments, see Note 13, "Disclosure About Fair Value of Financial Instruments."

Note 6. Property and Equipment

For the periods indicated, property and equipment consisted of the following:

 

 

December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

Furniture, fixtures, and equipment

 

$

27,228

 

 

$

27,011

 

Leasehold improvements

 

 

16,880

 

 

 

15,272

 

Property and equipment cost

 

 

44,108

 

 

 

42,283

 

Less accumulated depreciation

 

 

30,321

 

 

 

27,757

 

Property and equipment, net of accumulated depreciation

 

$

13,787

 

 

$

14,526

 

 

Depreciation expense for the years ended December 31, 2023, 2022, and 2021 totaled $4.6 million, $4.1 million, and $4.5 million, respectively.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 79


 

Note 7. Leases

The Company maintains lease agreements related to its branch network and for its corporate headquarters. The branch lease agreements range from three to seven years and generally contain options to extend from three to five years. The corporate headquarters lease agreement is for eleven years and contains an option to extend for ten years. All of the Company’s lease agreements are considered operating leases. None of the Company’s lease payments are dependent on an index that may change after the commencement date.

Future maturities of the Company’s operating lease liabilities are as follows:

Dollars in thousands

 

December 31, 2023

 

2024

 

$

9,681

 

2025

 

 

8,802

 

2026

 

 

7,000

 

2027

 

 

5,241

 

2028

 

 

3,767

 

Thereafter

 

 

8,475

 

Total future minimum lease payments

 

 

42,966

 

Present value adjustment

 

 

(6,390

)

Operating lease liability

 

$

36,576

 

The Company’s operating and short-term lease expenses are presented below:

 

 

Year Ended December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

Operating leases

 

$

10,587

 

 

$

9,457

 

 

$

9,573

 

Short-term leases

 

 

447

 

 

 

745

 

 

 

648

 

Total lease expense

 

$

11,034

 

 

$

10,202

 

 

$

10,221

 

The Company’s weighted-average remaining lease term and discount rate for the periods indicated are as follows:

 

 

December 31, 2023

 

 

December 31, 2022

 

Weighted-average remaining lease term (in years)

 

 

5.5

 

 

 

6.1

 

Weighted-average discount rate

 

 

5.75

%

 

 

5.46

%

 

Rent expense for the years ended December 31, 2023, 2022, and 2021 equaled $11.0 million, $10.2 million, and $10.2 million, respectively. In addition to rent, the Company typically pays for all operating expenses, property taxes, and repairs and maintenance on properties that it leases.

Note 8. Intangible Assets

The following table provides the gross carrying amount and related accumulated amortization of intangible assets:

 

 

December 31, 2023

 

 

December 31, 2022

 

Dollars in thousands

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Software

 

$

30,825

 

 

$

(15,695

)

 

$

15,130

 

 

$

25,363

 

 

$

(13,957

)

 

$

11,406

 

Other

 

 

950

 

 

 

(234

)

 

 

716

 

 

 

950

 

 

 

(234

)

 

 

716

 

Total intangible assets

 

$

31,775

 

 

$

(15,929

)

 

$

15,846

 

 

$

26,313

 

 

$

(14,191

)

 

$

12,122

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 80


 

Intangible amortization expense for the years ended December 31, 2023, 2022, and 2021 totaled $3.7 million, $2.9 million, and $2.4 million, respectively. As of December 31, 2023, the Company’s weighted-average amortization period for software was 6.1 years. The following table sets forth the future amortization of software:

Dollars in thousands

 

Amount

 

2024

 

$

3,771

 

2025

 

 

3,152

 

2026

 

 

2,564

 

2027

 

 

1,804

 

2028

 

 

1,560

 

Thereafter

 

 

2,279

 

Total

 

$

15,130

 

 

Note 9. Other Assets

Other assets include the following as of the periods indicated:

 

 

December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

Prepaid expenses

 

$

9,661

 

 

$

9,115

 

Income tax receivable

 

 

7,260

 

 

 

8,598

 

Card payments receivable

 

 

5,666

 

 

 

5,118

 

Credit insurance receivable

 

 

2,759

 

 

 

2,748

 

Warehouse credit facilities debt issue costs

 

 

2,362

 

 

 

1,314

 

Other

 

 

1,711

 

 

 

1,315

 

Total other assets

 

$

29,419

 

 

$

28,208

 

 

Note 10. Interest Rate Caps

The Company previously purchased interest rate cap contracts to manage the risk associated with LIBOR-based borrowings. Each contract was collateralizable and contained a strike rate against the one-month LIBOR. When the one-month LIBOR exceeded the strike rate, the counterparty remitted to the Company for the excess over the strike rate. No payment was required by the Company or the counterparty when the one-month LIBOR was below the strike rate.

As of September 30, 2022, the Company no longer maintained interest rate cap protections.

The following is a summary of changes in fair value of the interest rate caps for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

 

 

$

6,586

 

 

$

265

 

Purchases

 

 

 

 

 

 

 

 

3,600

 

Sales

 

 

 

 

 

(19,720

)

 

 

 

Fair value adjustment included as a decrease in interest expense

 

 

 

 

 

13,134

 

 

 

2,721

 

Balance at end of period

 

$

 

 

$

 

 

$

6,586

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 81


 

Note 11. Debt

The following is a summary of the Company’s debt as of the periods indicated:

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Dollars in thousands

 

Debt

 

 

Unamortized Debt Issuance Costs (1)

 

 

Net Debt

 

 

Debt

 

 

Unamortized Debt Issuance Costs (1)

 

 

Net Debt

 

Senior revolving credit facility

 

$

195,462

 

 

$

(606

)

 

$

194,856

 

 

$

147,547

 

 

$

(1,104

)

 

$

146,443

 

RMR II revolving warehouse credit facility

 

 

 

 

 

 

 

 

 

 

 

189

 

 

 

 

 

 

189

 

RMR IV revolving warehouse credit facility

 

 

3,197

 

 

 

 

 

 

3,197

 

 

 

18,144

 

 

 

(338

)

 

 

17,806

 

RMR V revolving warehouse credit facility

 

 

26,718

 

 

 

 

 

 

26,718

 

 

 

286

 

 

 

 

 

 

286

 

RMR VI revolving warehouse credit facility

 

 

15,953

 

 

 

 

 

 

15,953

 

 

 

 

 

 

 

 

 

 

RMR VII revolving warehouse credit facility

 

 

4,216

 

 

 

 

 

 

4,216

 

 

 

 

 

 

 

 

 

 

RMIT 2020-1 securitization

 

 

145,290

 

 

 

 

 

 

145,290

 

 

 

180,214

 

 

 

(618

)

 

 

179,596

 

RMIT 2021-1 securitization

 

 

248,915

 

 

 

(141

)

 

 

248,774

 

 

 

248,916

 

 

 

(985

)

 

 

247,931

 

RMIT 2021-2 securitization

 

 

200,192

 

 

 

(1,106

)

 

 

199,086

 

 

 

200,192

 

 

 

(1,534

)

 

 

198,658

 

RMIT 2021-3 securitization

 

 

125,202

 

 

 

(864

)

 

 

124,338

 

 

 

125,202

 

 

 

(1,178

)

 

 

124,024

 

RMIT 2022-1 securitization

 

 

250,374

 

 

 

(991

)

 

 

249,383

 

 

 

250,374

 

 

 

(1,841

)

 

 

248,533

 

RMIT 2022-2B securitization

 

 

184,295

 

 

 

(870

)

 

 

183,425

 

 

 

184,295

 

 

 

(1,914

)

 

 

182,381

 

Total

 

$

1,399,814

 

 

$

(4,578

)

 

$

1,395,236

 

 

$

1,355,359

 

 

$

(9,512

)

 

$

1,345,847

 

Unused amount of revolving credit facilities
   (subject to borrowing base)

 

$

551,508

 

 

 

 

 

 

 

 

$

555,117

 

 

 

 

 

 

 

(1) Unamortized debt issuance costs related to the revolving warehouse credit facilities are presented within other assets in the consolidated balance sheets. These credit facilities had $2.4 million and $1.3 million in such costs as of December 31, 2023 and 2022, respectively.

Senior Revolving Credit Facility: In November 2022, the Company amended and restated its senior revolving credit facility to, among other things, decrease the availability under the facility from $500 million to $420 million. The senior revolving credit facility matures in September 2024. Excluding the receivables held by the Company’s VIEs, the senior revolving credit facility is secured by substantially all of the Company’s finance receivables and equity interests of the majority of its subsidiaries. Advances on the senior revolving credit facility are capped at 83% of eligible secured finance receivables (65% of eligible secured finance receivables as of December 31, 2023).

In September 2022, the Company amended and restated its senior revolving credit facility to replace LIBOR as the benchmark rate for the calculation of interest with a forward-looking term rate based on the secured overnight financing rate (“SOFR”) or, in certain limited circumstances, another alternative benchmark rate. The one-month LIBOR was replaced on October 1, 2022 by one-month SOFR with a floor of not less than 0.50%, plus a 3.00% margin and a benchmark adjustment. The effective interest rate was 8.44% at December 31, 2023. The Company pays an unused commitment fee between 0.50% and 1.00% based upon the average outstanding balance. As of December 31, 2023, the Company had $76.2 million of immediate available liquidity to draw down cash under the facility and held $4.5 million in unrestricted cash.

See Note 19, “Subsequent Events,” for information regarding the amendment of this facility following the end of the fiscal year.

Variable Interest Entity Debt: As part of its overall funding strategy, the Company has transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions. The following debt arrangements are issued by the Company’s wholly owned, bankruptcy-remote SPEs, which are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary.

These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $109.9 million and $112.2 million as of December 31, 2023 and 2022, respectively. Cash inflows from the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that the Company owns in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to the Company, which is eliminated in consolidation. Distributions from the SPEs to the Company are permitted under the debt arrangements.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 82


 

At each sale of receivables from the Company’s affiliates to the SPEs, the Company makes certain representations and warranties about the quality and nature of the collateralized receivables. The debt arrangements require the Company to repurchase the receivables in certain circumstances, including circumstances in which the representations and warranties made by the Company concerning the quality and characteristics of the receivables are inaccurate. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates.

RMR II Revolving Warehouse Credit Facility: In April 2021, the Company and its wholly owned SPE, Regional Management Receivables II, LLC (“RMR II”), amended and restated the credit agreement that provides for a revolving warehouse credit facility to RMR II to, among other things, extend the date at which the facility converts to an amortizing loan and the termination date to March 2023 and March 2024, respectively, decrease the total facility from $125 million to $75 million, increase the cap on facility advances from 80% to 83% of eligible finance receivables, and increase the rate at which borrowings under the facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, with a LIBOR floor of 0.25%, plus a margin of 2.35% (2.15% prior to the April 2021 amendment).

In September 2022, the Company and its wholly-owned SPE, RMR II, amended and restated the credit agreement that provides for a revolving warehouse credit facility to RMR II to replace LIBOR as the benchmark rate for calculation of interest rate with a forward-looking term rate based on SOFR or, in certain limited circumstances, another alternative benchmark rate. The three-month LIBOR was replaced on October 1, 2022 by three-month SOFR with a floor of 0.25%, plus a 2.35% margin and a benchmark adjustment.

In March 2023, the Company and RMR II exercised the right to make an optional principal repayment in full, and in connection with such repayment, the facility terminated.

RMR IV Revolving Warehouse Credit Facility: In April 2021, the Company and its wholly owned SPE, Regional Management Receivables IV, LLC (“RMR IV”), entered into a credit agreement that provides for a $125 million revolving warehouse credit facility to RMR IV. The facility was to convert to an amortizing loan in April 2023 and terminate in April 2024. In April and May 2023, the Company and RMR IV amended and restated the credit agreement that provides for a revolving warehouse credit facility to (i) extend the amortizing loan conversion date from April 2023 to May 2025 and the termination date from April 2024 to May 2026; (ii) decrease the capped advances on the facility from 81% to 77% of eligible finance receivables; and (iii) increase the margin from 2.35% to 2.80%. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR IV.

In September 2022, the Company and RMR IV amended and restated the credit agreement that provides for a revolving warehouse credit facility to RMR IV to replace LIBOR as the benchmark rate for calculation of interest rate with a forward-looking term rate based on SOFR or, in certain limited circumstances, another alternative benchmark rate. The one-month LIBOR was replaced on October 1, 2022 by one-month SOFR with a margin of 2.35% and a benchmark adjustment. The effective interest rate was 8.24% at December 31, 2023. RMR IV pays an unused commitment fee between 0.35% and 0.70% based upon the average daily utilization of the facility. RMR IV had $16.5 million of immediate availability to draw down cash under the facility and held $0.3 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the credit agreement.

 

RMR V Revolving Warehouse Credit Facility: In September 2022, the Company and its wholly owned SPE, Regional Management Receivables V, LLC (“RMR V”), amended and restated the credit agreement that provides for a $100 million revolving warehouse credit facility to RMR V to extend the date at which the facility converts to an amortizing loan and the termination date to November 2022 and November 2023, respectively (October 2022 and October 2023, respectively, prior to the September 2022 amendment). Following a subsequent amendment in November 2022, the amortizing loan conversion date and termination date were extended to November 2024 and November 2025, respectively. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR V. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a per annum rate, which in the case of a conduit lender is the commercial paper rate, plus a margin of 2.75% (2.20% prior to the November 2022 amendment). The effective interest rate was 8.34% at December 31, 2023. RMR V pays an unused commitment fee between 0.45% and 0.75% based upon the average daily utilization of the facility. RMR V had $15.4 million of immediate availability to draw down cash under the facility and held $0.5 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the credit agreement.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 83


 

RMR VI Revolving Warehouse Credit Facility: In February 2023, the Company and its wholly-owned SPE, Regional Management Receivables VI, LLC (“RMR VI”), entered into a credit agreement that provides for a $75 million revolving warehouse credit facility to RMR VI. The facility converts to an amortizing loan in February 2025 and terminates in February 2026. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR VI. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a rate equal to one-month SOFR, plus (i) 0.10% per annum, (ii) a margin of 2.50%, and (iii) the applicable step-up margin (0.00% during the revolving period). The effective interest rate was 7.94% as of December 31, 2023. RMR VI pays a monthly unused commitment fee of 0.50%. RMR VI had no immediate availability to draw down cash under the facility and held $0.2 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the credit agreement.

RMR VII Revolving Warehouse Credit Facility: In April 2023, the Company and its wholly-owned SPE, Regional Management Receivables VII, LLC (“RMR VII”), entered into a credit agreement that provides for a $75 million revolving warehouse credit facility to RMR VII. The facility converts to an amortizing loan in October 2024 and terminates in October 2025. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR VII. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a rate equal to one-month SOFR, plus (i) 0.10% per annum, (ii) a margin of 3.00%, and (iii) the applicable step-up margin (0.00% during the revolving period). The effective interest rate was 8.44% as of December 31, 2023. RMR VII pays a monthly unused commitment fee ranging between 0.45% and 0.65%. RMR VII had no immediate availability to draw down cash under the facility and held $0.1 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the credit agreement.

RMIT 2020-1 Securitization: In September 2020, the Company, its wholly owned SPE, RMR III, and the Company’s indirect wholly owned SPE, Regional Management Issuance Trust ("RMIT") 2020-1, completed a private offering and sale of $180 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate, asset-backed notes by RMIT 2020-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2020-1. The notes had a revolving period ending in September 2023, with a final maturity date in October 2030. RMIT 2020-1 held $1.9 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2020-1 securitization bear interest, payable monthly, at an effective interest rate of 2.97% as of December 31, 2023. Prior to maturity in October 2030, the Company may redeem the notes in full, but not in part. During the year ended December 31, 2023, the Company made principal repayments of $34.9 million subsequent to the end of the revolving period.

RMIT 2021-1 Securitization: In February 2021, the Company, its wholly owned SPE, RMR III, and the Company’s indirect wholly owned SPE, RMIT 2021-1, completed a private offering and sale of $249 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate, asset-backed notes by RMIT 2021-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-1. The notes have a revolving period ending in February 2024, with a final maturity date in March 2031. RMIT 2021-1 held $2.6 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-1 securitization bear interest, payable monthly, at an effective interest rate of 2.08% as of December 31, 2023. Prior to maturity in March 2031, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in March 2024. No payments of principal of the notes will be made during the revolving period.

RMIT 2021-2 Securitization: In July 2021, the Company, its wholly owned SPE, RMR III, and the Company’s indirect wholly owned SPE, RMIT 2021-2, completed a private offering and sale of $200 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate, asset-backed notes by RMIT 2021-2. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-2. The notes have a revolving period ending in July 2026, with a final maturity date in August 2033. RMIT 2021-2 held $2.1 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-2 securitization bear interest, payable monthly, at an effective interest rate of 2.30% as of December 31, 2023. Prior to maturity in August 2033, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in August 2026. No payments of principal of the notes will be made during the revolving period.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 84


 

RMIT 2021-3 Securitization: In October 2021, the Company, its wholly owned SPE, RMR III, and the Company’s indirect wholly owned SPE, RMIT 2021-3, completed a private offering and sale of $125 million of asset-backed notes. The transaction consisted of the issuance of fixed-rate, asset-backed notes by RMIT 2021-3. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-3. The notes have a revolving period ending in September 2026, with a final maturity date in October 2033. RMIT 2021-3 held $1.5 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-3 securitization bear interest, payable monthly, at an effective interest rate of 3.88% as of December 31, 2023. Prior to maturity in October 2033, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in October 2024. No payments of principal of the notes will be made during the revolving period.

RMIT 2022-1 Securitization: In February 2022, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, RMIT 2022-1, completed a private offering and sale of $250 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2022-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2022-1. The notes have a revolving period ending in February 2025, with a final maturity date in March 2032. RMIT 2022-1 held $2.6 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2022-1 securitization bear interest, payable monthly, at an effective interest rate of 3.59% as of December 31, 2023. Prior to maturity in March 2032, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in March 2025. No payments of principal of the notes will be made during the revolving period.

RMIT 2022-2B Securitization: In October 2022, the Company, its wholly-owned SPE, RMR III, and its indirect wholly-owned SPE, RMIT 2022-2B, completed a private offering and sale of $200 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate, asset-backed notes by RMIT 2022-2B. The asset-backed notes were secured by finance receivables and other related assets that RMR III purchased from the Company and have a revolving period ending in October 2024, with a final maturity date in November 2031. RMR III sold two classes of the asset-backed notes and transferred them to RMIT 2022-2B. RMIT 2022-2B held $2.3 million in restricted cash reserves as of December 31, 2023 to satisfy provisions of the transaction documents. Borrowings under the sold notes bear interest, payable monthly, at an effective interest rate of 7.51% as of December 31, 2023. The $16.3 million Class C fixed-rate, asset-backed notes were retained by RMR III on the closing date but may be sold in whole or in part. Prior to maturity in November 2031, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in November 2024. No payments of principal of the notes will be made during the revolving period.

The Company’s debt arrangements contain certain covenants, including monthly and annual reporting, maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other indebtedness, and certain other restrictions. The Company was in compliance with all debt covenants as of December 31, 2023.

The following is a summary of estimated future principal payments required on outstanding debt:

 

Dollars in thousands

 

Amount

 

2024

 

$

441,290

 

2025

 

 

412,988

 

2026

 

 

291,031

 

2027

 

 

202,473

 

2028

 

 

42,607

 

Thereafter

 

 

5,634

 

Total

 

$

1,396,023

 

 

Note 12. Stockholders’ Equity

Stock repurchase program: In May 2021, the Company announced that its Board of Directors (the "Board") had authorized a $30.0 million stock repurchase program. In August 2021, the Company announced that the Board had approved a $20.0 million increase in the amount authorized under the stock repurchase program, from $30.0 million to $50.0 million. In January 2022, the Company completed the stock repurchase program, having repurchased a total of 945 thousand shares of common stock.

In February 2022, the Company announced that the Board had authorized a new $20.0 million stock repurchase program. In May 2022, the Company completed the stock repurchase program, having repurchased a total of 426 thousand shares of common stock.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 85


 

The following is a summary of the Company’s repurchased shares of common stock for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands, except per share amounts

 

2023

 

 

2022

 

 

2021

 

Common stock repurchased

 

 

 

 

 

437

 

 

 

1,450

 

Weighted-average cost per share

 

$

 

 

$

47.14

 

 

$

46.47

 

Total cost of common stock repurchased

 

$

 

 

$

20,613

 

 

$

67,442

 

 

Quarterly cash dividend: The Board may in its discretion declare and pay cash dividends on the Company’s common stock. The following table presents the dividends declared per share of common stock for the periods indicated:

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Dividends declared per common share

 

$

1.20

 

 

$

1.20

 

 

$

0.95

 

 

See Note 19, “Subsequent Events,” for information regarding the Company’s cash dividend following the end of the fiscal year.

Note 13. Disclosure About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and restricted cash: Cash and restricted cash is recorded at cost, which approximates fair value due to its highly liquid nature.

Restricted available-for-sale investments: The fair value of U.S. Treasury securities is priced using an external pricing service which the Company corroborates using a secondary external vendor. For additional information on the Company's restricted available-for-sale investments, see Note 5, "Restricted Available-for-Sale Investments."

Net finance receivables: The Company determines the fair value of net finance receivables using a discounted cash flows methodology. The application of this methodology requires the Company to make certain estimates and judgments. These estimates and judgments include, but are not limited to, prepayment rates, default rates, loss severity, and risk-adjusted discount rates.

Debt: The Company estimates the fair value of debt using estimated credit marks based on an index of similar financial instruments (credit facilities) and projected cash flows from the underlying collateralized finance receivables (securitizations), each discounted using a risk-adjusted discount rate.

Certain of the Company’s assets estimated fair value are classified and disclosed in one of the following three categories:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are estimated at fair value. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 86


 

The following table includes the carrying amounts and estimated fair values of financial assets and liabilities disclosed but not carried at fair value:

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Dollars in thousands

 

Carrying Amount

 

 

Estimated Fair Value

 

 

Carrying Amount

 

 

Estimated Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

4,509

 

 

$

4,509

 

 

$

3,873

 

 

$

3,873

 

Restricted cash

 

 

124,164

 

 

 

124,164

 

 

 

127,926

 

 

 

127,926

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,536,118

 

 

 

1,603,737

 

 

 

1,469,585

 

 

 

1,554,794

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

Debt

 

 

1,399,814

 

 

 

1,308,349

 

 

 

1,355,359

 

 

 

1,219,832

 

The following table includes the carrying amounts and estimated fair values of amounts the Company measures at fair value on a recurring basis:

 

 

December 31, 2023

 

 

December 31, 2022

 

Dollars in thousands

 

Carrying
Amount

 

 

Estimated
Fair Value

 

 

Carrying
Amount

 

 

Estimated
Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Level 2

 

 

 

 

 

 

 

 

 

 

 

 

Restricted available-for-sale investments

 

 

22,740

 

 

 

22,740

 

 

 

20,416

 

 

 

20,416

 

As of the periods indicated above, there were no financial assets or liabilities measured at fair value on a non-recurring basis.

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 87


 

Note 14. Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. The Company files consolidated or separate state income tax returns as required by individual states in which it operates. The Company is generally no longer subject to federal, state, or local income tax examinations by taxing authorities before 2020. However, the Company remains subject to examination in Wisconsin for its 2019 tax return and in Texas for its 2018 and 2019 tax returns.

Income tax expense attributable to total income before income taxes consists of the following for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

3,567

 

 

$

7,383

 

 

$

24,735

 

State and local

 

 

1,146

 

 

 

1,948

 

 

 

3,350

 

 

 

4,713

 

 

 

9,331

 

 

 

28,085

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

289

 

 

 

5,247

 

 

 

(4,169

)

State and local

 

 

(177

)

 

 

(481

)

 

 

(130

)

 

 

112

 

 

 

4,766

 

 

 

(4,299

)

Total

 

$

4,825

 

 

$

14,097

 

 

$

23,786

 

Income tax expense differed from the amount computed by applying the federal income tax rate to total income before income taxes as a result of the following:

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Dollars in thousands

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

Federal tax expense at statutory rate

 

$

4,364

 

 

 

21.0

%

 

$

13,717

 

 

 

21.0

%

 

$

23,619

 

 

 

21.0

%

Increase (reduction) in income taxes resulting
   from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State tax, net of federal benefit

 

 

882

 

 

 

4.2

%

 

 

1,134

 

 

 

1.7

%

 

 

2,620

 

 

 

2.3

%

Non-deductible compensation

 

 

1,021

 

 

 

4.9

%

 

 

627

 

 

 

1.0

%

 

 

672

 

 

 

0.6

%

Excess tax benefits from share-based awards

 

 

301

 

 

 

1.4

%

 

 

(344

)

 

 

(0.5

)%

 

 

(2,711

)

 

 

(2.4

)%

Research and development

 

 

(1,459

)

 

 

(7.0

)%

 

 

(1,222

)

 

 

(1.9

)%

 

 

 

 

 

 

Other

 

 

(284

)

 

 

(1.3

)%

 

 

185

 

 

 

0.3

%

 

 

(414

)

 

 

(0.4

)%

Total tax expense

 

$

4,825

 

 

 

23.2

%

 

$

14,097

 

 

 

21.6

%

 

$

23,786

 

 

 

21.1

%

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 88


 

Net deferred tax assets and liabilities consist of the following as of the periods indicated:

 

 

 

December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

44,200

 

 

$

41,877

 

Lease liability

 

 

8,711

 

 

 

8,782

 

Unearned insurance commissions

 

 

7,729

 

 

 

8,345

 

Research and experimental expenditures

 

 

4,100

 

 

 

2,060

 

Share-based compensation

 

 

2,870

 

 

 

2,512

 

Accrued expenses

 

 

2,542

 

 

 

2,081

 

State net operating loss carryforward

 

 

1,548

 

 

 

1,478

 

Unearned premium reserves

 

 

225

 

 

 

653

 

Other

 

 

134

 

 

 

222

 

Gross deferred tax assets

 

 

72,059

 

 

 

68,010

 

Deferred tax liabilities:

 

 

 

 

 

 

Fair market value adjustment of net finance receivables

 

 

42,713

 

 

 

37,415

 

Lease assets

 

 

8,173

 

 

 

8,268

 

Deferred loan costs

 

 

3,658

 

 

 

3,282

 

Depreciation and software amortization

 

 

2,353

 

 

 

4,076

 

Prepaid expenses

 

 

1,521

 

 

 

1,159

 

Gross deferred tax liabilities

 

 

58,418

 

 

 

54,200

 

Net deferred tax asset

 

$

13,641

 

 

$

13,810

 

The Company had a state net operating loss carryforward of approximately $52.3 million as of December 31, 2023. These carryforwards are available to offset future taxable income. If not used, the carryforward will expire beginning in 2032.

Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, based solely on the technical merits of the position. At December 31, 2023, the Company had $0.7 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax line of the consolidated statements of comprehensive income. During the year ended 2023, the Company recognized approximately $0.1 million of interest and penalties.

The following schedule reconciles unrecognized tax positions for the periods indicated:

 

 

 

Year Ended December 31,

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

Balance at January 1

 

$

414

 

 

$

 

 

$

 

Additions based on tax positions related to the current year

 

 

268

 

 

 

233

 

 

 

 

Additions for tax positions of prior years

 

 

51

 

 

 

181

 

 

 

 

Balance at December 31

 

$

733

 

 

$

414

 

 

$

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 89


 

Note 15. Earnings Per Share

The following schedule reconciles the computation of basic and diluted earnings per share for the periods indicated:

 

 

 

Year Ended December 31,

 

Dollars in thousands, except per share amounts

 

2023

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

15,958

 

 

$

51,224

 

 

$

88,687

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding for basic earnings per share

 

 

9,398

 

 

 

9,296

 

 

 

10,034

 

Effect of dilutive securities

 

 

195

 

 

 

360

 

 

 

609

 

Weighted-average shares adjusted for dilutive securities

 

 

9,593

 

 

 

9,656

 

 

 

10,643

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.70

 

 

$

5.51

 

 

$

8.84

 

Diluted

 

$

1.66

 

 

$

5.30

 

 

$

8.33

 

 

The Company excluded outstanding shares of common stock totaling 0.4 million, 0.3 million, and 11 thousand for the years ended December 31, 2023, 2022, and 2021, respectively, from the computation of diluted earnings per share because they were anti-dilutive. These anti-dilutive awards include Non-Qualified Stock Options, Restricted Stock Awards, Performance-Contingent Restricted Stock Units, and Performance Restricted Stock Units.

Note 16. Share-Based Compensation

The Company previously adopted the 2007 Management Incentive Plan (the “2007 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). On April 22, 2015, the stockholders of the Company approved the 2015 Long-Term Incentive Plan (the “2015 Plan”), and on each of April 27, 2017 and May 20, 2021, the stockholders of the Company re-approved the 2015 Plan, as amended and restated on each respective date. As of December 31, 2023, subject to adjustments as provided in the 2015 Plan, the maximum aggregate number of shares of the Company’s common stock that could be issued under the 2015 Plan could not exceed the sum of (i) 2.6 million shares (such amount reflecting an increase of 1.05 million additional or “new” shares in connection with the May 20, 2021 re-approval of the 2015 Plan) plus (ii) any shares remaining available for the grant of awards as of the 2015 Plan effective date (April 22, 2015) under the 2007 Plan or the 2011 Plan, plus (iii) any shares subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cash-settled, cancelled, terminated, expires, or lapses for any reason without the issuance of shares or pursuant to which such shares are forfeited. As of the effective date of the 2015 Plan (April 22, 2015), there were 0.9 million shares available for grant under the 2015 Plan, inclusive of shares previously available for grant under the 2007 Plan and the 2011 Plan that were rolled over to the 2015 Plan. No further grants will be made under the 2007 Plan or the 2011 Plan. However, awards that are outstanding under the 2007 Plan and the 2011 Plan will continue in accordance with their respective terms. As of December 31, 2023, there were 0.3 million shares available for grant under the 2015 Plan.

For the years ended December 31, 2023, 2022, and 2021, the Company recorded share-based compensation expense of $11.8 million, $10.8 million, and $7.4 million, respectively. As of December 31, 2023, unrecognized share-based compensation expense to be recognized over future periods approximated $11.5 million. This amount will be recognized as expense over a weighted-average period of 1.6 years. Share-based compensation expenses are recognized on a straight-line basis over the requisite service period of the agreement. All share-based compensation is classified as equity awards.-

The Company allows for the settlement of share-based awards on a net share basis. With net share settlement, the employee does not surrender any cash or shares upon the exercise of stock options or the vesting of stock awards or stock units. Rather, the Company withholds the number of shares with a value equivalent to the option exercise price (for stock options) and the statutory tax withholding (for all share-based awards). Net share settlements have the effect of reducing the number of shares that would have otherwise been issued as a result of exercise or vesting.

Long-term incentive program: The Company issues performance restricted stock units (“PRSUs”) and restricted stock awards (“RSAs”) to certain members of senior management under a long-term incentive program (“LTIP”). Recurring annual grants are made at the discretion of the Board. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. Vested PRSUs are subject to an additional one-year holding period following the vesting date. The actual value of the PRSUs that may be earned can range from 0% to 150% of target based on positive or negative cumulative total shareholder return concluding at the end of the third calendar year.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 90


 

Prior to 2022, the Company issued non-qualified stock options, performance-contingent restricted stock units (“RSUs”), cash-settled performance units (“CSPUs”), and RSAs to certain members of senior management under the LTIP. The CSPUs are cash incentive awards, and the associated expense is not based on the market price of the Company’s common stock. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. The actual value of the RSUs and CSPUs that may be earned can range from 0% to 150% of target based on the percentile ranking of the Company’s compound annual growth rate of pre-provision net income and pre-provision net income per share compared to a public company peer group over a three-year performance period.

Key team member incentive program: The Company also has a key team member incentive program for certain other members of senior management. Recurring annual participation in the program is at the discretion of the Board and executive management. Each participant in the program is eligible to earn an RSA, subject to performance over a one-year period. Payout under the program can range from 0% to 150% of target based on the achievement of five Company performance metrics and individual performance goals (subject to continued employment and certain other terms and conditions of the program). If earned, the RSA is issued following the one-year performance period and vests ratably over a subsequent two-year period (subject to continued employment or as otherwise provided in the underlying award agreement).

Inducement and retention program: From time to time, the Company issues stock awards and other long-term incentive awards in conjunction with employment offers to select new employees and retention grants to select existing employees. The Company issues these awards to attract and retain talent and to provide market competitive compensation. The grants have various vesting terms, including fully-vested awards at the grant date, cliff-vesting, and graded-vesting over periods of up to five years (subject to continued employment or as otherwise provided in the underlying award agreements).

Non-employee director compensation program: The Company awards its non-employee directors a cash retainer and shares of restricted common stock. The RSAs are granted on the fifth business day following the Company’s annual meeting of stockholders and fully vest upon the earlier of the first anniversary of the grant date or the completion of the directors’ annual service to the Company (so long as the period between the date of the annual stockholders’ meeting related to the grant date and the date of the next annual stockholders’ meeting is not less than 50 weeks).

The following are the terms and amounts of the awards issued under the Company’s share-based incentive programs:

Non-qualified stock options: The exercise price of all stock options is equal to the Company’s closing stock price on the date of grant. Stock options are subject to various vesting terms, including graded- and cliff-vesting over periods of up to five years. In addition, stock options vest and become exercisable in full or in part under certain circumstances, including following the occurrence of a change of control (as defined in the option award agreements). Participants who are awarded options must exercise their options within a maximum of ten years of the grant date.

The fair value of option grants was estimated on the grant date using the Black-Scholes option-pricing model. Beginning in 2022, the Company no longer issues non-qualified stock options as part of its annual long-term incentive program. The following table summarizes the weighted-average assumptions for option grants during the periods indicated:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Expected volatility

 

 

 

 

 

 

 

 

47.83

%

Expected dividends

 

 

 

 

 

 

 

 

2.63

%

Expected term (in years)

 

 

 

 

 

 

 

 

6.0

 

Risk-free rate

 

 

 

 

 

 

 

 

0.64

%

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 91


 

The following table summarizes the stock option activity for the year ended December 31, 2023:

Dollars in thousands, except per share amounts

 

Number of
Shares

 

 

Weighted-Average Exercise Price
Per Share

 

 

Weighted-Average Remaining Contractual Life (Years)

 

 

Aggregate Intrinsic Value

 

Options outstanding at January 1, 2023

 

 

527

 

 

$

23.07

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(18

)

 

 

16.09

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding at December 31, 2023

 

 

509

 

 

$

23.32

 

 

 

4.9

 

 

$

1,954

 

Options exercisable at December 31, 2023

 

 

509

 

 

$

23.32

 

 

 

4.9

 

 

$

1,954

 

The following table provides additional stock option information for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands, except per share amounts

 

2023

 

 

2022

 

 

2021

 

Weighted-average grant date fair value per share

 

$

 

 

$

 

 

$

10.52

 

Intrinsic value of options exercised

 

$

277

 

 

$

2,142

 

 

$

11,711

 

Fair value of stock options that vested

 

$

544

 

 

$

849

 

 

$

1,063

 

Performance restricted stock units: Compensation expense for PRSUs is based on the fair value of the award estimated on the grant date using the Monte Carlo valuation model. The following are the weighted-average assumptions for the PRSU grants during the periods indicated:

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Expected volatility

 

 

40.18

%

 

 

39.24

%

 

 

 

Expected dividends

 

 

2.24

%

 

 

 

 

 

 

Risk-free rate

 

 

5.21

%

 

 

1.05

%

 

 

 

Discount for post-vesting restrictions

 

 

8.48

%

 

 

11.93

%

 

 

 

The following table summarizes PRSU activity during the year ended December 31, 2023:

Dollars and units in thousands, except per unit amounts

 

Units

 

 

Weighted-Average
Grant Date
Fair Value Per Unit

 

Non-vested units at January 1, 2023

 

 

70

 

 

$

52.07

 

Granted

 

 

118

 

 

 

32.40

 

Achieved performance adjustment

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited

 

 

(13

)

 

 

36.67

 

Non-vested units at December 31, 2023

 

 

175

 

 

$

39.94

 

The following table provides additional PRSU information for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands, except per unit amounts

 

2023

 

 

2022

 

 

2021

 

Weighted-average grant date fair value per unit

 

$

32.40

 

 

$

52.07

 

 

$

 

Fair value of PRSUs that vested

 

$

 

 

$

 

 

$

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 92


 

Performance-contingent restricted stock units: Compensation expense for RSUs is based on the Company’s closing stock price on the date of grant and the probability that certain financial goals will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSU activity during the year ended December 31, 2023:

Dollars in thousands, except per unit amounts

 

Units

 

 

Weighted-Average Grant Date Fair Value Per Unit

 

Non-vested units at January 1, 2023

 

 

108

 

 

$

21.87

 

Granted (target)

 

 

 

 

 

 

Achieved performance adjustment (1)

 

 

28

 

 

 

15.86

 

Vested

 

 

(91

)

 

 

15.86

 

Forfeited

 

 

 

 

 

 

Non-vested units at December 31, 2023

 

 

45

 

 

$

30.22

 

(1) The 2020 LTIP RSUs were earned and vested at 145.0% of target, as described in greater detail in the Company’s definitive proxy statement filed with the SEC on April 12, 2023.

The following table provides additional RSU information for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands, except per unit amounts

 

2023

 

 

2022

 

 

2021

 

Weighted-average grant date fair value per unit

 

$

 

 

$

 

 

$

30.22

 

Fair value of RSUs that vested

 

$

1,445

 

 

$

513

 

 

$

1,199

 

Restricted stock awards: The fair value and compensation expense of the primary portion of the Company’s RSAs are calculated using the Company’s closing stock price on the date of grant. These RSAs include director awards, inducement awards, and RSAs granted pursuant to the Company’s long-term incentive program.

The fair value and compensation expense of RSAs granted pursuant to the Company’s performance-based key team member incentive program are calculated using the Company’s closing stock price on the date of grant and the probability that certain financial goals will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSA activity during the year ended December 31, 2023:

Dollars in thousands, except per share amounts

 

Shares

 

 

Weighted-Average Grant Date Fair Value Per Share

 

Non-vested shares at January 1, 2023

 

 

198

 

 

$

38.99

 

Granted

 

 

248

 

 

 

34.25

 

Vested

 

 

(239

)

 

 

36.73

 

Forfeited

 

 

(17

)

 

 

36.37

 

Non-vested shares at December 31, 2023

 

 

190

 

 

$

35.89

 

The following table provides additional RSA information for the periods indicated:

 

 

Year Ended December 31,

 

Dollars in thousands, except per share amounts

 

2023

 

 

2022

 

 

2021

 

Weighted-average grant date fair value per share

 

$

34.25

 

 

$

40.76

 

 

$

35.18

 

Fair value of RSAs that vested

 

$

8,787

 

 

$

7,274

 

 

$

4,874

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 93


 

Note 17. Commitments and Contingencies

In the normal course of business, the Company has been named as a defendant in legal actions in connection with its activities. Some of the actual or threatened legal actions include claims for compensatory damages or claims for indeterminate amounts of damages. The Company contests liability and the amount of damages, as appropriate, in each pending matter.

Where available information indicates that it is probable that a liability has been incurred and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to net income.

However, in many legal actions, it is inherently difficult to determine whether any loss is probable, or even reasonably possible, or to estimate the amount of loss. This is particularly true for actions that are in their early stages of development or where plaintiffs seek indeterminate damages. In addition, even where a loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued, it is not always possible to reasonably estimate the size of the possible loss or range of loss. Before a loss, additional loss, range of loss, or range of additional loss can be reasonably estimated for any given action, numerous issues may need to be resolved, including through lengthy discovery, following determination of important factual matters, and/or by addressing novel or unsettled legal questions.

For certain other legal actions, the Company can estimate reasonably possible losses, additional losses, ranges of loss, or ranges of additional loss in excess of amounts accrued, but the Company does not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the consolidated financial statements.

While the Company will continue to identify legal actions where it believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that the Company has not yet been notified of or are not yet determined to be probable, or reasonably possible and reasonable to estimate.

The Company expenses legal costs as they are incurred.

Note 18. Insurance Products and Reinsurance of Certain Risks

RMC Reinsurance, Ltd. is a wholly-owned insurance subsidiary of the Company. The Company sells optional insurance products to its customers in connection with its lending operations. These optional products include credit life, credit accident and health, credit property, vehicle single interest, and credit involuntary unemployment insurance. The type and terms of our optional insurance products vary from state to state based on applicable laws and regulations. Insurance premiums are remitted to an unaffiliated company that issues the policy to the customer. This unaffiliated company cedes the premiums to RMC Reinsurance, Ltd. Life insurance premiums are ceded to the Company as written and non-life products are ceded as earned. Unearned insurance premiums represent insurance premiums, net of premiums held by the unaffiliated insurance underwriter, that will be earned over the terms of the policies.

The Company maintains a restricted reserve comprised of restricted cash and restricted available-for-sale investments for life insurance claims in an amount determined by the ceding company. At December 31, 2023 and 2022, the restricted reserves consisted of $21.9 million and $21.2 million of unearned premium reserves and $1.2 million and $1.1 million of unpaid claim reserves, respectively. For non-life products, the Company had no unpaid claim reserves at both December 31, 2023 and 2022, as changes in claim reserves are settled between the Company and the unaffiliated insurance underwriter as they are incurred. For the year ended December 31, 2023, non-life unpaid claim reserves, included in insurance income, net as presented in the table below, decreased $0.2 million. For the year ended December 31, 2022, non-life unpaid claim reserves increased $0.5 million, and decreased $0.4 million for the year ended December 31, 2021.

Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from the Company. Earned premiums are accounted for over the period of the underlying reinsured policies using assumptions consistent with the policy terms. Direct costs included in insurance income, net are claims paid, changes in claims reserves, ceding fees, and premium taxes paid. The Company does not allocate to insurance income, net, any other head office or branch administrative costs associated with managing its insurance operations, managing its captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 94


 

The following table summarizes the components of insurance income, net for the periods indicated:

 

 

 

Insurance Premiums and Direct Expenses

 

Dollars in thousands

 

2023

 

 

2022

 

 

2021

 

Earned premiums

 

$

59,830

 

 

$

60,190

 

 

$

53,218

 

Claims, reserves, and certain direct expenses

 

 

(15,301

)

 

 

(16,688

)

 

 

(17,736

)

Insurance income, net

 

$

44,529

 

 

$

43,502

 

 

$

35,482

 

Apart from the various optional payment and collateral protection insurance products that the Company offers to customers, on certain loans, the Company also collects a fee from customers and, in turn, purchases non-file insurance from an unaffiliated insurance company for its benefit in lieu of recording and perfecting its security interest in personal property collateral. Non-file insurance protects the Company from credit losses where, following an event of default, it is unable to take possession of personal property collateral because its security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such circumstances, non-file insurance generally will pay to the Company an amount equal to the lesser of the loan balance or the collateral value.

Note 19. Subsequent Events

Senior revolving credit facility amendment: In February 2024, the Company amended its senior revolving credit facility to, among other things, (i) extend the maturity date to September 2025, (ii) increase the consolidated funded debt to consolidated tangible net worth covenant by 0.25, (iii) reduce the consolidated interest coverage ratios applicable to certain time periods, (iv) remove BankUnited, N.A. and Synovus Bank as lenders and reduce the aggregate commitments by the amount of BankUnited, N.A. and Synovus Bank’s aggregate commitments of $65.0 million, and (v) add the ability to post cash collateral to secure hedging agreements. The amended senior revolving credit facility is described in greater detail in the Current Report on Form 8-K filed by the Company with the SEC on February 7, 2024.

Quarterly cash dividend: In February 2024, the Company announced that the Board declared a quarterly cash dividend of $0.30 per share. The dividend will be paid on March 14, 2024 to shareholders of record at the close of business on February 22, 2024. The declaration, amount, and payment of any future cash dividends on shares of the Company’s common stock will be at the discretion of the Board.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 95


 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost–benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for the preparation, integrity, accuracy, and fair presentation of the consolidated financial statements appearing in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The financial statements were prepared in conformity with GAAP and include amounts based on judgments and estimates by management.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with GAAP. Our internal control over financial reporting is supported by internal audits, appropriate reviews by management, policies and guidelines, careful selection and training of qualified personnel, and codes of ethics adopted by our Company’s Board that are applicable to all directors, officers, and employees of our Company.

Because of its inherent limitations, no matter how well designed, internal control over financial reporting may not prevent or detect all misstatements. Internal controls can only provide reasonable assurance with respect to financial statement preparation and presentation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that the controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management assessed the effectiveness of our internal control over financial reporting, with the participation of our chief executive officer and chief financial officer, as of December 31, 2023. In conducting this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on this assessment, management believes that we maintained effective internal control over financial reporting as of December 31, 2023. Our independent registered public accounting firm for the fiscal year ended December 31, 2023, Deloitte & Touche, LLP, has issued an attestation report on our internal control over financial reporting, which appears in Part II, Item 8, “Financial Statements and Supplementary Data.”

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

On November 3, 2023, Robert W. Beck, the President and Chief Executive Officer of the Company and a member of the Board, terminated a Rule 10b5-1 trading arrangement that he had adopted on March 10, 2023 with respect to the sale of up to 20,000

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 96


 

shares of the Company’s common stock (the “Beck 10b5-1 Trading Plan”). The Beck 10b5-1 Trading Plan was scheduled to expire by its terms on May 31, 2024.

During the three months ended December 31, 2023, none of the Company’s other officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as such terms are defined in Item 408(a) of Regulation S-K.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 97


 

Part III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required under this item is incorporated herein by reference to the information presented under the headings “Board of Directors and Corporate Governance Matters—Committees of the Board,” “Executive Officers,” “Stockholder Proposals—Proposal No. 1: Election of Directors,” and “Delinquent Section 16(a) Reports” (to the extent reported therein) in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2023.

Our Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”). The Code of Ethics applies to all of our directors, officers, and employees and is posted on the Company’s Investor Relations website under the “Governance” tab at www.regionalmanagement.com. A stockholder may request a copy of the Code of Ethics by contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, SC 29651. To the extent permissible under applicable law, the rules of the SEC, and NYSE listing standards, we intend to disclose on our website any amendment to our Code of Ethics, or any grant of a waiver from a provision of our Code of Ethics, that requires disclosure under applicable law, the rules of the SEC, or NYSE listing standards.

ITEM 11. EXECUTIVE COMPENSATION.

The information required under this item is incorporated herein by reference to the information presented under the headings “Board of Directors and Corporate Governance Matters—Compensation Committee Interlocks and Insider Participation,” “Board of Directors and Corporate Governance Matters—Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation Tables,” “Summary of Employment Arrangements with Executive Officers,” and “Summary of Company Incentive Plans” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2023.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required under this item is incorporated herein by reference to the information presented under the headings “Other Information—Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation Tables—Equity Compensation Plan Information” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2023.

The information required under this item is incorporated herein by reference to the information presented under the headings “Other Information—Certain Relationships and Related Person Transactions,” “Board of Directors and Corporate Governance Matters—Board Independence,” and “Board of Directors and Corporate Governance Matters—Current Directors and Director Nominees” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2023.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required under this item is incorporated herein by reference to the information presented under the heading “Stockholder Proposals—Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2023.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 98


 

Part IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this report:

(1) Financial Statements:

(i) Reports of Independent Registered Public Accounting Firms

(ii) Consolidated Balance Sheets at December 31, 2023 and December 31, 2022

(iii) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021

(iv) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021

(v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021

(vi) Notes to Consolidated Financial Statements

(2) Financial Statement Schedules: None. Financial statement schedules have been omitted because the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

(3) Exhibits: The exhibits listed in the following index are filed as a part of this Annual Report on Form 10-K.

 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

3.1

 

Amended and Restated Certificate of Incorporation of Regional Management Corp.

 

 

8-K

 

001-35477

 

3.1

 

04/02/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Amended and Restated Bylaws of Regional Management Corp.

 

 

8-K

 

001-35477

 

3.2

 

04/02/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

4.1

 

Indenture, dated September 23, 2020, by and among Regional Management Issuance Trust 2020-1, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank

 

 

 

8-K

 

001-35477

 

4.1

 

09/29/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2

 

Indenture, dated February 18, 2021, by and among Regional Management Issuance Trust 2021-1, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank

 

 

 

8-K

 

001-35477

 

4.1

 

02/23/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

4.3

 

Indenture, dated July 22, 2021, by and among Regional Management Issuance Trust 2021-2, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank

 

 

 

8-K

 

001-35477

 

4.1

 

07/22/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

4.4

 

Indenture, dated October 8, 2021, by and among Regional Management Issuance Trust 2021-3, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank

 

 

 

8-K

 

001-35477

 

4.1

 

10/12/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

4.5

 

Indenture, dated February 22, 2022, by and among Regional Management Issuance Trust 2022-1, as issuer, Regional Management Corp., as servicer, and Computershare Trust Company National Association, as indenture trustee

 

 

 

8-K

 

001-35477

 

4.1

 

02/22/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

4.6

 

Indenture, dated October 20, 2022, by and among Regional Management Issuance Trust 2022-2B, as issuer, Regional

 

 

 

8-K

 

001-35477

 

4.1

 

10/20/2022

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 99


 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

 

 

Management Corp., as servicer, and Computershare Trust Company, N.A., as indenture trustee and securities intermediary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.7

 

Description of Securities

 

 

 

10-K

 

001-35477

 

4.4

 

03/16/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1.1

 

Cooperation Agreement, dated as of January 26, 2018, by and between Basswood Capital Management, L.L.C. and the Company

 

 

 

8-K

 

001-35477

 

10.1

 

01/29/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1.2

 

Letter Agreement, dated November 28, 2022, by and between Regional Management Corp. and Basswood Capital Management, L.L.C.

 

 

 

8-K

 

001-35477

 

10.3

 

11/29/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.1

 

Seventh Amended and Restated Loan and Security Agreement, dated September 20, 2019, by and among Regional Management Corp. and certain of its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as Agent

 

 

 

8-K

 

001-35477

 

10.1

 

09/20/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.2

 

First Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of October 15, 2020, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

10/16/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.3

 

Second Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of February 9, 2021, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

 

001-35477

 

10.1

 

02/10/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.4

 

Third Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of August 23, 2021, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

 

08/24/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.5

 

Fourth Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of December 17, 2021, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

12/21/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.6

 

Fifth Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of September 7, 2022, among Regional Management Corp. as a borrower and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

09/12/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.7

 

Sixth Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of November 22, 2022, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

11/29/2022

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 100


 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.8

 

Seventh Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of March 21, 2023, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

10-Q

 

001-35477

 

10.2

 

05/05/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2.9

 

Eighth Amendment to Seventh Amended and Restated Loan and Security Agreement, dated as of February 5, 2024, by and among Regional Management Corp. and its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as agent

 

 

 

8-K

 

001-35477

 

10.1

 

02/07/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.1

 

Credit Agreement, dated April 19, 2021 by and among Regional Management Receivables IV, LLC, as borrower, Regional Management Corp., as servicer, the lenders and agents from time to time parties thereto, Wells Fargo Bank, National Association as account bank and backup servicer and Wells Fargo Bank, National Association as administration agent

 

 

 

8-K

 

001-35477

 

10.2

 

04/20/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.2

 

Amendment No. 1 to the Credit Agreement, dated as of December 17, 2021, by and among Regional Management Corp., as servicer, Regional Management Receivables IV, LLC, as borrower, Wells Fargo Bank, National Association, as agent and committed lender and Wells Fargo Bank, National Association, as administrative agent

 

 

 

8-K

 

001-35477

 

10.3

 

12/21/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.3

 

Amendment No. 2 to the Credit Agreement, dated as of August 11, 2022, by and among Regional Management Corp., as servicer, Regional Management Receivables IV, LLC, as borrower, Wells Fargo Bank, National Association, as agent and committed lender, and Wells Fargo Bank, National Association, as administrative agent

 

 

 

10-K

 

001-35477

 

10.4.3

 

02/24/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.4

 

Amendment No. 3 to the Credit Agreement, dated as of September 7, 2022, by and among Regional Management Corp., as servicer, Regional Management Receivables IV, LLC, as borrower, Wells Fargo Bank, National Association, as agent and committed lender, and Wells Fargo Bank, National Association, as administrative agent

 

 

 

8-K

 

001-35477

 

10.3

 

09/12/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.5

 

Amendment No. 4 to the Credit Agreement dated as of April 13, 2023, by and among Regional Management Corp., as servicer, Regional Management Receivables IV, LLC, as borrower, the lenders and agents party thereto, Wells Fargo Bank, National Association, as administrative agent, and Wells Fargo Bank, National Association, acting through its Corporate Trust Services division, as account bank and backup servicer

 

 

 

10-Q

 

001-35477

 

10.3

 

08/04/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3.6

 

Amendment No. 5 to the Credit Agreement dated as of May 15, 2023, by and among Regional Management Corp., as servicer, Regional Management Receivables IV, LLC, as borrower, the lenders and agents party thereto, Wells Fargo Bank, National Association, as administrative agent, and Wells Fargo Bank, National Association, acting through its Corporate Trust Services division, as account bank and backup servicer

 

 

 

8-K

 

001-35477

 

10.1

 

05/19/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 101


 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

10.4.1

 

Credit Agreement, dated April 28, 2021 by and among Regional Management Receivables V, LLC, as borrower, Regional Management Corp., as servicer, the lenders from time to time parties thereto, Wells Fargo Bank, National Association as account bank and backup servicer and JPMorgan Chase Bank, N.A. as administration agent

 

 

 

8-K

 

001-35477

 

10.1

 

04/29/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.4.2

 

Amendment No.1 to the Credit Agreement, dated as of December 17, 2021, by and among Regional Management Corp., as servicer, Regional Management Receivables V, LLC, as borrower, the lenders from time to time parties thereto, Wells Fargo Bank, National Association, acting as its corporate trust services division, including its successors and permitted assigns, as account bank and backup servicer, and JPMorgan Chase Bank, N.A., as administrative agent

 

 

 

8-K

 

001-35477

 

10.4

 

12/21/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.4.3

 

Amendment No. 2 to the Credit Agreement, dated as of August 11, 2022, by and among Regional Management Corp., as servicer, Regional Management Receivables V, LLC, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Wells Fargo, National Association, acting as its corporate trust services division, as account bank and backup servicer

 

 

 

10-K

 

001-35477

 

10.5.3

 

02/24/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.4.4

 

Amendment No. 3 to the Credit Agreement, dated as of September 30, 2022, by and among Regional Management Corp., as servicer, Regional Management Receivables V, LLC, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Wells Fargo, National Association, acting as its corporate trust services division, as account bank and backup servicer

 

 

 

 

10-K

 

001-35477

 

10.5.4

 

02/24/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.4.5

 

Amendment No. 4 to the Credit Agreement, dated as of November 22, 2022, by and among Regional Management Corp., as servicer, Regional Management Receivables V, LLC, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Wells Fargo, National Association, acting as its corporate trust services division, as account bank and backup servicer

 

 

 

8-K

 

001-35477

 

10.2

 

11/29/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.5

 

Credit Agreement, dated as of February 2, 2023, by and among Regional Management Corp., as servicer, Regional Management Receivables VI, LLC, as borrower, the lenders and agents parties thereto, Regions Bank, as administrative agent, and Computershare Trust Company, N.A., as securities intermediary and backup servicer

 

 

 

8-K

 

001-35477

 

10.1

 

02/08/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.6

 

Credit Agreement, dated as of April 3, 2023, by and among Regional Management Corp., as servicer, Regional Management Receivables VII, LLC, as borrower, the lenders and agents parties thereto, BMO Capital Markets Corp., as administrative agent, and Computershare Trust Company, N.A., as securities intermediary and backup servicer

 

 

 

8-K

 

001-35477

 

10.1

 

04/06/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 102


 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

10.7

 

Sale and Servicing Agreement, dated September 23, 2020, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2020-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2020-1A SUBI

 

 

 

8-K

 

001-35477

 

10.1

 

09/29/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

10.8

 

Sale and Servicing Agreement, dated February 18, 2021, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2021-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2021-1A SUBI

 

 

 

8-K

 

001-35477

 

10.1

 

02/23/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.9

 

Sale and Servicing Agreement, dated July 22, 2021, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2021-2, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2021-2A SUBI

 

 

 

8-K

 

001-35477

 

10.1

 

07/22/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.10

 

Sale and Servicing Agreement, dated October 8, 2021, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, and Regional Management Issuance Trust 2021-3, as issuer

 

 

 

8-K

 

001-35477

 

10.1

 

10/12/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.11

 

Sale and Servicing Agreement, dated February 22, 2022, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2022-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2022-1A SUBI

 

 

 

8-K

 

001-35477

 

10.1

 

02/22/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.12

 

Sale and Servicing Agreement, dated October 20, 2022, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2022-2B, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2022-2B SUBI

 

 

 

8-K

 

001-35477

 

10.1

 

10/20/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.1†

 

Regional Management Corp. 2015 Long-Term Incentive Plan (As Amended and Restated Effective May 20, 2021)

 

 

8-K

 

001-35477

 

10.1

 

05/21/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.2†

 

Declaration of Amendment to Regional Management Corp. 2015 Long-Term Incentive Plan (As Amended and Restated Effective May 20, 2021)

 

 

 

10-Q

 

001-35477

 

10.1

 

05/06/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.3†

 

Form of Nonqualified Stock Option Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to April 27, 2017)

 

 

8-K

 

001-35477

 

10.3

 

04/28/2015

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.4†

 

Form of Nonqualified Stock Option Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)

 

 

 

8-K

 

001-35477

 

10.2

 

05/02/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.5†

 

Form of Performance-Contingent Restricted Stock Unit Award Agreement under the 2015 Long-Term Incentive Plan

 

 

 

8-K

 

001-35477

 

10.3

 

05/02/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 103


 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Filed

Herewith

 

Form

 

File

Number

 

Exhibit

 

Filing

Date

10.13.6†

 

Form of Cash-Settled Performance Unit Award Agreement under the 2015 Long-Term Incentive Plan

 

 

 

8-K

 

001-35477

 

10.4

 

05/02/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.7†

 

Form of Restricted Stock Award Agreement under the 2015 Long-Term Incentive Plan

 

 

 

8-K

 

001-35477

 

10.5

 

05/02/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.8†

 

Form of Stock Award Agreement under the 2015 Long-Term Incentive Plan

 

 

 

8-K

 

001-35477

 

10.6

 

05/02/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

10.13.9†

 

Form of Performance Restricted Stock Unit Award Agreement

 

 

 

8-K

 

001-35477

 

10.1

 

02/18/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.14†

 

Regional Management Corp. Annual Incentive Plan (as amended and restated effective March 23, 2015)

 

 

8-K

 

001-35477

 

10.2

 

04/28/2015

 

 

 

 

 

 

 

 

 

 

 

 

 

10.15†

 

Form of Key Team Member Incentive Program Agreement

 

 

 

8-K

 

001-35477

 

10.2

 

09/29/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

10.16†

 

Summary of Non-Employee Director Compensation Program

 

 

 

10-K

 

001-35477

 

10.16

 

03/04/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

10.17†

 

Regional Management Corp. Executive Severance and Change in Control Plan

 

 

 

8-K

 

001-35477

 

10.1

 

04/10/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

10.18†

 

Form of Retention Award Agreement

 

 

8-K

 

001-35477

 

10.1

 

03/13/2015

 

 

 

 

 

 

 

 

 

 

 

 

 

16.1

 

Letter from RSM US LLP, dated November 2, 2021

 

 

 

8-K

 

001-35477

 

16.1

 

11/02/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

21.1

 

Subsidiaries of Regional Management Corp.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.1

 

Consent of Deloitte & Touche LLP

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.2

 

Consent of RSM US LLP

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Section 1350 Certifications

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97.1

 

Regional Management Corp. Dodd-Frank Act Compensation Recoupment (Clawback) Policy

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104

 

Cover Page Interactive Data File—the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101

 

 

 

 

 

 

 

 

 

 

† Indicates a management contract or a compensatory plan, contract, or arrangement.

ITEM 16. FORM 10-K SUMMARY.

None.

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 104


 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Regional Management Corp.

 

 

 

Date: February 22, 2024

 

/s/ Robert W. Beck

 

 

Robert W. Beck

 

 

President and Chief Executive Officer

 

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert W. Beck and Harpreet Rana, and each of them, jointly and severally, as true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all which said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 22, 2024.

 

/s/ Robert W. Beck

 

Name:

 

Robert W. Beck

 

Title:

 

President, Chief Executive Officer, and Director

(principal executive officer)

 

 

 

 

 

/s/ Harpreet Rana

 

Name:

 

Harpreet Rana

 

Title:

 

Executive Vice President and Chief Financial Officer

(principal financial officer)

 

 

 

 

 

/s/ Steven B. Barnette

 

Name:

 

Steven B. Barnette

 

 

Title:

 

Vice President and Chief Accounting Officer

(principal accounting officer)

 

 

 

 

 

/s/ Carlos Palomares

 

Name:

 

Carlos Palomares

 

Title:

 

Chair of the Board of Directors

 

 

 

 

 

/s/ Jonathan D. Brown

 

Name:

 

Jonathan D. Brown

 

 

Title:

 

Director

 

 

 

 

 

/s/ Roel C. Campos

 

Name:

 

Roel C. Campos

 

 

Title:

 

Director

 

 

 

 

 

/s/ Maria Contreras-Sweet

 

Name:

 

Maria Contreras-Sweet

 

 

Title:

 

Director

 

 

 

 

 

/s/ Michael R. Dunn

 

Name:

 

Michael R. Dunn

 

 

Title:

 

Director

 

 

 

 

 

/s/ Steven J. Freiberg

 

Name:

 

Steven J. Freiberg

 

 

Title:

 

Director

 

 

 

 

 

/s/ Sandra K. Johnson, Ph.D.

 

Name:

 

Sandra K. Johnson, Ph.D.

 

 

Title:

 

Director

 

Regional Management Corp. | 2023 Annual Report on Form 10-K | 105