Regional Management Corp. Announces Fourth Quarter 2012 Results

Regional Management Corp. Announces Fourth Quarter 2012 Results

GREENVILLE, S.C.--(BUSINESS WIRE)-- Regional Management Corp. (NYS: RM) , a diversified specialty consumer finance company, today announced results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Highlights and Subsequent Events

  • Total fourth quarter 2012 revenue was $37.0 million, a 25.7% increase from the prior-year period.
  • Net income for the fourth quarter of 2012 was $6.6 million, a 3.7% increase from the prior-year period, and diluted earnings per share was $0.52 based on a diluted share count of 12.8 million.
  • Finance receivables as of December 31, 2012 were $437.6 million, an increase of 42.7% from the prior-year period. Net charge-offs as a percentage of average finance receivables for the fourth quarter of 2012 were 7.1%, an increase from 7.0% in the prior-year period.
  • Same-store revenue growth1 for the fourth quarter of 2012 was 17.0%.
  • Opened 8 new branches in the fourth quarter of 2012 and its first branch in Georgia in January 2013; as of December 31, 2012, Regional Management's branch network consisted of 221 locations.

"2012 was a year of significant milestones and growth for our company, as we became a publicly traded entity, added 51 branches to our network and saw our finance receivables increase by over 40% from the prior year-end," said Thomas Fortin, Chief Executive Officer of Regional Management Corp. "I am proud of the entire Regional Management team's hard work and dedication that made 2012 such a success. In terms of our fourth quarter, while our bottom line numbers were ultimately below our expectations, we were very satisfied with our growth trajectory in the quarter, especially with our RMC Retail business unit and our live check campaign. We also saw a slight increase in our net charge-offs as a percentage of average finance receivables as well as a material increase of our efficiency ratio, and we are watching those figures carefully in 2013 to ensure they are aligned with our growth strategy."

Fourth Quarter 2012 Results

For the fourth quarter ended December 31, 2012, Regional Management reported total revenue of $37.0 million, a 25.7% increase from $29.4 million in the prior-year period. Interest and fee income revenue for the fourth quarter of 2012 was $32.9 million, a 29.7% increase from $25.4 million in the prior-year period, primarily due to a 42.7% year-over-year increase in finance receivables. Insurance and other income for the fourth quarter of 2012 was $4.1 million, a 1.1% increase from the prior-year period. Same-store revenue growth for the fourth quarter of 2012 was 17.0%.

Finance receivables outstanding at December 31, 2012 were $437.6 million, a 42.7% increase from $306.6 million in the prior-year period. Finance receivables increased primarily due to the addition of 51 branches - including the 19 net new branches acquired in January 2012 in Alabama - since December 31, 2011, through both de novo openings and acquisitions. Same-store loans receivable (stores open at least 13 months) grew 26.6%.

Provision for loan losses in the fourth quarter of 2012 was $8.8 million versus $6.0 million in the prior-year period, primarily due to the increase in loan volume. Net charge-offs as a percentage of average finance receivables for the fourth quarter of 2012 was 7.1%, an increase from 7.0% in the prior-year period.

General and administrative expenses for the fourth quarter of 2012 were $14.9 million, an increase of 49.6% from $10.0 million in the prior-year period, primarily due to increased personnel costs from opening and acquiring an additional 51 branches since December 31, 2011. During the fourth quarter of 2012, Regional Management opened 8 new branches. Regional Management's efficiency ratio - the percentage of general and administrative expenses compared to total revenue - in the fourth quarter of 2012 was 40.4%, an increase of 650 basis points from 33.9% in the prior-year period.

Net income for the fourth quarter of 2012 was $6.6 million, a 3.7% increase compared to net income of $6.4 million in the prior-year period, and diluted earnings per share for the fourth quarter of 2012 was $0.52 based on a diluted share count of 12.8 million.

Full Year 2012 Results

For the full year ended December 31, 2012, Regional Management reported total revenue of $136.0 million, a 29.3% increase from $105.2 million in the prior year. Interest and fee income revenue for the full year ended December 31, 2012 was $119.2 million, a 30.6% increase from $91.3 million in the prior year. Insurance and other income for the full year ended December 31, 2012 was $16.8 million, a 20.8% increase from the prior year.

Provision for loan losses in the full year ended December 31, 2012 was $27.8 million versus $17.9 million in the prior year, primarily due to the increase in loan volume. Net charge-offs as a percentage of average finance receivables for the full year ended December 31, 2012 was 6.5%, an increase from 6.3% in the prior year.

General and administrative expenses for the full year ended December 31, 2012 were $55.3 million, an increase of 36.1% from $40.6 million in the prior year, primarily due to increased personnel costs from opening and acquiring an additional 51 branches since December 31, 2011. Regional Management's efficiency ratio in the full year ended December 31, 2012 was 40.6%, an increase of 200 basis points from 38.6% in the prior year.

GAAP net income for the full year ended December 31, 2012 was $25.4 million, a 19.4% increase compared to net income of $21.2 million in the prior year, and diluted earnings per share for the full year ended December 31, 2012 was $2.12 based on a diluted share count of 12.0 million. On a pro forma basis, excluding one-time IPO expenses and applying the proceeds from the IPO to reduce outstanding debt, net income for the full year ended December 31, 2012 was $27.0 million, a 27.2% increase from the prior year, and diluted earnings per share was $2.12 based on a diluted share count of 12.8 million.

Liquidity and Capital Resources

As of December 31, 2012, Regional Management had finance receivables of $437.6 million and outstanding debt of $292.4 million on its $325.0 million senior revolving credit facility and on its $1.5 million other notes payable line of credit.

Conference Call Information

The Company will host a conference call and webcast today at 5:00 PM Eastern. Both the call and webcast are open to the general public.

The dial-in number for the conference call is (800) 299-6183, passcode 55173070 - please dial the number 10 minutes prior to the scheduled start time. A live webcast of the conference call will also be available on Regional Management's website at www.RegionalManagement.com.

A replay of the call will be available two hours following the end of the call through midnight Eastern on Wednesday, March 6 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 33033172.

Forward-Looking Statements

This press release may contain various "forward-looking statements" within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, which represent Regional Management's expectations or beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following: the continuation or worsening of adverse conditions in the global and domestic credit markets and uncertainties regarding, or the impact of governmental responses to those conditions; changes in interest rates; risks related to acquisitions and new branches; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; recently-enacted or proposed legislation; the timing and amount of revenues that may be recognized by Regional Management; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); changes in Regional Management's markets and general changes in the economy (particularly in the markets served by Regional Management). Such factors are discussed in greater detail in Regional Management's filings with the Securities and Exchange Commission. Regional Management Corp. will not and is not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (NYS: RM) is a diversified specialty consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. Regional Management began operations in 1987 with four branches in South Carolina and has expanded its branch network to 221 locations with over 245,000 active accounts across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma and New Mexico as of December 31, 2012. Each of its loan products is secured, structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Management's loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, furniture and appliance retailers and its consumer website. For more information, please visit http://www.RegionalManagement.com.

1 Defined as stores open for at least 13 months.

Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
For the Three and Twelve Months Ended December 31, 2012 and 2011
(Unaudited)
($ in Thousands except per share amounts)
    
Three Months EndedTwelve Months Ended
December 31,December 31,
2012201120122011
Revenue
Interest and fee income$32,902$25,373$119,235$91,303
Insurance income, net2,6632,88710,8209,247
Other income 1,435 1,168 5,991 4,669
 
Total revenue 37,000 29,428 136,046 105,219
 
Expenses
Provision for loan losses8,8475,96027,76517,854
General and administrative expenses
Personnel8,5996,08233,36625,462
Occupancy2,3741,7568,6556,527
Advertising9103572,7672,056
Other3,0491,78910,5006,589
Consulting and advisory fees1801,451975
Interest expense
Senior revolving credit facility and other notes payable3,0232,27910,5808,306
Mezzanine debt-related parties  1,018 1,030 4,037
 
Total interest expense 3,023 3,297 11,610 12,343
 
Total expenses 26,802 19,421 96,114 71,806
 
Income before income taxes10,19810,00739,93233,413
Income taxes 3,560 3,603 14,565 12,169
 
Net income$6,638$6,404$25,367$21,244
 
Net income per common share:
Basic$0.53$0.69$2.17$2.28
 
Diluted$0.52$0.66$2.12$2.21
 
Weighted average common shares outstanding:
Basic 12,486,727 9,336,727 11,694,924 9,336,727
 
Diluted 12,779,515 9,759,916 11,980,748 9,620,967
 
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
December 31, 2012 and 2011
(Unaudited)
($ in Thousands except per share amounts)
  
 
20122011
Assets
Cash$3,298$4,849
Gross finance receivables529,583387,494
Less unearned finance charges, insurance premiums, and commissions (92,024) (80,900)
 
Finance receivables437,559306,594
Allowance for loan losses (23,616) (19,300)
 
Net finance receivables413,943287,294
Property and equipment, net of accumulated depreciation5,1114,446
Deferred tax asset, net15
Repossessed assets at net realizable value711409
Intangible assets2,849960
Other assets 5,296  6,177 
 
Total assets$431,208 $304,150 
 
 
Liabilities and Shareholders' Equity
Liabilities:
Cash overdraft$$1
Deferred tax liability, net2,997
Accounts payable and accrued expenses5,2637,447
Senior revolving credit facility and other notes payable292,379206,009
Mezzanine debt-related parties   25,814 
 
Total liabilities300,639239,271
 
 

Commitments and Contingencies

Temporary equity12,000
 
Shareholders' equity:

Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,486,727 shares issued and outstanding at

December 31, 2012; 25,000,000 shares authorized, 9,336,727 shares issued and outstanding at December 31, 2011

1,249934
Additional paid-in-capital80,15828,150
Retained earnings 49,162  23,795 
 
Total shareholders' equity 130,569  52,879 
 
Total liabilities and shareholders' equity$431,208 $304,150 
 
Regional Management Corp.
Selected Financial Data
As of and for the Three Months and Twelve Months ended December 31, 2012 and 2011
(Unaudited)
(Dollars in thousands)
   
Components of Increase in Interest Income
Three Months Ended December 31, 2012
Compared to Three Months Ended December 31, 2011
Increase (Decrease)
VolumeRateNet
Small installment loans$6,552$(2,787)$3,765
Large installment loans1,446(101)1,345
Automobile purchase loans1,710(307)1,403
Furniture and appliance purchase loans 965 51  1,016
Total increase in interest income$10,673$(3,144)$7,529
 
 Three Months Ended December 31,
Loans Originated (1)2012 2011
Small installment loans$146,578$105,758
Large installment loans23,80516,608
Automobile purchase loans31,08825,481
Furniture and appliance purchase loans 9,919  5,389 
Total finance receivables$211,390 $153,236 
Composite Yield 35.8% 

40.2

%
 
 Three Months Ended December 31,
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