• Net Income: $7 million in the first quarter.
• Diluted EPS: $0.70 for the first quarter.
• Revenue: $153 million, a record for the first quarter, up 7% year over year.
• Net Receivables Growth: Up 8% year over year.
• New Branches: 15 new branches opened since September 2024.
• Auto-Secured Loan Portfolio Growth: Increased by $59 million, or 37% year over year.
• High APR Loan Portfolio Growth: Increased by $59 million, or 21% year over year.
• 30+ Day Delinquency Rate: 7.1% at the end of the first quarter.
• Net Credit Loss Rate: 12.4%, 120 basis points better than the prior year period.
• Allowance for Credit Losses: $199 million, reserve rate of 10.5%.
• Total Capital Generation: $9.9 million in the first quarter.
• G&A Expenses: $66 million in the first quarter.
• Interest Expense: $19.8 million, or 4.2% of average net receivables.
• Effective Tax Rate: 23.5% in the first quarter.
• Dividend: $0.30 per common share for the second quarter.
• Share Repurchase: Approximately 187,000 shares repurchased at an average price of $34.56 per share.

• Warning! GuruFocus has detected 7 Warning Sign with RM.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Regional Management Corp (NYSE:RM) reported $7 million in net income and $0.70 of diluted EPS for the first quarter, aligning with their guidance.
• The company experienced record first-quarter originations while maintaining a tightened credit box, with net receivables up 8% year over year.
• RM opened 15 new branches since September 2024, with 10 in new markets, all performing well and contributing to revenue growth.
• The auto-secured loan portfolio grew by 37% year over year, contributing to a diversified and high-margin portfolio.
• RM maintained a strong balance sheet with $641 million of total unused capacity and $129 million of available liquidity at the end of the quarter.

Negative Points

• Net income for the first quarter was lower than the previous year due to the absence of a special loan sale benefit from the prior year.
• The company faces potential economic uncertainty, particularly related to trade policies and macroeconomic conditions.
• Operating expenses increased, driven by new branch openings and marketing expenses, impacting overall profitability.
• Interest expenses are expected to rise as fixed-rate funding matures and variable-rate debt is utilized for growth.
• The company's guidance for meaningful EPS growth in 2025 is challenged by provisioning tied to loan growth and macroeconomic uncertainties.

Q & A Highlights

Q: Can you provide a longer-term outlook on Net Interest Margin (NIM) and discuss the factors affecting cost of funds and yield? A: Harpreet Rana, CFO, explained that as fixed-rate funding matures, cost of funds will increase. Pricing changes have been implemented, and the portfolio reflects these adjustments. The barbell strategy, which includes higher-margin loans and auto-secured loans with lower yields but lower credit losses, will influence yields. CEO Robert Beck added that future yield adjustments will depend on macroeconomic conditions and potential underwriting changes.

Q: Have you observed any changes in consumer behavior since February, particularly regarding demand and payment patterns? A: Robert Beck, CEO, noted that consumer behavior remains stable, with credit results tracking as expected. The tax season was strong, leading to higher payment rates, especially on higher-rate small loans. Economic indicators like open jobs and wage growth are positive for their customer base. The company is prepared to adjust its credit box if macroeconomic conditions worsen.

Q: Is there anything new in this earnings call compared to the previous one, aside from trade policy uncertainties? A: Robert Beck highlighted three key points: credit performance exceeded guidance by $1.6 million, new branches are performing well with positive pre-provision net income by month three, and the company's ability to generate capital remains strong. These factors position the company well for future growth despite macroeconomic uncertainties.

Q: Can you clarify the capital generation calculation and why Q1 capital generation appears lower than previous years? A: Harpreet Rana explained that Q1 net income is typically lower, impacting capital generation. The allowance for credit losses will increase with more balances, but the reserve rate is expected to decline slightly in Q2 due to the release of hurricane reserves.

Q: How do you define credit tightening, and what does it mean for your underwriting process? A: Robert Beck stated that the company applies stress factors to ensure attractive returns, with different stress levels for various portfolio segments. The approach is detailed, considering risk ranks, product types, and distribution channels, rather than applying a single stress factor across the portfolio.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.