• Net Income: $7.7 million.

• Diluted EPS: $0.76.

• Revenue: $146 million, a record high despite a $3.5 million charge due to hurricane-related insurance claims.

• Net Credit Loss Rate: 10.6%, a 40 basis point improvement year-over-year.

• Interest and Fee Yield: 29.9%, up 90 basis points year-over-year.

• Operating Expense Ratio: Improved by 50 basis points to 13.9%.

• Portfolio Growth: Increased by $46 million sequentially to $1.82 billion.

• Small Loan Portfolio Growth: Increased by 11% year-over-year.

• Auto-Secured Portfolio Growth: Increased by 35% year-over-year.

• 30-plus Day Delinquency Rate: 6.9%, unchanged sequentially and improved by 40 basis points year-over-year.

• Allowance for Credit Losses Reserve Rate: 10.6%.

• G&A Expenses: $62.5 million, up 0.6% year-over-year.

• Interest Expense: $19.4 million, or 4.3% of average net receivables.

• Book Value Per Share: Approximately $34.72.

• Dividend Declared: $0.30 per common share for the fourth quarter.

• Warning! GuruFocus has detected 4 Warning Sign with RM.

Release Date: November 06, 2024

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

Positive Points

• Regional Management Corp (NYSE:RM) reported a 40-basis-point decline in net credit loss rate year-over-year, indicating improved credit performance.

• The company achieved a record high quarterly revenue of $146 million, driven by quality portfolio growth.

• Interest and fee yield increased by 90 basis points year-over-year to 29.9%, the highest in over two years.

• The auto-secured segment grew by 35% from the prior year, contributing to a balanced risk profile.

• RM maintained a tight grip on G&A expenses, which increased by less than 1% year-over-year, improving the operating expense ratio by 50 basis points.

Negative Points

• Hurricanes Helene and Beryl impacted operations, resulting in a $5.6 million pretax impact on net income.

• The company reserved $2.1 million for incremental net credit losses and $3.5 million for estimated personal property insurance claims due to hurricane impacts.

• The loan loss reserve rate increased to 10.6%, higher than the guidance of 10.4% to 10.5%, due to hurricane-related reserves.

• Higher receivables growth requires higher provisioning for loan losses, creating a near-term drag on earnings.

• The growth in higher-margin small loans, while beneficial for revenue, comes with higher expected net credit losses.

Q & A Highlights

Q: How much of the provision tied to hurricane activities is a one-off, and how much could be a pull forward of losses that would have occurred in later quarters? A: Harpreet Rana, CFO, explained that the $2.1 million incremental reserve is specifically due to the hurricane activity and will cover losses expected over the next several months. Robert Beck, CEO, added that the $3.5 million pretax impact from personal property insurance claims is anticipated, with a significant portion expected in Western North Carolina.