Regional Management Corp.

Thank you for standing by. This is the conference operator. Welcome to the regional management fourth quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Garrett Edson of ICR for opening remarks. Please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which was released prior to this call and may be found on our website at regionalmanagement.com. Before we begin our formal remarks, I will direct you to page two of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures. Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates, and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict, and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore you should not place undue reliance upon them. We refer all of you to our press release presentation and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and the certainties that could impact the future operating results and financial condition of Regional Management Corp. Also, our discussion today may include references to certain non-GATT measures. A reconciliation of these measures to the most comparable GATT measure can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com. I would now like to introduce Rob Beck, President and CEO of Regional Management Corp.

Thanks, Garrett, and welcome to our fourth quarter 2020 earnings call. I'm joined today by Harp Rana, our Chief Financial Officer. Our team executed extremely well and delivered strong results in the fourth quarter. We generated $14.3 million net income, or $1.28 of diluted EPS, as a result of continued quality growth in our loan portfolio, a strong credit profile, disciplined expense management, and low funding costs. We leveraged our new growth initiatives to take advantage of an increase in consumer demand in the quarter. We originated $359 million of loans in the fourth quarter, which was comparable to the prior year and up nearly $51 million, or 16%, from the third quarter. This drove sequential growth in our total portfolio of $77 million, or 7%. Our core small and large loan portfolio grew by $80 million, or 8%, quarter over quarter. And on a year-over-year basis, our core loan portfolio grew by 19 million, or 2%, and an impressive result considering the circumstances presented in 2020. Credit quality also remained stable in the fourth quarter, and we continued to maintain a very strong balance sheet. Our net credit loss rate during the quarter was 6.9%, a 210 basis point improvement from last year, and we ended the quarter with a 30-plus day delinquency rate of 5.3%. down from 7% last year. Our $150 million allowance for credit losses as of December 31st continues to compare quite favorably to our 30-plus-day contractual delinquency of $60.5 million and includes a $30.4 million reserve for additional credit losses associated with COVID-19. This reserve assumes an unemployment rate of 9% at the end of 2021. We continue to believe that we have ample coverage to absorb future credit losses. In addition, with $452 million of unused capacity on our credit facilities and $203 million of available liquidity as of February 5th, we have access to more than enough capital to invest in our business and fund our ambitious growth plans. Earlier today, we also amended our ABL facility to provide an additional $20 million of flexibility to return capital to our shareholders in the future, whether through dividends or share repurchases. In addition, earlier this week, we priced our latest securitization transaction, which is expected to close on February 18th. Approximately 250 million securitization garnered wide interest from investors and priced at a record low average weighted coupon of 2.08%, nearly 80 basis points better than our previous securitization. The proceeds from the securitization will be used to retire our RMIT 2018-2 securitization. thereby significantly reducing our cost of capital and further strengthening our balance sheet. Before looking ahead to 2021 and beyond, I'd like to take a moment to reflect on the accomplishments of the past year. From the beginning of the pandemic, we maintained our focus on serving our customers, supporting our team members, delivering assistance to our communities, and generating value for our shareholders. For our customers, we provided effective avenues for continued access to our valuable loan product. We introduced curbside service for payments, loan closings, and all other types of servicing activity, and we quickly created and rolled out electronic remote loan closing capabilities, enabling our customers to extend and expand their relationship with us from the comfort of their homes. In December, we closed 20% of our branch originations through the remote loan closing process. We also offered borrow assistant programs as a necessary bridge for those most impacted by the pandemic. and in combination with government stimulus, we experienced historically low delinquencies throughout much of the year. Importantly, we ensured our customers' safety while continuing to provide the best-in-class service experience. For our team members, we expanded our paid time off policy to provide them with flexibility to address personal obligations and to assist in situations where they were unable to work remotely. We implemented enhanced safety measures in all of our branches, covered the cost of virtual health visits for our team members, and offered for paid leave for those exposed to the virus. At the end of the year, we announced significantly enhanced benefit programs. For our communities, we introduced Retail Reach, an employee-led initiative dedicated to creating positive social change and goodwill through community service, charitable giving, and diversity, equity, and inclusion initiatives. In the spring, we partnered with the American Heart Association and led all upstate South Carolina companies in fundraising for the Heart Walk. More recently, we partnered with local food banks throughout our footprint to raise tens of thousands of dollars and collect literally tons of food for distribution within local communities. For our shareholders, we grew our loan portfolio, maintained a stable credit profile, appropriately managed our operating expenses, and decreased our funding costs, resulting in excellent bottom line results. We fortified our balance sheet and we maintained access to significant borrowing capacity and liquidity. We made considerable progress on our digital investments and initiatives, including by migrating our technology infrastructure to the cloud at the end of the year. And thanks to our strong capital position and the confidence we have in our long-term strategy, we returned excess capital to our shareholders through a share repurchase program and the initiation of a quarterly dividend of 20 cents per share. The resilience of our omni-channel operating model was clearly validated in 2020. As we turned the page on what was for everyone a very challenging year, I could not be prouder of our team and how they stepped up to navigate the crisis successfully. We entered 2021 in a position of considerable strength and ready to embark on our next chapter. Looking ahead, we're excited about the opportunities that we see for sustainable growth. We remain focused on expanding our market share, maintaining the credit quality of our loan portfolio, and extending our competitive advantages. Over the next 18 months, we will acquire new customers through innovation and geographic expansion. We will continue to prioritize our investment in digital capabilities to further enable our growth and to ensure that we're always available at our customers' convenience. During the first half of 2021, we expect to roll out an improved digital pre-qualification experience for our customers, including expanded integration with existing and new digital affiliates and lead generators. We're also moving ahead with our pilot of a new guaranteed loan offer program. This will be an alternative to our convenience check loan product, and may be fulfilled online with ACH funding into a customer's bank account. In the second half of 2021 and into early 2022, we expect to test a digital origination product and channel for new and existing customers. At the same time, we will complete the development of our mobile app and enhancements to our customer portal, allowing our customers easy access to payment functionality and additional features. In parallel with our digital investments, we will expand our operations into four to five new states over the next 18 months. Doing so will make our valuable product set, including a newly enhanced auto-secured product, available to millions of new customers. Thanks to our digital initiatives, including our remote loan closing capabilities introduced in 2020, we plan to enter new states with a lighter branch density than we have in the past. To that end, we plan to open between 15 and 20 net new branches in 2021. We believe this branch expansion strategy, supported by our digital initiatives, will enable our branches to maintain a wider geographic reach and higher average receivables per branch. This will ultimately further expand our revenue and operating efficiencies and lead to stronger bottom-line growth. Our accelerated state expansion will begin with Illinois in the second quarter. While Illinois has recently passed legislation to cap the all-in APR at 36%, we feel that it remains a terrific opportunity to enter a new market with our digitally-enabled business model and take advantage of the competitive disruptions from the recent legislation. As of year end 2020, 80% of our loan portfolio had an APR at or below 36%. While we have significant plans to invest in our growth in 2021 and beyond, we will not sacrifice the credit quality of our portfolio, which remains of paramount importance. As of year end, 61% of our total portfolio had been underwritten using the enhanced credit standards that we deployed during the pandemic. It's our credit performance and underwriting capabilities that provide us with confidence in the pursuit of our long-term growth strategies. We will continue to invest in our underwriting capabilities over time, including advanced machine learning tools to ensure the sustainability of our growth. As we've said previously, any additional stimulus, such as the recent $600 stimulus checks, will push COVID-related losses into the second half of 2021. Any subsequent stimulus will continue to positively impact credit, but will reduce loan demand early this year. As we experienced in 2020, we expect a strong second-half bounce in loan demand as vaccinations become more widespread and the economy begins to reopen more fully. In sum, we had a fantastic end to a year that challenged everyone. We executed across all facets of our business, and we have set ourselves up for an improved 2021 on both the top and bottom lines. Our team continues to go above and beyond to ensure that our customers receive the best possible experience. We are excited about and confident in the sustainability of our omni-channel operating model, the resiliency of our customers, and our team's ability to execute on our growth plans. I'll now turn the call over to Harp to provide additional color on our financials.