Regional Management Corp.

Thank you for standing by. This is the conference operator. Welcome to the regional management first quarter 2021 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Garrett Edson of ICR. 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 uncertainties that could impact the future operating results and financial condition of Regional Management Corp. Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP 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 first quarter 2021 earnings call. I'm joined today by Harp Rana, our Chief Financial Officer. Following our strong performance in the second half of last year, we carried forward the momentum into 2021. In the first quarter, we generated record bottom line results of $25.5 million of net income and $2.31 of diluted EPS. Our growth initiatives helped to reduce our typical first quarter seasonal liquidation and the impact of new stimulus payments, which in turn drove strong revenue performance. At the same time, we maintained a superior credit profile with historically low 30-plus day delinquencies, retained a tight grip on expenses while continuing to invest in our digital initiatives and growth strategies, and experienced low funding costs thanks to our strong execution in the securitization markets. Despite pressure from a combination of tax refunds and two stimulus payments in the quarter, our core small and large loan portfolio grew by $18 million or 2% over the prior year period and was down only $28 million or 2.5% quarter over quarter. This strong result was driven in part by the new growth initiatives that we implemented in 2020, which continue to perform very effectively. We originated $231 million of loans in the quarter, up 1% year-over-year and up 5% from the first quarter of 2019, with $29 million of our originated loans derived from new growth initiatives. The second round of $600 stimulus checks appeared to have been spent relatively quickly. The third round of $1,400 stimulus checks led to a temporary period of higher loan payment activity, along with some weakening of loan demand. As a result, while the stimulus payments impacted first quarter demand, the overall impact on our typical first quarter seasonal loan portfolio liquidation was much lower than we expected and much lower than what some others in our industry and in the prime credit space experienced. Our large loan portfolio actually grew sequentially in the first quarter by $4 million, or 0.6%, as the stimulus measures disproportionately impacted our higher rate small loan portfolios. Loan demand remained relatively soft in April due to the impact of the distribution of the remaining 20% of stimulus payments, along with additional tax refunds. However, we saw demand start to pick up in the latter part of April, and we expect demand to continue to rebound in May and June, which should enable us to generate modest loan growth in the second quarter. We continue to believe that loan demand in the second half of the year will be strong as the economy more fully reopens. Credit quality continued to remain very solid in the quarter, and our balance sheet remains robust. Our net credit loss rate during the quarter was 7.7%, a 280 basis points improvement from the prior year period. And we ended the quarter with a record low 30-plus day delinquency rate of 4.3%, a 230 basis points improvement from the end of March of 2020. As of April 30th, our 30 plus day contractual delinquency rate further improved to approximately 3.7%. We expect that our credit performance will continue to be strong throughout 2021. Any COVID-related net credit losses will occur in late 2021 at the earliest, though we anticipate that our delinquency rate will begin to normalize throughout the balance of the year as the benefits of federal stimulus dissipate. Given our continued superior credit performance, we released $6.6 million in COVID-19 reserves in the first quarter and $3.8 million of additional reserves as a result of the seasonal runoff in the portfolio. Our $139.6 million allowance for credit losses as of March 31st continues to compare quite favorably to our 30-plus-day contracts of delinquency of $47.7 million. Our allowance includes a $23.8 million reserve for additional credit losses associated with COVID-19. We remain conservative in our maintenance of COVID reserves as the overall economy has not yet fully recovered from the pandemic. We also continue to further strengthen our overall balance sheet and liquidity position. In April, we enhanced our warehouse facility capacity by closing on two new warehouse facilities with our current lenders, Wells Fargo and Credit Suisse. and by adding a third warehouse facility with a new lender, JP Morgan. While our prior facility only funded large loans, the new facilities fund multiple collateral types, including small loans, large loans, convenience checks, and digitally originated loans. We are very pleased with this outcome. It represents yet another step in the evolution of our capital structure as we continue to pursue new avenues of funding diversification and additional capacity to support our ambitious growth plans and our capital return program. To that end, we are happy to announce an increase of our quarterly dividend by 25% to 25 cents per share. In addition, in May, we completed our $30 million stock repurchase program that began in the fourth quarter of 2020, having repurchased in total 951,841 shares at a weighted average price of $31.52 per share. Our board of directors recently authorized a new $30 million stock repurchase program, which we plan to commence later this month. Our outstanding performance and financial results over the past year have enabled us to maintain and expand an attractive capital return program for our shareholders. As we discussed on our last call, 2021 is a year of investment in our long-term growth, We remained focused on investing in our digital capabilities to complete our omnichannel model, geographic expansion into new states, and new product and channel development to drive additional long-term growth. In the first quarter, we completed development of and began testing our improved digital prequalification experience for our customers. Digitally sourced originations represented 33% of our total new borrower branch volume in the first quarter, and 25% of all branch originations we booked remotely in March. We are very pleased to see the success of our digital and technological investments and the adoption of our expanding omnichannel model by our customers. In the second and third quarters, we expect to roll out the new pre-qualification experience to all our states and to begin integrating the new functionality with our existing and new digital affiliates and lead generators. In addition, Within the next few months, we will begin testing our new guaranteed loan offer program, which is an alternative to our convenience check loan product and offers online fulfillment with ACH funding into a customer's bank account. We also remain on track to begin testing our end-to-end digital origination product for new and existing customers later this year. And by the first quarter of 2022, we expect to roll out an improved online customer portal and a mobile app. As we communicated previously, we entered Illinois, our 12th state, in mid-April and are excited to begin offering our valuable loan products to millions of new consumers in the state. We plan to open 15 to 20 new branches in 2021. We also expect to enter up to two additional states by the end of 2021 and an additional four to six states over the next 18 months. Our geographic expansion will be supported by our digital and new growth initiatives, allowing our branches in these states to maintain a wider geographic reach, resulting in higher average receivables per branch and the need for fewer branches. Our digital investments and geographic expansion will also offer new products to our customers, including our new auto-secured product, which we began testing in the first quarter and we expect to roll out to all our states by the end of the third quarter. We are very excited about the rest of this year and what the future holds for our franchise. We will continue to invest throughout the year in our growth initiatives while maintaining our focus on credit quality and optimizing our overall underwriting capabilities. As of March 31st, approximately 70% of our total portfolio had been originated since April 2020, the vast majority of which was subject to enhanced credit standards that we deployed following the outset of the pandemic. Our credit performance and underwriting capabilities continue to be foundational to our operational success and provide us with confidence as we pursue our long-term growth strategies. We could not be happier with our first quarter performance, which is a testament to the strength and dedication of the entire regional team. We remain fully committed to our customers and our path forward, and we are in a prime position to generate strong top and bottom line growth for the four-year. As we execute on our priorities this year, we are also looking ahead to 2022 and beyond. We are focused on our key strategic initiatives of digital innovation, geographic expansion, and the development of new products and channels, all of which will allow us to gain market share and create sustainable long-term value for our shareholders. I'll now turn the call over to Harp to provide additional color on our financials.