Regional Management Corp.

Thank you for standing by. This is the conference operator. Welcome to the Regional Management Corp First Quarter 2022 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 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 were 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 2 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 of 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 corporates. Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable gap 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 2022 earnings call. I'm joined today by Harb Rana, our Chief Financial Officer. We produced another set of outstanding financial and operating results in the first quarter, including strong and controlled growth. We posted top and bottom line quarterly records of $121 million of revenue, $26.8 million of net income, and $2.67 of diluted EPS. And we continue to deliver robust returns of 7.3% ROA and 36.7% ROE. For the fourth straight quarter, we logged double-digit year-over-year growth in our net finance receivables and quarterly revenue, which were up 31% and 24% respectively. We also increased our number of active accounts by 18% compared to the prior year, demonstrating our ability to capture new customers in new and existing markets, while at the same time satisfying the evolving needs of our existing customers by graduating them to larger loans. Notably, we overcame the seasonal portfolio liquidation that typically is the hallmark of the first quarter. Thanks to the success of our strategic growth initiatives, we generated record first quarter originations of $326 million, up 39% from the prior year period. And we grew our net finance receivables to an all-time high of $1.45 billion. Historically, our portfolio has experienced a normal seasonal runoff in the first quarter due to reduced demand and higher loan payments associated with tax refunds. Most notably, in the first quarters of both 2021 and 2020, our portfolio contracted by approximately $31 million. This quarter is the first time in over a decade that we've grown our loan portfolio organically in the first quarter of the year. That success is primarily attributable to strong loan demand across all channels. The investments we made in our growth initiatives during the pandemic, the expansion of our auto-secured loan product and the continuing mixed shift to large loans, which are less sensitive to seasonal payoffs. We expect the strong portfolio growth to continue in the second quarter, which will in turn drive strong sequential quarterly revenue growth throughout the second half of the year. Over the last several years, we've also de-risked our business by investing heavily in our custom underwriting models and shifting 84% of our portfolio to higher quality loans at or below 36% APR. These efforts have enabled us to maintain a stable credit profile as we grow. In the first quarter, delinquencies continue to normalize in line with our expectations, primarily in higher risk segments. However, the credit quality of our portfolio remains stronger than prior to the pandemic. We ended the quarter with a 30-plus day delinquency rate of 5.7%, a 30 basis point improvement from year end, and 120 basis points better than the first quarter of 2019 pre-pandemic levels. Likewise, our net credit loss rate during the quarter was 8.7%, which was 200 basis points better than the first quarter of 2019, and 50 basis points better than our guidance of 9.2%. While we continue to keep a close eye on inflation and other macroeconomic trends, we believe that our typical customer remains in strong financial health. Unemployment is near historically low levels, And it's our experience that the credit quality of our portfolio aligns more closely with employment than inflation. In addition, wage increases have been strongest in lower income brackets, outpacing inflation and creating real wage growth, which has left our customers' ability to pay largely intact. Finally, the net worth of the least wealthy 50% of consumers increased sharply during the pandemic, and the balance sheet of these consumers remains healthy. with cash balances for the lowest income consumer quartile still 60% above pre-COVID levels as of the first quarter. At this time, inflation has not materially impacted the credit quality of our portfolio. An inflationary environment, however, typically has a positive impact on loan demand. Consumer spending and demand for our products were both strong in the quarter. Additional evidence of the financial health and positive economic settlement of our customers. Our strategic investments in geographic expansion, digital initiatives, and product and channel development, along with our proven multi-channel marketing engine, enabled us to capitalize once again on the increased demand for credit and expand our market share, as our growth has continued to outpace the broader industry. In February, we expanded our geographic footprint to Mississippi, our 14th state. After less than three months of operations, our three branches in Mississippi already average $1.8 million in receivables per branch as of the end of April. Later this year, we plan to continue our national expansion by entering an additional four to five new states, including California. Our entry into California will increase our addressable market size by around 33%, representing a very attractive opportunity for us. As we previously discussed, We plan to leverage our digital investments and support from our centralized sales and service team to operate with a lighter branch footprint in new states, with each branch maintaining a broader geographic reach. As a result, we expect to have higher receivables per branch and better operating efficiencies in new states. For example, in 2021, we entered Illinois with six branches. As of the end of April, the Illinois branches have been open for an average of nine months and have 4.6 million in average receivables per branch, already in excess of the company average of 4.2 million per branch. Likewise, we continue to assess our legacy branch network for opportunities to optimize our branch footprint and improve our operating leverage. To that end, in the second quarter, we expect to close approximately 20 branches where there are clear opportunities to consolidate operations into a larger branch in close proximity, while still providing our customers with the best-in-class service they've come to expect. These branch optimization actions will generate approximately $1.8 million in annual G&A expense savings, which will nearly allow us to self-fund the more than 20 new branches that we plan to open this year in new and existing states. As Harp will discuss in greater detail later in the call, our lighter branch footprint strategy in new states, our branch optimization strategy in existing states, and our new growth initiatives have already combined to drive substantial same-store portfolio growth. We also continue to innovate and evolve our business through our investment in digital initiatives. We originated $40 million of digitally sourced loans in the first quarter, up 150% from the prior year period. New digital volumes represented 28% of our total new borrower volume in the quarter. In addition, in late March, we began piloting end-to-end digital lending in one state. Having booked our first fully digital loans, we expect to expand the pilot to additional states in the second half of 2022. We're excited to introduce this new lending channel, which allows us to offer our small loan and large loan products on an entirely digital basis without the need for intervention by our team, from the point of application through loan proceed distribution. We intend to limit our risk exposure to end-to-end digital lending until we're comfortable that we fine-tune the customer experience and gain sufficient data to validate the efficacy of our credit models. Later this year, we also plan to complete the enhancement of our customer portal and development of a mobile app. The new portal and mobile app will allow our customers better access to payment functionality and greatly improve the customer mobile experience. Ultimately, we believe that our investments in an improved pre-qualification experience, new end-to-end digital lending, an enhanced customer portal, and a new mobile app will enable us to deliver a digital user experience on par with any FinTech lender. At the same time, we're able to differentiate ourselves from the competition by offering our customers the benefit of a branch-based, omni-channel operating model, affording our customers multiple avenues to interact with us. This model will further enhance our best-in-class customer experience and allow us to maintain our high-touch, relationship-based lending model, which positively impacts our credit performance and customer loyalty. In conclusion, we delivered another quarter of consistent, predictable, and superior results, and we continue to be well-situated to execute on our long-term strategies, including our ambitious growth plans throughout this year and beyond. I'll now turn the call over to HARP to provide additional color on our financial results.