Regional Management Corp.

Greetings. Welcome to the Regional Management Second Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Garrett Edson from Investor Relations. Thank you. You may begin.

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 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 findings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition. Also, our discussion today may include references to certain non-GAAP measures. Reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com. I would now like to introduce Lakhbir Lamba, President and CEO of Regional Management Corp.

Thanks, Garrett, and good afternoon, everyone. Joining me on the call today is Harpreet Rana, our Chief Financial and Administrative Officer. I'll begin with a summary of our second quarter results and an update on our strategic priorities, and then Harpreet will walk through the financial details. In the second quarter, our franchise continued to perform well. We generated strong revenue, grew our higher-quality auto-secured portfolio, improved our operating efficiency, and continue to return capital to shareholders. For the quarter, we generated net income of $8.2 million or 85 cents of diluted earnings per share. On a year-to-date basis, net income and diluted EPS are up 14% and 17% respectively compared to the first half of last year. We delivered total revenue in the second quarter of $168 million, up 7% year-over-year, driven by continued portfolio growth. We also maintain strong operating leverage, improving our operating expense ratio by 80 basis points year over year to 12.4%, while continuing to invest in the business. As we continue to grow our auto-secured product portfolio, which increased 32% year over year, now representing 15% of our total portfolio, and carries a 30 plus day delinquency rate of just 2%. At the same time, we operated in a more competitive environment for customer acquisition and we made deliberate decisions to tighten underwriting in certain higher risk segments that did not meet our risk adjusted return hurdles. Portfolio growth came in below our outlook for the quarter and our net credit loss rate was modestly above our forecast. driven in part by the lighter portfolio growth. As I'll describe, we are acting decisively to improve both our growth trajectory and credit performance. In particular, we've identified and selectively tightened credit in certain geographic and channel-specific segments and we've significantly strengthened our fraud detection and prevention capabilities principally in our direct mail and digital affiliate channels. The early results from these enhanced controls are very promising, and we expect them to support improving credit performance. Consistent with what we discussed on prior calls, we remain committed to our long-term goal of a net credit loss rate below 10%. We are cautiously optimistic about the health of the consumer. We continue to monitor the potential impact of Higher Inflation, including continued elevated gas prices, and we remain disciplined and conservative in our underwriting as we navigate the current macro environment. We are also making meaningful progress across our strategic priorities as we invest to compete and win. First and foremost, we continue to expand our bank partnership program with Column. This program is an important enabler of our long-term strategy, providing greater product and operational uniformity across states, faster entry into new markets, expanded relationships with our customers, a wider addressable market, and attractive unit economics as this program scales. We've accelerated implementation of the program ahead of our internal plan. We've now fully implemented the program for branch originations in Texas, our largest market, and we expect to expand to additional states beginning later this year. We are encouraged by the early results, including origination trends, yield impact, and credit performance. Originations exceed $65 million under the program since its launch, on a run rate basis, originations under the program now represent roughly 28% of total originations. And we expect that ratio to increase materially as we transition additional products and states to the program later this year and next year. We are projecting that pre-tax margin will improve by at least 200 basis points under the program compared to like-for-like loans originated in our state licensed operations. This list and margin reflects an improvement in total revenue yield driven by marketing and servicing fees that are paid to us by the bank and higher interest and fee income earned on originated loans. Offset in part by program costs paid to the bank and a decline in insurance revenue from the elimination of personal property and non-file insurance. Early credit performance is also promising. As of the end of the second quarter, the one plus day delinquency rate on the portfolio of bank partnership loans that we originated in March and April was 160 basis points better than the comparable portfolio of state licensed loans originated in Texas over the same time period. We will continue to scale the partnership methodically as we evaluate results and refine the strategy. We expect nearly all states in our network to be operating under the bank partnership model by the end of 2027. We believe this will be transformative to the operations and returns of our business and a key enabler for net income growth in 2027 and beyond. Second, and building directly on that foundation, in early July, we launched an end-to-end digital lending origination capability. This is a distinct step beyond our historical digitally sourced model in which we generate leads that are underwritten and closed in our branches. With this new capability, customers can complete the entire process online from application through funding in minutes. This technology positions us to compete more effectively with fintechs and lean further into our omnichannel operating model. To be clear, our branch network remains at the core of our operations and our relationships with customers, and the digital channel complements it. Given the importance of credit performance in this channel, we're building it on strong fraud authentication and machine learning-based underwriting, and we will be deliberate and methodical in scaling it, expanding only as we confirm that it clears our risk-adjusted return huddles. Third, we are accelerating the rollout of our new branch loan origination platform and alongside it we're introducing an enhanced machine learning based origination credit model. This is a continuation of the technology and analytics investments we would discuss previously and moving them forward more quickly strengthens both our operating efficiency and credit decision. Both we've made significant progress in enabling artificial intelligence across our operations, including in collections and customer service, which we expect to enhance both the customer experience and our operational effectiveness and efficiency. Finally, we continue to invest in growth. We are diversifying origination channels and our marketing capabilities to strengthen customer acquisition, and we are expanding into attractive new markets. In the second quarter, we entered the state of Florida, our 20th state, which represents a meaningful long-term growth opportunity. Turning to our outlook, we are revising our full year guidance. We now expect full year diluted earnings per share growth of 10% to 13% and portfolio growth of 5% to 7%. AARP will provide additional detail on the quarterly cadence but we continue to expect sequentially stronger quarterly earnings in the third and fourth quarters. This reset on near-term guidance reflects a deliberate choice. We'd rather build from an even stronger foundation and grow profitably than pursue growth that doesn't earn an appropriate return. The actions we are taking across credit, technology, distribution, and our bank partnership, while putting modest pressure on second half results, position us to reaccelerate profitable growth, improve our returns as we exit 2026, and deliver very strong results in 2027 and beyond for our shareholders. I am confident we are building from a position of strength and making the right decisions for the long-term health of the business. With that, I will turn the call over to her.