UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 5, 2020

 

 

Regional Management Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35477   57-0847115

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

979 Batesville Road, Suite B

Greer, South Carolina 29651

(Address of principal executive offices) (zip code)

(864) 448-7000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading

Symbol

 

Name of Each Exchange

on Which Registered

Common Stock, $0.10 par value   RM   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 5, 2020, Regional Management Corp. (the “Company”) issued a press release announcing financial results for the three and six months ended June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. On August 5, 2020, the Company will host a conference call to discuss financial results for the three and six months ended June 30, 2020. A copy of the presentation to be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

All information in the press release and the presentation is furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition,” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.

  

Description

99.1    Press Release issued by Regional Management Corp. on August 5, 2020, announcing financial results for Regional Management Corp. for the three and six months ended June 30, 2020.
99.2    Presentation of Regional Management Corp., dated August 5, 2020.

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   Regional Management Corp.
Date: August 5, 2020    By:  

/s/ Robert W. Beck

    

Name: Robert W. Beck

Title:   President and Chief Executive Officer

 

3

EX-99.1

Exhibit 99.1

 

LOGO

Regional Management Corp. Announces Second Quarter 2020 Results

-    Net income of $7.5 million and diluted earnings per share of $0.68    -

-    6.6% year-over-year revenue growth and 9.9% average net finance receivables growth    -

-    Historical low 30+ day contractual delinquencies of 4.5% as of July 31, 2020    -

-    Available liquidity of $162 million as of July 31, 2020    -

Greenville, South Carolina – August 5, 2020 – Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the second quarter ended June 30, 2020.

“Our omni-channel capabilities and proactive credit initiatives have successfully supported our customers and enabled us to navigate through this challenging period,” said Robert W. Beck, President and Chief Executive Officer of Regional Management Corp. “Our customers have accessed our borrower assistance programs as needed, and along with the government stimulus, these programs have enabled us to maintain a low 30+ day delinquency rate during the crisis. In addition, demand for loan originations continues to rebound steadily from the low point in April, and our new remote loan closing capabilities have provided our customers with a safe and effective way to access our responsible and affordable credit solutions.”

“Additionally, we continue to maintain a strong liquidity profile, buoyed by the work we accomplished over the past several years to strengthen our balance sheet,” added Mr. Beck. “As of July 31, 2020, we had $162 million of available liquidity and $486 million of unused capacity on our revolving credit facilities. Looking ahead, we expect to remain focused in the coming months on further enhancing our digital capabilities, gradually relaunching additional marketing initiatives as demand returns, and continuing to originate loans that meet our advanced and measured underwriting criteria. With a proven operating model, a strong balance sheet, and ample liquidity, we remain well positioned to manage through the current environment and are prepared to return to strong growth as the economy rebounds.”

Second Quarter 2020 Highlights

 

   

Net income for the second quarter of 2020 was $7.5 million and diluted earnings per share was $0.68, compared to net income of $8.4 million and diluted earnings per share of $0.70 in the prior-year period.

 

1


   

Net finance receivables as of June 30, 2020 were $1.0 billion, an increase of 2.8%, or $27.7 million, from the prior-year period.

 

   

Total core small and large loan net finance receivables increased $46.7 million, or 4.9%, compared to the prior-year period.

 

   

Large loan net finance receivables of $618.1 million increased $102.1 million, or 19.8%, from the prior-year period and represented 60.4% of the total loan portfolio. Small loan net finance receivables as of June 30, 2020 were $380.1 million, a decrease of 12.7% from the prior-year period.

 

   

Total revenue for the second quarter of 2020 was $89.9 million, a $5.6 million, or 6.6%, increase from the prior-year period.

 

   

Interest and fee income increased 5.4%, primarily attributable to a 9.9% increase in average net finance receivables compared to the prior-year period.

 

   

Insurance income, net increased $2.6 million, driven by an increase in premium revenue and a decrease in non-file insurance claims expense.

 

   

Provision for credit losses for the second quarter of 2020 was $27.5 million, an increase of $1.8 million, or 6.9%, from the prior-year period. The provision for credit losses includes an incremental build in the allowance for credit losses of $9.5 million related to the expected economic impact of the COVID-19 pandemic, offset by a $9.9 million base reserve release related to portfolio liquidation.

 

   

Annualized net credit losses as a percentage of average net finance receivables were 10.6%, a 20 basis point increase from 10.4% in the prior-year period.

 

   

30+ day contractual delinquencies as of June 30, 2020 were 4.8%, compared to 6.3% in the prior-year period. 30+ day contractual delinquencies stood at 4.5% as of July 31, 2020, an additional improvement of 30 basis points from June 30, 2020. In June, 2.3% of customer accounts were renewed or deferred under internal borrower assistance programs, which is consistent with the average of 2.2% over the twelve months preceding the pandemic.

 

   

General and administrative expenses for the second quarter of 2020 were $41.5 million, an increase of $3.8 million, or 10.0%, from the prior-year period. The company deferred $2.0 million less in loan origination costs on reduced loan volume in the second quarter of 2020, which increased personnel expense from the prior-year period. The second quarter of 2020 included $0.9 million of incremental costs related to new branches that opened since the prior-year period and $0.6 million of COVID-19 expenses for customer communications and protective measures in our branches.

 

2


   

The operating expense ratio (annualized general and administrative expenses as a percentage of average net finance receivables) was 15.8%, comparable with the prior-year period. Reduced deferred loan origination costs and direct COVID-19 expenses impacted the operating expense ratio by 100 basis points in the second quarter of 2020 compared to the prior-year period.

 

   

As of June 30, 2020, the company had total unused capacity on its revolving credit facilities of $493 million, subject to the borrowing base.

 

   

As of July 31, 2020, the company had available liquidity of $162 million, including unrestricted cash on hand and immediate availability to draw down cash from its revolving credit facilities.

2020 De Novo Outlook

As of June 30, 2020, the company’s branch network consisted of 368 locations. During the second half of 2020, subject to the changing economic environment, the company plans to open approximately three de novo branches where it sees clear expansion opportunities in its current footprint.

Liquidity and Capital Resources

As of June 30, 2020, the company had net finance receivables of $1.0 billion and outstanding long-term debt of $683.9 million ($682.0 million of outstanding debt and $1.8 million of interest payable), consisting of:

 

   

$246.3 million on its $640.0 million senior revolving credit facility,

 

   

$26.8 million on its $125.0 million revolving warehouse credit facility, and

 

   

$410.8 million through its asset-backed securitizations.

The company’s unused capacity on its revolving credit facilities (subject to the borrowing base) was $493 million, or 64.5%, as of June 30, 2020.

The company had a funded debt-to-equity ratio of 2.6 to 1.0 and a stockholders’ equity ratio of 26.0% as of June 30, 2020. On a non-GAAP basis, the company had a funded debt-to-tangible equity ratio of 2.7 to 1.0 as of June 30, 2020. Please refer to the reconciliations of non-GAAP measures to comparable GAAP measures included at the end of this press release.

Conference Call Information

Regional Management Corp. will host a conference call and webcast today at 5:00 PM ET to discuss these results.

 

3


The dial-in number for the conference call is (855) 327-6837 (toll-free) or (631) 891-4304 (direct). Please dial the number 10 minutes prior to the scheduled start time.

*** A supplemental slide presentation will be made available on Regional’s website prior to the earnings call at www.RegionalManagement.com. ***

In addition, a live webcast of the conference call will be available on Regional’s website at www.RegionalManagement.com.

A replay will be available following the end of the call through Wednesday, August 12, 2020, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (international), passcode 10010118. A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified consumer finance company that provides attractive, easy-to-understand installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Regional Management operates under the name “Regional Finance” in 368 branch locations across 11 states in the Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States, as of June 30, 2020. Most of its loan products are secured, and each is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. Regional Management sources loans through its multiple channel platform, which includes branches, centrally-managed direct mail campaigns, digital partners, retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent Regional Management Corp.’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on forward-looking statements.

 

4


Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: changes in general economic conditions, including levels of unemployment and bankruptcies; the impact of the recent outbreak of a novel coronavirus (COVID-19), including on Regional Management’s access to liquidity and the credit risk of Regional Management’s finance receivable portfolio; risks associated with Regional Management’s ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support its operations and initiatives; risks associated with Regional Management’s loan origination and servicing software system, including the risk of prolonged system outages; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including credit risk, repayment risk, and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; risks associated with the implementation of new underwriting models and processes, including as to the effectiveness of new custom scorecards; risks relating to Regional Management’s asset-backed securitization transactions; changes in interest rates; the risk that Regional Management’s existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; changes in accounting standards, rules, and interpretations, and the failure of related assumptions and estimates, including those associated with the implementation of current expected credit loss (CECL) accounting; the impact of changes in tax laws, guidance, and interpretations; the timing and amount of revenues that may be recognized by Regional Management; changes in current revenue and expense trends (including trends affecting delinquencies and credit losses); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management); changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; risks related to acquisitions; changes in operating and administrative expenses; and the departure, transition, or replacement of key personnel. The COVID-19 pandemic may also magnify many of these risks and uncertainties.

The foregoing factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not update or revise forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. Regional Management is not responsible for changes made to this document by wire services or Internet services.

Contact

Investor Relations

Garrett Edson, (203) 682-8331

investor.relations@regionalmanagement.com

 

5


Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

 

                 Better (Worse)                 Better (Worse)  
     2Q 20     2Q 19     $     %     YTD 20     YTD 19     $     %  

Revenue

                

Interest and fee income

   $ 80,067     $ 75,974     $ 4,093       5.4   $ 167,064     $ 150,296     $ 16,768       11.2

Insurance income, net

     7,650       5,066       2,584       51.0     13,599       9,179       4,420       48.2

Other income

     2,133       3,234       (1,101     (34.0 )%      5,261       6,547       (1,286     (19.6 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     89,850       84,274       5,576       6.6     185,924       166,022       19,902       12.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

                

Provision for credit losses

     27,499       25,714       (1,785     (6.9 )%      77,021       49,057       (27,964     (57.0 )% 

Personnel

     26,863       22,511       (4,352     (19.3 )%      56,374       44,904       (11,470     (25.5 )% 

Occupancy

     6,253       6,210       (43     (0.7 )%      12,024       12,375       351       2.8

Marketing

     1,438       2,261       823       36.4     3,124       3,912       788       20.1

Other

     6,971       6,761       (210     (3.1 )%      16,246       14,735       (1,511     (10.3 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total general and administrative

     41,525       37,743       (3,782     (10.0 )%      87,768       75,926       (11,842     (15.6 )% 

Interest expense

     9,137       9,771       634       6.5     19,296       19,492       196       1.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     11,689       11,046       643       5.8     1,839       21,547       (19,708     (91.5 )% 

Income taxes

     4,219       2,677       (1,542     (57.6 )%      694       5,070       4,376       86.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 7,470     $ 8,369     $ (899     (10.7 )%    $ 1,145     $ 16,477     $ (15,332     (93.1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

                

Basic

   $ 0.68     $ 0.71     $ (0.03     (4.2 )%    $ 0.10     $ 1.41     $ (1.31     (92.9 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.68     $ 0.70     $ (0.02     (2.9 )%    $ 0.10     $ 1.37     $ (1.27     (92.7 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding:

                

Basic

     10,962       11,706       744       6.4     10,929       11,709       780       6.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     11,013       12,022       1,009       8.4     11,130       12,049       919       7.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average assets (annualized)

     2.9     3.4         0.2     3.4    
  

 

 

   

 

 

       

 

 

   

 

 

     

Return on average equity (annualized)

     11.7     11.5         0.9     11.5    
  

 

 

   

 

 

       

 

 

   

 

 

     

 

6


Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)

 

                Increase (Decrease)  
    2Q 20     2Q 19     $     %  

Assets

       

Cash

  $ 8,973     $ 694     $ 8,279       1,192.9

Net finance receivables

    1,022,635       994,980       27,655       2.8

Unearned insurance premiums

    (27,016     (21,546     (5,470     (25.4 )% 

Allowance for credit losses

    (142,000     (57,200     (84,800     (148.3 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Net finance receivables, less unearned insurance premiums and allowance for credit losses

    853,619       916,234       (62,615     (6.8 )% 

Restricted cash

    54,423       41,803       12,620       30.2

Lease assets

    27,177       25,575       1,602       6.3

Property and equipment

    15,504       14,132       1,372       9.7

Intangible assets

    8,824       9,953       (1,129     (11.3 )% 

Deferred tax asset

    20,682       437       20,245       4,632.7

Other assets

    11,023       10,488       535       5.1
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 1,000,225     $ 1,019,316     $ (19,091     (1.9 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

       

Liabilities:

       

Long-term debt

  $ 683,865     $ 689,310     $ (5,445     (0.8 )% 

Unamortized debt issuance costs

    (7,584     (7,357     (227     (3.1 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Net long-term debt

    676,281       681,953       (5,672     (0.8 )% 

Accounts payable and accrued expenses

    34,843       19,690       15,153       77.0

Lease liabilities

    29,220       27,454       1,766       6.4
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    740,344       729,097       11,247       1.5

Stockholders’ equity:

       

Preferred stock ($0.10 par value, 100,000 shares authorized, no shares issued or outstanding)

    —         —         —         —    

Common stock ($0.10 par value, 1,000,000 shares authorized, 13,727 shares issued and 11,243 shares outstanding at June 30, 2020 and 13,494 shares issued and 11,663 shares outstanding at June 30, 2019)

    1,373       1,349       24       1.8

Additional paid-in capital

    104,530       100,486       4,044       4.0

Retained earnings

    204,052       220,574       (16,522     (7.5 )% 

Treasury stock (2,484 shares at June 30, 2020 and 1,831 shares at June 30, 2019)

    (50,074     (32,190     (17,884     (55.6 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

    259,881       290,219       (30,338     (10.5 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

  $ 1,000,225     $ 1,019,316     $ (19,091     (1.9 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

 

7


Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands, except per share amounts)

 

     Net Finance Receivables by Product  
     2Q 20      1Q 20      QoQ $
Inc (Dec)
    QoQ %
Inc (Dec)
    2Q 19      YoY $
Inc (Dec)
    YoY %
Inc (Dec)
 

Small loans

   $ 380,083      $ 440,282      $ (60,199     (13.7 )%    $ 435,467      $ (55,384     (12.7 )% 

Large loans

     618,134        632,593        (14,459     (2.3 )%      516,019        102,115       19.8
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total core loans

     998,217        1,072,875        (74,658     (7.0 )%      951,486        46,731       4.9

Automobile loans

     6,059        7,532        (1,473     (19.6 )%      15,717        (9,658     (61.4 )% 

Retail loans

     18,359        21,878        (3,519     (16.1 )%      27,777        (9,418     (33.9 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total net finance receivables

   $ 1,022,635      $ 1,102,285      $ (79,650     (7.2 )%    $ 994,980      $ 27,655       2.8
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Number of branches at period end

     368        368        —         0.0     356        12       3.4

Average net finance receivables per branch

   $ 2,779      $ 2,995      $ (216     (7.2 )%    $ 2,795      $ (16     (0.6 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

     Averages and Yields  
     2Q 20     1Q 20     2Q 19  
     Average Net
Finance
Receivables
     Average
Yield

(Annualized)
    Average Net
Finance
Receivables
     Average
Yield

(Annualized)
    Average Net
Finance
Receivables
     Average
Yield

(Annualized)
 

Small loans

   $ 404,019        36.2   $ 458,132        36.7   $ 423,699        38.2

Large loans

     618,860        27.3     633,510        27.5     484,483        27.7

Automobile loans

     6,820        14.8     8,618        13.5     17,972        14.6

Retail loans

     20,114        18.0     23,056        17.8     28,786        18.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total interest and fee yield

   $ 1,049,813        30.5   $ 1,123,316        31.0   $ 954,940        31.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue yield

   $ 1,049,813        34.2   $ 1,123,316        34.2   $ 954,940        35.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Components of Increase in Interest and Fee Income
2Q 20 Compared to 2Q 19
Increase (Decrease)
 
     Volume      Rate      Volume & Rate      Net  

Small loans

   $ (1,879    $ (2,055    $ 96      $ (3,838

Large loans

     9,297        (403      (112      8,782  

Automobile loans

     (406      12        (8      (402

Retail loans

     (409      (58      18        (449

Product mix

     945        (639      (306      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total increase in interest and fee income

   $ 7,548      $ (3,143    $ (312    $ 4,093  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

8


     Net Loans Originated (1) (2)  
     2Q 20      1Q 20      QoQ $
Inc (Dec)
    QoQ %
Inc (Dec)
    2Q 19      YoY $
Inc (Dec)
    YoY %
Inc (Dec)
 

Small loans

   $ 79,265      $ 120,024      $ (40,759     (34.0 )%    $ 174,440      $ (95,175     (54.6 )% 

Large loans

     90,980        105,648        (14,668     (13.9 )%      169,373        (78,393     (46.3 )% 

Retail loans

     1,907        3,573        (1,666     (46.6 )%      5,179        (3,272     (63.2 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total net loans originated

   $ 172,152      $ 229,245      $ (57,093     (24.9 )%    $ 348,992      $ (176,840     (50.7 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

Represents the balance of loan origination and refinancing net of unearned finance charges.

(2)

The company ceased originating automobile loans in November 2017.

 

     Other Key Metrics  
     2Q 20     1Q 20     2Q 19  

Net credit losses

   $ 27,899     $ 29,422     $ 24,914  

Percentage of average net finance receivables (annualized)

     10.6     10.5     10.4

Provision for credit losses (1)

   $ 27,499     $ 49,522     $ 25,714  

Percentage of average net finance receivables (annualized)

     10.5     17.6     10.8

Percentage of total revenue

     30.6     51.5     30.5

General and administrative expenses (2) (3)

   $ 41,525     $ 46,243     $ 37,743  

Percentage of average net finance receivables (annualized)

     15.8     16.5     15.8

Percentage of total revenue

     46.2     48.1     44.8

Same store results (4):

      

Net finance receivables at period-end

   $ 1,016,776     $ 1,093,701     $ 977,175  

Net finance receivable growth rate

     2.2     17.6     13.0

Number of branches in calculation

     349       351       333  

 

(1)

Includes COVID-19 pandemic impacts to provision for credit losses of $9,500 and $23,900 for 2Q 20 and 1Q 20, respectively.

(2)

Includes non-operating executive transition costs of $3,066 for 1Q 20.

(3)

Includes non-operating loan management system outage costs of $720 for 1Q 20.

(4)

Same store sales reflect the change in year-over-year sales for the comparable branch base. The comparable branch base includes those branches open for at least one year.

 

9


     Contractual Delinquency by Aging  
     2Q 20     1Q 20     2Q 19  

Allowance for credit losses (1)

   $ 142,000        13.9   $ 142,400        12.9   $ 57,200        5.7

Current

     896,928        87.8     931,032        84.4     825,726        83.0

1 to 29 days past due

     76,172        7.4     98,896        9.0     106,708        10.7
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Delinquent accounts:

               

30 to 59 days

     15,277        1.4     20,907        1.9     22,207        2.3

60 to 89 days

     9,764        1.0     16,456        1.5     14,039        1.4

90 to 119 days

     7,014        0.7     11,889        1.1     10,018        1.0

120 to 149 days

     8,081        0.8     12,059        1.1     8,128        0.8

150 to 179 days

     9,399        0.9     11,046        1.0     8,154        0.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total contractual delinquency (2)

   $ 49,535        4.8   $ 72,357        6.6   $ 62,546        6.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total net finance receivables

   $ 1,022,635        100.0   $ 1,102,285        100.0   $ 994,980        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

1 day and over past due

   $ 125,707        12.2   $ 171,253        15.6   $ 169,254        17.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Contractual Delinquency by Product  
     2Q 20     1Q 20     2Q 19  

Small loans

   $ 24,465        6.4   $ 37,662        8.6   $ 33,368        7.7

Large loans

     23,660        3.8     32,201        5.1     25,699        5.0

Automobile loans

     291        4.8     508        6.7     1,294        8.2

Retail loans

     1,119        6.1     1,986        9.1     2,185        7.9
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total contractual delinquency (2)

   $ 49,535        4.8   $ 72,357        6.6   $ 62,546        6.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Includes incremental COVID-19 allowance for credit losses of $33,400 and $23,900 in 2Q 20 and 1Q 20, respectively.

(2)

Includes 0.1% delinquency related to the loan management system outage in 1Q 20.

 

10


     Income Statement Quarterly Trend  
     2Q 19      3Q 19      4Q 19      1Q 20     2Q 20      QoQ $
B(W)
    YoY $
B(W)
 

Revenue

                  

Interest and fee income

   $ 75,974      $ 83,089      $ 87,784      $ 86,997     $ 80,067      $ (6,930   $ 4,093  

Insurance income, net

     5,066        5,087        6,551        5,949       7,650        1,701       2,584  

Other income

     3,234        3,531        3,649        3,128       2,133        (995     (1,101
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total revenue

     84,274        91,707        97,984        96,074       89,850        (6,224     5,576  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Expenses

                  

Provision for credit losses

     25,714        24,515        26,039        49,522       27,499        22,023       (1,785

Personnel

     22,511        23,791        25,305        29,511       26,863        2,648       (4,352

Occupancy

     6,210        6,367        5,876        5,771       6,253        (482     (43

Marketing

     2,261        2,397        1,897        1,686       1,438        248       823  

Other

     6,761        7,612        7,813        9,275       6,971        2,304       (210
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total general and administrative

     37,743        40,167        40,891        46,243       41,525        4,718       (3,782

Interest expense

     9,771        10,348        10,285        10,159       9,137        1,022       634  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

     11,046        16,677        20,769        (9,850     11,689        21,539       643  

Income taxes

     2,677        4,105        5,086        (3,525     4,219        (7,744     (1,542
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 8,369      $ 12,572      $ 15,683      $ (6,325   $ 7,470      $ 13,795     $ (899
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) per common share:

                  

Basic

   $ 0.71      $ 1.11      $ 1.44      $ (0.58   $ 0.68      $ 1.26     $ (0.03
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ 0.70      $ 1.08      $ 1.38      $ (0.56   $ 0.68      $ 1.24     $ (0.02
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Weighted-average shares outstanding:

                  

Basic

     11,706        11,302        10,893        10,897       10,962        (65     744  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

     12,022        11,677        11,327        11,253       11,013        240       1,009  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net interest margin

   $ 74,503      $ 81,359      $ 87,699      $ 85,915     $ 80,713      $ (5,202   $ 6,210  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net credit margin

   $ 48,789      $ 56,844      $ 61,660      $ 36,393     $ 53,214      $ 16,821     $ 4,425  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
     Balance Sheet Quarterly Trend  
     2Q 19      3Q 19      4Q 19      1Q 20     2Q 20      QoQ $
Inc (Dec)
    YoY $
Inc (Dec)
 

Total assets

   $ 1,019,316      $ 1,086,172      $ 1,158,540      $ 1,078,890     $ 1,000,225      $ (78,665   $ (19,091
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net finance receivables

   $ 994,980      $ 1,067,086      $ 1,133,404      $ 1,102,285     $ 1,022,635      $ (79,650   $ 27,655  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Allowance for credit losses

   $ 57,200      $ 60,900      $ 62,200      $ 142,400     $ 142,000      $ (400   $ 84,800  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Long-term debt

   $ 689,310      $ 743,835      $ 808,218      $ 777,847     $ 683,865      $ (93,982   $ (5,445
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

11


     Other Key Metrics Quarterly Trend  
     2Q 19     3Q 19     4Q 19     1Q 20     2Q 20     QoQ
Inc (Dec)
    YoY
Inc (Dec)
 

Interest and fee yield (annualized)

     31.8     32.1     32.0     31.0     30.5     (0.5 )%      (1.3 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio (1)

     44.8     43.8     41.7     48.1     46.2     (1.9 )%      1.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expense ratio (2)

     15.8     15.5     14.9     16.5     15.8     (0.7 )%      0.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

30+ contractual delinquency

     6.3     6.5     7.0     6.6     4.8     (1.8 )%      (1.5 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net credit loss ratio (3)

     10.4     8.1     9.0     10.5     10.6     0.1     0.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value per share

   $ 24.88     $ 26.00     $ 27.49     $ 22.49     $ 23.11     $ 0.62     $ (1.77
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

General and administrative expenses as a percentage of total revenue.

(2)

Annualized general and administrative expenses as a percentage of average net finance receivables.

(3)

Annualized net credit losses as a percentage of average net finance receivables.

 

     Averages and Yields  
     YTD 20     YTD 19  
     Average Net
Finance
Receivables
     Average Yield
(Annualized)
    Average Net
Finance
Receivables
     Average
Yield
(Annualized)
 

Small loans

   $ 431,076        36.5   $ 431,253        38.0

Large loans

     626,185        27.4     468,600        27.4

Automobile loans

     7,719        14.1     20,611        14.7

Retail loans

     21,585        17.9     29,415        18.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Total interest and fee yield

   $ 1,086,565        30.8   $ 949,879        31.6
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue yield

   $ 1,086,565        34.2   $ 949,879        35.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

     Components of Increase in Interest and Fee Income
YTD 20 Compared to YTD 19
Increase (Decrease)
 
     Volume      Rate      Volume &
Rate
     Net  

Small loans

   $ (34    $ (3,163    $ 2      $ (3,195

Large loans

     21,580        129        43        21,752  

Automobile loans

     (949      (64      40        (973

Retail loans

     (733      (114      31        (816

Product mix

     1,763        (1,036      (727      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total increase in interest and fee income

   $ 21,627      $ (4,248    $ (611    $ 16,768  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


     Net Loans Originated (1) (2)  
     YTD 20      YTD 19      YTD $
Inc (Dec)
     YTD%
Inc (Dec)
 

Small loans

   $ 199,289      $ 303,685      $ (104,396      (34.4 )% 

Large loans

     196,628        253,441        (56,813      (22.4 )% 

Retail loans

     5,480        11,376        (5,896      (51.8 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net loans originated

   $ 401,397      $ 568,502      $ (167,105      (29.4 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Represents the balance of loan origination and refinancing net of unearned finance charges.

(2)

The company ceased originating automobile loans in November 2017.

 

     Other Key Metrics  
     YTD 20     YTD 19  

Net credit losses

   $ 57,321     $ 50,157  

Percentage of average net finance receivables (annualized)

     10.6     10.6

Provision for credit losses (1)

   $ 77,021     $ 49,057  

Percentage of average net finance receivables (annualized)

     14.2     10.3

Percentage of total revenue

     41.4     29.5

General and administrative expenses (2) (3)

   $ 87,768     $ 75,926  

Percentage of average net finance receivables (annualized)

     16.2     16.0

Percentage of total revenue

     47.2     45.7

 

(1)

Includes COVID-19 pandemic impacts to provision for credit losses of $33,400 for YTD 20.

(2)

Includes non-operating executive transition costs of $3,066 for YTD 20.

(3)

Includes non-operating loan management system outage costs of $720 for YTD 20.

 

13


Non-GAAP Financial Measures

In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. The company’s management utilizes non-GAAP measures as additional metrics to aid in, and enhance, its understanding of the company’s financial results. Tangible equity and funded debt-to-tangible equity ratio are non-GAAP measures that adjust GAAP measures to exclude intangible assets. Management uses these equity measures to evaluate and manage the company’s capital and leverage position. The company also believes that these equity measures are commonly used in the financial services industry and provide useful information to users of the company’s financial statements in the evaluation of its capital and leverage position.

This non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following tables provide a reconciliation of GAAP measures to non-GAAP measures.

 

     2Q 20  

Long-term debt

   $ 683,865  

Total stockholders’ equity

     259,881  

Less: Intangible assets

     8,824  
  

 

 

 

Tangible equity (non-GAAP)

   $ 251,057  
  

 

 

 

Funded debt-to-equity ratio

     2.6

Funded debt-to-tangible equity ratio (non-GAAP)

     2.7

 

14

EX-99.2

Exhibit 99.2

 

LOGO

2Q 2020 Earnings Call Supplemental Presentation August 5, 2020


LOGO

Legal Disclosures This document contains summarized information concerning Regional Management Corp. (the “Company”) and the Company’s business, operations, financial performance, and trends. No representation is made that the information in this document is complete. For additional financial, statistical, and business information, please see the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”), as well as the Company’s other reports filed with the SEC from time to time. Such reports are or will be available on the Company’s website (www.regionalmanagement.com) and on the SEC’s website (www.sec.gov). The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any regulatory or supervisory authority. This presentation, the related remarks, and the responses to various questions may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent the Company’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of the Company. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on such statements. Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: changes in general economic conditions, including levels of unemployment and bankruptcies; the impact of the recent outbreak of a novel coronavirus (COVID-19), including on the Company’s access to liquidity and the credit risk of the Company’s finance receivable portfolio; risks associated with the Company’s ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support its operations and initiatives; risks associated with the Company’s loan origination and servicing software system, including the risk of prolonged system outages; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including credit risk, repayment risk, and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; risks associated with the implementation of new underwriting models and processes, including as to the effectiveness of new custom scorecards; risks relating to the Company’s asset-backed securitization transactions; changes in interest rates; the risk that the Company’s existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; changes in accounting standards, rules, and interpretations, and the failure of related assumptions and estimates, including those associated with the implementation of current expected credit loss (CECL) accounting; the impact of changes in tax laws, guidance, and interpretations; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquencies and credit losses); changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company); changes in the competitive environment in which the Company operates or a decrease in the demand for its products; risks related to acquisitions; changes in operating and administrative expenses; and the departure, transition, or replacement of key personnel. The foregoing factors and others are discussed in greater detail in the Company’s filings with the SEC. The COVID-19 pandemic may also magnify many of these risks and uncertainties. The Company cannot guarantee future events, results, actions, levels of activity, performance, or achievements. The Company will not update or revise forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. This presentation also contains certain non-GAAP measures. Please refer to the Appendix accompanying this presentation for a reconciliation of non-GAAP measures to the most comparable GAAP measures.


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Proudly Supporting Our Customers and Employees Supporting Our Customers Our branches remain open and available to service the needs of our customers ̶ Substantially all of our branches are open, and we have increased the frequency of cleaning and disinfecting our facilities ̶ Strictly following CDC guidelines on social distancing ̶ Currently closing loans by appointment, curbside, and remotely ̶ Branches offer curbside payment drop-off, and customers are also taking advantage of our customer payment portal Communicating with our customers to inform them of our borrower assistance programs, ability to pay via electronic and telephonic means, and branch hours Several special borrower assistance programs to support our customers ̶ Special renewal and upsell programs to existing customers ̶ Expanded deferral eligibility policies, including waiving late fees Supporting Our Employees Created an HR contact center designed to: ̶ Monitor employee exposure ̶ Address field employee questions and concerns Offering contingent pay for employees that test positive for COVID-19 Expanded the PTO policy to provide employees flexibility to address personal obligations and to assist in situations where employees are unable to work remotely Covering the cost of virtual health visits for employees Implemented more frequent cleaning and sanitizing of our branches, installed acrylic protective shields, and equipped staff with disinfectant and face masks Corporate, centralized employees, and some field staff are working remotely using secure remote access connections


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Proven Operating Model and Effectively Managing the Ongoing COVID-19 Crisis Our Proven Approach Customer-Centric Focus Sound Data-Driven Credit Underwriting Significant Liquidity and Strong Balance Sheet Strong relationship-driven customer interaction model allows us to create responsible lending solutions and service our customers’ needs Adoption of new scorecards positions us well throughout the cycle Proactively monitor credit trends to make underwriting adjustments Large loan upsell strategy provides “on us” payment history Proven borrower assistance programs to mitigate losses Available liquidity of $162 million as of July 31, 2020 Conservatively funded debt-to-tangible equity ratio (1) of 2.7x as of June 30, 2020 Ongoing COVID-19 Response Proactively deployed borrower assistance programs; June 30, 2020 30+ day delinquency rate at 4.8% Rolled out remote loan closing capabilities across the branch network Paused direct mail and digital originations in April to recalibrate risk-adjusted returns Restarted these channels in May to achieve acceptable risk-adjusted returns under our severe stress scenario Tightened branch credit underwriting using our custom scorecards Reducing discretionary expenses and pacing investments Benefits from credit programs support capital and liquidity (1) This is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure.


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Monthly Lending and Collection Activity $76.2 $77.2 $75.9 Millions in Originations Branch Direct Mail Digital $92.9 $79.0 $57.9 $35.3 January February March April May June July % Y/Y Change 0% 12% 2% (65%) (58%) (29%) (27%) 30+ Day Delinquencies $120.0 7.5% 8 7.1% $110.0 6.6% 7 $100.0 $90.0 $84.5 $79.5 5.4% 6 $80.0 $72.4 5.0% 4.8% $70.0 4.5% 5 $57.3 $60.0 $51.5 $49.5 4 $50.0 $46.3 $40.0 3 $30.0 $20.0 2 January February March April May June July Borrower Assistance 2.3% 2.2% 2.3% 5.8% 3.1% 2.3% 2.1% Program Usage (1) Branch originations rebounded from April’s low of $32MM to $70MM in July Reinitiated our direct mail campaigns and digital channel, focusing on higher credit quality customers. In July, these channels produced $23MM of originations, up from $4MM in April July 30+ delinquency improved 190 bps, or $20MM, vs. prior year from new custom scorecards, effective borrower assistance programs, and the government stimulus Borrower assistance programs at 2.1% in July, back to normalized levels (1) Percentage of accounts that utilized borrower assistance programs during the month


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Significant Capacity to Absorb Losses Our balance sheet is in a strong position to absorb losses Absorption Capacity (in millions) 2Q 20 Total stockholders’ equity $259.9 Allowance for credit losses $142.0 Total absorption capacity $401.9 Absorption capacity as % of net finance receivables 39.3% TTM Margin (revenue less G&A and interest expense) (1) $166.9 Additional capacity using TTM margin 16.3% Total absorption capacity with TTM margin 55.6% TTM Net credit loss rate (2) 9.6% Net finance receivables $1,022.6 (1) TTM Margin defined as total revenue of $375.6million, less general and administrative expenses of $168.8million and interest expense of $39.9 million from 3Q 19 through 2Q 20 (2) Net credit losses as a percentage of average net finance receivables


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2Q 20 Financial Highlights dollars in millions 2Q 20 2Q 19 $ Chg B/(W) % Chg B/(W) (except per share amounts) Average net finance receivables (ANR) $ 1,049.8 $ 954.9 $ 94.9 9.9% Interest & fee income 80.1 76.0 4.1 5.4% Total revenue 89.9 84.3 5.6 6.6% Provision for credit losses 27.5 25.7 (1.8) (6.9%) G&A expense 41.5 37.7 (3.8) (10.0%) Interest expense 9.1 9.8 0.6 6.5% Net income 7.5 8.4 (0.9) (10.7%) ROA 2.9% 3.4% (0.5%) (14.7%) ROE 11.7% 11.5% 0.2% 1.7% Diluted EPS $ 0.68 $ 0.70 $ (0.02) (2.9%) Net income of $7.5 million, or $0.68 diluted EPS Total revenue growth of 6.6% driven by $94.9 million year-over-year average portfolio growth â,‹ Interest and fee income up 5.4% year-over-year on 9.9% increase in average net finance receivables â,‹ Insurance income, net increased $2.6 million, driven by an increase in premium revenue and a decrease in non-file insurance claims expense â,‹ Other income decreased by $1.1 million due to fewer late fees from low delinquency and waived payment deferral fees Provision for credit losses up 6.9%, or $1.8 million, primarily due to: â,‹ 9.9% increase in average net finance receivables â,‹ $9.5 million increase in the allowance for credit losses resulting from COVID-19, offset by $9.9 million decrease due to portfolio liquidation Operating expense ratio of 15.8% remained unchanged from the prior-year â,‹ 2Q 20 included 1.0%, or approximately $2.6 million, of COVID-19 expenses and reduced deferred loan origination costs relative to the prior-year period â,‹ 2Q 20 included $0.9million of expense from 12 net new branches that opened since the prior-year period Interest expense decrease of 6.5%, primarily due to Fed rate decreases, partially offset by portfolio growth


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Portfolio Growth and Mix Trends Ending Net Finance Receivables (ENR) in millions 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Small loans (£ $2,500) $365 $389 $419 $442 $426 $435 $454 $468 $440 $380 Large loans (³ $2,500) 377 406 424 452 455 516 575 632 633 618 Core loan products $741 $794 $843 $895 $881 $951 $1,029 $1,100 $1,073 $998 Automobile loans 49 40 32 26 21 16 12 10 8 6 Retail loans 32 31 31 30 29 28 26 24 22 18 Total $822 $865 $906 $951 $931 $995 $1,067 $1,133 $1,102 $1,023 Total YoY Ä ($) $115 $126 $117 $117 $109 $130 $161 $182 $171 $28 Total YoY Ä (%) 16.3% 17.0% 14.8% 14.0% 13.3% 15.0% 17.8% 19.2% 18.4% 2.8% vs. 1Q 20 vs. 2Q 19 $ Chg I/(D) % Chg I/(D) $ Chg I/(D) % Chg I/(D) ($60) (13.7%) ($55) (12.7%) (14) (2.3%) 102 19.8% ($75) (7.0%) $47 4.9% (1) (19.6%) (10) (61.4%) (4) (16.1%) (9) (33.9%) ($80) (7.2%) $28 2.8% % of Total Finance Receivables Product Mix 70.0% 60.4% 60.0% 50.0% 44.3% 40.0% 37.2% 45.8% 30.0% 20.0% 10.0% 5.9% 3.9% 1.8% 0.0% 0.6% 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Small Loans Large Loans Automobile Loans Retail Loans COVID-19 reduced loan demand in 2Q 20 Originations improved in both May and June as state economies reopened Shift toward large loans in 2Q 20 from 1Q 20 due to the temporary pausing of convenience checks


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Average Receivables and Revenue Trends Revenue $98.0 $96.1 $100.0 $91.7 $89.9 $90.0 $83.7 $84.3 $81.7 $77.9 $80.0 $72.6 $72.4 Millions $70.0 $60.0 $50.0 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Interest and Fee Income Insurance Income Other Income Sequential Ä 0.7% (0.3%) 7.6% 7.5% (2.4%) 3.1% 8.8% 6.8% (1.9%) (6.5%) YoY Ä 10.3% 10.8% 12.6% 16.1% 12.6% 16.4% 17.7% 17.0% 17.5% 6.6% Total revenue increased 6.6% vs. the prior-year period Interest and fee yield decreased 130 basis points vs. the prior-year period, as large loan portfolio growth outpaced higher-yielding small loan growth As of June 30, 2020, 79% of finance receivables were at or below 36% APR Average Net Finance Receivables $1,200 $1,123 $1,098 $1,100 $1,050 $1,034 $1,000 $945 $955 $888 $933 $900 Millions $833 $837 $800 $700 $600 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Sequential Ä 2.5% 0.5% 6.2% 5.0% 1.3% 1.1% 8.3% 6.2% 2.3% (6.5%) YoY Ä 15.5% 16.3% 15.8% 14.8% 13.5% 14.1% 16.4% 17.8% 18.9% 9.9% Total Revenue and Interest & Fee Yields 40.0% 37.5% 35.9% 35.3% 35.5% 35.7% 34.9% 35.1% 34.6% 34.6% 34.2% 34.2% 35.0% 32.5% 32.2% 32.1% 31.8% 31.9% 31.5% 31.8% 32.0% 32.5% 31.0% 30.5% 30.0% 27.5% 25.0% 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Total Revenue Yield Interest and Fee Yield Sequential Ä (0.6%) (0.3%) 0.5% 0.8% (1.3%) 0.7% 0.2% 0.2% (1.5%) -YoY Ä (1.6%) (1.7%) (1.0%) 0.4% (0.3%) 0.7% 0.4% (0.2%) (0.4%) (1.1%) Note: Table above reflects changes in total revenue yield


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Recent Net Credit Loss Trends Net credit loss rate increased 20 basis points vs. the prior-year period The denominator effect of slower portfolio growth negatively impacted the 2Q 20 net credit loss rate 12.0% Net Credit Loss Rate 10.7% 10.5% 10.6% 10.4% ANR 10.0% 9.9% of 9.3% 8.9% 9.0% % 8.1% Annualized 8.0% 7.6% 6.0% 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Sequential Ä 1.1% (0.6%) (1.7%) 1.3% 1.8% (0.3%) (2.3%) 0.9% 1.5% 0.1% Year/Year Ä (0.9%) (0.5%) (0.1%) 0.1% 0.8% 1.1% 0.5% 0.1% (0.2%) 0.2% Net credit loss rate above includes: Non-file claims 0.3% 0.2% 0.3% 0.8% 0.7% 0.7% 0.7% 0.9% 0.9% 1.0% System outage 0.3% -Hurricane losses 0.4% 0.5% 0.1% 0.4% 0.6%


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Delinquency at Historically Low Levels 2Q 20 delinquency is down from prior year as a result of new custom scorecards, federal stimulus, and the successful execution of internal borrower assistance programs â,‹ 30+ days past due of 4.8% is 150 basis points lower than prior year â,‹ 90+ days past due of 2.4% is 20 basis points lower than prior year â,‹ 30+ days past due is under $50 million (loan loss reserves = $142 million) July 2020 30+ days past due improved to 4.5% 30+ & 90+ Delinquency Rates 12.0% $75.0 $35.5 $32.4 $29.6 $35.0 10.0% $60.0 $25.6 $31.8 $26.3 Millions 8.0% in $26.5 $22.1 $45.0 7.6% $24.5 ENR 7.0% 6.9% 7.0% 6.5% 6.6% 6.0% 6.4% 6.3% of 6.2% % $30.0 3.2% 3.4% 3.4% 3.2% 4.8% 4.0% 3.1% Delinquency 2.6% 2.8% 2.8% 2.6% 2.4% $15.0 2.0% $26.5 $31.2 $37.8 $40.1 $32.1 $36.2 $39.3 $44.1 $37.4 $25.0 $ 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 30-89 Days 90-179 Days 30+ DQ % 90+ DQ % 30+ DQ 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Sequential Ä (1.0%) (0.2%) 0.8% 0.6% (0.7%) (0.6%) 0.2% 0.5% (0.4%) (1.8%) YoY Ä (0.3%) 0.2% 0.2% 0.5% 0.1% (0.5%) (0.6%) (0.3%) (1.5%) 90+ DQ 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Sequential Ä (0.1%) (0.6%) 0.2% 0.6% (0.8%) 0.2% 0.3% 0.1% (0.8%) YoY Ä 0.2% (0.1%) (0.1%) 0.1% 0.2% (0.3%) (0.2%) (0.2%)


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Reserved For Stressed Credit Losses We ran several macroeconomic stress scenarios, and our final forecast contemplated the following: unemployment peaking at 17.2% in our footprint in 2020 and declining to 8.6% by the end of 2021. The severity of our macro assumptions remained relatively consistent with the first quarter model, and, in the second quarter, we extended the assumed duration of elevated unemployment levels. The macro scenario was adjusted for the potential benefits of the federal stimulus and internal borrower assistance programs. (1) $9.5(1) (in millions) $23.9 $142.4 $142.0 ($3.8) ($9.9) $60.1 $122.3 $62.2 4Q 19 Ending Jan. 1st CECL 1Q 20 Beginning 1Q 20 Reserve 1Q 20 Release 1Q 20 Ending 2Q 20 Reserve 2Q Release 2Q 20 Ending Reserve Implementation Reserve Build Portfolio Reserve Build Portfolio Reserve COVID-19 Liquidation COVID-19 Liquidation Reserves as 5.5% 10.8% 12.9% 13.9% % of ENR (1) 2Q 20 Ending Reserve includes $33.4 million of incremental COVID-19 reserves


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Operating Expense Ratio Deferred $2.0 million less in loan origination costs on reduced loan volume in 2Q 20, which increased personnel expense Incurred $0.6 million of 2Q 20 expenses for COVID-19 related customer communications, protective supplies, and remote work equipment These items impacted the operating expense ratio by 100 basis points in 2Q 20 $50.0 19.0% Operating Expense Ratio $46.2 $40.9 $41.5 $40.2 $40.0 $38.2 $37.7 18.0% $35.9 $36.6 $34.6 $33.2 $30.0 17.0% 16.6% 16.5% (1) 16.2% ANR 16.1% Millions of 15.9% $20.0 15.8% 15.8% 16.0% % 15.5% (2) 15.7% 15.1% 14.9% $10.0 15.0% $- 14.0% 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Total SG&A Expenses % of ANR (1) Non-GAAP % of ANR (1) As % of ANR (1) 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Year/Year Ä (0.9%) (1.7%) (1.5%) (1.0%) (0.4%) (0.1%) (0.6%) (0.8%) 0.3% (1) Annualized general and administrative expenses as a percentage of average net finance receivables (2) Excludes $3.8 million of non-operating costs; $3.1 million related to the CEO transition and $0.7 million from the system outage Refer to the appendix for a discussion of non-GAAP measures


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Cost of Funds Trending Downward $12.0 8.0% $10.3 $10.3 $10.2 7.0% $10.0 $9.6 $9.7 $9.8 $9.1 $8.7 6.0% $7.9 $8.0 $7.2 5.0% 4.0% 4.1% 4.1% 4.1% 4.0% (1) $6.0 3.7% 3.7% 3.6% 4.0% 3.5% 3.4% ANR Millions of % 3.0% $4.0 2.0% $2.0 1.0% $ 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Interest Expense % of ANR(1) As % of ANR (1) 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Year/Year Ä 0.7% 0.8% 0.5% 0.7% 0.6% 0.4% (0.4%) (0.5%) (0.7%) 2Q 20 interest expense as a percentage of average finance receivables decreased 70 basis points from the prior-year period Senior revolver has a 1% LIBOR floor; as such, we are nearing the lower end of our costs of funds


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Strong Funding Profile Debt Capacity As of June 30, 2020, total undrawn $600 capacity was $493 million (subject to borrowing base) $500 $98 Available liquidity of $162 million $400 $94 $95 $70 as of July 31, 2020 $120 $43 $74 $79 Millions $300 $34 $34 Fixed-rate debt represents 60% of $200 $395 total debt $312 $339 $294 $329 $257 $287 $277 $291 $100 $224 Senior revolver has a 1% LIBOR $- floor; as such, we are nearing the 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 lower end of our cost of funds Undrawn Senior Revolver Capacity Undrawn Warehouse Capacity 3.00 Funded Debt Ratios Fixed vs Variable Debt 2.67 2.76 2.72 2.63 100% 2.50 2.45 2.50 2.39 2.37 80% 39.9% 2.00 54.2% 49.2% 60% 1.50 90.7% 40% 1.00 0.69 0.69 0.70 0.68 60.1% 45.8% 50.8% 0.50 20% 9.3% 2017 2018 2019 2Q 20 2017 2018 2019 2Q 20 Funded Debt Ratio (Debt / Assets) Funded Debt-to-Equity Ratio Funded Debt-to-Tangible Equity Ratio(1) % Fixed Debt % Variable Debt Interest 3.2% 3.7% 4.0% 3.4% Expense % (2) (1) This is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure (2) Annualized interest expense as a percentage of average net finance receivables


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Appendix


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Same Store Portfolio Growth Same store(1) portfolio growth in 2Q 20 of 2.2% vs. 13.0% in the prior-year period due to the impact of COVID-19 Considerable growth opportunities in our existing branch footprint, particularly from branches opened within the last 3 years Wisconsin de novo branches moved from <1 year to 1-3 year cohort, driving the ENR per branch below the 2019 1-3 year cohort $3,500 Ending Net Finance Receivables Per Branch $3,000 2Q 19 2Q 20 $2,500 Branch $2,000 per thousands) ENR (in $1,500 $2,823 $2,884 $2,983 $3,028 $2,378 $1,000 $1,775 $500 $774 $308 $-< 1 Year 1-3 Years 3-5 Years 5+ Years # of Branches (2Q 20) 19 28 35 286 # of Branches (2Q 19) 23 12 55 266 (1) Same store sales are based on branches more than 1 year old


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Digitally-Sourced Originations Digital originations are sourced from either our affiliate partnerships or directly from our website All digitally-sourced loans are underwritten in our branches by our custom credit scorecards and serviced by our branches As of 2Q 20, our digital volume represented approximately 24% of our total new borrower volume Large loans represented 72% of digitally-sourced loans booked Digitally-Sourced Origination Volume Trend $18,000 $15,967 30.0% $16,000 $14,768 25.0% $14,000 $12,202 $11,624 $12,000 $10,803 20.0%Volume 20.8% 21.8% $10,000 18.8% 18.6% 15.0% $8,000 16.3% $7,406 Borrower Thousands $6,278 $6,000 $4,486 10.0% New 14.2% of $4,000 15.2% 23.8% 5.0% % $2,000 $- 0.0% 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 Small Loans Large Loans % of New Borrowers


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Diversified Liquidity Profile ï,§ Long history of liquidity support from a strong group of banking partners ï,§ Diversified funding platform with a senior revolving facility, warehouse facility, and securitizations Senior Revolver Warehouse Facility Large Loan Securitizations ï,§ Size:$640 millionï,§ Size: Up to $150 millionï,§ Size: Successfully completed three transactions totaling $410 million ï,§ Interest Type: Floatingï,§ Interest Type: Floating ï,§ Interest Type: Fixed ï,§ Maturity: September 2022ï,§ Maturity: April 2022 ï,§ Maturities: ï,§ Lenders: Wells Fargo Bank (Agent), ï,§ Administrative Agent: Wells Fargo $150 million, Jul. 2027, WAC –3.93% Bank of America, BMO Harris, First Bank $130 million, Jan. 2028, WAC –4.87% Tennessee, Texas Capital, Synovus, $130 million, Nov. 2028, WAC –3.17% Bank United, Axis Bankï,§ Structuring Agent: Credit Suisseï,§ Lenders: Qualified institutional investorsï,§ Collateral: Allows for the funding of ï,§ Collateral: Allows for the funding of Small, Large, and Retail loans Large Loans ï,§ Collateral: Allows for the funding of Large Loans ï,§ Facility has been upsized and renewed multiple times over the last 30 years


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Consolidated Income Statements in thousands 2Q 20 2Q 19 2019 2018 2017 2016 Revenue Interest and fee income $ 80,067 $ 75,974 $ 321,169 $ 280,121 $ 249,034 $ 220,963 Insurance income, net 7,650 5,066 20,817 14,793 13,061 9,456 Other income 2,133 3,234 13,727 11,792 10,364 10,099 Total revenue 89,850 84,274 355,713 306,706 272,459 240,518 Expenses Provision for credit losses 27,499 25,714 99,611 87,056 77,339 63,014 Personnel 26,863 22,511 94,000 84,068 75,992 68,979 Occupancy 6,253 6,210 24,618 22,519 21,530 20,059 Marketing 1,438 2,261 8,206 7,745 7,128 6,837 Other 6,971 6,761 30,160 25,952 26,305 22,757 Total general and administrative 41,525 37,743 156,984 140,284 130,955 118,632 Interest expense 9,137 9,771 40,125 33,464 23,908 19,924 Income before income taxes 11,689 11,046 58,993 45,902 40,257 38,948 Income taxes 4,219 2,677 14,261 10,557 10,294 14,917 Net income $ 7,470 $ 8,369 $ 44,732 $ 35,345 $ 29,963 $ 24,031


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Consolidated Balance Sheets in thousands 2Q 20 2Q 19 2019 2018 2017 2016 Cash $ 8,973 $ 694 $ 2,263 $ 3,657 $ 5,230 $ 4,446 Net finance receivables 1,022,635 994,980 1,133,404 951,183 834,045 729,161 Unearned insurance premiums (27,016) (21,546) (28,591) (18,940) (16,582) (11,386) Allowance for credit losses (142,000) (57,200) (62,200) (58,300) (48,910) (41,250) Net finance receivables, less unearned insurance premiums and allowance for credit losses 853,619 916,234 1,042,613 873,943 768,553 676,525 Restricted cash 54,423 41,803 54,164 46,484 16,787 8,297 Lease assets 27,177 25,575 26,438 -Property and equipment 15,504 14,132 15,301 13,926 12,294 11,693 Intangible assets 8,824 9,953 9,438 10,010 10,607 6,448 Deferred tax asset 20,682 437 619 33 Other assets 11,023 10,488 7,704 8,375 16,012 4,782 Total assets $ 1,000,225 $ 1,019,316 $ 1,158,540 $ 956,395 $ 829,483 $ 712,224 Long-term debt $ 683,865 $ 689,310 $ 808,218 $ 660,507 $ 571,496 $ 491,678 Unamortized debt issuance costs (7,584) (7,357) (9,607) (9,158) (4,950) (2,152) Net long-term debt 676,281 681,953 798,611 651,349 566,546 489,526 Accounts payable and accrued expenses 34,843 19,690 28,676 25,138 18,565 15,223 Lease liabilities 29,220 27,454 28,470 -Deferred tax liability 747 4,961 -Total liabilities 740,344 729,097 855,757 677,234 590,072 504,749 Common stock 1,373 1,349 1,350 1,332 1,321 1,300 Additional paid-in capital 104,530 100,486 102,678 98,778 94,384 92,432 Retained earnings 204,052 220,574 248,829 204,097 168,752 138,789 Treasury stock (50,074) (32,190) (50,074) (25,046) (25,046) (25,046) Total stockholders’ equity 259,881 290,219 302,783 279,161 239,411 207,475 Total liabilities and stockholders’ equity $ 1,000,225 $ 1,019,316 $ 1,158,540 $ 956,395 $ 829,483 $ 712,224


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In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. The company’s management utilizes non-GAAP measures as additional metrics to aid in, and enhance, its understanding of the company’s financial results. Tangible equity and funded debt-to-tangible equity ratio are non-GAAP measures that adjust GAAP measures to exclude intangible assets. Management uses these equity measures to evaluate and manage the company’s capital and leverage position. The company also believes that these equity measures are commonly used in the financial services industry and provide useful information to users of the company’s financial statements in the evaluation of its capital and leverage position. In addition, the company has presented non-GAAP measures that adjust for the executive transition and the loan management system outage. The company believes that these non-GAAP measures provide useful information by excluding certain material items that may not be indicative of our core operating results. As a result, the company believes that the non-GAAP measures that it has presented will allow for a better evaluation of the operating performance of the business. This non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, the company’s on-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following tables provide a reconciliation of GAAP measures to non-GAAP measures. 1Q 2020 Non-GAAP Reconciliation in thousands GAAP Non-Operating (1) Non-GAAP G&A expense $ 46,243 $ (3,786) $ 42,457 Average net finance receivables $ 1,123,316 $ $ 1,123,316 Operating expense ratio 16.5% (1.4%) 15.1% (1) Non-operating G&A expense items include costs of $3,066 related to the executive transition and $720 related to the loan management system outage


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Non-GAAP Financial Measures (Cont’d) in thousands 2Q 20 2Q 19 2019 2018 2017 2016 Total assets $ 1,000,225 $ 1,019,316 $ 1,158,540 $ 956,395 $ 829,483 $ 712,224 Less: Intangible assets 8,824 9,953 9,438 10,010 10,607 6,448 Tangible assets (non-GAAP) 991,401 1,009,363 1,149,102 946,385 818,876 705,776 Gross long-term debt 683,865 689,310 808,218 660,507 571,496 491,678 Total stockholders’ equity 259,881 290,219 302,783 279,161 239,411 207,475 Less: Intangible assets 8,824 9,953 9,438 10,010 10,607 6,448 Tangible common equity (non-GAAP) $ 251,057 $ 280,266 $ 293,345 $ 269,151 $ 228,804 $ 201,027 Basic Shares Outstanding 11,243 11,662 11,013 11,777 11,659 11,450 Funded debt-to-equity ratio 2.63 2.38 2.67 2.37 2.39 2.37 Funded debt-to-tangible equity ratio (non-GAAP) 2.72 2.46 2.76 2.45 2.50 2.45 Total stockholders’ equity to total assets 26.0% 28.5% 26.1% 29.2% 28.9% 29.1% Tangible equity to tangible assets (non-GAAP) 25.3% 27.8% 25.5% 28.4% 27.9% 28.5% Book value per share $ 23.11 $ 24.88 $ 27.49 $ 23.70 $ 20.53 $ 18.12 Tangible book value per share (non-GAAP) $ 22.33 $ 24.03 $ 26.64 $ 22.85 $ 19.62 $ 17.56


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