# Regional Management Corp. (RM) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Regional Management Corp.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1519401/000095017025024903/rm-20241231.htm
Accession: 0000950170-25-024903
Filing date: 2025-02-21
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/RM/
All MD&A years: /company/RM/mda/
Previous year: /company/RM/mda/fy2023/ (FY 2023)
Next year: /company/RM/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and the related notes that appear in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. These discussions contain forward-looking statements that reflect our current expectations and that include, but are not limited to, statements concerning our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “predicts,” “will,” “would,” “should,” “could,” “potential,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. The forward-looking information we have provided in this Annual Report on Form 10-K pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or revise such statements, except as required by the federal securities laws.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of December 31, 2024, we operate under the name “Regional Finance” online and in 344 branch locations in 19 states across the United States, serving 575,400 active accounts. Most of our 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. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network with the support of centralized sales, underwriting, service, collections, and administrative teams. This model provides us with frequent contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Our products include:

•
Large Loans ($2,500) – As of December 31, 2024, we had 259.5 thousand large installment loans outstanding, representing $1.3 billion in net finance receivables. This included 69.5 thousand large loan convenience checks, representing $199.5 million in net finance receivables.

•
Small Loans (≤$2,500) – As of December 31, 2024, we had 314.9 thousand small installment loans outstanding, representing $554.7 million in net finance receivables. This included 167.3 thousand small loan convenience checks, representing $260.9 million in net finance receivables.

•
Retail Loans – As of December 31, 2024, we had 1.0 thousand retail purchase loans outstanding, representing $1.1 million in net finance receivables.

•
Optional Insurance Products – We offer optional payment and collateral protection insurance to our direct loan customers.

Large and small installment loans are our core products and will be the drivers of future growth. We ceased accepting applications for our retail loan product offering in November 2022, to focus on growing our core loan portfolio. We continue to own and service our existing portfolio of retail loans. Our primary sources of revenue are interest and fee income from our loan products, of which interest and fees relating to large and small installment loans are the largest component. In addition to interest and fee income from loans, we derive revenue from optional insurance products purchased by customers of our direct loan products.

For additional information regarding our business operations, see Part I, Item 1, “Business.”

Regional Management Corp. | 2024 Annual Report on Form 10-K | 47

Outlook

We continually assess the macroeconomic environment in which we operate in order to appropriately and timely adapt to current market conditions. Macroeconomic factors, including, but not limited to, inflationary pressures, higher interest rates, and impacts from current geopolitical events outside the U.S., may affect our business, liquidity, financial condition, and results of operations.

Due to moderating inflation and expectations for an improving economic environment, we have prudently increased the growth in our small loan portfolio. We grew the small loan portfolio by $61.2 million, or 12.4%, year-over-year. To balance the risk associated with the growth in our small loan portfolio, we deploy a barbell strategy of also originating higher-credit-quality, auto-secured loans.

Our allowance for credit losses was 10.5% of net finance receivables as of December 31, 2024. Going forward, macroeconomic conditions may necessitate changes to the macroeconomic assumptions within our forecast and to our credit loss performance outlook, either of which could lead to further changes in our allowance for credit losses, reserve rate, and provision for credit losses expense.

We have proactively diversified our funding over the past few years and continue to maintain a strong liquidity profile. As of December 31, 2024, we had $136.9 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities. In addition, we had $466.2 million of unused capacity on our revolving credit facilities (subject to the borrowing base) as of December 31, 2024. We believe our liquidity position provides substantial runway to support the fundamental operations of our business and to fund future growth.

Factors Affecting Our Results of Operations

Our business is impacted by several factors affecting our revenues, costs, and results of operations, including the following:

Quarterly Information and Seasonality. Our loan volume and contractual delinquency follow seasonal trends. Demand for our loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation, and larger provisions for credit losses in periods of portfolio growth. Consequently, we experience seasonal fluctuations in our operating results. However, changes in macroeconomic factors, including inflation, higher interest rates, and geopolitical conflict, have impacted our typical seasonal trends for loan volume and delinquency.

Growth in Loan Portfolio. The revenue that we generate from interest and fees is largely driven by the balance of loans that we originate. We source our loans through our branches, centrally-managed direct mail program, digital partners, and our consumer website. The majority of our loans, regardless of origination channel, are serviced through our branches. Increasing the number of loans per branch and growing our state footprint allows us to increase the number of customers we are able to serve. We continue to assess our branch network for clear opportunities to add branches in new and existing states where it is favorable for us to conduct business or consolidate operations into larger branches within close geographic proximity. This branch optimization is consistent with our omni-channel strategy and builds upon our recent successes in entering new states with a lighter branch footprint, while still providing customers with best-in-class service. As we consider our growth rate, we not only consider the health of the consumer, the strength of the economy, and the credit performance of our portfolio, we also balance our commitment to deliver strong short-term results for investors while also generating the portfolio growth that will fuel our success and returns over the long-term. As we grow our portfolio, we are required to reserve for expected lifetime credit losses at the origination of each loan, which reduces net income. The related revenue benefits are recognized over the life of each loan.

Product Mix. We are exposed to different credit risks and charge different interest rates and fees with respect to the various types of loans we offer. Our product mix also varies to some extent by state, and we may further diversify our product mix in the future. The interest rates and fees vary from state to state, depending on the competitive environment and relevant laws and regulations.

Asset Quality and Allowance for Credit Losses. Our results of operations are highly dependent upon the credit quality of our loan portfolio. The credit quality of our loan portfolio is the result of our ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as we grow our loan portfolio.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 48

The primary underlying factors driving the provision for credit losses for each loan type are our underwriting standards, delinquency trends, the general economic conditions in the areas in which we conduct business, loan portfolio growth, and the effectiveness of our servicing and collection efforts. We monitor these factors, and the amount and past due status of all loans, to identify trends that might require us to modify the allowance for credit losses.

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, a majority of our funding was held at a fixed rate as of December 31, 2024, representing 79% of our total debt.

Operating Costs. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of comprehensive income.

Components of Results of Operations

Interest and Fee Income. Our interest and fee income consists primarily of interest earned on outstanding loans. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

Most states allow certain fees in connection with lending activities, such as loan origination fees, acquisition fees, and maintenance fees. Some states allow for higher fees while keeping interest rates lower. Loan fees are additional charges to the customer and generally are included in the annual percentage rate shown in the Truth in Lending disclosure that we make to our customers. The fees may or may not be refundable to the customer in the event of an early payoff, depending on state law. Fees are recognized as income over the life of the loan on the constant yield method.

Insurance Income, Net. Our insurance operations are a material part of our overall business and are integral to our lending activities. Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from us. Insurance income, net also includes the earned premiums and direct costs associated with the non-file insurance that we purchase to protect us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected. We do not sell insurance to non-borrowers. Direct costs included in insurance income, net are claims paid, claims reserves, ceding fees, and premium taxes paid. We do not allocate to insurance income, net, any other head office or branch administrative costs associated with management of insurance operations, management of our captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

As reinsurer, we maintain restricted reserves comprised of restricted cash and restricted AFS investments for life insurance in an amount determined by the unaffiliated insurance company. As of December 31, 2024, the restricted reserves consisted of $21.2 million of unearned premium reserves and $1.2 million of unpaid claims reserves. The unaffiliated insurance company maintains the reserves for non-life claims.

Other Income. Our other income consists primarily of late charges assessed on customers who fail to make a payment within a specified number of days following the due date of the payment. In addition, interest income from restricted cash, commissions earned from the sale of club membership products, and investment income from restricted AFS securities are included in other income.

Provision for Credit Losses. Provisions for credit losses are charged to income in amounts that we estimate as sufficient to maintain an allowance for credit losses at an adequate level to provide for lifetime expected credit losses on the related finance receivable portfolio. We reserve for expected lifetime credit losses at origination of each loan, while the revenue benefits are recognized over the life of the loan. Credit loss experience, current conditions, reasonable and supportable economic forecasts, delinquency of finance receivables, loan portfolio growth, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. Substantial adjustments to the allowance may be necessary if there are significant changes in forecasted economic conditions or loan portfolio performance.

General and Administrative Expenses. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of comprehensive income. Our general and administrative expenses are comprised of four categories: personnel, occupancy, marketing, and other.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 49

Our personnel expenses are the largest component of our general and administrative expenses and consist primarily of the salaries and wages, overtime, contract labor, relocation costs, incentives, benefits, and related payroll taxes associated with all of our operations and head office employees.

Our occupancy expenses consist primarily of the cost of renting our facilities, all of which are leased, and the utility, depreciation of leasehold improvements and furniture and fixtures, communication services, data processing, and other non-personnel costs associated with operating our business.

Our marketing expenses consist primarily of costs associated with our direct mail campaigns (including postage and costs associated with selecting recipients), digital marketing, maintaining our consumer website, and local marketing by branches. These costs are expensed as incurred.

Other expenses consist primarily of legal, compliance, audit, and consulting costs, as well as software maintenance and support, non-employee director compensation, electronic payment processing costs, bank service charges, office supplies, credit bureau charges, and the amortization of software, software licenses, and implementation costs. We frequently experience fluctuations in other expenses as we grow our loan portfolio and expand our market footprint. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part I, Item 1A, “Risk Factors.”

Interest Expense. Our interest expense consists primarily of paid and accrued interest for debt, unused line fees, and amortization of debt issuance costs on debt.

Income Taxes. Income taxes consist of state and federal income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The change in deferred tax assets and liabilities is recognized in the period in which the change occurs, and the effects of future tax rate changes are recognized in the period in which the enactment of new rates occurs.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 50

Results of Operations

The following table summarizes our results of operations, both in dollars and as a percentage of average net finance receivables:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["Dollars in thousands","Amount","","% of Average Net Finance Receivables","","Amount","","% of Average Net Finance Receivables","","Amount","","% of Average Net Finance Receivables"],["Revenue"],["Interest and fee income","$","528,894","","","29.6","%","$","489,698","","","28.6","%","$","450,854","","","29.5","%"],["Insurance income, net","","40,695","","","2.3","%","","44,529","","","2.6","%","","43,502","","","2.8","%"],["Other income","","18,914","","","1.0","%","","17,172","","","1.0","%","","12,831","","","0.8","%"],["Total revenue","","588,503","","","32.9","%","","551,399","","","32.2","%","","507,187","","","33.1","%"],["Expenses"],["Provision for credit losses","","212,200","","","11.9","%","","220,034","","","12.9","%","","185,115","","","12.1","%"],["Personnel","","153,789","","","8.6","%","","156,872","","","9.2","%","","141,243","","","9.2","%"],["Occupancy","","25,823","","","1.4","%","","25,029","","","1.5","%","","23,809","","","1.6","%"],["Marketing","","19,006","","","1.1","%","","15,774","","","0.9","%","","15,378","","","1.0","%"],["Other","","49,080","","","2.7","%","","45,444","","","2.6","%","","42,098","","","2.7","%"],["Total general and administrative","","247,698","","","13.8","%","","243,119","","","14.2","%","","222,528","","","14.5","%"],["Interest expense","","74,530","","","4.2","%","","67,463","","","3.9","%","","34,223","","","2.2","%"],["Income before income taxes","","54,075","","","3.0","%","","20,783","","","1.2","%","","65,321","","","4.3","%"],["Income taxes","","12,848","","","0.7","%","","4,825","","","0.3","%","","14,097","","","1.0","%"],["Net income","$","41,227","","","2.3","%","$","15,958","","","0.9","%","$","51,224","","","3.3","%"]]
[[/GREPCENT_TABLE]]

Information explaining the changes in our results of operations from year-to-year is provided in the following pages.

Comparison of December 31, 2024, Versus December 31, 2023

The following discussion and table describe the changes in finance receivables by product type:

•
Large Loans ($2,500) – Large loans outstanding increased by $62.6 million, or 4.9%, to $1.3 billion at December 31, 2024, from $1.3 billion at December 31, 2023. The increase was due to growth in our auto-secured portfolio, the growth of receivables in branches opened during 2023 and 2024, and the transition of small loan customers to large loans.

•
Small Loans (≤$2,500) – Small loans outstanding increased by $61.2 million, or 12.4%, to $554.7 million at December 31, 2024, from $493.5 million at December 31, 2023. The increase was due to growth in our higher-margin loan portfolio and the growth of receivables in branches opened during 2023 and 2024, partially offset by the transition of small loan customers to large loans.

•
Retail Loans – Retail loans outstanding decreased $2.7 million, or 71.9%, to $1.1 million at December 31, 2024, from $3.8 million at December 31, 2023. We ceased accepting applications for our retail loan product offering in November 2022 to focus on growing our core loan portfolio.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 51

[[GREPCENT_TABLE]]
[["","","Net Finance Receivables by Product"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023","","","YoY $ Inc (Dec)","","","YoY % Inc (Dec)"],["Large loans","","$","1,336,780","","","$","1,274,137","","","$","62,643","","","","4.9","%"],["Small loans","","","554,686","","","","493,473","","","","61,213","","","","12.4","%"],["Retail loans","","","1,069","","","","3,800","","","","(2,731",")","","","(71.9",")%"],["Total","","$","1,892,535","","","$","1,771,410","","","$","121,125","","","","6.8","%"],["Number of branches at period end","","","344","","","","346","","","","(2",")","","","(0.6",")%"],["Net finance receivables per branch","","$","5,502","","","$","5,120","","","$","382","","","","7.5","%"]]
[[/GREPCENT_TABLE]]

Comparison of the Year Ended December 31, 2024, Versus the Year Ended December 31, 2023

Net Income. Net income increased $25.3 million, or 158.3%, to $41.2 million in 2024, from $16.0 million in 2023. The increase was due to an increase in revenue of $37.1 million and a decrease in provision for credit losses of $7.8 million, partially offset by increases in income taxes of $8.0 million, interest expense of $7.1 million, and general and administrative expenses of $4.6 million.

Revenue. Total revenue increased $37.1 million, or 6.7%, to $588.5 million in 2024, from $551.4 million in 2023. The components of revenue are explained in greater detail below.

Interest and Fee Income. Interest and fee income increased $39.2 million, or 8.0%, to $528.9 million in 2024, from $489.7 million in 2023. The increase was due to a 4.5% increase in average net finance receivables and a 1.0% increase in average yield. The increase in yield was due to price increases, growth in our higher-margin small loan business, and improved credit performance. Reductions in revenue reversals from the loan sale that occurred in the fourth quarter of 2023 increased 2024 interest and fee income by an estimated $1.7 million.

The following table sets forth the average net finance receivables balance and average yield for our loan products:

[[GREPCENT_TABLE]]
[["","","Average Net Finance Receivables for the Year Ended","","","Average Yields for the Year Ended"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023","","","YoY % Inc (Dec)","","","December 31, 2024","","","December 31, 2023","","","YoY % Inc (Dec)"],["Large loans","","$","1,278,683","","","$","1,242,529","","","","2.9","%","","","26.4","%","","","26.1","%","","","0.3","%"],["Small loans","","","507,584","","","","462,116","","","","9.8","%","","","37.6","%","","","35.6","%","","","2.0","%"],["Retail loans","","","2,214","","","","6,522","","","","(66.1",")%","","","16.1","%","","","17.3","%","","","(1.2",")%"],["Total","","$","1,788,481","","","$","1,711,167","","","","4.5","%","","","29.6","%","","","28.6","%","","","1.0","%"]]
[[/GREPCENT_TABLE]]

Total originations increased to $1.7 billion in 2024, from $1.5 billion in 2023. Origination volume increased during 2024 compared to prior year due to increases in small loan convenience checks and large branch loans. The following table represents the principal balance of loans originated and refinanced:

[[GREPCENT_TABLE]]
[["","","Loans Originated for the Year Ended"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023","","","YoY $ Inc (Dec)","","","YoY % Inc (Dec)"],["Large loans","","$","973,048","","","$","928,499","","","$","44,549","","","","4.8","%"],["Small loans","","","681,463","","","","606,412","","","","75,051","","","","12.4","%"],["Retail loans","","","\u2014","","","","146","","","","(146",")","","","(100.0",")%"],["Total","","$","1,654,511","","","$","1,535,057","","","$","119,454","","","","7.8","%"]]
[[/GREPCENT_TABLE]]

Regional Management Corp. | 2024 Annual Report on Form 10-K | 52

The following table summarizes the components of the increase in interest and fee income:

[[GREPCENT_TABLE]]
[["","","Components of Increase in Interest and Fee Income Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Increase (Decrease)"],["Dollars in thousands","","Volume","","","Rate","","","Volume & Rate","","","Net"],["Large loans","","$","9,424","","","$","4,262","","","$","124","","","$","13,810"],["Small loans","","","16,202","","","","9,065","","","","892","","","","26,159"],["Retail loans","","","(746",")","","","(80",")","","","53","","","","(773",")"],["Product mix","","","(2,754",")","","","3,086","","","","(332",")","","","\u2014"],["Total","","$","22,126","","","$","16,333","","","$","737","","","$","39,196"]]
[[/GREPCENT_TABLE]]

Insurance Income, Net. Insurance income, net decreased $3.8 million, or 8.6%, to $40.7 million in 2024, from $44.5 million in 2023. In both 2024 and 2023, personal property insurance premiums represented the largest component of aggregate earned insurance premiums, and life insurance claims expense represented the largest component of direct insurance expenses.

The following table summarizes the components of insurance income, net:

[[GREPCENT_TABLE]]
[["","","Insurance Premiums and Direct Expenses for the Year Ended"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023","","","YoY $ B(W)","","","YoY % B(W)"],["Earned premiums","","$","57,312","","","$","59,830","","","$","(2,518",")","","","(4.2",")%"],["Claims, reserves, and certain direct expenses","","","(16,617",")","","","(15,301",")","","","(1,316",")","","","(8.6",")%"],["Insurance income, net","","$","40,695","","","$","44,529","","","$","(3,834",")","","","(8.6",")%"]]
[[/GREPCENT_TABLE]]

Earned premiums during 2024 decreased by $2.5 million, and claims, reserves, and certain direct expenses increased by $1.3 million in each case compared to 2023. The decrease in earned premiums was primarily due to our strategic shifts in product and geographic mix which resulted in fewer active policies. The increase in claims, reserves, and certain direct expenses was primarily due to an increase in personal property insurance claims and reserves of $2.6 million related to hurricane activity.

Other Income. Other income increased $1.7 million, or 10.1%, to $18.9 million in 2024, from $17.2 million in 2023, primarily due to higher late charges of $0.9 million associated with portfolio growth, an increase in sales of our club membership products of $0.6 million, and higher investment income of $0.2 million.

Provision for Credit Losses. Our provision for credit losses decreased $7.8 million, or 3.6%, to $212.2 million in 2024, from $220.0 million in 2023. The decrease was due to a decrease in net credit losses of $11.3 million, partially offset by an incremental increase in the allowance for credit losses of $3.5 million compared to 2023. The decrease in the provision for credit losses is explained in greater detail below.

Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. Our increase in the allowance for credit losses was $12.1 million, an increase of $3.5 million from $8.6 million in 2023. Our increase in 2024 was primarily due to incremental portfolio growth of $49.1 million compared to prior year growth and changes in macro conditions. The allowance for credit losses as a percentage of finance receivables decreased to 10.5% as of December 31, 2024, from 10.6% as of December 31, 2023 due to changes in estimated future macroeconomic impacts on credit losses. See Note 4, “Finance Receivables, Credit Quality Information, and Allowance for Credit Losses” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our allowance for credit losses.

Net Credit Losses. Net credit losses decreased $11.3 million, or 5.4%, to $200.1 million in 2024, from $211.4 million in 2023. Our net credit losses during 2024 were inclusive of an estimated $12.2 million benefit from accelerated charge-offs in the fourth quarter of 2023 attributable to the loan sale that occurred during the fourth quarter of 2023 and further benefited from an improved macroeconomic environment. These decreases were partially offset by an increase in net credit losses due to higher average net finance receivables during the year ended December 31, 2024. The prior-year period included impacts from the loan sales that occurred in the fourth quarters of 2022 and 2023, which resulted in a net increase in net credit losses of $1.6 million. Our net credit loss ratio was 11.2% in 2024, compared to 12.4% in 2023. The 2023 loan sale resulted in a decrease of 70 basis points to

Regional Management Corp. | 2024 Annual Report on Form 10-K | 53

our 2024 net credit loss ratio. The 2022 and 2023 loan sales resulted in a net increase of 10 basis points to our 2023 net credit loss ratio.

Delinquency Performance. Our delinquency rate increased to 7.7% as of December 31, 2024, from 6.9% as of December 31, 2023. Our delinquency rate as of December 31, 2023 was inclusive of a 90 basis point reduction from the 2023 loan sale.

The following tables include contractual delinquency balances by aging category and by product:

[[GREPCENT_TABLE]]
[["","","Contractual Delinquency by Aging"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023"],["Current","","$","1,590,381","","","","84.0","%","","$","1,493,341","","","","84.3","%"],["1 to 29 days past due","","","156,312","","","","8.3","%","","","155,196","","","","8.8","%"],["Delinquent accounts:"],["30 to 59 days","","","36,948","","","","1.9","%","","","34,756","","","","1.9","%"],["60 to 89 days","","","35,242","","","","1.9","%","","","31,212","","","","1.8","%"],["90 to 119 days","","","28,085","","","","1.5","%","","","27,107","","","","1.5","%"],["120 to 149 days","","","23,987","","","","1.3","%","","","15,317","","","","0.9","%"],["150 to 179 days","","","21,580","","","","1.1","%","","","14,481","","","","0.8","%"],["Total delinquency","","$","145,842","","","","7.7","%","","$","122,873","","","","6.9","%"],["Total net finance receivables","","$","1,892,535","","","","100.0","%","","$","1,771,410","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Contractual Delinquency by Product"],["Dollars in thousands","","December 31, 2024","","","December 31, 2023"],["Large loans","","$","88,054","","","","6.6","%","","$","80,136","","","","6.3","%"],["Small loans","","","57,595","","","","10.4","%","","","42,151","","","","8.5","%"],["Retail loans","","","193","","","","18.1","%","","","586","","","","15.4","%"],["Total","","$","145,842","","","","7.7","%","","$","122,873","","","","6.9","%"]]
[[/GREPCENT_TABLE]]

General and Administrative Expenses. Our general and administrative expenses increased $4.6 million, or 1.9%, to $247.7 million in 2024 from $243.1 million in 2023. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Personnel. The largest component of general and administrative expenses is personnel expense, which decreased $3.1 million, or 2.0%, to $153.8 million in 2024, from $156.9 million in 2023. The decrease was primarily due to higher capitalized loan origination costs, which reduce personnel expenses, of $2.2 million and reduction in force expenses of $1.7 million in 2023, partially offset by higher labor costs of $0.9 million.

Occupancy. Occupancy expenses increased $0.8 million, or 3.2%, to $25.8 million in 2024, from $25.0 million in 2023, primarily due to increased rent expense of $0.9 million.

Marketing. Marketing expenses increased $3.2 million, or 20.5%, to $19.0 million in 2024, from $15.8 million in 2023 primarily due to increased activity in our direct mail campaigns of $3.3 million to support growth, partially offset by lower digital marketing costs of $0.2 million.

Other Expenses. Other expenses increased $3.6 million, or 8.0%, to $49.1 million in 2024, from $45.4 million in 2023, primarily due to an increase in collections expense of $1.1 million and increased investment in digital and technological capabilities of $1.0 million. The prior-year period included insurance settlement proceeds of $1.0 million, which reduced other expenses. Additionally, we often experience increases in other expenses including legal expenses, bank fees, and certain professional expenses as we grow our loan portfolio and expand our market footprint.

Operating Expense Ratio. Our operating expense ratio decreased by 0.4% to 13.8% during 2024, from 14.2% during 2023. Our operating expense ratio has improved as we have grown our loan portfolio and controlled expense growth.

Interest Expense. Interest expense increased $7.1 million, or 10.5%, to $74.5 million in 2024, compared to $67.5 million in 2023. The increase was primarily due to an increase in our cost of funds as well as an increase in the average balance of our debt

Regional Management Corp. | 2024 Annual Report on Form 10-K | 54

facilities. Our cost of funds increased 0.3% to 4.2% during 2024, from 3.9% during 2023. The average balance of our debt facilities increased to $1.4 billion in 2024, from $1.3 billion in 2023.

Income Taxes. Income taxes increased $8.0 million, or 166.3%, to $12.8 million in 2024, from $4.8 million in 2023. The increase was primarily due to a $33.3 million increase in income before taxes compared to 2023. Our effective tax rate increased to 23.8% in 2024, compared to 23.2% in 2023. The increase in the effective tax rate was primarily related to a decrease in the research and development tax credit and offset by decreases related to non-deductible compensation and excess tax benefits related to share-based compensation.

Comparison of the Year Ended December 31, 2023, Versus the Year Ended December 31, 2022

For a comparison of our results of operations for the years ended December 31, 2023 and December 31, 2022, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (which was filed with the SEC on February 22, 2024), which is incorporated by reference herein.

Liquidity and Capital Resources

Our primary cash needs relate to the funding of our lending activities and, to a lesser extent, expenditures relating to improving our technology infrastructure and expanding and maintaining our branch locations. We have historically financed, and plan to continue to finance, our short-term and long-term operating liquidity and capital needs through a combination of cash flows from operations and borrowings under our debt facilities, including our senior revolving credit facility, revolving warehouse credit facilities, and asset-backed securitization transactions, all of which are described below. We continue to seek ways to diversify our funding sources. As of December 31, 2024, we had a funded debt-to-equity ratio of 4.1 to 1.0 and a stockholders’ equity ratio of 18.7%.

Cash and cash equivalents decreased to $4.0 million as of December 31, 2024, from $4.5 million as of December 31, 2023. As of December 31, 2024 and December 31, 2023 we had $132.9 million and $108.1 million, respectively, of immediate availability to draw down cash from our revolving credit facilities. Our unused capacity on our revolving credit facilities (subject to the borrowing base) was $466.2 million and $551.5 million as of December 31, 2024 and December 31, 2023, respectively. Our debt balance was $1.5 billion as of December 31, 2024 compared to $1.4 billion the prior year-end.

A summary of the future material financial obligations requiring payments as of December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Future Material Financial Obligations by Period"],["Dollars in thousands","","Next Twelve Months","","","Beyond Twelve Months","","","Total"],["Principal payments on debt obligations","","$","466,626","","","$","1,007,637","","","$","1,474,263"],["Interest payments on debt obligations","","","65,822","","","","76,813","","","","142,635"],["Operating lease obligations","","","11,001","","","","36,728","","","","47,729"],["Total","","$","543,449","","","$","1,121,178","","","$","1,664,627"]]
[[/GREPCENT_TABLE]]

Based upon anticipated cash flows, we believe that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and operations over the next twelve months, as well as into the future.

From time to time, we have extended the maturity date of and increased the borrowing limits under our senior revolving credit facility. While we have successfully obtained such extensions and increases in the past, there can be no assurance that we will be able to do so if and when needed in the future. In addition, the revolving period maturities of our securitizations and warehouse credit facilities as of December 31, 2024 (each as described below within “Financing Arrangements and Restricted Cash Reserve Accounts”) ranged from February 2025 to May 2027. As of December 31, 2024, we did not exercise our rights to redeem the notes of our RMIT 2020-1 or RMIT 2021-1 securitizations, for which the revolving periods ended in September 2023 and February 2024, respectively. There can be no assurance that we will be able to secure an extension of the warehouse credit facilities or close additional securitization transactions if and when needed in the future. See Note 21, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding the amendment of the RMR VI revolving warehouse credit facility following the end of the fiscal year.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 55

Dividends and Stock Repurchases.

The Board may in its discretion declare and pay cash dividends on our common stock. The following table sets forth the dividends declared and paid for 2024:

[[GREPCENT_TABLE]]
[["Period","","Declaration Date","","Record Date","","Payment Date","","Dividends Declared Per Common Share"],["1Q 24","","February 7, 2024","","February 22, 2024","","March 14, 2024","","$","0.30"],["2Q 24","","May 1, 2024","","May 22, 2024","","June 12, 2024","","","0.30"],["3Q 24","","July 31, 2024","","August 21, 2024","","September 12, 2024","","","0.30"],["4Q 24","","November 6, 2024","","November 21, 2024","","December 11, 2024","","","0.30"],["Total","","","","","","","","$","1.20"]]
[[/GREPCENT_TABLE]]

The Board declared $12.3 million of cash dividends on our common stock during 2024. See Note 21, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding our quarterly cash dividend following the end of the year.

While we intend to pay our quarterly dividend for the foreseeable future, all subsequent dividends will be reviewed and declared at the discretion of the Board and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that the Board deems relevant. Our dividend payments may change from time to time, and the Board may choose not to continue to declare dividends in the future.

In December 2024, we announced that the Board had authorized a $30.0 million stock repurchase program. The authorization was effective immediately and extends through December 31, 2026. As of December 31, 2024, we had repurchased 0.1 million shares of common stock at a total cost of $3.5 million.

Cash Flow.

Operating Activities. Net cash provided by operating activities in 2024 was $269.6 million, compared to $249.2 million provided by operating activities in 2023, an increase of $20.5 million. The increase was primarily due to the growth of our loan portfolio.

Investing Activities. Investing activities consist of originations and repayments of finance receivables, purchases of intangible assets, and purchases of property and equipment for new and existing branches. Net cash used in investing activities in 2024 was $316.1 million, compared to $278.7 million in 2023, an increase of $37.4 million. The increase was primarily driven by increased originations as we grow our loan portfolio, partially offset by increased repayments of finance receivables.

Financing Activities. Financing activities consist of borrowings and payments on our outstanding indebtedness. Net cash provided by financing activities in 2024 was $53.4 million, compared to $26.4 million in 2023, an increase of $27.0 million. The increase in cash provided was the result of an increase in net advances on debt instruments of $34.5 million, partially offset by an increase in payments for debt issuance costs of $3.9 million and an increase in the repurchases of common stock of $3.5 million.

Financing Arrangements and Restricted Cash Reserve Accounts.

As of December 31, 2024, we had five credit facilities outstanding and, from time to time, engage in the private offering and sale of asset-backed notes. We had $132.9 million and $108.1 million of immediate availability to draw down cash from our revolving credit facilities as of December 31, 2024 and December 31, 2023, respectively. As part of our overall funding strategy, we have transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions. Our debt arrangements described below, other than our senior revolving credit facility, are issued by each of our RMR and RMIT SPEs, which are considered VIEs under GAAP. These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $117.1 million and $109.9 million as of December 31, 2024 and December 31, 2023, respectively. Our debt arrangements also contain various debt covenants. We were in compliance with all such debt covenants as of December 31, 2024.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 56

Revolving Credit Facilities. The following is a summary of our revolving credit facilities as of December 31, 2024:

[[GREPCENT_TABLE]]
[["Dollars in thousands","","Capacity","","","Debt Balance","","","Effective Interest Rate","","Facility Cash Reserve Requirement","","","Restricted Cash Collection","","","Maturity Date"],["Senior","","$","355,000","","","$","219,339","","","7.7%","","$","\u2014","","","$","\u2014","","","Sep 2025"],["RMR IV warehouse","","$","125,000","","","$","4,792","","","7.5%","","$","61","","","$","256","","","May 2026"],["RMR V warehouse","","$","100,000","","","$","52,307","","","6.9%","","$","325","","","$","3,882","","","Nov 2027"],["RMR VI warehouse (1)","","$","75,000","","","$","2,443","","","7.2%","","$","32","","","$","171","","","Feb 2026"],["RMR VII warehouse","","$","125,000","","","$","37,023","","","7.0%","","$","242","","","$","2,746","","","Oct 2026"]]
[[/GREPCENT_TABLE]]

(1) See Note 21, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for information regarding the amendment of this facility following the end of the fiscal year.

Securitizations. The following is a summary of our securitizations as of December 31, 2024:

[[GREPCENT_TABLE]]
[["Dollars in thousands","","Issue Amount","","","Debt Balance","","","Effective Interest Rate","","Restricted Cash Reserves","","","Restricted Cash Collection","","","Revolving Period Maturity","","Final Maturity Date"],["RMIT 2020-1","","$","180,000","","","$","46,769","","","4.3%","","$","1,875","","","$","4,849","","","Sep 2023","","Oct 2030"],["RMIT 2021-1","","$","248,700","","","$","101,550","","","2.7%","","$","2,604","","","$","9,969","","","Feb 2024","","Mar 2031"],["RMIT 2021-2","","$","200,000","","","$","200,191","","","2.3%","","$","2,083","","","$","16,871","","","Jul 2026","","Aug 2033"],["RMIT 2021-3","","$","125,000","","","$","125,202","","","3.9%","","$","1,471","","","$","16,698","","","Sep 2026","","Oct 2033"],["RMIT 2022-1","","$","250,000","","","$","250,374","","","3.6%","","$","2,646","","","$","21,469","","","Feb 2025","","Mar 2032"],["RMIT 2024-1","","$","187,305","","","$","187,788","","","6.2%","","$","1,078","","","$","17,332","","","May 2027","","July 2036"],["RMIT 2024-2","","$","250,000","","","$","250,558","","","5.3%","","$","1,418","","","$","22,892","","","Nov 2026","","Dec 2033"]]
[[/GREPCENT_TABLE]]

RMC Reinsurance. Our wholly owned subsidiary, RMC Reinsurance, Ltd., is required to maintain reserves against life insurance policies ceded to it, as determined by the ceding company. These reserves are comprised of restricted cash and restricted AFS investments, which totaled $0.7 million and $21.7 million, respectively, as of December 31, 2024.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP and conform to general practices within the consumer finance industry. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Allowance for Credit Losses.

The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining our estimate of expected credit losses, we evaluate information related to credit metrics, changes in our lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

We selected a PD / LGD model to estimate our base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).

To enhance the precision of the allowance for credit loss estimate, we evaluate our finance receivable portfolio on a pool basis and segment each pool of finance receivables with similar credit risk characteristics. As part of our evaluation, we consider loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, we selected the following segmentation: product type, FICO score, and delinquency status.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 57

As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). We use our segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. We also consider the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Macroeconomic forecasts are required for our allowance for credit loss model and require significant judgment and estimation uncertainty. We consider key economic factors, most notably unemployment rates, to incorporate into our estimate of the allowance for credit losses. We engaged a major rating service provider to assist with compiling a reasonable and supportable forecast which we use to support the adjustments of our historical loss experience.

Due to the judgment and uncertainty in estimating the expected credit losses, we may experience changes to the macroeconomic assumptions within our forecast, as well as changes to our credit loss performance outlook, both of which could lead to further changes in our allowance for credit losses, allowance as a percentage of net finance receivables, and provision for credit losses. Potential macroeconomic changes have created conditions that increase the level of uncertainty associated with our estimate of the amount and timing of future credit losses from our loan portfolio.

Macroeconomic Sensitivity. To demonstrate the sensitivity of forecasting macroeconomic conditions, we stressed our macroeconomic model with 10% increased weighting towards slower near-term growth that would have increased our reserves as of December 31, 2024 by $1.8 million.

The macroeconomic scenarios are highly influenced by timing, severity, and duration of changes in the underlying economic factors. This makes it difficult to estimate how potential changes in economic factors affect the estimated credit losses. Therefore, this hypothetical analysis is not intended to represent our expectation of changes in our estimate of expected credit losses due to a change in the macroeconomic environment, nor does it consider management’s judgment of other quantitative and qualitative information which could increase or decrease the estimate.

Regulatory Developments.

On March 7, 2023, the CFPB provided us with Notice seeking to establish supervisory authority over us pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010. Under that provision, the CFPB may establish supervisory authority over any non-bank covered person that it has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. We responded to the Notice by voluntarily consenting to the CFPB’s supervisory authority and entering into the Consent Agreement. Pursuant to the Consent Agreement and related CFPB order, the CFPB will have supervisory authority over us for a period of two years ending January 8, 2026. The Consent Agreement does not constitute an admission by us that we are a nonbank covered person who is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. See “Government Regulation” in Part I, Item 1 “Business” and “Risks Related to Regulation and Legal Proceedings” in Part I, Item 1A “Risk Factors” for a further discussion of the regulation and regulatory risks to which we are subject.

On March 6, 2024, the SEC adopted a final rule to require registrants to disclose certain climate-related information in their registration statements and annual reports. On April 4, 2024, the SEC issued an order staying the effectiveness of the final rule pending completion of the judicial review of consolidated challenges to the rule by the U.S. Court of Appeals for the Eighth Circuit. On February 11, 2025, the Acting Chairman of the SEC directed the SEC staff to notify the U.S. Court of Appeals for the Eighth Circuit of the change in the composition of the SEC and other changed circumstances and request that the court not schedule the case for oral argument to provide time for the SEC to deliberate and determine the appropriate next steps. We will continue to monitor developments with respect to the rule.

Regional Management Corp. | 2024 Annual Report on Form 10-K | 58