Regional Management Corp. Provides Business Update Related to COVID-19

Regional Management Corp. (NYSE:RM), a diversified consumer finance company, today provided an update regarding the company’s response to the COVID-19 pandemic.

Our top priority is the health and well-being of our customers and our team members. To that end, we have taken numerous steps to support our customers and team members in a socially responsible way, as outlined below. Importantly, we have also taken steps to solidify our financial position and believe that we are prepared to respond as events develop.

Financially Sound – At this time, our primary operational focus is on servicing and collecting our existing portfolio. We remain confident in our business given our strong balance sheet and liquidity, the time-tested fundamentals of our income statement, the solid infrastructure that we have built (including our centralized collections capabilities) and our underwriting through custom risk models:

• Strong Balance Sheet – We have consistently operated with a conservative leverage ratio. As of December 31, 2019, we had a funded debt-to-equity ratio of 2.7x, with $302.8 million of shareholder equity ($293.3 million of tangible shareholder equity). With our December 31, 2019 allowance for credit losses of $62.2 million, we have $365.0 million of capacity to absorb losses while still maintaining positive shareholder equity. In addition, we will generate additional margin this year to absorb losses. Using our 2019 margin of $158.6 million (defined as total revenue of $355.7 million, less general and administrative expenses of $157.0 million and interest expense of $40.1 million), we anticipate that we have the ability to absorb losses of over 45% of our year-end 2019 finance receivables of $1.1 billion.
• Ample Liquidity – Our liquidity profile is strong because we proactively diversified our funding over the past few years in anticipation of a shift in the credit cycle. On March 20, 2020, we drew down $50 million on our senior revolving credit facility in order to maintain additional cash on hand. As of yesterday, the company has approximately $62 million of immediate availability to draw down cash from our revolving credit facilities, which are led by Wells Fargo, Credit Suisse, and Bank of America. As of yesterday, we had approximately $366 million of unused capacity on our various credit facilities, subject to the borrowing base, and therefore, we do not believe we will require access to the securitization market through 2021. In sum, we believe we have more than adequate capacity to support the fundamental operations of our business throughout the COVID-19 pandemic.
• New Business – We have temporarily suspended all direct marketing to acquire new customers, including direct mail and digital campaigns. Our efforts are focused on supporting our existing customers and providing them with additional loan proceeds, when justified by our underwriting, to assist them through any challenges they may encounter. We have also paused investment in new branches, non-critical hiring, and other spending until conditions begin to rebound.
• Underwriting – We are using our custom scorecards, as well as our legacy internal metrics and data, to appropriately tighten our lending criteria and to remain disciplined with respect to originations while supporting our borrowers.
• Business Continuity – Our branches have remained open during this time, adhering closely to the guidelines provided by the Centers for Disease Control. Our customers are able to renew their loans, subject to tightened underwriting requirements, and utilize multiple channels, including branches and online options, to continue making payments on their loans. Online payment options and our centralized collections capabilities are essential to serving our customers during this time. Certain of our team members, including our home office and field leadership, are currently able to work remotely as we employ our business continuity plans. We are currently expanding our capabilities for branch team members to work from home and to provide full origination capabilities remotely.

Customer-Centric – We have continued to provide support to our customers during this challenging time, and we remain committed to ensuring that our customers have access to affordable credit. As a financial services provider, we believe our operations are considered “essential services” under all state “shelter in place” mandates that have been issued to date in our operating footprint. Steps we have taken to support our customers include: