Regional Management Declines 2.5% Despite Q2 Earnings Beat

Shares of Regional Management Corp. RM have declined 2.5% since it reported second-quarter 2024 results on Jul 31, after the closing bell. The strong second-quarter earnings were supported by an increase in interest and fee income and improved efficiency in its branches. However, the positives were partly offset by higher expenses and lower insurance income.

It reported second-quarter 2024 adjusted earnings per share of 86 cents, which beat the Zacks Consensus Estimate by 45.8%. The bottom line increased 36.5% year over year.

RM's total revenues climbed 7.1% year over year to $143 million. The top line missed the consensus mark by only 0.1%.

Operational Update

Interest and fee income increased 8.3% year over year to $127.9 million, which beat the Zacks Consensus Estimate by 0.5%. Net insurance income of $10.5 million fell 6.2% in the second quarter and missed the consensus mark by 8.6%. Other income of $4.6 million grew 10.1% year over year but missed the consensus mark by 4.4%.

Provision for credit losses rose by 2.4% year over year to $53.8 million.

Total general and administrative expenses rose by 5.7% in the second quarter to $60.1 million due to higher personnel, marketing and other costs. The efficiency ratio, which depicts the general and administrative expenses as a percentage of revenues, was at 42% in the second quarter, down from 42.6% a year ago. It was much lower than the Zacks Consensus Estimate of 43.1%. Interest expenses increased 10.1% year over year to $17.9 million in the quarter under review.

Regional Management recorded a net income of $8.4 million in the second quarter of 2024 compared to a net income of $6 million a year ago.

At the end of the second quarter, net finance receivables were at $1.8 billion, up 5% from a year ago. While small loans rose 13.7% year over year to $505.6 million, large loans jumped 2.3% to $1.3 billion. It had 343 branches at the second-quarter end, with net finance receivables per branch at $5.2 million, up 6.2% year over year. This indicates rising efficiency in its branches.

The company recorded total loan originations of $426.1 million during the June quarter, which rose 6.8% year over year because of controlled growth from credit-tightening actions.

Financial Position (as of Jun 30, 2024)

Regional Management exited the second quarter with total assets of $1.79 billion, almost flat from 2023-end. The cash amount fell to $4.3 million from $4.5 million at 2023-end.

Net debt fell from $1.399 billion at 2023-end to $1.378 billion. Total liabilities of $1.44 billion at the second-quarter end were lower than $1.47 billion at 2023 end. Total shareholders' equity rose from $322.3 million at 2023-end to $344.9 million.

Dividend Update

For the third quarter of 2024, Regional Management announced a dividend of 30 cents per share, which will be paid on Sep 12  to shareholders of record as of Aug 21.

Future View

The company expects to improve credit losses in the second half of 2024. It will boost investments in strategic initiatives and portfolio growth. It plans to open 10 new branch locations by the year-end.

Ending Net Finance Receivables are expected to grow around 6% in 2024, while the third quarter is likely to see a growth of $48 million. It expects general and administrative expenses for 2024 to be around $250 million, up from $243.1 million in 2023. For the third quarter, the metric is expected to be around $64.5 million.

RM foresees about 60-70 basis points year-over-year growth in total revenue yield for 2024. It anticipates the effective tax rate to be within 24-25% for the full year. The company expects a full-year 2024 net income within the $41-$44 million range.

Zacks Rank & Key Picks

Regional Management currently has a Zacks Rank #3 (Hold).

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. JXN, WisdomTree, Inc. WT and HIVE Digital Technologies Ltd. HIVE. While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each.

The Zacks Consensus Estimate for Jackson Financial's current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN's current year revenues suggests a 116.7% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree's 2024 earnings indicates 64.9% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital's current-year earnings suggests a 34.6% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $127.2 million, indicating an 11.1% increase from a year ago.

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