RM Q1 2026 Earnings Transcript

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DATE

Wednesday, April 29, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Latvir Lambda
• Chief Financial and Administrative Officer — Harpreet Rana

TAKEAWAYS

• Net Income -- $11.4 million, reflecting a 69% increase supported by portfolio growth and improved operating metrics.
• Diluted EPS -- $1.18, rising alongside net income growth.
• Loan Portfolio -- $2.1 billion ending balance, up $214 million or 11% year over year.
• Total Revenue -- $167 million, a 9% year-over-year increase and a first-quarter record.
• Operating Expense Ratio -- 12.2%, an improvement of 180 basis points year over year, setting a new company best.
• Return on Equity -- 12.2%, up 430 basis points year over year, reflecting higher earnings and operational efficiency.
• Total Originations -- $388 million, decreasing modestly year over year, which management attributed to a strong tax refund season and underwriting discipline.
• Average Receivables per Branch -- $5.9 million, up nearly 11% year over year, indicating improved branch productivity.
• Auto Secured Portfolio -- $300 million in outstanding balances, up 38% year over year, now comprising 14% of total loans with a 30-plus day delinquency rate of 2%.
• 30-Plus Day Delinquency Rate -- 7.2%, increasing 10 basis points year over year but improving 30 basis points sequentially; management noted this reflects seasonal patterns.
• Net Credit Loss Rate -- Increased by 10 basis points year over year; management linked this to higher portfolio liquidation.
• Allowance for Credit Losses -- Declined by $1.4 million sequentially, while the allowance rate rose to 10.4% due to updated macroeconomic assumptions.
• Interest Expense -- $22.9 million, representing 4.3% of average receivables on an annualized basis.
• Unused Funding Capacity -- $516 million, supporting plans for continued portfolio growth.
• Capital Returned to Shareholders -- Over $10 million via dividends and share repurchases, including a $0.30 per share dividend and 208,000 shares repurchased.
• Bank Partnership Expansion -- Partnership with Column Bank launched in March, initially piloted in one branch and expanded to 12 branches, with positive early origination data.
• Digital Originations Initiative -- Ongoing investment to build a frictionless digital experience and expand access to higher-credit-quality customers.
• AI and Data Investments -- Increased spending on data, credit analytics, AI capabilities, and fraud controls to improve credit performance and underwriting.
• Geographic Expansion -- Plan to enter Florida in the second quarter, adding the twentieth state.
• Full-Year Outlook -- Portfolio growth guidance of 10% and net income growth in the 20%-25% range; management expects second quarter net income to be the year’s low point due to seasonality.

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RISKS

• Management cited “elevated gas prices and inflation” as key macroeconomic risks impacting reserve posture and underwriting discipline.
• The company expects “net credit losses to remain seasonally elevated in the second quarter before improving” later in the year.
• Rana stated the allowance rate “could go up if things get a little bit tighter—if oil continues to increase and inflation and gas prices continue to increase.”

SUMMARY

Regional Management Corp. (NYSE:RM) introduced new bank partnership and digital initiatives while increasing investments in credit analytics and AI to address credit risk and support scalable growth. Management provided quantitative guidance for 2026, emphasizing the expectation that the second quarter will see temporarily lower net income due to seasonal portfolio liquidation and higher provisioning. The company highlighted expansion into Florida, further broadening its geographic footprint and addressable market amid ongoing investment in branch and product diversification.

• Larger loan products, especially auto secured, are driving the annual loan portfolio growth and now represent a growing share of originations and outstandings.
• Management’s operational flexibility was reiterated, with the ability to moderate growth or adjust underwriting in response to macro changes, particularly if inflationary pressures persist.
• The bank partnership with Column is anticipated to provide strategic opportunities for product uniformity, national expansion, and risk-adjusted yield optimization as it scales through 2026 and beyond.

INDUSTRY GLOSSARY

• De novo branch: A newly opened branch established from the ground up, not acquired or converted from an existing location.
• CECL provision: Current Expected Credit Loss provision, a forward-looking reserve for anticipated loan losses based on economic forecasts and credit trends.
• Nationally chartered bank: A bank that operates under a federal charter, enabling standardized products across multiple states regardless of local laws.
• 30-plus day delinquency rate: Percentage of loans with payments overdue by more than 30 days, used as a leading indicator of credit risk.
• Net credit loss rate (NCL): The ratio of loan principal charge-offs (net of recoveries) to average loan receivables, a key measure of portfolio credit performance.
• Operating expense ratio: Operating expenses expressed as a percentage of average receivables, measuring efficiency relative to loan portfolio size.

Full Conference Call Transcript

Latvir Lambda, President and CEO of Regional Management Corp.

Latvir Lambda: Thanks, Garrett, and good afternoon, everyone. We delivered a strong start to 2026 with solid financial performance, continued year-over-year portfolio growth, and further progress on our strategic priorities. Over the past few months, I have spent significant time across the organization continuing to listen, learn, and evaluate our business, and I am increasingly excited about the opportunities ahead. As I have deepened my understanding of our customers, products, and markets, I see a clear path to stronger performance and improving return outcomes over time. Our results in the first quarter reflect the strength of our operating model, disciplined execution, and continued investment in the business. Joining me on the call today is Harpreet Rana, our Chief Financial and Administrative Officer.

I will begin with a summary of our first quarter results, provide an update on our strategic initiatives, and then Harpreet will walk through the financial details. We generated net income of $11.4 million, or $1.18 of diluted earnings per share, representing an increase of 69% year over year. These results were driven by continued portfolio growth, strong revenue performance, and further improvement in operating efficiency. Our loan portfolio increased by $214 million year over year to $2.1 billion, representing 11% growth, and we generated record revenue for our first quarter, up 9% compared to the prior-year period. Demand for our products remains healthy, and we continue to grow this portfolio in a disciplined manner.

We also delivered strong operating leverage. Our operating expense ratio improved 180 basis points year over year to 12.2%, another all-time best for the company. Notably, revenue growth outpaced G&A and interest expense growth by a wide margin, reflecting the scalability of our model. Capital generation remained strong in the quarter. We had $12 million of capital generation and returned more than $10 million to shareholders through dividends and share repurchases while continuing to fund portfolio growth. Our 30-plus day delinquency and net credit loss rates in Q1 were flat year over year after adjusting for this year's larger portfolio liquidation.

Our customers remain stable and resilient in the current economic environment, and overall credit trends continue to perform within our expectations. That said, we are closely monitoring macroeconomic conditions, including elevated gas prices and inflation, and we remain disciplined and conservative in our underwriting. As we discussed on our last call, we are focused on continuing to improve our net credit loss rate over time, with a long-term target below 10%. In support of this objective, we are increasing our investment in data, credit analytics, emerging AI capabilities, and fraud detection, including first-party and synthetic fraud controls.

We are actively evaluating and beginning to deploy AI initiatives to enhance our underwriting, decisioning capabilities, and collections over time, while maintaining appropriate risk controls. These investments are critical to improving credit performance as we scale the portfolio and enter new markets. We continue to make good progress on our key strategic priorities. First, we are continuing to invest in market expansion. We plan to enter the state of Florida in the second quarter, which will mark our expansion into our twentieth state and represents an important long-term growth opportunity. Second, responsible portfolio growth remains a core priority. We are seeing continued strength in our auto secured lending product.

The auto secured portfolio reached $300 million in outstandings at the end of the first quarter, representing a 38% increase year over year. It now accounts for 14% of our total portfolio and carries a 30-plus day delinquency rate of 2%. This product continues to deliver attractive credit performance and returns. Third, we are advancing our bank partnership strategy. In early March, we announced the launch of our partnership with Column, a nationally chartered bank.

We expect this partnership to provide several important strategic benefits over time as it scales, including optimization of risk-adjusted yields, expanded relationships with existing customers and a broader addressable market, greater product and operational uniformity across states, faster entry into new markets, additional fee income opportunities, and increased wallet share over time from the introduction of new products. We launched the partnership in one branch with select products and have since expanded to 12 branches. We are encouraged by the early results, particularly in the origination trends, including volume, mix, and revenue characteristics.

As we expected, at this stage, our data is primarily focused on origination, credit quality, and yield metrics, and we expect to begin seeing early credit performance in the coming months. We plan to expand the partnership throughout the year as we continue to evaluate results, assess customer adoption, and refine the strategy. Fourth, we are continuing to invest in an end-to-end digital originations capability. We see meaningful long-term opportunity in this channel, including the ability to reach higher-credit-quality customers and expand our addressable market. We are focused on creating a frictionless digital experience with strong fraud detection, credit underwriting, and risk-based pricing capabilities as we scale this channel.

We are also evaluating the use of AI to enhance customer acquisition, improve decisioning speed and accuracy, and optimize channel performance over time. Our bank partnership will play an important role in supporting this initiative over time. Looking ahead, our expectations for the year remain unchanged. We continue to target full-year portfolio growth of 10% and net income growth in the range of 20% to 25%, while remaining prepared to moderate portfolio growth if warranted by macroeconomic or credit conditions. As a reminder, we expect second quarter net income to represent the low point for the year, consistent with normal seasonal trends.

First quarter tax refund activity results in portfolio liquidation, which impacts second quarter revenue, while growth begins to accelerate as we move through the second quarter, driving sequentially higher CECL provisioning and G&A expenses. Portfolio growth in the second quarter and throughout the remainder of the year supports stronger revenue and earnings in the third and fourth quarters. We also expect net credit losses to remain seasonally elevated in the second quarter before improving to lower levels in the second half of the year. In addition, we anticipate the benefits of our bank partnership, portfolio growth, and other strategic initiatives will build throughout the year, supporting stronger earnings performance in the third and fourth quarters.

Over the longer term, our objective remains clear. We will deliver sustainable, profitable growth while generating attractive returns for shareholders. We will continue to improve our return on equity through responsible portfolio growth, improving credit performance, operating leverage, and disciplined capital management. Regional Management Corp. is off to a strong start in 2026. We have a clear strategy, strong execution, and meaningful opportunities ahead, and we remain focused on delivering long-term value for our shareholders. With that, I will turn the call over to Harpreet.

Harpreet Rana: Thank you, Latvir, and good afternoon, everyone. I will now take you through our first quarter results in more detail. Starting on page four of the supplemental presentation, we delivered another quarter of strong year-over-year improvement across our key financial metrics. Net income was $11.4 million, and diluted earnings per share were $1.18, both driven by continued year-over-year portfolio and revenue growth, stable credit performance, strong operating leverage, and a disciplined balance sheet. Return on equity improved to 12.2%, up 430 basis points year over year, reflecting higher earnings and operating efficiency. Turning to pages five and six, total originations were $388 million, down modestly year over year as expected due to a stronger tax refund season and disciplined underwriting.

Portfolio growth remained strong, with ending net receivables of $2.1 billion, representing 11% year-over-year growth. This growth continues to be driven by larger loans, including our auto secured product, as well as contributions from new branches. Average receivables per branch increased to approximately $5.9 million, up nearly 11% year over year, reflecting improved branch productivity and continued maturation of our newer locations. From a sequential perspective, we saw a $36 million reduction in receivables, consistent with normal seasonal patterns driven by first quarter tax refund activity. Looking ahead, we expect to return to sequential portfolio growth in the second quarter, while maintaining the flexibility to adjust originations if macroeconomic or credit conditions warrant.

Turning to page seven, total revenue was a first quarter record of $167 million, increasing 9% year over year, driven by higher average receivables. Total revenue yield declined on both a sequential and a year-over-year basis primarily due to normal seasonality and continued mix shift toward larger, lower-yielding loans. As we move into the second quarter, we expect revenue yield to increase modestly on a sequential basis, consistent with typical seasonal trends. Turning to page eight, credit performance remained stable. Our 30-plus day delinquency rate was 7.2%, up 10 basis points year over year, and improved 30 basis points sequentially, reflecting normal seasonal patterns.

Our net credit loss rate increased modestly by 10 basis points year over year, also consistent with expectations. Both our delinquency rate and NCL rate included roughly 10 basis points of impact from higher liquidation in 2026 compared to 2025. Looking ahead to the second quarter, we expect delinquency and net credit losses to decline sequentially, consistent with seasonal patterns. Overall, credit performance remains in line with our expectations, and we continue to monitor macroeconomic conditions closely. Turning to page nine, the allowance for credit losses declined by $1.4 million during the quarter, primarily reflecting seasonal portfolio liquidation. The allowance rate increased slightly to 10.4%, reflecting updates to macroeconomic assumptions and continued prudence in reserving.

Subject to economic conditions and credit performance, we expect our allowance rate to stay flat sequentially in the second quarter. Turning to page 10, we continue to demonstrate strong operating leverage. Our operating expense ratio improved to 12.2%, an all-time best and a 180 basis point improvement year over year, while we continue to invest in key initiatives. Total G&A expenses declined modestly year over year, reflecting continued discipline in managing expenses while scaling the business. For the second quarter, we expect a sequential increase in our operating expense ratio but a year-over-year improvement from the second quarter of last year.

Turning to pages eleven and twelve, interest expense was $22.9 million, or 4.3% of average receivables on an annualized basis. We continue to maintain a strong and flexible funding profile, including $516 million of unused capacity, a diversified funding structure, and a high proportion of fixed-rate debt, which represented 84% of total debt at quarter end. This positions us well to support continued portfolio growth. Looking ahead, we anticipate that our funding costs will tick up slightly in the second quarter. Turning to page 13, we continue to generate strong capital and allocate it in a disciplined manner.

During the quarter, we had approximately $12 million of capital generation, and we returned over $10 million to shareholders through dividends and share repurchases. Our Board declared a $0.30 per share dividend, and we repurchased approximately 208 thousand shares during the quarter. Finally, turning to page 14 and building on Latvir’s comments about second quarter net income and seasonality, I will provide some additional detail on how we expect the year to progress from a quarterly perspective. As we noted, we expect second quarter net income to represent the low point for the year, followed by stronger performance in the third and fourth quarters, consistent with our normal seasonal pattern.

The primary driver of this cadence is the impact of first quarter tax refund activity, which results in seasonal portfolio liquidation in the first quarter and, in turn, impacts average receivables and revenue in the second quarter. At the same time, we begin to rebuild the portfolio during the second quarter, with growth typically accelerating as we move through the quarter. This results in a sequential increase in provision for credit losses in the second quarter as we reserve for new originations. As that portfolio growth takes hold, we see the benefit in the second half of the year.

The increase in receivables exiting the second quarter drives higher revenue in both the third and fourth quarters, and those growth tailwinds continue throughout the back half of the year. While provisioning for loan growth remains elevated in the third and fourth quarters relative to the first quarter, it is more comparable to second quarter levels, allowing revenue growth to drive stronger earnings. From a credit perspective, we expect net credit losses to remain seasonally elevated in the second quarter before improving in the third and fourth quarters. Finally, as Latvir mentioned, we expect the benefits of our strategic initiatives to build as we move through the year, with increasing contribution in the second half.

That concludes my remarks, and I will now turn the call back over to Latvir.

Latvir Lambda: To close, we are very pleased with how we started 2026 and are encouraged by the momentum we are carrying into the rest of the year. We delivered strong results while continuing to invest in the business, improve underlying credit performance, and drive operating leverage. Importantly, we did this in a disciplined way that positions us well for sustainable, profitable growth. As we look ahead, our priorities are clear: continue growing the portfolio responsibly, improving credit outcomes, expanding into attractive new markets, and investing in our people, technology, and digital, data, and AI-driven capabilities to enhance risk-adjusted returns.

We believe the opportunities in front of us across products, markets, and operating efficiency are compelling, and we are focused on executing against them thoughtfully. We have a strong foundation, a resilient customer base, and a highly capable team. I am confident in our ability to continue creating long-term value for our shareholders. My sincere thanks to the Regional Management Corp. team for delivering a great quarter.

Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. Pick up your handset before pressing the star keys. Our first question will come from Kyle Joseph with Stephens.

Kyle Joseph: Hey, good afternoon, guys. Thanks for taking my question. Just curious, a lot of moving parts in the first quarter with elevated tax refunds and then gas prices rising in March. Just kind of walk us through how loan demand and credit performed and the cadence of demand, and then how that has trended into April with gas prices remaining elevated?

Harpreet Rana: Okay, Kyle. It is Harp. I will take that question. In terms of the elevated refunds, that was something that we had expected. We had all heard that refunds were going to be outsized, and they did come in higher than where they were last year but not quite as high as what everyone expected. Demand was where we expected it to be, knowing that refunds were going to be higher, so that is what we saw there. In terms of gas prices, it continues to be something that we are watching.

What we found in the first quarter is our customers continue to be adaptable and resilient, but we do understand that inflation, and particularly gas prices, can take a toll on their wallet. So we continue to watch that through first payment default, delinquency rate, and also through any listening that we do when we have conversations with our customers, particularly even collections conversations, just to understand what is causing them the pain point. Right now, they appear to continue to be resilient, but again, in the second quarter, we continue to watch the gas prices, particularly given how much they have increased this week.

Latvir Lambda: The only thing I will add to that is we are, as far as monitoring the portfolio, looking at all rates, both early and late stage, and our reserve posture reflects the higher gas prices and potentially some impact on inflation. The segment of consumer we are really monitoring is high debt service coverage or debt-to-income and low-premium consumer. If gas prices remain elevated for a prolonged period, discretionary spending gets tested, and we are continuing to monitor that.

Kyle Joseph: Got it. Really helpful. Thanks. And then second question, kind of a two-part question. First, as you think about AI and you talked about incorporating AI, where do you think OpEx can go over that time frame? And then, as a follow-up, the relationship with Column is very exciting. Walk us through how you think about that impacting the P&L as that expands.

Latvir Lambda: Thanks, Kyle. On AI, we see value in machine learning models in origination and collections—some we have mentioned in the past that are already in the company and deployed. Those models help us take better risk and then price better for risk. In terms of Gen AI and agent AI deployments, although I do not have a specific guidance for you on the subject, we believe both our cost to originate and cost to service/collect over time can come down as we automate both the origination and collections journeys using agent/AI workflows. That is the track we are taking in this space.

In terms of your second question, on the Column partnership, we believe there are certain segments of consumers we cannot serve today because we are focused on implementing based on state laws and state charter. Those segments of consumers we believe we can originate using a national charter over time. That is a state-by-state specific analysis and execution. Second, we are now going to be in 20 states. We still have a bunch of work to do to expand in other markets. We believe a national charter execution and product uniformity increase our speed to market in those markets. We can scale up faster, especially with the digital originations capability we are building in parallel.

Third, there are pockets of customers or business where we do not get paid for the risk we take. We are very thoughtful in evaluating opportunities where we can optimize risk and return better in the business as we go forward. Lastly, Column Bank’s technology stack is pretty advanced. We believe the consumer we serve has needs for a bunch of other products. We will evaluate each one of them on their own business cases and see if we can launch and diversify our product set through branches and/or digital channels using the Column tech stack and charter. That is a next year and beyond opportunity. Harp, anything you want to add?

Harpreet Rana: Just in terms of where OpEx can go, how I would think about OpEx in the near term is, as we talk about some of the investment that we are going to continue to make in those areas, there will be some productivity improvement in the short to medium term, and then, really, in terms of OpEx, additional leverage will come through scale. If there are enhancements in the cost to originate and the cost to service, those will come in the medium term. That is how I would think about that.

Kyle Joseph: Thanks for taking my questions.

Operator: Thank you. Our next question comes from Vincent Albert Caintic with BTIG.

Vincent Albert Caintic: Hi, good afternoon. Thanks for taking my questions, and I really appreciate the very detailed quarterly guidance that you gave. Thank you very much for that. First question, I wanted to go over some of the macro assumptions that you are having in your guidance estimates, particularly when you are thinking about your credit reserve rate. I noticed that it is going to be flat for the rest of the year implied in guidance. Just wondering what you are assuming in there—if there are any macro changes or what you are thinking about unemployment. Thank you.

Harpreet Rana: Hey, Vincent. It is Harp. We did take the reserve rate up quarter over quarter versus where we were in the fourth quarter of last year, and the reason why we took that up was based upon some of the macro that we were seeing, which was basically oil prices and gas prices, and just being prudent around that in terms of what that could mean for our customers. In terms of where it is going to be next quarter or the quarter after, I cannot really say right now. In the prepared remarks, we have assumed that we are going to be flat to the 10.4% that we are at in the first quarter, barring any other macro news.

It could go up if things get a little bit tighter—if oil continues to increase and inflation and gas prices continue to increase—or it could come back down if oil prices come back down to where they were a few weeks ago and gas prices moderate.

Vincent Albert Caintic: Okay. Got it. That is helpful. Thank you. And then second question, how should we think about product growth? I appreciate the overall loan growth guidance, but if you could talk about small dollar loans versus large loans. It looks like auto is doing really well, and you sound pretty excited about that. If you could describe the mix shift in terms of where you want to go and where the customer demand is as you are thinking about the year. Thank you.

Harpreet Rana: Vincent, it is Harp again. In terms of priorities, auto secured is one of the priorities that Latvir laid out in his prepared remarks, and you can see how our larger loans have grown over time. That continues to be a priority given the returns on that product. However, we remain very much committed to our small loans as well. We often talk about our graduation strategy. In 2025, we refinanced 26,000 of those small loan customers and moved them up to larger small loans or large loans, and we were also able to bring down their rate. That is really a part of our customer journey and relationship strategy.

Harpreet Rana: So, Zach, it is really hard to give you what a normal number would be, but you are probably looking at last year as well. In terms of what we saw this year, I would say it is pretty typical. What we have read is tax refunds on average were up by about $300 over last year. In terms of our allowance, if you think about a $7 million bill, that swing of $8.4 million is going to drop right down to the bottom line. Of course, other things are going to continue to improve, such as revenue, which is going to continue to improve, and growth will end up being a tailwind the rest of the year.

So you will see revenue improve, but in the second quarter, you will see that swing because of the growth in the CECL provision that will drop down to the bottom line.

Zach Oster: Got it. Understood. And then one more question if I could add it on. Thinking about macro assumptions, any updated commentary on rate cuts or any assumptions going into or exiting the quarter on the allowance rate in terms of the rate cuts?

Harpreet Rana: In terms of rate cuts, the Fed held flat today. That was our expectation. I think when we all entered the year, we probably thought that there was going to be one rate cut at the beginning of the year. With them holding flat, we have taken what the forecast is on rates, as well as the forecast and other macro narrative, into account when we did our reserve calculation. When we look at the macro, we do look at a ratings agency outlook and incorporate those into the future. We took all of that into consideration as well as, of course, our own core portfolio—product mix, delinquency status, FICO.

We look at our own portfolio and then the macro assumptions for the rest of the year in order to come up with the reserve rate. We anticipated where we are today in terms of taking up that reserve rate, if that helps.

Latvir Lambda: The biggest levers in our credit assumptions are the labor market—which has been stable—inflation, which is an outcome of everything that is happening around gas prices and what have you, and GDP. Those are big levers as we model our reserve content. The biggest uncertainty that remains on the credit side is gas prices and how prolonged this whole geopolitical conflict in the Middle East may be.

Harpreet Rana: Zach, I will add one other thing to what Latvir just said. In terms of open jobs, we talk about that on these calls. There are still about 7 million open jobs, and we know that open jobs for our target segment matter looking out into the future when we do our reserve, just in terms of what the unemployment picture looks like. So right now, we will say that our customers are resilient and adaptable. There are plenty of open jobs available for them. As Latvir mentioned, inflation and gas prices—we continue to watch those as we move into the second quarter.

Zach Oster: Understood. Thank you for the color.

Operator: Moving next to William Joseph Dezellem with Tieton Capital.

William Joseph Dezellem: Thank you. A couple of questions. First, relative to your originations in the first quarter, the small loan originations were down, call it, 19%, while the large loan originations were up 10%. Can you walk us through the dynamics that led to that differential in origination change versus the first quarter of last year?

Harpreet Rana: Hey, Bill. Nice to hear from you. A couple of things. On the small loan originations, in higher tax season, we do expect our small loans to pay off, and we expect originations—in terms of response rate—to be muted in the first quarter. That is what you are seeing in 2026. When you compare that to 2025, we had 17 de novos come online between the fourth quarter and first quarter, and those de novos have mail support. Although you did have an origination impact on small loans last year, that was offset by the fact that we had those de novos coming online. That is part of what you are seeing in the year-over-year origination dynamics.

And then in terms of the large loans, it is really the auto secured product. As we grow that business, that is what you are seeing on the large loan year over year.

William Joseph Dezellem: That is very helpful. Thank you. And

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