2018 Annual Report
Fiscal Year 2018 Form 10 -K
Proxy Statement for the
2019 Annual Meeting of Stockholders
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Regional
979 Bate
Greer, So
www.regiona
Management C
esville Road, Su
uth Carolina 29
almanagement.
Corp.
uite B
9651
.com
March 2019
M
De
ear Valued Sto
ckholders:
Regional
he second con
th
he foundation
Th
nd disciplined
an
had another s
nsecutive year
we’ve created
cost manage
uccessful yea
of double-digi
d provides a so
ment. As a res
ar in 2018. We
it growth of ou
olid base to co
sult, we remain
continued to e
ur loan portfol
ontinue to driv
n well-position
execute on all
io, total reven
ve top-line grow
ned to deliver
facets of our
ue, and diluted
wth with stabl
strong returns
business, res
d earnings per
le credit perfo
s over the long
ulting in
r share.
ormance
g term.
In 2018, w
ourth consecut
fo
evenue of $30
Re
eceivables imp
re
2.93, represen
$2
we grew our lo
tive year of do
07 million in 20
proved by 120
nting year-over
an portfolio by
ouble-digit port
018 was up 13
basis points f
r-year increase
y $115 million
tfolio growth.
3% from 2017,
from the prior
es of 18% and
n to $932 millio
Our core portf
while operatin
year. Net inco
15%, respecti
on, an increas
folio of small
ng expenses a
ome for 2018 w
vely.
e of 14% from
and large inst
as a percentag
was $35 millio
m the prior year
allment loans
ge of average
on and diluted
r------our
grew 21%.
EPS was
Our hybrid
xpansion, cont
ex
ncludes de nov
in
leased to see
pl
ey initiatives th
ke
gnificant oppo
si
marketing prog
m
d growth strat
tinued to drive
vo branches) g
our more mat
hat allow our t
ortunity to furt
rams, includin
egy of increas
e our excellent
grew to $2.6 m
ure branches
team to focus
ther increase o
ng through our
sing average re
t 2018 perform
million in the fo
continue to de
more of its en
our average re
r proven ability
eceivables in o
mance. Our ave
ourth quarter f
eliver strong g
nergies on sale
eceivables per
y to graduate o
our existing br
erage finance
from $2.4 milli
rowth, bolster
es and servici
r branch by uti
our qualified c
ranches, coup
receivables p
ion in the prior
red by our new
ng. We believe
lizing our well
customers to l
pled with de no
per branch (wh
r-year period. W
w loan system
e there remain
-established s
arger loans.
ovo branch
hich
We were
and other
ns
sales and
In additio
Wisconsin in th
W
e novo branch
de
n, we expande
e fourth quart
h growth in the
ed our footprin
ter. We now op
e back half of t
nt to the Midw
perate in 11 st
the year.
est during the
tates. Looking
e year, entering
to the balanc
g Missouri in t
ce of 2019, we
the third quart
expect to con
er and
ntinue our
Along wit
co
ompleted the i
mplemented sc
im
ontinue to beli
co
econd half of 2
se
h our growth s
implementatio
corecards in th
ieve that they
2019 and into
strategy, stabl
on of custom c
he second hal
will become a
2020.
e credit qualit
credit scoreca
f of 2018, we
n important co
ty is key to our
ards across ou
have been ple
ontributor tow
r success. At t
ur entire branc
eased so far w
ward reducing
the time of thi
ch network. Fo
with their early
our net credit
s letter, we ha
or the states w
performance
losses beginn
ave just
where we
and
ning in the
On the liq
uring the year,
apitalized and
uidity front, w
, increasing an
positioned st
e further enha
nd diversifying
rongly to fund
anced our prof
g our funding c
d our long-term
file in 2018 by
capabilities an
m growth.
du
ca
completing tw
nd reducing ou
wo asset-back
ur overall cost
ked securitizat
of capital. We
tions
e are well-
Finally, on
pcoming retire
nd overall suc
n behalf of the
ement. Don ha
cess. It has be
e entire Region
as been a vital
een a pleasure
nal team, I wan
contributor ov
e to work along
nt to congratul
ver the past si
gside him, and
late our Chief
ix years to our
d we all wish h
Financial Offi
r growth, stron
him the best in
cer Don Thom
nger capital str
n his next chap
mas on his
ructure,
pter.
up
an
We are ve
eyond. As alw
xpansion, whic
ery excited abo
ays, our objec
ch we believe
out Regional’s
ctive remains t
will ultimately
progress ove
to deliver quali
y generate long
r the past few
ity growth and
g-term value fo
w years, as wel
d increase our
or our stockho
l as for our op
operating leve
olders.
be
ex
pportunities in
erage to drive
2019 and
margin
Thank you
eeing you at o
u for your cont
ur Annual Mee
tinued suppor
eting.
se
rt and ownersh
hip of Regiona
al Managemen
nt Corp. stock.
. We look forw
ward to
Best r
regards,
Peter
Presid
R. Knitzer
dent and Chief
Executive Offic
cer
This le
which
etter and annu
h accompanies
al report to sto
this letter and
ockholders may
annual report
y contain forwa
to stockholder
ard-looking stat
rs, for additiona
tements. Pleas
al information r
se refer to our A
regarding forw
Annual Report
ward-looking sta
on Form 10-K,
atements.
QUICK FACTS (as of December 31, 2018)
$932 million
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359
branches
11 states
AL • GA • MO • NM • NC
OK • SC • TX • TN • VA • WI
MANAGEMENT TEAM
Peter R. Knitzer
President and
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John D. Schachtel
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(cid:39)(cid:76)(cid:77)(cid:73)(cid:74)(cid:4)(cid:51)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:4)(cid:51)(cid:446)(cid:71)(cid:73)(cid:86)(cid:4)(cid:4)
Donald E. Thomas
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Daniel J. Taggart
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Brian J. Fisher
Senior Vice President,
CONTACT INFORMATION
Regional Management Corp.
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Greer, SC 29651
Telephone: (864) 448-7000
RegionalManagement.com
COMPANY OVERVIEW
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customers with limited access to consumer credit from banks, thrifts, credit card companies, and
other lenders. As of December 31, 2018, we had approximately 401,500 accounts and $932.2 million in
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BRANCH NETWORK & ORIGINATION CHANNELS
We operated under the name “Regional Finance” in 359 branches across 11 states at the end of 2018.
Our integrated branch model is the foundation of our multi-channel origination strategy, with nearly all loans,
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performance. In addition to our branch network, we promote our products and facilitate loan applications and
originations through direct mail campaigns, digital partners, retailers, and our consumer website.
LOAN PRODUCTS
We underwrite our loans based on our customers’ ability to make monthly payments out of their discretionary
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performance to national credit reporting agencies, allowing our customers the opportunity to establish or
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(cid:84)(cid:83)(cid:86)(cid:88)(cid:74)(cid:83)(cid:80)(cid:77)(cid:83)(cid:4)(cid:86)(cid:77)(cid:87)(cid:79)(cid:16)(cid:4)(cid:91)(cid:76)(cid:77)(cid:80)(cid:73)(cid:4)(cid:84)(cid:86)(cid:83)(cid:90)(cid:77)(cid:72)(cid:77)(cid:82)(cid:75)(cid:4)(cid:83)(cid:89)(cid:86)(cid:4)(cid:71)(cid:89)(cid:87)(cid:88)(cid:83)(cid:81)(cid:73)(cid:86)(cid:87)(cid:4)(cid:91)(cid:77)(cid:88)(cid:76)(cid:4)(cid:69)(cid:88)(cid:88)(cid:86)(cid:69)(cid:71)(cid:88)(cid:77)(cid:90)(cid:73)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:73)(cid:69)(cid:87)(cid:93)(cid:17)(cid:88)(cid:83)(cid:17)(cid:89)(cid:82)(cid:72)(cid:73)(cid:86)(cid:87)(cid:88)(cid:69)(cid:82)(cid:72)(cid:4)(cid:80)(cid:83)(cid:69)(cid:82)(cid:4)(cid:84)(cid:86)(cid:83)(cid:72)(cid:89)(cid:71)(cid:88)(cid:87)(cid:4)(cid:88)(cid:76)(cid:69)(cid:88)(cid:4)(cid:87)(cid:73)(cid:86)(cid:90)(cid:73)(cid:4)
• Fixed Rate
• Fixed Term
(cid:397)(cid:4)(cid:41)(cid:85)(cid:89)(cid:69)(cid:80)(cid:4)(cid:49)(cid:83)(cid:82)(cid:88)(cid:76)(cid:80)(cid:93)(cid:4)(cid:52)(cid:69)(cid:93)(cid:81)(cid:73)(cid:82)(cid:88)(cid:87)
• Flexible Loan Sizes & Maturities
• Fully-Amortizing
• No Pre-Payment Penalties
Loan Products
Size
Term
Small Installment Loans
Range: $500 – $2,500
Up to 48 months
Large Installment Loans
18 to 60 months
Retail Purchase Loans
Range: Up to $7,500
6 to 48 months
(cid:37)(cid:90)(cid:73)(cid:86)(cid:69)(cid:75)(cid:73)(cid:4)(cid:80)(cid:83)(cid:69)(cid:82)(cid:4)(cid:87)(cid:77)(cid:94)(cid:73)(cid:30)(cid:4)(cid:8)(cid:21)(cid:16)(cid:26)(cid:20)(cid:20)
Range: $2,501 – $12,000
(cid:37)(cid:90)(cid:73)(cid:86)(cid:69)(cid:75)(cid:73)(cid:4)(cid:80)(cid:83)(cid:69)(cid:82)(cid:4)(cid:87)(cid:77)(cid:94)(cid:73)(cid:30)(cid:4)(cid:8)(cid:24)(cid:16)(cid:24)(cid:20)(cid:20)
(cid:37)(cid:90)(cid:73)(cid:86)(cid:69)(cid:75)(cid:73)(cid:4)(cid:80)(cid:83)(cid:69)(cid:82)(cid:4)(cid:87)(cid:77)(cid:94)(cid:73)(cid:30)(cid:4)(cid:8)(cid:21)(cid:16)(cid:24)(cid:20)(cid:20)
General Counsel, and Secretary
(cid:88)(cid:76)(cid:73)(cid:77)(cid:86)(cid:4)(cid:90)(cid:69)(cid:86)(cid:77)(cid:73)(cid:72)(cid:4)(cid:444)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4)(cid:82)(cid:73)(cid:73)(cid:72)(cid:87)(cid:18)
LOAN FEATURES
INVESTOR INQUIRIES
OPPORTUNITY FOR GROWTH
Garrett Edson, ICR
(203) 682-8331
Garrett.Edson@icrinc.com
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(cid:88)(cid:83)(cid:4)(cid:77)(cid:82)(cid:71)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:87)(cid:77)(cid:94)(cid:73)(cid:4)(cid:83)(cid:74)(cid:4)(cid:83)(cid:89)(cid:86)(cid:4)(cid:83)(cid:90)(cid:73)(cid:86)(cid:69)(cid:80)(cid:80)(cid:4)(cid:80)(cid:83)(cid:69)(cid:82)(cid:4)(cid:86)(cid:73)(cid:71)(cid:73)(cid:77)(cid:90)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)(cid:4)(cid:70)(cid:93)(cid:4)(cid:74)(cid:83)(cid:71)(cid:89)(cid:87)(cid:77)(cid:82)(cid:75)(cid:4)(cid:83)(cid:82)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:4)(cid:83)(cid:74)(cid:4)(cid:83)(cid:89)(cid:86)(cid:4)(cid:71)(cid:83)(cid:86)(cid:73)(cid:4)(cid:87)(cid:81)(cid:69)(cid:80)(cid:80)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:80)(cid:69)(cid:86)(cid:75)(cid:73)(cid:4)
installment loan portfolios within our existing branches and by expanding our branch network in our current
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(cid:83)(cid:84)(cid:84)(cid:83)(cid:86)(cid:88)(cid:89)(cid:82)(cid:77)(cid:88)(cid:93)(cid:4)(cid:88)(cid:83)(cid:4)(cid:86)(cid:73)(cid:69)(cid:71)(cid:76)(cid:4)(cid:82)(cid:73)(cid:91)(cid:4)(cid:71)(cid:89)(cid:87)(cid:88)(cid:83)(cid:81)(cid:73)(cid:86)(cid:87)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:88)(cid:83)(cid:4)(cid:83)(cid:74)(cid:74)(cid:73)(cid:86)(cid:4)(cid:82)(cid:73)(cid:91)(cid:4)(cid:84)(cid:86)(cid:83)(cid:72)(cid:89)(cid:71)(cid:88)(cid:87)(cid:4)(cid:88)(cid:83)(cid:4)(cid:73)(cid:92)(cid:77)(cid:87)(cid:88)(cid:77)(cid:82)(cid:75)(cid:4)(cid:71)(cid:89)(cid:87)(cid:88)(cid:83)(cid:81)(cid:73)(cid:86)(cid:87)(cid:4)(cid:69)(cid:87)(cid:4)(cid:88)(cid:76)(cid:73)(cid:77)(cid:86)(cid:4)(cid:71)(cid:86)(cid:73)(cid:72)(cid:77)(cid:88)(cid:4)(cid:84)(cid:86)(cid:83)(cid:444)(cid:80)(cid:73)(cid:87)(cid:4)
(cid:69)(cid:82)(cid:72)(cid:4)(cid:82)(cid:73)(cid:73)(cid:72)(cid:87)(cid:4)(cid:73)(cid:90)(cid:83)(cid:80)(cid:90)(cid:73)(cid:18)
BUSINESS & FINANCIAL HIGHLIGHTS
• 2018 net income of $35.3 million
• 2018 diluted earnings per share of $2.93
• R(cid:73)(cid:90)(cid:73)(cid:82)(cid:89)(cid:73)(cid:4)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:4)(cid:69)(cid:88)(cid:4)(cid:69)(cid:4)(cid:25)(cid:17)(cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:39)(cid:37)(cid:43)(cid:54)(cid:4)(cid:83)(cid:74)(cid:4)(cid:21)(cid:22)(cid:18)(cid:24)(cid:9)(cid:16)(cid:4)(cid:74)(cid:86)(cid:83)(cid:81)(cid:4)(cid:8)(cid:21)(cid:27)(cid:20)(cid:18)(cid:26)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:23)(cid:4)(cid:88)(cid:83)(cid:4)(cid:8)(cid:23)(cid:20)(cid:26)(cid:18)(cid:27)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:28)
• (cid:37)(cid:75)(cid:75)(cid:86)(cid:73)(cid:75)(cid:69)(cid:88)(cid:73)(cid:4)(cid:86)(cid:73)(cid:71)(cid:73)(cid:77)(cid:90)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)(cid:4)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:4)(cid:69)(cid:88)(cid:4)(cid:69)(cid:4)(cid:25)(cid:17)(cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:39)(cid:37)(cid:43)(cid:54)(cid:4)(cid:83)(cid:74)(cid:4)(cid:21)(cid:21)(cid:18)(cid:23)(cid:9)(cid:16)(cid:4)(cid:74)(cid:86)(cid:83)(cid:81)(cid:4)(cid:8)(cid:25)(cid:24)(cid:24)(cid:18)(cid:27)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:23)(cid:4)(cid:88)(cid:83)(cid:4)(cid:8)(cid:29)(cid:23)(cid:22)(cid:18)(cid:22)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:28)
Annual Report on Form 10-K
for the Year Ended December 31, 2018
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2018
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
to
Commission File Number: 001-35477
Regional Management Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
979 Batesville Road, Suite B
Greer, South Carolina
(Address of principal executive offices)
57-0847115
(I.R.S. Employer
Identification No.)
29651
(Zip Code)
(864) 448-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.10 par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ‘
Non-accelerated filer ‘
È
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
As of June 29, 2018 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate
market value of the common stock held by non-affiliates of the registrant was $345,188,148 based upon the closing sale price
as reported on the New York Stock Exchange. See Part II, Item 5 of this Annual Report on Form 10-K for additional
information.
As of March 7, 2019, there were 11,828,806 shares of the registrant’s common stock outstanding.
Documents Incorporated by Reference
Certain information required by Part III of this Annual Report on Form 10-K is incorporated herein by reference to the Proxy
Statement for the registrant’s 2019 Annual Meeting of Stockholders, which is expected to be filed pursuant to Regulation 14A
within 120 days after the end of the registrant’s fiscal year ended December 31, 2018.
REGIONAL MANAGEMENT CORP.
ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended December 31, 2018
TABLE OF CONTENTS
Forward-Looking Statements
Business
ITEM 1.
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART I
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
ITEM 6.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
ITEM 8.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9.
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14.
Principal Accounting Fees and Services
ITEM 15. Exhibits, Financial Statement Schedules
ITEM 16.
Signatures
Form 10-K Summary
PART IV
Page
1
2
16
44
44
44
44
45
47
48
73
74
109
109
110
111
111
111
111
111
112
119
120
F
o
r
m
1
0
-
K
FORWARD-LOOKING STATEMENTS
Each of the terms “Regional,” the “Company,” “we,” “us,” and “our” as used herein refers collectively
to Regional Management Corp. and its wholly-owned subsidiaries, unless otherwise stated.
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, certain
statements and disclosures contained in Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors,” and Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These
forward-looking statements include, but are not limited to, statements about 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, plans and
objectives of management, representations, and contentions, and are not historical facts. Forward-looking
statements typically are identified by the use of terms such as “may,” “will,” “should,” “could,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and similar words, although
some forward-looking statements are expressed differently. 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. The forward-looking statements included herein reflect and contain management’s
current judgment, and 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. We do not intend to update any of these forward-looking statements or publicly
announce the results of or any revisions to these forward-looking statements, other than as is required under the
federal securities laws.
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to,
our audited consolidated financial statements, including the notes thereto.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 1
ITEM 1. BUSINESS.
Overview
PART I
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.
We operate under the name “Regional Finance” in 359 branch locations across 11 states in the Southeastern,
Southwestern, Mid-Atlantic, and Midwestern United States, serving 401,500 active accounts, as of December 31,
2018. 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 multiple channel platform, which includes our branches, centrally-managed direct mail campaigns,
digital partners, retailers, 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. This provides us with frequent
in-person 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 small, large, and retail installment loans. Our small loans and large loans are our core
loan products and will be the drivers of our future growth.
•
Small Loans – We offer small installment loans with cash proceeds to the customer ranging from $500
to $2,500, with terms of up to 48 months. Our small loans are typically secured by non-essential
household goods and/or, to a lesser extent, a lien on a vehicle, which may be an automobile,
motorcycle, boat, or all-terrain vehicle. As of December 31, 2018, we had 276,800 small loans
outstanding representing $437.7 million in finance receivables, or an average of approximately $1,600
per loan. In 2018, 2017, and 2016, interest and fee income from small loans contributed $156.6 million,
$150.1 million, and $142.1 million, respectively, to our total revenue.
• Large Loans – We offer large installment loans with cash proceeds to the customer generally ranging
from $2,501 to $12,000, with terms of between 18 and 60 months. Our large loans are typically secured
by non-essential household goods and/or a vehicle. As of December 31, 2018, we had 99,800 large
loans outstanding representing $438.0 million in finance receivables, or an average of approximately
$4,400 per loan. In 2018, 2017, and 2016, interest and fee income from large loans contributed
$111.1 million, $80.3 million, and $55.0 million, respectively, to our total revenue.
• Retail Loans – We offer indirect retail loans of up to $7,500, with terms of between 6 and 48 months,
which are secured by the purchased items. These loans are offered at the point of sale through a
network of retailers within and, to a limited extent, outside of our branch footprint. As of December 31,
2018, we had 21,200 retail loans outstanding representing $30.4 million in finance receivables, or an
average of approximately $1,400 per loan. In 2018, 2017, and 2016, interest and fee income from retail
loans contributed $5.9 million, $5.9 million, and $5.8 million, respectively, to our total revenue.
• Optional Payment and Collateral Protection Insurance Products – We offer our customers optional
payment and collateral protection insurance relating to many of our loan products. In 2018, 2017, and
2016, insurance income, net contributed $14.8 million, $13.1 million, and $9.5 million, respectively, to
our total revenue.
Through November 2017, we also offered direct and indirect automobile purchase loans of up to $27,500.
We ceased originating automobile loans in November 2017, but we continue to own and service the automobile
loans that we previously originated. As of December 31, 2018, we had 3,700 automobile loans outstanding
representing $26.2 million in finance receivables, or an average of approximately $7,100 per loan. In 2018, 2017,
and 2016, interest and fee income from automobile loans contributed $6.4 million, $12.8 million, and
$18.1 million, respectively, to our total revenue.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 2
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Our Industry, Customers, and Purpose
We operate in the consumer finance industry, in which consumers are generally described as super-prime
(most creditworthy), prime, near-prime, non-prime, subprime, or deep-subprime (least creditworthy). Our
customers typically have less-than-perfect credit profiles and, for that reason, are generally considered subprime,
non-prime, or near-prime consumers. As a result, our customers often do not qualify for prime financing from
banks, thrifts, credit card providers, and other lenders. However, like prime consumers, our customers have a
need and a desire to utilize credit.
Notwithstanding that many lenders are unwilling to serve our customers, we believe that responsible,
transparent, and fairly-priced credit products should be made available to our customers. We exist to serve that
purpose. Accordingly, we offer our customers access to credit through our affordable, easy-to-understand small
loan, large loan, and retail loan products, which we price on fair terms in consideration of the associated credit
risk and servicing costs.
The average annual percentage rate (“APR”) of our small loans originated in 2018 was 44.4%. Our large
loans, which are reserved for higher credit quality customers who meet more stringent underwriting requirements
than those applied to small loan applicants, had an average APR of 30.0% for loans originated in 2018. We
believe that the rates on our products are significantly more attractive than many other credit options available to
our customers, such as payday, pawn, and title loans, which often come with APRs over 300%. Our loans are
also safer and more favorably structured than loans offered by alternative financial service providers. We
underwrite our loans based on an applicant’s ability to repay, whereas payday, pawn, and title loans are typically
underwritten based on an ability to collect, either through access to the borrower’s bank account or by
repossession and sale of collateral. We also structure our loans on a fixed rate, fixed term basis with fully
amortizing equal monthly installment payments that are designed to be affordable for our customers and made
over an average term of 21 months for small loans and 43 months for large loans (based on loans originated in
2018). By comparison, payday, pawn, and title loans typically have balloon payments following short terms of 14
to 60 days.
Importantly, we further differentiate ourselves from alternative financial service providers by reporting our
customers’ payment performance to credit bureaus. This practice provides our customers with the opportunity to
improve their credit profile by establishing a responsible payment history with us and, ultimately, to gain access
to a wider range of credit options, including our own. For example, in 2018, we worked with many of our
deserving customers to refinance nearly 12,000 of our customers’ small loans into large loans, representing more
than $53 million in finance receivables at origination, and resulting in a decrease in these customers’ average
APR from 44.1% to 31.8%. We also believe that over time many of our customers transition away from our
company to prime sources of credit.
Our diversity of loan products with competitive, safe, and transparent pricing and terms, combined with the
opportunity for our customers to improve their credit history and profile, distinguishes us in the consumer
finance market, provides us with a competitive advantage, and allows us to serve an important purpose that is
mutually beneficial to our customers, communities, employees, and stockholders.
Our Business Model
Multiple Channel Platform. Our multiple channel platform, which includes our branches, direct mail
campaigns, digital partners, retailers, and our consumer website, enables us to offer a range of loan products to
new, existing, and former customers throughout our markets. We began building our branch network over 30
years ago and have expanded the network to 359 branches as of December 31, 2018. Our branch personnel
market our products in a number of ways, including through a merchant referral program, customer referrals,
direct telephone and mail solicitations of current and former customers, and by leveraging our direct mail
program. Our direct mail campaigns include pre-screened convenience check mailings and mailings of
Regional Management Corp. | 2018 Annual Report on Form 10-K | 3
pre-qualified offers and invitations to apply, which enable us to market our products to millions of current and
potential customers in a cost-effective manner. We have also developed our consumer website and partnered with
digital lead generation sources to promote our products and facilitate loan applications via the internet. Finally,
we have relationships with retailers that offer our retail loans in their stores at the point of sale. We believe that
our multiple channel platform provides us with a competitive advantage by giving us broad access to our existing
and former customers and multiple avenues to attract new customers.
Attractive Products for Customers with Limited Access to Credit. Our flexible loan products, generally
ranging from $500 to $12,000 with terms of up to 60 months, are competitively priced, easy to understand, and
incorporate features designed to meet the varied financial needs and credit profiles of a broad range of
consumers. This product diversity distinguishes us from monoline competitors and provides us with the ability to
offer our customers new loan products as their credit profiles evolve, building customer loyalty and increasing
the overall value of customer relationships.
Integrated Branch Model. Our branch network serves as the foundation of our multiple channel platform
and the primary point of contact with our customers. Nearly 80% of our loan originations in 2018 occurred in one
of our branch locations, and nearly all loans, regardless of origination channel, are serviced through our branches,
allowing us to maintain frequent, in-person contact with our customers. By integrating loan origination and loan
servicing at the branch level, our employees are able to maintain a relationship with our customers throughout the
life of a loan. We believe this frequent-contact, relationship-driven lending model provides greater insight into
potential payment difficulties, reduces credit risk, and allows us to assess the borrowing needs of our customers,
better enabling us to offer them new loan products as their credit profiles and needs evolve.
Consistent Portfolio Performance. Over the past several years, we have sharpened our focus on credit
quality by investing in highly-qualified personnel, refining underwriting practices, developing custom credit
scorecards, streamlining procedures, automating underwriting decisions, and improving reporting capabilities, all
of which allow us to better control the credit quality of our portfolio, maintain compliance with evolving state
and federal law, and react quickly whenever market dynamics may change. We have also expanded our
centralized collections department and provided our branches with improved collections tools, training, and
incentives. As a result of these efforts and practices, between 2015 and 2018, we reported annual net credit loss
rates in a relatively narrow band of 8.8% to 9.4% of average finance receivables.
Demonstrated Organic Growth. We have grown our total finance receivables by 70.7%, from
$546.2 million at December 31, 2014 to $932.2 million at December 31, 2018, a compound annual growth rate
(“CAGR”) of 14.3%. More importantly, we have grown our core small loan and large loan finance receivables by
139.5%, from $365.7 million at December 31, 2014 to $875.7 million at December 31, 2018, a CAGR of 24.4%.
This receivables growth has driven a revenue increase of 49.8%, from $204.7 million in 2014 to $306.7 million
in 2018, a CAGR of 10.6%. Our portfolio growth has come from expanding our branch network, growing our
finance receivable portfolios within existing branches, and developing new products and channels, including
through digital lead generation. From 2014 to 2018, we grew our year-end branch count from 300 branches to
359 branches. We opened a net 17 new branches in 2018, and we have also grown our existing branch revenues.
Historically, our branches have rapidly increased their outstanding finance receivables during the early years of
operations and generally achieved profitability within one year of opening.
Experienced Management Team. Our executive and senior operations management teams consist of
individuals experienced in installment lending and other consumer finance services. Both our Chief Executive
Officer and our Chief Operating Officer have nearly 30 years of experience in consumer financial services, and
our Chief Risk Officer has over 20 years of financial and consumer lending experience, including expertise in
credit risk management. As of December 31, 2018, our state operations vice presidents averaged nearly 28 years
of industry experience and more than 8 years of service at Regional, while our district supervisors averaged
nearly 21 years of industry experience and more than 6 years of service with Regional. Our executive and senior
operations management team members intend to leverage their experience and expertise in consumer lending to
grow our business, deliver high-quality service to our customers, and carefully manage our credit risk.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 4
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Our Strategies
Grow Our Branch Network. We intend to continue to grow the receivables, revenue, and profitability of
our existing branches, to open new branches within our existing geographic footprint, and to expand our
operations into new states. Establishing local contact with our customers through our branch network is key to
our frequent-contact, relationship-driven lending model. We believe that there remains substantial opportunity to
grow the finance receivable portfolios of our existing branches by continuing our focus on large loan originations
and by cross-selling new loan products to our existing customers, including those customers with retail loans and
automobile loans. In addition, from 2014 to 2018, we opened or acquired a net 59 new branches, and in 2018, we
opened our first branches in Missouri and Wisconsin. We expect that as our newer branches mature, their
revenue will grow faster than our overall same-store revenue growth rate. We believe there is sufficient demand
for consumer finance services to continue new branch openings in certain of the states where we currently
operate, allowing us to capitalize on our existing infrastructure and experience in these markets. We also intend
to explore opportunities for growth in several states outside of our existing geographic footprint that enjoy
favorable operating environments. Our competitors operate in as many as 44 states.
Leverage Our Direct Mail Capabilities. Direct mail campaigns are launched throughout the year, but are
weighted to coincide with seasonal consumer demand. In addition, we mail convenience checks in new markets
as soon as new branches are open, which develops a customer base and builds finance receivables for these new
branches. In 2018, we mailed 6.6 million convenience checks, 1.4 million pre-qualified loan offers, and
2.2 million invitations to apply. Moving forward, we plan to continue to invest in and to improve the targeting
criteria, offer strategies, and testing protocols of our direct mail campaigns, which we believe will enable us to
efficiently grow our receivables with improved credit performance. We expect that these efforts will allow us to
increase volume at our branches by adding new customers, recapturing former customers, and creating
opportunities to offer new loan products to our existing customers.
Expand Our Digital Presence. In order to better serve and attract customers who prefer to conduct
business digitally, we make an online loan application available on our consumer website, generate customer
leads through digital partners, and provide our customers with online account management capabilities.
Throughout 2018, we continued to grow our digital acquisition channel, more than tripling our investment from
2017 to 2018. This investment enabled us to increase our digitally-sourced loan originations by nearly 130%
year-over-year and to grow the percentage of new customers generated through this channel to more than 15% of
all new small and large loan customers in 2018. We also continued to enhance and promote our online account
management tools that enable customers to make payments and manage their accounts online. In 2019, we expect
to continue to invest in the digital channel, thereby adding capabilities, improving efficiencies, enhancing the
customer experience, and testing new mechanisms for lead generation to further diversify and expand our new
business acquisition mechanisms.
Maintain Sound Underwriting and Credit Control. Since 2015, we have invested heavily in our credit and
collections functions. We plan to continue to do so in the future by maintaining highly-qualified employees
dedicated to managing credit risk, refining our underwriting models, and improving our collection efforts,
through both our branch operations and our centralized collections department. In early 2018, we completed the
implementation of our new loan origination and servicing software platform, which allows us to automate our
underwriting decisions, among other benefits. In addition, in the second half of 2018, we began to integrate
custom credit models into our automated underwriting processes. We expect to complete the rollout of our
custom credit models to all of our states in 2019, with the benefit of such models expected to begin impacting our
results in late 2019 and 2020. Through these efforts and others, we plan to continue to carefully manage our
credit exposure as we grow our business, offer new products, and enter new markets.
Carefully Manage Our G&A Expenses. We have made significant investments in our business over the
past several years, including by increasing our marketing spend to drive new business, expanding our branch
network, hiring operations employees to service our growing finance receivable portfolio, and improving our
Regional Management Corp. | 2018 Annual Report on Form 10-K | 5
credit and information technology capabilities. However, during that time, we also remained keenly focused on
driving operating leverage through the prudent management of our expenses. Between 2015 and 2018, our
general and administrative expenses as a percentage of average finance receivables decreased from 20.2% to
16.4%. As we grow our business, we will remain vigilant in our management of general and administrative
expenses, with the goal of causing such expenses to decrease as a percentage of average finance receivables over
time.
Our Loan Products
We offer small, large, and retail installment loans to our customers. Our underwriting standards focus on
our customers’ ability to affordably make loan payments out of their discretionary income, with the value of
pledged collateral serving as a credit enhancement rather than the primary underwriting criterion. The interest
rates, fees and other charges, maximum principal amounts, and maturities for our loans vary from state to state,
depending on the competitive environment and relevant laws and regulations.
Small loans and large loans are closed in our branch network or originated through our convenience check
direct mail campaigns. Our convenience check direct mail loan offers enable prospective customers to enter into
a loan with us by cashing or depositing the check attached to the loan offer, thereby agreeing to the terms of the
loan as prominently set forth on the check and accompanying disclosures. When a customer enters into a loan by
cashing or depositing the convenience check, our personnel gather additional information on the borrower to
assist in servicing the loan. Our retail loans are indirect installment loans structured as retail installment sales
contracts. Retail loans are made through a retailer at the point of sale without the need for the customer to visit
one of our branches. Our customers use our retail loans to finance the purchase of furniture, appliances, and other
retail products. The vast majority of our retail loans are originated inside of our eleven-state brick-and-mortar
footprint, but on a limited basis, we offer retail loans in states outside of our footprint. The servicing of nearly all
retail loans is performed within our branches, with only out-of-footprint retail loans being serviced centrally from
our headquarters in South Carolina.
For loans originated in our branch network, we consider numerous factors in evaluating a potential
customer’s creditworthiness, such as unencumbered income, debt-to-income ratios, length of current
employment, duration of residence, and a credit report detailing the applicant’s credit history. Our loan
origination and servicing software platform guides our branch personnel through the credit application process
and automates much of the underwriting, with underwriting exceptions generally subject to review and approval
by a senior operations or centralized underwriting team member. For retail loans, our retail partners typically
submit credit applications to us online while the customer waits in the retailer’s store. Underwriting for our retail
loans is conducted by our centralized underwriting team using standards substantially similar to our branch small
loan and large loan underwriting guidelines. Our retail loan credit decisions generally are provided to the retailer
within ten minutes of our receipt of the application. For convenience check loans, each prospect that we solicit
has been pre-screened through a major credit bureau against our underwriting criteria, which includes an
evaluation of the recipient’s credit score, bankruptcy history, and a number of additional credit attributes relevant
to the recipient’s likely ability and willingness to repay the offered convenience check loan.
Loan renewals are also an important part of our business. Our customers use renewals to extend and
expand their lending relationships with us. We generally offer loan renewals to existing customers who have
demonstrated an ability and willingness to repay amounts owed to us. Renewals typically refinance one or more
of a customer’s loans into a single new loan, which in some cases will be for a larger principal balance than the
customer’s original loan, though we permit renewals of existing loans at or below the original loan amount. In
evaluating a loan for renewal, in addition to our standard underwriting requirements, we are able to take into
consideration the customer’s prior payment performance with us, which we believe is a very strong indicator of
the customer’s future credit performance. In 2018, renewals of loans in an amount greater than the original loan
amount represented 47% of our loan originations and renewals of loans at or below the original loan amount
represented 19% of our loan originations.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 6
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Small Loans. In 2018, the average originated net loan size and term for our small loans were $1,831 and
21 months, respectively. The average yield we earned on our portfolio of small loans was 40.0% in 2018. The
following table sets forth the distribution of our small loan finance receivable portfolio by state as of the dates
indicated.
At December 31,
2014
2015
2016
2017
2018
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29% 31% 32% 34% 34%
25% 23% 20% 17% 16%
15% 15% 15% 14% 15%
13% 13% 14% 14% 13%
18% 18% 19% 21% 22%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100% 100% 100%
The following table sets forth the total number of small loans, total small loan finance receivables, and
average size per loan by state as of December 31, 2018.
Number
of Loans
Finance
Receivables
Average Size
Per Loan
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,416
40,918
40,212
32,738
62,475
(In thousands)
$154,821
68,169
64,013
54,987
95,672
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,759
$437,662
$1,542
1,666
1,592
1,680
1,531
$1,581
Large Loans. In 2018, our average originated net loan size and term for large loans were $5,015 and 43
months, respectively. The average yield we earned on our portfolio of large loans was 28.5% for 2018. The
following table sets forth the distribution of our large loan finance receivable portfolio by state as of the dates
indicated.
At December 31,
2014
2015
2016
2017
2018
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10% 22% 22% 24% 27%
25% 22% 20% 19% 21%
27% 18% 21% 19% 16%
26% 17% 14% 12% 11%
12% 21% 23% 26% 25%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100% 100% 100%
Regional Management Corp. | 2018 Annual Report on Form 10-K | 7
The following table sets forth the total number of large loans, total large loan finance receivables, and
average size per loan by state as of December 31, 2018.
Number
of Loans
Finance
Receivables
Average Size
Per Loan
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,297
19,010
17,165
10,633
24,692
(In thousands)
$116,355
92,297
70,721
47,591
111,034
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99,797
$437,998
$4,112
4,855
4,120
4,476
4,497
$4,389
Retail Loans. In 2018, our average originated net loan size and term for retail loans were $1,994 and 28
months, respectively. The average yield we earned on our portfolio of retail loans was 19.0% for 2018. The
following table sets forth the distribution of our retail loan finance receivable portfolio by state as of the dates
indicated.
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62% 69% 73% 75% 72%
9%
8%
14% 10%
7%
6%
6%
8%
17% 13% 13% 13% 13%
7%
5%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100% 100% 100%
At December 31,
2014
2015
2016
2017
2018
The following table sets forth the total number of retail loans, total retail loan finance receivables, and
average size per loan by state as of December 31, 2018.
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,482
1,840
1,303
2,609
(In thousands)
22,149
2,611
1,850
3,819
1,431
1,419
1,420
1,464
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,234
$30,429
$1,433
Number
of Loans
Finance
Receivables
Average Size
Per Loan
Our Insurance and Ancillary Products
We also offer our customers various optional payment and collateral protection insurance products as a
complement to our lending operations. Our primary insurance products include optional credit life insurance,
accident and health insurance, involuntary unemployment insurance, and personal property insurance. These
insurance products are optional and not a condition of the loan, and we do not sell insurance to non-borrowers.
Our insurance products, including the types of products offered and their terms and conditions, vary from state to
state in compliance with applicable laws and regulations. Insurance policy premiums, claims, and expenses are
included in the company’s results of operations as insurance income, net in the consolidated statements of
income. In 2018, insurance income, net was $14.8 million, or 4.8% of our total revenue.
Credit life insurance provides for the payment in full of the borrower’s credit obligation to the lender in the
event of the borrower’s death and, in some states, may provide a payment to a secondary beneficiary listed by the
Regional Management Corp. | 2018 Annual Report on Form 10-K | 8
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borrower. Credit accident and health insurance provides for the repayment of certain loan installments to the
lender that come due during an insured’s period of income interruption resulting from disability from illness or
injury. Credit involuntary unemployment insurance provides for repayment of certain loan installments in the
event that the borrower is no longer employed as the result of a qualifying event, such as a layoff or reduction in
workforce. Credit personal property insurance provides for payment following accidental loss of or damage to
personal property collateral resulting from certain casualty events. We require that customers maintain property
insurance on any personal property securing loans and offer customers the option of providing proof of such
insurance purchased from a third party (such as homeowners or renters insurance) in lieu of purchasing property
insurance from us. We also require proof of insurance on any vehicles securing loans, and in select markets, we
offer vehicle single interest insurance on vehicles used as collateral on small and large loans.
All customers purchasing these types of insurance from us are required to sign multiple statements
affirming that they understand that their purchase of insurance is optional and not a condition of the loan. In
addition, a customer may cancel purchased insurance at any time during the life of the loan, including in
connection with an early payoff or loan refinancing. Customers who cancel within thirty (30) days of the date of
purchase receive a full refund of the insurance premium, and customers who cancel thereafter receive a refund of
the unearned portion of the insurance premium.
Apart from the various optional payment and collateral protection insurance products that we offer to our
customers, on certain loans, we also collect a fee from our customers and, in turn, purchase non-file insurance
from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our security interest in
personal property collateral. Non-file insurance protects 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 (for example, in certain instances where a customer files for bankruptcy). In such circumstances,
non-file insurance generally will pay to us an amount equal to the lesser of the loan balance or the collateral
value, with such claims payment lowering our net credit losses.
We market and sell insurance policies as an agent of an unaffiliated insurance company, within the
limitations established by our agency contracts with the unaffiliated insurance company. We then remit to the
unaffiliated insurance company the premiums we collect, net of refunds on prepaid loans and net of commission
on new business. The unaffiliated insurance company then cedes to our wholly-owned insurance subsidiary,
RMC Reinsurance, Ltd., the net insurance premium revenue and the associated insurance claims liability for all
insurance products, including the non-file insurance that we purchase. Life insurance premiums are ceded as
written, and non-life insurance premiums are ceded as earned. In accepting the premium revenue and associated
claims liability, RMC Reinsurance, Ltd. acts as reinsurer for all insurance products that we sell to our customers
and for the non-file insurance that we purchase. RMC Reinsurance, Ltd. pays the unaffiliated insurance company
a ceding fee for the continued administration of all insurance products.
In addition, in select states, we offer an “Auto Plus Plan” auto club product that is administered and
serviced through a third-party provider. The product generally provides certain automobile, home, travel, and
other services and benefits to customers, including emergency towing and roadside assistance, emergency
locksmith service, automobile repair reimbursement, stolen car expense benefit, automobile insurance deductible
reimbursement, limited legal services, and various travel and other discounts. As with the optional insurance
products that we offer, any customer purchasing an Auto Plus Plan acknowledges that the purchase is optional
and not a condition of the loan and that the plan may be cancelled within 30 days for a full refund.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 9
Our Branches
Our branches are generally located in visible, high-traffic locations, such as shopping centers. We believe
that our branches have an open, welcoming, and hospitable layout. In evaluating whether to locate a branch in a
particular community, we examine several factors, including the demographic profile of the community,
demonstrated demand for consumer finance, the regulatory and political climate, and the availability of suitable
employees to staff, manage, and supervise the new branch.
The following table sets forth the number of branches as of the dates indicated:
At December 31,
2014
2015
2016
2017
2018
83
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
300
98
72
50
36
28
21
1
18
—
7
—
331
98
72
49
36
28
21
8
19
—
8
—
339
98
68
47
37
28
21
17
18
—
8
—
342
103
67
46
36
28
23
18
17
9
8
4
359
The following table sets forth the average finance receivables per branch based on maturity, excluding
acquired branches:
Age of Branch
(As of December 31, 2018)
Branches open less than one year . . . . .
Branches open one to three years . . . . .
Branches open three to five years . . . . .
Branches open five years or more . . . . .
Average Finance
Receivables Per
Branch as of
December 31, 2018
(In thousands)
$ 843
$2,158
$2,623
$2,792
Percentage Increase
From Prior Age
Category
Number of
Branches
—
156.0%
21.5%
6.4%
22
28
56
253
The average contribution to operating income from our branches has historically increased as our branches
mature. The following table sets forth the average operating income contribution per branch for the year ended
December 31, 2018, based on maturity of the branch, excluding acquired branches.
Age of Branch
(As of December 31, 2018)
Average Branch
Operating Income (Loss)
Contribution
Percentage Increase
From Prior Age
Category
Number of
Branches
Branches open less than one year
. . .
Branches open one to three years . . . .
Branches open three to five years . . .
Branches open five years or more . . .
(In thousands)
$ (12)
$137
$309
$407
—
1,241.7%
125.5%
31.7%
22
28
56
253
We calculate the average branch contribution as total revenues generated by the branch less the expenses
directly attributable to the branch, including the provision for losses and operating expenses, such as personnel,
lease, and interest expenses. General corporate overhead, including management salaries, is not attributed to any
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individual branch. Accordingly, the sum of branch contributions from all of our branches is greater than our
income before taxes.
Employees and Training
As of December 31, 2018, we had 1,535 employees. New employees must complete a comprehensive
training curriculum that focuses on the company- and position-specific competencies needed to be successful.
The training includes a blended approach utilizing eLearning modules, hands-on exercises, webinars, and
assessments. Training content is focused on our operating policies and procedures, as well as several key
compliance areas. Incentive compensation for new employees is contingent upon the successful and timely
completion of the required new hire training curriculum. All current employees are also required to complete
annual compliance training and re-certification. Additional management and developmental training is provided
for those employees seeking to advance within our company.
Payment and Loan Servicing
We have implemented company-wide payment and loan servicing policies and procedures, which are
designed to maintain consistent portfolio performance and to ensure regulatory compliance. Our district
supervisors, state vice presidents, and compliance and internal audit teams regularly review servicing and
collection records to ensure compliance with our policies and procedures. Our centralized management
information system enables regular monitoring of branch portfolio metrics by management, and the
compensation opportunities of our operations employees and senior management have a significant performance
component that is closely tied to credit quality, among other defined performance targets.
The responsibility for the servicing and collection of each loan generally rests with the originating branch.
Borrowers who have signed up for online account access have on-demand access to their account information
through Regional’s website. In addition, borrowers may elect to receive automated, one-way text messages with
information regarding their account, including payment reminders. Borrowers have the option of making
payments (i) in person at a branch where they may pay by cash, check, money order, debit card, or immediate,
one-time future, or recurring ACH, (ii) through our customer portal via debit card or immediate, one-time future,
or recurring ACH, or (iii) by immediate or one-time future debit card or ACH over the phone. In the fourth
quarter of 2018, more than half of customer payments were made by debit card or ACH.
If a loan becomes severely delinquent, a branch may receive co-collection assistance from our centralized
servicing facility. Our philosophy is to work with customers experiencing payment difficulties. If a customer is
unable to make the required payments to bring his or her loan current, acceptable solutions to remedy a past due
loan may include deferment of a payment, loan renewal, or settlement. All solutions are intended to enable the
customer to meet his or her current and future obligations in a manner that we believe will mitigate our risk,
while also complying with state and federal laws and regulations, as well as our policies and procedures.
Customers are limited to two deferrals in a rolling twelve-month period unless it is determined that an
exception is warranted (e.g. following a natural disaster). We generally limit the refinancing of delinquent loans
to those customers who have made recent payments and for whom we have verified current employment, and we
do not charge any origination fees on the refinancing of a delinquent loan. We believe that refinancing delinquent
loans for certain deserving customers who have made periodic payments allows us to help customers resolve
temporary financial setbacks and repair or sustain their credit. During 2018, we refinanced approximately
$26.5 million of loans that were 60 or more days contractually past due, representing approximately 2.5% of our
total loan originations in 2018. As of December 31, 2018, the outstanding balance of such refinanced loans was
$33.8 million, or 3.6% of finance receivables as of such date. We may also agree to settle a past due loan by
accepting less than the full principal balance owed. A settlement is only used in certain limited cases and is only
offered once we have determined that we are unlikely to collect the entire outstanding balance of the loan.
For seriously delinquent accounts, we may seek legal judgments or pursue repossession of collateral. We
typically initiate repossession efforts only when we have exhausted other means of collection and, in the opinion
Regional Management Corp. | 2018 Annual Report on Form 10-K | 11
of management, the customer is unlikely to make further payments. We sell substantially all repossessed
collateral through sales conducted by independent auction organizations, after the required post-repossession
waiting period. Generally, we charge off loans during the month that the loan becomes 180 days contractually
delinquent. Non-titled accounts in a confirmed Chapter 7 or Chapter 13 bankruptcy are charged off at 60 days
contractually delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month
following the proper notification of passing, with the exception of borrowers with credit life insurance. We sell
most of our charged-off accounts to third-party debt buyers.
Information Technology
In 2016, we entered into an agreement with Nortridge Software, LLC (“Nortridge”) to transition to the
Nortridge loan origination and servicing platform. From January 2016 to February 2018, we conducted a
state-by-state phased implementation of the Nortridge platform in each of our states of operation. As of February
2018, all of our branches operate using the Nortridge platform. Prior to our use of Nortridge, we serviced our
loan portfolio using a software package developed and owned by ParaData Financial Systems.
We utilize the Nortridge platform both to originate loans and to service our loan portfolio, and we have
invested in customizing the Nortridge platform to meet our needs based upon our specific products, processes,
and reporting requirements. The Nortridge custom decision engine utilizes application information and a credit
report detailing the applicant’s credit history to generate an initial credit decision and to guide our branch
employees through the loan origination process to the final credit decision. Throughout the life of the loan, our
employees utilize Nortridge to, among other things, enter payments, generate collection queues, and log
collection activity. Nortridge also facilitates electronic and recurring payments, automated text messaging, and
customer account access through a customer portal. Nortridge logs and maintains, within our centralized
information systems, a permanent record of the loan origination and servicing approvals and processes, and
permits all levels of branch and centralized management to review the individual and collective performance of
all branches for which they are responsible on a daily basis.
We intend to continue to enhance the Nortridge platform to further leverage its capabilities and to meet our
evolving needs. In addition, we rely on Teledata Communications Inc. and other third-party software vendors to
provide access to credit applications.
Competition
The consumer finance industry is highly fragmented, with numerous competitors. The competition we face
for each of our loan products is distinct.
Small and Large Loans. We compete with several national companies operating greater than 800 branch
locations each, as well as a handful of smaller, regionally-focused companies with between 100 and 300 branches
in certain of the states in which we operate. We believe that the majority of our competitors are independent
operators with generally less than 100 branches. We believe that competition between installment consumer loan
companies occurs primarily on the basis of price, breadth of loan product offerings, flexibility of loan terms
offered, and the quality of customer service provided. While underbanked customers may also use alternative
financial services providers, such as title lenders, payday lenders, and pawn shops, their products offer different
terms and typically carry substantially higher interest rates and fees than our installment loans. Accordingly, we
believe that alternative financial services providers are not an attractive option for customers who meet our
underwriting standards, which are generally stricter than the underwriting standards of alternative financial
services providers. Our small and large loans also compete with pure online lenders, peer-to-peer lenders, and
issuers of non-prime credit cards.
Retail Loans. In recent years, the retail loan industry has seen an increasing number of lenders enter the
market that are dedicated to originating non-prime retail loans. We also face competition from rent-to-own
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financing, leasing, and credit card companies. Our retail loans are typically made at competitive rates, and
competition is largely on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan
terms offered, the speed of approval, and the quality of customer service provided. Point-of-sale financing
decisions must be made rapidly while the customer is on the sales floor. We endeavor to provide responses to
customers in less than ten minutes, and we staff our centralized retail loan underwriting team with multiple shifts
seven days per week during peak retail shopping hours to ensure rapid response times.
Seasonality
Our loan volume and contractual delinquency follow seasonal trends. Demand for our small and large
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. With the exception of retail
loans, 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 quarter of the year and
rise throughout the remainder of the fiscal year. Consequently, we experience seasonal fluctuations in our
operating results and cash needs.
Government Regulation
Consumer finance companies are subject to extensive regulation, supervision, and licensing under various
federal, state, and local statutes, regulations, and ordinances. Many of these laws impose detailed constraints on
the terms of our loans and the retail installment sales contracts that we purchase, the lending forms that we
utilize, and our operations. The software that we use to originate loans is designed in part to aid in compliance
with all applicable lending laws and regulations.
State Lending Regulation. We are regulated by state agencies that regularly audit our branches and
operations. In general, state statutes establish maximum loan amounts and interest rates, as well as the types and
maximum amounts of fees and insurance premiums that we may charge for both direct and indirect lending.
Specific allowable charges vary by state. In addition, state laws regulate the keeping of books and records and
other aspects of the operation of consumer finance companies, and state and federal laws regulate account
collection practices. State agency approval is required to open new branches, and each of our branches is
separately licensed under the laws of the state in which the branch is located. Licenses granted by the regulatory
agencies in these states are subject to renewal every year and may be revoked for failure to comply with
applicable state and federal laws and regulations. In the states in which we currently operate, licenses may be
revoked only after an administrative hearing. We believe we are in compliance with state laws and regulations
applicable to our lending operations in each state.
State Insurance Regulation. Premiums and charges for optional payment and collateral protection
insurance products are set at or below authorized statutory rates and are stated separately in our disclosures to
customers, as required by the federal Truth in Lending Act and by various applicable state laws. We are also
subject to state laws and regulations governing insurance agents in the states in which we sell insurance. State
insurance regulations require that insurance agents be licensed and limit the premium amount charged for such
insurance. Our captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos
Islands of the British West Indies, where the subsidiary is organized and domiciled.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). At the
federal level, Congress enacted comprehensive financial regulatory reform legislation in 2010. A significant
focus of the law, known as the Dodd-Frank Act, is heightened consumer protection. The Dodd-Frank Act
established the Consumer Financial Protection Bureau (the “CFPB”), which has regulatory, supervisory, and
enforcement powers over providers of consumer financial products and services, including explicit supervisory
authority to examine and require registration of non-depository lenders and to promulgate rules that can affect the
practices and activities of lenders.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 13
The Dodd-Frank Act and the regulations promulgated thereunder may affect our operations through
increased oversight of financial services products by the CFPB and the imposition of restrictions on the terms of
certain loans. The CFPB has significant authority to implement and enforce federal consumer finance laws,
including the protections established in the Dodd-Frank Act, as well as the authority to identify and prohibit
unfair, deceptive, and abusive acts and practices.
The Dodd-Frank Act also gives the CFPB the authority to examine and regulate large non-depository
financial companies and gives the CFPB authority over anyone deemed by rule to be a “larger participant of a
market for other consumer financial products or services.” The CFPB contemplates regulating the installment
lending industry as part of the “consumer credit and related activities” market. However, this so-called “larger
participant rule” will not impose substantive consumer protection requirements, but rather will provide to the
CFPB the authority to supervise larger participants in certain markets, including by requiring reports and
conducting examinations to ensure, among other things, that they are complying with existing federal consumer
financial law. While the CFPB has defined a “larger participant” standard for certain markets, such as the debt
collection, automobile finance, and consumer reporting markets, it has not yet acted to define “larger participant”
in the traditional installment lending market. If, in the future, a traditional installment lending “larger participant
rule” is promulgated by the CFPB, the rule would likely cover only the largest installment lenders, and we do not
yet know whether the definition of larger participant would cover us.
In addition to the grant of certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB
authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In
these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or
rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties. Also, where a
company has violated Title X of the Dodd-Frank Act or CFPB regulations thereunder, the Dodd-Frank Act
empowers state attorneys general and state regulators to bring civil actions to remedy violations of state law.
Other Federal Laws and Regulations. In addition to the Dodd-Frank Act and state and local laws,
regulations, and ordinances, numerous other federal laws and regulations affect our lending operations. These
laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Servicemembers Civil Relief Act, the Military Lending Act, the Gramm-Leach-Bliley Act, and in each case the
regulations thereunder, and the Federal Trade Commission’s Credit Practices Rule. These laws require us to
provide complete disclosure of the principal terms of each loan to the borrower prior to the consummation of the
loan transaction, prohibit misleading advertising, protect against discriminatory lending practices, govern the
manner in which we report customer information to consumer reporting agencies, govern the terms of loans to
servicemembers, and proscribe unfair credit practices.
•
Truth in Lending Act. Under the Truth in Lending Act and Regulation Z promulgated thereunder, we
must disclose certain material terms related to a credit transaction, including, but not limited to, the
annual percentage rate, finance charge, amount financed, total of payments, the number and amount of
payments, and payment due dates to repay the indebtedness.
• Equal Credit Opportunity Act. Under the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, we cannot discriminate against any credit applicant on the basis of any protected category,
such as race, color, religion, national origin, sex, marital status, or age. We are also required to make
certain disclosures regarding consumer rights and advise customers whose credit applications are not
approved of the reasons for the rejection.
• Fair Credit Reporting Act. Under the Fair Credit Reporting Act, we must provide certain information
to customers whose credit applications are not approved on the basis of a report obtained from a
consumer reporting agency, promptly update any credit information reported to a credit reporting
agency about a customer, and have a process by which customers may inquire about credit information
furnished by us to a consumer reporting agency.
•
Servicemembers Civil Relief Act. The Servicemembers Civil Relief Act is designed to ease legal and
financial burdens on military personnel and their families during active duty status. We may be
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required to reduce interest rates on “pre-service” debts incurred by servicemembers, and we may be
prohibited from pursuing certain forms of legal action against servicemembers, such as default
judgments, during periods of active duty.
• Military Lending Act. The Military Lending Act applies to active-duty servicemembers and their
covered dependents. We are prohibited from charging a borrower covered under the Military Lending
Act more than a 36% Military Annual Percentage Rate, which includes certain costs associated with
the loan in calculating the interest rate.
• Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, we must protect the confidentiality of
our customers’ non-public personal information and disclose information on our privacy policy and
practices, including with regard to the sharing of customers’ non-public personal information with third
parties. This disclosure must be made to customers at the time the customer relationship is established
and, in some cases, at least annually thereafter.
• Credit Practices Rule. The Federal Trade Commission’s Credit Practices Rule limits the types of
property we may accept as collateral to secure a consumer loan.
Violations of these statutes and regulations may result in actions for damages, claims for refund of
payments made, certain fines and penalties, injunctions against certain practices, and the potential forfeiture of
rights to repayment of loans. 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.”
Additional Information
Regional Management Corp. was incorporated in South Carolina on March 25, 1987, and converted into a
Delaware corporation on August 23, 2011. The Company’s principal internet address is
www.regionalmanagement.com. The Company provides its Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, and Current Reports on Form 8-K, and all amendments to those reports, free of charge on
www.regionalmanagement.com, as soon as reasonably practicable after they are electronically filed with, or
furnished to, the Securities and Exchange Commission. The Company’s consumer website is
www.regionalfinance.com. The information contained on, or that can be accessed through, the Company’s
websites is not incorporated by reference into this Annual Report on Form 10-K. The Company has included its
website addresses as factual references and does not intend the website addresses to be active links to such
websites.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 15
ITEM 1A. RISK FACTORS.
We operate in a rapidly changing environment that involves a number of risks, some of which are beyond
our control. The following discussion highlights some of the risks that may affect our future operating results.
These are the risks and uncertainties that we believe are the most important for you to consider, but the risks
described below are not the only risks facing our company. Additional risks and uncertainties not presently
known to us, that we currently deem immaterial, or that are similar to those faced by other companies in our
industry or in business in general, may also impair our business operations. If any of the following risks or
uncertainties occurs, continues, or worsens, our business, financial condition, and operating results would likely
suffer. You should carefully consider the risks described below together with the other information set forth in
this Annual Report on Form 10-K.
Risks Related to Our Business
We have grown significantly in recent years, and our delinquency, credit loss rates, and overall results
of operations may be adversely affected if we do not manage our growth effectively.
We have experienced substantial growth in recent years, opening a net 8 branches in 2016, a net 3 branches
in 2017, and a net 17 branches in 2018, and increasing the size of our finance receivable portfolio from
$628.4 million at the beginning of 2016 to $932.2 million at the end of 2018, a compound annual growth rate of
14.0%. We intend to continue our growth strategy in the future. As we increase the number of branches we
operate, we will be required to find new, or relocate existing, employees to operate our branches and allocate
resources to train and supervise those employees. The success of a branch depends significantly on the manager
overseeing its operations and on our ability to enforce our underwriting standards and implement controls over
branch operations. Recruiting suitable managers for new branches can be challenging, particularly in remote
areas and in areas where we face significant competition. Furthermore, the annual turnover rate among our
branch managers was approximately 21% in 2017 and 22% in 2018, and turnover rates of managers in our new
branches may be similar or higher. Increasing the number of branches that we operate may divide the attention of
our senior management or strain our ability to adapt our infrastructure and systems to accommodate our growth.
If we are unable to promote, relocate, or recruit suitable managers, oversee their activities effectively, maintain
our underwriting and loan servicing standards, and otherwise appropriately and effectively staff our branches, our
delinquency and credit loss rates may increase and our overall results of operations may be adversely impacted.
We face significant risks in implementing our growth strategy, some of which are outside of our control.
We intend to continue our growth strategy, which is based on opening and acquiring branches in existing
and new markets, introducing new products and channels, and increasing the finance receivable portfolios of our
existing branches. Our ability to execute this growth strategy is subject to significant risks, some of which are
beyond our control, including:
•
•
•
•
•
•
the inherent uncertainty regarding general economic conditions;
the prevailing laws and regulatory environment of each state in which we operate or seek to operate
and federal laws and regulations, all of which are subject to change at any time;
the degree of competition in new markets and its effect on our ability to attract new customers;
our ability to identify attractive locations for new branches;
our ability to recruit qualified personnel, particularly in remote areas and in areas where we face a great
deal of competition; and
our ability to obtain adequate financing for our expansion plans.
For example, certain states into which we may expand limit the number of lending licenses granted. For
instance, Georgia requires a “convenience and advantage” assessment of a new lending license and location prior
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to the granting of the license. This assessment adds time and expense to opening new locations and creates risk
that our state regulator will deny an application for a new lending license due to a perceived oversaturation of
existing licensed lenders in the area in which we seek to expand and operate. There can be no assurance that if
we apply for a license for a new branch, whether in one of the states where we currently operate or in a state into
which we would like to expand, we will be granted a license to operate. We also cannot be certain that any such
license, even if granted, would be obtained in a timely manner or without burdensome conditions or limitations.
In addition, we may not be able to obtain and maintain the regulatory approvals, government permits, or licenses
that may be required to operate.
We are exposed to credit risk in our lending activities.
Our ability to collect on loans depends on the willingness and repayment ability of our borrowers. Any
material adverse change in the effectiveness of our underwriting models, our implementation of such models
(including through our loan origination software and processes), or the ability or willingness of a significant
portion of our borrowers to meet their obligations to us, whether due to changes in general economic, political, or
social conditions, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, or other
causes over which we have no control, or to changes or events affecting our borrowers such as unemployment,
major medical expenses, bankruptcy, divorce, or death, would have a material adverse impact on our earnings
and financial condition. Further, a substantial majority of our borrowers are non-prime borrowers, who are more
likely to be affected, and more severely affected, by adverse macroeconomic conditions. We cannot be certain
that our credit administration personnel, policies, and procedures will adequately adapt to changes in economic
or any other conditions affecting customers and the quality of the loan portfolio.
Our convenience check strategy exposes us to certain risks.
A significant portion of the growth in our installment loans has been achieved through direct mail
campaigns. One aspect of our direct mail campaigns involves mailing “convenience checks” to pre-screened
recipients, which customers can sign and cash or deposit, thereby agreeing to the terms of the loan, which are
disclosed on the front and back of the check and in the accompanying disclosures. We use convenience checks to
seed new branch openings and to attract new customers to existing branches in our geographic footprint. In 2017
and 2018, loans initiated through convenience checks represented 17.2% and 19.2%, respectively, of the value of
our originated loans. We expect that convenience checks will continue to represent a meaningful portion of our
installment loan originations in the future. There are several risks associated with the use of convenience checks,
including the following:
•
it is more difficult to maintain sound underwriting standards with convenience check customers, and
these customers have historically presented a higher risk of default than customers that originate loans
in our branches, as we do not meet convenience check customers prior to soliciting them and extending
a loan to them, and we may not be able to verify certain elements of their financial condition, including
their current employment status, income, or life circumstances;
• we rely on credit information from a third-party credit bureau that is more limited than a full credit
report to pre-screen potential convenience check recipients, which may not be as effective as a full
credit report or may be inaccurate or outdated;
• we face limitations on the number of potential borrowers who meet our lending criteria within
proximity to our branches;
• we may not be able to continue to access the demographic and credit file information that we use to
generate our mailing lists due to expanded regulatory or privacy restrictions;
•
convenience checks pose a risk of fraud;
• we depend on one bank to issue and clear our convenience checks, and any failure by that bank to
properly process the convenience checks could limit the ability of a recipient to cash the check and
enter into a loan with us;
Regional Management Corp. | 2018 Annual Report on Form 10-K | 17
•
•
customers may opt out of direct mail solicitations and solicitations based on their credit file or may
otherwise prohibit us from soliciting them; and
postal rates and production costs may continue to rise.
In the future, we could experience one or more of these issues associated with our direct mail strategy. Any
increase in the use of convenience checks will further increase our exposure to, and the magnitude of, these risks.
Our policies and procedures for underwriting, processing, and servicing loans are subject to potential
failure or circumvention, which may adversely affect our results of operations.
A substantial portion of our underwriting activities and our credit extension decisions are made at our local
branches. We rely on certain inputs and verifications in the underwriting process to be performed by individual
personnel at the branch level. In addition, pursuant to our operations policies and procedures, exceptions to
general underwriting criteria can be approved by central underwriting employees and certain other senior
employees. We train our employees individually onsite in the branch and through online training modules to
make loans that conform to our underwriting standards. Such training includes critical aspects of state and federal
regulatory compliance, cash handling, account management, and customer relations. Although we have
standardized employee manuals and online training modules, we primarily rely on our district supervisors, with
oversight by our state vice presidents, branch auditors, and headquarters personnel, to train and supervise our
branch employees, rather than centralized training programs. Therefore, the quality of training and supervision
may vary from district to district and branch to branch depending on the amount of time apportioned to training
and supervision and individual interpretations of our operations policies and procedures. There can also be no
assurance that we will be able to attract, train, and retain qualified personnel to perform the tasks that are part of
the underwriting process. If the training and supervision of our personnel fails to be effective, or if we are unable
to attract and retain qualified employees, it is possible that our underwriting criteria will be improperly applied to
a greater percentage of loan applications. If such improper applications were to increase, delinquency and losses
on our loan portfolio could increase.
In addition, we rely on certain third-party service providers in connection with loan underwriting and
origination. Any error or failure by a third-party service provider in providing loan underwriting and origination
services may cause us to originate loans to borrowers that do not meet our underwriting standards. Likewise, any
failure or error by us in utilizing third-party software or services to implement our underwriting and origination
criteria may cause us to originate loans to borrowers that do not meet our underwriting standards. We cannot be
certain that every loan is made in accordance with our underwriting standards and rules. We have experienced
instances of loans extended that varied from our underwriting standards. Variances in underwriting standards and
lack of supervision could expose us to greater delinquencies and credit losses than we have historically
experienced. Due to the decentralized nature in which the loan application process occurs, employee misconduct
or error in the application or closing process could also result in the origination of loans that do not satisfy our
underwriting standards, which could in turn have a material adverse effect on our results of operations and
financial condition.
In addition, in deciding whether to extend credit or enter into other transactions with customers and
counterparties, we rely heavily on information provided by customers, counterparties, and other third parties,
including credit bureaus and data aggregators, and we further rely on representations of customers and
counterparties as to the accuracy and completeness of that information. If a significant percentage of our
customers were to intentionally or negligently misrepresent any of this information, or provide incomplete
information, and our internal processes were to fail to detect such misrepresentations in a timely manner, or any
or all of the other components of the underwriting process described above were to fail, we could end up
approving a loan that, based on our underwriting criteria, we would not have otherwise made. As a result, our
earnings and our financial condition could be negatively impacted.
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We may be limited in our ability to collect on our loan portfolio, and the security interests securing a
significant portion of our loan portfolio are not perfected, which may increase our credit losses.
Legal and practical limitations may limit our ability to collect on our loan portfolio, resulting in increased
credit losses, decreased revenues, and decreased earnings. State and federal laws and regulations restrict our
collection efforts. The amounts that we are able to recover from the repossession and sale of collateral typically
do not fully cover the outstanding loan balance and costs of recovery. In cases where we repossess a vehicle
securing a loan, we generally sell our repossessed automobile inventory through sales conducted by independent
automobile auction organizations after the required post-repossession waiting period. In certain instances, we
may sell repossessed collateral other than vehicles through our branches after the required post-repossession
waiting period and appropriate receipt of valid bids. In either case, such sales are made consistent with applicable
state law. The proceeds we receive from such sales depend upon various factors, including the supply of, and
demand for, used vehicles and other property at the time of sale. During periods of economic slowdown or
recession, there may be less demand for used vehicles and other property that we desire to resell.
Most of our loan portfolio is secured, but a significant portion of such security interests have not been and
will not be perfected, which means that we cannot be certain that such security interests will be given first
priority over other creditors. The lack of perfected security interests is one of several factors that may make it
more difficult for us to collect on our loan portfolio. Additionally, for those of our loans that are unsecured,
borrowers may choose to repay obligations under other indebtedness before repaying loans to us because such
borrowers may feel that they have no collateral at risk. In addition, given the relatively small size of our loans,
the costs of collecting loans may be high relative to the amount of the loan. As a result, many collection practices
that are legally available, such as litigation, may be financially impracticable. Lastly, there is an inherent risk that
a portion of the retail installment contracts that we hold will be subject to certain claims or defenses that the
borrower may assert against the originator of the contract and, by extension, us as the holder of the contract.
These factors may increase our credit losses, which would have a material adverse effect on our results of
operations and financial condition.
Our insurance operations are subject to a number of risks and uncertainties.
We market and sell optional credit life, accident and health, personal property, involuntary unemployment,
and vehicle single interest insurance to our borrowers in selected markets as an agent for an unaffiliated third-
party insurance company. In addition, on certain loans, we collect a fee from our customers and in turn purchase
non-file insurance from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our
security interest in personal property collateral. The unaffiliated insurance company cedes to our wholly-owned
insurance subsidiary, RMC Reinsurance, Ltd., the net insurance premium revenue and the associated insurance
claims liability for all insurance products, including the non-file insurance that we purchase.
When purchased by a borrower, the optional credit insurance products benefit the borrower by insuring the
borrower’s payment obligations on the associated loan in the event of the borrower’s inability to make monthly
payments due to death, disability, or involuntary unemployment, or in the event of a casualty event associated
with collateral. Payment of the associated premiums can be made by the borrower separately, but except in very
rare instances, the borrower finances payment of the premium, with the financed premium included in the
balance of the loan. A credit insurance product may be cancelled if, for example, (i) we request cancellation due
to the borrower’s default on obligations under the associated loan, (ii) the borrower prepays the principal balance
of the associated loan in full, or (iii) the borrower elects to terminate the credit insurance prior to the expiration
of the term thereof (which the borrower may do at any time). Generally, upon any cancellation of credit
insurance, the borrower will be entitled to a refund of the unearned premium for the cancelled insurance. We
typically refund insurance premiums by reducing the principal balance of the associated loan by the required
refund amount, following which the unaffiliated insurance company reimburses us for the refunded amount.
Our insurance operations are subject to a number of material risks and uncertainties, including changes in
laws and regulations, borrower demand for insurance products, claims experience, and insurance carrier
Regional Management Corp. | 2018 Annual Report on Form 10-K | 19
relationships. Changes to laws or regulations may, for example, negatively impact our ability to offer one or
more of our insurance products or to purchase non-file insurance; the manner in which we are permitted to offer
such products; capital and reserve requirements; the frequency and type of regulatory monitoring and reporting to
which we are subject; benefits or loss ratio requirements; insurance producer licensing or appointment
requirements; and reinsurance operations. In addition, because our borrowers are not required to purchase the
credit insurance products that we offer, we cannot be certain that borrower demand for credit insurance products
will not decrease in the future. In addition to adversely impacting our insurance income, net, any decrease in the
demand for credit insurance products would negatively impact our interest and fee income because we finance
substantially all of our borrowers’ insurance premiums. Our insurance operations are also dependent on our
lending operations as the sole source of business and product distribution. If our lending operations discontinue
offering insurance products, our insurance operations would have no method of distribution. Insurance claims
and policyholder liabilities are also difficult to predict and may exceed the related reserves set aside for claims
and associated expenses for claims adjudication.
We are also dependent on the continued willingness of unaffiliated third-party insurance companies to
participate in the credit insurance market and to offer non-file insurance to us. For example, in 2016, we
transitioned our credit insurance business to a new unaffiliated third-party insurance company because the
insurance company with which we previously had a relationship made a strategic decision to exit the credit
insurance market altogether. While we were able to transition successfully to a new provider in 2016, we cannot
be certain that the credit insurance market will remain viable in the future. Further, if our insurance provider is
for any reason unable or unwilling to meet its claims and premium reimbursement payment obligations or its
premium ceding obligations, we would experience increased net credit losses, regulatory scrutiny, litigation, and
other losses and expenses.
Finally, in recent years, as large loans have become a larger percentage of our portfolio, the severity of
non-file insurance claims has increased and non-file insurance claims expenses have exceeded non-file insurance
premiums by a material amount. The resulting net loss from the non-file insurance product is reflected in our
insurance income, net. It is uncertain whether the non-file insurance product will be available to us in the future
on the same terms as it is today, or at all. If the unaffiliated insurance company were to enforce limitations on our
non-file loss ratios or otherwise change the terms under which it offers non-file insurance to us, our net credit
losses, loss rates, and provision for credit losses could increase.
If any of these events, risks, or uncertainties were to occur or materialize, it could have a material adverse
effect on our business, financial condition, and results of operations and cash flows.
A reduction in demand for our products and a failure by us to adapt to such reduction could adversely
affect our business and results of operations.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic
patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer
access to particular products, or the availability of competing products, including through alternative or
competing marketing channels. For example, we are highly dependent upon selecting and maintaining attractive
branch locations. These locations are subject to local market conditions, including the employment available in
the area, housing costs, traffic patterns, crime, and other demographic influences, any of which may quickly
change, thereby negatively impacting demand for our products in the area. Should we fail to adapt to significant
changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and
our operations could be harmed. Even if we do make changes to existing products or introduce new products and
channels to fulfill customer demand, customers may resist or may reject such products. Moreover, the effect of
any product change on the results of our business may not be fully ascertainable until the change has been in
effect for some time, and by that time it may be too late to make further modifications to such product without
causing further harm to our business, results of operations, and financial condition.
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We face strong direct and indirect competition.
The consumer finance industry is highly competitive, and the barriers to entry for new competitors are
relatively low in the markets in which we operate. We compete for customers, locations, employees, and other
important aspects of our business with many other local, regional, national, and international financial
institutions, many of which have greater financial resources than we do.
Our installment loan operations compete with other installment lenders, as well as with alternative
financial services providers (such as payday and title lenders, check advance companies, and pawnshops), online
or peer-to-peer lenders, issuers of non-prime credit cards, and other competitors. We believe that regulatory
developments in the consumer finance industry have caused and may in the future cause lenders that focus on
alternative financial services to begin to offer installment loans. In addition, if companies in the installment loan
business attempt to provide more attractive loan terms than is standard across the industry, we may lose
customers to those competitors. With respect to installment loans, we compete primarily on the basis of price,
breadth of loan product offerings, flexibility of loan terms offered, and the quality of customer service provided.
Our retail purchase loan operations compete with non-prime retail lenders, store and third-party credit
cards, prime lending sources, rent-to-own finance providers, and other competitors. We compete primarily on the
basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered, the speed of
approval, and the quality of customer service provided.
If we fail to compete successfully, we could face lower sales and may decide or be compelled to materially
alter our lending terms to our customers, which could result in decreased profitability.
We may attempt to pursue acquisitions or strategic alliances that may be unsuccessful.
We may attempt to achieve our business objectives through acquisitions and strategic alliances. We
compete with other companies for these opportunities, including companies with greater financial resources, and
we cannot be certain that we will be able to effect acquisitions or strategic alliances on commercially reasonable
terms, or at all. Furthermore, most acquisition targets that we have pursued previously have been significantly
smaller than us. We do not have extensive experience with integrating larger acquisitions. In pursuing these
transactions, we may experience, among other things:
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overvaluing potential targets;
difficulties in integrating any acquired companies, branches, or products into our existing business,
including integration of account data into our information systems;
inability to realize the benefits we anticipate in a timely fashion, or at all;
attrition of key personnel from acquired businesses;
unexpected losses due to the acquisition of loan portfolios with loans originated using less stringent
underwriting criteria;
significant costs, charges, or write-downs; or
unforeseen operating difficulties that require significant financial and managerial resources that would
otherwise be available for the ongoing development and expansion of our existing operations.
Geographic concentration of our loan portfolio may increase the risk of loss.
Any concentration of our loan portfolio in a state or region may present unique risk concentrations. Our
branches in South Carolina, Texas, and North Carolina accounted for 18%, 32%, and 16%, respectively, of our
finance receivables in 2018. Furthermore, all of our operations are in five Southeastern, three Southwestern, one
Mid-Atlantic, and two Midwestern states. As a result, we are highly susceptible to adverse economic conditions
Regional Management Corp. | 2018 Annual Report on Form 10-K | 21
in those areas. The unemployment and bankruptcy rates in some states in our footprint are among the highest in
the country. High unemployment rates may reduce the number of qualified borrowers to whom we will extend
loans, which would result in reduced loan originations. In addition, some geographic regions of the United States
will, from time to time, experience weaker regional economic conditions and consequently will experience
higher rates of loss and delinquency. A regional economy may be adversely affected by the loss of jobs in certain
industries, by state and local taxes, or by other factors, including natural disasters, civil disturbances, or
international events such as wars. In the event that a significant portion of our loan portfolio is comprised of
loans owed by borrowers residing in certain jurisdictions where economic conditions, elevated bankruptcy
filings, natural disasters, or other factors specific to these jurisdictions adversely impact the delinquency and
default experience of our loan portfolio, we could experience reduced or delayed payments on outstanding loans.
For example, in 2017 and 2018, we experienced increases in credit losses as a result of hurricanes impacting
customer accounts in our geographic footprint. These losses occurred in states where a substantial majority of our
loan portfolio is concentrated—specifically in Texas in 2017 and in South Carolina and North Carolina in 2018.
Conversely, an improvement in economic conditions could result in prepayments by our borrowers of their
payment obligations on our loans. As a result, we may receive principal payments on the outstanding loans
earlier than anticipated, which would reduce our finance receivables and the interest income earned thereon. No
prediction can be made and no assurance can be given as to the effect of economic conditions on the rate of
delinquencies, prepayments, or losses on our loan portfolio with respect to any part of our geographic footprint.
Furthermore, the concentration of our loan portfolio in one or more states would have a disproportionate
effect on our business if governmental authorities in any of those states take action against us. In addition, the
occurrence of any of the adverse regulatory or legislative events described in this “Risk Factors” section in states
with a high concentration of our loan portfolio could materially and adversely affect our business, results of
operations, and financial condition. For example, if interest rates in South Carolina, which currently are not
capped, were to be capped, our business, results of operations, and financial condition would be materially and
adversely affected.
Failure of third-party service providers upon which we rely could adversely affect our business.
We rely on certain third-party service providers. In particular, we currently rely on one key vendor to print
and mail our convenience check and other offers for our direct mail marketing campaigns, and on certain other
third-party service providers in connection with loan underwriting, origination, and servicing. Our reliance on
these and other third parties can expose us to risks. For example, an error by our current convenience check
vendor in 2015 resulted in check offers being misdirected, requiring us in some cases to notify state regulators
and to refund certain interest and fee amounts, and exposing us to increased credit risk. If any of our third-party
service providers, including our direct mail vendor and those third parties providing services in connection with
loan underwriting, origination, and servicing, are unable to provide their services timely, accurately, and
effectively, or at all, it could have a material adverse effect on our business, financial condition, and results of
operations and cash flows.
We rely on information technology products developed, owned, and supported by third parties. Our
ability to manage our business and monitor results is highly dependent upon these information technology
products. A failure of these products and systems or of the implementation of new information technology
products and systems could disrupt our business.
In the operation of our business, we are highly dependent upon a variety of information technology
products, including our loan management system, which allows us to record, document, and manage our loan
portfolio. In April 2016, we entered into an agreement with Nortridge pursuant to which Nortridge provides us
with loan management software and related services. In February 2018, we completed our transition to the
Nortridge loan management software across our operations footprint.
Since we began transitioning to the Nortridge platform, we have tailored it to meet our specific needs. To a
certain extent, we depend on the willingness and ability of Nortridge to continue to provide customized solutions
Regional Management Corp. | 2018 Annual Report on Form 10-K | 22
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and to support our evolving products and business model. In the future, Nortridge may not be willing or able to
provide the services necessary to meet our loan management system needs. If this occurs, we may be forced to
migrate to an alternative software package, which could materially affect our business, results of operations, and
financial condition.
Further, the Nortridge platform may in the future fail to perform in a manner consistent with our current
expectations and may be inadequate for our needs. As we are dependent upon our ability to gather and promptly
transmit accurate information to key decision makers, our business, results of operations, and financial condition
may be adversely affected if our loan management system does not allow us to transmit accurate information,
even for a short period of time. Failure to properly or adequately address these issues could impact our ability to
perform necessary business operations, which could adversely affect our competitive position, business, results
of operations, and financial condition.
We also rely on Teledata Communications Inc. and other third-party software vendors to provide access to
loan applications and/or screen applications. There can be no assurance that these third party providers will
continue to provide us with information in accordance with our lending guidelines or that they will continue to
provide us lending leads at all. If this occurs, our credit losses, business, results of operations, and financial
condition may be adversely affected.
Further, the Nortridge platform and other third-party software vendor products and applications are subject
to damage or interruption from:
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power loss, computer systems failures, and internet, telecommunications, or data network failures;
operator negligence or improper operation by, or supervision of, employees;
physical and electronic loss of data or security breaches, misappropriation, and similar events;
computer viruses;
cyberterrorism;
intentional acts of vandalism and similar events; and
hurricanes, fires, floods, and other natural disasters.
Any failure of the Nortridge platform or any other third-party software vendor product systems, if not
addressed by our disaster recovery plan, could cause an interruption in operations. Though we have implemented
contingency and disaster recovery processes in the event of one or several technology failures, any unforeseen
failure, interruption, or compromise of these systems or security measures could affect the origination, servicing,
and collection of loans. The risk of possible failures or interruptions may not be adequately addressed, and such
failures or interruptions could occur.
We may not be able to make technological improvements as quickly as some of our competitors, which
could harm our competitive ability and adversely affect our business, prospects, results of operations, and
financial condition.
The financial services industry is undergoing rapid technological changes, with frequent introductions of
new technology-driven products, services, and marketing channels. We rely on our integrated branch network as
the foundation of our multiple channel platform and the primary point of contact with our active accounts.
However, to serve customers who want to reach us over the internet, we developed a new channel in late 2008 by
making an online loan application available on our consumer website, and in 2017, we rolled out an online
customer portal, which provides customers with online access to their account information and an electronic
payment option. Our future success will depend, in part, on our ability to address the needs of our customers by
using technology to provide products and services that will satisfy customer demand for convenience, as well as
Regional Management Corp. | 2018 Annual Report on Form 10-K | 23
to create additional efficiencies in our operations. We expect that new technologies and business processes
applicable to the consumer finance industry will continue to emerge, and these new technologies and business
processes may be more efficient than those that we currently use. We cannot ensure that we will be able to
sustain our investment in new technology, and we may not be able to effectively implement new technology-
driven products and services as quickly as some of our competitors or be successful in marketing these products
and services to our customers. Failure to successfully keep pace with technological change affecting the financial
services industry could cause disruptions in our operations, harm our ability to compete with our competitors,
and adversely affect our business, prospects, results of operations, and financial condition.
Security breaches, cyber-attacks, failures in our information systems, or fraudulent activity could result
in damage to our operations or lead to reputational damage.
We rely heavily on communications and information systems to conduct our business. Each branch is part
of an information network that is designed to permit us to maintain adequate cash inventory, reconcile cash
balances on a daily basis, and report revenues and expenses to our headquarters. Our computer systems, software,
and networks may be vulnerable to breaches (including via computer hackings), unauthorized access, misuse,
computer viruses, or other failures or disruptions that could result in disruption to our business or the loss or theft
of confidential information, including customer information. Any failure, interruption, or breach in security of
these systems, including any failure of our back-up systems, hardware failures, or an inability to access data
maintained offsite, could result in failures or disruptions in our customer relationship management, general
ledger, loan, and other systems and could result in a loss of data (including loan portfolio data), a loss of
customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation, possible financial
liability, and other adverse consequences, any of which could have a material adverse effect on our financial
condition and results of operations. Furthermore, we may not be able to detect immediately any such breach,
which may increase the losses that we would suffer. In addition, our existing insurance policies would not
reimburse us for all of the damages that we might incur as a result of a breach.
A security breach or cyber-attack on our computer systems could interrupt or damage our operations or
harm our reputation. Despite the implementation of security measures, our systems may still be vulnerable to
data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems. If we
were to experience a security breach or cyber-attack, we could be required to incur substantial costs and
liabilities, including, among other things, the following:
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expenses to rectify the consequences of the security breach or cyber-attack;
liability for stolen assets or information;
costs of repairing damage to our systems;
lost revenue and income resulting from any system downtime caused by such breach or attack;
increased costs of cyber security protection;
costs of incentives we may be required to offer to our customers or business partners to retain their
business; and
damage to our reputation causing customers and investors to lose confidence in our company.
Further, any compromise of security or cyber-attack could deter consumers from entering into transactions
that require them to provide confidential information to us. In addition, if confidential customer information or
information belonging to our business partners is misappropriated from our computer systems, we could be sued
by those who assert that we did not take adequate precautions to safeguard our systems and confidential data
belonging to our customers or business partners, which could subject us to liability and result in significant legal
fees and expenses in defending these claims. As a result, any compromise of security of our computer systems or
cyber-attack could have a material adverse effect on our business, prospects, results of operations, and financial
condition.
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As part of our business, and subject to applicable privacy laws, we may share confidential customer
information and proprietary information with vendors, service providers, and business partners. The information
systems of these third parties may also be vulnerable to security breaches, and we may not be able to ensure that
these third parties have appropriate security controls in place to protect the information that we share with them.
If our proprietary or confidential customer information is intercepted, stolen, misused, or mishandled while in
possession of a third party, it could result in reputational harm to us, loss of customer business, and additional
regulatory scrutiny, and it could expose us to civil litigation and possible financial liability, any of which could
have a material adverse effect on our business, financial condition, and liquidity. Although we maintain
insurance that is intended to cover certain losses from such events, there can be no assurance that such insurance
will be adequate or available.
Our centralized headquarters’ functions and branch operations are susceptible to disruption by
catastrophic events, which could have a material adverse effect on our business, results of operations, and
financial condition.
Our headquarters are in an office building located in Greer, South Carolina, a town located outside of
Greenville, South Carolina. Our information systems and administrative and management processes are primarily
provided to our branches from this centralized location, and our separate data management facility is located in
Greenville, South Carolina. These processes could be disrupted if a catastrophic event, such as a tornado, power
outage, or act of terror, affected Greenville, Greer, or the nearby areas. Any such catastrophic event(s) or other
unexpected disruption of our headquarters or data management facility could have a material adverse effect on
our business, results of operations, and financial condition.
Our business could suffer if we are unsuccessful in making, continuing, and growing relationships with
retailers, or if the retailers with whom we have relationships experience a decline or disruption in their sales
volumes.
Our retail purchase loans are reliant on our relationships with retailers. Our retail purchase loan business
model is based on our ability to enter into agreements with individual retailers to provide financing to customers
in their stores. If a competitor were to offer better service or more attractive loan products to our retail partners, it
is possible that our retail partners would terminate their relationships with us. If we are unable to continue to
grow our existing relationships and develop new relationships, our results of operations, financial condition, and
ability to continue to expand could be adversely affected.
Even with good relationships with retailers, our ability to originate retail purchase loans is dependent, in
large part, on the underlying consumer demand for retail goods. Retail sales are subject to fluctuation as a result
of general economic trends and other factors. If sales volumes at the retailers with whom we have relationships
decrease in the future as a result of general economic trends or due to any other factors, we may experience a
corresponding decrease in the volume of such loans that we originate. In such circumstances, we may experience
an adverse effect on our business, results of operations, and financial condition.
Interest rates on retail purchase loans are determined at competitive market interest rates, and we may
fail to adequately set interest rates, which may adversely affect our business.
Unlike installment loans, particularly small installment loans, which in certain states are typically made at
or near the maximum interest rates permitted by law, retail purchase loans are often made at competitive market
interest rates, which are governed by laws for installment sales contracts. If we fail to set interest rates at a level
that adequately reflects market rates or the credit risks of our customers, or if we set interest rates at a level too
low to sustain our profitability, our business, results of operations, and financial condition could be adversely
affected.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 25
Regular turnover among our managers and other employees at our branches makes it more difficult for
us to operate our branches and increases our costs of operations, which could have an adverse effect on our
business, results of operations, and financial condition.
Our workforce is comprised primarily of employees who work on an hourly basis. In certain areas where
we operate, there is significant competition for employees. In the past, we have lost employees and candidates to
competitors who have been willing to pay higher compensation. Our ability to continue to expand our operations
depends on our ability to attract, train, and retain a large and growing number of qualified employees. The
turnover among all of our branch employees was approximately 42% in 2016, 40% in 2017, and 51% in 2018.
This turnover increases our cost of operations and makes it more difficult to operate our branches. Our account
executives and assistant manager roles have historically experienced high turnover. We may not be able to retain
and cultivate personnel at these ranks for future promotion to branch manager. If our employee turnover rates
increase above historical levels or if unanticipated problems arise from our high employee turnover and we are
unable to readily replace such employees, our business, results of operations, financial condition, and ability to
continue to expand could be adversely affected.
The departure, transition, or replacement of key personnel could significantly impact the results of our
operations. If we cannot continue to hire and retain high-quality employees, our business and financial results
may be negatively affected.
Our future success significantly depends on the continued service and performance of our key management
personnel. Competition for these employees is intense. Our operating results could be adversely affected by
higher employee turnover or increased salary and benefit costs. Like most businesses, our employees are
important to our success and we are dependent in part on our ability to retain the services of our key
management, operational, finance, and administrative personnel. We have built our business on a set of core
values, and we attempt to hire employees who are committed to these values. We want to hire and retain
employees who will fit our culture of compliance and of providing exceptional service to our customers. In order
to compete and to continue to grow, we must attract, retain, and motivate employees, including those in
executive, senior management, and operational positions. As our employees gain experience and develop their
knowledge and skills, they become highly desired by other businesses. Therefore, to retain our employees, we
must provide a satisfying work environment and competitive compensation and benefits. If costs to retain our
skilled employees increase, then our business and financial results may be negatively affected.
Our continued growth is also dependent, in part, on the skills, experience, and efforts of our executive
officers and senior management. As previously announced on February 12, 2019, our Executive Vice President
and Chief Financial Officer, Donald E. Thomas, is retiring from Regional, pending the appointment of a new
Chief Financial Officer, and we have engaged an executive search firm to conduct a search for our new Chief
Financial Officer. We may not be successful in retaining the other members of our executive or senior
management team or our other key employees. The loss of the services of any of our executive officers, senior
management, or key team members, including state vice presidents, or the inability to attract additional qualified
personnel as needed, could have an adverse effect on our business, financial condition, and results of operations.
We also depend on our district supervisors to supervise, train, and motivate our branch employees. These
supervisors have significant experience with our company and within our industry, and would be difficult to
replace. If we lose a district supervisor to a competitor, we could also be at risk of losing other employees and
customers. In addition, the process of identifying management successors creates uncertainty and could become a
distraction to our senior management and our Board of Directors, and we may not be successful in attracting
qualified candidates to replace key positions when necessary. The identification and recruitment of candidates to
fill senior management positions, and the resulting transition process, including in the search for and transition to
a new Chief Financial Officer, may be disruptive to our business and operations.
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Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting
us to significant legal liability, regulatory scrutiny, and reputational harm.
Our reputation is critical to maintaining and developing relationships with our existing and potential
customers and third parties with whom we do business. There is a risk that our employees or third-party
contractors could engage in misconduct that adversely affects our business. For example, if an employee or third-
party contractor were to engage—or be accused of engaging—in illegal or suspicious activities, we could be
subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer
relationships, and ability to attract future customers. Employee or third-party misconduct could prompt regulators
to allege or to determine, based upon such misconduct, that we have not established adequate supervisory
systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. It
is not always possible to deter employee or third-party misconduct, and the precautions we take to detect and
prevent misconduct may not be effective in all cases. Misconduct by our employees or third-party contractors, or
even unsubstantiated allegations, could result in a material adverse effect on our reputation and our business.
Security breaches in our branches or acts of theft, fraud, or violence could adversely affect our financial
condition and results of operations.
A portion of our account payments occur at our branches, either in person or by mail, and often consist of
cash payments, which we deposit at local banks throughout the day. This business practice exposes us daily to
the potential for employee theft of funds or, alternatively, to theft and burglary due to the cash we maintain in our
branches. Despite controls and procedures to prevent such losses, we have sustained losses due to employee theft
and fraud (including collusion), including from the origination of fraudulent loans. We are also susceptible to
break-ins at our branches, where money and/or customer records necessary for day-to-day operations (which also
contain extensive confidential information about our customers, including financial and personally identifiable
information) could be taken. A breach in the security of our branches or in the safety of our employees could
result in employee injury, loss of funds or records, and adverse publicity, and could result in a loss of customer
business or expose us to additional regulatory scrutiny and penalties, civil litigation, and possible financial
liability, any of which could have a material adverse effect on our reputation, financial condition, and results of
operations.
Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to
effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk,
prepayment risk, liquidity risk, and other market-related risks, as well as regulatory and operational risks related
to our business, assets, and liabilities. Our risk management policies, procedures, and techniques may not be
sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify
additional risks to which we may become subject in the future.
We may be unsuccessful in maintaining effective internal controls over financial reporting and
disclosure controls and procedures.
Controls and procedures are particularly important for consumer finance companies. Effective internal
controls over financial reporting are necessary for us to provide reliable financial reports and, together with
adequate disclosure controls and procedures, are designed to prevent fraud or material error. Any system of
controls, however well-designed and operated, is based in part on certain assumptions and can provide only
reasonable, not absolute, assurance that the objectives of the system are met. Section 404 of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) requires management of public companies to develop and implement
internal controls over financial reporting and evaluate the effectiveness thereof. Under standards established by
the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
Regional Management Corp. | 2018 Annual Report on Form 10-K | 27
misstatement of our financial statements will not be prevented or detected on a timely basis. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less
severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our
financial reporting. Any failure to maintain current internal controls or implement required new or improved
controls, or difficulties encountered in their maintenance and/or implementation, could cause us to fail to meet
our reporting obligations.
If material weaknesses or significant deficiencies in our internal control over financial reporting are
discovered or occur in the future or if our controls and procedures fail or are circumvented, our consolidated
financial statements may contain material misstatements, we could be required to restate our financial results, we
may be unable to produce accurate and timely financial statements, and we may be unable to maintain
compliance with applicable stock exchange listing requirements, any of which could have a material adverse
effect on our business, results of operations, financial condition, and stock price. The discovery of a material
weakness and the disclosure of that fact, even if quickly remediated, could reduce the market value of shares of
our common stock. Additionally, the existence of any material weakness or significant deficiency requires
management to devote significant time and incur significant expense to remediate any such material weaknesses
or significant deficiency, and management may not be able to remediate any such material weaknesses or
significant deficiency in a timely manner. Undetected material weaknesses in our internal controls could lead to
financial statement restatements, which could have a material adverse effect on our business, financial condition,
and results of operation.
If our estimates of reserves for credit losses are not adequate to absorb actual losses, our provision for
credit losses would increase, which would adversely affect our results of operations.
We maintain an allowance for credit losses for all loans we make. To estimate the appropriate level of
credit loss reserves, we consider known and relevant internal and external factors that affect loan collectability,
including the total amount of loans outstanding; delinquency levels, roll rates, and trends; historical credit losses;
our current collection patterns; and economic trends. Our methodology for establishing our reserves for credit
losses is based in large part on our delinquency roll rates and our historic loss experience. If customer behavior
changes as a result of economic, political, social, or other conditions and if we are unable to predict how the
unemployment rate and general economic uncertainty may affect our credit loss reserves, our provision may be
inadequate. During fiscal 2018, our provision for credit losses was $87.1 million, and we had net credit losses of
$77.7 million related to losses on our loans. As of December 31, 2018, our finance receivables were
$932.2 million. Maintaining the adequacy of our allowance for credit losses may require that we make significant
and unanticipated increases in our provisions for credit losses, which would materially affect our results of
operations. Our credit loss reserves, however, are estimates, and if actual credit losses are materially greater than
our credit loss reserves, our financial condition and results of operations could be adversely affected. Neither
state regulators nor federal regulators regulate our allowance for credit losses.
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This ASU significantly changes the way that entities will be required to measure credit losses. The
new standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than
the “incurred loss” approach currently required. The new approach will require entities to measure all expected
credit losses for financial assets based on historical experience, current conditions, and reasonable forecasts of
collectability. It is anticipated that the expected credit loss model may require earlier recognition of credit losses
than the incurred loss approach. This ASU will become effective for us for fiscal years beginning January 1,
2020. Early adoption is permitted for fiscal years beginning January 1, 2019. We believe the adoption of this
ASU will have a material adverse effect on our consolidated financial statements. See Note 2, “Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements
and Supplementary Data” for more information on this new accounting standard.
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If assumptions or estimates we use in preparing our financial statements are incorrect or are required to
change, our reported results of operations and financial condition may be adversely affected.
We are required to use certain assumptions and estimates in preparing our financial statements under U.S.
Generally Accepted Accounting Principles (“GAAP”), including in determining allowances for credit losses, the
fair value of financial instruments, asset impairment, reserves related to litigation and other legal matters, the fair
value of share-based compensation, valuation of income, and other taxes and regulatory exposures. In addition,
significant assumptions and estimates are involved in determining certain disclosures required under GAAP,
including those involving the fair value of our financial instruments. If the assumptions or estimates underlying
our financial statements are incorrect, the actual amounts realized on transactions and balances subject to those
estimates will be different, and this could have a material adverse effect on our results of operations and financial
condition.
In addition, the FASB is currently reviewing or proposing changes to several financial accounting and
reporting standards that govern key aspects of our financial statements, including areas where assumptions or
estimates are required. As a result of changes to financial accounting or reporting standards, whether
promulgated or required by the FASB or other regulators, we could be required to change certain of the
assumptions or estimates we previously used in preparing our financial statements, which could negatively
impact how we record and report our results of operations and financial condition generally. For additional
information on the key areas for which assumptions and estimates are used in preparing our financial statements,
see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Policies” and Note 2, “Significant Accounting Policies,” of the Notes to
Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”
We depend to a substantial extent on borrowings under our senior revolving credit facility to fund our
liquidity needs.
We have a senior revolving credit facility committed through June 2020 that allows us to borrow up to
$638.0 million, assuming we are in compliance with a number of covenants and conditions. The credit facility
also has an accordion provision that allows for the expansion of the facility up to $700.0 million. The senior
revolving credit facility is collateralized by certain of our assets, including substantially all of our finance
receivables (other than those held by certain special purpose entities, as described below) and equity interests of
the majority of our subsidiaries. As of December 31, 2018, the amount outstanding under our senior revolving
credit facility was $328.1 million and we had $68.6 million of eligible borrowing capacity on the credit facility
(subject to certain covenants and conditions). During fiscal 2018, the maximum amount of borrowings
outstanding under the facility at any one time was $459.5 million. We use our senior revolving credit facility as a
source of liquidity, including for working capital and to fund the loans we make to our customers. If our existing
sources of liquidity become insufficient to satisfy our financial needs or our access to these sources becomes
unexpectedly restricted, we may need to try to raise additional capital in the future. If such an event were to
occur, we can give no assurance that such alternate sources of liquidity would be available to us on favorable
terms or at all. In addition, we cannot be certain that we will be able to replace the amended and restated senior
revolving credit facility when it matures on favorable terms or at all. If any of these events occur, our business,
results of operations, and financial condition could be adversely affected.
The credit agreements governing our long-term debt contain restrictions and limitations that could
affect our ability to operate our business.
The credit agreements governing our senior revolving credit facility, revolving warehouse credit facility,
and amortizing loan contain a number of covenants that could adversely affect our business and our flexibility to
respond to changing business and economic conditions or opportunities. Among other things, these covenants
limit our ability to:
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incur or guarantee additional indebtedness;
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purchase loan portfolios in bulk;
pay dividends or make distributions on our capital stock or make certain other restricted payments;
sell assets, including our loan portfolio or the capital stock of our subsidiaries;
enter into transactions with our affiliates;
offer certain loan products;
create or incur liens; and
consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets.
The credit agreements also impose certain obligations on us relating to our underwriting standards,
recordkeeping and servicing of our loans, and our loss reserves and charge-off policies, and they require us to
maintain certain financial ratios, including an interest coverage ratio and a borrowing base ratio. If we were to
breach any covenants or obligations under our credit agreements and such breaches were to result in an event of
default, our lenders could cause all amounts outstanding to become due and payable, subject to applicable grace
periods. An event of default in any one credit agreement could also trigger cross-defaults under other existing
and future credit agreements and other debt instruments, and materially and adversely affect our financial
condition and ability to continue operating our business as a going concern.
Our securitizations may expose us to financing and other risks, and there can be no assurance that we
will be able to access the securitization market in the future, which may require us to seek more costly
financing.
We completed our first securitization in June 2018 and our second securitization in December 2018, and
we may in the future securitize certain of our finance receivables to generate cash to originate new finance
receivables or to pay our outstanding indebtedness. In such transactions, we typically convey a pool of finance
receivables to a special purpose entity, which, in turn, conveys the finance receivables to a trust (the issuing
entity). Concurrently, the issuing entity issues non-recourse notes or certificates pursuant to the terms of an
indenture and/or amended and restated trust agreement, which then are transferred to the special purpose entity in
exchange for the finance receivables. The securities issued by the issuing entity are secured by the pool of
finance receivables. In exchange for the transfer of finance receivables to the issuing entity, we typically receive
the cash proceeds from the sale of the securities issued by the issuing entity, all residual interests, if any, in the
cash flows from the finance receivables after payment of the securities, and a 100% beneficial interest in the
issuing entity.
Although we successfully completed our first two securitizations in 2018, we can give no assurances that
we will be able to complete additional securitizations, including if, for example, the securitization markets
become constrained. In addition, the value of any subordinated securities that we may retain in our securitizations
might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or other
factors.
Regional Management Corp. currently acts as the servicer (in such capacity, the “Servicer”) with respect to
each securitization. If the Servicer defaults in its servicing obligations, an early amortization event could occur
under each securitization and the Servicer could be replaced as servicer. Servicer defaults include, but are not
limited to, the failure of the Servicer to make any payment, transfer, or deposit in accordance with applicable
securitization documents; breaches of representations, warranties, or agreements made by the Servicer under
applicable securitization documents; and the occurrence of certain insolvency events with respect to the Servicer.
Such an early amortization event could have materially adverse consequences on our liquidity and cost of funds.
Rating agencies may also affect our ability to execute a securitization transaction or increase the costs we
expect to incur from executing securitization transactions, not only by deciding not to issue ratings for our
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securitization transactions, but also by altering the criteria and process they follow in issuing ratings. Rating
agencies could alter their ratings processes or criteria after we have accumulated finance receivables for
securitization in a manner that effectively reduces the value of those finance receivables by increasing our
financing costs or otherwise requiring that we incur additional costs to comply with those processes and criteria.
We have no ability to control or predict what actions the rating agencies may take.
Further, other matters, such as (i) accounting standards applicable to securitization transactions and
(ii) capital and leverage requirements applicable to banks and other regulated financial institutions holding asset-
backed securities, could result in decreased investor demand for securities issued through our securitization
transactions or increased competition from other institutions that undertake securitization transactions. In
addition, compliance with certain regulatory requirements, including the Dodd-Frank Act, may affect the type of
securitization transactions that we are able to complete.
An inability to consummate further securitization transactions on terms similar to our existing
securitization transactions, or at all, could require us to seek more costly financing and/or have a material adverse
effect on our business, results of operations, and financial condition.
We may be required to indemnify, or repurchase certain finance receivables from, purchasers of finance
receivables that we have sold or securitized, or which we will sell or securitize in the future, if our finance
receivables fail to meet certain criteria or characteristics or under other circumstances, which could adversely
affect our results of operations, financial condition, and liquidity.
We have entered into certain financing arrangements, including an amortizing loan and a revolving
warehouse credit facility, that are secured by certain retail installment contracts and promissory notes (the
“Receivables”). In June 2018, we securitized approximately $168.5 million of Receivables, and in December
2018, we securitized approximately $136.9 million of Receivables. Our operating subsidiaries originated the
Receivables and subsequently transferred the Receivables to certain of our wholly-owned subsidiaries that were
established for the special purpose of entering into the financing arrangements and the respective securitizations.
The documents governing our financing arrangements and securitizations contain provisions that require us to
repurchase the affected Receivables under certain circumstances. While our financing and securitization
documents vary, they generally contain customary provisions that require us and the special purpose entities to
make certain representations and warranties about the quality and nature of the Receivables. Together with the
special purpose entities, we may be required to repurchase the Receivables if a representation or warranty is later
determined to be inaccurate. In such a case, we will be required to pay a repurchase price for the release of the
affected Receivables.
We believe that many purchasers of loans and other counterparties to transactions like those provided for in
the revolving warehouse credit facility, the amortizing loan, the securitizations, and other similar transactions are
particularly aware of the conditions under which originators or sellers of such finance receivables must
indemnify for or repurchase finance receivables, and may benefit from enforcing any available repurchase
remedies. If we are required to repurchase Receivables that we have sold or pledged, it could adversely affect our
results of operations, financial condition, and liquidity.
We are subject to interest rate risk resulting from general economic conditions and policies of various
governmental and regulatory agencies.
Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations
and financial condition. Interest rates are highly sensitive to many factors that are beyond our control, including
general economic conditions and policies of various governmental and regulatory agencies, in particular, the
Federal Reserve Board. Furthermore, market conditions or regulatory restrictions on interest rates we charge may
prevent us from passing any increases in interest rates along to our customers. We originate finance receivables
at either prevailing market rates or at statutory limits. Subject to statutory limits, our ability to react to changes in
Regional Management Corp. | 2018 Annual Report on Form 10-K | 31
prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our
existing loan portfolio, which allows us to originate new loans at prevailing market rates. Our loan portfolio turns
over approximately 1.2 times per year from cash payments, renewals, and charged-off loans. Because our large
loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, the
rate of turnover of the loan portfolio may change as our large loans change as a percentage of our portfolio.
In addition, rising interest rates will increase our cost of capital by influencing the amount of interest we
pay on our senior revolving credit facility, our revolving warehouse credit facility, or any other floating interest
rate obligations that we may incur, which would increase our operating costs and decrease our operating margins.
Interest payable on our senior revolving credit facility and our revolving warehouse credit facility is variable and
could increase in the future.
For additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market
Risk.”
Any replacement of LIBOR as the basis on which our variable rate debt is calculated may harm our cost
of capital, financial results, and cash flows.
Borrowings under our senior revolving credit facility and our revolving warehouse credit facility bear
interest at rates that are calculated based on LIBOR, and from time to time, we purchase interest rate cap
contracts with strike rates that are also calculated based on LIBOR. In July 2017, the head of the United
Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee
comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured
Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by
Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index
Average, an alternative reference rate that is based on transactions, it is unknown whether these alternative
reference rates will attain market acceptance as replacements of LIBOR.
If LIBOR ceases to exist, the method and rate used to calculate our variable-rate debt in the future may
result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over
time with the interest rates and/or payments that would have been made on our obligations if LIBOR was
available in its current form. There is currently no definitive information regarding the future utilization of
LIBOR or of any particular replacement rate. As such, the potential effect of any such event on our cost of
capital, financial results, and cash flows cannot yet be determined.
Our use of derivatives exposes us to credit and market risk.
From time to time, we enter into derivative transactions for economic hedging purposes, such as managing
our exposure to interest rate risk. By using derivative instruments, we are exposed to credit and market risk,
including the risk of loss associated with variations in the spread between the asset yield and the funding and/or
hedge cost, default risk, and the risk of insolvency or other inability of the counterparty to a particular derivative
transaction to perform its obligations. For additional information, see Part II, Item 7A, “Quantitative and
Qualitative Disclosures About Market Risk.”
Macroeconomic conditions could have a material adverse effect on our business, financial position,
results of operations, and cash flows, and may increase loan defaults and affect the value and liquidity of your
investment.
We are not insulated from the pressures and potentially negative consequences of financial crises and
similar risks beyond our control that have in the past and may in the future affect the capital and credit markets,
the broader economy, the financial services industry, or the segment of that industry in which we operate. Our
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financial performance generally, and in particular the ability of our borrowers to make payments on outstanding
loans, is highly dependent upon the business and economic environments in the markets where we operate and in
the United States as a whole.
During an economic downturn or recession, credit losses in the financial services industry generally
increase and demand for credit products often decreases. Declining asset values, defaults on consumer loans, and
the lack of market and investor confidence, as well as other factors, all combine to decrease liquidity during an
economic downturn. As a result of these factors, some banks and other lenders have suffered significant losses
during economic downturns, and the strength and liquidity of many financial institutions worldwide weakened
during the most recent economic crisis. Additionally, during an economic downturn, our loan servicing costs and
collection costs may increase as we may have to expend greater time and resources on these activities. Our
underwriting criteria, policies and procedures, and product offerings may not sufficiently protect our growth and
profitability during a sustained period of economic downturn or recession. Any renewed economic downturn will
adversely affect the financial resources of our customers and may result in the inability of our customers to make
principal and interest payments on, or refinance, the outstanding debt when due.
In addition, periods of economic slowdown or recession are typically accompanied by decreased consumer
demand for retail goods. Our ability to originate retail purchase loans depends, in large part, on the underlying
demand for such products. Further, our business is focused on customers who generally do not qualify for
conventional retail financing, and customers in this demographic are more likely to be affected, and more
severely affected, by an economic downturn. Accordingly, our business, financial position, results of operations,
and cash flows may be adversely impacted during any economic downturn or recession.
Should economic conditions worsen, they may adversely affect the credit quality of our loans. In the event
of increased default by borrowers under the loans, and/or a decrease in the volume of the loans we originate, our
business, results of operations, and financial condition could be adversely affected.
A prolonged shutdown of the federal government may result in higher delinquency and could negatively
affect our financial condition and results of operations.
The U.S. federal government experienced a partial shutdown from December 22, 2018 until January 25,
2019, and we do not yet know the full impact of the shutdown on our customers, business, results of operations,
and financial condition. Delinquencies in our loan portfolio generally reach their lowest point in the first quarter
of the year, which we believe is largely due to the timing of income tax refunds. A federal government shutdown
could lead to a delay in our customers receiving their income tax refunds as a result of employees of the Internal
Revenue Service not being available to process refunds. If our customers do not timely receive their income tax
refunds, we could experience higher delinquency and losses in our loan portfolio. Furthermore, a federal
government shutdown could result in reduced income for government employees or employees of companies that
engage in business with the federal government, which could result in higher loan delinquencies, increased credit
losses, and a decrease in demand for our loan products. Additionally, during and immediately following a
prolonged government shutdown, our loan servicing costs and collection costs may increase as we may have to
expend greater time and resources on these activities. As a result, our business, results of operations, and
financial condition could be adversely affected.
Damage to our reputation could negatively impact our business.
Recently, financial services companies have been experiencing increased reputational risk as consumers
and the media take issue with certain of their practices or judgments. Maintaining a strong reputation is critical to
our attracting and retaining customers, investors, and employees. Harm to our reputation can arise from many
sources, including employee misconduct, misconduct by outsourced service providers or other counterparties,
litigation or regulatory actions, failure by us to meet minimum standards of service and quality, inadequate
protection of customer information, and compliance failures. Negative publicity regarding our company (or
others engaged in a similar business or similar activities), whether or not accurate, may damage our reputation,
which could have a material adverse effect on our business, results of operations, and financial condition.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 33
Risks Related to Regulation and Legal Proceedings
Our business products and activities are strictly and comprehensively regulated at the local, state, and
federal levels.
The consumer finance industry is extensively regulated by federal, state, and local laws and regulations,
including consumer protection laws and regulations relating to the creation, collection, and enforcement of
consumer contracts, such as consumer loans. These laws and regulations impose significant costs and limitations
on the way we conduct and expand our business, and these costs and limitations may increase in the future if
such laws and regulations are changed. These laws and regulations govern or affect, among other things:
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the interest rates and manner of calculating such rates that we may charge customers;
terms of loans, including fees, maximum amounts, and minimum durations;
origination practices;
disclosure requirements, including posting of fees;
solicitation and advertising practices;
currency and suspicious activity reporting;
recording and reporting of certain financial transactions;
privacy of personal customer information;
the types of products and services that we may offer;
servicing and collection practices;
approval of licenses; and
locations of our branches.
Due to the highly regulated nature of the consumer finance industry, we are required to comply with a wide
array of federal, state, and local laws and regulations that affect, among other things, the manner in which we
conduct our origination and servicing operations. These laws and regulations directly impact our business and
require constant compliance, monitoring, and internal and external audits. Although we have an enterprise-wide
compliance framework structured to continuously evaluate our activities, compliance with applicable law is
costly and may create operational constraints.
At a federal level, these laws and their implementing regulations include, among others, the Truth in
Lending Act and Regulation Z, the Consumer Financial Protection Act, the Dodd-Frank Act, the Equal Credit
Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Electronic
Funds Transfer Act, the Federal Trade Commission Act, the Servicemembers Civil Relief Act, the Military
Lending Act, the Telephone Consumer Protection Act, and requirements related to unfair, deceptive, or abusive
acts or practices. Many states and local jurisdictions have consumer protection laws analogous to, or in addition
to, those listed above, such as usury laws and state debt collection practices laws that apply to first-party lenders.
These federal, state, and local laws regulate the manner in which consumer finance companies deal with
customers when making loans or conducting other types of financial transactions.
Changes to statutes, regulations, or regulatory policies, including the interpretation, implementation, and
enforcement of statutes, regulations, or policies, could affect us in substantial and unpredictable ways, including
limiting the types of financial services and products that we may offer and increasing the ability of competitors to
offer competing financial services and products. Compliance with laws and regulations requires us to invest
increasingly significant portions of our resources in compliance planning and training, monitoring tools, and
personnel, and requires the time and attention of management. These costs divert capital and focus away from
efforts intended to grow our business. Because these laws and regulations are complex and often subject to
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interpretation, or because of a result of unintended errors, we may, from time to time, inadvertently violate these
laws, regulations, and policies, as each is interpreted by our regulators. If we do not successfully comply with
laws, regulations, or policies, we could be subject to fines, penalties, lawsuits, or judgments, our compliance
costs could increase, our operations could be limited, and we may suffer damage to our reputation. If more
restrictive laws, rules, and regulations are enacted or more restrictive judicial and administrative interpretations
of current laws are issued, compliance with the laws could become more expensive or difficult. Furthermore,
changes in these laws and regulations could require changes in the way we conduct our business, and we cannot
predict the impact such changes would have on our profitability.
The Dodd-Frank Act also may adversely affect the securitization market because it requires, among other
things, that the sponsor of a securitization transaction or a majority-owned affiliate of the sponsor retain not less
than 5% of the credit risk of the assets collateralizing the asset-backed securities. The risk retention requirement
may limit our ability to securitize loans. The impact of the risk retention rule on the asset-backed securities
market remains uncertain. In addition, rules relating to securitizations rated by nationally-recognized statistical
rating agencies require that the findings of any third-party due diligence service providers be made publicly
available at least five (5) business days prior to the first sale of securities, which has led, and will continue to
lead, us to incur additional costs in connection with each securitization.
Our primary regulators are the state regulators for the states in which we operate. We operate each of our
branches under licenses granted to us by these state regulators. State regulators may enter our branches and
conduct audits of our records and practices at any time, with or without notice. If we fail to observe, or are not
able to comply with, applicable legal requirements, we may be forced to discontinue certain product offerings,
which could adversely affect our business, results of operations, and financial condition. In addition, violation of
these laws and regulations could result in fines and other civil and/or criminal penalties, including the suspension
or revocation of our branch licenses, rendering us unable to operate in one or more locations. All of the states in
which we operate have laws governing the interest rates and fees that we can charge and required disclosure
statements, among other restrictions. Violation of these laws could involve penalties requiring the forfeiture of
principal and/or interest and fees that we have charged. Depending on the nature and scope of a violation, fines
and other penalties for noncompliance of applicable requirements could be significant and could have a material
adverse effect on our business, results of operations, and financial condition.
While we believe that we maintain all material licenses and permits required for our current operations and
are in substantial compliance with all applicable federal, state, and local laws and regulations, we may not be
able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory
requirements could have a material adverse effect on our operations. In addition, changes in laws or regulations
applicable to us could subject us to additional licensing, registration, and other regulatory requirements in the
future or could adversely affect our ability to operate or the manner in which we conduct business. Licenses to
open new branches are granted in the discretion of state regulators. Accordingly, licenses may be denied
unexpectedly or for reasons outside of our control. This could hinder our ability to implement our business plans
in a timely manner or at all.
As we enter new markets and develop new products and services, we may become subject to additional
local, state, and federal laws and regulations. For example, although we intend to expand into new states, we may
encounter unexpected regulatory or other difficulties in these new states, including as they relate to securing the
necessary licenses to operate, which may inhibit our growth. As a result, we may not be able to successfully
execute our strategies to grow our revenue and earnings.
We are also subject to potential enforcement, supervision, or other actions that may be brought by state
attorneys general or other state enforcement authorities and other governmental agencies. For example, the
CFPB, state and federal banking regulators, state attorneys general, the Federal Trade Commission, the U.S.
Department of Justice, and federal government agencies have imposed sanctions on consumer loan originators
for practices including, but not limited to, charging borrowers excessive fees, steering borrowers to loans with
Regional Management Corp. | 2018 Annual Report on Form 10-K | 35
higher costs or more onerous terms, imposing higher interest rates than the borrower’s credit risk warrants,
failing to disclose material terms of loans to borrowers, and otherwise engaging in discriminatory or unfair
lending practices or unfair, deceptive, or abusive acts or practices. While we believe we are in substantial
compliance with all applicable federal, state, and local laws and regulations, a contrary determination by a
regulator, and any resulting action, could subject us to civil money penalties, customer remediation, and
increased compliance costs, as well as damage to our reputation and brand and could limit or prohibit our ability
to offer certain products and services or engage in certain business practices.
Additionally, Congress, the states, and regulatory agencies could further regulate the consumer credit
industry in ways that make it more difficult for us to conduct business. Further, changes in the regulatory
application or judicial interpretation of the laws and regulations applicable to financial institutions also could
impact the manner in which we conduct our business. The regulatory environment in which financial institutions
operate has become increasingly complex and robust, and following the financial crisis of 2008, supervisory
efforts to apply relevant laws, regulations, and policies have become more intense. Any of the events described
above could have a material adverse effect on all aspects of our business, results of operations, and financial
condition.
We may become involved in investigations, examinations, and proceedings by government and self-
regulatory agencies, which may result in material adverse consequences to our business, financial condition,
and results of operations.
From time to time, we may become involved in formal and informal reviews, investigations, examinations,
proceedings, and information-gathering requests by federal and state government and self-regulatory agencies.
Should we become subject to such an investigation, examination, or proceeding, the matter could result in
material adverse consequences to us, including, but not limited to, increased compliance costs, adverse
judgments, significant settlements, fines, penalties, injunction, or other actions.
Changes in laws and regulations or interpretations of laws and regulations could negatively impact our
business, results of operations, and financial condition.
The laws and regulations directly affecting our lending activities are constantly under review and are
subject to change. In addition, consumer advocacy groups and various other media sources continue to advocate
for governmental and regulatory action to prohibit or severely restrict various financial products, including the
loan products we offer. Any changes in such laws and regulations, or the implementation, interpretation, or
enforcement of such laws and regulations, could force us to modify, suspend, or cease part or, in the worst case,
all of our existing operations. It is also possible that the scope of federal regulations could change or expand in
such a way as to preempt what has traditionally been state law regulation of our business activities. The
enactment of one or more of such regulatory changes could materially and adversely affect our business, results
of operations, and prospects.
State and federal legislatures and regulators may also seek to impose new requirements or interpret or
enforce existing requirements in new ways. Changes in current laws or regulations or the implementation of new
laws or regulations in the future may restrict our ability to continue our current methods of operation or expand
our operations. For example, on December 10, 2018, legislation referred to as the “Unsolicited Loan Act of
2018” was introduced in the Senate. This legislation would prohibit the practice of directly mailing convenience
checks to potential borrowers. In order for this legislation to progress, it would have to be reintroduced in
Congress, which has not yet occurred. If the Unsolicited Loan Act of 2018 or a similar bill were to be
reintroduced and ultimately become law, we would no longer be permitted to mail convenience check offers to
potential customers, which could materially and adversely affect our business, results of operations, and
prospects.
Additionally, new laws and regulations could subject us to liability for prior operating activities or lower or
eliminate the profitability of operations going forward by, among other things, reducing the amount of interest
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and fees we charge in connection with our loans or limiting the types of insurance and other ancillary products
that we may offer to our customers. If these or other factors lead us to close our branches in a state, in addition to
the loss of net revenues attributable to that closing, we would incur closing costs such as lease cancellation
payments and we would have to write off assets that we could no longer use. If we were to suspend rather than
permanently cease our operations in a state, we would also have continuing costs associated with maintaining our
branches and our employees in that state, with little or no revenues to offset those costs.
In addition to state and federal laws and regulations, our business is subject to various local rules and
regulations, such as local zoning regulations. Local zoning boards and other local governing bodies have been
increasingly restricting the permitted locations of consumer finance companies. Any future actions taken to
require special use permits for or impose other restrictions on our ability to provide products could adversely
affect our ability to expand our operations or force us to attempt to relocate existing branches. If we were forced
to relocate any of our branches, in addition to the costs associated with the relocation, we may be required to hire
new employees in the new areas, which may adversely impact the operations of those branches. Relocation of an
existing branch may also hinder our collection abilities, as our business model relies in part on the location of our
branches being close to where our customers live in order to successfully collect on outstanding loans.
Changes in laws or regulations may have a material adverse effect on all aspects of our business in a
particular state and on our overall business, results of operations, and financial condition.
The Dodd-Frank Act authorizes the CFPB to adopt rules and undertake supervisory and enforcement
activity that could potentially have a serious impact on our ability to offer installment loans or otherwise
materially and adversely affect our operations and financial performance.
Title X of the Dodd-Frank Act establishes the CFPB, which became operational on July 21, 2011. Under
the Dodd-Frank Act, the CFPB has regulatory, supervisory, and enforcement powers over providers of consumer
financial products that we offer, including explicit supervisory authority to examine and require registration of
installment lenders such as ourselves. Included in the powers afforded to the CFPB is the authority to adopt rules
describing specified acts and practices as being “unfair,” “deceptive,” or “abusive,” and hence unlawful.
Specifically, the CFPB has the authority to declare an act or practice abusive if it, among other things, materially
interferes with the ability of a consumer to understand a term or condition of a consumer financial product or
service or takes unreasonable advantage of a lack of understanding on the part of the consumer of the product or
service.
Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits,
some consumer advocacy groups have suggested that certain forms of alternative consumer finance products,
such as traditional installment loans, should be a regulatory priority, and it is possible that the CFPB could
propose and adopt rules making the products that we offer materially less profitable or impractical. Further, the
CFPB may target specific features of loans or loan practices, such as refinancings, by rulemaking that could
cause us to cease offering certain products or cease engaging in certain practices. The CFPB could also adopt
rules imposing new and potentially burdensome requirements and limitations with respect to any of our current
or future products or lines of business or on our methods of servicing our loans. Any such rules could have a
material adverse effect on our business, results of operation, and financial condition.
The Dodd-Frank Act also gives the CFPB the authority to examine and regulate entities it classifies as a
“larger participant of a market for other consumer financial products or services.” In the past, the CFPB has
indicated that it may in the future issue a proposed rule defining larger participants in the installment lending
market. The CFPB has not yet issued a “larger participant” rule applicable to us. However, if in the future we are
covered by a final larger participant rule for the installment lending market, we will be subject to related CFPB
supervisory examinations.
In addition to the Dodd-Frank Act’s grant of regulatory powers to the CFPB, the Dodd-Frank Act gives the
CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial
Regional Management Corp. | 2018 Annual Report on Form 10-K | 37
laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution
or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties ranging from a
maximum of $5,639 per day for minor violations of federal consumer financial laws (including the CFPB’s own
rules) to $28,195 per day for reckless violations and $1,127,799 per day for knowing violations. If we are subject
to such administrative proceedings, litigation, orders, or monetary penalties in the future, it could have a material
adverse effect on our operations and financial performance. Also, where a company has violated Title X of the
Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and
state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for
civil penalties). If the CFPB or one or more state officials find that we have violated the foregoing laws, they
could exercise their enforcement powers in ways that would have a material adverse effect on us.
In addition to preexisting enforcement rights for state attorneys general, the Dodd-Frank Act gives
attorneys general authority to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank
Act’s authority. In conducting an investigation, the CFPB or state attorneys general may issue a civil
investigative demand requiring a target company to prepare and submit, among other items, documents, written
reports, answers to interrogatories, and deposition testimony. If we are subject to investigation, the required
response could result in substantial costs and a diversion of our management’s attention and resources. In
addition, the market price of our common stock could decline as a result of the initiation of a CFPB investigation
of our company or even the perception that such an investigation could occur, even in the absence of any finding
by the CFPB that we have violated any state or federal law.
Although many of the regulations implementing portions of the Dodd-Frank Act have been promulgated,
we are still unable to predict how this significant legislation may be interpreted and enforced or the full extent to
which implementing regulations and supervisory policies may affect us. Finally, President Donald Trump and the
Congressional majority have indicated that the Dodd-Frank Act will be under further scrutiny and some of the
provisions of the Dodd-Frank Act and rules promulgated thereunder, including those provisions establishing the
CFPB and the rules and regulations proposed and enacted by the CFPB, may be revised, repealed, or amended,
but there can be no assurance that future reforms will not significantly and adversely impact our business,
financial condition, and results of operations.
We sell certain of our loans, including, in some instances, charged-off loans and loans where the
borrower is in default. This practice could subject us to heightened regulatory scrutiny, expose us to legal
action, cause us to incur losses, and/or limit or impede our collection activity.
As part of our business model, we have purchased and sold, and may in the future purchase and sell, some
of our finance receivables, including loans that have been charged-off and loans where the borrower is in default.
The CFPB and other regulators recently have significantly increased their scrutiny of debt sales, especially
delinquent and charged-off debt. The CFPB has criticized sellers of debt for insufficient documentation to
support and verify the validity or amount of the debt. It has also criticized debt collectors for, among other things,
collection tactics, attempting to collect debts that are no longer valid, misrepresenting the amount of the debt, not
having sufficient documentation to verify the validity or amount of the debt, and failing to obtain or maintain
proper licenses. Accordingly, our sales of loans could expose us to lawsuits or fines by regulators if we do not
have sufficient documentation to support and verify the validity and amount of the loans underlying the
transactions, or if we or purchasers of our loans use collection methods that are viewed as unfair, deceptive, or
abusive. In addition, our collections could suffer and we may incur additional expenses if we are required to
change collection practices or stop collecting on certain debts as a result of a lawsuit or action on the part of
regulators.
Our use of third-party vendors is subject to increasing regulatory attention.
The CFPB and other regulators have issued regulatory guidance that has focused on the need for financial
institutions to oversee their business relationships with service providers in a manner that ensures such service
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providers comply with applicable law. This results in increased due diligence and ongoing monitoring of third-
party vendor relationships, thus increasing the scope of management involvement and decreasing the benefit that
we receive from using third-party vendors. Moreover, if regulators conclude that we have not met the heightened
standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary
penalties, supervisory orders to cease and desist, or other remedial actions, which could have an adverse effect on
our business, financial condition, and operating results
We are subject to government regulations concerning our hourly and our other employees, including
minimum wage, overtime, and health care laws.
We are subject to applicable rules and regulations relating to our relationship with our employees,
including minimum wage and break requirements, health benefits, unemployment and sales taxes, overtime, and
working conditions and immigration status. Legislated increases in the federal minimum wage and increases in
additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates,
compliance costs and fines, as well as the cost of litigation in connection with these regulations, would increase
our labor costs. Unionizing and collective bargaining efforts have received increased attention nationwide in
recent periods. Should our employees become represented by unions, we would be obligated to bargain with
those unions with respect to wages, hours, and other terms and conditions of employment, which is likely to
increase our labor costs. Moreover, as part of the process of union organizing and collective bargaining, strikes
and other work stoppages may occur, which would cause disruption to our business. Similarly, many employers
nationally in similar retail environments have been subject to actions brought by governmental agencies and
private individuals under wage-hour laws on a variety of claims, such as improper classification of workers as
exempt from overtime pay requirements and failure to pay overtime wages properly, with such actions
sometimes brought as class actions. These actions can result in material liabilities and expenses. Should we be
subject to employment litigation, such as actions involving wage-hour, overtime, break, and working time, it may
distract our management from business matters and result in increased labor costs. In addition, we currently
sponsor employer-subsidized premiums for major medical programs for eligible personnel who elect health care
coverage through our insurance programs. As a result of regulatory changes, we may not be able to continue to
offer health care coverage to our employees on affordable terms or at all and subsequently may face increased
difficulty in hiring and retaining employees. If we are unable to locate, attract, train, or retain qualified personnel,
or if our costs of labor increase significantly, our business, results of operations, and financial condition may be
adversely affected.
Our stock price or results of operations could be adversely affected by media and public perception of
installment loans and of legislative and regulatory developments affecting activities within the installment
lending sector.
Consumer advocacy groups and various media sources continue to criticize alternative financial services
providers (such as payday and title lenders, check advance companies, and pawnshops). These critics frequently
characterize such alternative financial services providers as predatory or abusive toward consumers. If these
persons were to criticize the products that we offer, it could result in further regulation of our business and could
negatively impact our relationships with existing borrowers and efforts to attract new borrowers. Furthermore,
our industry is highly regulated, and announcements regarding new or expected governmental and regulatory
action in the alternative financial services sector may adversely impact our stock price and perceptions of our
business even if such actions are not targeted at our operations and do not directly impact us.
Legal proceedings to which we may become subject may have a material adverse impact on our
financial position and results of operations.
Like many companies in our industry, we are from time to time involved in various legal proceedings and
subject to claims and other actions related to our business activities brought by borrowers and others. All such
legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation is often
Regional Management Corp. | 2018 Annual Report on Form 10-K | 39
expensive, time-consuming, disruptive to our operations and resources, and distracting to management. If
resolved against us, such legal proceedings could result in excessive verdicts and judgments, injunctive relief,
equitable relief, and other adverse consequences that may affect our financial condition and how we operate our
business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we operate
our business. Future court decisions, alternative dispute resolution awards, business expansion, or legislative
activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial
non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage,
there can be no assurance that such coverage will cover any particular verdict, judgment, or settlement that may
be entered against us, that such coverage will prove to be adequate, or that such coverage will continue to remain
available on acceptable terms, if at all. If in any legal proceeding we incur liability or defense costs that exceed
our insurance coverage or that are not within the scope of our insurance coverage, it could have a material
adverse effect on our business, financial condition, and results of operations.
Current and proposed regulation related to consumer privacy, data protection, and information security
could increase our costs.
We are subject to a number of federal and state consumer privacy, data protection, and information security
laws and regulations. Moreover, various federal and state regulatory agencies require us to notify customers in
the event of a security breach. Federal and state legislators and regulators are increasingly pursuing new
guidance, laws, and regulations. Compliance with current or future customer privacy, data protection, and
information security laws and regulations could result in higher compliance, technology, or other operating costs.
Any violations of these laws and regulations may require us to change our business practices or operational
structure, and could subject us to legal claims, monetary penalties, sanctions, and the obligation to indemnify
and/or notify customers or take other remedial actions.
U.S. federal income tax reform may impact our financial results in unexpected ways or may otherwise
have a material adverse impact on our financial position, results of operations, and cash flows.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”) that
significantly reformed the Internal Revenue Code of 1986, as amended. The Tax Act contains significant changes
to corporate taxation, including a reduction of the corporate tax rate from 35% to 21%, a limitation on the tax
deduction for interest expense to 30% of earnings (except for certain small businesses), a limitation on the
deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss
carrybacks, immediate deductions for certain new investments instead of deductions for depreciation expense
over time, and modifying or repealing many business deductions and credits. While our accounting for
provisional adjustments in the 2017 financial statements for impacts of the Tax Act was completed in 2018, the
Internal Revenue Service did not issue guidance on all elements of the Tax Act in 2018. Accordingly, the overall
impact of the Tax Act is uncertain and the ultimate impact may prove to be inconsistent with our current
expectations. As a result, the Company’s financial position, results of operations, and cash flows could be
adversely affected by the Tax Act, the interpretation and administration of the Tax Act, and/or any future tax
reform legislation.
In addition, the Tax Act, its implementing regulations, and associated regulatory guidance significantly
changed certain aspects of individual taxation, including tax rates and employer tax withholding requirements.
Our customers often utilize income tax refunds in part to make payments on their loans with us, which we
believe materially impacts the delinquency levels in our loan portfolio in the first quarter of each year. As a result
of the Tax Act, beginning in 2019, our customers may receive an income tax refund that is smaller than the
refund that they expect or to which they have become accustomed, or our customers may receive no income tax
refund and instead owe additional tax payments. If this were to occur, our customers would have fewer financial
resources to make payments on their loans with us. As a result, we could experience higher delinquencies and
losses in our loan portfolio, which would adversely affect our financial position, results of operations, and cash
flows.
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Risks Related to the Ownership of Our Common Stock
If securities or industry analysts do not publish research or reports about our business, or if they
downgrade their recommendations regarding our common stock, our stock price and trading volume could
decline.
The trading market for our common stock is influenced by the research and reports that industry or
securities analysts publish about us or our business. If any of the analysts who cover us downgrades our common
stock or publishes inaccurate or unfavorable research about our business, our common stock price may decline. If
analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause our common stock price or trading volume to decline and our common stock
to be less liquid.
The market price of shares of our common stock may continue to be volatile, which could cause the
value of your investment to decline.
The market price of our common stock has been highly volatile and could be subject to wide fluctuations.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as
well as general economic, market, or political conditions, could reduce the market price of shares of our common
stock in spite of our operating performance. In addition, our operating results and the market price of our
common stock could be below the expectations of public market analysts and investors due to a number of
potential factors, including variations in our quarterly operating results, additions or departures of key
management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our
industry, litigation and government investigations, changes or proposed changes in laws or regulations or
differing interpretations or enforcement thereof affecting our business, adverse market reaction to any
indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar
companies, speculation in the press or investment community, announcements by our competitors of significant
contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments, adverse
publicity about the industries we participate in, or individual scandals.
We have no current plans to pay cash dividends on our common stock for the foreseeable future.
We do not expect to pay cash dividends for the foreseeable future. Instead, we intend to retain future
earnings, if any, for future operation, expansion, and debt repayment. The declaration, amount, and payment of
any future cash dividends on shares of common stock will be at the discretion of our Board of Directors. Our
Board of Directors may take into account general and economic conditions, our financial condition and results of
operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal,
tax, and regulatory restrictions and implications on the payment of cash dividends by us to our stockholders or by
our subsidiaries to us, and such other factors as our Board of Directors may deem relevant. In addition, our
ability to pay cash dividends may be limited by covenants of any existing and future outstanding indebtedness we
or our subsidiaries incur, including our senior revolving credit facility. As a result, investors may need to rely on
sales of their common stock after price appreciation, which may not occur, as the only way to realize future gains
on their investment.
Your stock ownership may be diluted by the future issuance of additional common stock in connection
with our incentive plans, acquisitions, or otherwise.
We have approximately 987 million shares of common stock authorized but unissued, as of March 7, 2019.
Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and
options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms
and conditions established by our Board of Directors in its discretion, whether in connection with acquisitions or
otherwise. Our stockholders previously approved the Regional Management Corp. 2015 Long-Term Incentive
Plan (as amended and/or restated, the “2015 Plan”). Subject to adjustments as provided in the 2015 Plan, the
maximum aggregate number of shares of our common stock that may be issued under the 2015 Plan may not
Regional Management Corp. | 2018 Annual Report on Form 10-K | 41
exceed the sum of (a) 1,550,000 shares plus (b) any shares (i) remaining available for the grant of awards as of
the effective date under the 2007 Management Incentive Plan (the “2007 Plan”) or the 2011 Stock Incentive Plan
(the “2011 Plan”), and/or (ii) subject to an award granted under the 2007 Plan or the 2011 Plan, which award is
forfeited, cancelled, terminated, expires or lapses. We have 885,742 shares available for issuance under the 2015
Plan, as of March 7, 2019. In addition, our Board may recommend in the future that our stockholders approve
new stock plans. Any common stock that we issue, including under our 2015 Plan or other equity incentive plans
that we may adopt in the future, would dilute the percentage ownership held by our stockholders. In addition, the
market price of our common stock could decline as a result of sales of a large number of shares of common stock
in the market or the perception that such sales could occur. These sales, or the possibility that these sales may
occur, also might make it more difficult for us to issue equity securities in the future at a time and at a price that
we deem appropriate.
Anti-takeover provisions in our charter documents and applicable state law might discourage or delay
acquisition attempts for us that you might consider favorable.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions
that may make the acquisition of our company more difficult without the approval of our Board of Directors.
Among other things, these provisions:
•
•
•
•
authorize the issuance of undesignated preferred stock, the terms of which may be established and the
shares of which may be issued without stockholder approval, and which may include super voting,
special approval, dividend, or other rights or preferences superior to the rights of the holders of
common stock;
prohibit stockholder action by written consent, which will require all stockholder actions to be taken at
a meeting of our stockholders;
provide that the Board of Directors is expressly authorized to make, alter, or repeal our bylaws and that
our stockholders may only amend our bylaws with the approval of 80% or more of all of the
outstanding shares of our capital stock entitled to vote; and
establish advance notice requirements for nominations for elections to our Board of Directors or for
proposing matters that can be acted upon by stockholders at stockholder meetings.
In addition, certain states require the approval of a state regulator for the acquisition, directly or indirectly,
of more than a certain amount of the voting or common stock of a consumer finance company. The overall effect
of these laws is to make it more difficult to acquire a consumer finance company than it might be to acquire
control of a nonregulated corporation.
Furthermore, as a Delaware corporation, we are also subject to provisions of Delaware law, which may
impair a takeover attempt that our stockholders may find beneficial. These anti-takeover provisions and other
provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of
our company, including actions that our stockholders may deem advantageous, or negatively affect the trading
price of our common stock. These provisions could also discourage proxy contests and make it more difficult for
you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you
desire.
Our amended and restated certificate of incorporation contains a provision renouncing our interest and
expectancy in certain corporate opportunities identified by our non-employee directors and their affiliates.
Certain of our non-employee directors and their affiliates are in the business of providing buyout capital
and growth capital to developing companies and may acquire interests in businesses that directly or indirectly
compete with certain portions of our business. Our amended and restated certificate of incorporation provides for
the allocation of certain corporate opportunities between us, on the one hand, and certain of our non-employee
Regional Management Corp. | 2018 Annual Report on Form 10-K | 42
directors and their affiliates, on the other hand. As set forth in our amended and restated certificate of
incorporation, such non-employee directors and their affiliates shall not have any duty to refrain from engaging,
directly or indirectly, in the same business activities or similar business activities or lines of business in which we
operate. Therefore, a non-employee director of our company may pursue certain acquisition opportunities that
may be complementary to our business and, as a result, such acquisition opportunities may not be available to us.
These potential conflicts of interest could have a material adverse effect on our business, financial condition,
results of operations, or prospects if attractive corporate opportunities are allocated by such non-employee
directors to themselves or their other affiliates instead of to us.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Our headquarters operations are located in an approximately 51,700 square foot leased facility in Greer,
South Carolina, a town located outside of Greenville, South Carolina. As of March 7, 2019, each of our 360
branches is leased under fixed term lease agreements. Our branches are located in 11 states throughout the
Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States, and the average branch size is
approximately 1,576 square feet.
In the opinion of management, our properties have been well-maintained, are in sound operating condition,
and contain all equipment and facilities necessary to operate at present levels. We believe that all of our facilities
are suitable and adequate for our present purposes. Our only reportable segment, which is our consumer finance
segment, uses the properties described in this Part I, Item 2, “Properties.”
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings and related actions that have arisen in the ordinary
course of its business that have not been fully adjudicated. The Company’s management does not believe that
these matters, when ultimately concluded and determined, will have a material adverse effect on its financial
condition, liquidity, or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock has been listed on the New York Stock Exchange (the “NYSE”) under the symbol
“RM” since March 28, 2012. The last reported sale price of our common stock on the NYSE on March 7, 2019,
was $25.96 per share.
Holders
As of March 7, 2019, there were 54 registered holders of our common stock. Because many of the shares
of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to
determine the exact number of beneficial stockholders represented by those record holders, but we believe that
there were approximately 2,030 beneficial owners of our common stock as of March 1, 2019.
Non-Affiliate Ownership
For purposes of calculating the aggregate market value of shares of our common stock held by non-affiliates,
as set forth on the cover page of this Annual Report on Form 10-K, we have assumed that all outstanding shares are
held by non-affiliates, except for shares held by each of our executive officers, directors, and 5% or greater
stockholders as of June 30, 2018. In the case of 5% or greater stockholders, we have not deemed such stockholders
to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any
control over our company or unless they hold 10% or more of our outstanding common stock. These assumptions
should not be deemed to constitute an admission that all executive officers, directors, and 5% or greater
stockholders are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be
affiliates of our company. Further information concerning shareholdings of our officers, directors, and principal
stockholders is incorporated by reference in Part III, Item 12, “Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters” of this Annual Report on Form 10-K.
Dividends; Stock Repurchases
We have not paid any cash dividends since our initial public offering in 2012, and we have no current plans
to pay any cash dividends on our common stock for the foreseeable future. In 2016, we repurchased
approximately $25 million of our common stock at a weighted-average price of $16.17 per share. Other than our
2016 stock repurchase program, which was completed in June 2016, we have historically retained earnings for
future operations, expansion, and debt repayment.
The declaration, amount, and payment of any future cash dividends on shares of common stock and/or
repurchases of common stock will be at the discretion of our Board of Directors. Our Board of Directors may
take into account general and economic conditions; our financial condition and results of operations; our
available cash and current and anticipated cash needs; capital requirements; contractual, legal, tax, and regulatory
restrictions and implications on the payment of cash dividends by us to our stockholders or by our subsidiaries to
us; and such other factors as our Board of Directors may deem relevant. Our amended and restated senior
revolving credit facility includes a provision restricting our ability to pay dividends on our common stock based
upon, among other things, our net income and hypothetical availability under the credit facility. Likewise, certain
of our credit facilities restrict certain of our wholly-owned subsidiaries from paying dividends to us, subject to
certain exceptions.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 45
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and
Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be
incorporated by reference into any filing of the Company under the Securities Act of 1933.
The following graph shows a comparison of the cumulative total return for our common stock, the NYSE
Composite Index, and the NYSE Financial Index for the five years ended December 31, 2018. The graph
assumes that $100 was invested at the market close on December 31, 2013, in the common stock of the
Company, the NYSE Composite Index, and the NYSE Financial Index, and data for the NYSE Composite Index
and the NYSE Financial Index assumes reinvestments of dividends. The stock price performance of the
following graph is not necessarily indicative of future stock price performance.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 46
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ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated historical financial data for the periods set forth below are derived from audited
consolidated financial statements. We derived the selected historical consolidated statement of income data for
each of the years ended December 31, 2018, 2017, and 2016 and the selected historical consolidated balance
sheet data as of December 31, 2018 and 2017 from our audited consolidated financial statements, which appear
in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We have
derived the selected historical consolidated statement of income data for the years ended December 31, 2015 and
2014 and the selected historical consolidated balance sheet data as of December 31, 2016, 2015, and 2014 from
our audited financial statements, which do not appear elsewhere in this Annual Report on Form 10-K.
The following selected consolidated financial data should be read in conjunction with our consolidated
financial statements, the related notes, and Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. The historical
results are not necessarily indicative of the results to be expected for any future period.
In thousands, except per share data
2018
2017
2016
2015
2014
Year Ended December 31,
Consolidated Statements of Income Data:
Revenue
Interest and fee income . . . . . . . . . . . . . . . . . . . .
Insurance income, net, and other income . . . . . . .
$280,121
26,585
$249,034
23,425
$220,963
19,555
$195,794
21,512
$184,797
19,922
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306,706
272,459
240,518
217,306
204,719
Expenses
Provision for credit losses . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
87,056
140,284
33,464
77,339
130,955
23,908
63,014
118,632
19,924
47,348
115,598
16,221
69,057
96,776
14,947
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
260,804
232,202
201,570
179,167
180,780
Income before income taxes . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,902
10,557
40,257
10,294
38,948
14,917
38,139
14,774
23,939
9,137
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35,345
$ 29,963
$ 24,031
$ 23,365
$ 14,802
Earnings per Share Data:
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . .
Basic weighted-average shares . . . . . . . . . . . . . . . . . . .
Diluted weighted-average shares . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet Data (at period end):
Finance receivables(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . .
$
$
3.03
2.93
11,655
12,078
$
$
2.59
2.54
11,551
11,783
$
$
2.03
1.99
11,824
12,085
$
$
1.82
1.79
12,849
13,074
$
$
1.17
1.14
12,701
12,951
$932,243
(58,300)
$817,463
(48,910)
$717,775
(41,250)
$628,444
(37,452)
$546,192
(40,511)
Net finance receivables(2) . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . .
$873,943
956,395
660,507
677,234
$279,161
$768,553
829,483
571,496
590,072
$239,411
$676,525
712,224
491,678
504,749
$207,475
$590,992
626,373
411,177
421,146
$205,227
$505,681
529,401
341,419
351,078
178,323
(1) Finance receivables equal the total amount due from the customer, net of unearned finance charges and
insurance premiums.
(2) Net finance receivables equal the total amount due from the customer, net of unearned finance charges,
insurance premiums, and allowance for credit losses.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 47
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.
We operate under the name “Regional Finance” in 359 branch locations across 11 states in the Southeastern,
Southwestern, Mid-Atlantic, and Midwestern United States, serving 401,500 active accounts, as of December 31,
2018. 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. Our loans are sourced
through our multiple channel platform, which includes our branches, centrally-managed direct mail campaigns,
digital partners, retailers, 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. This provides us with frequent
in-person 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 loan portfolio risk, while
providing our customers with attractive and easy-to-understand loan products that serve their varied financial
needs.
Our products include small, large, and retail installment loans:
•
•
Small Loans (≤$2,500) – As of December 31, 2018, we had 276.8 thousand small installment loans
outstanding, representing $437.7 million in finance receivables. This included 99.4 thousand small loan
convenience checks, representing $143.5 million in finance receivables.
Large Loans (>$2,500) – As of December 31, 2018, we had 99.8 thousand large installment loans
outstanding, representing $438.0 million in finance receivables. This included 3.4 thousand large loan
convenience checks, representing $9.8 million in finance receivables.
• Retail Loans – As of December 31, 2018, we had 21.2 thousand retail purchase loans outstanding,
representing $30.4 million in finance receivables.
• Optional Insurance Products – We offer optional payment and collateral protection insurance to our
direct loan customers.
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Small and large installment loans are our core loan products and will be the drivers of our future growth.
We ceased originating automobile purchase loans in November 2017 to focus on growing our core loan portfolio,
but we continue to own and service the automobile loans that we previously originated. As of December 31,
2018, we had approximately 3.7 thousand automobile loans outstanding, representing $26.2 million in finance
receivables. Our primary sources of revenue are interest and fee income from our loan products, of which interest
and fees relating to small and large 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.”
Factors Affecting Our Results of Operations
Our business is driven 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 small and large 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. With the exception of retail loans, 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 quarter of the year and rise throughout the remainder of the fiscal year. Consequently, we
experience seasonal fluctuations in our operating results and cash needs.
Growth in Loan Portfolio. The revenue that we derive from interest and fees is largely driven by the
balance of loans that we originate and purchase. Average finance receivables grew 14.8% from $572.8 million in
2015 to $657.4 million in 2016, grew 13.2% to $744.2 million in 2017, and grew 14.7% to $853.8 million in
2018. We source our loans through our branches, direct mail program, retail partners, digital partners, and our
consumer website. Our loans are made almost exclusively in geographic markets served by our network of
branches. Increasing the number of loans per branch and the number of branches we operate allows us to increase
the number of loans that we are able to service. We opened 17, 3, and 8 net new branches in 2018, 2017, and
2016, respectively. We believe that we have the opportunity to add as many as 700 additional branches in states
where it is currently favorable for us to conduct business, and we have plans to continue to grow our branch
network.
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. The allowance for credit losses calculation uses the current delinquency
profile and historical delinquency roll rates as key data points in estimating the allowance. We believe that the
primary underlying factors driving the provision for credit losses for each loan type are our underwriting
standards, the general economic conditions in the areas in which we conduct business, loan portfolio growth, and
the effectiveness of our collection efforts. In addition, the market for repossessed automobiles at auction is
another underlying factor that we believe influences the provision for credit losses for automobile purchase loans
and, to a lesser extent, large loans. We monitor these factors, and the amount and past due status of all loans one
or more days past due, to identify trends that might require us to modify the allowance for credit losses.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 49
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, we have purchased interest rate cap contracts.
As of December 31, 2018, we held four interest rate cap contracts with an aggregate notional principal amount of
$400.0 million. The interest rate caps have maturities of March 2019 ($50.0 million, 2.50% strike rate), April
2020 ($100.0 million, 3.25% strike rate), June 2020 ($50.0 million, 2.50% strike rate), and April 2021
($200.0 million, 3.50% strike rate). As of December 31, 2018, the one-month LIBOR was 2.50%. When the
one-month LIBOR exceeds the strike rate, the counterparty reimburses us for the excess over the strike rate. No
payment is required by us or the counterparty when the one-month LIBOR is below the strike rate. In addition,
the interest rate on a portion of our long-term debt (the amortizing loan, RMIT 2018-1 securitization, and RMIT
2018-2 securitization (each as described below)) is fixed. As of December 31, 2018, 45.8% of our long-term debt
was at a fixed rate.
Operating Costs. Our financial results are impacted by the costs of operations and home office functions.
Those costs are included in general and administrative expenses on our consolidated statements of income. Our
receivable efficiency ratio (sum of general and administrative expenses divided by average finance receivables)
was 16.4% for 2018, compared to 17.6% in 2017 and 18.0% in 2016. We believe that this ratio is generally in
line with industry standards for companies of our size, and we expect that it will continue to decline in future
years as we continue to grow our loan portfolio and control expense growth.
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 accrued to 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. 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 home office or branch administrative costs associated
with managing our insurance operations, managing our captive insurance company, marketing and selling
insurance products, legal and compliance review, or internal audits. All of these unallocated administrative costs,
which management estimates were approximately $6.7 million in 2018, are included in general and
administrative expenses in our consolidated statement of income.
In recent years, as large loans have become a larger percentage of our loan portfolio, the severity of
non-file insurance claims has increased and non-file insurance claims expenses have exceeded non-file insurance
fees. The resulting net loss from the non-file insurance product has been reflected in our insurance income, net.
We have evaluated various ways to lower our non-file insurance claims, and we reduced our utilization of
non-file insurance beginning in the fourth quarter of 2018. This policy change will cause substantially offsetting
increases to insurance income, net and net credit losses in future years. Therefore, we do not expect this change
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in policy to impact our profitability in future years. For additional information regarding this policy change,
including its impact on our allowance for credit losses in 2018, 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.”
As reinsurer, we maintain cash reserves for life insurance claims in an amount determined by the
unaffiliated insurance company. As of December 31, 2018, the restricted cash balance for these cash reserves was
$7.1 million. 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, fees for
extending the due date of a loan, returned check charges, and commissions earned from the sale of an auto club
product 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 estimated losses on the
related finance receivable portfolio. Credit loss experience, 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. Our provision for credit losses fluctuates
so that we maintain an adequate credit loss allowance that reflects forecasted future credit losses over the
estimated loss emergence period (the interval of time between the event that caused a borrower to default and our
recording of the credit loss) for each finance receivable type. Changes in our delinquency and net credit loss rates
may result in changes to our provision for credit losses. Substantial adjustments to the allowance may be
necessary if there are significant changes in economic conditions or loan portfolio performance.
General and Administrative Expenses. Our general and administrative expenses are comprised of four
categories: personnel, occupancy, marketing, and other. We measure our general and administrative expenses as
a percentage of average finance receivables, which we refer to as our receivable efficiency ratio.
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, bonuses, benefits, and related
payroll taxes associated with all of our operations and home office employees.
Our occupancy expenses consist primarily of the cost of renting our facilities, all of which are leased, as
well as the utility, depreciation of leasehold improvements and furniture and fixtures, telecommunication, 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, and maintaining our consumer website,
as well as some local marketing by branches. These costs are expensed as incurred.
Other expenses consist primarily of legal, compliance, audit, and consulting costs, non-employee director
compensation, amortization of software licenses and implementation costs, electronic payment processing costs,
bank service charges, office supplies, and credit bureau charges. We expect legal and compliance costs to remain
elevated due to the regulatory environment in the consumer finance industry. 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 long-term debt,
unused line fees, and amortization of debt issuance costs on long-term debt. Interest expense also includes costs
attributable to the interest rate caps that we use to manage our interest rate risk. Changes in the fair value of the
interest rate caps are reflected in interest expense.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 51
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.
Results of Operations
The following table summarizes our results of operations, both in dollars and as a percentage of average
finance receivables:
Year Ended December 31,
2018
2017
2016
% of
Average
Receivables
% of
Average
Receivables
% of
Average
Receivables
Amount
Amount
Amount
In thousands
Revenue
Interest and fee income . . . . . .
Insurance income, net . . . . . . . .
Other income . . . . . . . . . . . . . .
$280,121
14,793
11,792
32.8% $249,034
13,061
1.7%
10,364
1.4%
33.5% $220,963
9,456
1.8%
10,099
1.3%
Total revenue . . . . . . . . . .
306,706
35.9%
272,459
36.6%
240,518
Expenses
Provision for credit losses . . . .
Personnel
. . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . .
Marketing . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
Total general and
administrative . . . . . . . .
Interest expense . . . . . . . . . . . .
Income before income taxes . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . .
87,065
84,068
22,519
7,745
25,952
140,284
33,464
45,902
10,557
10.2%
9.8%
2.6%
0.9%
3.1%
16.4%
3.9%
5.4%
1.3%
77,339
75,992
21,530
7,128
26,305
130,955
23,908
40,257
10,294
10.4%
10.2%
2.9%
1.0%
3.5%
17.6%
3.2%
5.4%
1.4%
63,014
68,979
20,059
6,837
22,757
118,632
19,924
38,948
14,917
Net income . . . . . . . . . . . . . . . . . . . .
$ 35,345
4.1% $ 29,963
4.0% $ 24,031
33.6%
1.4%
1.6%
36.6%
9.6%
10.5%
3.1%
1.0%
3.4%
18.0%
3.1%
5.9%
2.2%
3.7%
Information explaining the changes in our results of operations from year-to-year is provided in the
following pages.
Comparison of December 31, 2018, Versus December 31, 2017
The following discussion and table describe the changes in finance receivables by product type:
•
•
Small Loans (≤$2,500) – Small loans outstanding increased by $61.9 million, or 16.5%, to
$437.7 million at December 31, 2018, from $375.8 million at December 31, 2017. The increase was
primarily due to increased marketing.
Large Loans (>$2,500) – Large loans outstanding increased by $90.8 million, or 26.1%, to
$438.0 million at December 31, 2018, from $347.2 million at December 31, 2017. The increase was
primarily due to increased marketing and the transition of small loan customers to large loans.
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• Automobile Loans – Automobile loans outstanding decreased by $35.3 million, or 57.4%, to
$26.2 million at December 31, 2018, from $61.4 million at December 31, 2017. We ceased originating
automobile loans in November 2017 to focus on growing our core loan portfolio.
• Retail Loans – Retail loans outstanding decreased $2.6 million, or 7.9%, to $30.4 million at
December 31, 2018, from $33.1 million at December 31, 2017.
In thousands
Finance Receivables by Product
December 31,
2018
December 31,
2017
YoY $
Inc (Dec)
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total core loans . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$437,662
437,998
875,660
26,154
30,429
$375,772
347,218
722,990
61,423
33,050
$ 61,890
90,780
152,670
(35,269)
(2,621)
16.5%
26.1%
21.1%
(57.4)%
(7.9)%
Total finance receivables . . . . . . . . . . . . . . . . . .
$932,243
$817,463
$114,780
14.0%
Number of branches at period end . . . . . . . . . . .
Average finance receivables per branch . . . . . . .
359
2,597
$
342
2,390
$
17
207
$
5.0%
8.7%
Comparison of the Year Ended December 31, 2018, Versus the Year Ended December 31, 2017
Net Income. Net income increased $5.4 million, or 18.0%, to $35.3 million during 2018, from
$30.0 million in 2017. The increase was primarily due to an increase in revenue of $34.2 million, offset by an
increase in provision for credit losses of $9.7 million, an increase in general and administrative expenses of
$9.3 million, and an increase in interest expense of $9.6 million.
Revenue. Total revenue increased $34.2 million, or 12.6%, to $306.7 million in 2018, from $272.5 million
in 2017. The components of revenue are explained in greater detail below.
Interest and Fee Income. Interest and fee income increased $31.1 million, or 12.5%, to
$280.1 million in 2018, from $249.0 million in 2017. The increase was primarily due to a 14.7% increase in
average finance receivables, offset by a 0.7% decrease in average yield.
The following table sets forth the average finance receivables balance and average yield for our loan
products:
In thousands
Average Finance Receivables for the
Year Ended
December 31,
2017
December 31,
2018
YoY %
Inc (Dec)
Average Yields for the Year Ended
December 31,
2018
December 31,
2017
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . .
$391,481
389,919
41,026
31,393
$355,826
278,397
78,317
31,660
10.0%
40.1%
(47.6)%
(0.8)%
Total interest and fee yield . . . . . . .
$853,819
$744,200
14.7%
40.0%
28.5%
15.6%
19.0%
32.8%
42.2%
28.8%
16.3%
18.8%
33.5%
(2.2)%
(0.3)%
(0.7)%
0.2%
(0.7)%
Regional Management Corp. | 2018 Annual Report on Form 10-K | 53
Small loan yields decreased 2.2% compared to 2017 as more of our small loan customers have
originated loans with larger balances and longer maturities, which typically are priced at lower interest rates.
Large loan yields decreased 0.3% compared to 2017. As our large loan portfolio matured in 2018, a greater
amount of accrued interest income was reversed as a reduction of interest and fee income for charged-off
accounts. Automobile loan yields decreased 0.7% compared to 2017. We anticipate that the automobile loan
yields will remain at the current level or decline due to higher-yielding loans paying off or renewing into large
loans, leaving the lower-yielding loans in the liquidating automobile loan portfolio. When compared to 2017,
retail loan yields increased 0.2% as a result of adjusted pricing that reflects current market conditions.
Since we began focusing on large loan growth in early 2015, the large loan portfolio has grown faster
than the rest of our loan products, and we expect that this trend will continue in the future. Over time, large loan
growth will change our product mix, which will reduce our total interest and fee yield.
The following table represents the amount of loan originations and refinancing, net of unearned
finance charges:
In thousands
Net Loans Originated for the Year Ended
December 31,
2018
December 31,
2017
YoY $
Inc (Dec)
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 624,243
409,174
—
26,579
$573,858
355,931
20,331
28,885
$ 50,385
53,243
(20,331)
(2,306)
8.8%
15.0%
(100.0)%
(8.0)%
Total net loans originated . . . . . . . . . . . . . . . . . .
$1,059,996
$979,005
$ 80,991
8.3%
The hurricanes that impacted our branches in September 2018 and August 2017 had an estimated
$2.8 million and $3.0 million negative impact on loan originations in 2018 and 2017, respectively. We believe
that the small loan portfolio experienced most of these impacts.
The following table summarizes the components of the increase in interest and fee income:
In thousands
Components of Increase in Interest and Fee Income
Year Ended December 31, 2018
Compared to Year Ended December 31, 2017 Increase
(Decrease)
Volume
Rate
Volume & Rate
Net
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,036
32,159
(6,073)
(50)
(4,390)
$(7,680)
(930)
(542)
52
4,223
Total increase in interest and fee income . . . . . . . .
$36,682
$(4,877)
$(770)
(372)
258
(1)
167
$(718)
$ 6,586
30,857
(6,357)
1
—
$31,087
The $31.1 million increase in interest and fee income in 2018 compared to 2017 was primarily driven
by finance receivables growth, offset by a decrease in yield, as illustrated in the table above. We expect future
increases in interest and fee income to continue to be driven primarily from growth in our average finance
receivables.
Insurance Income, Net. Insurance income, net increased $1.7 million, or 13.3%, to $14.8 million in
2018, from $13.1 million in 2017. Insurance income, net represented 1.7% and 1.8% of average finance
receivables in 2018 and 2017, respectively. In both 2018 and 2017, personal property insurance premiums
Regional Management Corp. | 2018 Annual Report on Form 10-K | 54
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represented the largest component of aggregate earned insurance premiums and non-file insurance claims
expense represented the largest component of direct insurance expenses.
The following table summarizes the components of insurance income, net:
In thousands
Insurance Premiums and Direct Expenses for the
Year Ended
December 31,
2018
December 31,
2017
YoY $
B(W)
YoY %
B(W)
Earned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims, reserves, and certain direct expenses . . . . .
$ 31,095
(16,302)
$ 25,860
(12,799)
$ 5,235
(3,503)
20.2%
(27.4)%
Insurance income, net
. . . . . . . . . . . . . . . . . . . . . . .
$ 14,793
$ 13,061
$ 1,732
13.3%
In 2018, earned premiums increased by $5.2 million and claims, reserves, and certain direct expenses
increased by $3.5 million, in each case compared to 2017. The increase in earned premiums was primarily due to
loan growth. The increase in claims, reserves, and certain direct expenses was primarily due to higher non-file
insurance claims expense compared to 2017. The increase in non-file insurance claims expense was primarily
due to an increase in the severity of non-file insurance claims. As large loans have become a larger percentage of
our loan portfolio, the severity of non-file insurance claims has increased.
In addition, non-file insurance claims expense was lower in 2017 due to a transition in insurance
carriers during which fewer accounts were covered by non-file insurance. Furthermore, as described above, the
non-file insurance product has been operating at a loss that has been reflected in our insurance income, net.
Effective in the fourth quarter of 2018, we implemented a policy change that reduces the amount of non-file
insurance claims that we file. This policy change causes substantially offsetting increases to insurance income,
net and net credit losses. Therefore, we do not expect this change in policy to impact our profitability in future
periods. This policy change is described in greater detail in 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.” As a result of these factors, $2.9 million and
$4.4 million of non-file insurance claims impacted net credit losses instead of insurance income, net in 2018 and
2017, respectively.
Other Income. Other income increased $1.4 million, or 13.8%, to $11.8 million in 2018, from
$10.4 million in 2017, due to a $1.2 million increase in commissions earned from the sale of our auto club
product and a $0.4 million increase in loan deferral fee income. These increases were offset by a decrease of
$0.2 million in income from late charges. The decrease in late charges was primarily due to large loan customers
with higher credit quality comprising a greater percentage of our total loan portfolio in 2018, compared to 2017,
and our expanded use of electronic payments to reduce early-stage delinquency. As large loans continue to
represent a greater percentage of our total loan portfolio and we continue to leverage electronic payment options,
we expect lower late charges per active account. Other income represented 1.4% and 1.3% of average finance
receivables in 2018 and 2017, respectively.
Provision for Credit Losses. Our provision for credit losses increased $9.7 million, or 12.6%, to
$87.1 million in 2018, from $77.3 million in 2017. The increase was primarily due to an increase in net credit
losses of $8.0 million and a $1.7 million increase in the allowance for credit losses compared to 2017. The
provision for credit losses as a percentage of average finance receivables in 2018 was 10.2%, compared to 10.4%
in 2017. Fiscal 2018 included a 0.4% impact from the net $3.7 million hurricane-related provision and a 0.3%
impact from the $2.9 million increase in net credit losses discussed in the insurance income, net paragraph above.
Fiscal 2017 included a 0.4% impact from the hurricane-related $2.9 million provision and a 0.6% impact from
the $4.4 million increase in net credit losses discussed in the insurance income, net paragraph above, offset by a
0.1% benefit from the bulk sale of previously charged-off customer accounts in bankruptcy (the “2017 Bulk
Sale”).
Regional Management Corp. | 2018 Annual Report on Form 10-K | 55
The increase in the provision for credit losses is explained in greater detail below.
Hurricane Impact. During 2018, our provision for credit losses was impacted by a $3.9 million
increase in the allowance for credit losses related to estimated incremental credit losses on customer accounts
impacted by a hurricane. In late 2018, we released $0.3 million of the hurricane allowance for credit losses to
cover hurricane-related net credit losses. As of December 31, 2018, the allowance for credit losses related to the
hurricane was $3.6 million. During 2017, our provision for credit losses was impacted by a $3.0 million increase
in the allowance for credit losses related to estimated incremental credit losses on customer accounts impacted by
two hurricanes. In late 2017, we released $0.2 million of the hurricane allowance for credit losses to cover
hurricane-related net credit losses. As of December 31, 2017, the allowance for credit losses related to the
hurricanes was $2.8 million.
Bulk Sale. We recognized a recovery of $1.0 million in 2017 from the 2017 Bulk Sale. These
accounts were excluded from prior sales of charged-off loans.
Net Credit Losses. Net credit losses increased $8.0 million, or 11.5%, to $77.7 million in 2018, from
$69.7 million in 2017. The increase was primarily due to a $109.6 million increase in average finance receivables
in 2018. Net credit losses as a percentage of average finance receivables were 9.1% in 2018, compared to 9.4% in
2017. Fiscal 2018 included a 0.2% impact from the $1.7 million increase in net credit losses resulting from the
2017 hurricanes and a 0.3% impact from the $2.9 million increase in net credit losses discussed in the insurance
income, net paragraph above. Fiscal 2017 included a 0.6% impact from the $4.4 million increase in net credit
losses discussed in the insurance income, net paragraph above, offset by a 0.1% benefit from the $1.0 million
2017 Bulk Sale.
The following table provides net credit losses and the benefit to net credit losses associated with
non-file insurance claims payments as a percentage of average finance receivables for the periods indicated:
Non-File Insurance Impact on
Net Credit Loss Rates for the
Year Ended
December 31,
2018
December 31,
2017
Net credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-file benefit
9.1%
1.0%
9.4%
0.8%
We have evaluated various ways to lower our non-file insurance claims, and we decided to reduce
our utilization of non-file insurance beginning in the fourth quarter of 2018. As a result, we expect that the
benefit provided by non-file insurance will decrease by approximately 0.65% as a percentage of average finance
receivables over the next four quarters, resulting in a corresponding increase in our net credit loss rate. Our
allowance for credit losses contains sufficient reserves for this anticipated increase in net 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.” In
addition, due to the decrease in non-file insurance claims, our insurance income, net will increase by an amount
comparable to the anticipated increase in net credit losses, resulting in an income statement offset. Therefore, we
do not expect this policy change to impact our profitability in future periods.
Delinquency Performance. Our December 31, 2018 contractual delinquency as a percentage of total
finance receivables increased to 7.7% from 7.5% as of December 31, 2017, primarily due to credit tightening and
the maturation of our large loan portfolio. Total contractual delinquency as of December 31, 2018 and December
31, 2017 were inclusive of increases of 0.4% and 0.3%, respectively, attributable to the impact of the hurricanes.
We expect that the 2018 hurricane will negatively impact our delinquencies and net credit losses in the first half
of 2018, but we believe that we are fully reserved for such losses.
In mid-2018, we implemented stricter underwriting guidelines, which primarily impacted our large
loan customers. A portion of our existing large loan customers attempted to renew their loans but did not qualify
due to these tighter underwriting guidelines. As a result, some of these accounts became delinquent. We expect
Regional Management Corp. | 2018 Annual Report on Form 10-K | 56
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this credit tightening to increase delinquency and losses in the short-term and decrease delinquency and losses in
the long-term. In addition to delinquencies increasing from tighter underwriting guidelines, we also observed
higher delinquencies from the maturing of our large loan portfolio in 2018. Each of these items contributed to
incremental increases in delinquency rates as of December 31, 2018, compared to December 31, 2017. We also
continue to monitor the impacts of the recent government shutdown and the Tax Act on our customers, including
as to any delay in the processing of tax refunds due to the government shutdown and the size of tax refunds due
to the Tax Act. At this time, we are uncertain whether the government shutdown or the Tax Act will adversely
affect our delinquencies and losses in 2019.
To actively manage the delinquencies and losses of our loan portfolios, we have undertaken a
number of initiatives to drive improved delinquency results in 2019. For example, custom credit scorecards have
been implemented in nine of eleven states as of January 2019. The scorecards provide a significant improvement
over the previous criteria that were used to underwrite small and large loans.
The following tables include delinquency balances by aging category and by product:
In thousands
Contractual Delinquency by Aging
December 31, 2018
December 31, 2017
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 to 29 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,300
754,162
105,920
6.3% $ 48,910
80.9% 669,451
86,533
11.4%
6.0%
81.9%
10.6%
Delinquent accounts:
30 to 59 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60 to 89 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90 to 119 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120 to 149 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150 to 179 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,529
17,382
12,279
10,890
9,081
2.3%
1.9%
1.3%
1.2%
1.0%
18,728
15,297
11,339
8,865
7,250
Total contractual delinquency . . . . . . . . . . . . . . . . . . . . . . .
$ 72,161
7.7% $ 61,479
2.2%
1.9%
1.4%
1.1%
0.9%
7.5%
Total finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .
$932,243
100.0% $817,463
100.0%
In thousands
Contractual Delinquency by Product
December 31, 2018
December 31, 2017
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 40,663
26,814
2,083
2,601
9.3% $ 35,246
18,540
6.1%
4,896
8.0%
2,797
8.5%
Total contractual delinquency . . . . . . . . . . . . . . . . . . . . . . .
$ 72,161
7.7% $ 61,479
9.4%
5.3%
8.0%
8.5%
7.5%
Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in
establishing the allowance for credit losses. The following table sets forth our allowance for credit losses
compared to the related finance receivables as of the end of the periods indicated:
December 31, 2018
December 31, 2017
In thousands
Finance
Receivables
Small loans . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . .
$437,662
437,998
Total core loans . . . . . . . . . .
Automobile loans . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . .
875,660
26,154
30,429
Allowance
for Credit
Losses
$30,759
23,702
54,461
1,893
1,946
Total . . . . . . . . . . . . . . .
$932,243
$58,300
Allowance as a
Percentage
of
Finance
Receivables
7.0%
5.4%
6.2%
7.2%
6.4%
6.3%
Finance
Receivables
$375,772
347,218
722,990
61,423
33,050
Allowance
for Credit
Losses
$24,749
17,548
42,297
4,025
2,588
$817,463
$48,910
Allowance as a
Percentage
of
Finance
Receivables
6.6%
5.1%
5.9%
6.6%
7.8%
6.0%
Regional Management Corp. | 2018 Annual Report on Form 10-K | 57
The allowance for credit losses as a percentage of finance receivables increased to 6.3% as of
December 31, 2018, from 6.0% as of December 31, 2017. The increase was primarily due to a higher
delinquency level as of December 31, 2018, compared to December 31, 2017, and a $0.8 million increase in the
remaining allowance for credit losses on customer accounts impacted by the hurricanes. The remaining
allowance for credit losses on customer accounts impacted by the hurricanes was $3.6 million as of
December 31, 2018.
General and Administrative Expenses. Our general and administrative expenses, comprising expenses for
personnel, occupancy, marketing, and other expenses, increased $9.3 million, or 7.1%, to $140.3 million in 2018
from $131.0 million in 2017. Our receivable efficiency ratio (general and administrative expenses as a
percentage of average finance receivables) decreased to 16.4% in 2018, from 17.6% in 2017. We believe that our
receivable efficiency ratio will continue to decline in future years as we continue to grow our loan portfolio and
control expense growth. 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 increased $8.1 million, or 10.6%, to $84.1 million in 2018, from $76.0 million in 2017. Labor expense
increased $4.7 million primarily due to added headcount in our information technology department, centralized
late-stage collections department, and branches, most of which was added to effectively service active account
growth that has occurred since December 31, 2017. Corporate incentive compensation expense increased
$2.7 million compared to 2017 primarily due to the 2018 annual grant of awards (which have three-year
performance targets) under our long-term incentive plan. Fiscal 2018 was the first year that three annual
outstanding award grants impacted our personnel expense in one year. During 2018, we opened 17 net new
branches, including 13 net new branches that opened in the fourth quarter. These new branches resulted in a net
$0.7 million increase in personnel costs.
Occupancy. Occupancy expenses increased $1.0 million, or 4.6%, to $22.5 million in 2018, from
$21.5 million in 2017. The increase was due to increases in rent and maintenance costs of $0.7 million, computer
support service costs of $0.6 million (offset by a decrease in software amortization in other expense),
depreciation expense of $0.3 million, and $0.2 million in costs related to 17 net new branches. These increases
were offset by a $0.9 million decrease in telecommunication costs due to reduced rates from our service provider.
Marketing. Marketing expenses increased $0.6 million, or 8.7%, to $7.7 million in 2018, from
$7.1 million in 2017. The increase was primarily due to increased investment in our digital marketing channels
and the impact of our 17 net new branches that opened during 2018.
Other Expenses. Other expenses decreased $0.4 million, or 1.3%, to $26.0 million in 2018, from
$26.3 million in 2017. The decrease was primarily due to a $1.0 million decrease in costs related to the
implementation of our loan management system, a $0.7 million decrease in software amortization (offset by an
increase in computer support service costs in occupancy expense), and a $0.9 million decrease in legal and
settlement expenses. These decreases were offset by a $1.0 million increase in electronic payment processing
fees, a $0.7 million increase in loan management system software amortization, and a $0.7 million increase in
collection expense.
Interest Expense. Interest expense on long-term debt increased $9.6 million, or 40.0%, to $33.5 million in
2018, from $23.9 million in 2017. The increase was primarily due to an increase in interest rates and increases in
the average balance of our long-term debt facilities from finance receivable growth, which combined to result in
a $7.5 million increase in interest expense. Additionally, amortization of debt issuance costs increased
$1.3 million, while unused line fees and interest expense related to our rate cap agreements increased
$0.5 million and $0.3 million, respectively. The average cost of our total long-term debt increased 0.93% to
5.66% in 2018, from 4.73% in 2017. The average cost of our long-term debt has increased as we have diversified
our long-term funding sources.
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Income Taxes. Income taxes increased $0.3 million, or 2.6%, to $10.6 million in 2018, from $10.3 million
in 2017. During 2018, tax benefits from the exercise and vesting of share-based awards and research and
development tax credits decreased $1.2 million and $0.3 million, respectively, compared to 2017. A $5.6 million
increase in income before income taxes in 2018 resulted in a $1.2 million increase in federal income taxes
compared to 2017. The Tax Act reduced the corporate federal tax rate from 35% to 21% and made other changes
to U.S. tax law. This decrease in the corporate federal tax rate resulted in a $5.6 million decrease in income taxes
in 2018, compared to 2017. During 2017, the revaluation of net deferred tax liabilities to the newly enacted
federal corporate tax rate resulted in a $3.1 million income tax benefit.
Our effective tax rates were 23.0% and 25.6% in 2018 and 2017, respectively. The tax benefits related to
the exercise and vesting of share-based awards and other items (2017 tax return to provisional estimates) reduced
the 2018 effective tax rate by 0.8% and 0.5%, respectively. The revaluation of the net deferred tax liability
decreased the 2017 effective tax rate by 7.8%. The tax benefits related to the exercise and vesting of share-based
awards and research and development tax credits reduced the 2017 effective tax rate by 4.0% and 1.0%,
respectively. In future years, we expect our effective tax rates to be negatively impacted by changes in the Tax
Act related to the deductibility of executive compensation.
Comparison of December 31, 2017, Versus December 31, 2016
•
The following discussion and table describe the changes in finance receivables by product type:
Small Loans (≤$2,500) – Small loans outstanding increased by $17.3 million, or 4.8%, to
$375.8 million at December 31, 2017, from $358.5 million at December 31, 2016, despite the transition
of many small loan customers to large loans. The growth in receivables in branches opened in 2016 and
2017 contributed to the growth in small loans outstanding.
•
Large Loans (>$2,500) – Large loans outstanding increased by $111.9 million, or 47.5%, to
$347.2 million at December 31, 2017, from $235.3 million at December 31, 2016. The increase was
primarily due to increased marketing and the transition of small loan customers to large loans.
• Automobile Loans – Automobile loans outstanding decreased by $29.0 million, or 32.1%, to
$61.4 million at December 31, 2017, from $90.4 million at December 31, 2016, as we continued to
restructure our automobile loan business to a centralized model during the first 10 months of 2017 and
then determined to cease originating automobile loans in November 2017 to focus on growing our core
loan portfolio.
• Retail Loans – Retail loans outstanding decreased $0.5 million, or 1.4%, to $33.1 million at
December 31, 2017, from $33.5 million at December 31, 2016.
In thousands
Finance Receivables by Product
December 31,
2017
December 31,
2016
YoY $
Inc (Dec)
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total core loans . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$375,772
347,218
722,990
61,423
33,050
$358,471
235,349
593,820
90,432
33,523
$ 17,301
111,869
129,170
(29,009)
(473)
Total finance receivables . . . . . . . . . . . . . . . . . .
$817,463
$717,775
$ 99,688
Number of branches at period end . . . . . . . . . . .
Average finance receivables per branch . . . . . . .
342
2,390
$
339
2,117
$
3
273
$
4.8%
47.5%
21.8%
(32.1)%
(1.4)%
13.9%
0.9%
12.9%
Comparison of the Year Ended December 31, 2017, Versus the Year Ended December 31, 2016
Net Income. Net income increased $5.9 million, or 24.7%, to $30.0 million in 2017, from $24.0 million in
2016. The increase was primarily due to an increase in revenue of $31.9 million and a decrease in income taxes
Regional Management Corp. | 2018 Annual Report on Form 10-K | 59
of $4.6 million, offset by an increase in provision for credit losses of $14.3 million, an increase in general and
administrative expenses of $12.3 million, and an increase in interest expense of $4.0 million.
Revenue. Total revenue increased $31.9 million, or 13.3%, to $272.5 million in 2017, from $240.5 million
in 2016. The components of revenue are explained in greater detail below.
Interest and Fee Income. Interest and fee income increased $28.1 million, or 12.7%, to
$249.0 million in 2017, from $221.0 million in 2016. The increase was primarily due to a 13.2% increase in
average finance receivables, offset by a 0.1% yield decrease.
The following table sets forth the average finance receivables balance and average yield for each of
our loan products:
In thousands
Average Finance Receivables for the Year Ended
Average Yields for the Year Ended
December 31,
2017
December 31,
2016
YoY %
Inc (Dec)
December 31,
2017
December 31,
2016
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . .
$355,826
278,397
78,317
31,660
Total interest and fee yield . . .
$744,200
$334,152
190,855
102,023
30,321
$657,351
6.5%
45.9%
(23.2)%
4.4%
13.2%
42.2%
28.8%
16.3%
18.8%
33.5%
42.5%
28.8%
17.7%
19.2%
33.6%
(0.3)%
0.0%
(1.4)%
(0.4)%
(0.1)%
Small loan yields decreased 0.3% compared to 2016 as more of our small loan customers originated
loans with larger balances and longer maturities, which typically are priced at lower interest rates. Automobile
loan yields decreased 1.4% compared to 2016 due to our revised pricing model for our automobile loan program.
Retail loan yields decreased 0.4% compared to 2016 as a result of adjusted pricing that reflected market
conditions.
The following table represents the amount of loan originations and refinancing, net of unearned
finance charges:
In thousands
Net Loans Originated for the Year Ended
December 31,
2017
December 31,
2016
YoY $
Inc (Dec)
YoY %
Inc (Dec)
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$573,858
355,931
20,331
28,885
$580,936
250,862
37,038
34,629
$ (7,078)
105,069
(16,707)
(5,744)
(1.2)%
41.9%
(45.1)%
(16.6)%
Total net loans originated . . . . . . . . . . . . . . . . . .
$979,005
$903,465
$ 75,540
8.4%
The hurricanes that impacted our branches in August 2017 had an estimated $3.0 million negative
impact on loan originations during 2017. We believe that the small loan portfolio experienced most of this
impact.
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The following table summarizes the components of the increase in interest and fee income:
In thousands
Components of Increase in Interest and Fee Income
Year Ended December 31, 2017
Compared to Year Ended December 31, 2016 Increase
(Decrease)
Volume
Rate
Volume & Rate
Net
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,215
25,220
(4,205)
257
(1,293)
$(1,165)
54
(1,480)
(113)
1,712
Total increase in interest and fee income . . . . . . . .
$29,194
$ (992)
$ (75)
24
344
(5)
(419)
$(131)
$ 7,975
25,298
(5,341)
139
—
$28,071
The $28.1 million increase in interest and fee income in 2017 compared to 2016 was primarily driven
by finance receivables growth, offset by a decrease in yield, as illustrated in the table above.
Insurance Income, Net. Insurance income, net increased $3.6 million, or 38.1%, to $13.1 million in
2017, from $9.5 million in 2016. Insurance income, net represented 1.8% and 1.4% of average finance
receivables in 2017 and 2016, respectively. During 2017 and 2016, personal property insurance premiums
represented the largest component of aggregate earned insurance premiums and non-file insurance claims
expenses represented the largest component of direct insurance expenses.
The following table summarizes the components of insurance income, net:
Insurance Premiums and Direct Expenses for the
Year Ended
In thousands
December 31,
2017
December 31,
2016
Earned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims, reserves, and certain direct expenses . . . . . .
$ 25,860
(12,799)
$ 23,191
(13,735)
Insurance income, net . . . . . . . . . . . . . . . . . . . . . . . .
$ 13,061
$ 9,456
YoY $
B(W)
$2,669
936
$3,605
YoY %
B(W)
11.5%
6.8%
38.1%
In 2017, earned premiums increased by $2.7 million and claims, reserves, and certain direct expenses
decreased by $0.9 million, in each case compared to 2016. The increase in earned premiums was primarily due to
loan growth. The decrease in claims, reserves, and certain direct expenses was primarily due to a transition in
insurance carriers that caused $4.4 million of insurance claims to impact net credit losses instead of insurance
income, offset by an increase in claims expense.
Other Income. Other income, which consisted primarily of late charges, increased $0.3 million, or
2.6%, to $10.4 million in 2017, from $10.1 million in 2016. Other income represented 1.3% of average finance
receivables in 2017, compared to 1.6% of average finance receivables in 2016, with the decrease primarily due to
large loans (with higher credit quality and fewer late fee charges) becoming a greater percentage of our total loan
portfolio in 2017. Our most significant driver for other income is average active accounts. Average active
accounts increased 3.0% in 2017, while average finance receivables increased 13.2%.
Provision for Credit Losses. Our provision for credit losses increased $14.3 million, or 22.7%, to
$77.3 million in 2017, from $63.0 million in 2016. The increase was due to an increase in net credit losses of
$10.5 million and a $3.9 million increase in the allowance for credit losses compared to 2016. The provision for
credit losses represented 10.4% of average finance receivables in 2017 compared to 9.6% of average finance
receivables in 2016. Fiscal 2017 included a 0.4% impact from the net $2.9 million hurricane-related provision
and a 0.6% impact from the shift of $4.4 million in insurance claims into net credit losses during a transition in
our insurance provider, offset by a 0.1% benefit from the $1.0 million 2017 Bulk Sale.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 61
The increase in the provision for credit losses is explained in greater detail below.
Hurricane Impact. During 2017, our provision for credit losses was impacted by a $3.0 million
increase in the allowance for credit losses related to estimated incremental credit losses on customer accounts
impacted by hurricanes. In late 2017, we released $0.2 million of the hurricane allowance for credit losses to
cover hurricane-related net credit losses. As of December 31, 2017, the allowance for credit losses related to the
hurricanes was $2.8 million.
Bulk Sale. We recognized a recovery of $1.0 million from the 2017 Bulk Sale. These accounts were
excluded from prior sales of charged-off loans.
Net Credit Losses. Net credit losses increased $10.5 million, or 17.7%, to $69.7 million in 2017,
from $59.2 million in 2016. The increase was primarily due to an $86.8 million increase in average finance
receivables in 2017 and a shift of $4.4 million in insurance claims into net credit losses during a transition in our
insurance provider, offset by the recovery of $1.0 million from the 2017 Bulk Sale. Net credit losses as a
percentage of average finance receivables were 9.4% in 2017 compared to 9.0% in 2016. Fiscal 2017 included
0.6% from the shift of $4.4 million in insurance claims into net credit losses and a 0.1% benefit from the
$1.0 million 2017 Bulk Sale. To improve future net credit losses, we reduced lending to specific underperforming
segments of our customer base in 2017.
The following table provides net credit losses and the benefit to net credit losses associated with
non-file insurance claims payments as a percentage of average finance receivables for the periods indicated:
Non-File Insurance Impact on
Net Credit Loss Rates for the
Year Ended
December 31,
2017
December 31,
2016
Net credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-file benefit
9.4%
0.8%
9.0%
1.4%
Delinquency Performance. Contractual delinquency as a percentage of total finance receivables
increased to 7.5% (inclusive of an increase of 0.3% attributable to the impact of the hurricanes) on December 31,
2017, from 7.4% as of December 31, 2016. Along with the impact from the hurricanes, our delinquency results
were also elevated due to our loan management system conversion in Texas, which was completed in October
2017. The delinquency increases from the loan management system conversions were temporary and only
impacted the two to three months immediately following the loan management system conversion.
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The following tables include delinquency balances by aging category and by product:
In thousands
Contractual Delinquency by Aging
December 31, 2017
December 31, 2016
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 to 29 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 48,910
669,451
86,533
6.0% $ 41,250
81.9% 587,202
77,106
10.6%
5.7%
81.9%
10.7%
Delinquent accounts:
30 to 59 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60 to 89 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90 to 119 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120 to 149 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150 to 179 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,728
15,297
11,339
8,865
7,250
2.2%
1.9%
1.4%
1.1%
0.9%
16,727
11,641
10,021
8,205
6,873
Total contractual delinquency . . . . . . . . . . . . . . . . . . . . . . .
$ 61,479
7.5% $ 53,467
2.3%
1.6%
1.4%
1.1%
1.0%
7.4%
Total finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .
$817,463
100.0% $717,775
100.0%
In thousands
Contractual Delinquency by Product
December 31, 2017
December 31, 2016
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35,246
18,540
4,896
2,797
9.4% $ 32,955
12,114
5.3%
6,300
8.0%
2,098
8.5%
Total contractual delinquency . . . . . . . . . . . . . . . . . . . . . . .
$ 61,479
7.5% $ 53,467
9.2%
5.1%
7.0%
6.3%
7.4%
Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan categories in
establishing the allowance for credit losses. The following table sets forth our allowance for credit losses
compared to the related finance receivables as of the end of the periods indicated:
December 31, 2017
December 31, 2016
In thousands
Finance
Receivables
Allowance
for Credit
Losses
Allowance as a
Percentage
of
Finance
Receivables
Small loans . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . .
$375,772
347,218
$24,749
17,548
Total core loans . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . .
722,990
61,423
33,050
42,297
4,025
2,588
Total . . . . . . . . . . . . . . . . . . . . .
$817,463
$48,910
6.6%
5.1%
5.9%
6.6%
7.8%
6.0%
Finance
Receivables
Allowance
for Credit
Losses
$358,471
235,349
$21,770
11,460
593,820
90,432
33,523
33,230
5,910
2,110
$717,775
$41,250
Allowance as a
Percentage
of
Finance
Receivables
6.1%
4.9%
5.6%
6.5%
6.3%
5.7%
The allowance as a percentage of finance receivables increased to 6.0% as of December 31, 2017,
from 5.7% as of December 31, 2016. The increase was primarily due to the $2.8 million remaining allowance for
credit losses on customer accounts impacted by the hurricanes.
General and Administrative Expenses. Our general and administrative expenses, comprising expenses for
personnel, occupancy, marketing, and other expenses, increased $12.3 million, or 10.4%, to $131.0 million in
2017 from $118.6 million in 2016. Our receivable efficiency ratio (general and administrative expenses as a
percentage of average finance receivables) decreased to 17.6% during 2017 from 18.0% in 2016. The absolute
dollar increase in general and administrative expenses is explained in greater detail below.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 63
Personnel. The largest component of general and administrative expenses is personnel expense,
which increased $7.0 million, or 10.2%, to $76.0 million in 2017 from $69.0 million in 2016. The increase was
primarily due to a $1.7 million increase from added headcount in our information technology department,
$1.2 million in costs related to building the centralized late-stage collections department, a $2.1 million increase
in branch costs to effectively service active account growth since December 31, 2016, and a $1.7 million increase
in incentive compensation expense primarily due to the 2017 annual grant of awards under our long-term
incentive plan, which have three-year performance targets.
Occupancy. Occupancy expenses increased $1.5 million, or 7.3%, to $21.5 million in 2017 from
$20.1 million in 2016. The increase was due to costs related to the opening of 3 net new branches since
December 31, 2016, branch relocations, and expenses associated with a larger home office building.
Additionally, we frequently experience increases in rent, leasehold improvements, and computer equipment as
we renew existing branch leases.
Marketing. Marketing expenses increased $0.3 million, or 4.3%, to $7.1 million in 2017 from
$6.8 million in 2016. The increase was due to more convenience check mailings, increased direct mail to existing
customers, and expanded digital marketing, partially offset by increased efficiencies in the direct mail
campaigns.
Other Expenses. Other expenses increased $3.5 million, or 15.6%, to $26.3 million in 2017 from
$22.8 million in 2016. The increase was primarily due to a $0.9 million increase in collection expenses, a
$0.9 million increase due to training costs and amortization related to our loan management system, a
$0.9 million increase in electronic payment processing costs, and a $0.8 million increase in various costs related
to finance receivable growth (office supplies, travel costs, training expense, and credit bureau costs) since
December 31, 2016.
Interest Expense. Interest expense on long-term debt increased $4.0 million, or 20.0%, to $23.9 million in
2017 from $19.9 million in 2016. The increase was primarily due to increases in the average balance of our long-
term debt facilities from finance receivable growth, an increase in interest rates, an increase in unused line fees,
and additional debt issuance cost amortization related to both the amended senior revolving credit facility and our
warehouse credit facility. The average cost of our combined revolving credit facilities increased 0.21% to 4.73%
in 2017 from 4.52% in 2016.
Income Taxes. Income taxes decreased $4.6 million, or 31.0%, to $10.3 million in 2017 from
$14.9 million in 2016. The decrease was primarily due to a $3.1 million reduction of a net deferred tax liability
as a result of the Tax Act, $1.6 million in tax benefits related to the exercise and vesting of share-based awards,
and $0.4 million in tax benefits related to research and development tax credits, offset by an increase in income
before income taxes of $1.3 million. In December 2017, the Tax Act was signed into law. This legislation makes
changes to U.S. tax law, including a reduction in the corporate tax rate from 35% to 21%. As a result of the
enacted law, we were required to revalue deferred tax assets and liabilities at the enacted rate. This revaluation
resulted in a benefit of $3.1 million to income tax expense and a corresponding reduction in the deferred tax
liability.
Our effective tax rates were 25.6% and 38.3% in 2017 and 2016, respectively. The reduction of the net
deferred tax liability decreased the 2017 effective tax rate by 7.8%. The tax benefits related to the exercise and
vesting of share-based awards and research and development tax credits reduced the 2017 effective tax rate by
4.0% and 1.0%, respectively.
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. In
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connection with our plans to improve our technology infrastructure and to expand our branch network in future
years, we expect to incur approximately $9.0 million to $12.0 million of expenditures annually. 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 senior revolving credit
facility, revolving warehouse credit facility, amortizing loan, and, more recently, asset-backed securitization
transactions, all of which are described below. We had a debt-to-equity ratio of 2.4 to 1.0 and a shareholder
equity ratio of 29.2% as of December 31, 2018.
We believe that cash flow from our operations and borrowings under our long-term debt facilities will be
adequate to fund our business for the next twelve months, including initial operating losses of new branches and
finance receivable growth of new and existing branches. 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 periods of our warehouse credit facility, RMIT 2018-1
securitization, and RMIT 2018-2 securitization (each as described below) end in February 2020, June 2020, and
December 2020, respectively. There can be no assurance that we will be able to secure an extension of the
warehouse credit facility or close additional securitization transactions if and when needed in the future.
We are continuing to seek ways to diversify our long-term funding sources, though new funding sources
may be more expensive than our existing funding sources.
Cash Flow.
Operating Activities. Net cash provided by operating activities increased by $30.9 million, or
26.7%, to $146.3 million in 2018, from $115.4 million in 2017. The increase was primarily due to the growth in
our business described above, which produced an increase in net income, before provision for credit losses.
Investing Activities. Investing activities consist of originations and purchases 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 2018 was $199.2 million, compared to $179.9 million in 2017, a net increase of
$19.3 million. The increase in cash used was primarily due to increased net originations of finance receivables.
Financing Activities. Financing activities consist of borrowings and payments on our outstanding
indebtedness and issuances of common stock. In 2018, net cash provided by financing activities was
$81.1 million, an increase of $7.3 million compared to $73.8 million in 2017. The increase was primarily a result
of advances on the RMIT 2018-1 and RMIT 2018-2 securitizations of $150.2 million and $130.4 million,
respectively. The increase was partially offset by an increase in net payments on debt and debt issuance costs of
$274.2 million.
Financing Arrangements.
Senior Revolving Credit Facility. In June 2017, we amended and restated our senior revolving
credit facility to, among other things, increase the availability under the facility from $585 million to
$638 million and extend the maturity of the facility from August 2019 to June 2020. The facility has an
accordion provision that allows for the expansion of the facility to $700 million. Excluding the receivables held
by our variable interest entities (each, a “VIE”), the senior revolving credit facility is secured by substantially all
of our finance receivables and equity interests of the majority of our subsidiaries. Advances on the senior
revolving credit facility are capped at 85% of eligible secured finance receivables and 70% of eligible unsecured
finance receivables. These advance rates are subject to adjustment at certain credit quality levels (81% of eligible
secured finance receivables and 66% of eligible unsecured finance receivables as of December 31, 2018). As of
December 31, 2018, we had $68.6 million of eligible borrowing capacity under the facility. Borrowings under the
facility bear interest, payable monthly, at rates equal to LIBOR of a maturity we elect between one and six
Regional Management Corp. | 2018 Annual Report on Form 10-K | 65
months (one-month LIBOR was 2.50% as of December 31, 2018), with a LIBOR floor of 1.00%, plus a 3.00%
margin, increasing to 3.25% when the availability percentage is below 10%. Alternatively, we may pay interest at
the prime rate (5.50% as of December 31, 2018) plus a 2.00% margin, increasing to 2.25% when the availability
percentage is below 10%. We also pay an unused line fee of 0.50% per annum, payable monthly. This fee
decreases to 0.375% when the average outstanding balance exceeds $413.0 million.
Our long-term debt under the senior revolving credit facility was $328.1 million as of December 31,
2018. A year or more in advance of its June 2020 maturity date, we intend to extend the maturity date of the
amended and restated senior revolving credit facility or take other appropriate action to address repayment upon
maturity. See Part I, Item 1A, “Risk Factors” for a discussion of risks related to our amended and restated senior
revolving credit facility, including refinancing risk.
Variable Interest Entity Debt. As part of our overall funding strategy, we have transferred certain
finance receivables to affiliated VIEs for asset-backed financing transactions, including securitizations. The
following debt arrangements are issued by our wholly-owned, bankruptcy-remote, special purpose entities (each,
an “SPE”), which are considered VIEs under GAAP and are consolidated into the financial statements of their
primary beneficiary. We are considered to be the primary beneficiary because we have (i) power over the
significant activities through our role as servicer of the finance receivables under each debt arrangement and
(ii) the obligation to absorb losses or the right to receive returns that could be significant through our interest in
the monthly residual cash flows of the SPEs after each debt is paid.
These long-term 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 $33.5 million and $8.6 million as of December 31, 2018 and 2017, respectively. Cash inflows from
the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest
that we own in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to us,
which is eliminated in consolidation. Distributions from the SPEs to us are permitted under the debt
arrangements.
At each sale of receivables from our affiliates to the SPEs, we make certain representations and
warranties about the quality and nature of the collateralized receivables. The debt arrangements require us to
repurchase the receivables in certain circumstances, including circumstances in which the representations and
warranties made by us concerning the quality and characteristics of the receivables are inaccurate. Assets
transferred to SPEs are legally isolated from us and our affiliates, as well as the claims of our and our affiliates’
creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or
other obligations of us or any of our affiliates. See Part I, Item 1A, “Risk Factors” for a discussion of risks related
to our variable interest entity debt.
Amortizing Loan. In November 2017, we and our wholly-owned SPE, Regional Management
Receivables, LLC (“RMR I”), amended and restated the December 2015 credit agreement that provided for a
$75.7 million asset-backed, amortizing loan. The amended and restated credit agreement provided for an
additional advance in the amount of $37.8 million and extended the maturity date to December 2024. The debt is
secured by finance receivables and other related assets that we purchased from our affiliates, which we then sold
and transferred to RMR I. Advances on the loan were capped at 88% of eligible finance receivables. RMR I held
$1.3 million in restricted cash reserves as of December 31, 2018 to satisfy provisions of the credit agreement.
Borrowings previously bore interest, payable monthly, at a rate of 3.00%. In February 2018, the advance rate
lowered to 85% and the interest rate increased to 3.25%. The credit agreement allows us to prepay the loan when
the outstanding balance falls below 20% of the original loan amount. As of December 31, 2018, our long-term
debt under the credit agreement was $21.6 million.
Revolving Warehouse Credit Facility. In August 2018, we and our wholly-owned SPE, Regional
Management Receivables II, LLC (“RMR II”), amended the June 2017 credit agreement that provides for a
Regional Management Corp. | 2018 Annual Report on Form 10-K | 66
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$125 million revolving warehouse credit facility to RMR II. The amendment extended the date at which the
facility converts to an amortizing loan and the termination date to February 2020 and February 2021,
respectively. The facility has an accordion provision that allows for the expansion of the facility to $150 million.
We elected to expand the facility to $150 million from May 2018 to August 2018. The debt is secured by finance
receivables and other related assets that we purchased from our affiliates, which we then sold and transferred to
RMR II. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the
facility previously bore interest, payable monthly, at a blended rate equal to three-month LIBOR, plus a margin
of 3.50%. In October 2017 and February 2018, the margin decreased to 3.25% and 3.00%, respectively,
following the satisfaction of milestones associated with our conversion to a new loan origination and servicing
system. The August 2018 amendment to the credit agreement decreased the margin to 2.20%. The three-month
LIBOR was 2.81% and 1.69% at December 31, 2018 and 2017, respectively. RMR II pays an unused
commitment fee of between 0.35% and 0.85% based upon the average daily utilization of the facility. We intend
to seek an extension of the maturity date of the facility before February 2020. As of December 31, 2018, our
long-term debt under the credit facility was $30.1 million.
RMIT 2018-1 Securitization. In June 2018, we, our wholly-owned SPE, Regional Management
Receivables III, LLC (“RMR III”), and our indirect wholly-owned SPE, Regional Management Issuance Trust
2018-1 (“RMIT 2018-1”), completed a private offering and sale of $150 million of asset-backed notes. The
transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT 2018-1. The
asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us,
which RMR III then sold and transferred to RMIT 2018-1. The notes have a revolving period ending in June
2020, with a final maturity date in July 2027. Borrowings under the RMIT 2018-1 securitization bear interest,
payable monthly, at a weighted-average rate of 3.93%. Prior to maturity in July 2027, we may redeem the notes
in full, but not in part, at our option on any note payment date on or after the payment date occurring in July
2020. No payments of principal of the notes will be made during the revolving period. As of December 31, 2018,
our long-term debt under the securitization was $150.2 million.
RMIT 2018-2 Securitization. In December 2018, we, our wholly-owned SPE, RMR III, and our
indirect wholly-owned SPE, Regional Management Issuance Trust 2018-2 (“RMIT 2018-2”), completed a
private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of four
classes of fixed-rate asset-backed notes by RMIT 2018-2. The asset-backed notes are secured by finance
receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to
RMIT 2018-2. The notes have a revolving period ending in December 2020, with a final maturity date in January
2028. Borrowings under the RMIT 2018-2 securitization bear interest, payable monthly, at a weighted-average
rate of 4.87%. Prior to maturity in January 2028, we may redeem the notes in full, but not in part, at our option
on any note payment date on or after the payment date occurring in January 2021. No payments of principal of
the notes will be made during the revolving period. As of December 31, 2018, our long-term debt under the
securitization was $130.4 million.
Our debt arrangements are subject to certain covenants, including monthly and annual reporting,
maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other
indebtedness, maintenance of a minimum allowance for credit losses, and certain other restrictions. At
December 31, 2018, we were in compliance with all debt covenants.
We expect that the LIBOR reference rate will be phased out by the end of 2021. Both our senior
revolving credit facility and revolving warehouse credit facility use LIBOR as a benchmark in determining the
cost of funds borrowed. We plan to work with our banking partners to modify our credit agreements to
contemplate the cessation of the LIBOR reference rate. We will also work to identify a replacement rate to
LIBOR and look to adjust the pricing structure of our facilities as needed.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 67
Restricted Cash Reserve Accounts.
Amortizing Loan. As required under the credit agreement governing the amortizing loan, we
deposited $3.7 million of cash proceeds into a restricted cash reserve account at closing. The reserve requirement
decreased to $1.7 million in June 2016 following our satisfaction of certain provisions of the credit agreement.
The credit agreement was amended and restated in November 2017 with a cash reserve requirement of
$1.3 million, which will remain until the termination of the facility. The amortizing loan is supported by the
expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a
restricted cash collection account, which totaled $1.1 million as of December 31, 2018.
Revolving Warehouse Credit Facility. The credit agreement governing the revolving warehouse
credit facility requires that we maintain a 1% cash reserve based upon the ending finance receivables balance of
the facility. As of December 31, 2018, the warehouse facility cash reserve requirement totaled $1.6 million. The
warehouse facility is supported by the expected cash flows from the underlying collateralized finance
receivables. Collections are remitted to a restricted cash collection account, which totaled $1.8 million as of
December 31, 2018.
RMIT 2018-1 Securitization. As required under the transaction documents governing the RMIT
2018-1 securitization, we deposited $1.7 million of cash proceeds into a restricted cash reserve account at
closing. The securitization is supported by the expected cash flows from the underlying collateralized finance
receivables. Collections are remitted to a restricted cash collection account, which totaled $14.5 million as of
December 31, 2018.
RMIT 2018-2 Securitization. As required under the transaction documents governing the RMIT
2018-2 securitization, we deposited $1.4 million of cash proceeds into a restricted cash reserve account at
closing. The securitization is supported by the expected cash flows from the underlying collateralized finance
receivables. Collections are remitted to a restricted cash collection account, which totaled $16.2 million as of
December 31, 2018.
RMC Reinsurance. Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain
cash reserves ($7.1 million as of December 31, 2018) against life insurance policies ceded to it, as determined by
the ceding company, and has also purchased a $0.1 million cash-collateralized letter of credit in favor of the
ceding company.
Interest Rate Caps.
As a component of our strategy to manage the interest rate risk associated with future interest payments on
our variable-rate debt, we have purchased interest rate cap contracts. As of December 31, 2018, we held four
interest rate cap contracts with an aggregate notional principal amount of $400.0 million. The interest rate caps
have maturities of March 2019 ($50.0 million, 2.50% strike rate), April 2020 ($100.0 million, 3.25% strike rate),
June 2020 ($50.0 million, 2.50% strike rate), and April 2021 ($200.0 million, 3.50% strike rate). As of
December 31, 2018, the one-month LIBOR was 2.50%. When the one-month LIBOR exceeds the strike rate, the
counterparty reimburses us for the excess over the strike rate. No payment is required by us or the counterparty
when the one-month LIBOR is below the strike rate.
Off-Balance Sheet Arrangements
Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain cash reserves against life
insurance policies ceded to it, as determined by the ceding company. As of December 31, 2018, the cash reserves
were $7.1 million. We have also purchased a cash collateralized letter of credit in favor of the ceding company.
As of December 31, 2018, the letter of credit was $0.1 million.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 68
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Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2018, and the effect such
obligations are expected to have on our liquidity and cash flows in future periods.
In thousands
Payments Due by Period
Total
Less than 1
Year
1 – 3 Years
3 – 5 Years
More than 5
Years
Principal payments on long-term debt obligations . .
Interest payments on long-term debt obligations . . .
Operating lease obligations . . . . . . . . . . . . . . . . . . . .
$660,507
64,184
29,699
$13,954
35,006
6,814
$578,786
27,547
10,862
$67,767
1,631
6,701
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$754,390
$55,774
$617,195
$76,099
$ —
—
5,322
$5,322
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost, except for interest
rate caps, which are carried at fair value. While it is difficult to accurately measure the impact of inflation due to
the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of
operations and financial condition have been immaterial.
Critical Accounting Policies
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.
We set forth below those material accounting policies that we believe are the most critical to an
understanding of our financial results and condition and that involve a higher degree of complexity and
management judgment.
Credit Losses.
Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts
sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on our
finance receivables. We charge credit losses against the allowance when the account becomes 180 days
delinquent, subject to certain exceptions. Our policy for non-titled accounts in a confirmed bankruptcy is to
charge them off at 60 days delinquent, subject to certain exceptions. Deceased borrower accounts are charged off
in the month following the proper notification of passing, with the exception of borrowers with credit life
insurance. Subsequent recoveries, if any, are credited to the allowance. Loss experience, the loss emergence
period, contractual delinquency of finance receivables by loan type, 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. While management uses the best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are significant changes in economic conditions or loan
portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to
significant revisions as more information becomes available.
We initiate repossession proceedings when, in the opinion of management, the customer is unlikely to
make further payments. We sell substantially all repossessed vehicle inventory through sales conducted by
Regional Management Corp. | 2018 Annual Report on Form 10-K | 69
independent automobile auction organizations after the required post-repossession waiting period. Losses on the
sale of repossessed collateral are charged to the allowance for credit losses.
The allowance for credit losses consists of general and specific components. The general component of the
allowance estimates credit losses for groups of finance receivables on a collective basis and relates to probable
incurred losses of unimpaired finance receivables. Prior to September 30, 2016, the general component of the
allowance was primarily based on historical loss rates. Effective September 30, 2016, it is based on delinquency
roll rates. Our finance receivable types are stratified by delinquency stages, and the future monthly delinquency
profiles and credit losses are projected forward using historical delinquency roll rates. We record a general
allowance for credit losses that includes forecasted future credit losses over the estimated loss emergence period
(the interval of time between the event which caused a borrower to default and our recording of the credit loss)
for each finance receivable type.
We adjust the computed roll rate forecast as described above for qualitative factors based on an assessment
of internal and external influences on credit quality that are not fully reflected in the roll rate forecast. Those
qualitative factors include trends in growth in the loan portfolio, delinquency, unemployment, bankruptcy,
operational risks, and other economic trends.
The specific component of the allowance for credit losses relates to impaired finance receivables, which
include accounts for which a customer has initiated a bankruptcy filing and finance receivables that have been
modified under our loss mitigation policies. Finance receivables that have been modified are accounted for as
troubled debt restructurings. At the time of the bankruptcy filing or restructuring pursuant to a loss mitigation
policy, a specific valuation allowance is established for such finance receivables within the allowance for credit
losses. We compute the estimated loss on our impaired loans by discounting the projected cash flows at the
original contract rates on the loan using the terms imposed by the bankruptcy court or restructured by us. This
method is applied in the aggregate to each of our four classes of loans. In making the computations of the present
value of cash payments to be received on impaired accounts in each product category, we use the weighted-
average interest rates and weighted-average remaining term based on data as of each balance sheet date.
For customers in a confirmed Chapter 13 bankruptcy plan, we reduce the interest rate to that specified in
the bankruptcy order and we receive payments with respect to the remaining amount of the loan from the
bankruptcy trustee. For customers who recently filed for Chapter 13 bankruptcy, we generally do not receive any
payments until their bankruptcy plan is confirmed by the court. If the customers have made payments to the
trustee in advance of plan confirmation, we may receive a lump sum payment from the trustee once the plan is
confirmed. This lump sum payment represents our pro-rata share of the amount paid by the customer. If a
customer fails to comply with the terms of the bankruptcy order, we will petition the trustee to have the customer
dismissed from bankruptcy. Upon dismissal, we restore the account to the original terms and pursue collection
through our normal loan servicing activities.
If a customer files for bankruptcy under Chapter 7 of the bankruptcy code, the bankruptcy court has the
authority to cancel the customer’s debt. If a vehicle secures a Chapter 7 bankruptcy account, the customer has the
option of surrendering the vehicle, buying the vehicle at fair value, or reaffirming the loan and continuing to pay
the loan.
The FASB issued an accounting update in June 2016 to change the impairment model for estimating credit
losses on financial assets. The current incurred loss impairment model requires the recognition of credit losses
when it is probable that a loss has been incurred. The incurred loss model will be replaced by an expected loss
model, which requires entities to estimate the lifetime expected credit loss on such instruments and to record an
allowance to offset the amortized cost basis of the financial asset. This update is effective for annual and interim
periods beginning after December 15, 2019, and early adoption is permitted. We believe the implementation of
the accounting update will have a material adverse effect on our consolidated financial statements, and we are in
the process of quantifying the potential impacts.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 70
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Income Recognition.
Interest income is recognized using the interest method (constant yield method). Therefore, we recognize
revenue from interest at an equal rate over the term of the loan. Unearned finance charges on pre-compute
contracts are rebated to customers utilizing statutory methods, which in many cases is the sum-of-the-years’
digits method. The difference between income recognized under the constant yield method and the statutory
method is recognized as an adjustment to interest income at the time of rebate. 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.
We recognize income on credit life insurance, credit property insurance, and automobile insurance using
the sum-of-the-years’ digits or straight-line methods over the terms of the policies. We recognize income on
credit accident and health insurance using the average of the sum-of-the-years’ digits and the straight-line
methods over the terms of the policies. We recognize income on credit involuntary unemployment insurance
using the straight-line method over the terms of the policies. Rebates are computed using statutory methods,
which in many cases match the GAAP method, and where it does not match, the difference between the GAAP
method and the statutory method is recognized in income at the time of rebate. Fee income for non-file insurance
is recognized using the sum-of-the-years’ digits method over the loan term.
We deferred fees charged to automobile dealers and recognize income using the constant yield method for
indirect loans and the straight-line method for direct loans over the lives of the respective loans.
Charges for late fees are recognized as income when collected.
Share-Based Compensation.
We measure compensation cost for share-based awards at estimated fair value and recognize compensation
expense over the service period for awards expected to vest. We use the closing stock price on the date of grant
as the fair value of restricted stock awards. The fair value of stock options is determined using the Black-Scholes
valuation model. The Black-Scholes model requires the input of highly subjective assumptions, including
expected volatility, risk-free interest rate, and expected life, changes to which can materially affect the fair value
estimate. We estimate volatility using our historical stock prices. The risk-free rate is based on the zero coupon
U.S. Treasury bond rate for the expected term of the award on the grant date. The expected term is calculated by
using the simplified method (average of the vesting and original contractual terms) due to insufficient historical
data to estimate the expected term. In addition, the estimation of share-based awards that will ultimately vest
requires judgment, and to the extent actual results or updated estimates differ from current estimates, such
amounts will be recorded as a cumulative adjustment in the period estimates are revised.
Income Taxes.
We record a tax provision for the anticipated tax consequences of our reported operating results. The
provision for income taxes is computed using the asset and liability method, under which 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 effects of future tax rate changes
are recognized in the period when the enactment of new rates occurs.
We recognize the financial statement effects of a tax position when it is more likely than not that, based on
technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in
the consolidated financial statements are then measured based on the largest amount of benefit that is greater than
50% likely to be realized upon settlement with a taxing authority. As of December 31, 2018, we had not taken
any tax position that exceeds the amount described above.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 71
Pursuant to the adoption of an accounting standard update issued in March 2016 and effective beginning in
fiscal year 2017, we recognize the tax benefits or deficiencies from the exercise or vesting of share-based awards
in the income tax line of our consolidated statements of income. These tax benefits and deficiencies were
previously recognized within additional paid-in-capital on our consolidated balance sheet.
Recently Issued Accounting Standards
See Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part
II, Item 8, “Financial Statements and Supplementary Data” for a discussion of recently issued accounting
pronouncements, including information on new accounting standards and the future adoption of such standards.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 72
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations
and financial condition. We originate finance receivables at either prevailing market rates or at statutory limits.
Our finance receivables are structured on a fixed rate, fixed term basis. Accordingly, subject to statutory limits,
our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay
off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market
rates. Our loan portfolio turns over approximately 1.2 times per year from payments, renewals, and net credit
losses. Because our large loans have longer maturities than our small loans and typically renew at a slower rate
than our small loans, the rate of turnover of the loan portfolio may change as our large loans change as a
percentage of our portfolio.
We also are exposed to changes in interest rates as a result of certain borrowing activities. As of
December 31, 2018, the interest rates on 45.8% of our long-term debt (the amortizing loan, RMIT 2018-1
securitization, and RMIT 2018-2 securitization) were fixed. We maintain liquidity and fund our business
operations in part through variable-rate borrowings under a senior revolving credit facility and a revolving
warehouse credit facility. At December 31, 2018, the outstanding balances under the senior revolving credit
facility and the revolving warehouse credit facility were $328.1 million and $30.1 million, respectively.
Borrowings under the senior revolving credit facility bear interest, payable monthly, at a rate equal to
LIBOR of a maturity we elect between one and six months, with a LIBOR floor of 1.00%, plus a margin of
3.00%, increasing to 3.25% when the availability percentage is below 10%. Alternatively, we may pay interest
under the senior revolving credit facility at a rate based on the prime rate, plus a margin of 2.00%, increasing to
2.25% when the availability percentage is below 10%. Borrowings under the revolving warehouse credit facility
previously bore interest, payable monthly, at a blended rate equal to three-month LIBOR, plus a margin of
3.50%. Effective October 2017 and February 2018, the revolving warehouse credit facility margin decreased to
3.25% and 3.00%, respectively, following the satisfaction of milestones associated with our conversion to a new
loan origination and servicing system. In August 2018, in connection with an amendment and extension of the
revolving warehouse credit facility, the margin further decreased to 2.20%. As of December 31, 2018, the
LIBOR rates under the senior revolving credit facility and the revolving warehouse credit facility were 2.50%
and 2.81%, respectively.
We have purchased interest rate caps to manage the risk associated with an aggregate notional
$400.0 million of our LIBOR-based borrowings. These interest rate caps are based on the one-month LIBOR and
reimburse us for the difference when the one-month LIBOR exceeds the strike rate. The interest rate caps have
maturities of March 2019 ($50.0 million, 2.50% strike rate), April 2020 ($100.0 million, 3.25% strike rate), June
2020 ($50.0 million, 2.50% strike rate), and April 2021 ($200.0 million, 3.50% strike rate).
Interest rates on borrowings under the senior revolving credit facility and the revolving warehouse credit
facility were approximately 5.48% and 5.32%, respectively, for the year ended December 31, 2018, including, in
each case, an unused line fee. Based on the LIBOR rates and the outstanding balances at December 31, 2018, an
increase of 100 basis points in LIBOR rates would result in approximately $3.6 million of increased interest
expense on an annual basis, in the aggregate, under these LIBOR-based borrowings. Our interest rate cap
coverage at December 31, 2018 would reduce this increased expense by approximately $1.3 million on an annual
basis.
The nature and amount of our debt may vary as a result of future business requirements, market conditions,
and other factors.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 73
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REGIONAL MANAGEMENT CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended December 31, 2018
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2018 and December 31, 2017
Consolidated Statements of Income for the Years Ended December 31, 2018, December 31, 2017, and
December 31, 2016
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, December 31,
2017, and December 31, 2016
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, December 31, 2017, and
December 31, 2016
Notes to Consolidated Financial Statements
Page
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78
79
80
81
82
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Regional Management Corp. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Regional Management Corp. and its
subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of
income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018,
and the related notes to the consolidated financial statements (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in
the period ending December 31, 2018, in conformity with accounting principles generally accepted in the
United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013, and our report dated March 8, 2019 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the Company’s auditor since 2007.
Raleigh, North Carolina
March 8, 2019
Regional Management Corp. | 2018 Annual Report on Form 10-K | 75
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Regional Management Corp. and Subsidiaries
Opinion on the Internal Control Over Financial Reporting
We have audited Regional Management Corp. and its subsidiaries’ (the Company) internal control over financial
reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets as of December 31, 2018 and 2017 and the related
consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2018 of the Company and our report dated March 8, 2019 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting in the accompanying SOX 404
Management Assessment Report—Effectiveness of Internal Controls over Financial Reporting (“ICFR”) for the
Twelve Months Ending December 31, 2018. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 76
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
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Raleigh, North Carolina
March 8, 2019
Regional Management Corp. | 2018 Annual Report on Form 10-K | 77
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
December 31, 2018 and 2017
(in thousands, except par value amounts)
2018
2017
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned finance charges and insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,657
1,237,526
(305,283)
932,243
(58,300)
873,943
46,484
13,926
10,010
8,375
$ 956,395
$
5,230
1,066,650
(249,187)
817,463
(48,910)
768,553
16,787
12,294
10,607
16,012
$ 829,483
Liabilities and Stockholders’ Equity
Liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 660,507
(9,158)
651,349
25,138
747
677,234
$ 571,496
(4,950)
566,546
18,565
4,961
590,072
Commitments and contingencies (Notes 6, 16, and 17)
Stockholders’ equity:
Preferred stock ($0.10 par value, 100,000 shares authorized, no shares issued or
outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock ($0.10 par value, 1,000,000 shares authorized, 13,323 shares issued
and 11,777 shares outstanding at December 31, 2018 and 13,205 shares issued and
11,659 shares outstanding at December 31, 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,546 shares at December 31, 2018 and 2017) . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,332
98,778
204,097
(25,046)
279,161
$ 956,395
1,321
94,384
168,752
(25,046)
239,411
$ 829,483
The following table presents the assets and liabilities of our consolidated variable interest entities:
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
168
342,481
(18,378)
39,361
75
$
70
137,239
(7,129)
10,734
119
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$363,707
$141,033
Liabilities
Net long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 324,879
25
$ 116,658
53
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$324,904
$116,711
See accompanying notes to consolidated financial statements.
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Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
Years Ended December 31, 2018, 2017, and 2016
(in thousands, except per share amounts)
Revenue
Interest and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$280,121
14,793
11,792
$249,034
13,061
10,364
$220,963
9,456
10,099
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306,706
272,459
240,518
2018
2017
2016
Expenses
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,056
77,339
63,014
Personnel
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,068
22,519
7,745
25,952
75,992
21,530
7,128
26,305
68,979
20,059
6,837
22,757
Total general and administrative expenses . . . . . . . . . . . . . . . . . . . .
140,284
130,955
118,632
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income
Net income per common share:
33,464
45,902
10,557
23,908
40,257
10,294
19,924
38,948
14,917
$ 35,345
$ 29,963
$ 24,031
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3.03
2.93
$
$
2.59
2.54
$
$
2.03
1.99
Weighted-average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,655
11,551
11,824
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,078
11,783
12,085
See accompanying notes to consolidated financial statements.
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Regional Management Corp. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2018, 2017, and 2016
(in thousands)
Balance, December 31, 2015 . . . . . . . . . . .
Issuance of restricted stock awards . . .
Exercise of stock options . . . . . . . . . . .
Excess tax deficiency from stock
Common Stock
Shares
Amount
12,914
37
203
$1,291
4
20
option exercises . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . .
Shares withheld related to net share
settlement . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
—
—
(158)
—
—
—
—
(15)
—
—
Additional
Paid-in-Capital
Retained
Earnings
Treasury
Stock
Total
$89,178
(4)
—
(35)
—
(493)
3,786
—
$114,758
—
—
—
—
$ — $205,227
—
—
—
20
—
(25,046)
(35)
(25,046)
—
—
24,031
—
—
—
(508)
3,786
24,031
Balance, December 31, 2016 . . . . . . . . . . .
12,996
$1,300
$92,432
$138,789
$(25,046) $207,475
Issuance of restricted stock awards . . .
Exercise of stock options . . . . . . . . . . .
Shares withheld related to net share
settlement . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
74
289
(154)
—
—
7
29
(15)
—
—
(7)
305
(2,006)
3,660
—
—
—
—
—
29,963
—
—
—
—
—
—
334
(2,021)
3,660
29,963
Balance, December 31, 2017 . . . . . . . . . . .
13,205
$1,321
$94,384
$168,752
$(25,046) $239,411
Issuance of restricted stock awards . . .
Exercise of stock options . . . . . . . . . . .
Shares withheld related to net share
settlement . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
101
89
(72)
—
—
10
8
(7)
—
—
(10)
—
(858)
5,262
—
—
—
—
—
35,345
—
—
—
—
—
—
8
(865)
5,262
35,345
Balance, December 31, 2018 . . . . . . . . . . .
13,323
$1,332
$98,778
$204,097
$(25,046) $279,161
See accompanying notes to consolidated financial statements.
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Regional Management Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2018, 2017, and 2016
(in thousands)
2018
2017
2016
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
$ 35,345
$ 29,963
$ 24,031
activities:
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of property and equipment . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustment on interest rate caps . . . . . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
87,056
8,803
24
6,911
330
(4,214)
77,339
7,357
245
4,346
64
4,994
63,014
6,444
3
4,158
170
1,902
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . .
Increase in accounts payable and accrued expenses . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . .
7,306
4,724
146,285
(11,294)
2,419
115,433
(1,739)
2,255
100,238
Cash flows from investing activities:
Net originations of finance receivables . . . . . . . . . . . . . . . . . . . . .
Purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment
. . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal of property and equipment . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . .
(192,446)
(1,446)
(5,352)
—
(199,244)
(169,366)
(6,355)
(4,765)
558
(179,928)
(148,548)
(5,302)
(6,433)
721
(159,562)
Cash flows from financing activities:
Net advances (payments) on senior revolving credit facility . . . . .
Net proceeds from (payments on) amortizing loan . . . . . . . . . . . .
Net advances (payments) on revolving warehouse credit
facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net advances on securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes paid related to net share settlement of equity awards . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . .
Net change in cash and restricted cash . . . . . . . . . . . . . . . .
Cash and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . .
Cash and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . .
(123,977)
(31,738)
(799)
14,551
114,567
(34,067)
(35,940)
280,665
(7,235)
(692)
—
—
81,083
28,124
22,017
$ 50,141
66,066
—
(4,547)
(1,809)
307
—
73,769
9,274
12,743
$ 22,017
—
—
(1,060)
(487)
—
(25,046)
53,907
(5,417)
18,160
$ 12,743
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,127
$ 20,460
$ 17,590
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,600
$ 15,681
$ 12,585
The following table reconciles cash and restricted cash from the Consolidated Balance Sheets to the statements
above:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . .
Total cash and restricted cash . . . . . . .
$ 3,657
46,484
$50,141
$ 5,230
16,787
$22,017
$ 4,446
8,297
$12,743
$ 7,654
10,506
$18,160
December 31, 2018 December 31, 2017 December 31, 2016 December 31, 2015
See accompanying notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
Note 1. Nature of Business
Regional Management Corp. (the “Company”) was incorporated and began operations in 1987. The Company is
engaged in the consumer finance business, offering small loans, large loans, retail loans, and related payment and
collateral protection insurance products. The Company previously offered automobile loans, but ceased such
originations in November 2017. As of December 31, 2018, the Company operated branches in 359 locations in
the states of Alabama (46 branches), Georgia (8 branches), Missouri (9 branches), New Mexico (17 branches),
North Carolina (36 branches), Oklahoma (28 branches), South Carolina (67 branches), Tennessee (23 branches),
Texas (103 branches), Virginia (18 branches), and Wisconsin (4 branches) under the name Regional Finance.
The Company opened a net 17, 3, and 8 new branches during the years ended December 31, 2018, 2017, and
2016, respectively.
The Company’s loan volume and contractual delinquency follow seasonal trends. Demand for the Company’s
small and large loans is typically highest during the second, third, and fourth quarters, which the Company
believes is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. With
the exception of retail loans, loan demand has generally been the lowest during the first quarter, which the
Company believes is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest
point in the first quarter of the year and rise throughout the remainder of the fiscal year. Consequently, the
Company experiences seasonal fluctuations in its operating results and cash needs.
Note 2. Significant Accounting Policies
The following is a description of significant accounting policies used in preparing the financial statements. The
accounting and reporting policies of the Company are in accordance with U.S. Generally Accepted Accounting
Principles (“GAAP”) and conform to general practices within the consumer finance industry.
Business segments: The Company has one reportable segment, which is the consumer finance segment. The
other revenue generating activities of the Company, including insurance operations, are performed in the existing
branch network in conjunction with or as a complement to the lending operations.
Principles of consolidation: The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in
consolidation. The Company operates through a separate wholly-owned subsidiary in each state. The Company
also consolidates variable interest entities (each, a “VIE”) when it is considered to be the primary beneficiary of
the VIE because it has (i) power over the significant activities of the VIE and (ii) the obligation to absorb losses
or the right to receive returns that could be significant to the VIE.
Treasury stock: The Company records the repurchase of shares of its common stock at cost on the settlement
date of the transaction. These shares are considered treasury stock, which is a reduction to stockholders’ equity.
Treasury stock is included in authorized and issued shares but excluded from outstanding shares.
Variable interest entities: The Company transfers pools of loans to wholly-owned, bankruptcy-remote, special
purpose entities (each, an “SPE”) to secure debt for general funding purposes. These entities have the limited
purpose of acquiring finance receivables and holding and making payments on the related debts. Assets
transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the
Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not
available to satisfy the debts or other obligations of the Company or any of its affiliates. The Company continues
to service the finance receivables transferred to the SPEs. The lenders and investors in the debt issued by the
SPEs generally only have recourse to the assets of the SPEs and do not have recourse to the general credit of the
Company.
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The SPEs’ debt arrangements are structured to provide enhancements to the lenders and investors in the form of
overcollateralization (the principal balance of the collateral exceeds the balance of the debt) and reserve funds
(restricted cash held by the SPEs). These enhancements, along with the isolated finance receivables pools,
increase the creditworthiness of the SPEs above that of the Company as a whole. This increases the marketability
of the Company’s collateral for borrowing purposes, leading to more favorable borrowing terms, improved
interest rate risk management, and additional flexibility to grow the business.
The SPEs are considered VIEs under GAAP and are consolidated into the financial statements of their primary
beneficiary. The Company is considered to be the primary beneficiary of the SPEs because it has (i) power over
the significant activities through its role as servicer of the finance receivables under each debt arrangement and
(ii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s
interest in the monthly residual cash flows of the SPEs after each debt is paid.
Consolidation of VIEs results in these transactions being accounted for as secured borrowings; therefore, the
pooled receivables and the related debts remain on the consolidated balance sheet of the Company. Each debt is
secured solely by the assets of the VIEs and not by any other assets of the Company. The assets of the VIEs are
the only source of funds for repayment on each debt, and restricted cash held by the VIEs can only be used to
support payments on the debt. The Company recognizes revenue and provision for credit losses on the finance
receivables of the VIEs and interest expense on the related secured debt.
Use of estimates: The preparation of financial statements requires management to make 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. Actual results could differ
from those estimates.
Material estimates that are particularly susceptible to change relate to the determination of the allowance for
credit losses, the fair value of share-based compensation, the valuation of deferred tax assets and liabilities,
contingent liabilities on litigation matters, and the allocation of the purchase price to assets acquired in business
combinations.
Reclassifications: Certain prior-period amounts have been reclassified to conform to the current presentation.
Such reclassifications had no impact on previously reported net income or stockholders’ equity.
Statement of cash flows: Cash flows from finance receivables and the Company’s long-term debt are reported on
a net basis.
Finance receivables: The Company’s small loan portfolio is comprised of branch small loan receivables and
convenience check receivables. Branch small loan receivables are direct loans to customers closed in the branch
and are secured by non-essential household goods and, in some instances, an automobile. Convenience checks
are direct loans originated by mailing checks to customers based on a pre-screening process that includes a
review of the prospective customer’s credit profile provided by national credit reporting bureaus or data
aggregators. A recipient of a convenience check is able to enter into a loan by endorsing and depositing or
cashing the check. Large loan receivables are direct loans to customers, some of which are convenience check
receivables and the vast majority of which are secured by automobiles, other vehicles, and/or non-essential
household goods. Retail loan receivables consist principally of retail installment sales contracts collateralized by
the purchased furniture, appliances, and other retail items, and are initiated by and purchased from retailers,
subject to the Company’s credit approval. Automobile loan receivables consist of direct automobile purchase
loans, which were originated at the dealership and closed in one of the Company’s branches, and indirect
automobile purchase loans, which were originated and closed at a dealership in the Company’s network without
the need for the customer to visit one of the Company’s branches. In each case, these automobile loans are
collateralized primarily by the purchased automobiles and, in the case of indirect loans, were initiated by and
purchased from automobile dealerships, subject to the Company’s credit approval. The Company ceased
originating automobile loans in November 2017.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 83
Credit losses: Provisions for credit losses are charged to income as losses are estimated to have occurred and in
amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on
the Company’s finance receivables. The Company charges credit losses against the allowance when the account
becomes 180 days delinquent, subject to certain exceptions. The Company’s policy for non-titled accounts in a
confirmed bankruptcy is to charge them off at 60 days delinquent, subject to certain exceptions. Deceased
borrower accounts are charged off in the month following the proper notification of passing, with the exception
of borrowers with credit life insurance. Subsequent recoveries, if any, are credited to the allowance. Loss
experience, the loss emergence period, contractual delinquency of finance receivables by loan type, 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. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in
economic conditions or loan portfolio performance. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revisions as more information becomes available.
The Company initiates repossession proceedings when, in the opinion of management, the customer is unlikely to
make further payments. The Company sells substantially all repossessed vehicle inventory through sales
conducted by independent automobile auction organizations after the required post-repossession waiting period.
Losses on the sale of repossessed collateral are charged to the allowance for credit losses.
The allowance for credit losses consists of general and specific components. The general component of the
allowance estimates credit losses for groups of finance receivables on a collective basis and relates to probable
incurred losses of unimpaired finance receivables. Prior to September 30, 2016, the general component of the
allowance was primarily based on historical loss rates. Effective September 30, 2016, it is based on delinquency
roll rates. The Company’s finance receivable types are stratified by delinquency stages, and the future monthly
delinquency profiles and credit losses are projected forward using historical delinquency roll rates. The Company
records a general allowance for credit losses that includes forecasted future credit losses over the estimated loss
emergence period (the interval of time between the event which caused a borrower to default and the Company’s
recording of the credit loss) for each finance receivable type.
The Company adjusts the computed roll rate forecast as described above for qualitative factors based on an
assessment of internal and external influences on credit quality that are not fully reflected in the roll rate forecast.
Those qualitative factors include trends in growth in the loan portfolio, delinquency, unemployment, bankruptcy,
operational risks, and other economic trends.
Impaired finance receivables: The specific component of the allowance for credit losses relates to impaired
finance receivables, which include accounts for which a customer has initiated a bankruptcy filing and finance
receivables that have been modified under Company loss mitigation policies. Finance receivables that have been
modified are accounted for as troubled debt restructurings. At the time of the bankruptcy filing or restructuring
pursuant to a loss mitigation policy, a specific valuation allowance is established for such finance receivables
within the allowance for credit losses. The Company computes the estimated loss on its impaired loans by
discounting the projected cash flows at the original contract rates on the loan using the terms imposed by the
bankruptcy court or restructured by the Company. This method is applied in the aggregate to each of the
Company’s four classes of loans. In making the computations of the present value of cash payments to be
received on impaired accounts in each product category, the Company uses the weighted-average interest rates
and weighted-average remaining term based on data as of each balance sheet date.
For customers in a confirmed Chapter 13 bankruptcy plan, the Company reduces the interest rate to that specified
in the bankruptcy order and the Company receives payments with respect to the remaining amount of the loan
from the bankruptcy trustee. For customers who recently filed for Chapter 13 bankruptcy, the Company generally
does not receive any payments until their bankruptcy plan is confirmed by the court. If the customers have made
payments to the trustee in advance of plan confirmation, the Company may receive a lump sum payment from
the trustee once the plan is confirmed. This lump sum payment represents the Company’s pro-rata share of the
Regional Management Corp. | 2018 Annual Report on Form 10-K | 84
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amount paid by the customer. If a customer fails to comply with the terms of the bankruptcy order, the Company
will petition the trustee to have the customer dismissed from bankruptcy. Upon dismissal, the Company restores
the account to the original terms and pursues collection through its normal loan servicing activities.
If a customer files for bankruptcy under Chapter 7 of the bankruptcy code, the bankruptcy court has the authority
to cancel the customer’s debt. If a vehicle secures a Chapter 7 bankruptcy account, the customer has the option of
surrendering the vehicle, buying the vehicle at fair value, or reaffirming the loan and continuing to pay the loan.
Delinquency: The Company determines past due status using the contractual terms of the finance receivable.
Delinquency is one of the primary credit quality indicators used to evaluate the allowance for credit losses for
each class of finance receivables.
Repossessed assets: Repossessed collateral is valued at the lower of the receivable balance on the finance
receivable prior to repossession or the estimated net realizable value. Management estimates net realizable value
at the projected cash value upon liquidation, less costs to sell the related collateral.
Property and equipment: The Company leases its current headquarters building. Branch offices are leased under
non-cancellable leases of three to seven years with renewal options. Leasehold improvements are depreciated
over the shorter of their useful lives or the remaining term of the lease. Furniture and equipment are depreciated
on the straight-line method over their estimated useful lives, generally five to ten years. Maintenance and repairs
are charged to expense as incurred.
Restricted cash: Restricted cash includes cash and cash equivalents for which the Company’s ability to withdraw
funds is contractually limited. The Company’s restricted cash consists of cash reserves that are maintained as
collateral for potential credit life insurance claims and cash restricted for debt servicing of the Company’s
amortizing loan, revolving warehouse credit facility, and securitizations.
Derivative instruments: The Company holds derivative instruments in the form of interest rate caps for the
purpose of hedging a portion of its exposure to interest rate risk. Derivative instruments are recorded at fair value
and included in other assets, with their resulting gains or losses recognized in interest expense. Changes in fair
value are reported as an adjustment to net income in computing cash flows from operating activities.
Income recognition: Interest income is recognized using the interest method (constant yield method). Therefore,
the Company recognizes revenue from interest at an equal rate over the term of the loan. Unearned finance
charges on pre-compute contracts are rebated to customers utilizing statutory methods, which in many cases is
the sum-of-the-years’ digits method. The difference between income recognized under the constant yield method
and the statutory method is recognized as an adjustment to interest income at the time of rebate. 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.
The Company recognizes income on credit life insurance, credit property insurance, and automobile insurance
using the sum-of-the-years’ digits or straight-line methods over the terms of the policies. The Company
recognizes income on credit accident and health insurance using the average of the sum-of-the-years’ digits and
the straight-line methods over the terms of the policies. The Company recognizes income on credit involuntary
unemployment insurance using the straight-line method over the terms of the policies. Rebates are computed
using statutory methods, which in many cases match the GAAP method, and where it does not match, the
difference between the GAAP method and the statutory method is recognized in income at the time of rebate. Fee
income for non-file insurance is recognized using the sum-of-the-years’ digits method over the loan term.
The Company deferred fees charged to automobile dealers and recognizes income using the constant yield
method for indirect loans and the straight-line method for direct loans over the lives of the respective loans.
Charges for late fees are recognized as income when collected.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 85
Finance receivable origination fees and costs: Non-refundable fees received and direct costs incurred for the
origination of finance receivables are deferred and recognized to interest income over their contractual lives
using the constant yield method. Unamortized amounts are recognized in income at the time that finance
receivables are paid in full.
Share-based compensation: The Company measures compensation cost for share-based awards at estimated fair
value and recognizes compensation expense over the service period for awards expected to vest. The Company
uses the closing stock price on the date of grant as the fair value of restricted stock awards. The fair value of
stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the
input of highly subjective assumptions, including expected volatility, risk-free interest rate, and expected life,
changes to which can materially affect the fair value estimate. The Company estimates volatility using its
historical stock prices. The risk-free rate is based on the zero coupon U.S. Treasury bond rate for the expected
term of the award on the grant date. The expected term is calculated by using the simplified method (average of
the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. In
addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent
actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative
adjustment in the period estimates are revised.
Marketing costs: Marketing costs are expensed as incurred.
Income taxes: The Company records a tax provision for the anticipated tax consequences of its reported
operating results. The provision for income taxes is computed using the asset and liability method, under which
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 effects of
future tax rate changes are recognized in the period when the enactment of new rates occurs.
The Company recognizes the financial statement effects of a tax position when it is more likely than not that,
based on technical merits, the position will be sustained upon examination. The tax benefits of the position
recognized in the consolidated financial statements are then measured based on the largest amount of benefit that
is greater than 50% likely to be realized upon settlement with a taxing authority. As of December 31, 2018, the
Company had not taken any tax position that exceeds the amount described above.
Pursuant to the adoption of an accounting standard update issued in March 2016 and effective beginning in fiscal
year 2017, the Company recognizes the tax benefits or deficiencies from the exercise or vesting of share-based
awards in the income tax line of the consolidated statements of income. These tax benefits and deficiencies were
previously recognized within additional paid-in-capital on the Company’s consolidated balance sheet.
Earnings per share: Earnings per share have been computed based on the weighted-average number of common
shares outstanding during each reporting period presented. Common shares issuable upon the exercise of share-
based compensation, which are computed using the treasury stock method, are included in the computation of
diluted earnings per share.
Recent accounting pronouncements: In May 2014, the Financial Accounting Standards Board (“FASB”) issued
an accounting update on the recognition of revenue from contracts with customers. The update is based on the
principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that
reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the
update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands
disclosure requirements for revenue recognition. The update applies to all contracts with customers, except
leases, insurance contracts, financial instruments, guarantees, and certain nonmonetary exchanges. In August
2015, the FASB issued an additional update on revenue recognition, which deferred the effective date of the
Regional Management Corp. | 2018 Annual Report on Form 10-K | 86
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update to annual and interim reporting periods beginning after December 15, 2017. The Company adopted the
new standard effective in 2018. As substantially all of the Company’s revenues are generated from activities that
are outside the scope of the new standard, the adoption does not have a material impact on the Company’s
consolidated financial statements or disclosure requirements.
In February 2016, the FASB issued an accounting update to increase transparency and comparability of
accounting for lease transactions. The update requires: (i) all leases to be recognized on the balance sheet as
right-of-use assets and lease liabilities and (ii) both quantitative and qualitative disclosures regarding key
information about leasing arrangements. The Company has completed the implementation of third-party software
to facilitate compliance with the accounting and reporting requirements of the lease standard. All of the
Company’s leases are currently classified as operating leases, with no right-of-use assets or lease liabilities
recorded. The update is effective for annual and interim periods beginning after December 15, 2018, and early
adoption was permitted. The Company will transition to this accounting change on a modified retrospective basis
by recording the cumulative-effect of right-of-use assets and lease liabilities for active leases as of January 1,
2019. The Company will not restate comparative periods in transition and will elect to use the effective date of
January 1, 2019 as the initial date of transition. The Company will also elect to utilize the package of transition
practical expedients, which includes not reassessing the following: (i) whether existing contracts contain leases,
(ii) the existing classification of leases as operating or financing, or (iii) the initial direct costs of leases. In
addition, the Company will elect not to apply the new lease standard to leases with terms of twelve months or
less.
As a result of the adoption of the new lease standard on January 1, 2019, the Company expects to record
$24.4 million for both operating lease liabilities and corresponding right-of-use assets. The operating lease
liabilities will be based on the present value of the remaining minimum rental payments using discount rates as of
the effective date. There will be no impact to the consolidated statements of income related to the adoption of this
standard. The adoption of this standard will not require the Company to alter its debt covenants.
In June 2016, the FASB issued an accounting update to change the impairment model for estimating credit losses
on financial assets. The current incurred loss impairment model requires the recognition of credit losses when it
is probable that a loss has been incurred. The incurred loss model will be replaced by an expected loss model,
which requires entities to estimate the lifetime expected credit loss on such instruments and to record an
allowance to offset the amortized cost basis of the financial asset. This update is effective for annual and interim
periods beginning after December 15, 2019, and early adoption is permitted. The Company believes the
implementation of the accounting update will have a material adverse effect on the Company’s consolidated
financial statements and is in the process of quantifying the potential impacts.
In August 2016, the FASB issued an accounting update to provide specific guidance on certain cash flow
classification issues to reduce diversity in practice. These issues include debt prepayment or extinguishment
costs, contingent consideration payments after business combinations, beneficial interest in securitization
transactions, and proceeds from insurance claims. This update is effective for annual and interim periods
beginning after December 15, 2017, and early adoption was permitted. The Company adopted the new standard
effective in 2018, and implementation of the accounting update had no impact on the Company’s consolidated
financial statements.
In November 2016, the FASB issued an accounting update to address diversity in the classification of restricted
cash transfers on the statement of cash flows. The amendment requires that the statements of cash flows explain
the change during the period in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents.
This update is effective for annual and interim periods beginning after December 15, 2017, and early adoption
was permitted. The Company adopted the new standard effective in 2018. As a result, the Company no longer
reports the changes in restricted cash as an investing activity. Instead, restricted cash is included in the beginning
and ending cash balances on the consolidated statements of cash flows.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 87
In August 2018, the FASB issued an accounting update to provide additional guidance on the accounting for
costs of implementation activities performed in a cloud computing arrangement that is a service contract. The
amendments align the capitalization requirements for hosting arrangements that are service contracts with the
capitalization principles for internal-use software. This update is effective for annual and interim periods
beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the
potential impact of this update on its consolidated financial statements.
Note 3. Concentrations of Credit Risk
The Company’s portfolio of finance receivables is primarily with customers living in five Southeastern states
(Alabama, Georgia, North Carolina, South Carolina, and Tennessee), three Southwestern states (Oklahoma, New
Mexico, and Texas), one Mid-Atlantic state (Virginia), and two Midwestern states (Missouri and Wisconsin).
Consequently, such customers’ ability to honor their installment contracts may be affected by economic
conditions in these areas. Additionally, the Company is exposed to a concentration of credit risk inherent in
providing consumer finance products to near prime and non-prime borrowers.
The Company also has a risk that its customers will seek protection from creditors by filing under the bankruptcy
laws. When a customer files for bankruptcy protection, the Company must cease collection efforts and petition
the bankruptcy court to obtain its collateral or work out a court-approved bankruptcy plan involving the
Company and all other creditors of the customer. It is the Company’s experience that such plans can take an
extended period of time to conclude and usually involve a reduction in the interest rate from the rate in the
contract to a court-approved rate.
The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The
Company has not experienced losses in such accounts, which are maintained with large domestic banks.
Management believes the Company’s exposure to credit risk is minimal for these accounts.
Note 4. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses
Finance receivables for the periods indicated consisted of the following:
In thousands
December 31,
2018
2017
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$437,662
437,998
26,154
30,429
$375,772
347,218
61,423
33,050
Finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$932,243
$817,463
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The contractual delinquency of the finance receivable portfolio by product and aging for the periods indicated are
as follows:
December 31, 2018
In thousands
$
%
$
%
$
%
$
%
$
Small
Large
Automobile
Retail
Total
Current . . . . . . . . . . . . . . . . . . $347,053
1 to 29 days past due . . . . . . .
49,946
Delinquent accounts
79.3% $365,950
11.4% 45,234
83.6% $17,767
10.3% 6,304
67.9% $23,392
24.1% 4,436
76.9% $754,162
14.6% 105,920
12,168
30 to 59 days . . . . . . . . .
9,555
60 to 89 days . . . . . . . . .
7,202
90 to 119 days . . . . . . . .
6,266
120 to 149 days . . . . . . .
5,472
150 to 179 days . . . . . . .
Total delinquency . . . . . $ 40,663
8,768
2.8%
6,779
2.2%
4,407
1.6%
3,823
1.4%
3,037
1.3%
9.3% $ 26,814
751
2.0%
421
1.5%
241
1.0%
434
0.9%
236
0.7%
6.1% $ 2,083
842
2.9%
627
1.6%
429
0.9%
367
1.7%
336
0.9%
8.0% $ 2,601
2.7% 22,529
2.1% 17,382
1.4% 12,279
1.2% 10,890
9,081
1.1%
8.5% $ 72,161
%
80.9%
11.4%
2.3%
1.9%
1.3%
1.2%
1.0%
7.7%
Total finance receivables . . . . $437,662
100.0% $437,998
100.0% $26,154
100.0% $30,429
100.0% $932,243
100.0%
Finance receivables in
nonaccrual status . . . . . . . . $ 22,549
5.2% $ 14,379
3.3% $ 1,359
5.2% $ 1,276
4.2% $ 39,563
4.2%
December 31, 2017
In thousands
$
%
$
%
$
%
$
%
$
Small
Large
Automobile
Retail
Total
Current . . . . . . . . . . . . . . . . . . $301,114
1 to 29 days past due . . . . . . .
39,412
Delinquent accounts
80.1% $299,467
10.5% 29,211
86.3% $43,140
8.4% 13,387
70.2% $25,730
21.8% 4,523
77.8% $669,451
13.7% 86,533
9,738
30 to 59 days . . . . . . . . .
8,755
60 to 89 days . . . . . . . . .
6,881
90 to 119 days . . . . . . . .
5,284
120 to 149 days . . . . . . .
150 to 179 days . . . . . . .
4,588
Total delinquency . . . . . $ 35,246
5,949
2.6%
4,757
2.3%
3,286
1.9%
2,537
1.4%
1.2%
2,011
9.4% $ 18,540
1.6% 2,162
1.4% 1,046
701
1.0%
636
0.7%
0.6%
351
5.3% $ 4,896
879
3.6%
739
1.7%
471
1.1%
408
1.0%
0.6%
300
8.0% $ 2,797
2.7% 18,728
2.2% 15,297
1.5% 11,339
8,865
1.2%
0.9%
7,250
8.5% $ 61,479
%
81.9%
10.6%
2.2%
1.9%
1.4%
1.1%
0.9%
7.5%
Total finance receivables . . . . $375,772
100.0% $347,218
100.0% $61,423
100.0% $33,050
100.0% $817,463
100.0%
Finance receivables in
nonaccrual status . . . . . . . . $ 19,634
5.2% $
9,753
2.8% $ 2,461
4.0% $ 1,339
4.1% $ 33,187
4.1%
The allowance for credit losses consists of general and specific components. Prior to September 30, 2016, the
general component reflected estimated credit losses for groups of finance receivables on a collective basis and
was primarily based on historical loss rates (adjusted for qualitative factors). Effective September 30, 2016, the
general component is primarily based on delinquency roll rates. Delinquency roll rate modeling is forward-
looking and common practice in the consumer finance industry. As a result of this change, the Company
decreased the provision for credit losses for the year ended December 31, 2016 by $0.5 million, which increased
net income by $0.3 million, or $0.03 diluted earnings per share.
Changes in the allowance for credit losses for the periods indicated are as follows:
In thousands
Year Ended December 31,
2018
2017
2016
Balance at beginning of period . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . .
Credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 48,910
87,056
(82,341)
4,675
$ 41,250
77,339
(75,880)
6,201
$ 37,452
63,014
(64,064)
4,848
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,300
$ 48,910
$ 41,250
Regional Management Corp. | 2018 Annual Report on Form 10-K | 89
In the third quarter of 2018, three changes occurred that impacted the Company’s estimate of the allowance for
credit losses. The changes collectively increased the allowance for credit losses as of September 30, 2018 and the
provision for credit losses for the three months ended September 30, 2018, which decreased net income by
$0.2 million, or $0.01 diluted earnings per share. The three changes are described in more detail in the
paragraphs below.
Certain of the Company’s loan origination fees are non-refundable, and the unearned portion of those
non-refundable fees reduces the Company’s recorded investment in the related finance receivables
(non-refundable fees are included in “Unearned finance charges” on the Company’s consolidated balance sheets).
When using unearned non-refundable fees to estimate an allowance for credit losses, an allowance can be
established when the recorded investment in the finance receivables is accreted past the estimated incurred loss
amount. Prior to September 30, 2018, the Company properly reduced estimated future net credit losses in its
allowance modeling for the reversal of unearned non-refundable fees and, accordingly, did not reduce the
required allowance by the remaining unearned non-refundable fees on the Company’s consolidated balance
sheets. Effective September 30, 2018, the Company changed its estimated future net credit losses in its allowance
modeling to exclude the reversal of unearned non-refundable fees and, accordingly, reduced the required
allowance by the remaining unearned non-refundable fees on the Company’s consolidated balance sheets. This
change in estimate had the impact of reducing the allowance for credit losses as of September 30, 2018 and the
provision for credit losses for the three months ended September 30, 2018 by $6.6 million, which increased net
income by $5.0 million, or $0.41 diluted earnings per share.
In September 2018, the Company updated modeling assumptions used in estimating the specific component of
the allowance for credit losses related to impaired finance receivables. The Company obtained additional
performance data on finance receivables that had been modified under Company loss mitigation policies. Loss
mitigation policies were formalized during 2016, and the impacted finance receivables now have more seasoning
and predictable performance data. As a result of this change in estimate, the Company increased the allowance
for credit losses as of September 30, 2018 and the provision for credit losses for the three months ended
September 30, 2018 by $2.8 million, which decreased net income by $2.1 million, or $0.17 diluted earnings per
share.
Apart from the various optional payment and collateral protection insurance products that the Company offers to
customers on certain loans, the Company also collects a fee from customers and, in turn, purchases non-file
insurance for the Company’s benefit in lieu of recording and perfecting the Company’s security interest in
personal property collateral. Non-file insurance protects the Company from credit losses where, following an
event of default, the Company is unable to take possession of personal property collateral because the Company’s
security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In
such circumstances, non-file insurance generally will pay an amount equal to the lesser of the loan balance or the
collateral value. Since the non-file insurance product had been operating at a loss, the Company implemented a
policy change in October 2018 that reduced the amount of claims filed, which had the impact of increasing net
credit losses and, in turn, increased the required allowance for credit losses. As a result of the policy change, the
Company increased the allowance for credit losses as of September 30, 2018 and the provision for credit losses
for the three months ended September 30, 2018 by $4.1 million, which decreased net income by $3.1 million, or
$0.25 diluted earnings per share.
Separate from the changes noted above, in September 2018, the Company recorded a $3.9 million increase to the
allowance for credit losses related to estimated incremental credit losses on customer accounts impacted by a
hurricane in the third quarter of 2018. The incremental hurricane allowance resulted in a decrease to net income
of $2.9 million, or $0.24 diluted earnings per share, for the three months ended September 30, 2018.
In September 2017, the Company recorded a $3.0 million increase to the allowance for credit losses related to
estimated incremental credit losses on customer accounts impacted by hurricanes. The incremental hurricane
allowance resulted in a decrease to net income of $1.9 million, or $0.16 diluted earnings per share, for the three
months ended September 30, 2017.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 90
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On an annual basis, the Company updates the estimated loss emergence period for each finance receivable type.
During 2017, the loss emergence period for each finance receivable type changed as follows: small loan finance
receivables increased from six to seven months; large loan finance receivables decreased from twelve to ten
months; and retail loan finance receivables increased from ten to eleven months. These net changes in the loss
emergence periods increased the Company’s allowance for credit losses by $0.1 million, which decreased net
income for the year ended December 31, 2017 by $0.1 million, or $0.01 diluted earnings per share.
During 2018, the loss emergence period for each finance receivable type changed as follows: small loan finance
receivables increased from seven to eight months; large loan finance receivables decreased from ten to eight
months; automobile loan finance receivables decreased from twelve to nine months; and retail loan finance
receivables decreased from eleven to eight months. These net changes in the loss emergence periods decreased
the Company’s allowance for credit losses by $0.2 million, which increased net income for the year ended
December 31, 2018 by $0.2 million, or $0.01 diluted earnings per share.
The Company sells previously charged-off loans for all products in the portfolio to a third-party debt buyer. The
proceeds from these sales are recognized as a recovery in the allowance for credit losses. In September 2017, the
Company recognized a recovery of $1.0 million from the bulk sale of previously charged-off customer accounts
in bankruptcy. These accounts had been excluded from previous sales of charged-off loans.
The following is a reconciliation of the allowance for credit losses by product for the periods indicated:
In thousands
Small loans . . . .
Large loans . . . .
Automobile
loans . . . . . . .
Retail loans . . . .
Balance
January 1,
2018
Provision Credit Losses Recoveries
Balance
December 31,
2018
$24,749
17,548
$51,859
31,103
$(48,333)
(26,337)
$2,484
1,388
$30,759
23,702
Finance
Receivables
December 31,
2018
$437,662
437,998
4,025
2,588
1,300
2,794
(4,085)
(3,586)
653
150
1,893
1,946
26,154
30,429
Total . . . . . . . . .
$48,910
$87,056
$(82,341)
$4,675
$58,300
$932,243
In thousands
Small loans . . . .
Large loans . . . .
Automobile
loans . . . . . . .
Retail loans . . . .
Balance
January 1,
2017
Provision Credit Losses Recoveries
Balance
December 31,
2017
$21,770
11,460
$45,104
25,024
$(45,612)
(20,088)
$3,487
1,152
$24,749
17,548
Finance
Receivables
December 31,
2017
$375,772
347,218
5,910
2,110
4,210
3,001
(7,424)
(2,756)
1,329
233
4,025
2,588
61,423
33,050
Total . . . . . . . . .
$41,250
$77,339
$(75,880)
$6,201
$48,910
$817,463
In thousands
Small loans . . . .
Large loans . . . .
Automobile
loans . . . . . . .
Retail loans . . . .
Balance
January 1,
2016
Provision Credit Losses Recoveries
Balance
December 31,
2016
$21,535
5,593
$41,119
14,261
$(43,797)
(8,946)
$2,913
552
$21,770
11,460
Finance
Receivables
December 31,
2016
$358,471
235,349
8,828
1,496
4,785
2,849
(8,886)
(2,435)
1,183
200
5,910
2,110
90,432
33,523
Total . . . . . . . . .
$37,452
$63,014
$(64,064)
$4,848
$41,250
$717,775
Allowance as
Percentage of
Finance
Receivables
December 31, 2018
7.0%
5.4%
7.2%
6.4%
6.3%
Allowance as
Percentage of
Finance
Receivables
December 31, 2017
6.6%
5.1%
6.6%
7.8%
6.0%
Allowance as
Percentage of
Finance
Receivables
December 31, 2016
6.1%
4.9%
6.5%
6.3%
5.7%
Regional Management Corp. | 2018 Annual Report on Form 10-K | 91
Impaired finance receivables as a percentage of total finance receivables were 2.9% and 2.1% for the years ended
December 31, 2018 and 2017, respectively. The following is a summary of finance receivables evaluated for
impairment for the periods indicated:
December 31, 2018
In thousands
Small
Large
Automobile
Retail
Total
Impaired receivables specifically evaluated . . . . . . . . .
Finance receivables evaluated collectively . . . . . . . . . .
$
8,361
429,301
$ 17,196
420,802
$
918
25,236
$
110
30,319
$ 26,585
905,658
Finance receivables outstanding . . . . . . . . . . . . . . . . . .
$437,662
$437,998
$26,154
$30,429
$932,243
Impaired receivables in nonaccrual status . . . . . . . . . . .
$
1,209
$
2,292
Amount of the specific reserve for impaired
accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,791
$
6,860
$
$
178
492
$
$
37
$
3,716
61
$ 11,204
Amount of the general component of the allowance . .
$ 26,968
$ 16,842
$ 1,401
$ 1,885
$ 47,096
December 31, 2017
In thousands
Small
Large
Automobile
Retail
Total
Impaired receivables specifically evaluated . . . . . . . . .
Finance receivables evaluated collectively . . . . . . . . . .
$
5,094
370,678
$ 10,303
336,915
$ 1,724
59,699
$
109
32,941
$ 17,230
800,233
Finance receivables outstanding . . . . . . . . . . . . . . . . . .
$375,772
$347,218
$61,423
$33,050
$817,463
Impaired receivables in nonaccrual status . . . . . . . . . . .
$
707
$
931
Amount of the specific reserve for impaired
accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,190
$
2,183
$
$
129
373
$
$
31
$
1,798
20
$
3,766
Amount of the general component of the allowance . .
$ 23,559
$ 15,365
$ 3,652
$ 2,568
$ 45,144
The average recorded investment in impaired finance receivables and the amount of interest income recognized
on impaired loans for the periods indicated are as follows:
Year Ended December 31,
In thousands
Small loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average
Recorded
Investment
$ 6,577
13,221
1,381
109
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,288
2018
Interest Income
Recognized
$1,066
1,639
60
6
$2,771
2017 (1)
Average
Recorded
Investment
$ 3,946
8,205
2,062
107
$14,320
(1)
It was not practical to compute the amount of interest income recognized on impaired loans prior to fiscal
year 2018.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 92
F
o
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m
1
0
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K
Note 5. Property and Equipment
For the periods indicated, property and equipment consisted of the following:
In thousands
Furniture, fixtures, and equipment
. . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment cost . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated
December 31,
2018
2017
$23,131
10,578
33,709
19,783
$20,471
8,671
29,142
16,848
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,926
$12,294
Depreciation expense for the years ended December 31, 2018, 2017, and 2016 totaled $3.7 million, $3.4 million,
and $3.1 million, respectively.
Note 6. Leases
The Company maintains lease agreements related to its branch network and for its corporate headquarters. The
branch agreements range from five to seven years and generally contain options to extend from three to five
years. The branch and the headquarters lease agreements are considered operating leases.
Future minimum rent commitments under non-cancellable operating leases in effect as of December 31, 2018 are
as follows:
In thousands
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 6,814
6,074
4,788
3,617
3,084
5,322
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,699
Leases generally contain options to extend for periods from three to five years, and the cost of such extensions is
not included above. Rent expense for the years ended December 31, 2018, 2017, and 2016 equaled $8.1 million,
$7.7 million, and $7.0 million, respectively. In addition to rent, the Company typically pays for all operating
expenses, property taxes, and repairs and maintenance on properties that it leases.
In January 2019, the Company adopted a new lease accounting standard. See Note 2, “Significant Accounting
Policies,” for an overview of the impact this standard is expected to have in 2019.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 93
Note 7. Intangible Assets
The following table provides the gross carrying amount and related accumulated amortization of intangible
assets:
December 31, 2018
December 31, 2017
In thousands
Gross Carrying
Amount
Accumulated
Amortization Net Amount
Gross Carrying
Amount
Accumulated
Amortization Net Amount
Software . . . . . . . . . . . . . .
Customer list . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . .
Total intangible assets . . .
$13,811
2,485
950
$17,246
$(4,517)
(2,485)
(234)
$(7,236)
$ 9,294
—
716
$10,010
$13,396
2,485
950
$16,831
$(3,550)
(2,440)
(234)
$(6,224)
$ 9,846
45
716
$10,607
Intangible amortization expense for the years ended December 31, 2018, 2017, and 2016 totaled $2.0 million,
$2.2 million, and $1.9 million, respectively. The following table sets forth the future amortization of intangible
assets:
In thousands
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$1,976
1,776
1,638
1,621
1,403
880
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9,294
The Company performs an annual impairment test on goodwill during the fourth quarter of each fiscal year.
There were no goodwill additions or impairment losses for the years ended December 31, 2018 and 2017,
respectively.
Note 8. Other Assets
Other assets include the following as of the periods indicated:
In thousands
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit insurance receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repossessed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2018
2017
$4,167
2,292
1,027
124
—
765
$ 2,806
2,005
1,024
431
9,474
272
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,375
$16,012
The income tax receivable primarily resulted from a December 2017 change in tax method from the accrual
method to a more commonly used specific identification method for the allowance for credit losses.
Note 9. Interest Rate Caps
The Company has interest rate cap contracts with an aggregate notional principal amount of $400.0 million. Each
contract contains a strike rate against the one-month LIBOR (2.50% and 1.56% as of December 31, 2018 and
Regional Management Corp. | 2018 Annual Report on Form 10-K | 94
2017, respectively). The interest rate caps have maturities of March 2019 ($50.0 million with 2.50% strike rate),
April 2020 ($100.0 million with 3.25% strike rate), June 2020 ($50.0 million with 2.50% strike rate), and April
2021 ($200.0 million with 3.50% strike rate). When the one-month LIBOR exceeds the strike rate, the
counterparty reimburses the Company for the excess over the strike rate. No payment is required by the
Company or the counterparty when the one-month LIBOR is below the strike rate. The following is a summary
of changes in the rate caps:
F
o
r
m
1
0
-
K
In thousands
Balance at beginning of period . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustment included as an increase in
December 31,
2018
$ 98
481
2017
$ 62
100
2016
$ 120
112
interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(330)
(64)
(170)
Balance at end of period, included in other assets . . . . .
$ 249
$ 98
$ 62
Note 10. Long-Term Debt
The following is a summary of the Company’s long-term debt as of the periods indicated:
In thousands
Senior revolving credit facility . .
Amortizing loan . . . . . . . . . . . . . .
Revolving warehouse credit
facility . . . . . . . . . . . . . . . . . . .
RMIT 2018-1 securitization . . . . .
RMIT 2018-2 securitization . . . . .
Long-Term
Debt
$328,074
21,642
30,126
150,246
130,419
December 31, 2018
December 31, 2017
Unamortized
Debt Issuance
Costs
Net
Long-Term
Debt
Long-Term
Debt
Unamortized
Debt Issuance
Costs
Net
Long-Term
Debt
$(1,604)
(201)
$326,470
21,441
$452,050
53,380
$(2,162)
(547)
$449,888
52,833
(1,899)
(2,849)
(2,605)
28,227
147,397
127,814
66,066
—
—
(2,241)
—
—
63,825
—
—
Total . . . . . . . . . . . . . . . . . . . . . . .
$660,507
$(9,158)
$651,349
$571,496
$(4,950)
$566,546
Unused amount of revolving
credit facilities (subject to
borrowing base) . . . . . . . . . . . .
$406,600
$244,884
Senior Revolving Credit Facility: In June 2017, the Company amended and restated its senior revolving credit
facility to, among other things, increase the availability under the facility from $585 million to $638 million and
extend the maturity of the facility from August 2019 to June 2020. The facility has an accordion provision that
allows for the expansion of the facility to $700 million. Excluding the receivables held by the Company’s VIEs,
the senior revolving credit facility is secured by substantially all of the Company’s finance receivables and equity
interests of the majority of its subsidiaries. Advances on the senior revolving credit facility are capped at 85% of
eligible secured finance receivables, plus 70% of eligible unsecured finance receivables. These advance rates are
subject to adjustment at certain credit quality levels (81% of eligible secured finance receivables and 66% of
eligible unsecured finance receivables as of December 31, 2018). As of December 31, 2018, the Company had
$68.6 million of eligible borrowing capacity under the facility. Borrowings under the facility bear interest,
payable monthly, at rates equal to LIBOR of a maturity the Company elects between one and six months, with a
LIBOR floor of 1.00%, plus a 3.00% margin, increasing to 3.25% when the availability percentage is below 10%.
The one-month LIBOR rate was 2.50% and 1.56% at December 31, 2018 and 2017, respectively. Alternatively,
the Company may pay interest at the prime rate, plus a 2.00% margin, increasing to 2.25% when the availability
percentage is below 10%. The prime rate was 5.50% and 4.50% at December 31, 2018 and 2017, respectively.
The Company pays an unused line fee of 0.50% per annum, payable monthly. This fee decreases to 0.375% when
the average outstanding balance exceeds $413.0 million.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 95
Variable Interest Entity Debt: As part of its overall funding strategy, the Company has transferred certain
finance receivables to VIEs for asset-backed financing transactions, including securitizations. The following debt
arrangements are issued by the Company’s SPEs, which are considered VIEs under GAAP and are consolidated
into the financial statements of their primary beneficiary. The Company is considered to be the primary
beneficiary because it has (i) power over the significant activities through its role as servicer of the finance
receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that
could be significant through the Company’s interest in the monthly residual cash flows of the SPEs after each
debt is paid.
These long-term 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 $33.5 million and $8.6 million as of December 31, 2018 and 2017, respectively. Cash inflows from the
finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that
the Company owns in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee
to the Company, which is eliminated in consolidation. Distributions from the SPEs to the Company are permitted
under the debt arrangements.
At each sale of receivables from the Company’s affiliates to the SPEs, the Company makes certain
representations and warranties about the quality and nature of the collateralized receivables. The debt
arrangements require the Company to repurchase the receivables in certain circumstances, including
circumstances in which the representations and warranties made by the Company concerning the quality and
characteristics of the receivables are inaccurate. Assets transferred to each SPE are legally isolated from the
Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets
of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the
Company or any of its affiliates.
Amortizing Loan: In November 2017, the Company and its wholly-owned SPE, Regional Management
Receivables, LLC (“RMR I”), amended and restated the December 2015 credit agreement that provided for a
$75.7 million asset-backed, amortizing loan. The amended and restated credit agreement provided for an
additional advance in the amount of $37.8 million and extended the maturity date to December 2024. The debt is
secured by finance receivables and other related assets that the Company purchased from its affiliates, which the
Company then sold and transferred to RMR I. Advances on the loan were capped at 88% of eligible finance
receivables. RMR I held $1.3 million in restricted cash reserves as of December 31, 2018 to satisfy provisions of
the credit agreement. Borrowings previously bore interest, payable monthly, at a rate of 3.00%. In February
2018, the advance rate lowered to 85% and the interest rate increased to 3.25%. The credit agreement allows the
Company to prepay the loan when the outstanding balance falls below 20% of the original loan amount.
Revolving Warehouse Credit Facility: In August 2018, the Company and its wholly-owned SPE, Regional
Management Receivables II, LLC (“RMR II”), amended the June 2017 credit agreement that provides for a
$125 million revolving warehouse credit facility to RMR II. The amendment extended the date at which the
facility converts to an amortizing loan and the termination date to February 2020 and February 2021,
respectively. The facility has an accordion provision that allows for the expansion of the facility to $150 million.
The Company elected to expand the facility to $150 million from May 2018 to August 2018. The debt is secured
by finance receivables and other related assets that the Company purchased from its affiliates, which the
Company then sold and transferred to RMR II. Advances on the facility are capped at 80% of eligible finance
receivables. RMR II held $1.6 million in restricted cash reserves as of December 31, 2018 to satisfy provisions of
the credit agreement. Borrowings under the facility previously bore interest, payable monthly, at a blended rate
equal to three-month LIBOR, plus a margin of 3.50%. In October 2017 and February 2018, the margin decreased
to 3.25% and 3.00%, respectively, following the satisfaction of milestones associated with the Company’s
conversion to a new loan origination and servicing system. The August 2018 amendment to the credit agreement
decreased the margin to 2.20%. The three-month LIBOR was 2.81% and 1.69% at December 31, 2018 and 2017,
respectively. RMR II pays an unused commitment fee of between 0.35% and 0.85% based upon the average daily
utilization of the facility.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 96
F
o
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m
1
0
-
K
RMIT 2018-1 Securitization: In June 2018, the Company, its wholly-owned SPE, Regional Management
Receivables III, LLC (“RMR III”), and its indirect wholly-owned SPE, Regional Management Issuance Trust
2018-1 (“RMIT 2018-1”), completed a private offering and sale of $150 million of asset-backed notes. The
transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT 2018-1. The
asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the
Company, which RMR III then sold and transferred to RMIT 2018-1. The notes have a revolving period ending
in June 2020, with a final maturity date in July 2027. RMIT 2018-1 held $1.7 million in restricted cash reserves
as of December 31, 2018 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2018-1
securitization bear interest, payable monthly, at a weighted-average rate of 3.93%. Prior to maturity in July 2027,
the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the
payment date occurring in July 2020. No payments of principal of the notes will be made during the revolving
period.
RMIT 2018-2 Securitization: In December 2018, the Company, its wholly-owned SPE, RMR III, and its indirect
wholly-owned SPE, Regional Management Issuance Trust 2018-2 (“RMIT 2018-2”), completed a private
offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of four classes
of fixed-rate asset-backed notes by RMIT 2018-2. The asset-backed notes are secured by finance receivables and
other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to
RMIT 2018-2. The notes have a revolving period ending in December 2020, with a final maturity date in January
2028. RMIT 2018-2 held $1.4 million in restricted cash reserves as of December 31, 2018 to satisfy provisions of
the transaction documents. Borrowings under the RMIT 2018-2 securitization bear interest, payable monthly, at a
weighted-average rate of 4.87%. Prior to maturity in January 2028, the Company may redeem the notes in full,
but not in part, at its option on any note payment date on or after the payment date occurring in January 2021. No
payments of principal of the notes will be made during the revolving period.
The carrying amounts of consolidated VIE assets and liabilities are as follows:
In thousands
Assets
December 31,
2018
2017
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
168
342,481
(18,378)
39,361
75
$
70
137,239
(7,129)
10,734
119
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$363,707
$141,033
Liabilities
Net long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . .
$324,879
25
$116,658
53
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
$324,904
$116,711
The Company’s debt arrangements are subject to certain covenants, including monthly and annual reporting,
maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other
indebtedness, maintenance of a minimum allowance for credit losses, and certain other restrictions. At
December 31, 2018, the Company was in compliance with all debt covenants.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 97
The following is a summary of estimated principal payments required on outstanding debt during each of the
next five years:
In thousands
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 13,954
423,648
155,138
58,796
8,971
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$660,507
Note 11. Disclosure About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Cash and restricted cash: Cash and restricted cash is recorded at cost, which approximates fair value due
to its generally short maturity and highly liquid nature.
Finance receivables: Finance receivables are originated at prevailing market rates. The Company’s finance
receivable portfolio turns approximately 1.2 times per year. The portfolio turnover is calculated by dividing
cash payments, renewals, and net credit losses by the average finance receivables. Management believes that
the carrying amount approximates the fair value of its finance receivable portfolio.
Interest rate caps: The fair value of the interest rate caps is the estimated amount the Company would
receive to terminate the cap agreements at the reporting date, taking into account current interest rates and
the creditworthiness of the counterparty.
Repossessed assets: Repossessed assets are valued at the lower of the finance receivable balance prior to
repossession or the estimated net realizable value of the repossessed asset. The Company estimates net
realizable value using the projected cash value upon liquidation, less costs to sell the related collateral.
Long-term debt: The Company’s long-term debt is frequently renewed, amended, or recently originated.
As a result, the Company believes that the fair value of long-term debt approximates carrying amounts. The
Company also considered its creditworthiness in its determination of fair value.
The carrying amount and estimated fair values of the Company’s financial instruments summarized by level are
as follows:
In thousands
Assets
Level 1 inputs
December 31, 2018
December 31, 2017
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,657
46,484
$
3,657
46,484
$
5,230
16,787
$
5,230
16,787
Level 2 inputs
Interest rate caps . . . . . . . . . . . . . . . . . . . . . . .
249
249
98
98
Level 3 inputs
Net finance receivables . . . . . . . . . . . . . . . . . .
Repossessed assets . . . . . . . . . . . . . . . . . . . . .
873,943
124
873,943
124
768,553
431
768,553
431
Liabilities
Level 3 inputs
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . .
660,507
660,507
571,496
571,496
Regional Management Corp. | 2018 Annual Report on Form 10-K | 98
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Certain of the Company’s assets carried at fair value are classified and disclosed in one of the following three
categories:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 – Unobservable inputs that are not corroborated by market data.
In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are
carried at fair value. At each reporting period, all assets and liabilities for which the fair value measurement is
based on significant unobservable inputs are classified as Level 3. The table below presents the balances of assets
measured at fair value on a recurring basis by level within the hierarchy as of December 31, 2018 and 2017:
In thousands
Interest Rate Caps
Total
Level 1
Level 2
Level 3
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$249
$ 98
$—
$—
$249
$ 98
$—
$—
Certain assets are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair
value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when
there is evidence of impairment). The following table presents the assets carried on the balance sheet by level
within the hierarchy as of December 31, 2018 and 2017 for which a non-recurring change in fair value has been
recorded during the years ended December 31, 2018 and 2017:
In thousands
Repossessed Assets
Total
Level 1 Level 2 Level 3 Total Losses
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$124
$431
$— $— $124
$— $— $431
$142
$437
Note 12. Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. The Company files consolidated
or separate state income tax returns as required by individual states in which it operates. The Company is
generally no longer subject to federal, state, or local income tax examinations by taxing authorities before 2015,
though the Company remains subject to examination for the Texas tax return for the 2014 tax year.
Income tax expense differed from the amount computed by applying the federal income tax rate to total income
before income taxes as a result of the following:
In thousands
Federal tax expense at statutory rate . . . . . . . . . . . . . . . . . . . .
Increase (reduction) in income taxes resulting from:
Year Ended December 31,
2018
2017
2016
$
%
$
%
$
%
$ 9,639
21.0% $14,090
35.0% $13,632
35.0%
State tax, net of federal benefit . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based awards . . . . . . . . .
Research and development tax credits . . . . . . . . . . . . . .
Tax Cuts and Jobs Act . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,521
(370)
(114)
—
(119)
3.3% 1,253
(0.8)% (1,603)
(0.2)% (400)
0.0% (3,122)
76
(0.3)%
3.1% 1,275
(4.0)% —
(1.0)% —
(7.8)% —
10
0.3%
3.3%
0.0%
0.0%
0.0%
0.0%
$10,557
23.0% $10,294
25.6% $14,917
38.3%
Regional Management Corp. | 2018 Annual Report on Form 10-K | 99
In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act made changes
to U.S. tax law, including a reduction in the federal corporate tax rate from 35.0% to 21.0%. As a result of the
enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. The
revaluation resulted in a $3.1 million income tax benefit and a corresponding reduction in the Company’s net
deferred tax liability. Due to the timing of the enactment and the complexity involved in applying the provisions
of the Tax Act, the Company made reasonable estimates of the effects of the Tax Act and recorded provisional
amounts in its consolidated financial statements as of December 31, 2017. The accounting for the tax effects of
the Tax Act was completed in December 2018.
Pursuant to the adoption of an accounting standard update issued in March 2016 and effective beginning in fiscal
year 2017, the Company recognizes the tax benefits or deficiencies from the exercise or vesting of share-based
awards in the income tax line of the consolidated statements of income. These tax benefits and deficiencies were
previously recognized within additional paid-in-capital on the Company’s consolidated balance sheet.
Income tax expense attributable to total income before income taxes consists of the following for the periods
indicated:
In thousands
Current:
Federal
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Federal
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2018
2017
2016
$12,442
2,329
14,771
$ 4,479
821
$11,431
1,584
5,300
13,015
(3,705)
(509)
(4,214)
4,464
530
4,994
1,694
208
1,902
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,557
$10,294
$14,917
Regional Management Corp. | 2018 Annual Report on Form 10-K | 100
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Net deferred tax assets and liabilities consist of the following as of the periods indicated:
In thousands
Deferred tax assets:
December 31,
2018
2017
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . .
Unearned insurance premiums . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . .
State net operating loss carryforward . . . . . . . . . . . . . .
Deferred contract incentive . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,315
3,406
3,393
1,132
376
274
86
86
$ 6,491
2,314
2,971
391
424
300
163
206
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . .
19,068
13,260
Deferred tax liabilities:
Fair market value adjustment of finance receivables . .
Tax over book depreciation . . . . . . . . . . . . . . . . . . . . . .
Deferred loan costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . .
13,378
4,058
1,814
372
193
19,815
12,410
3,463
1,633
395
320
18,221
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . .
$ (747)
$ (4,961)
The Company had state net operating loss carryforwards of approximately $8.2 million and $9.7 million as of
December 31, 2018 and 2017, respectively, and related deferred tax assets of $0.3 million for both periods. These
carryforwards are available to offset future taxable income. If not used, the current carryforwards will expire
beginning in 2020.
Income tax expense was $10.6 million, $10.3 million, and $14.9 million for the years ended December 31, 2018,
2017, and 2016, respectively. Included in these amounts are tax benefits from share-based awards of
$0.4 million, $1.6 million, and $0 for the years ended December 31, 2018, 2017, and 2016, respectively.
At December 31, 2018, the Company did not have any material uncertain tax positions.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 101
Note 13. Earnings Per Share
The following schedule reconciles the computation of basic and diluted earnings per share for the periods
indicated:
In thousands, except per share amounts
Numerator:
Year Ended December 31,
2018
2017
2016
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$35,345
$29,963
$24,031
Denominator:
Weighted-average shares outstanding for basic
earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive securities . . . . . . . . . . . . . . . . . . . .
11,655
423
11,551
232
11,824
261
Weighted-average shares adjusted for dilutive
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,078
11,783
12,085
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3.03
2.93
$
$
2.59
2.54
$
$
2.03
1.99
Options to purchase 148 thousand, 126 thousand, and 140 thousand shares of common stock were outstanding
during the years ended December 31, 2018, 2017, and 2016, respectively, but were not included in the
computation of diluted earnings per share because they were anti-dilutive.
Note 14. Employee Benefit Plans
Retirement savings plan: The Company has a defined contribution employee benefit plan (401(k) plan)
covering full-time employees who have at least six months of service. The Company made a matching
contribution equal to 100 percent of the first three percent of an employee’s gross income and 50 percent of the
next two percent of gross income in 2018, 2017, and 2016. For the years ended December 31, 2018, 2017, and
2016, the Company recorded expense for the Company’s match of $0.9 million, $0.8 million, and $0.8 million,
respectively.
Note 15. Share-Based Compensation
The Company previously adopted the 2007 Management Incentive Plan (the “2007 Plan”) and the 2011 Stock
Incentive Plan (the “2011 Plan”). On April 22, 2015, the stockholders of the Company approved the 2015 Long-
Term Incentive Plan (the “2015 Plan”), and on April 27, 2017, the stockholders of the Company re-approved the
2015 Plan, as amended and restated. As of December 31, 2018, subject to adjustments as provided in the 2015
Plan, the maximum aggregate number of shares of the Company’s common stock that could be issued under the
2015 Plan could not exceed the sum of (i) 1.55 million shares plus (ii) any shares (A) remaining available for the
grant of awards as of the 2015 Plan effective date (April 22, 2015) under the 2007 Plan or the 2011 Plan, and/or
(B) subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cancelled,
terminated, expires, or lapses without the issuance of shares or pursuant to which such shares are forfeited. As of
the effectiveness of the 2015 Plan (April 22, 2015), there were 922 thousand shares available for grant under the
2015 Plan, inclusive of shares previously available for grant under the 2007 Plan and the 2011 Plan that were
rolled over to the 2015 Plan. No further grants will be made under the 2007 Plan or the 2011 Plan. However,
awards that are outstanding under the 2007 Plan and the 2011 Plan will continue in accordance with their
respective terms. As of December 31, 2018, there were 1.1 million shares available for grant under the 2015 Plan.
For the years ended December 31, 2018, 2017, and 2016, the Company recorded share-based compensation
expense of $6.9 million, $4.3 million, and $4.2 million, respectively. As of December 31, 2018, unrecognized
Regional Management Corp. | 2018 Annual Report on Form 10-K | 102
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share-based compensation expense to be recognized over future periods approximated $6.6 million. This amount
will be recognized as expense over a weighted-average period of 1.7 years. Share-based compensation expenses
are recognized on a straight-line basis over the requisite service period of the agreement. All share-based
compensation is classified as equity awards except for cash-settled performance units, which are classified as
liabilities.
The Company allows for the settlement of share-based awards on a net share basis. With net share settlement, the
employee does not surrender any cash or shares upon the exercise of stock options or the vesting of stock awards
or stock units. Rather, the Company withholds the number of shares with a value equivalent to the option
exercise price (for stock options) and the statutory tax withholding (for all share-based awards). Net share
settlements have the effect of reducing the number of shares that would have otherwise been issued as a result of
exercise or vesting.
Long-term incentive program: The Company issues non-qualified stock options, performance-contingent
restricted stock units (“RSUs”), and cash-settled performance units (“CSPUs”) to certain members of senior
management under a long-term incentive program. Recurring annual grants are made at the discretion of the
Company’s Board of Directors (the “Board”). The annual grants are subject to cliff- and graded-vesting,
generally concluding at the end of the third calendar year and subject to continued employment or as otherwise
provided in the underlying award agreements. The actual value of the RSUs and CSPUs that may be earned can
range from 0% to 150% of target based on the percentile ranking of the Company’s compound annual growth
rate of net income and net income per share compared to a public company peer group over a three-year
performance period.
In 2016, the Company introduced a key team member incentive program for certain other members of senior
management. Recurring annual participation in the program is at the discretion of the Board and executive
management. Each participant in the program is eligible to earn a restricted stock award, subject to performance
over a one-year period. Payout under the program can range from 0% to 150% of target based on the
achievement of five Company performance metrics and individual performance goals (subject to continued
employment and certain other terms and conditions of the program). If earned, the restricted stock award is
issued following the one-year performance period and vests ratably over a subsequent two-year period (subject to
continued employment or as otherwise provided in the underlying award agreement).
Inducement and retention program: From time to time, the Company issues stock awards and other long-term
incentive awards in conjunction with employment offers to select new employees and retention grants to select
existing employees. The Company issues these awards to attract and retain talent and to provide market
competitive compensation. The grants have various vesting terms, including fully-vested awards at the grant
date, cliff-vesting, and graded-vesting over periods of up to five years (subject to continued employment or as
otherwise provided in the underlying award agreements).
Non-employee director compensation program: In 2016, the Company awarded its non-employee directors a
cash retainer, committee meeting fees, shares of restricted common stock, and non-qualified stock options. The
Board revised the compensation program in April 2017 to provide that the value of each director’s equity-based
award be allocated solely to restricted stock, rather than split evenly between restricted stock and non-qualified
stock options. The restricted stock awards are granted on the fifth business day following the Company’s annual
meeting of stockholders and fully vest upon the earlier of the first anniversary of the grant date or the completion
of the directors’ annual service to the Company. In 2016, the non-qualified stock option awards were granted on
the fifth business day following the Company’s annual meeting of stockholders and were immediately vested on
the grant date. The Board further revised the compensation program in April 2018 to modify the amount of the
annual cash retainers for Board and committee members, eliminate committee meeting fees, and modify the
value of the restricted stock award for Board committee members.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 103
The following are the terms and amounts of the awards issued under the Company’s share-based incentive
programs:
Non-qualified stock options: The exercise price of all stock options is equal to the Company’s closing stock
price on the date of grant. Stock options are subject to various vesting terms, including graded- and cliff-vesting
over periods of up to five years. In addition, stock options vest and become exercisable in full or in part under
certain circumstances, including following the occurrence of a change of control (as defined in the option award
agreements). Participants who are awarded options must exercise their options within a maximum of ten years of
the grant date.
The fair value of option grants is estimated on the grant date using the Black-Scholes option-pricing model with
the following weighted-average assumptions for option grants during the periods indicated below:
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41.63% 43.95% 46.04%
0.00% 0.00% 0.00%
5.99
5.96
2.66% 2.09% 1.32%
5.80
Year Ended December 31,
2018
2017
2016
Expected volatility is based on the Company’s historical stock price volatility. The expected term is calculated by
using the simplified method (average of the vesting and original contractual terms) due to insufficient historical
data to estimate the expected term. The risk-free rate is based on the zero coupon U.S. Treasury bond rate over
the expected term of the awards.
The following table summarizes the stock option activity for the year ended December 31, 2018:
In thousands, except per share amounts
Options outstanding at January 1,
2018 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31,
Number of
Shares
Weighted-Average
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
958
112
(89)
—
—
$17.39
28.25
16.62
—
—
2018 . . . . . . . . . . . . . . . . . . . . . . . . .
981
$18.69
Options exercisable at December 31,
2018 . . . . . . . . . . . . . . . . . . . . . . . . .
871
$17.83
6.6
6.3
$5,982
$5,842
The following table provides additional stock option information for the periods indicated:
In thousands, except per share amounts
Year Ended December 31,
2018
2017
2016
Weighted-average grant date fair value per share . . . . . . . . . .
Intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . .
Fair value of stock options that vested . . . . . . . . . . . . . . . . . . .
$12.39
$1,604
$1,809
$ 8.90
$4,981
$3,004
$ 7.74
$1,397
$2,131
Regional Management Corp. | 2018 Annual Report on Form 10-K | 104
Performance-contingent restricted stock units: Compensation expense for RSUs is based on the Company’s
closing stock price on the date of grant and the probability that certain financial goals are achieved over the
performance period. Compensation cost is estimated based on expected performance and is adjusted at each
reporting period.
The following table summarizes RSU activity during the year ended December 31, 2018:
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In thousands, except per unit amounts
Weighted-Average
Grant Date
Fair Value Per Unit
Units
201
Non-vested units at January 1, 2018 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(78)
Non-vested units at December 31, 2018 . . . . . . . . . . . .
182
$17.33
28.25
—
14.92
$21.89
The following table provides additional RSU information for the periods indicated:
Year Ended December 31,
2018
2017
2016
Weighted-average grant date fair value per unit
. . . . . . . . . . .
$28.25
$19.99
$17.02
Cash-settled performance units: CSPUs will be settled in cash at the end of the performance measurement
period and are classified as a liability. The value of CSPUs bears no relationship to the value of the Company’s
common stock. Compensation cost is estimated based on expected performance and is adjusted at each reporting
period.
The following table summarizes CSPU activity during the year ended December 31, 2018:
In thousands, except per unit amounts
Non-vested units at January 1, 2018 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Units
3,484
1,660
—
(1,162)
Non-vested units at December 31, 2018 . . . . . . . . . .
3,982
Weighted -Average
Grant Date
Fair Value Per Unit
$1.00
1.00
—
1.00
$1.00
Restricted stock awards: The fair value and compensation cost of restricted stock is calculated using the
Company’s closing stock price on the date of grant.
The following table summarizes restricted stock activity during the year ended December 31, 2018:
In thousands, except per share amounts
Weighted-Average
Grant Date
Fair Value Per Share
Shares
Non-vested shares at January 1, 2018 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
53
101
(83)
Non-vested shares at December 31, 2018 . . . . . . . . .
71
$19.36
24.98
19.64
—
$26.95
Regional Management Corp. | 2018 Annual Report on Form 10-K | 105
The following table provides additional restricted stock information:
In thousands, except per share amounts
Year Ended December 31,
2018
2017
2016
Weighted-average grant date fair value per share . . . . . . . . . .
Fair value of restricted stock awards that vested . . . . . . . . . . .
$24.98
$1,609
$18.38
$ 983
$16.37
$ 347
Note 16. Commitments and Contingencies
In the normal course of business, the Company has been named as a defendant in legal actions in connection with
its activities. Some of the actual or threatened legal actions include claims for compensatory damages or claims
for indeterminate amounts of damages. The Company contests liability and the amount of damages, as
appropriate, in each pending matter.
Where available information indicates that it is probable that a liability has been incurred and the Company can
reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to net income.
However, in many legal actions, it is inherently difficult to determine whether any loss is probable, or even
reasonably possible, or to estimate the amount of loss. This is particularly true for actions that are in their early
stages of development or where plaintiffs seek indeterminate damages. In addition, even where a loss is
reasonably possible or an exposure to loss exists in excess of the liability already accrued, it is not always
possible to reasonably estimate the size of the possible loss or range of loss. Before a loss, additional loss, range
of loss, or range of additional loss can be reasonably estimated for any given action, numerous issues may need
to be resolved, including through lengthy discovery, following determination of important factual matters, and/or
by addressing novel or unsettled legal questions.
For certain other legal actions, the Company can estimate reasonably possible losses, additional losses, ranges of
loss, or ranges of additional loss in excess of amounts accrued, but the Company does not believe, based on
current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the
consolidated financial statements.
While the Company will continue to identify legal actions where it believes a material loss to be reasonably
possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims
that the Company has not yet been notified of or are not yet determined to be probable, or reasonably possible
and reasonable to estimate.
The Company expenses legal costs as they are incurred.
Note 17. Insurance Products and Reinsurance of Certain Risks
RMC Reinsurance, Ltd. is a wholly-owned insurance subsidiary of the Company. The Company sells optional
insurance products to its customers in connection with its lending operations. These optional products include
credit life, credit accident and health, credit property, vehicle single interest, and credit involuntary
unemployment insurance. The type and terms of our optional insurance products vary from state to state based on
applicable laws and regulations. Insurance premiums are remitted to an unaffiliated company that issues the
policy to the customer. This unaffiliated company cedes the premiums to RMC Reinsurance, Ltd. Life insurance
premiums are ceded to the Company as written and non-life products are ceded as earned.
The Company maintains a cash reserve for life insurance claims in an amount determined by the ceding
company. As of December 31, 2018 and 2017, the cash reserves were $7.1 million and $6.1 million, respectively.
The Company also purchased a cash collateralized letter of credit in favor of the ceding company. The letter of
credit was $0.1 million and $0.5 million as of December 31, 2018 and 2017, respectively.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 106
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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 the Company. Earned premiums are accounted for over the period of the underlying reinsured policies using
assumptions consistent with the policy terms. Direct costs included in insurance income, net are claims paid,
claims reserves, ceding fees, and premium taxes paid. The Company does not allocate to insurance income, net,
any other home office or branch administrative costs associated with managing its insurance operations,
managing its captive insurance company, marketing and selling insurance products, legal and compliance review,
or internal audits.
The following table summarizes the components of insurance income, net during the years ended December 31,
2018, 2017, and 2016:
In thousands
Insurance Premiums and
Direct Expenses
2018
2017
2016
Earned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims, reserves, and certain direct expenses . . . . . . . .
$ 31,095
(16,302)
$ 25,860
(12,799)
$ 23,191
(13,735)
Insurance income, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,793
$ 13,061
$ 9,456
Prior to May 2016, the Company had a collateral protection insurance (“CPI”) program. CPI was added to a loan
when a customer failed to provide the Company with proof of collision insurance on an automobile securing a
loan. The CPI program was administered by an independent third party, which tracked insurance lapses and
cancellations and issued a policy when the customer did not provide proof of insurance. The insurance was added
to the loan, which increased the customer’s monthly loan payment. The third party and its insurance partner
retained a percentage of the premium and paid all claims. For automobile purchase loans originated beginning in
May 2016, the Company was covered under a blanket vendor single interest insurance policy. The policy
protected the Company’s interest when the customer failed to maintain the required insurance coverage on an
automobile securing an automobile purchase loan. The customer’s loan and monthly payment were not impacted
by this insurance policy. This blanket vendor single interest insurance policy was cancelled in March 2018.
The Company offered a self-insured Guaranteed Asset Protection (“GAP”) coverage to customers in North
Carolina and Alabama. A GAP program is a contractual arrangement whereby the Company forgives the
remaining balance of the insured customer’s automobile purchase loan if the automobile is determined to be a
total loss by the primary insurance carrier and insurance proceeds are not sufficient to pay off the customer’s
loan. The GAP program revenue is recognized over the life of the loan. Losses are recognized in the period in
which they occur. The Company ceased offering the GAP product when it ceased its automobile loan
originations in November 2017.
Apart from the various optional payment and collateral protection insurance products that the Company offers to
customers, on certain loans, the Company also collects a fee from customers and, in turn, purchases non-file
insurance from an unaffiliated insurance company for its benefit in lieu of recording and perfecting its security
interest in personal property collateral. Non-file insurance protects the Company from credit losses where,
following an event of default, it is unable to take possession of personal property collateral because its security
interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such
circumstances, non-file insurance generally will pay to the Company an amount equal to the lesser of the loan
balance or the collateral value. In recent years, as large loans have become a larger percentage of the Company’s
loan portfolio, the severity of non-file insurance claims has increased and non-file insurance claims expenses
have exceeded non-file insurance fees. The resulting net loss from the non-file insurance product has been
reflected in the Company’s insurance income, net. The Company has evaluated various ways to lower its non-file
insurance claims, and determined to reduce its utilization of non-file insurance in the future, beginning in the
fourth quarter of 2018. This policy change will continue to cause substantially offsetting increases to insurance
income, net and net credit losses in future periods.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 107
As a result of the Company’s 2016 insurance administration transition to a new unaffiliated third-party provider,
certain of the Company’s non-file insurance claims expenses were temporarily shifted into provision for credit
losses during 2017 and 2018, impacting net credit losses instead of insurance income, net. Net income was not
impacted as a result of this transition.
Note 18. Quarterly Information (unaudited)
The following tables summarize the Company’s quarterly financial information for each of the four quarters of
2018 and 2017:
2018
In thousands, except per share amounts
First
Second
Third
Fourth
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$72,625
19,515
34,592
7,177
2,697
$ 8,644
$72,416
20,203
33,215
7,915
2,601
$ 8,482
$77,916
23,640
35,861
8,729
2,237
$ 7,449
$83,749
23,698
36,616
9,643
3,022
$10,770
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.74
0.72
$
$
0.73
0.70
$
$
0.64
0.61
$
$
0.92
0.90
(1) Third quarter 2018 includes a $3.9 million incremental hurricane allowance for credit losses.
2017
In thousands, except per share amounts
First
Second
Third
Fourth
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax(1)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$65,820
19,134
31,454
5,213
2,385
$ 7,634
$65,338
18,589
31,642
5,221
3,751
$ 6,135
$69,194
20,152
33,840
6,658
3,235
$ 5,309
$72,107
19,464
34,019
6,816
923
$10,885
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.66
0.65
$
$
0.53
0.52
$
$
0.46
0.45
$
$
0.94
0.92
(1) First quarter 2017 includes a $1.5 million tax benefit related to the exercise of stock options.
(2) Third quarter 2017 includes a $3.0 million incremental hurricane allowance for credit losses.
(3) Third quarter 2017 includes a $1.0 million recovery from the bulk sale of previously charged-off customer
accounts in bankruptcy.
(4) Fourth quarter 2017 includes a $3.1 million tax benefit related to implementation of the Tax Act.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 108
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2018. The term “disclosure
controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls
and other procedures of a company that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act
is accumulated and communicated to the company’s management, including its principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based on the evaluation of our disclosure controls and procedures as of December 31, 2018, our chief
executive officer and chief financial officer concluded that, as of such date, our disclosure controls and
procedures were effective. Management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their objectives, and management
necessarily applies its judgment in evaluating the cost–benefit relationship of possible controls and procedures.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for the preparation, integrity, accuracy, and fair presentation of the
consolidated financial statements appearing in this Annual Report on Form 10-K for the fiscal year ended
December 31, 2018. The financial statements were prepared in conformity with GAAP and include amounts
based on judgments and estimates by management.
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements in accordance with GAAP. Our internal control over
financial reporting is supported by internal audits, appropriate reviews by management, policies and guidelines,
careful selection and training of qualified personnel, and codes of ethics adopted by our company’s Board of
Directors that are applicable to all directors, officers, and employees of our company.
Because of its inherent limitations, no matter how well designed, internal control over financial reporting
may not prevent or detect all misstatements. Internal controls can only provide reasonable assurance with respect
to financial statement preparation and presentation. Further, the evaluation of the effectiveness of internal control
over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to
the risks that the controls may become inadequate because of changes in conditions or that the degree of
compliance with the policies and procedures may decline.
Management assessed the effectiveness of our internal control over financial reporting, with the
participation of our chief executive officer and chief financial officer, as of December 31, 2018. In conducting
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control—Integrated Framework (2013). Based on this assessment,
management believes that we maintained effective internal control over financial reporting as of December 31,
Regional Management Corp. | 2018 Annual Report on Form 10-K | 109
2018. Our independent registered public accounting firm, RSM US LLP, has issued a report on our internal
control over financial reporting, which appears in Part II, Item 8, “Financial Statements and Supplementary
Data.”
Changes in Internal Control
There were no changes in our internal control over financial reporting identified in management’s
evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this
Annual Report on Form 10-K that materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 110
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required under this item is incorporated herein by reference to the information presented
under the headings “Board of Directors and Corporate Governance Matters,” “Executive Officers,”
“Compensation Discussion and Analysis,” “Proposal No. 1: Election of Directors,” and “Section 16(a) Beneficial
Ownership Reporting Compliance” in the Company’s definitive proxy statement pursuant to Regulation 14A,
which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal
year ended December 31, 2018.
Our Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”). The
Code of Ethics applies to all of our directors, officers, and employees and is posted on the Company’s Investor
Relations website under the “Corporate Governance” tab at www.regionalmanagement.com. A stockholder may
request a copy of the Code of Ethics by contacting our Corporate Secretary at 979 Batesville Road, Suite B,
Greer, SC 29651. To the extent permissible under applicable law, the rules of the SEC, and NYSE listing
standards, we intend to disclose on our website any amendment to our Code of Ethics, or any grant of a waiver
from a provision of our Code of Ethics, that requires disclosure under applicable law, the rules of the SEC, or
NYSE listing standards.
ITEM 11. EXECUTIVE COMPENSATION.
The information required under this item is incorporated herein by reference to the information presented
under the headings “Board of Directors and Corporate Governance Matters,” “Executive Officers,”
“Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation
Tables,” “Summary of Employment Arrangements with Executive Officers,” and “Summary of Company
Incentive Plans” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended
December 31, 2018.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required under this item is incorporated herein by reference to the information presented
under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive
Compensation Tables” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended
December 31, 2018.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required under this item is incorporated herein by reference to the information presented
under the headings “Certain Relationships and Related Person Transactions” and “Board of Directors and
Corporate Governance Matters” in the Company’s definitive proxy statement pursuant to Regulation 14A, which
proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year
ended December 31, 2018.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required under this item is incorporated herein by reference to the information presented
under the heading “Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting
Firm” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be
filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2018.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 111
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
(1) Financial Statements:
(i) Reports of Independent Registered Public Accounting Firm
(ii) Consolidated Balance Sheets at December 31, 2018 and December 31, 2017
(iii) Consolidated Statements of Income for the Years Ended December 31, 2018, December 31,
2017, and December 31, 2016
(iv) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018,
December 31, 2017, and December 31, 2016
(v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2018,
December 31, 2017, and December 31, 2016
(vi) Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: None. Financial statement schedules have been omitted because
the required information is included in our consolidated financial statements contained elsewhere
in this Annual Report on Form 10-K.
(3) Exhibits: The exhibits listed in the following index are filed as a part of this Annual Report on
Form 10-K.
Exhibit
Number
Exhibit Description
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
3.1
3.2
4.1
4.2
Amended and Restated Certificate of
Incorporation of Regional Management Corp.
Amended and Restated Bylaws of Regional
Management Corp.
Indenture, dated June 28, 2018, by and among
Regional Management Issuance Trust 2018-1,
as issuer, Regional Management Corp., as
servicer, Wells Fargo Bank, N.A., as indenture
trustee, and Wells Fargo Bank, N.A., as
account bank
Indenture, dated December 13, 2018, by and
among Regional Management Issuance Trust
2018-2, as issuer, Regional Management
Corp., as servicer, Wells Fargo Bank, N.A., as
indenture trustee, and Wells Fargo Bank, N.A.,
as account bank
8-K 001-35477
3.1
4/2/2012
8-K 001-35477
3.2
4/2/2012
8-K 001-35477
4.1
06/29/2018
8-K 001-35477
4.1
12/13/2018
10.1
Cooperation Agreement, dated as of
January 26, 2018, by and between Basswood
Capital Management, L.L.C. and the Company
8-K 001-35477
10.1
01/29/2018
Regional Management Corp. | 2018 Annual Report on Form 10-K | 112
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
8-K 001-35477
10.2
6/20/2017
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8-K 001-35477
10.2
11/28/2017
10-Q 001-35477
10.2
05/01/2018
8-K 001-35477
10.1
11/28/2017
10-Q 001-35477
10.3
05/01/2018
Exhibit
Number
10.2.1
10.2.2
10.2.3
10.3.1
10.3.2
Exhibit Description
Sixth Amended and Restated Loan and
Security Agreement, dated as of June 20,
2017, by and among Regional Management
Corp. and its subsidiaries named as borrowers
therein, the financial institutions named as
lenders therein, and Bank of America, N.A., as
agent
First Amendment to Sixth Amended and
Restated Loan and Security Agreement, dated
as of November 21, 2017, by and among
Regional Management Corp. and its
subsidiaries named as borrowers therein, the
financial institutions named as lenders therein,
and Bank of America, N.A., as agent
Second Amendment to Sixth Amended and
Restated Loan and Security Agreement, dated
as of February 20, 2018, by and among
Regional Management Corp. and its
subsidiaries named as borrowers therein, the
financial institutions named as lenders therein,
and Bank of America, N.A., as agent
Amended and Restated Credit Agreement,
dated as of November 21, 2017, by and among
Regional Management Receivables, LLC, as
borrower, Regional Management Corp., as
servicer, Wells Fargo Bank, National
Association, as lender, the other lenders from
time to time parties thereto, Wells Fargo Bank,
National Association, as account bank,
collateral custodian, and backup servicer, and
Wells Fargo Securities, LLC, as administrative
agent for the lender and other lenders from
time to time parties thereto
Amendment No. 1 to the Amended and
Restated Credit Agreement, dated as of
February 20, 2018, by and among Regional
Management Receivables, LLC, as borrower,
Regional Management Corp., as servicer,
Wells Fargo Bank, National Association, as
lender, and Wells Fargo Securities, LLC, as
administrative agent
Regional Management Corp. | 2018 Annual Report on Form 10-K | 113
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
8-K 001-35477
10.1
11/02/2018
8-K 001-35477
10.1
6/20/2017
8-K 001-35477
10.1
05/24/2018
Exhibit
Number
10.3.3
10.4.1
10.4.2
Exhibit Description
Amendment No. 2 to the Amended and
Restated Credit Agreement, dated as of
October 30, 2018, by and among Regional
Management Receivables, LLC, as borrower,
Regional Management Corp., as servicer,
Wells Fargo Bank, National Association, as
lender, and Wells Fargo Securities, LLC, as
administrative agent
Credit Agreement, dated as of June 20, 2017,
by and among Regional Management
Receivables II, LLC, as borrower, Regional
Management Corp., as servicer, the lenders
from time to time parties thereto, Wells Fargo
Bank, National Association, as account bank,
image file custodian, and backup servicer,
Wells Fargo Bank, National Association, as
administrative agent, and Credit Suisse AG,
New York Branch, as structuring and
syndication agent
Amended and Restated Schedule A-1, effective
May 23, 2018, to the Credit Agreement, dated
June 20, 2017, by and among Regional
Management Receivables II, LLC, as
borrower, Regional Management Corp., as
servicer, the lenders from time to time parties
thereto, Wells Fargo Bank, National
Association, as account bank, image file
custodian, and backup servicer, Wells Fargo
Bank, National Association, as administrative
agent, and Credit Suisse AG, New York
Branch, as structuring and syndication agent
Regional Management Corp. | 2018 Annual Report on Form 10-K | 114
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
8-K 001-35477
10.2
06/29/2018
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8-K 001-35477
10.1
09/06/2018
Exhibit
Number
10.4.3
10.4.4
Exhibit Description
Omnibus Amendment, dated as of June 28,
2018, by and among Regional Management
Receivables II, LLC, Regional Management
Corp., Regional Finance Corporation of
Alabama, Regional Finance Company of
Georgia, LLC, Regional Finance Company of
New Mexico, LLC, Regional Finance
Corporation of North Carolina, Regional
Finance Company of Oklahoma, LLC,
Regional Finance Corporation of South
Carolina, Regional Finance Corporation of
Tennessee, Regional Finance Corporation of
Texas, Regional Finance Company of Virginia,
LLC, Regional Management North Carolina
Receivables Trust, and Wells Fargo Bank,
National Association, as administrative agent,
as acknowledged and agreed to by Wells Fargo
Bank, National Association, as Class A
committed lender, Class B committed lender,
Class A lender agent, and Class B lender agent,
Credit Suisse AG, Cayman Islands Branch, as
Class A committed lender and Class B
committed lender, GIFS Capital Company,
LLC, as Class A conduit lender and Class B
conduit lender, Credit Suisse AG, New York
Branch, as Class A lender agent and Class B
lender agent, and Wells Fargo Bank, National
Association, not in its individual capacity, but
solely as account bank, image file custodian,
and backup servicer
Amendment No. 2 to Credit Agreement, dated
August 30, 2018, by and among Regional
Management Receivables II, LLC, as
borrower, Regional Management Corp., as
servicer, the lenders from time to time parties
thereto, the agents from time to time parties
thereto, Wells Fargo Bank, National
Association, as administrative agent, Credit
Suisse AG, New York Branch, as structuring
and syndication agent, and Wells Fargo Bank,
National Association, as account bank, image
file custodian, and backup servicer
Regional Management Corp. | 2018 Annual Report on Form 10-K | 115
Exhibit
Number
10.5
10.6
10.7†
10.8.1†
10.8.2†
10.8.3†
10.8.4†
10.8.5†
10.8.6†
10.8.7†
10.9.1†
Exhibit Description
Sale and Servicing Agreement, dated as of
June 28, 2018, by and among Regional
Management Receivables III, LLC, as
depositor, Regional Management Corp., as
servicer, the subservicers party thereto,
Regional Management Issuance Trust
2018-1, as issuer, and Regional
Management North Carolina Receivables
Trust, acting thereunder solely with respect
to the 2018-1A SUBI
Sale and Servicing Agreement, dated as of
December 13, 2018, by and among
Regional Management Receivables III,
LLC, as depositor, Regional Management
Corp., as servicer, the subservicers party
thereto, Regional Management Issuance
Trust 2018-2, as issuer, and Regional
Management North Carolina Receivables
Trust, acting thereunder solely with respect
to the 2018-2A SUBI
Regional Management Corp. 2007
Management Incentive Plan
Regional Management Corp. 2011 Stock
Incentive Plan and Forms of Nonqualified
Stock Option Agreement (forms for grants
prior to October 1, 2014)
Form of Stock Award Agreement under the
2011 Stock Incentive Plan
Form of Restricted Stock Award Agreement
under the 2011 Stock Incentive Plan (form
for director grants)
Form of Nonqualified Stock Option
Agreement under the 2011 Stock Incentive
Plan (form for grants on or after October 1,
2014)
Form of Performance-Contingent Restricted
Stock Unit Award Agreement under the
2011 Stock Incentive Plan
Form of Cash-Settled Performance Share
Award Agreement under the 2011 Stock
Incentive Plan
Form of Restricted Stock Award Agreement
under the 2011 Stock Incentive Plan (form
for employee grants)
Regional Management Corp. 2015 Long-
Term Incentive Plan (As Amended and
Restated Effective April 27, 2017)
Filed
Herewith
Form
8-K
Incorporated by Reference
File
Number
Exhibit
Filing
Date
001-35477
10.1
06/29/2018
8-K
001-35477
10.1
12/13/2018
S-1/A 333-174245
10.4
6/23/2011
S-1/A 333-174245
10.5
8/4/2011
10-K 001-35477
10.4.2
3/17/2014
10-K 001-35477
10.4.3
3/17/2014
8-K
001-35477
10.1
10/7/2014
8-K
001-35477
10.2
10/7/2014
8-K
001-35477
10.3
10/7/2014
8-K
001-35477
10.4
10/7/2014
8-K
001-35477
10.1
5/2/2017
Regional Management Corp. | 2018 Annual Report on Form 10-K | 116
Exhibit
Number
10.9.2†
10.9.3†
10.9.4†
10.9.5†
10.9.6†
10.9.7†
10.9.8†
10.9.9†
10.9.10†
10.9.11†
10.9.12†
10.9.13†
Exhibit Description
Form of Nonqualified Stock Option
Agreement under the 2015 Long-Term
Incentive Plan (form for grants prior to
April 27, 2017)
Form of Performance-Contingent Restricted
Stock Unit Award Agreement under the 2015
Long-Term Incentive Plan (form for grants
prior to March 29, 2016)
Form of Cash-Settled Performance Unit
Award Agreement under the 2015 Long-Term
Incentive Plan (form for grants prior to
March 29, 2016)
Form of Restricted Stock Award Agreement
under the 2015 Long-Term Incentive Plan
(form for grants prior to April 27, 2017)
Form of Stock Award Agreement under the
2015 Long-Term Incentive Plan (form for
grants prior to April 27, 2017)
Form of Performance-Contingent Restricted
Stock Unit Award Agreement under the 2015
Long-Term Incentive Plan (form for grants on
or after March 29, 2016 through April 26,
2017)
Form of Cash-Settled Performance Unit
Award Agreement under the 2015 Long-Term
Incentive Plan (form for grants on or after
March 29, 2016 through April 26, 2017)
Form of Nonqualified Stock Option
Agreement under the 2015 Long-Term
Incentive Plan (form for grants on or after
April 27, 2017)
Form of Performance-Contingent Restricted
Stock Unit Award Agreement under the 2015
Long-Term Incentive Plan (form for grants on
or after April 27, 2017)
Form of Cash-Settled Performance Unit
Award Agreement under the 2015 Long-Term
Incentive Plan (form for grants on or after
April 27, 2017)
Form of Restricted Stock Award Agreement
under the 2015 Long-Term Incentive Plan
(form for grants on or after April 27, 2017)
Form of Stock Award Agreement under the
2015 Long-Term Incentive Plan (form for
grants on or after April 27, 2017)
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
8-K 001-35477
10.3
4/28/2015
F
o
r
m
1
0
-
K
8-K 001-35477
10.4
4/28/2015
8-K 001-35477
10.5
4/28/2015
8-K 001-35477
10.6
4/28/2015
8-K 001-35477
10.7
4/28/2015
8-K 001-35477
10.1
4/1/2016
8-K 001-35477
10.2
4/1/2016
8-K 001-35477
10.2
5/2/2017
8-K 001-35477
10.3
5/2/2017
8-K 001-35477
10.4
5/2/2017
8-K 001-35477
10.5
5/2/2017
8-K 001-35477
10.6
5/2/2017
Regional Management Corp. | 2018 Annual Report on Form 10-K | 117
Exhibit
Number
10.10†
10.11.1†
10.11.2†
10.12.1†
10.12.2†
10.13.1†
10.13.2†
10.14†
10.15†
10.16†
Exhibit Description
Regional Management Corp. Annual
Incentive Plan (as amended and restated
effective March 23, 2015)
Description of Non-Employee Director
Compensation Program (effective from
April 27, 2017 through April 25, 2018)
Description of Non-Employee Director
Compensation Program (effective beginning
April 25, 2018)
Employment Agreement, dated as of
June 14, 2016, by and between Peter R.
Knitzer and Regional Management Corp.
First Amendment to Employment
Agreement, dated as of August 30, 2017, by
and between Peter R. Knitzer and Regional
Management Corp.
Employment Agreement, dated as of
May 15, 2017, by and between John D.
Schachtel and Regional Management Corp.
First Amendment to Employment
Agreement, dated as of August 30, 2017, by
and between John D. Schachtel and Regional
Management Corp.
Employment Agreement, dated as of
August 30, 2017, by and between Donald E.
Thomas and Regional Management Corp.
Employment Agreement, dated as of
August 30, 2017, by and between Daniel J.
Taggart and Regional Management Corp.
Employment Agreement, dated as of
August 30, 2017, by and between Brian J.
Fisher and Regional Management Corp.
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
8-K 001-35477
10.2
4/28/2015
10-K 001-35477
10.9
02/23/2018
10-Q 001-35477
10.4
08/06/2018
8-K 001-35477
10.1
6/14/2016
8-K 001-35477
10.1
9/1/2017
8-K 001-35477
10.1
5/15/2017
8-K 001-35477
10.2
9/1/2017
8-K 001-35477
10.3
9/1/2017
8-K 001-35477
10.4
9/1/2017
8-K 001-35477
10.5
9/1/2017
10.17†
Form of Retention Award Agreement
8-K 001-35477
10.1
3/13/2015
21.1
23.1
31.1
31.2
Subsidiaries of Regional Management Corp.
Consent of RSM US LLP
Rule 13a-14(a) / 15(d)-14(a) Certification of
Principal Executive Officer
Rule 13a-14(a) / 15(d)-14(a) Certification of
Principal Financial Officer
32.1
Section 1350 Certifications
X
X
X
X
X
Regional Management Corp. | 2018 Annual Report on Form 10-K | 118
Incorporated by Reference
Filed
Herewith
Form
File
Number
Exhibit
Filing
Date
X
F
o
r
m
1
0
-
K
Exhibit
Number
101
Exhibit Description
The following materials from our Annual Report on
Form 10-K for the year ended December 31, 2018,
formatted in XBRL (eXtensible Business Reporting
Language): (i) the Consolidated Balance Sheets as of
December 31, 2018 and December 31, 2017, (ii) the
Consolidated Statements of Income for the years ended
December 31, 2018, December 31, 2017, and
December 31, 2016, (iii) the Consolidated Statements of
Stockholders’ Equity for the years ended December 31,
2018, December 31, 2017, and December 31, 2016, (iv)
the Consolidated Statements of Cash Flows for the years
ended December 31, 2018, December 31, 2017, and
December 31, 2016, and (v) the Notes to the
Consolidated Financial Statements, tagged as blocks of
text
†
Indicates a management contract or a compensatory plan, contract, or arrangement.
ITEM 16. FORM 10-K SUMMARY.
None.
Regional Management Corp. | 2018 Annual Report on Form 10-K | 119
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 8, 2019
Regional Management Corp.
/s/ Peter R. Knitzer
Peter R. Knitzer
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Peter R. Knitzer and Donald E. Thomas, and each of them, jointly and severally, as true
and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution for him/her and in his/
her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities indicated on March 8, 2019.
/s/ Peter R. Knitzer
/s/ Donald E. Thomas
/s/ Michael S. Dymski
/s/ Alvaro G. de Molina
/s/ Jonathan D. Brown
/s/ Roel C. Campos
/s/ Maria Contreras-Sweet
Name:
Title:
Name:
Title:
Name:
Title:
Peter R. Knitzer
President, Chief Executive Officer, and Director
(principal executive officer)
Donald E. Thomas
Executive Vice President and Chief Financial Officer
(principal financial officer)
Michael S. Dymski
Vice President and Chief Accounting Officer
(principal accounting officer)
Name:
Title:
Alvaro G. de Molina
Chairman of the Board of Directors
Name:
Title:
Jonathan D. Brown
Director
Name:
Title:
Roel C. Campos
Director
Name:
Title:
Maria Contreras-Sweet
Director
Regional Management Corp. | 2018 Annual Report on Form 10-K | 120
/s/ Michael R. Dunn
/s/ Steven J. Freiberg
/s/ Carlos Palomares
Name:
Title:
Michael R. Dunn
Director
Name:
Title:
Steven J. Freiberg
Director
Name:
Title:
Carlos Palomares
Director
F
o
r
m
1
0
-
K
Regional Management Corp. | 2018 Annual Report on Form 10-K | 121
Notice of 2019 Annual Meeting of Stockholders
and Proxy Statement
Regional Management Corp.
979 Batesville Road, Suite B
Greer, South Carolina 29651
(864) 448-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 25, 2019
To the Stockholders of Regional Management Corp.:
We hereby give notice that the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Regional Management Corp.
will be held on Thursday, April 25, 2019, at 8:00 a.m. local time, at our headquarters located at 979 Batesville Road, Suite B, Greer,
SC 29651, for the following purposes:
(1)
(2)
(3)
(4)
To elect the eight nominees named in the accompanying Proxy Statement to serve as members of our Board of Directors
until the next annual meeting of stockholders or until their successors are elected and qualified;
To ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2019;
To hold an advisory vote to approve executive compensation; and
To transact such other business as may properly come before the Annual Meeting or any adjournments thereof.
We began mailing this Notice of Annual Meeting of Stockholders and our Proxy Statement to stockholders on or about
March 27, 2019. Only stockholders whose names appear of record on our books at the close of business on March 1, 2019 will be
entitled to notice of and to vote at the Annual Meeting or at any adjournments thereof.
Your vote is important. Whether or not you plan to attend the Annual Meeting in person, you are urged to cast your
vote promptly in order to assure representation of your shares at the meeting and so that a quorum may be established. In
advance of the Annual Meeting, you may vote by Internet or by mail. If you attend the Annual Meeting, you may revoke your proxy
and vote your shares in person.
To vote by Internet, please visit www.proxyvote.com. Have the enclosed proxy card in hand when you access the
website, and follow the instructions to obtain your records and to create an electronic voting instruction form.
To vote by mail, please complete, date, and sign the enclosed proxy card, and mail it in the enclosed envelope. No
postage need be affixed if the proxy card is mailed in the United States.
On behalf of our Board of Directors and our management team, we thank you for your interest in Regional and for your
participation in the Annual Meeting.
By Order of the Board of Directors
Brian J. Fisher
SVP, General Counsel, and Secretary
Greer, South Carolina
March 26, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRIL 25, 2019: The Notice of Annual Meeting of Stockholders,
Proxy Statement, and Annual Report on Form 10-K are available free of charge at
https://materials.proxyvote.com/75902K and on our Investor Relations website at www.regionalmanagement.com.
PROXY STATEMENT
2019 Annual Meeting of Stockholders
TABLE OF CONTENTS
2019 Proxy Statement Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Information and Frequently Asked Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board of Directors and Corporate Governance Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Directors and Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matrix of Director Skills, Experience, and Demographic Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role in Risk Oversight
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Business Conduct and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary of Compensation Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Objectives and Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Compensation Policies, Practices, and Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of Employment Arrangements with Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment Agreements with Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement Agreement with Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change-in-Control
Summary of Company Incentive Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Incentive Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal No. 1: Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . .
Proposal No. 3: Advisory Vote to Approve Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Person Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposals by Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Householding of Annual Meeting Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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REGIONAL MANAGEMENT CORP.
979 Batesville Road, Suite B
Greer, South Carolina 29651
PROXY STATEMENT
For the Annual Meeting of Stockholders to Be Held on April 25, 2019
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on April 25, 2019:
The Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report on Form 10-K are
available free of charge at https://materials.proxyvote.com/75902K and on the Investor Relations website of
Regional Management Corp. at www.regionalmanagement.com.
March 26, 2019
2019 PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of
the information that you should consider. You should read the entire Proxy Statement carefully before voting.
Annual Meeting of Stockholders
Date:
Time:
Place:
Thursday, April 25, 2019
8:00 a.m. local time
Regional Management Corp. Headquarters at 979 Batesville Road, Suite B, Greer, SC
29651
Record Date:
March 1, 2019
Voting:
Stockholders as of the record date are entitled to vote. Each share of common stock is
entitled to one vote for each director nominee and one vote for each other proposal.
Stockholders may vote in person or by proxy. Instructions as to how you may cast your
vote by proxy are found on the accompanying proxy card and are set forth in the Proxy
Statement under “General Information and Frequently Asked Questions – How do I
vote?”
Proxy Materials:
The Proxy Statement and the accompanying proxy card are first being mailed on or
about March 27, 2019 to the stockholders of Regional Management Corp.
Meeting Agenda
Proposal
Election of eight directors
Ratification of the appointment of RSM US LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2019
Advisory vote to approve executive compensation
Transact other business as may properly come before the meeting
Board Vote
Recommendation
Page Reference
(for more detail)
FOR ALL
FOR
FOR
p. 58
p. 58
p. 60
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 1
Election of Director Nominees
The following table provides summary information about each director nominee. The nominees receiving a
plurality of the votes cast at the meeting will be elected as directors.
Name
Alvaro G. de Molina,
Chair of the Board
Director
Since
2012
Jonathan D. Brown
2018
Roel C. Campos
2012
Maria Contreras-Sweet
2018
Michael R. Dunn
2014
Steven J. Freiberg
2014
Peter R. Knitzer
2015
Carlos Palomares
2012
Experience/Qualifications
Financial Services Industry,
Leadership, Credit Risk,
Corporate Finance, M&A,
Accounting, Risk Management
Financial Services Industry,
Capital Allocation, Investor
Relations
Leadership, Cybersecurity,
Corporate Governance,
Government Affairs, Securities
Compliance, Regulatory
Financial Services Industry,
Leadership, Corporate Finance,
Technology/Innovation,
Corporate Governance,
Regulatory, Public Relations,
Government Affairs
Financial Services Industry,
Leadership, Credit Risk,
Corporate Finance, M&A, Risk
Management, Investor Relations
Financial Services Industry,
Leadership, Credit Risk,
Corporate Finance, Marketing,
M&A, Executive Compensation,
Technology, Risk Management,
Investor Relations
Financial Services Industry,
Leadership, Credit Risk,
Corporate Finance, Marketing,
Investor Relations
Financial Services Industry,
Leadership, Credit Risk,
Corporate Finance, Executive
Compensation, Accounting, Risk
Management
Committees
Independent
✓
AC
✓
CC
CGN
✓
✓
✓
✓
✓
✓
C
✓
✓
✓
C
✓
C
✓
AC = Audit Committee
CC = Compensation
Committee
CGN = Corporate Governance
and Nominating Committee
C = Committee Chair
Ratification of Independent Registered Public Accounting Firm
As a matter of good corporate governance, we are asking our stockholders to ratify the selection of RSM US
LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
Advisory Vote to Approve Executive Compensation
As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we
are providing our stockholders with the opportunity at the Annual Meeting of Stockholders to vote on a non-binding
advisory resolution to approve the compensation of our named executive officers (commonly known as a
“Say-on-Pay Vote”).
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 2
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2018 Compensation-Related Highlights
✓ Continued alignment of executive pay with company performance:
O
2018 incentives are largely performance-contingent, with long-term incentive awards roughly
two-thirds performance-contingent and short-term incentive awards entirely performance-contingent
O
Performance goals are rigorous and are based almost exclusively on objective, quantitative criteria
✓ Maintained competitive compensation and incentive program target opportunities for our executives
in order to continue to align their overall compensation with the market for executive talent
✓ Set our short-term incentive payout opportunities to provide high upside if performance goals are
exceeded, while paying low or no bonus amounts if goals are not achieved
✓ Granted long-term incentives, which include a significant portion that is contingent upon the
achievement of rigorous and clearly-defined performance measures, to named executive officers and other
key contributors, effectively aligning such individuals’ interests with the long-term interests of our
stockholders
Compensation Program “Best Practices” Summary
✓ Compensation program designed to closely align
pay with performance
✓ Significant share ownership guidelines for
executives (5x base salary for CEO, 2x for other
executive officers)
✓ Significant share ownership guidelines for directors
(5x annual cash retainer)
✓ Significant portion of compensation is variable and/
or performance-based
✓ No excessive perquisites
Fiscal 2018 Compensation Summary
✓ No excise tax gross-ups
✓ Formalized clawback policy
✓ Double-trigger change-in-control provisions
✓ Prohibition against hedging and pledging
✓ No re-pricing of equity incentive awards without
stockholder approval
✓ Independent Compensation Committee
✓ Independent compensation consultant
The following table sets forth the cash and other compensation that we paid to our named executive officers or
that was otherwise earned by our named executive officers for their services in all employment capacities during
2018. See the Summary Compensation Table of the Proxy Statement for additional information.
Name and Principal Position
Peter R. Knitzer,
President and Chief Executive Officer
John D. Schachtel,
Executive Vice President
and Chief Operating Officer
Donald E. Thomas,
Executive Vice President
and Chief Financial Officer
Daniel J. Taggart,
Executive Vice President
and Chief Credit Risk Officer
Brian J. Fisher,
Salary
($)
550,000
360,000
355,000
330,000
300,000
Bonus
($)
—
—
—
—
—
Senior Vice President, General Counsel,
and Secretary
2020 Annual Meeting of Stockholders
Stock
Awards
($)
733,314
Option
Awards
($)
733,327
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
($)
548,350
83,701
2,648,692
274,986
—
358,920
72,659
1,066,565
177,495
177,499
547,375
45,246
1,302,615
109,977
109,998
448,648
25,993
1,024,616
99,977
100,000
410,774
16,963
927,714
▪
▪
Stockholder proposals submitted pursuant to SEC Rule 14a-8 must be received by us no later than
November 28, 2019.
Notice of stockholder proposals outside of SEC Rule 14a-8 must be delivered to us not earlier than
December 27, 2019 and not later than January 26, 2020.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 3
GENERAL INFORMATION AND
FREQUENTLY ASKED QUESTIONS
This proxy statement (the “Proxy Statement”) and the accompanying proxy card are first being sent on or
about March 27, 2019, to the stockholders of Regional Management Corp., a Delaware corporation (“Regional,” the
“Company,” “we,” “us,” and “our”), in connection with the solicitation of proxies by our Board of Directors (the
“Board”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on April 25, 2019, at
Regional’s headquarters located at 979 Batesville Road, Suite B, Greer, SC 29651, at 8:00 a.m. local time and any
postponement or adjournment thereof. Our Annual Report on Form 10-K, containing financial statements for the
fiscal year ended December 31, 2018, is being mailed together with this Proxy Statement to all stockholders entitled
to vote at the Annual Meeting.
Why did I receive a proxy card and Proxy Statement?
As a stockholder of record on March 1, 2019, you are entitled to vote at the Annual Meeting. The
accompanying proxy card is for use at the Annual Meeting if a stockholder either will be unable to attend in person
or will attend but wishes to vote by proxy in advance of the Annual Meeting. Even if you plan to attend the Annual
Meeting in person, you are encouraged to vote by proxy in advance. Instructions as to how you may cast your vote
by proxy are found on the proxy card. If you attend the Annual Meeting, you may revoke your proxy and vote your
shares in person.
The proxy card is solicited by mail by and on behalf of the Board, and the cost of soliciting proxies will be
borne by us. In addition to solicitations by mail, proxies may be solicited in person, by telephone, or via the Internet
by our directors and officers who will not receive additional compensation for such services. We will request banks,
brokerage houses, and other institutions, nominees, and fiduciaries to forward the soliciting material to beneficial
owners and to obtain authorization for the execution of proxies. We will, upon request, reimburse these parties for
their reasonable expenses in forwarding proxy materials to our beneficial owners.
What is the purpose of the Annual Meeting?
The purpose of the Annual Meeting is:
(i)
(ii)
(iii)
(iv)
to elect the eight nominees named in the Proxy Statement to serve as members of the Board until the
next annual meeting of stockholders or until their successors are elected and qualified;
to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2019;
to hold an advisory vote to approve executive compensation; and
to transact such other business as may properly come before the Annual Meeting or any adjournments
thereof.
Who is entitled to vote?
Only stockholders of record at the close of business on March 1, 2019 (the “Record Date”), will be entitled to
receive notice of and to vote at the Annual Meeting. As of the Record Date, 11,828,806 shares of our common
stock, $0.10 par value per share, were outstanding. The holders of common stock are entitled to one vote per share
for each director nominee and to one vote per share on any other proposal presented at the Annual Meeting.
Brokers that are members of certain securities exchanges and that hold shares of our common stock in “street
name” on behalf of beneficial owners have authority to vote on certain items when they have not received
instructions from beneficial owners. Under the New York Stock Exchange (“NYSE”) rules and regulations
governing such brokers, the proposal to ratify the appointment of RSM US LLP as our independent registered public
accounting firm is considered a “discretionary” item. This means that brokers may vote in their discretion on this
proposal on behalf of beneficial owners who have not furnished voting instructions. In contrast, certain items are
considered “non-discretionary,” and a “broker non-vote” occurs when a broker or other nominee holding shares for
a beneficial owner votes on one proposal but does not vote on another proposal because, with respect to such other
proposal, the nominee does not have discretionary voting power and has not received instructions from the
beneficial owner. The proposals to elect directors and to approve executive compensation are considered “non-
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 4
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discretionary,” and therefore, brokers cannot vote your shares on these proposals when they do not receive voting
instructions from you.
What constitutes a quorum?
The representation in person or by proxy of at least a majority of the outstanding shares of common stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee, abstentions, and “broker non-votes” are counted as present or represented for purposes
of determining the presence or absence of a quorum for the Annual Meeting.
How do I vote?
Stockholders may vote in person or by proxy. Instructions as to how you may cast your vote by proxy are set
forth below and are found on the accompanying proxy card.
Vote in Person: If you attend the Annual Meeting, you may vote in person even if you have
previously returned your proxy card.
Vote by Internet (www.proxyvote.com): Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time on April 24, 2019. Have
your proxy card in hand when you access the website, and follow the instructions to obtain your
records and to create an electronic voting instruction form.
Vote by Mail: Mark, sign, and date your proxy card and promptly return it in the postage-paid
envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
Will other matters be voted on at the Annual Meeting?
Aside from the three proposals described above, the Board knows of no other matters to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting upon which a vote properly may be
taken, shares represented by all proxies received by the Board will be voted with respect thereto in accordance with
the best judgment of the persons named as proxy holders and attorneys-in-fact in the proxies.
May I revoke my proxy instructions?
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is
voted at the Annual Meeting. Proxies may be revoked by (i) filing with our Corporate Secretary, before the taking of
the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy; (ii) duly
completing a later-dated proxy card relating to the same shares and delivering it to our Corporate Secretary before
the taking of the vote at the Annual Meeting; or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent so as to be delivered to Regional Management Corp., 979 Batesville
Road, Suite B, Greer, South Carolina 29651, Attention: Corporate Secretary, before the taking of the vote at the
Annual Meeting.
How many votes are required to approve each proposal?
With respect to the proposal to elect directors (Proposal No. 1), the eight nominees receiving the highest
number of affirmative votes of the shares present or represented and entitled to vote at the Annual Meeting shall be
elected as directors. Regarding the proposal to ratify the appointment of RSM US LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2019 (Proposal No. 2), an affirmative vote of a
majority of the shares present, in person or represented by proxy, and voting on such matter is required for approval.
Likewise, the compensation of executive officers (Proposal No. 3) will be approved, on an advisory basis, if a
majority of the shares present, in person or represented by proxy, and voting on such matter is cast in favor of the
proposal. “Broker non-votes” are not considered voted for the particular matter, and for proposals subject to
majority voting (Proposal No. 2 and Proposal No. 3), “broker non-votes” have the effect of reducing the number of
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 5
affirmative votes required to achieve a majority for such matter by reducing the total number of shares from which
the majority is calculated.
Because your vote on Proposal No. 3 is advisory, it will not be binding on us, our Board, or our Compensation
Committee. However, the Board and the Compensation Committee will consider the outcome of this vote when
making future compensation decisions for our executive officers.
The persons named as proxy holders and attorneys-in-fact in the proxy card, Peter R. Knitzer and Brian
J. Fisher, were selected by the Board and are officers of the Company. All properly executed proxy cards returned in
time to be counted at the Annual Meeting will be voted by such persons at the Annual Meeting. Where a choice has
been specified on the proxy card with respect to the foregoing matters, the shares represented by the proxy will be
voted in accordance with the specifications. If no such specifications are indicated, such shares will be voted “FOR”
the election of all director nominees, “FOR” the ratification of the appointment of our independent registered public
accounting firm, and “FOR” the advisory approval of executive compensation.
How can I correspond directly with Regional Management Corp.?
The address of our principal executive office is 979 Batesville Road, Suite B, Greer, South Carolina 29651,
and our telephone number is (864) 448-7000. In addition, any person interested in communicating directly with the
independent Chair of our Board or with any other Board member may address such communication to our Corporate
Secretary, 979 Batesville Road, Suite B, Greer, South Carolina 29651, who will forward such communication to the
appropriate party.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 6
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BOARD OF DIRECTORS AND
CORPORATE GOVERNANCE MATTERS
The Board is responsible for directing and overseeing the management of our business and affairs in a manner
consistent with the best interests of the Company and its stockholders. The Board has implemented written
Corporate Governance Guidelines designed to assist the Board in fulfilling its duties and responsibilities. The
Corporate Governance Guidelines address a number of matters applicable to directors, including Board
composition, structure, and policies; director qualification standards; Board meetings; committees of the Board;
roles and expectations of the Board and its directors; director compensation; management succession planning; and
other matters. These Corporate Governance Guidelines are available on our Investor Relations website at
www.regionalmanagement.com. A stockholder may request a copy of the Corporate Governance Guidelines by
contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, South Carolina 29651.
Director Qualifications
Our Corporate Governance and Nominating Committee (the “Nominating Committee”) is responsible for
reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be
nominated for election to the Board. The Nominating Committee considers minimum individual qualifications,
including relevant career experience, strength of character, mature judgment, familiarity with our business and
industry, independence of thought, and an ability to work collegially with the other members of the Board, and all
other factors it considers appropriate, which may include age, diversity of background, existing commitments to
other businesses, potential conflicts of interest with other pursuits, legal considerations (such as antitrust issues),
corporate governance background, financial and accounting background, executive compensation background, and
the size, composition, and combined expertise of the existing Board. The Board and the Nominating Committee
monitor the mix of specific experience, qualifications, and skills of the Company’s directors in order to ensure that
the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of our business
and structure. Stockholders may also nominate directors for election at our annual stockholders’ meeting by
following the provisions set forth in our Amended and Restated Bylaws (the “Bylaws”), and in such a case, the
Nominating Committee will consider the qualifications of directors proposed by stockholders.
When determining whether director nominees have the experience, qualifications, attributes, and professional
and functional skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light
of our business and structure, the Nominating Committee has focused primarily on the valuable contributions of
incumbent directors to our success in recent years and on the skills, experience, and individual attributes that each
director nominee brings to the Board, including those discussed in the biographical descriptions and matrix set forth
below.
Board Diversity
The Board recognizes and embraces the value of a diverse board of directors in improving the quality of its
performance and our success. Diversity promotes the inclusion of different perspectives and ideas, mitigates against
groupthink, and ensures that the Board has the opportunity to benefit from all available talent. The Board also
recognizes the need for its directors to understand and to be able to respond effectively to the financial needs of its
diverse customer base. The promotion of a diverse Board makes prudent business sense and makes for better
corporate governance.
In February 2018, the Board approved its Board Diversity Policy (the “Diversity Policy”), which is available
on our Investor Relations website at www.regionalmanagement.com. The Diversity Policy establishes the Board’s
approach to achieving and maintaining diversity on the Board. The Board and the Nominating Committee are
committed to actively seeking out highly qualified, diverse candidates to include in the pool from which Board
nominees are chosen. The Board seeks to comprise itself of talented and dedicated directors with a diverse mix of
expertise in areas needed to foster our business success, as well as a diversity of personal characteristics that
include, but are not limited to, gender, race, ethnicity, national origin, sexual orientation, age, and geography. The
Board and the Nominating Committee implement the Diversity Policy by maintaining a director candidate list
comprised of individuals qualified to fill openings on the Board, which includes candidates with useful expertise
who possess diverse personal backgrounds. When director openings occur, the list will be used to assist in selecting
new directors. Ultimately, the selection of new directors will be based on the Board’s judgment of the overall
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 7
contributions that a candidate will bring to the Board, giving due weight to diverse personal characteristics that
contribute to the Board achieving the objectives of the Diversity Policy.
The Nominating Committee is charged with reviewing all steps taken pursuant to the Diversity Policy on an
annual basis, assessing the Board’s progress in achieving diversity, and presenting its findings and assessment to the
full Board for input. In its 2018 annual assessment, the Nominating Committee noted the following:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
In January 2018, the Board appointed two diverse candidates as directors of the Board. Maria Contreras-
Sweet is the Board’s first Hispanic female director, and Jonathan D. Brown is the Board’s first director
under the age of 40.
In February 2018, the Board adopted the Diversity Policy.
In March 2018, the Company included in its proxy statement a matrix that prominently lists each
director’s skills, experience, and demographic background, including diverse characteristics.
Throughout 2018, directors added diverse candidates to the director candidate list required to be
maintained by the Diversity Policy.
50% of the Board is comprised of Hispanic American directors.
The Nominating Committee and the Board are proud of the diverse characteristics of the Company’s directors
and will continue to promote diversity initiatives at the Board level and throughout the Company.
Current Directors and Director Nominees
The Board has the discretion to determine the size of the Board, the members of which are elected at each
year’s annual meeting of stockholders. Our Board currently consists of eight directors: Alvaro G. de Molina,
Jonathan D. Brown, Roel C. Campos, Maria Contreras-Sweet, Michael R. Dunn, Steven J. Freiberg, Peter R.
Knitzer, and Carlos Palomares, with Mr. de Molina serving as Chair of the Board. Each of these individuals has also
been nominated as a director candidate for election at the Annual Meeting.
Biographical information of each of our directors is provided below. In addition, following the biographical
information of our directors, we have provided a matrix summarizing the background, skills, experience,
qualifications, and other attributes of our directors that led the Nominating Committee and the Board to conclude
that such individuals would provide valuable contributions to our business and should therefore serve our company
as its directors.
ALVARO G. DE MOLINA
Age: 61
Director Since: 2012
Chair of the Board
Member of the Audit
Committee and Corporate
Governance and Nominating
Committee
Mr. de Molina has been a director of Regional since March 2012 and
currently serves as Chair of the Board. Until 2009, Mr. de Molina was the
Chief Executive Officer of GMAC LLC, which he originally joined as Chief
Operating Officer in 2007. Since departing GMAC LLC, Mr. de Molina has
been a private investor. He joined Cerberus Capital Management for a period
during 2007 where he worked with the operations group, following a 17-year
career at Bank of America, where he most recently served as its Chief
Financial Officer from 2005 until 2007. During his tenure at Bank of
America, Mr. de Molina also served as Chief Executive Officer of Banc of
America Securities, President of Global Capital Markets and Investment
Banking, head of Market Risk Management, and Corporate Treasurer.
Previously, he also served in key roles at JPMorgan Chase Bank, N.A.,
Becton, Dickinson and Company, and PriceWaterhouse LLP (now
PricewaterhouseCoopers LLP). From September 2012 until February 2018,
Mr. de Molina served on the board of directors of Walter Investment
Management Corp., a publicly-held entity which is an asset manager,
mortgage servicer, and mortgage portfolio owner specializing in less-than-
prime, non-conforming, and other credit-challenged mortgage assets. He
holds a B.S. degree in Accounting from Fairleigh Dickinson University and
an M.B.A. degree from Rutgers Business School and is a graduate of the
Duke University Advanced Management Program.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 8
JONATHAN D. BROWN
Age: 34
Director Since: 2018
ROEL C. CAMPOS
Age: 70
Director Since: 2012
Chair of the Corporate
Governance and Nominating
Committee
Member of the Compensation
Committee
MARIA CONTRERAS-SWEET
Age: 63
Director Since: 2018
Member of the Corporate
Governance and Nominating
Committee and the Compensation
Committee
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Mr. Brown has served as a director of Regional since January 2018. He is a
partner with Basswood Capital Management L.L.C. (“Basswood”), an
alternative asset manager with over $1.4 billion of assets under management.
Mr. Brown joined Basswood in 2009. In his current role, Mr. Brown is
responsible for the research and investment analysis of companies across a
broad range of sectors, with a specialized focus on financial services. Prior to
Basswood, Mr. Brown worked at Sandelman Partners and Goldman Sachs.
Mr. Brown graduated from Emory University’s Goizueta School of Business
in 2006 with a B.B.A., holding dual concentrations in Finance and
Strategy & Management Consulting, as well as a minor in History.
Mr. Brown is the representative of Basswood, our largest stockholder. For a
description of our cooperation agreement with Basswood, pursuant to which
Mr. Brown is nominated, see “Other Information – Certain Relationships and
Related Person Transactions – Cooperation Agreement,” below.
Mr. Campos has served as a director of Regional since March 2012. He has
been a partner with the law firm of Hughes Hubbard & Reed LLP since
February 2016, where he practices in the areas of securities regulation,
corporate governance, and securities enforcement and serves as Chair of the
firm’s Securities Enforcement Practice. Prior to joining Hughes Hubbard &
Reed LLP, Mr. Campos was a partner with Locke Lord LLP (April 2011 to
February 2016) and Cooley LLP (September 2007 to April 2011). Prior to
that, he received a presidential appointment and served as a Commissioner of
the Securities and Exchange Commission (the “SEC”) from 2002 to 2007.
Prior to serving with the SEC, Mr. Campos was a founding partner of a
Houston-based radio broadcaster. Earlier in his career, he practiced corporate
law and served as a federal prosecutor in Los Angeles, California.
Mr. Campos also previously served from January 2013 to May 2017 on the
board of directors of WellCare Health Plans, Inc., a publicly-held entity
which provides managed care services targeted to government-sponsored
health care programs. He is currently a director of Paulson International Ltd.,
a privately-held, Cayman-based hedge fund; a director of a private registered
broker-dealer, Liquidnet Holdings, Inc.; and a member of the Advisory
Board of Balyasny Asset Management L.P., a registered investment advisory
fund. Mr. Campos also serves on the Advisory Board for the Public
Company Accounting Oversight Board (the “PCAOB”), the Board of
Visitors to the United States Air Force Academy, and on various non-profit
boards. From 2008 to 2013, Mr. Campos served on the President’s citizen
Presidential Intelligence Advisory Board. Mr. Campos earned a B.S. degree
from the United States Air Force Academy, an M.B.A. degree from the
University of California, Los Angeles, and a J.D. degree from Harvard Law
School.
Ms. Contreras-Sweet has been a director of Regional since January 2018.
She is the Managing Partner of Rockway Equity Partners, and she previously
served as a member of President Obama’s cabinet as the Administrator of the
U.S. Small Business Administration from April 2014 to January 2017. Since
March 2017, Ms. Contreras-Sweet has served as a director and member of
the audit committee of Sempra Energy, a publicly-traded energy-services
company that invests in, develops, and operates energy infrastructure and
provides electric and gas services to customers in North and South America.
She was a founder of ProAmerica Bank, where she served as Executive
Chairwoman from 2006 to 2014, and Co-Founder and Managing Partner of
Fortius Holdings from 2003 to 2006. Prior to that, Ms. Contreras-Sweet
served as the California cabinet Secretary of the Business, Transportation
and Housing Agency from 1999 to 2003. Earlier in her career, she was a
senior executive with Westinghouse Electric Company’s 7-Up/RC Bottling
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 9
MICHAEL R. DUNN
Age: 67
Director Since: 2014
STEVEN J. FREIBERG
Age: 62
Director Since: 2014
Chair of the Compensation
Committee
Member of the Audit
Committee
Company. Ms. Contreras-Sweet is also a Distinguished Fellow of the
LARTA Institute and serves on the Board of Directors of the Bipartisan
Policy Center. She has been bestowed with honorary doctorates from Tufts
University, Whittier College, California State University, Los Angeles, and
La Verne University.
Mr. Dunn has been a director of Regional since July 2014. He previously
served as Chief Executive Officer of Regional from October 2014 through
July 2016 and as Executive Chairman of the Board from August 2016
through December 2016. Prior to joining Regional, Mr. Dunn was a partner
at the private equity firm of Brysam Global Partners, a specialized firm
focusing on investment in international banking and consumer lending
companies, from 2007 through 2013. Mr. Dunn served as a board or alternate
board member for all of Brysam’s portfolio companies. Prior to that,
Mr. Dunn was with Citigroup for over 30 years, where he was the Chief
Financial Officer of the Global Consumer Group from 1996 through 2007,
adding the title of Chief Operating Officer of the Group in 2005. He was also
a member of the Citigroup Management and Operating Committees.
Mr. Dunn previously served on the boards of Banamex, a wholly-owned
Mexican bank subsidiary of Citigroup, and on the U.S.-based Student Loan
Corporation, of which Citigroup owned a majority interest. He holds a B.S.
degree from New York University and attended the University of Michigan
Executive Program. He is a Certified Public Accountant in New York State.
Mr. Freiberg has been a director of Regional since July 2014. He has been a
Senior Advisor to The Boston Consulting Group since December 2012.
Previously, Mr. Freiberg served as Interim Chief Financial Officer of Social
Finance, Inc. from May 2017 until April 2018, and as a director and the
Chief Executive Officer of E*TRADE Financial Corporation from April
2010 until August 2012. Prior to joining E*TRADE, Mr. Freiberg spent 30
years at Citigroup and its predecessor companies and affiliates. Among his
notable roles at Citigroup, Mr. Freiberg served as Co-Chairman/Chief
Executive Officer of Citigroup’s Global Consumer Group, Chairman and
Chief Executive Officer of Citi Cards—Citigroup’s leading global credit card
business—and Chairman and Chief Executive Officer of Citigroup’s North
American Investment Products Division. Additionally, he was a member of
Citigroup’s Executive, Management, and Operating Committees, and he
served on the board of directors of several of Citigroup’s affiliates, including
Citibank N.A., Citicorp Credit Services Inc., Citicorp Investment Services,
Citicorp Insurance Group, Citibank Trust N.A., Citibank FSB, and the
Citigroup Foundation. Mr. Freiberg has served on the board of directors of
MasterCard Incorporated, a publicly-traded multinational financial services
corporation, since September 2006 and currently chairs its audit committee.
He also served on the former U.S. region board of MasterCard from January
2001 until May 2006 and served as Chairman of MasterCard’s United States
region board from 2004 until May 2006. In addition, Mr. Freiberg serves on
the board of directors or equivalent governing body of Social Finance, Inc. (a
private online personal finance company that provides student loan
refinancing, mortgages, and personal loans), Fair Square Financial, LLC (a
private credit card issuer that provides credit cards to “near-prime”
customers), and Purchasing Power, LLC (a private specialty e-retailer
offering consumer products, vacations, and online education services through
payment plans). Mr. Freiberg recently became the Chair of The Rewards
Network, one of the largest merchant-funded, card-linked reward networks in
the United States.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 10
PETER R. KNITZER
Age: 60
President and Chief Executive
Officer
Director Since: 2015
CARLOS PALOMARES
Age: 74
Director Since: 2012
Chair of the Audit Committee
Member of the Compensation
Committee
Mr. Knitzer has served as President and Chief Executive Officer of Regional
since May 2017. From August 2016 until May 2017, Mr. Knitzer served as
Chief Executive Officer of Regional. He has also been a director of Regional
since July 2015. Before joining Regional, Mr. Knitzer acted as an advisor to
financial services companies since 2013. Prior to 2013, he served as
Executive Vice President and head of the Payments group at CIBC and
President and Director at E*TRADE Bank. Prior to joining E*TRADE,
Mr. Knitzer spent 14 years at Citigroup in various senior roles, including
Chairman and Chief Executive Officer of Citibank North America; Business
Head, Cross-Sell Customer Management for all Citigroup businesses; and
EVP/Managing Director of Citi Cards, Citigroup’s leading global credit card
business. Mr. Knitzer has also previously held senior marketing positions at
Chase Manhattan Bank, American Express, and Nabisco Brands. He received
his M.B.A. in Marketing and Finance from Columbia University Graduate
School of Business and his B.A. in Political Science from Brown University.
Mr. Knitzer also served as a Director for Habitat for Humanity from 2008 to
2014, including Board Chair from 2011 to 2013, and on the Advisory Board
of Columbia University Business School’s Lang Center for Entrepreneurship
from 2015 to 2018.
Mr. Palomares has been a director of Regional since March 2012. Since
2007, Mr. Palomares has been President and Chief Executive Officer of
SMC Resources, a consulting practice that advises senior executives on
business and marketing strategy. From 2001 to 2007, Mr. Palomares was
Senior Vice President at Capital One Financial Corp., and he was Chief
Operating Officer of Capital One Federal Savings Bank banking unit from
2004 to 2007. Prior to joining Capital One, Mr. Palomares held a number of
senior positions with Citigroup Inc. and its affiliates, including Chief
Operating Officer of Citibank Latin America Consumer Bank from 1998 to
2001, Chief Financial Officer of Citibank North America Consumer Bank
from 1997 to 1998, Chairman and CEO of Citibank Italia from 1990 to 1992,
and President and CEO of Citibank FSB Florida from 1992 to 1997.
Mr. Palomares serves on the Boards of Directors of Pan American Life
Insurance Group, Inc. and the Coral Gables Trust Company. Mr. Palomares
earned a B.S. degree in Quantitative Analysis from New York University.
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There are no family relationships among any of our directors or executive officers.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 11
Matrix of Director Skills, Experience, and Demographic Background
The following table provides our stockholders and other interested parties with an overview of our directors’ skills,
experience, and demographic background. These qualities are of particular value to our business and led the Nominating
Committee and the Board to conclude that such individuals would provide valuable contributions to our company and
should therefore serve our company as its directors.
Alvaro G.
de Molina
Jonathan
D. Brown
Roel C.
Campos
Maria
Contreras-
Sweet
Michael R.
Dunn
Steven J.
Freiberg
Peter R.
Knitzer
Carlos
Palomares
Skills and Experience
Financial Services Industry
Other Public Co. Board of Directors
Executive Management
Entrepreneurship/Business Operations
Credit Risk Management
Corporate Finance or Capital Allocation
Marketing and/or Public Relations
Marketing to Hispanic Population
Mergers and Acquisitions
Human Resources/Executive Comp
Cybersecurity or Technology/Innovation
Corporate Governance
Government Affairs
Regulatory and/or SEC Compliance
Audit Committee Financial Expert
SOX and Internal Audit
Risk Management
Business Ethics
Investor Relations
Demographic Background
Board Tenure and Independence
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Year First Appointed or Elected
2012
2018
2012
Board Independent
Gender
Male
Female
Age
Years Old
Race/Ethnicity
White/Caucasian
Hispanic/Latino
✓
✓
61
✓
✓
✓
70
✓
✓
34
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
2018
✓
✓
63
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
2014
2014
2015
2012
✓
✓
62
✓
✓
60
✓
✓
67
✓
✓
✓
74
✓
✓
✓
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 12
Board Independence
Ms. Contreras-Sweet and Messrs. Brown, Campos, Freiberg, de Molina, and Palomares are each independent
in accordance with the criteria established by the NYSE for independent board members. The Board performed a
review to determine the independence of its members and made a subjective determination as to each of these
independent directors that no transactions, relationships, or arrangements exist that, in the opinion of the Board,
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of the
Company. In making these determinations, the Board reviewed the information provided by the directors and the
Company with regard to each director’s business and personal activities as they may relate to the Company and its
management. We define an “independent” director in accordance with Section 303A.02 of the NYSE Rules. The
categorical standards that the Board has established to assist it in making independence determinations can be found
in our Corporate Governance Guidelines on our Investor Relations website at www.regionalmanagement.com.
Leadership Structure
As described in the Corporate Governance Guidelines, the Board may select its Chair and our Chief Executive
Officer in any way that it considers to be in our best interests. Therefore, the Board does not have a policy on
whether the roles of Chair and Chief Executive Officer should be separate or combined and, if they are to be
separate, whether the Chair should be selected from the independent directors.
Mr. de Molina currently serves as Chair of our Board. At this time, the Board believes that the separation of
the roles of Chair and Chief Executive Officer promotes communication between the Board, the Chief Executive
Officer, and other senior management, and enhances the Board’s oversight of management. We believe that our
leadership structure provides increased accountability of our Chief Executive Officer to the Board and encourages
balanced decision-making. We also separate the roles in recognition of the differences in the roles. While the Chief
Executive Officer is responsible for day-to-day leadership of the Company and the setting of strategic direction, the
Chair of the Board provides guidance to the Chief Executive Officer and coordinates and manages the operation of
the Board and its committees.
At this time, the Board believes that its current leadership structure, with an independent Chair of the Board,
is appropriate for the Company and provides many advantages to the effective operation of the Board. The Board
will periodically evaluate and reassess the effectiveness of this leadership structure.
Meetings
The Board held 18 meetings during the fiscal year ended December 31, 2018. During 2018, each director
attended more than 75% of the total number of meetings of the Board and committees on which he or she served. In
addition to formal Board meetings, our Board communicates from time to time via telephone, electronic mail, and
informal meetings, and our Board and its committees may act by written consent in lieu of a formal meeting. Our
non-employee directors met in executive session following each of our regular, quarterly Board meetings in 2018,
and the independent members of our Board also periodically met in executive session in 2018. Mr. de Molina
presides over each executive session of our non-employee directors and independent directors.
Other than an expectation set forth in our Corporate Governance Guidelines that each director will make every
effort to attend the annual meeting of stockholders, we do not have a formal policy regarding the directors’
attendance at annual meetings. All of our directors attended our last annual meeting of stockholders held on
April 25, 2018.
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Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 13
Committees of the Board
Our Board has three standing committees: the Audit Committee, the Compensation Committee, and the
Corporate Governance and Nominating Committee. The composition and responsibilities of each committee are
described below. Members serve on these committees until their resignation or until otherwise determined by our
Board.
Roel C. Campos
Maria Contreras-Sweet
Steven J. Freiberg
Alvaro G. de Molina
Carlos Palomares
Number of Meetings Held in 2018:
Audit Committee
Audit
✓
✓
Chair
5
Compensation
✓
✓
Chair
✓
6
Corporate Governance
and Nominating
Chair
✓
✓
5
The Audit Committee is a separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The Audit Committee consists of Messrs. Palomares (Chair), Freiberg, and
de Molina. In accordance with SEC rules and NYSE rules, each of the members of our Audit Committee is an
independent director in accordance with the criteria established by the NYSE for the purpose of audit committee
membership independence. In addition, the Board has examined the SEC’s definition of “audit committee financial
expert” and has determined that Messrs. Palomares, Freiberg, and de Molina satisfy this definition.
Pursuant to the Audit Committee’s written charter, our Audit Committee is responsible for, among other
things:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
selecting and hiring our independent registered public accounting firm, and pre-approving the audit and
non-audit services to be performed by our independent auditors;
discussing the scope and results of the audit with the independent registered public accounting firm;
assisting the Board in evaluating the qualifications, performance, and independence of our independent
auditors;
assisting the Board in monitoring the quality and integrity of our financial statements and our
accounting and financial reporting processes;
assisting the Board in monitoring our compliance with legal and regulatory requirements;
assisting the Board in reviewing the adequacy and effectiveness of our internal control over financial
reporting processes;
assisting the Board in monitoring the performance of our internal audit function;
reviewing with management and our independent auditors our annual and quarterly financial statements;
establishing procedures for the receipt, retention, and treatment of complaints received by us regarding
accounting, internal accounting controls, or auditing matters and the confidential, anonymous
submission by our employees and others of concerns regarding questionable accounting or auditing
matters; and
(cid:129)
preparing the audit committee report that the SEC requires in our annual proxy statement.
The Audit Committee Charter, which contains a more complete explanation of the roles and responsibilities of
the Audit Committee, is posted on our Investor Relations website at www.regionalmanagement.com. A stockholder
may request a copy of the Audit Committee Charter by contacting our Corporate Secretary at 979 Batesville Road,
Suite B, Greer, South Carolina 29651. The Audit Committee held five meetings during the fiscal year ended
December 31, 2018.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 14
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Compensation Committee
Our Compensation Committee consists of Mr. Freiberg (Chair), Mr. Campos, Ms. Contreras-Sweet, and
Mr. Palomares. Ms. Contreras-Sweet was appointed to the Compensation Committee in October 2018. In
accordance with NYSE rules, each of the members of our Compensation Committee is an independent director in
accordance with the criteria established by the NYSE for the purpose of compensation committee membership
independence. Pursuant to the Compensation Committee’s written charter, our Compensation Committee is
responsible for, among other things:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
reviewing and approving, or making recommendations to the Board with respect to, corporate goals and
objectives relevant to the compensation of our Chief Executive Officer, evaluating our Chief Executive
Officer’s performance in light of those goals and objectives, and either as a committee or together with
the other independent directors (as directed by the Board), determining and approving our Chief
Executive Officer’s compensation level based on such evaluation;
reviewing and approving the compensation of our executive officers, including annual base salary,
annual incentive bonuses, specific goals, equity compensation, employment agreements, severance and
change-in-control arrangements, and any other benefits, compensation, or arrangements;
reviewing and recommending the compensation of our directors;
reviewing and discussing annually with management our “Compensation Discussion and Analysis”;
preparing the Report of the Compensation Committee; and
reviewing and making recommendations with respect to our equity compensation plans.
The Compensation Committee is entitled to delegate any or all of its responsibilities to subcommittees of the
Compensation Committee. Additionally, the Compensation Committee may delegate to one or more of our officers
the authority to make grants and awards of cash or options or other equity securities to any of our non-Section 16
officers under our incentive-compensation or other equity-based plans, as the Compensation Committee deems
appropriate and in accordance with the terms of such plans, provided that such delegation is in compliance with
such plans and applicable law.
The Compensation Committee Charter, which contains a more complete explanation of the roles and
responsibilities of the Compensation Committee, is posted on our Investor Relations website at
www.regionalmanagement.com. A stockholder may request a copy of the Compensation Committee Charter by
contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, South Carolina 29651. The
Compensation Committee held six meetings during the fiscal year ended December 31, 2018.
Corporate Governance and Nominating Committee
Our Nominating Committee consists of Mr. Campos (Chair), Ms. Contreras-Sweet, and Mr. de Molina.
Ms. Contreras-Sweet was appointed to the Nominating Committee in January 2018, replacing Mr. Palomares. In
accordance with NYSE rules, each of the members of our Nominating Committee is an independent director in
accordance with the criteria established by the NYSE for the purpose of corporate governance and nominating
committee membership independence. Pursuant to the Nominating Committee’s written charter, the Nominating
Committee is responsible for, among other things:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
assisting our Board in identifying prospective director nominees and recommending nominees to the
Board;
overseeing the evaluation of the Board;
reviewing developments in corporate governance practices and developing, recommending, and
maintaining a set of corporate governance guidelines; and
recommending members for each committee of our Board.
The Nominating Committee will consider a candidate for director proposed by a stockholder. A candidate
must be highly qualified and be both willing to serve and expressly interested in serving on the Board. A
stockholder wishing to propose a candidate for the Nominating Committee’s consideration in connection with the
Company’s 2020 annual meeting of stockholders (the “2020 Annual Meeting”) should forward the candidate’s name
and information about the candidate’s qualifications to Regional Management Corp., 979 Batesville Road, Suite B,
Greer, South Carolina 29651, Attn: Corporate Secretary, not earlier than December 27, 2019 nor later than January
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 15
26, 2020. If, following the filing and delivery of these proxy materials, the date of the 2020 Annual Meeting is
advanced or delayed by more than 20 calendar days from the one-year anniversary date of the 2019 Annual
Meeting, we will, in a timely manner, provide notice to our stockholders of the new date of the 2020 Annual
Meeting and the new dates by which stockholder proposals submitted both pursuant to and outside of SEC Rule
14a-8 must be received by the Company. Such notice will be included in the earliest possible Quarterly Report on
Form 10-Q under Part II, Item 5.
The Nominating Committee will select individuals, including candidates proposed by stockholders, as director
nominees who have the highest personal and professional integrity, who have demonstrated exceptional ability and
judgment, and who will be most effective, in conjunction with the other nominees to the Board, in collectively
serving the long-term interests of our stockholders. In evaluating nominees, the Nominating Committee will
consider, among other things, the director qualifications described above and will apply the objectives outlined in
the Diversity Policy.
The Nominating Committee Charter, which contains a more complete explanation of the roles and
responsibilities of the Nominating Committee, is posted on our Investor Relations website at
www.regionalmanagement.com. A stockholder may request a copy of the Nominating Committee Charter by
contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, South Carolina 29651. The Nominating
Committee held five meetings during the fiscal year ended December 31, 2018.
Role in Risk Oversight
As part of its role in risk oversight, our Audit Committee is responsible for reviewing our risk assessment and
risk management practices, and for discussing its findings with both management and our independent registered
public accounting firm. The Board and the Audit Committee periodically review the risks that may potentially affect
us, as identified and presented by management, including risks reflected in our periodic filings. For example, on a
periodic basis, members of the Board and the Audit Committee engage with management and/or third-party
consultants to assess the cyber threat landscape, to evaluate our information security program, to review the results
of penetration testing, and to analyze the design, effectiveness, and ongoing enhancement of our capabilities to
monitor, prevent, and respond to cyber threats and events. The Board may also request supplemental information
and disclosure about any other specific area of interest and concern relevant to risks it believes are faced by us and
our business.
The Board believes that our current leadership structure enhances its oversight of risk management because
our Chief Executive Officer, who is ultimately responsible for our risk management process, is in the best position
to discuss with the Board these key risks and management’s response to them by also serving as a director of the
Company.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”). The Code of Ethics
applies to all of our directors, officers, and employees and must be acknowledged in writing by our Chief Executive
Officer and Chief Financial Officer. In February 2018, the Board approved certain amendments to the Code of
Ethics, which were intended to update and bring the Code of Ethics more in line with current best practices. The
Code of Ethics is posted on our Investor Relations website at www.regionalmanagement.com. A stockholder may
request a copy of the Code of Ethics by contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer,
South Carolina 29651. To the extent permissible under applicable law, the rules of the SEC, and NYSE listing
standards, we intend to disclose on our website any amendment to our Code of Ethics, or any grant of a waiver from
a provision of our Code of Ethics, that requires disclosure under applicable laws, the rules of the SEC, or NYSE
listing standards.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2018, Mr. Campos, Ms. Contreras-Sweet, Mr. Freiberg, and
Mr. Palomares served on our Compensation Committee, with Ms. Contreras-Sweet having been appointed to the
Compensation Committee in October 2018. No member of the Compensation Committee has ever served as an
officer or employee of the Company or any of its subsidiaries or had any relationship during the fiscal year ended
December 31, 2018 that would be required to be disclosed pursuant to Item 404 of Regulation S-K. In addition,
during the fiscal year ended December 31, 2018, none of our executive officers served on the compensation
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 16
committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on our Board
or Compensation Committee.
Communications with the Board
Each member of the Board is receptive to and welcomes communications from our stockholders and other
interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board,
including, without limitation, the Chair of the Board, any independent director, or the independent directors as a
group, by addressing such communications or concerns to our Corporate Secretary, 979 Batesville Road, Suite B,
Greer, South Carolina, 29651, who will forward such communications to the appropriate party.
If a complaint or concern involves accounting, internal accounting controls, or auditing matters, the
correspondence will be forwarded to the chair of the Audit Committee. If no particular director is named, such
communication will be forwarded, depending on the subject matter, to the chair of the Audit Committee,
Compensation Committee, or Nominating Committee, as appropriate.
Anyone who has concerns regarding (i) questionable accounting, internal accounting controls, and auditing
matters, including those regarding the circumvention or attempted circumvention of internal accounting controls or
that would otherwise constitute a violation of our accounting policies, (ii) compliance with legal and regulatory
requirements, or (iii) retaliation against employees who voice such concerns, may communicate these concerns by
writing to the attention of the Audit Committee as set forth above, or by calling (800) 224-2330 at any time.
Director Compensation
Quality non-employee directors are critical to our success. We believe that the two primary duties of
non-employee directors are to effectively represent the long-term interests of our stockholders and to provide
guidance to management. As such, our compensation program for non-employee directors is designed to meet
several key objectives:
(cid:129) Adequately compensate directors for their responsibilities and time commitments and for the personal
liabilities and risks that they face as directors of a public company;
(cid:129) Attract the highest caliber non-employee directors by offering a compensation program consistent with
those at companies of similar size, complexity, and business character;
(cid:129) Align the interests of directors with our stockholders by providing a significant portion of
compensation in equity and requiring directors to own our stock; and
(cid:129) Provide compensation that is simple and transparent to stockholders and reflects corporate governance
best practices.
The Compensation Committee, with the assistance of the Compensation Committee’s executive compensation
consultant, reviews the compensation of our non-employee directors. In benchmarking director compensation, we
use the same compensation peer group that is used to benchmark compensation for our named executive officers
(see “Compensation Discussion and Analysis – Compensation Objectives and Approaches – Compensation
Determination Process” for information about the peer group).
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Our employees who serve as directors receive no separate compensation for service on the Board or on
committees of the Board. We maintain a non-employee director compensation program structured as follows:
(cid:129) Board Cash Retainer: Prior to April 25, 2018, each non-employee director received an annual cash
retainer of $30,000 payable in quarterly installments ($50,000 in the case of the chair or lead independent
director, if applicable, of the Board). Effective April 25, 2018, the annual cash retainer increased to
$70,000 ($90,000 in the case of the chair or lead independent director, if applicable, of the Board).
(cid:129) Committee Member Cash Retainer: Prior to April 25, 2018, each member of the Audit Committee,
Compensation Committee, and Nominating Committee received an additional annual cash retainer of $10,000
payable in quarterly installments ($20,000 in the case of the chair of each committee). Effective April 25, 2018,
the additional annual cash retainer decreased to $8,750 ($17,500 in the case of the chair of each committee).
(cid:129) Committee Meeting Fees: Prior to April 25, 2018, each member of the Audit Committee, Compensation
Committee, and Nominating Committee received a $1,500 meeting fee for each committee meeting
attended. Effective April 25, 2018, we no longer pay committee meeting fees.
(cid:129) Board Equity-Based Award: Each non-employee director receives, on an annual basis, shares of
restricted common stock with a value equal to $90,000 ($110,000 in the case of the chair or lead
independent director, if applicable, of the Board).
(cid:129) Committee Member Equity-Based Award: Prior to April 25, 2018, each member of the Audit Committee,
Compensation Committee, and Nominating Committee received, on an annual basis, additional shares of
restricted common stock with a value equal to $10,000 ($20,000 in the case of the chair of each committee).
Effective April 25, 2018, committee members instead receive additional shares of restricted common stock with
a value equal to $8,750 ($17,500 in the case of the chair of each committee).
The restricted stock awards (each, an “RSA”) are granted on the fifth business day following the date of the
annual stockholders’ meeting at which directors are elected. The number of shares subject to the RSA is determined
by dividing the value of the award by the closing price per share of common stock on the grant date (rounded down
to the nearest whole share). The RSA vests and becomes non-forfeitable as to 100% of the underlying shares on the
earlier of the first anniversary of the grant date or the date of the next annual stockholders’ meeting, subject to the
director’s continued service from the grant date until the vesting date, or upon the earlier occurrence of the
director’s termination of service as a director by reason of death or disability or upon a change in control of the
Company. In the event of the director’s termination of service for any other reason, the director forfeits the RSA
immediately. The RSA is subject to the terms and conditions of the Regional Management Corp. 2015 Long-Term
Incentive Plan (as amended and restated, effective April 27, 2017) (the “2015 Plan”) and an RSA agreement, the
form of which was previously approved by the Compensation Committee and the Board and filed with the SEC.
Under the 2015 Plan, the maximum number of shares of common stock subject to awards granted during any
12-month period to a non-employee director, taken together with any cash fees paid during such 12-month period to
such non-employee director in respect of Board service, may not exceed $600,000 in total value (calculating the
value of any such awards based on the fair market value per share of common stock on the grant date of the award).
In the event that the service of a director as a director, committee member, or Board or committee chair commences
or terminates during the director’s annual service to us, the director’s cash compensation will be adjusted on a
pro-rata basis. Annual service relates to the approximately 12-month period between our annual meetings of
stockholders. Each director is also reimbursed for reasonable out-of-pocket expenses incurred in connection with his
or her service on our Board, including the cost of attending continuing education seminars related to corporate board
of directors service and other topics relevant to the Company.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 18
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The following table provides information regarding the compensation paid to each of our non-employee
directors for their service as non-employee directors during the fiscal year ended December 31, 2018.
Name(1)
Directors:
Jonathan D. Brown
Roel C. Campos
Maria Contreras-Sweet
Michael R. Dunn
Steven J. Freiberg
Alvaro G. de Molina
Carlos Palomares
Fees Earned or
Paid in Cash
($)
Stock Awards
($)(2)
Total
($)
55,279
95,297
68,370
57,363
95,297
104,652
96,020
112,212
116,231
123,452
89,976
116,231
127,478
116,231
167,491
211,528
191,822
147,339
211,528
232,130
212,251
(1)
The compensation shown in the table reflects pro-rated amounts based on the following: (a) Mr. Brown and
Ms. Contreras-Sweet were appointed as directors in January 2018, at which time Ms. Contreras-Sweet was also
appointed to the Nominating Committee; (b) in January 2018, Mr. Palomares resigned from the Nominating
Committee; and (c) in October 2018, Ms. Contreras-Sweet was appointed to the Compensation Committee.
(2) At the time of the appointment of Mr. Brown and Ms. Contreras-Sweet as directors in January 2018, in
accordance with the non-employee director compensation program outlined above, we awarded Mr. Brown
and Ms. Contreras-Sweet shares of restricted common stock in the following amounts: Mr. Brown, 799
shares, and Ms. Contreras-Sweet, 888 shares. These RSAs vested on the date of the 2018 annual stockholders’
meeting. In addition, on May 2, 2018, in accordance with the non-employee director compensation program
outlined above, we awarded all of the Company’s non-employee directors shares of restricted common stock
in the following amounts: Mr. Brown, 2,608 shares; Mr. Campos, 3,369 shares; Ms. Contreras-Sweet, 2,862
shares; Mr. Dunn, 2,608 shares; Mr. Freiberg, 3,369 shares; Mr. de Molina, 3,695 shares; and Mr. Palomares,
3,369 shares. These annual RSAs vest on the earlier of the first anniversary of the grant date or the date of the
next annual stockholders’ meeting, subject to continued service of the director until the vesting date or as
otherwise provided in the award agreement. Amounts shown are the aggregate grant date fair value of stock
awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 718.
The total number of shares subject to RSAs held by each of our non-employee directors as of December 31,
2018 was: Mr. Brown, 2,608 shares; Mr. Campos, 3,369 shares; Ms. Contreras-Sweet, 2,862 shares; Mr. Dunn,
2,608 shares; Mr. Freiberg, 3,369 shares; Mr. de Molina, 3,695 shares; and Mr. Palomares, 3,369 shares. In addition,
as of December 31, 2018, Mr. Dunn held a performance-contingent restricted stock unit (“RSU”) award granted to
him during his service as our Chief Executive Officer, pursuant to which 10,166 target shares remained outstanding.
This RSU vested on December 31, 2018, and in March 2019, our Compensation Committee determined that 116.5%
of the target shares were earned based upon our performance over a three-year performance period that began on
January 1, 2016 and ended on December 31, 2018. The total number of shares subject to non-qualified stock options
held by each of our non-employee directors as of December 31, 2018 was: Mr. Campos, 28,670 shares; Mr. Dunn,
148,866 shares; Mr. Freiberg, 17,941 shares; Mr. de Molina, 30,166 shares; and Mr. Palomares, 28,670 shares.
Mr. Brown and Ms. Contreras-Sweet had no option awards outstanding as of December 31, 2018. The outstanding
equity awards held by Mr. Knitzer as of December 31, 2018 are set forth in the Outstanding Equity Awards at Fiscal
Year-End table that is presented elsewhere in this Proxy Statement.
In February 2018, our Compensation Committee increased our director stock ownership requirement from 3x
to 5x the annual cash retainer, placing the dollar value of the ownership requirement in the 90th percentile of our
peer group.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 19
EXECUTIVE OFFICERS
The following is a brief description of the background, business experience, and certain other information
regarding each of our executive officers:
Peter R. Knitzer (age 60) has served as President and Chief Executive Officer of Regional since May 2017.
From August 2016 until May 2017, Mr. Knitzer served as Chief Executive Officer of Regional. He has also been a
director of Regional since July 2015. Mr. Knitzer’s full biographical information is set forth above under “Board of
Directors and Corporate Governance Matters – Current Directors and Director Nominees.”
John D. Schachtel (age 57) has served as Executive Vice President and Chief Operating Officer of Regional
since May 2017. Mr. Schachtel has more than 30 years of experience in consumer financial services. From 2013
until 2016, Mr. Schachtel was the Chief Operating Officer of OneMain Financial Holdings, Inc. (formerly known as
CitiFinancial). As Chief Operating Officer of OneMain Financial, Mr. Schachtel’s responsibilities included
management and oversight of sales, field operations, marketing, and collections. Prior to assuming the Chief
Operating Officer role, Mr. Schachtel served for over 10 years as OneMain/CitiFinancial’s Executive Vice
President, Northeast and Midwest Division. Mr. Schachtel also held various other positions at OneMain/
CitiFinancial during his 29-year career with the company, including Operations Director and Director of Field
Compensation, New Branch Development, and Project Management, before becoming Senior Vice President of
Corporate Marketing in 1999. Since March 2017, Mr. Schachtel has also served as a member of the Board of
Directors of SilverSun Technologies, Inc., a publicly-traded business application, technology, and consulting
company. He serves as the chairman of SilverSun’s compensation committee and as a member of its audit
committee and its nominating and corporate governance committee. He received his M.B.A. in Finance from New
York University and his B.S. degree in Industrial Engineering and Economics from Northwestern University.
Donald E. Thomas (age 60) has served as Executive Vice President and Chief Financial Officer of Regional
since January 2013. Mr. Thomas has over 30 years of finance and accounting experience in public and private
companies, having previously served since April 2010 as Chief Financial Officer of TMX Finance LLC, a title
lending company. Prior to joining TMX Finance LLC, Mr. Thomas spent 17 years with 7-Eleven, an operator of
convenience stores, where he served in various capacities, including Chief Accounting Officer and Controller,
acting Chief Financial Officer, Vice President of Operations, and Vice President of Human Resources. Prior to
7-Eleven, Mr. Thomas spent 11 years in the audit function of Deloitte & Touche LLP and one year with the Trane
Company as a financial manager. Mr. Thomas earned accounting and finance degrees from Tarleton State
University and is a certified public accountant and certified global management accountant.
Daniel J. Taggart (age 46) has served as Executive Vice President and Chief Credit Risk Officer of Regional
since October 2018. From January 2015 (when he joined Regional) until October 2018, he served as Senior Vice
President and Chief Risk Officer. Prior to joining Regional, Mr. Taggart was Executive Vice President of Agility
360, a financial services consultancy. Prior to that, he was Senior Vice President at Wingspan Portfolio Advisors, a
specialty mortgage service provider, and also served as Executive Vice President of REDC Default Solutions LLC,
a startup division of Auction.com, LLC, a mortgage loss mitigation subservicing company. Before joining REDC
Default Solutions LLC, Mr. Taggart spent 11 years at Citigroup, where he held a variety of positions, including
Senior Vice President and Senior Credit Officer of CitiMortgage Default Risk Management, Senior Vice President
and Senior Credit Officer of Retail Distribution Risk Management, and Senior Vice President and Chief Credit
Officer of CitiFinancial (now known as OneMain Financial). Mr. Taggart has also worked for The Associates (prior
to its acquisition by Citigroup), FirstPlus Financial, and Fleet Bank in risk management and loan servicing
functions. Mr. Taggart received his B.S. in Finance from Canisius College.
Brian J. Fisher (age 35) has served as Senior Vice President, General Counsel, and Secretary of Regional
since February 2018. From January 2013 (when he joined Regional) until February 2018, he served as Vice
President, General Counsel, and Secretary. Prior to joining Regional, Mr. Fisher was an attorney in the Corporate
and Securities practice group of Womble Carlyle Sandridge and Rice, LLP (now known as Womble Bond
Dickinson (US) LLP) from 2009 to 2013. Mr. Fisher holds a B.A. degree in Economics from Furman University and
a J.D. degree from the University of South Carolina School of Law.
There are no family relationships among any of our directors or executive officers.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 20
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COMPENSATION DISCUSSION AND ANALYSIS
The following discussion of the compensation arrangements of our executive officers should be read together
with the compensation tables and related disclosures contained elsewhere in this Proxy Statement. Actual
compensation programs that we adopt following the date of this Proxy Statement may differ materially from the
existing and currently planned programs summarized in this discussion.
Executive Summary of Compensation Programs
Company Performance and Business Highlights in 2018
We produced another set of strong operating and financial results in 2018, including double-digit growth of
our loan portfolio, total revenue, and diluted earnings per share.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Loan Portfolio Growth: Our loan portfolio grew by $115 million to $932 million, an increase of 14.0%
from the prior year—our fourth consecutive year of double-digit portfolio growth. Our core portfolio of
small and large installment loans grew by 21.1%, led by continued, significant expansion in our large
loan category.
Increased Revenues and Improved Receivable Efficiency Ratio: Revenues of $307 million in 2018
were up 12.6% from 2017, while operating expenses as a percentage of average finance receivables
decreased to 16.4% in 2018 from 17.6% in 2017.
Increased Earnings: Net income for 2018 was $35.3 million and diluted EPS was $2.93, increases of
18.0% and 15.4%, respectively, from 2017.
Long-Term Stock Price Growth: Our stock price at the close of 2018 was $24.05, down from $26.31 at
the end of 2017 but up sharply from our stock price of $15.47 at the end of 2015.
In addition, in 2018, we achieved a number of other operating milestones. In February, we completed our
transition to a new loan origination and servicing system, a process that began in 2015. Our new system has allowed
us to introduce electronic payments, texting and imaging capabilities, an online customer portal, improved lead
management, and automated underwriting across our branch network. In the second half of 2018, we began to
integrate custom credit models into our automated underwriting processes, which we believe provide a significant
improvement over the previous criteria used for underwriting. We also continued to diversify our funding sources in
2018 by closing our first asset-backed securitization (“ABS”) transaction in June, followed by a second ABS
transaction in December. Finally, in September and October, we expanded our geographic presence by entering our
10th and 11th states of operation, Missouri and Wisconsin.
We were pleased with our 2018 results, and we believe that the compensation paid to our named executive
officers (our “NEOs”) for 2018 appropriately reflects and rewards their contributions to our performance.
Compensation Program Highlights in 2018
At our 2018 annual meeting of stockholders, we included a proposal that provided our stockholders with the
opportunity to vote to approve, on an advisory basis, the compensation of our NEOs. Because we only ceased to be
an emerging growth company under the Jumpstart Our Business Startups Act in 2018, this was our first annual
meeting of stockholders that included such a “say-on-pay” proposal. We were pleased to report that our
stockholders’ approval of our NEOs’ compensation was nearly unanimous, with 99.8% of voted shares having been
voted in favor of approval.
In 2018, our Compensation Committee carefully reviewed our executive compensation program to ensure that
it is designed to achieve its intended objectives and continues to reflect executive compensation “best practices.” In
light of the numerous improvements to our executive compensation program in the years prior to 2018 and our
stockholders’ overwhelming support of the program, our Compensation Committee determined not to make any
material changes to our executive compensation program in 2018. In making its determination, our Compensation
Committee received advice from its independent compensation consultant, Veritas Executive Compensation
Consultants (“Veritas”).
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 21
Compensation Program Best Practices
The primary objectives of our executive compensation program are to attract and retain talented executives to
effectively manage and lead our company and to create long-term stockholder value. We compensate our executive
officers primarily through a mix of base salary, performance-based annual cash awards, and service- and
performance-based long-term incentive awards. Consistent with our pay-for-performance philosophy, a substantial
portion of our executives’ compensation is at risk and linked to the successful performance and management of our
company, as measured against rigorous performance goals established by our Compensation Committee. Our 2018
executive compensation program continued to include a number of best compensation practices, including the
following:
✓ Alignment of executive pay with company performance:
O
O
2018 incentives are largely performance-contingent, with long-term incentive awards roughly
two-thirds performance-contingent and short-term incentive awards entirely performance-contingent
Performance goals are rigorous and are based almost exclusively on objective, quantitative criteria
▪
2018 short-term incentive program performance goals were largely achieved, resulting in
annual bonus payments at 99.7% of target bonuses
▪
Our compound annual growth rates (“CAGR”) of net income and earnings per share between 2016
and 2018 ranked in the 65th percentile of our peer group, contributing to the payment of
116.5% of target units under the performance-contingent awards associated with the 2016 long-
term incentive program
✓ Competitive compensation and incentive program target opportunities for our executives in order to
continue to align their overall compensation with the market for executive talent
✓ Set our short-term incentive payout opportunities to provide high upside if performance goals are
exceeded, while paying low or no bonus amounts if goals are not achieved
✓ Granted long-term incentives to NEOs and other key contributors, which include a significant portion
that is contingent upon the achievement of rigorous and clearly-defined performance measures over a
three-year period
✓ No payment of excessive perquisites to any NEO or other key employee
✓ No excise tax gross-up payments to any NEO or other key employee
✓ Double-trigger change-in-control provisions included in all employment agreements and long-term
incentive award agreements
✓ Prohibition against re-pricing of equity incentive awards without stockholder approval under our
2015 Plan
✓ Stock Ownership and Retention Policy for NEOs and directors (5x base salary for CEO, 2x base salary
for other NEOs, and 5x annual cash retainer for directors)
✓ Compensation Recoupment Policy, or “clawback policy,” for NEOs and other key employees
✓ Prohibition against hedging and pledging, as set forth in our Code of Ethics and our Stock Ownership
and Retention Policy
✓ Compensation program governed by an independent Compensation Committee with input from an
independent compensation consultant
Aligning Pay with Performance
We believe that a substantial portion of our executive officers’ compensation should be tied to their
performance and the short- and long-term financial and operating results of our company.
We developed our long-term incentive program in 2014 in consultation with Veritas. In 2013, our Chief
Executive Officer and the majority of our NEOs did not receive any long-term incentive awards. In addition, when
we appointed a new Chief Executive Officer in late October 2014, he did not receive any long-term incentive
awards until we finalized his employment agreement in 2015. As a result, the annualized total direct compensation
of our Chief Executive Officers who were serving at the end of 2013 and 2014 was substantially below both the
median of our peer group and our current Chief Executive Officer’s total direct compensation. We believe that the
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 22
creation and evolution of our long-term incentive program since 2014 has been critical to our ability to link our
executives’ pay with the performance of our company, to align our executives’ interests with those of our
stockholders, and to remain competitive in the marketplace for executive talent.
Our executive compensation program now embodies our pay-for-performance philosophy and closely ties the
interests of our key executives to those of our stockholders. We heavily weight our executive officers’ compensation
in performance-based short- and long-term incentive awards that are designed to reward exceptional performance.
The following table describes the program design for each element of our incentive-based pay in 2018.
Pay Elements
Program Design
Short-Term
Incentive Program
Long-Term
Incentive Program
(cid:129) Consists entirely of performance-based awards:
Metrics include net income from operations, average finance receivables, net credit losses as a
percentage of average finance receivables, total net debt/EBITDA, total general and
administrative expense percentage, and an analysis by our Compensation Committee of our
executives’ execution against short-term strategic objectives
(cid:129) Motivates our executives and brings total cash opportunities to competitive levels
(cid:129) Significant upside opportunity for high performance, but with a challenging threshold
(cid:129) Consists of performance-contingent RSUs, cash-settled performance units, and non-qualified
stock options:
Vesting of performance-contingent RSUs and cash-settled performance units is based primarily
on the CAGRs of net income and basic earnings per share, respectively, compared to our peer
group over a three-year performance period
Two-thirds of grant date fair value is in the form of performance-contingent awards
(cid:129) Provides strong incentive to meet or exceed pre-established long-term financial goals that
align with long-term stockholder interests, and is utilized to attract, retain, and motivate
executive talent
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The compensation packages of our Chief Executive Officer and our other NEOs are closely aligned with
performance. For 2018, the majority of compensation was variable and performance-based:
Chief Executive Officer
Target Pay Mix
Base Salary
17%
Other NEO Average
Target Pay Mix
Performance-
Based LTI
(Target)
26%
Base Salary
30%
Target STI
17%
Variable Pay
70%
Time-Vesting LTI
(Target)
22%
Time-Vesting
LTI (Target)
14%
Target STI
30%
Performance-
Based LTI
(Target)
44%
Variable Pay
83%
Note: The Other NEO target pay mix set forth above is the average for Messrs. Schachtel, Thomas, Taggart, and
Fisher. For Mr. Schachtel, we have used his aggregate target pay mix for 2017 (partial year) and 2018, as set forth
in his employment agreement and more fully described below. The presentation excludes perquisites, which are an
immaterial component of our executives’ compensation.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 23
Results of Short- and Long-Term Incentive Programs
Our short-term incentive program provides our executives with the opportunity to earn performance-based
annual cash awards pursuant to our Annual Incentive Plan (as amended and restated, the “Annual Incentive Plan”).
The achievement and payment of annual cash awards in 2018 was tied directly to our financial and operational
performance, based primarily (85%) on clearly-defined, objective performance measures and, to a lesser extent
(15%), on our Compensation Committee’s assessment of our executive team’s achievement of its short-term
strategic objectives. For 2018, our executive officers were paid 99.7% of their target annual bonuses (out of a range
of 0% to 150%) under our Annual Incentive Plan as a result of our strong financial and operating results and the
execution of certain key strategic objectives, including the rollout of custom credit scorecards and the closing of two
ABS transactions.
In recent years, our long-term incentive program has provided for the delivery of long-term incentive awards
through a combination of three award vehicles: (i) non-qualified stock options, (ii) performance-contingent RSUs,
and (iii) cash-settled performance units. Vesting of each of the performance-contingent awards is subject to, among
other things, the achievement of performance objectives over a three-year performance period that begins on
January 1st of the grant year. The three-year performance period established under the 2016 long-term incentive
program ended on December 31, 2018. Vesting of the performance-contingent RSUs and cash-settled performance
units granted in 2016 was based primarily (90%) on our CAGRs of net income (in the case of the performance-
contingent RSUs) and basic earnings per share (in the case of the cash-settled performance units) compared to our
peer group over the three-year performance period, and to a lesser extent (10%) on our Compensation Committee’s
assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. In
March 2019, as described in greater detail below, based upon results achieved during the performance period, our
Compensation Committee determined that participants in the 2016 long-term incentive program earned 116.5% of
their target performance-contingent RSUs and cash-settled performance units.
Stockholder Outreach and Engagement
Stockholder outreach is a central feature of our investor relations philosophy. We provide numerous
opportunities for current and prospective stockholders to gain access to our management team through attendance at
investor conferences, one-on-one in-person meetings, and telephone calls. Through these interactions, we are able to
educate current and prospective investors about our company, learn about concerns of stockholders, and provide
investors with a better understanding of our business model and philosophy. We also receive valuable feedback
from investors on topics including strategy, corporate governance, and compensation, which the Board and
management take into consideration in making future business and compensation decisions.
Since our 2018 annual meeting of stockholders, we reached out to institutional investors owning more than
60% of our outstanding common stock (as of September 30, 2018), specifically for the purpose of receiving their
feedback regarding executive compensation practices and corporate governance matters. Based on the feedback
received, we have made and expect to continue to make certain changes to our compensation and corporate
governance practices and disclosures. For example, in the past, certain investors requested that we increase the
percentage of independent directors on our Board and improve the gender diversity of our Board. In response, we
added two new independent directors in 2018, including Maria Contreras-Sweet, and adopted a Board Diversity
Policy. See “Board of Directors and Corporate Governance Matters – Board Diversity.” Independent directors now
hold 75% of our Board seats. In addition, certain investors expressed concern that we had granted retention awards
in consecutive years (2015 and 2016) to certain executives pursuant to our key employee retention program. In
response, we did not grant any retention awards to executive officers in 2017 or 2018. More recently, in early 2019,
investors suggested that we consider certain amendments to our Bylaws and that we re-evaluate the performance
metrics and relative weightings within our short-term incentive program. Our Board will consider this investor
feedback in 2019.
In 2019 and beyond, we expect to continue our stockholder outreach, including by making ourselves available
to hear stockholder feedback regarding executive compensation and corporate governance practices.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 24
Compensation Objectives and Approaches
Compensation Program Objectives
The primary objectives of our executive compensation program are to attract and retain talented executives to
effectively manage and lead our company and to create long-term stockholder value. The compensation packages
for our executive officers for 2018 generally included a base salary, performance-based annual cash awards, service-
and performance-based long-term incentive awards, and other benefits. Our current compensation program for our
executive officers has been designed based on our view that each component of executive compensation should be
set at levels that are necessary, within reasonable parameters, to successfully attract and retain skilled executives
and that are fair and equitable in light of market practices.
Base salaries are intended to provide a minimum, fixed level of cash compensation sufficient to attract and
retain an effective management team when considered in combination with other components of our executive
compensation program. The base salary element is meant to provide our executive officers with a stable income
stream that is commensurate with their responsibilities and to compensate them for services rendered during the
fiscal year.
Consistent with our pay-for-performance strategy, our performance-based annual cash incentive program is
customized to achieve specific objectives, reward increased levels of operational success, and place emphasis on
appropriate levels of performance measurement. The key goals addressed by our short-term incentive program
include (1) achievement of short-term financial and operational objectives, (2) increased stockholder value,
(3) motivation and attraction of key management talent, (4) rewarding key contributors for performance against
established criteria, and (5) focusing on our pay-for-performance compensation strategy. Benefits earned under our
short-term incentive program are paid under our Annual Incentive Plan.
Our long-term incentive program, which for 2018 included non-qualified stock options, performance-
contingent RSUs, and cash-settled performance units, operates in tandem with our short-term incentive program and
is consistent with our pay-for-performance strategy. Performance-based long-term incentives and service-based
option awards can provide significant benefits to both our employees and stockholders. These long-term incentives
generally are intended to create (1) a strong sense of ownership, (2) focus on achievement of long-term, strategic
business objectives, (3) an enhanced linkage between the interests of our executives and stockholders, (4) an
enhanced relationship between pay and performance, and (5) an incentive to attract and retain superior employees.
Long-term incentive program benefits are issued under our 2015 Plan, which was approved by our stockholders at
our 2015 annual meeting of stockholders and re-approved, as amended and restated, at our 2017 annual meeting of
stockholders.
The discussion below includes a review of our compensation program for 2018 and a preview of certain
aspects of our compensation program for 2019. Our NEOs for 2018 were:
Peter R. Knitzer
President and Chief Executive Officer
John D. Schachtel
Executive Vice President and Chief Operating Officer
Donald E. Thomas
Executive Vice President and Chief Financial Officer
Daniel J. Taggart
Executive Vice President and Chief Credit Risk Officer
Brian J. Fisher
Senior Vice President, General Counsel, and Secretary
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Compensation Determination Process
The Compensation Committee reviews and approves the compensation determinations for all of our executive
officers. In setting an executive officer’s compensation package and the relative allocation among different types of
compensation, we consider the nature of the position, the scope of associated responsibilities, the individual’s prior
experience and skills, and the individual’s compensation expectations, as well as the compensation of our existing
executive officers and our general impressions of prevailing conditions in the market for executive talent.
Engagement and Use of an Independent Compensation Consultant
The Compensation Committee has the authority to hire outside advisors and experts, including compensation
consultants, to assist it with director and executive officer compensation determinations. Since 2014, the
Compensation Committee has retained the services of Veritas Executive Compensation Consultants, an independent
compensation consultant, to ensure that our compensation practices are appropriate for our industry, to review and
to make recommendations with respect to executive officer and director cash and equity compensation, and to
update our peer group, in each case for the Compensation Committee’s use in setting compensation.
Veritas’ recommendations to the Compensation Committee were generally in the form of suggested ranges of
compensation or descriptions of policies that Veritas currently considers “best practice” in our industry and for
publicly-traded companies. The Compensation Committee used Veritas’ reports to further its understanding of
executive officer cash and equity compensation practices in the market.
During 2018, Veritas worked only for the Compensation Committee and performed no additional services for the
Company or any of our executive officers. The Compensation Committee Chair approved all work performed by
Veritas. During 2018, the Compensation Committee and the Company did not use the services of any other
compensation consultant. The Compensation Committee has also engaged Veritas in 2019 to provide similar services.
Our Compensation Committee has assessed the independence of Veritas, taking into account, among other
things, the factors set forth in NYSE rules, and has concluded that no conflict of interest exists with respect to the work
Veritas performed or performs for our Compensation Committee and that Veritas is independent under NYSE rules.
Establishment and Use of a Peer Group
We generally monitor compensation practices in the markets where we compete for executive talent to obtain
an overview of market practices and to ensure that we make informed decisions on executive pay packages. For
2018 compensation decisions, to obtain a sense of the market and a general understanding of current compensation
practices, we reviewed the compensation awarded by a peer group of publicly-traded companies. In addition, as
described in greater detail below, the vesting of certain of our executives’ long-term incentive awards is determined
based upon our financial performance compared to the financial performance of our peer group over a three-year
performance period.
At the outset of 2018, based upon prior peer group reviews conducted with the assistance of Veritas, our peer
group consisted of the following companies:
(cid:129) America’s Car-Mart, Inc.
(cid:129) CYS Investments, Inc.
(cid:129) Marlin Business Services Corp.
(cid:129) Asta Funding, Inc.
(cid:129) Atlanticus Holdings Corp.
(cid:129) B. Riley Financial, Inc.
(cid:129) Capstead Mortgage Corporation
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Encore Capital Group, Inc.
(cid:129) NewStar Financial, Inc.
Enova International, Inc.
(cid:129) Nicholas Financial, Inc.
EZCORP, Inc.
FirstCash, Inc.
(cid:129) On Deck Capital, Inc.
(cid:129) OneMain Holdings, Inc.
(cid:129) Consumer Portfolio Services, Inc.
(cid:129) Green Dot Corporation
(cid:129)
PRA Group, Inc.
(cid:129) Credit Acceptance Corp.
(cid:129)
JMP Group LLC
(cid:129) World Acceptance Corporation
In the third quarter of 2018, with assistance from Veritas, we reviewed our peer group using a scorecard-based
approach that involved applying several filters (e.g., strong financial health, positive shareholder standing, similar in
size, similar in industry classification, presence of overlapping peers, identification as a peer by a proxy advisory
firm) and selecting the most qualified peer companies from a broader list of candidates. Based on the evaluation, our
Compensation Committee determined to remove Asta Funding, Inc., Capstead Mortgage Corporation, and NewStar
Financial, Inc. from our peer group and to add Elevate Credit, Inc. and LendingClub Corporation to our peer group.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 26
As a result, our new peer group for 2019 consists of the following companies. As of the time that the Compensation
Committee approved our new peer group, we were in the 2nd quartile of the peer group based on revenue, market
capitalization, and enterprise value.
(cid:129) America’s Car-Mart, Inc.
(cid:129) Atlanticus Holdings Corp.
(cid:129) B. Riley Financial, Inc.
(cid:129) Consumer Portfolio Services, Inc.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Encore Capital Group, Inc.
(cid:129) Marlin Business Services Corp.
Enova International, Inc.
(cid:129) Nicholas Financial, Inc.
EZCORP, Inc.
FirstCash, Inc.
(cid:129) On Deck Capital, Inc.
(cid:129) OneMain Holdings, Inc.
(cid:129) Credit Acceptance Corp.
(cid:129) Green Dot Corporation
(cid:129)
PRA Group, Inc.
(cid:129) CYS Investments, Inc.
(cid:129)
Elevate Credit, Inc.
(cid:129)
(cid:129)
JMP Group LLC
(cid:129) World Acceptance Corporation
LendingClub Corporation
Proxy advisory firms Institutional Shareholder Services, Inc. and/or Glass, Lewis & Co. have identified 17 of
these companies (or 85% of our total peer group) as peers of Regional. These companies are largely within the
consumer finance or specialty finance industries, are similar in size and/or scope to Regional, and/or are companies
that Regional competes against for products, services, and human capital. Some companies included in our peer
group will meet some, but not all, of these criteria. For example, OneMain Holdings, Inc. (doing business as
OneMain Financial) is larger than us, but it competes directly with us in the consumer finance industry both for
customers and for human capital. As a result, despite being a larger company, we believe it is important to include
OneMain in our peer group to ensure that we maintain awareness of our direct competition, which will assist in our
efforts to retain talented executives and other employees. However, in setting compensation levels for our executive
officers, as noted below, our Compensation Committee remains cognizant that OneMain and certain other of our
peer companies are larger than us.
Consistent with our compensation objectives of attracting and retaining top executive talent, we believe that
the base salaries and performance-based short- and long-term incentive compensation of our executive officers
should be set at levels which are competitive with our peer group companies of comparable size, although we do not
target any specific pay percentile for our executive officers. The peer group is used more as a general guide, being
mindful of the following:
(cid:129)
(cid:129)
(cid:129)
Appropriate base salaries for our executive officers should generally be in line with those paid by peer
group companies of comparable size.
Performance-based short- and long-term incentive awards should reward exceptional performance, which
can result in overall compensation that can exceed those of peer group companies of comparable size.
Total compensation for executive officers may approach the higher end of the compensation at such peer
group companies of comparable size, but only if high levels of short- and long-term performance are
reached.
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Elements of Compensation
Each executive officer is eligible to receive a balance of variable and fixed compensation. The following table
describes the various forms of compensation used in 2018:
Pay Elements
Component(s)
Rationale for Form of Compensation
(cid:129) Cash
(cid:129) To attract and retain executive talent
(cid:129) To provide a fixed base of compensation generally
aligned to peer group levels
(cid:129) Performance-based annual cash bonus
(cid:129) To drive the achievement of key business results on
(cid:129) Performance-based long-term incentives:
Performance-contingent RSUs
Cash-settled performance units
(cid:129) Service-based long-term incentives:
Non-qualified stock options
an annual basis
(cid:129) To recognize individual executives based on their
specific and measurable contributions
(cid:129) To structure a meaningful amount of at-risk,
performance-based annual compensation
(cid:129) To drive the sustainable achievement of key long-
term business results
(cid:129) To align the interests of executives with
stockholders
(cid:129) To structure a meaningful amount of at-risk,
performance-based long-term compensation
(cid:129) To attract, retain, and motivate executive talent
Base Salary
Short-Term
Incentive
Long-Term Incentive
Base Salary
Annual base salaries are established on the basis of market conditions at the time we hire an executive, as well
as by taking into account the particular executive’s level of qualifications and experience. The Compensation
Committee reviews the base salaries of our executive officers annually, and any subsequent modifications to annual
base salaries are made in consideration of the appropriateness of each executive officer’s compensation, both
individually and relative to the other executive officers, the individual performance of each executive officer, and
any significant changes in market conditions. We do not apply specific formulas to determine increases.
The Compensation Committee approved executive officer annual base salaries for 2017, 2018, and 2019 as
described in the following table. Annual base salaries are pro-rated for any partial year.
Name
2017 Base Salary
2018 Base Salary
2019 Base Salary
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
$530,000
$350,000
$342,000
$318,000
$240,000
$550,000
$360,000
$355,000
$330,000
$300,000
$600,000
$400,000
$400,000
$375,000
$335,000
2019 Base Salary
Percentile Rank
Relative to Peer
Companies
43rd
39th
28th
34th
15th
In February 2018, in recognition of his performance and service to our company, the Board promoted
Mr. Fisher from Vice President to Senior Vice President and increased his base salary accordingly. At the time of
the increase in 2018, Mr. Fisher’s base salary remained below the 25th percentile relative to 5th-ranked NEOs in our
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 28
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peer group. In February 2019, following a total compensation analysis conducted by Veritas in late 2018, the
Compensation Committee elected to increase each executive officer’s base salary in order to better align their base
salaries with those paid by peer companies. Following these increases in 2019, as noted above, our executive
officers’ base salaries ranged between the 15th and 43rd percentile relative to comparable executive officers at peer
companies.
Our Compensation Committee believes that it has set base salaries at appropriate levels to attract and retain
effective executives and that base salaries, when combined with short- and long-term incentives, are an important
component of a holistic compensation approach.
Performance-Based Annual Cash Awards
Our annual incentive program is designed to drive achievement of annual corporate goals, including key
financial and operating results and strategic goals that create long-term stockholder value. Our executive officers are
eligible for performance-based annual cash awards linked to performance targets set by our Compensation
Committee.
Components of Annual Incentive Program
The awards for 2018 were based primarily (85%) on our performance with respect to the metrics in the
following table. The metrics in the table below drive the overall performance of our business from year to year and
are elements of our historical financial success.
Performance Metric
What it Measures
Rationale for Metric
Net Income from
Operations
Profitability
(cid:129) Measures the effectiveness of our management team’s execution of our
strategic and operational plans
(cid:129) Reflects business variables and factors that are within management’s
control or are influenced by decisions made by executives
Average Finance
Receivables
Loan growth
(cid:129) Measures our ability to grow our business
(cid:129) We establish annual growth objectives for our management team for
loans that we originate and service
Net Credit Losses as a
Percentage of Average
Finance Receivables
Loan portfolio control
(cid:129) Measures the control our management team exerts on our loan portfolio
(cid:129) It is ultimately a measure of the quality of underwriting policies and
decisions and the effectiveness of collection efforts
(cid:129) We guide our management team to specific aggregate net credit loss
goals each year that, combined with our average finance receivables
measure, attempt to balance attractive growth with effective portfolio
control
Total Net Debt /
EBITDA
Total General and
Administrative Expense
Percentage
Leverage ratio
(cid:129) Holds management accountable for the responsible use of credit to fund
(cid:129) Measures reliance on our credit facilities to produce cash flow
our business
Expense control
our corporate resources and minimizes our corporate expenses
(cid:129) Measures the effectiveness with which our management team utilizes
Note: We calculate EBITDA as consolidated net income from operations before interest expense, income taxes,
depreciation, and amortization, each as calculated in accordance with GAAP and as set forth in our audited
financial statements.
Our 2018 annual incentive awards were based to a lesser extent (15%) on our Compensation Committee’s
assessment of our executive team’s achievement of its short-term strategic objectives. In light of ongoing,
significant strategic projects and initiatives, our Compensation Committee believes that it is important to
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 29
appropriately incentivize the achievement of strategic objectives (which often cannot be measured quantitatively) by
linking their achievement (and the quality thereof) to our executives’ compensation.
Annual Incentive Program Performance Targets, Results, and Payouts
The following table provides for 2018 detail regarding the threshold and target levels of performance set by
the Compensation Committee for each performance metric, the weighting applied to each metric, our actual annual
performance pursuant to each metric, and the percentage payout for each metric and in total. A threshold level of
performance must be exceeded in order to earn any award, and each executive is eligible to earn up to 150% of his
target award based upon the achievement of the performance goals established by the Compensation Committee.
Performance Metric
Threshold
Performance
Target
Performance
Maximum
Performance
Actual
Performance
Percentage
Weight
Percentage
Payout
Net Income from Operations
$27,335,077
$39,050,110
$46,860,132
$35,344,473
Average Finance Receivables
$769,489,639
$854,988,487
$940,487,336
$857,906,704
Net Credit Losses Percentage
Total Debt / EBITDA
Total G&A Expense Percentage
9.99%
7.60x
49.88%
8.69%
6.34x
7.39%
5.07x
9.05%
6.99x
46.40%
42.92%
45.74%
Achievement of Strategic Objectives
N/A
N/A
N/A
N/A
30.0%
20.0%
15.0%
10.0%
10.0%
15.0%
100.0%
29.0%
20.3%
12.8%
8.6%
11.0%
18.0%
99.7%
In calculating the percentage payout above, the Compensation Committee adjusted actual results to account
for the impact of Hurricane Florence, which was beyond the reasonable control of management. Had the
Compensation Committee not made an adjustment, the total percentage payout would have instead been 94.9% of
target. The Compensation Committee believes that its decision to adjust actual results in 2018 is appropriately
balanced against its decision in the prior year to adjust actual results in a manner that caused the percentage payout
under the 2017 annual incentive program to be less than it otherwise would have been in the absence of such
adjustments. Additional information regarding the estimated impact of Hurricane Florence on our results of
operations, including our net income and net credit losses, may be found in our filings with the SEC, including our
Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
As described above, 15% of the total annual incentive program award opportunity is linked to our
Compensation Committee’s assessment of our executive team’s achievement of its short-term strategic objectives.
For 2018, our Compensation Committee elected to pay 120% of this award opportunity in recognition of our
company’s outstanding execution of its short-term strategic objectives, including the development of custom credit
scorecards, the closing of our first two ABS transactions in June 2018 and December 2018, the expansion of our
branch footprint to two new states, the completion of the implementation of our new loan origination and servicing
platform in each of our branches, and the continued improvements in our management of enterprise risks.
Target annual incentive levels and actual performance-based annual cash awards for each of our NEOs for
2018 are detailed below, based upon the 99.7% performance achievement detailed above.
Name
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
2018 Eligible
Base Salary
2018 Target Award
as % of Salary
Target Award
Actual Award
$550,000
$360,000
$355,000
$330,000
$300,000
100%
100%
100%
100%
100%
$550,000
$360,000
$355,000
$330,000
$300,000
$548,350
$358,920
$353,935
$329,010
$299,100
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The target award percentages described above were determined by the Compensation Committee and are
calibrated so that the total compensation opportunity for each executive officer is commensurate with that
executive’s role and responsibilities with us. Except in the case of Mr. Thomas, if an executive voluntarily
terminates his employment during the performance year, he becomes ineligible to receive payment of a
performance-based annual cash award. Pursuant to his retirement agreement, Mr. Thomas will be eligible to receive
a pro-rated, performance-based annual cash award based upon the number of days of service in 2019, subject to our
achievement of the performance goals established by the Compensation Committee for 2019. See “Summary of
Employment Arrangements with Executive Officers – Retirement Agreement with Chief Financial Officer.”
Annual Incentive Program Opportunities in 2019
Our Compensation Committee has not yet acted to establish the parameters of our annual incentive program
for 2019. However, we currently expect that it will be structured in a manner similar to the 2018 program, provided
that our Compensation Committee is considering the re-allocation of the weighting of certain of the metrics and the
replacement of the “Total Debt / EBITDA” performance metric with a metric that instead measures our return on
assets. We further expect that the target 2019 incentive levels for each of our executive officers will be set at 150%
of base salary in the case of Mr. Knitzer and 100% of base salary in the case of each other executive officer.
Our Compensation Committee believes that our short-term incentive program is effective in motivating our
executives to achieve short-term financial and operational objectives, in furtherance of our pay-for-performance
compensation strategy.
Long-Term Incentive Awards
Our long-term incentive award grants are intended to directly align the interests of our executive officers with
those of our stockholders, to give our executive officers a strong incentive to maximize stockholder returns on a
long-term basis, and to aid in our recruitment and retention of key executive talent necessary to ensure our
continued success.
Components of Long-Term Incentive Program
In 2016 through 2018, our long-term incentive program provided for the delivery of long-term incentive
awards through a combination of three award vehicles: (i) non-qualified stock options, (ii) performance-contingent
RSUs, and (iii) cash-settled performance units. Vesting of each of the performance-contingent awards is subject to,
among other things, the achievement of performance objectives over a three-year performance period that begins on
January 1st of the grant year. Long-term incentive awards are scheduled to occur in the first quarter of each year.
In 2018, as part of the long-term incentive program, we granted the following awards in the first quarter of
2018 to Messrs. Knitzer, Schachtel, Thomas, Taggart, Fisher, and other key employees:
LTI Vehicle
Principal
Performance Metric
Performance Period
Weighting
Recipients
Non-Qualified
Stock Options
Built-in metric of
stock price growth
N/A – Options vest in equal
installments on December 31,
2018, 2019, and 2020, subject
to continued employment
One-third of total
target award
Performance-
Contingent
Restricted Stock
Units
CAGR of net income
compared to a peer
group
Three years, from January 1,
2018 through December 31,
2020
One-third of total
target award
Cash-Settled
Performance Units
CAGR of basic
earnings per share
compared to a peer
group
Three years, from January 1,
2018 through December 31,
2020
One-third of total
target award
Executive officers
and several other
key C-suite
employees
Executive officers
and several other
key C-suite
employees
Executive officers
and several other
key C-suite
employees
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 31
Vesting of the performance-contingent RSUs and cash-settled performance units is based primarily (90%)
upon our performance over the three-year performance period compared to our peer group, as described in the table
below. Failure to meet the threshold level of performance results in the forfeiture of the associated award.
LTI Vehicle
Principal
Performance Metric
Performance Level
Required Performance
% of Target Award
Earned and Vested
Performance-
Contingent
Restricted Stock
Units
CAGR of net income
compared to our peer
group for the period from
January 1, 2018 through
December 31, 2020
Cash-Settled
Performance
Units
CAGR of basic earnings
per share compared to
our peer group for the
period from January 1,
2018 through December
31, 2020
Threshold Performance
Target Performance
Maximum Performance
Threshold Performance
Target Performance
Maximum Performance
Meets or Exceeds Peer
Group Performance at the
50th Percentile
Meets or Exceeds Peer
Group Performance at the
60th Percentile
Meets or Exceeds Peer
Group Performance at the
75th Percentile
Meets or Exceeds Peer
Group Performance at the
50th Percentile
Meets or Exceeds Peer
Group Performance at the
60th Percentile
Meets or Exceeds Peer
Group Performance at the
75th Percentile
50%
100%
150%
50%
100%
150%
To a lesser extent (10%), vesting of the performance-contingent RSUs and cash-settled performance units is
based on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same performance period. In light of ongoing, significant strategic projects and initiatives, our
Compensation Committee believes it is important to appropriately incentivize the achievement of strategic
objectives (which often cannot be measured quantitatively) by linking their achievement (and the quality thereof) to
our executives’ compensation.
Mr. Schachtel became our Executive Vice President and Chief Operating Officer effective as of May 30,
2017. Mr. Schachtel’s employment agreement establishes his aggregate long-term incentive compensation
opportunity level for 2017 and 2018, and provides that he will be granted long-term incentive award opportunities
through a combination of the three award vehicles described above—non-qualified stock options, performance-
contingent RSUs, and cash-settled performance units. The aggregate grant date target value of Mr. Schachtel’s 2017
and 2018 long-term incentive compensation opportunities is $850,000 (calculated as approximately $525,000 per
year on an annualized basis for the period commencing on Mr. Schachtel’s first day of employment, May 30, 2017,
through the end of 2018).
Mr. Schachtel’s long-term incentive compensation for 2017 and 2018 is split among non-qualified stock
options, performance-contingent RSUs, and cash-settled performance units having a grant date target value of
$300,000, $275,000, and $275,000, respectively. Because Mr. Schachtel’s employment commenced more than 90
days after the beginning of the performance period associated with the performance-contingent RSUs and cash-
settled performance units that we granted under our 2017 long-term incentive program, Mr. Schachtel’s
participation in the 2017 program with respect to performance-contingent RSUs and cash-settled performance units
would have resulted in the payment of compensation (if any) that would not have qualified for the performance-
based compensation exemption available pursuant to Code Section 162(m). Therefore, in an effort to preserve, to
the extent practicable, the future tax deductibility of Mr. Schachtel’s compensation, the Compensation Committee
approved Mr. Schachtel’s non-qualified stock option award with a grant date of May 30, 2017, the date he
commenced employment, and determined that the award of Mr. Schachtel’s performance-contingent RSUs and
cash-settled performance units should occur as part of the 2018 long-term incentive program.
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Long-Term Incentive Awards in 2018 and 2019
The grant date target values for awards granted to our NEOs in 2018 are detailed in the following table. For
the performance-contingent RSUs and cash-settled performance units, a threshold level of performance must be
exceeded for the awards to have any value, and participants are eligible to earn up to 150% of their target award
based upon the achievement of the performance goals established by the Compensation Committee. For the
non-qualified stock options, our stock price must exceed the exercise price (which is set at our closing stock price
on the grant date) for the options to have any value.
2018 Target Grant Date Value
Name
Total
Performance-
Contingent RSUs
Cash-Settled
Performance Units
Non-Qualified Stock
Options
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
$2,200,000
$550,000
$532,500
$330,000
$300,000
$733,333
$275,000
$177,500
$110,000
$100,000
$733,333
$275,000
$177,500
$110,000
$100,000
$733,334
N/A
$177,500
$110,000
$100,000
Our long-term incentive program in 2019 is structured in a manner similar to the 2018 program described above,
subject to certain exceptions. For 2019, in consultation with Veritas and following a review of peer company practices,
our Compensation Committee elected to add a service-based RSA as a fourth component of the program in order to
strengthen the retentive nature of the program and to more appropriately balance the allocation of long-term incentive
award opportunities between performance-based and service-based awards. The service-based RSA will vest in three
equal annual tranches over a three-year period, subject to continued employment through the respective vesting dates.
In addition, for 2019, the Compensation Committee did not grant any long-term incentive awards to Mr. Thomas in
light of his pending retirement, consistent with the terms of his retirement agreement. Finally, in October 2018, in
recognition of his performance and service to our company, the Board promoted Mr. Taggart from Senior Vice
President to Executive Vice President and increased his long-term incentive award opportunity accordingly.
2019 Target Grant Date Value
Name
Total
Performance-
Contingent RSUs
Cash-Settled
Performance Units
Non-Qualified
Stock Options
Restricted
Stock
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
$2,100,000
$600,000
N/A
$662,500
$435,000
$525,000
$150,000
N/A
$140,625
$83,750
$525,000
$150,000
N/A
$140,625
$83,750
$525,000
$150,000
N/A
$190,625
$133,750
$525,000
$150,000
N/A
$190,625
$133,750
Note: The number of shares subject to the performance-contingent RSU awards and the RSAs is determined by
dividing the value of the award by the closing price per share of common stock on the grant date (rounded down to
the nearest whole share). The number of shares subject to the non-qualified stock option awards is determined by
dividing the value of the award by the fair value per share of common stock on the grant date calculated using the
Black-Scholes valuation model (rounded down to the nearest whole share).
Our Compensation Committee believes that our long-term incentive program furthers our
pay-for-performance objectives, creates a compelling recruitment and retention tool, appropriately focuses our
executives on the achievement of long-term financial and business goals, and strengthens the alignment of our
executives’ interests with those of our stockholders.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 33
2016 Long-Term Incentive Program Performance Targets, Results, and Payouts
In 2016, we granted our then-current executive officers non-qualified stock options, performance-contingent
RSUs, and cash-settled performance units. Messrs. Thomas, Taggart, and Fisher were employed by us in 2016 and
participated in the 2016 long-term incentive program. The three-year performance period established under the 2016
long-term incentive program ended on December 31, 2018.
Vesting of the performance-contingent RSUs and cash-settled performance units granted in 2016 was based
primarily (90%) on our CAGRs of net income (in the case of the performance-contingent RSUs) and basic earnings
per share (in the case of the cash-settled performance units) compared to our 2016 peer group over the three-year
performance period. We refer to this portion of the performance-contingent RSU and cash-settled performance unit
award opportunities as the “Objective Criteria Units.” The Objective Criteria Units were eligible to vest based on
our performance relative to our peer group as follows:
Performance Relative
to Peer Group
% of Objective
Criteria Units Vested
50th Percentile
50th Percentile
60th Percentile
75th Percentile
0%
50%
100%
150%
The percentage of the Objective Criteria Units vested for results between the performance levels stated above
is calculated using linear interpolation. Our CAGRs of net income and earnings per share compared to our peer
group over the performance period were as follows:
Performance Measure
CAGR of Net Income
CAGR of Basic EPS
Performance at
25th Percentile
of Peer Group
Performance at
50th Percentile
of Peer Group
Performance at
75th Percentile
of Peer Group
Performance
of Regional
(50.7%)
(49.4%)
12.9%
12.2%
31.8%
35.3%
17.8%
21.7%
In calculating the performance of peer companies, the Compensation Committee excluded discontinued
operations, adjusted for the impact of goodwill impairments, and utilized pro-forma financial statements filed by
any peer company having made a significant acquisition, in each case as disclosed by the peer companies in their
SEC filings. Where a peer company was delisted following poor financial performance, the peer company was
ranked at the bottom of the peer group. Where a peer company was acquired by another peer company, the acquired
company was removed from the peer group, and where a peer company was acquired by a company outside of the
peer group, the acquired company’s CAGRs of net income and basic earnings per share were calculated using
available information. Our Compensation Committee also elected to remove one peer company from the peer group
analysis due to its significant governance failures and financial statement restatements during the performance
period, as well as its ongoing material weaknesses in internal control over financial reporting as of the end of the
performance period, all of which called into question the quality and accuracy of the company’s reported earnings.
Finally, in calculating peer company performance and our performance, the Compensation Committee adjusted
actual results to account for the impact of hurricane events.
Our performance at the above levels resulted in the vesting of 116.7% of the Objective Criteria Units
associated with each of the performance-contingent RSU awards and the cash-settled performance unit awards. Our
Compensation Committee believes that vesting at these levels appropriately reflects our pay-for-performance
strategy and is supported by our total shareholder return. Over the three-year performance period, we finished in the
same position within our peer group in each of total shareholder return, CAGR of net income, and CAGR of basic
earnings per share.
Vesting of the performance-contingent RSUs and cash-settled performance units granted in 2016 was also
based in small part (10%) on our Compensation Committee’s qualitative assessment of our executive team’s
achievement of its long-term strategic objectives between 2016 and 2018. We refer to this portion of the
performance-contingent RSU and cash-settled performance unit award opportunities as the “Qualitative Criteria
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Units.” Our Compensation Committee elected to pay 115% of the Qualitative Criteria Units in recognition of,
among other achievements, the implementation of our new loan origination and servicing platform in each of our
branches; the development of custom credit scorecards; material improvements in our liquidity profile, including
through a $100 million increase in capacity under our senior revolving credit facility, the closing of a $125 million
revolving warehouse credit facility, and the closing of our first two ABS transactions; the expansion of our branch
footprint to two new states; improvements to our compliance management system and enterprise risk management;
and the full dismissal in 2018 of the securities class action lawsuit filed against us in 2014.
Based upon the above results, in March 2019, our Compensation Committee determined that Messrs. Thomas,
Taggart, and Fisher vested in and earned 116.5% of their total target performance-contingent RSUs and cash-settled
performance units under the 2016 long-term incentive program. The following table provides information regarding
the percentage of the target performance-contingent RSUs and cash-settled performance units vested under our
2014, 2015, and 2016 long-term incentive programs, which were eligible to vest on December 31st of 2016, 2017,
and 2018, respectively:
Long-Term Incentive Program
Award Component
2014
Grant Year
2015
Grant Year
2016
Grant Year
Performance-Contingent RSUs
Cash-Settled Performance Units
0%
0%
0%
0%
116.5%
116.5%
Key Employee Retention Program
In 2014, even when including the increased target value of the short- and long-term incentive awards, total
compensation levels for our executive officers were below the median of our peer group. Further, the difficulties we
faced in 2014 resulted in a significant deficit in terms of realized compensation. As a result, in 2015, our
Compensation Committee, in consultation with Veritas, determined to implement a key employee retention program
as an incentive and retention vehicle for certain critical executives.
Pursuant to the key employee retention program, the Compensation Committee granted the following awards
to certain executive officers in 2015: (i) non-qualified stock options, which are subject to the terms of the Regional
Management Corp. 2011 Stock Incentive Plan (as amended, the “2011 Plan”), and (ii) a cash retention award. In
March 2016, the Compensation Committee elected to continue the key employee retention program with grants of
the following awards to certain executive officers: (i) RSAs, which are subject to the terms of the 2015 Plan, and
(ii) cash retention awards.
We did not grant any retention awards to our executive officers in 2017 or 2018.
Perquisites
We also provide various other limited perquisites and other personal benefits to our executive officers that are
intended to be part of a competitive compensation program. For 2018, these benefits included:
(cid:129) The ability to participate in a comprehensive voluntary annual health screening;
(cid:129) Monthly automobile allowance of $1,150 to Mr. Thomas;
(cid:129)
Payment of Mr. Knitzer’s and Mr. Schachtel’s travel expenses to and from their out-of-state personal
residences;
(cid:129) Mobile phone allowance payments to Messrs. Knitzer, Schachtel, Thomas, and Taggart; and
(cid:129)
Payment of supplemental long-term disability premiums and associated taxes, which is intended, in part,
to insure against our severance obligations in the event of a disability termination event under an
executive’s employment agreement.
We also offer our executive officers benefits that are generally available to all of our employees, including
401(k) plan matching contributions, health insurance, disability insurance, dental insurance, vision insurance, life
insurance, paid time off, and the reimbursement of qualified business expenses. The Compensation Committee
believes that these benefits are comparable to those offered by other companies that compete with us for executive
talent and are consistent with our overall compensation program. Perquisites are not a material part of our
compensation program.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 35
Other Compensation Policies, Practices, and Matters
Stock Ownership and Retention Policy
The Compensation Committee believes that significant ownership of common stock by our executives and
directors directly aligns their interests with those of our stockholders and also helps to balance the incentives for
risk-taking inherent in equity-based awards made to executives. Under our Stock Ownership and Retention Policy,
executives and directors are subject to the following ownership guidelines:
Covered Person
Chief Executive Officer
Other covered employees (including NEOs)
Directors
Ownership Guideline
5x annual base salary
2x annual base salary
5x annual cash retainer
In February 2018, our Compensation Committee increased our director stock ownership requirement from 3x
to 5x the annual cash retainer, placing the dollar value of the ownership requirement in the 90th percentile of our
peer group. Persons covered by the policy are expected to utilize grants under equity compensation plans to reach
the levels of ownership expected by the policy. The policy also incorporates a retention element requiring such
persons to retain 50% of the net shares resulting from the vesting or exercise of equity awards to obtain the required
ownership under the policy.
Clawback Policy
We have also adopted a Compensation Recoupment Policy, or “clawback policy.” Under the clawback policy,
the Chief Executive Officer, the Chief Financial Officer, any other person who is an executive officer, the Chief
Accounting Officer, and such other persons as may be determined by the Board or the Compensation Committee,
may be required to return to us and/or forfeit all or a portion of any cash-based incentive compensation and/or
equity-based incentive compensation received by such covered person.
Such a return or forfeit is required, unless the Compensation Committee determines otherwise, if
(i) compensation is received based on financial statements that are subsequently restated in a way that would
decrease the amount of the award to which such person was entitled and the restatement is based in whole or in part
on the misconduct of the covered person, (ii) such compensation was received by the covered person and the
Compensation Committee determines that such person has violated a non-competition, non-solicitation,
confidentiality, or other restrictive covenant applicable to such person, or (iii) recoupment is otherwise required
under applicable law.
Prohibition Against Hedging and Pledging
As stated in our Code of Conduct, directors, officers, employees, and their designees may not engage in
activities that are designed to profit from trading activity or hedge against decreases in the value of our securities.
This includes purchasing any financial instrument or contract, including prepaid variable forward contracts, equity
swaps, collars, and exchange traded funds, which is designed to hedge or offset any risk of decrease in the market
value of our common stock. These prohibitions apply regardless of whether the equity securities have been granted
to the directors, executive officers, or other employees as part of their compensation or are held, directly or
indirectly, by such persons or their designees.
In addition, pursuant to our Stock Ownership and Retention Policy, shares subject to the retention
requirements of the policy may not be pledged, hypothecated, or made subject to execution, attachment, or similar
process.
No Excise Tax Gross-Ups
We did not provide any of our executive officers with a “gross-up” or other reimbursement payment for any
tax liability that he might owe as a result of the application of Code Sections 280G, 4999, or 409A during 2018, and
we have not agreed and are not otherwise obligated to provide any NEO with such a “gross-up” or other
reimbursement.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 36
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Deductibility of Executive Compensation
Code Section 162(m) generally limits our ability to deduct for tax purposes compensation over $1,000,000 to
our principal executive officer, principal financial officer, or any one of our other three highest paid executive
officers. However, in the case of tax years commencing before 2018, Code Section 162(m) exempted qualifying
performance-based compensation from the deduction limit if certain requirements were met. Code Section 162(m)
was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based
compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered
into prior to November 2, 2017, that are not materially modified after that date and that would otherwise have been
deductible under Code Section 162(m) prior to the changes made by the Tax Cuts and Jobs Act) and to expand the
group of current and former executive officers who may be covered by the deduction limit under Code
Section 162(m). As a result, compensation paid to certain of our executive officers in excess of $1,000,000 will no
longer be deductible (other than with respect to certain “grandfathered” arrangements, as noted above).
Notwithstanding the elimination of the exemption for performance-based compensation, because of the importance
of linking pay and performance, our 2018 and 2019 executive compensation programs continue to impose
performance conditions on a significant portion of awards to our executive officers.
The Compensation Committee will review and consider the deductibility of executive compensation under
Code Section 162(m) and may authorize certain payments that will be in excess of the $1,000,000 limitation. The
Compensation Committee believes that it needs to balance the benefits of designing awards that are tax-deductible
with the need to design awards that attract, retain, and reward executives responsible for our success. While mindful
of the benefit to us of the full deductibility of compensation, the Compensation Committee believes that it should
not be constrained by the requirements of Code Section 162(m) where those requirements would impair flexibility
in compensating our executive officers in a manner that can best promote our corporate objectives, which the
Compensation Committee believes aligns our executive officers’ interests with our stockholders’ interests, and thus
is in the best interests of our stockholders.
Payments Upon Termination and Change-in-Control
Pursuant to the terms of each of their employment agreements and certain long-term incentive award
agreements, our NEOs are entitled to certain benefits upon the termination of their employment with us, the terms of
which are described below under “Summary of Employment Arrangements with Executive Officers.”
Risk Assessment of Compensation Policies and Practices
We have assessed our compensation programs for all employees and have concluded that our compensation
policies and practices do not create risks that are reasonably likely to have a material adverse effect on our
company. We believe that our compensation programs reflect an appropriate mix of compensation elements and
balance current and long-term performance objectives, cash and equity compensation, and risks and rewards. During
2018, the Compensation Committee reviewed our compensation policies and practices for all employees, including
our NEOs, particularly as they relate to risk management practices and risk-taking incentives. As part of its review,
the Compensation Committee discussed with management the ways in which risk is effectively managed or
mitigated as it relates to our compensation programs and policies.
Based on this review, the Compensation Committee believes that our compensation programs do not
encourage excessive risk but instead encourage behaviors that support sustainable value creation. The following
features of our executive compensation program illustrate this point.
(cid:129) Review by Independent Compensation Consultant. Our executive compensation programs have been
designed and reviewed by an independent compensation consultant.
(cid:129) Compensation Committee Oversight. Our executive compensation programs are regularly reviewed and
overseen by an independent Compensation Committee that retains the discretion to reduce compensation
based on corporate and individual performance and other factors.
(cid:129) Mix of Incentives. Our compensation programs provide an appropriate mix of short-term and long-term
incentives, as well as cash and equity opportunities.
(cid:129) Mix of Performance Metrics. The performance metrics associated with our incentive programs incorporate
a variety of drivers of the business over both annual and three-year time horizons.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 37
(cid:129)
Strong Link to Stockholder Interests. Equity components and long-term performance metrics create a
strong alignment between our executives’ interests and our stockholders’ interests. Because long-term
incentives typically vest over a three-year period, our executives will always have unvested awards that
could decrease in value if our business is not well-managed for the long term.
(cid:129) Alignment with Annual Budget and Long-Term Strategic Plan. Performance metrics in our short- and
long-term incentive programs are aligned with both our annual budget and our long-term strategic plan.
(cid:129) Appropriate Policies. We have adopted a “clawback” policy, a stock ownership and retention policy, and
prohibitions against hedging and pledging, thereby creating additional protections for our company and
encouraging an alignment of our executives’ and stockholders’ interests.
(cid:129) Field Incentive Plan. Our operations field incentive plan is focused on growth, control, and profit—the
three primary drivers of success in our branches. This creates appropriate alignment of employee incentive
opportunities with company goals.
(cid:129) Administration and Disclosure. Administrative procedures, communication, and disclosure processes
closely align with “best practices.”
(cid:129)
Securities Trading Policy. Officers must obtain permission from the General Counsel before the purchase
or sale of any shares, even during an open trading period.
Based on the factors above, we believe that our NEOs and other employees are encouraged to manage our
company in a prudent manner and that our incentive programs are not designed to encourage our NEOs or other
employees to take excessive risks or risks that are inconsistent with the Company’s and our stockholders’ best
interests. In addition, we have in place various controls and management processes that help mitigate the potential
for incentive compensation plans to materially and adversely affect the Company.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 38
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the foregoing “Compensation Discussion and
Analysis” with management. Based upon such review, the related discussions, and such other matters deemed
relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the
Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2018 through incorporation by reference to
this Proxy Statement.
Members of the Compensation
Committee:
Steven J. Freiberg (Chair)
Roel C. Campos
Maria Contreras-Sweet
Carlos Palomares
The Compensation Committee report does not constitute soliciting material, and shall not be deemed to be
filed or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent that we specifically incorporate the Compensation Committee report by reference
therein.
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Summary Compensation Table
EXECUTIVE COMPENSATION TABLES
The following table sets forth the cash and other compensation that we paid to our named executive officers or
that was otherwise earned by our named executive officers for their services in all employment capacities during the
fiscal years ended December 31, 2018, 2017, and 2016.
Name and Principal Position(1)
Peter R. Knitzer,(2)
President and Chief Executive Officer
John D. Schachtel,
Executive Vice President and
Chief Operating Officer
Donald E. Thomas,
Executive Vice President and
Chief Financial Officer
Daniel J. Taggart,
Executive Vice President and
Chief Credit Risk Officer
Brian J. Fisher,
Senior Vice President, General Counsel,
and Secretary
Year
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
Salary
($)(3)
550,000
530,000
221,557
360,000
207,123
—
355,000
342,000
332,000
330,000
318,000
308,000
300,000
240,000
230,000
Bonus
($)(4)
Stock
Awards
($)(5)
Option
Awards
($)(6)
Non-Equity
Incentive Plan
Compensation
($)(7)
All Other
Compensation
($)(8)
—
—
—
—
—
—
—
66,667
33,333
—
—
—
—
50,000
43,750
733,314
949,985
—
274,986
—
—
177,495
170,994
265,970
109,977
105,987
102,651
99,977
80,000
170,817
733,327
—
949,997
—
299,994
—
177,499
170,995
165,998
109,998
105,998
102,661
100,000
79,994
95,826
548,350
522,580
221,557
358,920
204,224
—
547,375
337,212
250,267
448,648
313,548
232,175
410,774
236,640
104,026
83,701
42,552
30,114
72,659
21,239
—
45,246
24,900
27,250
25,993
8,810
900
16,963
10,800
12,390
Total
($)
2,648,692
2,045,117
1,423,225
1,066,565
732,580
—
1,302,615
1,112,768
1,074,818
1,024,616
852,343
746,387
927,714
697,434
656,809
(1) Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher commenced employment effective as of August 1,
2016, May 30, 2017, January 2, 2013, January 5, 2015, and January 14, 2013, respectively.
(2)
(3)
(4)
Immediately prior to his appointment as our Chief Executive Officer, Mr. Knitzer served as a non-employee
director on our Board, a role in which he had served since his initial appointment in July 2015. The table
above reflects the compensation paid to Mr. Knitzer in his capacity as our Chief Executive Officer. Following
the effectiveness of his appointment as our Chief Executive Officer, Mr. Knitzer was no longer entitled to
receive separate compensation for his service on the Board.
The amounts represent annual base salaries, pro-rated for any partial year. For additional information, see
“Compensation Discussion and Analysis – Elements of Compensation – Base Salary.”
For 2017, the amounts represent installment payments totaling two-thirds of cash retention awards granted to
Mr. Thomas and Mr. Fisher in 2016 pursuant to our key employee retention program.
For 2016, the amounts represent one-third installment payments of cash retention awards granted to
Mr. Thomas and Mr. Fisher in 2016 pursuant to our key employee retention program, and installment
payments totaling three-quarters of a cash retention award granted to Mr. Fisher in 2015 pursuant to our key
employee retention program.
For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Key
Employee Retention Program.”
(5) Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC
Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such
valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2018.
In 2018, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher were granted performance-contingent RSUs
having the following grant date fair values: Mr. Knitzer, $733,314; Mr. Schachtel, $274,986; Mr. Thomas,
$177,495; Mr. Taggart, $109,977; and Mr. Fisher, $99,977 (and a maximum potential value of $1,099,970;
$412,478; $266,228; $164,952; and $149,951, respectively). The actual number of RSUs, if any, that may be
earned may range from 0% to 150% of the target number of units, based primarily (90%) on our CAGR of net
income compared to our peer group over the performance period, January 1, 2018 through December 31,
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 40
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2020, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s
achievement of its long-term strategic objectives over the same time period.
In 2017, Messrs. Knitzer, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the
following grant date fair values: Mr. Knitzer, $949,985; Mr. Thomas, $170,994; Mr. Taggart, $105,987; and
Mr. Fisher, $80,000 (and a maximum potential value of $1,424,967; $256,492; $158,980; and $120,000,
respectively). The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the
target number of units, based primarily (90%) on our CAGR of net income compared to our peer group over
the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our
Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same time period.
In 2016, pursuant to our key employee retention program, Mr. Thomas and Mr. Fisher each were granted a
service-based RSA with grant date fair values of $99,986 and $74,998, respectively. The RSAs vested on
September 29, 2017. In addition, in 2016, Messrs. Thomas, Taggart, and Fisher were granted performance-
contingent RSUs having the following grant date fair values: Mr. Thomas, $165,983; Mr. Taggart, $102,651;
and Mr. Fisher, $95,819 (and a maximum potential value of $248,975; $153,976; and $143,728, respectively).
The actual number of RSUs, if any, that may have been earned ranged from 0% to 150% of the target number
of units, based primarily (90%) on our CAGR of net income compared to our peer group over the
performance period, January 1, 2016 through December 31, 2018, and to a lesser extent (10%) on our
Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same time period. In March 2019, based upon results achieved during the performance
period, our Compensation Committee determined that Messrs. Thomas, Taggart, and Fisher earned 116.5% of
their 2016 target RSUs.
The performance-contingent RSUs and the service-based RSAs are subject to further terms and conditions,
including as to vesting, as set forth in an award agreement. For additional information, see “Compensation
Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards” and “Compensation
Discussion and Analysis – Elements of Compensation – Key Employee Retention Program.”
(6) Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC
Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such
valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2018.
For 2018, the option awards granted to Messrs. Knitzer, Thomas, Taggart, and Fisher vest in three equal
installments on each of December 31, 2018, 2019, and 2020.
For 2017, the option awards granted to Messrs. Thomas, Taggart, and Fisher vest in three equal installments on
each of December 31, 2017, 2018, and 2019. The option award granted to Mr. Schachtel vests on December 31,
2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%).
For 2016, the option awards granted to Messrs. Thomas, Taggart, and Fisher vest in three equal installments on
each of December 31, 2016, 2017, and 2018. The option award granted to Mr. Knitzer vests on December 31,
2016 (20%), December 31, 2017 (40%), and December 31, 2018 (40%).
The option awards are subject to further terms and conditions, including as to vesting, as set forth in an award
agreement. For additional information, see “Compensation Discussion and Analysis – Elements of
Compensation – Long-Term Incentive Awards.”
(7)
For 2018, the amounts for Messrs. Knitzer and Schachtel represent performance-based annual cash awards
earned in 2018. For Messrs. Thomas, Taggart, and Fisher, the amounts represent performance-based annual
cash awards earned in 2018, and cash-settled performance units that were granted in 2016 and earned over a
performance period of January 1, 2016 through December 31, 2018. In the case of the performance-based
annual cash awards, Messrs. Thomas, Taggart, and Fisher earned the following amounts: Mr. Thomas,
$353,935; Mr. Taggart, $329,010; and Mr. Fisher, $299,100. In the case of the cash-settled performance units,
Messrs. Thomas, Taggart, and Fisher earned the following amounts: Mr. Thomas, $193,440; Mr. Taggart,
$119,638; and Mr. Fisher, $111,674. We paid all such earned amounts in 2019.
For 2016 and 2017, the amounts represent performance-based annual cash awards earned in each such year
and paid in the following year.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 41
For additional information, see “Compensation Discussion and Analysis – Elements of Compensation –
Performance-Based Annual Cash Awards” and “Compensation Discussion and Analysis – Elements of
Compensation – Long-Term Incentive Awards.”
(8)
The following table provides detail regarding the amounts in the “All Other Compensation” column. For
additional information, see “Compensation Discussion and Analysis – Elements of Compensation –
Perquisites.”
Name
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
401(k)
Plan
Match
($)
11,000
8,969
—
11,000
—
—
11,000
10,800
10,600
11,000
6,605
—
11,000
10,800
10,600
Year
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
Travel
Expense to/
from
Personal
Residence
($)
Optional
Annual
Health
Screening
($)
39,551
32,683
18,566
33,088
18,327
—
—
—
—
—
—
—
—
—
—
3,546
—
—
3,966
—
—
—
—
2,850
4,563
—
—
—
—
1,790
Automobile
Allowance
($)
Mobile
Phone
Allowance
($)
Legal
Expenses
($)
Spousal
Travel
($)
Relocation
Benefits
($)
—
—
—
—
—
—
13,800
13,800
13,800
—
—
—
—
—
—
900
900
375
900
525
—
900
300
—
900
900
900
—
—
—
—
—
10,000
—
2,387
—
—
—
—
—
1,305
—
—
—
—
—
—
—
3,271
—
—
—
—
—
—
—
—
—
—
—
—
—
1,173
—
—
—
—
—
—
—
—
—
—
—
—
Long-Term
Disability
Insurance &
Associated
Taxes
($)
28,704
—
—
20,434
—
—
19,546
—
—
9,530
—
—
5,963
—
—
Total
($)
83,701
42,552
30,114
72,659
21,239
—
45,246
24,900
27,250
25,993
8,810
900
16,963
10,800
12,390
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 42
Grants of Plan-Based Awards
The following table provides information concerning annual and long-term incentive awards granted in 2018
to each of our named executive officers pursuant to our Annual Incentive Plan and our 2015 Plan.
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Estimated Future Payouts Under
Equity Incentive Plan Awards
Award
Type(1)
Grant
Date
Threshold
($)(2)
Target
($)
Maximum
($)
Threshold
(#)(2)
Target
(#)
Maximum
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant Date
Fair Value
of Stock
and Option
Awards
($)(3)
Name
Peter R. Knitzer
Annual 02/07/18
NQSO 02/07/18
RSU 02/07/18
CSPU 02/07/18
John D. Schachtel Annual 02/07/18
RSU 02/07/18
CSPU 02/07/18
Donald E. Thomas Annual 02/07/18
NQSO 02/07/18
RSU 02/07/18
CSPU 02/07/18
Daniel J. Taggart
Brian J. Fisher
Annual 02/07/18
NQSO 02/07/18
RSU 02/07/18
CSPU 02/07/18
Annual 02/07/18
NQSO 02/07/18
RSU 02/07/18
CSPU 02/07/18
—
550,000
825,000
330,000
733,333
1,100,000
—
360,000
540,000
123,750
275,000
412,500
—
355,000
532,500
79,875
177,500
266,250
—
330,000
495,000
49,500
110,000
165,000
—
300,000
450,000
45,000
100,000
150,000
11,681
25,958
38,937
59,187
28.25
4,380
9,734
14,601
2,827
6,283
9,424
14,326
28.25
1,751
3,893
5,839
8,878
28.25
1,592
3,539
5,308
8,071
28.25
733,327
733,314
274,986
177,499
177,495
109,998
109,977
100,000
99,977
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(1)
“Annual” refers to performance-based annual cash incentive award opportunities granted under our Annual
Incentive Plan. “NQSO” refers to non-qualified stock options, “RSU” refers to performance-contingent
restricted stock units, and “CSPU” refers to cash-settled performance units (with each unit’s target value
denominated as $1.00), each granted under our 2015 Plan. For additional information, see “Compensation
Discussion and Analysis – Elements of Compensation – Performance-Based Annual Cash Awards” and
“Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.”
(2)
The threshold number of units indicated will be earned only if a threshold level of performance is achieved.
(3) Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC
Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such
valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2018. For performance-contingent RSUs, the
grant date fair value is calculated using the target number of shares.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 43
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning equity awards that were outstanding as of December 31,
2018, for each of our named executive officers.
Option Awards
Stock Awards
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
that Have
Not Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
that Have
Not Vested
($)(1)
47,523(6)
25,958(7)
1,142,928
624,290
Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)
—
—
—
—
—
—
9,734(7)
11,323(5)
8,554(6)
6,283(7)
234,103
272,318
205,724
151,106
—
—
—
—
7,003(5)
5,302(6)
3,893(7)
6,537(5)
4,002(6)
3,539(7)
168,422
127,513
93,627
157,215
96,248
85,113
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
5,111
8,422
113,636
19,729
20,641
100,000
26,500
19,867
32,500
23,042
21,444
12,708
4,775
13,194
13,262
7,878
2,959
9,644
11,500
13,143
12,379
5,944
2,690
—
—
—
39,458(2)
13,762(3)
—
—
—
—
—
—
6,355(4)
9,551(2)
—
—
3,939(4)
5,919(2)
—
—
—
—
2,974(4)
5,381(2)
19.42
15.89
18.90
28.25
20.00
16.73
33.93
17.76
15.06
14.75
17.08
19.99
28.25
15.24
17.08
19.99
28.25
17.76
15.06
14.75
17.08
19.99
28.25
07/28/25
05/04/26
08/01/26
02/07/28
05/30/27
01/02/23
12/31/23
10/01/24
03/11/25
04/22/25
03/29/26
03/15/27
02/07/28
01/05/25
03/29/26
03/15/27
02/07/28
10/01/24
03/11/25
04/22/25
03/29/26
03/15/27
02/07/28
Name
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
(1) Amounts are calculated based on the closing price ($24.05) of our common stock on December 31, 2018, the
last trading day of 2018.
(2)
(3)
(4)
(5)
This option vests in three equal annual installments on each of December 31, 2018, 2019, and 2020.
This option vests on December 31, 2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%).
This option vests in three equal annual installments on each of December 31, 2017, 2018, and 2019.
This amount represents the earned portion of a performance-contingent RSU that became eligible to vest on
December 31, 2018, subject to our Compensation Committee’s certification as to the achievement of certain
performance goals. The actual number of RSUs, if any, that may have been earned ranged from 0% to 150%
of the target number of units, based primarily (90%) on our CAGR of net income compared to our peer group
over the performance period, January 1, 2016 through December 31, 2018, and to a lesser extent (10%) on our
Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same time period. The number of target RSUs granted to Messrs. Thomas, Taggart, and
Fisher were as follows: Mr. Thomas, 9,718 units; Mr. Taggart, 6,010 units; and Mr. Fisher, 5,610 units.
Vesting was also contingent upon the continued employment of the executive through December 31, 2018. In
March 2019, based upon results achieved during the performance period, our Compensation Committee
determined that Messrs. Thomas, Taggart, and Fisher earned 116.5% of their target RSUs. For additional
information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term
Incentive Awards.”
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 44
(6)
(7)
This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual
number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set
forth in the table above, based primarily (90%) on our CAGR of net income compared to our peer group over
the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our
Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same time period. Vesting is also contingent upon the continued employment of the
executive through December 31, 2019, or as otherwise provided in the applicable award agreement. For
additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-
Term Incentive Awards.”
This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual
number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set
forth in the table above, based primarily (90%) on our CAGR of net income compared to our peer group over
the performance period, January 1, 2018 through December 31, 2020, and to a lesser extent (10%) on our
Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic
objectives over the same time period. Vesting is also contingent upon the continued employment of the
executive through December 31, 2020, or as otherwise provided in the applicable award agreement. For
additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-
Term Incentive Awards.”
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Option Exercises and Stock Vested
The following table summarizes the exercise of options and the vesting of stock awards by each of our named
executive officers during the fiscal year ended December 31, 2018.
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
Value Realized
on Exercise
($)
Number of
Shares
Acquired on
Vesting(1)
(#)
Value Realized
on Vesting(2)
($)
—
—
—
—
—
—
—
—
—
—
—
—
11,323
7,003
6,537
—
—
272,318
168,422
157,215
Name
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
(1)
The amounts represent the number of shares delivered following the vesting of performance-contingent RSUs
on December 31, 2018, based upon results achieved during a performance period that began on January 1,
2016 and ended on December 31, 2018, as determined by our Compensation Committee in March 2019. For
additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-
Term Incentive Awards.”
(2) Amounts are calculated based on the closing price ($24.05) of our common stock on December 31, 2018, the
last trading day of 2018.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 46
Equity Compensation Plan Information
The following table provides information concerning the common stock that may be issued upon the exercise
of options, warrants, and rights under all of our existing equity compensation plans as of December 31, 2018. At
that date, there were a total of 11,776,692 shares of our common stock outstanding.
Plan Category
Equity Compensation Plans Approved by Security Holders
2011 Stock Incentive Plan(1)
2015 Long-Term Incentive Plan(2)
Equity Compensation Plans Not Approved by Security
Holders
Total:
(a)
Number of Securities to
Be Issued Upon
Exercise of Outstanding
Options,
Warrants, and Rights
(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
($)
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
299,962(3)
1,031,564(4)
—
1,331,526
17.85
19.07(5)
—
18.69
—
1,099,349
—
1,099,349
(1) Regional Management Corp. 2011 Stock Incentive Plan. In 2015, our stockholders approved the 2015 Plan, at
which time all shares then available for issuance under the 2011 Plan rolled over to the 2015 Plan. Awards
may no longer be granted under the 2011 Plan. However, awards that are outstanding under the 2011 Plan will
continue in accordance with their respective terms.
(2) Regional Management Corp. 2015 Long-Term Incentive Plan. As of March 22, 2019, there were 926,643
shares that remained available for issuance under the 2015 Plan, which allows for grants of incentive stock
options, non-qualified stock options, stock appreciation rights (“SARs”), unrestricted shares, restricted shares,
RSUs, phantom stock awards, and awards that are valued in whole or in part by reference to, or otherwise
based on, the fair market value of shares, including performance-based awards.
(3)
(4)
This amount represents shares of common stock underlying non-qualified stock option awards.
This amount represents 680,545 shares of common stock underlying non-qualified stock option awards,
272,779 shares of common stock underlying performance-contingent RSU awards, and 78,240 restricted
shares of common stock underlying and issuable pursuant to key team member incentive program award
agreements. Share amounts are determined based upon the maximum number of shares that may be delivered
pursuant to the performance-based awards. Under the key team member incentive program, each participant is
eligible to earn an RSA, subject to the achievement of performance goals over a one-year period. If earned,
the RSA is issued following the one-year performance period and vests ratably over a subsequent two-year
period (subject to continued employment or as otherwise provided in the underlying award agreement). No
executive officer participates in our key team member incentive program. There is no exercise price
associated with the RSU awards or restricted shares.
(5) Calculation excludes shares subject to RSU awards and shares underlying and issuable pursuant to key team
member incentive program award agreements.
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CEO Pay Ratio
The following table provides our calculation under applicable SEC regulations of the ratio of the annual total
compensation of our Chief Executive Officer to the median of the annual total compensation of our other
employees.
Compensation Component
Salary
Stock Awards
Option Awards
Non-Equity Incentive Plan Compensation
All Other Compensation
CEO
($)
550,000
733,314
733,327
548,350
83,701
Total Compensation:
2,648,692
Median Employee
($)
32,229
—
—
4,665
5,887
42,781
CEO to Median Employee Pay Ratio:
62 : 1
We took the following steps in identifying the median of the annual total compensation of all of our
employees:
(1) We determined that, as of December 31, 2018, our employee population was equal to 1,535 individuals, all
located in the United States. This number includes all the individuals determined to be employees for federal
tax purposes, whether full-time, part-time, or temporary, as of that date. We chose December 31, 2018, which
is within the last three months of our fiscal year as required by applicable SEC regulations, because it aligned
with our calendar year payroll procedures.
(2) We next identified the employee receiving the median amount of compensation in our employee population.
To do this, we compared the amount of wages and other compensation received by each employee, other than
Mr. Knitzer, as reflected in our payroll records and reported to the Internal Revenue Service in Box 5 of Form
W-2 for the calendar year ended December 31, 2018. This compensation measure was annualized for
permanent employees who were employed on the measurement date but who did not work for the full
calendar year. The compensation measure was consistently applied to all of our employees.
(3) Once we identified our median employee, we measured that employee’s annual total compensation for the
2018 fiscal year by adding together (a) the same elements of compensation that are included in Mr. Knitzer’s
total fiscal 2018 compensation, as reported in our Summary Compensation Table above, and
(b) non-discriminatory health and welfare benefits paid by Regional, which we have included as “All Other
Compensation” in the table above.
(4)
For Mr. Knitzer, we used the amount reported in the “Total” column of our Summary Compensation Table
above. Mr. Knitzer was eligible for but did not elect to participate in non-discretionary health and welfare
benefits offered by Regional.
The resulting pay ratio was calculated in a manner consistent with SEC regulations, and we believe that it
constitutes a reasonable estimate. However, as contemplated by SEC regulations, we relied on methods and
assumptions that we determined to be appropriate for calculating the Chief Executive Officer pay ratio at Regional.
Other public companies will use methods and assumptions that differ from the ones we chose but are appropriate for
their circumstances. It may therefore be difficult, for this and other reasons, to compare our reported pay ratio to pay
ratios reported by other companies, including companies in our industry.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 48
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SUMMARY OF EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
In 2018, the following individuals served as our executive officers:
(cid:129) Peter R. Knitzer, our President and Chief Executive Officer;
(cid:129) John D. Schachtel, our Executive Vice President and Chief Operating Officer;
(cid:129) Donald E. Thomas, our Executive Vice President and Chief Financial Officer;
(cid:129) Daniel J. Taggart, our Executive Vice President and Chief Credit Risk Officer; and
(cid:129) Brian J. Fisher, our Senior Vice President, General Counsel, and Secretary.
Each of these individuals served as executive officers at the beginning of 2018. Mr. Taggart assumed the title
of Executive Vice President and Chief Credit Risk Officer on October 24, 2018.
We entered into employment agreements with Messrs. Knitzer and Schachtel shortly before each commenced
employment with us in August 2016 and May 2017, respectively. Similarly, we entered into employment letter
agreements with Messrs. Thomas, Taggart, and Fisher shortly before each commenced employment with us in
January 2013, January 2015, and January 2013, respectively. In August 2017, we entered into employment
agreements with Messrs. Thomas, Taggart, and Fisher that superseded each executive’s prior employment letter
agreement. In addition, we amended the employment agreements of Messrs. Knitzer and Schachtel in August 2017.
In February 2019, we entered into a retirement agreement with Mr. Thomas that amended his employment
agreement.
We describe below the material terms of our executives’ current employment agreements that were in effect
for the entirety of 2018, as well as Mr. Thomas’ retirement letter agreement. Additional information regarding the
compensation that our executive officers are eligible for, earned, and were paid is set forth elsewhere in this Proxy
Statement, including in the Compensation Discussion and Analysis and the Executive Compensation Tables set
forth above.
Employment Agreements with Executive Officers
The employment agreements of Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher provide for a three-
year term. The three-year term ends on August 1, 2019 and May 30, 2020 in the case of Messrs. Knitzer and
Schachtel, respectively, and on August 30, 2020 in the case of Messrs. Thomas, Taggart, and Fisher. The
employment agreements generally provide for compensation to our executives in the form of annual base salaries,
annual cash incentive opportunities, long-term incentive opportunities, and various other limited perquisites and
personal benefits. Our executives have also agreed to certain restrictive covenants set forth in the employment
agreements, including a covenant not to compete.
Pursuant to their employment agreements, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher are
entitled to an annual base salary of no less than $530,000; $350,000; $342,000; $318,000; and $240,000,
respectively, pro-rated for any partial year. For each calendar year during the employment term, each executive is
also eligible to earn an annual bonus award under our Annual Incentive Plan based upon the achievement of
performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of
the executive’s base salary (pro-rated for any partial year). The employment agreements of Messrs. Knitzer and
Schachtel provide that each such executive is entitled to receive a non-qualified stock option award, a performance-
contingent RSU award, and a cash-settled performance unit award within his first year of employment, with the
vesting of each such award subject to continued employment through the vesting date and, in the case of the
performance-contingent RSU award and the cash-settled performance unit award, the achievement of performance
objectives established by our Compensation Committee. Each executive is otherwise eligible to participate in our
long-term incentive program at the sole discretion of our Compensation Committee and our Board.
Commencing in 2018 (or 2019, in the case of Mr. Schachtel), Messrs. Knitzer, Schachtel, Thomas, Taggart,
and Fisher will be eligible to receive an annual base salary, annual cash incentive opportunity, and long-term
incentive opportunity totaling in the aggregate at least $3,000,000; $1,225,000; $1,197,000; $954,000; and
$720,000, respectively. Each executive’s annual total compensation opportunity is subject to our Compensation
Committee’s discretion to adjust base salary, determine allocations between cash and equity compensation
opportunities, establish performance and/or multi-year service criteria, and determine if and to the extent any
incentive compensation is earned and payable based on the attainment of performance criteria and other terms and
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 49
conditions established by our Compensation Committee, and further subject to the terms and conditions of the
applicable incentive plan and related award agreements (including, if applicable under any such plan or award
agreement, multi-year vesting). Long-term incentive awards are subject to the terms of the 2015 Plan and the related
award agreements.
We also provide our executives with benefits generally available to our other employees, including medical
and retirement plans. In addition, we provide our executives with the use of a mobile phone (or the provision of a
stipend for a mobile phone), disability insurance policies, and reasonable travel expenses. In the case of Messrs.
Knitzer and Schachtel, we pay for reasonable expenses associated with their travel to and from their personal
residences to our headquarters in South Carolina. In the case of Mr. Thomas, we provide a car allowance of $1,150
per month.
Our executive employment agreements and long-term incentive award agreements also provide for certain
severance benefits following an executive’s termination by us without cause, by the executive as a result of good
reason, due to the executive’s disability, due to the executive’s death, or following a “double-trigger”
change-in-control event. A “double trigger” change-in-control event requires both (1) a change-in-control and (2) an
executive’s termination by us without cause or by the executive as a result of good reason within certain timeframes.
The terms “cause,” “good reason,” “disability,” and “change-in-control” are defined in the 2011 Plan, the 2015 Plan,
and/or each executive’s employment agreement and/or long-term incentive award agreements, as applicable. The
severance benefits are described in “Summary of Employment Arrangements with Executive Officers – Potential
Payments Upon Termination or Change-in-Control,” below. An executive’s receipt of severance benefits will be
subject to the executive’s execution of a release of claims within the time period specified in the employment
agreement and the continued compliance with the restrictive covenants described below.
Each executive is also subject to various restrictive covenants, and his entitlement to certain benefits is
contingent upon his compliance with such covenants. Specifically, each executive is subject to a covenant not to
disclose our confidential information during his employment and at all times thereafter, a covenant not to compete
during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his
termination of employment, a covenant not to solicit competitive “business services” through or from “loan
sources” (each as defined in the employment agreements) during his employment and for a period of one year (or
two years, in the case of Mr. Knitzer) following his termination of employment, a covenant not to solicit or hire our
employees during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following
his termination of employment, and a non-disparagement covenant effective during the employment term and at all
times thereafter. Each executive’s covenant not to compete is limited to an area within 25 miles of any of our
branches or other offices.
In addition, each executive must abide by any equity retention policy, compensation recovery policy, stock
ownership guidelines, or other similar policies that we maintain.
Retirement Agreement with Chief Financial Officer
On February 12, 2019, Mr. Thomas notified the Company of his intent to retire from the Company following
the completion of an orderly transition of duties and responsibilities from Mr. Thomas to a new Chief Financial
Officer to be identified by the Company. Mr. Thomas’ retirement will be treated as a voluntary termination of
employment pursuant to the terms of Mr. Thomas’ employment agreement (described in detail above). The date of
the completion of the Chief Financial Officer transition will be determined in the discretion of the Compensation
Committee.
The Compensation Committee approved a letter agreement (the “Retirement Agreement”), dated February 12,
2019, setting forth the terms of Mr. Thomas’ retirement. Pursuant to the Retirement Agreement, Mr. Thomas’
employment agreement was amended, among other items, to provide that the compensation terms found in the
Retirement Agreement generally supersede those found in his employment agreement. The Retirement Agreement
provides that Mr. Thomas will continue to serve as the Company’s Executive Vice President and Chief Financial
Officer until his termination date, which will follow an orderly transition of duties and responsibilities from
Mr. Thomas to a new Chief Financial Officer; however, the Company may modify his title, duties, and/or
responsibilities to facilitate the hiring of and transition to a new Chief Financial Officer.
During the transition period, Mr. Thomas will be paid an annualized base salary of $400,000 (pro-rated for
any partial year), which is subject to increase (but not decrease) by the Company. He will also generally continue to
participate in those Company benefit plans and arrangements in which he is currently eligible to participate. Mr.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 50
Thomas is eligible to receive a pro-rated annual cash incentive bonus for 2019 if and to the extent that the applicable
performance goals are met and the 2019 annual cash incentive bonus is deemed earned in accordance with the terms
of the Company’s Annual Incentive Plan and as determined by the Compensation Committee. He also will remain
eligible to receive an annual bonus for 2018 under the Annual Incentive Plan if and to the extent earned, as
determined by the Compensation Committee. Mr. Thomas is also eligible to earn a completion bonus of $200,000
following the completion of an orderly transition of duties and responsibilities to a new Chief Financial Officer. No
completion bonus will be paid if Mr. Thomas voluntarily terminates his employment prior to the completion date, as
determined by the Compensation Committee, or if the Company terminates his employment for cause. If the
Company terminates Mr. Thomas’ employment without cause, the completion bonus will be considered earned as of
his termination date. Mr. Thomas’ outstanding long-term incentive awards granted under the 2011 Plan and the
2015 Plan will continue to be governed by the terms of the applicable stock plan and related award agreement(s).
Mr. Thomas is also eligible to receive certain severance benefits provided under his employment agreement to the
extent his employment is terminated by the Company without cause, by him for good reason, or due to disability
prior to March 31, 2019. Mr. Thomas will not be entitled to severance benefits upon a termination for any other
reason or for any termination occurring after March 31, 2019.
As a condition to receipt of the $200,000 completion bonus and the 2019 annual cash incentive bonus,
Mr. Thomas has agreed to execute a general waiver and release of claims in favor of the Company and its affiliates.
Mr. Thomas also remains subject to the restrictive covenants described in his employment agreement, including
covenants concerning confidentiality, non-disparagement, and, for one year following his termination of
employment, non-competition and non-solicitation of customers and employees.
Potential Payments Upon Termination or Change-in-Control
Under their employment agreements and long-term incentive award agreements, our executive officers are
entitled to certain severance benefits following termination by us without cause, by the executive as a result of good
reason, due to the executive’s disability, due to the executive’s death, and following a “double-trigger”
change-in-control. These benefits ensure that our executives are motivated primarily by the needs of our business,
rather than circumstances that are outside of the ordinary course of business (such as circumstances that might lead
to the termination of an executive’s employment or that might lead to a change-in-control). Severance benefits
provide for a level of continued compensation if an executive’s employment is adversely affected in these
circumstances, subject to certain conditions. We believe that these benefits enable executives to focus fully on their
duties while employed by us, ensure that our executives act in the best interests of our stockholders, even if such
actions are otherwise contrary to our executives’ personal interests, and alleviate concerns that may arise in the
event of an executive’s separation from service with us. We believe that these severance benefits are in line with
current market practices.
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The rights to and level of benefits are determined by the type of termination event. Our executive employment
agreements provide for the following cash and other benefits:
Termination Event
By the Company
Without Cause or
by the Executive
for Good Reason
“Double-Trigger”
Change-in-Control
Disability
Death
Voluntary
Termination
Cause
Severance Benefits
(1) Payment in Lieu of 30 Days’ Notice. At our election, 30 days’ base salary in lieu of
allowing the executive to work through any required 30-day termination notice period.
(2) Base Salary Continuation. In the case of Mr. Knitzer, an amount equal to two times
his salary in effect on the termination date, payable over a period of 24 months
following his termination date, and in the case of each other executive, an amount
equal to his salary in effect on the termination date, payable over a period of 12
months following his termination date.
(3) Average Bonus. In the case of Mr. Knitzer, an amount equal to two times his average
bonus determined as of the termination date, payable over a period of 24 months
following his termination date, and in the case of each other executive, an amount
equal to his average bonus determined as of the termination date, payable over a
period of 12 months following his termination date. An executive’s “average bonus”
is defined in his employment agreement, generally as the average annual bonus paid
for the three fiscal years prior to the year of termination or such lesser number of full
fiscal years that the executive has been employed. If employment is terminated before
the last day of the executive’s first full fiscal year, the average bonus is calculated as
the executive’s target bonus.
(4) Annual Incentive Compensation. The pro-rata portion of any bonus for the year in
which termination occurs, to the extent earned, plus, if termination occurs after
year-end but before the bonus for the preceding year is paid, the bonus for the
preceding year.
(5) Health Benefits Continuation Coverage. Reimbursement of COBRA premiums for
continuation coverage under our group medical plan for 24 months (in the case of
Mr. Knitzer) or 12 months (in the case of each other executive) following his
termination date, so long as he is not entitled to obtain insurance from a subsequent
employer.
(6) Outplacement Services. Reasonable outplacement service expenses for 24 months (in
the case of Mr. Knitzer) or 12 months (in the case of each other executive) following
the termination date, not exceeding $25,000 per year.
For each executive other than Mr. Knitzer, if employment is terminated by us without cause
or by the executive as a result of good reason, and such termination occurs within six
months before or one year after the effective date of a change-in-control, then the executive
is entitled to the benefits described immediately above, plus the additional benefit that the
amounts described in items (2) and (3) will be increased by a factor of 100% (for a total of
two times salary and average bonus).
If employment is terminated due to the executive’s disability, he will be entitled to the same
benefits as if employment were terminated by us without cause or by the executive as a result
of good reason, except that he is not entitled to 30 days’ notice of termination (or payment in
lieu thereof). The disability severance benefits will be reduced by the amount of any disability
benefits paid to the executive pursuant to any disability insurance, plan, or policy provided by
us to or for the benefit of the executive. If any disability benefits paid to an executive pursuant
to any disability insurance, plan, or policy provided by us are not subject to local, state, or
federal taxation, then our severance obligations in the event of termination due to the
executive’s disability will be reduced by an amount equal to the gross taxable amount that we
would have been required to pay in order to yield the net, after-tax benefit that the executive
actually received pursuant to such disability insurance, plan, or policy.
Annual Incentive Compensation. The pro-rata portion of any bonus for the year in which
death occurs, to the extent earned, plus, if death occurs after year-end but before the bonus
for the preceding year is paid, the bonus for the preceding year (paid to the executive’s
designated beneficiary or estate, as applicable).
Annual Incentive Compensation. If termination occurs after year-end but before the bonus
for the preceding year is paid, the bonus for the preceding year (the executive is not entitled
to any bonus for the year during which voluntary termination occurs).
None.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 52
In addition to the benefits provided for under our executive employment agreements, our long-term incentive
award agreements provide for the following treatment of awards following termination:
Termination Event
By the Company Without
Cause, by the Executive for
Good Reason, Due to
Disability, or Due to Death
“Double-Trigger”
Change-in-Control
Retirement
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Award Treatment
Non-Qualified Stock Option Awards: Pro-rata accelerated vesting of any
unvested shares.
Restricted Stock Awards: Pro-rata accelerated vesting of any unvested shares.
Performance-Contingent RSUs: Eligibility to vest in a pro-rata portion of the
award, subject to actual performance over the full performance period.
Cash-Settled Performance Units: Eligibility to vest in a pro-rata portion of the
award, subject to actual performance over the full performance period.
Non-Qualified Stock Option Awards: Full accelerated vesting in the event of a
termination of employment by us without cause or by the executive as a result
of good reason within six months before or one year after the effective date of
a change-in-control.
Restricted Stock Awards: Full accelerated vesting in the event of a termination
of employment by us without cause or by the executive as a result of good
reason within six months before or one year after the effective date of a
change-in-control.
Performance-Contingent RSUs: Full accelerated vesting at target in the event
of a termination of employment by us without cause or by the executive as a
result of good reason within six months before or one year after the effective
date of a change-in-control.
Cash-Settled Performance Units: Full accelerated vesting at target in the event
of a termination of employment by us without cause or by the executive as a
result of good reason within six months before or one year after the effective
date of a change-in-control.
Non-Qualified Stock Option Awards: Continued vesting as if the executive
remained employed.
Restricted Stock Awards: Unvested shares are forfeited as of the termination date.
Performance-Contingent RSUs: Eligibility to vest in a pro-rata portion of the
award, subject to actual performance over the full performance period.
Cash-Settled Performance Units: Eligibility to vest in a pro-rata portion of the
award, subject to actual performance over the full performance period.
An executive is eligible for “Retirement” when he (i) is 65 or older at the time of
termination, or (ii) is 55 or older at the time of termination and has completed ten
(10) years of service to Regional.
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The following table provides information concerning the payments and the value of other benefits that our
NEOs would have been eligible to receive if their employment had been terminated under the described
circumstances. Our obligation to provide the payments and other benefits described in the table are found in each
NEO’s employment agreement and in long-term incentive award agreements, in each case as described above.
In calculating the amounts included in the table, we have assumed (i) that the termination event and/or
change-in-control occurred on December 31, 2018, (ii) a share price of $24.05 (our closing share price on
December 31, 2018), and (iii) the following:
(cid:129)
(cid:129)
“Payment in Lieu of 30 Days’ Notice”: We have assumed that we will elect to pay 30 days’ base salary in
lieu of allowing the NEO to work through any required 30-day termination notice period.
“Severance Payment”: The amount represents a combination of the “Base Salary Continuation” and
“Average Bonus” payments described above.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 53
(cid:129)
(cid:129)
(cid:129)
“Annual Incentive Compensation”: The amount is based upon the level of performance and percentage payout
actually achieved, as determined by the Compensation Committee in February 2019.
“Long-Term Incentive Award Vesting”: The value associated with accelerated non-qualified stock option awards
has been calculated by multiplying the number of accelerated shares by the amount by which our stock price as of
December 31, 2018 exceeded (if at all) the exercise price of the option. For any performance-contingent long-term
incentive award where vesting remains subject to actual performance over a performance period, (1) we have
calculated the value (if any) of awards associated with performance periods ending in 2018 based on actual
performance, and (2) we have ascribed no value to awards associated with performance periods ending after 2018
because there is no guarantee that we will meet the threshold performance criteria required for these awards to vest
and be paid.
“Other Benefits”: The amount includes reimbursement of COBRA premiums for continuation coverage and the
value of outplacement services. We have assumed (1) that the NEO will not become entitled to obtain insurance
from a subsequent employer, and (2) that the NEO will receive the maximum value of outplacement services.
Termination Event
Name
Peter R. Knitzer
John D. Schachtel
Donald E. Thomas
Daniel J. Taggart
Brian J. Fisher
Type of Payment or Benefit
Payment in Lieu of 30 Days’ Notice
Severance Payment
Annual Incentive Compensation
Long-Term Incentive Award Vesting(2)
Other Benefits
Total
Payment in Lieu of 30 Days’ Notice
Severance Payment
Annual Incentive Compensation
Long-Term Incentive Award Vesting(2)
Other Benefits
Total
Payment in Lieu of 30 Days’ Notice
Severance Payment
Annual Incentive Compensation
Long-Term Incentive Award Vesting(2)
Other Benefits
Total
Payment in Lieu of 30 Days’ Notice
Severance Payment
Annual Incentive Compensation
Long-Term Incentive Award Vesting(2)
Other Benefits
Total
Payment in Lieu of 30 Days’ Notice
Severance Payment
Annual Incentive Compensation
Long-Term Incentive Award Vesting(2)
Other Benefits
Total
Termination by
the Company
Without Cause or
by the Executive
for Good Reason
in Connection
with a Change in
Control
($)
Termination by
the Company
Without Cause or
by the Executive
for Good Reason
($)
Termination
Due to
Disability
($)
Termination
Due to Death
($)
Voluntary
Termination by
the Executive(1)
($)
45,205
2,170,930
548,350
—
50,000
2,814,485
29,589
718,920
358,920
34,231
40,679
1,182,339
29,178
668,805
353,935
482,343
37,469
1,571,730
27,123
621,578
329,010
298,340
43,453
1,319,504
24,658
513,255
299,100
276,648
33,634
1,147,295
45,205
2,170,930
548,350
3,450,551
50,000
6,265,036
29,589
1,437,840
358,920
564,839
40,679
2,431,867
29,178
1,337,610
353,935
1,130,849
37,469
2,889,041
27,123
1,243,156
329,010
700,340
43,453
2,343,082
24,658
1,026,510
299,100
604,189
33,634
1,988,091
—
2,170,930
548,350
—
50,000
2,769,280
—
718,920
358,920
34,231
40,679
1,152,750
—
668,805
353,935
482,343
37,469
1,542,552
—
621,578
329,010
298,340
43,453
1,292,381
—
513,255
299,100
276,648
33,634
1,122,637
—
—
548,350
—
—
548,350
—
—
358,920
34,231
—
393,151
—
—
353,935
482,343
—
836,278
—
—
329,010
298,340
—
627,350
—
—
299,100
276,648
—
575,748
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) A voluntary termination that is treated as a “retirement” may result in pro-rata or continued vesting of certain long-
term incentive awards. None of our NEOs were eligible for “retirement” as of December 31, 2018.
(2)
See “Executive Compensation Tables – Outstanding Equity Awards at Fiscal Year-End” for a summary of equity-
based long-term incentive awards outstanding as of December 31, 2018. As of December 31, 2018, in addition to
equity-based long-term incentive awards, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher held one or more
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 54
cash-settled performance unit awards having an aggregate target value of $1,683,333; $275,000; $514,500;
$318,667; and $275,833, respectively.
The amounts shown in the table do not include payments and benefits to the extent they are provided
generally to all salaried employees upon termination of employment and do not discriminate in scope, terms, or
operation in favor of our NEOs. Because the amounts in the table are calculated subject to the assumptions provided
and on the basis of the occurrence of a termination as of a particular date and under a particular set of
circumstances, the actual amount to be paid to each of our NEOs upon a termination or change in control may vary
significantly from the amounts included in the table. Factors that could affect these amounts include the timing
during the year of the termination event and the type of termination event that occurs.
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Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 55
The discussion that follows describes certain material terms of our principal long-term incentive plans and our
SUMMARY OF COMPANY INCENTIVE PLANS
principal cash incentive plan.
Long-Term Incentive Plans
2015 Long-Term Incentive Plan
The 2015 Plan became effective April 22, 2015, and was amended and restated effective April 27, 2017. The
purposes of the 2015 Plan are (i) to encourage and enable selected employees, directors, and consultants to acquire
or increase their holdings of our common stock and other equity-based interests and/or to provide other incentive
awards in order to promote a closer identification of their interests with our interests and those of our stockholders,
and (ii) to provide us with flexibility to motivate, attract, and retain the services of participants upon whose
judgment, interest, and special effort the successful conduct of our operation largely depends. Awards granted under
the 2015 Plan may be in the form of incentive or non-qualified stock options, SARs (including related or
freestanding SARs), RSAs, RSU awards, performance share awards, performance unit awards, phantom stock
awards, other stock-based awards, and/or dividend equivalent awards. Awards may be granted under the 2015 Plan
until April 21, 2025 or the plan’s earlier termination by the Board.
The 2015 Plan is administered by the Compensation Committee, subject to Board oversight. The maximum
aggregate number of shares of common stock that we may issue pursuant to awards granted under the 2015 Plan
may not exceed the sum of (i) 1,550,000 shares, plus (ii) any shares (A) remaining available for grant as of the
effective date of the 2015 Plan under any prior plan and/or (B) subject to an award granted under a prior plan, which
award is forfeited, canceled, terminated, expires, or lapses for any reason without the issuance of shares or pursuant
to which such shares are forfeited. In addition, shares subject to certain awards will again be available for issuance
(or otherwise not counted against the maximum number of available shares) under the 2015 Plan, including
unissued or forfeited shares subject to awards that are canceled, terminate, expire, are forfeited, or lapse for any
reason; awards settled in cash; dividends (including dividends paid in shares) or dividend equivalents paid in cash in
connection with outstanding awards; and shares subject to an award other than an option or SAR that are not issued
for any reason (including failure to achieve maximum performance criteria). Further, the following will not reduce
the maximum number of shares available under the 2015 Plan: (i) shares issued under the 2015 Plan through the
settlement, assumption, or substitution of outstanding awards granted by another entity or obligations to grant future
awards in connection with a merger or similar transaction that involves our acquisition of another entity, and
(ii) available shares under a shareholder approved plan of an acquired company (as adjusted to reflect the
transaction) that are used for awards under the 2015 Plan, in each case, subject to NYSE listing requirements.
The maximum aggregate number of shares of common stock that may be issued under the 2015 Plan pursuant
to the grant of incentive options may not exceed 1,550,000 shares. Further, under the 2015 Plan, in any 12-month
period, (i) no participant may be granted options and SARs that are not related to an option for more than 450,000
shares of common stock (or the equivalent value thereof based on the fair market value per share of the common
stock on the date of grant of an award); (ii) no participant may be granted awards other than options or SARs that
are settled in shares of common stock for more than 450,000 shares of common stock; and (iii) the maximum
amount of awards that are settled in cash that can be granted to any one participant is $2,500,000. Notwithstanding
the foregoing, the maximum number of shares of common stock subject to awards granted during any 12-month
period to a non-employee director, taken together with any cash fees paid during such 12-month period to such
non-employee director in respect of Board service, may not exceed $600,000 in total value (calculating the value of
any such awards based on the fair market value per share of common stock on the grant date of such award).
The number of shares reserved for issuance under the 2015 Plan, the participant award limitations, and the
terms of awards may be adjusted in the event of an adjustment in our capital structure (due to a merger,
recapitalization, stock split, stock dividend, or similar event).
2011 Stock Incentive Plan
The 2011 Plan provides for the issuance of a maximum of 950,000 shares of common stock pursuant to
awards granted under the plan. Awards may include incentive or non-qualified stock options, SARs (including
related or freestanding SARs), other stock-based awards (including shares of common stock, restricted shares,
RSUs, and awards that are valued in whole or in part by reference to, or are otherwise based on, the fair market
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 56
value of our common stock), and/or performance-based awards to our and our subsidiaries’ key employees,
directors, or other service providers. The number of shares reserved for issuance under the plan and the terms of
awards may be adjusted upon certain events affecting our capitalization. The 2011 Plan is administered by the
Compensation Committee and was replaced by the 2015 Plan. Awards may no longer be granted under the 2011
Plan, and any shares that remained available for grant have been rolled over to the 2015 Plan. However, awards that
remain outstanding under the 2011 Plan will continue in accordance with their respective terms.
Annual Incentive Plan
The Annual Incentive Plan is administered by the Compensation Committee and provides for the payment of
incentive bonuses based on the attainment of performance objectives in the form of cash or, at the discretion of the
Compensation Committee, in awards of shares under the 2015 Plan. The purpose of the Annual Incentive Plan is to
enable us to attract, retain, motivate, and reward selected officers and other employees by providing them with the
opportunity to earn annual incentive compensation awards based on the attainment of certain performance
objectives. The Compensation Committee will establish the performance periods over which performance objectives
will be measured. A performance period may be for a fiscal year or a shorter period, as determined by the
Compensation Committee, and performance periods may overlap. For a given performance period, the
Compensation Committee will establish (i) the performance objective or objectives that must be achieved for a
participant to be eligible to receive a bonus for such performance period, and (ii) the target incentive bonus for each
participant. The Compensation Committee may adjust awards as appropriate for partial achievement of goals or
other factors, and may interpret and make necessary and appropriate adjustments to performance goals and the
manner in which goals are evaluated. The Compensation Committee has absolute discretion to reduce or eliminate
the amount of an award granted to a participant, including an award otherwise earned and payable under the Annual
Incentive Plan, and to establish rules or procedures that have the effect of limiting the amount payable to each
participant to an amount that is less than the maximum amount otherwise authorized as that participant’s target
incentive bonus. No participant may receive a bonus under the Annual Incentive Plan, with respect to any fiscal
year, in excess of $2,500,000.
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Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 57
We are seeking stockholder action on the following three proposals, which are described in greater detail
below:
STOCKHOLDER PROPOSALS
1. The election of the eight nominees named in this Proxy Statement to serve as members of the Board
until the next annual meeting of stockholders or until their successors are elected and qualified;
2. The ratification of the appointment of RSM US LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2019; and
3. The approval, on an advisory basis, of our executive compensation.
Proposal No. 1: Election of Directors
Our Bylaws currently provide that the number of directors of the Company shall be fixed from time to time by
resolution adopted by the Board. There are presently eight directors.
The Nominating Committee evaluates the size and composition of the Board on at least an annual basis. In
connection therewith, the Nominating Committee has nominated and recommends for election as directors the
following eight nominees: Jonathan D. Brown, Roel C. Campos, Maria Contreras-Sweet, Michael R. Dunn, Steven
J. Freiberg, Peter R. Knitzer, Alvaro G. de Molina, and Carlos Palomares. Each nominee presently serves as a
director. Directors shall be elected to serve until the next annual meeting of stockholders or until their successors are
elected and qualified or until their earlier resignation, removal, or death.
A candidate for election as a director is nominated to stand for election based on his or her professional
experience, recognized achievements in his or her respective fields, an ability to contribute to some aspect of our
business, and the willingness to make the commitment of time and effort required of a director. A description of the
background, business experience, skills, qualifications, attributes, and certain other information with respect to each
of the nominees for election to the Board can be found above in the “Board of Directors and Corporate Governance
Matters” section of this Proxy Statement. Each of the above-listed nominees has been identified as possessing an
appropriate diversity of background and experience, good judgment, deep knowledge of our industry, strength of
character, and an independent mind, as well as a reputation for integrity and high personal and professional ethics.
Each nominee also brings a strong and unique background and set of skills to the Board, giving the Board, as a
whole, competence and experience in a wide variety of areas.
In selecting this slate of nominees for 2019, the Nominating Committee specifically considered the
background and business experience of each of the nominees, along with the familiarity of the nominees with our
business and prospects, which has been developed as a result of their service on our Board. The Nominating
Committee believes that such familiarity will be helpful in addressing the opportunities and challenges that we face
in the current business environment.
Each of the eight nominees has consented to being named in this Proxy Statement and to serve as a director, if
elected. In the event that any nominee withdraws, or for any reason is unable to serve as a director, the proxies will
be voted for such other person as may be designated by the Nominating Committee as a substitute nominee, but in
no event will proxies be voted for more than eight nominees. The Nominating Committee has no reason to believe
that any nominee will not continue to be a candidate or will not serve if elected.
The Board unanimously recommends a vote “FOR” the election of each of the nominees listed above.
Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm
RSM US LLP has served as our independent registered public accounting firm since 2007. The Audit
Committee has selected RSM US LLP as our independent registered public accounting firm for the fiscal year
ending December 31, 2019, and the Audit Committee and the Board recommend that the stockholders ratify the
appointment of RSM US LLP as our independent registered public accounting firm for fiscal 2019.
A representative of RSM US LLP plans to be present at the Annual Meeting, will have the opportunity to
make a statement, and will be available to respond to appropriate questions. Although ratification is not required,
the Board is submitting the appointment of RSM US LLP to the stockholders for ratification as a matter of good
corporate governance. In the event that the stockholders fail to ratify the appointment, the Audit Committee will
consider whether to appoint another independent registered public accounting firm.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 58
The following table sets forth the aggregate fees billed to us by our independent registered public accounting
firm, RSM US LLP, during the fiscal years ended December 31, 2018 and 2017.
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
Year Ended
December 31, 2018
Year Ended
December 31, 2017
$
$
856,843
$
8,400
170,114
—
1,035,357
$
702,990
—
202,101
—
905,091
In the above table, in accordance with applicable SEC rules:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
“Audit Fees” are fees billed for professional services rendered by the independent registered public
accounting firm for the audit of our annual consolidated financial statements, review of consolidated
financial statements included in our Forms 10-Q, and services that are normally provided by the
independent registered public accounting firm in connection with statutory and regulatory filings or
engagements.
“Audit-Related Fees” are fees billed for assurance and related services performed by the independent
registered public accounting firm that are reasonably related to the performance of the audit or review of
our financial statements that are not reported above under “Audit Fees.” In 2018, these fees were for
services performed by the independent registered public accounting firm for accounting consultation
services. There were no such fees incurred in 2017.
“Tax Fees” are fees billed for professional services rendered by the independent registered public
accounting firm for tax compliance, tax advice, and tax planning. In 2018, these fees were for services
performed for the filing of our 2017 tax returns and estimated payments for 2018. In 2017, these fees were
for services performed for the filing of our 2016 tax returns and estimated payments for 2017.
“All Other Fees” represent fees billed for ancillary professional services that are not reported above under
“Audit Fees,” “Audit Related Fees,” or “Tax Fees.” There were no such fees incurred in 2018 or 2017.
It is the policy of the Audit Committee to pre-approve all audit and permitted non-audit services proposed to
be performed by our independent registered public accounting firm. The Audit Committee reviewed and
pre-approved all of the services performed by RSM US LLP. The process for such pre-approval is typically as
follows: Audit Committee pre-approval is sought at one of the Audit Committee’s regularly scheduled meetings
following the presentation of information at such meeting detailing the particular services proposed to be performed.
The authority to pre-approve non-audit services may be delegated by the Audit Committee to the Chair of the Audit
Committee, who shall present any decision to pre-approve an activity to the full Audit Committee at the first regular
meeting following such decision. None of the services described above were approved by the Audit Committee
pursuant to the exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.
The Audit Committee has reviewed the non-audit services provided by RSM US LLP and has determined that
the provision of such services is compatible with maintaining RSM US LLP’s independence.
The Board unanimously recommends a vote “FOR” the ratification of the appointment of RSM US LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2019.
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Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 59
Proposal No. 3: Advisory Vote to Approve Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our
stockholders have the opportunity to cast an advisory vote to approve the compensation of our named executive
officers as disclosed pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion
and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables in this
Proxy Statement (a “Say-on-Pay Vote”). Taking into consideration the most recent voting results from our 2018
annual stockholders’ meeting concerning the frequency of the Say-on-Pay Vote, we determined that we will hold an
annual advisory vote to approve the compensation of our named executive officers until the next required advisory
vote on the frequency of such votes.
The Compensation Committee oversees the development of a compensation program designed to attract,
retain, and motivate executives who enable us to achieve our strategic and financial goals. The Compensation
Discussion and Analysis, the compensation tables, and the accompanying narrative disclosure illustrate the trends in
compensation and the application of our compensation philosophies and practices for the years presented. We
encourage stockholders to read the Compensation Discussion and Analysis, which describes the details of our
executive compensation program and the decisions made by the Compensation Committee in 2018.
The Compensation Committee believes that our executive compensation program achieves an appropriate
balance between fixed compensation and variable incentive compensation, pays for performance, and promotes an
alignment between the interests of our named executive officers and our stockholders. Accordingly, we are asking
our stockholders to vote at the Annual Meeting “FOR” the non-binding advisory resolution approving the
compensation of our named executive officers, including as described in the Compensation Discussion and
Analysis, compensation tables, and the accompanying narrative discussion.
Because your vote is advisory, it will not be binding upon us, the Compensation Committee, or the Board.
However, the Compensation Committee and the Board value the opinions of our stockholders and will take the
outcome of the vote into account when considering future executive compensation arrangements.
The Board unanimously recommends a vote “FOR” the advisory vote to approve the compensation of our
named executive officers.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 60
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OTHER INFORMATION
Audit Committee Report
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. The Audit
Committee operates under a written charter, a copy of which is available on our Investor Relations website,
www.regionalmanagement.com. This report reviews the actions taken by the Audit Committee with regard to our
financial reporting process during the fiscal year ended December 31, 2018, and particularly with regard to the
audited consolidated financial statements as of December 31, 2018 and 2017 and for the years ended December 31,
2018, 2017, and 2016.
The Audit Committee is composed solely of independent directors under existing NYSE listing standards and
SEC requirements. None of the committee members is or has been an officer or employee of the Company or any of
our subsidiaries or has engaged in any business transaction or has any business or family relationship with the
Company or any of our subsidiaries or affiliates. In addition, the Board of Directors has determined that
Messrs. Steven J. Freiberg, Alvaro G. de Molina, and Carlos Palomares are “audit committee financial experts,” as
defined by SEC rules.
Our management has the primary responsibility for our financial statements and reporting process, including
the systems of internal controls. The independent auditors are responsible for performing an independent audit of
our consolidated financial statements in accordance with auditing standards generally accepted in the United States
and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and to
select annually the accountants to serve as our independent auditors for the coming year. The Audit Committee has
implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems
necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter. To carry out its
responsibilities, the Audit Committee met five times during the fiscal year ended December 31, 2018.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the
audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2018, including a discussion of the quality, rather than just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee also discussed our audited consolidated financial statements in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2018, with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited consolidated financial statements with accounting
principles generally accepted in the United States, their judgments as to the quality, rather than just the
acceptability, of our accounting principles, and such other matters as are required to be discussed with the Audit
Committee under the applicable PCAOB Standards and SEC Rule 2-07 of Regulation S-X. In addition, the Audit
Committee discussed with the auditors their independence from management and the Company, including the
matters in the written disclosures and the letter required by the PCAOB regarding the independent auditors’
communications with the Audit Committee regarding independence. The Audit Committee also considered whether
the provision of services during the fiscal year ended December 31, 2018, by the auditors that were unrelated to
their audit of the consolidated financial statements referred to above and to their reviews of our interim consolidated
financial statements during the fiscal year is compatible with maintaining their independence.
Additionally, the Audit Committee discussed with the independent auditors the overall scope and plan for
their audit. The Audit Committee met with the independent auditors, with and without management present, to
discuss the results of their examination, their evaluation of our internal controls, and the overall quality of our
financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board
of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2018, for filing with the SEC. This report of the Audit Committee has been
prepared by members of the Audit Committee.
Members of the Audit Committee:
Carlos Palomares (Chair)
Steven J. Freiberg
Alvaro G. de Molina
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 61
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of our common stock as
of the close of trading on March 21, 2019, of: (i) each person known by us to beneficially own more than five
percent of our common stock; (ii) each of our directors; (iii) each of our named executive officers; and (iv) all of our
directors and executive officers, as a group.
Shares Beneficially
Owned(1)
Name
Basswood Capital Management, L.L.C.(2)
Wellington Management Group LLP and affiliates(3)
Dimensional Fund Advisors LP(4)
BlackRock, Inc.(5)
Gregory L. Summe(6)
Jonathan D. Brown(7)
Roel C. Campos(8)
Maria Contreras-Sweet
Michael R. Dunn(9)
Steven J. Freiberg(10)
Alvaro G. de Molina(11)
Carlos Palomares(12)
Peter R. Knitzer(13)
John D. Schachtel(14)
Donald E. Thomas(15)
Daniel J. Taggart(16)
Brian J. Fisher(17)
All directors and executive officers, as a group (12 persons)
Number
1,529,713
1,167,332
991,497
945,960
616,761
3,407
63,293
3,750
261,003
159,473
60,297
60,646
183,331
34,019
252,679
47,478
66,652
1,196,028
Percentage
12.9%
9.8%
8.3%
8.0%
5.2%
*
*
*
2.2%
1.3%
*
*
1.5%
*
2.1%
*
*
9.5%
(2)
Amount represents less than 1.0%
*
(1) Applicable percentage of ownership is based upon 11,881,658 shares of our common stock outstanding on
March 21, 2019. Beneficial ownership is determined in accordance with SEC rules and includes voting and
investment power with respect to shares shown as beneficially owned. Shares of common stock subject to
options currently exercisable or exercisable within 60 days are deemed outstanding for computing the shares
and percentage ownership of the person holding such options, but are not deemed outstanding for computing
the percentage ownership of any other person or entity. Except as otherwise indicated, the persons or entities
listed in the table have sole voting and investment power with respect to all shares shown as beneficially
owned by them. The address for all directors and officers listed in the table is c/o Regional Management
Corp., 979 Batesville Road, Suite B, Greer, South Carolina 29651.
The information reported is based on a Form 4 filed with the SEC on January 3, 2019, reporting (i) shared
power of Basswood Capital Management, L.L.C. (“Basswood”) to vote or direct the vote and to dispose or
direct the disposition of 1,529,713 shares; (ii) shared power of Basswood Opportunity Partners, L.L.C.
(“BOP”) to vote or direct the vote and to dispose of or direct the disposition of 236,899 shares; (iii) shared
power of Basswood Opportunity Fund, Inc. (“BOF”) to vote or direct the vote and to dispose of or direct the
disposition of 30,123 shares; (iv) shared power of Basswood Financial Fund, LP (“BFF”) to vote or direct the
vote and to dispose of or direct the disposition of 91,076 shares; (v) shared power of Basswood Financial
Fund, Inc. (“BFF, Inc.”) to vote or direct the vote and to dispose of or direct the disposition of 87,399 shares;
(vi) shared power of Basswood Financial Long Only Fund, LP (“BLOF”) to vote or direct the vote and to
dispose of or direct the disposition of 24,548 shares; (vii) shared power of Basswood Enhanced Long Short
Fund, L.P. (“BELS”) to vote or direct the vote and to dispose of or direct the disposition of 567,680 shares;
(viii) shared power of Basswood, BFF, BOF, BLOF, BFF, Inc., BELS, and BOP (collectively, the “Funds and
Managed Accounts”) to vote or direct the vote and to dispose of or direct the disposition of 488,581 shares;
(ix) shared power of Matthew Lindenbaum to vote or direct the vote and to dispose of or direct the disposition
of 1,529,713 shares; and (x) shared power of Bennett Lindenbaum to vote or direct the vote and to dispose of
or direct the disposition of 1,529,713 shares. Matthew Lindenbaum and Bennett Lindenbaum are the
Managing Members of Basswood and may be deemed to have a pecuniary interest in the shares held directly
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 62
or indirectly by the Funds and Managed Accounts. The information also includes 3,407 shares held by
Mr. Brown, a partner at Basswood, who serves on the Board pursuant to the Cooperation Agreement
described in detail below in the section entitled “Other Information – Certain Relationships and Related
Person Transactions.” As a result, Basswood is a “director-by-deputization” solely for the purposes of
Section 16 of the Exchange Act. Pursuant to Rule 16a-1 of the Exchange Act, Basswood may be deemed to be
a beneficial owner of the shares of common stock issued to Mr. Brown. The business address of Basswood is
645 Madison Avenue, 10th Floor, New York, NY 10022.
The information reported is based on two Schedules 13G/A, each filed with the SEC on February 12, 2019,
reporting: (i) shared power of Wellington Management Group LLP (“WMG”) to vote or direct the vote and to
dispose or direct the disposition of 1,167,332 shares; (ii) shared power of Wellington Group Holdings LLP
(“WGH”) to vote or direct the vote and to dispose or direct the disposition of 1,167,332 shares; (iii) shared
power of Wellington Investment Advisors Holdings LLP (“WIAH”) to vote or direct the vote and to dispose
or direct the disposition of 1,167,332 shares; (iv) shared power of Wellington Management Company LLP
(“WMC”) to vote or direct the vote and to dispose or direct the disposition of 1,141,378 shares; and (v) shared
power of Wellington Trust Company, NA (“WTC”) to vote or direct the vote and to dispose or direct the
disposition of 1,048,544 shares. The business address of WMG, WGH, WIAH, WMC, and WTC is 280
Congress Street, Boston, MA 02210.
The information reported is based on a Schedule 13G/A filed with the SEC on February 8, 2019, reporting the
sole power of Dimensional Fund Advisors LP (“Dimensional”) to vote or direct the vote of 947,030 shares
and the sole power of Dimensional to dispose or direct the disposition of 991,497 shares. The business address
of Dimensional is Building One, 6300 Bee Cave Road, Austin, TX 78746.
The information reported is based on a Schedule 13G/A filed with the SEC on February 6, 2019, reporting the
sole power of BlackRock, Inc. (“BlackRock”) to vote or direct the vote of 854,991 shares and the sole power
of BlackRock to dispose or direct the disposition of 945,960 shares. The business address of BlackRock is 55
East 52nd Street, New York, NY 10055.
The information reported is based on a Schedule 13G/A filed with the SEC on February 11, 2019, reporting
the shared power of Gregory L. Summe to vote or direct the vote and to dispose or direct the disposition of
616,761 shares. This number includes shares held by members of Mr. Summe’s family where he shares voting
and investment control. Mr. Summe is the sole member of Glen Capital Partners LLC and Glen Capital
Partners GP LLC, which is the general partner of Glen Capital Partners Focus Fund, L.P. These entities each
report shared power to vote or direct the vote or dispose or direct the disposition of 552,400 shares. The
business address of Mr. Summe is 75 Arlington St., Suite 500, Boston, MA 02116.
(3)
(4)
(5)
(6)
(7) Mr. Brown is a partner at Basswood, serving on the Board pursuant to the Cooperation Agreement described
in detail below in the section entitled “Other Information – Certain Relationships and Related Person
Transactions.” As a result, Basswood is a “director-by-deputization” solely for the purposes of Section 16 of
the Exchange Act. Pursuant to Rule 16a-1 of the Exchange Act, Basswood may be deemed to be a beneficial
owner of the shares of common stock issued to Mr. Brown.
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(8)
The amount stated includes 28,670 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Campos will not have voting or investment power until the
options are exercised. The option shares described in this footnote are considered outstanding for the purpose
of computing the percentage of outstanding stock owned by Mr. Campos and by directors and executive
officers as a group, but not for the purpose of computing the percentage ownership of any other person.
The amount stated includes 148,866 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Dunn will not have voting or investment power until the options
are exercised. The option shares described in this footnote are considered outstanding for the purpose of
computing the percentage of outstanding stock owned by Mr. Dunn and by directors and executive officers as
a group, but not for the purpose of computing the percentage ownership of any other person.
(10) Mr. Freiberg holds 86,678 shares directly. Additional shares stated are owned by (i) Neena Freiberg
(9)
(Mr. Freiberg’s wife) (30,000 shares), and (ii) the Neena Freiberg Irrevocable Trust, of which Mr. Freiberg is
trustee (24,854 shares). The amount stated also includes 17,941 shares subject to options either currently
exercisable or exercisable within 60 days of March 21, 2019, over which Mr. Freiberg will not have voting or
investment power until the options are exercised. The option shares described in this footnote are considered
outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Freiberg and by
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 63
directors and executive officers as a group, but not for the purpose of computing the percentage ownership of
any other person.
(11) The amount stated includes 30,166 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. de Molina will not have voting or investment power until the
options are exercised. The option shares described in this footnote are considered outstanding for the purpose
of computing the percentage of outstanding stock owned by Mr. de Molina and by directors and executive
officers as a group, but not for the purpose of computing the percentage ownership of any other person.
(12) The amount stated includes 28,670 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Palomares will not have voting or investment power until the
options are exercised. The option shares described in this footnote are considered outstanding for the purpose
of computing the percentage of outstanding stock owned by Mr. Palomares and by directors and executive
officers as a group, but not for the purpose of computing the percentage ownership of any other person.
(13) The amount stated includes 146,898 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Knitzer will not have voting or investment power until the options
are exercised. The option shares described in this footnote are considered outstanding for the purpose of
computing the percentage of outstanding stock owned by Mr. Knitzer and by directors and executive officers
as a group, but not for the purpose of computing the percentage ownership of any other person.
(14) The amount stated includes 20,641 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Schachtel will not have voting or investment power until the
options are exercised. The option shares described in this footnote are considered outstanding for the purpose
of computing the percentage of outstanding stock owned by Mr. Schachtel and by directors and executive
officers as a group, but not for the purpose of computing the percentage ownership of any other person.
(15) The amount stated includes 11,843 shares owned by The Donald Eugene Thomas and Jeanine Leigh Thomas
Joint Revocable Living Trust. Mr. Thomas and his wife, Jeanine Leigh Thomas, are the trustees of The
Donald Eugene Thomas and Jeanine Leigh Thomas Joint Revocable Living Trust. The amount stated also
includes 240,836 shares subject to options either currently exercisable or exercisable within 60 days of
March 21, 2019, over which Mr. Thomas will not have voting or investment power until the options are
exercised. The option shares described in this footnote are considered outstanding for the purpose of
computing the percentage of outstanding stock owned by Mr. Thomas and by directors and executive officers
as a group, but not for the purpose of computing the percentage ownership of any other person.
(16) The amount stated includes 37,293 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Taggart will not have voting or investment power until the options
are exercised. The option shares described in this footnote are considered outstanding for the purpose of
computing the percentage of outstanding stock owned by Mr. Taggart and by directors and executive officers
as a group, but not for the purpose of computing the percentage ownership of any other person.
(17) The amount stated includes 55,300 shares subject to options either currently exercisable or exercisable within
60 days of March 21, 2019, over which Mr. Fisher will not have voting or investment power until the options
are exercised. The option shares described in this footnote are considered outstanding for the purpose of
computing the percentage of outstanding stock owned by Mr. Fisher and by directors and executive officers as
a group, but not for the purpose of computing the percentage ownership of any other person.
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 64
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more
than ten percent of our common stock to file with the SEC initial reports of ownership and reports of changes in
ownership of common stock and our other equity securities. Our directors, executive officers, and greater than ten
percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations
that no other reports were required, during the fiscal year ended December 31, 2018, all Section 16(a) filing
requirements applicable to directors, executive officers, and greater than ten percent beneficial owners were timely
complied with by such persons.
Certain Relationships and Related Person Transactions
Cooperation Agreement
On January 26, 2018, we entered into a Cooperation Agreement (the “Cooperation Agreement”) with
Basswood, pursuant to which we appointed Jonathan D. Brown to the Board, effective January 26, 2018.
Pursuant to the Cooperation Agreement, Mr. Brown is required to, at all times while serving as a member of
the Board, comply with all policies, procedures, processes, codes, rules, standards, and guidelines applicable to
non-employee Board members. In addition, the Cooperation Agreement provides that Mr. Brown must offer to
resign from the Board if (i) Basswood and its affiliates, collectively, no longer beneficially own an aggregate “net
long position” of at least 874,705 shares of our common stock (subject to adjustment for stock splits, reverse stock
splits, stock dividends, and similar adjustments), or (ii) Basswood fails to comply with or breaches any of the terms
of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach or failure
has not been cured within 15 days after receipt by Basswood of written notice from us specifying such material
breach or failure, provided that we are not in material breach of the Cooperation Agreement at such time. The
Cooperation Agreement also provides that, if requested by Basswood, we are obligated to appoint Mr. Brown to any
existing or newly created committee of the Board that may be designated to oversee or review strategic alternatives
(including an extraordinary transaction).
In the Cooperation Agreement, in addition to certain confidentiality and non-disparagement provisions,
Basswood has agreed to various customary standstill provisions for the duration of the Standstill Period (as defined
below), which provide, among other things, that Basswood and its affiliates will not (i) acquire beneficial ownership
of 19.9% or more of the outstanding shares of our common stock; (ii) participate in a proxy solicitation with respect
to the voting of any shares of our common stock; (iii) submit a proposal for or offer of any extraordinary transaction
or propose a change in the structure, size, or composition of the Board or executive officers of the Company; or
(iv) subject to certain exceptions for open market and underwritten transactions, sell shares of our common stock to
a third party or group that to Basswood’s knowledge would result in such third party or group owning 5% or more
of the outstanding shares of our common stock.
Basswood has also agreed that, during the Standstill Period, it shall cause the shares of our common stock
beneficially owned by it and its affiliates to be voted (i) in favor of each director nominated by the Board for
election, and (ii) in accordance with the Board’s recommendations on all other matters; provided that Basswood and
its affiliates may vote their shares of our common stock in their sole discretion with respect to (a) a proposal to
authorize or approve an extraordinary transaction, (b) matters related to the implementation of takeover defenses,
(c) new or amended incentive compensation plans submitted for stockholder approval, or (d) any other proposal if
either Institutional Shareholder Services Inc. or Glass Lewis & Co., LLC do not recommend voting in accordance
with the Board’s recommendation with respect to such proposal (other than with respect to the election or removal
of directors) at any annual or special meeting of stockholders.
Pursuant to the Cooperation Agreement, the “Standstill Period” was initially defined to mean the period
commencing on January 26, 2018 and ending on the earliest of (i) 12:01 a.m. (New York time) on the date that is 20
days prior to the nomination deadline for the 2019 Annual Meeting, (ii) if we fail to comply with or breach any of
the terms of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach
or failure has not been cured within 15 days after receipt by us of written notice from Basswood specifying such
material breach or failure, provided that Basswood is not in material breach of the Cooperation Agreement at such
time, (iii) the consummation of an extraordinary transaction following which consummation the director designated
by Basswood no longer serves on the Board, and (iv) a reorganization of the Company under any federal or state
law relating to bankruptcy or insolvency. However, as permitted by the terms of the Cooperation Agreement, we
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 65
provided timely written notice to Basswood that we would nominate a director designated by Basswood for election
to the Board at the 2019 Annual Meeting, which extended the Standstill Period until the date that is 20 days prior to
the nomination deadline for the 2020 Annual Meeting. If we provide written notice to Basswood that we will
nominate a director designated by Basswood for election to the Board at the 2020 Annual Meeting or for any annual
meeting of stockholders of the Company subsequent thereto (each, an “Applicable Meeting”) at least 20 days prior
to the nomination deadline for such Applicable Meeting and Basswood has agreed in advance to such nomination,
then the Standstill Period will be automatically extended further until the date that is 20 days prior to the nomination
deadline for the annual stockholders meeting subsequent to such Applicable Meeting.
The Cooperation Agreement terminates upon the expiration of the Standstill Period (subject to any extensions
as provided in the Cooperation Agreement), provided that the confidentiality provisions of the Cooperation
Agreement will survive for a period of 18 months following the date upon which no director designated by
Basswood serves as a director of the Company.
Statement of Policy Regarding Transactions with Related Persons
Our Board has adopted a written statement of policy regarding transactions with related persons, which we
refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined in
paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our general counsel, or other person
designated by our Board, any “related person transaction” (defined as any transaction that is anticipated and would
be reportable by us under Item 404(a) of Regulation S-K, which includes transactions in which we were or are to be
a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or
indirect material interest) and all material facts with respect thereto. The general counsel, or such other person, will
then promptly communicate that information to our Board. No related person transaction will be executed without
the approval or ratification of our Board or a committee of the Board. It is our policy that directors interested in a
related person transaction will recuse themselves from any vote of a related person transaction in which they have
an interest and provide all material information he or she has concerning the related person transaction to the Board.
Our policy does not specify the standards to be applied by directors in determining whether or not to approve or
ratify a related person transaction, and we accordingly anticipate that these determinations will be made in
accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. In
determining whether to approve or ratify a related person transaction, the Board may consider such facts and
circumstances as it deems appropriate, including (1) the benefits to us; (2) the availability of other sources for
comparable products or services; (3) the terms of the proposed related person transaction; and (4) the terms
available to unrelated third parties or to employees generally in an arms-length negotiation.
Indemnification of Directors, Officers, and Certain Current and Former Stockholders
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the
Delaware General Corporation Law (the “DGCL”). In addition, our Amended and Restated Certificate of
Incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the DGCL. Further, in connection with the September 2013 and December 2013
secondary public offerings described above, we agreed to indemnify Palladium, Parallel, and certain other selling
stockholders for certain losses, claims, damages, liabilities, and expenses arising out of such secondary public
offerings.
There is no pending litigation or proceeding naming any of our directors or officers to which indemnification
is being sought, and we are not aware of any pending or threatened litigation that may result in claims for
indemnification by any director, officer, or other party.
Proposals by Stockholders
Under certain conditions, stockholders may request that we include a proposal at a forthcoming meeting of
our stockholders in our proxy materials for such meeting. Under SEC Rule 14a-8, any stockholder desiring to
present such a proposal to be acted upon at the 2020 Annual Meeting and included in the proxy materials for such
meeting must ensure that we receive the proposal at our principal executive office in Greer, South Carolina by
November 28, 2019, in order for the proposal to be eligible for inclusion in our proxy statement and proxy card
relating to such meeting.
If a stockholder desires to propose any business at an annual meeting of stockholders, even if the proposal or
proposed director candidate is not to be included in our proxy statement, our Bylaws provide that the stockholder
Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 66
must deliver or mail timely advance written notice of such business to our principal executive office. Under our
Bylaws, to be timely, a stockholder’s notice generally must be delivered to our Corporate Secretary at our principal
executive offices not later than the 90th day before the first anniversary of the date of the preceding year’s annual
meeting and not earlier than the 120th day prior to such anniversary. However, in the event that the date of the
annual meeting is advanced by more than 20 days or delayed by more than 70 days from such anniversary date,
notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting
and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is first made. Each item of business
must be made in accordance with, and must include the information required by, our Bylaws, our Corporate
Governance Guidelines, and any other applicable law, rule, or regulation. Assuming that the date of the 2020
Annual Meeting is not advanced or delayed in the manner described above, the required notice for the 2020 Annual
Meeting would need to be provided to us not earlier than December 27, 2019 and not later than January 26, 2020.
If, following the filing and delivery of these proxy materials, the date of the 2020 Annual Meeting is advanced
or delayed by more than 20 calendar days from the one-year anniversary date of the 2019 Annual Meeting, we will,
in a timely manner, provide notice to our stockholders of the new date of the 2020 Annual Meeting and the new
dates by which stockholder proposals submitted both pursuant to and outside of SEC Rule 14a-8 must be received
by us. Such notice will be included in the earliest possible Quarterly Report on Form 10-Q under Part II, Item 5.
Householding of Annual Meeting Materials
Some banks, brokers, and other nominee record holders may be participating in the practice of
“householding” annual reports and proxy statements. This means that only one copy of our Annual Report on Form
10-K and Proxy Statement, as applicable, may have been sent to multiple stockholders in the same household. We
will promptly deliver a separate copy of our Annual Report on Form 10-K and Proxy Statement, as applicable, to
any stockholder upon request submitted in writing to us at the following address: Regional Management Corp., 979
Batesville Road, Suite B, Greer, South Carolina, 29651, Attention: Corporate Secretary, or by calling
(864) 448-7000. Any stockholder who wants to receive separate copies of our Annual Report on Form 10-K and
Proxy Statement in the future, or who is currently receiving multiple copies and would like to receive only one copy
for his or her household, should contact his or her bank, broker, or other nominee record holder, or contact us at the
above address and telephone number.
Other Business
The Board is not aware of any matters, other than those specified above, to come before the Annual Meeting
for action by the stockholders. However, if any matter requiring a vote of the stockholders should be duly presented
for a vote at the Annual Meeting, then the persons named in the form of proxy intend to vote such proxy in
accordance with their best judgment.
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Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | 67
QUICK FACTS (as of December 31, 2018)
$932 million
(cid:4)(cid:4)(cid:77)(cid:82)(cid:4)(cid:444)(cid:82)(cid:69)(cid:82)(cid:71)(cid:73)(cid:4)(cid:86)(cid:73)(cid:71)(cid:73)(cid:77)(cid:90)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)
359
branches
11 states
AL • GA • MO • NM • NC
OK • SC • TX • TN • VA • WI
MANAGEMENT TEAM
Peter R. Knitzer
President and
(cid:39)(cid:76)(cid:77)(cid:73)(cid:74)(cid:4)(cid:41)(cid:92)(cid:73)(cid:71)(cid:89)(cid:88)(cid:77)(cid:90)(cid:73)(cid:4)(cid:51)(cid:446)(cid:71)(cid:73)(cid:86)
John D. Schachtel
(cid:41)(cid:92)(cid:73)(cid:71)(cid:89)(cid:88)(cid:77)(cid:90)(cid:73)(cid:4)(cid:58)(cid:77)(cid:71)(cid:73)(cid:4)(cid:52)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)
(cid:39)(cid:76)(cid:77)(cid:73)(cid:74)(cid:4)(cid:51)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:4)(cid:51)(cid:446)(cid:71)(cid:73)(cid:86)(cid:4)(cid:4)
Donald E. Thomas
(cid:41)(cid:92)(cid:73)(cid:71)(cid:89)(cid:88)(cid:77)(cid:90)(cid:73)(cid:4)(cid:58)(cid:77)(cid:71)(cid:73)(cid:4)(cid:52)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)
(cid:39)(cid:76)(cid:77)(cid:73)(cid:74)(cid:4)(cid:42)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4)(cid:51)(cid:446)(cid:71)(cid:73)(cid:86)(cid:4)
Daniel J. Taggart
(cid:41)(cid:92)(cid:73)(cid:71)(cid:89)(cid:88)(cid:77)(cid:90)(cid:73)(cid:4)(cid:58)(cid:77)(cid:71)(cid:73)(cid:4)(cid:52)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)
(cid:39)(cid:76)(cid:77)(cid:73)(cid:74)(cid:4)(cid:39)(cid:86)(cid:73)(cid:72)(cid:77)(cid:88)(cid:4)(cid:54)(cid:77)(cid:87)(cid:79)(cid:4)(cid:51)(cid:446)(cid:71)(cid:73)(cid:86)
Brian J. Fisher
Senior Vice President,
General Counsel, and Secretary
CONTACT INFORMATION
Regional Management Corp.
(cid:29)(cid:27)(cid:29)(cid:4)(cid:38)(cid:69)(cid:88)(cid:73)(cid:87)(cid:90)(cid:77)(cid:80)(cid:80)(cid:73)(cid:4)(cid:54)(cid:83)(cid:69)(cid:72)(cid:16)(cid:4)(cid:55)(cid:89)(cid:77)(cid:88)(cid:73)(cid:4)(cid:38)
Greer, SC 29651
Telephone: (864) 448-7000
RegionalManagement.com
INVESTOR INQUIRIES
Garrett Edson, ICR
(203) 682-8331
Garrett.Edson@icrinc.com
COMPANY OVERVIEW
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customers with limited access to consumer credit from banks, thrifts, credit card companies, and
other lenders. As of December 31, 2018, we had approximately 401,500 accounts and $932.2 million in
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BRANCH NETWORK & ORIGINATION CHANNELS
We operated under the name “Regional Finance” in 359 branches across 11 states at the end of 2018.
Our integrated branch model is the foundation of our multi-channel origination strategy, with nearly all loans,
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performance. In addition to our branch network, we promote our products and facilitate loan applications and
originations through direct mail campaigns, digital partners, retailers, and our consumer website.
LOAN PRODUCTS
We underwrite our loans based on our customers’ ability to make monthly payments out of their discretionary
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performance to national credit reporting agencies, allowing our customers the opportunity to establish or
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LOAN FEATURES
• Fixed Rate
• Fixed Term
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• Fully-Amortizing
• Flexible Loan Sizes & Maturities
• No Pre-Payment Penalties
Loan Products
Size
Term
Small Installment Loans
Large Installment Loans
Retail Purchase Loans
Range: $500 – $2,500
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Range: $2,501 – $12,000
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Range: Up to $7,500
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Up to 48 months
18 to 60 months
6 to 48 months
OPPORTUNITY FOR GROWTH
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installment loan portfolios within our existing branches and by expanding our branch network in our current
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(cid:69)(cid:82)(cid:72)(cid:4)(cid:82)(cid:73)(cid:73)(cid:72)(cid:87)(cid:4)(cid:73)(cid:90)(cid:83)(cid:80)(cid:90)(cid:73)(cid:18)
BUSINESS & FINANCIAL HIGHLIGHTS
• R(cid:73)(cid:90)(cid:73)(cid:82)(cid:89)(cid:73)(cid:4)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:4)(cid:69)(cid:88)(cid:4)(cid:69)(cid:4)(cid:25)(cid:17)(cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:39)(cid:37)(cid:43)(cid:54)(cid:4)(cid:83)(cid:74)(cid:4)(cid:21)(cid:22)(cid:18)(cid:24)(cid:9)(cid:16)(cid:4)(cid:74)(cid:86)(cid:83)(cid:81)(cid:4)(cid:8)(cid:21)(cid:27)(cid:20)(cid:18)(cid:26)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:23)(cid:4)(cid:88)(cid:83)(cid:4)(cid:8)(cid:23)(cid:20)(cid:26)(cid:18)(cid:27)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:28)
• 2018 net income of $35.3 million
• 2018 diluted earnings per share of $2.93
• (cid:37)(cid:75)(cid:75)(cid:86)(cid:73)(cid:75)(cid:69)(cid:88)(cid:73)(cid:4)(cid:86)(cid:73)(cid:71)(cid:73)(cid:77)(cid:90)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)(cid:4)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:4)(cid:69)(cid:88)(cid:4)(cid:69)(cid:4)(cid:25)(cid:17)(cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:39)(cid:37)(cid:43)(cid:54)(cid:4)(cid:83)(cid:74)(cid:4)(cid:21)(cid:21)(cid:18)(cid:23)(cid:9)(cid:16)(cid:4)(cid:74)(cid:86)(cid:83)(cid:81)(cid:4)(cid:8)(cid:25)(cid:24)(cid:24)(cid:18)(cid:27)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:23)(cid:4)(cid:88)(cid:83)(cid:4)(cid:8)(cid:29)(cid:23)(cid:22)(cid:18)(cid:22)(cid:4)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:4)(cid:77)(cid:82)(cid:4)(cid:22)(cid:20)(cid:21)(cid:28)
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Regional Management Corp.
(cid:29)(cid:27)(cid:29)(cid:4)(cid:38)(cid:69)(cid:88)(cid:73)(cid:87)(cid:90)(cid:77)(cid:80)(cid:80)(cid:73)(cid:4)(cid:54)(cid:83)(cid:69)(cid:72)(cid:16)(cid:4)(cid:55)(cid:89)(cid:77)(cid:88)(cid:73)(cid:4)(cid:38)(cid:4)(cid:397)(cid:4)(cid:43)(cid:86)(cid:73)(cid:73)(cid:86)(cid:16)(cid:4)(cid:55)(cid:39)(cid:4)(cid:22)(cid:29)(cid:26)(cid:25)(cid:21)