Regional Management Corp

Previous wording

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. 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 our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (which was filed with the SEC on February 22, 2024), our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (which was filed with the SEC on May 3, 2024), and this Quarterly Report on Form 10-Q. The forward-looking information we have provided in this Quarterly Report on Form 10-Q 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.

Current wording

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. 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 our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (which was filed with the SEC on February 22, 2024), our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (which was filed with the SEC on May 3, 2024), our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 (which was filed with the SEC on August 2, 2024), and this Quarterly Report on Form 10-Q. The forward-looking information we have provided in this Quarterly Report on Form 10-Q 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.

Previous wording

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of June 30, 2024, we operate under the name “Regional Finance” online and in 343 branch locations in 19 states across the United States, serving 545,900 active accounts. Most of our loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network with the support of centralized sales, underwriting, service, collections, and administrative teams. This model provides us with frequent contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Current wording

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of September 30, 2024, we operate under the name “Regional Finance” online and in 340 branch locations in 19 states across the United States, serving 557,400 active accounts. Most of our loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network with the support of centralized sales, underwriting, service, collections, and administrative teams. This model provides us with frequent contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Previous wording

Large Loans (>$2,500) – As of June 30, 2024, we had 247.4 thousand large installment loans outstanding, representing $1.3 billion in net finance receivables. This included 63.5 thousand large loan convenience checks, representing $186.4 million in net finance receivables.

Current wording

Large Loans (>$2,500) – As of September 30, 2024, we had 252.2 thousand large installment loans outstanding, representing $1.3 billion in net finance receivables. This included 65.7 thousand large loan convenience checks, representing $189.9 million in net finance receivables.

Previous wording

Small Loans (≤$2,500) – As of June 30, 2024, we had 296.9 thousand small installment loans outstanding, representing $505.6 million in net finance receivables. This included 156.7 thousand small loan convenience checks, representing $236.9 million in net finance receivables.

Current wording

Small Loans (≤$2,500) – As of September 30, 2024, we had 303.9 thousand small installment loans outstanding, representing $524.8 million in net finance receivables. This included 160.1 thousand small loan convenience checks, representing $246.2 million in net finance receivables.

Previous wording

Retail Loans – As of June 30, 2024, we had 1.6 thousand retail purchase loans outstanding, representing $2.1 million in net finance receivables.

Current wording

Retail Loans – As of September 30, 2024, we had 1.3 thousand retail purchase loans outstanding, representing $1.5 million in net finance receivables.

Previous wording

As inflation accelerated and geopolitical stability began to deteriorate in the fourth quarter of 2021, we began to proactively tighten our credit models. Ongoing inflationary pressures, higher interest rates, and geopolitical events outside of the U.S. continue to create economic uncertainty. We have therefore continued to maintain tighter underwriting guidelines. More recently, due to moderating inflation and expectations for an improving economic environment, we have increased the growth in our higher-margin, small loan portfolio. We grew the small loan portfolio by $61 million, or 14%, year-over-year. To balance the risk associated with the growth in our higher-margin small loan portfolio, we also continue to deploy a barbell strategy of originating larger amounts of high-quality, auto-secured loans. However, we continue to thoughtfully manage our growth and our portfolio in this economic environment.

Current wording

As inflation accelerated and geopolitical stability began to deteriorate in the fourth quarter of 2021, we began to proactively tighten our credit models. Ongoing inflationary pressures, higher interest rates, and geopolitical events outside of the U.S. continue to create economic uncertainty. We have therefore continued to maintain tighter underwriting guidelines. However, more recently, due to moderating inflation and expectations for an improving economic environment, we have prudently increased the growth in our higher-margin small loan portfolio. We grew the small loan portfolio by $50.6 million, or 10.7%, year-over-year. To balance the risk associated with the growth in our higher-margin small loan portfolio, we continue to deploy a barbell strategy of originating higher-credit-quality, auto-secured loans.

Previous wording

Our allowance for credit losses was 10.5% of net finance receivables as of June 30, 2024. Our contractual delinquency as a percentage of net finance receivables was 6.9% as of June 30, 2024, consistent with the prior-year period. Going forward, macroeconomic conditions may necessitate changes to the macroeconomic assumptions within our forecast and to our credit loss performance outlook, either of which could lead to further changes in our allowance for credit losses, reserve rate, and provision for credit losses expense.

Current wording

Our allowance for credit losses was 10.6% of net finance receivables as of September 30, 2024. Our contractual delinquency as a percentage of net finance receivables was 6.9% as of September 30, 2024, down from 7.3% as of the prior-year period. Going forward, macroeconomic conditions may necessitate changes to the macroeconomic assumptions within our forecast and to our credit loss performance outlook, either of which could lead to further changes in our allowance for credit losses, reserve rate, and provision for credit losses expense.

Previous wording

We proactively diversified our funding over the past few years and continue to maintain a strong liquidity profile. As of June 30, 2024, we had $149.4 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities. In addition, we had $564.4 million of unused capacity on our revolving credit facilities (subject to the borrowing base) as of June 30, 2024. We believe our liquidity position provides substantial runway to support the fundamental operations of our business and to fund future growth.

Current wording

We proactively diversified our funding over the past few years and continue to maintain a strong liquidity profile. As of September 30, 2024, we had $154.7 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities. In addition, we had $482.2 million of unused capacity on our revolving credit facilities (subject to the borrowing base) as of September 30, 2024. We believe our liquidity position provides substantial runway to support the fundamental operations of our business and to fund future growth.

Previous wording

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

Current wording

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

Previous wording

Growth in Loan Portfolio. The revenue that we generate from interest and fees is largely driven by the balance of loans that we originate. Average net finance receivables were $1.8 billion for the first six months of 2024 and $1.7 billion for the prior-year period. We source our loans through our branches, centrally-managed direct mail program, digital partners, and our consumer website. The majority of our loans, regardless of origination channel, are serviced through our branches. Increasing the number of loans per branch and growing our state footprint allows us to increase the number of customers we are able to serve. We continue to assess our branch network for clear opportunities to add additional branches in new and existing states where it is favorable for us to conduct business or consolidate operations into larger branches within close geographic proximity. This branch optimization is consistent with our omni-channel strategy and builds upon our recent successes in entering new states with a lighter branch footprint, while still providing customers with best-in-class service.

Current wording

Growth in Loan Portfolio. The revenue that we generate from interest and fees is largely driven by the balance of loans that we originate. Average net finance receivables were $1.8 billion for the first nine months of 2024 and $1.7 billion for the prior-year period. We source our loans through our branches, centrally-managed direct mail program, digital partners, and our consumer website. The majority of our loans, regardless of origination channel, are serviced through our branches. Increasing the number of loans per branch and growing our state footprint allows us to increase the number of customers we are able to serve. We continue to assess our branch network for clear opportunities to add additional branches in new and existing states where it is favorable for us to conduct business or consolidate operations into larger branches within close geographic proximity. This branch optimization is consistent with our omni-channel strategy and builds upon our recent successes in entering new states with a lighter branch footprint, while still providing customers with best-in-class service.

Previous wording

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, a majority of our funding was held at a fixed rate as of June 30, 2024, representing 88% of our total debt.

Current wording

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, a majority of our funding was held at a fixed rate as of September 30, 2024, representing 82% of our total debt.

Previous wording

As reinsurer, we maintain restricted reserves comprised of restricted cash and restricted available-for-sale investments for life insurance claims in an amount determined by the unaffiliated insurance company. As of June 30, 2024, the restricted reserves consisted of $21.8 million of unearned premium reserves and $1.2 million of unpaid claims reserves. The unaffiliated insurance company maintains the reserves for non-life claims.

Current wording

As reinsurer, we maintain restricted reserves comprised of restricted cash and restricted available-for-sale investments for life insurance claims in an amount determined by the unaffiliated insurance company. As of September 30, 2024, the restricted reserves consisted of $20.9 million of unearned premium reserves and $1.1 million of unpaid claims reserves. The unaffiliated insurance company maintains the reserves for non-life claims.

Previous wording

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

Current wording

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

Previous wording

General and Administrative Expenses. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of comprehensive income. Our general and administrative expenses are comprised of four categories: personnel, occupancy, marketing, and other. We measure our general and administrative expenses as a percentage of average net finance receivables, which we refer to as our operating expense ratio.

Current wording

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

Previous wording

Large Loans (>$2,500)– Large loans outstanding increased by $28.0 million, or 2.3%, to $1.3 billion at June 30, 2024, from $1.2 billion at June 30, 2023. The increase was due to increased marketing, the growth of receivables in branches opened during 2023 and 2024, and the transition of small loan customers to large loans, partially offset by credit tightening for disciplined growth.

Current wording

Large Loans (>$2,500)– Large loans outstanding increased by $21.5 million, or 1.7%, remaining consistent at $1.3 billion as of the periods ending September 30, 2024 and September 30, 2023. The increase was due to growth in our auto-secured loan portfolio, the growth of receivables in branches opened during 2023 and 2024, and the transition of small loan customers to large loans.

Previous wording

Small Loans (≤$2,500)– Small loans outstanding increased by $61.1 million, or 13.7%, to $505.6 million at June 30, 2024, from $444.6 million at June 30, 2023. The increase was due to increased marketing and growth of receivables in branches opened during 2023 and 2024, partially offset by credit tightening for disciplined growth and the transition of small loan customers to large loans.

Current wording

Small Loans (≤$2,500)– Small loans outstanding increased by $50.6 million, or 10.7%, to $524.8 million at September 30, 2024, from $474.2 million at September 30, 2023. The increase was due to increased marketing, growth in our higher-margin loan portfolio, and growth of receivables in branches opened during 2023 and 2024, partially offset by the transition of small loan customers to large loans.

Previous wording

Retail Loans– Retail loans outstanding decreased $4.2 million, or 67.2%, to $2.1 million at June 30, 2024, from $6.3 million at June 30, 2023. We ceased accepting applications for our retail loan product offering as of November 2022 to focus on growing our core loan portfolio.

Current wording

Retail Loans– Retail loans outstanding decreased $3.4 million, or 69.2%, to $1.5 million at September 30, 2024, from $4.9 million at September 30, 2023. We ceased accepting applications for our retail loan product offering as of November 2022 to focus on growing our core loan portfolio.

Previous wording

Net Income. Net income increased $8.9 million, or 60.8%, to $23.7 million during the six months ended June 30, 2024, from $14.7 million during the prior-year period. The increase was due to an increase in revenue of $18.5 million, partially offset by an increase in general and administrative expenses of $4.4 million, an increase in income taxes of $2.8 million and an increase in interest expense of $2.4 million.

Current wording

Net Income. Net income decreased $1.2 million, or 13.1%, to $7.7 million during the three months ended September 30, 2024, from $8.8 million during the prior-year period. The decrease was due to an increase in provision for credit losses of $3.4 million, an increase in interest expense of $2.4 million, an increase in general and administrative expenses of $0.4 million, and an increase in income taxes of $0.4 million, partially offset by an increase in revenue of $5.5 million.

Previous wording

Revenue. Total revenue increased $9.5 million, or 7.1%, to $143.0 million during the three months ended June 30, 2024, from $133.5 million during the prior-year period. The components of revenue are explained in greater detail below.

Current wording

Revenue. Total revenue increased $5.5 million, or 3.9%, to $146.3 million during the three months ended September 30, 2024, from $140.9 million during the prior-year period. The components of revenue are explained in greater detail below.

Previous wording

Interest and Fee Income. Interest and fee income increased $9.8 million, or 8.3%, to $127.9 million during the three months ended June 30, 2024, from $118.1 million during the prior-year period. The increase was primarily due to a 4.5% increase in average net finance receivables and a 1.1% increase in annualized average yield. The increase in yield was due to price increases and product mix to higher-rate small loan business.

Current wording

Interest and Fee Income. Interest and fee income increased $8.9 million, or 7.1%, to $133.9 million during the three months ended September 30, 2024, from $125.0 million during the prior-year period. The increase was primarily due to a 4.1% increase in average net finance receivables and a 0.9% increase in annualized average yield. The increase in yield was due to price increases, growth in our higher-margin small loan business, and improved credit performance.

Previous wording

Total originations increased to $426.1 million during the three months ended June 30, 2024, from $399.0 million during the prior-year period. Quarterly origination volume was higher than the prior-year period primarily due to an increase in small loan convenience checks. The following table represents the principal balance of loans originated and refinanced:

Current wording

Total originations increased to $426.2 million during the three months ended September 30, 2024, from $425.1 million during the prior-year period. The following table represents the principal balance of loans originated and refinanced:

Previous wording

Insurance Income, Net. Insurance income, net decreased $0.7 million, or 6.2% to $10.5 million during the three months ended June 30, 2024, from $11.2 million during the prior-year period. During both the three months ended June 30, 2024 and the prior-year period, personal property insurance premiums represented the largest component of aggregate earned insurance premiums, and life insurance claims expense represented the largest component of direct insurance expenses.

Current wording

Insurance Income, Net. Insurance income, net decreased $4.0 million, or 34.8% to $7.4 million during the three months ended September 30, 2024, from $11.4 million during the prior-year period. During both the three months ended September 30, 2024 and the prior-year period, personal property insurance premiums represented the largest component of aggregate earned insurance premiums. During the three months ended September 30, 2024 personal property claims reserves represented the largest component of direct insurance expenses. During the three months ended September 30, 2023 life insurance claims expense represented the largest component of direct insurance expenses.

Previous wording

Earned premiums decreased by $0.8 million, and claims, reserves, and certain direct expenses decreased by $0.1 million compared to the prior-year period. The decrease in earned premiums was primarily due to our strategic shifts in product and geographic mix which resulted in fewer active policies. The decrease in claims, reserves, and certain direct expenses was primarily due to a decrease in claims expense.

Current wording

Earned premiums decreased by $0.7 million, and claims, reserves, and certain direct expenses increased by $3.3 million, in each case compared to the prior-year period. The decrease in earned premiums was primarily due to our strategic shifts in product and geographic mix which resulted in fewer active policies. The increase in claims, reserves, and certain direct expenses was primarily due to an increase in personal property insurance claims and reserves of $3.5 million related to hurricane activity.

Previous wording

Other Income. Other income increased $0.9 million, or 11.3%, to $9.1 million during the six months ended June 30, 2024, from $8.2 million during the prior-year period, primarily due to higher late charges of $0.4 million associated with portfolio growth, higher interest income of $0.2 million from cash reserves, and an increase in sales of our auto club product of $0.1 million.

Current wording

Other Income. Other income increased $0.5 million, or 11.3%, to $5.0 million during the three months ended September 30, 2024, from $4.5 million during the prior-year period, primarily due to higher late charges of $0.2 million associated with portfolio growth, an increase in sales of our auto club product of $0.1 million, and higher investment income of $0.1 million.

Previous wording

Provision for Credit Losses. Our provision for credit losses increased $1.3 million, or 2.4%, to $53.8 million during the three months ended June 30, 2024, from $52.6 million during the prior-year period. The increase was due to a change in provision expense of $0.7 million and an increase in net credit losses of $0.6 million, in each case compared to the prior-year period. The increase in the provision for credit losses is explained in greater detail below.

Current wording

Provision for Credit Losses. Our provision for credit losses increased $3.4 million, or 6.7%, to $54.3 million during the three months ended September 30, 2024, from $50.9 million during the prior-year period. The increase was due to a change in provision expense of $3.2 million and an increase in net credit losses of $0.2 million, in each case compared to the prior-year period. The increase in the provision for credit losses is explained in greater detail below.

Previous wording

Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. During the three months ended June 30, 2024, and the prior-year period, the allowance for credit losses included releases of $1.7 million and $2.4 million, respectively. The allowance for credit losses as a percentage of finance receivables decreased to 10.5% as of June 30, 2024, from 10.7% as of the prior-year period due to changes in estimated future macroeconomic impacts on credit losses, partially offset by portfolio growth.

Current wording

Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. During the three months ended September 30, 2024, and the prior-year period, the allowance for credit losses included builds of $6.7 million and $3.5 million, respectively. We grew our loan portfolio sequentially by $46.0 million and $62.1 million during the three months ended September 30, 2024 and the prior-year period, respectively, which required increases to our provision for credit losses of $4.6 million and $6.3 million. The three months ended September 30, 2024 also included a $2.1 million reserve related to third quarter hurricane activity. The allowance for credit losses as a percentage of net finance receivables remained consistent at 10.6% as of September 30, 2024 and the prior-year period.

Previous wording

Net Credit Losses. Net credit losses increased $0.6 million, or 1.0%, to $55.5 million during the three months ended June 30, 2024, from $55.0 million during the prior-year period. The increase was primarily due to higher average net finance receivables. Annualized net credit losses as a percentage of average net finance receivables were 12.7% during the three months ended June 30, 2024, compared to 13.1% during the prior-year period.

Current wording

Net Credit Losses. Net credit losses increased $0.2 million, or 0.5%, to $47.6 million during the three months ended September 30, 2024, from $47.4 million during the prior-year period. The increase was primarily due to higher average net finance receivables. The net credit loss ratio was 10.6% during the three months ended September 30, 2024, compared to 11.0% during the prior-year period. Our net credit loss ratio during the three months ended September 30, 2024 was inclusive of a 30 basis point increase from growth in our higher-margin small loan business.

Previous wording

General and Administrative Expenses. Our general and administrative expenses increased $3.2 million, or 5.7%, to $60.1 million during the three months ended June 30, 2024, from $56.9 million during the prior-year period. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Current wording

General and Administrative Expenses. Our general and administrative expenses increased $0.4 million, or 0.6%, to $62.5 million during the three months ended September 30, 2024, from $62.1 million during the prior-year period. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Previous wording

Personnel. The largest component of general and administrative expenses was personnel expense, which increased $0.7 million, or 1.9%, to $37.1 million during the three months ended June 30, 2024, from $36.4 million during the prior-year period. The increase was driven by higher incentive costs of $1.1 million. This increase was partially offset by higher capitalized loan origination costs, which reduce personnel expenses, of $0.5 million compared to the prior-year period.

Current wording

Personnel. The largest component of general and administrative expenses was personnel expense, which decreased $1.5 million, or 3.8%, to $38.3 million during the three months ended September 30, 2024, from $39.8 million during the prior-year period. The decrease was driven by decreased labor costs of $0.8 million, capitalized loan origination costs which reduce personnel expenses of $0.3 million, lower incentives of $0.1 million, and lower recruiter fees of $0.1 million, in each case compared to the prior-year period.

Previous wording

Marketing. Marketing expenses increased $1.0 million, or 25.8%, to $4.8 million during the three months ended June 30, 2024, from $3.8 million during the prior-year period due to increased activity in our direct mail campaigns to support growth.

Current wording

Marketing. Marketing expenses increased $1.0 million, or 24.6%, to $5.1 million during the three months ended September 30, 2024, from $4.1 million during the prior-year period due to increased activity in our direct mail campaigns to support growth.

Previous wording

Other Expenses. Other expenses increased $1.6 million, or 15.1%, to $12.1 million during the three months ended June 30, 2024, from $10.5 million during the prior-year period. The prior-year period included insurance settlement proceeds of $1.0 million which reduced other expenses. The remaining increase was primarily due to investment in digital and technological capabilities of $0.4 million and collections expense of $0.3 million compared to the prior-year period.

Current wording

Other Expenses. Other expenses increased $0.6 million, or 5.4%, to $12.5 million during the three months ended September 30, 2024, from $11.9 million during the prior-year period. The increase was primarily due to investment in digital and technological capabilities of $0.4 million and higher credit bureau fees of $0.3 million.

Previous wording

Interest Expense. Interest expense increased $1.6 million, or 10.1%, to $17.9 million during the three months ended June 30, 2024, from $16.2 million during the prior-year period. The increase was primarily due to an increase in our average cost of debt as well as an increase in the average balance of our debt facilities. An increase in variable rate funding costs increased our annualized average cost of debt 0.35% to 5.25% during the three months ended June 30, 2024, from 4.90% as of the prior-year period. The average balance of our debt facilities increased to $1.4 billion during the three months ended June 30, 2024, from $1.3 billion during the prior-year period.

Current wording

Interest Expense. Interest expense increased $2.4 million, or 14.2%, to $19.4 million during the three months ended September 30, 2024, from $16.9 million during the prior-year period. The increase was primarily due to an increase in our average cost of debt as well as an increase in the average balance of our debt facilities. The annualized average cost of debt increased 0.58% to 5.58% during the three months ended September 30, 2024, from 5.00% during the prior-year period. The average balance of our debt facilities increased $30.0 million, or 2.2%, and the ending balance remained consistent at $1.4 billion as of the periods ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Income Taxes. Income taxes increased $2.8 million, or 59.5%, to $7.5 million during the six months ended June 30, 2024, from $4.7 million during the prior-year period. The increase was primarily due to a $11.7 million increase in income before income taxes compared to the prior-year period. Our effective tax rates were 24.1% and 24.2% for the six months ended June 30, 2024 and the prior-year period, respectively.

Current wording

Income Taxes. Income taxes increased $0.4 million, or 20.5%, to $2.5 million during the three months ended September 30, 2024, from $2.1 million during the prior-year period. The increase was primarily due to discrete tax benefits as a result of the re-establishment of deferred tax assets for certain state net operating losses during the prior-year period, partially offset by a $0.7 million decrease in income before income taxes compared to the prior-year period. Our effective tax rates were 24.6% and 19.1% for the three months ended September 30, 2024 and the prior-year period, respectively. The increase in the effective tax rate was primarily related to the re-establishment of deferred tax assets in the prior-year period.

Previous wording

Comparison of the Six Months Ended June 30, 2024, Versus the Six Months Ended June 30, 2023

Current wording

Comparison of the Nine Months Ended September 30, 2024, versus the Nine Months Ended September 30, 2023

Previous wording

Net Income. Net income increased $2.4 million, or 40.2%, to $8.4 million during the three months ended June 30, 2024, from $6.0 million during the prior-year period. The increase was due to an increase in revenue of $9.5 million, partially offset by an increase in general and administrative expenses of $3.2 million, an increase in interest expense of $1.6 million, an increase in provision for credit losses of $1.3 million, and an increase in income taxes of $1.0 million.

Current wording

Net Income. Net income increased $7.8 million, or 33.1%, to $31.3 million during the nine months ended September 30, 2024, from $23.5 million during the prior-year period. The increase was due to an increase in revenue of $23.9 million, partially offset by an increase in interest expense of $4.8 million, an increase in general and administrative expenses of $4.7 million, an increase in provision for credit losses of $3.4 million, and an increase in income taxes of $3.2 million.

Previous wording

Revenue. Total revenue increased $18.5 million, or 6.9%, to $287.3 million during the six months ended June 30, 2024, from $268.9 million during the prior-year period. The components of revenue are explained in greater detail below.

Current wording

Revenue. Total revenue increased $23.9 million, or 5.8%, to $433.7 million during the nine months ended September 30, 2024, from $409.7 million during the prior-year period. The components of revenue are explained in greater detail below.

Previous wording

Interest and Fee Income. Interest and fee income increased $18.2 million, or 7.6%, to $256.7 million during the six months ended June 30, 2024, from $238.5 million during the prior-year period. The increase was primarily due to a 4.2% increase in average net finance receivables and a 1.0% increase in annualized average yield. The increase in yield was due to price increases and product mix to higher-rate small loan business. The six months ended June 30, 2024 and June 30, 2023 included reductions in revenue reversals of an estimated $1.7 million and $1.9 million attributable to the loan sales that occurred during the fourth quarters of 2023 and 2022, respectively.

Current wording

Interest and Fee Income. Interest and fee income increased $27.1 million, or 7.5%, to $390.6 million during the nine months ended September 30, 2024, from $363.5 million during the prior-year period. The increase was primarily due to a 4.2% increase in average net finance receivables and a 0.9% increase in annualized average yield. The increase in yield was due to price increases, growth in our higher-margin small loan business, and improved credit performance. The nine months ended September 30, 2024 and September 30, 2023 included reductions in revenue reversals of an estimated $1.7 million and $1.9 million attributable to the loan sales that occurred during the fourth quarters of 2023 and 2022, respectively.

Previous wording

Total originations increased to $752.4 million during the six months ended June 30, 2024, from $702.2 million during the prior-year period. Origination volume increased during the six months ended June 30, 2024 compared to the prior-year period due to an increase in small loan convenience checks. The following table represents the principal balance of loans originated and refinanced:

Current wording

Total originations increased to $1.2 billion during the nine months ended September 30, 2024, from $1.1 billion during the prior-year period. Origination volume increased during the nine months ended September 30, 2024 compared to the prior-year period due to an increase in small loan convenience checks. The following table represents the principal balance of loans originated and refinanced:

Previous wording

Insurance Income, Net. Insurance income, net decreased $0.7 million, or 3.1%, to $21.5 million during the six months ended June 30, 2024, from $22.2 million during the prior-year period. During both the six months ended June 30, 2024 and the prior-year period, personal property insurance premiums represented the largest component of aggregate earned insurance premiums. Life insurance claims expense represented the largest component of direct insurance expenses for both the six months ended June 30, 2024 and the prior-year period.

Current wording

Insurance Income, Net. Insurance income, net decreased $4.6 million, or 13.8%, to $28.9 million during the nine months ended September 30, 2024, from $33.5 million during the prior-year period. During both the nine months ended September 30, 2024 and the prior-year period, personal property insurance premiums represented the largest component of aggregate earned insurance premiums. Life insurance claims expense represented the largest component of direct insurance expenses for both the nine months ended September 30, 2024 and the prior-year period.

Previous wording

Earned premiums decreased by $1.8 million and claims, reserves, and certain direct expenses decreased by $1.1 million compared to the prior-year period. The decrease in earned premiums was primarily due to our strategic shifts in product and geographic mix which resulted in fewer active policies. The decrease in claims, reserves, and certain direct expenses was primarily due to a decrease in claims expense.

Current wording

Earned premiums decreased by $2.4 million and claims, reserves, and certain direct expenses increased by $2.2 million, in each case compared to the prior-year period. The decrease in earned premiums was primarily due to our strategic shifts in product and geographic mix which resulted in fewer active policies. The increase in claims, reserves, and certain direct expenses was primarily due to an increase in personal property insurance claims and reserves of $3.5 million related to hurricane activity.