Regional Management Q3 Earnings Call Highlights

Key Points

• Regional Management reported record third-quarter revenue of $178.8 million and net income of $15.1 million, up from $14.4 million a year earlier, supported by 8% portfolio growth and higher bank-partnership fee income.
• Credit pressure remains elevated: the net credit loss rate improved sequentially to 10.9% but exceeded the year-ago level, while 30-plus-day delinquencies rose to 7.5%. The company tightened underwriting, reduced digital originations and shifted its portfolio toward larger, secured loans.
• The company maintained its full-year growth guidance but now expects fourth-quarter net income to decline sequentially because of higher seasonal losses, funding costs and upfront expenses from accelerating its Column bank partnership.

Regional Management NYSE: RM reported third-quarter 2026 net income of $15.1 million, or $1.61 per diluted share, as record revenue and portfolio growth offset higher credit losses, operating expenses and interest costs. Net income increased from $14.4 million, or $1.42 per share, in the prior-year quarter.

President and CEO Lakhbir Lamba said the consumer lender delivered “strong net income, record quarterly revenue, 8% year-over-year portfolio growth, and 16% annualized return on equity.” The company’s net finance receivables grew by $62 million during the quarter to $2.2 billion.

Third-quarter revenue rose 8% year over year to a record $178.8 million, supported by an 8.5% increase in average net finance receivables and fee income generated through the company’s bank partnership with Column. Other income, including bank partnership fee revenue, more than doubled from the year-earlier period to $12.3 million.

Credit trends remain elevated

Regional Management’s net credit loss rate improved 130 basis points sequentially to 10.9%, reflecting seasonal trends, but was 70 basis points higher than a year earlier and 20 basis points above the company’s July outlook. Its 30-plus-day delinquency rate was 7.5%, up 50 basis points both sequentially and year over year.

Lamba said the year-over-year deterioration was concentrated in certain portfolio segments, primarily loans originated in 2025. Slower portfolio growth compared with last year also increased the loss rate, he said. The company also cited elevated gas prices and inflation as pressures on borrowers with limited discretionary income.

Management said it has tightened underwriting in underperforming areas, especially its digital affiliate channel. Regional Management either exited or increased score cutoffs in its highest-risk digital affiliate segments and eliminated other high-risk cohorts. Lamba said those actions addressed segments believed to account for roughly half of the 70-basis-point year-over-year increase in net credit losses.

As a result, digitally sourced originations fell 13% year over year. The company also implemented enhanced fraud controls in June, including third-party fraud scores, stepped-up identity verification and a centralized fraud operations team. According to Lamba, early first-payment-default readings for July originations were better than the prior year across every channel, though he said the loans need more time to mature.

Regional Management is also rolling out a proprietary origination scorecard designed to better separate performing and non-performing accounts, particularly among new borrowers and digital-channel customers. The scorecard is live in most states and is expected to be fully deployed in the fourth quarter. The company appointed Liz Canini as chief credit risk officer; she previously held consumer lending and credit risk roles at Citi, PNC and HSBC.

Portfolio mix shifts toward larger, secured loans

Total originations reached $530 million, increasing 5.3% sequentially and 1.5% from a year earlier. Large-loan originations rose 12% year over year, while small-loan originations declined 22% as the company tightened underwriting in higher-risk segments.

Large loans represented 79% of the ending portfolio, compared with 74% a year earlier. The auto-secured portfolio, which management described as its best-credit-quality product, increased 25% year over year and accounted for nearly 16% of total receivables. Its 30-plus-day delinquency rate was 2.2%.

During the question-and-answer session, Lamba said the company has not abandoned small-dollar loans, but will pursue them when the economics meet its risk-adjusted return requirements. He said underwriting and pricing decisions are based on proprietary risk scores and borrowers’ discretionary income, with loan offers and pricing adjusted to risk and affordability.

The allowance for credit losses increased by $6.8 million during the quarter to $230.8 million, primarily to support portfolio growth. The allowance rate was 10.4%, unchanged from the prior quarter and 10 basis points above the prior year.

Column partnership expands

The Column bank partnership expanded into North Carolina, Louisiana and Missouri during the quarter. More than 40% of October originations had come through the partnership, compared with roughly 28% on a run-rate basis in July, according to Lamba. Regional Management expects substantially all branches to operate under the partnership by the end of 2027.

Management said bank partnership fee income added approximately 120 basis points to total revenue yield during the third quarter. It projects that, for comparable loans, the program can improve pretax margins by at least 200 basis points relative to loans originated under the company’s state-licensed model.

Chief Financial and Administrative Officer Harp Rana said the partnership changes the timing of certain expenses because some origination costs that are deferred under the state-license model are recognized immediately when partnership loans are originated. The program therefore raises near-term operating expenses, but management said the underlying economics remain accretive to earnings.

Regional Management’s operating expense ratio improved 20 basis points year over year to 12.6%, despite approximately 40 basis points of upfront bank-partnership origination costs. The company also continued investments in a new loan-origination platform, centralized late-stage collections, enhanced contact data, branded calling and AI-enabled collection tools. It launched end-to-end digital lending in July and said it will expand that channel only as credit performance validates returns.

Guidance maintained, but fourth-quarter income expected to decline sequentially

The company maintained its full-year outlook for net income growth of 6% to 9%, diluted earnings-per-share growth of 10% to 13%, and portfolio growth of 5% to 7%.

However, Rana said Regional Management now expects fourth-quarter net income to be lower than third-quarter income, reversing its prior expectation for a sequential increase. The updated view reflects seasonally higher net credit losses above the prior outlook, increased upfront costs tied to an accelerated bank partnership rollout, higher funding costs and the timing of certain general and administrative expenses.

For the fourth quarter, the company expects approximately $60 million in portfolio growth, a net credit loss rate of about 11.5%, a roughly $6 million reserve build and a sequential increase in total revenue yield. Its cost of funds is expected to rise to approximately 4.7% as lower-cost fixed-rate funding amortizes and variable-rate debt costs increase.

Regional Management repurchased about 266,000 shares for $10 million during the quarter at a weighted average price of $37.64 per share. Its board also declared a fourth-quarter dividend of $0.30 per share. Looking beyond 2026, management said it is targeting return on equity above 18% over time and plans to provide its 2027 outlook on its next earnings call.

About Regional Management (NYSE:RM)

Regional Management Corp. NYSE: RM is a consumer finance company that provides credit products to individuals who may have limited access to traditional bank financing. The company primarily offers small and medium-sized installment loans, including secured and unsecured personal loans, through a network of local branches and digital channels.

Its services may also include optional credit-related products, such as insurance and other ancillary offerings associated with consumer lending.

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