The following table presents the assets and liabilities of our consolidated variable interest entities:
The following table reconciles cash and restricted cash from the Consolidated Balance Sheets to the statements above:
Regional Management Corp. and Subsidiaries
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 purchase loans, but ceased such originations in November 2017. As of March 31, 2021, the Company operated under the name “Regional Finance” in 365 branch locations across 11 states in the Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States.
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. 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 half of the year and rise in the second half of the year. The current expected credit loss (“CECL”) accounting model requires earlier recognition of credit losses compared to the prior incurred loss approach. This 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 compared to prior years. Consequently, the Company experiences seasonal fluctuations in its operating results. However, changes in borrower assistance programs and customer access to external economic stimulus measures related to the novel strain of coronavirus (“COVID-19”) have impacted the Company’s typical seasonal trends for loan volume and delinquency.
Note 2. Basis of Presentation and Significant Accounting Policies
Basis of presentation: The consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and, accordingly, do not include all information and note disclosures required by GAAP for complete financial statements. The interim financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management, the interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows in accordance with GAAP. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC.
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 GAAP and conform to general practices within the consumer finance industry.
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.
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.
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.
7
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.
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, and the fair value of financial instruments.
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.
Net 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 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 non-essential household goods, automobiles, and/or other vehicles. 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 purchase loans in November 2017.
Allowance for credit losses: The Financial Accounting Standards Board (the “FASB”) issued an accounting update in June 2016 to change the impairment model for estimating credit losses on financial assets. The previous incurred loss impairment model required the recognition of credit losses when it was probable that a loss had been incurred. The incurred loss model was replaced by the CECL model, which requires entities to estimate the lifetime expected credit loss on financial instruments and to record an allowance to offset the amortized cost basis of the financial asset. The CECL model requires earlier recognition of credit losses as compared to the incurred loss approach. The Company adopted this standard effective January 1, 2020.
The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining its estimate of expected credit losses, the Company evaluates information related to credit metrics, changes in its lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.
The Company selected a static pool Probability of Default (“PD”) / Loss Given Default (“LGD”) model to estimate its base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical static pools of net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).
To enhance the precision of the allowance for credit loss estimate, the Company evaluates its finance receivable portfolio on a pool basis and segments each pool of finance receivables with similar credit risk characteristics. As part of its evaluation, the Company considers loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, the Company selected the following segmentation: product type, Fair Isaac Corporation (“FICO”) score, and delinquency status.
The Company accounts for certain finance receivables that have been modified by bankruptcy proceedings or company loss mitigation policies using a discounted cash flows approach to properly reserve for customer concessions (rate reductions and term extensions).
8
As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). The Company uses its segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.
Reasonable and supportable macroeconomic forecasts are required for the Company’s allowance for credit loss model. The Company engaged a major rating service to assist with compiling a reasonable and supportable forecast. The Company reviews macroeconomic forecasts to use in its allowance for credit losses. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations. The Company does not require reversion adjustments, as the contractual lives of its portfolio (considering the effect of prepayments) are shorter than its available forecast periods.
The Company charges credit losses against the allowance when an account reaches 180 days contractually delinquent, subject to certain exceptions. The Company’s non-titled customer accounts in a confirmed bankruptcy are charged off in the month following the bankruptcy notification or 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. Subsequent recoveries of amounts charged off, if any, are credited to the allowance.
Troubled Debt Restructurings: The Company classifies a finance receivable as a troubled debt restructuring (each, a “TDR”) when the Company modifies the finance receivable’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grants a concession that it would not otherwise consider (including Chapter 13 bankruptcies and delinquent renewals). Modifications primarily include an interest rate reduction and/or term extension to reduce the borrower’s monthly payment. Once a loan is classified as a TDR, it remains a TDR for the purpose of calculating the allowance for credit losses for the remainder of its contractual term.
The Company establishes its allowance for credit losses related to its TDRs by calculating the present value of all expected cash flows (discounted at the finance receivable’s effective interest rate prior to modification) less the amortized costs of the aggregated pool. The Company uses the modified interest rates and certain assumptions, including expected credit losses and recoveries, to estimate the expected cash flows from its TDRs.
Nonaccrual status: 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. Interest received on such loans is accounted for on the cash-basis method, until qualifying for return to accrual. Under the cash-basis method, interest income is recorded when the payment is received. Loans resume accruing interest when the past due status is brought below 90 days. The Company made a policy election to not record an allowance for credit losses related to accrued interest because it has nonaccrual and charge-off policies that result in the timely suspension and reversal of accrued interest.
Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses
Net finance receivables for the periods indicated consisted of the following:
In thousands
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Small loans
|
|
$
|
371,188
|
|
|
$
|
403,062
|
|
Large loans
|
|
|
719,441
|
|
|
|
715,210
|
|
Automobile loans
|
|
|
3,033
|
|
|
|
3,889
|
|
Retail loans
|
|
|
11,941
|
|
|
|
14,098
|
|
Net finance receivables
|
|
$
|
1,105,603
|
|
|
$
|
1,136,259
|
|
Net finance receivables included net deferred origination fees of $11.8 million and $12.6 million as of March 31, 2021 and December 31, 2020, respectively.
The credit quality of the Company’s finance receivable portfolio is dependent on the Company’s ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as it grows its portfolio. The allowance for credit losses uses FICO scores and delinquency as key data points in estimating the allowance. The Company uses six FICO band categories to assess FICO scores. The first FICO band category includes the lowest FICO scores, while the sixth FICO band category includes the highest FICO scores.
9
Net finance receivables by product, FICO band, and origination year as of March 31, 2021 are as follows:
|
|
Net Finance Receivables by Origination Year
|
|
In thousands
|
|
2021 (1)
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
Prior
|
|
|
Total Net Finance Receivables
|
|
Small Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Band
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
18,423
|
|
|
$
|
51,375
|
|
|
$
|
10,823
|
|
|
$
|
1,116
|
|
|
$
|
129
|
|
|
$
|
29
|
|
|
$
|
81,895
|
|
2
|
|
|
10,776
|
|
|
|
27,530
|
|
|
|
4,419
|
|
|
|
296
|
|
|
|
18
|
|
|
|
6
|
|
|
|
43,045
|
|
3
|
|
|
11,752
|
|
|
|
28,594
|
|
|
|
4,577
|
|
|
|
308
|
|
|
|
12
|
|
|
|
4
|
|
|
|
45,247
|
|
4
|
|
|
12,869
|
|
|
|
30,604
|
|
|
|
4,668
|
|
|
|
287
|
|
|
|
13
|
|
|
|
4
|
|
|
|
48,445
|
|
5
|
|
|
13,535
|
|
|
|
33,408
|
|
|
|
5,617
|
|
|
|
209
|
|
|
|
5
|
|
|
|
3
|
|
|
|
52,777
|
|
6
|
|
|
23,388
|
|
|
|
64,496
|
|
|
|
11,591
|
|
|
|
295
|
|
|
|
7
|
|
|
|
2
|
|
|
|
99,779
|
|
Total small loans
|
|
$
|
90,743
|
|
|
$
|
236,007
|
|
|
$
|
41,695
|
|
|
$
|
2,511
|
|
|
$
|
184
|
|
|
$
|
48
|
|
|
$
|
371,188
|
|
Large Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Band
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
10,759
|
|
|
$
|
39,799
|
|
|
$
|
20,802
|
|
|
$
|
5,944
|
|
|
$
|
2,320
|
|
|
$
|
884
|
|
|
$
|
80,508
|
|
2
|
|
|
9,310
|
|
|
|
30,017
|
|
|
|
11,177
|
|
|
|
1,728
|
|
|
|
385
|
|
|
|
168
|
|
|
|
52,785
|
|
3
|
|
|
20,037
|
|
|
|
60,438
|
|
|
|
27,194
|
|
|
|
4,593
|
|
|
|
766
|
|
|
|
83
|
|
|
|
113,111
|
|
4
|
|
|
24,369
|
|
|
|
73,605
|
|
|
|
33,242
|
|
|
|
5,047
|
|
|
|
802
|
|
|
|
60
|
|
|
|
137,125
|
|
5
|
|
|
22,013
|
|
|
|
68,169
|
|
|
|
30,447
|
|
|
|
5,261
|
|
|
|
845
|
|
|
|
31
|
|
|
|
126,766
|
|
6
|
|
|
38,881
|
|
|
|
112,170
|
|
|
|
48,027
|
|
|
|
8,883
|
|
|
|
1,128
|
|
|
|
57
|
|
|
|
209,146
|
|
Total large loans
|
|
$
|
125,369
|
|
|
$
|
384,198
|
|
|
$
|
170,889
|
|
|
$
|
31,456
|
|
|
$
|
6,246
|
|
|
$
|
1,283
|
|
|
$
|
719,441
|
|
Automobile Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Band
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
729
|
|
|
$
|
553
|
|
|
$
|
1,282
|
|
2
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
292
|
|
|
|
247
|
|
|
|
539
|
|
3
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
420
|
|
|
|
195
|
|
|
|
615
|
|
4
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
204
|
|
|
|
84
|
|
|
|
288
|
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60
|
|
|
|
92
|
|
|
|
152
|
|
6
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
92
|
|
|
|
65
|
|
|
|
157
|
|
Total automobile loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,797
|
|
|
$
|
1,236
|
|
|
$
|
3,033
|
|
Retail Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Band
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
11
|
|
|
$
|
320
|
|
|
$
|
608
|
|
|
$
|
137
|
|
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
1,084
|
|
2
|
|
|
—
|
|
|
|
197
|
|
|
|
483
|
|
|
|
119
|
|
|
|
4
|
|
|
|
2
|
|
|
|
805
|
|
3
|
|
|
138
|
|
|
|
720
|
|
|
|
512
|
|
|
|
141
|
|
|
|
11
|
|
|
|
5
|
|
|
|
1,527
|
|
4
|
|
|
292
|
|
|
|
1,593
|
|
|
|
960
|
|
|
|
343
|
|
|
|
15
|
|
|
|
2
|
|
|
|
3,205
|
|
5
|
|
|
284
|
|
|
|
1,260
|
|
|
|
811
|
|
|
|
281
|
|
|
|
29
|
|
|
|
1
|
|
|
|
2,666
|
|
6
|
|
|
304
|
|
|
|
1,279
|
|
|
|
780
|
|
|
|
270
|
|
|
|
17
|
|
|
|
4
|
|
|
|
2,654
|
|
Total retail loans
|
|
$
|
1,029
|
|
|
$
|
5,369
|
|
|
$
|
4,154
|
|
|
$
|
1,291
|
|
|
$
|
81
|
|
|
$
|
17
|
|
|
$
|
11,941
|
|
Total Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Band
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
29,193
|
|
|
$
|
91,494
|
|
|
$
|
32,233
|
|
|
$
|
7,197
|
|
|
$
|
3,183
|
|
|
$
|
1,469
|
|
|
$
|
164,769
|
|
2
|
|
|
20,086
|
|
|
|
57,744
|
|
|
|
16,079
|
|
|
|
2,143
|
|
|
|
699
|
|
|
|
423
|
|
|
|
97,174
|
|
3
|
|
|
31,927
|
|
|
|
89,752
|
|
|
|
32,283
|
|
|
|
5,042
|
|
|
|
1,209
|
|
|
|
287
|
|
|
|
160,500
|
|
4
|
|
|
37,530
|
|
|
|
105,802
|
|
|
|
38,870
|
|
|
|
5,677
|
|
|
|
1,034
|
|
|
|
150
|
|
|
|
189,063
|
|
5
|
|
|
35,832
|
|
|
|
102,837
|
|
|
|
36,875
|
|
|
|
5,751
|
|
|
|
939
|
|
|
|
127
|
|
|
|
182,361
|
|
6
|
|
|
62,573
|
|
|
|
177,945
|
|
|
|
60,398
|
|
|
|
9,448
|
|
|
|
1,244
|
|
|
|
128
|
|
|
|
311,736
|
|
Total loans
|
|
$
|
217,141
|
|
|
$
|
625,574
|
|
|
$
|
216,738
|
|
|
$
|
35,258
|
|
|
$
|
8,308
|
|
|
$
|
2,584
|
|
|
$
|
1,105,603
|
|
(1)
|
Includes loans originated during the three months ended March 31, 2021.
|
10
The contractual delinquency of the net finance receivables portfolio by product and aging for the periods indicated are as follows:
|
|
March 31, 2021
|
|
|
|
Small
|
|
|
Large
|
|
|
Automobile
|
|
|
Retail
|
|
|
Total
|
|
In thousands
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
Current
|
|
$
|
331,377
|
|
|
|
89.3
|
%
|
|
$
|
666,828
|
|
|
|
92.6
|
%
|
|
$
|
2,377
|
|
|
|
78.4
|
%
|
|
$
|
10,277
|
|
|
|
86.1
|
%
|
|
$
|
1,010,859
|
|
|
|
91.4
|
%
|
1 to 29 days past due
|
|
|
17,229
|
|
|
|
4.6
|
%
|
|
|
28,436
|
|
|
|
4.0
|
%
|
|
|
429
|
|
|
|
14.1
|
%
|
|
|
930
|
|
|
|
7.8
|
%
|
|
|
47,024
|
|
|
|
4.3
|
%
|
Delinquent accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 to 59 days
|
|
|
5,106
|
|
|
|
1.3
|
%
|
|
|
5,960
|
|
|
|
0.8
|
%
|
|
|
51
|
|
|
|
1.7
|
%
|
|
|
135
|
|
|
|
1.1
|
%
|
|
|
11,252
|
|
|
|
1.0
|
%
|
60 to 89 days
|
|
|
4,697
|
|
|
|
1.3
|
%
|
|
|
4,896
|
|
|
|
0.7
|
%
|
|
|
42
|
|
|
|
1.4
|
%
|
|
|
173
|
|
|
|
1.4
|
%
|
|
|
9,808
|
|
|
|
0.9
|
%
|
90 to 119 days
|
|
|
4,317
|
|
|
|
1.2
|
%
|
|
|
4,197
|
|
|
|
0.7
|
%
|
|
|
37
|
|
|
|
1.2
|
%
|
|
|
131
|
|
|
|
1.2
|
%
|
|
|
8,682
|
|
|
|
0.8
|
%
|
120 to 149 days
|
|
|
4,032
|
|
|
|
1.1
|
%
|
|
|
4,515
|
|
|
|
0.6
|
%
|
|
|
36
|
|
|
|
1.2
|
%
|
|
|
134
|
|
|
|
1.1
|
%
|
|
|
8,717
|
|
|
|
0.8
|
%
|
150 to 179 days
|
|
|
4,430
|
|
|
|
1.2
|
%
|
|
|
4,609
|
|
|
|
0.6
|
%
|
|
|
61
|
|
|
|
2.0
|
%
|
|
|
161
|
|
|
|
1.3
|
%
|
|
|
9,261
|
|
|
|
0.8
|
%
|
Total delinquency
|
|
$
|
22,582
|
|
|
|
6.1
|
%
|
|
$
|
24,177
|
|
|
|
3.4
|
%
|
|
$
|
227
|
|
|
|
7.5
|
%
|
|
$
|
734
|
|
|
|
6.1
|
%
|
|
$
|
47,720
|
|
|
|
4.3
|
%
|
Total net finance receivables
|
|
$
|
371,188
|
|
|
|
100.0
|
%
|
|
$
|
719,441
|
|
|
|
100.0
|
%
|
|
$
|
3,033
|
|
|
|
100.0
|
%
|
|
$
|
11,941
|
|
|
|
100.0
|
%
|
|
$
|
1,105,603
|
|
|
|
100.0
|
%
|
Net finance receivables in nonaccrual status
|
|
$
|
13,606
|
|
|
|
3.7
|
%
|
|
$
|
14,586
|
|
|
|
2.0
|
%
|
|
$
|
184
|
|
|
|
6.1
|
%
|
|
$
|
508
|
|
|
|
4.3
|
%
|
|
$
|
28,884
|
|
|
|
2.6
|
%
|
|
|
December 31, 2020
|
|
|
|
Small
|
|
|
Large
|
|
|
Automobile
|
|
|
Retail
|
|
|
Total
|
|
In thousands
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
Current
|
|
$
|
342,744
|
|
|
|
85.0
|
%
|
|
$
|
633,806
|
|
|
|
88.6
|
%
|
|
$
|
2,729
|
|
|
|
70.2
|
%
|
|
$
|
11,188
|
|
|
|
79.3
|
%
|
|
$
|
990,467
|
|
|
|
87.2
|
%
|
1 to 29 days past due
|
|
|
32,615
|
|
|
|
8.1
|
%
|
|
|
50,145
|
|
|
|
7.0
|
%
|
|
|
864
|
|
|
|
22.2
|
%
|
|
|
1,718
|
|
|
|
12.2
|
%
|
|
|
85,342
|
|
|
|
7.5
|
%
|
Delinquent accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 to 59 days
|
|
|
8,195
|
|
|
|
2.1
|
%
|
|
|
9,808
|
|
|
|
1.4
|
%
|
|
|
49
|
|
|
|
1.2
|
%
|
|
|
329
|
|
|
|
2.3
|
%
|
|
|
18,381
|
|
|
|
1.6
|
%
|
60 to 89 days
|
|
|
6,907
|
|
|
|
1.7
|
%
|
|
|
7,639
|
|
|
|
1.1
|
%
|
|
|
119
|
|
|
|
3.1
|
%
|
|
|
290
|
|
|
|
2.1
|
%
|
|
|
14,955
|
|
|
|
1.3
|
%
|
90 to 119 days
|
|
|
4,866
|
|
|
|
1.2
|
%
|
|
|
5,407
|
|
|
|
0.8
|
%
|
|
|
29
|
|
|
|
0.7
|
%
|
|
|
194
|
|
|
|
1.4
|
%
|
|
|
10,496
|
|
|
|
0.9
|
%
|
120 to 149 days
|
|
|
4,193
|
|
|
|
1.0
|
%
|
|
|
4,648
|
|
|
|
0.6
|
%
|
|
|
37
|
|
|
|
1.0
|
%
|
|
|
207
|
|
|
|
1.5
|
%
|
|
|
9,085
|
|
|
|
0.8
|
%
|
150 to 179 days
|
|
|
3,542
|
|
|
|
0.9
|
%
|
|
|
3,757
|
|
|
|
0.5
|
%
|
|
|
62
|
|
|
|
1.6
|
%
|
|
|
172
|
|
|
|
1.2
|
%
|
|
|
7,533
|
|
|
|
0.7
|
%
|
Total delinquency
|
|
$
|
27,703
|
|
|
|
6.9
|
%
|
|
$
|
31,259
|
|
|
|
4.4
|
%
|
|
$
|
296
|
|
|
|
7.6
|
%
|
|
$
|
1,192
|
|
|
|
8.5
|
%
|
|
$
|
60,450
|
|
|
|
5.3
|
%
|
Total net finance receivables
|
|
$
|
403,062
|
|
|
|
100.0
|
%
|
|
$
|
715,210
|
|
|
|
100.0
|
%
|
|
$
|
3,889
|
|
|
|
100.0
|
%
|
|
$
|
14,098
|
|
|
|
100.0
|
%
|
|
$
|
1,136,259
|
|
|
|
100.0
|
%
|
Net finance receivables in nonaccrual status
|
|
$
|
14,617
|
|
|
|
3.6
|
%
|
|
$
|
16,683
|
|
|
|
2.3
|
%
|
|
$
|
216
|
|
|
|
5.6
|
%
|
|
$
|
723
|
|
|
|
5.1
|
%
|
|
$
|
32,239
|
|
|
|
2.8
|
%
|
The accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If a loan is charged off, the accrued interest is reversed as a reduction of interest and fee income. The Company reversed $2.4 million of accrued interest as a reduction of interest and fee income for the three months ended March 31, 2021.
The following table illustrates the impacts to the allowance for credit losses for the periods indicated:
|
|
Three Months Ended (Unaudited)
|
|
In thousands
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Beginning balance
|
|
$
|
150,000
|
|
|
$
|
62,200
|
|
Impact of CECL adoption
|
|
|
—
|
|
|
|
60,100
|
|
COVID-19 reserve build (release)
|
|
|
(6,600
|
)
|
|
|
23,900
|
|
Other
|
|
|
(3,800
|
)
|
|
|
(3,800
|
)
|
Ending balance
|
|
$
|
139,600
|
|
|
$
|
142,400
|
|
Allowance for credit losses as a percentage of net finance receivables
|
|
|
12.6
|
%
|
|
|
12.9
|
%
|
The allowance for credit losses was $62.2 million, or 5.5% of net finance receivables, as of December 31, 2019. The Company adopted CECL accounting on January 1, 2020, and increased the allowance for credit losses to $122.3 million, or 10.8% of net finance receivables.
11
In March 2020, the spread of COVID-19 was declared a pandemic by the World Health Organization. Subsequently, the pandemic was declared a national emergency in the United States and several government stimulus programs were signed into law which provided a variety of financial aid to a meaningful portion of the Company’s customer base.
During the three months ended March 31, 2021, the Company decreased the allowance for credit losses by $10.4 million, which included a $6.6 million release related to the economic impact of COVID-19, in addition to a base reserve release of $3.8 million. As of March 31, 2021, the allowance for credit losses included $23.8 million of reserves related to the economic impact of COVID-19. During the three months ended March 31, 2020, the Company increased the allowance for credit losses by $20.1 million, which included a $23.9 million build related to the economic impact of COVID-19, offset by a base reserve release of $3.8 million. The ending balance of the allowance for credit losses as a percentage of net finance receivables was 12.6% and 12.9% as of March 31, 2021 and 2020, respectively. The Company ran several macroeconomic stress scenarios, and its final forecast assuming unemployment of under 10% at the end of 2021. The macroeconomic scenario was adjusted for the potential benefits of the American Rescue Plan Act signed into law in March 2021.
The following is a reconciliation of the allowance for credit losses by product for the periods indicated:
In thousands
|
|
Small
|
|
|
Large
|
|
|
Automobile
|
|
|
Retail
|
|
|
Total
|
|
Beginning balance at January 1, 2021
|
|
$
|
59,410
|
|
|
$
|
87,275
|
|
|
$
|
783
|
|
|
$
|
2,532
|
|
|
$
|
150,000
|
|
Provision for credit losses
|
|
|
4,761
|
|
|
|
6,844
|
|
|
|
(116
|
)
|
|
|
(127
|
)
|
|
|
11,362
|
|
Credit losses
|
|
|
(10,973
|
)
|
|
|
(11,260
|
)
|
|
|
(80
|
)
|
|
|
(456
|
)
|
|
|
(22,769
|
)
|
Recoveries
|
|
|
475
|
|
|
|
486
|
|
|
|
17
|
|
|
|
29
|
|
|
|
1,007
|
|
Ending balance at March 31, 2021
|
|
$
|
53,673
|
|
|
$
|
83,345
|
|
|
$
|
604
|
|
|
$
|
1,978
|
|
|
$
|
139,600
|
|
Net finance receivables at March 31, 2021
|
|
$
|
371,188
|
|
|
$
|
719,441
|
|
|
$
|
3,033
|
|
|
$
|
11,941
|
|
|
$
|
1,105,603
|
|
Allowance as percentage of net finance receivables at March 31, 2021
|
|
|
14.5
|
%
|
|
|
11.6
|
%
|
|
|
19.9
|
%
|
|
|
16.6
|
%
|
|
|
12.6
|
%
|
In thousands
|
|
Small
|
|
|
Large
|
|
|
Automobile
|
|
|
Retail
|
|
|
Total
|
|
Beginning balance at January 1, 2020
|
|
$
|
30,588
|
|
|
$
|
29,148
|
|
|
$
|
820
|
|
|
$
|
1,644
|
|
|
$
|
62,200
|
|
Impact of CECL adoption
|
|
|
24,185
|
|
|
|
33,550
|
|
|
|
599
|
|
|
|
1,766
|
|
|
|
60,100
|
|
Provision for credit losses
|
|
|
24,550
|
|
|
|
23,755
|
|
|
|
98
|
|
|
|
1,119
|
|
|
|
49,522
|
|
Credit losses
|
|
|
(17,527
|
)
|
|
|
(11,961
|
)
|
|
|
(311
|
)
|
|
|
(881
|
)
|
|
|
(30,680
|
)
|
Recoveries
|
|
|
658
|
|
|
|
521
|
|
|
|
41
|
|
|
|
38
|
|
|
|
1,258
|
|
Ending balance at March 31, 2020
|
|
$
|
62,454
|
|
|
$
|
75,013
|
|
|
$
|
1,247
|
|
|
$
|
3,686
|
|
|
$
|
142,400
|
|
Net finance receivables at March 31, 2020
|
|
$
|
440,282
|
|
|
$
|
632,593
|
|
|
$
|
7,532
|
|
|
$
|
21,878
|
|
|
$
|
1,102,285
|
|
Allowance as percentage of net finance receivables at March 31, 2020
|
|
|
14.2
|
%
|
|
|
11.9
|
%
|
|
|
16.6
|
%
|
|
|
16.8
|
%
|
|
|
12.9
|
%
|
The Company makes modifications to its finance receivables to assist borrowers experiencing financial difficulties. The Company classifies a loan as a TDR finance receivable when the Company modifies a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grants a concession that it would not otherwise consider.
The amount of TDR net finance receivables and the related TDR allowance for credit losses for the periods indicated are as follows:
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
In thousands
|
|
TDR Net Finance Receivables
|
|
|
TDR Allowance for Credit Losses
|
|
|
TDR Net Finance Receivables
|
|
|
TDR Allowance for Credit Losses
|
|
Small loans
|
|
$
|
4,391
|
|
|
$
|
1,862
|
|
|
$
|
8,975
|
|
|
$
|
3,380
|
|
Large loans
|
|
|
14,372
|
|
|
|
4,850
|
|
|
|
20,631
|
|
|
|
7,084
|
|
Automobile loans
|
|
|
274
|
|
|
|
114
|
|
|
|
460
|
|
|
|
192
|
|
Retail loans
|
|
|
70
|
|
|
|
29
|
|
|
|
112
|
|
|
|
47
|
|
Total
|
|
$
|
19,107
|
|
|
$
|
6,855
|
|
|
$
|
30,178
|
|
|
$
|
10,703
|
|
12
The following table provides the number and amount of net finance receivables modified and classified as TDRs during the periods presented:
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Dollars in thousands
|
|
Number of Loans
|
|
|
TDR Net Finance Receivables (1)
|
|
|
Number of Loans
|
|
|
TDR Net Finance Receivables (1)
|
|
Small loans
|
|
|
787
|
|
|
$
|
1,455
|
|
|
|
1,801
|
|
|
$
|
5,374
|
|
Large loans
|
|
|
621
|
|
|
|
3,118
|
|
|
|
1,277
|
|
|
|
3,920
|
|
Automobile loans
|
|
|
2
|
|
|
|
13
|
|
|
|
1
|
|
|
|
3
|
|
Retail loans
|
|
|
2
|
|
|
|
4
|
|
|
|
16
|
|
|
|
65
|
|
Total
|
|
|
1,412
|
|
|
$
|
4,590
|
|
|
|
3,095
|
|
|
$
|
9,362
|
|
(1) Represents the post-modification net finance receivables balance of loans that have been modified during the period and resulted in a TDR.
The following table provides the number of accounts and balance of finance receivables that subsequently defaulted within the periods indicated (that were modified as a TDR in the preceding 12 months). The Company defines payment default as 90 days past due for this disclosure. The respective amounts and activity for the periods indicated are as follows:
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Dollars in thousands
|
|
Number of Loans
|
|
|
TDR Net Finance Receivables (1)
|
|
|
Number of Loans
|
|
|
TDR Net Finance Receivables (1)
|
|
Small loans
|
|
|
266
|
|
|
$
|
458
|
|
|
|
799
|
|
|
$
|
1,418
|
|
Large loans
|
|
|
159
|
|
|
|
792
|
|
|
|
438
|
|
|
|
2,205
|
|
Automobile loans
|
|
|
1
|
|
|
|
10
|
|
|
|
21
|
|
|
|
39
|
|
Retail loans
|
|
|
2
|
|
|
|
4
|
|
|
|
1,258
|
|
|
|
3,663
|
|
Total
|
|
|
428
|
|
|
$
|
1,264
|
|
|
|
2,516
|
|
|
$
|
7,325
|
|
(1) Only includes defaults occurring within 12 months of a loan being designated as a TDR. Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.
Note 4. Interest Rate Caps
The Company has interest rate cap contracts with an aggregate notional principal amount of $600.0 million. Each contract contains a strike rate against the one-month LIBOR (0.11% and 0.14% as of March 31, 2021 and December 31, 2020, respectively). 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 the Company’s interest rate caps as of March 31, 2021:
|
|
|
|
|
|
|
|
Notional Amount
|
|
Execution Date
|
|
Maturity Date
|
|
Strike Rate
|
|
|
(in thousands)
|
|
04/2018
|
|
04/2021
|
|
|
3.50
|
%
|
|
$
|
200,000
|
|
03/2020
|
|
03/2023
|
|
|
1.75
|
%
|
|
|
100,000
|
|
08/2020
|
|
08/2023
|
|
|
0.50
|
%
|
|
|
50,000
|
|
09/2020
|
|
10/2023
|
|
|
0.50
|
%
|
|
|
100,000
|
|
11/2020
|
|
11/2023
|
|
|
0.25
|
%
|
|
|
50,000
|
|
02/2021
|
|
02/2024
|
|
|
0.25
|
%
|
|
|
50,000
|
|
03/2021
|
|
03/2024
|
|
|
0.25
|
%
|
|
|
50,000
|
|
Total notional amount
|
|
|
|
|
|
|
|
$
|
600,000
|
|
13
The following is a summary of changes in the interest rate caps for the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
In thousands
|
|
2021
|
|
|
2020
|
|
Balance at beginning of period
|
|
$
|
265
|
|
|
$
|
—
|
|
Purchases
|
|
|
602
|
|
|
|
114
|
|
Fair value adjustment included as a decrease (increase) in interest expense
|
|
|
785
|
|
|
|
(29
|
)
|
Balance at end of period, included in other assets
|
|
$
|
1,652
|
|
|
$
|
85
|
|
Note 5. Long-Term Debt
The following is a summary of the Company’s long-term debt as of the periods indicated:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
In thousands
|
|
Long-Term Debt
|
|
|
Unamortized Debt Issuance Costs
|
|
|
Net Long-Term Debt
|
|
|
Long-Term Debt
|
|
|
Unamortized Debt Issuance Costs
|
|
|
Net Long-Term Debt
|
|
Senior revolving credit facility
|
|
$
|
156,532
|
|
|
$
|
(1,457
|
)
|
|
$
|
155,075
|
|
|
$
|
286,113
|
|
|
$
|
(1,687
|
)
|
|
$
|
284,426
|
|
Revolving warehouse credit facility
|
|
|
36,366
|
|
|
|
(1,194
|
)
|
|
|
35,172
|
|
|
|
42,061
|
|
|
|
(1,486
|
)
|
|
|
40,575
|
|
RMIT 2018-2 securitization
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
130,349
|
|
|
|
—
|
|
|
|
130,349
|
|
RMIT 2019-1 securitization
|
|
|
130,172
|
|
|
|
(1,021
|
)
|
|
|
129,151
|
|
|
|
130,172
|
|
|
|
(1,216
|
)
|
|
|
128,956
|
|
RMIT 2020-1 securitization
|
|
|
180,214
|
|
|
|
(2,060
|
)
|
|
|
178,154
|
|
|
|
180,214
|
|
|
|
(2,272
|
)
|
|
|
177,942
|
|
RMIT 2021-1 securitization
|
|
|
248,916
|
|
|
|
(2,464
|
)
|
|
|
246,452
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
752,200
|
|
|
$
|
(8,196
|
)
|
|
$
|
744,004
|
|
|
$
|
768,909
|
|
|
$
|
(6,661
|
)
|
|
$
|
762,248
|
|
Unused amount of revolving credit facilities (subject to borrowing base)
|
|
$
|
573,110
|
|
|
|
|
|
|
|
|
|
|
$
|
438,082
|
|
|
|
|
|
|
|
|
|
Senior Revolving Credit Facility: In September 2019, the Company amended and restated its senior revolving credit facility to, among other things, increase the availability under the facility from $638 million to $640 million and extend the maturity of the facility from June 2020 to September 2022. The facility has an accordion provision that allows for the expansion of the facility to $650 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, 80% of eligible unsecured finance receivables, and 60% of eligible delinquent renewals (82% of eligible secured finance receivables, 77% of eligible unsecured finance receivables, and 57% of eligible delinquent renewals as of March 31, 2021). As of March 31, 2021, the Company had $199.5 million of available liquidity under the facility and held $7.2 million in unrestricted cash. Borrowings under the facility bear interest, payable monthly, at rates equal to one-month LIBOR, 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 0.11% and 0.14% at March 31, 2021 and December 31, 2020, respectively. The amended and restated facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. The Company pays an unused line fee between 0.375% and 0.65% based upon the average outstanding balance of the facility.
Variable Interest Entity Debt: As part of its overall funding strategy, the Company has transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions, including securitizations. The following debt arrangements are issued by the Company’s wholly-owned, bankruptcy-remote 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.
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 $58.6 million and $46.6 million as of March 31, 2021 and December 31, 2020, 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.
14
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.
Revolving Warehouse Credit Facility: In August 2020, the Company and its wholly-owned SPE, Regional Management Receivables II, LLC (“RMR II”), amended the 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 April 2021 and April 2022, respectively. The facility has an accordion provision that allows for the expansion of the facility to $150 million. 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 $0.5 million in restricted cash reserves as of March 31, 2021 to satisfy provisions of the credit agreement. Borrowings under the facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, with a LIBOR floor of 0.25%, plus a margin of 2.15% (2.20% prior to the August 2020 amendment). The three-month LIBOR was 0.19% and 0.24% at March 31, 2021 and December 31, 2020, respectively. RMR II pays an unused commitment fee between 0.35% and 0.85% based upon the average daily utilization of the facility. See Note 12, “Subsequent Events,” for information regarding the amendment of this facility following the end of the fiscal quarter.
RMIT 2018-2 Securitization: In December 2018, the Company, its wholly-owned SPE, Regional Management Receivables III, LLC (“RMR III”), and the Company’s 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. Prior to maturity in January 2028, the Company could redeem the notes in full, but not in part, at its option on any remaining note payment date. In February 2021, the Company and RMR III exercised the right to make an optional principal repayment in full, and in connection with such prepayment, the securitization terminated in February 2021.
RMIT 2019-1 Securitization: In October 2019, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2019-1 (“RMIT 2019-1”), completed a private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT 2019-1. 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 2019-1. The notes have a revolving period ending in October 2021, with a final maturity date in November 2028. RMIT 2019-1 held $1.4 million in restricted cash reserves as of March 31, 2021 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2019-1 securitization bear interest, payable monthly, at a weighted-average rate of 3.17%. Prior to maturity in November 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 November 2021. No payments of principal of the notes will be made during the revolving period.
RMIT 2020-1 Securitization: In September 2020, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2020-1 (“RMIT 2020-1”), completed a private offering and sale of $180 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2020-1. 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 2020-1. The notes have a revolving period ending in September 2023, with a final maturity date in October 2030. RMIT 2020-1 held $1.9 million in restricted cash reserves as of March 31, 2021 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2020-1 securitization bear interest, payable monthly, at a weighted-average rate of 2.85%. Prior to maturity in October 2030, 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 October 2023. No payments of principal of the notes will be made during the revolving period.
RMIT 2021-1 Securitization: In February 2021, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2021-1 (“RMIT 2021-1”), completed a private offering and sale of $248.7 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2021-1. 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 2021-1. The notes have a revolving period ending in February 2024, with a final maturity date in March 2031. RMIT 2021-1 held $2.6 million in restricted cash reserves as of March 31, 2021 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-1 securitization bear interest, payable monthly, at a weighted-average rate of 2.08%. Prior to maturity in March 2031, 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 March 2024. No payments of principal of the notes will be made during the revolving period.
15
See Note 12, “Subsequent Events,” for information regarding the additions of two credit facilities following the end of the fiscal quarter.
The carrying amounts of consolidated VIE assets and liabilities are as follows:
In thousands
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
187
|
|
|
$
|
236
|
|
Net finance receivables
|
|
|
592,526
|
|
|
|
483,674
|
|
Allowance for credit losses
|
|
|
(70,771
|
)
|
|
|
(59,046
|
)
|
Restricted cash
|
|
|
64,983
|
|
|
|
51,849
|
|
Other assets
|
|
|
262
|
|
|
|
5
|
|
Total assets
|
|
$
|
587,187
|
|
|
$
|
476,718
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Net long-term debt
|
|
$
|
588,929
|
|
|
$
|
477,822
|
|
Accounts payable and accrued expenses
|
|
|
64
|
|
|
|
87
|
|
Total liabilities
|
|
$
|
588,993
|
|
|
$
|
477,909
|
|
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 March 31, 2021, the Company was in compliance with all debt covenants.
Note 6. Stockholders’ Equity
Stock repurchase program: In October 2020, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program allowing for the repurchase of up to $30.0 million of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective immediately and extended through October 22, 2022. During the three months ended March 31, 2021, the Company repurchased 352 thousand shares of common stock at a total cost of $11.8 million.
Quarterly cash dividend: The Board may in its discretion declare and pay cash dividends on the Company’s common stock. Total dividends declared and paid were $0.20 per common share during the three months ended March 31, 2021. No dividends were declared or paid during the three months ended March 31, 2020.
See Note 12, “Subsequent Events,” for information regarding our stock repurchase program and quarterly cash dividend following the end of the fiscal quarter.
Note 7. 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.
Net finance receivables: The Company determines the fair value of net finance receivables using a discounted cash flows methodology. The application of this methodology requires the Company to make certain estimates and judgments. These estimates and judgments include, but are not limited to, prepayment rates, default rates, loss severity, and risk-adjusted discount rates.
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.
Long-term debt: The Company estimates the fair value of long-term debt using estimated credit marks based on an index of similar financial instruments (credit facilities) and projected cash flows from the underlying collateralized finance receivables (securitizations), each discounted using a risk-adjusted discount rate.
16
The carrying amount and estimated fair values of the Company’s financial instruments summarized by level are as follows:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
In thousands
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
7,226
|
|
|
$
|
7,226
|
|
|
$
|
8,052
|
|
|
$
|
8,052
|
|
Restricted cash
|
|
|
79,012
|
|
|
|
79,012
|
|
|
|
63,824
|
|
|
|
63,824
|
|
Level 2 inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps
|
|
|
1,652
|
|
|
|
1,652
|
|
|
|
265
|
|
|
|
265
|
|
Level 3 inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance receivables, less unearned insurance
premiums and allowance for credit losses
|
|
|
931,252
|
|
|
|
1,012,628
|
|
|
|
951,714
|
|
|
|
1,032,558
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
752,200
|
|
|
|
751,259
|
|
|
|
768,909
|
|
|
|
767,185
|
|
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.
Note 8. Income Taxes
The Company records interim provisions for income taxes based on an estimated annual effective tax rate. Due to uncertainty surrounding the impacts of COVID-19, the Company’s effective tax rate may fluctuate during the year based on the Company’s operating results.
The Company recognizes tax benefits or deficiencies from the exercise or vesting of share-based awards in the income tax line of the consolidated statements of income.
The following table summarizes the components of income taxes for the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
In thousands
|
|
2021
|
|
|
2020
|
|
Provision for corporate taxes
|
|
$
|
8,348
|
|
|
$
|
(3,577
|
)
|
Tax (benefits) deficiencies from share-based awards
|
|
|
(479
|
)
|
|
|
52
|
|
Total income taxes
|
|
$
|
7,869
|
|
|
$
|
(3,525
|
)
|
17
Note 9. Earnings Per Share
The following schedule reconciles the computation of basic and diluted earnings per share for the periods indicated:
|
|
Three Months Ended
March 31,
|
|
In thousands, except per share amounts
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
25,522
|
|
|
$
|
(6,325
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding for basic earnings per share
|
|
|
10,543
|
|
|
|
10,897
|
|
Effect of dilutive securities
|
|
|
523
|
|
|
|
356
|
|
Weighted-average shares adjusted for dilutive securities
|
|
|
11,066
|
|
|
|
11,253
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.42
|
|
|
$
|
(0.58
|
)
|
Diluted
|
|
$
|
2.31
|
|
|
$
|
(0.56
|
)
|
Options to purchase 0.2 million shares of common stock were each outstanding during the three months ended March 31, 2021 and 2020, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.
Note 10. 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 March 31, 2021, 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 0.9 million 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 March 31, 2021, there were 0.2 million shares available for grant under the 2015 Plan.
For the three months ended March 31, 2021 and 2020, the Company recorded share-based compensation expense of $1.6 million and $1.4 million, respectively. As of March 31, 2021, unrecognized share-based compensation expense to be recognized over future periods approximated $12.2 million. This amount will be recognized as expense over a weighted-average period of 2.2 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.
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”), cash-settled performance units (“CSPUs”), and restricted stock awards (“RSAs”) to certain members of senior management under a long-term incentive program (“LTIP”). The CSPUs are cash incentive awards, and the associated expense is not based on the market price of the Company’s common stock. Recurring annual grants are made at the discretion of 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 (for the 2019 LTIP) or the percentile ranking of the Company’s compound annual growth rate of pre-provision net income and pre-provision net income per share (for the 2020 LTIP and 2021 LTIP), in each case compared to a public company peer group over a three-year performance period.
18
The Company also has 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 an RSA, 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 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).
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: The Company awards its non-employee directors a cash retainer and shares of restricted common stock. The RSAs 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.
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:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Expected volatility
|
|
|
47.83
|
%
|
|
|
44.88
|
%
|
Expected dividends
|
|
|
2.63
|
%
|
|
|
0.00
|
%
|
Expected term (in years)
|
|
|
6.0
|
|
|
|
6.0
|
|
Risk-free rate
|
|
|
0.64
|
%
|
|
|
0.71
|
%
|
Expected volatility is based on the Company’s historical stock price volatility. Expected dividends are calculated using the expected dividend yield (annualized dividends divided by the grant date stock price). 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 three months ended March 31, 2021:
In thousands, except per share amounts
|
|
Number of Shares
|
|
|
Weighted-Average Exercise Price
Per Share
|
|
|
Weighted-Average Remaining Contractual
Life (Years)
|
|
|
Aggregate Intrinsic Value
|
|
Options outstanding at January 1, 2021
|
|
|
908
|
|
|
$
|
19.73
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
137
|
|
|
|
30.44
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(137
|
)
|
|
|
15.44
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(3
|
)
|
|
|
16.30
|
|
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2021
|
|
|
905
|
|
|
$
|
22.01
|
|
|
|
6.1
|
|
|
$
|
11,444
|
|
Options exercisable at March 31, 2021
|
|
|
648
|
|
|
$
|
20.49
|
|
|
|
4.8
|
|
|
$
|
9,175
|
|
19
The following table provides additional stock option information for the periods indicated:
|
|
Three Months Ended
March 31,
|
|
In thousands, except per share amounts
|
|
2021
|
|
|
2020
|
|
Weighted-average grant date fair value per share
|
|
$
|
10.52
|
|
|
$
|
7.58
|
|
Intrinsic value of options exercised
|
|
$
|
2,861
|
|
|
$
|
219
|
|
Fair value of stock options that vested
|
|
$
|
—
|
|
|
$
|
353
|
|
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 will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.
The following table summarizes RSU activity during the three months ended March 31, 2021:
In thousands, except per unit amounts
|
|
Units
|
|
|
Weighted-Average
Grant Date
Fair Value Per Unit
|
|
Non-vested units at January 1, 2021
|
|
|
124
|
|
|
$
|
21.89
|
|
Granted (target)
|
|
|
45
|
|
|
|
30.22
|
|
Achieved performance adjustment (1)
|
|
|
2
|
|
|
|
28.25
|
|
Vested
|
|
|
(42
|
)
|
|
|
28.25
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
Non-vested units at March 31, 2021
|
|
|
129
|
|
|
$
|
22.84
|
|
(1)
|
The 2018 LTIP RSUs were earned and vested at 105.6% of target, as described in greater detail in the Company’s definitive proxy statement filed with the SEC on April 16, 2021.
|
The following table provides additional RSU information for the periods indicated:
|
|
Three Months Ended
March 31,
|
|
In thousands, except per unit amounts
|
|
2021
|
|
|
2020
|
|
Weighted-average grant date fair value per unit
|
|
$
|
30.22
|
|
|
$
|
—
|
|
Fair value of RSUs that vested
|
|
$
|
1,199
|
|
|
$
|
1,314
|
|
Restricted stock awards: The fair value and compensation expense of RSAs are calculated using the Company’s closing stock price on the date of grant.
The following table summarizes RSA activity during the three months ended March 31, 2021:
In thousands, except per share amounts
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value Per Share
|
|
Non-vested shares at January 1, 2021
|
|
|
266
|
|
|
$
|
19.34
|
|
Granted
|
|
|
136
|
|
|
|
28.18
|
|
Vested
|
|
|
(3
|
)
|
|
|
26.11
|
|
Forfeited
|
|
|
(2
|
)
|
|
|
22.82
|
|
Non-vested shares at March 31, 2021
|
|
|
397
|
|
|
$
|
22.31
|
|
The following table provides additional RSA information for the periods indicated:
|
|
Three Months Ended
March 31,
|
|
In thousands, except per share amounts
|
|
2021
|
|
|
2020
|
|
Weighted-average grant date fair value per share
|
|
$
|
28.18
|
|
|
$
|
21.36
|
|
Fair value of RSAs that vested
|
|
$
|
40
|
|
|
$
|
301
|
|
20
Note 11. 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 12. Subsequent Events
Amendment and restatement of RMR II revolving warehouse credit facility: In April 2021, the Company amended and restated its revolving warehouse credit facility to, among other things, extend the date at which the facility converts to an amortizing loan and the termination date to March 2023 and March 2024, respectively, decrease the total facility to $75.0 million, increase the cap on facility advances to 83% of eligible finance receivables, and increase the rate at which borrowings under the facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, with a LIBOR floor of 0.25%, plus a margin of 2.35%. The amended and restated revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. The amended and restated revolving warehouse credit facility is described in greater detail in the Current Report on Form 8-K filed by the Company with the SEC on April 20, 2021.
RMR IV revolving warehouse credit facility: In April 2021, the Company and its wholly-owned SPE, Regional Management Receivables IV, LLC (“RMR IV”), entered into a credit agreement that provides for a $125 million revolving warehouse credit facility to RMR IV. The facility converts to an amortizing loan in April 2023 and terminates in April 2024. The debt will be secured by finance receivables and other related assets that the Company will purchase from its affiliates, which the Company will sell and transfer to RMR IV. Advances on the facility are capped at 81% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a rate equal to one-month LIBOR, plus a margin of 2.35%. RMR IV pays a monthly unused commitment fee between 0.35% and 0.70% based upon the average daily utilization of the facility. The RMR IV revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. The RMR IV revolving warehouse credit facility is described in greater detail in the Current Report on Form 8-K filed by the Company with the SEC on April 20, 2021.
RMR V revolving warehouse credit facility: In April 2021, the Company and its wholly-owned SPE, Regional Management Receivables V, LLC (“RMR V”), entered into a credit agreement that provides for a $100 million revolving warehouse credit facility to RMR V. The facility converts to an amortizing loan in October 2022 and terminates in October 2023. The debt will be secured by finance receivables and other related assets that the Company will purchase from its affiliates, which the Company will sell and transfer to RMR V. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a per annum rate, which in the case of a conduit lender is the commercial paper rate, plus a margin of 2.20%. If a facility amortization event has occurred, but an event of default has not occurred, the 2.20% margin over the commercial paper rate plus 1.00% is incurred. RMR V pays a monthly unused commitment fee between 0.45% and 0.75% based upon the average daily utilization of the facility. The RMR V revolving warehouse credit facility is described in greater detail in the Current Report on Form 8-K filed by the Company with the SEC on April 29, 2021.
21
Quarterly cash dividend: In May 2021, the Company announced that the Board declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on June 15, 2021 to shareholders of record at the close of business on May 26, 2021. The declaration, amount, and payment of any future cash dividends on shares of the Company’s common stock will be at the discretion of the Board.
Stock repurchase programs: In May 2021, the Company completed its $30.0 million stock repurchase program previously announced on October 29, 2020. The Company repurchased a total of 952 thousand shares of common stock pursuant to the program.
On May 4, 2021, the Company announced that the Board authorized a new $30.0 million stock repurchase program. The authorization was effective immediately and extends through April 29, 2023. Stock repurchases under the stock repurchase program may be made in the open market at prevailing market prices, through privately negotiated transactions, or through other structures in accordance with applicable federal securities laws, at times and in amounts as management deems appropriate. The timing and the amount of any common stock repurchases will be determined by the Company’s management based on its evaluation of market conditions, the Company’s liquidity needs, legal and contractual requirements and restrictions (including covenants in the Company’s credit agreements), share price, and other factors. Repurchases of common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program does not obligate the Company to purchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice. The Company intends to fund the program with a combination of cash and debt.
22