Regional Management Corp. Aktie

Greetings, and welcome to the Regional Management First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Garrett Edson. Please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at regionalmanagement.com.

Before we begin our formal remarks, I will direct you to Page 2 of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures. Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates and projections about the company's future financial performance and business prospects.

These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them. We refer all of you to our press release, presentation and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition.

Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com.

I would now like to introduce Lakhbir Lamba, President and CEO of Regional Management Corp.

Thanks, Garrett, and good afternoon, everyone. We delivered a strong start to 2026 with solid financial performance, continued year-over-year portfolio growth and further progress on our strategic priorities.

Over the past few months, I've spent significant time across the organization, continuing to listen, learn and evaluate our business. And I'm increasingly excited about the opportunities ahead. As I've deepened my understanding of our customers, products and markets, I see a clear path to stronger performance and improving return outcomes over time. Our results in the first quarter reflect the strength of our operating model, disciplined execution and continued investment in the business.

Joining me on the call today is Harp Rana, our Chief Financial and Administrative Officer. I'll begin with a summary of our first quarter results, provide an update on our strategic initiatives, and then Harp will walk through the financial details.

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

We also delivered strong operating leverage. G&A expenses declined 2% year-over-year, even as we continue to invest in growth initiatives, technology and digital capabilities. Our operating expense ratio improved 180 basis points year-over-year to 12.2%, another all-time best for the company. Notably, revenue growth outpaced G&A and interest expense growth by a wide margin, reflecting the scalability of our model.

Capital generation remained strong in the quarter. We had $12 million of capital generation and returned more than $10 million to shareholders through dividends and share repurchases while continuing to fund portfolio growth.

Our 30-plus day delinquency and net credit loss rates in Q1 were flat year-over-year after adjusting for this year's larger portfolio liquidation. Our customers remain stable and resilient in the current economic environment and overall credit trends continue to perform within our expectations. That said, we are closely monitoring macroeconomic conditions, including elevated gas prices and inflation, and we remain disciplined and conservative in our underwriting.

As we discussed on our last call, we are focused on continuing to improve our net credit loss rate over time with a long-term target below 10%. In support of this objective, we are increasing our investment in data, credit analytics, emerging AI capabilities and fraud detection, including first-party and synthetic fraud controls. We are actively evaluating and beginning to deploy AI initiatives to enhance our underwriting, decisioning capabilities and collections over time, while maintaining appropriate risk controls. These investments are critical to improving credit performance as we scale the portfolio and enter new markets.

We continue to make good progress on our key strategic priorities. First, we are continuing to invest in market expansion. We plan to enter the state of Florida in the second quarter, which will mark our expansion into our 20th state and represents an important long-term growth opportunity.

Second, responsible portfolio growth remains a core priority. We are seeing continued strength in our auto-secured lending product. The auto-secured portfolio reached $300 million in outstandings at the end of the first quarter, representing a 38% increase year-over-year. It now accounts for 14% of our total portfolio and carries a 30-plus day delinquency rate of 2%. This product continues to deliver attractive credit performance and returns.

Third, we are advancing our bank partnership strategy. In early March, we announced the launch of our partnership with Column, a nationally chartered bank. We expect this partnership to provide several important strategic benefits over time as it scales, including optimization of risk-adjusted yields, expanded relationships with existing customers and a broader addressable market, greater product and operational uniformity across states, faster entry into new markets, additional fee income opportunities and increased wallet share over time from the introduction of new products.

We launched the partnership in one branch with select products and have since expanded to 12 branches. We are encouraged by the early results, particularly in the origination trends, including volume, mix and revenue characteristics. As we expected, at this stage, our data is primarily focused on origination, credit quality and yield metrics, and we expect to begin seeing early credit performance in the coming months. We plan to expand the partnership throughout the year as we continue to evaluate results, assess customer adoption and refine the strategy.

Fourth, we are continuing to invest in an end-to-end digital originations capability. We see meaningful long-term opportunity in this channel, including the ability to reach higher credit quality customers and expand our addressable market. We are focused on creating a frictionless digital experience with strong fraud detection, credit underwriting and risk-based pricing capabilities as we scale this channel. We are also evaluating the use of AI to enhance customer acquisition, improve decisioning speed and accuracy and optimize channel performance. Our bank partnership will play an important role in supporting this initiative over time.

Looking ahead, our expectations for the year remain unchanged. We continue to target full year portfolio growth of 10% and net income growth in the range of 20% to 25%, while remaining prepared to moderate portfolio growth if warranted by macroeconomic or credit conditions.

As a reminder, we expect second quarter net income to represent the low point for the year, consistent with normal seasonal trends. First quarter tax refund activity results in portfolio liquidation, which impacts second quarter revenue, while growth begins to accelerate as we move through the second quarter, driving sequentially higher CECL provisioning and G&A expenses. Portfolio growth in the second quarter and throughout the remainder of the year supports stronger revenue and earnings in the third and fourth quarters.

We also expect net credit losses to remain seasonally elevated in the second quarter before improving to lower levels in the second half of the year. In addition, we anticipate the benefits of our bank partnership, portfolio growth and other strategic initiatives will build throughout the year, supporting stronger earnings performance in the third and fourth quarters.

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

With that, I will turn the call over to Harp.

Thank you, Lakhbir, and good afternoon, everyone. I'll now take you through our first quarter results in more detail. Starting on Page 4 of the supplemental presentation, we delivered another quarter of strong year-over-year improvement across our key financial metrics. Net income was $11.4 million and diluted earnings per share were $1.18, both driven by continued year-over-year portfolio and revenue growth, stable credit performance, strong operating leverage and a disciplined balance sheet. Return on equity improved to 12.2%, up 430 basis points year-over-year, reflecting higher earnings and operating efficiency.

Turning to Pages 5 and 6. Total originations were $388 million, down modestly year-over-year, as expected, due to a stronger tax refund season and disciplined underwriting. Portfolio growth remains strong with ending net receivables of $2.1 billion, representing 11% year-over-year growth. This growth continues to be driven by larger loans, including our auto-secured product as well as contributions from new branches. Average receivables per branch increased to approximately $5.9 million, up nearly 11% year-over-year, reflecting improved branch productivity and continued maturation of our newer locations.

From a sequential perspective, we saw a $36 million reduction in receivables, consistent with normal seasonal patterns driven by first quarter tax refund activity. Looking ahead, we expect to return to sequential portfolio growth in the second quarter while maintaining the flexibility to adjust originations if macroeconomic or credit conditions warrant.

Turning to Page 7. Total revenue was a first quarter record of $167 million, increasing 9% year-over-year, driven by higher average receivables. Total revenue yield declined on both a sequential and a year-over-year basis, primarily due to normal seasonality and continued mix shift towards larger, lower-yielding loans. As we move into the second quarter, we expect revenue yield to increase modestly on a sequential basis, consistent with typical seasonal trends.

Turning to Page 8. Credit performance remained stable. Our 30-plus day delinquency rate was 7.2%, up 10 basis points year-over-year and improved 30 basis points sequentially, reflecting normal seasonal patterns. Our net credit loss rate increased modestly by 10 basis points year-over-year, also consistent with expectations. Both our delinquency rate and NCL rate included roughly 10 basis points of impact from higher liquidation in the first quarter of 2026 compared to the first quarter of 2025.

Looking ahead to the second quarter, we expect delinquency and net credit losses to decline sequentially, consistent with seasonal patterns. Overall, credit performance remains in line with our expectations, and we continue to monitor macroeconomic conditions closely.

Turning to Page 9. The allowance for credit losses declined by $1.4 million during the quarter, primarily reflecting seasonal portfolio liquidation. The allowance rate increased slightly to 10.4%, reflecting updates to macroeconomic assumptions and continued prudence in reserving. Subject to economic conditions and credit performance, we expect our allowance rate to stay flat sequentially in the second quarter.

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

Turning to Pages 11 and 12. Interest expense was $22.9 million or 4.3% of average receivables on an annualized basis. We continue to maintain a strong and flexible funding profile, including $516 million of unused capacity, a diversified funding structure and a high proportion of fixed rate debt, which represented 84% of total debt at quarter end. This positions us well to support continued portfolio growth. Looking ahead, we anticipate that our funding costs will tick up slightly in the second quarter.

Turning to Page 13. We continue to generate strong capital and allocate it in a disciplined manner. During the quarter, we had approximately $12 million of capital generation, and we returned over $10 million to shareholders through dividends and share repurchases. Our Board declared a $0.30 per share dividend, and we repurchased approximately 208,000 shares during the quarter.

Finally, turning to Page 14 and building on Lakhbir's comments about second quarter net income and seasonality, I'll provide some additional detail on how we expect the year to progress from a quarterly perspective.

As we noted, we expect second quarter net income to represent the low point for the year, followed by stronger performance in the third and fourth quarters, consistent with our normal seasonal patterns. The primary driver of this cadence is the impact of first quarter tax refund activity, which results in seasonal portfolio liquidation in the first quarter and in turn, impacts average receivables and revenue in the second quarter.

At the same time, we begin to rebuild the portfolio during the second quarter with growth typically accelerating as we move through the quarter. This results in a sequential increase in provision for credit losses in the second quarter as we reserve for new originations. As that portfolio growth takes hold, we see the benefit in the second half of the year. The increase in receivables exiting the second quarter drives higher revenue in both the third and fourth quarters, and those growth tailwinds continue throughout the back half of the year.

While provisioning for loan growth remains elevated in the third and fourth quarters, relative to the first quarter, it is more comparable to second quarter levels, allowing revenue growth to drive stronger earnings.

From a credit perspective, we expect net credit losses to remain seasonally elevated in the second quarter before improving in the third and fourth quarters. Finally, as Lakhbir mentioned, we expect the benefits of our strategic initiatives to build as we move through the year with increasing contribution in the second half.

That concludes my remarks, and I'll now turn the call back over to Lakhbir.

To close, we are very pleased with how we started 2026, and are encouraged by the momentum we are carrying into the rest of the year. We delivered strong results while continuing to invest in the business, improve underlying credit performance and drive operating leverage. Importantly, we did this in a disciplined way that positions us well for sustainable, profitable growth.

As we look ahead, our priorities are clear: continue growing the portfolio responsibly, improving credit outcomes, expanding into attractive new markets and investing in our people, technology and digital data and AI-driven capabilities to enhance risk-adjusted returns.

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

[Operator Instructions] And our first question will come from Kyle Joseph with Stephens.

Just curious, a lot of moving parts in the first quarter with elevated tax refunds and then gas prices rising in March. Just kind of walk us through how loan demand and credit kind of performed and kind of the cadence of demand and then how that's trended into April with gas prices remaining elevated.

Kyle, it's Harp. So I'll take that question. So in terms of the elevated refunds, that was something that we had expected, right? We had all heard that refunds were going to be outsized. And they did come in, right, higher than where they were last year, but not quite as high as what everyone expected. Demand was where we expected it to be, knowing that refunds were going to be higher. So that's what we saw there.

In terms of the gas prices, it continues to be something that we're watching. What we found in first quarter is our customers continue to be adaptable, resilient, but we do understand that inflation, and particularly gas prices, can take a toll on their wallet. So we continue to watch that through first payment default, delinquency rate and also through any listing that we do when we have conversations with our customers, particularly even collection conversations just to understand sort of what is causing them the pain point.

So right now, they appear to continue to be resilient. But again, in second quarter, we continue to watch the gas prices, particularly given how much they've increased this week.

Yes. Kyle, the only thing I'll add to that is we are, to Harp's point, monitoring the portfolio, looking at roll rates both early and late stage. And reserve posture reflects the higher gas prices and potential near-term impact on inflation, where the segment of consumer we are really monitoring is high debt service coverage or debt to income and low fee income consumer that if gas prices remain elevated for a prolonged period, that discretionary spending gets tested. And so we're sort of continuing to monitor that.

Got it. Really helpful. And then second question, kind of a 2-part question. First, I mean, as you think about AI and you guys talked about incorporating AI, I mean, talk about where you think OpEx can go over that time frame? And then, just a follow-up to that. Obviously, the relationship with Column is very exciting, but walk us through how you think about that impacting the P&L as that expands.

Thanks, Kyle. Let me take a crack at the first one. On the AI, one, I think we see our investment in machine learning models and origination and collection. Some I think we've mentioned in the past that are already in production in the company that we've deployed. Those models help us take more -- take better risk and then price better for risk.

And then in terms of Gen AI and agentic AI deployments, although I don't have a specific guidance for you on the subject, I think both are cost to originate and cost to service/collect over time. We believe as we automate both the origination and collection journeys using agentic AI workflows, we believe both those cost numbers on a variable basis can come down over time. So that's kind of the track we are taking in this space.

In terms of your second question, I'll start and then I'll have Harp add to it. On the Column partnership, we believe, as I mentioned in the remarks, there are certain segments of consumers we cannot serve today because we are focused on implementing based on state laws and state charter. Those segments of consumers, we believe we can originate using a national charter over time. So that's a state-by-state specific kind of analysis and execution.

Second, I think we are now going to be in 20 states. We still have a bunch of work to do to expand in other markets. We believe a national charter execution and product uniformity increases our speed to market in those markets, we can scale up faster, especially with the digital originations capability we are building in parallel.

And then I think the third thing I would say is there are pockets of customers or business where we don't get paid for the risk we take, and that's something that we are very thoughtful in terms of evaluating opportunities where we can optimize risk and return better in the business as we go forward.

And then the last thing is, as I mentioned, the Column Bank's technology stack is pretty advanced. We believe the consumer we serve has needs for a bunch of other products. So we will evaluate each one of them on their own business cases and see if we can launch and diversify our product set and serve the products through branches and/or digital channels using the Column tech stack and the charter there. So -- but that's as we go forward next year and beyond opportunity.

Harp, anything you want to add?

Yes. Just in terms of where OpEx can go. So how I would think about OpEx in the near term is as we talked about some of the investments that we're going to continue to make in those areas. And how I would think about OpEx is there will be some productivity improvement in the short to the medium term. And then really, right, in terms of OpEx, that will come through scale. And then you'll see if there are enhancements in the cost to originate and the cost to service, those will come in the medium term. That's how I would think about that.

Our next question comes from Vincent Caintic with BTIG.

I really appreciate the very detailed quarterly guidance that you gave. First question, I wanted to go over maybe some of the macro assumptions that you're having in your guidance estimates, particularly when you're thinking about your credit reserve rate, I noticed that it's going to be flat for the rest of the year implied in guidance. Just wondering what you're assuming in there, if there's any like macro changes or what you're thinking about unemployment.

Vincent, it's Harp. So we did take the reserve rate up quarter-over-quarter versus where we were in fourth quarter of last year. And the reason why we took that up was just based upon some of the macro that we were seeing, which was basically oil prices and also gas prices and just being prudent around that in terms of what that could mean for our customers.

In terms of where we're going to be next quarter or a quarter out, I can't really say right now. Right now, in the prepared remarks, right, we've assumed that we're going to be flat to the 10.4% that we're at in the first quarter, of course, barring any other macro news. So it could go up if things get a little bit tighter in terms of oil continues to increase and inflation continues to increase and gas prices continue to increase, or it could absolutely come back down based upon, right, if oil prices come back down to where they were a few weeks ago and gas prices moderate.

Okay. Got it. That's helpful. And then second question, I wanted to ask about how we should think about product growth. So I appreciate the overall loan growth guidance. But if you could talk about, say, between your small dollar loans versus your large loans, it looks like auto is doing really well, and you sound pretty excited about that. But if you could describe like mix shift in terms of where you want to go, where the customer demand is as you're thinking about the year?

So Vincent, this is Harp again. So here's what I would say. So in terms of our priorities, auto-secured is one of the priorities that Lakhbir laid out in his prepared remarks, and you can sort of see how our large loans have grown over time. So that continues to be a priority just given the returns on that product.

However, we remain very much committed to our small loans as well. We often talk about our graduation strategy. And again, in 2025, we did refinance 26,000 of those small loan customers. And then we moved them up to larger small loans or large loans, and then we're also able to bring down their rate. So that is really a part of our acquisition and our customer life cycle journey. So we remain committed to the small loans, but large loans, particularly auto-secured, is a focus, given the returns on that product.

[Operator Instructions] We'll go next to Zachary Oster with Citizens Capital.

I wanted to dig in a little bit on the tax refund side and kind of see if we can get some sort of disaggregated number, or really just, I guess, a "normalized" sense of where origination growth would have been, had that been excluded for this quarter?

So Zach, it's really hard to give you what a normal number would be, but you're probably looking at last year as well, right? So in terms of what we saw this year, I would say it's pretty typical. I think what we've read is tax refunds on average were up by about $300 over last year.

In terms of our portfolio liquidation, we saw about $36 million quarter-over-quarter. Last year, right, we only saw $2.2 million. And you have to remember that last year, what we saw was masked by the number of de novos that we had come online in first quarter of 2025. So what we saw this year is exactly what we expected in terms of knowing that refunds on average were going to be a little bit larger.

And then typically, we do see a liquidation of small dollar loans as people get their refunds and they go ahead and they pay us with the refund money. So what we saw was actually quite typical of what we expected, given our portfolio size.

Now as we move into second quarter, right, we are going to have growth in second quarter. So you have the $36 million in liquidation in the first quarter. And on Page 14 of the supplement, we've actually guided to an approximation of where growth is expected.

So when you're modeling, what you have to keep in mind is we had a provision release of $1.4 million in the first quarter based upon that liquidation. We've also provided you with a range based upon growth in terms of what that provision increase will be in second quarter.

And then going back to Lakhbir's remarks, right, that swing in provision from the $1.4 million release up to, if I take the midpoint, a $7 million build, that swing of $8.4 million is going to drop right down to the bottom line. Of course, other things are going to continue to improve, such as revenue is going to continue to improve. So you will -- and that will be -- right, the growth will end up being a tailwind for the rest of the year. So you will see revenue improve. But in the second quarter, you will see that swing because of the growth in the CECL provision that will drop down to the bottom line.

Got it. Understood. And then one more question, if I could just add it on. Just digging also into the macro assumptions, I wanted to see if you guys have any updated commentary on rate cuts or kind of any assumptions going into -- or exiting the quarter on the allowance rate in terms of the rate cuts.

So in terms of the rate cuts, right, the Fed held flat today. That was our expectation. I think when we all entered the year, we probably thought that there was going to be one rate cut right at the beginning of the year. So now, right, with them holding flat, we've taken what the forecast is on rates as well as, right, the forecast and other macro narratives into account when we did our reserve calculation.

So when we look at the macro, we do look at the ratings agency and sort of their predictions of all of those things into the future. So we took all of that into consideration as well as, of course, our own portfolio, right, where we look at the product mix, we look at delinquency status, we look at FICO. We look at our own portfolio and then we go ahead and we look at sort of what the macro assumptions are for the rest of the year in order to come up with the reserve rate.

So I would tell you that we sort of anticipated where we are today in terms of coming up with that reserve rate, if that helps.

Zach, I would just add, the biggest levers in our credit assumptions essentially are the labor market, which are -- which have been stable. It's -- number two, it's inflation, which is an outcome of everything that's happening around gas prices and what have you. And so those -- and GDP, obviously, those are big levers as we model our reserve content.

So I think the biggest uncertainty that remains, I think, on the credit side, the obvious one is gas prices and how prolonged this whole geopolitical conflict in the Middle East is going to stay.

Zach, I'm sorry, I'll add one other thing to what Lakhbir just said, right? So in terms of open jobs, we talk about that on these calls. So there's still about 7 million open jobs. And again, we know that open jobs for our target segment, there are ample jobs out there. So that's just something else that we take into consideration as we're looking out into the future when we do our reserve just in terms of what does the unemployment picture look like.

So right now, again, we'll say that our customers are resilient. They're adaptable. There's plenty of open jobs available for them. As Lakhbir mentioned, right, inflation, gas prices, we continue to watch those as we move into second quarter.

And moving next to Bill Dezellem with Tieton Capital.

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

Yes. So Bill, it's Harp. So a couple of things. So I think on the small loan originations, a couple of things that I would point out, right? One is we had -- in higher tax season, we do expect our small loans to pay off. And we do expect originations in terms of response rates to be muted in first quarter. So that's really what you're seeing in 2026.

When you compare that to 2025, in 2025, we had 17 de novos come online between fourth quarter and first quarter. And in those de novos, they have mail support. So although you did have an origination impact on small loans last year, that was masked by the fact that we had those de novos coming online. So that's really part of what you're seeing there in terms of year-over-year originations. And then in terms of the small loans, it's really our -- the auto-secured, right? As we grow that business, that is what you're seeing on the large loans year-over-year.

That's very helpful. And would you want to take that last comment a step further and segment the auto-secured origination growth versus the non-auto-secured large loan origination growth?

Yes. And Bill, the best way for me to answer that is that portfolio grew $83 million, the auto-secured portfolio. And now it's 14.3% of our portfolio. Compared to last year, it was only 11.6% of our portfolio. So that continues to be a driver within large loans.

Fair enough. And then you referenced...

And Bill, I'm sorry. I apologize. One other thing that I would add there is just the growth rate on the auto-secured compared to the growth rate on ENR on large loans. So auto-secured grew by 38%. And so again, that's a component of what you're seeing on the ENR in terms of large loans. But again, auto-secured is a driver of that.

Yes. And then shifting to the Column relationship. I believe in your opening [Audio Gap], you referenced to you started with one branch up to a dozen. When are you anticipating that, that relationship will be across all branches?

So that -- Bill, here's what I would say. I would say that we're going to continue to roll that out. We're going to be quite measured. The reason why we roll out one is to make sure it works the way that we think it's going to work from a technological perspective and also from a branch operational perspective and also from a customer perspective.

So you roll it out into one and then you roll it out a little bit larger and again, make sure that it's working the way that you want it to work. What I would say is it is very much -- in terms of the data that we're seeing, we're quite -- it's exactly what we thought it was going to be. So we're quite pleased with that.

And in terms of the rollout, what I would say is that we're going to continue to be measured in rolling it out. But as Lakhbir said earlier, right, we're now in 20 states. And we'll take a look and see what makes sense over time, particularly given where we're rolling it out currently and how we want to roll that out going forward. That's probably as much information as I can give you right now on that.

Okay. And I'm going to dive into that a bit further here, please. So my perception, having never rolled out this sort of a relationship would be that once you get up to 50 branches or so, that going from 50 to 250, you really aren't going to learn [ anything ] there, going from 1 to 12 or a dozen to 50, very much maybe. So assuming that, that presumption is correct, do you have operational heavy lifting or lifting that needs to be done each time this has moved into a branch, therefore, it's not as easy as flipping a switch once you're at whatever your maximum test number is using my example, 50, or do you really need to take that at whatever pace your operations team [ follow up ]?

So here's how I would think about that, Bill. You're absolutely right, right? After you hit a critical mass, it becomes easier to roll that out because you know that technologically, it works. And it's really about training the staff in the branches where you are. So you're absolutely right on that, and it just becomes sort of the flywheel of training the branches.

What I would think about is, again, right, we will soon be in 20 states and rolling it out in each state probably is where we're focused and making sure that we are going to do that right in one state and then eventually in multiple states, the flywheel approach of, hey, if you've done 50 and now you know how to train the folks and you know what works, that would absolutely be a true statement.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Lakhbir Lamba for closing comments.

Thank you so much. As I said earlier on the call, we're very pleased with how we started 2026. I'm excited about opportunities ahead this year and as we go forward for Regional Management. As we also mentioned, just -- and we just talked in the Q&A, we are watching the macroeconomic conditions carefully, and we'll adjust our posture in terms of, be it underwriting or what have you, relative to how macroeconomic conditions perform.

But outside of that, really excited about where we are and how we started the year. My sincere thanks to the whole Regional Management team, and we've got exciting times ahead. Thank you.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Regional Management Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Garrett Edson with ICR. Garrett, please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at regionalmanagement.com. Before we begin our formal remarks, I will direct you to Page 2 of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures.

Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them. We refer all of you to our press release, presentation and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition.

Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com.

I would now like to introduce Lakhbir Lamba, President and CEO of Regional Management Corp.

Thanks, Garrett, and good afternoon, everyone. I'm pleased to be joining you today on my first earnings call as President and CEO of Regional Management. Over the past few months, I've had the opportunity to spend time in the business, meet many members of the Regional team and deepen my understanding of what makes this company special. I've also had significant time that I've spent reviewing the economics of the business across various customer, product, risk and market segments with an eye towards opportunities to grow net income and increase risk-adjusted returns.

I'm excited about the opportunity ahead and honored to lead an organization with strong culture, a disciplined operating model and a long track record of responsible growth. Before turning to our results, I want to thank Rob for his leadership in building the strong platform we have today. I've appreciated working closely with him during this transition. Regional enters 2026 from a position of strength, and my focus is on building on that momentum.

Joining me on the call today is Harp Rana, our Chief Financial and Administrative Officer. I'll begin with a summary of our fourth quarter and full year results, provide an update on our strategic priorities and outlook, and then Harp will walk through the financial details.

We delivered strong financial and operating results in the fourth quarter and finished 2025 with excellent momentum. In the fourth quarter, we generated net income of $12.9 million or $1.30 of diluted earnings per share, representing an increase of 33% year-over-year. This result exceeded our guidance despite incurring a larger provision for credit losses driven by stronger-than-expected portfolio growth.

Quarterly revenue reached record levels, reflecting continued growth in net receivables and consistent execution across the organization. For the full year, we generated net income of $44.4 million, an increase of 8% compared to 2024, landing towards the upper end of the guidance range we previously provided. Ending net receivables grew by $248 million or 13% year-over-year, in line with the growth guidance of at least 10% that we provided at the outset of 2025.

We closed the year with a loan portfolio of $2.1 billion. Portfolio growth remained a key driver of our performance. In the fourth quarter, net receivables increased by $87 million, supported by strong origination activity across channels and a healthy customer demand. Total fourth quarter originations were $537 million, up meaningfully from the prior year period.

We continue to see encouraging trends in our underlying credit performance. Our 30-plus delinquency rate improved 20 basis points year-over-year in the fourth quarter, supported by our credit tightening actions, improved analytics and credit decisioning and strong performance in most segments of newer vintages. This trend supports continued improved credit performance throughout the year.

On an adjusted basis, our fourth quarter 2025 annualized net credit loss rate improved by 30 basis points year-over-year and our full year 2025 net credit loss rate improved by 70 basis points compared to the prior year. These improvements reflect disciplined underwriting, enhanced credit risk management and the benefits of investments we've been making in data, analytics and portfolio monitoring.

During the first quarter, we expect to observe typical seasonality in net credit losses, reflective of our later-stage delinquency levels, which ordinarily drive a sequential net credit loss rate increase of roughly 150 basis points. Where we land in the first quarter will be sensitive to the denominator impact of payment and credit behavior driven by expected elevated tax refunds.

Looking ahead, we'll continue to improve our net credit loss rate with a portfolio NCL rate risk tolerance level under 10% over the long term. Assuming a stable macroeconomic environment, we would expect to make continuous progress towards this 10% level throughout 2026.

Expense discipline remained a key priority throughout the quarter and the year. Our annualized operating expense ratio was 12.4% in the fourth quarter, an all-time best and an improvement of 160 basis points compared to the prior year period. This reflected benefits of scale and continued focus on operating efficiency. For the full year, our operating expense ratio was 13.1%, an improvement of 70 basis points year-over-year, even as we continued to invest in the business.

Capital generation remains strong throughout 2025. For the full year, we generated $74 million of capital and returned $36 million to shareholders through dividends and share repurchases. Our balance sheet remains healthy, flexible and well positioned to support continued growth and capital returns. Overall, we are very pleased with how the year finished and with the consistency of execution throughout the company.

As I step into this role, my immediate focus has been on listening, learning and building on Regional trends. That said, there are several areas I see meaningful opportunity to grow shareholder value. First, portfolio growth remains a core priority. And within that, our auto-secured portfolio stands out as a particularly attractive opportunity. In 2025, our auto-secured portfolio grew by 42% year-over-year and continues to represent a larger portion of our overall portfolio. Credit performance and returns in this segment remain extremely compelling, and we will continue to invest in this asset class in a disciplined and analytical rigorous manner.

Second, we continue to expand our physical footprint in attractive markets. In the fourth quarter, we opened 5 new branches in California and Louisiana. Looking ahead, we expect to open additional branches throughout 2026 with the potential for new state expansion as well. We will approach this expansion thoughtfully with a focus on execution, local talent, fraud and credit risk and returns.

Third, I see significant opportunities in continuing to invest in our people, technology, data and analytics and credit risk management. Regional's success has been built on strong operators, a disciplined credit culture and continuous improvement. My initial assessment of our digital capabilities, origination and servicing customer journeys indicates numerous opportunities to improve both the customer and team member experience.

We believe investments in digital and AI will help us grow originations and lower our cost to originate and service our loan book. Importantly, even as we make these investments, we will continue lowering our operating expense ratio over time, supported by scale and productivity improvements.

In parallel, we remain focused on improving branch and state level profitability. As the portfolio and footprint grow, disciplined evaluation of performance in every segment will remain critical to delivering sustainable, profitable growth and maximizing risk-adjusted return on capital.

As we look at our business across various markets, and digital affiliate channels, we are paying particular attention to first payment default trends, sales productivity, operating expenses and risk-adjusted yields. We believe we have opportunities to optimize the yields and operating expenses in certain markets.

I also want to touch briefly on an initiative that we've been working on over the past several quarters, developing a bank partnership capability. While still in development, we believe a bank partnership model could provide meaningful strategic benefits over time, including faster entry into new markets, greater product and operational uniformity across states, the ability to broaden our product set and optimize risk-adjusted yields. We view this as another potential tool to support responsible growth and enhance our long-term strategic flexibility. We'll share more as this partnership and capability continue to take shape.

Looking ahead, we remain focused on disciplined execution as we enter 2026. For the full year of 2026, we expect another year of ending net receivables growth of at least 10% and net income growth in the 20% to 25% range. For the first quarter of 2026, we expect net income to reflect our portfolio growth levels, normal first quarter of credit seasonality and continued investment in the business. The projected year-over-year increase in tax refunds due to the One Big Beautiful Bill Act will likely reduce balances through debt paydowns and improved collections and delinquencies in the first quarter.

Over the longer term, our objective is clear: to deliver sustainable profitable growth while generating attractive returns for shareholders. We will improve our return on equity through responsible portfolio growth, improving credit performance, operating leverage and disciplined capital management. Regional enters the next phase of its growth with a strong foundation, a talented team and a clear strategic focus. I'm excited about what lies ahead and confident in our ability to continue creating long-term value for our clients, our communities and our shareholders.

With that, I'll turn the call over to Harp, who will provide more details on our financial results.

Thank you, Lakhbir, and hello, everyone. I'll now take you through our fourth quarter results in more detail.

On Page 5 of the supplemental presentation, we provide our fourth quarter financial highlights, demonstrating another quarter of significant improvement across key financial metrics. Our net income of $12.9 million and diluted EPS of $1.30 were once again supported by solid portfolio and revenue growth, a healthy credit profile, expense discipline and a strong balance sheet. For 2026, consistent with seasonal trends and our 2025 quarterly results, our net income will be meaningfully higher in the second half of the year than the first half of the year, driven by stronger credit performance, balance sheet growth and continued improvement in operating leverage.

Turning to Pages 6 and 7. We had a record total originations of $537 million in the fourth quarter, up 13% year-over-year. Loan volume was driven by continued strong performance from digital leads, our auto secured product and the 17 de novo branches we've opened over the past 12 months. For the full year, we generated $2 billion in originations, a 19% increase from 2024. Our total portfolio finished at a record $2.1 billion at year-end, while our ending net receivables per branch reached $6.1 million on average.

We continue to believe that key economic markers remain strong and that our customers tend to be resilient and adaptable. These conditions, along with the increase in our addressable market through geographic expansion have allowed us to grow our portfolio while maintaining a tight credit box.

Looking ahead, as a reminder, the first quarter is always our softest origination quarter because of the normal seasonal impact of tax refunds. Demand may be particularly soft this year due to the expected larger tax refunds for our customers. As a result, we anticipate that our ending net receivables will contract sequentially in the first quarter and perhaps more than our typical seasonal trend due to the OBBA impact. However, we expect consumer loan demand to remain strong for the balance of the year following tax season.

Turning to Page 8. Total revenue grew to a record $170 million in the fourth quarter, up 10% year-over-year. Our total revenue yield and interest and fee yield declined 60 and 40 basis points sequentially to 32.5% and 29.3%, respectively, due to seasonality and product mix. In the first quarter, we expect total revenue yield to decrease sequentially due to normal seasonal trends of interest accrual reversals associated with NCLs and the runoff of smaller, higher-yielding loans during tax season.

Moving to Page 9. Our portfolio continues to perform well. Our 30-plus day delinquency rate as of quarter end was 7.5%, a 20 basis point improvement year-over-year. Our fourth quarter annualized net credit loss rate improved by 30 basis points year-over-year after adjusting for the prior year 50 basis point impact from disaster deferrals. For the full year, our NCL rate improved by 70 basis points compared to 2024 after adjusting for the impact of the 2024 disaster deferrals and the fourth quarter 2023 loan sale, which materially benefited first quarter 2024 net credit losses. In the first quarter, we expect our delinquency rate to improve, consistent with seasonal patterns associated with tax refund benefits, and we anticipate that our net credit losses will increase sequentially, again, due to normal seasonality for NCLs.

Turning to Page 10. We increased our allowance for credit losses in the quarter by $8.9 million to support portfolio growth. Consistent with our outlook, our allowance for credit losses rate remained steady at 10.3%, an improvement of 20 basis points from the prior year period.

Flipping to Page 11. We continue to closely manage our spending while still investing in our growth capabilities and strategic initiatives. Our annualized operating expense ratio was 12.4% in the fourth quarter, another all-time best and an improvement of 160 basis points from the prior year period as we modestly reduced expenses year-over-year.

Turning to Pages 12 and 13. Our interest expense for the fourth quarter was $22.6 million or 4.3% of average net receivables on an annualized basis. We remain pleased with the way that we've managed our interest expense over the past few years. Moving forward, we'll continue to maintain a strong balance sheet with ample liquidity and borrowing capacity, diversified and staggered funding sources and a sensible interest rate management strategy.

Aside from investing in our growth and strategic initiatives, we continue to allocate excess capital to our dividend and share repurchase program. Our Board of Directors declared a dividend of $0.30 per common share for the first quarter. And pursuant to our buyback program, we repurchased approximately 197,000 shares of our common stock in the fourth quarter at a weighted average price of $38.07 per share. For the full year, we repurchased approximately 702,000 shares at a weighted average price of $34.12 per share.

That concludes my remarks. I'll now turn the call back over to Lakhbir.

Thanks, Harp. To close, we are very pleased with how we finished 2025 and encouraged by the momentum we are carrying into 2026. We delivered strong results while continuing to invest in the business, improve underlying credit performance and drive operating leverage. Importantly, we did this in a disciplined way that positions us well for sustainable profitable growth.

As we look ahead, our priorities are clear: continue growing the portfolio responsibly, improving credit outcomes, expanding into attractive new markets and investing in our people, technology and analytics to enhance risk-adjusted returns. We believe the opportunities in front of us across products, markets and operating efficiency are compelling, and we are focused on executing against them thoughtfully. Regional has a strong foundation, a resilient customer base and a talented team, and I'm confident in our ability to continue creating long-term value for our shareholders.

With that, we'll open the call for questions. Operator, could you please open the line?

[Operator Instructions] Our first question is coming from Vincent Caintic from BTIG.

Lakhbir, looking forward to working with you. Welcome on board. First question, you were very comprehensive already with your kind of strategic vision and the things you're focused on so I really appreciate that. One of the comments you were discussing is bank partnerships. And I was wondering if you could go into more detail about what sort of things we can anticipate Regional Management getting enhanced by with the bank? And then have you thought about becoming a bank yourselves? It seems like some of the -- some nonbanks are now kind of thinking about becoming banks given that it might be an easier path with the new administration. So I just wanted your thoughts on that as well.

Thanks, Vincent. As I shared in my remarks, we've been working on a bank partnership for several quarters. I'm highly focused with the team on getting that initiative executed. We believe it will improve our speed to market. It will expand our digital reach, help us with product uniformity across our footprint. I think as I mentioned, one of the key things is it will help us fill holes we have and are meeting our client needs in certain states just because of the way the regulations work. Plus, it will help us optimize yields, just make sure we get paid for the risk we take in all various segments of our business. At this point, we don't have detailed time line to your point or any specific state rollouts at this stage, but we'll be sharing that as soon as we're comfortable doing.

To your second question, again, too early in the seat for me to come in and change the overall strategy or question the strategy. But to your point, we do see a number of nonbanks buying banking institutions. I think long term, it does obviously help with cost of funds flexibility and strategic options, if you will. In the near term, though, I think our focus is getting this initiative done that the team had been working on for a number of quarters. But we'll continue to evaluate the landscape to your point as it evolves.

Okay. Appreciate that. And then, Harp, so thank you for all the different guidance items for 2026. I was just curious, I think in the past, you've had some other guidance items. So I was just curious if you're willing to give guidance on like credit reserves. And maybe I think you were talking about expenses being a bit higher and then how should we think about yields and interest expense?

Yes. So Vincent, traditionally and historically, we have provided detailed short-term P&L guidance, but we've reassessed our forecasting framework and how we run the business. And short-term precision isn't always the most effective or reliable way to communicate our outlook. Quarterly results can swing meaningfully due to timing-related factors that don't always reflect the true underlying momentum of the business. So we're shifting to a full year view. We're going to keep the focus where it belongs on the fundamental drivers of long-term value creation. Nothing about our transparency is going to change. We're always going to continue to provide you guys with color on these calls.

How I would think about first quarter and the other quarters is I would take a look at our business is very seasonal. So we've talked a little bit about that. Yields will be lower in first quarter as the higher rate small loans pay down due to the impact of tax season. That could be a little bit higher this year as folks are expecting higher tax refunds. We know our delinquencies typically are always lowest in the first half and then they increase. And as a result, our net credit losses are always highest in the first half of the year, and then they are lower in the rest of the year.

In terms of ENR growth, we've talked about, right, the impact of tax season. When you're looking at last year, you'll want to normalize for the de novo growth that we had in the first quarter, which muted some of that runoff that we normally see just because those de novos came on in fourth quarter of 2024. So you'll want to adjust for that.

And then the other thing that I would tell you is just adjust for the hurricane noise that we've had in the past year and then also for the loan sale benefit that we had in first quarter '24. So if you make those adjustments and then you go back to the cyclicality of the business, that should get you there with your model, along with the guidance that we did provide around the at least 10% ENR growth and our net income guidance for the year at that range.

You also mentioned expenses. So expenses, you will see our OpEx come down over time as we gain scale, but there is seasonality, of course, in our expenses, particularly year-over-year just as the full year impact of some of the investments that we made last year sort of comes fully online in the first quarter. So that's how I would think about the model, but we're happy to delve deeper with you guys on the analyst calls later.

Next question is coming from David Shar from Citizens Capital Markets.

This is Zach Oster on for David. Congrats on the strong operational quarter. I wanted to dig in a little bit on the same-store results. So obviously, there's good acceleration throughout the year in terms of same-store receivable growth. And speaking towards the guide for kind of expansion going into the new year, I wanted to get some more detail or color on how much room there is basically to continue growing those balances on the same-store basis versus just kind of expanding the store count.

Paul, can you just repeat that last part of that question for me again, please?

No worries. Yes, I just wanted to get some more color on where the growth trajectory is and kind of what pace we could be seeing for growth on a per store basis for receivables versus more kind of organic store expansion growth?

So I think we've talked a lot about sort of our market expansion, our geographic expansion, Kyle, in terms of right, that still is a lever for us. I think if you look at the supplemental presentation, you will see that we've become more efficient in terms of the loan balances that we have per branch. So we are becoming more efficient with those branches. So I would really marry those 2 things together as you're sort of thinking about the impact that, that is going to have on our overall ENR balances. And then we provided you, obviously, with the ENR growth forecast for this year.

And I would just, again, look at that in terms of seasonality in terms of when we put that on, as we know, right, in first quarter, you have the tax refund. We go back to growing those balances in second, third and fourth quarter, and we would expect without any exogenous variables that, that would be the same pattern that we would follow this year.

Got it. And then if we can just get one follow-up. I wanted to get a little bit more detail also on the graduation program. I think that small balance loans came in a little bit lower than we were expecting, while larger loans came in higher. So I wanted to see if we can get more color on how that's progressing and if there was kind of more of a funnel over to the larger loans and graduation in the quarter than expected.

Yes. So Kyle, how I would think about that is very much we meet the demand where the demand is as long as it fits within our credit box. So that is very much what we've been doing. Our auto secured product is more of a newer product for us. So you are seeing that grow in terms of it's growing quite rapidly just because you're coming off of that smaller base. And then, of course, it has the larger ticket size. But we remain committed to our balanced approach to growth. We will continue to bring in smaller, higher-yielding loans that fit our credit box and our return hurdles, we will continue to graduate them up to larger small loans and also larger large loans with the other end of that continuum being the auto-secured business.

Lakhbir talked a little bit about the auto secured business in his prepared remarks. We think that is a very stable portfolio, but we also understand what small loans bring to our balanced approach. And so we will continue with that graduation strategy. You will see sometimes some oscillation in that, but that is really because of where the demand is and our credit box at that time. We'll always continue to put on good loans that meet our return hurdles.

Next question is coming from Kyle Joseph from Stephens.

Just wanted to step back and get your perspective on macro. I appreciate what you guys said in terms of tax refunds, and we understand the seasonality there. But from a high level, obviously, there's some uncertainty out there, but we've seen, call it, almost 2 years now or more of kind of a good mix of strong loan demand balanced with stable credit. So on the heels of the higher tax refunds, how you're expecting kind of the remainder of '26 to look and how that factors into your outlook?

Kyle, it's Lakhbir. I appreciate the question. The macro picture, I'd just restate what the FOMC statement was last week. The economy has been growing at a solid pace. We do see the consumer to be healthy, saw in the early-stage delinquency levels for fourth quarter. And as I said, we've been studying kind of various segments of the book, slicing dicing various segments and markets. And I think overall, the consumer, to your point, is fairly healthy even in the part of the K-shaped economy that we serve.

In terms of first quarter, as we mentioned, we believe the OBBA impact really sort of has 3 sort of runs to it. One, I think the real increase in purchasing power, we believe consumers are going to use to pay down past due debt. So it should help in collections. Two, consumers might use that increase in purchase power to pay down debt in general, that's high interest rate or what have you. And so that's the big question mark and how much impact it does to balances. And then three, I think some of this refund increase, which folks estimate could be 20% year-over-year increase, will also help increase discretionary spending, which frankly gives us an opportunity to grow loans.

And so we are looking at this from all 3 perspectives, post OBBA impact, which by kind of end May kind of time frame. We believe consumer demand is going to -- loan demand is going to stay healthy as it has been. And so that's kind of what's reflected in our 10% receivables growth year-over-year sort of guidance for '26.

Yes. And Kyle, just some of the other things that I would add to that, some of the metrics that we tend to follow. We'll continue to look at the employment rate and then the unemployment rate for the folks for our current customers and for those folks that could be potential customers. We know that open jobs still remain at 7 million. So open jobs, ample open jobs for our folks even if they do tend to lose their jobs. We've been watching inflation, which is moderating. And then we look at wage growth in sort of the lowest quartiles and there is wage growth has moderated, but it still continues to be real wage growth.

And then we always look at the gas per gallon, right? And the gas per gallon has come down from where it was last year. It's come down from where it was in September. And we always look at the health of our customer in terms of their ability to pay. So we'll continue to do that. But we do believe that even if there is an outsized sort of tax impact because people get higher refunds, we believe that all indications are demand will continue to be there. And if they do pay down their loans that you should see that in terms of collections and then, of course, on NCLs later in the year.

Got it. Very helpful. And then just kind of honing in on customer acquisition costs. Obviously, marketing isn't a huge part of your P&L. But just kind of want to get your sense for how marketing should trend kind of weighing what you talked about in terms of broader G&A trends.

Yes. I mean if you take a look at our marketing quarter-over-quarter and year-over-year, we've improved it. We talked a little bit about it during the last call. We've become much more efficient around our mail. Now what we will do is we will probably reinvest some of that, right, in terms of growth. So right now, you saw in the quarter that we actually had ample growth in the quarter. It's a little bit higher than the guidance that I gave, but we were better on our marketing expenses, and that's really due to the efficiency. But if demand is strong and those folks meet our risk box, we will probably redeploy some of those expenses in order to grow the business.

[Operator Instructions] Our next question is coming from Alexander Villalobos from Jefferies.

A lot of the questions I had have been answered. I did want to ask a question about pricing, though. Obviously, rates have come down a decent amount last year. Are you guys able to keep pricing kind of where it is given the segment of the consumer that you guys serve, not being that maybe that elastic. But I was just curious if pricing might come down a little bit as rates go down? Or should we think about pricing yields of the book kind of like staying where they are?

So just a couple of things on that, Alex. So when we think about pricing, we really look at pricing in context of where the market is at. And so you always want to price within a range to the market because you don't want adverse selection if you're too high. You don't want to be too low because then you just don't want to be too low, you're leaving some opportunity there on the table. So we always measure those things as we look at pricing.

But again, I'll go back to, right, we also look at, obviously, the consumer's ability to pay, and this consumer is often more focused on the payment dollars that they have to pay every month. So as long as you do that first part where you're in line with what the market will bear in terms of competition, the consumer in this segment is usually most concerned about their monthly payment. So we put all of that together when we think about pricing.

And some other different firms have been extending duration. Have you guys kind of kept duration where it has been historically? Or to get to that like payment that you're talking about, some other companies have extended duration. I was just curious if that has happened as well.

So we haven't done that in terms of how you're asking about it in terms of programmatically. I mean we have put on our auto secured product, which just comes with -- it's a longer loan. So that definitely is a variable. And then, of course, as we work through our programs with customers who are having difficulty making payments, we'll look at a number of curing tools in order. And that's on a loan-by-loan basis in order to ensure that the customer has the ability to pay us and therefore, will pay us. So we do look at it from that lens. But no, there is no programmatic extension of duration.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you. Just to close and maybe repeat myself, we're very pleased with how we finished 2025. We're really encouraged by the momentum we are carrying into 2026. I want to thank all my colleagues at Regional, the team have done a tremendous job building the platform and the momentum we have today. And I really thank them and wish them luck as we work together in building an amazing 2026. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Good afternoon, ladies and gentlemen, and welcome to the Regional Management Third Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I will now hand you over to Garrett Edson of ICR. Please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at Regionalmanagement.com. Before we begin our formal remarks, I will direct you to Page 2 of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures. Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them. We refer all of you to our press release, presentation and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition.

Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at Regionalmanagement.com.

I would now like to introduce Rob Beck, President and CEO of Regional Management Corp.

Thanks, Garrett, and welcome to our third quarter 2025 earnings call. I'm joined today by Harp Rana, our Chief Financial and Administrative Officer.

On this call, we'll cover our third quarter results, provide an update on our portfolio growth strategies and credit performance and share our expectations for the remainder of the year. As you may have noticed, we also announced my pending retirement today. I'll provide a few words on that towards the end of the call.

Building off last quarter's strong numbers and momentum, we again posted excellent financial and operating results in the third quarter. We delivered net income of $14.4 million and diluted earnings per share of $1.42, an improvement of 87% year-over-year. We grew our portfolio by $93 million sequentially, pushing our ending net receivables past $2 billion in the quarter, a new milestone for Regional. Our portfolio generated $165 million of total revenue, a record high, while our operating expense ratio dipped to 12.8%, also an all-time best.

The team continues to manage all line items of the income statement and balance sheet very well as we focus on driving growth, improving our operating effectiveness and generating capital that we can reinvest in our expansion and return to our shareholders through dividends and stock repurchases.

We continue to monitor economic conditions and believe consumers in our target segment remain healthy. Stable consumer health and expanded geographic presence and our improved data and analytic capabilities have enabled us to responsibly grow our portfolio, while at the same time improving our credit performance. Our total originations in the third quarter reached another record high, up 23% from the prior year period. Year-over-year, our portfolio grew by $233 million or 13%, keeping us on track to meet our targeted portfolio growth rate of at least 10% in 2025.

Notably, we exceeded our receivable growth expectations by roughly $35 million in the quarter as we took advantage of strong demand for our auto-secured product and a larger addressable market from new branch growth while maintaining a tight credit box. The additional $35 million of growth required us to recognize incremental provision expense in the quarter of approximately $3.6 million or $2.7 million after tax. Despite the additional provision expense, our net income was roughly in line with our guidance, thanks to effective management of all our other line items. We also continue to experience improvements in our portfolio credit quality and performance, thanks to our credit tightening actions and returns on our data and analytic investments.

At quarter end, our 30-plus day delinquency rate was 7%, an increase of 10 basis points year-over-year, but a 30 basis point improvement after adjusting for the impact in the prior year of special borrow assistant programs associated with hurricane activity. Our net credit loss rate of 10.2% improved 170 basis points sequentially and 40 basis points year-over-year due to credit tightening, effective portfolio management and product mix.

We're observing particularly strong credit performance in our newer vintages and in our portfolio of loans with an APR of 36% or less, including our auto-secured portfolio. For our portfolio loans with APRs capped at 36%, our 30-plus day delinquency rate was 6.2%, and our NCL rate was 8.9% in the third quarter, a 60 basis points improvement year-over-year and 130 basis points improvement from the third quarter of 2023.

We also continue to closely manage expenses in the quarter. Our operating expense ratio of 12.8% improved 110 basis points year-over-year despite continued investment in innovation and growth, including 16 new branches opened since the third quarter of last year. Our year-over-year total revenue growth outpaced our G&A expense growth by 12x. We'll continue to invest in initiatives that will drive long-term returns while practicing sound expense discipline.

In the third quarter, we had capital generation of $26 million, bringing total capital generation year-to-date to $53 million. Through the third quarter of this year, we returned an aggregate of $26 million in capital to shareholders via stock repurchases of $17 million and dividends of $9 million. Our book value per share reached $37.94 at quarter end.

In sum, we're very pleased with our third quarter results, and I continue to be impressed with our team's execution. We have very positive momentum and a growing healthy portfolio, and we remain well positioned to deliver strong results. Looking ahead, we'll continue to execute on our growth strategies and improving our operating effectiveness. We expect to open 5 new branches before year-end in Louisiana and California and another 5 to 10 new branches in the first half of 2026. We also plan to enter 1 to 2 new states in 2026. Our new branches are performing well, growing rapidly and generating positive monthly net income at around month 14 and positive pre-provision net income at around month 3. We continue to view new branch openings as excellent investments, and we'll continue to open new branches in new and existing markets with the pace of openings dependent on economic conditions.

Our barbell strategy of growth in our higher-quality auto-secured and higher-margin small loan portfolios also continues to be very effective. Growth in our auto-secured portfolio, in particular, is outpacing the growth of our broader portfolio. Auto-secured loans grew by $80 million or 41% year-over-year to 13.4% of the portfolio at quarter end. Our auto-secured book has very strong margins and the best credit performance of any segment of our portfolio with a 30-plus day delinquency rate of only 1.8%. Meanwhile, growth of our higher-margin small loan portfolios support our returns and customer graduation strategy.

On the expense front, we remain good stewards of shareholder capital while investing in ways that will improve our operating efficiency and credit performance. We continue to implement improvements in technology and advanced data and analytics, such as our new front-end branch origination platform, customer lifetime value analytic framework for direct mail marketing and machine learning branch underwriting model. Ultimately, these investments will improve our customer experience and team member efficiency, allow us to make better credit and marketing decisions, enhance our ability to monitor results and enable us to optimize profitably. We expect that our team's efforts to grow our portfolio, increase our operational efficiency and improve our credit performance will drive increases in net income and shareholder value over time.

For 2025, we're now forecasting full year net income of $43.5 million, the midpoint of our prior guide of $42 million to $45 million. Where we land will be driven by macroeconomic conditions and our fourth quarter portfolio growth, which directly impacts our provisioning for credit losses and bottom-line results. Ultimately, our portfolio growth rate in the fourth quarter will depend on the health of the consumers informed by our credit metrics and macroeconomic conditions, including the status of the government shutdown.

Finally, our Board of Directors approved an increase in our stock repurchase program from $30 million to $60 million, of which $36 million remained available as of the end of October. We have a very healthy balance sheet with significant funding for continued execution of our long-term growth strategy and the return of excess capital to shareholders. The larger authorization will enable us to continue to be opportunistic in repurchasing our common stock as we grow our business.

I'll now turn the call over to Harp, who will provide more detail on our results.

Thank you, Rob, and hello, everyone. I'll now take you through our third quarter results in more detail and provide you with an outlook for the fourth quarter.

On Page 4 of the supplemental presentation, we provide our third quarter financial highlights, demonstrating significant improvements across key financial metrics. Our net income of $14.4 million and diluted EPS of $1.42 were once again supported by solid portfolio and revenue growth, a healthy credit profile, expense discipline and a strong balance sheet. For the fourth quarter, we're projecting net income of roughly $12 million.

Turning to Pages 5 and 6. We had record originations of $522 million in the third quarter, up 23% year-over-year. Loan volume was driven by continued strong performance from our digital channel, auto-secured product and the 16 de novo branches we've opened over the past 12 months. Our total portfolio crossed the $2 billion milestone in the quarter and stood at a record $2.1 billion at the end of the third quarter, while our ending net receivables per branch reached $5.9 million on average. We continue to believe that economic markers remain solid and that our customers tend to be resilient and adaptable. These conditions, along with the increases in our addressable market through geographic expansion, have allowed us to grow our portfolio while maintaining a tight credit box. Looking ahead to the fourth quarter, we anticipate that our ending net receivables will increase by roughly $60 million to $70 million sequentially and that our average net receivables will be up by roughly $80 million sequentially.

Turning to Page 7. Total revenue grew to a record $165 million in the third quarter, up 13% year-over-year. Our total revenue yield and interest and fee yield moved up 20 and 30 basis points sequentially to 33.1% and 29.7%, respectively, in line with seasonal patterns. In the fourth quarter, we expect total revenue yield of 32.2%, a 90 basis point sequential decrease due to seasonality and product mix.

Moving to Page 8. Our portfolio continues to perform well. Our 30-plus day delinquency rate as of quarter end was 7%, a 30 basis point improvement year-over-year after adjusting for the prior year hurricane impact. Our third quarter net credit loss rate of 10.2% improved 170 basis points sequentially and 40 basis points year-over-year due to credit tightening, effective portfolio management and product mix. In the fourth quarter, we expect our delinquency rate to rise gradually, consistent with seasonal patterns. We anticipate that our net credit losses will be approximately $57 million in the fourth quarter. The NCL rate will be sequentially higher due to seasonality, and it will be roughly in line to the fourth quarter of last year.

Turning to Page 9. We increased our allowance for credit losses in the quarter by $9.2 million to support portfolio growth. Consistent with our outlook, our allowance for credit losses rate remained steady at 10.3%. Looking to the fourth quarter, subject to economic conditions and portfolio performance, we expect our reserve rate to remain at 10.3%.

Flipping to Page 10. We continue to closely manage our spending while still investing in our growth, capabilities and strategic initiatives. Our annualized operating expense ratio was 12.8% in the third quarter, another all-time best and an improvement of 110 basis points from the prior year period. In the third quarter, our revenue growth outpaced our G&A expense growth by 12x. In the fourth quarter, we expect G&A expenses to be roughly $65 million.

Turning to Pages 11 and 12. Our interest expense for the third quarter was $22 million or 4.4% of average net receivables on an annualized basis. Our cost of funds increased year-over-year as lower fixed rate debt has matured and we funded our growth with higher fixed and variable rate debt. Even with the increased cost of funds, we're pleased with the way that we've managed our interest expense over the past few years. As of the end of the third quarter, 76% of our debt was fixed rate with a weighted average coupon of 4.6%. In October, we closed a $253 million asset-backed securitization transaction at a weighted average coupon of 4.8%, a 50 basis point improvement from our deal earlier this year. This transaction once again demonstrates the strength of our ABS platform.

Following the closing of the October securitization, fixed rate debt represented 89% of total debt with a weighted average coupon of 4.7% and a weighted average revolving duration of 1.2 years. In the fourth quarter, we expect interest expense to be approximately $23 million or 4.4% of average net receivables. Moving forward, we'll continue to maintain a strong balance sheet with ample liquidity and borrowing capacity, diversified and staggered funding sources and a sensible interest rate management strategy.

Aside from investing in our growth and strategic initiatives, we continue to allocate excess capital to our dividend and share repurchase programs. Our Board of Directors declared a dividend of $0.30 per common share for the fourth quarter. And pursuant to our buyback program, we repurchased approximately 154,000 shares of our common stock in the third quarter at a weighted average price of $32.56 per share.

Finally, I'll note that we provide a summary of our fourth quarter 2025 guidance on Page 14 of our earnings supplement. That concludes my remarks. I'll now turn the call back over to Rob.

Thanks, Harp. In summary, we're proud of our third quarter results. Our team executed very well, delivering strong net income, a new milestone in ending net receivables and an all-time best on our originations, revenue and operating expense ratio lines. We continue to grow the company responsibly while increasing shareholder value.

Before I close things out, I'll say a few words about my retirement. After careful consideration, I decided now is the right time to retire and spend more time with my family. Following a diligent search, our Board of Directors identified Lakhbir Lamba to succeed me as President and Chief Executive Officer of Regional. Lakhbir brings to Regional nearly 30 years of leadership experience in consumer lending and financial services with extensive expertise in consumer credit, digital and technology platform development, brand sales and service, analytics and product management. We're excited to welcome Lakhbir to Regional as we believe he is the ideal fit to continue our current growth strategy and lead Regional Management forward. It's been my distinct pleasure to lead such an outstanding team over the past 5.5 years. I want to thank everyone at Regional for their unwavering commitment and efforts. I'm proud of what we've accomplished as we've navigated through some of the most challenging environments we've experienced in decades, while nearly doubling our net finance receivables and expanding our footprint across the country to 8 new states. Over the same time period, we invested heavily to transform our technology platforms and data analytic capabilities, positioning the business for future growth. With Regional well positioned for its next stage of expansion and my confidence that Lakhbir will lead the team to even greater success, I look forward to beginning my next chapter.

I'll now open up the call for questions. Operator, could you please open the line?

[Operator Instructions] Our first question comes from John Hecht of Jefferies.

First of all, Rob, congratulations and hope to keep in touch and best of luck in your next journey. And Lakhbir, look forward to working with you as well. So my questions are, you had a pretty good acceleration in same-store sales as your digital volume picks up, too. I'm wondering at the store level, maybe can you tell us like what's going on? Is it increased new customer count? Is it graduating borrowers to larger loans that's driving that? Maybe just a little bit of a breakdown there.

Well, thanks, John. I appreciate the nice words. Yes, the same-store sales have really increased nicely. We're -- we underwrite our digital loans through the branches, and we're seeing really strong momentum coming through digital as well as, look, our traditional renewal customers come through existing customers as well as our live check program. So we're seeing no surprise, we're seeing good demand, and we're able to be choosy on the customers we pick with a tight credit box. So we feel good about where we're at.

And just to add to that, John, so we've had exceptional growth in terms of the auto-secured. The branches are really sort of tracking to auto-secured. Digital volumes are also up and as you know, those are booked through the branches. So between those two items, you're seeing strong performance in our branches year-over-year.

Okay. And then I guess, anything to think about as we transition toward '26 in terms of focusing on a product mix? Is it -- are we thinking similar mix this year to next year? Or is there something that would be guiding a change?

So John, how I would think about it is in terms of our mix, we're always very, very nimble given the economic environment that we face. We talked about our growth in auto-secured. That is a nascent product for us. So I would expect to see that continue to grow. You can take a look at our mix in terms of our large loans and our small loans, and we will continue to grow the large loans, particularly driven by auto-secured, but we always remain nimble in terms of our state expansion, new borrowers and growing small loans in those new states.

[Operator Instructions] Our next question comes from Kyle Joseph of Stephens.

Kind of piggybacking on John's questions. Yes, I just want to get some color for -- obviously, you had really good growth on the large loan side and loan growth slowed on the smaller loans. Any -- you talked about the auto loans kind of driving that, but we've heard a lot about the higher-end consumers doing better than the lower-end consumer. Is any of that kind of flowing through your origination trends?

So we're not seeing anything in our data just yet, Kyle, but we always continue to look at our data and make adjustments around the margins. In terms of our auto growth, we are definitely booking loans that meet our credit box and meet our risk return hurdles. So we're feeling pretty good about the growth that we've seen there.

So, so far, we haven't seen anything in our data, but we remain mindful about the uncertainty that folks are feeling. We know that there's still over 7 million jobs open to customers in our segment. We also know that although inflation is high, it is where it was expected to be. And we know that our customers are resilient. So we continue to look at the uncertainty and make sure that we're making decisions based upon that. But right now, we're not seeing anything in our data that we can't control for by just making some changes around the margin.

Got it. And then I think you mentioned this, but in terms of the yield decline, just a function of seasonality and loan mix shift. Is that right?

That is right. And when you're looking at -- sorry, go ahead.

Yes, I was going to say for the fourth quarter guidance versus the third quarter number.

For the fourth -- Yes, for the fourth quarter, so you're going to see a seasonal decline. You have to remember that in third quarter last year that we did have the hurricane impact. So you've got to normalize for that. But other than that, it is a seasonal decline and then also with the mix shift to the larger loans. You're going to see yields decline because of that just because the larger loans, although that they have a great risk return margin, you will see lower yields with the larger loans.

Our next question comes from Vincent Caintic of BTIG.

And Rob, it's been a pleasure working with you all this time. So congratulations, well deserved. So first question on the -- so actually wanting to touch back again on the level of growth and the outperformance versus your third quarter guidance. So I guess credit seems to have been okay, so that wasn't the driver. Just wondering if there was something else like was it less competition or something else because it was just a significant and nice beat. So just wondering what you saw in the quarter that surprised you that drove that outperformance.

So Vincent, it's Harp. So when we give guidance, right, we were looking out at the same uncertainty that we're looking out at going into the fourth quarter. So we guided based upon what we thought we were going to see. What we found was demand continued to be strong. And then we had to match that demand against our risk box. And as we've talked about in the prepared remarks, our risk box continues to be conservative, right, in terms of it’s been tight. It hasn’t really loosened. So we were able to actually meet that demand with our current risk box. We always put on good quality loans, and we had an opportunity to do that in the third quarter. So that's what we did.

Looking out into fourth quarter in terms of our guidance, again, we're looking at the uncertainty. We want to make sure that we're putting on good loans. And if there is an opportunity to grow faster because we're able to meet demand within our risk box and our return hurdles, we will do so. Keep in mind that if we do grow faster than what we've guided to, that, of course, will have a [indiscernible] impact, and it will affect the guidance that we've given for net income in the fourth quarter and therefore, our full year guidance, but that will, of course, impact net income to the positive in 2026, so that if we're able to put on good growth in the fourth quarter, we will take that opportunity to do so.

Yes. And Vincent, great working with you as well. The only thing I would add to Harp's commentary is, obviously, the government shutdown is still going underway. We've taken steps to reduce our direct mail in geographies that have concentration of government employees. We've also got a tighter risk box around those government employees in terms of verification of income and the like and how much we will renew with them until we get a better lens on when the shutdown might end. And so I think we're being appropriately cautious going into the fourth quarter, given what's happening in D.C.

Okay. Great. And that actually sort of touches on my next question, which is that marketing expense was pretty efficient this quarter even with you beating your loan outlook, expenses -- marketing expenses were down $800,000 quarter-over-quarter. So I'm just wondering if that's a sustainable efficiency with your marketing? Or I guess, was that pullback in direct mail to government employees? Or if you can maybe talk about that in more detail.

So that really has to do with our new model that we've spoken about in the past, Vincent. So our new models are very efficient, and we're able to make use of them, and we can do a number of things with them, right? We could either mail more with less marketing dollars or we could remain at the same marketing dollars and have higher volumes. And we're also able to adjust for risk.

So what we did in the quarter, given where demand was, we were able to spend money and be more efficient while choosing the right customers to meet our risk box. So that's really what you see there in terms of the marketing spend. You -- again, given our growth in the fourth quarter, you will hopefully see the same in the fourth quarter in terms of those models working for us. So we're hoping that, that is sustainable in the future with those new models.

Yes. And Vince, we talked about this, the direct mail customer lifetime value gives us the ability to see the profitability curves across all line items projected out for a couple of years for life each mailing. And we can actually turn on and off risk segments, states, whatever to optimize our spend or to optimize revenue or to optimize growth or to optimize losses or to optimize profitability 12 months out. So the power of these models, and they get refreshed for the current environment. The power of these models is something that a lot of investment went into and it's starting to pay off.

Ladies and gentlemen, with no further questions in the question queue, I will now hand back over to Rob Beck for closing remarks.

Yes. Thanks, operator, and thanks, everyone, for joining. I want to first thank our investors who have supported the team and I over the last 5.5 years. We're proud of what we have been able to accomplish in transforming the business during, as I said, a very difficult time with COVID and the period of high inflation. Since I started in my role, we've had total shareholder return of over 230%. We returned $178 million of capital to shareholders in the form of dividends and buybacks, and we increased our tangible book value by more than $13 per share and most importantly, remain profitable through the cycle.

Now I have gotten to know Lakhbir , and I am confident that he will continue to build upon our momentum to grow our franchise, and of course, I will be available to assist with the transition through June of next year. I also want to thank the Board for their support over the last 5.5 years. And last but not least, I want to thank the entire Regional team. We've been together from the start of my time at Regional, and they are an incredible group and I think the best in the industry. Everything that has been accomplished is due to their unwavering dedication and hard work in support of our customers, and I will miss them greatly.

Access to capital is essential for every person to build a productive life, and Regional provides this to subprime customers that need it the most, something of which we are all very proud of. And lastly, any CEO that has operated since COVID will tell you it has been a demanding journey but also a rewarding one. As my family knows and Harp, I put everything I had in Regional 24/7. And it's now time to focus on my family, my health and the next chapter of my life, and I wish you all the very best.

Thank you, sir. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.

Ladies and gentlemen, greetings, and welcome to the Regional Management Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Garrett Edson from ICR. Please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at regionalmanagement.com.

Before we begin our formal remarks, I will direct you to Page 2 of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures. Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates, and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them. We refer all of you to our press release, presentation, and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition.

Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com.

I would now like to introduce Rob Beck, President and CEO of Regional Management Corp.

Thanks, Garrett, and welcome to our second quarter 2025 earnings call. I'm joined today by Harp Rana, our Chief Financial and Administrative Officer. On this call, we'll cover our second-quarter results, provide an update on our portfolio credit performance and growth strategies, and share our expectations for the second half of 2025.

We delivered very strong financial and operating results in the second quarter. We generated net income of $10.1 million and diluted earnings per share of $1.03, an improvement of 20% year-over-year. Our results across all line items met or beat our guidance, including net income that was $3 million or 42% better than the midpoint of our guidance. Our quarterly revenue reached a record level of $157 million. Total originations were also at a record high, and our annualized operating expense ratio was an all-time best. I continue to be impressed with our team's execution as we focus on driving growth, improving our operating effectiveness, and delivering strong shareholder returns.

Consumers in our target segment remain healthy. This has allowed us to responsibly grow our portfolio while also improving our credit performance. We grew our net receivables by $70 million sequentially in the second quarter on $510 million of originations. Our ending net receivables were up 10.5% year-over-year, in line with our expectations to grow the portfolio by at least 10% in 2025.

At quarter end, our 30-day delinquency rate was 6.6%, an improvement of 50 basis points sequentially and 30 basis points better year-over-year. Our net credit loss rate of 11.9% was in line with our expectations for the quarter. The NCL rate improved 50 basis points sequentially and was 80 basis points better than the prior year period. Our credit tightening actions continue to yield positive results. We also managed expenses tightly in the quarter. Our operating expense ratio of 13.2% improved 60 basis points year-over-year despite continued investment in innovation and growth, including new branch openings. We'll continue to invest in initiatives that will drive long-term returns while practicing sound expense discipline.

In the second quarter, we had capital generation of $16.9 million, bringing total capital generation year-to-date to $26.8 million. Through the second quarter of this year, we returned an aggregate of $17.6 million in capital to shareholders via stock repurchases of $11.6 million and dividends of $6.1 million. Our book value per share reached $36.43 at quarter end.

In sum, we're very pleased with our second quarter results. As I reflect on economic conditions and our team's efforts over the last several years, I believe the second quarter represents one of the strongest periods of execution since 2021 and early 2022, a time when inflation was stable, funding costs were low, and government stimulus was contributing to strong credit outcomes. We have very positive momentum, a growing healthy portfolio, and remain well-positioned to deliver strong results moving forward.

Before handing things over to Harp, I'll touch on a few strategic items. We opened 2 branches in the second quarter, bringing total new branch openings to 17 since early September of last year, of which 11 are in new markets in California, Arizona, and Louisiana. These branches are performing well and growing rapidly, and we expect to open another 5 to 10 branches over the next 6 months. We generally observe that new branches begin to generate positive monthly net income at around month 14 and pre-provision net income at around month 3. We view new branch openings as excellent investments, and we'll continue to open new branches in new and existing markets, with the pace of openings dependent on economic conditions.

We also continue to execute on our barbell strategy, which focuses on growth in our high-quality auto secured and high-margin small loan portfolios. Our auto secured loan portfolio grew by $66 million or 37% year-over-year from 10% to 13% of the total portfolio and carries a 30-day delinquency rate of 1.9%. Meanwhile, our portfolio of loans with APRs above 36% grew by $50 million or 16% year-over-year, increasing modestly from 17% to 18% of our total portfolio. These portfolios continue to perform well, have strong margins, and support our customer graduation strategy.

On the expense front, we remain good stewards of shareholder capital. As a normal course of our operations, we regularly review branch-level financial and operating metrics and evaluate opportunities to improve network efficiency. In connection with those efforts, we expect to consolidate 8 to 10 branches this year into nearby branches. The G&A expense from these actions will be used to support our new branch openings in new geographies.

In addition, earlier this month, we completed a small restructuring in our corporate offices with the general goal of streamlining our business processes to maximize efficiency. While this resulted in a restructuring charge in the third quarter, the G&A expense savings from the action will more than offset the charge within the quarter. Moving forward, we expect annualized G&A expense savings of roughly $2.3 million from this repositioning. These savings will support our ongoing investments in technology and advanced data and analytics, which are already bearing fruit.

For example, we developed a new front-end branch origination platform that will improve team member effectiveness, enhance the customer experience, and ultimately benefit our operating efficiency. The new system facilitates a smoother, quicker, and more accurate origination process. We began piloting the system earlier this year, have deployed the system within one of our larger states, and we will be rolling it out throughout our network over the next 18 months. We've also developed a new customer lifetime value analytic framework for direct mail marketing that consists of dozens of machine learning models that allow us to better optimize offer and selection criteria. We began using the new model in the second quarter and will fully deploy it in the third quarter. We expect to see significant benefits as it scales in use.

Similarly, we'll be rolling out our new machine learning branch underwriting model starting in the third quarter, and we'll deploy it across our network as we implement our new front-end origination tool. These new models will allow us to improve volume while holding credit risk constant, improve credit risk while holding volume constant, or some combination of the 2. Ultimately, the models will improve our mail selection, enhance our ability to monitor results, and enable us to optimize profitability. We expect that our team's efforts to grow our portfolio, increase our operational efficiency, and improve our credit performance will drive increases in net income and shareholder value. For 2025, we're forecasting full-year net income of $42 million to $45 million.

Given the strong portfolio growth we experienced in the second quarter, there may be an opportunity for faster growth in the second half of the year. Where we land within the forecasted 2025 net income range will be driven by our portfolio growth, which directly impacts our provisioning for credit losses and bottom-line results. Ultimately, our portfolio growth rate in the second half will depend on the health of our customers, informed by our credit metrics and macroeconomic conditions.

I'll now turn the call over to Harp, who will provide more detail on our results.

Thank you, Rob, and hello, everyone. I'll now take you through our second quarter results in more detail and provide you with an outlook for the second half of the year. On Page 4 of the supplemental presentation, we provide our second-quarter financial highlights. Our net income of $10.1 million and diluted EPS of $1.03 were supported by a solid portfolio and revenue growth, a healthy credit profile, expense discipline, and a strong balance sheet. For the third quarter, we're projecting net income of roughly $14.5 million.

Turning to Pages 5 and 6. We had record total originations of $510 million in the second quarter, up 20% year-over-year. Loan volume was driven by strong performance from our digital channel, auto secured product, and the 17 de novo branches we've opened over the past 12 months, the latter of which generated 24% of our year-over-year growth. Our total portfolio reached record levels at the end of the second quarter and is expected to cross $2 billion in the third quarter, while our ending net receivables per branch reached $5.6 million on average.

We continue to believe that key economic markers, including wage growth, the number of open jobs, the unemployment rate, and the direction of inflation, are favoring our customers and that our customers tend to be resilient and adaptable. These conditions have allowed us to grow our portfolio while maintaining a tight credit box. Looking ahead to the third quarter, we anticipate that our ending net receivables will increase roughly $55 million to $60 million sequentially and that our average net receivables will be up roughly $75 million sequentially.

Turning to Page 7. Total revenue grew to a record $157 million in the second quarter, up 10% year-over-year. Our total revenue yield and interest and fee yield each moved up 50 basis points sequentially to 32.9% and 29.4%, consistent with seasonal patterns. Total revenue yield improved 20 basis points year-over-year from the improved credit performance and ancillary product revenue. In the third quarter, we expect total revenue yield of 32.8%, a 10 basis point sequential decrease due to portfolio mix. And for the fourth quarter, we anticipate a further decline in revenue yield due to seasonality.

Moving to Page 8. Our portfolio continues to perform well. Our 30-plus day delinquency rate as of quarter end was 6.6%, 50 basis points better sequentially and a 30 basis point improvement year-over-year. Our net credit losses in the second quarter were better than our forecast, and our net credit loss rate of 11.9% improved 50 basis points sequentially and 80 basis points year-over-year due to credit tightening and effective portfolio management.

Our second quarter net credit losses include a $2.1 million or 40 basis point impact from prior year hurricane activity. In the third quarter, we expect our delinquency rate to rise gradually, consistent with seasonal patterns. We anticipate that our net credit losses will be approximately $51 million in the third quarter or a net credit loss rate of approximately 10.3%, a 30 basis point improvement from the third quarter of last year. The expected sequential improvement in our net credit losses in the third quarter is consistent with seasonal patterns, and the expected year-over-year improvement in our net credit loss rate in the third quarter is reflective of the overall improved credit quality and performance of our portfolio. For the fourth quarter, we expect a sequential seasonal increase in our NCL rate.

Turning to Page 9. We increased our allowance for credit losses in the quarter by $3.7 million to support portfolio growth. Consistent with our outlook, our allowance for credit losses rate declined to 10.3% due to the release of the remaining hurricane reserve against the associated net credit losses in the second quarter. Looking to the third quarter, subject to economic conditions and portfolio performance, we expect our reserve rate to remain steady at 10.3% at the end of the quarter.

Flipping to Page 10. We continue to closely manage our spending while still investing in our growth capabilities and strategic initiatives. Our annualized operating expense ratio was 13.2% in the second quarter, an all-time best and an improvement of 60 basis points from the prior year period. In the second quarter, our revenue growth outpaced our G&A expense growth by more than 5x. In the third quarter, we expect G&A expenses to be roughly $65 million to $66 million.

Turning to Pages 11 and 12. Our interest expenses for the second quarter was $20.4 million or 4.2% of average net receivables on an annualized basis, better than our outlook on lower average debt and lower fees. Our cost of funds increased year-over-year as lower fixed-rate debt has matured, and we funded our growth with higher fixed and variable-rate debt. Even with the increased cost of funds, we're pleased with the way we've managed our interest expense over the past few years.

As of the end of the second quarter, 84% of our debt was fixed-rate with a weighted average coupon of 4.5%. In the third quarter, we expect interest expense to be approximately $22 million or 4.4% of average net receivables. And for the fourth quarter, we expect the cost of funds rate to increase further to 4.5%. Moving forward, we'll continue to maintain a strong balance sheet with ample liquidity and borrowing capacity, diversified and staggered funding sources, and a sensible interest rate management strategy.

Aside from investing in our growth and strategic initiatives, we continue to allocate excess capital to our dividend and $30 million share repurchase program. Our Board of Directors declared a dividend of $0.30 per common share for the third quarter. Pursuant to our buyback program, we repurchased approximately 165,000 shares of our common stock in the second quarter at a weighted average price of $30.36 per share.

Finally, I'll note that we provide a summary of our third quarter 2025 guidance on Page 14 of our earnings supplement. That concludes my remarks.

I'll now turn the call back over to Rob.

Thanks, Harp. Before we wrap up, I want to take a moment to thank the entire Regional team for their dedication and outstanding execution during the second quarter. Your hard work continues to drive our success and positions us for long-term growth. We're extremely proud of our results this quarter: record revenue, strong net income, responsible portfolio growth, disciplined expense management, and improved credit performance. These achievements reflect the strength of our strategy, the quality of our execution, and the resilience of our business model. Looking ahead, we remain focused on accelerating growth, investing in strategic initiatives like branch expansion, advanced analytics, and technology enhancements, and further strengthening our credit performance. These actions will enable us to deliver sustainable, profitable growth and long-term value for our shareholders.

Thank you again for your continued support and confidence in Regional Management. We're excited about the opportunities ahead and look forward to updating you on our progress in the quarters to come.

I'll now open up the call for questions. Operator, could you please open the line?

[Operator Instructions] The first question comes from the line of David Scharf from Citizens Capital Markets.

Terrific results. And I'm wondering, Rob, you've discussed an awful lot of different initiatives, whether it's geographic expansion, some of the store-based origination, marketing channel technology developments. As we look beyond just kind of the near-term 90-, 180-day guidance, is there kind of a ranking of where you see the most opportunity you can provide us, whether it's geographic, channel related or product-related? Or should we just think of this as always fine-tuning among all the different aspects of growth?

So great, Dan, great question. Thanks for joining. So here's how I would answer that question. And I'll give you the context of what I think we accomplished this quarter in doing so. First and foremost, what I would say is we have a lot of levers for growth, which is reflecting all the investments we've made in the various initiatives over the last several years, including what has been a pretty challenging time during the high inflation period. And so it puts us in a unique position where we can pull those levers based on what we see in the health of the customer and the macro conditions or the macro environment. So the drivers of the growth for us have been a combination of state expansion and the new branches, many of which are in those new states.

Our auto secured lending, which we did lean into digital underwriting, which you can see was very strong this quarter, and also the advanced analytics that we've invested in, which helps us to really fine-tune our underwriting and marketing strategies to deliver increased growth if we choose to or to use those models to moderate losses. So we can optimize using those advanced analytics depending on the market conditions. So what I would say to you is -- and this isn't mutually exclusive, but if you look at the $187 million of growth we had in ENR year-on-year, our lower-risk large loans grew $147 million, which was 79% of the growth. And that was almost quadruple the increase in our small loans. The auto secured loans increased by $66 million. And obviously, that's a subset of large loans, but that was 35% of our growth. And it's now 13% of our portfolio. And as I said, delinquency rates, 30-day delinquency rates is 1.9%. So attractive low-risk business.

The 17 new branches that we opened since September contributed $45 million of growth, which is about 25% of the overall growth. And then if you just look at new states, that was $97 million growth, or roughly 52% of the growth. And most of that growth was at rates below 36%. So the takeaway is we are achieving this growth without loosening our credit standards, okay? In fact, even our high-margin business, greater than 36% only increased marginally from 17% of the portfolio to 18% of the portfolio. So as we look ahead, we're in a great position to be able to have all these levers to pull. And of course, with our advanced analytical tools, we can pull those levers to lean into growth where we think we're going to optimize returns depending on what the market environment is like.

And so I think it's a great place to be. And in terms of where we expect to go for the rest of the year, look, it really depends on what we see as the health of the customer, which at this point, we're seeing credit performance, which is spot on with what we expected from the very beginning of the year. And so we have an opportunity to grow faster, I think, if we choose to in the second half of the year. But we're going to let the credit performance and any macro developments kind of guide where we end the growth for the full year.

Got it. No, that's helpful. I mean it's certainly a lot of different levers at play. Maybe just one follow-up on your comments on credit. It looks like pretty much every lender that's reported in our coverage, regional, no exception, seem to have probably exited the first quarter, maybe in an over-reserve position, which was entirely understandable in the wake of the kind of April 2 announcements. Given all of the constructive commentary you provided about the stability of your borrower base, is the allowance -- is the kind of flat allowance rate or reserve rate guidance you're providing, should that be taken as an indication that that's probably a normalized level? Or are there certain other things you're on the lookout for that could potentially lead that reserve rate below 10%?

So David, it's Harp. I'll answer that. So we look at our CECL allowance rate, as you know, it's based upon our portfolio mix and our growth, and we look at product, FICO, and delinquency. So we look at credit and delinquency trends in terms of what we see internally. And then we overlay macro on top of that. So what you saw this quarter in terms of the 10.3% and how that came down from last quarter, we had signaled that we would be releasing the remaining hurricane, which we did. So that's part of that 10.5% to 10.3%. The macro improved, and that's another reason why we're seeing it come down from 10.5% to 10.3%, so we've got the improvement of macro currently in the numbers that are calculated in the allowance for the quarter.

Now as you know, every quarter, we'll take a look at revised macros. And if there is an opportunity for the reserve to come down lower based on macro, but also our own trends and our product mix, we take a look at that every quarter. But right now, in terms of -- and you're probably looking at our guidance, we're comfortable in terms of where we're guiding to in third quarter at the 10.3%.

Yes. I was going to add a little bit here just on the health of the customer as we're seeing it. I would say the customers are generally doing pretty well, and they're making smart choices. Our customers tend to do a pretty good job of finding ways to mitigate social times. Unemployment, as everyone knows, is low. It was nice to see the economy grow last quarter. And we're still seeing real wage growth in our customer segment. And there's still 7.5 million open jobs out there, and many of those roles fit our customer profile. I do think immigration may further boost -- the immigration restrictions will further boost wage growth and job prospects for our clients.

And then if we look at the O BBB or OBB bill, however you want to say it, look, I think it's likely positive for our customers based on everything we see. A little early to tell, but we generally view that as positive. And look, the uncertainty right now remains tariffs. I think there's a little bit more certainty than there was. And inflation is still a little elevated, but I think the view from most market is any tariffs will be more of a one-time shock to inflation rather than one that per increased inflation continuously. So that's not to say that we're watching the performance of our customers and having to tighten credit where we want. In fact, as I think I've said numerous times, we're always turning the dials tighter here to address where we might see stresses. But at this point in time, I think the consumer is holding up pretty nicely.

The next question comes from the line of Alexander Villalobos from Jefferies.

This is Alex here instead of John Hecht. I wanted to ask you a little bit about how we should think about yields going forward. Potentially, there might be a rate cut later this year, but definitely a year from now, we should be expecting lower rates. So just kind of what is the playbook with yields? Should we expect to kind of maintain higher pricing as interest expense goes down? Just kind of how we should think about that?

So Alex, it's Harp. When you say yields, are you referencing fund's interest expense?

Yields. Interest income, yield.

Yes. So revenue yield. Okay. So revenue yields, Alex. So I think we've guided in terms of where revenue yields will be in the third quarter. In terms of how we price, we price in terms of competition. So you'll always price in terms of the right product or at the right price for the right customer. So that's how we price, and we'll take a look at how our competitive pricing is to make sure that we don't have adverse selection. So we'll continue to monitor that. And if there's opportunity to look at pricing, we will definitely do that.

And then on the interest expense side, in the future, is there any ability to kind of switch to a better cost of fund source of funds versus mezzanine debt?

So Alex, what we do is we manage cost of funds quite effectively. If you look at what we've done over the last several quarters, you can see that we basically maintain cost of funds within the 4% to 4.3% range. So we've done a very good job through the cycle managing cost of funds. Now part of that is because of how much of our book is fixed, 84% of our book is fixed. And so when you're modeling, we're looking at cost of funds in the future, even though interest rates may come down through Fed cuts, what we have to remember is that we have securitization that we have put on books at very, very low rates.

Those will come due, and they will reset at market rates. So you will see our cost of funds go up, especially in -- we guided higher cost of funds in the third quarter. We've guided even higher cost of funds at 4.5% in fourth quarter. So that sort of the baseline as we look to model into next year. And then when you look at next year, you should really look at the securitization that we have come into and what the weighted average cost of those securitizations are.

And then if you were to just look at the last securitization that we book, that would give you a pretty good indication of how cost of funds is going to change and increase into next year.

The next question comes from the line of Kyle Joseph from Stephens Inc.

Let me echo congratulations on a strong quarter. I just want to talk about the originations mix in the quarter, it looks like small decelerated a little bit, large accelerated. Just wondering, is that a function of demand, a function of competition? Or is it really just one quarter is not enough to really call it a trend?

Yes, I'll take that. Harp, you can jump in. As I said, our large loans grew nicely year-on-year. I think a big part of that is driven by the increase in our secured business. I think in our digital originations, bigger concentration in the larger loans, better quality, and that's done with invention. I think even in the new states that we enter, particularly we're renewing smaller loans and the larger loans, that's a generalized theme that we're growing our larger loan book faster than our small loan book.

And I'll say this, and look, I'm not going to give you a definitive view of where the greater than 36% business will be over time. But I do think it's going to decline as a percentage of the portfolio because of the levers I just mentioned, the growth in new states, the digital larger loans, the auto secured, all of which helps improve the quality of our portfolio, and I think are all originated at attractive returns. Harp, did you add anything?

No, I think that's it.

Yes, that's helpful. And then just one follow-up on OpEx. I appreciate the guidance for 3Q. But as we think about that going forward, it sounds like there's some puts and takes in terms of branch consolidation versus new builds, and then some restructuring you did at the corporate level. But how you're thinking about whether it's marketing on its own or expense, and how that compares to kind of your expectations for loan growth overall?

Yes. I mean if we lean into faster growth in the second half of the year, we have guided to minimum ER growth of 10%. Now in the second quarter, we grew at about 10.5%, which was about $15 million higher than our guidance on ENR. And so pretty healthy beat on growth in the second quarter. So as we look at the second half of the year, there is an opportunity potentially to grow faster. Again, we'll have to see what the macro conditions hold and support. But at the end of the day, there could be opportunity and there could be additional expenditure to go along with that. Naturally, we want to take advantage of that. But look, as I think everybody knows, higher growth does impact short-term net income due to CECL, as you take the lifetime losses upfront.

And so that's part of the reason, or is the reason for the range of the full year. But faster growth is just going to propel higher earnings for next year. And so I think that we're sitting in a good position where we see the opportunity to grow and potentially take advantage of it if market conditions warrant.

[Operator Instructions] The next question comes from the line of Vincent Caintic from BTIG.

I did want to follow up on the guidance. So I wanted to ask about your philosophy around guidance and how much conservatism is baked into it. When I look at your good second-quarter results versus your guidance, you handily beat it. Loan growth was, what, 22% higher than guidance. Revenue yield was 30 basis points higher than your guidance, and the expenses were lower. So your net income was 40% above your own second-quarter guidance. So I wanted to ask, first, maybe what changed in your performance versus what you were expecting when you gave the guidance? And then when I look at the third quarter, third quarter guidance calls for lower loan growth than what we saw in the second quarter, and the revenue yield declining quarter-over-quarter. So I just wanted to ask how much conservatism is baked into all of that.

No, Vincent, that's a good question. I would tell you that when we were giving guidance for second quarter, we were coming off the first quarter where volume growth wasn't where we had hoped it would be, and that's part because of a strong tax season and some weather. And of course, the biggest backdrop was just all the uncertainty about tariffs and the potential for a hard landing. So I think as we started to see things evolve a little bit and saw customer demand be there for the segments where we get a good return, we were able to lean into the growth faster, and that's what we should do.

But as I noted in the document, we also, obviously, having a mind towards the future if things were going to slow down, we took actions on expenses, and we ran the place to be as efficient as possible. We took some restructuring actions. And some of these things, you just can't give guidance on because we're working the numbers and the results each and every month of the quarter. So as we look ahead, in terms of conservatism or not, I don't think there's 100% clarity on where tariffs are going to go. And so part of the reason why we're giving a range on full-year net income is it's very much dependent on how much growth we choose to do.

That's very helpful on how you're thinking about guidance. I really appreciate that. Separate question. I noticed in one of the slides, a very helpful detail on all the slides. One of the slides that you were talking about your store growth. The receivables per store is actually higher for the 1- to 3-year-old stores than for stores older than 3 years. And I thought that was interesting. I was wondering if maybe you can describe like what's driving that and if there's any learnings is on Slide, I think, 6 of the presentation deck. I just thought that was very fascinating that there's so much growth there. So I'm wondering about the opportunities for the rest of the stores.

Yes. Again, great question. The driver of that is most of those stores are in the newer states, which have less range density. And so we're seeing bigger stores on the average than what we have in our legacy states.

The next question comes from the line of John Rowan from Janney Montgomery Scott.

Just a quick question. So the -- you said that there was a restructuring charge in the third quarter, correct? Because you did come in below your G&A guide for the quarter, but that -- whatever the restructuring expense was recognized in the second quarter, correct?

Yes. So there was a restructuring charge in the second quarter, but you will have savings through I'm sorry, in third quarter. And so you will have -- so the prices will be recognized in the third quarter, and you have savings in the second half of the year.

Yes. It's neutral, if not positive in the third quarter.

Okay. And just maybe one simple question. So if I look at guidance and you look at the net income guide and maybe go towards the -- let's just forget the mistake, say you're at the middle of net income guide for the year, that would kind of indicate a slightly down net income third to fourth quarter. It's been a while since we've had kind of a clean back half of the year, given all the loan sales you've had in prior years. Is that -- and obviously, things change as you kind of lean into small loan growth. Is that kind of the typical seasonality that we should expect going forward?

I think your question is, do we normally grow faster in the second half of the year? I think in general, that's true. And I think that the lever here is just simply how we grow in order to -- depending on the environment, and then to benefit next year.

Net income will obviously be the amount that we have to take for the incremental growth.

The next question comes from the line of Bill Dezellem from Tieton Capital Management.

Fantastic quarter. A couple of questions here to start with, the digital originations stepped up meaningfully from the prior quarters. Would you please discuss the dynamics behind that, please?

So in terms of the digital originations, I think we just had -- our affiliates, we had some good loans book through the affiliates. Our branches became more productive in terms of booking those leads. And we were also able to book larger loans through the affiliates, and that's really what you see show up on the page.

And as a result of what you just said, that sounds like that is a repeatable and sustainable going forward as opposed to a one-off phenomenon?

Yes. Look, the digital partners have been driving really nice growth. We obviously review those partners and credit performance regularly. And so there will always be some modulation in terms of the level of digital originations relative to other opportunities because, at the end of the day, as you know, we are trying to maximize the bottom line returns. So there may be quarters where we might slow the digital a little bit and grow other parts of the portfolio faster. Again, we're always looking at what -- as is the right thing to do for -- on a risk-return basis.

Great. And then as you pointed out, your revenues grew 5x faster than expenses. Is that somewhat normal now going forward for a few quarters? Or was there something special that came together to make that happen this quarter?

Well, look, the investment dollars are always a little bit episodic. We have invested a fairly significant amount of money in our technology platform and our advanced analytics, adding additional branches. And so one of the things that could change that dynamic is if we open up a significant number of branches. Now we're guiding to 5 to 10 more branches in the next 6 months, kind of what we did in the second half of last year going into the first quarter. But what I would say is it's all about growth. And we had record originations, $510 million, which was up almost 20% this year. That drove the record ENR in the quarter, which is up $70 million or 10.5%, which drove record revenue of $157 million, up 10%. And so that top line growth is critical to create scale in this business, and so over time, and we've done this now consistently for 5 years, we're looking to continue to drive down our operating expense ratio.

Now I will add to that, and we don't have a way to quantify this, but the new front-end platform that we're rolling out in our branches, and we have that now in one state, I mean, that is dramatically improving the decisioning time for each and every loan for customer origination. And that's going to lead to productivity improvements where for the same level of expense we hopefully can generate more volume or more time on collections. And so where that's going to play out over the next 18 months as we roll that out across the network, we'll start to see. But we're very much investing not only for top-line growth, but we're investing to be a more efficient organization.

Excellent. And then one additional question that emanates from me not having enough time to do my homework here. But your guidance for the third quarter equates to assuming 9.8 million shares, $1.45 to $1.50 of earnings, which is meaningfully above what you just reported. So that -- or the primary swing factors that are leading to that meaningful uptick in earnings in Q3 versus Q2?

Well, I'll take a crack at it, and Harp is going to correct me if I'm wrong, but it's the top line growth from the higher volumes in the second quarter and volumes in the third quarter. It's continued expense discipline, and we're expecting further improvements on NCLs and cost of funds, I think, are pretty much in the same ballpark, maybe a slight pickup. And so that's driving strong bottom-line growth. And look, where the volume ends up the full year, we'll see. But like I said, we have lots of levers for growth.

Right. So all of those things. ANR is growing. So that is going to help. NPLs usually come down in third quarter, and we've guided 51. So based off of where we are, you can see that that's contributing. Interest expense is going to take up just very, very slightly, but relatively flat compared to other things. But those are all things that are going to drive 145.

Great. Well, congratulations again on a solid quarter and having things develop as you had forecasted or guided last quarter. Well done.

Ladies and gentlemen, as there are no further questions, I would now hand the conference over to Rob Beck for his closing comments.

Well, thanks again, everyone, for joining today. Look, as we said, we're, I'd say, extremely pleased with our quarterly results, which really were strong across all our key metrics. It's clear to me that the capabilities that we developed over the recent years positions us to continue to deliver strong growth and long-term shareholder value. Look, the -- as I said, I'll reiterate our investments over the recent years in new states and branches, our unsecured business, our digital capabilities, and our advanced credit models and analytics really support our growth while also keeping credit risk in check. Second half, we'll see how the customer health is doing if it stays the way it is, and we'll inform our growth in the second half of the year by our credit metrics and macroeconomic conditions.

So again, thanks, everybody, for joining this evening, and enjoy the rest of your time.

Thank you. Ladies and gentlemen, the conference of Regional Management has now concluded. Thank you for your participation, and you may now disconnect your lines.