Regional Management (RM) 10-K 2019 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission File Number:001-35477

Regional Management Corp.

(Exact name of registrant as specified in its charter)

Delaware	57-0847115
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
979 Batesville Road, Suite B Greer, South Carolina	29651
(Address of principal executive offices)	(Zip Code)

(864)448-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.10 par value	RM	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).    Yes  ☐    No  ☒

As of June 28, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held bynon-affiliates of the registrant was $256,875,391 based upon the closing sale price as reported on the New York Stock Exchange. See Part II, Item 5 of this Annual Report on Form10-K for additional information.

As of March 12, 2020, there were 11,017,073 shares of the registrant’s common stock outstanding.

Documents Incorporated by Reference

Certain information required by Part III of this Annual Report on Form10-K is incorporated herein by reference to the Proxy Statement for the registrant’s 2020 Annual Meeting of Stockholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2019.

REGIONAL MANAGEMENT CORP.

ANNUAL REPORT ON FORM10-K

Fiscal Year Ended December 31, 2019

TABLE OF CONTENTS

		Page
Forward-Looking Statements			1
PART I
ITEM 1.	Business		2
ITEM 1A.	Risk Factors		16
ITEM 1B.	Unresolved Staff Comments		44
ITEM 2.	Properties		44
ITEM 3.	Legal Proceedings		44
ITEM 4.	Mine Safety Disclosures		44
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		45
ITEM 6.	Selected Financial Data		48
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		49
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk		67
ITEM 8.	Financial Statements and Supplementary Data		68
ITEM 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		104
ITEM 9A.	Controls and Procedures		104
ITEM 9B.	Other Information		105
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance		106
ITEM 11.	Executive Compensation		106
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		106
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		106
ITEM 14.	Principal Accounting Fees and Services		106
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules		107
ITEM 16.	Form10-K Summary		112
Signatures			112

FORWARD-LOOKING STATEMENTS

Each of the terms “Regional,” the “Company,” “we,” “us,” and “our” as used herein refers collectively to Regional Management Corp. and its wholly-owned subsidiaries, unless otherwise stated.

This Annual Report on Form10-K includes “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, certain statements and disclosures contained in Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, plans and objectives of management, representations, and contentions, and are not historical facts. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and similar words, although some forward-looking statements are expressed differently. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. The forward-looking statements included herein reflect and contain management’s current judgment, and involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form10-K. We do not intend to update any of these forward-looking statements or publicly announce the results of or any revisions to these forward-looking statements, other than as is required under the federal securities laws.

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 1

PART I

ITEM 1. BUSINESS.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. We operate under the name “Regional Finance” in 366 branch locations across 11 states in the Southeastern, Southwestern,Mid-Atlantic, and Midwestern United States, serving 432,200 active accounts, as of December 31, 2019. Most of our loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. We source our loans through our multiple channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, retailers, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network. This provides us with frequentin-person contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive andeasy-to-understand loan products that serve their varied financial needs.

Our products include small, large, and retail installment loans. Our small loans and large loans are our core loan products and are the drivers of our growth.

• Small Loans– We offer small installment loans with cash proceeds to customers ranging from $500 to $2,500, with terms of up to 48 months. Our small loans are typically secured bynon-essential household goods and/or, to a lesser extent, a lien on a vehicle, which may be an automobile, motorcycle, boat, orall-terrain vehicle. As of December 31, 2019, we had 283,000 small loans outstanding representing $462.5 million in finance receivables, or an average of approximately $1,600 per loan. In 2019, 2018, and 2017, interest and fee income from small loans contributed $168.4 million, $156.6 million, and $150.1 million, respectively, to our total revenue.

• Large Loans– We offer large installment loans with cash proceeds to customers generally ranging from $2,501 to $12,000, with terms between 18 and 60 months. Our large loans are typically secured bynon-essential household goods and/or a vehicle. As of December 31, 2019, we had 130,700 large loans outstanding representing $608.6 million in finance receivables, or an average of approximately $4,700 per loan. In 2019, 2018, and 2017, interest and fee income from large loans contributed $145.1 million, $111.1 million, and $80.3 million, respectively, to our total revenue.

• Retail Loans– We offer indirect retail loans of up to $7,500, with terms between 6 and 48 months, which are secured by the purchased items. These loans are offered at the point of sale through a network of retailers within and, to a limited extent, outside of our branch footprint. As of December 31, 2019, we had 16,900 retail loans outstanding representing $24.1 million in finance receivables, or an average of approximately $1,400 per loan. In 2019, 2018, and 2017, interest and fee income from retail loans contributed $5.3 million, $5.9 million, and $5.9 million, respectively, to our total revenue.

• Optional Payment and Collateral Protection Insurance Products– We offer our customers optional payment and collateral protection insurance relating to many of our loan products. In 2019, 2018, and 2017, insurance income, net contributed $20.8 million, $14.8 million, and $13.1 million, respectively, to our total revenue.

Through November 2017, we also offered direct and indirect automobile purchase loans of up to $27,500. We ceased originating automobile loans in November 2017, but we continue to own and service the automobile loans that we previously originated. As of December 31, 2019, we had 1,600 automobile loans outstanding representing $9.6 million in finance receivables, or an average of approximately $6,000 per loan. In 2019, 2018, and 2017, interest and fee income from automobile loans contributed $2.4 million, $6.4 million, and $12.8 million, respectively, to our total revenue.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 2

Our Industry, Customers, and Purpose

We operate in the consumer finance industry, in which consumers are generally described as super-prime (most creditworthy), prime, near-prime,non-prime, subprime, or deep-subprime (least creditworthy). Our customers typically have less-than-perfect credit profiles and, for that reason, are generally considered subprime,non-prime, or near-prime consumers. As a result, our customers often do not qualify for prime financing from banks, thrifts, credit card providers, and other lenders. However, like prime consumers, our customers have a need and a desire to utilize credit.

Notwithstanding that many lenders are unwilling to serve our customers, we believe that responsible, transparent, and fairly-priced credit products should be made available to our customers. We exist to serve that purpose, and accordingly, we offer our customers access to credit through our affordable,easy-to-understand small, large, and retail loan products, which we price on fair terms in consideration of the associated credit risk and servicing costs.

The average annual percentage rate (“APR”) of our small loans originated in 2019 was 42.6%. Our large loans, which are reserved for higher credit quality customers who meet more stringent underwriting requirements than those applied to small loan applicants, had an average APR of 30.3% for loans originated in 2019. We believe that the rates on our products are significantly more attractive than many other credit options available to our customers, such as payday, pawn, and title loans, which often come with APRs over 300%. Our loans are also safer and more favorably structured than loans offered by alternative financial service providers. We underwrite our loans based on an applicant’s ability to repay, whereas payday, pawn, and title loans are typically underwritten based on an ability to collect, either through access to the borrower’s bank account or by repossession and sale of collateral. We also structure our loans on a fixed-rate, fixed-term basis with fully amortizing, equal monthly installment payments that are designed to be affordable for our customers and made over an average term of 21 months and 44 months for small and large loans, respectively (based on loans originated in 2019). By comparison, payday, pawn, and title loans typically have balloon payments following short terms of 14 to 60 days.

Importantly, we further differentiate ourselves from alternative financial service providers by reporting our customers’ payment performance to credit bureaus. This practice provides our customers with the opportunity to improve their credit profile by establishing a responsible payment history with us and, ultimately, to gain access to a wider range of credit options, including our own. For example, in 2019, we worked with many of our deserving customers to refinance more than 22,000 of our customers’ small loans into large loans, representing $104.6 million in finance receivables at origination, and resulting in a decrease in these customers’ average APR from 43.0% to 31.4%. We also believe that, over time, many of our customers transition away from our company to prime sources of credit.

Our diversity of loan products with competitive, safe, and transparent pricing and terms, combined with the opportunity for our customers to improve their credit history and profile, distinguishes us in the consumer finance market, provides us with a competitive advantage, and allows us to serve an important purpose that is mutually beneficial to our customers, communities, employees, and stockholders.

Our Business Model

Multiple Channel Platform. Our multiple channel platform, which includes our branches, direct mail campaigns, digital partners, retailers, and our consumer website, enables us to offer a range of loan products to new, existing, and former customers throughout our markets. We began building our branch network over 30 years ago and have expanded the network to 366 branches as of December 31, 2019. Our branch personnel markets our products in a number of ways, including through a merchant referral program, customer referrals, direct telephone and mail solicitations of current and former customers, and by leveraging our direct mail program. Our direct mail campaigns include mailings ofpre-screened convenience checks,pre-qualified offers,

Regional Management Corp. | 2019 Annual Report on Form 10-K | 3

and invitations to apply, which enable us to market our products to millions of current and potential customers in a cost-effective manner. We have also developed our consumer website and partnered with digital lead generation sources to promote our products and facilitate loan applications via the internet. Finally, we have relationships with retailers that offer our retail loans in their stores at the point of sale. We believe that our multiple channel platform provides us with a competitive advantage by giving us broad access to our existing and former customers and multiple avenues to attract new customers.

Attractive Products for Customers with Limited Access to Credit. Our flexible loan products, generally ranging from $500 to $12,000 with terms of up to 60 months, are competitively priced, easy to understand, and incorporate features designed to meet the varied financial needs and credit profiles of a broad range of consumers. This product diversity distinguishes us from monoline competitors and provides us with the ability to offer our customers new loan products as their credit profiles evolve, building customer loyalty and increasing the overall value of customer relationships.

Integrated Branch Model.Our branch network serves as the foundation of our multiple channel platform and the primary point of contact with our customers. Nearly 80% of our loan originations in 2019 occurred in one of our branch locations, and nearly all loans, regardless of origination channel, are serviced through our branches, allowing us to maintain frequent,in-person contact with our customers. By integrating loan origination and loan servicing at the branch level, our employees are able to maintain a relationship with our customers throughout the life of a loan. We believe this frequent-contact, relationship-driven lending model provides greater insight into potential payment difficulties, reduces credit risk, and allows us to assess the borrowing needs of our customers, better enabling us to offer them new loan products as their credit profiles and needs evolve.

Consistent Portfolio Performance. Over the past several years, we have sharpened our focus on credit quality by investing in highly-qualified personnel, refining underwriting practices, developing custom credit scorecards, streamlining procedures, automating underwriting decisions, and improving reporting capabilities. These investments allow us to better control the credit quality of our portfolio, maintain compliance with evolving state and federal law, and react quickly whenever market dynamics may change. We have also expanded our centralized collections department and provided our branches with improved collections tools, training, and incentives. As a result of these efforts and practices, between 2015 and 2019, we reported annual net credit loss rates in a relatively narrow band of 8.8% to 9.7% of average finance receivables.

Demonstrated Organic Growth. We have grown our total finance receivables by 75.8%, from $628.4 million at December 31, 2015 to $1,104.8 million at December 31, 2019, a compound annual growth rate (“CAGR”) of 15.1%. More importantly, we have grown our core small loan and large loan finance receivables by 121.0%, from $484.7 million at December 31, 2015 to $1,071.1 million at December 31, 2019, a CAGR of 21.9%. This receivables growth has driven a revenue increase of 63.7%, from $217.3 million in 2015 to $355.7 million in 2019, a CAGR of 13.1%. Our portfolio growth has come from expanding our branch network, growing our finance receivable portfolios within existing branches, and developing new products and channels, including through digital lead generation. From 2015 to 2019, we grew ouryear-end branch count from 331 branches to 366 branches. We opened 7 net new branches in 2019, and we have also grown our existing branch revenues. Historically, our branches have rapidly increased their outstanding finance receivables during the early years of operations and generally achieved profitability within one year of opening.

Experienced Management Team.Our executive and senior operations management teams consist of individuals experienced in installment lending and other consumer finance services. Both our Chief Executive Officer and our Chief Operating Officer have over 30 years of experience in consumer financial services, and our Chief Credit Risk Officer has over 15 years of financial and consumer lending experience, including expertise in credit risk management. As of December 31, 2019, our state operations vice presidents averaged nearly 25 years of industry experience and 9 years of service at Regional, while our district supervisors averaged more than 20 years of industry experience and nearly 7 years of service with Regional. Our executive and senior operations management team members intend to leverage their experience and expertise in consumer lending to grow our business, deliver high-quality service to our customers, and carefully manage our credit risk.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 4

Our Strategies

Grow Our Branch Network. We intend to continue to grow the receivables, revenue, and profitability of our existing branches, to open new branches within our existing geographic footprint, and to expand our operations into new states. Establishing local contact with our customers through our branch network is key to our frequent-contact, relationship-driven lending model. We believe that there remains substantial opportunity to grow the finance receivable portfolios of our existing branches by continuing our focus on large loan originations and by cross-selling new loan products to our existing customers, including those customers with retail loans. In addition, from 2015 to 2019, we opened 35 net new branches, and in 2018, we opened our first branches in Missouri and Wisconsin. We expect that as our newer branches mature, their revenue will grow faster than our overall same-store revenue growth rate. We believe there is sufficient demand for consumer finance services to continue new branch openings in certain of the states where we currently operate, allowing us to capitalize on our existing infrastructure and experience in these markets. We also intend to explore opportunities for growth in several states outside of our existing geographic footprint that enjoy favorable operating environments. Our competitors operate in as many as 44 states.

Leverage Our Direct Mail Capabilities.Direct mail campaigns are launched throughout the year, but are weighted to coincide with seasonal consumer demand. In addition, we mail convenience checks in new markets as soon as new branches are open, which develops a customer base and builds finance receivables for these new branches. We plan to continue to invest in and to improve the targeting criteria, offer strategies, and testing protocols of our direct mail campaigns, which we believe will enable us to efficiently grow our receivables with improved credit performance. We expect that these efforts will allow us to increase volume at our branches by adding new customers, recapturing former customers, and creating opportunities to offer new loan products to our existing customers.

Expand Our Digital Presence.In order to better serve and attract customers who prefer to conduct business digitally, we make an online loan application available on our consumer website, generate customer leads through digital partners, and provide our customers with online account management capabilities. Throughout 2019, we continued to grow our digital acquisition channel, expanding our investment in the channel by nearly 40% year-over-year. This investment enabled us to increase our digitally-sourced loan originations by nearly 30% year-over-year and to grow digital volume as a percentage of new customer volume to more than 19% in 2019. We also continued to enhance and promote our online account management tools that enable customers to make payments and manage their accounts online. In 2020, we expect to continue to invest in the digital channel, thereby adding capabilities, improving efficiencies, enhancing the customer experience, and testing new mechanisms for lead generation to further diversify and expand our new business acquisition mechanisms.

Maintain Sound Underwriting and Credit Control. We have invested heavily in our credit and collections functions. We plan to continue to do so in the future by maintaining highly-qualified employees dedicated to managing credit risk, refining our underwriting models, and improving our collection efforts through both our branch operations and our centralized collections department. In early 2018, we completed the implementation of our new loan origination and servicing software platform, which allows us to automate our underwriting decisions, among other benefits. In addition, we began to integrate custom credit models into our automated underwriting processes during the second half of 2018. We completed the rollout of our custom credit models to all of our states in 2019 and began seeing the impact in our results in late 2019. Through these efforts and others, we plan to continue to carefully manage our credit exposure as we grow our business, offer new products, and enter new markets.

Carefully Manage Our G&A Expenses. We have made significant investments in our business over the past several years, including by increasing our marketing spend to drive new business, expanding our branch network, hiring operations employees to service our growing finance receivable portfolio, and improving our credit and information technology capabilities. However, during that time, we also remained keenly focused on driving operating leverage through the prudent management of our expenses. Between 2015 and 2019, our

Regional Management Corp. | 2019 Annual Report on Form 10-K | 5

operating expense ratio (annualized general and administrative expenses as a percentage of average finance receivables) decreased from 20.2% to 15.9%. As we grow our business, we will remain vigilant in our management of general and administrative expenses, with the goal of decreasing such expenses as a percentage of average finance receivables over time.

Our Loan Products

We offer small, large, and retail installment loans to our customers. Our underwriting standards focus on our customers’ ability to affordably make loan payments out of their discretionary income, with the value of pledged collateral serving as a credit enhancement rather than the primary underwriting criterion. The interest rates, fees and other charges, maximum principal amounts, and maturities for our loans vary from state to state, depending on the competitive environment and relevant laws and regulations.

Small and large loans are closed in our branch network or originated through our convenience check direct mail campaigns. Our convenience check direct mail loan offers enable prospective customers to enter into a loan with us by cashing or depositing the check attached to the loan offer, thereby agreeing to the terms of the loan as prominently set forth on the check and accompanying disclosures. When a customer enters into a loan by cashing or depositing the convenience check, our personnel gathers additional information on the borrower to assist in servicing the loan. Our retail loans are indirect installment loans structured as retail installment sales contracts. Retail loans are made through a retailer at the point of sale without the need for the customer to visit one of our branches. Customers use our retail loans to finance the purchase of furniture, appliances, and other retail products. The vast majority of our retail loans are originated inside of our eleven-state,brick-and-mortar footprint, but on a limited basis, we offer retail loans in states outside of our footprint. The servicing of nearly all retail loans is performed within our branches, with onlyout-of-footprint retail loans being serviced centrally from our headquarters in South Carolina.

For loans originated in our branch network, we consider numerous factors in evaluating a potential customer’s creditworthiness, such as unencumbered income,debt-to-income ratios, length of current employment, duration of residence, and a credit report detailing the applicant’s credit history. Our loan origination and servicing software platform guides our branch personnel through the credit application process and automates much of the underwriting, with underwriting exceptions generally subject to review and approval by a senior operations or centralized underwriting team member. For retail loans, our retail partners typically submit credit applications to us online while the customer waits in the retailer’s store. Underwriting for our retail loans is conducted by our centralized underwriting team using standards substantially similar to our branch small loan and large loan underwriting guidelines. Our retail loan credit decisions generally are provided to the retailer within ten minutes of our receipt of the application. For convenience check loans, each prospect that we solicit has beenpre-screened through a major credit bureau against our underwriting criteria, which includes an evaluation of the recipient’s credit score, bankruptcy history, and a number of additional credit attributes relevant to the recipient’s likely ability and willingness to repay the offered convenience check loan.

Loan renewals are also an important part of our business. Our customers use renewals to extend and expand their lending relationships with us. We generally offer loan renewals to existing customers who have demonstrated an ability and willingness to repay amounts owed to us. Renewals typically refinance one or more of a customer’s loans into a single new loan, which in some cases will be for a larger principal balance than the customer’s original loan, though we permit renewals of existing loans at or below the original loan amount. In evaluating a loan for renewal, in addition to our standard underwriting requirements, we are able to take into consideration the customer’s prior payment performance with us, which we believe is a very strong indicator of the customer’s future credit performance. In 2019, renewals of loans in an amount greater than the original loan amount represented 56% of our loan originations, while renewals of loans at or below the original loan amount represented 12% of our loan originations.

Small Loans.In 2019, the average originated net loan size and term for our small loans were $1,932 and 21 months, respectively. The average yield we earned on our portfolio of small loans was 38.5% in 2019. The

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following table sets forth the distribution of our small loan finance receivable portfolio by state as of the dates indicated.

	At December 31,
	2015			2016			2017			2018			2019
Texas		31	%		32	%		34	%		34	%		39	%
South Carolina		23	%		20	%		17	%		16	%		13	%
North Carolina		15	%		15	%		14	%		15	%		15	%
Alabama		13	%		14	%		14	%		13	%		11	%
All Other States		18	%		19	%		21	%		22	%		22	%
Total		100	%		100	%		100	%		100	%		100	%

The following table sets forth the total number of small loans, total small loan finance receivables, and average size per loan by state as of December 31, 2019.

	Number of Loans		Finance Receivables		Average Size Per Loan
			(In thousands)
Texas		108,603	$	177,090	$	1,631
South Carolina		35,199		60,454		1,717
North Carolina		41,351		68,452		1,655
Alabama		30,236		53,186		1,759
All Other States		67,660		103,317		1,527
Total		283,049	$	462,499	$	1,634

Large Loans. In 2019, our average originated net loan size and term for large loans were $5,330 and 44 months, respectively. The average yield we earned on our portfolio of large loans was 28.8% for 2019. The following table sets forth the distribution of our large loan finance receivable portfolio by state as of the dates indicated.

	At December 31,
	2015			2016			2017			2018			2019
Texas		22	%		22	%		24	%		27	%		27	%
South Carolina		22	%		20	%		19	%		21	%		19	%
North Carolina		18	%		21	%		19	%		16	%		15	%
Alabama		17	%		14	%		12	%		11	%		11	%
All Other States		21	%		23	%		26	%		25	%		28	%
Total		100	%		100	%		100	%		100	%		100	%

The following table sets forth the total number of large loans, total large loan finance receivables, and average size per loan by state as of December 31, 2019.

	Number of Loans		Finance Receivables		Average Size Per Loan
			(In thousands)
Texas		38,345	$	171,010	$	4,460
South Carolina		23,045		113,470		4,924
North Carolina		20,578		90,674		4,406
Alabama		13,622		64,223		4,715
All Other States		35,060		169,231		4,827
Total		130,650	$	608,608	$	4,658

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Retail Loans.In 2019, our average originated net loan size and term for retail loans were $2,068 and 29 months, respectively. The average yield we earned on our portfolio of retail loans was 19.0% for 2019. The following table sets forth the distribution of our retail loan finance receivable portfolio by state as of the dates indicated.

	At December 31,
	2015			2016			2017			2018			2019
Texas		69	%		73	%		75	%		72	%		74	%
North Carolina		10	%		8	%		7	%		9	%		10	%
Oklahoma		8	%		6	%		5	%		6	%		6	%
All Other States		13	%		13	%		13	%		13	%		10	%
														��
Total		100	%		100	%		100	%		100	%		100	%

The following table sets forth the total number of retail loans, total retail loan finance receivables, and average size per loan by state as of December 31, 2019.

	Number of Loans		Finance Receivables		Average Size Per Loan
			(In thousands)
Texas		12,320	$	17,772	$	1,443
North Carolina		1,719		2,502		1,455
Oklahoma		1,011		1,358		1,343
All Other States		1,807		2,451		1,356
Total		16,857	$	24,083	$	1,429

Our Insurance and Ancillary Products

We also offer our customers various optional payment and collateral protection insurance products as a complement to our lending operations. Our primary insurance products include optional credit life insurance, accident and health insurance, involuntary unemployment insurance, and personal property insurance. These insurance products are optional and not a condition of the loan, and we do not sell insurance tonon-borrowers. Our insurance products, including the types of products offered and their terms and conditions, vary from state to state in compliance with applicable laws and regulations. Insurance policy premiums, claims, and expenses are included in our results of operations as insurance income, net in the consolidated statements of income. In 2019, insurance income, net was $20.8 million, or 5.9% of our total revenue.

Credit life insurance provides for the payment in full of the borrower’s credit obligation to the lender in the event of the borrower’s death and, in some states, may provide a payment to a secondary beneficiary listed by the borrower. Credit accident and health insurance provides for the repayment of certain loan installments to the lender that come due during an insured’s period of income interruption resulting from disability from illness or injury. Credit involuntary unemployment insurance provides for repayment of certain loan installments in the event that the borrower is no longer employed as the result of a qualifying event, such as a layoff or reduction in workforce. Credit personal property insurance provides for payment following accidental loss of, or damage to, personal property collateral resulting from certain casualty events. We require that customers maintain property insurance on any personal property securing loans and offer customers the option of providing proof of such insurance purchased from a third party (such as homeowners or renters insurance) in lieu of purchasing property insurance from us. We also require proof of insurance on any vehicles securing loans, and in select markets, we offer vehicle single interest insurance on vehicles used as collateral on small and large loans.

All customers purchasing these types of insurance from us are required to sign multiple statements affirming that they understand that their purchase of insurance is optional and not a condition of the loan. In

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addition, a customer may cancel purchased insurance at any time during the life of the loan, including in connection with an early payoff or loan refinancing. Customers who cancel within thirty (30) days of the date of purchase receive a full refund of the insurance premium, and customers who cancel thereafter receive a refund of the unearned portion of the insurance premium.

Apart from the various optional payment and collateral protection insurance products that we offer to our customers, on certain loans, we also collect a fee from our customers and, in turn, purchasenon-file insurance from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our security interest in personal property collateral.Non-file insurance protects us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such circumstances,non-file insurance generally will pay to us an amount equal to the lesser of the loan balance or the collateral value, with such claims payment lowering our net credit losses.

We market and sell insurance policies as an agent of an unaffiliated insurance company, within the limitations established by our agency contracts with the unaffiliated insurance company. We then remit to the unaffiliated insurance company the premiums we collect, net of refunds on prepaid loans and net of commission on new business. The unaffiliated insurance company then cedes to our wholly-owned insurance subsidiary, RMC Reinsurance, Ltd., the net insurance premium revenue and the associated insurance claims liability for all insurance products, including thenon-file insurance that we purchase. Life insurance premiums are ceded as written, andnon-life insurance premiums are ceded as earned. In accepting the premium revenue and associated claims liability, RMC Reinsurance, Ltd. acts as reinsurer for all insurance products that we sell to our customers and for thenon-file insurance that we purchase. RMC Reinsurance, Ltd. pays the unaffiliated insurance company a ceding fee for the continued administration of all insurance products.

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In addition, in select states, we offer an “Auto Plus Plan” auto club product that is administered and serviced through a third-party provider. The product generally provides certain automobile, home, travel, and other services and benefits to customers, including emergency towing and roadside assistance, emergency locksmith service, automobile repair reimbursement, stolen car expense benefit, automobile insurance deductible reimbursement, limited legal services, and various travel and other discounts. The Auto Plus Plan is not an insurance product, and therefore, it is not included in our results of operations as insurance income, net, but rather, it is included as part of revenue under other income. However, as with the optional insurance products that we offer, any customer purchasing an Auto Plus Plan acknowledges that the purchase is optional and not a condition of the loan and that the plan may be cancelled within 30 days for a full refund.

Our Branches

Our branches are generally located in visible, high-traffic locations, such as shopping centers. We believe that our branches have an open, welcoming, and hospitable layout. In evaluating whether to locate a branch in a particular community, we examine several factors, including the demographic profile of the community, demonstrated demand for consumer finance, the regulatory and political climate, and the availability of suitable employees to staff, manage, and supervise the new branch.

The following table sets forth the number of branches as of the dates indicated:

	At December 31,
	2015		2016		2017		2018		2019
Texas		98		98		98		103		105
South Carolina		72		72		68		67		65
Alabama		50		49		47		46		46
North Carolina		36		36		37		36		36
Oklahoma		28		28		28		28		24
Tennessee		21		21		21		23		23
Virginia		1		8		17		18		19
New Mexico		18		19		18		17		16
Missouri		—		—		—		9		15
Wisconsin		—		—		—		4		9
Georgia		7		8		8		8		8
Total		331		339		342		359		366

The following table sets forth the average finance receivables per branch based on maturity:

Age of Branch (As of December 31, 2019)	Average Finance Receivables Per Branch as of December 31, 2019		Percentage Increase From Prior Age Category			Number of Branches
	(In thousands)
Branches open less than one year	$	1,128		—			29
Branches open one to three years	$	2,650		134.9	%		18
Branches open three to five years	$	3,174		19.8	%		39
Branches open five years or more	$	3,217		1.4	%		280

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The average contribution to operating income from our branches has historically increased as our branches mature. The following table sets forth the average operating income contribution per branch for the year ended December 31, 2019, based on maturity of the branch.

Age of Branch (As of December 31, 2019)	Average Branch Operating Income Contribution		Percentage Increase From Prior Age Category			Number of Branches
	(In thousands)
Branches open less than one year	$	19		—			29
Branches open one to three years	$	250		1,215.8	%		18
Branches open three to five years	$	353		41.2	%		39
Branches open five years or more	$	448		26.9	%		280

We calculate the average branch contribution as total revenues generated by the branch less the expenses directly attributable to the branch, including the provision for losses and operating expenses, such as personnel, lease, and interest expenses. General corporate overhead, including management salaries, is not attributed to any individual branch. Accordingly, the sum of branch contributions from all of our branches is greater than our income before taxes.

Employees and Training

As of December 31, 2019, we had 1,638 employees. New employees must complete a comprehensive training curriculum that focuses on the company- and position-specific competencies needed to be successful. The training includes a blended approach utilizing eLearning modules,hands-on exercises, webinars, and assessments. Training content is focused on our operating policies and procedures, as well as several key compliance areas. Incentive compensation for new employees is contingent upon the successful and timely completion of the required new hire training curriculum. All current employees are also required to complete annual compliance training andre-certification. Additional management and developmental training is provided for those employees seeking to advance within our company.

Payment and Loan Servicing

We have implemented company-wide payment and loan servicing policies and procedures, which are designed to maintain consistent portfolio performance and to ensure regulatory compliance. Our district supervisors, state vice presidents, and compliance and internal audit teams regularly review servicing and collection records to ensure compliance with our policies and procedures. Our centralized management information system enables regular monitoring of branch portfolio metrics by management, and the compensation opportunities of our operations employees and senior management have a significant performance component that is closely tied to credit quality, among other defined performance targets.

The responsibility for the servicing and collection of each loan generally rests with the originating branch. Borrowers who have signed up for online account access haveon-demand access to their account information through Regional’s website. In addition, borrowers may elect to receive automated,one-way text messages with information regarding their account, including payment reminders. Borrowers have the option of making payments (i) in person at a branch where they may pay by cash, check, money order, debit card, or immediate,one-time future, or recurring ACH, (ii) through our customer portal via debit card or immediate,one-time future, or recurring ACH, or (iii) by immediate orone-time future debit card or ACH over the phone. In the fourth quarter of 2019, over 70% of customer payments were made by debit card or ACH.

If a loan becomes severely delinquent, a branch may receiveco-collection assistance from our centralized servicing facility. Our philosophy is to work with customers experiencing payment difficulties. If a customer is unable to make the required payments to bring his or her loan current, acceptable solutions to remedy a past due loan may include deferment of a payment, loan renewal, or settlement. All solutions are intended to enable the

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customer to meet his or her current and future obligations in a manner that we believe will mitigate our risk, while also complying with state and federal laws and regulations, as well as our policies and procedures.

Customers are limited to two deferrals in a rolling twelve-month period unless it is determined that an exception is warranted (e.g. following a natural disaster). We generally limit the refinancing of delinquent loans to those customers who have made recent payments and for whom we have verified current employment, and we do not charge any origination fees on the refinancing of a severely delinquent loan. We believe that refinancing delinquent loans for certain deserving customers who have made periodic payments allows us to help customers resolve temporary financial setbacks and repair or sustain their credit. During 2019, we refinanced approximately $24.3 million of loans that were 60 or more days contractually past due, representing approximately 1.9% of our total loan originations in 2019. As of December 31, 2019, the outstanding balance of such refinanced loans was $18.5 million, or 1.6% of finance receivables as of such date. We may also agree to settle apast-due loan by accepting less than the full principal balance owed. A settlement is only used in certain limited cases and is only offered once we have determined that we are unlikely to collect the entire outstanding balance of the loan.

For seriously delinquent accounts, we may seek legal judgments or pursue repossession of collateral. We typically initiate repossession efforts only when we have exhausted other means of collection and, in the opinion of management, the customer is unlikely to make further payments. We sell substantially all repossessed collateral through sales conducted by independent auction organizations, after the required post-repossession waiting period. Generally, we charge off loans during the month that the loan becomes 180 days contractually delinquent.Non-titled accounts in a confirmed Chapter 7 or Chapter 13 bankruptcy are charged off at 60 days contractually delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the exception of borrowers with credit life insurance. We sell most of ourcharged-off accounts to third-party debt buyers.

Information Technology

In 2016, we entered into an agreement with Nortridge Software, LLC (“Nortridge”) to transition to the Nortridge loan origination and servicing platform. From January 2016 to February 2018, we conducted astate-by-state phased implementation of the Nortridge platform in each of our states of operation. Since February 2018, all of our branches have operated using the Nortridge platform. Prior to our use of Nortridge, we serviced our loan portfolio using a software package developed and owned by ParaData Financial Systems.

We utilize the Nortridge platform both to originate loans and to service our loan portfolio, and we have invested in customizing the Nortridge platform to meet our needs based upon our specific products, processes, and reporting requirements. The Nortridge custom decision engine utilizes application information and a credit report detailing the applicant’s credit history to generate an initial credit decision and to guide our branch employees through the loan origination process to the final credit decision. Throughout the life of the loan, our employees utilize Nortridge to, among other things, enter payments, generate collection queues, and log collection activity. Nortridge also facilitates electronic and recurring payments, automated text messaging, and customer account access through a customer portal. Nortridge logs and maintains, within our centralized information systems, a permanent record of the loan origination and servicing approvals and processes, and permits all levels of branch and centralized management to review the individual and collective performance of all branches for which they are responsible on a daily basis.

We intend to continue to enhance the Nortridge platform to further leverage its capabilities and to meet our evolving needs. In addition, we rely on Teledata Communications Inc. and other third-party software vendors to provide access to certain credit applications.

Competition

The consumer finance industry is highly fragmented, with numerous competitors. The competition we face for each of our loan products is distinct.

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Small and Large Loans.We compete with several national companies operating greater than 800 branch locations each, as well as a handful of smaller, regionally-focused companies with between 100 and 300 branches in certain of the states in which we operate. We believe that the majority of our competitors are independent operators with generally less than 100 branches. We believe that competition between installment consumer loan companies occurs primarily on the basis of price, breadth of loan product offerings, flexibility of loan terms offered, and the quality of customer service provided. While underbanked customers may also use alternative financial services providers, such as title lenders, payday lenders, and pawn shops, these providers’ products offer different terms and typically carry substantially higher interest rates and fees than our installment loans. Accordingly, we believe that alternative financial services providers are not an attractive option for customers who meet our underwriting standards, which are generally stricter than the underwriting standards of alternative financial services providers. Our small and large loans also compete with pure online lenders,peer-to-peer lenders, and issuers ofnon-prime credit cards.

Retail Loans. In recent years, the retail loan industry has seen an increasing number of lenders enter the market that are dedicated to originatingnon-prime retail loans. We also face competition fromrent-to-own financing, leasing, and credit card companies. Our retail loans are typically made at competitive rates, and competition is largely on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered, the speed of approval, and the quality of customer service provided.Point-of-sale financing decisions must be made rapidly while the customer is on the sales floor. We endeavor to provide responses to customer applications in less than ten minutes, and we staff our centralized retail loan underwriting team with multiple shifts seven days per week during peak retail shopping hours to ensure rapid response times.

Seasonality

Our loan volume and contractual delinquency follow seasonal trends. Demand for our small and large loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money forvacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Consequently, we experience seasonal fluctuations in our operating results and cash needs.

Government Regulation

Consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, regulations, and ordinances. Many of these laws impose detailed constraints on the terms of our loans and the retail installment sales contracts that we purchase, the lending forms that we utilize, and our operations. The software that we use to originate loans is designed in part to aid in compliance with all applicable lending laws and regulations.

State Lending Regulation. We are regulated by state agencies that regularly audit our branches and operations. In general, state statutes establish maximum loan amounts and interest rates, as well as the types and maximum amounts of fees and insurance premiums that we may charge for both direct and indirect lending. Specific allowable charges vary by state. In addition, state laws regulate the keeping of books and records and other aspects of the operation of consumer finance companies, and state and federal laws regulate account collection practices. State agency approval is required to open new branches, and each of our branches is separately licensed under the laws of the state in which the branch is located. Licenses granted by the regulatory agencies in these states are subject to renewal every year and may be revoked for failure to comply with applicable state and federal laws and regulations. In the states in which we currently operate, licenses may be revoked only after an administrative hearing. We believe we are in compliance with state laws and regulations applicable to our lending operations in each state.

State Insurance Regulation.Premiums and charges for optional payment and collateral protection insurance products are set at or below authorized statutory rates and are stated separately in our disclosures to

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customers, as required by the federal Truth in Lending Act and by various applicable state laws. We are also subject to state laws and regulations governing insurance agents in the states in which we sell insurance. State insurance regulations require that insurance agents be licensed and limit the premium amount charged for such insurance. Our captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies, where the subsidiary is organized and domiciled.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). At the federal level, Congress enacted comprehensive financial regulatory reform legislation in 2010. A significant focus of the law, known as the Dodd-Frank Act, is heightened consumer protection. The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”), which has regulatory, supervisory, and enforcement powers over providers of consumer financial products and services, including explicit supervisory authority to examine and require registration ofnon-depository lenders and to promulgate rules that can affect the practices and activities of lenders.

The Dodd-Frank Act and the regulations promulgated thereunder may affect our operations through increased oversight of financial services products by the CFPB and the imposition of restrictions on the terms of certain loans. The CFPB has significant authority to implement and enforce federal consumer finance laws, including the protections established in the Dodd-Frank Act, as well as the authority to identify and prohibit unfair, deceptive, and abusive acts and practices.

The Dodd-Frank Act also gives the CFPB the authority to examine and regulate largenon-depository financial companies and gives the CFPB authority over anyone deemed by rule to be a “larger participant of a market for other consumer financial products or services.” The CFPB contemplates regulating the installment lending industry as part of the “consumer credit and related activities” market. However, thisso-called “larger participant rule” will not impose substantive consumer protection requirements, but rather will provide to the CFPB the authority to supervise larger participants in certain markets, including by requiring reports and conducting examinations to ensure, among other things, that they are complying with existing federal consumer financial law. While the CFPB has defined a “larger participant” standard for certain markets, such as the debt collection, automobile finance, and consumer reporting markets, it has not yet acted to define “larger participant” in the traditional installment lending market. If, in the future, a traditional installment lending “larger participant rule” is promulgated by the CFPB, the rule would likely cover only the largest installment lenders, and we do not yet know whether the definition of larger participant would cover us.

In addition to the grant of certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations thereunder, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations of state law.

Other Federal Laws and Regulations. In addition to the Dodd-Frank Act and state and local laws, regulations, and ordinances, numerous other federal laws and regulations affect our lending operations. These laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Gramm-Leach-Bliley Act, and in each case the regulations thereunder, and the Federal Trade Commission’s Credit Practices Rule. These laws require us to provide complete disclosure of the principal terms of each loan to the borrower prior to the consummation of the loan transaction, prohibit misleading advertising, protect against discriminatory lending practices, govern the manner in which we report customer information to consumer reporting agencies, govern the terms of loans to servicemembers, and proscribe unfair credit practices.

• Truth in Lending Act. Under the Truth in Lending Act and Regulation Z promulgated thereunder, we must disclose certain material terms related to a credit transaction, including, but not limited to, the

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annual percentage rate, finance charge, amount financed, total of payments, the number and amount of payments, and payment due dates to repay the indebtedness.

• Equal Credit Opportunity Act. Under the Equal Credit Opportunity Act and Regulation B promulgated thereunder, we cannot discriminate against any credit applicant on the basis of any protected category, such as race, color, religion, national origin, sex, marital status, or age. We are also required to make certain disclosures regarding consumer rights and advise customers whose credit applications are not approved of the reasons for the rejection.

• Fair Credit Reporting Act. Under the Fair Credit Reporting Act, we must provide certain information to customers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency, promptly update any credit information reported to a credit reporting agency about a customer, and have a process by which customers may inquire about credit information furnished by us to a consumer reporting agency.

• Servicemembers Civil Relief Act. The Servicemembers Civil Relief Act is designed to ease legal and financial burdens on military personnel and their families during active duty status. We may be required to reduce interest rates on “pre-service” debts incurred by servicemembers, and we may be prohibited from pursuing certain forms of legal action against servicemembers, such as default judgments, during periods of active duty.

• Military Lending Act. The Military Lending Act applies to active-duty servicemembers and their covered dependents. We are prohibited from charging a borrower covered under the Military Lending Act more than a 36% Military Annual Percentage Rate, which includes certain costs associated with the loan in calculating the interest rate.

• Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, we must protect the confidentiality of our customers’non-public personal information and disclose information on our privacy policy and practices, including with regard to the sharing of customers’non-public personal information with third parties. This disclosure must be made to customers at the time the customer relationship is established and, in some cases, at least annually thereafter.

• Credit Practices Rule. The Federal Trade Commission’s Credit Practices Rule limits the types of property we may accept as collateral to secure a consumer loan.

Violations of these statutes and regulations may result in actions for damages, claims for refund of payments made, certain fines and penalties, injunctions against certain practices, and the potential forfeiture of rights to repayment of loans. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part I, Item 1A, “Risk Factors.”

Additional Information

Regional Management Corp. was incorporated in South Carolina on March 25, 1987, and converted into a Delaware corporation on August 23, 2011. The Company’s principal internet address iswww.regionalmanagement.com. The Company provides its Annual Reports on Form10-K, Quarterly Reports on Form10-Q, and Current Reports on Form8-K, and all amendments to those reports, free of charge onwww.regionalmanagement.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The Company’s consumer website iswww.regionalfinance.com. The information contained on, or that can be accessed through, the Company’s websites is not incorporated by reference into this Annual Report on Form10-K. The Company has included its website addresses as factual references and does not intend the website addresses to be active links to such websites.

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ITEM 1A.     RISK FACTORS.

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. The following discussion highlights some of the risks that may affect our future operating results. These are the risks and uncertainties that we believe are the most important for you to consider, but the risks described below are not the only risks facing our company. Additional risks and uncertainties not presently known to us, that we currently deem immaterial, or that are similar to those faced by other companies in our industry or in business in general, may also impair our business operations. If any of the following risks or uncertainties occurs, continues, or worsens, our business, financial condition, and operating results would likely suffer. You should carefully consider the risks described below together with the other information set forth in this Annual Report on Form10-K.

Risks Related to Our Business

We have grown significantly in recent years, and our delinquency, credit loss rates, and overall results of operations may be adversely affected if we do not manage our growth effectively.

We have experienced substantial growth in recent years, opening 3 net new branches in 2017, 17 net new branches in 2018, and 7 net new branches in 2019, and increasing the size of our finance receivable portfolio from $717.8 million at the beginning of 2017 to $1,104.8 million at the end of 2019, a compound annual growth rate of 15.5%. We intend to continue our growth strategy in the future. As we increase the number of branches we operate, we will be required to find new, or relocate existing, employees to operate our branches and allocate resources to train and supervise those employees. The success of a branch depends significantly on the manager overseeing its operations and on our ability to enforce our underwriting standards and implement controls over branch operations. Recruiting suitable managers for new branches can be challenging, particularly in remote areas and in areas where we face significant competition. Furthermore, the annual turnover rate among our branch managers was approximately 22% in 2018 and 16.1% in 2019, and turnover rates of managers in our new branches may be similar or higher. Increasing the number of branches that we operate may divide the attention of our senior management or strain our ability to adapt our infrastructure and systems to accommodate our growth. If we are unable to promote, relocate, or recruit suitable managers, oversee their activities effectively, maintain our underwriting and loan servicing standards, and otherwise appropriately and effectively staff our branches, our delinquency and credit loss rates may increase and our overall results of operations may be adversely impacted.

We face significant risks in implementing our growth strategy, some of which are outside of our control.

We intend to continue our growth strategy, which is based on opening and acquiring branches in existing and new markets, introducing new products and channels, and increasing the finance receivable portfolios of our existing branches. Our ability to execute this growth strategy is subject to significant risks, some of which are beyond our control, including:

• the inherent uncertainty regarding general economic conditions, including the economic effects of a prolonged public health crisis or pandemic (such as the recent outbreak of a novel coronavirus(COVID-19));

• the prevailing laws and regulatory environment of each state in which we operate or seek to operate and federal laws and regulations, all of which are subject to change at any time;

• the degree of competition in new markets and its effect on our ability to attract new customers;

• our ability to identify attractive locations for new branches;

• our ability to recruit qualified personnel, particularly in remote areas and in areas where we face a great deal of competition; and

• our ability to obtain adequate financing for our expansion plans.

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For example, certain states into which we may expand limit the number of lending licenses granted. For instance, Georgia requires a “convenience and advantage” assessment of a new lending license and location prior to the granting of the license. This assessment adds time and expense to opening new locations and creates risk that our state regulator will deny an application for a new lending license due to a perceived oversaturation of existing licensed lenders in the area in which we seek to expand and operate. There can be no assurance that if we apply for a license for a new branch, whether in one of the states where we currently operate or in a state into which we would like to expand, we will be granted a license to operate. We also cannot be certain that any such license, even if granted, would be obtained in a timely manner or without burdensome conditions or limitations. In addition, we may not be able to obtain and maintain the regulatory approvals, government permits, or licenses that may be required to operate.

We are exposed to credit risk in our lending activities.

Our ability to collect on loans depends on the willingness and repayment ability of our borrowers. Any material adverse change in the effectiveness of our underwriting models, our implementation of such models (including through our loan origination software and processes), or the ability or willingness of a significant portion of our borrowers to meet their obligations to us, whether due to changes in general economic, political, or social conditions, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, prolonged public health crises or a pandemic (such asCOVID-19), or other causes over which we have no control, or to changes or events affecting our borrowers such as unemployment, major medical expenses, bankruptcy, divorce, or death, would have a material adverse impact on our earnings and financial condition. Further, a substantial majority of our borrowers arenon-prime borrowers, who are more likely to be affected, and more severely affected, by adverse macroeconomic conditions. We cannot be certain that our credit administration personnel, policies, and procedures will adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio.

Our convenience check strategy exposes us to certain risks.

A significant portion of the growth in our installment loans has been achieved through direct mail campaigns. One aspect of our direct mail campaigns involves mailing “convenience checks” topre-screened recipients, which customers can sign and cash or deposit, thereby agreeing to the terms of the loan, which are disclosed on the front and back of the check and in the accompanying disclosures. We use convenience checks to seed new branch openings and to attract new customers to existing branches in our geographic footprint. In 2018 and 2019, loans initiated through convenience checks represented 19.2% and 20.3%, respectively, of the value of our originated loans. We expect that convenience checks will continue to represent a meaningful portion of our installment loan originations in the future. There are several risks associated with the use of convenience checks, including the following:

• it is more difficult to maintain sound underwriting standards with convenience check customers, and these customers have historically presented a higher risk of default than customers that originate loans in our branches, as we do not meet convenience check customers prior to soliciting them and extending a loan to them, and we may not be able to verify certain elements of their financial condition, including their current employment status, income, or life circumstances;

• we rely on credit information from a third-party credit bureau that is more limited than a full credit report topre-screen potential convenience check recipients, which may not be as effective as a full credit report or may be inaccurate or outdated;

• we face limitations on the number of potential borrowers who meet our lending criteria within proximity to our branches;

• we may not be able to continue to access the demographic and credit file information that we use to generate our mailing lists due to expanded regulatory or privacy restrictions;

• convenience checks pose a risk of fraud;

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• we depend on one bank to issue and clear our convenience checks, and any failure by that bank to properly process the convenience checks could limit the ability of a recipient to cash the check and enter into a loan with us;

• customers may opt out of direct mail solicitations and solicitations based on their credit file or may otherwise prohibit us from soliciting them; and

• postal rates and production costs may continue to rise.

In the future, we could experience one or more of these issues associated with our direct mail strategy. Any increase in the use of convenience checks will further increase our exposure to, and the magnitude of, these risks.

Our policies and procedures for underwriting, processing, and servicing loans are subject to potential failure or circumvention, which may adversely affect our results of operations.

A substantial portion of our underwriting activities and our credit extension decisions are made at our local branches. We rely on certain inputs and verifications in the underwriting process to be performed by individual personnel at the branch level. In addition, pursuant to our operations policies and procedures, exceptions to general underwriting criteria can be approved by central underwriting employees and certain other senior employees. We train our employees individually onsite in the branch and through online training modules to make loans that conform to our underwriting standards. Such training includes critical aspects of state and federal regulatory compliance, cash handling, account management, and customer relations. Although we have standardized employee manuals and online training modules, we primarily rely on our district supervisors, with oversight by our state vice presidents, branch auditors, and headquarters personnel, to train and supervise our branch employees, rather than centralized training programs. Therefore, the quality of training and supervision may vary from district to district and branch to branch depending on the amount of time apportioned to training and supervision and individual interpretations of our operations policies and procedures. There can also be no assurance that we will be able to attract, train, and retain qualified personnel to perform the tasks that are part of the underwriting process. If the training and supervision of our personnel fails to be effective, or if we are unable to attract and retain qualified employees, it is possible that our underwriting criteria will be improperly applied to a greater percentage of loan applications. If such improper applications were to increase, delinquency and losses on our loan portfolio could increase.

In addition, we rely on certain third-party service providers in connection with loan underwriting and origination. Any error or failure by a third-party service provider in providing loan underwriting and origination services may cause us to originate loans to borrowers that do not meet our underwriting standards. Likewise, any failure or error by us in utilizing third-party software or services to implement our underwriting and origination criteria may cause us to originate loans to borrowers that do not meet our underwriting standards. We cannot be certain that every loan is made in accordance with our underwriting standards and rules. We have experienced instances of loans extended that varied from our underwriting standards. Variances in underwriting standards and lack of supervision could expose us to greater delinquencies and credit losses than we have historically experienced. Due to the decentralized nature in which the loan application process occurs, employee misconduct or error in the application or closing process could also result in the origination of loans that do not satisfy our underwriting standards, which could in turn have a material adverse effect on our results of operations and financial condition.

In addition, in deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely heavily on information provided by customers, counterparties, and other third parties, including credit bureaus and data aggregators, and we further rely on representations of customers and counterparties as to the accuracy and completeness of that information. If a significant percentage of our customers were to intentionally or negligently misrepresent any of this information, or provide incomplete information, and our internal processes were to fail to detect such misrepresentations in a timely manner, or any or all of the other components of the underwriting process described above were to fail, we could end up

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approving a loan that, based on our underwriting criteria, we would not have otherwise made. As a result, our earnings and our financial condition could be negatively impacted.

We may be limited in our ability to collect on our loan portfolio, and the security interests securing a significant portion of our loan portfolio are not perfected, which may increase our credit losses.

Legal and practical limitations may limit our ability to collect on our loan portfolio, resulting in increased credit losses, decreased revenues, and decreased earnings. State and federal laws and regulations restrict our collection efforts. The amounts that we are able to recover from the repossession and sale of collateral typically do not fully cover the outstanding loan balance and costs of recovery. In cases where we repossess a vehicle securing a loan, we generally sell our repossessed automobile inventory through sales conducted by independent automobile auction organizations after the required post-repossession waiting period. In certain instances, we may sell repossessed collateral other than vehicles through our branches after the required post-repossession waiting period and appropriate receipt of valid bids. In either case, such sales are made consistent with applicable state law. The proceeds we receive from such sales depend upon various factors, including the supply of, and demand for, used vehicles and other property at the time of sale. During periods of economic slowdown or recession, there may be less demand for used vehicles and other property that we desire to resell.

Most of our loan portfolio is secured, but a significant portion of such security interests have not been and will not be perfected, which means that we cannot be certain that such security interests will be given first priority over other creditors. The lack of perfected security interests is one of several factors that may make it more difficult for us to collect on our loan portfolio. Additionally, for those of our loans that are unsecured, borrowers may choose to repay obligations under other indebtedness before repaying loans to us because such borrowers may feel that they have no collateral at risk. In addition, given the relatively small size of our loans, the costs of collecting loans may be high relative to the amount of the loan. As a result, many collection practices that are legally available, such as litigation, may be financially impracticable. Lastly, there is an inherent risk that a portion of the retail installment contracts that we hold will be subject to certain claims or defenses that the borrower may assert against the originator of the contract and, by extension, us as the holder of the contract. These factors may increase our credit losses, which would have a material adverse effect on our results of operations and financial condition.

Our insurance operations are subject to a number of risks and uncertainties.

We market and sell optional credit life, accident and health, personal property, involuntary unemployment, and vehicle single interest insurance to our borrowers in selected markets as an agent for an unaffiliated third-party insurance company. In addition, on certain loans, we collect a fee from our customers and in turn purchasenon-file insurance from an unaffiliated insurance company for our benefit in lieu of recording and perfecting our security interest in personal property collateral. The unaffiliated insurance company cedes to our wholly-owned insurance subsidiary, RMC Reinsurance, Ltd., the net insurance premium revenue and the associated insurance claims liability for all insurance products, including thenon-file insurance that we purchase.

When purchased by a borrower, the optional credit insurance products benefit the borrower by insuring the borrower’s payment obligations on the associated loan in the event of the borrower’s inability to make monthly payments due to death, disability, or involuntary unemployment, or in the event of a casualty event associated with collateral. Payment of the associated premiums can be made by the borrower separately, but except in very rare instances, the borrower finances payment of the premium, with the financed premium included in the balance of the loan. A credit insurance product may be cancelled if, for example, (i) we request cancellation due to the borrower’s default on obligations under the associated loan, (ii) the borrower prepays the principal balance of the associated loan in full, or (iii) the borrower elects to terminate the credit insurance prior to the expiration of the term thereof (which the borrower may do at any time). Generally, upon any cancellation of credit insurance, the borrower will be entitled to a refund of the unearned premium for the cancelled insurance. We typically refund insurance premiums by reducing the principal balance of the associated loan by the required refund amount, following which the unaffiliated insurance company reimburses us for the refunded amount.

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Our insurance operations are subject to a number of material risks and uncertainties, including changes in laws and regulations, borrower demand for insurance products, claims experience, and insurance carrier relationships. Changes to laws or regulations may, for example, negatively impact our ability to offer one or more of our insurance products or to purchasenon-file insurance; the manner in which we are permitted to offer such products; capital and reserve requirements; the frequency and type of regulatory monitoring and reporting to which we are subject; benefits or loss ratio requirements; insurance producer licensing or appointment requirements; and reinsurance operations. In addition, because our borrowers are not required to purchase the credit insurance products that we offer, we cannot be certain that borrower demand for credit insurance products will not decrease in the future. In addition to adversely impacting our insurance income, net, any decrease in the demand for credit insurance products would negatively impact our interest and fee income because we finance substantially all of our borrowers’ insurance premiums. Our insurance operations are also dependent on our lending operations as the sole source of business and product distribution. If our lending operations discontinue offering insurance products, our insurance operations would have no method of distribution. Insurance claims and policyholder liabilities are also difficult to predict and may exceed the related reserves set aside for claims and associated expenses for claims adjudication.

We are also dependent on the continued willingness of unaffiliated third-party insurance companies to participate in the credit insurance market and to offernon-file insurance to us. For example, in 2016, we transitioned our credit insurance business to a new unaffiliated third-party insurance company because the insurance company with which we previously had a relationship made a strategic decision to exit the credit insurance market altogether. While we were able to transition successfully to a new provider in 2016, we cannot be certain that the credit insurance market will remain viable in the future. Further, if our insurance provider is for any reason unable or unwilling to meet its claims and premium reimbursement payment obligations or its premium ceding obligations, we would experience increased net credit losses, regulatory scrutiny, litigation, and other losses and expenses.

Finally, in recent years, as large loans have become a larger percentage of our portfolio, the severity ofnon-file insurance claims has increased andnon-file insurance claims expenses have exceedednon-file insurance premiums by a material amount. The resulting net loss from thenon-file insurance product is reflected in our insurance income, net. It is uncertain whether thenon-file insurance product will be available to us in the future on the same terms as it is today, or at all. If the unaffiliated insurance company were to enforce limitations on ournon-file loss ratios or otherwise change the terms under which it offersnon-file insurance to us, our net credit losses, loss rates, and provision for credit losses could increase.

If any of these events, risks, or uncertainties were to occur or materialize, it could have a material adverse effect on our business, financial condition, and results of operations and cash flows.

A reduction in demand for our products and a failure by us to adapt to such reduction could adversely affect our business and results of operations.

The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products, or the availability of competing products, including through alternative or competing marketing channels. For example, we are highly dependent upon selecting and maintaining attractive branch locations. These locations are subject to local market conditions, including the employment available in the area, housing costs, traffic patterns, crime, and other demographic influences, any of which may quickly change, thereby negatively impacting demand for our products in the area. Should we fail to adapt to significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and our operations could be harmed. Even if we do make changes to existing products or introduce new products and channels to fulfill customer demand, customers may resist or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and by that time it may be too late to make further modifications to such product without causing further harm to our business, results of operations, and financial condition.

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We face strong direct and indirect competition.

The consumer finance industry is highly competitive, and the barriers to entry for new competitors are relatively low in the markets in which we operate. We compete for customers, locations, employees, and other important aspects of our business with many other local, regional, national, and international financial institutions, many of which have greater financial resources than we do.

Our installment loan operations compete with other installment lenders, as well as with alternative financial services providers (such as payday and title lenders, check advance companies, and pawnshops), online orpeer-to-peer lenders, issuers ofnon-prime credit cards, and other competitors. We believe that regulatory developments in the consumer finance industry have caused and may in the future cause lenders that focus on alternative financial services to begin to offer installment loans. In addition, if companies in the installment loan business attempt to provide more attractive loan terms than is standard across the industry, we may lose customers to those competitors. With respect to installment loans, we compete primarily on the basis of price, breadth of loan product offerings, flexibility of loan terms offered, and the quality of customer service provided.

Our retail purchase loan operations compete withnon-prime retail lenders, store and third-party credit cards, prime lending sources,rent-to-own finance providers, and other competitors. We compete primarily on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered, the speed of approval, and the quality of customer service provided.

If we fail to compete successfully, we could face lower sales and may decide or be compelled to materially alter our lending terms to our customers, which could result in decreased profitability.

We may attempt to pursue acquisitions or strategic alliances that may be unsuccessful.

We may attempt to achieve our business objectives through acquisitions and strategic alliances. We compete with other companies for these opportunities, including companies with greater financial resources, and we cannot be certain that we will be able to effect acquisitions or strategic alliances on commercially reasonable terms, or at all. Furthermore, most acquisition targets that we have pursued previously have been significantly smaller than us. We do not have extensive experience with integrating larger acquisitions. In pursuing these transactions, we may experience, among other things:

• overvaluing potential targets;

• difficulties in integrating any acquired companies, branches, or products into our existing business, including integration of account data into our information systems;

• inability to realize the benefits we anticipate in a timely fashion, or at all;

• attrition of key personnel from acquired businesses;

• unexpected losses due to the acquisition of loan portfolios with loans originated using less stringent underwriting criteria;

• significant costs, charges, or write-downs; or

• unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development and expansion of our existing operations.

Geographic concentration of our loan portfolio may increase the risk of loss.

Any concentration of our loan portfolio in a state or region may present unique risk concentrations. Our branches in South Carolina, Texas, and North Carolina accounted for 16%, 33%, and 15%, respectively, of our finance receivables in 2019. Furthermore, all of our operations are in five Southeastern, three Southwestern, oneMid-Atlantic, and two Midwestern states. As a result, we are highly susceptible to adverse economic conditions

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in those areas. The unemployment and bankruptcy rates in some states in our footprint are among the highest in the country. High unemployment rates may reduce the number of qualified borrowers to whom we will extend loans, which would result in reduced loan originations. In addition, some geographic regions of the United States will, from time to time, experience weaker regional economic conditions and consequently will experience higher rates of loss and delinquency. A regional economy may be adversely affected by the loss of jobs in certain industries, by state and local taxes, or by other factors, including natural disasters, prolonged public health crises or a pandemic (such asCOVID-19), civil disturbances, or international events such as wars. In the event that a significant portion of our loan portfolio is comprised of loans owed by borrowers residing in certain jurisdictions where economic conditions, elevated bankruptcy filings, natural disasters, or other factors specific to these jurisdictions adversely impact the delinquency and default experience of our loan portfolio, we could experience reduced or delayed payments on outstanding loans. For example, in 2017 and 2018, we experienced increases in credit losses as a result of hurricanes impacting customer accounts in our geographic footprint. These losses occurred in states where a substantial majority of our loan portfolio is concentrated—specifically in Texas in 2017 and in South Carolina and North Carolina in 2018. Conversely, an improvement in economic conditions could result in prepayments by our borrowers of their payment obligations on our loans. As a result, we may receive principal payments on the outstanding loans earlier than anticipated, which would reduce our finance receivables and the interest income earned thereon. No prediction can be made and no assurance can be given as to the effect of economic conditions on the rate of delinquencies, prepayments, or losses on our loan portfolio with respect to any part of our geographic footprint.

Furthermore, the concentration of our loan portfolio in one or more states would have a disproportionate effect on our business if governmental authorities in any of those states take action against us. In addition, the occurrence of any of the adverse regulatory or legislative events described in this “Risk Factors” section in states with a high concentration of our loan portfolio could materially and adversely affect our business, results of operations, and financial condition. For example, if interest rates in South Carolina, which currently are not capped, were to be capped, our business, results of operations, and financial condition would be materially and adversely affected.

Failure of third-party service providers upon which we rely could adversely affect our business.

We rely on certain third-party service providers. In particular, we currently rely on one key vendor to print and mail our convenience check and other offers for our direct mail marketing campaigns, and on certain other third-party service providers in connection with loan underwriting, origination, and servicing. Our reliance on these and other third parties can expose us to risks. For example, an error by our current convenience check vendor in 2015 resulted in check offers being misdirected, requiring us in some cases to notify state regulators and to refund certain interest and fee amounts, and exposing us to increased credit risk. If any of our third-party service providers, including our direct mail vendor and those third parties providing services in connection with loan underwriting, origination, and servicing, are unable to provide their services timely, accurately, and effectively, or at all, it could have a material adverse effect on our business, financial condition, and results of operations and cash flows.

We rely on information technology products developed, owned, and supported by third parties. Our ability to manage our business and monitor results is highly dependent upon these information technology products. A failure of these products and systems or of the implementation of new information technology products and systems could disrupt our business.

In the operation of our business, we are highly dependent upon a variety of information technology products, including our loan management system, which allows us to record, document, and manage our loan portfolio. In April 2016, we entered into an agreement with Nortridge pursuant to which Nortridge provides us with loan management software and related services. In 2018, we completed our transition to the Nortridge loan management software across our operations footprint.

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Since we began transitioning to the Nortridge platform, we have tailored it to meet our specific needs. To a certain extent, we depend on the willingness and ability of Nortridge to continue to provide customized solutions and to support our evolving products and business model. In the future, Nortridge may not be willing or able to provide the services necessary to meet our loan management system needs. If this occurs, we may be forced to migrate to an alternative software package, which could materially affect our business, results of operations, and financial condition.

Further, the Nortridge platform may in the future fail to perform in a manner consistent with our current expectations and may be inadequate for our needs. As we are dependent upon our ability to gather and promptly transmit accurate information to key decision makers, our business, results of operations, and financial condition may be adversely affected if our loan management system does not allow us to transmit accurate information, even for a short period of time. Failure to properly or adequately address these issues could impact our ability to perform necessary business operations, which could adversely affect our competitive position, business, results of operations, and financial condition.

We also rely on Teledata Communications Inc. and other third-party software vendors to provide access to loan applications and/or screen applications. There can be no assurance that these third party providers will continue to provide us with information in accordance with our lending guidelines or that they will continue to provide us lending leads at all. If this occurs, our credit losses, business, results of operations, and financial condition may be adversely affected.

Further, the Nortridge platform and other third-party software vendor products and applications are subject to damage or interruption from:

• power loss, computer systems failures, and internet, telecommunications, or data network failures;

• operator negligence or improper operation by, or supervision of, employees;

• physical and electronic loss of data or security breaches, misappropriation, and similar events;

• computer viruses;

• cyberterrorism;

• intentional acts of vandalism and similar events; and

• hurricanes, fires, floods, and other natural disasters.

Any failure of the Nortridge platform or any other third-party software vendor product systems, if not addressed by our disaster recovery plan, could cause an interruption in operations. Though we have implemented contingency and disaster recovery processes in the event of one or several technology failures, any unforeseen failure, interruption, or compromise of these systems or security measures could affect the origination, servicing, and collection of loans. The risk of possible failures or interruptions may not be adequately addressed, and such failures or interruptions could occur.

For example, in January 2020, we experienced an information technology infrastructure event caused by a system backup that affected our ability to originate branch loans and process certain methods of payment. As a result, our loan management system was not fully operational for a total of approximately seven business days between January 5, 2020 and January 16, 2020. The outage is expected to have an adverse impact on our results of operations. Although the Company, with the assistance of third-party experts, addressed and resolved the issue, there can be no assurance that a similar event will not occur in the future. See Note 20, “Subsequent Events,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on this outage.

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We may not be able to make technological improvements as quickly as some of our competitors, which could harm our competitive ability and adversely affect our business, prospects, results of operations, and financial condition.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products, services, and marketing channels. We rely on our integrated branch network as the foundation of our multiple channel platform and the primary point of contact with our active accounts., In order to serve consumers who want to reach us over the internet, we make an online loan application available on our consumer website, and we provide our customers an online customer portal, giving them online access to their account information and an electronic payment option. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demand for convenience, as well as to create additional efficiencies in our operations. We expect that new technologies and business processes applicable to the consumer finance industry will continue to emerge, and these new technologies and business processes may be more efficient than those that we currently use. We cannot ensure that we will be able to sustain our investment in new technology, and we may not be able to effectively implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could cause disruptions in our operations, harm our ability to compete with our competitors, and adversely affect our business, prospects, results of operations, and financial condition.

Security breaches, cyber-attacks, failures in our information systems, or fraudulent activity could result in damage to our operations or lead to reputational damage.

We rely heavily on communications and information systems to conduct our business. Each branch is part of an information network that is designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis, and report revenues and expenses to our headquarters. Our computer systems, software, and networks may be vulnerable to breaches (including via computer hackings), unauthorized access, misuse, computer viruses, malware, phishing, employee error or malfeasance, or other failures or disruptions that could result in disruption to our business or the loss or theft of confidential information, including customer, employee, and business information. Any failure, interruption, or breach in security of these systems, including any failure of ourback-up systems, hardware failures, or an inability to access data maintained offsite, could result in failures or disruptions in our customer relationship management, general ledger, loan, and other systems and could result in a loss of data (including loan portfolio data), a loss of customer business, or a violation of applicable privacy and other laws, subject us to additional regulatory scrutiny, or expose us to civil litigation, possible financial liability, and other adverse consequences, any of which could have a material adverse effect on our financial condition and results of operations. Furthermore, the techniques that are used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect for long periods of time. Accordingly, we may not be able to detect immediately any such breach, which may increase the losses that we would suffer. In addition, our existing insurance policies would not reimburse us for all of the damages that we might incur as a result of a breach.

A security breach or cyber-attack on our computer systems could interrupt or damage our operations or harm our reputation. We have implemented systems and processes designed to protect against unauthorized access to or use of personal information, and rely on encryption and authentication technology to effectively secure transmission of confidential information, including customer bank account, credit card, and other personal information. Despite the implementation of these security measures, there is no guarantee that they are adequate to safeguard against all security breaches and our systems may still be vulnerable to data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems. If we were to experience a security breach or cyber-attack, we could be required to incur substantial costs and liabilities, including, among other things, the following:

• expenses to rectify the consequences of the security breach or cyber-attack;

• liability for stolen assets or information;

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• costs of repairing damage to our systems;

• lost revenue and income resulting from any system downtime caused by such breach or attack;

• increased costs of cyber security protection;

• costs of incentives we may be required to offer to our customers or business partners to retain their business; and

• damage to our reputation causing customers and investors to lose confidence in our company.

Further, any compromise of security or cyber-attack could deter consumers from entering into transactions that require them to provide confidential information to us. In addition, if confidential customer information or information belonging to our business partners is misappropriated from our computer systems, we could be sued by those who assert that we did not take adequate precautions to safeguard our systems and confidential data belonging to our customers or business partners, which could subject us to liability and result in significant legal fees and expenses in defending these claims. As a result, any compromise of security of our computer systems or cyber-attack could have a material adverse effect on our business, prospects, results of operations, and financial condition.

As part of our business, and subject to applicable privacy laws, we may share confidential customer information and proprietary information with vendors, service providers, and business partners. The information systems of these third parties may also be vulnerable to security breaches, and we may not be able to ensure that these third parties have appropriate security controls in place to protect the information that we share with them. If our proprietary or confidential customer information is intercepted, stolen, misused, or mishandled while in possession of a third party, it could result in reputational harm to us, loss of customer business, and additional regulatory scrutiny, and it could expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, and liquidity. Although we maintain insurance that is intended to cover certain losses from such events, there can be no assurance that such insurance will be adequate or available.

Our centralized headquarters’ functions and branch operations are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.

Our headquarters are in an office building located in Greer, South Carolina, a town located outside of Greenville, South Carolina. Our information systems and administrative and management processes are primarily provided to our branches from this centralized location, and our separate data management facility is located in Greenville, South Carolina. These processes could be disrupted if a catastrophic event, such as a tornado, power outage, or act of terror, affected Greenville, Greer, or the nearby areas. Any such catastrophic event(s) or other unexpected disruption of our headquarters or data management facility could have a material adverse effect on our business, results of operations, and financial condition.

Our business could suffer if we are unsuccessful in making, continuing, and growing relationships with retailers, or if the retailers with whom we have relationships experience a decline or disruption in their sales volumes.

Our retail purchase loans are reliant on our relationships with retailers. Our retail purchase loan business model is based on our ability to enter into agreements with individual retailers to provide financing to customers in their stores. If a competitor were to offer better service or more attractive loan products to our retail partners, it is possible that our retail partners would terminate their relationships with us. If we are unable to continue to grow our existing relationships and develop new relationships, our results of operations, financial condition, and ability to continue to expand could be adversely affected.

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Even with good relationships with retailers, our ability to originate retail purchase loans is dependent, in large part, on the underlying consumer demand for retail goods. Retail sales are subject to fluctuation as a result of general economic trends and other factors. If sales volumes at the retailers with whom we have relationships decrease in the future as a result of general economic trends or due to any other factors, we may experience a corresponding decrease in the volume of such loans that we originate. In such circumstances, we may experience an adverse effect on our business, results of operations, and financial condition.

Interest rates on retail purchase loans are determined at competitive market interest rates, and we may fail to adequately set interest rates, which may adversely affect our business.

Unlike installment loans, particularly small installment loans, which in certain states are typically made at or near the maximum interest rates permitted by law, retail purchase loans are often made at competitive market interest rates, which are governed by laws for installment sales contracts. If we fail to set interest rates at a level that adequately reflects market rates or the credit risks of our customers, or if we set interest rates at a level too low to sustain our profitability, our business, results of operations, and financial condition could be adversely affected.

Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our branches and increases our costs of operations, which could have an adverse effect on our business, results of operations, and financial condition.

Our workforce is comprised primarily of employees who work on an hourly basis. In certain areas where we operate, there is significant competition for employees. In the past, we have lost employees and candidates to competitors who have been willing to pay higher compensation. Our ability to continue to expand our operations depends on our ability to attract, train, and retain a large and growing number of qualified employees. The turnover among all of our branch employees was approximately 40% in 2017, 51% in 2018, and 45% in 2019. This turnover increases our cost of operations and makes it more difficult to operate our branches. Our account executives and assistant manager roles have historically experienced high turnover. We may not be able to retain and cultivate personnel at these ranks for future promotion to branch manager. If our employee turnover rates increase above historical levels or if unanticipated problems arise from our high employee turnover and we are unable to readily replace such employees, our business, results of operations, financial condition, and ability to continue to expand could be adversely affected.

The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.

Our future success significantly depends on the continued service and performance of our key management personnel. Competition for these employees is intense. Our operating results could be adversely affected by higher employee turnover or increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, operational, finance, and administrative personnel. We have built our business on a set of core values, and we attempt to hire employees who are committed to these values. We want to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers. In order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior management, and operational positions. As our employees gain experience and develop their knowledge and skills, they become highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and competitive compensation and benefits. If costs to retain our skilled employees increase, then our business and financial results may be negatively affected.

Our continued growth is also dependent, in part, on the skills, experience, and efforts of our executive officers and senior management. As previously announced, our former Executive Vice President and Chief

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Financial Officer, Donald E. Thomas, retired from Regional in the third quarter of 2019, and our former Executive Vice President and Chief Credit Risk Officer, Daniel J. Taggart, stepped down from his position at Regional in the first quarter of 2020. Prior to their departure, the Company hired a new Chief Financial Officer and a new Chief Credit Risk Officer. We may not be successful in retaining the other members of our executive or senior management team or our other key employees. The loss of the services of any of our executive officers, senior management, or key team members, including state vice presidents, or the inability to attract additional qualified personnel as needed, could have an adverse effect on our business, financial condition, and results of operations. We also depend on our district supervisors to supervise, train, and motivate our branch employees. These supervisors have significant experience with our company and within our industry, and would be difficult to replace. If we lose a district supervisor to a competitor, we could also be at risk of losing other employees and customers. In addition, the process of identifying management successors creates uncertainty and could become a distraction to our senior management and our Board of Directors, and we may not be successful in attracting qualified candidates to replace key positions when necessary. The identification and recruitment of candidates to fill senior management positions, and the resulting transition process, may be disruptive to our business and operations.

Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting us to significant legal liability, regulatory scrutiny, and reputational harm.

Our reputation is critical to maintaining and developing relationships with our existing and potential customers and third parties with whom we do business. There is a risk that our employees or third-party contractors could engage in misconduct that adversely affects our business. For example, if an employee or third-party contractor were to engage—or be accused of engaging—in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships, and ability to attract future customers. Employee or third-party misconduct could prompt regulators to allege or to determine, based upon such misconduct, that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. It is not always possible to deter employee or third-party misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees or third-party contractors, or even unsubstantiated allegations, could result in a material adverse effect on our reputation and our business.

Security breaches in our branches or acts of theft, fraud, or violence could adversely affect our financial condition and results of operations.

A portion of our account payments occur at our branches, either in person or by mail, and often consist of cash payments, which we deposit at local banks throughout the day. This business practice exposes us daily to the potential for employee theft of funds or, alternatively, to theft and burglary due to the cash we maintain in our branches. Despite controls and procedures to prevent such losses, we have sustained losses due to employee theft and fraud (including collusion), including from the origination of fraudulent loans. We are also susceptible tobreak-ins at our branches, where money and/or customer records necessary forday-to-day operations (which also contain extensive confidential information about our customers, including financial and personally identifiable information) could be taken. A breach in the security of our branches or in the safety of our employees could result in employee injury, loss of funds or records, and adverse publicity, and could result in a loss of customer business or expose us to additional regulatory scrutiny and penalties, civil litigation, and possible financial liability, any of which could have a material adverse effect on our reputation, financial condition, and results of operations.

Our risk management efforts may not be effective.

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as regulatory and operational risks related

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to our business, assets, and liabilities. Our risk management policies, procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future.

We may be unsuccessful in maintaining effective internal controls over financial reporting and disclosure controls and procedures.

Controls and procedures are particularly important for consumer finance companies. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud or material error. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurance that the objectives of the system are met. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires management of public companies to develop and implement internal controls over financial reporting and evaluate the effectiveness thereof. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Any failure to maintain current internal controls or implement required new or improved controls, or difficulties encountered in their maintenance and/or implementation, could cause us to fail to meet our reporting obligations.

If material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future or if our controls and procedures fail or are circumvented, our consolidated financial statements may contain material misstatements, we could be required to restate our financial results, we may be unable to produce accurate and timely financial statements, and we may be unable to maintain compliance with applicable stock exchange listing requirements, any of which could have a material adverse effect on our business, results of operations, financial condition, and stock price. The discovery of a material weakness and the disclosure of that fact, even if quickly remediated, could reduce the market value of shares of our common stock. Additionally, the existence of any material weakness or significant deficiency requires management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiency, and management may not be able to remediate any such material weaknesses or significant deficiency in a timely manner. Undetected material weaknesses in our internal controls could lead to financial statement restatements, which could have a material adverse effect on our business, financial condition, and results of operation.

If our estimate of allowance for credit losses is not adequate to absorb actual losses, our provision for credit losses would increase, which would adversely affect our results of operations.

We maintain an allowance for credit losses for all loans we make. To estimate the appropriate level of credit loss reserves, we consider known and relevant internal and external factors that affect loan collectability, including the total amount of loans outstanding; delinquency levels, roll rates, and trends; historical credit losses; our current collection patterns; and economic trends. Our methodology for establishing our allowance for credit losses is based in large part on our delinquency roll rates and our historic loss experience. If customer behavior changes because of economic, political, social, or other conditions and if we are unable to predict how the unemployment rate and general economic uncertainty may affect our credit loss allowance, our provision for credit losses may be inadequate. During fiscal 2019, our provision for credit losses was $99.6 million, and we had net credit losses of $95.7 million. As of December 31, 2019, our finance receivables were $1,104.8 million. Maintaining the adequacy of our allowance for credit losses may require significant and unanticipated changes in our provisions for credit losses, which would materially affect our results of operations. Our allowance for credit losses, however, is an estimate, and if actual credit losses are materially greater than our credit loss allowance,

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our financial condition and results of operations could be adversely affected. Neither state regulators nor federal regulators regulate our allowance for credit losses.

In June 2016, the Financial Accounting Standards Board (“FASB”)issued an accounting update significantly changing the impairment model for estimating credit losses on financial assets. While the then-existing incurred loss impairment model required the recognition of credit losses when it was probable that a loss had been incurred, the new current expected credit loss (“CECL”) model requires entities to estimate the lifetime expected credit losses on such instruments and to record an allowance to offset the amortized cost basis of the financial assets. The CECL model requires earlier recognition of credit losses as compared to the incurred loss approach. It uses historical experience, current conditions, and reasonable and supportable economic forecasts to estimate lifetime expected credit losses. In addition to the risks and uncertainties identified in the preceding paragraph, the CECL model requires increased use of judgment and dependence on forward-looking economic forecasts that may prove to be incorrect. Based on analyses and forecasts of future macroeconomic conditions as of December 31, 2019, we estimated a CECL allowance for credit losses of $122 million. The allowance under the prior incurred loss approach was $62 million as of December 31, 2019. Thus, effective January 1, 2020, the adoption of CECL accounting, through a modified-retrospective approach, caused an increase to the allowance for credit losses of approximately $60 million. Adjusting the CECL allowance for credit losses for changes in economic forecasts may result in the need for significant and unanticipated changes in our provisions for credit losses, which would materially affect our results of operations. See Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on this new accounting standard.

If assumptions or estimates we use in preparing our financial statements are incorrect or are required to change, our reported results of operations and financial condition may be adversely affected.

We are required to use certain assumptions and estimates in preparing our financial statements under U.S. Generally Accepted Accounting Principles (“GAAP”), including in determining allowances for credit losses, the fair value of financial instruments, asset impairment, reserves related to litigation and other legal matters, the fair value of share-based compensation, valuation of income, and other taxes and regulatory exposures. In addition, significant assumptions and estimates are involved in determining certain disclosures required under GAAP, including those involving the fair value of our financial instruments. If the assumptions or estimates underlying our financial statements are incorrect, the actual amounts realized on transactions and balances subject to those estimates will be different, and this could have a material adverse effect on our results of operations and financial condition.

In addition, the FASB is currently reviewing or proposing changes to several financial accounting and reporting standards that govern key aspects of our financial statements, including areas where assumptions or estimates are required. As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain of the assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition generally. For additional information on the key areas for which assumptions and estimates are used in preparing our financial statements, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

We depend to a substantial extent on borrowings under our senior revolving credit facility to fund our liquidity needs.

We have a senior revolving credit facility committed through September 2022 that allows us to borrow up to $640.0 million, assuming we are in compliance with a number of covenants and conditions. The credit facility also has an accordion provision that allows for the expansion of the facility up to $650.0 million. The senior revolving credit facility is collateralized by certain of our assets, including substantially all of our finance

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receivables (other than those held by certain special purpose entities (each, an “SPE”), as described below) and equity interests of the majority of our subsidiaries. As of December 31, 2019, the amount outstanding under our senior revolving credit facility was $350.8 million and we had $290.7 million of eligible borrowing capacity on the credit facility (subject to certain covenants and conditions). During fiscal 2019, the maximum amount of borrowings outstanding under the facility at any one time was $395.2 million. We use our senior revolving credit facility as a source of liquidity, including for working capital and to fund the loans we make to our customers. If our existing sources of liquidity become insufficient to satisfy our financial needs or our access to these sources becomes unexpectedly restricted, we may need to try to raise additional capital in the future. If such an event were to occur, we can give no assurance that such alternate sources of liquidity would be available to us on favorable terms or at all. In addition, we cannot be certain that we will be able to replace the amended and restated senior revolving credit facility when it matures on favorable terms or at all. If any of these events occur, our business, results of operations, and financial condition could be adversely affected.

The credit agreements governing our long-term debt contain restrictions and limitations that could affect our ability to operate our business.

The credit agreements governing our senior revolving credit facility and revolving warehouse credit facility contain a number of covenants that could adversely affect our business and our flexibility to respond to changing business and economic conditions or opportunities. Among other things, these covenants limit our ability to:

• incur or guarantee additional indebtedness;

• purchase loan portfolios in bulk;

• pay dividends or make distributions on our capital stock or make certain other restricted payments;

• sell assets, including our loan portfolio or the capital stock of our subsidiaries;

• enter into transactions with our affiliates;

• offer certain loan products;

• create or incur liens; and

• consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets.

The credit agreements also impose certain obligations on us relating to our underwriting standards, recordkeeping and servicing of our loans, and our loss reserves andcharge-off policies, and they require us to maintain certain financial ratios, including an interest coverage ratio and a capital base ratio. If we were to breach any covenants or obligations under our credit agreements and such breaches were to result in an event of default, our lenders could cause all amounts outstanding to become due and payable, subject to applicable grace periods. An event of default in any one credit agreement could also trigger cross-defaults under other existing and future credit agreements and other debt instruments, and materially and adversely affect our financial condition and ability to continue operating our business as a going concern.

Our securitizations may expose us to financing and other risks, and there can be no assurance that we will be able to access the securitization market in the future, which may require us to seek more costly financing.

We completed two securitizations in 2018 and one securitization in 2019, and we may in the future securitize certain of our finance receivables to generate cash to originate new finance receivables or to pay our outstanding indebtedness. In such transactions, we typically convey a pool of finance receivables to a special purpose entity, which, in turn, conveys the finance receivables to a trust (the issuing entity). Concurrently, the issuing entity issuesnon-recourse notes or certificates pursuant to the terms of an indenture and/or amended and restated trust agreement, which then are transferred to the special purpose entity in exchange for the finance

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receivables. The securities issued by the issuing entity are secured by the pool of finance receivables. In exchange for the transfer of finance receivables to the issuing entity, we typically receive the cash proceeds from the sale of the securities issued by the issuing entity, all residual interests, if any, in the cash flows from the finance receivables after payment of the securities, and a 100% beneficial interest in the issuing entity.

Although we successfully completed securitizations in 2018 and 2019, we can give no assurances that we will be able to complete additional securitizations, including if, for example, the securitization markets become constrained or events within the Company cause investors to lack confidence in our ability to fulfill our obligations as servicer with respect to the securitizations. Further, the value of any subordinated securities that we may retain in our securitizations might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or other factors.

Regional Management Corp. currently acts as the servicer (in such capacity, the “Servicer”) with respect to each securitization. If the Servicer defaults in its servicing obligations, an early amortization event could occur under each securitization and the Servicer could be replaced as servicer. Servicer defaults include, but are not limited to, the failure of the Servicer to make any payment, transfer, or deposit in accordance with applicable securitization documents; breaches of representations, warranties, or agreements made by the Servicer under applicable securitization documents; and the occurrence of certain insolvency events with respect to the Servicer. Such an early amortization event could have materially adverse consequences on our liquidity and cost of funds.

Rating agencies may also affect our ability to execute a securitization transaction or increase the costs we expect to incur from executing securitization transactions, not only by deciding not to issue ratings for our securitization transactions, but also by altering the processes and criteria they follow in issuing ratings. Rating agencies could alter their ratings processes or criteria after we have accumulated finance receivables for securitization in a manner that effectively reduces the value of those finance receivables by increasing our financing costs or otherwise requiring that we incur additional costs in order to comply with those processes and criteria. We have no ability to control or predict what actions the rating agencies may take.

Further, other matters, such as (i) accounting standards applicable to securitization transactions and (ii) capital and leverage requirements applicable to banks and other regulated financial institutions holding asset-backed securities, could result in decreased investor demand for securities issued through our securitization transactions or increased competition from other institutions that undertake securitization transactions. In addition, compliance with certain regulatory requirements, including the Dodd-Frank Act, may affect the type of securitization transactions that we are able to complete.

An inability to consummate further securitization transactions on terms similar to our existing securitization transactions, or at all, could require us to seek more costly financing and/or have a material adverse effect on our business, results of operations, and financial condition.

We may be required to indemnify, or repurchase certain finance receivables from, purchasers of finance receivables that we have sold or securitized, or which we will sell or securitize in the future, if our finance receivables fail to meet certain criteria or characteristics or under other circumstances, which could adversely affect our results of operations, financial condition, and liquidity.

We have entered into certain financing arrangements, including a revolving warehouse credit facility, which is secured by certain retail installment contracts and promissory notes (the “Receivables”). In June 2018, we securitized approximately $168.5 million of Receivables, in December 2018, we securitized approximately $136.9 million of Receivables, and in October 2019, we securitized approximately $144.5 million of Receivables. Our operating subsidiaries originated the Receivables and subsequently transferred the Receivables to certain of our wholly-owned subsidiaries that were established for the special purpose of entering into the financing arrangements and the respective securitizations. The documents governing our financing arrangements and securitizations contain provisions that require us to repurchase the affected Receivables under certain

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circumstances. While our financing and securitization documents vary, they generally contain customary provisions that require us and the special purpose entities to make certain representations and warranties about the quality and nature of the Receivables. Together with the special purpose entities, we may be required to repurchase the Receivables if a representation or warranty is later determined to be inaccurate. In such a case, we will be required to pay a repurchase price for the release of the affected Receivables.

We believe that many purchasers of loans and other counterparties to transactions like those provided for in the revolving warehouse credit facility, the securitizations, and other similar transactions are particularly aware of the conditions under which originators or sellers of such finance receivables must indemnify for or repurchase finance receivables, and may benefit from enforcing any available repurchase remedies. If we are required to repurchase Receivables that we have sold or pledged, it could adversely affect our results of operations, financial condition, and liquidity.

We are subject to interest rate risk resulting from general economic conditions and policies of various governmental and regulatory agencies.

Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. Furthermore, market conditions or regulatory restrictions on interest rates we charge may prevent us from passing any increases in interest rates along to our customers. We originate finance receivables at either prevailing market rates or at statutory limits. Subject to statutory limits, our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market rates. Our loan portfolio turns over approximately 1.2 times per year from cash payments, renewals, andcharged-off loans. Because our large loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, the rate of turnover of the loan portfolio may change as our large loans change as a percentage of our portfolio.

In addition, rising interest rates will increase our cost of capital by influencing the amount of interest we pay on our senior revolving credit facility, our revolving warehouse credit facility, or any other floating interest rate obligations that we may incur, which would increase our operating costs and decrease our operating margins. Interest payable on our senior revolving credit facility and our revolving warehouse credit facility is variable and could increase in the future.

For additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

Any replacement of LIBOR as the basis on which our variable rate debt is calculated may harm our cost of capital, financial results, and cash flows.

Borrowings under our senior revolving credit facility and our revolving warehouse credit facility bear interest at rates that are calculated based on LIBOR, and from time to time, we purchase interest rate cap contracts with strike rates that are also calculated based on LIBOR. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it is unknown whether these alternative reference rates will attain market acceptance as replacements of LIBOR.

If LIBOR ceases to exist, the method and rate used to calculate our variable-rate debt in the future may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over

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time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form. Changes in interest rates may also influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and cash flows. In addition, any transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that rely on LIBOR, reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. This could materially and adversely affect our results of operations, cash flows, and liquidity. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. As such, the potential effect of any such event on our cost of capital, financial results, and cash flows cannot yet be determined.

Our use of derivatives exposes us to credit and market risk.

From time to time, we enter into derivative transactions for economic hedging purposes, such as managing our exposure to interest rate risk. By using derivative instruments, we are exposed to credit and market risk, including the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost, default risk, and the risk of insolvency or other inability of the counterparty to a particular derivative transaction to perform its obligations. For additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

Macroeconomic conditions could have a material adverse effect on our business, financial position, results of operations, and cash flows, and may increase loan defaults and affect the value and liquidity of your investment.

We are not insulated from the pressures and potentially negative consequences of financial crises and similar risks beyond our control that have in the past and may in the future affect the capital and credit markets, the broader economy, the financial services industry, or the segment of that industry in which we operate. Our financial performance generally, and in particular the ability of our borrowers to make payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we operate and in the United States as a whole.

During an economic downturn or recession, credit losses in the financial services industry generally increase and demand for credit products often decreases. Declining asset values, defaults on consumer loans, and the lack of market and investor confidence, as well as other factors, all combine to decrease liquidity during an economic downturn. As a result of these factors, some banks and other lenders have suffered significant losses during economic downturns, and the strength and liquidity of many financial institutions worldwide weakened during the most recent economic crisis. Additionally, during an economic downturn, our loan servicing costs and collection costs may increase as we may have to expend greater time and resources on these activities. Our underwriting criteria, policies and procedures, and product offerings may not sufficiently protect our growth and profitability during a sustained period of economic downturn or recession. Any renewed economic downturn will adversely affect the financial resources of our customers and may result in the inability of our customers to make principal and interest payments on, or refinance, the outstanding debt when due.

In addition, periods of economic slowdown or recession are typically accompanied by decreased consumer demand for retail goods. Our ability to originate retail purchase loans depends, in large part, on the underlying demand for such products. Further, our business is focused on customers who generally do not qualify for conventional retail financing, and customers in this demographic are more likely to be affected, and more severely affected, by an economic downturn. Accordingly, our business, financial position, results of operations, and cash flows may be adversely impacted during any economic downturn or recession.

Should economic conditions worsen, they may adversely affect the credit quality of our loans. In the event of increased default by borrowers under the loans, and/or a decrease in the volume of the loans we originate, our business, results of operations, and financial condition could be adversely affected.

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Damage to our reputation could negatively impact our business.

Recently, financial services companies have been experiencing increased reputational risk as consumers and the media take issue with certain of their practices or judgments. Maintaining a strong reputation is critical to our attracting and retaining customers, investors, and employees. Harm to our reputation can arise from many sources, including employee misconduct, misconduct by outsourced service providers or other counterparties, litigation or regulatory actions, failure by us to meet minimum standards of service and quality, inadequate protection of customer information, and compliance failures. Negative publicity regarding our company (or others engaged in a similar business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to Regulation and Legal Proceedings

Our business products and activities are strictly and comprehensively regulated at the local, state, and federal levels.

The consumer finance industry is extensively regulated by federal, state, and local laws and regulations, including consumer protection laws and regulations relating to the creation, collection, and enforcement of consumer contracts, such as consumer loans. These laws and regulations impose significant costs and limitations on the way we conduct and expand our business, and these costs and limitations may increase in the future if such laws and regulations are changed. These laws and regulations govern or affect, among other things:

• the interest rates and manner of calculating such rates that we may charge customers;

• terms of loans, including fees, maximum amounts, and minimum durations;

• origination practices;

• disclosure requirements, including posting of fees;

• solicitation and advertising practices;

• currency and suspicious activity reporting;

• recording and reporting of certain financial transactions;

• privacy of personal customer information;

• the types of products and services that we may offer;

• servicing and collection practices;

• approval of licenses; and

• locations of our branches.

Due to the highly regulated nature of the consumer finance industry, we are required to comply with a wide array of federal, state, and local laws and regulations that affect, among other things, the manner in which we conduct our origination and servicing operations. These laws and regulations directly impact our business and require constant compliance, monitoring, and internal and external audits. Although we have an enterprise-wide compliance framework structured to continuously evaluate our activities, compliance with applicable law is costly and may create operational constraints.

At a federal level, these laws and their implementing regulations include, among others, the Truth in Lending Act and Regulation Z, the Consumer Financial Protection Act, the Dodd-Frank Act, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Electronic Funds Transfer Act, the Federal Trade Commission Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Telephone Consumer Protection Act, and requirements related to unfair, deceptive, or abusive acts or practices. Many states and local jurisdictions have consumer protection laws analogous to, or in addition

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to, those listed above, such as usury laws and state debt collection practices laws that apply to first-party lenders. These federal, state, and local laws regulate the manner in which consumer finance companies deal with customers when making loans or conducting other types of financial transactions.

Changes to statutes, regulations, or regulatory policies, including the interpretation, implementation, and enforcement of statutes, regulations, or policies, could affect us in substantial and unpredictable ways, including limiting the types of financial services and products that we may offer and increasing the ability of competitors to offer competing financial services and products. Compliance with laws and regulations requires us to invest increasingly significant portions of our resources in compliance planning and training, monitoring tools, and personnel, and requires the time and attention of management. These costs divert capital and focus away from efforts intended to grow our business. Because these laws and regulations are complex and often subject to interpretation, or because of a result of unintended errors, we may, from time to time, inadvertently violate these laws, regulations, and policies, as each is interpreted by our regulators. If we do not successfully comply with laws, regulations, or policies, we could be subject to fines, penalties, lawsuits, or judgments, our compliance costs could increase, our operations could be limited, and we may suffer damage to our reputation. If more restrictive laws, rules, and regulations are enacted or more restrictive judicial and administrative interpretations of current laws are issued, compliance with the laws could become more expensive or difficult. Furthermore, changes in these laws and regulations could require changes in the way we conduct our business, and we cannot predict the impact such changes would have on our profitability.

The Dodd-Frank Act also may adversely affect the securitization market because it requires, among other things, that the sponsor of a securitization transaction or a majority-owned affiliate of the sponsor retain not less than 5% of the credit risk of the assets collateralizing the asset-backed securities. The risk retention requirement may limit our ability to securitize loans. The impact of the risk retention rule on the asset-backed securities market remains uncertain. In addition, rules relating to securitizations rated by nationally-recognized statistical rating agencies require that the findings of any third-party due diligence service providers be made publicly available at least five (5) business days prior to the first sale of securities, which has led, and will continue to lead, us to incur additional costs in connection with each securitization.

Our primary regulators are the state regulators for the states in which we operate. We operate each of our branches under licenses granted to us by these state regulators. State regulators may enter our branches and conduct audits of our records and practices at any time, with or without notice. If we fail to observe, or are not able to comply with, applicable legal requirements, we may be forced to discontinue certain product offerings, which could adversely affect our business, results of operations, and financial condition. In addition, violation of these laws and regulations could result in fines and other civil and/or criminal penalties, including the suspension or revocation of our branch licenses, rendering us unable to operate in one or more locations. All of the states in which we operate have laws governing the interest rates and fees that we can charge and required disclosure statements, among other restrictions. Violation of these laws could involve penalties requiring the forfeiture of principal and/or interest and fees that we have charged. Depending on the nature and scope of a violation, fines and other penalties for noncompliance of applicable requirements could be significant and could have a material adverse effect on our business, results of operations, and financial condition.

While we believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state, and local laws and regulations, we may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations. In addition, changes in laws or regulations applicable to us could subject us to additional licensing, registration, and other regulatory requirements in the future or could adversely affect our ability to operate or the manner in which we conduct business. Licenses to open new branches are granted in the discretion of state regulators. Accordingly, licenses may be denied unexpectedly or for reasons outside of our control. This could hinder our ability to implement our business plans in a timely manner or at all.

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As we enter new markets and develop new products and services, we may become subject to additional local, state, and federal laws and regulations. For example, although we intend to expand into new states, we may encounter unexpected regulatory or other difficulties in these new states, including as they relate to securing the necessary licenses to operate, which may inhibit our growth. As a result, we may not be able to successfully execute our strategies to grow our revenue and earnings.

We are also subject to potential enforcement, supervision, or other actions that may be brought by state attorneys general or other state enforcement authorities and other governmental agencies. For example, the CFPB, state and federal banking regulators, state attorneys general, the Federal Trade Commission, the U.S. Department of Justice, and federal government agencies have imposed sanctions on consumer loan originators for practices including, but not limited to, charging borrowers excessive fees, steering borrowers to loans with higher costs or more onerous terms, imposing higher interest rates than the borrower’s credit risk warrants, failing to disclose material terms of loans to borrowers, and otherwise engaging in discriminatory or unfair lending practices or unfair, deceptive, or abusive acts or practices. While we believe we are in substantial compliance with all applicable federal, state, and local laws and regulations, a contrary determination by a regulator, and any resulting action, could subject us to civil money penalties, customer remediation, and increased compliance costs, as well as damage to our reputation and brand and could limit or prohibit our ability to offer certain products and services or engage in certain business practices.

Additionally, Congress, the states, and regulatory agencies could further regulate the consumer credit industry in ways that make it more difficult for us to conduct business. Further, changes in the regulatory application or judicial interpretation of the laws and regulations applicable to financial institutions also could impact the manner in which we conduct our business. The regulatory environment in which financial institutions operate has become increasingly complex and robust, and following the financial crisis of 2008, supervisory efforts to apply relevant laws, regulations, and policies have become more intense. Any of the events described above could have a material adverse effect on all aspects of our business, results of operations, and financial condition.

We may become involved in investigations, examinations, and proceedings by government and self-regulatory agencies, which may result in material adverse consequences to our business, financial condition, and results of operations.

From time to time, we may become involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by federal and state government and self-regulatory agencies. Should we become subject to such an investigation, examination, or proceeding, the matter could result in material adverse consequences to us, including, but not limited to, increased compliance costs, adverse judgments, significant settlements, fines, penalties, injunction, or other actions.

Changes in laws and regulations or interpretations of laws and regulations could negatively impact our business, results of operations, and financial condition.

The laws and regulations directly affecting our lending activities are constantly under review and are subject to change. In addition, consumer advocacy groups and various other media sources continue to advocate for governmental and regulatory action to prohibit or severely restrict various financial products, including the loan products we offer. Any changes in such laws and regulations, or the implementation, interpretation, or enforcement of such laws and regulations, could force us to modify, suspend, or cease part or, in the worst case, all of our existing operations. It is also possible that the scope of federal regulations could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities. The enactment of one or more of such regulatory changes could materially and adversely affect our business, results of operations, and prospects.

State and federal legislatures and regulators may also seek to impose new requirements or interpret or enforce existing requirements in new ways. Changes in current laws or regulations or the implementation of new

Regional Management Corp. | 2019 Annual Report on Form 10-K | 36

laws or regulations in the future may restrict our ability to continue our current methods of operation or expand our operations. For example, on December 12, 2019, legislation referred to as the “Unsolicited Loan Act of 2019” was reintroduced in the Senate after first being introduced in December 2018. This legislation would prohibit the practice of directly mailing convenience checks to potential borrowers. Currently, the only action that has been taken on the bill is referral to the Senate Committee on Banking, Housing, and Urban Affairs, which occurred immediately after its introduction on December 12, 2019. If the Unsolicited Loan Act of 2019 or a similar bill were to ultimately become law, we would no longer be permitted to mail convenience check offers to potential customers, which could materially and adversely affect our business, results of operations, and prospects. In addition, the “Veterans and Consumers Fair Credit Act” was introduced in the Senate on November 12, 2019 and referred to the Committee on Banking, Housing, and Urban Affairs. This legislation would extend the Military Lending Act’s consumer protections to all consumers, including a 36 percent interest rate cap on all consumer loans. If the Veterans and Consumers Fair Credit Act or a similar bill were to ultimately become law, our consumer loans would be capped at an annual percentage rate of 36 percent, which could materially and adversely affect our business, results of operations, and prospects.

Additionally, new laws and regulations could subject us to liability for prior operating activities or lower or eliminate the profitability of operations going forward by, among other things, reducing the amount of interest and fees we charge in connection with our loans or limiting the types of insurance and other ancillary products that we may offer to our customers. If these or other factors lead us to close our branches in a state, in addition to the loss of net revenues attributable to that closing, we would incur closing costs such as lease cancellation payments and we would have to write off assets that we could no longer use. If we were to suspend rather than permanently cease our operations in a state, we would also have continuing costs associated with maintaining our branches and our employees in that state, with little or no revenues to offset those costs.

In addition to state and federal laws and regulations, our business is subject to various local rules and regulations, such as local zoning regulations. Local zoning boards and other local governing bodies have been increasingly restricting the permitted locations of consumer finance companies. Any future actions taken to require special use permits for or impose other restrictions on our ability to provide products could adversely affect our ability to expand our operations or force us to attempt to relocate existing branches. If we were forced to relocate any of our branches, in addition to the costs associated with the relocation, we may be required to hire new employees in the new areas, which may adversely impact the operations of those branches. Relocation of an existing branch may also hinder our collection abilities, as our business model relies in part on the location of our branches being close to where our customers live in order to successfully collect on outstanding loans.

Changes in laws or regulations may have a material adverse effect on all aspects of our business in a particular state and on our overall business, results of operations, and financial condition.

The Dodd-Frank Act authorizes the CFPB to adopt rules and undertake supervisory and enforcement activity that could potentially have a serious impact on our ability to offer installment loans or otherwise materially and adversely affect our operations and financial performance.

Title X of the Dodd-Frank Act establishes the CFPB, which became operational on July 21, 2011. Under the Dodd-Frank Act, the CFPB has regulatory, supervisory, and enforcement powers over providers of consumer financial products that we offer, including explicit supervisory authority to examine and require registration of installment lenders such as ourselves. Included in the powers afforded to the CFPB is the authority to adopt rules describing specified acts and practices as being “unfair,” “deceptive,” or “abusive,” and hence unlawful. Specifically, the CFPB has the authority to declare an act or practice abusive if it, among other things, materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or takes unreasonable advantage of a lack of understanding on the part of the consumer of the product or service.

Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits, some consumer advocacy groups have suggested that certain forms of alternative consumer finance products,

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such as traditional installment loans, should be a regulatory priority, and it is possible that the CFPB could propose and adopt rules making the products that we offer materially less profitable or impractical. Further, the CFPB may target specific features of loans or loan practices, such as refinancings, by rulemaking that could cause us to cease offering certain products or cease engaging in certain practices. The CFPB could also adopt rules imposing new and potentially burdensome requirements and limitations with respect to any of our current or future products or lines of business or on our methods of servicing our loans. Any such rules could have a material adverse effect on our business, results of operation, and financial condition.

The Dodd-Frank Act also gives the CFPB the authority to examine and regulate entities it classifies as a “larger participant of a market for other consumer financial products or services.” In the past, the CFPB has indicated that it may in the future issue a proposed rule defining larger participants in the installment lending market. The CFPB has not yet issued a “larger participant” rule applicable to us. However, if in the future we are covered by a final larger participant rule for the installment lending market, we will be subject to related CFPB supervisory examinations.

In addition to the Dodd-Frank Act’s grant of regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties ranging from a maximum of $5,883 per day for minor violations of federal consumer financial laws (including the CFPB’s own rules) to $29,416 per day for reckless violations and $1,176,638 per day for knowing violations. If we are subject to such administrative proceedings, litigation, orders, or monetary penalties in the future, it could have a material adverse effect on our operations and financial performance. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). If the CFPB or one or more state officials find that we have violated the foregoing laws, they could exercise their enforcement powers in ways that would have a material adverse effect on us.

In addition to preexisting enforcement rights for state attorneys general, the Dodd-Frank Act gives attorneys general authority to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank Act’s authority. In conducting an investigation, the CFPB or state attorneys general may issue a civil investigative demand requiring a target company to prepare and submit, among other items, documents, written reports, answers to interrogatories, and deposition testimony. If we are subject to investigation, the required response could result in substantial costs and a diversion of our management’s attention and resources. In addition, the market price of our common stock could decline as a result of the initiation of a CFPB investigation of our company or even the perception that such an investigation could occur, even in the absence of any finding by the CFPB that we have violated any state or federal law.

Although many of the regulations implementing portions of the Dodd-Frank Act have been promulgated, we are still unable to predict how this significant legislation may be interpreted and enforced or the full extent to which implementing regulations and supervisory policies may affect us. Finally, President Donald Trump and the Congressional majority have indicated that the Dodd-Frank Act will be under further scrutiny and some of the provisions of the Dodd-Frank Act and rules promulgated thereunder, including those provisions establishing the CFPB and the rules and regulations proposed and enacted by the CFPB, may be revised, repealed, or amended. The results of the 2020 presidential and congressional elections may further impact the extent to which new or revised legislation or regulations are adopted. There can be no assurance that future reforms will not significantly and adversely impact our business, financial condition, and results of operations.

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We sell certain of our loans, including, in some instances,charged-off loans and loans where the borrower is in default. This practice could subject us to heightened regulatory scrutiny, expose us to legal action, cause us to incur losses, and/or limit or impede our collection activity.

As part of our business model, we have purchased and sold, and may in the future purchase and sell, some of our finance receivables, including loans that have beencharged-off and loans where the borrower is in default. The CFPB and other regulators recently have significantly increased their scrutiny of debt sales, especially delinquent andcharged-off debt. The CFPB has criticized sellers of debt for insufficient documentation to support and verify the validity or amount of the debt. It has also criticized debt collectors for, among other things, collection tactics, attempting to collect debts that are no longer valid, misrepresenting the amount of the debt, not having sufficient documentation to verify the validity or amount of the debt, and failing to obtain or maintain proper licenses. Accordingly, our sales of loans could expose us to lawsuits or fines by regulators if we do not have sufficient documentation to support and verify the validity and amount of the loans underlying the transactions, or if we or purchasers of our loans use collection methods that are viewed as unfair, deceptive, or abusive. In addition, our collections could suffer and we may incur additional expenses if we are required to change collection practices or stop collecting on certain debts as a result of a lawsuit or action on the part of regulators.

Our use of third-party vendors is subject to increasing regulatory attention.

The CFPB and other regulators have issued regulatory guidance that has focused on the need for financial institutions to oversee their business relationships with service providers in a manner that ensures such service providers comply with applicable law. This results in increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement and decreasing the benefit that we receive from using third-party vendors. Moreover, if regulators conclude that we have not met the heightened standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist, or other remedial actions, which could have an adverse effect on our business, financial condition, and operating results.

We are subject to government regulations concerning our hourly and our other employees, including minimum wage, overtime, and health care laws.

We are subject to applicable rules and regulations relating to our relationship with our employees, including minimum wage and break requirements, health benefits, unemployment and sales taxes, overtime, and working conditions and immigration status. Legislated increases in the federal minimum wage and increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, compliance costs and fines, as well as the cost of litigation in connection with these regulations, would increase our labor costs. Unionizing and collective bargaining efforts have received increased attention nationwide in recent periods. Should our employees become represented by unions, we would be obligated to bargain with those unions with respect to wages, hours, and other terms and conditions of employment, which is likely to increase our labor costs. Moreover, as part of the process of union organizing and collective bargaining, strikes and other work stoppages may occur, which would cause disruption to our business. Similarly, many employers nationally in similar retail environments have been subject to actions brought by governmental agencies and private individuals under wage-hour laws on a variety of claims, such as improper classification of workers as exempt from overtime pay requirements and failure to pay overtime wages properly, with such actions sometimes brought as class actions. These actions can result in material liabilities and expenses. Should we be subject to employment litigation, such as actions involving wage-hour, overtime, break, and working time, it may distract our management from business matters and result in increased labor costs. In addition, we currently sponsor employer-subsidized premiums for major medical programs for eligible personnel who elect health care coverage through our insurance programs. As a result of regulatory changes, we may not be able to continue to offer health care coverage to our employees on affordable terms or at all and subsequently may face increased difficulty in hiring and retaining employees. If we are unable to locate, attract, train, or retain qualified personnel,

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or if our costs of labor increase significantly, our business, results of operations, and financial condition may be adversely affected.

Our stock price or results of operations could be adversely affected by media and public perception of installment loans and of legislative and regulatory developments affecting activities within the installment lending sector.

Consumer advocacy groups and various media sources continue to criticize alternative financial services providers (such as payday and title lenders, check advance companies, and pawnshops). These critics frequently characterize such alternative financial services providers as predatory or abusive toward consumers. If these persons were to criticize the products that we offer, it could result in further regulation of our business and could negatively impact our relationships with existing borrowers and efforts to attract new borrowers. Furthermore, our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action in the alternative financial services sector may adversely impact our stock price and perceptions of our business even if such actions are not targeted at our operations and do not directly impact us.

Legal proceedings to which we may become subject may have a material adverse impact on our financial position and results of operations.

Like many companies in our industry, we are from time to time involved in various legal proceedings and subject to claims and other actions related to our business activities brought by borrowers and others. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation is often expensive, time-consuming, disruptive to our operations and resources, and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion, or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantialnon-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment, or settlement that may be entered against us, that such coverage will prove to be adequate, or that such coverage will continue to remain available on acceptable terms, if at all. If in any legal proceeding we incur liability or defense costs that exceed our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations.

Current and proposed regulation related to consumer privacy, data protection, and information security could increase our costs.

We are subject to a number of federal and state consumer privacy, data protection, and information security laws and regulations. Moreover, various federal and state regulatory agencies require us to notify customers in the event of a security breach. Federal and state legislators and regulators are increasingly pursuing new guidance, laws, and regulations. Compliance with current or future customer privacy, data protection, and information security laws and regulations could result in higher compliance, technology, or other operating costs. Any violations of these laws and regulations may require us to change our business practices or operational structure, and could subject us to legal claims, monetary penalties, sanctions, and the obligation to indemnify and/or notify customers or take other remedial actions.

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Risks Related to the Ownership of Our Common Stock

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our business, our common stock price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

The market price of shares of our common stock may continue to be volatile, which could cause the value of your investment to decline.

The market price of our common stock has been highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance. In addition, our operating results and the market price of our common stock could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies, speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments, adverse publicity about the industries we participate in, or individual scandals.

We have no current plans to pay cash dividends on our common stock for the foreseeable future.

We do not expect to pay cash dividends for the foreseeable future. Instead, we intend to retain future earnings, if any, for future operation, expansion, and debt repayment. The declaration, amount, and payment of any future cash dividends on shares of common stock will be at the discretion of our Board of Directors. Our Board of Directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions and implications on the payment of cash dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our Board of Directors may deem relevant. In addition, our ability to pay cash dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our senior revolving credit facility. As a result, investors may need to rely on sales of their common stock after price appreciation, which may not occur, as the only way to realize future gains on their investment.

Your stock ownership may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions, or otherwise.

We have approximately 986 million shares of common stock authorized but unissued, as of March 12, 2020. Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board of Directors in its discretion, whether in connection with acquisitions or otherwise. Our stockholders previously approved the Regional Management Corp. 2015 Long-Term Incentive Plan (as amended and/or restated, the “2015 Plan”). Subject to adjustments as provided in the

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2015 Plan, the maximum aggregate number of shares of our common stock that may be issued under the 2015 Plan may not exceed the sum of (a) 1,550,000 shares plus (b) any shares (i) remaining available for the grant of awards as of the effective date under the 2007 Management Incentive Plan (the “2007 Plan”) or the 2011 Stock Incentive Plan (the “2011 Plan”), and/or (ii) subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cancelled, terminated, expires or lapses. We have 818,656 shares available for issuance under the 2015 Plan, as of March 12, 2020. In addition, our Board may recommend in the future that our stockholders approve new stock plans. Any common stock that we issue, including under our 2015 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our stockholders. In addition, the market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to issue equity securities in the future at a time and at a price that we deem appropriate.

Anti-takeover provisions in our charter documents and applicable state law might discourage or delay acquisition attempts for us that you might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our Board of Directors. Among other things, these provisions:

• authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;

• prohibit stockholder action by written consent, which will require all stockholder actions to be taken at a meeting of our stockholders;

• provide that the Board of Directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all of the outstanding shares of our capital stock entitled to vote; and

• establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, certain states require the approval of a state regulator for the acquisition, directly or indirectly, of more than a certain amount of the voting or common stock of a consumer finance company. The overall effect of these laws is to make it more difficult to acquire a consumer finance company than it might be to acquire control of a nonregulated corporation.

Furthermore, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities identified by ournon-employee directors and their affiliates.

Certain of ournon-employee directors and their affiliates are in the business of providing buyout capital and growth capital to developing companies and may acquire interests in businesses that directly or indirectly compete with certain portions of our business. Our amended and restated certificate of incorporation provides for

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the allocation of certain corporate opportunities between us, on the one hand, and certain of ournon-employee directors and their affiliates, on the other hand. As set forth in our amended and restated certificate of incorporation, suchnon-employee directors and their affiliates shall not have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Therefore, anon-employee director of our company may pursue certain acquisition opportunities that may be complementary to our business and, as a result, such acquisition opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations, or prospects if attractive corporate opportunities are allocated by suchnon-employee directors to themselves or their other affiliates instead of to us.

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Our headquarters operations are located in an approximately 51,700 square foot leased facility in Greer, South Carolina, a town located outside of Greenville, South Carolina. As of March 12, 2020, each of our 368 branches is leased under fixed-term lease agreements. Our branches are located in 11 states throughout the Southeastern, Southwestern,Mid-Atlantic, and Midwestern United States, and the average branch size is approximately 1,573 square feet.

In the opinion of management, our properties have been well-maintained, are in sound operating condition, and contain all equipment and facilities necessary to operate at present levels. We believe that all of our facilities are suitable and adequate for our present purposes. Our only reportable segment, which is our consumer finance segment, uses the properties described in this Part I, Item 2, “Properties.”

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in various legal proceedings and related actions that have arisen in the ordinary course of its business that have not been fully adjudicated. The Company’s management does not believe that these matters, when ultimately concluded and determined, will have a material adverse effect on its financial condition, liquidity, or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock has been listed on the New York Stock Exchange (the “NYSE”) under the symbol “RM” since March 28, 2012. The last reported sale price of our common stock on the NYSE on March 12, 2020, was $20.39 per share.

Holders

As of March 12, 2020, there were 32 registered holders of our common stock. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to determine the exact number of beneficial stockholders represented by those record holders, but we believe that there were approximately 2,200 beneficial owners of our common stock as of March 6, 2020.

Non-Affiliate Ownership

For purposes of calculating the aggregate market value of shares of our common stock held bynon-affiliates, as set forth on the cover page of this Annual Report on Form10-K, we have assumed that all outstanding shares are held bynon-affiliates, except for shares held by each of our executive officers, directors, and 5% or greater stockholders as of June 30, 2019. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors, and 5% or greater stockholders are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors, and principal stockholders is incorporated by reference in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report onForm 10-K.

Dividends; Stock Repurchases

We have not paid any cash dividends since our initial public offering in 2012. In both 2016 and 2019, we repurchased approximately $25 million of our common stock at weighted-average prices of $16.17 per share and $26.65 per share, respectively. Other than our 2016 and 2019 stock repurchase programs, which were completed in June 2016 and October 2019, respectively, we have historically retained earnings for future operations, expansion, and debt repayment.

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The following table provides information regarding our repurchase of our common stock during the year ended December 31, 2019.

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased		Weighted-Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program*
January 1, 2019 – April 30, 2019		—	$	—		—	$	—
May 1, 2019 – May 31, 2019		36,342		24.26		36,342	$	24,118,324
June 1, 2019 – June 30, 2019		248,862		25.13		248,862	$	17,865,184
July 1, 2019 – July 31, 2019		204,224		26.26		204,224	$	12,501,253
August 1, 2019 – August 31, 2019		—		—		—	$	12,501,253
September 1, 2019 – September 30, 2019		68,561		28.15		68,561	$	10,571,196
October 1, 2019 – October 31, 2019		379,922		27.82		379,922	$	15
November 1, 2019 – November 30, 2019		—		—		—	$	15
December 1, 2019 – December 31, 2019		—		—		—	$	15
Total		937,911	$	26.65		937,911

* On May 8, 2019, we announced that our Board of Directors had authorized the repurchase of up to $25.0 million of our outstanding shares of common stock. The authorization was effective immediately and extended through May 6, 2021. In October 2019, we completed the stock repurchase program.

The declaration, amount, and payment of any future cash dividends on shares of common stock and/or repurchases of common stock will be at the discretion of our Board of Directors. Our Board of Directors may take into account general and economic conditions; our financial condition and results of operations; our available cash and current and anticipated cash needs; capital requirements; contractual, legal, tax, and regulatory restrictions and implications on the payment of cash dividends by us to our stockholders or by our subsidiaries to us; and such other factors as our Board of Directors may deem relevant. Our amended and restated senior revolving credit facility includes a provision restricting our ability to pay dividends on our common stock based upon, among other things, our net income and hypothetical availability under the credit facility. Likewise, certain of our credit facilities restrict certain of our wholly-owned subsidiaries from paying dividends to us, subject to certain exceptions.

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Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933.

The following graph shows a comparison of the cumulative total return for our common stock, the NYSE Composite Index, and the NYSE Financial Index for the five years ended December 31, 2019. The graph assumes that $100 was invested at the market close on December 31, 2014, in the common stock of the Company, the NYSE Composite Index, and the NYSE Financial Index, and data for the NYSE Composite Index and the NYSE Financial Index assumes reinvestments of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

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ITEM 6. SELECTED FINANCIAL DATA.

The selected consolidated historical financial data for the periods set forth below are derived from audited consolidated financial statements. We derived the selected historical consolidated statement of income data for each of the years ended December 31, 2019, 2018, and 2017 and the selected historical consolidated balance sheet data as of December 31, 2019 and 2018 from our audited consolidated financial statements, which appear in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form10-K. We have derived the selected historical consolidated statement of income data for the years ended December 31, 2016 and 2015 and the selected historical consolidated balance sheet data as of December 31, 2017, 2016, and 2015 from our audited financial statements, which do not appear elsewhere in this Annual Report on Form10-K.

The following selected consolidated financial data should be read in conjunction with our consolidated financial statements, the related notes, and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form10-K. The historical results are not necessarily indicative of the results to be expected for any future period.

	Year Ended December 31,
In thousands, except per share data	2019			2018			2017			2016			2015
Consolidated Statements of Income Data:
Revenue
Interest and fee income	$	321,169		$	280,121		$	249,034		$	220,963		$	195,794
Insurance income, net, and other income		34,544			26,585			23,425			19,555			21,512
Total revenue		355,713			306,706			272,459			240,518			217,306
Expenses
Provision for credit losses		99,611			87,056			77,339			63,014			47,348
General and administrative expenses		156,984			140,284			130,955			118,632			115,598
Interest expense		40,125			33,464			23,908			19,924			16,221
Total expenses		296,720			260,804			232,202			201,570			179,167
Income before income taxes		58,993			45,902			40,257			38,948			38,139
Income taxes		14,261			10,557			10,294			14,917			14,774
Net income	$	44,732		$	35,345		$	29,963		$	24,031		$	23,365
Earnings per Share Data:
Basic earnings per share	$	3.92		$	3.03		$	2.59		$	2.03		$	1.82
Diluted earnings per share	$	3.80		$	2.93		$	2.54		$	1.99		$	1.79
Basic weighted-average shares		11,401			11,655			11,551			11,824			12,849
Diluted weighted-average shares		11,773			12,078			11,783			12,085			13,074
Consolidated Balance Sheet Data (at period end):
Finance receivables(1)	$	1,104,813		$	932,243		$	817,463		$	717,775		$	628,444
Allowance for credit losses		(62,200	)		(58,300	)		(48,910	)		(41,250	)		(37,452	)
Net finance receivables(2)	$	1,042,613		$	873,943		$	768,553		$	676,525		$	590,992
Total assets		1,158,540			956,395			829,483			712,224			626,373
Long-term debt		808,218			660,507			571,496			491,678			411,177
Total liabilities		855,757			677,234			590,072			504,749			421,146
Total stockholders’ equity	$	302,783		$	279,161		$	239,411		$	207,475		$	205,227

(1) Finance receivables equal the total amount due from the customer, net of unearned finance charges and insurance premiums.

(2) Net finance receivables equal the total amount due from the customer, net of unearned finance charges, insurance premiums, and allowance for credit losses.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 48

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and the related notes that appear in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form10-K. These discussions contain forward-looking statements that reflect our current expectations and that include, but are not limited to, statements concerning our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “predicts,” “will,” “would,” “should,” “could,” “potential,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report onForm 10-K. The forward-looking information we have provided in this Annual Report on Form10-K pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or revise such statements, except as required by the federal securities laws.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. We operate under the name “Regional Finance” in 366 branch locations across 11 states in the Southeastern, Southwestern,Mid-Atlantic, and Midwestern United States, serving 432,200 active accounts, as of December 31, 2019. Most of our loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. We source our loans through our multiple channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, retailers, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network. This provides us with frequentin-person contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive andeasy-to-understand loan products that serve their varied financial needs.

Our products include small, large, and retail installment loans:

• Small Loans (£$2,500) – As of December 31, 2019, we had 283.0 thousand small installment loans outstanding, representing $462.5 million in finance receivables. This included 116.1 thousand small loan convenience checks, representing $174.1 million in finance receivables.

• Large Loans (>$2,500) – As of December 31, 2019, we had 130.7 thousand large installment loans outstanding, representing $608.6 million in finance receivables. This included 4.7 thousand large loan convenience checks, representing $14.1 million in finance receivables.

• Retail Loans – As of December 31, 2019, we had 16.9 thousand retail purchase loans outstanding, representing $24.1 million in finance receivables.

• OptionalInsurance Products – We offer optional payment and collateral protection insurance to our direct loan customers.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 49

Small and large installment loans are our core loan products and will be the drivers of our future growth. We ceased originating automobile purchase loans in November 2017 to focus on growing our core loan portfolio, but we continue to own and service the automobile loans that we previously originated. As of December 31, 2019, we had 1.6 thousand automobile loans outstanding, representing $9.6 million in finance receivables. Our primary sources of revenue are interest and fee income from our loan products, of which interest and fees relating to small and large installment loans are the largest component. In addition to interest and fee income from loans, we derive revenue from optional insurance products purchased by customers of our direct loan products.

For additional information regarding our business operations, see Part I, Item 1, “Business.”

Factors Affecting Our Results of Operations

Our business is driven by several factors affecting our revenues, costs, and results of operations, including the following:

Quarterly Information and Seasonality.Our loan volume and contractual delinquency follow seasonal trends. Demand for our small and large loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money for vacation,back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Consequently, we experience seasonal fluctuations in our operating results and cash needs.

Growth in Loan Portfolio. The revenue that we derive from interest and fees is largely driven by the balance of loans that we originate and purchase. Average finance receivables grew 13.2% to $744.2 million in 2017, grew 14.7% to $853.8 million in 2018, and grew 15.5% to $985.7 million in 2019. We source our loans through our branches, direct mail program, retail partners, digital partners, and our consumer website. Our loans are made almost exclusively in geographic markets served by our network of branches. Increasing the number of loans per branch and the number of branches we operate allows us to increase the number of loans that we are able to service. We opened 7, 17, and 3 net new branches in 2019, 2018, and 2017, respectively. We believe that we have the opportunity to add hundreds of additional branches in states where it is currently favorable for us to conduct business, and we have plans to continue to grow our branch network.

Product Mix. We are exposed to different credit risks and charge different interest rates and fees with respect to the various types of loans we offer. Our product mix also varies to some extent by state, and we may further diversify our product mix in the future. The interest rates and fees vary from state to state, depending on the competitive environment and relevant laws and regulations.

Asset Quality and Allowance for Credit Losses. Our results of operations are highly dependent upon the credit quality of our loan portfolio. The credit quality of our loan portfolio is the result of our ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as we grow our loan portfolio. The allowance for credit losses calculation uses the current delinquency profile and historical delinquency roll rates as key data points in estimating the allowance. We believe that the primary underlying factors driving the provision for credit losses for each loan type are our underwriting standards, the general economic conditions in the areas in which we conduct business, loan portfolio growth, and the effectiveness of our collection efforts. In addition, the market for repossessed automobiles at auction is another underlying factor that we believe influences the provision for credit losses for automobile purchase loans and, to a lesser extent, large loans. We monitor these factors, and the amount and past due status of all loans one or more days past due, to identify trends that might require us to modify the allowance for credit losses.

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk

Regional Management Corp. | 2019 Annual Report on Form 10-K | 50

associated with future interest payments on our variable-rate debt, we have purchased interest rate cap contracts. As of December 31, 2019, we held three interest rate cap contracts with an aggregate notional principal amount of $350.0 million. The interest rate caps have maturities of April 2020 ($100.0 million, 3.25% strike rate), June 2020 ($50.0 million, 2.50% strike rate), and April 2021 ($200.0 million, 3.50% strike rate). As of December 31, 2019, theone-month LIBOR was 1.76%. When theone-month LIBOR exceeds the strike rate, the counterparty reimburses us for the excess over the strike rate. No payment is required by us or the counterparty when theone-month LIBOR is below the strike rate. In addition, as described below, the interest rate on a portion of our long-term debt is fixed. As of December 31, 2019, 50.8% of our long-term debt was at a fixed rate. See Note 20, “Subsequent Events,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for information regarding the purchase of an interest rate cap contract in March 2020.

Operating Costs. Our financial results are impacted by the costs of operations and home office functions. Those costs are included in the general and administrative expenses line of our consolidated statements of income. Our operating expense ratio (general and administrative expenses as a percentage of average finance receivables) was 15.9% for 2019, compared to 16.4% in 2018 and 17.6% in 2017. We believe that this ratio is generally in line with industry standards for companies of our size, and we expect that it will continue to decline in future years as we continue to grow our loan portfolio and control expense growth.

Components of Results of Operations

Interest and Fee Income.Our interest and fee income consists primarily of interest earned on outstanding loans. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

Most states allow certain fees in connection with lending activities, such as loan origination fees, acquisition fees, and maintenance fees. Some states allow for higher fees while keeping interest rates lower. Loan fees are additional charges to the customer and generally are included in the annual percentage rate shown in the Truth in Lending disclosure that we make to our customers. The fees may or may not be refundable to the customer in the event of an early payoff, depending on state law. Fees are accrued to income over the life of the loan on the constant yield method.

Insurance Income, Net.Our insurance operations are a material part of our overall business and are integral to our lending activities. Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from us. Insurance income, net also includes the earned premiums and direct costs associated with thenon-file insurance that we purchase to protect us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected. We do not sell insurance tonon-borrowers. Direct costs included in insurance income, net are claims paid, claims reserves, ceding fees, and premium taxes paid. We do not allocate to insurance income, net, any other home office or branch administrative costs associated with managing our insurance operations, managing our captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

In recent years, as large loans have become a larger percentage of our loan portfolio, the severity ofnon-file insurance claims has increased andnon-file insurance claims expenses have exceedednon-file insurance fees. The resulting net loss from thenon-file insurance product has been reflected in our insurance income, net. We evaluated various ways to lower ournon-file insurance claims, and we reduced our utilization ofnon-file insurance beginning in the fourth quarter of 2018. This policy change will cause substantially offsetting increases to insurance income, net and net credit losses in current and future years.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 51

As reinsurer, we maintain cash reserves for life insurance claims in an amount determined by the unaffiliated insurance company. As of December 31, 2019, the restricted cash balance for these cash reserves was $9.9 million. The unaffiliated insurance company maintains the reserves fornon-life claims.

Other Income.Our other income consists primarily of late charges assessed on customers who fail to make a payment within a specified number of days following the due date of the payment. In addition, fees for extending the due date of a loan, returned check charges, commissions earned from the sale of an auto club product, and interest income from restricted cash are included in other income.

Provision for Credit Losses.Provisions for credit losses are charged to income in amounts that we estimate as sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses on the related finance receivable portfolio. Credit loss experience, delinquency of finance receivables, loan portfolio growth, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. Our provision for credit losses fluctuates so that we maintain an adequate credit loss allowance that reflects forecasted future credit losses over the estimated loss emergence period (the interval of time between the event that caused a borrower to default and our recording of the credit loss) for each finance receivable type. Changes in our delinquency and net credit loss rates may result in changes to our provision for credit losses. Substantial adjustments to the allowance may be necessary if there are significant changes in economic conditions or loan portfolio performance.

General and Administrative Expenses.Our general and administrative expenses are comprised of four categories: personnel, occupancy, marketing, and other. We measure our general and administrative expenses as a percentage of average finance receivables, which we refer to as our operating expense ratio.

Our personnel expenses are the largest component of our general and administrative expenses and consist primarily of the salaries and wages, overtime, contract labor, relocation costs, bonuses, benefits, and related payroll taxes associated with all of our operations and home office employees.

Our occupancy expenses consist primarily of the cost of renting our facilities, all of which are leased, as well as the utility, depreciation of leasehold improvements and furniture and fixtures, telecommunication, data processing, and othernon-personnel costs associated with operating our business.

Our marketing expenses consist primarily of costs associated with our direct mail campaigns (including postage and costs associated with selecting recipients), digital marketing, and maintaining our consumer website, as well as some local marketing by branches. These costs are expensed as incurred.

Other expenses consist primarily of legal, compliance, audit, and consulting costs,non-employee director compensation, amortization of software licenses and implementation costs, electronic payment processing costs, bank service charges, office supplies, and credit bureau charges. We expect legal and compliance costs to remain elevated due to the regulatory environment in the consumer finance industry. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part I, Item 1A, “Risk Factors.”

Interest Expense.Our interest expense consists primarily of paid and accrued interest for long-term debt, unused line fees, and amortization of debt issuance costs on long-term debt. Interest expense also includes costs attributable to the interest rate caps that we use to manage our interest rate risk. Changes in the fair value of the interest rate caps are reflected in interest expense.

Income Taxes.Income taxes consist of state and federal income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which

Regional Management Corp. | 2019 Annual Report on Form 10-K | 52

those temporary differences are expected to be recovered or settled. The change in deferred tax assets and liabilities is recognized in the period in which the change occurs, and the effects of future tax rate changes are recognized in the period in which the enactment of new rates occurs.

Results of Operations

The following table summarizes our results of operations, both in dollars and as a percentage of average finance receivables:

	Year Ended December 31,
	2019					2018					2017
In thousands	Amount		% of Average Receivables			Amount		% of Average Receivables			Amount		% of Average Receivables
Revenue
Interest and fee income	$	321,169		32.6	%	$	280,121		32.8	%	$	249,034		33.5	%
Insurance income, net		20,817		2.1	%		14,793		1.7	%		13,061		1.8	%
Other income		13,727		1.4	%		11,792		1.4	%		10,364		1.3	%
Total revenue		355,713		36.1	%		306,706		35.9	%		272,459		36.6	%
Expenses
Provision for credit losses		99,611		10.1	%		87,056		10.2	%		77,339		10.4	%
Personnel		94,000		9.5	%		84,068		9.8	%		75,992		10.2	%
Occupancy		24,618		2.5	%		22,519		2.6	%		21,530		2.9	%
Marketing		8,206		0.8	%		7,745		0.9	%		7,128		1.0	%
Other		30,160		3.1	%		25,952		3.1	%		26,305		3.5	%
Total general and administrative		156,984		15.9	%		140,284		16.4	%		130,955		17.6	%
Interest expense		40,125		4.1	%		33,464		3.9	%		23,908		3.2	%
Income before income taxes		58,993		6.0	%		45,902		5.4	%		40,257		5.4	%
Income taxes		14,261		1.5	%		10,557		1.3	%		10,294		1.4	%
Net income	$	44,732		4.5	%	$	35,345		4.1	%	$	29,963		4.0	%

Information explaining the changes in our results of operations fromyear-to-year is provided in the following pages.

Comparison of December 31, 2019, Versus December 31, 2018

The following discussion and table describe the changes in finance receivables by product type:

• Small Loans (£$2,500)– Small loans outstanding increased by $24.8 million, or 5.7%, to $462.5 million at December 31, 2019, from $437.7 million at December 31, 2018. The increase was primarily due to increased marketing.

• Large Loans (>$2,500)– Large loans outstanding increased by $170.6 million, or 39.0%, to $608.6 million at December 31, 2019, from $438.0 million at December 31, 2018. The increase was primarily due to increased marketing and the transition of small loan customers to large loans.

• Automobile Loans– Automobile loans outstanding decreased by $16.5 million, or 63.2%, to $9.6 million at December 31, 2019, from $26.2 million at December 31, 2018. We ceased originating automobile loans in November 2017 to focus on growing our core loan portfolio.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 53

• Retail Loans– Retail loans outstanding decreased $6.3 million, or 20.9%, to $24.1 million at December 31, 2019, from $30.4 million at December 31, 2018.

	Finance Receivables by Product
In thousands	December 31, 2019		December 31, 2018		YoY $ Inc (Dec)			YoY % Inc  (Dec)
Small loans	$	462,499	$	437,662	$	24,837			5.7	%
Large loans		608,608		437,998		170,610			39.0	%
Total core loans		1,071,107		875,660		195,447			22.3	%
Automobile loans		9,623		26,154		(16,531	)		(63.2	)%
Retail loans		24,083		30,429		(6,346	)		(20.9	)%
Total finance receivables	$	1,104,813	$	932,243	$	172,570			18.5	%
Number of branches at period end		366		359		7			1.9	%
Average finance receivables per branch	$	3,019	$	2,597	$	422			16.2	%

Comparison of the Year Ended December 31, 2019, Versus the Year Ended December 31, 2018

Net Income. Net income increased $9.4 million, or 26.6%, to $44.7 million during 2019, from $35.3 million in 2018. The increase was primarily due to an increase in revenue of $49.0 million, offset by increases in general and administrative expenses of $16.7 million, provision for credit losses of $12.6 million, interest expense of $6.7 million, and income taxes of $3.7 million.

Revenue.Total revenue increased $49.0 million, or 16.0%, to $355.7 million in 2019, from $306.7 million in 2018. The components of revenue are explained in greater detail below.

Interest and Fee Income.Interest and fee income increased $41.0 million, or 14.7%, to $321.2 million in 2019, from $280.1 million in 2018. The increase was primarily due to a 15.5% increase in average finance receivables, offset by a 0.2% decrease in average yield.

The following table sets forth the average finance receivables balance and average yield for our loan products:

	Average Finance Receivables for the Year Ended							Average Yields for the Year Ended
In thousands	December 31, 2019		December 31, 2018		YoY % Inc (Dec)			December 31, 2019			December 31, 2018			YoY % Inc (Dec)
Small loans	$	437,358	$	391,481		11.7	%		38.5	%		40.0	%		(1.5	)%
Large loans		504,302		389,919		29.3	%		28.8	%		28.5	%		0.3	%
Automobile loans		16,384		41,026		(60.1	)%		14.8	%		15.6	%		(0.8	)%
Retail loans		27,701		31,393		(11.8	)%		19.0	%		19.0	%		0.0	%
Total interest and fee yield	$	985,745	$	853,819		15.5	%		32.6	%		32.8	%		(0.2	)%

Regional Management Corp. | 2019 Annual Report on Form 10-K | 54

Small loan yields decreased 1.5% compared to 2018 as more of our small loan customers have originated loans with larger balances and longer maturities, which typically are priced at lower interest rates. Large loan yields increased 0.3% compared to 2018 as a result of adjusted pricing that reflects current market conditions. Automobile loan yields decreased 0.8% compared to 2018. We anticipate that the automobile loan yields will remain at the current level or decline due to higher-yielding loans paying off or renewing into large loans, leaving the lower-yielding loans in the liquidating automobile loan portfolio. When compared to 2018, retail loan yields remained unchanged.

As a result of our focus on large loan growth over the last several years, the large loan portfolio has grown faster than the rest of our loan products, and we expect that this trend will continue in the future. Over time, large loan growth will change our product mix, which will reduce our total interest and fee yield.

The following table represents the amount of loan originations and refinancing, net of unearned finance charges:

	Net Loans Originated for the Year Ended
In thousands	December 31, 2019		December 31, 2018		YoY $ Inc (Dec)			YoY% Inc (Dec)
Small loans	$	662,281	$	624,243	$	38,038			6.1	%
Large loans		594,617		409,174		185,443			45.3	%
Retail loans		19,630		26,579		(6,949	)		(26.1	)%
Total net loans originated	$	1,276,528	$	1,059,996	$	216,532			20.4	%

The hurricane that impacted our branches in September 2018 had an estimated $2.8 million negative impact on loan originations in 2018. The small loan portfolio experienced most of this impact.

The following table summarizes the components of the increase in interest and fee income:

	Components of Increase in Interest and Fee Income Year Ended December 31, 2019 Compared to Year Ended December 31, 2018 Increase (Decrease)
In thousands	Volume			Rate			Volume & Rate			Net
Small loans	$	18,356		$	(5,932	)	$	(695	)	$	11,729
Large loans		32,602			1,067			314			33,983
Automobile loans		(3,842	)		(315	)		189			(3,968	)
Retail loans		(700	)		4			—			(696	)
Product mix		(3,134	)		3,241			(107	)		—
Total increase in interest and fee income	$	43,282		$	(1,935	)	$	(299	)	$	41,048

The $41.0 million increase in interest and fee income in 2019 compared to 2018 was primarily driven by finance receivables growth, offset by a decrease in yield, as illustrated in the table above. We expect future increases in interest and fee income to continue to be driven primarily from growth in our average finance receivables.

Insurance Income, Net.Insurance income, net increased $6.0 million, or 40.7%, to $20.8 million in 2019, from $14.8 million in 2018. Insurance income, net represented 2.1% and 1.7% of average finance receivables in 2019 and 2018, respectively. In both 2019 and 2018, personal property insurance premiums represented the largest component of aggregate earned insurance premiums andnon-file insurance claims expense represented the largest component of direct insurance expenses.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 55

The following table summarizes the components of insurance income, net:

	Insurance Premiums and Direct Expenses for the Year Ended
In thousands	December 31, 2019			December 31, 2018			YoY $ B(W)		YoY% B(W)
Earned premiums	$	35,544		$	31,095		$	4,449		14.3	%
Claims, reserves, and certain direct expenses		(14,727	)		(16,302	)		1,575		9.7	%
Insurance income, net	$	20,817		$	14,793		$	6,024		40.7	%

In 2019, earned premiums increased by $4.4 million and claims, reserves, and certain direct expenses decreased by $1.6 million, in each case compared to 2018. The increase in earned premiums was primarily due to loan growth. The decrease in claims, reserves, and certain direct expenses was primarily due to $4.2 million less innon-file insurance claims expense related to our change in business practice to decrease utilization ofnon-file insurance. The change in business practice to lower utilization ofnon-file insurance causes substantially offsetting increases to insurance income, net and net credit losses.

Other Income.Other income increased $1.9 million, or 16.4%, to $13.7 million in 2019, from $11.8 million in 2018, due to a $1.3 million increase in commissions earned from the sale of our auto club product, a $0.5 million increase in interest income from restricted cash, and a $0.3 million increase in late charges. Late charges of $8.9 million and $8.6 million represented 64.9% and 73.0% of total other income in 2019 and 2018, respectively. As large loans continue to represent a greater percentage of our total loan portfolio and we continue to leverage electronic payment options, we expect lower late charges per active account. Other income represented 1.4% of average finance receivables in both 2019 and 2018.

Provision for Credit Losses.Our provision for credit losses increased $12.6 million, or 14.4%, to $99.6 million in 2019, from $87.1 million in 2018. The increase was due to an increase in net credit losses of $18.0 million, offset by a $5.5 million decrease in the allowance for credit losses compared to 2018. The provision for credit losses as a percentage of average finance receivables in 2019 was 10.1%, compared to 10.2% in 2018. Fiscal 2019 included a 0.8% impact from the $7.6 million of net credit losses discussed in the insurance income, net paragraph above. Fiscal 2018 included a 0.4% impact from the $3.7 million of provision for credit losses related to a hurricane in 2018 and a 0.4% impact from the $3.4 million of net credit losses discussed in the insurance income, net paragraph above.

The increase in the provision for credit losses is explained in greater detail below.

Net Credit Losses. Net credit losses increased $18.0 million, or 23.2%, to $95.7 million in 2019, from $77.7 million in 2018. The increase was primarily due to a $131.9 million increase in average finance receivables in 2019. Additionally, $4.2 million of the increase in net credit losses was related to the increase innon-file insurance claims expense related to our change in business practice to decrease utilization ofnon-file insurance.

Net credit losses as a percentage of average finance receivables were 9.7% in 2019, compared to 9.1% in 2018. Fiscal 2019 included a 0.4% impact from the $4.2 million incremental increase in net credit losses discussed in the insurance income, net paragraph above.

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The following table provides net credit losses and the benefit to net credit losses associated withnon-file insurance claims payments as a percentage of average finance receivables for the periods indicated:

	Non-File Insurance Impact on Net Credit Loss Rates for the Year Ended
	December 31, 2019			December 31, 2018
Net credit losses		9.7	%		9.1	%
Non-file benefit		0.5	%		1.0	%

Delinquency Performance.Our December 31, 2019 contractual delinquency as a percentage of total finance receivables decreased to 7.2% from 7.7% as of December 31, 2018. Total contractual delinquency as of December 31, 2018 included 0.5% attributable to the impact of a hurricane in 2018.

The following tables include delinquency balances by aging category and by product:

	Contractual Delinquency by Aging
In thousands	December 31, 2019				December 31, 2018
Allowance for credit losses	$	62,200	5.6	%	$	58,300	6.3	%
Current		921,856	83.4	%		754,162	80.9	%
1 to 29 days past due		103,925	9.4	%		105,920	11.4	%
Delinquent accounts:
30 to 59 days		25,110	2.3	%		22,529	2.3	%
60 to 89 days		18,665	1.7	%		17,382	1.9	%
90 to 119 days		13,836	1.3	%		12,279	1.3	%
120 to 149 days		11,595	1.0	%		10,890	1.2	%
150 to 179 days		9,826	0.9	%		9,081	1.0	%
Total contractual delinquency	$	79,032	7.2	%	$	72,161	7.7	%
Total finance receivables	$	1,104,813	100.0	%	$	932,243	100.0	%
	Contractual Delinquency by Product
In thousands	December 31, 2019				December 31, 2018
Small loans	$	42,265	9.1	%	$	40,663	9.3	%
Large loans		33,554	5.5	%		26,814	6.1	%
Automobile loans		754	7.8	%		2,083	8.0	%
Retail loans		2,459	10.2	%		2,601	8.5	%
Total contractual delinquency	$	79,032	7.2	%	$	72,161	7.7	%

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Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. The following table sets forth our allowance for credit losses compared to the related finance receivables as of the end of the periods indicated:

	December 31, 2019							December 31, 2018
In thousands	Finance Receivables		Allowance for Credit Losses		Allowance as a Percentage of Finance Receivables			Finance Receivables		Allowance for Credit Losses		Allowance as a Percentage of Finance Receivables
Small loans	$	462,499	$	30,588		6.6	%	$	437,662	$	30,759		7.0	%
Large loans		608,608		29,148		4.8	%		437,998		23,702		5.4	%
Total core loans		1,071,107		59,736		5.6	%		875,660		54,461		6.2	%
Automobile loans		9,623		820		8.5	%		26,154		1,893		7.2	%
Retail loans		24,083		1,644		6.8	%		30,429		1,946		6.4	%
Total	$	1,104,813	$	62,200		5.6	%	$	932,243	$	58,300		6.3	%

The allowance for credit losses as a percentage of finance receivables decreased to 5.6% as of December 31, 2019, from 6.3% as of December 31, 2018. The decrease was primarily due to a $3.6 million decrease in the allowance related to credit losses on customer accounts impacted by a hurricane in the prior-year period. Additionally, our large loan portfolio growth and implementation of custom scorecards in all 11 states have further reduced the allowance for credit losses as a percentage of finance receivables.

General and Administrative Expenses.Our general and administrative expenses, comprising expenses for personnel, occupancy, marketing, and other expenses, increased $16.7 million, or 11.9%, to $157.0 million in 2019 from $140.3 million in 2018. Our operating expense ratio decreased to 15.9% in 2019, from 16.4% in 2018. We believe that our operating expense ratio will continue to decline in future years as we continue to grow our loan portfolio and control expense growth. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Personnel.The largest component of general and administrative expenses is personnel expense, which increased $9.9 million, or 11.8%, to $94.0 million in 2019, from $84.1 million in 2018. Labor expense increased $8.2 million primarily due to added headcount in our branches to effectively service active account growth that has occurred since December 31, 2018. Additional increases include branch incentive costs of $0.9 million, personnel costs related to our 7 net new branches that opened since the prior-year period of $0.4 million, and employee relocation costs of $0.3 million.

Occupancy. Occupancy expenses increased $2.1 million, or 9.3%, to $24.6 million in 2019, from $22.5 million in 2018. The increase was primarily due to costs related to branch relocations, remodels, and our 7 net new branches that opened since the prior-year period. Additionally, we frequently experience increases in rent, leasehold improvements, and computer equipment expenses as we renew existing branch leases.

Marketing. Marketing expenses increased $0.5 million, or 6.0%, to $8.2 million in 2019, from $7.7 million in 2018. The increase was primarily due to increased investment in our digital marketing channels and the impact of our 7 net new branches that opened during 2019.

Other Expenses. Other expenses increased $4.2 million, or 16.2%, to $30.2 million in 2019, from $26.0 million in 2018. We frequently experience increases in other expenses including legal and settlement expenses, external fraud, collections expense, bank fees, and certain professional expenses as we grow our loan portfolio and expand our market footprint.

Interest Expense.Interest expense on long-term debt increased $6.7 million, or 19.9%, to $40.1 million in 2019, from $33.5 million in 2018. The increase was primarily due to an increase in the average balance of our

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long-term debt facilities from finance receivable growth. The average cost of our total long-term debt increased 0.11% to 5.77% in 2019, from 5.66% in 2018, primarily due to an increase in the amortization of debt issuance costs related to securitizations.

Income Taxes. Income taxes increased $3.7 million, or 35.1%, to $14.3 million in 2019, from $10.6 million in 2018. The increase was primarily due to a $13.1 million increase inpre-tax income compared to the prior-year period. Our effective tax rate increased to 24.2% in 2019, compared to 23.0% in 2018. The increase was primarily due to the decrease in tax benefits from the exercise and vesting of share-based awards and the decrease in research and development tax credits.

Comparison of the Year Ended December 31, 2018, Versus the Year Ended December 31, 2017

For a comparison of our results of operations for the years ended December 31, 2018 and December 31, 2017, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form10-K for the fiscal year ended December 31, 2018 (which was filed with the SEC on March 8, 2019), which comparison is incorporated by reference herein.

Liquidity and Capital Resources

Our primary cash needs relate to the funding of our lending activities and, to a lesser extent, expenditures relating to improving our technology infrastructure and expanding and maintaining our branch locations. In connection with our plans to improve our technology infrastructure and to expand our branch network in future years, we expect to incur approximately $9.0 million to $12.0 million of expenditures annually. We have historically financed, and plan to continue to finance, our short-term and long-term operating liquidity and capital needs through a combination of cash flows from operations and borrowings under our debt facilities, including our senior revolving credit facility, revolving warehouse credit facility, and asset-backed securitization transactions, all of which are described below. We had a fundeddebt-to-equity ratio (long-term debt divided by total stockholders’ equity) of 2.7 to 1.0 and a shareholder equity ratio (total stockholders’ equity as a percentage of total assets) of 26.1% as of December 31, 2019.

We believe that cash flow from our operations and borrowings under our long-term debt facilities will be adequate to fund our business for the next twelve months, including initial operating losses of new branches and finance receivable growth of new and existing branches. From time to time, we have extended the maturity date of and increased the borrowing limits under our senior revolving credit facility. While we have successfully obtained such extensions and increases in the past, there can be no assurance that we will be able to do so if and when needed in the future. In addition, the revolving periods of our warehouse credit facility and RMIT2018-1, RMIT2018-2, and RMIT2019-1 securitizations (each as described below) end in April 2021, June 2020, December 2020, and October 2021, respectively. There can be no assurance that we will be able to secure an extension of the warehouse credit facility or close additional securitization transactions if and when needed in the future. We are continuing to seek ways to diversify our long-term funding sources.

In May 2019, the Board of Directors authorized the repurchase of up to $25.0 million of our outstanding shares of common stock. The authorization was effective immediately and extended through May 6, 2021. In October 2019, we completed the stock repurchase program.

Cash Flow.

Operating Activities.Net cash provided by operating activities increased by $18.8 million, or 12.8%, to $165.1 million in 2019, from $146.3 million in 2018. The increase was primarily due to the growth in our business described above, which produced an increase in net income, before provision for credit losses.

Investing Activities.Investing activities consist of originations and purchases of finance receivables, purchases of intangible assets, and purchases of property and equipment for new and existing branches. Net cash

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used in investing activities in 2019 was $275.6 million, compared to $199.2 million in 2018, a net increase of $76.4 million. The increase in cash used was primarily due to increased net originations of finance receivables.

Financing Activities.Financing activities consist of borrowings and payments on our outstanding indebtedness and issuances of common stock. In 2019, net cash provided by financing activities was $116.9 million, an increase of $35.8 million compared to $81.1 million in 2018. The increase in cash provided was primarily a result of an increase in net advances on debt instruments of $58.7 million and a decrease in payments for debt issuance costs of $2.3 million, offset by a $25.0 million increase in the repurchase of our common stock.

Financing Arrangements.

Senior Revolving Credit Facility.In September 2019, we amended and restated our senior revolving credit facility to, among other things, increase the availability under the facility from $638 million to $640 million and extend the maturity of the facility from June 2020 to September 2022. The facility has an accordion provision that allows for the expansion of the facility to $650 million. Excluding the receivables held by our variable interest entities (each, a “VIE”), the senior revolving credit facility is secured by substantially all of our finance receivables and equity interests of the majority of our subsidiaries. Advances on the senior revolving credit facility are capped at 85% of eligible secured finance receivables, 80% of eligible unsecured finance receivables, and 60% of eligible delinquent renewals (80% of eligible secured finance receivables, 75% of eligible unsecured finance receivables, and 55% of eligible delinquent renewals as of December 31, 2019). As of December 31, 2019, we had $109.6 million of eligible borrowing capacity under the facility. Borrowings under the facility bear interest, payable monthly, at rates equal toone-month LIBOR, with a LIBOR floor of 1.00%, plus a 3.00% margin, increasing to 3.25% when the availability percentage is below 10%. Theone-month LIBOR rate was 1.76% and 2.50% at December 31, 2019 and December 31, 2018, respectively. The amended and restated facility provides for a process to transition from LIBOR to a new benchmark, if necessary. We pay an unused line fee between 0.375% and 0.65% based upon the average outstanding balance of the facility.

Our long-term debt under the senior revolving credit facility was $350.8 million as of December 31, 2019. In advance of its September 2022 maturity date, we intend to extend the maturity date of the amended and restated senior revolving credit facility or take other appropriate action to address repayment upon maturity. See Part I, Item 1A, “Risk Factors” and the filings referenced therein for a discussion of risks related to our amended and restated senior revolving credit facility, including refinancing risk.

Variable Interest Entity Debt.As part of our overall funding strategy, we have transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions, including securitizations. The following debt arrangements are issued by our wholly-owned, bankruptcy-remote, special purpose entities, which are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. We are considered to be the primary beneficiary because we have (i) power over the significant activities through our role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through our interest in the monthly residual cash flows of the SPEs after each debt is paid.

These long-term debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $39.4 million and $33.5 million as of December 31, 2019 and December 31, 2018, respectively. Cash inflows from the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that we own in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to us, which is eliminated in consolidation. Distributions from the SPEs to us are permitted under the debt arrangements.

At each sale of receivables from our affiliates to the SPEs, we make certain representations and warranties about the quality and nature of the collateralized receivables. The debt arrangements require us to

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repurchase the receivables in certain circumstances, including circumstances in which the representations and warranties made by us concerning the quality and characteristics of the receivables are inaccurate. Assets transferred to SPEs are legally isolated from us and our affiliates, and the claims of our and our affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of us or any of our affiliates. See Part I, Item 1A, “Risk Factors” and the filings referenced therein for a discussion of risks related to our variable interest entity debt.

Amortizing Loan. In November 2017, we and our wholly-owned SPE, Regional Management Receivables, LLC (“RMR I”), amended and restated the December 2015 credit agreement that provided for a $75.7 million asset-backed, amortizing loan. The amended and restated credit agreement provided for an additional advance in the amount of $37.8 million and extended the maturity date to December 2024. The amended and restated credit agreement also allowed us to prepay the loan when the outstanding balance fell below 20% of the original loan amount. In October 2019, we and RMR I exercised the right to make an optional principal repayment in full, and in connection with such prepayment, the facility terminated.

Revolving Warehouse Credit Facility. In October 2019, we and our wholly-owned SPE, Regional Management Receivables II, LLC (“RMR II”), amended the credit agreement that provides for a $125 million revolving warehouse credit facility to RMR II. The amendment extended the date at which the facility converts to an amortizing loan and the termination date to April 2021 and April 2022, respectively. The facility has an accordion provision that allows for the expansion of the facility to $150 million. The debt is secured by finance receivables and other related assets that we purchased from our affiliates, which we then sold and transferred to RMR II. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, plus a margin of 2.15% (2.20% prior to the October 2019 amendment). The three-month LIBOR was 1.91% and 2.81% at December 31, 2019 and December 31, 2018, respectively. RMR II pays an unused commitment fee between 0.35% and 0.85% based upon the average daily utilization of the facility. As of December 31, 2019, our long-term debt under the credit facility was $46.6 million.

RMIT 2018-1 Securitization. In June 2018, we, our wholly-owned SPE, Regional Management Receivables III, LLC (“RMR III”), and our indirect wholly-owned SPE, Regional Management Issuance Trust 2018-1 (“RMIT 2018-1”), completed a private offering and sale of $150 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT 2018-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2018-1. The notes have a revolving period ending in June 2020, with a final maturity date in July 2027. Borrowings under the RMIT 2018-1 securitization bear interest, payable monthly, at a weighted-average rate of 3.93%. Prior to maturity in July 2027, we may redeem the notes in full, but not in part, at our option on any note payment date on or after the payment date occurring in July 2020. No payments of principal of the notes will be made during the revolving period. As of December 31, 2019, our long-term debt under the securitization was $150.2 million.

RMIT 2018-2 Securitization. In December 2018, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, Regional Management Issuance Trust 2018-2 (“RMIT 2018-2”), completed a private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2018-2. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2018-2. The notes have a revolving period ending in December 2020, with a final maturity date in January 2028. Borrowings under the RMIT 2018-2 securitization bear interest, payable monthly, at a weighted-average rate of 4.87%. Prior to maturity in January 2028, we may redeem the notes in full, but not in part, at our option on any note payment date on or after the payment date occurring in January 2021. No payments of principal of the notes will be made during the revolving period. As of December 31, 2019, our long-term debt under the securitization was $130.3 million.

RMIT 2019-1 Securitization. In October 2019, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, Regional Management Issuance Trust 2019-1 (“RMIT 2019-1”), completed a

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private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT 2019-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2018-2. The notes have a revolving period ending in December 2020, with a final maturity date in January 2028. Borrowings under the RMIT 2018-2 securitization bear interest, payable monthly, at a weighted-average rate of 4.87%. Prior to maturity in January 2028, we may redeem the notes in full, but not in part, at our option on any note payment date on or after the payment date occurring in January 2021. No payments of principal of the notes will be made during the revolving period. As of December 31, 2019, our long-term debt under the securitization was $130.3 million.

Our debt arrangements are subject to certain covenants, including monthly and annual reporting, maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other indebtedness, maintenance of a minimum allowance for credit losses, and certain other restrictions. At December 31, 2019, we were in compliance with all debt covenants.

We expect that the LIBOR reference rate will be phased out by the end of 2021. Both our senior revolving credit facility and revolving warehouse credit facility use LIBOR as a benchmark in determining the cost of funds borrowed. Our senior revolving credit facility provides for a process to transition from LIBOR to a new benchmark, if necessary. We plan to continue to work with our banking partners to modify our credit agreements to contemplate the cessation of the LIBOR reference rate. We will also continue to work to identify a replacement rate to LIBOR and look to adjust the pricing structure of our facilities as needed.

Restricted Cash Reserve Accounts.

Revolving Warehouse Credit Facility. The credit agreement governing the revolving warehouse credit facility requires that we maintain a 1% cash reserve based upon the ending finance receivables balance of the facility. As of December 31, 2019, the warehouse facility cash reserve requirement totaled $0.3 million. The warehouse facility is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $3.3 million as of December 31, 2019.

RMIT2018-1 Securitization. As required under the transaction documents governing the RMIT2018-1 securitization, we deposited $1.7 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $14.9 million as of December 31, 2019.

RMIT2018-2 Securitization.As required under the transaction documents governing the RMIT2018-2 securitization, we deposited $1.4 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $11.3 million as of December 31, 2019.

RMIT2019-1 Securitization.As required under the transaction documents governing the RMIT2019-1 securitization, we deposited $1.4 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $9.9 million as of December 31, 2019.

RMC Reinsurance. Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain cash reserves against life insurance policies ceded to it, as determined by the ceding company. As of December 31, 2019, cash reserves for reinsurance were $9.9 million

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Interest Rate Caps.

As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, we have purchased interest rate cap contracts. As of December 31, 2019, we held three interest rate cap contracts with an aggregate notional principal amount of $350.0 million. The interest rate caps have maturities of April 2020 ($100.0 million, 3.25% strike rate), June 2020 ($50.0 million, 2.50% strike rate), and April 2021 ($200.0 million, 3.50% strike rate). As of December 31, 2019, theone-month LIBOR was 1.76%. When theone-month LIBOR exceeds the strike rate, the counterparty reimburses us for the excess over the strike rate. No payment is required by us or the counterparty when theone-month LIBOR is below the strike rate. See Note 20, “Subsequent Events,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for information regarding the purchase of an interest rate cap contract in March 2020.

Off-Balance Sheet Arrangements

Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain cash reserves against life insurance policies ceded to it, as determined by the ceding company. As of December 31, 2019, the cash reserves were $9.9 million.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2019, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
In thousands	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Principal payments on long-term debt obligations	$	808,218	$	59,940	$	704,725	$	43,553	$	—
Interest payments on long-term debt obligations		81,646		35,807		45,302		537		—
Operating lease obligations		33,274		7,047		11,804		8,237		6,186
Total	$	923,138	$	102,794	$	761,831	$	52,327	$	6,186

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost, except for interest rate caps, which are carried at fair value. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP and conform to general practices within the consumer finance industry. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

We set forth below those material accounting policies that we believe are the most critical to an understanding of our financial results and condition and that involve a higher degree of complexity and management judgment.

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Credit Losses.

Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on our finance receivables. We charge credit losses against the allowance when the account becomes 180 days contractual delinquent, subject to certain exceptions. Our policy fornon-titled accounts in a confirmed bankruptcy is to charge them off at 60 days contractual delinquency, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the exception of borrowers with credit life insurance. Subsequent recoveries, if any, are credited to the allowance. Loss experience, the loss emergence period, contractual delinquency of finance receivables by loan type, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or loan portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

We initiate repossession proceedings when, in the opinion of management, the customer is unlikely to make further payments. We sell substantially all repossessed vehicle inventory through sales conducted by independent automobile auction organizations after the required post-repossession waiting period. Losses on the sale of repossessed collateral are charged to the allowance for credit losses.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of finance receivables on a collective basis and relates to probable incurred losses of unimpaired finance receivables. Our finance receivable types are stratified by delinquency stages, and the future monthly delinquency profiles and credit losses are projected forward using historical delinquency roll rates. We record a general allowance for credit losses that includes forecasted future credit losses over the estimated loss emergence period (the interval of time between the event which caused a borrower to default and our recording of the credit loss) for each finance receivable type.

We adjust the computed roll rate forecast as described above for qualitative factors based on an assessment of internal and external influences on credit quality that are not fully reflected in the roll rate forecast. Those qualitative factors include trends in growth in the loan portfolio, delinquency, unemployment, bankruptcy, operational risks, and other economic trends.

The specific component of the allowance for credit losses relates to impaired finance receivables, which include accounts for which a customer has initiated a bankruptcy filing and finance receivables that have been modified under our loss mitigation policies. Finance receivables that have been modified are accounted for as troubled debt restructurings. At the time of the bankruptcy filing or restructuring pursuant to a loss mitigation policy, a specific valuation allowance is established for such finance receivables within the allowance for credit losses. We compute the estimated loss on our impaired loans by discounting the projected cash flows at the original contract rates on the loan using the terms imposed by the bankruptcy court or restructured by us. This method is applied in the aggregate to each of our four classes of loans. In making the computations of the present value of cash payments to be received on impaired accounts in each product category, we use the weighted-average interest rates and weighted-average remaining term based on data as of each balance sheet date.

For customers in a confirmed Chapter 13 bankruptcy plan, we reduce the interest rate to that specified in the bankruptcy order and we receive payments with respect to the remaining amount of the loan from the bankruptcy trustee. For customers who recently filed for Chapter 13 bankruptcy, we generally do not receive any payments until their bankruptcy plan is confirmed by the court. If the customers have made payments to the trustee in advance of plan confirmation, we may receive a lump sum payment from the trustee once the plan is confirmed. This lump sum payment represents ourpro-rata share of the amount paid by the customer. If a customer fails to comply with the terms of the bankruptcy order, we will petition the trustee to have the customer

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dismissed from bankruptcy. Upon dismissal, we restore the account to the original terms and pursue collection through our normal loan servicing activities.

If a customer files for bankruptcy under Chapter 7 of the bankruptcy code, the bankruptcy court has the authority to cancel the customer’s debt. If a vehicle secures a Chapter 7 bankruptcy account, the customer has the option of surrendering the vehicle, buying the vehicle at fair value, or reaffirming the loan and continuing to pay the loan.

The FASB issued an accounting update in June 2016 to change the impairment model for estimating credit losses on financial assets. While the then-existing incurred loss impairment model required the recognition of credit losses when it was probable that a loss had been incurred, the new CECL model requires entities to estimate the lifetime expected credit loss on such instruments and to record an allowance to offset the amortized cost basis of the financial assets. This update is effective for annual and interim periods beginning after December 15, 2019, and early adoption was permitted. Based on analyses and forecasts of future macroeconomic conditions as of December 31, 2019, we have quantified the estimated impacts. See Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on this new accounting standard.

Income Recognition.

Interest income is recognized using the interest method (constant yield method). Therefore, we recognize revenue from interest at an equal rate over the term of the loan. Unearned finance charges onpre-compute contracts are rebated to customers utilizing statutory methods, which in many cases is thesum-of-the-years’ digits method. The difference between income recognized under the constant yield method and the statutory method is recognized as an adjustment to interest income at the time of rebate. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

We recognize income on credit life insurance, credit property insurance, and automobile insurance using thesum-of-the-years’ digits or straight-line methods over the terms of the policies. We recognize income on credit accident and health insurance using the average of thesum-of-the-years’ digits and the straight-line methods over the terms of the policies. We recognize income on credit involuntary unemployment insurance using the straight-line method over the terms of the policies. Rebates are computed using statutory methods, which in many cases match the GAAP method, and where it does not match, the difference between the GAAP method and the statutory method is recognized in income at the time of rebate. Fee income fornon-file insurance is recognized using thesum-of-the-years’ digits method over the loan term.

Charges for late fees are recognized as income when collected.

Share-Based Compensation.

We measure compensation cost for share-based awards at estimated fair value and recognize compensation expense over the service period for awards expected to vest. We use the closing stock price on the date of grant as the fair value of restricted stock awards. The fair value of stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free interest rate, and expected life, changes to which can materially affect the fair value estimate. We estimate volatility using our historical stock prices. The risk-free rate is based on the zero coupon U.S. Treasury bond rate for the expected term of the award on the grant date. The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. In addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

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Income Taxes.

We record a tax provision for the anticipated tax consequences of our reported operating results. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects of future tax rate changes are recognized in the period when the enactment of new rates occurs.

We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the consolidated financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority.

We recognize the tax benefits or deficiencies from the exercise or vesting of share-based awards in the income tax line of our consolidated statements of income.

Recently Issued Accounting Standards

See Note 2, “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for a discussion of recently issued accounting pronouncements, including information on new accounting standards and the future adoption of such standards.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 66

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. We originate finance receivables at either prevailing market rates or at statutory limits. Our finance receivables are structured on a fixed-rate, fixed-term basis. Accordingly, subject to statutory limits, our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market rates. Our loan portfolio turns over approximately 1.2 times per year from payments, renewals, and net credit losses. Because our large loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, the rate of turnover of the loan portfolio may change as our large loans change as a percentage of our portfolio.

We also are exposed to changes in interest rates as a result of certain borrowing activities. As of December 31, 2019, the interest rates on 50.8% of our long-term debt (the securitizations) were fixed. We maintain liquidity and fund our business operations in part through variable-rate borrowings under a senior revolving credit facility and a revolving warehouse credit facility. At December 31, 2019, the balances of the senior revolving credit facility and the revolving warehouse credit facility were $350.8 million and $46.6 million, respectively.

Borrowings under the senior revolving credit facility bear interest, payable monthly, at rates equal toone-month LIBOR, with a LIBOR floor of 1.00%, plus a margin of 3.00%, increasing to 3.25% when the availability percentage is below 10%. Borrowings under the revolving warehouse credit facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, plus a margin of 2.15% (2.20% prior to the October 2019 amendment). As of December 31, 2019, the LIBOR rates under the senior revolving credit facility and the revolving warehouse credit facility were 1.76% and 1.91%, respectively.

We have purchased interest rate caps to manage the risk associated with an aggregate notional $350.0 million of our LIBOR-based borrowings. These interest rate caps are based on theone-month LIBOR and reimburse us for the difference when theone-month LIBOR exceeds the strike rate. The interest rate caps have maturities of April 2020 ($100.0 million, 3.25% strike rate), June 2020 ($50.0 million, 2.50% strike rate), and April 2021 ($200.0 million, 3.50% strike rate). See Note 20, “Subsequent Events,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for information regarding the purchase of an interest rate cap contract in March 2020.

Effective interest rates for borrowings under the senior revolving credit facility and the revolving warehouse credit facility were 5.80% and 5.99%, respectively, for the year ended December 31, 2019, including, in each case, an unused line fee. Based on the LIBOR rates and the outstanding balances at December 31, 2019, an increase of 100 basis points in LIBOR rates would result in approximately $4.0 million of increased interest expense on an annual basis, in the aggregate, under these LIBOR-based borrowings. Our interest rate cap coverage at December 31, 2019 would reduce this increased expense by approximately $0.1 million on an annual basis.

The nature and amount of our debt may vary as a result of future business requirements, market conditions, and other factors.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 67

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REGIONAL MANAGEMENT CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Year Ended December 31, 2019

	Page
Reports of Independent Registered Public Accounting Firm		69
Consolidated Balance Sheets at December 31, 2019 and December 31, 2018		72
Consolidated Statements of Income for the Years Ended December 31, 2019,  December 31, 2018, and December 31, 2017		73
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019,  December 31, 2018, and December 31, 2017		74
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019,  December 31, 2018, and December 31, 2017		75
Notes to Consolidated Financial Statements		76

Regional Management Corp. | 2019 Annual Report on Form 10-K | 68

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Regional Management Corp. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Regional Management Corp. and its subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 13, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for lease transactions in 2019 due to the adoption of Accounting Standards Update2016-02, Leases (Topic 842).

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor since 2007.

Raleigh, North Carolina

March 13, 2020

Regional Management Corp. | 2019 Annual Report on Form 10-K | 69

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Regional Management Corp. and Subsidiaries

Opinion on the Internal Control Over Financial Reporting

We have audited Regional Management Corp. and its subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2019 and 2018 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019 of the Company and our report dated March 13, 2020 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying SOX 404 Management Assessment Report—Effectiveness of Internal Controls over Financial Reporting (“ICFR”) for the Twelve Months Ended December 31, 2019. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 70

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ RSM US LLP

Raleigh, North Carolina

March 13, 2020

Regional Management Corp. | 2019 Annual Report on Form 10-K | 71

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

December 31, 2019 and 2018

(in thousands, except par value amounts)

	2019			2018
Assets
Cash	$	2,263		$	3,657
Gross finance receivables		1,500,962			1,237,526
Unearned finance charges and insurance premiums		(396,149	)		(305,283	)
Finance receivables		1,104,813			932,243
Allowance for credit losses		(62,200	)		(58,300	)
Net finance receivables		1,042,613			873,943
Restricted cash		54,164			46,484
Lease assets		26,438			—
Property and equipment		15,301			13,926
Intangible assets		9,438			10,010
Deferred tax asset		619			—
Other assets		7,704			8,375
Total assets	$	1,158,540		$	956,395
Liabilities and Stockholders’ Equity
Liabilities:
Long-term debt	$	808,218		$	660,507
Unamortized debt issuance costs		(9,607	)		(9,158	)
Net long-term debt		798,611			651,349
Accounts payable and accrued expenses		28,676			25,138
Lease liabilities		28,470			—
Deferred tax liability		—			747
Total liabilities		855,757			677,234
Commitments and contingencies (Notes 6, 17, and 18)
Stockholders’ equity:
Preferred stock ($0.10 par value, 100,000 shares authorized, no shares issued or outstanding)		—			—
Common stock ($0.10 par value, 1,000,000 shares authorized, 13,497 shares issued and 11,013 shares outstanding at December 31, 2019 and 13,323 shares issued and 11,777 shares outstanding at December 31, 2018)		1,350			1,332
Additionalpaid-in-capital		102,678			98,778
Retained earnings		248,829			204,097
Treasury stock (2,484 shares at December 31, 2019 and 1,546 shares at December 31, 2018)		(50,074	)		(25,046	)
Total stockholders’ equity		302,783			279,161
Total liabilities and stockholders’ equity	$	1,158,540		$	956,395

The following table presents the assets and liabilities of our consolidated variable interest entities:

Assets
Cash	$	152		$	168
Finance receivables		474,340			342,481
Allowance for credit losses		(22,015	)		(18,378	)
Restricted cash		44,221			39,361
Other assets		68			75
Total assets	$	496,766		$	363,707
Liabilities
Net long-term debt	$	450,297		$	324,879
Accounts payable and accrued expenses		86			25
Total liabilities	$	450,383		$	324,904

See accompanying notes to consolidated financial statements.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 72

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, 2019, 2018, and 2017

(in thousands, except per share amounts)

	2019		2018		2017
Revenue
Interest and fee income	$	321,169	$	280,121	$	249,034
Insurance income, net		20,817		14,793		13,061
Other income		13,727		11,792		10,364
Total revenue		355,713		306,706		272,459
Expenses
Provision for credit losses		99,611		87,056		77,339
Personnel		94,000		84,068		75,992
Occupancy		24,618		22,519		21,530
Marketing		8,206		7,745		7,128
Other		30,160		25,952		26,305
Total general and administrative expenses		156,984		140,284		130,955
Interest expense		40,125		33,464		23,908
Income before income taxes		58,993		45,902		40,257
Income taxes		14,261		10,557		10,294
Net income	$	44,732	$	35,345	$	29,963
Net income per common share:
Basic	$	3.92	$	3.03	$	2.59
Diluted	$	3.80	$	2.93	$	2.54
Weighted-average common shares outstanding:
Basic		11,401		11,655		11,551
Diluted		11,773		12,078		11,783

See accompanying notes to consolidated financial statements.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 73

Regional Management Corp. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2019, 2018, and 2017

(in thousands)

	Year Ended December 31, 2019
	Common Stock						Additional Paid-in-Capital			Retained Earnings		Treasury Stock			Total
	Shares			Amount
Balance, December 31, 2018		13,323		$	1,332		$	98,778		$	204,097	$	(25,046	)	$	279,161
Issuance of restricted stock awards		211			21			(21	)		—		—			—
Exercise of stock options		16			2			—			—		—			2
Repurchase of common stock		—			—			—			—		(25,028	)		(25,028	)
Shares withheld related to net share settlement		(53	)		(5	)		(1,226	)		—		—			(1,231	)
Share-based compensation		—			—			5,147			—		—			5,147
Net income		—			—			—			44,732		—			44,732
Balance, December 31, 2019		13,497		$	1,350		$	102,678		$	248,829	$	(50,074	)	$	302,783

	Year Ended December 31, 2018
	Common Stock						Additional Paid-in-Capital			Retained Earnings		Treasury Stock			Total
	Shares			Amount
Balance, December 31, 2017		13,205		$	1,321		$	94,384		$	168,752	$	(25,046	)	$	239,411
Issuance of restricted stock awards		101			10			(10	)		—		—			—
Exercise of stock options		89			8			—			—		—			8
Shares withheld related to net share settlement		(72	)		(7	)		(858	)		—		—			(865	)
Share-based compensation		—			—			5,262			—		—			5,262
Net income		—			—			—			35,345		—			35,345
Balance, December 31, 2018		13,323		$	1,332		$	98,778		$	204,097	$	(25,046	)	$	279,161

	Year Ended December 31, 2017
	Common Stock						Additional Paid-in-Capital			Retained Earnings		Treasury Stock			Total
	Shares			Amount
Balance, December 31, 2016		12,996		$	1,300		$	92,432		$	138,789	$	(25,046	)	$	207,475
Issuance of restricted stock awards		74			7			(7	)		—		—			—
Exercise of stock options		289			29			305			—		—			334
Shares withheld related to net share settlement		(154	)		(15	)		(2,006	)		—		—			(2,021	)
Share-based compensation		—			—			3,660			—		—			3,660
Net income		—			—			—			29,963		—			29,963
Balance, December 31, 2017		13,205		$	1,321		$	94,384		$	168,752	$	(25,046	)	$	239,411

See accompanying notes to consolidated financial statements.

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Regional Management Corp. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2019, 2018, and 2017

(in thousands)

	2019			2018			2017
Cash flows from operating activities:
Net income	$	44,732		$	35,345		$	29,963
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		99,611			87,056			77,339
Depreciation and amortization		10,856			8,803			7,357
Loss on disposal of property and equipment		94			24			245
Share-based compensation		5,147			5,262			3,660
Fair value adjustment on interest rate caps		249			330			64
Deferred income taxes, net		(1,366	)		(4,214	)		4,994
Changes in operating assets and liabilities:
(Increase) decrease in other assets		2,456			7,306			(11,294	)
Increase in accounts payable and accrued expenses		3,283			6,373			3,105
Net cash provided by operating activities		165,062			146,285			115,433
Cash flows from investing activities:
Net originations of finance receivables		(268,281	)		(192,446	)		(169,366	)
Purchases of intangible assets		(1,603	)		(1,446	)		(6,355	)
Purchases of property and equipment		(5,804	)		(5,352	)		(4,765	)
Proceeds from disposal of property and equipment		59			—			558
Net cash used in investing activities		(275,629	)		(199,244	)		(179,928	)
Cash flows from financing activities:
Net advances (payments) on senior revolving credit facility		22,744			(123,977	)		(799	)
Net proceeds from (payments on) amortizing loan		(21,642	)		(31,738	)		14,551
Net advances (payments) on revolving warehouse credit facility		16,507			(35,940	)		66,066
Net advances on securitizations		130,102			280,665			—
Payments for debt issuance costs		(4,891	)		(7,235	)		(4,547	)
Taxes paid related to net share settlement of equity awards		(939	)		(692	)		(1,809	)
Proceeds from exercise of stock options		—			—			307
Repurchases of common stock		(25,028	)		—			—
Net cash provided by financing activities		116,853			81,083			73,769
Net change in cash and restricted cash		6,286			28,124			9,274
Cash and restricted cash at beginning of period		50,141			22,017			12,743
Cash and restricted cash at end of period	$	56,427		$	50,141		$	22,017
Supplemental cash flow information:
Interest paid	$	35,478		$	30,127		$	20,460
Income taxes paid	$	14,695		$	3,600		$	15,681

The following table reconciles cash and restricted cash from the Consolidated Balance Sheets to the statements above:

	December 31, 2019		December 31, 2018		December 31, 2017		December 31, 2016
Cash	$	2,263	$	3,657	$	5,230	$	4,446
Restricted cash		54,164		46,484		16,787		8,297
Total cash and restricted cash	$	56,427	$	50,141	$	22,017	$	12,743

See accompanying notes to consolidated financial statements.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 75

Regional Management Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business

Regional Management Corp. (the “Company”) was incorporated and began operations in 1987. The Company is engaged in the consumer finance business, offering small loans, large loans, retail loans, and related payment and collateral protection insurance products. The Company previously offered automobile loans, but ceased such originations in November 2017. As of December 31, 2019, the Company operated under the name “Regional Finance” in 366 branch locations across 11 states in the Southeastern, Southwestern,Mid-Atlantic, and Midwestern United States. The Company opened 7, 17, and 3 net new branches during the years ended December 31, 2019, 2018, and 2017, respectively.

The Company’s loan volume and contractual delinquency follow seasonal trends. Demand for the Company’s small and large loans is typically highest during the second, third, and fourth quarters, which the Company believes is largely due to customers borrowing money forvacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which the Company believes is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Consequently, the Company experiences seasonal fluctuations in its operating results and cash needs.

Note 2. Significant Accounting Policies

The following is a description of significant accounting policies used in preparing the financial statements. The accounting and reporting policies of the Company are in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and conform to general practices within the consumer finance industry.

Business segments: The Company has one reportable segment, which is the consumer finance segment. The other revenue generating activities of the Company, including insurance operations, are performed in the existing branch network in conjunction with or as a complement to the lending operations.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates through a separate wholly-owned subsidiary in each state. The Company also consolidates variable interest entities (each, a “VIE”) when it is considered to be the primary beneficiary of the VIE because it has (i) power over the significant activities of the VIE and (ii) the obligation to absorb losses or the right to receive returns that could be significant to the VIE.

Treasury stock: The Company records the repurchase of shares of its common stock at cost on the settlement date of the transaction. These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Variable interest entities: The Company transfers pools of loans to wholly-owned, bankruptcy-remote, special purpose entities (each, an “SPE”) to secure debt for general funding purposes. These entities have the limited purpose of acquiring finance receivables and holding and making payments on the related debts. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates. The Company continues to service the finance receivables transferred to the SPEs. The lenders and investors in the debt issued by the SPEs generally only have recourse to the assets of the SPEs and do not have recourse to the general credit of the Company.

The SPEs’ debt arrangements are structured to provide enhancements to the lenders and investors in the form of overcollateralization (the principal balance of the collateral exceeds the balance of the debt) and reserve funds

Regional Management Corp. | 2019 Annual Report on Form 10-K | 76

(restricted cash held by the SPEs). These enhancements, along with the isolated finance receivables pools, increase the creditworthiness of the SPEs above that of the Company as a whole. This increases the marketability of the Company’s collateral for borrowing purposes, leading to more favorable borrowing terms, improved interest rate risk management, and additional flexibility to grow the business.

The SPEs are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. The Company is considered to be the primary beneficiary of the SPEs because it has (i) power over the significant activities through its role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s interest in the monthly residual cash flows of the SPEs after each debt is paid.

Consolidation of VIEs results in these transactions being accounted for as secured borrowings; therefore, the pooled receivables and the related debts remain on the consolidated balance sheet of the Company. Each debt is secured solely by the assets of the VIEs and not by any other assets of the Company. The assets of the VIEs are the only source of funds for repayment on each debt, and restricted cash held by the VIEs can only be used to support payments on the debt. The Company recognizes revenue and provision for credit losses on the finance receivables of the VIEs and interest expense on the related secured debt.

Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to change relate to the determination of the allowance for credit losses, the fair value of share-based compensation, the valuation of deferred tax assets and liabilities, contingent liabilities on litigation matters, and the allocation of the purchase price to assets acquired in business combinations.

Reclassifications:Certain prior-period amounts have been reclassified to conform to the current presentation. Such reclassifications had no impact on previously reported net income or stockholders’ equity.

Statement of cash flows: Cash flows from finance receivables and the Company’s long-term debt are reported on a net basis.

Finance receivables: The Company’s small loan portfolio is comprised of branch small loan receivables and convenience check receivables. Branch small loan receivables are direct loans to customers closed in the branch and are secured bynon-essential household goods and, in some instances, an automobile. Convenience checks are direct loans originated by mailing checks to customers based on apre-screening process that includes a review of the prospective customer’s credit profile provided by national credit reporting bureaus or data aggregators. A recipient of a convenience check is able to enter into a loan by endorsing and depositing or cashing the check. Large loan receivables are direct loans to customers, some of which are convenience check receivables and the vast majority of which are secured by automobiles, other vehicles, and/ornon-essential household goods. Retail loan receivables consist principally of retail installment sales contracts collateralized by the purchased furniture, appliances, and other retail items, and are initiated by and purchased from retailers, subject to the Company’s credit approval. Automobile loan receivables consist of direct automobile purchase loans, which were originated at the dealership and closed in one of the Company’s branches, and indirect automobile purchase loans, which were originated and closed at a dealership in the Company’s network without the need for the customer to visit one of the Company’s branches. In each case, these automobile loans are collateralized primarily by the purchased automobiles and, in the case of indirect loans, were initiated by and purchased from automobile dealerships, subject to the Company’s credit approval. The Company ceased originating automobile loans in November 2017.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 77

Credit losses: Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on the Company’s finance receivables. The Company charges credit losses against the allowance when the account becomes 180 days delinquent, subject to certain exceptions. The Company’s policy fornon-titled accounts in a confirmed bankruptcy is to charge them off at 60 days delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the exception of borrowers with credit life insurance. Subsequent recoveries, if any, are credited to the allowance. Loss experience, the loss emergence period, contractual delinquency of finance receivables by loan type, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or loan portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The Company initiates repossession proceedings when, in the opinion of management, the customer is unlikely to make further payments. The Company sells substantially all repossessed vehicle inventory through sales conducted by independent automobile auction organizations after the required post-repossession waiting period. Losses on the sale of repossessed collateral are charged to the allowance for credit losses.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of finance receivables on a collective basis and relates to probable incurred losses of unimpaired finance receivables. The general component of the allowance is primarily based on delinquency roll rates. The Company’s finance receivable types are stratified by delinquency stages, and the future monthly delinquency profiles and credit losses are projected forward using historical delinquency roll rates. The Company records a general allowance for credit losses that includes forecasted future credit losses over the estimated loss emergence period (the interval of time between the event which caused a borrower to default and the Company’s recording of the credit loss) for each finance receivable type.

The Company adjusts the computed roll rate forecast as described above for qualitative factors based on an assessment of internal and external influences on credit quality that are not fully reflected in the roll rate forecast. Those qualitative factors include trends in growth in the loan portfolio, delinquency, unemployment, bankruptcy, operational risks, and other economic trends.

Impaired finance receivables:The specific component of the allowance for credit losses relates to impaired finance receivables, which include accounts for which a customer has initiated a bankruptcy filing and finance receivables that have been modified under Company loss mitigation policies. Finance receivables that have been modified are accounted for as troubled debt restructurings. At the time of the bankruptcy filing or restructuring pursuant to a loss mitigation policy, a specific valuation allowance is established for such finance receivables within the allowance for credit losses. The Company computes the estimated loss on its impaired loans by discounting the projected cash flows at the original contract rates on the loan using the terms imposed by the bankruptcy court or restructured by the Company. This method is applied in the aggregate to each of the Company’s four classes of loans. In making the computations of the present value of cash payments to be received on impaired accounts in each product category, the Company uses the weighted-average interest rates and weighted-average remaining term based on data as of each balance sheet date.

For customers in a confirmed Chapter 13 bankruptcy plan, the Company reduces the interest rate to that specified in the bankruptcy order and the Company receives payments with respect to the remaining amount of the loan from the bankruptcy trustee. For customers who recently filed for Chapter 13 bankruptcy, the Company generally does not receive any payments until their bankruptcy plan is confirmed by the court. If the customers have made payments to the trustee in advance of plan confirmation, the Company may receive a lump sum payment from the trustee once the plan is confirmed. This lump sum payment represents the Company’spro-rata share of the amount paid by the customer. If a customer fails to comply with the terms of the bankruptcy order, the Company

Regional Management Corp. | 2019 Annual Report on Form 10-K | 78

will petition the trustee to have the customer dismissed from bankruptcy. Upon dismissal, the Company restores the account to the original terms and pursues collection through its normal loan servicing activities.

If a customer files for bankruptcy under Chapter 7 of the bankruptcy code, the bankruptcy court has the authority to cancel the customer’s debt. If a vehicle secures a Chapter 7 bankruptcy account, the customer has the option of surrendering the vehicle, buying the vehicle at fair value, or reaffirming the loan and continuing to pay the loan.

Delinquency: The Company determines past due status using the contractual terms of the finance receivable. Delinquency is one of the primary credit quality indicators used to evaluate the allowance for credit losses for each class of finance receivables.

Repossessed assets: Repossessed collateral is valued at the lower of the receivable balance on the finance receivable prior to repossession or the estimated net realizable value. Management estimates net realizable value at the projected cash value upon liquidation, less costs to sell the related collateral.

Property and equipment: The Company leases its current headquarters building. Branch offices are leased undernon-cancellable leases of three to seven years with renewal options. Leasehold improvements are depreciated over the shorter of their useful lives or the remaining term of the lease. Furniture and equipment are depreciated on the straight-line method over their estimated useful lives, generally five to ten years. Maintenance and repairs are charged to expense as incurred.

Restricted cash: Restricted cash includes cash and cash equivalents for which the Company’s ability to withdraw funds is contractually limited. The Company’s restricted cash consists of cash reserves that are maintained as collateral for potential credit life insurance claims and cash restricted for debt servicing of the Company’s revolving warehouse credit facility and securitizations.

Derivative instruments: The Company holds derivative instruments in the form of interest rate caps for the purpose of hedging a portion of its exposure to interest rate risk. Derivative instruments are recorded at fair value and included in other assets, with their resulting gains or losses recognized in interest expense. Changes in fair value are reported as an adjustment to net income in computing cash flows from operating activities.

Income recognition: Interest income is recognized using the interest method (constant yield method). Therefore, the Company recognizes revenue from interest at an equal rate over the term of the loan. Unearned finance charges onpre-compute contracts are rebated to customers utilizing statutory methods, which in many cases is thesum-of-the-years’ digits method. The difference between income recognized under the constant yield method and the statutory method is recognized as an adjustment to interest income at the time of rebate. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

The Company recognizes income on credit life insurance, credit property insurance, and automobile insurance using thesum-of-the-years’ digits or straight-line methods over the terms of the policies. The Company recognizes income on credit accident and health insurance using the average of thesum-of-the-years’ digits and the straight-line methods over the terms of the policies. The Company recognizes income on credit involuntary unemployment insurance using the straight-line method over the terms of the policies. Rebates are computed using statutory methods, which in many cases match the GAAP method, and where it does not match, the difference between the GAAP method and the statutory method is recognized in income at the time of rebate. Fee income fornon-file insurance is recognized using thesum-of-the-years’ digits method over the loan term.

Charges for late fees are recognized as income when collected.

Finance receivable origination fees and costs: Non-refundable fees received and direct costs incurred for the origination of finance receivables are deferred and recognized to interest income over their contractual lives using the constant yield method. Unamortized amounts are recognized in income at the time that finance receivables are paid in full.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 79

Share-based compensation: The Company measures compensation cost for share-based awards at estimated fair value and recognizes compensation expense over the service period for awards expected to vest. The Company uses the closing stock price on the date of grant as the fair value of restricted stock awards. The fair value of stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free interest rate, and expected life, changes to which can materially affect the fair value estimate. The Company estimates volatility using its historical stock prices. The risk-free rate is based on the zero coupon U.S. Treasury bond rate for the expected term of the award on the grant date. The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. In addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

Marketing costs: Marketing costs are expensed as incurred.

Income taxes: The Company records a tax provision for the anticipated tax consequences of its reported operating results. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects of future tax rate changes are recognized in the period when the enactment of new rates occurs.

The Company recognizes the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the consolidated financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority.

The Company recognizes the tax benefits or deficiencies from the exercise or vesting of share-based awards in the income tax line of the consolidated statements of income.

Earnings per share: Earnings per share have been computed based on the weighted-average number of common shares outstanding during each reporting period presented. Common shares issuable upon the exercise of share-based compensation, which are computed using the treasury stock method, are included in the computation of diluted earnings per share.

Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (the “FASB”) issued an accounting update to increase transparency and comparability of accounting for lease transactions. The update required: (i) all leases to be recognized on the balance sheet as lease(right-of-use) assets and lease liabilities and (ii) both quantitative and qualitative disclosures regarding key information about leasing arrangements. The update was effective for annual and interim periods beginning after December 15, 2018. The Company completed the implementation of third-party software to facilitate compliance with the accounting and reporting requirements of the lease standard. Prior to adoption, all of the Company’s leases were classified as operating leases, with no lease assets or liabilities recorded. The Company transitioned to this accounting change on a modified retrospective basis by recording the cumulative-effect of lease assets and liabilities for active leases as of January 1, 2019. The Company did not restate comparative periods in transition and elected to use the effective date of January 1, 2019 as the initial date of transition. The Company also elected to utilize the package of transition practical expedients, which included not reassessing the following: (i) whether existing contracts contain leases, (ii) the existing classification of leases as operating or financing, or (iii) the initial direct costs of leases. The Company did not use hindsight to determine the lease term or include options to extend for leases existing at the transition date. In addition, the Company elected not to apply the new lease standard to leases with terms of twelve months or less.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 80

As a result of the adoption of the new lease standard on January 1, 2019, the Company recorded $24.1 million for both lease liabilities and the corresponding lease assets. The lease liabilities were based on the present value of the remaining minimum rental payments using discount rates as of the effective date. There was no impact to the consolidated statements of income related to the adoption of this standard. The adoption of this standard did not require the Company to alter its debt covenants.

In June 2016, the FASB issued an accounting update significantly changing the impairment model for estimating credit losses on financial assets. While the then-existing incurred loss impairment model required the recognition of credit losses when it was probable that a loss had been incurred, the new current expected credit loss (“CECL”) model requires entities to estimate the lifetime expected credit loss on such instruments and to record an allowance to offset the amortized cost basis of the financial assets. The CECL model requires earlier recognition of credit losses as compared to the incurred loss approach. It uses historical experience, current conditions, and reasonable and supportable economic forecasts to estimate lifetime expected credit losses. This accounting update is effective for annual and interim periods beginning after December 15, 2019, and early adoption was permitted.

The Company’s cross-functional CECL implementation team, software vendor, and consulting team have completed the established implementation plan to ensure compliance with the accounting update at the time of adoption. The Company continues to finalize refinements to the future state business processes, policies, controls, and related documentation, and those items are being audited.

Based on analyses and forecasts of future macroeconomic conditions as of December 31, 2019, the Company estimates a CECL allowance for credit losses of $122 million. The allowance under the prior incurred loss approach was $62 million as of December 31, 2019. Effective January 1, 2020, the adoption of CECL accounting, through a modified-retrospective approach, caused an increase to the allowance for credit losses of $60 million anda one-time, cumulative reduction to retained earnings of $46 million (net of $14 million in taxes). The Company’s allowance for credit losses of 5.8% as a percentage of finance receivables on December 31, 2019 increased to 10.8% as a percentage of the amortized cost basis on January 1, 2020. The CECL accounting adoption will not result in any changes in the cash flows of the financial assets, will not cause the Company to violate any of its existing debt covenants, and will not inhibit the Company in funding its growth or returning capital to its shareholders.

The following table illustrates the impact of the CECL accounting adoption by product:

	December 31, 2019		January 1, 2020
In thousands	Pre-Adoption Allowance		Impact of Adoption		CECL Allowance
Small loans	$	30,588	$	24,185	$	54,773
Large loans		29,148		33,550		62,698
Automobile loans		820		599		1,419
Retail loans		1,644		1,766		3,410
Allowance for credit losses	$	62,200	$	60,100	$	122,300

Regional Management Corp. | 2019 Annual Report on Form 10-K | 81

Beginning in January 2020 with the adoption of CECL accounting, the Company will reclassify unearned insurance premiums out of the finance receivables line item to align its consolidated balance sheet presentation with the amortized cost definition in the new accounting standard. The tables below illustrate the impacts of this reclassification to the Company’s previously reported balance sheet presentation of receivables and other key metrics:

	Quarterly Trend – As Reported(Pre-CECL Adoption)
In thousands	3/31/2019			6/30/2019			9/30/2019			12/31/2019
Gross finance receivables	$	1,204,495		$	1,300,043		$	1,404,172		$	1,500,962
Unearned finance charges		(273,651	)		(305,063	)		(337,086	)		(367,558	)
Unearned insurance premiums		(18,594	)		(21,546	)		(24,900	)		(28,591	)
Finance receivables		912,250			973,434			1,042,186			1,104,813
Allowance for credit losses		(56,400	)		(57,200	)		(60,900	)		(62,200	)
Net finance receivables	$	855,850		$	916,234		$	981,286		$	1,042,613
Average finance receivables	$	924,948		$	934,373		$	1,010,515		$	1,071,265
As a % of finance receivables:
Allowance for credit losses		6.2	%		5.9	%		5.8	%		5.6	%
30+ day contractual delinquency		7.0	%		6.4	%		6.6	%		7.2	%
As a % of average finance receivables:
Interest and fee yield (annualized)		32.1	%		32.5	%		32.9	%		32.8	%
Operating expense ratio (annualized)		16.5	%		16.2	%		15.9	%		15.3	%
Net credit loss ratio (annualized)		10.9	%		10.7	%		8.2	%		9.2	%

	Quarterly Trend – Amortized Cost Basis  (Post-CECL Adoption)
In thousands	3/31/2019			6/30/2019			9/30/2019			12/31/2019
Finance receivables	$	930,844		$	994,980		$	1,067,086		$	1,133,404
Unearned insurance premiums		(18,594	)		(21,546	)		(24,900	)		(28,591	)
Allowance for credit losses		(56,400	)		(57,200	)		(60,900	)		(62,200	)
Net finance receivables	$	855,850		$	916,234		$	981,286		$	1,042,613
Average finance receivables	$	944,763		$	954,940		$	1,033,939		$	1,098,410
As a % of finance receivables:
Allowance for credit losses		6.1	%		5.7	%		5.7	%		5.5	%
30+ day contractual delinquency		6.9	%		6.3	%		6.5	%		7.0	%
As a % of average finance receivables:
Interest and fee yield (annualized)		31.5	%		31.8	%		32.1	%		32.0	%
Operating expense ratio (annualized)		16.2	%		15.8	%		15.5	%		14.9	%
Net credit loss ratio (annualized)		10.7	%		10.4	%		8.1	%		9.0	%

Regional Management Corp. | 2019 Annual Report on Form 10-K | 82

	Quarterly Trend – Reclassification Change
In thousands	3/31/2019			6/30/2019			9/30/2019			12/31/2019
Finance receivables	$	18,594		$	21,546		$	24,900		$	28,591
Average finance receivables	$	19,815		$	20,567		$	23,424		$	27,145
As a % of finance receivables:
Allowance for credit losses		(0.1	)%		(0.2	)%		(0.1	)%		(0.1	)%
30+ day contractual delinquency		(0.1	)%		(0.1	)%		(0.1	)%		(0.2	)%
As a % of average finance receivables:
Interest and fee yield (annualized)		(0.6	)%		(0.7	)%		(0.8	)%		(0.8	)%
Operating expense ratio (annualized)		(0.3	)%		(0.4	)%		(0.4	)%		(0.4	)%
Net credit loss ratio (annualized)		(0.2	)%		(0.3	)%		(0.1	)%		(0.2	)%

In August 2018, the FASB issued an accounting update to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments align the capitalization requirements for hosting arrangements that are service contracts with the capitalization principles forinternal-use software. This update is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted. Upon adoption, the Company will apply the update on a prospective basis. The adoption will not have a material impact on its financial statements.

Note 3. Concentrations of Credit Risk

The Company’s portfolio of finance receivables is primarily with customers living in five Southeastern states (Alabama, Georgia, North Carolina, South Carolina, and Tennessee), three Southwestern states (Oklahoma, New Mexico, and Texas), oneMid-Atlantic state (Virginia), and two Midwestern states (Missouri and Wisconsin). Consequently, such customers’ ability to honor their installment contracts may be affected by economic conditions in these areas. Additionally, the Company is exposed to a concentration of credit risk inherent in providing consumer finance products to near prime andnon-prime borrowers.

The Company also has a risk that its customers will seek protection from creditors by filing under the bankruptcy laws. When a customer files for bankruptcy protection, the Company must cease collection efforts and petition the bankruptcy court to obtain its collateral or work out a court-approved bankruptcy plan involving the Company and all other creditors of the customer. It is the Company’s experience that such plans can take an extended period of time to conclude and usually involve a reduction in the interest rate from the rate in the contract to a court-approved rate.

The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced losses in such accounts, which are maintained with large domestic banks. Management believes the Company’s exposure to credit risk is minimal for these accounts.

Note 4. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Finance receivables for the periods indicated consisted of the following:

	December 31,
In thousands	2019		2018
Small loans	$	462,499	$	437,662
Large loans		608,608		437,998
Automobile loans		9,623		26,154
Retail loans		24,083		30,429
Finance receivables	$	1,104,813	$	932,243

Regional Management Corp. | 2019 Annual Report on Form 10-K | 83

The contractual delinquency of the finance receivable portfolio by product and aging for the periods indicated are as follows:

	December 31, 2019
	Small					Large					Automobile					Retail					Total
In thousands	$		%			$		%			$		%			$		%			$		%
Current	$	372,921		80.7	%	$	523,936		86.1	%	$	6,906		71.8	%	$	18,093		75.1	%	$	921,856		83.4	%
1 to 29 days past due		47,313		10.2	%		51,118		8.4	%		1,963		20.4	%		3,531		14.7	%		103,925		9.4	%
Delinquent accounts
30 to 59 days		12,666		2.8	%		11,351		1.9	%		240		2.5	%		853		3.6	%		25,110		2.3	%
60 to 89 days		9,889		2.1	%		8,103		1.3	%		110		1.1	%		563		2.3	%		18,665		1.7	%
90 to 119 days		7,500		1.6	%		5,832		1.0	%		129		1.4	%		375		1.5	%		13,836		1.3	%
120 to 149 days		6,570		1.4	%		4,541		0.7	%		127		1.3	%		357		1.5	%		11,595		1.0	%
150 to 179 days		5,640		1.2	%		3,727		0.6	%		148		1.5	%		311		1.3	%		9,826		0.9	%
Total delinquency	$	42,265		9.1	%	$	33,554		5.5	%	$	754		7.8	%	$	2,459		10.2	%	$	79,032		7.2	%
Total finance receivables	$	462,499		100.0	%	$	608,608		100.0	%	$	9,623		100.0	%	$	24,083		100.0	%	$	1,104,813		100.0	%
Finance receivables in nonaccrual status	$	22,718		4.9	%	$	17,739		2.9	%	$	590		6.1	%	$	1,186		4.9	%	$	42,233		3.8	%

	December 31, 2018
	Small					Large					Automobile					Retail					Total
In thousands	$		%			$		%			$		%			$		%			$		%
Current	$	347,053		79.3	%	$	365,950		83.6	%	$	17,767		67.9	%	$	23,392		76.9	%	$	754,162		80.9	%
1 to 29 days past due		49,946		11.4	%		45,234		10.3	%		6,304		24.1	%		4,436		14.6	%		105,920		11.4	%
Delinquent accounts
30 to 59 days		12,168		2.8	%		8,768		2.0	%		751		2.9	%		842		2.7	%		22,529		2.3	%
60 to 89 days		9,555		2.2	%		6,779		1.5	%		421		1.6	%		627		2.1	%		17,382		1.9	%
90 to 119 days		7,202		1.6	%		4,407		1.0	%		241		0.9	%		429		1.4	%		12,279		1.3	%
120 to 149 days		6,266		1.4	%		3,823		0.9	%		434		1.7	%		367		1.2	%		10,890		1.2	%
150 to 179 days		5,472		1.3	%		3,037		0.7	%		236		0.9	%		336		1.1	%		9,081		1.0	%
Total delinquency	$	40,663		9.3	%	$	26,814		6.1	%	$	2,083		8.0	%	$	2,601		8.5	%	$	72,161		7.7	%
Total finance receivables	$	437,662		100.0	%	$	437,998		100.0	%	$	26,154		100.0	%	$	30,429		100.0	%	$	932,243		100.0	%
Finance receivables in nonaccrual status	$	22,549		5.2	%	$	14,379		3.3	%	$	1,359		5.2	%	$	1,276		4.2	%	$	39,563		4.2	%

Changes in the allowance for credit losses for the periods indicated are as follows:

	Year Ended December 31,
In thousands	2019			2018			2017
Balance at beginning of period	$	58,300		$	48,910		$	41,250
Provision for credit losses		99,611			87,056			77,339
Credit losses		(100,056	)		(82,341	)		(75,880	)
Recoveries		4,345			4,675			6,201
Balance at end of period	$	62,200		$	58,300		$	48,910

In the third quarter of 2018, three changes occurred that impacted the Company’s estimate of the allowance for credit losses. The changes collectively increased the allowance for credit losses as of September 30, 2018 and the provision for credit losses for the three months ended September 30, 2018, which decreased net income by $0.2 million, or $0.01 diluted earnings per share. The three changes are described in more detail in the paragraphs below.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 84

Certain of the Company’s loan origination fees arenon-refundable, and the unearned portion of thosenon-refundable fees reduces the Company’s recorded investment in the related finance receivables(non-refundable fees are included in “Unearned finance charges” on the Company’s consolidated balance sheets). When using unearnednon-refundable fees to estimate an allowance for credit losses, an allowance can be established when the recorded investment in the finance receivables is accreted past the estimated incurred loss amount. Prior to September 30, 2018, the Company properly reduced estimated future net credit losses in its allowance modeling for the reversal of unearnednon-refundable fees and, accordingly, did not reduce the required allowance by the remaining unearnednon-refundable fees on the Company’s consolidated balance sheets. Effective September 30, 2018, the Company changed its estimated future net credit losses in its allowance modeling to exclude the reversal of unearnednon-refundable fees and, accordingly, reduced the required allowance by the remaining unearnednon-refundable fees on the Company’s consolidated balance sheets. This change in estimate had the impact of reducing the allowance for credit losses as of September 30, 2018 and the provision for credit losses for the three months ended September 30, 2018 by $6.6 million, which increased net income by $5.0 million, or $0.41 diluted earnings per share.

In September 2018, the Company updated modeling assumptions used in estimating the specific component of the allowance for credit losses related to impaired finance receivables. The Company obtained additional performance data on finance receivables that had been modified under Company loss mitigation policies. Loss mitigation policies were formalized during 2016, and the impacted finance receivables now have more seasoning and predictable performance data. As a result of this change in estimate, the Company increased the allowance for credit losses as of September 30, 2018 and the provision for credit losses for the three months ended September 30, 2018 by $2.8 million, which decreased net income by $2.1 million, or $0.17 diluted earnings per share.

Apart from the various optional payment and collateral protection insurance products that the Company offers to customers, on certain loans, the Company also collects a fee from customers and, in turn, purchasesnon-file insurance for the Company’s benefit in lieu of recording and perfecting the Company’s security interest in personal property collateral.Non-file insurance protects the Company from credit losses where, following an event of default, the Company is unable to take possession of personal property collateral because the Company’s security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such circumstances,non-file insurance generally will pay an amount equal to the lesser of the loan balance or the collateral value. In September 2018, thenon-file insurance product had been operating at a loss, and the Company was implementing a policy change that would reduce the amount of claims filed, which will have the impact of increasing future net credit losses and, in turn, increasing the required allowance for credit losses. As a result of the policy change, the Company increased the allowance for credit losses as of September 30, 2018 and the provision for credit losses for the three months ended September 30, 2018 by $4.1 million, which decreased net income by $3.1 million, or $0.25 diluted earnings per share.

Separate from the changes noted above, in September 2018, the Company recorded a $3.9 million increase to the allowance for credit losses related to estimated incremental credit losses on customer accounts impacted by hurricanes. As of June 30, 2019, the allowance for credit losses no longer required or included an incremental hurricane allowance.

In September 2017, the Company recorded a $3.0 million increase to the allowance for credit losses related to estimated incremental credit losses on customer accounts impacted by hurricanes. As of June 30, 2018, the allowance for credit losses no longer required or included an incremental hurricane allowance.

On an annual basis, the Company updates the estimated loss emergence period for each finance receivable type. During 2017, the loss emergence period for each finance receivable type changed as follows: small loan finance receivables increased from six to seven months; large loan finance receivables decreased from twelve to ten months; and retail loan finance receivables increased from ten to eleven months. These net changes in the loss emergence periods increased the Company’s allowance for credit losses by $0.1 million, which decreased net income for the year ended December 31, 2017 by $0.1 million, or $0.01 diluted earnings per share.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 85

During 2018, the loss emergence period for each finance receivable type changed as follows: small loan finance receivables increased from seven to eight months; large loan finance receivables decreased from ten to eight months; automobile loan finance receivables decreased from twelve to nine months; and retail loan finance receivables decreased from eleven to eight months. These net changes in the loss emergence periods decreased the Company’s allowance for credit losses by $0.2 million, which increased net income for the year ended December 31, 2018 by $0.2 million, or $0.01 diluted earnings per share.

During 2019, the loss emergence period for each finance receivable type neither required nor included any changes.

The Company sells previouslycharged-off loans for all products in the portfolio to a third-party debt buyer. The proceeds from these sales are recognized as a recovery in the allowance for credit losses. In September 2017, the Company recognized a recovery of $1.0 million from the bulk sale of previouslycharged-off customer accounts in bankruptcy. These accounts had been excluded from previous sales ofcharged-off loans.

The following is a reconciliation of the allowance for credit losses by product for the periods indicated:

In thousands	Balance January 1, 2019		Provision		Credit Losses			Recoveries		Balance December 31, 2019		Finance Receivables December 31, 2019		Allowance as Percentage of Finance Receivables December 31, 2019
Small loans	$	30,759	$	54,842	$	(57,323	)	$	2,310	$	30,588	$	462,499		6.6	%
Large loans		23,702		41,278		(37,475	)		1,643		29,148		608,608		4.8	%
Automobile loans		1,893		575		(1,893	)		245		820		9,623		8.5	%
Retail loans		1,946		2,916		(3,365	)		147		1,644		24,083		6.8	%
Total	$	58,300	$	99,611	$	(100,056	)	$	4,345	$	62,200	$	1,104,813		5.6	%

In thousands	Balance January 1, 2018		Provision		Credit Losses			Recoveries		Balance December 31, 2018		Finance Receivables December 31, 2018		Allowance as Percentage of Finance Receivables December 31, 2018
Small loans	$	24,749	$	51,859	$	(48,333	)	$	2,484	$	30,759	$	437,662		7.0	%
Large loans		17,548		31,103		(26,337	)		1,388		23,702		437,998		5.4	%
Automobile loans		4,025		1,300		(4,085	)		653		1,893		26,154		7.2	%
Retail loans		2,588		2,794		(3,586	)		150		1,946		30,429		6.4	%
Total	$	48,910	$	87,056	$	(82,341	)	$	4,675	$	58,300	$	932,243		6.3	%

In thousands	Balance January 1, 2017		Provision		Credit Losses			Recoveries		Balance December 31, 2017		Finance Receivables December 31, 2017		Allowance as Percentage of Finance Receivables December 31, 2017
Small loans	$	21,770	$	45,104	$	(45,612	)	$	3,487	$	24,749	$	375,772		6.6	%
Large loans		11,460		25,024		(20,088	)		1,152		17,548		347,218		5.1	%
Automobile loans		5,910		4,210		(7,424	)		1,329		4,025		61,423		6.6	%
Retail loans		2,110		3,001		(2,756	)		233		2,588		33,050		7.8	%
Total	$	41,250	$	77,339	$	(75,880	)	$	6,201	$	48,910	$	817,463		6.0	%

Regional Management Corp. | 2019 Annual Report on Form 10-K | 86

Impaired finance receivables as a percentage of total finance receivables were 2.8% and 2.9% for the years ended December 31, 2019 and 2018, respectively. The following is a summary of finance receivables evaluated for impairment for the periods indicated:

	December 31, 2019
In thousands	Small		Large		Automobile		Retail		Total
Impaired receivables specifically evaluated	$	9,920	$	20,667	$	652	$	130	$	31,369
Finance receivables evaluated collectively		452,579		587,941		8,971		23,953		1,073,444
Finance receivables outstanding	$	462,499	$	608,608	$	9,623	$	24,083	$	1,104,813
Impaired receivables in nonaccrual status	$	1,629	$	3,189	$	184	$	40	$	5,042
Amount of the specific reserve for impaired accounts	$	4,069	$	7,733	$	386	$	69	$	12,257
Amount of the general component of the allowance	$	26,519	$	21,415	$	434	$	1,575	$	49,943

	December 31, 2018
In thousands	Small		Large		Automobile		Retail		Total
Impaired receivables specifically evaluated	$	8,361	$	17,196	$	918	$	110	$	26,585
Finance receivables evaluated collectively		429,301		420,802		25,236		30,319		905,658
Finance receivables outstanding	$	437,662	$	437,998	$	26,154	$	30,429	$	932,243
Impaired receivables in nonaccrual status	$	1,209	$	2,292	$	178	$	37	$	3,716
Amount of the specific reserve for impaired accounts	$	3,791	$	6,860	$	492	$	61	$	11,204
Amount of the general component of the allowance	$	26,968	$	16,842	$	1,401	$	1,885	$	47,096

The average recorded investment in impaired finance receivables and the amount of interest income recognized on impaired loans for the periods indicated are as follows:

	Year Ended December 31,
	2019				2018
In thousands	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Small loans	$	9,723	$	1,551	$	6,577	$	1,066
Large loans		18,938		2,538		13,221		1,639
Automobile loans		786		37		1,381		60
Retail loans		129		5		109		6
Total	$	29,576	$	4,131	$	21,288	$	2,771

Regional Management Corp. | 2019 Annual Report on Form 10-K | 87

Note 5. Property and Equipment

For the periods indicated, property and equipment consisted of the following:

	December 31,
In thousands	2019		2018
Furniture, fixtures, and equipment	$	25,185	$	23,131
Leasehold improvements		12,110		10,578
Property and equipment cost		37,295		33,709
Less accumulated depreciation		21,994		19,783
Property and equipment, net of accumulated depreciation	$	15,301	$	13,926

Depreciation expense for the years ended December 31, 2019, 2018, and 2017 totaled $4.3 million, $3.7 million, and $3.4 million, respectively.

Note 6. Leases

The Company adopted a new lease accounting standard in January 2019. See Note 2, “Significant Accounting Policies,” for an overview of the transition to this standard.

The Company maintains lease agreements related to its branch network and for its corporate headquarters. The branch lease agreements range from five to seven years and generally contain options to extend from three to five years. The corporate headquarters lease agreement is for eleven years and contains an option to extend for ten years. All of the Company’s lease agreements are considered operating leases. None of the Company’s lease payments are dependent on an index that may change after the commencement date.

The Company’s lease liability was $28.5 million as of December 31, 2019. This liability is based on the present value of the remaining minimum rental payments using a discount rate that is based on the Company’s incremental borrowing rate on its senior revolving credit facility. The lease asset was $26.4 million as of December 31, 2019. This asset includesright-of-use assets equaling the lease liability, net of prepaid rent and deferred rents that existed as of the adoption of the new lease standard. The Company assesses its leased assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If a lease is impaired, the impairment loss is recognized in lease costs and theright-of-use asset is reduced to the impaired value.

The Company has made several policy elections related to lease assets and liabilities. The Company elected to utilize the package of transition practical expedients, which includes not reassessing the following at adoption: (i) whether existing contracts contained leases, (ii) the existing classification of leases as operating or financing, or (iii) the initial direct costs of leases. In addition, the Company did not use hindsight to determine the lease term or include options to extend for leases existing at the transition date.

Lease agreements with terms of twelve months or less are not capitalized as part of lease assets or liabilities and are expensed as incurred. The Company has elected to account for each separate lease component of a contract and its associatednon-lease components as a single lease component for its branch leases. The Company has elected not to apply this policy in relation to the corporate headquarters lease. The Company has also determined that it is reasonably certain that the first option to extend lease contracts will be exercised for new branch locations; therefore, the first option to extend is included in the lease asset and liability calculation.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 88

Future maturities of the Company’s operating lease liabilities are as follows:

In thousands	December 31, 2019
2020	$	7,047
2021		6,562
2022		5,242
2023		4,641
2024		3,596
Thereafter		6,186
Total future minimum lease payments		33,274
Present value adjustment		(4,804	)
Operating lease liability	$	28,470

The Company’s operating and short-term lease expenses are presented below:

In thousands	Year Ended December 31, 2019
Operating leases	$	7,929
Short-term leases		435
Total lease expense	$	8,364

Supplemental cash flow andnon-cash information related to the Company’s operating leases is presented below:

In thousands	Year Ended December 31, 2019
Cash paid for operating leases	$	7,379
Lease assets and liabilities acquired(1)	$	10,102

(1) Excludes $24.1 million of lease assets and liabilities recorded on the transition date.

As of December 31, 2019, the weighted-average remaining lease term and weighted-average discount rate were 5.6 years and 5.40%, respectively.

Rent expense for the years ended December 31, 2019, 2018, and 2017 equaled $8.4 million, $8.1 million, and $7.7 million, respectively. In addition to rent, the Company typically pays for all operating expenses, property taxes, and repairs and maintenance on properties that it leases.

Note 7. Intangible Assets

The following table provides the gross carrying amount and related accumulated amortization of intangible assets:

	December 31, 2019							December 31, 2018
In thousands	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Software	$	15,389	$	(6,667	)	$	8,722	$	13,811	$	(4,517	)	$	9,294
Goodwill		950		(234	)		716		950		(234	)		716
Total intangible assets	$	16,339	$	(6,901	)	$	9,438	$	14,761	$	(4,751	)	$	10,010

Regional Management Corp. | 2019 Annual Report on Form 10-K | 89

Intangible amortization expense for the years ended December 31, 2019, 2018, and 2017 totaled $2.2 million, $2.0 million, and $2.2 million, respectively. The following table sets forth the future amortization of intangible assets:

In thousands	Amount
2020	$	2,120
2021		1,966
2022		1,870
2023		1,596
2024		915
Thereafter		255
Total	$	8,722

The Company performs an annual impairment test on goodwill during the fourth quarter of each fiscal year. There were no goodwill additions or impairment losses for the years ended December 31, 2019 and 2018, respectively.

Note 8. Other Assets

Other assets include the following as of the periods indicated:

	December 31,
In thousands	2019		2018
Prepaid expenses	$	3,256	$	4,167
Credit insurance receivable		2,061		1,027
Card payments receivable		1,853		2,292
Other		534		889
Total other assets	$	7,704	$	8,375

Note 9. Interest Rate Caps

The Company has interest rate cap contracts with an aggregate notional principal amount of $350.0 million. Each contract contains a strike rate against theone-month LIBOR (1.76% and 2.50% as of December 31, 2019 and 2018, respectively). The interest rate caps have maturities of April 2020 ($100.0 million with 3.25% strike rate), June 2020 ($50.0 million with 2.50% strike rate), and April 2021 ($200.0 million with 3.50% strike rate). When theone-month LIBOR exceeds the strike rate, the counterparty reimburses the Company for the excess over the strike rate. No payment is required by the Company or the counterparty when theone-month LIBOR is below the strike rate. The following is a summary of changes in the rate caps:

	December 31,
In thousands	2019			2018			2017
Balance at beginning of period	$	249		$	98		$	62
Purchases		—			481			100
Fair value adjustment included as an increase in interest expense		(249	)		(330	)		(64	)
Balance at end of period, included in other assets	$	—		$	249		$	98

See Note 20, “Subsequent Events,” for information regarding the purchase of an interest rate cap contract in March 2020.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 90

Note 10. Long-Term Debt

The following is a summary of the Company’s long-term debt as of the periods indicated:

	December 31, 2019							December 31, 2018
In thousands	Long-Term Debt		Unamortized Debt Issuance Costs			Net Long-Term Debt		Long-Term Debt		Unamortized Debt Issuance Costs			Net Long-Term Debt
Senior revolving credit facility	$	350,818	$	(2,504	)	$	348,314	$	328,074	$	(1,604	)	$	326,470
Amortizing loan		—		—			—		21,642		(201	)		21,441
Revolving warehouse credit facility		46,633		(1,875	)		44,758		30,126		(1,899	)		28,227
RMIT2018-1 securitization		150,246		(1,558	)		148,688		150,246		(2,849	)		147,397
RMIT2018-2 securitization		130,349		(1,687	)		128,662		130,419		(2,605	)		127,814
RMIT2019-1 securitization		130,172		(1,983	)		128,189		—		—			—
Total	$	808,218	$	(9,607	)	$	798,611	$	660,507	$	(9,158	)	$	651,349
Unused amount of revolving credit facilities (subject to borrowing base)	$	369,271						$	406,600

Senior Revolving Credit Facility: In September 2019, the Company amended and restated its senior revolving credit facility to, among other things, increase the availability under the facility from $638 million to $640 million and extend the maturity of the facility from June 2020 to September 2022. The facility has an accordion provision that allows for the expansion of the facility to $650 million. Excluding the receivables held by the Company’s VIEs, the senior revolving credit facility is secured by substantially all of the Company’s finance receivables and equity interests of the majority of its subsidiaries. Advances on the senior revolving credit facility are capped at 85% of eligible secured finance receivables, 80% of eligible unsecured finance receivables, and 60% of eligible delinquent renewals (80% of eligible secured finance receivables, 75% of eligible unsecured finance receivables, and 55% of eligible delinquent renewals as of December 31, 2019). As of December 31, 2019, the Company had $109.6 million of eligible borrowing capacity under the facility. Borrowings under the facility bear interest, payable monthly, at rates equal toone-month LIBOR, with a LIBOR floor of 1.00%, plus a 3.00% margin, increasing to 3.25% when the availability percentage is below 10%. Theone-month LIBOR rate was 1.76% and 2.50% at December 31, 2019 and 2018, respectively. The amended and restated facility provides for a process to transition from LIBOR to a new benchmark, if necessary. The Company pays an unused line fee between 0.375% and 0.65% based upon the average outstanding balance of the facility.

Variable Interest Entity Debt:As part of its overall funding strategy, the Company has transferred certain finance receivables to VIEs for asset-backed financing transactions, including securitizations. The following debt arrangements are issued by the Company’s SPEs, which are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. The Company is considered to be the primary beneficiary because it has (i) power over the significant activities through its role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s interest in the monthly residual cash flows of the SPEs after each debt is paid.

These long-term debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $39.4 million and $33.5 million as of December 31, 2019 and 2018, respectively. Cash inflows from the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that the Company owns in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to the Company, which is eliminated in consolidation. Distributions from the SPEs to the Company are permitted under the debt arrangements.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 91

At each sale of receivables from the Company’s affiliates to the SPEs, the Company makes certain representations and warranties about the quality and nature of the collateralized receivables. The debt arrangements require the Company to repurchase the receivables in certain circumstances, including circumstances in which the representations and warranties made by the Company concerning the quality and characteristics of the receivables are inaccurate. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates.

Amortizing Loan: In November 2017, the Company and its wholly-owned SPE, Regional Management Receivables, LLC (“RMR I”), amended and restated the December 2015 credit agreement that provided for a $75.7 million asset-backed, amortizing loan. The amended and restated credit agreement provided for an additional advance in the amount of $37.8 million and extended the maturity date to December 2024. The amended and restated credit agreement also allowed the Company to prepay the loan when the outstanding balance fell below 20% of the original loan amount. In October 2019, the Company and RMR I exercised the right to make an optional principal repayment in full, and in connection with such prepayment, the facility terminated.

Revolving Warehouse Credit Facility: In October 2019, the Company and its wholly-owned SPE, Regional Management Receivables II, LLC (“RMR II”), amended the credit agreement that provides for a $125 million revolving warehouse credit facility to RMR II. The amendment extended the date at which the facility converts to an amortizing loan and the termination date to April 2021 and April 2022, respectively. The facility has an accordion provision that allows for the expansion of the facility to $150 million. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR II. Advances on the facility are capped at 80% of eligible finance receivables. RMR II held $0.3 million in restricted cash reserves as of December 31, 2019 to satisfy provisions of the credit agreement. Borrowings under the facility bear interest, payable monthly, at a blended rate equal to three-month LIBOR, plus a margin of 2.15% (2.20% prior to the October 2019 amendment). The three-month LIBOR was 1.91% and 2.81% at December 31, 2019 and 2018, respectively. RMR II pays an unused commitment fee between 0.35% and 0.85% based upon the average daily utilization of the facility.

RMIT2018-1 Securitization: In June 2018, the Company, its wholly-owned SPE, Regional Management Receivables III, LLC (“RMR III”), and its indirect wholly-owned SPE, Regional Management Issuance Trust2018-1 (“RMIT2018-1”), completed a private offering and sale of $150 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT2018-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT2018-1. The notes have a revolving period ending in June 2020, with a final maturity date in July 2027. RMIT2018-1 held $1.7 million in restricted cash reserves as of December 31, 2019 to satisfy provisions of the transaction documents. Borrowings under the RMIT2018-1 securitization bear interest, payable monthly, at a weighted-average rate of 3.93%. Prior to maturity in July 2027, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in July 2020. No payments of principal of the notes will be made during the revolving period.

RMIT2018-2 Securitization: In December 2018, the Company, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust2018-2 (“RMIT2018-2”), completed a private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT2018-2. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT2018-2. The notes have a revolving period ending in December 2020, with a final maturity date in January 2028. RMIT2018-2 held $1.4 million in restricted cash reserves as of December 31, 2019 to satisfy provisions of the transaction documents. Borrowings under the RMIT2018-2 securitization bear interest, payable monthly, at a weighted-average rate of 4.87%. Prior to maturity in January 2028, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in January 2021. No payments of principal of the notes will be made during the revolving period.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 92

RMIT2019-1 Securitization:In October 2019, the Company, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust2019-1 (“RMIT2019-1”), completed a private offering and sale of $130 million of asset-backed notes. The transaction consisted of the issuance of three classes of fixed-rate asset-backed notes by RMIT2019-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT2019-1. The notes have a revolving period ending in October 2021, with a final maturity date in November 2028. RMIT2019-1 held $1.4 million in restricted cash reserves as of December 31, 2019 to satisfy provisions of the transaction documents. Borrowings under the RMIT2019-1 securitization bear interest, payable monthly, at a weighted-average rate of 3.17%. Prior to maturity in November 2028, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in November 2021. No payments of principal of the notes will be made during the revolving period.

The carrying amounts of consolidated VIE assets and liabilities are as follows:

	December 31,
In thousands	2019			2018
Assets
Cash	$	152		$	168
Finance receivables		474,340			342,481
Allowance for credit losses		(22,015	)		(18,378	)
Restricted cash		44,221			39,361
Other assets		68			75
Total assets	$	496,766		$	363,707
Liabilities
Net long-term debt	$	450,297		$	324,879
Accounts payable and accrued expenses		86			25
Total liabilities	$	450,383		$	324,904

The Company’s debt arrangements are subject to certain covenants, including monthly and annual reporting, maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other indebtedness, maintenance of a minimum allowance for credit losses, and certain other restrictions. At December 31, 2019, the Company was in compliance with all debt covenants.

The following is a summary of estimated principal payments required on outstanding debt during each of the next five years:

In thousands	Amount
2020	$	59,940
2021		170,817
2022		533,908
2023		43,553
2024		—
Total	$	808,218

Note 11. Stockholders’ Equity

Stock repurchase program: In May 2019, the Company’s Board of Directors (the “Board”) authorized a new stock repurchase program allowing for the repurchase of up to $25.0 million of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective immediately and extended

Regional Management Corp. | 2019 Annual Report on Form 10-K | 93

through May 6, 2021. In October 2019, the Company completed its $25.0 million stock repurchase program. The Company repurchased a total of 938 thousand shares of common stock pursuant to the program.

Note 12. Disclosure About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and restricted cash: Cash and restricted cash is recorded at cost, which approximates fair value due to its generally short maturity and highly liquid nature.

Finance receivables: Finance receivables are originated at prevailing market rates. The Company’s finance receivable portfolio turns approximately 1.2 times per year. The portfolio turnover is calculated by dividing cash payments, renewals, and net credit losses by the average finance receivables. Management believes that the carrying amount approximates the fair value of its finance receivable portfolio.

Interest rate caps: The fair value of the interest rate caps is the estimated amount the Company would receive to terminate the cap agreements at the reporting date, taking into account current interest rates and the creditworthiness of the counterparty.

Long-term debt: The Company’s long-term debt is frequently renewed, amended, or recently originated. As a result, the Company believes that the fair value of long-term debt approximates carrying amounts. The Company also considered its creditworthiness in its determination of fair value.

The carrying amount and estimated fair values of the Company’s financial instruments summarized by level are as follows:

	December 31, 2019				December 31, 2018
In thousands	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Level 1 inputs
Cash	$	2,263	$	2,263	$	3,657	$	3,657
Restricted cash		54,164		54,164		46,484		46,484
Level 2 inputs
Interest rate caps		—		—		249		249
Level 3 inputs
Net finance receivables		1,042,613		1,042,613		873,943		873,943
Liabilities
Level 3 inputs
Long-term debt		808,218		808,218		660,507		660,507

Certain of the Company’s assets carried at fair value are classified and disclosed in one of the following three categories:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs that are not corroborated by market data.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 94

In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are carried at fair value. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The table below presents the balances of assets measured at fair value on a recurring basis by level within the hierarchy as of December 31, 2019 and 2018:

	Interest Rate Caps
In thousands	Total		Level 1		Level 2		Level 3
2019	$	—	$	—	$	—	$	—
2018	$	249	$	—	$	249	$	—

Note 13. Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. The Company files consolidated or separate state income tax returns as required by individual states in which it operates. The Company is generally no longer subject to federal, state, or local income tax examinations by taxing authorities before 2016, though the Company remains subject to examination for the Texas tax return for the 2015 tax year.

Income tax expense differed from the amount computed by applying the federal income tax rate to total income before income taxes as a result of the following:

	Year Ended December 31,
	2019						2018						2017
In thousands	$			%			$			%			$			%
Federal tax expense at statutory rate	$	12,389			21.0	%	$	9,639			21.0	%	$	14,090			35.0	%
Increase (reduction) in income taxes resulting from:
State tax, net of federal benefit		1,980			3.4	%		1,521			3.3	%		1,253			3.1	%
Excess tax benefits from share-based awards		(171	)		(0.3	)%		(370	)		(0.8	)%		(1,603	)		(4.0	)%
Research and development tax credits		(31	)		(0.1	)%		(114	)		(0.2	)%		(400	)		(1.0	)%
Tax Cuts and Jobs Act		—			0.0	%		—			0.0	%		(3,122	)		(7.8	)%
Other		94			0.2	%		(119	)		(0.3	)%		76			0.3	%
	$	14,261			24.2	%	$	10,557			23.0	%	$	10,294			25.6	%

In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act made changes to U.S. tax law, including a reduction in the federal corporate tax rate from 35.0% to 21.0%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. The revaluation resulted in a $3.1 million income tax benefit and a corresponding reduction in the Company’s net deferred tax liability. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects of the Tax Act and recorded provisional amounts in its consolidated financial statements as of December 31, 2017. The accounting for the tax effects of the Tax Act was completed in December 2018.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 95

Income tax expense attributable to total income before income taxes consists of the following for the periods indicated:

	Year Ended December 31,
In thousands	2019			2018			2017
Current:
Federal	$	13,270		$	12,442		$	4,479
State and local		2,357			2,329			821
		15,627			14,771			5,300
									��
Deferred:
Federal		(1,298	)		(3,705	)		4,464
State and local		(68	)		(509	)		530
		(1,366	)		(4,214	)		4,994
Total	$	14,261		$	10,557		$	10,294

Net deferred tax assets and liabilities consist of the following as of the periods indicated:

	December 31,
In thousands	2019		2018
Deferred tax assets:
Allowance for credit losses	$	12,879	$	10,315
Unearned insurance premiums		5,058		3,393
Share-based compensation		2,933		2,765
Accrued expenses		1,928		1,773
State net operating loss carryforward		262		274
Amortization of intangible assets		200		376
Deferred rent		129		—
Deferred contract incentive		60		86
Other		83		86
Gross deferred tax assets		23,532		19,068
Deferred tax liabilities:
Fair market value adjustment of finance receivables		16,853		13,378
Tax over book depreciation		3,735		4,058
Deferred loan costs		1,983		1,814
Prepaid expenses		316		372
Other		26		193
Gross deferred tax liabilities		22,913		19,815
Net deferred tax asset (liability)	$	619	$	(747	)

The Company had state net operating loss carryforwards of approximately $8.0 million and $8.2 million as of December 31, 2019 and 2018, respectively, and related deferred tax assets of $0.3 million for both periods. These carryforwards are available to offset future taxable income. If not used, the current carryforwards will expire beginning in 2032.

Income tax expense was $14.3 million, $10.6 million, and $10.3 million for the years ended December 31, 2019, 2018, and 2017, respectively. Included in these amounts are tax benefits from share-based awards of $0.2 million, $0.4 million, and $1.6 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 96

Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, based solely on the technical merits of the position. The Company had $0.8 million of material unrecognized tax benefits as of December 31, 2019. Included in these amounts are interest and penalties accrued related to unrecognized tax benefits of $52 thousand for the year ended December 31, 2019. These components are included in the income tax line of the consolidated statements of income.

The following schedule reconciles unrecognized tax positions for the periods indicated:

In thousands	Year Ended December 31, 2019
Balance at January 1	$	—
Additions based on tax positions related to the current year		363
Additions for tax positions of prior years		452
Reductions for tax positions of prior years		—
Settlements		—
Balance at December 31	$	815

Note 14. Earnings Per Share

The following schedule reconciles the computation of basic and diluted earnings per share for the periods indicated:

	Year Ended December 31,
In thousands, except per share amounts	2019		2018		2017
Numerator:
Net income	$	44,732	$	35,345	$	29,963
Denominator:
Weighted-average shares outstanding for basic earnings per share		11,401		11,655		11,551
Effect of dilutive securities		372		423		232
Weighted-average shares adjusted for dilutive securities		11,773		12,078		11,783
Earnings per share:
Basic	$	3.92	$	3.03	$	2.59
Diluted	$	3.80	$	2.93	$	2.54

Options to purchase 250 thousand, 148 thousand, and 126 thousand shares of common stock were outstanding during the years ended December 31, 2019, 2018, and 2017, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

Note 15. Employee Benefit Plans

Retirement savings plan:The Company has a defined contribution employee benefit plan (401(k) plan) covering full-time employees who have at least six months of service. The Company made a matching contribution equal to 100 percent of the first three percent of an employee’s gross income and 50 percent of the next two percent of gross income in 2019, 2018, and 2017. For the years ended December 31, 2019, 2018, and 2017, the Company recorded expense for the Company’s match of $1.5 million, $0.9 million, and $0.8 million, respectively.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 97

Note 16. Share-Based Compensation

The Company previously adopted the 2007 Management Incentive Plan (the “2007 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). On April 22, 2015, the stockholders of the Company approved the 2015 Long-Term Incentive Plan (the “2015 Plan”), and on April 27, 2017, the stockholders of the Companyre-approved the 2015 Plan, as amended and restated. As of December 31, 2019, subject to adjustments as provided in the 2015 Plan, the maximum aggregate number of shares of the Company’s common stock that could be issued under the 2015 Plan could not exceed the sum of (i) 1.55 million shares plus (ii) any shares (A) remaining available for the grant of awards as of the 2015 Plan effective date (April 22, 2015) under the 2007 Plan or the 2011 Plan, and/or (B) subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cancelled, terminated, expires, or lapses without the issuance of shares or pursuant to which such shares are forfeited. As of the effectiveness of the 2015 Plan (April 22, 2015), there were 0.9 million shares available for grant under the 2015 Plan, inclusive of shares previously available for grant under the 2007 Plan and the 2011 Plan that were rolled over to the 2015 Plan. No further grants will be made under the 2007 Plan or the 2011 Plan. However, awards that are outstanding under the 2007 Plan and the 2011 Plan will continue in accordance with their respective terms. As of December 31, 2019, there were 0.8 million shares available for grant under the 2015 Plan.

For the years ended December 31, 2019, 2018, and 2017, the Company recorded share-based compensation expense of $5.1 million, $5.3 million, and $3.7 million, respectively. As of December 31, 2019, unrecognized share-based compensation expense to be recognized over future periods approximated $5.6 million. This amount will be recognized as expense over a weighted-average period of 1.7 years. Share-based compensation expenses are recognized on a straight-line basis over the requisite service period of the agreement. All share-based compensation is classified as equity awards.

The Company allows for the settlement of share-based awards on a net share basis. With net share settlement, the employee does not surrender any cash or shares upon the exercise of stock options or the vesting of stock awards or stock units. Rather, the Company withholds the number of shares with a value equivalent to the option exercise price (for stock options) and the statutory tax withholding (for all share-based awards). Net share settlements have the effect of reducing the number of shares that would have otherwise been issued as a result of exercise or vesting.

Long-term incentive program:The Company issuesnon-qualified stock options, performance-contingent restricted stock units (“RSUs”), cash-settled performance units (“CSPUs”), and restricted stock awards (“RSAs”) to certain members of senior management under a long-term incentive program (“LTIP”). The CSPUs are cash incentive awards, and the associated expense is not based on the market price of the Company’s common stock. Recurring annual grants are made at the discretion of the Board. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. The actual value of the RSUs and CSPUs that may be earned can range from 0% to 150% of target based on the percentile ranking of the Company’s compound annual growth rate of net income and net income per share compared to a public company peer group over a three-year performance period.

The Company also has a key team member incentive program for certain other members of senior management. Recurring annual participation in the program is at the discretion of the Board and executive management. Each participant in the program is eligible to earn an RSA, subject to performance over aone-year period. Payout under the program can range from 0% to 150% of target based on the achievement of five Company performance metrics and individual performance goals (subject to continued employment and certain other terms and conditions of the program). If earned, the RSA is issued following theone-year performance period and vests ratably over a subsequenttwo-year period (subject to continued employment or as otherwise provided in the underlying award agreement).

Inducement and retention program: From time to time, the Company issues stock awards and other long-term incentive awards in conjunction with employment offers to select new employees and retention grants to select

Regional Management Corp. | 2019 Annual Report on Form 10-K | 98

existing employees. The Company issues these awards to attract and retain talent and to provide market competitive compensation. The grants have various vesting terms, including fully-vested awards at the grant date, cliff-vesting, and graded-vesting over periods of up to five years (subject to continued employment or as otherwise provided in the underlying award agreements).

Non-employee director compensation program:The Company awards itsnon-employee directors a cash retainer and shares of restricted common stock. The RSAs are granted on the fifth business day following the Company’s annual meeting of stockholders and fully vest upon the earlier of the first anniversary of the grant date or the completion of the directors’ annual service to the Company. The Board revised the compensation program in April 2018 to modify the amount of the annual cash retainers for Board and committee members, eliminate committee meeting fees, and modify the value of the RSAs for committee members.

The following are the terms and amounts of the awards issued under the Company’s share-based incentive programs:

Non-qualified stock options: The exercise price of all stock options is equal to the Company’s closing stock price on the date of grant. Stock options are subject to various vesting terms, including graded- and cliff-vesting over periods of up to five years. In addition, stock options vest and become exercisable in full or in part under certain circumstances, including following the occurrence of a change of control (as defined in the option award agreements). Participants who are awarded options must exercise their options within a maximum of ten years of the grant date.

The fair value of option grants is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions for option grants during the periods indicated below:

	Year Ended December 31,
	2019			2018			2017
Expected volatility		41.06	%		41.63	%		43.95	%
Expected dividends		0.00	%		0.00	%		0.00	%
Expected term (in years)		6.0			6.0			6.0
Risk-free rate		2.41	%		2.66	%		2.09	%

Expected volatility is based on the Company’s historical stock price volatility. The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. The risk-free rate is based on the zero coupon U.S. Treasury bond rate over the expected term of the awards.

The following table summarizes the stock option activity for the year ended December 31, 2019:

In thousands, except per share amounts	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Options outstanding at January 1, 2019		981		$	18.69
Granted		124			27.53
Exercised		(16	)		16.50
Forfeited		(22	)		25.70
Expired		—			—
Options outstanding at December 31, 2019		1,067		$	19.61		5.7	$	11,222
Options exercisable at December 31, 2019		956		$	18.67		5.3	$	10,957

Regional Management Corp. | 2019 Annual Report on Form 10-K | 99

The following table provides additional stock option information for the periods indicated:

	Year Ended December 31,
In thousands, except per share amounts	2019		2018		2017
Weighted-average grant date fair value per share	$	11.82	$	12.39	$	8.90
Intrinsic value of options exercised	$	265	$	1,604	$	4,981
Fair value of stock options that vested	$	1,126	$	1,809	$	3,004

Performance-contingent restricted stock units:Compensation expense for RSUs is based on the Company’s closing stock price on the date of grant and the probability that certain financial goals are achieved over the performance period. Compensation cost is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSU activity during the year ended December 31, 2019:

In thousands, except per unit amounts	Units			Weighted-Average Grant Date Fair Value Per Unit
Non-vested units at January 1, 2019		182		$	21.89
Granted (target)		40			27.89
Achieved performance adjustment(1)		8			16.98
Vested		(54	)		16.98
Forfeited		(20	)		24.39
Non-vested units at December 31, 2019		156		$	24.57

(1) The 2016 LTIP RSUs were earned and vested at 116.5% of target, as described in greater detail in the Company’s definitive proxy statement filed with the SEC on March 27, 2019.

The following table provides additional RSU information for the periods indicated:

	Year Ended December 31,
In thousands, except per unit amounts	2019		2018		2017
Weighted-average grant date fair value per unit	$	27.89	$	28.25	$	19.99
Fair value of RSUs that vested	$	916	$	—	$	—

Restricted stock awards:The fair value and compensation cost of restricted stock is calculated using the Company’s closing stock price on the date of grant.

The following table summarizes restricted stock activity during the year ended December 31, 2019:

In thousands, except per share amounts	Shares			Weighted-Average Grant Date Fair Value Per Share
Non-vested shares at January 1, 2019		71		$	26.95
Granted		166			26.78
Vested		(103	)		26.97
Forfeited		(8	)		26.06
Non-vested shares at December 31, 2019		126		$	26.78

The following table provides additional restricted stock information:

	Year Ended December 31,
In thousands, except per share amounts	2019		2018		2017
Weighted-average grant date fair value per share	$	26.78	$	24.98	$	18.38
Fair value of RSAs that vested	$	2,767	$	1,609	$	983

Regional Management Corp. | 2019 Annual Report on Form 10-K | 100

Note 17. Commitments and Contingencies

In the normal course of business, the Company has been named as a defendant in legal actions in connection with its activities. Some of the actual or threatened legal actions include claims for compensatory damages or claims for indeterminate amounts of damages. The Company contests liability and the amount of damages, as appropriate, in each pending matter.

Where available information indicates that it is probable that a liability has been incurred and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to net income.

However, in many legal actions, it is inherently difficult to determine whether any loss is probable, or even reasonably possible, or to estimate the amount of loss. This is particularly true for actions that are in their early stages of development or where plaintiffs seek indeterminate damages. In addition, even where a loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued, it is not always possible to reasonably estimate the size of the possible loss or range of loss. Before a loss, additional loss, range of loss, or range of additional loss can be reasonably estimated for any given action, numerous issues may need to be resolved, including through lengthy discovery, following determination of important factual matters, and/or by addressing novel or unsettled legal questions.

For certain other legal actions, the Company can estimate reasonably possible losses, additional losses, ranges of loss, or ranges of additional loss in excess of amounts accrued, but the Company does not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the consolidated financial statements.

While the Company will continue to identify legal actions where it believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that the Company has not yet been notified of or are not yet determined to be probable, or reasonably possible and reasonable to estimate.

The Company expenses legal costs as they are incurred.

Note 18. Insurance Products and Reinsurance of Certain Risks

RMC Reinsurance, Ltd. is a wholly-owned insurance subsidiary of the Company. The Company sells optional insurance products to its customers in connection with its lending operations. These optional products include credit life, credit accident and health, credit property, vehicle single interest, and credit involuntary unemployment insurance. The type and terms of our optional insurance products vary from state to state based on applicable laws and regulations. Insurance premiums are remitted to an unaffiliated company that issues the policy to the customer. This unaffiliated company cedes the premiums to RMC Reinsurance, Ltd. Life insurance premiums are ceded to the Company as written andnon-life products are ceded as earned.

The Company maintains a cash reserve for life insurance claims in an amount determined by the ceding company. As of December 31, 2019 and 2018, the cash reserves were $9.9 million and $7.1 million, respectively. The Company also purchased a cash collateralized letter of credit in favor of the ceding company. The letter of credit was $0 and $0.1 million as of December 31, 2019 and 2018, respectively.

Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from the Company. Earned premiums are accounted for over the period of the underlying reinsured policies using assumptions consistent with the policy terms. Direct costs included in insurance income, net are claims paid, claims reserves, ceding fees, and premium taxes paid. The Company does not allocate to insurance income, net, any other home office or branch administrative costs associated with managing its insurance operations, managing its captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 101

The following table summarizes the components of insurance income, net during the years ended December 31, 2019, 2018, and 2017:

	Insurance Premiums and Direct Expenses
In thousands	2019			2018			2017
Earned premiums	$	35,544		$	31,095		$	25,860
Claims, reserves, and certain direct expenses		(14,727	)		(16,302	)		(12,799	)
Insurance income, net	$	20,817		$	14,793		$	13,061

The Company was covered under a blanket vendor single interest insurance policy. The policy protected the Company’s interest when the customer failed to maintain the required insurance coverage on an automobile securing an automobile purchase loan. The customer’s loan and monthly payment were not impacted by this insurance policy. This blanket vendor single interest insurance policy was cancelled in March 2018.

The Company offered a self-insured Guaranteed Asset Protection (“GAP”) coverage to customers in North Carolina and Alabama. A GAP program is a contractual arrangement whereby the Company forgives the remaining balance of the insured customer’s automobile purchase loan if the automobile is determined to be a total loss by the primary insurance carrier and insurance proceeds are not sufficient to pay off the customer’s loan. The GAP program revenue is recognized over the life of the loan. Losses are recognized in the period in which they occur. The Company ceased offering the GAP product when it ceased its automobile loan originations in November 2017.

Apart from the various optional payment and collateral protection insurance products that the Company offers to customers, on certain loans, the Company also collects a fee from customers and, in turn, purchasesnon-file insurance from an unaffiliated insurance company for its benefit in lieu of recording and perfecting its security interest in personal property collateral.Non-file insurance protects the Company from credit losses where, following an event of default, it is unable to take possession of personal property collateral because its security interest is not perfected (for example, in certain instances where a customer files for bankruptcy). In such circumstances,non-file insurance generally will pay to the Company an amount equal to the lesser of the loan balance or the collateral value. In recent years, as large loans have become a larger percentage of the Company’s loan portfolio, the severity ofnon-file insurance claims has increased andnon-file insurance claims expenses have exceedednon-file insurance fees. The resulting net loss from thenon-file insurance product has been reflected in the Company’s insurance income, net. The Company evaluated various ways to lower itsnon-file insurance claims, and reduced its utilization ofnon-file insurance beginning in the fourth quarter of 2018. This policy change will cause substantially offsetting increases to insurance income, net and net credit losses in current and future years.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 102

Note 19. Quarterly Information (unaudited)

The following tables summarize the Company’s quarterly financial information for each of the four quarters of 2019 and 2018:

	2019
In thousands, except per share amounts	First		Second		Third		Fourth
Total revenue	$	81,748	$	84,274	$	91,707	$	97,984
Provision for credit losses		23,343		25,714		24,515		26,039
General and administrative expenses		38,183		37,743		40,167		40,891
Interest expense		9,721		9,771		10,348		10,285
Income tax		2,393		2,677		4,105		5,086
Net income	$	8,108	$	8,369	$	12,572	$	15,683
Net income per common share:
Basic	$	0.69	$	0.71	$	1.11	$	1.44
Diluted	$	0.67	$	0.70	$	1.08	$	1.38

	2018
In thousands, except per share amounts	First		Second		Third		Fourth
Total revenue	$	72,625	$	72,416	$	77,916	$	83,749
Provision for credit losses(1)		19,515		20,203		23,640		23,698
General and administrative expenses		34,592		33,215		35,861		36,616
Interest expense		7,177		7,915		8,729		9,643
Income tax		2,697		2,601		2,237		3,022
Net income	$	8,644	$	8,482	$	7,449	$	10,770
Net income per common share:
Basic	$	0.74	$	0.73	$	0.64	$	0.92
Diluted	$	0.72	$	0.70	$	0.61	$	0.90

(1) Third quarter 2018 includes a $3.9 million incremental hurricane allowance for credit losses.

Note 20. Subsequent Events

In January 2020, the Company experienced an isolated information technology infrastructure event that caused an extended outage of its loan management system, which was not fully operational for a total of approximately seven business days between January 5, 2020 and January 16, 2020. The Company determined that an inadvertent operational failure in information technology allowed a system back-up process to run concurrently and inappropriately with normal nightly processes, resulting in the event. The outage affected the Company’s ability to originate branch loans and process certain methods of payment. However, during that time, all branches remained open, serviced customers, and accepted payments via cash, personal check, money order, and certain electronic payment methods. The outage did not impact the security of customer information or the integrity of company and customer data. The event also did not involve an external breach or the compromise of data by any third party. The Company, with the assistance of third-party experts, addressed and resolved the issue. While the event did not impact the Company’s fourth quarter 2019 financial results, the Company expects that the outage will adversely impact net income by approximately $1.3 million in the first quarter of 2020 and by an additional $0.3 million throughout the remainder of the year.

In March 2020, as a component of its strategy to manage the interest rate risk associated with future interest payments on variable-rate debt, the Company purchased an interest rate cap contract for $0.2 million with an aggregate notional principal amount of $100.0 million. The interest rate cap matures in March 2023 with a 1.75% strike rate against theone-month LIBOR.

Regional Management Corp. | 2019 Annual Report on Form 10-K | 103

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019. The term “disclosure controls and procedures,” as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost–benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for the preparation, integrity, accuracy, and fair presentation of the consolidated financial statements appearing in this Annual Report on Form10-K for the fiscal year ended December 31, 2019. The financial statements were prepared in conformity with GAAP and include amounts based on judgments and estimates by management.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with GAAP. Our internal control over financial reporting is supported by internal audits, appropriate reviews by management, policies and guidelines, careful selection and training of qualified personnel, and codes of ethics adopted by our company’s Board of Directors that are applicable to all directors, officers, and employees of our company.

Because of its inherent limitations, no matter how well designed, internal control over financial reporting may not prevent or detect all misstatements. Internal controls can only provide reasonable assurance with respect to financial statement preparation and presentation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that the controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management assessed the effectiveness of our internal control over financial reporting, with the participation of our chief executive officer and chief financial officer, as of December 31, 2019. In conducting this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control—Integrated Framework (2013). Based on this assessment,

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management believes that we maintained effective internal control over financial reporting as of December 31, 2019. Our independent registered public accounting firm, RSM US LLP, has issued a report on our internal control over financial reporting, which appears in Part II, Item 8, “Financial Statements and Supplementary Data.”

Changes in Internal Control

We implemented certain internal controls related to the January 1, 2020 adoption of the new current expected credit loss (“CECL”) model. Because these changes were not fully implemented until January 2020, except for the estimated impact of CECL adoption, we used our then-existing incurred loss impairment methodology, processes, and controls in preparing our 2019 consolidated financial statements included in this report.

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules13a-15(d) or15d-15(d) of the Exchange Act during the period covered by this Annual Report on Form10-K that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required under this item is incorporated herein by reference to the information presented under the headings “Board of Directors and Corporate Governance Matters—Committees of the Board,” “Executive Officers,” “Stockholder Proposals—Proposal No. 1: Election of Directors,” and “Delinquent Section 16(a) Reports” (to the extent reported therein) in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2019.

Our Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”). The Code of Ethics applies to all of our directors, officers, and employees and is posted on the Company’s Investor Relations website under the “Governance” tab atwww.regionalmanagement.com. A stockholder may request a copy of the Code of Ethics by contacting our Corporate Secretary at 979 Batesville Road, Suite B, Greer, SC 29651. To the extent permissible under applicable law, the rules of the SEC, and NYSE listing standards, we intend to disclose on our website any amendment to our Code of Ethics, or any grant of a waiver from a provision of our Code of Ethics, that requires disclosure under applicable law, the rules of the SEC, or NYSE listing standards.

ITEM 11. EXECUTIVE COMPENSATION.

The information required under this item is incorporated herein by reference to the information presented under the headings “Board of Directors and Corporate Governance Matters—Compensation Committee Interlocks and Insider Participation,” “Board of Directors and Corporate Governance Matters—Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation Tables,” “Summary of Employment Arrangements with Executive Officers,” and “Summary of Company Incentive Plans” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2019.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required under this item is incorporated herein by reference to the information presented under the headings “Other Information—Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation Tables—Equity Compensation Plan Information” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2019.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required under this item is incorporated herein by reference to the information presented under the headings “Other Information—Certain Relationships and Related Person Transactions,” “Board of Directors and Corporate Governance Matters—Board Independence,” and “Board of Directors and Corporate Governance Matters—Current Directors and Director Nominees” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2019.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required under this item is incorporated herein by reference to the information presented under the heading “Stockholder Proposals—Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2019.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this report:

(1) Financial Statements:

(i) Reports of Independent Registered Public Accounting Firm

(ii) Consolidated Balance Sheets at December 31, 2019 and December 31, 2018

(iii) Consolidated Statements of Income for the Years Ended December 31, 2019, December 31, 2018, and December 31, 2017

(iv) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019, December 31, 2018, and December 31, 2017

(v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, December 31, 2018, and December 31, 2017

(vi) Notes to Consolidated Financial Statements

(2) Financial Statement Schedules: None. Financial statement schedules have been omitted because the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form10-K.

(3) Exhibits: The exhibits listed in the following index are filed as a part of this Annual Report on Form10-K.

			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File Number		Exhibit		Filing Date
3.1	Amended and Restated Certificate of Incorporation of Regional Management Corp.		8-K		001-35477		3.1		04/02/2012
3.2	Amended and Restated Bylaws of Regional Management Corp.		8-K		001-35477		3.2		04/02/2012
4.1	Indenture, dated June 28, 2018, by and among Regional Management Issuance Trust2018-1, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank		8-K		001-35477		4.1		06/29/2018
4.2	Indenture, dated December  13, 2018, by and among Regional Management Issuance Trust2018-2, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank		8-K		001-35477		4.1		12/13/2018
4.3	Indenture, dated October 31, 2019, by and among Regional Management Issuance Trust2019-1, as issuer, Regional Management Corp., as servicer, Wells Fargo Bank, N.A., as indenture trustee, and Wells Fargo Bank, N.A., as account bank		8-K		001-35477		4.1		10/31/2019

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				Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith		Form		File Number		Exhibit		Filing Date
4.4	Description of Securities		X
10.1	Cooperation Agreement, dated as of January  26, 2018, by and between Basswood Capital Management, L.L.C. and the Company				8-K		001-35477		10.1		01/29/2018
10.2	Seventh Amended and Restated Loan and Security Agreement, dated September  20, 2019, by and among Regional Management Corp. and certain of its subsidiaries named as borrowers therein, the financial institutions named as lenders therein, and Wells Fargo Bank, National Association, as Agent				8-K		001-35477		10.1		09/20/2019
10.3.1	Amended and Restated Credit Agreement, dated as of November  21, 2017, by and among Regional Management Receivables, LLC, as borrower, Regional Management Corp., as servicer, Wells Fargo Bank, National Association, as lender, the other lenders from time to time parties thereto, Wells Fargo Bank, National Association, as account bank, collateral custodian, and backup servicer, and Wells Fargo Securities, LLC, as administrative agent for the lender and other lenders from time to time parties thereto				8-K		001-35477		10.1		11/28/2017
10.3.2	Amendment No.  1 to the Amended and Restated Credit Agreement, dated as of February  20, 2018, by and among Regional Management Receivables, LLC, as borrower, Regional Management Corp., as servicer, Wells Fargo Bank, National Association, as lender, and Wells Fargo Securities, LLC, as administrative agent				10-Q		001-35477		10.3		05/01/2018
10.3.3	Amendment No.  2 to the Amended and Restated Credit Agreement, dated as of October  30, 2018, by and among Regional Management Receivables, LLC, as borrower, Regional Management Corp., as servicer, Wells Fargo Bank, National Association, as lender, and Wells Fargo Securities, LLC, as administrative agent				8-K		001-35477		10.1		11/02/2018

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			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File Number		Exhibit		Filing Date
10.4	Amended and Restated Credit Agreement, dated as of October  17, 2019, by and among Regional Management Receivables II, LLC, as borrower, Regional Management Corp., as servicer, the lenders from time to time parties thereto, the agents from time to time parties thereto, Wells Fargo Bank, National Association, as account bank, image file custodian, and backup servicer, Wells Fargo Bank, National Association, as administrative agent, and Credit Suisse AG, New York Branch, as structuring and syndication agent		8-K		001-35477		10.1		10/22/2019
10.5	Sale and Servicing Agreement, dated as of June  28, 2018, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust2018-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the2018-1A SUBI		8-K		001-35477		10.1		06/29/2018
10.6	Sale and Servicing Agreement, dated as of December  13, 2018, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust2018-2, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the2018-2A SUBI		8-K		001-35477		10.1		12/13/2018
10.7	Sale and Servicing Agreement, dated October  31, 2019, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust2019-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the2019-1A SUBI		8-K		001-35477		10.1		10/31/2019
10.8†	Regional Management Corp. 2007 Management Incentive Plan		S-1/A		333-174245		10.4		06/23/2011
10.9.1†	Regional Management Corp. 2011 Stock Incentive Plan and Forms of Nonqualified Stock Option Agreement (forms for grants prior to October 1, 2014)		S-1/A		333-174245		10.5		08/04/2011
10.9.2†	Form of Stock Award Agreement under the 2011 Stock Incentive Plan		10-K		001-35477		10.4.2		03/17/2014

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			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File Number		Exhibit		Filing Date
10.9.3†	Form of Restricted Stock Award Agreement under the 2011 Stock Incentive Plan (form for director grants)		10-K		001-35477		10.4.3		03/17/2014
10.9.4†	Form of Nonqualified Stock Option Agreement under the 2011 Stock Incentive Plan (form for grants on or after October 1, 2014)		8-K		001-35477		10.1		10/07/2014
10.9.5†	Form of Performance-Contingent Restricted Stock Unit Award Agreement under the 2011 Stock Incentive Plan		8-K		001-35477		10.2		10/07/2014
10.9.6†	Form of Cash-Settled Performance Share Award Agreement under the 2011 Stock Incentive Plan		8-K		001-35477		10.3		10/07/2014
10.9.7†	Form of Restricted Stock Award Agreement under the 2011 Stock Incentive Plan (form for employee grants)		8-K		001-35477		10.4		10/07/2014
10.10.1†	Regional Management Corp. 2015 Long-Term Incentive Plan (As Amended and Restated Effective April 27, 2017)		8-K		001-35477		10.1		05/02/2017
10.10.2†	Form of Nonqualified Stock Option Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to April 27, 2017)		8-K		001-35477		10.3		04/28/2015
10.10.3†	Form of Performance-Contingent Restricted Stock Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to March 29, 2016)		8-K		001-35477		10.4		04/28/2015
10.10.4†	Form of Cash-Settled Performance Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to March 29, 2016)		8-K		001-35477		10.5		04/28/2015
10.10.5†	Form of Restricted Stock Award Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to April 27, 2017)		8-K		001-35477		10.6		04/28/2015
10.10.6†	Form of Stock Award Agreement under the 2015 Long-Term Incentive Plan (form for grants prior to April 27, 2017)		8-K		001-35477		10.7		04/28/2015
10.10.7†	Form of Performance-Contingent Restricted Stock Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after March 29, 2016 through April 26, 2017)		8-K		001-35477		10.1		04/01/2016
10.10.8†	Form of Cash-Settled Performance Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after March 29, 2016 through April 26, 2017)		8-K		001-35477		10.2		04/01/2016

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			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File Number		Exhibit		Filing Date
10.10.9†	Form of Nonqualified Stock Option Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)		8-K		001-35477		10.2		05/02/2017
10.10.10†	Form of Performance-Contingent Restricted Stock Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)		8-K		001-35477		10.3		05/02/2017
10.10.11†	Form of Cash-Settled Performance Unit Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)		8-K		001-35477		10.4		05/02/2017
10.10.12†	Form of Restricted Stock Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)		8-K		001-35477		10.5		05/02/2017
10.10.13†	Form of Stock Award Agreement under the 2015 Long-Term Incentive Plan (form for grants on or after April 27, 2017)		8-K		001-35477		10.6		05/02/2017
10.11†	Regional Management Corp. Annual Incentive Plan (as amended and restated effective March 23, 2015)		8-K		001-35477		10.2		04/28/2015
10.12†	Description ofNon-Employee Director Compensation Program		10-Q		001-35477		10.4		08/06/2018
10.13.1†	Employment Agreement, dated as of June  14, 2016, by and between Peter R. Knitzer and Regional Management Corp.		8-K		001-35477		10.1		06/14/2016
10.13.2†	First Amendment to Employment Agreement, dated as of August  30, 2017, by and between Peter R. Knitzer and Regional Management Corp.		8-K		001-35477		10.1		09/01/2017
10.13.3†	Employment Agreement, dated as of May  6, 2019, between Peter R. Knitzer and Regional Management Corp.		8-K		001-35477		10.1		05/08/2019
10.14.1†	Employment Agreement, dated as of May  15, 2017, by and between John D. Schachtel and Regional Management Corp.		8-K		001-35477		10.1		05/15/2017
10.14.2†	First Amendment to Employment Agreement, dated as of August  30, 2017, by and between John D. Schachtel and Regional Management Corp.		8-K		001-35477		10.2		09/01/2017
10.15.1†	Employment Agreement, dated as of August  30, 2017, by and between Donald E. Thomas and Regional Management Corp.		8-K		001-35477		10.3		09/01/2017

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				Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith		Form		File Number		Exhibit		Filing Date
10.15.2†	Letter Agreement, dated as of February  12, 2019, between Donald E. Thomas and Regional Management Corp.				8-K		001-35477		10.1		02/12/2019
10.16†	Employment Agreement, dated as of August  30, 2017, by and between Daniel J. Taggart and Regional Management Corp.				8-K		001-35477		10.4		09/01/2017
10.17†	Employment Agreement, dated as of August  30, 2017, by and between Brian J. Fisher and Regional Management Corp.				8-K		001-35477		10.5		09/01/2017
10.18†	Employment Agreement, dated July  10, 2019, between Robert W. Beck and Regional Management Corp.				8-K		001-35477		10.1		07/16/2019
10.21†	Form of Retention Award Agreement				8-K		001-35477		10.1		03/13/2015
21.1	Subsidiaries of Regional Management Corp.		X
23.1	Consent of RSM US LLP		X
31.1	Rule13a-14(a) /15(d)-14(a) Certification of Principal Executive Officer		X
31.2	Rule13a-14(a) /15(d)-14(a) Certification of Principal Financial Officer		X
32.1	Section 1350 Certifications		X
101	The following materials from our Annual Report on Form10-K for the year ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018, (ii) the Consolidated Statements of Income for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, (iii) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text		X

† Indicates a management contract or a compensatory plan, contract, or arrangement.

ITEM 16. FORM10-K SUMMARY.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Regional Management Corp.
Date: March 13, 2020		/s/ Peter R. Knitzer
		Peter R. Knitzer
		President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter R. Knitzer and Robert W. Beck, and each of them, jointly and severally, as true and lawfulattorneys-in-fact and agents, with full power of substitution andre-substitution for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all which saidattorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 13, 2020.

/s/ Peter R. Knitzer	Name: Title:	Peter R. Knitzer President, Chief Executive Officer, and Director (principal executive officer)
/s/ Robert W. Beck	Name: Title:	Robert W. Beck Executive Vice President and Chief Financial Officer (principal financial officer)
/s/ Michael S. Dymski	Name: Title:	Michael S. Dymski Vice President and Chief Accounting Officer (principal accounting officer)
/s/ Carlos Palomares	Name: Title:	Carlos Palomares Chair of the Board of Directors
/s/ Jonathan D. Brown	Name: Title:	Jonathan D. Brown Director
/s/ Roel C. Campos	Name: Title:	Roel C. Campos Director
/s/ Maria Contreras-Sweet	Name: Title:	Maria Contreras-Sweet Director

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/s/ Alvaro G. de Molina	Name: Title:	Alvaro G. de Molina Director
/s/ Michael R. Dunn	Name: Title:	Michael R. Dunn Director
/s/ Steven J. Freiberg	Name: Title:	Steven J. Freiberg Director

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