Alexander Villalobos-Morsink

Alexander Villalobos-Morsink asked about Regional Management's pricing strategy given declining interest rates, specifically if the company can maintain current pricing levels or if yields on the loan book might decrease. He also inquired whether the company has been extending loan durations programmatically to manage customer payments, similar to other firms.

Answer

CFO Harp Rana explained that pricing is set within a market range to avoid adverse selection and optimize opportunity, while also considering the consumer's ability to pay and their focus on monthly payment dollars. She stated that the company has not programmatically extended loan durations. However, she noted that the auto-secured product naturally comes with a longer loan term, and curing tools are used on a loan-by-loan basis for customers facing payment difficulties to ensure their ability to repay.

Alexander Villalobos-Morsink from Jefferies questioned the future of revenue yields in a potential lower interest rate environment and asked about the potential to source lower-cost funding.

Answer

EVP, Chief Financial & Administrative Officer Harp Rana responded that revenue yield is determined by competitive pricing for the right customer and product. Regarding funding costs, he clarified that despite potential Fed rate cuts, the company's cost of funds is expected to rise as older, low-rate securitizations mature and are replaced at current market rates, guiding for an increase to 4.5% in Q4.

Alexander Villalobos-Morsink asked for more specific guidance on full-year expenses and requested details on consumer spending behavior, particularly whether the company's data indicated any pull-forward of demand.

Answer

CFO Harpreet Rana declined to provide full-year expense guidance but guided Q2 G&A expenses to be approximately $65.5 million, noting that while expenses will rise with loan volume, the company remains focused on prudent cost management. CEO Robert Beck addressed consumer behavior, stating they are not seeing evidence of accelerated or pull-forward spending, as their customer segment typically lacks the excess funds for such activity. He emphasized that recent expense growth was not from operational bloat but from strategic investments in growth, such as new branches and marketing, which are already generating positive returns.