Regional Management Corp (RM) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen. Will come to the Q1 2015 Regional Management Corp. Earnings Conference Call. My name is Derek and I will be your operator for today.

(Operator Instructions)

I would now like to turn the conference over to Mr. Garret Edson, Senior Vice President of ICR. Please proceed.

Thank you, Derek, and good afternoon. By now everyone should have access to our news announcement, which was released prior to this call, which may also be found on our website at RegionalManagement.com. Before we begin our formal remarks, I need remind everyone that the part of our discussion today may include forward-looking statements which are based on the expectations, estimates and projections that management has of today.

The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict, and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Regional Management Corp.

We disclaim any intentions or obligations to update or revise any forward-looking statements, expect to the extent required by applicable law. Also, our discussion today may include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement and posted on our website at RegionalManagement.com.

I would now like to introduce Michael Dunn, CEO of Regional Management Corp.

Thanks, Gary.

Good afternoon everyone, and welcome to our first quarter 2015 Earnings Conference Call. I'm here with our Executive Vice President and CFO, Don Thomas, he will speak later about our first quarter financial results, and I'm also joined by other members of our financial team.

On our previous call we discussed specific objectives we want to accomplish in the short-term, focused broadly on reducing and managing our risk exposure, run our small and large loan portfolios and controlling expenses. We made solid progress during the first few months and today we're pleased to report our first quarter results are further evidence of the progress we've made on most of these objectives.

To start, in the quarter, we continue to improve the overall credit quality of our loan portfolio. The total delinquency profile, recorded as of March 31, 2015, is the lowest for the Company since the IPO in March 2012. Total delinquencies, as a percent of finance receivables, were 19.2%, and importantly, the early-stage buckets are showing significant improvement due mainly to the credit and marketing improvements we made in the beginning of the fourth quarter of last year.

We also continue to believe that the convenience check loan issue from last year had been fully reflected on our financial statements, and we should see the last remaining charge-offs from these solicitations in our second quarter results, but we also believe that these have been fully reserved in the financials.

We also talked before about driving receivables growth throughout 2015 by continuing our focus on the core branch small and convenience check loan categories, and also increasing our emphasis on the opportunity we see in our large loan category. I'm pleased to say that aided by our new and expanded marketing initiatives, we achieved considerable success in these portfolios in the first quarter. As of March 31, 2015 our large loan category grew by 51.3%, branch small loan receivables grew 21.6%, and our convenience checks grew 9.7%, all on a year-over-year basis. And perhaps even more impressive, on a sequential basis, our large loan receivables as of March 31, grew 37% compared to December 31, 2014.

The first quarter is the start of our slowest origination period from the seasonal perspective, and we normally see a net decline in customer accounts and portfolio receivables from December to March, as customers use their tax refunds to pay down or pay off our loans. Our ability to generate these results during the seasonally slow quarter for our industry increases our confidence and our ability to continue these strong results going forward. As a result of the focus on our core products, we ended the quarter with total finance receivables of $526 million, down only 3.7% from December 31, better than a 50% improvement from the 7.9% decline we reported from December 31, 2013 to March 31, 2014, and importantly receivables were up 5%, or $24 million, versus the first quarter of 2014.

Our expenses were high in the first quarter, in part driven by $2.7 million of nonoperating expenses, and an increase of $1.5 million in marketing expense, which was related to our portfolio growth plans. $600,000 of the nonoperating costs relate to the GOLDPoint system implementation, and the termination of our agreement with them. As we know that we do not believe that the termination of the agreement will have a material effect on our operations, and we're continuing to use our current loan management system for the near term. We now intend to reevaluate the various loan management system capabilities available in today's markets.

Also on expense, we recognize that we have work to do on this very important P&L line. The work that began in the first quarter may have included some new expense disclosures in our Press Release that would help provide more insight into our expense components and to allow for better tracking over time.

Headcount in our existing branches as of March 31, was reduced by 62 staff members from the end of the fourth quarter, principally reflecting the better quality of our credit portfolio and the abandonment of our system conversion project. We expect to reduce the headcount at our branches further in the second quarter. Office staffing has essentially been completed with the hiring of our Chief Credit and Chief Compliance Officers in the last quarter, and should be -- and should level off from this point going forward. Overall we believe we remain solidly on the path we established in the prior quarter, especially in terms of improving delinquencies and growing the large loan product category, and we're optimistic that we're positioned well to return to bottom-line growth in the near and long-term.

In terms of the regulatory environment, I just want to touch briefly on the proposals issued by the CFPB last month. As everything appears to be in a very preliminary stage, it's premature for us to speculate on what the final rules may entail. That said we just know that the initial focus of the proposal appears to be unassuring that consumers can adequately repay their loans, and that is something we've been doing at regional since our founding by underwriting our loans to consumers credit history. In addition, our customers have always repaid their loans at our branches, and we currently do not access customer accounts at other institutions. In the coming months, we will continue to build our compliance infrastructure to observe how the recent CFPB proposal evolve through the rule making process, and endeavor to provide competitive saving transparent products to our consumers.

Before turning the call over to Don, I'll take you through some first-quarter highlights. Diluted earnings per share for the first quarter was $0.31, but excluding approximately $2.7 million in nonoperating charges, non-GAAP diluted earnings per share was $0.44. Total delinquencies, as I mentioned before as a percentage of total finance receivables, as of March 31, were 19.2%, compared to 21.7% as of March 31, 2014, and 22.6% as of December 31, 2014. Again, our totally delinquencies as a percent of receivables also represent the lowest since the IPO in March 2012.

The first-quarter revenue increased 5.9% from the prior period. Our total revenue yield for the first quarter was 39.4%, an increase of 170 basis points from the prior year period. Importantly, as I noted earlier, the combined branch small loan and convenience check portfolios increased 14.3% year-over-year, and our large loan portfolio increased 51.3%, and during the quarter we opened up six new branches, bringing our branch network total to 306 branches as of March 31, 2015, and since then we've opened up two additional branches and are maintaining our projection of opening between 25 and 30 available branches in 2015.

And with those brief comments, I will turn it over to Don.

Thanks, Mike.

I'll start with some additional comments on our loan portfolio. As Mike mentioned, total financed receivables at March 31, 2015 were $24.2 million greater than the prior year period. While the branch small, convenience check and large loan portfolios were collectively up $58.1 million, that increase was dampened by declines in auto and retail, totaling $33.9 million. The $28.4 million decline in the auto portfolio is the largest portion of the dampening effect incurred because we've been cautious about the auto market over the past 18 months or so.

However, there are areas in the auto market that we feel we can pursue and, like in first quarter, we revised our auto program accordingly. We believe the auto program changes are showing some improvement and expect the auto portfolio will remain near current levels through the second quarter, at which time we will have completed our strategic review of the product.

Total net loan originations increased 22.4% year-over-year. The increase in originations was driven by branch small loans, convenience checks and large loans. Originations for the large loans, in particular, were up 188% year-over-year, and 68.2% sequentially, reflecting the early success we're having growing out this portfolio with pre-approved offers and other marketing programs.

We spent $1.5 million more in marketing in the first quarter of 2015 than in prior year periods. This expenditure help drive the year-over-year growth in originations, and significantly reduced the typical seasonality we see in our business during the first quarter. Given the success we've seen thus far, and additional marketing initiatives on tap for the remainder of the year, we expect our marketing spend will remain higher than the prior year spend throughout 2015.

Portfolio growth drove 87% of the increase in interest and fee income in the first quarter of 2015 over the prior year period, while increased yield provided the other 13% increase. Our total interest and CD yield for the first quarter was 35.3%, up 180 basis points from the prior year period.

Improvement primarily came from convenience check loans, we saw yield increase of 240 basis points. We're pleased that branch small loans, convenience checks and large loans provided the entire increase in the interest and fee income from the prior year period, and they will remain the core drivers of our growth strategy for the foreseeable future.

Interest income for the first quarter decreased $366,000 year-over-year and represented 5.6% of revenues. The year-over-year decrease was primarily the result of increased claims costs. Other income for the first quarter increased $324,000 year-over-year.

Noted previously, the year-over-year increase is due to the implementation of a late fee in North Carolina, as part of the modernization of their consumer finance law. As a reminder, approximately 15% of our accounts are in the State of North Carolina.

Provision for credit losses in the first quarter was $9.7 million, representing a 42.7% decrease year-over-year, and a 39.1% sequential decrease. Net charge-offs in the quarter totaled $13.3 million, exceeding the provision in the first quarter of 2015, due to the release of a portion of the allowance recorded in 2014 for convenience checks.

At the back of the Press Release we provide information about the $17.9 million remaining balance of summer 2014 convenience check loans. The current allowance for these loans covers 100% of 30-day and over contractual delinquencies, and 69% of accounts one or more days past due. As we said in our fourth quarter call we believe the risk related to these lower credit quality convenience check originations was captured in our 2014 financials.

Turning to delinquencies, total accounts one or more days past due increased $23 million sequentially, with a large majority of the decline coming from early-stage delinquencies. Delinquency was sequentially lower in all product categories due to the credit marketing changes made beginning in the fourth quarter of 2014. Annualized net charge-offs were 9.9%, average finance receivables for the first quarter of 2015, slightly above the 9.7% figure for the first quarter of 2014, and significantly below the 13.9% fourth quarter 2014 figure.

Mike mentioned we've included some expense trend information at the back of the Press Release to help you better understand our expenses. Personnel costs in the first quarter of 2015 include $2.1 million of nonoperating charges costs for our CEO stock grant, which was disclosed in an 8-K during the quarter, and for the retirement agreement with our former Vice Chairman.

As we recorded last quarter, personnel cost for the fourth quarter of 2014 include $1.2 million of nonoperating costs for the resignation of our former CEO. Excluded in these nonoperating items, personnel costs were up $1.8 million sequentially.

For home office, headcount increased sequentially by 20 employees, which increased our cost in the first quarter of 2015 by approximately $0.3 million. We now have a full complement of home office personnel, and our expense should level off from this point forward.

The sequential change in branch personnel costs is further explained by the lower number of loan originations that occurred in the first quarter, which means we deferred $1.4 million less in compensation related to deferred loan costs than we did in the fourth quarter. Personnel costs for the first quarter of 2015 increased $8.6 million compared to the prior year period, and let me remind you that the first quarter of 2014, we changed the Company's vacation pay policy and recorded a $1.4 million benefit in that period.

Excluding these nonoperating items, personnel costs were up $5.2 million in the first quarter of 2015 versus the prior year period. Existing branch headcount was up 189 employees, which increased our costs by approximately $2.7 million.

Approximately 75 employees were hired with 25 new branch openings between March 31, 2014 and March 31, 2015. The rest of the employees were added to deal with our previously high delinquency level, but now that our delinquency is in good shape we expect further reduction in branch headcount in the second quarter of 2015, which we will carefully balance with our staffing needs related to both branch and portfolio growth.

Also, compared to the prior year period, on January 1, 2015, we implemented a revised branch incentive program that rewards employees in connection with our corporate goals. Expense for the old branch incentive programs started lower and increased in later quarters. The new incentive plan has higher expense in the first quarter, and then tapers off the rest of the year. Therefore, we incurred $1.8 million in increased costs from the new branch incentive programs in the first quarter of 2015, compared to the prior year period, as the new program, we're watching it closely and we'll adjust it as necessary to properly balance results and rewards.

Other expenses for the first quarter of 2015 increased $1.9 million, an increase of 45% year-over-year. The increase is driven by $0.4 million, or termination costs for the GOLDPoint agreement, as well as increases for credit risk consulting, legal expense related to the securities contracts and lawsuit, executive compensation consulting and legal costs, and costs related to a larger number of branches. Collectively across our income statement, nonoperating loan system implementation costs, including the agreement termination costs, were $0.6 million in the first quarter.

Diluted gap earnings per share for the first quarter was $0.31, compared to $0.43 per share in the prior year period, excluding nonoperating costs of $2.1 million for compensation-related items, and $0.6 million for loan system implementation costs, non-GAAP diluted earnings per share for the first quarter was $0.44. Regional Management continues to maintain the ability to fund our growth strategy. In March 31, 2015, Regional Management had finance receivables of $525.9 million, and outstanding debt of $312.5 million on our $500 million Senior Revolving Credit Facility. The credit facility has an expansion feature to grow the $600 million and matures in May 2016.

That concludes my remarks, now I'll turn the call back to Mike for some closing comments.

Thanks, Don.

In closing we're pleased with our continuing progress, especially in our large loan portfolio growth. We remain focused on improving our expense management and growing our top and bottom lines. The operating improvements, tightened risk management policies, and our marketing initiatives implemented during the last two months are beginning to produce the results we anticipated, and more importantly are laying the foundation for an increased profitability and creating long-term shareholder value.

Thanks for your time and interest, I would now like to open up the call for questions.

(Operator Instructions)

Sanjay Sakhrani, KBW.

Thank you, appreciate it, good afternoon. Thank you for all the color on expenses, but I still have a couple more, if you don't mind. So if we think about the personnel costs going forward, I know you guys alluded to the fact that it should come down. Can you just talk about dimensions of how much it can come down throughout the year? And then, I've got a follow-up question on marketing.

So, Sanjay, yes, on the branch side, what we tried to do on page 12 of the press release, was to kind of show you the patterning of the expenses in the branches for the four quarters of 2014 and into the first quarter 2015. And as I said, and as Don said, if you look at the way it lays out, we built -- we had increased people in the branches in 2014 for a couple of reasons.

One, we started in the first quarter when we started to add some people to deal with the delinquency problems throughout the year. We added some more, we added some more for the increased number of branches, and at the end of the fourth quarter, the new management team, we were -- as the new management team we were reluctant to change anything in terms of the branch headcount until we were sure that the issues that we were dealing with on delinquencies, our issues around loan implementations, system conversion, we had that sort of figured out.

First quarter, we were feeling more comfortable, beginning actually in the January month, and we started to let the headcount decline, mostly from turnover of the people. And we took out, as it says here on page 12, 62 from the existing branches, we added 15 in the new branches.

Our sense with the branches, the core branches, not the 2015 new branches, would be by the end of the second quarter, I think, that we will have that right sized, if I could use that expression. My sense would be not quite the same decrease that we saw from the fourth to the first, but maybe two-thirds of that or something like that.

In terms of home office, again, of course in this business, as most businesses I suppose, or a lot of businesses anyway, headcount drives expense. As you can see we added 20 folks from the end of the fourth quarter to the end of the first quarter in home office. And as I said in my remarks, we added -- and I think we also issued a press release on this as well, we hired a Chief Credit Officer. I think it was in early January we put out a press release.

And, in the credit functional loan, we added about 10 folks, a combination of credit people and collectors, and we added some people in compliance and added in a few other areas. But as Don said in his remarks, at 125 we think maybe we have another one or two to add at home office mostly for credit, but we think we have, as Don used the word, the full complement of people.

So the expense for our home office should level off and flatten out, but we also have some, as Don mentioned, and we have also on page 12, we also had some nonrecurring, nonoperating items in the first quarter that won't be there going forward. So, when you take a look at the home office G&A expenses of $10.8 million from the first quarter, that number will come down because of the absence of the nonrecurring items, and expenses in the branches should also come down a little bit as we take more people out.

And, as Don said, as the Regional Rewards, which is the new rewards system or bonus system for the branches, will display the trend that Don talked about, which is a little higher in the first half of the year and a little lower going forward. So our expectation is expenses going forward will be below what we reported in the first quarter.

Okay. Great. I guess a follow-up on advertising. When we think about your advertising run rate today it's almost 2 times what it was in 2013. The portfolio has shrunk some.

Can you talk about like what's changed that you guys have to advertise a fair amount more? I mean is there more targeted marketing that's being driven out of the branches, or what exactly is driving that higher cost?

Well, just a couple of reference points. One is, if you look at the first quarter of last year, we reported a significant increase in marketing expense over the first quarter. And then if you take a look again on page 12, we give the layout for five quarters.

First quarter of last year was a very low level of marketing expense for a variety of reasons, including switching vendors, which as you all know, didn't go so well for us. But, we had a low level of marketing spend in the first quarter, but if you take a look at the second through the fourth quarters of last year, there are about $1.7 million to $1.8 million.

In this year's first quarter, most of the money we spent on the fourth quarter and prior was, I'm going to say, almost entirely focused on not only on small loans, and really a small loan for convenience checks and invitation to apply -- thank you. What we've done in the first quarter is we, again, we recognize this is a slow quarter seasonally. We didn't want -- what happened last year with our portfolio was we declined from the fourth of 2013, and we didn't get back to the December 2013 level until September of 2014, and we didn't want that to recur this year, so we spent more marketing dollars to make sure that didn't happen.

And, as we said, we were successful in that we had half of the decline we had a year ago. And also we're spending about half the money that spent this year was on the large loan portfolio, large loan offers, if you will. These are all pre-qualified, these are not convenience checks, these were all pre-qualified offers to customers, and very successful. We were up from $4 million to $6 million at the end of the fourth quarter. We ended the first quarter at $62 million.

So, this business is a business where you have to spend marketing dollars in order to drive portfolio growth, and we feel really comfortable about the level we spent. Our expectations as we go forward on this, is that this quarter was probably one of the higher quarters that we'll see over the next couple quarters.

In the second quarter, we have a customer appreciation, fourth quarter we have a customer appreciation, but I think our spending levels on marketing will be higher than they have been. Even a little lower than we had in the first, but higher than they've been in the past four or five quarters on average.

Okay, great. I guess I have a question on credit quality, but I'll let my peers ask, and I have another follow-up question. Just on Leaf and OneMain, I mean are there any opportunities that are created for you guys as a result of that combination? I mean is that something you're actively kind of trying to find out?

Well, I think we've talked about this a little bit to some of you. One of the things we see with the combination is, and we've seen this personally, professionally as well, is companies that are of like-size and are merging, what typically happens is a lot of inward focus, and so I think that will happen.

The reality is we're in 8 states, the combined company is probably in 42, 43 states. Their portfolio, and a large loan combined, is around 11 on a pro forma basis, $11 billion, sorry. Our large loan portfolio is $62 million. So I think we have a lot of opportunity to grow irrespective of what happens with OneMain and Springleaf, especially in the large loan category, and they don't play in small loans like we do.

And Jody Anderson came from OneMain, as our President, he has a very good sense for where OneMain was successful, in terms of branches and states and those kinds of things, and we have a good sense for that as well. So I think we have some expansion opportunities. I don't think it's related specifically OneMain or the combination, but we're looking at what we can do on the expansion front.

All right, great. Thank you.

Bob Ramsey, FBR.

Good evening, guys. Just wanted to touch on the provision. Obviously a lot of improvement in your quoted metrics this quarter, and the provision this quarter look a lot more like 2012 or 2013 as a percent of revenues than last year. Are those years good ways to think about the full-year credit costs, something in the 20% to 22% of revenues kind of ballpark?

Let me just answer that in a different way, and then I'll let Don answer the percent of revenue. The way we typically look at it internally, or we look at it now internally, I should say, is as a percent of receivables, and again there's a mix on that as well, because of the composition of the receivable base. But, in the fourth quarter we were at 13.4%, I think it was, and in the first quarter 9.9%, [fourth-quarter comparison] 9.7%.

Our expectations -- these are write-offs, this is not the provision I'm talking about, these are write-offs. And, I think the write-offs obviously drive the provisioning. There are two things that are involved in the provisioning, one is a the write-offs and two is the level of delinquency, so as it relates to the provisioning, delinquencies have improved so that shouldn't require us to add anything in addition to what we already have, all other things being equal because the delinquencies are better.

And on the write-offs this quarter, first quarter, 9.9%, second quarter as I mentioned, we'll have the remaining effects of the bad solicitations we did in 2014 hit our write-off line. But, I would expect that going forward we'll be 20% better on the write-off line, 15% better, something like that, going forward because of the absence of the convenience check issues, plus, for the balance of 2015, plus the better quality portfolio.

Don, you want to add on the percent of revenue as you guys thought about it in the past?

Well it's obviously changing, I mean, with Dan Taggart coming on board and building a team, and spending a lot of time with our underwriting and the things that we're doing it's getting better. So, we're not sure exactly where that will come out, but it's going to be better than we've seen over this last year, when things were not working very well for us. As a percent of revenues, previously I might've said 23%, 24% might be a good place for you to be short term until we prove to you we can do better, and I guess that's what I'd offer up to you, Bob.

Okay.

Maybe the right way to look at it is, look at both those things and it's going to be the range I think.

Okay, and thinking about it from the net charge-off sort of approach, is it your expectation that through the course of the year your provision would be less the net charge-offs, like this quarter, as you continue to kind of work down some of the excess reserves that you built up at the end of last year?

No, I think it's -- when you take a look at the disclosure that we have, just making sure I know where it is, take a look at the disclosure on page 10, and as Don mentioned in his comments, we built the reserves in the third quarter and a little bit in the fourth quarter of 2014 for the convenience check problems. And, I'm not going to remember the total that we showed at the end of the fourth quarter, but it was in the $12 million, $13 million range if I recall correctly.

And I think what we've done since then is, that was reserves specific to the convenience checks, and as the convenience checks write-offs have come through, we've basically taken them against that reserve. Once the remaining convenience check write-offs are taken, which is going to happen in the second quarter, early in the second quarter, we utilize a fair portion of this reserve.

And then going forward, we'll -- the reserve will be -- well the provision in the reserve, both I suppose, will be reviewed and we will add to the reserve, write-offs will be one of the components of our reserve adequacy. Delinquency is another component of reserve adequacy and the loan growth.

So, I guess my expectation going forward is, the short answer to your question, is no, I don't expect to see any significant releases of reserves. And, I think we will build reserves as we hopefully build our portfolio, and that's just a function of the growth in the portfolio.

Great.

Prior losses will be very consistent going forward, and then only reason that you'll build reserves, hopefully, again, delinquencies will remain hopefully good. And, the only reason you'd build reserves, going forward, is because you have to accommodate the increase of the size of the portfolio.

Okay, great. Last question, I'll hop out, but coming at expenses again, I know you all have talked about the desire to sort of improve efficiency on the model overall, and it looks like, even backing out the nonoperating items this quarter, efficiency was higher than it was last year. Just curious if you all have got a target for efficiency this year?

I think that the efficiency will be derived at the end of the year from all of the initiatives that we have going on, on expenses. So again, what I would say would be this, that I would -- our expectation is with lower headcount going into the second quarter on the branches than we had going into the first quarter, and with additional reductions in headcount in the branches in the second quarter, my expectation -- and the combination, as Don also said, with the regional rewards having a slightly lower number in the second quarter, my expectation is the branch expense should be lower in the second quarter and then flatten down.

And, the only adds to the expenses and branches from that point, going forward, should be because of new branches. And then home office will be flat at 125 people, give or take one or two for additional adds on the credit side, and then, hopefully, the absence of these nonoperating items. So on page 9 we disclose efficiency at 62% in the quarter, and it's up from 53%, right now it's at 52.8% and 40%, our expectations by the end of the year is that should come, by the end of the year, much closer to the end of the fourth quarter or slightly lower than that.

But again, what we're trying to do is manage expenses as a discrete line item, not targeting, at this point, for this year any target that a percentage of revenue. But basically trying to leverage the infrastructure expense that we currently have, and not had anything to it, allow our portfolio to grow, spend some more marketing dollars, we need to spend to support the growth in their portfolio, and allow revenue to take off from that point.

Okay, thank you.

Eric Jaschke, Stephens.

Thanks for taking my question. My first one's just kind of around the large loan portfolio growth. Can you tell us a little bit about kind of the customers that are taking on this product? Are they current customers, former customers, new customers? Then also, given kind of the seasonality in Q1, how are you thinking about the growth of this portfolio over the remainder of the year?

Sure. We had $46 million at the end of the fourth quarter in the large loan category, and we ended the first quarter at around $62 million, if I'm remembering my numbers correctly. And so that $16 million of growth, as I mentioned before in on of the other questions, we increased the marketing efforts.

Well I shouldn't even say that, actually what we really ended up doing is we initiated the marketing efforts on large loans in the first quarter in a significant way by mailing out, as I said before, pre-qualified offers to folks who we think would be credit worthy for these large loans. Large loans, I think on average, were about $3,800, the offers were to these folks, and clearly a better credit quality customer than our small loans, or our convenience check customers.

The $16 million in growth we got in the first quarter, $9 million was from net new customers. They came in from a variety of the channels, but mostly from the mail, but we also got some through the internet and through the branch channels. The other $7 million in growth came from a combination of up-selling our existing customers out of the small loans, or the auto loans, or from former borrowers that we contacted through the branch infrastructure. So that's the growth we had in the first quarter, and the credit quality of those customers are different and better than the small loan customers.

Going forward, again, if you go back to what I said about OneMain and Springer with an $11 billion portfolio, we think there's ample opportunity for us to continue to grow that portfolio. And we're looking at -- we've had matrixes out in the field, which tell them how to make the loan, we've had training that 100% of our branch personnel have been trained in how to sell a large loan, which is new for this Company.

This Company was typically a convenience check and small loan customer, small loan company, so we had training out there, we have matrixes out there, we have the regional awards, provides them with bonuses. So, we think we have all the tools in place, and we don't see any reason why we can't continue to grow this portfolio. Maybe not the same percentage growth, and maybe the same dollar growth for the balance of the year.

Great, thanks for the detail. And then what about, kind of, with the cancellation of GOLDPoint earlier in the quarter, can you just update us on kind of how your thinking about your loan management systems, kind of where you are in the process of possibly evaluating some new alternatives, and kind of what benefit you expect to see from installing something different?

Sure. It was regrettable with GOLDPoint, we thought that would provide us with some enhanced capability, but it didn't work out. We're on a system called Paradata, and we've been on that system for about 15 years. What we're doing currently is we're getting proof functionality from that vendor, which allows us to do some of the things that we wanted to do, in terms of product enhancements and customer interface, and those kinds of things. And we're working on it currently.

But concurrently, we brought in an outside consulting firm to help us with a vendor selection process, and we anticipate that this will take us over the next couple of months to figure that out because part of what we're doing is we're re-mapping all of our business processes, and ensuring what it is we exactly want from the new vendor for our loan processing system.

So we're currently working with our current vendor to help us get some more functionality, more efficiency that we can get from them. And, at the same time, we're looking to sign up with a new vendor to provide us with the functionality that we want. We anticipate, as I said, that process to take a couple of months before we select a new vendor.

Great, thanks a lot.

John Hecht, Jefferies.

Thanks very much. First question, Don, forgive me if you mentioned this, but what would your same-store sales like on a receivable basis, I guess, been? So same-store receivable growth, ex the contraction of the auto portfolio?

John, great question. We've done a little bit of dealing around this, actually within the last 30 to 60 days, and I think we had determined there might be as much as a 5% impact on our same-store sales calculation from the auto loan decline. So reporting down some, we would certainly be down a lot less if the auto loan portfolio would be up a little bit, had the auto loan portfolio had not declined.

Okay, great that's what I was looking for. Second question is, for all intents and purposes, the material credit issues are behind you, you can start focusing, I guess, on growth and a lot of the commentary has been around that.

I'm just wondering how should we think about, I guess the prioritization of the growth story, is this a maximizing the infrastructure, drive receivables to the branches now, and increase efficiencies? Or, is it get back to maybe what the post-IPO story was, which was new branches and season those branches? How do we think about the focus of growth right now?

Yes, I think that it's a combination of things, since most things usually are. So, one of the things we're doing is we see this on large loans, we see huge opportunity, as I mentioned, and our expectation to advance it to somebody else would be to continue to grow that portfolio significantly over the balance of the year through marketing activities, through in branch activities, as well.

But, we're not going to give up the bread and butter for this business, which is the small loans and convenience check products. And, I think we did very well in the first quarter given that it's a seasonally slower quarter for us, for the industry rather, and I think we'll continue to do that.

So our strategy is, if you take a look at an average branch our focus fell by $1.8 million per branch. We think that, that is -- and that's obviously they are branches much higher branches, some of the newer branches much lower, it's not a strategy here that just is going to be based upon the expansion of branches and volume growth just solely from the branches. We continue, as I said in my comments, opening up 30 branches or so this year. We have already opened up eight, six in the first quarter, two in the second quarter, so we'll continue to open up branches, and that will be part of what we want to do.

Somebody asked the question about new territories, we'll look at that as part of our branch strategy and expansion strategy, as well, but we also are focusing on the operating results of our existing branches. Those branches that have been open for 15 months or so, and longer, and as you might expect in the 300 branch network, the performance of those branches as it relates to growth and profitability are, at best, spotty.

So one of the things we think we can do from a growth perspective is get some of those branches that haven't experienced the growth that they should have been experiencing over the past couple of years, to continue to grow again. Whether that means we need to provide training, which we've done and we'll do that, if it means we need to bring more mail into those branch trade areas, we'll do that. We're focusing on all that.

So I think we'll achieve the growth strategy for the Company through better management of our existing structure, more marketing dollars that are focused on the different product categories we have, and as well growing the branch footprint, if you will. I think all of those things, and the large loans as well, I think all those things will allow us to grow this portfolio pretty significantly over the balance of the year.

Okay. And then, final question, understanding the consolidated yield might shift if there's a mix shift in product concentration, but at the product level do you think that the current yields are going to be consistent going forward, or is there anything to think about there?

Yes, the large loans, I think we have a yield of 27% in the quarter. I think that's pretty consistent. The new products that we're putting on are not similar to that, and I think the small loan and convenience checks, there always is a little bit of change depending upon the states where we're doing the largest, or highest, amount of growth. But I think, broadly speaking, the yields should stay around the same by category.

Great.

So the total might change a little bit, but that's going to be, as the mix changes, but the categories remain roughly the same.

Great, thanks very much.

Vincent Caintic, Macquarie.

Hi, good evening, guys. And I apologize if this might've been addressed in the opening remarks, but I was wondering if you could discuss the regulatory landscape? I know we had a little bit of volatility from the CFPB, and I was wondering if you had any thoughts on that? And conversely, if there might be any tailwinds to your business if there are regulations in other specialty lending businesses?

Obviously, Don's spoken to you a little bit about this, but obviously the CFPB, I'm not even going to call it a proposal, but what they came out with a few weeks ago, pre-proposal, I guess, is the way to maybe frame it, got a lot of attention from everybody in our industry, including us, and that included conversations in-house, also conversations at the Board trying to figure out if we can tell what the impact might be.

But as I mentioned in my remarks, opening up, we think that very early stages -- and we talked to outside counsel as well -- very early stages of where the CFPB is in terms of rule-making, and it's hard to say from what they put out a few weeks ago, which direction that will ultimately take. Their initial focus, as I mentioned, was really on the ability for those lenders to focus on the ability to repay, or focus on the ability to access customer accounts, and not on lenders like us who do mostly underwriting for all of our products. And, as I mentioned, we don't have access to our customer accounts through the ACH, or equivalents, so not sure how this will play out, we think it's premature.

We don't think -- we've tried to assess what we think might be the impact, and again, without knowing specifically how it ultimately will play out, it's hard to guess it. But we don't think, and again, we're just sort of guessing at this, we don't think it will have much of an impact for us. If it does have any kind of impact in any of our products, we also think that, since we do underwrite all of our loans, that we might have to make modifications, but those modifications won't be big overhauls, but slight tweaks of the current processes we have.

As it relates to how it will impact other people who are more directly affected by these preliminary rules, not clear, but we're also looking at that and we'll be paying attention to that. There could be some opportunities for us, but again, premature, first we'll have to figure out how it plays out. And, we talked to some folks and we talked to some folks about a timeline.

Some people who are in the government, or some people with the CFPB before, think that, at best, this is a couple of years out and there will be a lot of give-and-take between the CFPB and the industry between now and then. So, we'll be watching it and making sure we know what's going on and making sure we understand the impact to us as it becomes clearer, but at this point it's just too early to tell.

Great, thanks for the color.

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Mr. Michael Dunn for any closing remarks.

I think that's it. Thanks, everybody, for the participation and interest. We think, in summary, that from all of the things we said already, we had a good quarter. Production was up 22%. We have the liquidation that we observed last year in 2014 in the first quarter. We grew the small loans year over year, and the convenience checks. We grew the large loans significantly both year over year and in the quarter.

And, we think the profile, obviously of delinquencies, as I said, is the best since the IPO. So we think we've got a lot of some of the issues, or a lot of the issues, behind us, and now we can focus on growing the portfolio, because this business is all about growing the portfolio, and making sure we continue to manage the credit, and then managing our expenses. And then trying to drive a little more margin through those efforts, and we think we can do it.

So I look forward to the July call, because hopefully it will be even better news, but we have a lot of work to do between now and then. Again, thanks for the participation and the interest, and we'll talk again soon.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.