Thank you for standing by. This is the conference operator. Welcome to the Regional Management Corp. third quarter 2017 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the call to Garrett Edson. Please go ahead.

Thank you and good afternoon. By now, everyone should have access to our earnings announcement and slide presentation, 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 to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates and projections of management as 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 except to the extent required by applicable law. I would now like to introduce Peter Knitzer, CEO of Regional Management Corp.

Thanks Garrett and welcome to our third quarter 2017 earnings call. As always, I want to thank everyone for participating this afternoon and for your continued interest in our company. I am here with our CFO, Don Thomas, who will speak later on the call. I am also here with some members of our financial team. For those of you with access to a computer or mobile device, we have a posted a supplemental presentation on our website at regionalmanagement.com to provide additional color to our remarks. As you can see on page three, we have diluted EPS of $0.45 which includes $0.18 of estimated negative impact form the hurricanes and a $0.05 benefit from the bulk sale of previously charged-off bankrupt accounts. Despite the hurricanes, we generated revenue growth of 10.8% driven by $78.7 million of year-over-year portfolio growth. This represents our fifth consecutive quarter of double digit growth in revenue and 10th consecutive quarter of double digit growth in finance receivables. While the cost of credit increased primarily due to the impact of the hurricanes for which we took a $3 million reserve, we believe that the reserve will capture all future credit losses related to the hurricanes. Later on, Don will show you that our core credit metrics are actually performing quite well. Most importantly, the hurricanes should have no impact on our overall business results and strategic plans for 2018 and beyond. Lastly, our interest expense increased due to growth, upsizing of our bank facility and higher cost of warehouse financing. Again, Don will take you through this in more detail. Turning to slide four. From a strategic standpoint, there are few significant items to highlight. At the beginning of October, we successfully completed the conversion of our Texas branches onto our new NLS system. With…

Thanks Peter and hello to everyone on the call. Picking up on slide six. Net finance receivables for the third quarter of 2017 increased more than 11% over the prior year. It's the 10th consecutive quarter with double digit growth for and net finance receivables. On slide seven, you can see the components of our ending net receivables. Core loan net receivables at September 30, 2017, stood at $672 million, growing 18.6% from the prior year period. Our large loan portfolio continues to be our growth engine as we saw $92 million or a 42.2% increase from the prior year and a 15.2% pickup from the end of the second quarter. The large loan portfolio now stands at $309 million and accounts for nearly 40% of our total portfolio. Meanwhile, our small and category saw $14 million or 4%increase from the prior year and a $15 million or 4% increase from the end of the second quarter. Out other loan categories were down $7 million sequentially and $27 million from the prior year, primarily due to the continued liquidation in our automobile loan category. Given our announcement that we are discontinuing auto loan origination in order to focus more squarely on our core loan portfolio, our receivables in our other loan categories will continue to decline in subsequent quarters. The 11% year-over-year revenue growth on slide eight was primarily driven by an 11.8% increase in our average finance receivables. This is the eighth consecutive quarter with double digit increases in average net receivables. Total revenue yield in the third quarter of 2017 declined 30 basis points year-over-year as shifting product mix more than offset the benefit of the line swing between revenues and provision for credit losses as a result of the insurance carrier change we have mentioned on previous…

Thanks Don. To sum up, despite the short-term interruption caused by the hurricanes, we believe our prospects for 2018 and beyond remain completely unchanged. In the third quarter, we continued to generate double digit revenue and receivable growth while our credit, excluding the one-time hurricane impact, remains stable. We successfully completed the conversion of Texas on to our NLS system and a large majority of our branches and customer accounts are now functioning smoothly on our new platform. We still anticipate returning to an increased level of de novo branch openings in 2018. Finally, we continue to remain completely focused on building our core loan portfolio and the discontinuation of our auto originations only further emphasizes that point. In all, Regional remains squarely positioned to achieve ongoing long-term profitable growth. Thank you for your time and interest. I would like to now open the call up for questions.

[Operator Instructions]. The first question comes from Mike Del Grosso from Jeffries.

Good afternoon and thank you for taking my questions. I guess the first one is on the hurricane impacts. Was there any one-time callouts on the revenue or interest income related to the storms?

Yes. We estimate that about $400,000 to $500,000 of revenue was impacted by the storm. A lot of it was, we waived late fees and we gave free deferments for those customers who were in need. So we felt that those were good moves to make our customer base for those who really were in need from the hurricanes.

Understood. I guess the second one is a little more broad, pulling up a bit. At this juncture in the credit cycle, what are you seeing as far as consumer, the borrower straps or potential loan stacking? Can you comment on what you are seeing perhaps at the borrower level?

Sure. This is from our vantage point at Regional. We are seeing the credit cycle is benign for us within our customer base and prospects. So we don't see any particular erosion or deterioration in our credit numbers.

Understood. Thank you.

Thank you.

Our next question comes from Vincent Caintic of Stephens.

Hi. Thanks. Good afternoon guys. I had a couple of questions. On the charged-off sales you had this quarter, it had a good number there. I am just wondering how persistent that could be for more additional charged-off sales and what is the market looking like for charged-off paper in terms of the recoveries you can get? And maybe relatedly, you are building up your centralized collections effort, I am just may be wondering, as you build that up, if may be there won't be as much of an emphasis on sales? Just how you think about it? Thank you.

Sure. Thanks Vincent. In terms of our sales of our charged-off bankruptcies, the market was pretty healthy and we felt that it was a very good trade-off in the context of selling them versus working them throughout the lifecycle. So we felt, in doing the analysis, it was the right decision. In terms of charged-off bankruptcies in the future, we have a forward flow agreement in place for the next 12 months. With respect to centralized collections, we keep looking at the data and it's really impressive. Mind you, we only have about 30% to 35% of our total volume that we are doing centralized collections really late stage collections. But the initial results are encouraging and we will continue to roll that out throughout fourth quarter and 2018.

Okay. Got it. That's helpful.

Just one other comment, Vincent. I am sorry. There is a lead lag. We are hiring up a bunch of folks. So the expense comes in before the benefit in roll rates and in losses, but clearly the trade-off that we have seen is very strong.

Okay. That's helpful. And so right now they are working on, I am guessing, it's primarily 60-plus day delinquencies, but not until the charge-off point. So staying within that bucket?

Yes. We are working 60-plus delinquencies.

Okay. Got you. So I will expect maybe both of those to continue. Great. Another question I had was just on what you are thinking about marketing and customer acquisition costs? It seems like it's been working well with LendingTree referrals. I have been hearing that. May be that market is getting more competitive or at least more expensive. Just what you are thinking about there? And was there also any impact from the hurricanes in the sense of maybe there was some less marketing base if people were less able to borrow? Thanks.

So with respect to overall marketing. What we have found is, we were able to reduce our cost per piece, which made us much more efficient and lowered cost per account and cost per $1,000 book. So that's through our mail channel. With respect to digital channels, have because we are improving over time, the impact of higher cost per lead or cost per booked account has not really hit us because we have actually become more efficient and more effective in doing that. So we really see continued opportunity in that channel right now. Turning to the hurricane impact. We made some conscious decisions to stop mailing in those affected areas for a temporary period of time. Rationale is multi fold. Number one, the mail may not be delivered. Number two, we want to make sure that because this is a preapproved, in most cases a preapproved check, we want to make sure that those receiving it were able to pay. So what we did is, we held back, we have resumed all our campaigns in all the affected areas because now they are back pretty much to normal in terms of being able to deliver the mail, in terms of leveraging our prescreen criteria to identify those customers who are able to pay.

Great. Very helpful. Thanks very much.

Thank you.

[Operator Instructions]. Our next question comes from Bill Dezellem of Tieton Capital.

Thank you. Two questions. First of all, relative to the marketing spending, up $0.5 million from the second quarter, would you please discuss that decision and the degree to which that's incremental versus a shifting of your strategy?

Sure Bill. We continue to look at new tools and we are developing better marketing tools to target prospects in the marketplace. And the increase in spending is consistent with our ability to find credit qualified universe. There is some seasonality that occurs. Third quarter is typically the strongest quarter for customer acquisition and growth. And that's typical if you go back several years. That's been the case in our industry and in our business. So it's not atypical to see increased marketing spending in the third quarter.

Thank you. And then secondarily, you have touched on this from a couple of different direction. But I am just going to ask point blank, to what degree were your originations impacted by the hurricane?

Not to a great degree. I would say that, you know, under 10% roughly for curative two months. So when I think about that in the scheme of our overall campaigns, it really was not a big impact. And the 10% is imprecise. It's certainly no higher than that. But I don't have those numbers at my fingertips. It could be 5%, but it was not a huge portion of our planned acquisition activities, Bill.

Great. Thank you.

Thank you.

This concludes the question-and-answer session. I would now like to turn the conference back over to Peter Knitzer for any closing remarks.

Well, I appreciate everyone's interest in our company and I thank you for your time today and we look forward to continuing the dialogue as we go forward. Thank you all very much.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.