Garrett Edson – Senior Vice President ICR Michael R. Dunn – Chief Executive OfficerDonald E. Thomas – Executive Vice President and Chief Financial Officer.

Sanjay Sakhrani – Keefe, Bruyette & Woods, Inc. Robert H. Ramsey – FBR Capital Markets & Co. David Scharf – JMP Securities LLC Vincent A. Caintic – Macquarie Securities Group John J. Rowan – Sidoti & Company, LLC John Hecht – Jefferies Group LLC John R. Bizzell – Stephens Inc. .

Good day, ladies and gentlemen and welcome to the Third Quarter 2014 Regional Management Corporation Earnings Conference Call. My name is Tony and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Garrett Edson, Senior Vice President with ICR. Please proceed..

Thank you, Tony and good afternoon. By now everyone should have access to our earnings announcement which was released prior to this call and 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 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. Also our discussion today may include references to certain non-GAAP measures.

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 R. Dunn, Interim CEO of Regional Management Corp..

Thanks Garrett. Good afternoon and welcome to the third quarter 2014 earnings conference call. Earlier today Regional announced the resignation of Chief Executive Officer Tom Fortin and the Board has appointed me as interim CEO, effectively immediately.

The Board also announced it will conduct a search process among internal and external candidates for permanent CEO. Tom has made many valuable contributions over the past seven years to Regional’s growth and was key in brining the company public in 2012. So on behalf of the Board, we all wish Tom the best in his future endowers.

I’m here with our executive Vise President and CFO Don Thomas, who will speak later about our third quarter financial results and I’m also joined here by other members of our team and given that I have been on the job for about an hour and Don and I have been trying to figure out how effectively conduct this call and he is a better teacher than I am his student.

This will be a little concrete, but we’ll try to get our way through make our way though that.

To give you a little bit of background about myself, I joined Regional’s Board in July of this year, I had spent six-years prior to that as a partner as a small private equity firm called Brysam Global Partners, which focused on investing in international banking and consumer lending companies.

While at Brysam I served on the board, alternate board member for all of the portfolio companies, but prior to Brysam I spent over 30-years at Citigroup I was the Chief Financial Officer of the Global Consumer Group for the last 10-years, I left there in 2007.

And I was the Chief Operating Officer of the Global Consumer Group for the last year and half before I left. I was also a member of Citigroup’s Operating Committee which consisted of the top 30 members of the company, as well as the Management Committee.

The consumer group also relevantly included consumer finance business much like Regional and over 30 countries around the world and in the U.S. of course had CitiFinancial remained one main. So I have experience in this business.

Given the third quarter results that were released about an hour ago and especially looking and focusing on the delinquencies and provisioning, I think I will start there.

First, one thing I want to stress is that the credit issue that was addressed in the third quarter through the builds of the allowance relates to problems in our small loan portfolio. All of the other loan categories behaved within our normal historical ranges.

So during the quarter we add an additional $6.5 million dollar to the small loan allowance to cover elevated delinquencies that will ultimate roll into write-offs. And this resulted from our convenience check campaigns.

During the second and third quarters of 2014, the company engaged in the typical direct mail campaigns to originate small installment loans through the program is called the convenient check programs, which results in loans that are typically originated in $1,200 range.

During these two quarters there was originated a higher than normal proportion of these lower credit quality loans as result delinquency levels as I mentioned from these originations were elevated in the quarter, which necessitated us to increase the provision for credit losses, as GAAP requires us to reserve for losses at this point rather than in the future when the losses come through.

Our direct mail campaigns that we have used historically have been adjusted for the fourth quarter and including October campaign to prevent any reoccurrence of what had happened during the second and third quarter campaigns.

We believe these changes will reduce the volatility of the delinquency rates going forward, but we probably will see an elevated – an increase in the net charge-off in the next several months.

In addition, we've talked in the past or Tom as talked in the past about GOLDPoint, we decided to postpone the implementation of GOLDPoint just our loan management system till the first quarter of 2015 and the reason we did was to postpone this out of the busy holiday season, which is very – typically where we see into the period, we have high seasonality and we have shifted it into the first quarter where we really can fully concentrate on it.

During the fourth quarter the company has completed extensive training for its employees in all of the branches as well as conducting a series of successful test cutovers.

And our overall long-term strategy remains intact and these adjustments and changes do not affect any of the other plans we have and we don’t expect a significant effect in expense related to this delay over the next couple of months.

The third quarter did have some positives, given again that I’m only on the job an hour I’ll let Don get into more detail, but revenue was $53.9 million, which was up 22% from prior year, but same-store sales growth were about 14.7%, yield was 40.1 which is an increase of 210 points from the third of 2013 and up 270 basis points sequentially.

Don again as I said, will elaborate on that in his discussion in a little bit. Receivables as of the quarter end September 30 was $543 million or 5.7% from the prior-year period. Active accounts reached 350,000 accounts which was up from 325,000 accounts in the second quarter.

And during the quarter we also opened three new branches and this opening of new branches will likely continue through the balance of this year and going forward. Don will talk about credit and will talk about operating expenses so I will look forward to those discussions to him.

Finally, we are pleased also which we announced during the quarter to welcome Jody Anderson as the company’s new President and Chief Operating Officer, he succeeds Glynn Quattlebaum, who is now full time Vice Chairman of the Board.

Jody has only been on job for a month a much longer than I have, but he has very become a valuable contributor to the operations. One of the Jody’s near term priorities will be to focus on expanding originations in the large and stronger loan product which we believe provides an excellent risk rewards opportunity for Regional going forward.

We are excited to have Jody as part of the management team and we would also be remiss if we didn’t thank Glynn for being so instrumental to Regional’s growth since its founding.

Just a quick note on regulatory matters, which I guess is what we do before turning the call over to Don, there is currently nothing new report at either federal or state level, but we continue to invest in our internal compliance program and infrastructure in order to provide safe and transparent products to our customers.

And so with those comments, I’ll turn this over to Don..

Thanks Mike and afternoon and thank you for being on the call with us. I’ll start with some revenue discussion and move down to P&L.

Interest and fee income for the third quarter $28.4 million, a 23% increase from $39.7 million in the prior year period primarily due to a shift and product mix towards higher yielding, small installment loans and 6% year-over-year increase in finance receivables and the schedules attach to the press release you can see the migration of product mix over the last two years and see how it has in fact trended significant upward towards small installment loans.

Finance receivables increased primarily due to the addition of 32 de novo branches since September 30, 2013. In the third quarter, we estimate an additional 2.5 million and interest and fee income was generated via the fee change and Texas which was a right change that occurred in the state last October.

So we are rolling over that implementation date now. Insurance income net for the third quarter of 2014 was $2.6 million; that’s a 7% decrease from $2.8 million in the prior year period. The decrease in insurance income was caused by a 680,000 year-over-year increase in claims cost, insurance income for the quarter was 4.9% of total revenue.

Other income for the third quarter of 2014 was $2.5 million, this is the 41% increased from $1.8 million in the prior year period. The 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 20% of our accounts were in the state of North Carolina.

Provision for credit losses in the third quarter of 2014 was $22.5 million, up from $11.1 million in the prior year period, due primarily to increased delinquencies from our direct mail campaign as well as this larger total portfolio.

Accounts over 30-days contractually delinquent as of September 30, 2014 were 7.4% up from 7.3% as of September 30, 2013 and 6.6% as of June 30, 2014. Excluding $2.1 million of charge-offs from a change in our charge-off policy that I'll describe in more in a minute.

Our delinquency would have been 7.9% at September 30, 2014 compared to these other two figures.

We provided a detail of all the delinquencies categories for our total portfolio in our press release, as Mike mentioned in his remarks all of our loan portfolios have delinquencies that are normal except for the direct mail portion of our small loan category, which increased from 6.9% at June 30 to 8.8% at September 30.

And again, with the policy change that number would have been 9.1% in September 30, so you can see there was more than 2% increase in the delinquency of the direct mail portion of our small loan category.

Annualized net charge-offs were 10.3% of average finance receivables for the third quarter of 2014, above 6.5% in the prior year period and slightly below the 10.5% rate for the second quarter of 2014.

During the quarter, we did change our charge-off policy as two components, certainly the first one is to charge-off accounts when they are deemed uncollectible, the second is a time based element in the past it has been to charge-off no later than 365-days and in the third quarter of this year we changed that policy to charge-off no later than 180-days pass due.

We believe this policy change is in step with the industry practice and will ultimately provide greater transparency with respect to our charge-offs going forward.

And of course as a result of that policy change, we did incur one-time $2.1 million increase in our charge-offs to clear out the 180-day and over category of delinquent loans, which also reduce the specific allowance for this pool of impaired lines.

Excluding that one-time change, non-GAAP annualized net charge-offs as a percentage of finance receivables for the third quarter of 2014 were 8.7% somewhat more inline with our expectations for the quarter. The largest amount of net charge-offs occurred in Texas, South Carolina and Alabama during the third quarter of 2014.

The allowance for credit losses as a percentage of finance receivables was 8% at the end of the third quarter of 2014, well above 6.7% at the end of second quarter of 2014, obviously due to the augmentation of the allowance as Mike described earlier.

And until we have demonstrated a quarterly history of consistently improved credit metrics, our allowance will remain at an elevated level.

Personnel cost for the third quarter of 2014 were $14 million an increase of 45% from $9.7 million in the prior year period, this is due to the purpose on reducing our APEs, this account per employee metric we’ve talked about previously and as we brought that metric down we have obviously hired more people to put into the branches.

The increase is also due to the fact that we have more branches and we’ve also been completing more of our home office or corporate infrastructure in multiple departments. We are doing that so that we can continue to improve our execution and control and to provide support for future growth.

As we had noted on prior calls by achieving and maintaining an APE in the range of 285 to 300, we are adding additional expense throughout the year. We have other costs that have increased as well.

I mentioned group insurance costs or medical costs which are $350 higher in Q3 of 2014 versus the prior year quarter and that’s due to both increased headcount and also an increase in the cost of coverage to meet requirements of the Affordable Care Act.

In addition, we incurred approximately 550,000 of increased over time as we’ve completed additional appliance training, software training and continued our collection efforts throughout the quarter. Occupancy expense for the third quarter of 2014 was $4.2 million as an increase of 32% from $3.2 million in the prior year period.

And it’s primarily due to the store openings and ongoing customer service and telecommunication upgrades. Marketing cost for the third quarter of 2014 were $1.8 million, an increase of 79% from $1 million in the prior year period.

The additional costs are due to the increased volume of our back-to-school direct mail program that occurred during the quarter. Other expenses for the third quarter of 2014 were $5.3 million and 43% increase from $3.7 million in the prior year period.

Primarily pertaining to a variety of cost including 300,000 of expenses related to the implementation of the GOLDPoint loan management system and collectively across all of our income statement captions, the one time GOLDPoint costs were $600,000 in the third quarter.

In addition, we incurred additional personal compliance, legal, succession planning and compensation consulting expense during the quarter.

As Mike mentioned previously we expect GOLDPoint loan management system cost in the fourth quarter and the first quarter of next year to be minimal and expect these system to be up and running in the first quarter of 2015 which is the time period that we can use to focus on the implementation during seasonality level.

Diluted earnings per share for the quarter was $0.11 and decline of $0.56 per share in the prior year period. Regional Management’s ability fund discussed strategy does remain strong. We have at least $60 million of borrowing capacity as of September 30.

Regional Management have finance receivables of $543 and outstanding debt of $339 million on our $500 million senior revolving credit facility, which has an expansion feature to grow to $600 million and matures in May 2016. And with that, I’ll turn the call back to Mike for some closing remarks..

Okay, thanks Don. In closing, I think you can see we have some challenges and something’s we need to accomplish which we will do beginning immediately to drive this business for the growth and executional excellence.

We really optimistic about the company obviously in the near-term and in the long-term and I think as we look forward into 2015 with the people that we abated during 2014, I think I am confident that we have the right people to produce with this company has the capacity to produce and hopefully our results going forward we’ll respect that, so Don is that..

Yes, that’s the end of our prepared remarks and at this time we’d like to open the call up for Q&A..

(Operator Instructions) Your first question comes from the line of Mr. Sanjay Sakhrani. Please proceed..

Thank you. I guess the first question is if we could just a get little more color on when these problem loans were originated and kind of what specifically went wrong in the underwriting process..

Hey, Sanjay this is Don. Yes, the origination started in the later part of the second quarter and continued through into most of the third quarter and we had certainly an opportunity to reduce costs and pulling data from data sources and we moved down that path to use a different vendor.

And in the process certainly the selection parameters were not handled well in the process. And so we did windup with higher proportion of these lower quality loans on our books as a result of that, does that help..

And then when we think about this $6.5 million that you put into the provision, is that pretty much all of the impact that you expect to recognize related to those loans or could there be more impacts in ensuing quarters?.

Yes, I mean Sanjay these are sort of early stage delinquencies and information. But yes to the best of our ability, we made an estimate that would bring fans these line originations and provide the charge that would handle them as we move forward.

And importantly as we mentioned these parameters were changed and adjusted in the fourth quarter as these loans take a while to roll through delinquencies and the good news is that the parameters were adjusted, the October campaigns reflect the more historical norms of the parameters and that the originations in the fourth quarter will be more normalized if I can just use that word.

And so the – so we’ve stopped adding to the issues if you will..

Understood, so when we think about the provision levels going forward should they be more representative of that credit performance of the underlying portfolio which wasn’t changed all that much or could there be more residual impact to the best of your knowledge?.

Generally that is what we would expect Sanjay is that the provision would be relatively normal..

And then Don you mentioned, I’m sorry I’ve just two more questions.

Don, you mentioned that the provision levels will remain elevated for period of time, could you just talk about like how we should think about those levels going forward?.

Yes, I think Sanjay I was referring to the allowance itself..

I’m sorry about that..

So we augmented the existing allowance and as we move forward what’s going to happen is you’ll see charge-offs will improve at a higher rate, so our underlying methodology will pickup those losses and mechanically suggest higher and higher allowances which should then be offset as we reverse this portion of this particular charge.

So the net result of that is that the allowance itself as a percentage of receivables stayed relatively high for a period of time when we get passed the period of higher charge-offs obviously then we will get into a period where charge-offs decline. And as they do then our allowance expectation would also come down..

Okay. Final question.

I’m not sure I heard a delinquency rate X the problem loans, is there a delinquency statistic on the core portfolio?.

Do we have that available guys on the core portfolio X the – yes we do not have that.

In the small loan portfolio Sanjay, what we said is that about two-thirds of that portfolio is direct mail and in the direct mail portfolio of $200 million approximately there are some loans there that are lower quality, but the direct mail portfolio overall has moved up from the 6% range to the 9.1% range..

Okay, all right great. Thank you very much..

Your next question comes from the line of Mr. Bob Ramsey of FBR. Please proceed..

Hey good evening guys, thanks for taking the call.

I guess I’m just kind of curious if you could give a little more color on how you will have honed in sort of identifying this is the root case of the problems, and that we had quite problems previously that seem to be related to employees or accounts for employee, now the problem seems to be a shift in some of the underwriting, but how do you know that you have really identified what the root cause of the problem and that its not something so simple as losses on direct mail loans or simply structurally higher than on the retail business..

Yes, great question Bob. When we were talking about delinquency issue in the first quarter call we were talking about the fact the delinquency was up across basically all of our loan categories to some degree. And during that time period, we said we found a strong correlation to staffing issues in a good number of branches.

So we had been certainly business staffing those branches at a higher level, we've lined out the staffing across the branches, now for a number of months we've been training our personnel to perform at a higher level and what we've seen over that period of time is that we have lower delinquency and we have in fact throughout the period of the third quarter seen continued slow declines in net charge-offs with the exception of this policy change.

So absent to policy change what we saw across all categories were declines in net charge-off, we see this as net result of staffing the branches properly. Separate and distinct from that at the end of September, we notice the sharp increase in delinquency and specifically we’re able to tie to our direct mail portfolio.

So when we look at the other product portfolios we see very normal levels of delinquency. However, when we look at direct mail inside of the small loan portfolio we see it at an elevated level. And that caused us to obviously go back upstream and begin digging around until we found some of the issues that we’ve talked about previously..

Okay. And then if I understood you correctly you have now – you had shift data sources and change some of the selection parameters, but now you’ve gone completely back to the way that things used to be done.

You’ve gone back to your old data source providers, your old vendors not using the same parameters you always did in the check mailing underwriting..

That is correct, we’ve gone back to the sources that we’re – and the source we are using previously and the selection criteria and communication back and forth certainly with that vendor had been well owned over a number of years and so we have gone back and we established their use and have expectations from October forward that the direct mail programs will produce results like we had seen before..

And is there any shift and sort of how the company is thinking about direct mail at a higher level. Do you anticipate doing a similar volume this quarter to what you would have said three or six months ago or are you in anyway sort of backing off until you sort of got the credit problems kings worked out..

Bob, we’re really not backing off, these corrections are easily made and once identified and so they were rapidly put in place and so we don’t have the expectation of issues. As we have been continuing to learn and grow our marketing efforts in our direct mail campaigns, we certainly are diversifying a bit, the types of instruments we send out.

The convenience check portion of our mailing programs is gradually shirking and we’re beginning to send higher quantities of pre-qualified or pre-screened offers of credit. That would require the customer to come into the branch and finish the underwriting process.

So those combined with some invitations took place well round out the direct mail campaigns..

Okay..

The short answer is now, we do not have – we’re not in the mode of backing off of the direct mail campaigns..

Okay. And then when I guess did you all sort of start to notice that the originations made over the summer we’re not aging the way that you expected and would require a larger provision.

And I guess why not sort of preannounce some of this weakness a month ago or whenever it sort of started to become apparent that the credit cost we’re going to higher until lower..

Yes, Bob we don’t give guidance and what we saw during the third quarter, we saw slight uptick in August, but a dramatic uptick in September. So September month in was the first month in we really saw the dramatic increase. So its very light in the quarter as that particular metric popped up and began more of our investigation..

And as Don said, these are these campaigns were in the April were less than in May but June and payments that the customers have to make are 30-days after the loan is originated. So it takes a while for this to become apparent, when you’re looking at delinquencies.

But some what we’re told and what we’ve seen as soon as the numbers started to tick up the company took action and then in the financials as GAAP requires took the reserve build if you will in the third quarter..

And then maybe last question. And I’ll hop out, but how are you thinking about what the efficiency ratio for Regional is on a go forward basis. And it sounds like you will be spending a little bit more on the original data source providers and the underwriting process, you obviously have increased staffing levels.

What you think the right expense run rate is for this business?.

Well, Bob you know as I mentioned earlier we really don’t guide, I think what you’ve seen as we have become public companies, we’ve been filling out some of our infrastructure. So a bit of a step increase as a growth company. Our goal is to continue to grow and to develop some operating leverage from that growth.

So we’ll just keep pounding away at the growth and we will get that operating efficiency number down over a period of time..

I mean, I guess you all in the past so I’ve said, I think you said something 40% to 43% as sort of the right efficiency level for this business is that something higher than when you look at the business today..

I think Bob we have noted numbers in that range, certainly there were periods in our past where we had achieved those levels and I think with appropriate growth and leverage of the expense structure that we can certainly decrease from where we are now.

I mean if you add in the higher regulatory cost that all companies in the space are incurring, it could be a tick up from there, but not where it is today..

Okay, thank you..

Your next question comes from the line of Mr. David Scharf of JMP. Please proceed..

Hi, good afternoon. Many of my questions have been asked obviously, but I would like to revisit the last few questions it related to your general commitment to the live check direct mail program.

I know it sounded like this was a very sort of discreet pool of loans that were underwritten and you stated the likely cause, but at the same time it seems like the growth in the company’s AR really picked up in 2013 when you dramatically increased the number of mailings per year and then we saw elevated losses start to kick in by the end of that year into this year.

And what I’m really asking is what the growth profile of Regional would look like if it went back to kind of a historical just three to four scheduled mailings a year around certain calendar events as opposed to kind of the monthly type mailings we’ve seen.

I mean is there been any discussion of whether that’s a more manageable process?.

To be honest no David, we have not everything that we have discovered around often credit through mail suggest you as that there is a market there on a regular basis that our customer base has needs at a lot of different time periods through the year. We may hit them with a mailing in February and another one in April.

And they may not take February, but they certainly make take April. So we feel like we have to be in the market regularly which is very consistent with some of the big direct mail producers in the market today. That’s their experience, it’s certainly our experience too.

If your question is – are we committed to it and answer is absolutely yes, certainly as we move forward we've said along, it’s a bit of a continuous learning system.

So are there additional things we can do to continue to evaluate and improve the underwriting over time as we have over the last several years, absolutely are we going to continue that absolutely.

We are continuing to work on credit and underwriting standards and to that end I can tell you that we are in the market right now and are conducting a search for Chief Credit Risk Officer to add to our team. And so we are moving down the path with that answer expect to be carrying out interviews in the very near future..

The convenience check program is a core part of the business model and while what happened in the last few months is not where we anticipated or expected, it hasn’t shaken the confidence and the program is a highly profitable piece of business for the business and it will continue, we will evolve it from all different dimensions.

They were in all different dimensions including criteria mailing bettering targeting and things, but the other point which was sort of referred to we also have other products that we have as part of the business platform which is auto and a large check and some retail business that we're looking that we will also try to drive through and leverage our are footprint and so the short answer is hasn’t shaken our confidence in the convenience check.

We will continue to do it, hopefully do it better than we had in the past, but we also will drive the other elements and other products that we can sell and I mentioned that in my opening remarks, with Jody [ph] who has experience in the large loan program that he has seen in its best.

So we will try to evolve this and continue to grow the business, because obviously the portfolio and the growth in the portfolio and the growth in the footprint is what is going to derive this business..

All right. Can you give us a sense for in the quarter as well as through the nine-months? Dunn what the same-store AR looked like growth just for the walk-in business, excluding any direct mail, trying to get a sense for what the traditional store based share looks….

Yes David, we don’t have that data..

Is it a positive or negative number, I mean do you have a handle for that?.

We don’t have the number, we can do some analysis and see if we can find it, but that’s not a piece of data that we track day-in and day-out in our business.

We have a multi channel business and customers come to us from a variety of directions and, we don’t really care where they come from or that’s a web app or is walking into branch or direct mail, some of our channel partners, you know its going to windup in a branch and serviced in the branch and so we are not actively tracking that particular staff..

Got it.

And you had mentioned as it relates to direct mail the mix was going to trend more towards pre-qualified convenience checks, can you help us understand what the implications are for a) the yield in the small loan portfolio with that type of shift and b) what the response rates are typically like? I know you’ve talked about live checks having a 1% to 5% response rate which is obviously multiples of what you see for pre-qualified credit card offers in the mail.

Can you give us a sense for what shifting the pre-qual means in terms of marketing costs and response rates?.

Yes, we can answer part of it, we’re really in our infancy in exploring pre-qualified offers and certainly large loan category, but we do expect a lower response rate for a pre-qualified offers, we see a use for them in the small loan category and in the large loan category and so we’ll have a lower response rate on those.

We think that the incremental cost around the pre-qualified offer and it is a little more expensive to utilize a pre-qualified offer, but we think that cost is certainly offset by being able to screen out some of the credit; you wouldn’t be able to screen out in a convenience check scenario.

So it allows the branch to look very closely at a lot of details and be face-to-face with the customer to originate the loan. And so that for certain customers and certain credit scores and with certain characteristic pre-qualified offers make a lot of sense..

The board has urge the business to leverage all of the currently available techniques and customer acquisition and so the convenience check being the way Regional has heavily on in the past, but all these other customer acquisition activities will go through – the business will go through a testing and learning process to see what works the best and in combination of all the activities and all the acquisition activities we’ll try to grow the business not deemphasizing the convenience check, but as if that’s going to be the same number of level of mailing if you will.

It’ll just be a smaller piece – it’ll be same number, but a smaller piece of the total mail campaign..

Got it, got it. And just one last question or follow-up to when I was asked about the – I guess the data sources. Could you get a little more specific and just should we really get a more tangible feel for perhaps what type of data, what was done differently for this particular pool.

I know in the past you’ve talked about as many as 30 and 40 different discrete data points going into your scouring model for doing convenience checks.

Was this – was one vendor or you rely it on one vendor for the vast majority of different data points or was it just one thing in particular, just trying to get an understanding for what exactly was different this time around?.

Yes, David good question, obviously we do have a large number of screening criteria to select and deselect potential customers and that’s really our secret sauce, so we really don’t want to talk in too much detail about it. We did move to move away from direct selection from credit bureau files and to a particular data aggregator.

And so that was a vendor move that we made and clearly the selection parameters with the new vendor did not get set properly. So we look at it as simply getting the selection parameters right. And in going back directly to the credit bureau is our source which is where we have a lot of success in the past, that’s what we are doing.

There is obviously a cost differential there or we would not made the change, we had an opportunity to lower our cost somewhat and so we are going back now and spending just a little bit more for the comfort of knowing where it’s from and that the parameters we have are working..

Got it, got it. Thank you very much..

Your next question comes from the line of Mr. Vincent Caintic of Macquarie. Please proceed..

Thanks and good evening. Couple of questions, I know its early days, but if you could describe if the board has a broad plan for as maybe I’d though about or discussed any strategic changes as part of your new management team for the strategy of the company, that would be great..

And I think the short answer is no and I think that and again we haven’t – I’ve only been in the two board meetings until I joined in July. But in my private discussions with the other board members I think we think that Regional has great footprint, it’s been in eight states, nine states, eight states..

Okay. .

Almost 290 somewhat branches and growing good product offering, good customer base that can be levered, we didn’t talk about former customers, but in this business former customers are a good source of the new business. And we think that I think its more to do, a little bit more to evolve the company.

As we talked about a little bit in customer acquisition, be better targeting, better credit and better pricing, more differentiated to loan portfolio into different concentrations, but that’s more of an evolutionary approach to what we think Regional is and can become more than a revolutionary approach.

And we think is really about execution and we thinks about adding the town and the Know-how and tools. And you know I think I said number if I did maybe all that somebody did, but you know Tom begin that process prices and added lots of folks over the last couple of years who have added a lot of value in the management of this company.

And I think as we look forward over, our intent and my intension for this period that I will be here will be to continue to focus on execution. And making sure that we do everything as well as we can do it every single, while also evolving the business and to using better tools and but that’s an evolutionary process.

So and that’s I think what we’ve discussed that the board and I think that’s what we will try to do at the management level..

Okay, got it.

And then just couple of questions was breaking down but the credit trends this quarter, first on the elevated charge-offs that we saw for prior quarters due to the servicing staffing levels, has that been completely resolved and work through?.

Well certainly we’re seeing some strong benefit from having the staffing at a lower level from an extended period of time. Due to the fact that you have a certain turnover level. I would say that we’re along way down the road to solving that issue, maybe a small pocket here and there, but substantially down the road to putting that behind us..

I think as Don said before, I think the issue before was across all the portfolio was down general in the later part of last year or early part of this year.

And having the necessary staffing and the branches where the collections have done has helped and you can see sort of the flattening or leveling off of the delinquencies in all that categories of loans other than a small loan category which I think we’ve talked about a lot which is really related to this convenience check.

So it has resulted in a leveling off and an improvement of the delinquencies in the other buckets at the other buckets the other product portfolio, sorry..

Okay, got it. And then the normalized 8.7% charge-offs for the third quarter, what’s your feel for maybe thinking long-term what’s would be the normalized charge-off rate is it 8%, 9% or back to your 6% or 7% you had in the past how should we think about that..

Yes, it’s probably similar around eight or low-eights would be one way to look at it, you look at the two-year change in the product mix and you have 17% increase in the small loan portfolio from 40% to 57%.

And along with that you know you can model that yourself, but that’s at least a four percentage point increase in the expectation for charge-off rate just because of mixed change.

Most people have noted also that over the last six-months to nine-months we've moved off the bottom of the credit cycle and so when you look at where we were a year-ago or so versus where we are now, there is a pretty good shift from getting off the bottom as well as 4% increase in the – 1% increase in the charge-off expectation for mixed shift..

Got it and then my last question just quickly. If you could remind us how much direct mail campaigns drive your small investment lending, maybe as a percentage of that the small investment bucket that would be great thank you very much..

So Vince you asked – let me clarify the question again, you asked how much is the direct mail driving our small loan originations, is that the way you characterized that?.

Yes that’s the way to frame it, yes..

Yes. So. Let’s take a quick look at a chart here to try to give you an answer. It looks like its somewhere in 35% to 40% range in terms of originations..

Got it, great. Thanks very much guys..

Your next question comes from the line of Mr. John Rowan of Sidoti & Company. Please proceed..

Good evening everyone..

Good evening..

Just a follow-up on the last question, I think it’s a very important point.

You are deriving 35% to 40% of your loan originations from direct mailing, you are obviously tweaking that business and I would assume that we are going to see lower volumes out of that business, even if you are staying committed to it, we are going to see lower volumes out of that business as you de-risk if you will.

We saw 6.5% loan growth this quarter versus 12.8% last quarter.

What does loan growth look like in a new scenario, my understanding from what you said is that you adjusted the loan, your risk parameters in October; does loan growth materially fall off from the 6.5% going forward, because of this change in risk on direct mail?.

Hey John how are you doing?.

Good..

No I appreciate the question. And when you look at originations you have to think through obviously that we have a lot of former borrowers that come back into the business, we have lot of refinancing and originations, but the convenience checks are still a substantial part of generating new borrowers for the business. So….

35% is including all of the originations which include the former as far as renewable..

Yes, the formal borrowers versus new borrowers are part of that origination.

So as you look forward you know we talked about some of the other loan product categories and you’ve seen in the same to here spend of time that small went from 40 to 57 you saw auto go from 40 to 30 and we've talked about how competitive the auto business is out there, so we’ve seen some actual decline in the auto portfolio over the last six-months or so and that’s working against the overall growth statistic, we certainly are taking step to try to arrest that to the extent that we can, but the auto business is pretty competitive and we have purposely restrained ourselves from overly long maturities and advance rates that are just too high for us just swallow the risk..

That’s going to – let me help..

Sure..

Sorry I’m trying to get handle on if you change whatever you effected on October 1, if you had done that on July 1, what would your loan portfolio growth look like it was 6.5% would it have been flat, would it have down, I’m just trying to understand where we go from here, because this change was made post the end of the quarter..

That’s correct it was made post the end of the quarter, so think about continuing to pump steady stream convenience checks into the sweet spot in the market for us and around the edges and certainly in the higher pack [ph] ranges begging to test and experiment with large loans we think there is a tremendous opportunity to continue to grow the business at a fairly strong clip if we add in the element around large loans and begin to have some success with it..

Okay, but there will be some yield relation as move greater into large loans I assume..

That’s possible, certainly if we have success in the auto business there will be yield degradation as well.

Our yield now is slightly above 40% I believe and a year-ago it was 4%, 5% less so we are very actively working to build yield over 12-month to 18-month time period and now we're at the point where we really look at the full basket of products and say you know we can work with an add any other products of the portfolio even some other lower yielding products..

Okay how much room do you have on our convents?.

We have good grim, we have come back and certainly taken a look at those convents as we have gone through the reporting process and the convents are fine. We have a good borrowing capacity talk to our lead bank and our bank group today and had conversation with them to make sure that we were in good shape overall and so we feel good about it..

Okay. Thank you very much..

Your next question comes from the line of Mr. John Hecht with Jefferies. Please proceed..

Thank guys for taking my questions.

First one just kind of modeling question, you shifted to releasing your net originations, do you have the gross originations in the small dollar installment loan category available?.

John, let us check here and you are right, yes we did that particular piece of information was one of the last remaining wastages that reporting anything on a gross basis and we did change that this quarter. So you picked up on it and we are taking a quick look here and see if we got gross.

Okay, Q3 total is if our stack sheet here is correct and I’m not sure if it’s fully audited, but $277 million is the gross number and let’s compare that with something else and see if it’s good..

Okay, why you are looking to that I'll throw out the other question. So your one to 60-day or one to 59-day delinquency pickup was pretty substantial about $15 million worth of really in early stage delinquency.

Just trying to isolate this to the mailings, I mean can you give us a sense or how much of that pickup was related to that one mailing vintage?.

Yes, John so first back to the net loans. Yes the $277 million that we gave you appears to be a good number; I see the $209 million for the three months that’s net. So there is your information there. And as far as the one to 29 bucket, yes we did see pickup there that’s consistent with the pickup we saw in the 30-day delinquency bucket as well.

So you can clearly see that some more of those delinquencies are coming through and that’s part of the reason for the additional charge of $6.5 million. We’ve run through a lot of different modeling and exercises and scenarios to try to estimate how much of that belongs there, but by bucket I don’t have any answer for you. We came up with a no….

Okay, the sense is that half of the cost or – because if you are ascribing this issue to that category and you’ve done the analysis and just wanted to say if we can quantify how of the issue is specifically related to that vintage?.

Yes, there is a good bid John I mean that’s the rollover from the back-to-school campaign. So it’s a substantial portion of the originations during Q3 and during this period of selection parameter issue. So a good chunk of it, the allowance charge relates to that time period in those dollars. We don’t have a percent that we can give you..

Okay, and then with that type of increase in early stage delinquencies, you talk about accounts per employee you want to solve these issues before it become mid and late stage.

Do you think you have hire more or go below your average historical ATE in order to address this or how do we think about managing the business from that perspective?.

Yes, good question John and the answer is no, we don’t need to hire anymore employees. So we are always looking 30-days to 60-days out in projecting our account growth and from that projecting our employee needs.

So we have the people on board to manage the accounts, we are actively looking for ways to look at these accounts and service them in the most efficient way, whether we bring some of them back to centralized location and working from there are we working in the branches we do have sufficient personal and there is no additional hiring needed..

Okay, and then you had – it was more than a 200 basis point pickup in yield in the small product you ascribe that to some of the changes in late fees in Carolina is the 48.6 rate in the small loan category the right rate or would that come down as delinquencies normalize and so what’s the kind of thought for what the average rate would be in the next few quarters or yield or whatever you guys think about it..

Yes, we are going through the ramp up stage from the state law changes. And so where you are going to see now is its going to substantially plateau in the next three to six months.

And the other part of the revenue Jeff to keep in mind is that according to our policy when we do charge-off accounts if there is any accrued interest on that account it reverses through the revenue line as opposed to into the provision and allowance.

So we usually do get a hit on higher charge-off time periods in the revenue line as we move forward..

Okay. Thanks very much for that..

Yes..

We have time for one more question and that will be from J.R. Bizzell of Stephens Inc. Please proceed..

Yes, thanks for taking my questions. And switching back to loan growth, wondering if you can – you’ve referenced it a couple of times the large installment loan.

I wondered if you can kind of expand upon any anticipated efforts or any efforts that are currently in place to kind of growth that portfolio given you have referenced it a couple of times?.

Yes, we really had treated the categories in a combination in the past. I know we've noted that on a number of prior calls and so we've just begun the early stages of testing a variety of offers and trying to hone in on what we think is the most successful type of offer that we can make and obtain the best response rate.

Obviously with Jody on board we are picking his brain about methods used in the past and trying to get some involvement from him in thinking about large loans inside our management team. So we are just in the early stages is what I would say..

Okay. And I was wondering if – you talked about the delay in GOLDPoint, I’m wondering if you could go and do a little more detail around that decision and given my understanding that it was – the point of it is to have more visibility into the day-to-day workings of the business.

Just wonder if you could kind of walk us through that and the expectations of GOLDPoint here..

Yes.

We made tremendous progress at GOLDPoint, I mean we have very few details left to do to complete that implementation and simply made a management decision that why are we doing this in the middle of our fourth quarter busy season and just pure business judgment we said let’s try this into the first quarter when it is low seasonality, we would be fully able to concentrate on it and put it in and do a better job and so that’s exactly what we are doing..

Okay thanks guys..

That concludes the Q&A portion of the earnings call. We will now proceed with closing remarks..

Good, we would like to thank everybody for being on the call today and for your interest and we look forward to producing excellent results, we will move forward and thank you again. Good bye..

Ladies and gentlemen thank you so much for your participation. You may now disconnect and have a great day..