Regional Management Corp. (RM) stock intrinsic value fair value estimate & owner earnings analysis

Regional Management makes small installment loans (mostly $2,500 to $10,000 and under, priced at high consumer-finance rates) to lower-income borrowers through 353 branches in 19 states, plus direct-mail convenience checks and online channels. At the end of 2025 the loan book was roughly $2.1 billion, funded by about $1.7 billion of debt, mostly securitizations and bank credit lines. Texas (about 30% of receivables) and North Carolina (about 15%) are the largest states. How we measured earnings. Reported operating cash flow badly overstates what a lender earns: it adds back the loan-loss provision, but the loans that default are replaced by new originations that sit outside operating cash flow. We therefore treated net credit losses as a running cost of staying in business (2025: $224.0 million), alongside stock compensation and maintenance spending on branches and software, and left growth in the loan book and the reserve build out as growth. On that basis owner earnings per share were $2.09, $3.40, $3.63, $3.16, $4.40, $7.66, $6.56, $1.53, $4.01 and $6.39 for 2016 through 2025. The swings are mostly credit losses: 2021 was flattered by unusually low pandemic-era charge-offs and 2023 was the peak of losses ($211 million). We used the seven years 2019 through 2025, which contain both extremes and the recent share count, and took the median: about $4.40 per share. We did not use the strong 2025 figure as the level; 2024 also included roughly $12 million of one-time benefit from accelerated charge-offs. Growth check. Owner earnings per share rose about 59% in 2025 ($4.01 to $6.39), but that mostly reflects the 2024 base being depressed. The base case assumes only 3% growth in year 1 from the $4.40 anchor, below the trailing rate, so no reversal argument is needed. Base case, about $70 per share. Earnings of $4.40 grow 3% a year for ten years, then hold flat for a further 15 years, and nothing is assumed after that. What is credited: revenue has grown about 11% a year since 2016 and 9.7% in 2025 (to $645.6 million), 288 of the 353 branches are five or more years old and the filing shows receivables per branch rising as branches mature, and the company has bought back shares (diluted shares fell from about 12.1 million to 10.0 million). We credit only a small share of that: 3% a year, well under the demonstrated pace, because it is financed with debt, and because higher loan growth has not consistently lifted per-share owner earnings. Not credited: faster branch openings, new products, margin gains and any recovery in credit quality beyond the seven-year median. After year 25 the case ends because nothing in the filings supports earnings that far out. Bear case, about $21 per share. Owner earnings of $2.20 a year (between the 2023 loss peak of $1.53 and 2019's $3.16), with no growth, for 15 years, then nothing. The named risks are the loss rate staying near the 11.4% seen in 2025 (11.2% in 2024) with no improvement, and the company's leverage: about $1.7 billion of debt against roughly $2.1 billion of loans, dependent on securitization and credit-line markets, with interest cost 4.3% of the average loan book in 2025. Regulators have also been active: the company was under CFPB supervision under a consent agreement from January 2024, which ended January 8, 2026 after the CFPB closed its examination in April 2025 without adverse findings, so this is a lower risk than before but the loans remain subject to state rate rules, the Military Lending Act 36% limit for covered borrowers, and federal consumer-lending law. Bull case, about $109 per share. Owner earnings start at $6.40, the level reached in 2025 and roughly matched in 2021 and 2022, and grow 4% a year for ten years, then stay flat for 15 years. This requires credit losses to stay at 2025 levels (not worse) while receivables per branch keep maturing and share buybacks continue; it does not assume a better economy. What would make this wrong. Earnings depend heavily on loss rates: each additional point of net credit losses on an average loan book of about $2.0 billion costs roughly $20 million, or about $2 per share, so a return to 2023 losses would cut owner earnings sharply. A tighter rate cap or weaker funding markets would do the same. The 2019 cash-flow figures were restated in later filings and we used the latest version. Unearned insurance premiums are not separately tagged for 2016 through 2018, so working capital in those years excludes that small item.