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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ended

Commission File Number: 001-35477

Regional Management Corp.

(Exact name of registrant as specified in its charter)


Delaware	57-0847115
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

979 Batesville Road, Suite B Greer, South Carolina	29651
(Address of principal executive offices)	(Zip Code)

(864) 448-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.10 par value

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2022, the registrant had outstanding 9,671,985 shares of Common Stock, $0.10 par value.

		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets Dated March 31, 2022 and December 31, 2021	3

	Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021	4

	Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021	5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 6.	Exhibits	46

SIGNATURE		47

ITEM 1.

FINANCIAL STATEMENTS.

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except par value amounts)

	March 31, 2022
	(Unaudited)			December 31, 2021
Assets
Cash	$	17,635		$	10,507
Net finance receivables		1,446,071			1,426,257
Unearned insurance premiums		(47,075	)		(47,837	)
Allowance for credit losses		(158,800	)		(159,300	)
Net finance receivables, less unearned insurance premiums and allowance for credit losses		1,240,196			1,219,120
Restricted cash		138,919			138,682
Lease assets		28,087			28,721
Deferred tax assets, net		18,093			18,420
Property and equipment		13,036			12,938
Intangible assets		9,475			9,517
Other assets		32,230			21,757
Total assets	$	1,497,671		$	1,459,662
Liabilities and Stockholders’ Equity
Liabilities:
Debt	$	1,134,377		$	1,107,953
Unamortized debt issuance costs		(12,001	)		(11,010	)
Net debt		1,122,376			1,096,943
Accounts payable and accrued expenses		46,302			49,283
Lease liabilities		30,251			30,700
Total liabilities		1,198,929			1,176,926
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock ($0.10 par value, 100,000 shares authorized, none issued or outstanding)		—			—
Common stock ($0.10 par value, 1,000,000 shares authorized, 14,360 shares issued and 9,806 shares outstanding at March 31, 2022 and 14,157 shares issued and 9,788 shares outstanding at December 31, 2021)		1,436			1,416
Additional paid-in capital		105,989			104,745
Retained earnings		329,878			306,105
Treasury stock (4,554 shares at March 31, 2022 and 4,370 shares at December 31, 2021)		(138,561	)		(129,530	)
Total stockholders’ equity		298,742			282,736
Total liabilities and stockholders’ equity	$	1,497,671		$	1,459,662

The following table presents the assets and liabilities of our consolidated variable interest entities:

Assets
Cash	$	361		$	364
Net finance receivables		1,086,164			1,004,954
Allowance for credit losses		(117,001	)		(109,898	)
Restricted cash		117,827			118,818
Other assets		9			4
Total assets	$	1,087,360		$	1,014,242
Liabilities
Net debt	$	1,078,699		$	986,223
Accounts payable and accrued expenses		92			71
Total liabilities	$	1,078,791		$	986,294

See accompanying notes to consolidated financial statements.

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2022			2021
Revenue
Interest and fee income	$	107,631		$	87,279
Insurance income, net		10,544			7,985
Other income		2,673			2,467
Total revenue		120,848			97,731

Expenses
Provision for credit losses		30,858			11,362

Personnel		35,654			28,851
Occupancy		5,808			6,020
Marketing		3,091			2,710
Other		10,547			8,262
Total general and administrative expenses		55,100			45,843

Interest expense		(59	)		7,135
Income before income taxes		34,949			33,391
Income taxes		8,166			7,869

Net income	$	26,783		$	25,522
Net income per common share:
Basic	$	2.81		$	2.42
Diluted	$	2.67		$	2.31
Weighted-average common shares outstanding:
Basic		9,533			10,543
Diluted		10,022			11,066

See accompanying notes to consolidated financial statements.

Regional Management Corp. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)

	Three Months Ended March 31, 2022
	Common Stock						Additional Paid-In			Retained			Treasury
	Shares			Amount			Capital			Earnings			Stock			Total
Balance, December 31, 2021		14,157		$	1,416		$	104,745		$	306,105		$	(129,530	)	$	282,736
Cash dividends		—			—			—			(3,010	)		—			(3,010	)
Issuance of restricted stock awards		178			18			(18	)		—			—			—
Exercise of stock options		61			6			—			—			—			6
Repurchase of common stock		—			—			—			—			(9,031	)		(9,031	)
Shares withheld related to net share settlement		(36	)		(4	)		(844	)		—			—			(848	)
Share-based compensation		—			—			2,106			—			—			2,106
Net income		—			—			—			26,783			—			26,783
Balance, March 31, 2022		14,360		$	1,436		$	105,989		$	329,878		$	(138,561	)	$	298,742

	Three Months Ended March 31, 2021
	Common Stock						Additional Paid-In			Retained			Treasury
	Shares			Amount			Capital			Earnings			Stock			Total
Balance, December 31, 2020		13,851		$	1,385		$	105,483		$	227,343		$	(62,088	)	$	272,123
Cash dividends		—			—			—			(2,206	)		—			(2,206	)
Issuance of restricted stock awards		176			18			(18	)		—			—			—
Exercise of stock options		137			14			—			—			—			14
Repurchase of common stock		—			—			—			—			(11,834	)		(11,834	)
Shares withheld related to net share settlement		(101	)		(11	)		(1,535	)		—			—			(1,546	)
Share-based compensation		—			—			1,563			—			—			1,563
Net income		—			—			—			25,522			—			25,522
Balance, March 31, 2021		14,063		$	1,406		$	105,493		$	250,659		$	(73,922	)	$	283,636

See accompanying notes to consolidated financial statements.

Regional Management Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net income	$	26,783		$	25,522
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		30,858			11,362
Depreciation and amortization		3,238			2,891
Amortization of deferred originations fees and costs		(3,905	)		(3,846	)
Loss on disposal of property and equipment		2			1
Share-based compensation		2,106			1,563
Fair value adjustment on interest rate caps		(10,158	)		(785	)
Deferred income taxes, net		327			(245	)
Changes in operating assets and liabilities:
Increase (decrease) in unearned insurance premiums		(762	)		206
(Increase) decrease in lease assets		634			(536	)
(Increase) decrease in other assets		4			(2,989	)
Increase (decrease) in accounts payable and accrued expenses		(2,891	)		1,357
Increase (decrease) in lease liabilities		(449	)		511
Net cash provided by operating activities		45,787			35,012
Cash flows from investing activities:
Originations of finance receivables		(326,329	)		(232,052	)
Repayments of finance receivables		278,742			248,083
Purchases of intangible assets		(642	)		(769	)
Purchases of property and equipment		(1,126	)		(411	)
Net cash provided by (used in) investing activities		(49,355	)		14,851
Cash flows from financing activities:
Advances on revolving credit facilities		437,815			371,610
Payments on revolving credit facilities		(552,118	)		(506,638	)
Advances on securitizations		250,000			248,700
Payments on securitizations		(109,228	)		(130,085	)
Payments for debt issuance costs		(2,657	)		(2,506	)
Taxes paid related to net share settlement of equity awards		(828	)		(2,638	)
Cash dividends		(3,020	)		(2,110	)
Repurchases of common stock		(9,031	)		(11,834	)
Net cash provided by (used in) financing activities		10,933			(35,501	)
Net change in cash and restricted cash		7,365			14,362
Cash and restricted cash at beginning of period		149,189			71,876
Cash and restricted cash at end of period	$	156,554		$	86,238
Supplemental cash flow information:
Interest paid	$	8,616		$	7,230
Income taxes paid (refunded)	$	1		$	(199	)
Operating leases paid	$	2,794		$	2,087
Non-cash lease assets and liabilities acquired	$	1,246		$	2,202
Non-cash dividends payable	$	(10	)	$	96

The following table reconciles cash and restricted cash from the Consolidated Balance Sheets to the statements above:

	March 31, 2022		December 31, 2021		March 31, 2021
Cash	$	17,635	$	10,507	$	7,226
Restricted cash		138,919		138,682		79,012
Total cash and restricted cash	$	156,554	$	149,189	$	86,238

See accompanying notes to consolidated financial statements.

Regional Management Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business

Regional Management Corp. (the “Company”) was incorporated and began operations in 1987. The Company is engaged in the consumer finance business, offering small loans, large loans, retail loans, and related payment and collateral protection insurance products. As of March 31, 2022, the Company operated 354 branch locations under the name “Regional Finance” in 14 states across the United States.

The Company’s small loan portfolio is comprised of branch small loan receivables and convenience check receivables. Branch small loan receivables are direct loans to customers and are secured by non-essential household goods and, in some instances, an automobile. Convenience checks are direct loans originated by mailing checks to customers based on a pre-screening process that includes a review of the prospective customer’s credit profile provided by national credit reporting bureaus or data aggregators. A recipient of a convenience check is able to enter into a loan by endorsing and depositing or cashing the check. Large loan receivables are direct loans to customers, some of which are convenience check receivables and the vast majority of which are secured by non-essential household goods, automobiles, and/or other vehicles. Retail loan receivables consist principally of retail installment sales contracts collateralized by the purchased furniture, appliances, and other retail items and are initiated by and purchased from retailers, subject to the Company’s credit approval.

The Company’s loan volume and contractual delinquency follow seasonal trends. Demand for the Company’s small and large loans is typically highest during the second, third, and fourth quarters, which the Company believes is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which the Company believes is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation, and larger provisions for credit losses in periods of portfolio growth. Consequently, the Company experiences seasonal fluctuations in its operating results and cash needs. However, changes in borrower assistance programs and customer access to external economic stimulus measures related to the COVID-19 pandemic have impacted the Company’s typical seasonal trends for loan volume and delinquency.

Note 2. Basis of Presentation and Significant Accounting Policies

Basis of presentation: The consolidated financial statements of the Company have been prepared in accordance with the Securities and Exchange Commission (the “SEC”) regulations and U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and, accordingly, do not include all information and note disclosures required by GAAP for complete financial statements. The interim financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management, the interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows in accordance with GAAP. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC.

Significant accounting policies: The following is a description of significant accounting policies used in preparing the financial statements. The accounting and reporting policies of the Company are in accordance with GAAP.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates through a separate wholly-owned subsidiary in each state. The Company also consolidates variable interest entities (each, a “VIE”) when it is considered to be the primary beneficiary of the VIE because it has (i) power over the significant activities of the VIE and (ii) the obligation to absorb losses or the right to receive returns that could be significant to the VIE.

Variable interest entities: The Company transfers pools of loans to wholly-owned, bankruptcy-remote, special purpose entities (each, an “SPE”) to secure debt for general funding purposes. These entities have the limited purpose of acquiring finance receivables and holding and making payments on the related debts. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates. The Company continues to service the finance receivables transferred to the SPEs. The lenders and investors in the debt issued by the SPEs generally only have recourse to the assets of the SPEs and do not have recourse to the general credit of the Company.

The SPEs’ debt arrangements are structured to provide credit enhancements to the lenders and investors, which may include overcollateralization, subordination of interests, excess spread, and reserve funds. These enhancements, along with the isolated finance receivables pools, increase the creditworthiness of the SPEs above that of the Company as a whole. This increases the marketability of the Company’s collateral for borrowing purposes, leading to more favorable borrowing terms, improved interest rate risk management, and additional flexibility to grow the business.

The SPEs are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. The Company is considered to be the primary beneficiary of the SPEs because it has (i) power over the significant activities through its role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s interest in the monthly residual cash flows of the SPEs.

Consolidation of VIEs results in these transactions being accounted for as secured borrowings; therefore, the pooled receivables and the related debts remain on the consolidated balance sheet of the Company. Each debt is secured solely by the assets of the VIEs and not by any other assets of the Company. The assets of the VIEs are the only source of funds for repayment on each debt, and restricted cash held by the VIEs can only be used to support payments on the debt. The Company recognizes revenue and provision for credit losses on the finance receivables of the VIEs and interest expense on the related secured debt.

Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Actual results could differ from those estimates.

Estimates that are susceptible to change relate to the determination of the allowance for credit losses, the valuation of deferred tax assets and liabilities, and the fair value of financial instruments.

Reclassifications: Certain prior-period amounts have been reclassified to conform to the current presentation. Such reclassifications had no impact on previously reported net income or stockholders’ equity.

Revision: Subsequent to issuance of the March 31, 2021 financial statements, the Company concluded that certain cash flow statement line items should be broken out to reflect cash receipts and cash payments on a gross basis, rather than net. As a result, the net originations of finance receivables, net advances (payments) on senior revolving credit facility, net advances (payments) on revolving warehouse credit facilities, and net advances on securitizations line items have been updated to reflect a gross presentation. The Company also concluded that the amortization of deferred origination fees and costs, accrued interest receivables, and unearned insurance premiums included in the net originations of finance receivables (previously in investing activities) and accrued interest payables included in debt (previously in financing activities) should be included in operating activities. These changes will classify cash flows related to interest received on finance receivables and interest paid on debt as operating activities and cash flows related to net loan origination fees and costs as investing activities. To correct these classification errors, amounts previously reported have been reclassified for the three months ended March 31, 2021. Impacts for the three months ended March 31, 2021 included a decrease in net cash provided by operating activities of $7.3 million, an increase in net cash provided by investing activities of $6.9 million, and a decrease in net cash used in financing activities of $0.4 million.

Net finance receivables: Generally, the Company classifies finance receivables as held for investment based on management’s intent at the time of origination. The Company determines classification on a receivable-by-receivable basis. The Company classifies finance receivables as held for investment due to its ability and intent to hold them until their contractual maturities. Net finance receivables consist of the Company’s installment loans. The Company carries net finance receivables at amortized cost, which includes remaining principal balance, accrued interest, and net unamortized deferred origination costs and unamortized fees.

Allowance for credit losses: The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining its estimate of expected credit losses, the Company evaluates information related to credit metrics, changes in its lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

The Company selected a static pool Probability of Default (“PD”) / Loss Given Default (“LGD”) model to estimate its base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical static pools of net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).

To enhance the precision of the allowance for credit loss estimate, the Company evaluates its finance receivable portfolio on a pool basis and segments each pool of finance receivables with similar credit risk characteristics. As part of its evaluation, the Company considers loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency

status, geographical location, and vintage. Based on analysis of historical loss experience, the Company selected the following segmentation: product type, Fair Isaac Corporation (“FICO”) score, and delinquency status.

As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). The Company uses its segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the Company’s allowance for credit loss model. The Company engaged a major rating service to assist with compiling a reasonable and supportable forecast. The Company reviews macroeconomic forecasts to use in its allowance for credit losses. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations. The Company does not require reversion adjustments, as the contractual lives of its portfolio (considering the effect of prepayments) are shorter than its reasonable and supportable forecast periods.

The Company charges credit losses against the allowance when an account reaches 180 days contractually delinquent, subject to certain exceptions. The Company’s non-titled customer accounts in a confirmed bankruptcy are charged off in the month following the bankruptcy notification or at 60 days contractually delinquent, subject to certain exceptions. Deceased borrower accounts are charged off in the month following the proper notification of passing, with the exception of borrowers with credit life insurance. Subsequent recoveries of amounts charged off, if any, are credited to the allowance.

Troubled Debt Restructurings: The Company classifies a finance receivable as a troubled debt restructuring (each, a “TDR”) when the Company modifies the finance receivable’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grants a concession that it would not otherwise consider (including Chapter 13 bankruptcies and delinquent renewals). Modifications primarily include an interest rate reduction and term extension to reduce the borrower’s monthly payment. Once a loan is classified as a TDR, it remains a TDR for the purpose of calculating the allowance for credit losses for the remainder of its contractual term.

The Company establishes its allowance for credit losses related to its TDRs by calculating the present value of all expected cash flows (discounted at the finance receivable’s effective interest rate prior to modification) less the amortized costs of the aggregated pool. The Company uses the modified interest rates and certain assumptions, including expected credit losses and recoveries, to estimate the expected cash flows from its TDRs.

Nonaccrual status: Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income. Interest received on such loans is accounted for on the cash-basis method, until qualifying for return to accrual. Under the cash-basis method, interest income is recorded when the payment is received. Loans resume accruing interest when the past due status is brought below 90 days. The Company made a policy election to not record an allowance for credit losses related to accrued interest because it has nonaccrual and charge-off policies that result in the timely suspension and reversal of accrued interest.

Finance receivable origination fees and costs: Non-refundable fees received and direct costs (personnel and digital loan origination costs) incurred for the origination of finance receivables are deferred and recognized to interest income over their contractual lives using the constant yield method. Unamortized amounts are recognized in interest income at the time that finance receivables are paid in full, renewed, or charged off.

Share-based compensation: The Company measures compensation cost for share-based awards at estimated fair value and recognizes compensation expense over the service period for awards expected to vest. The Company uses the closing stock price on the date of grant as the fair value of restricted stock awards. The fair value of stock options is determined using the Black-Scholes valuation model and the fair value of Performance Restricted Stock Units is determined using the Monte Carlo valuation model. The Black-Scholes and Monte Carlo models require the input of assumptions, including expected volatility, expected dividends, expected life, risk-free interest rate, and a discount associated with post-vest holding restrictions, changes to which can affect the fair value estimate. Expected volatility is based on the Company’s historical stock price volatility. Expected dividends are calculated using the expected dividend yield (annualized dividends divided by the grant date stock price). The expected term for stock options is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. The risk-free rate is based on the zero-coupon U.S. Treasury bond rate over the expected term of the awards. The estimated discount associated with post-vest holding restrictions is calculated using a blend of the Finnerty and Chaffe models. In addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual

results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

Recent accounting pronouncements: In March 2022, the Financial Accounting Standards Board (“FASB”) issued an accounting update eliminating the accounting for TDRs by creditors while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amendment also requires disclosure of gross credit losses by year of origination for finance receivables. The amendments in this update are effective for annual and interim periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the potential impact of this update on its consolidated financial statements.

Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Net finance receivables for the periods indicated consisted of the following:

Dollars in thousands	March 31, 2022		December 31, 2021
Small loans	$	438,153	$	445,023
Large loans		997,226		970,694
Retail loans		10,692		10,540
Net finance receivables	$	1,446,071	$	1,426,257

Net finance receivables included net deferred origination fees and costs of $13.8 million and $14.2 million as of March 31, 2022 and December 31, 2021, respectively.

The credit quality of the Company’s finance receivable portfolio is dependent on the Company’s ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as it grows its portfolio. The allowance for credit losses uses FICO scores and delinquency as key data points in estimating the allowance. The Company uses six FICO band categories to assess FICO scores. The first FICO band category includes the lowest FICO scores, while the sixth FICO band category includes the highest FICO scores.

Net finance receivables by product, FICO band, and origination year as of March 31, 2022 are as follows:

	Net Finance Receivables by Origination Year
Dollars in thousands	2022 (1)		2021		2020		2019		2018		Prior		Total Net Finance Receivables
Small Loans:
FICO Band
1	$	21,418	$	50,274	$	6,874	$	1,279	$	118	$	21	$	79,984
2		14,464		34,720		3,438		485		19		5		53,131
3		17,614		37,470		3,667		416		8		1		59,176
4		19,245		40,737		3,847		364		9		3		64,205
5		19,634		42,226		4,842		320		—		2		67,024
6		32,547		71,339		10,351		393		—		3		114,633
Total small loans	$	124,922	$	276,766	$	33,019	$	3,257	$	154	$	35	$	438,153
Large Loans:
FICO Band
1	$	12,424	$	36,253	$	15,370	$	7,791	$	2,036	$	1,419	$	75,293
2		8,112		34,675		9,860		3,602		417		290		56,956
3		28,262		96,173		20,344		8,651		841		330		154,601
4		35,775		118,462		27,579		11,273		971		195		194,255
5		34,335		113,313		28,051		10,665		1,076		132		187,572
6		60,554		199,580		48,841		17,528		1,905		141		328,549
Total large loans	$	179,462	$	598,456	$	150,045	$	59,510	$	7,246	$	2,507	$	997,226
Retail Loans:
FICO Band
1	$	—	$	17	$	104	$	121	$	12	$	3	$	257
2		127		212		59		91		5		1		495
3		330		1,214		254		90		5		7		1,900
4		386		1,712		652		225		26		6		3,007
5		296		1,402		536		222		23		6		2,485
6		301		1,511		537		187		9		3		2,548
Total retail loans	$	1,440	$	6,068	$	2,142	$	936	$	80	$	26	$	10,692
Total Loans:
FICO Band
1	$	33,842	$	86,544	$	22,348	$	9,191	$	2,166	$	1,443	$	155,534
2		22,703		69,607		13,357		4,178		441		296		110,582
3		46,206		134,857		24,265		9,157		854		338		215,677
4		55,406		160,911		32,078		11,862		1,006		204		261,467
5		54,265		156,941		33,429		11,207		1,099		140		257,081
6		93,402		272,430		59,729		18,108		1,914		147		445,730
Total loans	$	305,824	$	881,290	$	185,206	$	63,703	$	7,480	$	2,568	$	1,446,071

(1)	Includes loans originated during the three months ended March 31, 2022.

Net finance receivables by product, FICO band, and origination year as of December 31, 2021 are as follows:

	Net Finance Receivables by Origination Year
Dollars in thousands	2021		2020		2019		2018		2017		Prior		Total Net Finance Receivables
Small Loans:
FICO Band
1	$	71,720	$	11,243	$	2,202	$	208	$	44	$	6	$	85,423
2		48,507		5,805		856		33		11		3		55,215
3		52,113		6,278		764		24		5		1		59,185
4		56,631		6,834		689		31		8		1		64,194
5		57,058		8,484		615		14		2		1		66,174
6		96,149		17,837		835		7		3		1		114,832
Total small loans	$	382,178	$	56,481	$	5,961	$	317	$	73	$	13	$	445,023
Large Loans:
FICO Band
1	$	41,865	$	19,447	$	9,940	$	2,714	$	1,374	$	649	$	75,989
2		40,795		12,814		4,815		594		255		171		59,444
3		112,048		26,041		11,398		1,412		372		118		151,389
4		136,901		34,382		14,890		1,622		284		50		188,129
5		130,375		34,278		14,021		1,730		165		68		180,637
6		229,184		59,579		23,054		2,998		235		56		315,106
Total large loans	$	691,168	$	186,541	$	78,118	$	11,070	$	2,685	$	1,112	$	970,694
Retail Loans:
FICO Band
1	$	19	$	137	$	207	$	25	$	1	$	2	$	391
2		161		86		150		13		1		—		411
3		1,177		338		156		17		4		4		1,696
4		1,699		840		363		56		4		2		2,964
5		1,415		678		337		46		7		1		2,484
6		1,563		702		295		30		2		2		2,594
Total retail loans	$	6,034	$	2,781	$	1,508	$	187	$	19	$	11	$	10,540
Total Loans:
FICO Band
1	$	113,604	$	30,827	$	12,349	$	2,947	$	1,419	$	657	$	161,803
2		89,463		18,705		5,821		640		267		174		115,070
3		165,338		32,657		12,318		1,453		381		123		212,270
4		195,231		42,056		15,942		1,709		296		53		255,287
5		188,848		43,440		14,973		1,790		174		70		249,295
6		326,896		78,118		24,184		3,035		240		59		432,532
Total loans	$	1,079,380	$	245,803	$	85,587	$	11,574	$	2,777	$	1,136	$	1,426,257

The contractual delinquency of the net finance receivables portfolio by product and aging for the periods indicated are as follows:

	March 31, 2022
	Small					Large					Retail					Total
Dollars in thousands	$		%			$		%			$		%			$		%
Current	$	367,823		83.9	%	$	891,666		89.4	%	$	8,878		83.0	%	$	1,268,367		87.7	%
1 to 29 days past due		35,469		8.1	%		59,185		5.9	%		1,035		9.7	%		95,689		6.6	%
Delinquent accounts
30 to 59 days		7,251		1.7	%		12,352		1.2	%		215		2.0	%		19,818		1.4	%
60 to 89 days		6,272		1.4	%		9,966		1.0	%		152		1.4	%		16,390		1.1	%
90 to 119 days		6,945		1.6	%		8,553		0.9	%		138		1.4	%		15,636		1.1	%
120 to 149 days		7,159		1.6	%		8,020		0.8	%		143		1.3	%		15,322		1.1	%
150 to 179 days		7,234		1.7	%		7,484		0.8	%		131		1.2	%		14,849		1.0	%
Total delinquency	$	34,861		8.0	%	$	46,375		4.7	%	$	779		7.3	%	$	82,015		5.7	%
Total net finance receivables	$	438,153		100.0	%	$	997,226		100.0	%	$	10,692		100.0	%	$	1,446,071		100.0	%
Net finance receivables in nonaccrual status	$	21,975		5.0	%	$	25,935		2.6	%	$	463		4.3	%	$	48,373		3.3	%

	December 31, 2021
	Small					Large					Retail					Total
Dollars in thousands	$		%			$		%			$		%			$		%
Current	$	366,775		82.5	%	$	861,855		88.8	%	$	8,535		81.0	%	$	1,237,165		86.7	%
1 to 29 days past due		38,454		8.6	%		64,491		6.6	%		1,256		11.9	%		104,201		7.3	%
Delinquent accounts
30 to 59 days		11,244		2.5	%		13,777		1.5	%		262		2.5	%		25,283		1.9	%
60 to 89 days		9,436		2.1	%		10,788		1.1	%		171		1.6	%		20,395		1.4	%
90 to 119 days		7,868		1.8	%		7,971		0.8	%		123		1.2	%		15,962		1.0	%
120 to 149 days		5,897		1.3	%		6,480		0.7	%		89		0.8	%		12,466		0.9	%
150 to 179 days		5,349		1.2	%		5,332		0.5	%		104		1.0	%		10,785		0.8	%
Total delinquency	$	39,794		8.9	%	$	44,348		4.6	%	$	749		7.1	%	$	84,891		6.0	%
Total net finance receivables	$	445,023		100.0	%	$	970,694		100.0	%	$	10,540		100.0	%	$	1,426,257		100.0	%
Net finance receivables in nonaccrual status	$	21,285		4.8	%	$	23,495		2.4	%	$	390		3.7	%	$	45,170		3.2	%

The accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If a loan is charged off, the accrued interest is reversed as a reduction of interest and fee income. During the three months ended March 31, 2022 and 2021, the Company reversed $3.7 million and $2.4 million of accrued interest as reductions of interest and fee income, respectively.

The following is a reconciliation of the allowance for credit losses by product for the three months ended March 31, 2022 and 2021:

Dollars in thousands	Small			Large			Retail			Total
Beginning balance at January 1, 2022	$	61,294		$	96,494		$	1,512		$	159,300
Provision for credit losses		12,646			17,952			260			30,858
Credit losses		(16,255	)		(16,260	)		(265	)		(32,780	)
Recoveries		645			747			30			1,422
Ending balance at March 31, 2022	$	58,330		$	98,933		$	1,537		$	158,800
Net finance receivables at March 31, 2022	$	438,153		$	997,226		$	10,692		$	1,446,071
Allowance as percentage of net finance receivables at March 31, 2022		13.3	%		9.9	%		14.4	%		11.0	%

Dollars in thousands	Small			Large			Retail			Total
Beginning balance at January 1, 2021	$	59,410		$	88,058		$	2,532		$	150,000
Provision for credit losses		4,761			6,728			(127	)		11,362
Credit losses		(10,973	)		(11,340	)		(456	)		(22,769	)
Recoveries		475			503			29			1,007
Ending balance at March 31, 2021	$	53,673		$	83,949		$	1,978		$	139,600
Net finance receivables at March 31, 2021	$	371,188		$	722,474		$	11,941		$	1,105,603
Allowance as percentage of net finance receivables at March 31, 2021		14.5	%		11.6	%		16.6	%		12.6	%

The decrease in our allowance for credit losses for the three months ended March 31, 2022 was primarily due to a $1.1 million release for improvements in our economic forecasts related to continued stabilization of unemployment rates, partially offset by the $0.6 million build for growth in our large loan portfolio. The decrease in our allowance for credit losses for the three months ended March 31, 2021 was primarily due to $6.6 million release for improvements in our economic forecasts related to decreases in unemployment rates and continued stimulus payments and a $3.8 million release for portfolio liquidation. We may experience changes within our economic forecast, as well as changes to our credit loss performance outlook, both of which could lead to further changes in our allowance for credit losses and provision for credit losses.

The Company classifies a loan as a TDR finance receivable when the Company modifies a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and grants a concession that it would not otherwise consider.

The amount of TDR net finance receivables and the related TDR allowance for credit losses for the periods indicated are as follows:

	March 31, 2022				March 31, 2021
Dollars in thousands	TDR Net Finance Receivables		TDR Allowance for Credit Losses		TDR Net Finance Receivables		TDR Allowance for Credit Losses
Small loans	$	3,249	$	1,078	$	4,391	$	1,862
Large loans		13,295		3,782		14,646		4,964
Retail loans		58		19		70		29
Total	$	16,602	$	4,879	$	19,107	$	6,855

The following table provides the number and amount of net finance receivables modified and classified as TDRs during the periods presented:

	Three Months Ended
	March 31, 2022				March 31, 2021
Dollars in thousands	Number of Loans		TDR Net Finance Receivables (1)		Number of Loans		TDR Net Finance Receivables (1)
Small loans		766	$	1,464		787	$	1,455
Large loans		760		4,043		623		3,131
Retail loans		3		5		2		4
Total		1,529	$	5,512		1,412	$	4,590

(1) Represents the post-modification net finance receivables balance of loans that have been modified during the period and resulted in a TDR.

The following table provides the number of accounts and balance of finance receivables that subsequently defaulted within the periods indicated (that were modified as a TDR in the preceding 12 months). The Company defines payment default as 90 days past due for this disclosure. The respective amounts and activity for the periods indicated are as follows:

	Three Months Ended
	March 31, 2022				March 31, 2021
Dollars in thousands	Number of Loans		TDR Net Finance Receivables (1)		Number of Loans		TDR Net Finance Receivables (1)
Small loans		254	$	478		266	$	458
Large loans		210		1,212		160		802
Retail loans		2		6		2		4
Total		466	$	1,696		428	$	1,264

(1) Only includes defaults occurring within 12 months of a loan being designated as a TDR. Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.

Note 4. Interest Rate Caps

The Company has interest rate cap contracts with an aggregate notional principal amount of $550.0 million. Each contract is collateralizable and contains a strike rate against the one-month LIBOR (0.45% and 0.10% as of March 31, 2022 and December 31, 2021, respectively). When the one-month LIBOR exceeds the strike rate, the counterparty reimburses the Company for the excess over the strike rate. No payment is required by the Company or the counterparty when the one-month LIBOR is below the strike rate. Each of the Company’s interest rate cap contracts include a process to transition from LIBOR to a new benchmark in certain circumstances. The following is a summary of the Company’s interest rate caps as of March 31, 2022:

						Notional Amount
Execution Date	Effective Date	Maturity Date	Strike Rate			(in thousands)
03/2020	03/2020	03/2023		1.75	%	$	100,000
08/2020	08/2020	08/2023		0.50	%		50,000
09/2020	10/2020	10/2023		0.50	%		100,000
11/2020	11/2020	11/2023		0.25	%		50,000
02/2021	02/2021	02/2024		0.25	%		50,000
03/2021	03/2021	03/2024		0.25	%		50,000
06/2021	06/2021	06/2024		0.25	%		50,000
12/2021	08/2023	02/2026		0.50	%		50,000
12/2021	02/2024	02/2026		0.50	%		50,000
Total notional amount						$	550,000

The following is a summary of changes in fair value of the interest rate caps (included in other assets) for the periods indicated:

	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Balance at beginning of period	$	6,586	$	265
Purchases		—		602
Fair value adjustment included as a decrease in interest expense		10,158		785
Balance at end of period	$	16,744	$	1,652

See Note 12, “Subsequent Events,” for information regarding the Company’s interest rate caps following the end of the fiscal quarter.

Note 5. Debt

The following is a summary of the Company’s debt as of the periods indicated:

	March 31, 2022							December 31, 2021
Dollars in thousands	Debt		Unamortized Debt Issuance Costs			Net Debt		Debt		Unamortized Debt Issuance Costs			Net Debt
Senior revolving credit facility	$	44,919	$	(1,242	)	$	43,677	$	112,065	$	(1,345	)	$	110,720
RMR II revolving warehouse credit facility		33,536		(1,239	)		32,297		52,469		(1,393	)		51,076
RMR IV revolving warehouse credit facility		31,618		(474	)		31,144		20,071		(531	)		19,540
RMR V revolving warehouse credit facility		19,406		(460	)		18,946		59,451		(516	)		58,935
RMIT 2019-1 securitization		—		—			—		109,373		(464	)		108,909
RMIT 2020-1 securitization		180,214		(1,236	)		178,978		180,214		(1,442	)		178,772
RMIT 2021-1 securitization		248,916		(1,619	)		247,297		248,916		(1,830	)		247,086
RMIT 2021-2 securitization		200,192		(1,855	)		198,337		200,192		(1,962	)		198,230
RMIT 2021-3 securitization		125,202		(1,404	)		123,798		125,202		(1,527	)		123,675
RMIT 2022-1 securitization		250,374		(2,472	)		247,902		—		—			—
Total	$	1,134,377	$	(12,001	)	$	1,122,376	$	1,107,953	$	(11,010	)	$	1,096,943
Unused amount of revolving credit facilities (subject to borrowing base)	$	671,115						$	556,812

Senior Revolving Credit Facility: In December 2021, the Company amended and restated its senior revolving credit facility to, among other things, decrease the availability under the facility from $640 million to $500 million and extend the maturity of the facility from September 2022 to September 2024. Excluding the receivables held by the Company’s VIEs, the senior revolving credit facility is secured by substantially all of the Company’s finance receivables and equity interests of the majority of its subsidiaries. Advances on the senior revolving credit facility are capped at 83% of eligible secured finance receivables (80% of eligible secured finance receivables as of March 31, 2022). As of March 31, 2022, the Company had $196.9 million of immediate availability to draw down cash under the facility and held $17.6 million in unrestricted cash. Borrowings under the facility bear interest, payable monthly, at rates equal to one-month LIBOR, with a LIBOR floor of 0.50%, plus a 3.00% margin. The effective interest rate was 3.50% as of March 31, 2022. The amended and restated facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. The Company pays an unused line fee of 0.50%.

Variable Interest Entity Debt: As part of its overall funding strategy, the Company has transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions, including securitizations. The following debt arrangements are issued by the Company’s wholly-owned, bankruptcy-remote SPEs, which are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. The Company is considered to be the primary beneficiary because it has (i) power over the significant activities through its role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through the Company’s interest in the monthly residual cash flows of the SPEs.

These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $106.1 million and $107.7 million as of March 31, 2022 and December 31, 2021, respectively. Cash inflows from the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that the Company owns in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to the Company, which is eliminated in consolidation. Distributions from the SPEs to the Company are permitted under the debt arrangements.

At each sale of receivables from the Company’s affiliates to the SPEs, the Company makes certain representations and warranties about the quality and nature of the collateralized receivables. The debt arrangements require the Company to repurchase the receivables in certain circumstances, including circumstances in which the representations and warranties made by the Company concerning the quality and characteristics of the receivables are inaccurate. Assets transferred to each SPE are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its affiliates.

RMR II Revolving Warehouse Credit Facility: In April 2021, the Company and its wholly-owned SPE, Regional Management Receivables II, LLC (“RMR II”), amended and restated the credit agreement that provides for a revolving warehouse credit facility to RMR II to, among other things, extend the date at which the facility converts to an amortizing loan and the termination date to March 2023 and March 2024, respectively, decrease the total facility from $125 million to $75 million, increase the cap on facility advances from 80% to 83% of eligible finance receivables, and increase the rate at which borrowings under the facility bear interest, payable monthly, at a rate equal to three-month LIBOR, with a LIBOR floor of 0.25%, plus a blended margin of 2.35% (2.15% prior to the April 2021 amendment). The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR II. RMR II held $0.4 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the credit agreement. The effective interest rate was 3.31% as of March 31, 2022. RMR II pays an unused commitment fee between 0.35% and 0.85% based upon the average daily utilization of the facility. The RMR II revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances.

RMR IV Revolving Warehouse Credit Facility: In April 2021, the Company and its wholly-owned SPE, Regional Management Receivables IV, LLC (“RMR IV”), entered into a credit agreement that provides for a $125 million revolving warehouse credit facility to RMR IV. The facility converts to an amortizing loan in April 2023 and terminates in April 2024. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR IV. Advances on the facility are capped at 81% of eligible finance receivables. RMR IV held $0.4 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the credit agreement. Borrowings under the facility bear interest, payable monthly, at a rate equal to one-month LIBOR, plus a margin of 2.35%. The effective interest rate was 2.80% as of March 31, 2022. RMR IV pays an unused commitment fee between 0.35% and 0.70% based upon the average daily utilization of the facility. The RMR IV revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances.

RMR V Revolving Warehouse Credit Facility: In April 2021, the Company and its wholly-owned SPE, Regional Management Receivables V, LLC (“RMR V”), entered into a credit agreement that provides for a $100 million revolving warehouse credit facility to RMR V. The facility converts to an amortizing loan in October 2022 and terminates in October 2023. The debt is secured by finance receivables and other related assets that the Company purchased from its affiliates, which the Company then sold and transferred to RMR V. Advances on the facility are capped at 80% of eligible finance receivables. RMR V held $0.2 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the credit agreement. Borrowings under the facility bear interest, payable monthly, at a per annum rate, which in the case of a conduit lender is the commercial paper rate, plus a margin of 2.20%. The effective interest rate was 2.79% as of March 31, 2022. RMR V pays an unused commitment fee between 0.45% and 0.75% based upon the average daily utilization of the facility.

RMIT 2019-1 Securitization: In October 2019, the Company, its wholly-owned SPE, Regional Management Receivables III (“RMR III”), and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2019-1 (“RMIT 2019-1”), completed a private offering and sale of $130 million of asset-backed notes. Prior to maturity in November 2028, the Company could redeem the notes in full, but not in part, at its option on any remaining note payment date. In February 2022, the Company and RMR III exercised the right to make an optional principal repayment in full, and in connection with such prepayment, the securitization terminated in February 2022.

RMIT 2020-1 Securitization: In September 2020, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2020-1 (“RMIT 2020-1”), completed a private offering and sale of $180 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2020-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2020-1. The notes have a revolving period ending in September 2023, with a final maturity date in October 2030. RMIT 2020-1 held $1.9 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2020-1 securitization bear interest, payable monthly, at an effective interest rate of 2.85% as of March 31, 2022. Prior to maturity in October 2030, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in October 2023. No payments of principal of the notes will be made during the revolving period.

RMIT 2021-1 Securitization: In February 2021, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2021-1 (“RMIT 2021-1”), completed a private offering and sale of $249 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2021-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-1. The notes have a revolving period ending in February 2024, with a final maturity date in March 2031. RMIT 2021-1 held $2.6 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-1 securitization bear interest, payable monthly, at an effective interest rate of 2.08% as of March 31, 2022. Prior to maturity in March 2031, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in March 2024. No payments of principal of the notes will be made during the revolving period.

RMIT 2021-2 Securitization: In July 2021, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2021-2 (“RMIT 2021-2”), completed a private offering and sale of $200 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2021-2. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-2. The notes have a revolving period ending in July 2026, with a final maturity date in August 2033. RMIT 2021-2 held $2.1 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-2 securitization bear interest, payable monthly, at an effective interest rate of 2.30% as of March 31, 2022. Prior to maturity in August 2033, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in August 2026. No payments of principal of the notes will be made during the revolving period.

RMIT 2021-3 Securitization: In October 2021, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2021-3 (“RMIT 2021-3”), completed a private offering and sale of $125 million of asset-backed notes. The transaction consisted of the issuance of fixed-rate, asset-backed notes by RMIT 2021-3. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2021-3. The notes have a revolving period ending in September 2026, with a final maturity date in October 2033. RMIT 2021-3 held $1.5 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2021-3 securitization bear interest, payable monthly, at an effective interest rate of 3.88% as of March 31, 2022. Prior to maturity in October 2033, the Company may redeem the notes in full, but not in part, at its option on any business day on or after the payment date occurring in October 2024. No payments of principal of the notes will be made during the revolving period.

RMIT 2022-1 securitization: In February 2022, the Company, its wholly-owned SPE, RMR III, and the Company’s indirect wholly-owned SPE, Regional Management Issuance Trust 2022-1 (“RMIT 2022-1”), completed a private offering and sale of $250 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2022-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from the Company, which RMR III then sold and transferred to RMIT 2022-1. The notes have a revolving period ending in February 2025, with a final maturity date in March 2032. RMIT 2022-1 held $2.6 million in restricted cash reserves as of March 31, 2022 to satisfy provisions of the transaction documents. Borrowings under the RMIT 2022-1 securitization bear interest, payable monthly, at an effective interest rate of 3.59%. Prior to maturity in March 2032, the Company may redeem the notes in full, but not in part, at its option on any note payment date on or after the payment date occurring in March 2025. No payments of principal of the notes will be made during the revolving period.

The Company’s debt arrangements are subject to certain covenants, including monthly and annual reporting, maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other indebtedness, and certain other restrictions. As of March 31, 2022, the Company was in compliance with all debt covenants.

Note 6. Stockholders’ Equity

Stock repurchase program: In October 2020, the Company announced that its Board of Directors (the “Board”) had authorized a $30.0 million stock repurchase program. In May 2021, the Company completed the stock repurchase program, having repurchased a total of 952 thousand shares of common stock.

In May 2021, the Company announced that the Board had authorized a $30.0 million stock repurchase program. In August 2021, the Company announced that the Board had approved a $20.0 million increase in the amount authorized under the stock repurchase program, from $30.0 million to $50.0 million. In January 2022, the Company completed the stock repurchase program, having repurchased a total of 945 thousand shares of common stock.

In February 2022, the Company announced that the Board had authorized a new $20.0 million stock repurchase program. The authorization was effective immediately and extends through February 3, 2024.

Stock repurchases under our stock repurchase programs may be made in the open market at prevailing market prices or through privately negotiated transactions in accordance with applicable federal and state securities laws.

The following is a summary of the Company’s repurchased shares of common stock for the periods indicated:

	Three Months Ended March 31,
Dollars and shares in thousands, except per share amounts	2022		2021
Common stock repurchased		184		352
Weighted-average cost per share	$	49.00	$	33.57
Total cost of common stock repurchased	$	9,031	$	11,834

Quarterly cash dividend: The Board may in its discretion declare and pay cash dividends on the Company’s common stock. The following table presents the dividends declared per share of common stock for the periods indicated:

	Three Months Ended March 31,
	2022		2021
Dividends declared per common share	$	0.30	$	0.20

See Note 12, “Subsequent Events,” for information regarding the Company’s cash dividend following the end of the fiscal quarter.

Note 7. Disclosure About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and restricted cash: Cash and restricted cash is recorded at cost, which approximates fair value due to its generally short maturity and highly liquid nature.

Net finance receivables: The Company determines the fair value of net finance receivables using a discounted cash flows methodology. The application of this methodology requires the Company to make certain estimates and judgments. These estimates and judgments include, but are not limited to, prepayment rates, default rates, loss severity, and risk-adjusted discount rates.

Interest rate caps: The fair value of the interest rate caps is the estimated amount the Company would receive to terminate the cap agreements at the reporting date, taking into account current interest rates and the creditworthiness of the counterparty.

Debt: The Company estimates the fair value of debt using estimated credit marks based on an index of similar financial instruments (credit facilities) and projected cash flows from the underlying collateralized finance receivables (securitizations), each discounted using a risk-adjusted discount rate.

Certain of the Company’s assets estimated fair value are classified and disclosed in one of the following three categories:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are estimated at fair value. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

The carrying amount and estimated fair values of the Company’s financial instruments summarized by level are as follows:

	March 31, 2022				December 31, 2021
Dollars in thousands	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Level 1
Cash	$	17,635	$	17,635	$	10,507	$	10,507
Restricted cash		138,919		138,919		138,682		138,682
Level 2
Interest rate caps		16,744		16,744		6,586		6,586
Level 3
Net finance receivables, less unearned insurance premiums and allowance for credit losses		1,240,196		1,346,814		1,219,120		1,323,988
Liabilities
Level 3
Debt		1,134,377		1,086,277		1,107,953		1,098,625

Note 8. Income Taxes

The Company records interim provisions for income taxes based on an estimated annual effective tax rate. The Company recognizes discrete tax benefits or deficiencies in the income tax line of the consolidated statements of income. These discrete benefits or deficiencies are primarily the result of exercises or vestings of share-based awards.

The following table summarizes the components of income taxes for the periods indicated:

	Three Months Ended
	March 31,
Dollars in thousands	2022			2021
Provision for corporate taxes	$	8,562		$	8,348
Discrete tax benefits		(396	)		(479	)
Total income taxes	$	8,166		$	7,869

Note 9. Earnings Per Share

The following schedule reconciles the computation of basic and diluted earnings per share for the periods indicated:

	Three Months Ended March 31,
Dollars in thousands, except per share amounts	2022		2021
Numerator:
Net income	$	26,783	$	25,522
Denominator:
Weighted-average shares outstanding for basic earnings per share		9,533		10,543
Effect of dilutive securities		489		523
Weighted-average shares adjusted for dilutive securities		10,022		11,066
Earnings per share:
Basic	$	2.81	$	2.42
Diluted	$	2.67	$	2.31

Options to purchase 0.1 million and 0.2 million shares of common stock were outstanding during the three months ended March 31, 2022 and 2021, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

Note 10. Share-Based Compensation

The Company previously adopted the 2007 Management Incentive Plan (the “2007 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). On April 22, 2015, the stockholders of the Company approved the 2015 Long-Term Incentive Plan (the “2015 Plan”), and on each of April 27, 2017 and May 20, 2021, the stockholders of the Company re-approved the 2015 Plan, as amended and restated on each respective date. As of March 31, 2022, subject to adjustments as provided in the 2015 Plan, the maximum aggregate number of shares of the Company’s common stock that could be issued under the 2015 Plan could not exceed the sum of (i) 2.6 million shares (such amount reflecting an increase of 1.05 million additional or “new” shares in connection with the May 20, 2021 re-approval of the 2015 Plan) plus (ii) any shares remaining available for the grant of awards as of the 2015 Plan effective date (April 22, 2015) under the 2007 Plan or the 2011 Plan, plus (iii) any shares subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cash-settled, cancelled, terminated, expires, or lapses for any reason without the issuance of shares or pursuant to which such shares are forfeited. As of the effective date of the 2015 Plan (April 22, 2015), there were 0.9 million shares available for grant under the 2015 Plan, inclusive of shares previously available for grant under the 2007 Plan and the 2011 Plan that were rolled over to the 2015 Plan. No further grants will be made under the 2007 Plan or the 2011 Plan. However, awards that are outstanding under the 2007 Plan and the 2011 Plan will continue in accordance with their respective terms. As of March 31, 2022, there were 0.9 million shares available for grant under the 2015 Plan.

For the three months ended March 31, 2022 and 2021, the Company recorded share-based compensation expense of $2.1 million and $1.6 million, respectively. The Company recorded $2.1 million and $1.6 million in share-based compensation for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, unrecognized share-based compensation expense to be recognized over future periods approximated $18.8 million. This amount will be recognized as expense over a weighted-average period of 2.2 years. Share-based compensation expenses are recognized on a straight-line basis over the requisite service period of the agreement. All share-based compensation is classified as equity awards.

The Company allows for the settlement of share-based awards on a net share basis. With net share settlement, the employee does not surrender any cash or shares upon the exercise of stock options or the vesting of stock awards or stock units. Rather, the Company withholds the number of shares with a value equivalent to the option exercise price (for stock options) and the statutory tax withholding (for all share-based awards). Net share settlements have the effect of reducing the number of shares that would have otherwise been issued as a result of exercise or vesting.

Long-term incentive program: The Company issues performance restricted stock units (“PRSUs”) and restricted stock awards (“RSAs”) to certain members of senior management under a long-term incentive program (“LTIP”). Recurring annual grants are made at the discretion of the Board. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. Vested PRSUs are subject to an additional one-year holding period following the vesting date. The actual value of the PRSUs that may be earned can range from 0% to 150% of target based on positive or negative cumulative total shareholder return concluding at the end of the third calendar year.

Prior to 2022, the Company issued non-qualified stock options, performance-contingent restricted stock units (“RSUs”), cash-settled performance units (“CSPUs”), and RSAs to certain members of senior management under the LTIP. The CSPUs are cash incentive awards, and the associated expense is not based on the market price of the Company’s common stock. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. The actual value of the RSUs and CSPUs that may be earned can range from 0% to 150% of target based on the percentile ranking of the Company’s compound annual growth rate of pre-provision net income and pre-provision net income per share compared to a public company peer group over a three-year performance period.

Key team member incentive program: The Company also has a key team member incentive program for certain other members of senior management. Recurring annual participation in the program is at the discretion of the Board and executive management. Each participant in the program is eligible to earn an RSA, subject to performance over a one-year period. Payout under the program can range from 0% to 150% of target based on the achievement of five Company performance metrics and individual performance goals (subject to continued employment and certain other terms and conditions of the program). If earned, the RSA is issued following the one-year performance period and vests ratably over a subsequent two-year period (subject to continued employment or as otherwise provided in the underlying award agreement).

Inducement and retention program: From time to time, the Company issues stock awards and other long-term incentive awards in conjunction with employment offers to select new employees and retention grants to select existing employees. The Company issues these awards to attract and retain talent and to provide market competitive compensation. The grants have various vesting terms, including fully-vested awards at the grant date, cliff-vesting, and graded-vesting over periods of up to five years (subject to continued employment or as otherwise provided in the underlying award agreements).

Non-employee director compensation program: The Company awards its non-employee directors a cash retainer and shares of restricted common stock. The RSAs are granted on the fifth business day following the Company’s annual meeting of stockholders and fully vest upon the earlier of the first anniversary of the grant date or the completion of the directors’ annual service to the Company (so long as the period between the date of the annual stockholders’ meeting related to the grant date and the date of the next annual stockholders’ meeting is not less than 50 weeks).

The following are the terms and amounts of the awards issued under the Company’s share-based incentive programs:

Non-qualified stock options: The exercise price of all stock options is equal to the Company’s closing stock price on the date of grant. Stock options are subject to various vesting terms, including graded- and cliff-vesting over periods of up to five years. In addition, stock options vest and become exercisable in full or in part under certain circumstances, including following the occurrence of a change of control (as defined in the option award agreements). Participants who are awarded options must exercise their options within a maximum of ten years of the grant date.

The fair value of option grants is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions for option grants during the periods indicated below:

	Three Months Ended March 31,
	2022 (1)		2021
Expected volatility		—		47.83	%
Expected dividends		—		2.63	%
Expected term (in years)		—		6.0
Risk-free rate		—		0.64	%

(1) Beginning in 2022, the Company no longer issues non-qualified stock options as part of its annual long-term incentive program.

Expected volatility is based on the Company’s historical stock price volatility. Expected dividends are calculated using the expected dividend yield (annualized dividends divided by the grant date stock price). The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. The risk-free rate is based on the zero-coupon U.S. Treasury bond rate over the expected term of the awards.

The following table summarizes the stock option activity for the three months ended March 31, 2022:

Dollars in thousands, except per share amounts	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Options outstanding at January 1, 2022		589		$	22.50
Granted		—			—
Exercised		(61	)		17.60
Forfeited		—			—
Expired		(1	)		17.08
Options outstanding at March 31, 2022		527		$	23.07		6.6	$	13,447
Options exercisable at March 31, 2022		382		$	21.76		5.9	$	10,235

The following table provides additional stock option information for the periods indicated:

	Three Months Ended March 31,
Dollars in thousands, except per share amounts	2022		2021
Weighted-average grant date fair value per share	$	—	$	10.52
Intrinsic value of options exercised	$	2,142	$	2,861
Fair value of stock options that vested	$	—	$	—

Performance restricted stock units: Compensation expense for PRSUs is based on the fair value of the award estimated on the grant date using the Monte Carlo valuation model. The following are the weighted-average assumptions for the PRSU grants during the periods indicated below:

	Three Months Ended March 31,
	2022			2021
Expected volatility		39.24	%		—
Expected dividends		—			—
Risk-free rate		1.05	%		—
Discount for post-vesting restrictions		11.93	%		—

The following table summarizes PRSU activity during the three months ended March 31, 2022:

Dollars in thousands, except per unit amounts	Units		Weighted-Average Grant Date Fair Value Per Unit
Non-vested units at January 1, 2022		—	$	—
Granted		70		52.07
Achieved performance adjustment		—		—
Vested		—		—
Forfeited		—		—
Non-vested units at March 31, 2022		70	$	52.07

The following table provides additional PRSU information for the periods indicated:

	Three Months Ended March 31,
Dollars in thousands, except per unit amounts	2022		2021
Weighted-average grant date fair value per unit	$	52.07	$	—
Fair value of PRSUs that vested	$	—	$	—

Performance-contingent restricted stock units: Compensation expense for RSUs is based on the Company’s closing stock price on the date of grant and the probability that certain financial goals will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSU activity during the three months ended March 31, 2022:

Dollars in thousands, except per unit amounts	Units		Weighted-Average Grant Date Fair Value Per Unit
Non-vested units at January 1, 2022		129	$	22.84
Granted (target)		—		—
Achieved performance adjustment		—		—
Vested		—		—
Forfeited		—		—
Non-vested units at March 31, 2022		129	$	22.84

The following table provides additional RSU information for the periods indicated:

	Three Months Ended March 31,
Dollars in thousands, except per unit amounts	2022		2021
Weighted-average grant date fair value per unit	$	—	$	30.22
Fair value of RSUs that vested	$	—	$	1,199

Restricted stock awards: The fair value and compensation expense of the primary portion of the Company’s RSAs are calculated using the Company’s closing stock price on the date of grant. These RSAs include director awards, inducement awards, and RSAs granted pursuant to the Company’s long-term incentive program.

The fair value and compensation expense of RSAs granted pursuant to the Company’s performance-based key team member incentive program are calculated using the Company’s closing stock price on the date of grant and the probability that certain financial goals will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSA activity during the three months ended March 31, 2022:

Dollars in thousands, except per share amounts	Shares			Weighted-Average Grant Date Fair Value Per Share
Non-vested shares at January 1, 2022		219		$	30.32
Granted		179			40.13
Vested		(5	)		47.78
Forfeited		(1	)		35.10
Non-vested shares at March 31, 2022		392		$	34.58

The following table provides additional RSA information for the periods indicated:

	Three Months Ended March 31,
Dollars in thousands, except per share amounts	2022		2021
Weighted-average grant date fair value per share	$	40.13	$	28.18
Fair value of RSAs that vested	$	215	$	40

Note 11. Commitments and Contingencies

In the normal course of business, the Company has been named as a defendant in legal actions in connection with its activities. Some of the actual or threatened legal actions include claims for compensatory damages or claims for indeterminate amounts of damages. The Company contests liability and the amount of damages, as appropriate, in each pending matter.

Where available information indicates that it is probable that a liability has been incurred and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to net income.

However, in many legal actions, it is inherently difficult to determine whether any loss is probable, or even reasonably possible, or to estimate the amount of loss. This is particularly true for actions that are in their early stages of development or where plaintiffs seek indeterminate damages. In addition, even where a loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued, it is not always possible to reasonably estimate the size of the possible loss or range of loss. Before a loss, additional loss, range of loss, or range of additional loss can be reasonably estimated for any given action, numerous issues may need to be resolved, including through lengthy discovery, following determination of important factual matters, and/or by addressing novel or unsettled legal questions.

For certain other legal actions, the Company can estimate reasonably possible losses, additional losses, ranges of loss, or ranges of additional loss in excess of amounts accrued, but the Company does not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on the consolidated financial statements.

While the Company will continue to identify legal actions where it believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that the Company has not yet been notified of or are not yet determined to be probable, or reasonably possible and reasonable to estimate.

The Company expenses legal costs as they are incurred.

Note 12. Subsequent Events

Interest rate cap contracts: In April 2022, the Company collateralized its interest rate caps, and the collateral was then used to reduce the Company’s outstanding debt on its senior revolving credit facility. Subsequently, the Company sold its shorter-duration interest rate cap contracts with a fair value of $6.7 million. These sold interest rate caps had an aggregate notional principal amount of $300.0 million and maturity dates ranging from March 2023 through November 2023. After the sale, the Company maintained interest rate caps with an aggregate notional principal amount of $250.0 million.

Quarterly cash dividend: In May 2022, the Company announced that the Board declared a quarterly cash dividend of $0.30 per share. The dividend will be paid on June 15, 2022 to shareholders of record at the close of business on May 25, 2022. The declaration, amount, and payment of any future cash dividends on shares of the Company’s common stock will be at the discretion of the Board.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. These discussions contain forward-looking statements that reflect our current expectations and that include, but are not limited to, statements concerning our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “predicts,” “will,” “would,” “should,” “could,” “potential,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements involve risks and uncertainties that could cause actual results, events, and/or performance to differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. Such risks and uncertainties include, without limitation, the risks set forth in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (which was filed with the SEC on March 4, 2022) and this Quarterly Report on Form 10-Q. The COVID-19 pandemic may also magnify many of these risks and uncertainties. The forward-looking information we have provided in this Quarterly Report on Form 10-Q pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or revise such statements, except as required by the federal securities laws.

Overview

We are a diversified consumer finance company that provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. As of March 31, 2022, we operate under the name “Regional Finance” in 354 branch locations in 14 states across the United States, serving 466,100 active accounts. Most of our loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. We source our loans through our omni-channel platform, which includes our branches, centrally-managed direct mail campaigns, digital partners, retailers, and our consumer website. We operate an integrated branch model in which nearly all loans, regardless of origination channel, are serviced through our branch network. This provides us with frequent contact with our customers, which we believe improves our credit performance and customer loyalty. Our goal is to consistently grow our finance receivables and to soundly manage our portfolio risk, while providing our customers with attractive and easy-to-understand loan products that serve their varied financial needs.

Our products include small, large, and retail installment loans:

•

Small Loans (≤$2,500) – As of March 31, 2022, we had 270.5 thousand small installment loans outstanding, representing $438.2 million in net finance receivables. This included 142.2 thousand small loan convenience checks, representing $200.7 million in net finance receivables.

•

Large Loans (>$2,500) – As of March 31, 2022, we had 189.3 thousand large installment loans outstanding, representing $997.2 million in net finance receivables. This included 17.9 thousand large loan convenience checks, representing $56.5 million in net finance receivables.

•

Retail Loans – As of March 31, 2022, we had 6.3 thousand retail purchase loans outstanding, representing $10.7 million in net finance receivables.

•

Optional Insurance Products – We offer optional payment and collateral protection insurance to our direct loan customers.

Our primary sources of revenue are interest and fee income from our loan products, of which interest and fees relating to small and large installment loans are the largest component. In addition to interest and fee income from loans, we derive revenue from optional insurance products purchased by customers of our direct loan products.

Outlook

We continually assess the macroeconomic environment in which we operate in order to appropriately and timely adapt to current market conditions. Macroeconomic factors, including, but not limited to, the COVID-19 pandemic, impacts from current geopolitical events outside the U.S., and inflationary pressures, may affect our business, liquidity, financial condition, and results of operations.

The COVID-19 pandemic has resulted in economic disruption and uncertainty. At the beginning of the pandemic, during the second quarter of 2020, we experienced a decrease in demand. Since that time, our loan growth has steadily increased. Our net finance receivables were $1.4 billion as of March 31, 2022, $340.5 million higher than the prior-year period. However, future consumer demand remains subject to the uncertainty surrounding the duration and nature of the pandemic going forward, including the severity of any future waves of COVID-19. The extent to which the pandemic will ultimately impact our business and financial condition will depend on future events that are difficult to forecast, including, but not limited to, the duration and severity of the pandemic (as a result of variant strains of the virus and waves of outbreak), the success of actions taken to contain, treat, and prevent the spread of the virus, and the speed at which normal economic and operating conditions return and are sustained.

Recent geopolitical events outside of the U.S. have contributed to volatility in U.S. markets. Current inflationary pressures have also added to economic uncertainty. In addition, environmental, social, and governance (“ESG”) matters have become an area of increasing focus for lawmakers, regulators, stockholders, and other stakeholders. Proposed legislation and rulemaking issued or under consideration include proposals to require disclosure of climate, cybersecurity, and other ESG metrics and risks. The potential impact of any of these or other ESG-related legislation or regulations on our business remains uncertain.

We seek to employ a data-driven approach to managing our risk. We manage risk, among other ways, through our custom risk and response scorecards, adjustment of underwriting criteria, analysis of early payment activity, and detailed geographic and customer segmentation to ensure that incremental direct mail loan volume is capable of absorbing credit losses at two to three times our historical levels while still providing positive contribution margin.

As of March 31, 2022, our allowance for credit losses included $15.9 million of reserves associated with potential future macroeconomic impacts on credit losses, inclusive of those associated with the COVID-19 pandemic. Our contractual delinquency as a percentage of net finance receivables was 5.7% as of March 31, 2022, up from 4.3% as of March 31, 2021, and down from pre-pandemic levels of 6.6% and 6.9% as of March 31, 2020 and March 31, 2019, respectively. Going forward, we may experience changes to the macroeconomic assumptions within our forecast and changes to our credit loss performance outlook, both of which could lead to further changes in our allowance for credit losses, reserve rate, and provision for credit losses expense.

We proactively diversified our funding over the past few years and continue to maintain a strong liquidity profile. In the first quarter of 2022, we successfully closed a $250 million asset-backed securitization that consisted of the issuance of four classes of fixed-rate asset backed notes with a three-year revolving period. As of March 31, 2022, we had $214.6 million of available liquidity, comprised of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities, representing a $4.9 million improvement in our liquidity position since December 31, 2021. In addition, we had $671.1 million of unused capacity on our revolving credit facilities (subject to the borrowing base) as of March 31, 2022. We believe our liquidity position provides us substantial runway to fund our growth initiatives and to support the fundamental operations of our business.

We have increasingly relied on online operations for customer access, including remote loan closings in recent years. On the digital front, we continue to build and expand upon our end-to-end online and mobile origination capabilities for new and existing customers, along with additional digital servicing functionality. Combined with remote loan closings, we believe that these omni-channel sales and servicing capabilities have and will continue to expand the market reach of our branches, increase our average branch receivables, and improve our revenues and operating efficiencies, while at the same time increasing customer satisfaction.

Factors Affecting Our Results of Operations

Our business is driven by several factors affecting our revenues, costs, and results of operations, including the following:

Quarterly Information and Seasonality. Our loan volume and contractual delinquency follow seasonal trends. Demand for our small and large loans is typically highest during the second, third, and fourth quarters, which we believe is largely due to customers borrowing money for vacation, back-to-school, and holiday spending. Loan demand has generally been the lowest during the first quarter, which we believe is largely due to the timing of income tax refunds. Delinquencies generally reach their lowest point in the first half of the year and rise in the second half of the year. Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation, and larger provisions for credit losses in periods of portfolio growth. Consequently, we experience seasonal fluctuations in our operating results. However, changes in borrower assistance

programs and customer access to external economic stimulus measures related to the COVID-19 pandemic have impacted our typical seasonal trends for loan volume and delinquency.

Growth in Loan Portfolio. The revenue that we derive from interest and fees is largely driven by the balance of loans that we originate and purchase. Average net finance receivables were $1.4 billion for the first three months of 2022 and $1.1 billion for the prior-year period. We source our loans through our branches, direct mail program, retail partners, digital partners, and our consumer website. Our loans are made almost exclusively in geographic markets served by our network of branches. Increasing the number of loans per branch and growing our state footprint allows us to increase the number of loans that we are able to service. In February 2022, we opened our first branch in Mississippi, our fourteenth state. We expect to enter four to five additional states by the end of 2022, including California. We regularly assess our legacy branch network for clear opportunities to consolidate operations into larger branches within close geographic proximity. In the second quarter, we expect to close approximately twenty branches where there are clear opportunities to consolidate operations. This branch optimization is consistent with our omni-channel strategy and builds upon our recent successes in entering new states with a lighter branch footprint, while still providing customers with best-in-class service. We plan to add additional branches in new and existing states where it is favorable for us to conduct business.

Product Mix. We are exposed to different credit risks and charge different interest rates and fees with respect to the various types of loans we offer. Our product mix also varies to some extent by state, and we may further diversify our product mix in the future. The interest rates and fees vary from state to state, depending on the competitive environment and relevant laws and regulations.

Asset Quality and Allowance for Credit Losses. Our results of operations are highly dependent upon the credit quality of our loan portfolio. The credit quality of our loan portfolio is the result of our ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as we grow our loan portfolio.

The primary underlying factors driving the provision for credit losses for each loan type are our underwriting standards, the general economic conditions in the areas in which we conduct business, loan portfolio growth, and the effectiveness of our collection efforts. We monitor these factors, and the amount and past due status of all loans, to identify trends that might require us to modify the allowance for credit losses.

Interest Rates. Our costs of funds are affected by changes in interest rates, as the interest rates that we pay on certain of our credit facilities are variable. As a component of our strategy to manage the interest rate risk associated with future interest payments on our variable-rate debt, we have purchased interest rate cap contracts.

Operating Costs. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of income.

Components of Results of Operations

Interest and Fee Income. Our interest and fee income consists primarily of interest earned on outstanding loans. Accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If the account is charged off, the accrued interest income is reversed as a reduction of interest and fee income.

Most states allow certain fees in connection with lending activities, such as loan origination fees, acquisition fees, and maintenance fees. Some states allow for higher fees while keeping interest rates lower. Loan fees are additional charges to the customer and generally are included in the annual percentage rate shown in the Truth in Lending disclosure that we make to our customers. The fees may or may not be refundable to the customer in the event of an early payoff, depending on state law. Fees are recognized as income over the life of the loan on the constant yield method.

Insurance Income, Net. Our insurance operations are a material part of our overall business and are integral to our lending activities. Insurance income, net consists primarily of earned premiums, net of certain direct costs, from the sale of various optional payment and collateral protection insurance products offered to customers who obtain loans directly from us. Insurance income, net also includes the earned premiums and direct costs associated with the non-file insurance that we purchase to protect us from credit losses where, following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected. We do not sell insurance to non-borrowers. Direct costs included in insurance income, net are claims paid, claims reserves, ceding fees, and premium taxes paid. We do not allocate to insurance income, net, any other head office or branch administrative costs associated with management of insurance operations, management of our captive insurance company, marketing and selling insurance products, legal and compliance review, or internal audits.

As reinsurer, we maintain cash reserves for life insurance claims in an amount determined by the unaffiliated insurance company. As of March 31, 2022, the restricted cash balance for these cash reserves was $21.1 million. The unaffiliated insurance company maintains the reserves for non-life claims.

Other Income. Our other income consists primarily of late charges assessed on customers who fail to make a payment within a specified number of days following the due date of the payment. In addition, fees for extending the due date of a loan, returned check charges, commissions earned from the sale of an auto club product, and interest income from restricted cash are included in other income.

Provision for Credit Losses. Provisions for credit losses are charged to income in amounts that we estimate as sufficient to maintain an allowance for credit losses at an adequate level to provide for lifetime expected credit losses on the related finance receivable portfolio. Credit loss experience, current conditions, reasonable and supportable economic forecasts, delinquency of finance receivables, loan portfolio growth, the value of underlying collateral, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. Our provision for credit losses fluctuates so that we maintain an adequate credit loss allowance that reflects lifetime expected credit losses for each finance receivable type. Changes in our delinquency and net credit loss rates may result in changes to our provision for credit losses. Substantial adjustments to the allowance may be necessary if there are significant changes in forecasted economic conditions or loan portfolio performance.

General and Administrative Expenses. Our financial results are impacted by the costs of operations and head office functions. Those costs are included in general and administrative expenses within our consolidated statements of income. Our general and administrative expenses are comprised of four categories: personnel, occupancy, marketing, and other. We measure our general and administrative expenses as a percentage of average net finance receivables, which we refer to as our operating expense ratio.

Our personnel expenses are the largest component of our general and administrative expenses and consist primarily of the salaries and wages, overtime, contract labor, relocation costs, incentives, benefits, and related payroll taxes associated with all of our operations and head office employees.

Our occupancy expenses consist primarily of the cost of renting our facilities, all of which are leased, and the utility, depreciation of leasehold improvements and furniture and fixtures, communication services, data processing, and other non-personnel costs associated with operating our business.

Our marketing expenses consist primarily of costs associated with our direct mail campaigns (including postage and costs associated with selecting recipients), digital marketing, maintaining our consumer website, and some local marketing by branches. These costs are expensed as incurred.

Other expenses consist primarily of legal, compliance, audit, and consulting costs, as well as software maintenance and support, non-employee director compensation, electronic payment processing costs, bank service charges, office supplies, credit bureau charges, and the amortization of software, software licenses, and implementation costs. We frequently experience fluctuations in other expenses as we grow our loan portfolio and expand our market footprint. For a discussion regarding how risks and uncertainties associated with the current regulatory environment may impact our future expenses, net income, and overall financial condition, see Part II, Item 1A, “Risk Factors” and the filings referenced therein.

Interest Expense. Our interest expense consists primarily of paid and accrued interest for debt, unused line fees, and amortization of debt issuance costs on debt. Interest expense also includes changes in the fair value of interest rate caps.

Income Taxes. Income taxes consist of state and federal income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The change in deferred tax assets and liabilities is recognized in the period in which the change occurs, and the effects of future tax rate changes are recognized in the period in which the enactment of new rates occurs.

Results of Operations

The following table summarizes our results of operations, both in dollars and as a percentage of average net finance receivables (annualized):

	1Q 22						1Q 21
Dollars in thousands	Amount			% of Average Net Finance Receivables			Amount		% of Average Net Finance Receivables
Revenue
Interest and fee income	$	107,631			30.0	%	$	87,279		31.1	%
Insurance income, net		10,544			2.9	%		7,985		2.8	%
Other income		2,673			0.8	%		2,467		0.9	%
Total revenue		120,848			33.7	%		97,731		34.8	%
Expenses
Provision for credit losses		30,858			8.6	%		11,362		4.0	%

Personnel		35,654			9.9	%		28,851		10.3	%
Occupancy		5,808			1.6	%		6,020		2.1	%
Marketing		3,091			0.9	%		2,710		1.0	%
Other		10,547			3.0	%		8,262		2.9	%
Total general and administrative		55,100			15.4	%		45,843		16.3	%

Interest expense		(59	)		0.0	%		7,135		2.6	%
Income before income taxes		34,949			9.7	%		33,391		11.9	%
Income taxes		8,166			2.2	%		7,869		2.8	%
Net income	$	26,783			7.5	%	$	25,522		9.1	%

Information explaining the changes in our results of operations from year-to-year is provided in the following pages.

The following tables summarize the quarterly trends of our financial results:

	Income Statement Quarterly Trend
In thousands, except per share amounts	1Q 21		2Q 21		3Q 21		4Q 21		1Q 22			QoQ $ B(W)			YoY $ B(W)
Revenue
Interest and fee income	$	87,279	$	88,793	$	99,355	$	107,117	$	107,631		$	514		$	20,352
Insurance income, net		7,985		8,656		9,418		9,423		10,544			1,121			2,559
Other income		2,467		2,227		2,687		2,944		2,673			(271	)		206
Total revenue		97,731		99,676		111,460		119,484		120,848			1,364			23,117
Expenses
Provision for credit losses		11,362		20,549		26,096		31,008		30,858			150			(19,496	)

Personnel		28,851		28,370		29,299		33,313		35,654			(2,341	)		(6,803	)
Occupancy		6,020		5,568		6,027		6,511		5,808			703			212
Marketing		2,710		4,776		2,488		4,431		3,091			1,340			(381	)
Other		8,262		7,675		9,936		11,277		10,547			730			(2,285	)
Total general and administrative		45,843		46,389		47,750		55,532		55,100			432			(9,257	)

Interest expense		7,135		7,801		8,816		7,597		(59	)		7,656			7,194
Income before income taxes		33,391		24,937		28,798		25,347		34,949			9,602			1,558
Income taxes		7,869		4,771		6,577		4,569		8,166			(3,597	)		(297	)
Net income	$	25,522	$	20,166	$	22,221	$	20,778	$	26,783		$	6,005		$	1,261
Net income per common share:
Basic	$	2.42	$	1.98	$	2.25	$	2.18	$	2.81		$	0.63		$	0.39
Diluted	$	2.31	$	1.87	$	2.11	$	2.04	$	2.67		$	0.63		$	0.36
Weighted-average shares outstanding:
Basic		10,543		10,200		9,861		9,545		9,533			12			1,010
Diluted		11,066		10,797		10,544		10,177		10,022			155			1,044

Net interest margin	$	90,596	$	91,875	$	102,644	$	111,887	$	120,907		$	9,020		$	30,311
Net credit margin	$	79,234	$	71,326	$	76,548	$	80,879	$	90,049		$	9,170		$	10,815

	Balance Sheet Quarterly Trend
Dollars in thousands	1Q 21		2Q 21		3Q 21		4Q 21		1Q 22		QoQ $ Inc (Dec)			YoY $ Inc (Dec)
Total assets	$	1,098,295	$	1,191,305	$	1,313,558	$	1,459,662	$	1,497,671	$	38,009		$	399,376
Net finance receivables	$	1,105,603	$	1,183,387	$	1,314,233	$	1,426,257	$	1,446,071	$	19,814		$	340,468
Allowance for credit losses	$	139,600	$	139,400	$	150,100	$	159,300	$	158,800	$	(500	)	$	19,200
Debt	$	752,200	$	853,067	$	978,803	$	1,107,953	$	1,134,377	$	26,424		$	382,177

	Other Key Metrics Quarterly Trend
	1Q 21			2Q 21			3Q 21			4Q 21			1Q 22			QoQ Inc (Dec)			YoY Inc (Dec)
Interest and fee yield (annualized)		31.1	%		31.6	%		32.0	%		31.4	%		30.0	%		(1.4	)%		(1.1	)%
Efficiency ratio (1)		46.9	%		46.5	%		42.8	%		46.5	%		45.6	%		(0.9	)%		(1.3	)%
Operating expense ratio (2)		16.3	%		16.5	%		15.4	%		16.3	%		15.4	%		(0.9	)%		(0.9	)%
30+ contractual delinquency		4.3	%		3.6	%		4.7	%		6.0	%		5.7	%		(0.3	)%		1.4	%
Net credit loss ratio (3)		7.7	%		7.4	%		5.0	%		6.4	%		8.7	%		2.3	%		1.0	%
Book value per share	$	26.28		$	26.93		$	27.73		$	28.89		$	30.47		$	1.58		$	4.19

(1) Annualized general and administrative expenses as a percentage of total revenue

(2) Annualized general and administrative expenses as a percentage of average net finance receivables

(3) Annualized net credit losses as a percentage of average net finance receivables

Comparison of March 31, 2022, Versus March 31, 2021

The following discussion and table describe the changes in finance receivables by product type:

•

Small Loans (≤$2,500) – Small loans outstanding increased by $67.0 million, 18.0%, to $438.2 million at March 31, 2022, from $371.2 million at March 31, 2021. The increase was due to new growth initiatives, improved customer loan demand, and increased marketing, partially offset by the transition of small loan customers to large loans.

•

Large Loans (>$2,500) – Large loans outstanding increased by $274.8 million, or 38.0%, to $997.2 million at March 31, 2022, from $722.5 million at March 31, 2021. The increase was due to new growth initiatives, improved customer loan demand, increased marketing, and the transition of small loan customers to large loans.

•

Retail Loans – Retail loans outstanding decreased $1.2 million, or 10.5%, to $10.7 million at March 31, 2022, from $11.9 million at March 31, 2021.

	Net Finance Receivables by Product
Dollars in thousands	1Q 22		1Q 21		YoY $ Inc (Dec)			YoY % Inc (Dec)
Small loans	$	438,153	$	371,188	$	66,965			18.0	%
Large loans		997,226		722,474		274,752			38.0	%
Retail loans		10,692		11,941		(1,249	)		(10.5	)%
Total net finance receivables	$	1,446,071	$	1,105,603	$	340,468			30.8	%
Number of branches at period end		354		365		(11	)		(3.0	)%
Net finance receivables per branch	$	4,085	$	3,029	$	1,056			34.9	%

Comparison of the Three Months Ended March 31, 2022, Versus the Three Months Ended March 31, 2021

Net Income. Net income increased $1.3 million, or 4.9%, resulting in net income of $26.8 million during the three months ended March 31, 2022, from $25.5 million during the prior-year period. The increase was due to an increase in revenue of $23.1 million and a decrease in interest expense of $7.2 million, offset by an increase in provision for credit losses of $19.5 million, an increase in general and administrative expenses of $9.3 million, and an increase in income taxes of $0.3 million.

Revenue. Total revenue increased $23.1 million, or 23.7%, to $120.8 million during the three months ended March 31, 2022, from $97.7 million during the prior-year period. The components of revenue are explained in greater detail below.

Interest and Fee Income. Interest and fee income increased $20.4 million, or 23.3%, to $107.6 million during the three months ended March 31, 2022, from $87.3 million during the prior-year period. The increase was primarily due to a 27.7% increase in average net finance receivables, partially offset by a 1.1% decrease in annualized average yield.

The following table sets forth the average net finance receivables balance and average yield for our loan products:

	Average Net Finance Receivables for the Three Months Ended							Average Yields for the Three Months Ended (1)
Dollars in thousands	1Q 22		1Q 21		YoY % Inc (Dec)			1Q 22			1Q 21			YoY % Inc (Dec)
Small loans	$	440,936	$	389,138		13.3	%		36.0	%		37.5	%		(1.5	)%
Large loans		982,881		721,052		36.3	%		27.5	%		27.9	%		(0.4	)%
Retail loans		10,620		13,170		(19.4	)%		18.4	%		17.8	%		0.6	%
Total interest and fee yield	$	1,434,437	$	1,123,360		27.7	%		30.0	%		31.1	%		(1.1	)%

(1) Annualized interest and fee income as a percentage of average net finance receivables.

Small and large loan yields decreased 1.5% and 0.4%, respectively, compared to the prior-year period primarily due to normalization of credit performance across the portfolio and our portfolio composition shift toward higher credit quality customers with lower interest rates.

As a result of our focus on large loan growth over the last several years, the large loan portfolio has grown faster than the rest of our loan products, and we expect that this trend will continue in the future. Over time, large loan growth will change our product mix, which will reduce our total interest and fee yield percentage.

We continue to originate new loans with enhanced lending criteria. Demand for our loan products has continued to recover as total originations increased to $326.0 million during the three months ended March 31, 2022, from $234.8 million during the prior-year period. The following table represents the principal balance of loans originated and refinanced:

	Loans Originated for the Three Months Ended
Dollars in thousands	1Q 22		1Q 21		YoY $ Inc (Dec)		YoY % Inc (Dec)
Small loans	$	137,131	$	101,741	$	35,390		34.8	%
Large loans		186,279		131,325		54,954		41.8	%
Retail loans		2,590		1,780		810		45.5	%
Total loans originated	$	326,000	$	234,846	$	91,154		38.8	%

The following table summarizes the components of the increase in interest and fee income:

	Components of Increase in Interest and Fee Income 1Q 22 Compared to 1Q 21 Increase (Decrease)
Dollars in thousands	Volume			Rate			Volume & Rate			Net
Small loans	$	4,851		$	(1,447	)	$	(192	)	$	3,212
Large loans		18,246			(740	)		(268	)		17,238
Retail loans		(113	)		19			(4	)		(98	)
Product mix		1,185			(821	)		(364	)		—
Total increase in interest and fee income	$	24,169		$	(2,989	)	$	(828	)	$	20,352

The $20.4 million year-over-year increase in interest and fee income during the three months ended March 31, 2022, was primarily driven by growth of our average net finance receivables. This increase was partially offset by normalization of credit performance across the portfolio, the intended product mix shift toward large loans, and the portfolio composition shift toward higher credit quality customers with lower interest rates.

Insurance Income, Net. Insurance income, net increased $2.6 million, or 32.0%, to $10.5 million during the three months ended March 31, 2022, from $8.0 million during the prior-year period. During both the three months ended March 31, 2022 and the prior-year period, personal property insurance premiums represented the largest component of aggregate earned insurance premiums. Life insurance claims expense represented the largest component of direct insurance expenses for both the three months ended March 31, 2022 and the prior-year period.

The following table summarizes the components of insurance income, net:

	Insurance Premiums and Direct Expenses for the Three Months Ended
Dollars in thousands	1Q 22			1Q 21			YoY $ B(W)			YoY % B(W)
Earned premiums	$	14,873		$	12,125		$	2,748			22.7	%
Claims, reserves, and certain direct expenses		(4,329	)		(4,140	)		(189	)		(4.6	)%
Insurance income, net	$	10,544		$	7,985		$	2,559			32.0	%

Earned premiums increased by $2.7 million and claims, reserves, and certain direct expenses increased by $0.2 million, in each case compared to the prior-year period. The increase in earned premiums was primarily due to portfolio growth. The increase in claims, reserves, and certain direct expenses was primarily due to a $0.3 million increase in reserves for expected insurance claims during the three months ended March 31, 2022, compared to the prior-year period.

Other Income. Other income increased $0.2 million, or 8.4%, to $2.7 million during the three months ended March 31, 2022, from $2.5 million during the prior-year period, primarily due to an increase in late charges associated with portfolio growth.

Provision for Credit Losses. Our provision for credit losses increased $19.5 million, or 171.6%, to $30.9 million during the three months ended March 31, 2022, from $11.4 million during the prior-year period. The increase was due to increases of $9.9 million and $9.6 million in the allowance for credit losses and net credit losses, respectively, in each case compared to the prior-year period. The increase in the provision for credit losses is explained in greater detail below.

Allowance for Credit Losses. We evaluate delinquency and losses in each of our loan products in establishing the allowance for credit losses. The following table sets forth our allowance for credit losses compared to the related finance receivables as of the end of the periods indicated:

	Allowance for Credit Losses for the Three Months Ended
Dollars in thousands	1Q 22			1Q 21
Beginning balance	$	159,300		$	150,000
Macroeconomic reserve release		(1,100	)		(6,600	)
General reserve build (release) due to portfolio change		600			(3,800	)
Ending balance	$	158,800		$	139,600
Allowance for credit losses as a percentage of net finance receivables		11.0	%		12.6	%

As of March 31, 2022, our allowance for credit losses included a $15.9 million reserve associated with potential future macroeconomic impacts on credit losses, inclusive of those associated with the COVID-19 pandemic. During the three months ended March 31, 2022 and 2021, the allowance for credit losses included a net build of $0.6 million and a net release of $3.8 million related to portfolio change, respectively.

Net Credit Losses. Net credit losses increased $9.6 million, or 44.1%, to $31.4 million during the three months ended March 31, 2022, from $21.8 million during the prior-year period. The increase was primarily due to higher average net finance receivables and credit normalization. Annualized net credit losses as a percentage of average net finance receivables were 8.7% during the three months ended March 31, 2022, compared to 7.7% during the prior-year period.

Delinquency Performance. Our contractual delinquency as a percentage of net finance receivables continued to normalize, increasing to 5.7% as of March 31, 2022, from 4.3% in the prior-year period. Our credit performance remains strong due to the quality and adaptability of our underwriting criteria and the performance of our custom scorecards.

The following tables include delinquency balances by aging category and by product:

	Contractual Delinquency by Aging
Dollars in thousands	1Q 22				1Q 21
Current	$	1,268,367	87.7	%	$	1,010,859	91.4	%
1 to 29 days past due		95,689	6.6	%		47,024	4.3	%
Delinquent accounts:
30 to 59 days		19,818	1.4	%		11,252	1.0	%
60 to 89 days		16,390	1.1	%		9,808	0.9	%
90 to 119 days		15,636	1.1	%		8,682	0.8	%
120 to 149 days		15,322	1.1	%		8,717	0.8	%
150 to 179 days		14,849	1.0	%		9,261	0.8	%
Total contractual delinquency	$	82,015	5.7	%	$	47,720	4.3	%
Total net finance receivables	$	1,446,071	100.0	%	$	1,105,603	100.0	%

	Contractual Delinquency by Product
Dollars in thousands	1Q 22				1Q 21
Small loans	$	34,861	8.0	%	$	22,582	6.1	%
Large loans		46,375	4.7	%		24,404	3.4	%
Retail loans		779	7.3	%		734	6.1	%
Total contractual delinquency	$	82,015	5.7	%	$	47,720	4.3	%

General and Administrative Expenses. Our general and administrative expenses increased $9.3 million, or 20.2%, to $55.1 million during the three months ended March 31, 2022, from $45.8 million during the prior-year period. The absolute dollar increase in general and administrative expenses is explained in greater detail below.

Personnel. The largest component of general and administrative expenses was personnel expense, which increased $6.8 million, or 23.6%, to $35.7 million during the three months ended March 31, 2022, from $28.9 million during the prior-year period. We had several offsetting increases and decreases in personnel expenses during the three months ended March 31, 2022. Labor expenses and incentive costs increased $6.4 million and $1.0 million, respectively, compared to the prior-year period. Additionally,

the three months ended March 31, 2022 included branch optimization costs of $0.2 million. Capitalized loan origination costs, which reduce personnel expenses, increased by $0.9 million compared to the prior-year period due to an increase in loans originated.

Occupancy. Occupancy expenses decreased $0.2 million, or 3.5%, to $5.8 million during the three months ended March 31, 2022, from $6.0 million during the prior-year period. The decrease was primarily due to incremental expenses in the prior-year period related to an improvement to our technology infrastructure capabilities of $0.4 million, partially offset by branch optimization costs of $0.3 million during the three months ended March 31, 2022.

Marketing. Marketing expenses increased $0.4 million, or 14.1%, to $3.1 million during the three months ended March 31, 2022, from $2.7 million during the prior-year period. The increase was due to increased activity in our direct mail campaigns and digital marketing to support growth, partially offset by lower digital loan origination costs of $0.3 million.

Other Expenses. Other expenses increased $2.3 million, or 27.7%, to $10.5 million during the three months ended March 31, 2022, from $8.3 million during the prior-year period. The increase was primarily due to an increase in professional services of $0.6 million, an increase in our investment in digital and technological capabilities of $0.4 million, and an increase in travel expenses of $0.2 million compared to the prior-year period. Additionally, we often experience increases in other expenses including legal expenses, collections expense, and bank fees as we grow our loan portfolio and expand our market footprint.

Operating Expense Ratio. Our annualized operating expense ratio decreased by 0.9% to 15.4% during the three months ended March 31, 2022 from 16.3% during the prior-year period. Our operating expense ratio has declined as we have grown our loan portfolio and controlled expense growth. The three months ended March 31, 2022 included a ratio increase of 0.2% related to branch optimization expenses of $0.4 million.

Interest Expense. Interest expense decreased $7.2 million, or 100.8%, to a benefit of $0.1 million during the three months ended March 31, 2022, from an expense of $7.1 million during the prior-year period. The decrease was primarily due to a decrease in our average cost of debt, partially offset by an increase in the average balance of our debt facilities. The annualized average cost of debt decreased 3.81% during the three months ended March 31, 2022, from 3.79% as of the prior year period, primarily driven by an increase in the fair value of our interest rate caps of $9.4 million, which reduced our average cost by 3.27%. The average balance of our debt facilities increased to $1.1 billion for the three months ended March 31, 2022, from $753.1 million during the prior-year period. See Note 12, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part I, Item 1, “Financial Statements,” for information regarding our interest rate caps following the end of the fiscal quarter.

Income Taxes. Income taxes increased $0.3 million, or 3.8%, to $8.2 million during the three months ended March 31, 2022, from $7.9 million during the prior-year period. The increase was primarily due to a $1.6 million increase in income before income taxes compared to the prior-year period. Our effective tax rates were 23.4% and 23.6% for the three months ended March 31, 2022 and the prior-year period, respectively.

Liquidity and Capital Resources

Our primary cash needs relate to the funding of our lending activities and, to a lesser extent, expenditures relating to improving our technology infrastructure and expanding and maintaining our branch locations. We have historically financed, and plan to continue to finance, our short-term and long-term operating liquidity and capital needs through a combination of cash flows from operations and borrowings under our debt facilities, including our senior revolving credit facility, revolving warehouse credit facilities, and asset-backed securitization transactions, all of which are described below. We continue to seek ways to diversify our funding sources. As of March 31, 2022, we had a funded debt-to-equity ratio (debt divided by total stockholders’ equity) of 3.8 to 1.0 and a stockholders’ equity ratio (total stockholders’ equity as a percentage of total assets) of 19.9%.

Cash and cash equivalents increased to $17.6 million as of March 31, 2022, from $10.5 million as of December 31, 2021. As of March 31, 2022 and the prior year-end, we had $196.9 million and $199.2 million, respectively, of immediate availability to draw down cash from our revolving credit facilities. Our unused capacity on our revolving credit facilities (subject to the borrowing base) was $671.1 million and $556.8 million as of March 31, 2022, and the prior year-end, respectively. Our total debt of $1.1 billion remained consistent with the prior year-end.

Based upon anticipated cash flows, management believes that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and operations over the next twelve months, as well as into the future.

From time to time, we have extended the maturity date of and increased the borrowing limits under our senior revolving credit facility. While we have successfully obtained such extensions and increases in the past, there can be no assurance that we will be able to do so if and when needed in the future. In addition, the revolving period maturities of our securitizations and warehouse

credit facilities (each as described below within “Financing Arrangements”) range from October 2022 to September 2026. There can be no assurance that we will be able to secure an extension of the warehouse credit facilities or close additional securitization transactions if and when needed in the future.

Share Repurchases and Dividends.

In October 2020, we announced that our Board had authorized a $30.0 million stock repurchase program. In May 2021, we completed the stock repurchase program.

In May 2021, we announced that our Board had authorized a $30.0 million stock repurchase program. In August 2021, we announced that our Board had approved a $20.0 million increase in the amount authorized under the stock repurchase program, from $30.0 million to $50.0 million. In January 2022, we completed this stock repurchase program.

In February 2022, we announced that our Board had authorized a $20.0 million stock repurchase program. The authorization was effective immediately and extends through February 3, 2024. As of March 31, 2022, we had repurchased 173 thousand shares of common stock at a total cost of $8.4 million under this stock repurchase program.

Share repurchases under our stock repurchase programs may be made in the open market at prevailing market prices or through privately negotiated transactions in accordance with applicable federal and state securities laws.

The Board may in its discretion declare and pay cash dividends on our common stock. The following table sets forth the dividends declared and paid for the three months ended March 31, 2022:

Period

Declaration Date

Record Date

Payment Date

Dividends Declared Per

Common Share

1Q 22

February 9, 2022

February 23, 2022

March 16, 2022

0.30

Total

0.30

The Board declared and paid $3.0 million of cash dividends on our common stock during the three months ended March 31, 2022. See Note 12, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part I, Item 1, “Financial Statements,” for information regarding the declaration of a cash dividend following the end of the quarter.

While we intend to pay our quarterly dividend for the foreseeable future, all subsequent dividends will be reviewed and declared at the discretion of the Board and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that the Board deems relevant. Our dividend payments may change from time to time, and the Board may choose not to continue to declare dividends in the future.

Cash Flow.

Operating Activities. Net cash provided by operating activities during the three months ended March 31, 2022 was $45.8 million, compared to $35.0 million provided by operating activities during the prior-year period, a net increase of $10.8 million. The increase was primarily due to higher interest and fee income from the growth in our average net finance receivables, partially offset by higher general and administrative expenses.

Investing Activities. Investing activities consist of originations and repayments of finance receivables, purchases of intangible assets, and purchases of property and equipment for new and existing branches. Net cash used in investing activities during the three months ended March 31, 2022 was $49.4 million, compared to $14.9 million provided by investing activities during the prior-year period, a net increase in cash used of $64.2 million. The increase in cash used was primarily due to increased originations of finance receivables.

Financing Activities. Financing activities consist of borrowings and payments on our outstanding indebtedness. Net cash provided by financing activities during the three months ended March 31, 2022 was $10.9 million, compared to $35.5 million used in financing activities during the prior-year period, a net increase of $46.4 million. The net increase in cash provided was primarily due to an increase in net advances on debt instruments of $42.9 million.

Financing Arrangements.

Senior Revolving Credit Facility. In December 2021, we amended and restated our senior revolving credit facility to, among other things, decrease the availability under the facility from $640 million to $500 million and extend the maturity of the facility from September 2022 to September 2024. Excluding the receivables held by our VIEs, the senior revolving credit facility is

secured by substantially all of our finance receivables and equity interests of the majority of our subsidiaries. Advances on the senior revolving credit facility are capped at 83% of eligible secured finance receivables (80% of eligible secured finance receivables as of March 31, 2022). As of March 31, 2022, we had $196.9 million of immediate availability to draw down cash under the facility and held $17.6 million in unrestricted cash. Borrowings under the facility bear interest, payable monthly, at rates equal to one-month LIBOR, with a LIBOR floor of 0.50%, plus a 3.00% margin. The effective interest rate was 3.50% as of March 31, 2022. The amended and restated facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. We pay an unused line fee of 0.50%.

Our debt under the senior revolving credit facility was $44.9 million as of March 31, 2022. In advance of its September 2024 maturity date, we intend to extend the maturity date of the amended and restated senior revolving credit facility or take other appropriate action to address repayment upon maturity. See Part II, Item 1A, “Risk Factors,” and the filings referenced therein for a discussion of risks related to our amended and restated senior revolving credit facility, including refinancing risk.

Variable Interest Entity Debt. As part of our overall funding strategy, we have transferred certain finance receivables to affiliated VIEs for asset-backed financing transactions, including securitizations. The debt arrangements described below are issued by our wholly-owned, bankruptcy-remote SPEs, which are considered VIEs under GAAP and are consolidated into the financial statements of their primary beneficiary. We are considered to be the primary beneficiary because we have (i) power over the significant activities through our role as servicer of the finance receivables under each debt arrangement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through our interest in the monthly residual cash flows of the SPEs.

These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $106.1 million and $107.7 million as of March 31, 2022 and December 31, 2021, respectively. Cash inflows from the finance receivables are distributed to the lenders/investors, the service providers, and/or the residual interest that we own in accordance with a monthly contractual priority of payments. The SPEs pay a servicing fee to us, which is eliminated in consolidation.

At each sale of receivables from our affiliates to the SPEs, we make certain representations and warranties about the quality and nature of the collateralized receivables. The debt arrangements require us to repurchase the receivables in certain circumstances, including circumstances in which the representations and warranties made by us concerning the quality and characteristics of the receivables are inaccurate. Assets transferred to SPEs are legally isolated from us and our affiliates, and the claims of our and our affiliates’ creditors. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of us or any of our affiliates. See Part II, Item 1A, “Risk Factors,” and the filings referenced therein for a discussion of risks related to our variable interest entity debt.

RMR II Revolving Warehouse Credit Facility. In April 2021, we and our wholly-owned SPE, RMR II, amended and restated the credit agreement that provides for a revolving warehouse credit facility to RMR II to, among other things, extend the date at which the facility converts to an amortizing loan and the termination date to March 2023 and March 2024, respectively, decrease the total facility from $125 million to $75 million, increase the cap on facility advances from 80% to 83% of eligible finance receivables, and increase the rate at which borrowings under the facility bear interest, payable monthly, at a rate equal to three-month LIBOR, with a LIBOR floor of 0.25%, plus a blended margin of 2.35% (2.15% prior to the April 2021 amendment). The debt is secured by finance receivables and other related assets that we purchased from our affiliates, which we then sold and transferred to RMR II. The effective interest rate was 3.31% as of March 31, 2022. RMR II pays an unused commitment fee between 0.35% and 0.85% based upon the average daily utilization of the facility. The RMR II revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. As of March 31, 2022, our debt under the credit facility was $33.5 million.

RMR IV Revolving Warehouse Credit Facility. In April 2021, we and our wholly-owned SPE, RMR IV, entered into a credit agreement that provides for a $125 million revolving warehouse credit facility to RMR IV. The facility converts to an amortizing loan in April 2023 and terminates in April 2024. The debt is secured by finance receivables and other related assets that we purchased from our affiliates, which we then sold and transferred to RMR IV. Advances on the facility are capped at 81% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a rate equal to one-month LIBOR, plus a margin of 2.35%. The effective interest rate was 2.80% as of March 31, 2022. RMR IV pays an unused commitment fee between 0.35% and 0.70% based upon the average daily utilization of the facility. The RMR IV revolving warehouse credit facility provides for a process to transition from LIBOR to a new benchmark in certain circumstances. As of March 31, 2022, our debt under the credit facility was $31.6 million.

RMR V Revolving Warehouse Credit Facility. In April 2021, we and our wholly-owned SPE, RMR V, entered into a credit agreement that provides for a $100 million revolving warehouse credit facility to RMR V. The facility converts to an amortizing loan in October 2022 and terminates in October 2023. The debt is secured by finance receivables and other related assets that we purchased from our affiliates, which we then sold and transferred to RMR V. Advances on the facility are capped at 80% of eligible finance receivables. Borrowings under the facility bear interest, payable monthly, at a per annum rate, which in the case of a conduit lender is the commercial paper rate, plus a margin of 2.20%. The effective interest rate was 2.79% as of March 31, 2022. RMR V pays an unused commitment fee between 0.45% and 0.75% based upon the average daily utilization of the facility. As of March 31, 2022, our debt under the credit facility was $19.4 million.

RMIT 2019-1 Securitization. I In October 2019, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, RMIT 2019-1, completed a private offering and sale of $130 million of asset-backed notes. Prior to maturity in November 2028, we could redeem the notes in full, but not in part, at our option on any remaining note payment date. In February 2022, we and RMR III exercised the right to make an optional principal repayment in full, and in connection with such prepayment, the securitization terminated in February 2022.

RMIT 2020-1 Securitization. In September 2020, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, RMIT 2020-1, completed a private offering and sale of $180 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2020-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2020-1. The notes have a revolving period ending in September 2023, with a final maturity date in October 2030. Borrowings under the RMIT 2020-1 securitization bear interest, payable monthly, at an effective interest rate of 2.85% as of March 31, 2022. Prior to maturity in October 2030, we may redeem the notes in full, but not in part, at our option on any business day on or after the payment date occurring in October 2023. No payments of principal of the notes will be made during the revolving period. As of March 31, 2022, our debt under the securitization was $180.2 million.

RMIT 2021-1 Securitization. In February 2021, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, RMIT 2021-1, completed a private offering and sale of $249 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2021-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2021-1. The notes have a revolving period ending in February 2024, with a final maturity date in March 2031. Borrowings under the RMIT 2021-1 securitization bear interest, payable monthly, at an effective interest rate of 2.08% as of March 31, 2022. Prior to maturity in March 2031, we may redeem the notes in full, but not in part, at our option on any business day on or after the payment date occurring in March 2024. No payments of principal of the notes will be made during the revolving period. As of March 31, 2022, our debt under the securitization was $248.9 million.

RMIT 2021-2 Securitization. In July 2021, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, RMIT 2021-2, completed a private offering and sale of $200 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2021-2. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2021-2. The notes have a revolving period ending in July 2026, with a final maturity date in August 2033. Borrowings under the RMIT 2021-2 securitization bear interest, payable monthly, at an effective interest rate of 2.30% as of March 31, 2022. Prior to maturity in August 2033, we may redeem the notes in full, but not in part, at our option on any business day on or after the payment date occurring in August 2026. No payments of principal of the notes will be made during the revolving period. As of March 31, 2022, our debt under the securitization was $200.2 million.

RMIT 2021-3 Securitization. In October 2021, we, our wholly-owned SPE, RMR III, and our indirect wholly-owned SPE, RMIT 2021-3, completed a private offering and sale of $125 million of asset-backed notes. The transaction consisted of the issuance of fixed-rate asset-backed notes by RMIT 2021-3. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2021-3. The notes have a revolving period ending in September 2026, with a final maturity date in October 2033. Borrowings under the RMIT 2021-3 securitization bear interest, payable monthly, at an effective interest rate of 3.88% as of March 31, 2022. Prior to maturity in October 2033, we may redeem the notes in full, but not in part, at our option on any business day on or after the payment date occurring in October 2024. No payments of principal of the notes will be made during the revolving period. As of March 31, 2022, our debt under the securitization was $125.2 million.

RMIT 2022-1 Securitization. In February 2022, we, our wholly-owned SPE, RMR III, and our indirectly wholly-owned SPE, RMIT 2022-1, completed a private offering and sale of $250 million of asset-backed notes. The transaction consisted of the issuance of four classes of fixed-rate asset-backed notes by RMIT 2022-1. The asset-backed notes are secured by finance receivables and other related assets that RMR III purchased from us, which RMR III then sold and transferred to RMIT 2022-1. The notes have a

revolving period ending in February 2025, with a final maturity date in March 2032. Borrowings under the RMIT 2022-2 securitization bear interest, payable monthly, at an effective interest rate of 3.59% as of March 31, 2022. Prior to maturity in March 2032, we may redeem the notes in full, but not in part, at our option on any business day on or after the payment date occurring in March 2025. No payments of principal of the notes will be made during the revolving period. As of March 31, 2022, our debt under the securitization was $250.4 million.

Our debt arrangements are subject to certain covenants, including monthly and annual reporting, maintenance of specified interest coverage and debt ratios, restrictions on distributions, limitations on other indebtedness, and certain other restrictions. As of March 31, 2022, we were in compliance with all debt covenants.

We expect that the LIBOR reference rate will be phased out by June 2023. Our senior revolving credit facility, RMR II revolving warehouse credit facility, and RMR IV revolving warehouse credit facility each use LIBOR as a benchmark in determining the cost of funds borrowed. These credit facilities provide for a process to transition from LIBOR to a new benchmark, if necessary. We plan to continue to work with our banking partners to modify our credit agreements to contemplate the cessation of the LIBOR reference rate. We will also continue to work to identify a replacement rate to LIBOR and look to adjust the pricing structure of our facilities as needed.

Restricted Cash Reserve Accounts.

RMR II Revolving Warehouse Credit Facility. The credit agreement governing the RMR II revolving warehouse credit facility requires that we maintain a 1% cash reserve based upon the ending finance receivables balance of the facility. As of March 31, 2022, the warehouse facility cash reserve requirement totaled $0.4 million. The warehouse facility is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $3.1 million as of March 31, 2022.

RMR IV Revolving Warehouse Credit Facility. The credit agreement governing the RMR IV revolving warehouse credit facility requires that we maintain a 1% cash reserve based upon the ending finance receivables balance of the facility. As of March 31, 2022, the warehouse facility cash reserve requirement totaled $0.4 million. The warehouse facility is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $3.1 million as of March 31, 2022.

RMR V Revolving Warehouse Credit Facility. The credit agreement governing the RMR V revolving warehouse credit facility requires that we maintain a 1% cash reserve based upon the ending finance receivables balance of the facility. As of March 31, 2022, the warehouse facility cash reserve requirement totaled $0.2 million. The warehouse facility is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $1.7 million as of March 31, 2022.

RMIT 2020-1 Securitization. As required under the transaction documents governing the RMIT 2020-1 securitization, we deposited $1.9 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $14.8 million as of March 31, 2022.

RMIT 2021-1 Securitization. As required under the transaction documents governing the RMIT 2021-1 securitization, we deposited $2.6 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $24.7 million as of March 31, 2022.

RMIT 2021-2 Securitization. As required under the transaction documents governing the RMIT 2021-2 securitization, we deposited $2.1 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $19.0 million as of March 31, 2022.

RMIT 2021-3 Securitization. As required under the transaction documents governing the RMIT 2021-3 securitization, we deposited $1.5 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $18.3 million as of March 31, 2022.

RMIT 2022-1 Securitization. As required under the transaction documents governing the RMIT 2022-1 securitization, we deposited $2.6 million of cash proceeds into a restricted cash reserve account at closing. The securitization is supported by the expected cash flows from the underlying collateralized finance receivables. Collections are remitted to a restricted cash collection account, which totaled $21.4 million as of March 31, 2022.

RMC Reinsurance. Our wholly-owned subsidiary, RMC Reinsurance, Ltd., is required to maintain cash reserves against life insurance policies ceded to it, as determined by the ceding company. As of March 31, 2022, cash reserves for reinsurance were $21.1 million.

Impact of Inflation.

Our results of operations and financial condition are presented based on historical cost, except for interest rate caps, which are carried at fair value. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial to date. We continue to monitor inflation and other macroeconomic trends; however, as unemployment is near historically low levels, we believe that our typical customer remains in strong financial health.

Critical Accounting Policies and Estimates.

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP and conform to general practices within the consumer finance industry. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities for the periods indicated in the financial statements. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Allowance for Credit Losses.

The allowance for credit losses is based on historical credit experience, current conditions, and reasonable and supportable economic forecasts. The historical loss experience is adjusted for quantitative and qualitative factors that are not fully reflected in the historical data. In determining our estimate of expected credit losses, we evaluate information related to credit metrics, changes in our lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. These metrics include, but are not limited to, loan portfolio mix and growth, unemployment, credit loss trends, delinquency trends, changes in underwriting, and operational risks.

We selected a static pool Probability of Default (“PD”) / Loss Given Default (“LGD”) model to estimate our base allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical static pools of net finance receivables are tracked over the term of the pools to identify the incidences of loss (PDs) and the average severity of losses (LGDs).

To enhance the precision of the allowance for credit loss estimate, we evaluate our finance receivable portfolio on a pool basis and segment each pool of finance receivables with similar credit risk characteristics. As part of our evaluation, we consider loan portfolio characteristics such as product type, loan size, loan term, internal or external credit scores, delinquency status, geographical location, and vintage. Based on analysis of historical loss experience, we selected the following segmentation: product type, Fair Isaac Corporation score, and delinquency status.

We account for certain finance receivables that have been modified by bankruptcy proceedings or company loss mitigation policies using a discounted cash flows approach to properly reserve for customer concessions (rate reductions and term extensions).

As finance receivables are originated, provisions for credit losses are recorded in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for estimated losses over the contractual life of the finance receivables (considering the effect of prepayments). Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the finance receivable’s contractual life (considering the effect of prepayments). We use our segmentation loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. We also consider the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Macroeconomic forecasts are required for our allowance for credit loss model and require significant judgment and estimation uncertainty. We consider key economic factors, most notably unemployment rates, to incorporate into our estimate of the allowance for credit losses. We engaged a major rating service provider to assist with compiling a reasonable and supportable

forecast which we use to support the adjustments of our historical loss experience. We do not require reversion adjustments, as the contractual lives of our loan portfolio (considering the effect of prepayments) are shorter than our available forecast periods.

Due to the judgment and uncertainty in estimating the expected credit losses, we may experience changes to the macroeconomic assumptions within our forecast, as well as changes to our credit loss performance outlook, both of which could lead to further changes in our allowance for credit losses, allowance as a percentage of net finance receivables, and provision for credit losses.

During 2020, management captured the potential impact of the COVID-19 pandemic as a component of its macroeconomic forecast, and we had reserved $33.4 million as of June 30, 2020. Overall improvements in the pandemic led us to release portions of that reserve gradually. As of March 31, 2022 and December 31, 2021, we had $15.9 million and $17.0 million in macroeconomic reserves inclusive of remaining effects of COVID-19, respectively. Potential macroeconomic changes have created conditions that increase the level of uncertainty associated with our estimate of the amount and timing of future credit losses from our loan portfolio.

Macroeconomic Sensitivity. To demonstrate the sensitivity of forecasting macroeconomic conditions, we stressed our macroeconomic model with 10% increased weighting towards slower near-term growth that would have increased our reserves as of March 31, 2022 by $0.8 million.

The macroeconomic scenarios are highly influenced by timing, severity, and duration of changes in the underlying economic factors. This makes it difficult to estimate how potential changes in economic factors affect the estimated credit losses. Therefore, this hypothetical analysis is not intended to represent our expectation of changes in our estimate of expected credit losses due to a change in the macroeconomic environment, nor does it consider management’s judgment of other quantitative and qualitative information which could increase or decrease the estimate.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial condition. We originate finance receivables either at prevailing market rates or at statutory limits. Our finance receivables are structured on a fixed-rate, fixed-term basis. Accordingly, subject to statutory limits, our ability to react to changes in prevailing market rates is dependent upon the speed at which our customers pay off or renew loans in our existing loan portfolio, which allows us to originate new loans at prevailing market rates. Because our large loans have longer maturities than our small loans and typically renew at a slower rate than our small loans, our reaction time to changes may be affected as our large loans change as a percentage of our portfolio.

We also are exposed to changes in interest rates as a result of certain borrowing activities. As of March 31, 2022, the interest rates on 88.6% of our debt (the securitizations) were fixed. We maintain liquidity and fund our business operations in part through variable-rate borrowings under a senior revolving credit facility and three revolving warehouse credit facilities. As of March 31, 2022, the balances and key terms of the credit facilities were as follows:

Revolving Credit Facility	Balance (in thousands)		Interest Payment Frequency	Rate Type	Floor			Margin			Effective Interest Rate
Senior	$	44,919	Monthly	1-mo LIBOR		0.50	%		3.00	%		3.50	%
RMR II Warehouse		33,536	Monthly	3-mo LIBOR		0.25	%		2.35	%		3.31	%
RMR IV Warehouse		31,618	Monthly	1-mo LIBOR		—			2.35	%		2.80	%
RMR V Warehouse		19,406	Monthly	Conduit		—			2.20	%		2.79	%
Total	$	129,479

We have purchased interest rate caps to manage the risk associated with an aggregate notional $550.0 million of our LIBOR-based borrowings. These interest rate caps are based on the one-month LIBOR and reimburse us for the difference when the one-month LIBOR exceeds the strike rate. The following is a summary of the Company’s interest rate caps as of March 31, 2022:

						Notional Amount
Execution Date	Effective Date	Maturity Date	Strike Rate			(in thousands)
03/2020	03/2020	03/2023		1.75	%	$	100,000
08/2020	08/2020	08/2023		0.50	%		50,000
09/2020	10/2020	10/2023		0.50	%		100,000
11/2020	11/2020	11/2023		0.25	%		50,000
02/2021	02/2021	02/2024		0.25	%		50,000
03/2021	03/2021	03/2024		0.25	%		50,000
06/2021	06/2021	06/2024		0.25	%		50,000
12/2021	08/2023	02/2026		0.50	%		50,000
12/2021	02/2024	02/2026		0.50	%		50,000
Total notional amount						$	550,000

Based on the underlying rates and the outstanding balances as of March 31, 2022, an increase of 100 basis points in the LIBOR and conduit rates of our revolving credit facilities would result in approximately $1.3 million of increased interest expense on an annual basis, in the aggregate, under these borrowings. Our interest rate cap coverage as of March 31, 2022 would reduce this increased expense by approximately $3.8 million on an annual basis.

The nature and amount of our debt may vary as a result of future business requirements, market conditions, and other factors.

See Note 12, “Subsequent Events” of the Notes to Consolidated Financial Statements in Part I, Item 1, “Financial Statements,” for information regarding our interest rate caps following the end of the fiscal quarter.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost–benefit relationship of possible controls and procedures.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other information

ITEM 1.

LEGAL PROCEEDINGS.

The Company is involved in various legal proceedings and related actions that have arisen in the ordinary course of its business that have not been fully adjudicated. The Company’s management does not believe that these matters, when ultimately concluded and determined, will have a material adverse effect on its financial condition, liquidity, or results of operations.

ITEM 1A.

RISK FACTORS.

There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. In addition to the other information set forth in this report and in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (which was filed with the SEC on March 4, 2022), which could materially affect our business, financial condition, and/or future operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially and adversely affect the Company’s business, financial condition, and/or operating results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information regarding the Company’s repurchase of its common stock during the three months ended March 31, 2022.

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased		Weighted- Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program*
January 1, 2022 – January 31, 2022		11,393		52.67		11,393	$	3
February 1, 2022 – February 28, 2022		39,006		52.12		39,006	$	17,967,034
March 1, 2022 – March 31, 2022		133,770		47.79		133,770	$	11,574,832
Total		184,169	$	49.00		184,169

* On February 9, 2022, we announced that our Board (i) completed the stock repurchase program previously announced on May 4, 2021 and August 3, 2021 and (ii) authorized a new $20.0 million stock repurchase program. The authorization of the new stock repurchase program was effective immediately and extends through February 23, 2024. Stock repurchases under the stock repurchase program may be made in the open market at prevailing market prices or through privately negotiated transactions in accordance with applicable federal and state securities laws, at times and in amounts as management deems appropriate. The timing and the amount of any common stock repurchases will be determined by our management based on their evaluation of market conditions, our liquidity needs, legal and contractual requirements and restrictions (including covenants in our credit agreements), share price, and other factors. Repurchases of common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when we might otherwise be precluded from doing so under insider trading laws. The repurchase program does not obligate us to purchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice. We intend to fund the program with a combination of cash and debt.

ITEM 6.

EXHIBITS.

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

Herewith

Form

File

Number

Exhibit

Filing Date

4.1

Indenture, dated February 22, 2022, by and among Regional Management Issuance Trust 2022-1, as issuer, Regional Management Corp., as servicer, and Computershare Trust Company National Association, as indenture trustee.

8-K

001-35477

4.1

2/22/2022

10.1

Form of Performance Restricted Stock Unit Award Agreement

8-K

001-35477

10.1

2/18/2022

10.1

Declaration of Amendment to Regional Management Corp. 2015 Long-Term Incentive Plan (As Amended and Restated Effective May 20, 2021)

10.2

Sale and Servicing Agreement, dated February 22, 2022, by and among Regional Management Receivables III, LLC, as depositor, Regional Management Corp., as servicer, the subservicers party thereto, Regional Management Issuance Trust 2022-1, as issuer, and Regional Management North Carolina Receivables Trust, acting thereunder solely with respect to the 2022-1A SUBI.

8-K

001-35477

10.1

2/22/2022

31.1

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certifications

101.INS

XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File—the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REGIONAL MANAGEMENT CORP.

Date: May 6, 2022	By:	/s/ Harpreet Rana
		Harpreet Rana, Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

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