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, 2020 (which was filed with the SEC on February 25, 2021), our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021 (which
was filed with the SEC on May 6, 2021), our Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2021 (which was filed with the SEC on August
3, 2021), 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


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. We operate under the
name "Regional Finance" in 372 branch locations in 13 states across the United
States, serving 435,800 active accounts as of September 30, 2021. We assessed
our legacy branch network for clear opportunities to consolidate operations into
larger branches within close geographic proximity. As a result, we closed 31
branches in October and November 2021. 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 in-person 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) – Dated September 30, 2021, we had 257.0 thousand

outstanding small installment loans, representing $ 419.6 million in mesh

finance debts. This included 127.8 thousand small convenience loans

checks, representative $ 184.0 million in net financial receivables.

• Large loans (>$ 2,500) – Dated September 30, 2021, we had 171.3 thousand

outstanding large installment loans, representing $ 882.5 million in mesh

finance debts. This included 13,000 large convenience loans

checks, representative $ 39.6 million in net financial receivables.

• Loans to individuals – As of September 30, 2021, we had 7.1 thousand retail businesses

buy outstanding loans, representing $ 10.4 million in net finances


• Optional insurance products – We offer optional payment and warranty

protection insurance for our direct loan clients.

Small and large installment loans are our core loan products and will be the
drivers of our future growth. 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.


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Impact of the COVID-19 pandemic on the outlook

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.
As of September 30, 2021, our net finance receivables were $1.3 billion, $254.7
million higher than the prior-year period. Future consumer demand remains
subject to the uncertainty around the extent and duration of the pandemic.

Due to the pandemic, we experienced the temporary closure of some branches
in the third quarter of 2021 due to the quarantine measures initiated by the company.
However, almost all of our branches are currently open, and our
centralized operations continue to support our customers and our branch network.

We have employed a data-driven approach to managing our risk throughout the
pandemic, which is essential during periods of market volatility. We manage this
risk through our custom risk and response scorecards, 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

We proactively adjusted our underwriting criteria at the start of the pandemic
in 2020 to adapt to the new environment and have continued to originate loans
with appropriately enhanced lending criteria. As we have progressed through the
pandemic and acquired additional data, we have continued to update and sharpen
our underwriting standards, paying close attention to those geographies and
industries that have been most affected by the virus and related economic
disruption. As of September 30, 2021, our allowance for loan losses included
$15.5 million of reserves related to the expected economic impact of the
COVID-19 pandemic. Our contractual delinquency as a percentage of net finance
receivables increased to 4.7% as of September 30, 2021, up from the historically
low level of 3.6% as of June 30, 2021 and on par with the delinquency
experienced as of September 30, 2020. We believe this increase corresponds to
the decrease in pandemic-related government stimulus. 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 third quarter of 2021, we
successfully closed a $200 million asset-backed securitization that consisted of
the issuance of four classes of fixed-rate asset backed notes with a five-year
revolving period. As of September 30, 2021, we had $194.0 million of immediate
liquidity, comprised of unrestricted cash on hand and immediate availability to
draw down cash from our revolving credit facilities. This represented a $0.6
million improvement in our liquidity position since September 30, 2020. In
addition, we had $721.6 million of unused capacity on our revolving credit
facilities (subject to the borrowing base) as of September 30, 2021. We believe
our liquidity position provides us substantial runway to fund our growth
initiatives and to support the fundamental operations of our business.

We continue to rely more heavily on online operations for customer access,
including remote loan closings. 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
service capabilities will 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.

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
(including as a result of waves of outbreak or variant strains of the virus),
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.

Factors Affecting Our Operating Results

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. Delinquency levels generally reach their lowest point in the
first half of the year and rise in the second half of the year. In addition, the
CECL accounting model requires earlier recognition of credit losses compared to
the prior incurred loss approach. This could result in larger allowance for
credit loss releases in periods of loan portfolio liquidation, and larger
provisions for credit losses in periods of loan portfolio growth, compared to
prior years. 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 COVID-19 a
impacted our typical seasonal trends for 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 $1.2 billion for the first nine months of 2021 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
our state footprint allows us to increase the number of loans that we are able
to service. In April 2021, we opened our first branch in Illinois, our twelfth
state, and in September 2021, we opened our first branch in Utah, our thirteenth
state. We expect to enter an additional five to seven states by the end of 2022.
We assessed our legacy branch network for clear opportunities to consolidate
operations into larger branches within close geographic proximity. 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 can add additional
branches in 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

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. Our
allowance for credit losses estimate changed on January 1, 2020, as we adopted
the CECL accounting model. See Note 2, "Basis of Presentation and Significant
Accounting Policies" of the Notes to Consolidated Financial Statements in Part
I, Item 1, "Financial Statements," for more information on our allowance for
credit losses.

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. In addition, the market for repossessed automobiles
at auction is another underlying factor that we believe influences the provision
for credit losses for loans collateralized by automobiles. 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. As of September 30, 2021, we held seven interest rate cap
contracts with an aggregate notional principal amount of $450.0 million.

Operating costs. Our financial results are impacted by operating costs
and home office functions. These costs are generally included and
administrative costs in our consolidated statements of earnings.

Components of the results of operations

Interest and fee income. Our interest and commission income mainly consists of
interest received on outstanding loans. Accumulation of interest income on finance
receivables is suspended when an account becomes 90 days past due. If the
the account is debited, the accrued interest is reversed in reduction
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 accrued to 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 home


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 September 30, 2021, the
restricted cash balance for these cash reserves was $17.7 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 home 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 costs are the most important component of our general expenses and
administrative costs and consist mainly of salaries and wages,
overtime, contract labor, relocation costs, incentives, benefits and
payroll taxes associated with all of our operations and home office workers.

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, 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 non-employee director compensation, amortization of software
licenses and implementation costs, electronic payment processing costs, bank
service charges, office supplies, software maintenance and support, and credit
bureau charges. 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

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 costs attributable to the interest rate
caps that we use to manage our interest rate risk. Changes in the fair value of
the interest rate caps are reflected in interest expense.

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.


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Results of operations

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

                                                3Q 21                            3Q 20                           YTD 21                           YTD 20
                                                        % of                            % of                             % of                             % of
                                                    Average Net                     Average Net                      Average Net                      Average Net
                                                      Finance                         Finance                          Finance                          Finance
In thousands                          Amount        Receivables        Amount       Receivables        Amount        Receivables        Amount        Receivables
Interest and fee income              $  99,355               32.0 %   $ 81,306               31.5 %   $ 275,427               31.6 %   $ 248,370               31.0 %
Insurance income, net                    9,418                3.0 %      6,861                2.7 %      26,059                3.0 %      20,460                2.6 %
Other income                             2,687                0.9 %      2,371                0.9 %       7,381                0.8 %       7,632                0.9 %
Total revenue                          111,460               35.9 %     90,538               35.1 %     308,867               35.4 %     276,462               34.5 %
Provision for credit losses             26,096                8.4 %     22,089                8.6 %      58,007                6.6 %      99,110               12.4 %

Personnel                               29,299                9.4 %     26,207               10.2 %      86,520                9.9 %      82,581               10.3 %
Occupancy                                6,027                1.9 %      5,893                2.3 %      17,615                2.0 %      16,728                2.1 %
Marketing                                2,488                0.8 %      3,249                1.3 %       9,974                1.1 %       6,373                0.8 %
Other                                    9,936                3.3 %      8,405                3.2 %      25,873                3.0 %      25,840                3.2 %
Total general and administrative        47,750               15.4 %     43,754               17.0 %     139,982               16.0 %     131,522               16.4 %

Interest expense                         8,816                2.8 %      9,300                3.5 %      23,752                2.8 %      28,596                3.5 %
Income before income taxes              28,798                9.3 %     15,395                6.0 %      87,126               10.0 %      17,234                2.2 %
Income taxes                             6,577                2.1 %      4,157                1.6 %      19,217                2.2 %       4,851                0.7 %
Net income                           $  22,221                7.2 %   $ 11,238                4.4 %   $  67,909                7.8 %   $  12,383                1.5 %

Information explaining changes in our operating results from
year by year is provided on the following pages.


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The following table summarizes the quarterly trend of our financial results:

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