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), our Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2022 (which was filed
with the SEC on May 6, 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.


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 June 30, 2022,
we operate under the name "Regional Finance" in 334 branch locations in 15
states across the United States, serving 482,300 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) – Starting the June 30, 2022we had 278.5 thousand babies

current installment loans, representing $455.3 million in net funding

receivables. This included 148,200 convenience checks for small loans,

representing $209.9 million in net financial claims.

• Large loans (>$2,500) – Starting the June 30, 2022we had 197.8 thousand big

current installment loans, representing $1.1 billion in net funding

receivables. This included 19,800 large loan convenience checks,

representing $63.2 million in net financial claims.

• Personal Loans – As of June 30, 2022we had 6.0 thousand retail purchases

outstanding loans, representing $10.9 million in net financial claims.

• Optional insurance products: we offer optional payments and guarantees

protection insurance to our direct lending 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.


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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, inflationary pressures, rising interest
rates, impacts from current geopolitical events outside the U.S., and the
COVID-19 pandemic, 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 $1.5 billion at June 30, 2022, $342.3 million
higher than at June 30, 2021. However, future consumer demand remains subject to
the uncertainty surrounding the duration and nature of the pandemic going
forward. 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 number and severity 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.

Current inflationary pressures and rising interest rates have created economic
uncertainty and diminished consumer confidence. Recent geopolitical events
outside of the U.S. have also contributed to volatility in U.S. markets. As
inflation accelerated and geopolitical stability began to deteriorate in the
fourth quarter of 2021, we began to proactively tighten our credit models. We
have principally focused on tightening certain higher-risk, higher-rate customer
segments that have been most adversely impacted by a more challenging economic
environment. As of June 30, 2022, delinquency and net credit loss rates had
largely normalized to 2019 pre-pandemic levels.

In addition, legislation and rulemaking issued or under consideration include
proposals to require disclosure of environmental, social, and governance ("ESG")
metrics and risks, such as the March 2022 proposal by the Securities and
Exchange Commission to enhance and standardize climate-related disclosures. The
potential impact of these or other ESG-related legislation or regulations on our
business remains uncertain.

We maintained our allowance for credit losses at 11% of net finance receivables
as of June 30, 2022, and held $14.9 million of reserves associated with
estimated future macroeconomic impacts on credit losses. Our contractual
delinquency as a percentage of net finance receivables was 6.2% as of June 30,
2022, up from 3.6% as of June 30, 2021, and still down 10 basis points from the
pre-pandemic level of 6.3% as of June 30, 2019. 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

We proactively diversified our funding over the past few years and continue to
maintain a strong liquidity profile. As of June 30, 2022, we had $195.0 million
of available liquidity, comprised of unrestricted cash on hand and immediate
availability to draw down cash from our revolving credit facilities. In
addition, we had $611.2 million of unused capacity on our revolving credit
facilities (subject to the borrowing base) as of June 30, 2022. We believe our
liquidity position provides substantial runway to fund our growth initiatives
and to support the fundamental operations of our business.

Online operations continue to be an important part of our customer acquisition
strategy, 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 impacted by several factors affecting our revenues, costs and
operating results, 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 macroeconomic


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including inflation, rising interest rates and geopolitical conflicts, have
had an impact on our typical seasonal trends in 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. Average net finance
receivables were $1.5 billion for the first six 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 customers that we are able to
serve. In February 2022, we opened our first branch in Mississippi, our
fourteenth state, and in June 2022, we opened our first branch in Indiana, our
fifteenth state. In July 2022, we opened our first branch in California, our
sixteenth state. We expect to enter two to three additional states by the end of
2022. After assessing our legacy branch network for clear opportunities to
consolidate operations into larger branches within close geographic proximity,
we closed 21 branches during the second quarter of 2022. 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

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 operating results are
highly dependent on the credit quality of our loan portfolio. Credit
the quality of our loan portfolio is the result of our ability to apply sound
underwriting standards, maintaining diligent portfolio servicing 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 operating costs
and head office functions. These costs are included in general and
administrative expenses in our Consolidated Statements of Income.

Components of operating results

Interest and commission income. Our interest and commission income consists mainly of
interest earned on outstanding loans. Accumulation of interest income on financing
Accounts Receivable is suspended when an account is 90 days past due. If the
account is written off, accrued interest income is written off as a reduction
interest and commission 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.


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As a reinsurer, we maintain reserves for life insurance claims in the amount
determined by the unaffiliated insurance company. From June 30, 2022the
cash balance allocated for these reserves has been $21.1 million. Non-affiliates
insurance company maintains 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 costs form the largest part of our general expenses and
administrative costs and consist mainly of salaries and wages,
overtime, contract labor, relocation costs, incentives, benefits and more
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

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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Operating results

The following table summarizes our results of operations, both in dollars and in
a percentage of average net financial claims (annualised):

                                      2Q 22                            2Q 21                            YTD 22                           YTD 21
                                              % of                             % of                             % of                             % of
                                          Average Net                      Average Net                      Average Net                      Average Net
                                            Finance                          Finance                          Finance                          Finance
Dollars in thousands        Amount        Receivables        Amount        Receivables        Amount        Receivables        Amount        Receivables
Interest and fee income    $ 109,771               29.8 %   $  88,793               31.6 %   $ 217,402               29.9 %   $ 176,072               31.3 %
Insurance income, net         10,220                2.8 %       8,656                3.1 %      20,764                2.9 %      16,641                3.0 %
Other income                   2,880                0.8 %       2,227                0.8 %       5,553                0.7 %       4,694                0.8 %
Total revenue                122,871               33.4 %      99,676               35.5 %     243,719               33.5 %     197,407               35.1 %
Provision for credit
losses                        45,400               12.3 %      20,549                7.3 %      76,258               10.5 %      31,911                5.7 %

Personnel                     33,941                9.2 %      28,370               10.1 %      69,595                9.6 %      57,221               10.2 %
Occupancy                      6,156                1.7 %       5,568                2.0 %      11,964                1.6 %      11,588                2.1 %
Marketing                      4,108                1.1 %       4,776                1.7 %       7,199                1.0 %       7,486                1.3 %
Other                          9,916                2.7 %       7,675                2.7 %      20,463                2.8 %      15,937                2.8 %
Total general and
administrative                54,121               14.7 %      46,389               16.5 %     109,221               15.0 %      92,232               16.4 %

Interest expense               7,564                2.1 %       7,801                2.8 %       7,505                1.0 %      14,936                2.6 %
Income before income
taxes                         15,786                4.3 %      24,937                8.9 %      50,735                7.0 %      58,328               10.4 %
Income taxes                   3,804                1.0 %       4,771                1.7 %      11,970                1.7 %      12,640                2.3 %
Net income                 $  11,982                3.3 %   $  20,166                7.2 %   $  38,765                5.3 %   $  45,688                8.1 %

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


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The following tables summarize quarterly trends in our financial results:


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