What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-04 compared with 2021-11-05 · 97 added, 101 removed, 183 unchanged (52% of the section changed)

29 unchanged sentences

The following table sets forth certain information derived from the Company's consolidated statements of operations and balance sheets (unaudited), as well as operating data and ratios, for the periods indicated:

Three months ended September 30, Six months ended September 30,

Three months ended December 31, Nine months ended December 31,

2021 2020 2021 2020

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It does not include loans purchased through acquisitions.

Comparison of three months ended September 30, 2021 versus three months ended September 30, 2020

Gross loans outstanding increased to $1.39 billion as of September 30, 2021, a 25.7% increase from the $1.11 billion of gross loans outstanding as of September 30, 2020.

During the three months ended September 30, 2021 our unique borrowers increased by 8.2% compared to an decrease of 3.7% during the three months ended September 30, 2020.

Net income for the three months ended September 30, 2021 decreased to $12.4 million, a 7.2% decrease from $13.4 million for the same period of the prior year.

Comparison of three months ended December 31, 2021 versus three months ended December 31, 2020

Gross loans outstanding increased to $1.61 billion as of December 31, 2021, a 27.0% increase from the $1.26 billion of gross loans outstanding as of December 31, 2020.

During the three months ended December 31, 2021 our unique borrowers increased by 7.7% compared to a decrease of 8.4% during the three months ended December 31, 2020.

Net income for the three months ended December 31, 2021 decreased to $7.3 million, a 49.4% decrease from $14.5 million for the same period of the prior year.

Operating income (revenue less provision for credit losses and general and administrative expenses) decreased by $6.3 million, or 26.1%.

Revenues for the three months ended September 30, 2021 increased by $13.4 million, or 10.8%, to $137.8 million from $124.4 million for the same period of the prior year.

Revenues for the three months ended December 31, 2021 increased by $17.6 million, or 13.5%, to $148.6 million from $130.9 million for the same period of the prior year.

The increase was primarily due to an increase in average net loans outstanding.

Interest and fee income for the three months ended September 30, 2021 increased by $9.2 million, or 8.5%, from the same period of the prior year.

Interest and fee income for the three months ended December 31, 2021 increased by $13.3 million, or 11.5%, from the same period of the prior year.

Interest and fee income was impacted by a shift to larger lower interest rate loans.

Net loans outstanding at September 30, 2021 increased by 25.0% over the balance at September 30, 2020.

Average net loans outstanding increased by 19.9% for the three months ended September 30, 2021 compared to the three-month period ended September 30, 2020.

Insurance commissions and other income for the three months ended September 30, 2021 increased by $4.2 million, or 26.7%, from the same period of the prior year.

Insurance commissions increased by approximately $3.1 million, or 28.6%, during the three months ended September 30, 2021 when compared to the three months ended September 30, 2020.

Net loans outstanding at December 31, 2021 increased by 26.2% over the balance at December 31, 2020.

Average net loans outstanding increased by 26.4% for the three months ended December 31, 2021 compared to the three-month period ended December 31, 2020.

Insurance commissions and other income for the three months ended December 31, 2021 increased by $4.4 million, or 27.2%, from the same period of the prior year.

Insurance commissions increased by approximately $2.9 million, or 24.9%, during the three months ended December 31, 2021 when compared to the three months ended December 31, 2020.

Insurance revenue increased due to a shift to larger loans during the quarter.

The sale of insurance products are limited to large loans in several of our states.

The large loan portfolio increased from 39.8% of the overall portfolio as of September 30, 2020 to 47.6% as of September 30, 2021.

The large loan portfolio increased from 39.5% of the overall portfolio as of December 31, 2020 to 49.5% as of December 31, 2021.

Other income increased by $1.5 million.

Sales of our motor club product increased by $1.5 million as sales opportunities increased, similar to our insurance products, with the increase in large loan originations.

The Company recorded a gain on company owned life insurance of $1.1 million in the prior year due to the death of a former executive.

On April 1, 2020, the Company replaced its incurred loss methodology with a current expected credit loss ("CECL") methodology to accrue for expected losses.

The provision for credit losses increased $16.0 million, or 61.1%, to $42.0 million from $26.1 million when comparing the second quarter of fiscal 2022 to the second quarter of fiscal 2021.

The provision increased during the quarter primarily due to significant loan growth during the quarter.

CECL requires expected losses to be accrued at the time of origination.

This increase was offset by a $3.9 million decrease in net charge-offs.

Net charge-offs as a percentage of average net loans receivable on an annualized basis decreased from 14.5% in the second quarter of fiscal 2021 to 10.5% in the second quarter of fiscal 2022.

The charge-off rate during the quarter benefited from the increased average tenure and reduced credit risk of customers in the portfolio as of June 30, 2021.

We are experiencing lower losses on loans that were in the portfolio as of October 1, 2020 than initially predicted under our CECL methodology through September 30, 2021.

The Company's allowance for credit losses as a percentage of net loans was 11.2% at September 30, 2021 compared to 13.4% at September 30, 2020.

Accounts that were 61 days or more past due on a recency basis were 5.0% of the portfolio at September 30, 2021 and 4.5% of the portfolio at September 30, 2020.

Accounts that were 61 days or more past due on a contractual basis were 6.2% of the portfolio at September 30, 2021 compared to 6.2% of the portfolio at September 30, 2020.

G&A expenses for the three months ended September 30, 2021 decreased by $0.3 million, or 0.4%, from the corresponding period of the previous year.

As a percentage of revenues, G&A expenses decreased from 60.5% during the three months ended September 30, 2020 to 54.4% during the three months ended September 30, 2021.

G&A expenses per average open branch increased by 2.2% when comparing the two three-month periods.

The provision for credit losses increased $27.6 million, or 95.6%, to $56.5 million from $28.9 million when comparing the third quarter of fiscal 2022 to the third quarter of fiscal 2021.

The provision for credit losses increased during the most recent quarter primarily due to significant loan growth and the increase in loans 90 days past due.

The same quarter in the prior year also included a $6.5 million release of a pandemic related reserve.

Net charge-offs as a percentage of average net loans receivable on an annualized basis increased from 11.6% in the third quarter of fiscal 2021 to 13.8% in the third quarter of fiscal 2022.

The increases in delinquency and charge-offs were expected due to the increase in new and shorter tenured customers in the most recent fiscal second and third quarters.

The Company's allowance for credit losses as a percentage of net loans was 11.4% at December 31, 2021 compared to 12.2% at December 31, 2020.

Accounts that were 61 days or more past due on a recency basis were 6.4% of the portfolio at December 31, 2021 and 5.2% of the portfolio at December 31, 2020.

Accounts that were 61 days or more past due on a contractual basis were 7.8% of the portfolio at December 31, 2021 compared to 6.6% of the portfolio at December 31, 2020.

G&A expenses for the three months ended December 31, 2021 decreased by $3.6 million, or 4.7%, from the corresponding period of the previous year.

As a percentage of revenues, G&A expenses decreased from 59.5% during the three months ended December 31, 2020 to 50.0% during the three months ended December 31, 2021.

G&A expenses per average open branch decreased by 2.4% when comparing the two three-month periods.

The change in G&A expense is explained in greater detail below.

Personnel expense totaled $45.7 million for the three months ended September 30, 2021, a $1.1 million, or 2.3%, decrease over the three months ended September 30, 2020.

Salary expense decreased approximately $0.8 million, or 2.5%, when comparing the two quarterly periods ended September 30, 2021 and 2020.

Our headcount as of September 30, 2021, decreased 7.5% compared to September 30, 2020.

Benefit expense increased approximately $0.4 million, or 4.4%, when comparing the quarterly periods ended September 30, 2021 and 2020.

Personnel expense totaled $44.4 million for the three months ended December 31, 2021, a $2.3 million, or 5.0%, decrease over the three months ended December 31, 2020.

Salary expense decreased approximately $0.1 million, or 0.2%, when comparing the two quarterly periods ended December 31, 2021and 2020.

Our headcount as of December 30, 2021, decreased 5.9% compared to December 30, 2020.

Benefit expense decreased approximately $2.1 million, or 20.5%, when comparing the quarterly periods ended December 31, 2021 and 2020.

Incentive expense decreased $0.2 million, or 1.8%.

Occupancy and equipment expense totaled $12.9 million for the three months ended September 30, 2021, a $0.6 million, or 4.3%, decrease over the three months ended September 30, 2020.

Occupancy and equipment expense totaled $12.6 million for the three months ended December 31, 2021, a $2.4 million, or 16.2%, decrease over the three months ended December 31, 2020.

Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period.

For the three months ended September 30, 2021, the average occupancy and equipment expense per branch decreased to $10.7 thousand, down from $10.9 thousand for the three months ended September 30, 2020.

Advertising expense remained flat in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

For the three months ended December 31, 2021, the average occupancy and equipment expense per branch decreased to $10.5 thousand, down from $12.2 thousand for the three months ended December 31, 2020.

The prior year includes a $2.1 million write down of signage as a result of rebranding our offices in the prior year quarter and we did not have any similar expense this year.

Advertising expense remained flat in the third quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

The Company anticipated an increase in demand during the quarter and increased marketing accordingly.

Marketing spend remained neutral as the Company shifted to lower cost channels.

Amortization of intangible assets totaled $1.2 million for the three months ended September 30, 2021, a $40.6 thousand, or 3.2%, decrease over the three months ended September 30, 2020.

Other expense totaled $9.8 million for the three months ended September 30, 2021, a $1.4 million, or 16.3%, increase over the three months ended September 30, 2020.

Other expense increased $0.4 million due to an increase in travel

costs during the quarter and $0.3 million due to an increase in credit investigation costs as a result of an increase in customer applications during the quarter.

Interest expense for the three months ended September 30, 2021 increased by $0.8 million, or 13.9%, from the corresponding three months of the previous year.

The increase in interest expense was due to a 37.8% increase in the average debt outstanding, from $380.7 million to $524.7 million, offset by a 17.1% decrease in the effective interest rate from 6.1% to 5.0%.

The Company’s senior debt-to-equity ratio increased from at 1.2:1 at September 30, 2020 to 1.4:1 at September 30, 2021.

Other key return ratios for the three months ended September 30, 2021 included a 8.6% return on average assets and a return on average equity of 22.4% (both on a trailing 12-month basis), as compared to a 4.5% return on average assets and a return on average equity of 11.8% (both on a trailing 12-month basis) for the three months ended September 30, 2020.

The Company’s effective income tax rate decreased to 11.7% for the three months ended September 30, 2021 compared to 21.9% for the corresponding period of the previous year.

The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises as a discrete item in the current quarter, the recognition of Federal Historic Tax Credits in the current quarter and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment being treated as a discrete item in the prior year quarter.

This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current quarter and the recognition of the permanent tax benefit related to the exclusion of life insurance proceeds in the prior year quarter.

Comparison of six months ended September 30, 2021 versus six months ended September 30, 2020

Gross loans outstanding increased to $1.39 billion as of September 30, 2021, a 25.7% increase from the $1.11 billion of gross loans outstanding as of September 30, 2020.

During the six months ended September 30, 2021 our number of unique borrowers in the portfolio increased by 7.1% compared to a decrease of 17.2% during the six months ended September 30, 2020.

Net income for the six months ended September 30, 2021 decreased to $28.2 million, a 2.4% decrease from the $28.9 million reported for the same period of the prior year.

Amortization of intangible assets totaled $1.3 million for the three months ended December 31, 2021, a $101.5 thousand, or 7.4%, decrease over the three months ended December 31, 2020.

Other expense totaled $9.1 million for the three months ended December 31, 2021, a $1.0 million, or 12.7%, increase over the three months ended December 31, 2020.

Other expense increased $0.4 million due to an increase in software subscriptions and $0.3 million due to an increase in office supplies.

Interest expense for the three months ended December 31, 2021 increased by $2.9 million, or 39.2%, from the corresponding three months of the previous year.

The increase in interest expense was due to a 34.7% increase in the average debt outstanding, from $475.7 million to $640.8 million, and a 3.7% increase in the effective interest rate from 6.1% to 6.3%.

The Company’s senior debt-to-equity ratio increased from at 1.5:1 at December 31, 2020 to 1.8:1 at December 31, 2021.

Other key return ratios for the three months ended December 31, 2021 included a 7.4% return on average assets and a return on average equity of 20.1% (both on a trailing 12-month basis), as compared to a 6.6% return on average assets and a return on average equity of 17.4% (both on a trailing 12-month basis) for the three months ended December 31, 2020.

The Company’s effective income tax rate decreased to 5.1% for the three months ended December 31, 2021 compared to 14.3% for the corresponding period of the previous year.

The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises and vesting of restricted stock as discrete items in the current quarter, the recognition of Federal Historic Tax Credits in the current quarter and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment being treated as a discrete item in the prior year quarter.

This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current quarter.

Comparison of nine months ended December 31, 2021 versus nine months ended December 31, 2020

Gross loans outstanding increased to $1.61 billion as of December 31, 2021, a 27.0% increase from the $1.26 billion of gross loans outstanding as of December 31, 2020.

During the nine months ended December 31, 2021 our number of unique borrowers in the portfolio increased by 15.4% compared to a decrease of 10.2% during the nine months ended December 31, 2020.

Net income for the nine months ended December 31, 2021 decreased to $35.5 million, a 18.1% decrease from the $43.4 million reported for the same period of the prior year.

Operating income (revenue less provision for credit losses and general and administrative expenses) decreased by $9.1 million, or 12.4%.

Revenues increased by $19.2 million, or 7.7%, to $267.5 million during the six months ended September 30, 2021 from $248.3 million for the same period of the prior year.

Revenues increased by $36.8 million, or 9.7%, to $416.1 million during the nine months ended December 31, 2021 from $379.3 million for the same period of the prior year.

The increase was primarily due to an increase in average net loans outstanding.

Interest and fee income for the six months ended September 30, 2021 increased by $8.5 million, or 3.9%, from the same period of the prior year.

Interest and fee income for the nine months ended December 31, 2021 increased by $21.8 million, or 6.5%, from the same period of the prior year.

Interest and fee income was impacted by a shift to larger, lower interest rate loans.

Net loans outstanding at September 30, 2021 increased by 25.0% over the balance at September 30, 2020.

Average net loans outstanding increased by 10.5% for the six months ended September 30, 2021 compared to the six-month period ended September 30, 2020.

Insurance commissions and other income for the six months ended September 30, 2021 increased by $10.6 million, or 36.0%, from the same period of the prior year.

Insurance commissions increased by approximately $5.1 million, or 24.4%, during the six months ended September 30, 2021 when compared to the six months ended September 30, 2020.

Net loans outstanding at December 31, 2021 increased by 26.2% over the balance at December 31, 2020.

Average net loans outstanding increased by 15.7% for the nine months ended December 31, 2021 compared to the nine-month period ended December 31, 2020.

Insurance commissions and other income for the nine months ended December 31, 2021 increased by $15.0 million, or 32.9%, from the same period of the prior year.

Insurance commissions increased by approximately $8.0 million, or 24.6%, during the nine months ended December 31, 2021 when compared to the nine months ended December 31, 2020.

Insurance commissions benefited from the shift to larger loans mentioned above.

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Sales of our motor club product increased by $6.1 million as sales opportunities increased, similar to our insurance products, with the increase in large loan originations.

Revenue from our tax preparation business increased by $1.3 million in the first half of fiscal 2022 from $2.8 million in the first half of fiscal 2021, or 47.7%.

Revenue from our tax preparation business increased by $1.3 million during the first three quarters of fiscal 2022 from $3.0 million during the first three quarters of fiscal 2021, or 43.5%.

This was largely driven by a delay in the individual income tax filing season which resulted in a higher number of tax preparations being completed in the first quarter of fiscal 2022.

On April 1, 2020, the Company replaced its incurred loss methodology with a current expected credit loss ("CECL") methodology to accrue for expected losses.

The provision for credit losses increased $20.6 million, or 39.7%, to $72.3 million from $51.8 million when comparing the first half of fiscal 2022 to the first half of fiscal 2021.

The provision increased during the first half of the year primarily due to significant loan growth during the period.

The provision for credit losses increased $48.2 million, or 59.7%, to $128.8 million from $80.6 million when comparing the first three quarters of fiscal 2022 to the first three quarters of fiscal 2021.

The provision increased during the first three quarters of the year primarily due to significant loan growth during the period.

CECL requires expected losses to be accrued at the time of origination.

This increase was offset by a $5.0 million decrease in net charge-offs.

Net charge-offs as a percentage of average net loans receivable on an annualized basis decreased from 16.4% in the first half of fiscal 2021 to 10.9% in the first half of fiscal 2022.

The charge-off rate during the quarter benefited from the increased average tenure and reduced credit risk of customers in the portfolio as of March 31, 2021.

We are experiencing lower losses on loans that were in the portfolio as of October 1, 2020 than initially predicted under our CECL methodology through September 30, 2021.

G&A expenses for the six months ended September 30, 2021 increased by $1.4 million, or 1.0%, from the corresponding period of the previous year.

As a percentage of revenues, G&A expenses decreased from 59.2% during the first six months of fiscal 2021 to 55.5% during the first six months of fiscal 2022.

G&A expenses per average open branch increased by 3.9% when comparing the two six-month periods.

Net charge-offs as a percentage of average net loans receivable on an annualized basis decreased from 14.7% in the first three quarters of fiscal 2021 to 12.0% in the first three quarters of fiscal 2022.

The charge-off rate during the period benefited from the increased average tenure and reduced credit risk of customers in the portfolio as of March 31, 2021.

We are experiencing lower losses on loans that were in the portfolio as of January 1, 2021 than initially predicted under our CECL methodology through December 31, 2021.

G&A expenses for the nine months ended December 31, 2021 decreased by $2.2 million, or 1.0%, from the corresponding period of the previous year.

As a percentage of revenues, G&A expenses decreased from 59.3% during the first nine months of

fiscal 2021 to 53.5% during the first nine months of fiscal 2022.

G&A expenses per average open branch increased by 1.7% when comparing the two nine-month periods.

The change in G&A expense is explained in greater detail below.

Personnel expense totaled $92.0 million for the six months ended September 30, 2021, a $0.5 million, or 0.6%, increase over the six months ended September 30, 2020.

Salary expense decreased approximately $1.9 million, or 3.2%, when comparing the two six month periods ended September 30, 2021 and 2020.

Our headcount as of September 30, 2021, decreased 7.5% compared to September 30, 2020.

Benefit expense increased approximately $2.1 million, or 12.9%, when comparing the six month periods ended September 30, 2021 and 2020.

Personnel expense totaled $136.4 million for the nine months ended December 31, 2021, a $1.8 million, or 1.3%, decrease over the nine months ended December 31, 2020.

Salary expense decreased approximately $2.1 million, or 2.3%, when comparing the two nine month periods ended December 31, 2021 and 2020.

Our headcount as of December 31, 2021, decreased 5.9% compared to December 31, 2020.

Benefit expense increased approximately $0.1 million, or 0.3%, when comparing the nine month periods ended December 31, 2021 and 2020.

Incentive expense increased $1.3 million, or 3.9% due to an increase in branch level bonuses offset by a decrease in share-based compensation.

Occupancy and equipment expense totaled $26.5 million for the six months ended September 30, 2021, a $0.2 million, or 0.6%, decrease over the six months ended September 30, 2020.

Occupancy and equipment expense totaled $39.2 million for the nine months ended December 31, 2021, a $2.6 million, or 6.2%, decrease over the nine months ended December 31, 2020.

Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period.

For the six months ended September 30, 2021, the average occupancy and equipment expense per branch increased to $22.0 thousand, up from $21.5 thousand for the six months ended September 30, 2020.

Advertising expense totaled $9.1 million for the six months ended September 30, 2021, a $1.2 million, or 15.1%, increase over the six months ended September 30, 2020.

For the nine months ended December 31, 2021, the average occupancy and equipment expense per branch decreased to $32.5 thousand, down from $33.8 thousand for the nine months ended December 31, 2020.

The prior year includes $1.6 million more in write down of signage as a result of rebranding our offices when comparing the two nine-month periods.

Advertising expense totaled $15.9 million for the nine months ended December 31, 2021, a $1.4 million, or 9.5%, increase over the nine months ended December 31, 2020.

The Company anticipated an increase in demand during the period and increased marketing spend accordingly.

Amortization of intangible assets totaled $2.5 million for the six months ended September 30, 2021, a $207.9 thousand, or 7.8%, decrease over the six months ended September 30, 2020.

Other expense totaled $18.3 million for the six months ended September 30, 2021, an $0.1 million, or 0.5%, increase over the six months ended September 30, 2020.

Interest expense for the six months ended September 30, 2021 increased by $0.8 million, or 6.6%, from the corresponding six months of the previous year.

Amortization of intangible assets totaled $3.7 million for the nine months ended December 31, 2021, a $309.4 thousand, or 7.6%, decrease over the nine months ended December 31, 2020.

Other expense totaled $27.4 million for the nine months ended December 31, 2021, a $1.1 million, or 4.3%, increase over the nine months ended December 31, 2020.

Interest expense for the nine months ended December 31, 2021 increased by $3.6 million, or 19.3%, from the corresponding nine months of the previous year.

The increase in interest expense was due to a 25.8% increase in the average debt outstanding, from $421.2 million to $530.0 million offset by a 5.7% decrease in the effective interest rate from 5.8% to 5.5%.

Other key return ratios for the first six months of fiscal 2022 included a 8.6% return on average assets and a return on average equity of 22.4% (both on a trailing 12-month basis), as compared to a 4.5% return on average assets and a return on average equity of 11.8% (both on a trailing 12-month basis) for the first six months of fiscal 2021.

The Company’s effective income tax rate decreased to 18.5% for the six months ended September 30, 2021 compared to 24.3% for the corresponding period of the previous year.

The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises recorded as a discrete item in the current period, the recognition of Federal Historic Tax Credits in the current period and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment recorded in the prior year.

Other key return ratios for the first nine months of fiscal 2022 included a 7.4% return on average assets and a return on average equity of 20.1% (both on a trailing 12-month basis), as compared to a 6.6% return on average assets and a return on average equity of 17.4% (both on a trailing 12-month basis) for the first nine months of fiscal 2021.

The Company’s effective income tax rate decreased to 16.1% for the nine months ended December 31, 2021 compared to 21.3% for the corresponding period of the previous year.

The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises and vesting of restricted stock in the current period, the recognition of Federal Historic Tax Credits in the current period and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment recorded in the prior year.

This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current period and the recognition of the permanent tax benefit related to the exclusion of life insurance proceeds in the prior year.

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The Rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an Annual Percentage Rate over 36% (“payment requirements”).

The Company does not believe that the Rule will have a material impact on the Company’s existing lending procedures, because the Company currently does not make short-term consumer loans or longer-term consumer installment loans with balloon payments that would subject the Company to the Rule’s ability to repay requirements.

The Company also currently underwrites all its loans (including those secured by a vehicle title that would fall within the scope of

these proposals) by reviewing the customer’s ability to repay based on the Company’s standards.

However, implementation of the Rule’s payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

The the Company does not believe that it will have a material impact on the Company’s existing lending procedures, because the Company currently does not make short-term consumer loans or longer-term consumer installment loans with balloon payments that would subject the Company to the Rule’s ability to repay requirements.

The Company also currently underwrites all its loans (including those secured by a vehicle title that would fall within the scope of these proposals) by reviewing the customer’s ability to repay based on the Company’s standards.

However, implementation of

the Rule’s payment requirements may require changes to the Company’s practices and procedures for such loans, which could affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

Further, on June 6, 2019, the CFPB amended the Rule to delay the August 19, 2019 compliance date for part of the Rule’s provisions, including the ability to repay requirements.

The new compliance date for the ability to repay requirements is November 19, 2020.

In addition, on February 6, 2019, the CFPB issued a notice of proposed rulemaking proposing to rescind provisions of the Rule governing the ability to repay requirements.

The comment period for this proposed rulemaking closed in May 2019.

According to the CFPB’s Fall 2019 rulemaking agenda, the CFPB is reviewing the approximately 190,000 comments it received and expected to take final action in April 2020 with respect to this proposal.

However, no final action has been taken as of yet.

Any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations.

Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism” under the Rule.

There were also lawsuits filed challenging various provisions of these Rules, as well as the constitutionality of the CFPB’s structure, and the court stayed the compliance date of the Rule while the litigation was pending.

The Supreme Court handed down its decision on the constitutional challenge in June 2020, and in July 2020, the CFPB issued a final Rule, which revoked the underwriting provisions of the prior Rule.

However, additional lawsuits were filed challenging the payment provisions of the Rule issued in 2020.

In August 2021, the court found for the CFPB and dismissed the remaining challenges.

As a result, the compliance date for the payments provisions of the Rule is now June 13, 2022 Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism” under the Rule.

If the payment provisions of the Rule apply, the Company will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the final rule.

The CFPB also announced on July 7, 2020 that it will undertake new research focusing on identifying information that could be disclosed to consumers during the small dollar lending process to allow them to make the most informed choices.

Depending on the outcome of this research and future action taken by the CFPB, implementation of new disclosures may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, and the profitability of such loans.

The CFPB is currently working under an acting director as the new administration’s nominee awaits congressional confirmation.

These changes in the CFPB leadership could result in a change in priorities for the agency, including the Rule discussed above or other initiatives of the CFPB.

See Part I, Item 1, “Business - Government Regulation - Federal legislation,” for a further discussion of these matters and the federal regulations to which the Company’s operations are subject and Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K for the year ended March 31, 2021 for more information regarding these regulatory and related risks.

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The Company has generally applied its cash flows from operations to fund its loan volume, fund acquisitions, repay long-term indebtedness, and repurchase its common stock.

Net cash provided by operating activities for the six months ended September 30, 2021 was $110.6 million.

Net cash provided by operating activities for the nine months ended December 31, 2021 was $171.1 million.

The Company believes that attractive opportunities to acquire new branches or receivables from its competitors or to acquire branches in communities not currently served by the Company will continue to become available as conditions in local economies and the financial circumstances of owners change.

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In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility.

We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock;

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There can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR.

We intend to monitor the developments with respect to the potential phasing out of LIBOR and will work to limit any negative impacts that could result during any transition away from LIBOR.

At September 30, 2021, the aggregate commitments under the revolving credit facility were $685.0 million.

The $300,000 letter of credit outstanding under the subfacility expires on December 31, 2021;

We intend to monitor the developments with respect to the phasing out of LIBOR and will work to limit any negative impacts that could result during the transition away from LIBOR.

At December 31, 2021, the aggregate commitments under the revolving credit facility were $685.0 million.

The $300,000 letter of credit outstanding under the subfacility expired on December 31, 2021;

however, it automatically extends for one year on the expiration date.

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Further, under the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

For the six months ended September 30, 2021 and fiscal year ended March 31, 2021, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 5.0% annualized and 5.8%, respectively, and the unused amount available under the revolver at September 30, 2021 was $409.0 million.

For the nine months ended December 31, 2021 and fiscal year ended March 31, 2021, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 5.5% annualized and 5.8%, respectively, and the unused amount available under the revolving credit facility at December 31, 2021 was $259.5 million.

Borrowings under the revolving credit facility mature on June 7, 2024.

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and (iv) a maximum collateral performance indicator of 24% as of the end of each calendar month.

The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement.

The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on the amount incurred that are imposed by the financial covenants under the agreement.

The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty days past due and (b) an eight-month rolling average net charge-off rate.

The Company was in compliance with these covenants at September 30, 2021 and does not believe that these covenants will materially limit its business and expansion strategy.

The Company was in compliance with these covenants at December 31, 2021 and does not believe that these covenants will materially limit its business and expansion strategy.

The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default and cross-acceleration to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt, certain changes of control of the Company, and the occurrence of certain regulatory events (including the entry of any stay, order, judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating, holding, pledging, collecting or enforcing its eligible finance receivables that is material to the Company or any subsidiary) which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause a material adverse change.

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On June 16, 2021, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations.

As of September 30, 2021, the Company had $15.5 million in aggregate remaining repurchase capacity.

On December 7, 2021, the Board of Directors authorized the Company to repurchase up to $50.0 million of the Company's outstanding common stock inclusive of any amount that remains available for repurchase under prior repurchase authorizations.

As of December 31, 2021, the Company had $46.1 million in aggregate remaining repurchase capacity.

The timing and actual number of shares of common stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the revolving credit facility and other market and economic conditions.

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises.

Under the terms of our revolving credit facility and the Notes, we have, subject to certain restrictions, the ability to make share repurchases of at least $90.0 million through June 30, 2022.

Under the terms of our revolving credit facility and the Notes, we have, subject to certain restrictions, the ability to make total share repurchases of at least $90.0 million through June 30, 2022.

As of December 31, 2021, subject to further approval from our Board of Directors, we could repurchase approximately $84.4 million of shares under the terms of our debt facilities.

Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes.

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To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.

As of September 30, 2021, the Company's debt outstanding was $570.6 million and its shareholders' equity was $419.0 million resulting in a debt-to-equity ratio of 1.4:1.0.

As of December 31, 2021, the Company's debt outstanding was $720.3 million and its shareholders' equity was $409.4 million resulting in a debt-to-equity ratio of 1.8:1.0.

Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis