WORLD ACCEPTANCE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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Caution Regarding Forward-Looking Information

This report on Form 10-Q, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," contains various
"forward-looking statements," within the meaning of The Private Securities
Litigation Reform Act of 1995, that are based on management's beliefs and
assumptions, as well as information currently available to
management. Statements other than those of historical fact, as well as those
identified by the words "anticipate," "estimate," "intend," "plan," "expect,"
"believe," "may," "will," "should," "would," "could," "continue," "forecast,"
and any variation of the foregoing and similar expressions are forward-looking
statements. Although the Company believes that the expectations reflected in any
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. Any such statements are subject to
certain risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
the Company's actual financial results, performance or financial condition may
vary materially from those anticipated, estimated or expected. Therefore, you
should not rely on any of these forward-looking statements.

Among the key factors that could cause our actual financial results, performance
or condition to differ from the expectations expressed or implied in such
forward-looking statements are the following: the ongoing impact of the COVID-19
pandemic and the mitigation efforts by governments and related effects on our
financial condition, business operations and liquidity, our customers, our
employees, and the overall economy; recently enacted, proposed or future
legislation and the manner in which it is implemented; changes in the U.S. tax
code; the nature and scope of regulatory authority, particularly discretionary
authority, that may be exercised by regulators, including, but not limited to,
the Securities and Exchange Commission (SEC), Department of Justice, U.S.
Consumer Financial Protection Bureau, and individual state regulators having
jurisdiction over the Company; the unpredictable nature of regulatory
proceedings and litigation, employee misconduct or misconduct by third parties,
uncertainties associated with management turnover and the effective succession
of senior management; media and public characterization of consumer installment
loans, labor unrest the impact of changes in accounting rules and regulations,
or their interpretation or application, which could materially and adversely
affect the Company's reported consolidated financial statements or necessitate
material delays or changes in the issuance of the Company's audited consolidated
financial statements; the Company's assessment of its internal control over
financial reporting; changes in interest rates; risks relating to the
acquisition or sale of assets or businesses or other strategic initiatives,
including increased loan delinquencies or net charge-offs, the loss of key
personnel, integration or migration issues, the failure to achieve anticipated
synergies, increased costs of servicing, incomplete records, and retention of
customers; risks inherent in making loans, including repayment risks and value
of collateral; cybersecurity threats, including the potential misappropriation
of assets or sensitive information, corruption of data or operational
disruption; our dependence on debt and the potential impact of limitations in
the Company's amended revolving credit facility or other impacts on the
Company's ability to borrow money on favorable terms, or at all; the timing and
amount of revenues that may be recognized by the Company; changes in current
revenue and expense trends (including trends affecting delinquency and
charge-offs); the impact of extreme weather events and natural disasters;
changes in the Company's markets and general changes in the economy
(particularly in the markets served by the Company). These and other risks are
discussed in more detail in Part I, Item 1A "Risk Factors" in the Company's most
recent annual report on Form 10-K for the fiscal year ended March 31, 2021 filed
with the SEC, and in the Company's other reports filed with, or furnished to,
the SEC from time to time. The Company does not undertake any obligation to
update any forward-looking statements it may make.

Operating results

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:
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                                                 Three months ended December 31,                   Nine months ended December 31,
                                                    2021                    2020                   2021                         2020
                                                                                (Dollars in thousands)
Gross loans receivable                       $     1,606,111           $ 1,264,530          $     1,606,111                $ 1,264,530
Average gross loans receivable (1)                 1,493,234             1,175,251                1,319,026                  1,133,065
Net loans receivable (2)                           1,172,679               929,474                1,172,679                    929,474
Average net loans receivable (3)                   1,094,014               865,480                  970,992                    839,491

Expenses as a percentage of total revenue:
Provision for credit losses                             38.0   %              22.0  %                  30.9   %                   21.3  %
General and administrative                              50.0   %              59.5  %                  53.5   %                   59.3  %
Interest expense                                         6.8   %               5.6  %                   5.4   %                    4.9  %
Operating income as a % of total revenue (4)            12.0   %              18.5  %                  15.6   %                   19.5  %

Loan volume (5)                                      976,118               782,995                2,531,815                  1,893,502

Net charge-offs as percent of average net
loans receivable on an annualized basis                 13.8   %              11.6  %                  12.0   %                   14.7  %

Return on average assets (trailing 12
months)                                                  7.4   %               6.6  %                   7.4   %                    6.6  %

Return on average equity (trailing 12
months)                                                 20.1   %              17.4  %                  20.1   %                   17.4  %

Branches opened or acquired (merged or
closed), net                                               -                    (2)                      (3)                       (13)

Branches open (at period end)                          1,202                 1,230                    1,202                      1,230


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(1) Average gross loans receivable has been determined by averaging month-end
gross loans receivable over the indicated period, excluding tax advances.
(2) Net loans receivable is defined as gross loans receivable less unearned
interest and deferred fees.
(3) Average net loans receivable has been determined by averaging month-end
gross loans receivable less unearned interest and deferred fees over the
indicated period, excluding tax advances.
(4) Operating income is computed as total revenue less provision for credit
losses and general and administrative expenses.
(5) Loan volume includes all loan balances originated by the Company. It does
not include loans purchased through acquisitions.


Comparison of three months ended December 31, 2021 against 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 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.

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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 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
39.5% 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.

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 $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 $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 $12.6 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 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 totals $1.3 million for the three months ended December 31, 2021a $101.5 thousandor 7.4%, decrease during the three months ended December 31, 2020.

Other expenses totaled $9.1 million for the three months ended December 31, 2021a $1.0 millionor 12.7%, increase during the three months ended December 31, 2020. Other expenses increased $0.4 million due to an increase in software subscriptions and $0.3 million due to an increase in office supplies.

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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 the nine months ended December 31, 2021 against 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 $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 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 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. Other income increased by $7.0 million. 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 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 $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 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.

General and administrative expenses for the nine months ended December 31, 2021 decreased by $2.2 million, or 1.0%, compared to the corresponding period of the previous year. As a percentage of revenue, general and administrative expenses decreased by 59.3% in the first nine months of

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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 $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 $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 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 $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 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.
Regulatory Matters

CFPB Rulemaking Initiatives

On October 5, 2017, the CFPB issued a final rule (the "Rule") imposing
limitations on (i) short-term consumer loans, (ii) longer-term consumer
installment loans with balloon payments, and (iii) higher-rate consumer
installment loans repayable by a payment authorization. The Rule requires
lenders originating short-term loans and longer-term balloon payment loans to
evaluate whether each consumer has the ability to repay the loan along with
current obligations and expenses ("ability to repay requirements"). 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 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
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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. 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. 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.

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.


Cash and capital resources

The Company has historically financed and continues to finance its operations,
acquisitions and branch expansion primarily through a combination of cash flows
from operations and borrowings from its institutional lenders. As discussed
below, the Company has also issued debt securities to finance its operations and
repay a portion of its outstanding indebtedness. 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 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.

On September 27, 2021, we issued $300 million in aggregate principal amount of
7.0% senior notes due 2026 (the "Notes"). The Notes were sold in a private
placement in reliance on Rule 144A and Regulation S under the Securities Act of
1933, as amended. The Notes are unconditionally guaranteed, jointly and
severally, on a senior unsecured basis by all of the Company's existing and
certain of its future subsidiaries that guarantee the revolving credit facility.
Interest on the notes is payable semi-annually in arrears on May 1 and November
1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023,
the Company may redeem the Notes, in whole or in part, at a redemption price
equal to 100% of the principal amount plus a make-whole premium, as described in
the indenture, plus accrued and unpaid interest, if any, to, but not including,
the date of redemption. At any time on or after November 1, 2023, the Company
may redeem the Notes at redemption prices set forth in the indenture, plus
accrued and unpaid interest, if any, to, but not including, the date of
redemption. 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 of this offering to repay a portion of the indebtedness outstanding 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; (ii) pay dividends or distributions or redeem or
purchase capital stock; (iii) prepay subordinated debt or make certain
investments; (iv) transfer and sell assets; (v) create or permit to exist liens;
(vi) enter into agreements that restrict dividends, loans and other
distributions from their subsidiaries; (vii) engage in a merger, consolidation
or sell, transfer or otherwise dispose of all or substantially all of their
assets; and (viii) engage in transactions with affiliates. However, these
covenants are subject to a number of important detailed qualifications and
exceptions.
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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 up to $90.0 million through June 30, 2022. 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.

The Company has a revolving credit facility with a syndicate of banks. The
revolving credit facility provides for revolving borrowings of up to the lesser
of (a) the aggregate commitments under the facility and (b) a borrowing base,
and it includes a $300,000 letter of credit under a $1.5 million subfacility.

Subject to a borrowing base formula, the Company may borrow at the rate of LIBOR
plus 3.5% with a minimum rate of 4.5%. The Company's amended and restated
revolving credit agreement provides procedures for determining a replacement or
alternative rate in the event LIBOR is unavailable or discontinued or if the
administrative agent elects to replace LIBOR prior to its discontinuation. 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 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. The borrowing base limitation is equal to the product of
(a) the Company's eligible finance receivables, less unearned finance charges,
insurance premiums and insurance commissions applicable to such eligible finance
receivables, and (b) an advance rate percentage that ranges from 74% to 80%
based on a collateral performance indicator, as more completely described below.
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 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.

The Company's obligations under the revolving credit facility, together with
treasury management and hedging obligations owing to any lender under the
revolving credit facility or any affiliate of any such lender, are required to
be guaranteed by each of the Company's wholly-owned domestic subsidiaries. The
obligations of the Company and the subsidiary guarantors under the revolving
credit facility, together with such treasury management and hedging obligations,
are secured by a first-priority security interest in substantially all assets of
the Company and the subsidiary guarantors.

The agreement governing the Company's revolving credit facility contains
affirmative and negative covenants, including covenants that restrict the
ability of the Company and its subsidiaries to, among other things, incur or
guarantee indebtedness, incur liens, pay dividends and repurchase or redeem
capital stock, dispose of assets, engage in mergers and consolidations, make
acquisitions or other investments, redeem or prepay subordinated debt, amend
subordinated debt documents, make changes in the nature of its business, and
engage in transactions with affiliates. The agreement also contains financial
covenants, including (i) a minimum consolidated net worth of $325.0 million;
(ii) a minimum fixed charge coverage ratio of 2.75 to 1.0; (iii) a maximum ratio
of total debt to consolidated adjusted net worth of 2.5 to 1.0; 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 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 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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The Company believes that cash flow from operations and borrowings under its
revolving credit facility or other sources will be adequate to fund the expected
cost of opening or acquiring new branches, including funding initial operating
losses of new branches and funding loans receivable originated by those branches
and the Company's other branches (for the next 12 months and for the foreseeable
future beyond that). Except as otherwise discussed in this report including, but
not limited to, any discussions in Part 1, Item 1A, "Risk Factors" in this
Quarterly Report on Form 10-Q and our Annual Report on Form 10-K (as
supplemented by any subsequent disclosures in information the Company files with
or furnishes to the SEC from time to time), management is not currently aware of
any trends, demands, commitments, events or uncertainties that it believes will
or could result in, or are or could be reasonably likely to result in, any
material adverse effect on the Company's liquidity.

Share buyback program

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. 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 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. Our first priority is to ensure we have enough
capital to fund loan growth. To the extent we have excess capital, we may
repurchase stock, if appropriate and as authorized by our Board of Directors. 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.

Inflation

The Company does not believe that inflation, within reasonably anticipated
rates, will have a material, adverse effect on its financial condition. Although
inflation would increase the Company's operating costs in absolute terms, the
Company expects that the same decrease in the value of money would result in an
increase in the size of loans demanded by its customer base. We anticipate that
such a change in customer preference would result in an increase in total loans
receivable and an increase in absolute revenue to be generated from that larger
amount of loans receivable. That increase in absolute revenue should offset any
increase in operating costs. In addition, because the Company's loans have a
relatively short contractual term, it is unlikely that loans made at any given
point in time will be repaid with significantly inflated dollars.

Quarterly information and seasonality

See Note 3 to the unaudited consolidated financial statements.

Recently Adopted Accounting Pronouncements

See Note 3 to the unaudited consolidated financial statements.

Critical accounting policies

The Company's accounting and reporting policies are in accordance with GAAP and
conform to general practices within the finance company industry. Certain
accounting policies involve significant judgment by the Company's management,
including the use of estimates and assumptions which affect the reported amounts
of assets, liabilities, revenue, and expenses. As a result, changes in these
estimates and assumptions could significantly affect the Company's financial
position and results of operations. The Company considers its policies regarding
the allowance for credit losses, share-based compensation and income taxes to be
its most critical accounting policies due to the significant degree of
management judgment involved.

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Allowance for Credit Losses

Accounting policies related to the allowance for credit losses are considered to
be critical as these policies involve considerable subjective judgement and
estimation by management. As discussed in Note 3 - Summary of Significant
Policies, to our unaudited Consolidated Financial Statements included in this
report, our policies related to the allowances for credit losses changed on
April 1, 2020 in connection with the adoption of a new accounting standard
update as codified in ASC 326. In the case of loans, the allowance for credit
losses is a contra-asset valuation account, calculated in accordance with ASC
326 that is deducted from the amortized cost basis of loans to present the net
amount expected to be collected. The amount of the allowance account represents
management's best estimate of current expected credit losses on these financial
instruments considering available information, from internal and external
sources, relevant to assessing exposure to credit loss over the contractual term
of the instrument. Relevant available information includes historical credit
loss experience, current conditions, and reasonable and supportable forecasts.

Share-based compensation

The Company measures compensation cost for share-based awards at fair value and
recognizes compensation over the service period for awards expected to vest. The
fair value of restricted stock is based on the number of shares granted and the
quoted price of the Company's common stock at the time of grant, and the fair
value of stock options is determined using the Black-Scholes valuation model.
The Black-Scholes model requires the input of highly subjective assumptions,
including expected volatility, risk-free interest rate and expected life,
changes to which can materially affect the fair value estimate. Actual results
and future changes in estimates may differ substantially from the Company's
current estimates.

Income taxes

Management uses certain assumptions and estimates in determining income taxes
payable or refundable, deferred income tax liabilities and assets for events
recognized differently in its financial statements and income tax returns, and
income tax expense. Determining these amounts requires analysis of certain
transactions and interpretation of tax laws and regulations. Management
exercises considerable judgment in evaluating the amount and timing of
recognition of the resulting income tax liabilities and assets. These judgments
and estimates are re-evaluated on a periodic basis as regulatory and business
factors change.

No assurance can be given that either the tax returns submitted by management or
the income tax reported on the Consolidated Financial Statements will not be
adjusted by either adverse rulings, changes in the tax code, or assessments made
by the IRS, state, or foreign taxing authorities. The Company is subject to
potential adverse adjustments, including but not limited to: an increase in the
statutory federal or state income tax rates, the permanent non-deductibility of
amounts currently considered deductible either now or in future periods, and the
dependency on the generation of future taxable income in order to ultimately
realize deferred income tax assets.

Under FASB ASC Topic 740, the Company will include the current and deferred tax
impact of its tax positions in the financial statements when it is more likely
than not (likelihood of greater than 50%) that such positions will be sustained
by taxing authorities, with full knowledge of relevant information, based on the
technical merits of the tax position. While the Company supports its tax
positions by unambiguous tax law, prior experience with the taxing authority,
and analysis of what it considers to be all relevant facts, circumstances and
regulations, management must still rely on assumptions and estimates to
determine the overall likelihood of success and proper quantification of a given
tax position.

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