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REGIONAL MANAGEMENT CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Edgar Online, Inc.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes that appear elsewhere in
this Quarterly Report on Form 10-Q. These discussions contain forward-looking
statements reflecting our current expectations that involve risks and
uncertainties. These forward-looking statements include, but are not limited to,
statements concerning our strategy, 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," "will," "would," 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. Actual
results or events could differ materially from the plans, intentions, and
expectations disclosed in the forward-looking statements that we make. These
forward-looking statements involve risks and uncertainties that could cause our
actual results to differ materially from those in the forward-looking
statements, including without limitation, the risks set forth in our filings
with the Securities and Exchange Commission, including our Quarterly Reports on
Form 10-Q for the period ended March 31, 2012 (which was filed with the
Securities and Exchange Commission on May 10, 2012) and for the period ended
June 30, 2012 (which was filed with the Securities and Exchange Commission on
August 13, 2012). The forward-looking information we have provided in this
Quarterly Report on Form 10-Q pursuant to the safe harbor established under the
Private Securities Litigation Reform Act of 1995 should be evaluated in the
context of these factors. Forward-looking statements speak only as of the date
they were made and we undertake no obligation to update or revise such
statements, except as required by the federal securities laws.

Overview


We are a diversified specialty consumer finance company providing a broad array
of loan products primarily to customers with limited access to consumer credit
from banks, thrifts, credit card companies, and other traditional lenders. We
began operations in 1987 with four branches in South Carolina and have expanded
our branch network to 213 locations in the states of South Carolina, Texas,
North Carolina, Tennessee, Alabama, Oklahoma, and New Mexico as of September 30,
2012. Each of our loan products is secured, structured on a fixed rate, fixed
term basis with fully amortizing equal monthly installment payments and is
repayable at any time without penalty. Our loans are sourced through our
multiple channel platform, including in our branches, through direct mail
campaigns, independent and franchise automobile dealerships, online credit
application networks, furniture and appliance retailers, and our consumer
website. We operate an integrated branch model in which all loans, regardless of
origination channel, are serviced and collected through our branch network,
providing us with frequent in-person contact with our customers, which we
believe improves our credit performance and customer loyalty. Our goal is to
consistently and soundly grow our finance receivables and manage our portfolio
risk while providing our customers with attractive and easy-to-understand loan
products that serve their varied financial needs.

Our diversified product offerings include:

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• Small Installment Loans - As of September 30, 2012, we had approximately

158,600 small installment loans outstanding, representing $158.5 million in

      finance receivables.



• Large Installment Loans - As of September 30, 2012, we had approximately

20,200 large installment loans outstanding, representing $56.9 million in

      finance receivables.



• Automobile Purchase Loans - As of September 30, 2012, we had approximately

17,900 automobile purchase loans outstanding, representing $155.3 million in

      finance receivables.




  •   Furniture and Appliance Purchase Loans - As of September 30, 2012, we had

approximately 22,700 furniture and appliance purchase loans outstanding,

      representing $26.2 million in finance receivables.



• Insurance Products - We offer our customers optional payment protection

insurance options relating to many of our loan products.



Our primary sources of revenue are interest and fee income from our loan
products, of which interest and fees relating to installment loans and
automobile purchase loans have historically been the largest component. In 2009,
we introduced furniture and appliance purchase loans and expanded our automobile
purchase loans to offer loans through online credit application networks. In
addition to interest and fee income from loans, we derive revenue from insurance
products sold to customers of our direct loan products.

Initial Public Offering

On March 27, 2012, our registration statement on Form S-1 relating to our initial public offering was declared effective by the Securities and Exchange Commission ("SEC"). Our initial public offering closed on April 2, 2012, at which time we sold 3,150,000 shares of our common stock and received cash proceeds of approximately $43.9 million, net of underwriting discounts and

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commissions. Additionally, we incurred offering costs of $4.2 million related to
the initial public offering. We used the proceeds of the offering to pay a
portion of our indebtedness. We anticipate incurring significantly lower amounts
of interest expense in future periods from the reduction of debt resulting from
our initial public offering, as described in "Unaudited Pro Forma Consolidated
Financial Information" below.

Factors Affecting Our Results of Operations

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


Growth in Loan Portfolio. The revenue that we derive from interest and fees from
our loan products is largely driven by the number of loans that we originate.
Average finance receivables grew 22.2% from $216.0 million in 2010 to $264.0
million in 2011. Average finance receivables grew 34.4% from $254.3 million in
the first nine months of 2011 to $341.9 million in the first nine months of
2012. We originated or purchased 55,300, 67,300 and 80,200 new loans during
2010, 2011 and the first nine months of 2012, respectively. We source our loans
through our branches and our live check program, as well as through automobile
dealerships and furniture and appliance retailers that partner with us. Our
loans are made exclusively in geographic markets served by our network of
branches. Increasing the number of branches we operate allows us to increase the
number of loans that we are able to service. We opened 17, 36, and 43 new
branches in 2010, 2011, and the first nine months of 2012, respectively. We
opened two AutoCredit Source branches in early 2011 and two additional
AutoCredit Source branches in Texas in January 2012. We have grown more rapidly
in Tennessee and Alabama than in the other states in which we operate. We opened
our first branch in Tennessee in 2007 and our first branch in Alabama in 2009.
As of September 30, 2012, we operated 20 branches with a total of $20.4 million
in net finance receivables in Tennessee and 42 branches with a total of
$38.0 million in net finance receivables in Alabama.

Product Mix. We offer a number of different loan products, including small
installment loans, large installment loans, automobile purchase loans and
furniture and appliance purchase loans. We charge different interest rates and
fees and are exposed to different credit risks with respect to the various types
of loans we offer. For example, in recent years, we have sought to increase our
product diversification by growing our automobile purchase and furniture and
appliance purchase loans, which have lower interest rates and fees than our
small and large installment loans but also have longer maturities and lower
charge-off rates. Our product mix also varies to some extent by state. For
example, small installment loans make up a smaller percentage of our loan
portfolio in North Carolina than in the other states in which we operate because
the rate structure in North Carolina is more favorable for larger loans. Small
installment loans make up a larger percentage of our loan portfolio in Texas
than our other loan products because our branches in Texas have historically
focused on small installment loans. However, we expect to continue diversifying
our product mix in Texas in the future, including opening additional AutoCredit
Source branches.

Asset Quality. Our results of operations are highly dependent upon the strength
of our asset portfolio. We recorded $17.9 million of provisions for loan losses
during 2011 (or 6.8% as a percentage of average finance receivables) and $18.9
million of provisions for loan losses during the first nine months of 2012 (or
7.4% as a percentage of average finance receivables (both annualized)). The
quality of our asset portfolio is the result of our ability to enforce sound
underwriting standards, maintain diligent portfolio oversight, and respond to
changing economic conditions as we grow our loan portfolio.

Allowance for Loan Losses

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Beginning January 1, 2010, we have evaluated losses in each of the four
categories of loans in establishing the allowance for loan losses. The following
table sets forth our allowance for loan losses compared to the related finance
receivables as of September 30, 2012 and December 31, 2011:



                                          As of September 30, 2012                       As of December 31, 2011
                                                           Allowance  as                                 Allowance  as
                                                            Percentage                                    Percentage
                                                            of Related                                    of Related
                                       Finance                Finance                Finance                Finance
                                     Receivables            Receivables            Receivables            Receivables
                                                                  (Dollars in thousands)
Small Installment Loans            $       158,468                    6.9 %      $       130,257                     6.8 %
Large installment loans                     56,888                    5.7 %               36,938                     6.6 %
Automobile purchase loans                  155,344                    4.8 %              128,660                     5.9 %
Furniture and appliance
purchase loans                              26,220                    2.5 %               10,739                     3.7 %

Total                              $       396,920                    5.6 %      $       306,594                     6.3 %



The allowance for loan losses as a percentage of related financial receivables
decreased in the nine months ended September 30, 2012, primarily for automobile
purchase loans. The performance of our automobile purchase loan portfolio
continues to improve and we believe the reduction is appropriate given the
recent performance.



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Provisions for Loan Losses


In evaluating our allowance for loan losses, we currently separate our portfolio
of receivables into four components based on loan type: small installment, large
installment, automobile purchase, and furniture and appliance purchase. The
allowance for small installment loans is based on the historic loss percentage
computed by using the most recent eight months of losses applied to the most
recent month-end balance of loans. The allowance for each other loan type is
based on the historic loss percentage computed by using the most recent 12
months of losses applied to the most recent month-end balance of loans for each
such loan type. We believe that the primary underlying factor driving the
provision for loan losses for each of these loan types is the same: general
economic conditions in the areas in which we conduct business. In addition,
gasoline prices and the market for repossessed automobiles at auction are an
additional underlying factor that we believe influences the provision for loan
losses for automobile purchase loans and, to a lesser extent, large installment
loans. We monitor these factors, the monthly trend of delinquencies and the slow
file (which consists of all loans one or more days past due) to identify trends
that might require an increased provision, and we modify the provision for loan
losses accordingly.

Interest Rates. Our costs of funds are affected by changes in interest rates. In
particular, the interest rate that we pay on our senior revolving credit
facility is a floating rate based on LIBOR. Although we have purchased interest
rate caps to protect a notional amount of $150.0 million of our outstanding
senior revolving credit facility should the three-month LIBOR exceed 6.0%, our
cost of funding will increase if LIBOR increases. The interest rates that we
charge on our loans are not significantly impacted by changes in market interest
rates.

Efficiency Ratio. One of our key operating metrics is our efficiency ratio,
which is calculated by dividing the sum of general and administrative expenses
by total revenue. Our efficiency ratio was 40.7% in the first nine months of
2012, compared to 40.4% in the same period of 2011. We expect the efficiency
ratio to improve as we leverage our operating expenses, although the additional
personnel and other costs of being a public company will reduce the improvement
that we might have otherwise achieved.

Components of Results of Operations

Interest and Fee Income


Our interest and fee income consists primarily of interest earned on outstanding
loans. We cease accruing interest on a loan when the customer is contractually
past due 90 days. Accrual resumes when the customer makes at least one full
payment and the account is less than 90 days contractually past due.

Loan fees are additional charges to the customer, such as loan origination fees,
acquisition fees and maintenance fees, as permitted by state law. The fees may
or may not be refundable to the customer in the event of an early payoff,
depending on state law. Fees are accreted to income over the life of the loan on
the constant yield method and are included in the customer's truth in lending
disclosure.

Insurance Income

Our insurance income consists of revenue from the sale of various insurance
products and other payment protection options offered to customers who obtain
loans directly from us. We do not sell insurance to non-borrowers. The type and
terms of our insurance products vary from state to state based on applicable
laws and regulations. We offer optional credit life insurance, credit accident
and health insurance, and involuntary unemployment insurance. We require
property insurance on any personal property securing loans and offer customers
the option of providing proof of such insurance purchased from a third party
(such as homeowners or renters insurance) in lieu of purchasing property
insurance from us. We also require proof of liability and collision insurance
for any vehicles securing loans, and we obtain collateral insurance on behalf of
customers who permit their other insurance coverage to lapse.

We issue insurance certificates as agents on behalf of an unaffiliated insurance
company and then remit to the unaffiliated insurance company the premiums we
collect (net of refunds on paid out or renewed loans). The unaffiliated
insurance company cedes life insurance premiums to our wholly-owned insurance
subsidiary, RMC Reinsurance, Ltd. ("RMC Reinsurance"), as written and non-life
premiums to RMC Reinsurance as earned. As of September 30, 2012, we had pledged
a $1.3 million letter of credit to the unaffiliated insurance company to secure
payment of life insurance claims. We maintain a cash reserve for life insurance
claims in an amount determined by the unaffiliated insurance company. The
unaffiliated insurance company maintains the reserves for non-life claims.

Other Income


Our other income consists primarily of late charges assessed on customers who
fail to make a payment within a specified number of days following the due date
of the payment (except in North Carolina, which does not permit late charges on
direct consumer loans). Other income also includes fees for extending the due
date of a loan and returned check charges. Due date extensions are only
available to a customer once every thirteen months, are available only to
customers who are current on their loans, and must be approved by personnel at
our headquarters. Less than 1% of scheduled payments were deferred in 2011 and
in the nine months ended September 30, 2012.



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Provision for Loan Losses


Provisions for loan losses are charged to income in amounts that we judge as
sufficient to maintain an allowance for loan losses at an adequate level to
provide for losses on the related finance receivables portfolio. Loan loss
experience, contractual delinquency of finance receivables, 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 loan
losses. Our provision for loan losses fluctuates so that we maintain an adequate
loan loss allowance that accurately reflects our estimates of losses in our loan
portfolio. Therefore changes in our charge-off rates may result in changes to
our provision for loan losses. While management uses the best information
available to make its evaluation, future adjustments to the allowance may be
necessary if there are significant changes in economic conditions or portfolio
performance.

General and Administrative Expenses


Our general and administrative expenses are comprised of four categories:
personnel, occupancy, advertising, and other. We typically measure our general
and administrative expenses as a percentage of total revenue, which we refer to
as our "efficiency ratio."

Our personnel expenses are the largest component of our general and
administrative expenses and consist primarily of the salaries, bonuses, and
benefits associated with all of our branch, field and headquarters employees,
and related payroll taxes. In connection with our initial public offering in
March 2012, we granted awards of stock options to purchase an aggregate of
280,000 shares of our common stock to our executive officers and directors and
stock options to purchase an aggregate of 30,000 shares to other employees, each
pursuant to the Regional Management Corp. 2011 Stock Incentive Plan (the "2011
Stock Plan"). Each stock option has an exercise price equal to the initial
public offering price of $15.00 per share and vest in five equal annual
installments beginning on the first anniversary of the grant date. We recorded a
deferred stock-based compensation expense equal to the grant-date fair value of
the stock options issued of $2.8 million, which is being recognized as
compensation expense over the vesting period.

Our occupancy expenses consist primarily of the cost of renting our branches,
all of which are leased, as well as the utility and other non-personnel costs
associated with operating our branches.

Our advertising expenses consist primarily of costs associated with our live
check direct mail campaigns (including postage and costs associated with
selecting recipients), and maintaining our web site, as well as telephone
directory advertisements and some local advertising by branches. These costs are
expensed as incurred.

Other expenses consist primarily of various other expenses including legal, audit, office supplies, credit bureau charges, and postage.


We expect that our general and administrative expenses will increase as a result
of the additional legal, accounting, insurance, and other expenses associated
with being a public company.

Consulting and Advisory Fees

Consulting and advisory fees consist of amounts payable to the sponsors and
certain former major stockholders, who were members of our management before our
acquisition by the sponsors, pursuant to certain agreements that were terminated
in connection with our initial public offering in March 2012.

Interest Expense


Our interest expense consists primarily of interest payable and amortization of
debt issuance costs in respect of borrowings under our senior revolving credit
facility and our mezzanine debt. Interest expense also includes costs
attributable to the interest rate caps we enter into to manage our interest rate
risk and unused line fees. Changes in the fair value of the interest rate cap
are reflected in interest expense for the senior revolving credit facility and
other notes payable. We repaid the mezzanine debt and a portion of the
borrowings under our senior revolving credit facility with proceeds from our
initial public offering in April 2012. We entered into an amended and restated
senior revolving credit facility in January 2012, which was subsequently amended
in July 2012. See "Liquidity and Capital Resources."

Income Taxes


Incomes taxes consist primarily 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 effects of future tax
rate changes are recognized in the period when the enactment of new rates
occurs.



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Results of Operations


The following tables summarize key components of our results of operations for
the periods indicated, both in dollars and as a percentage of total revenue
(unaudited):



                                                          Three Months Ended September 30,
                                                          2012                        2011
                                                                 % of                        % of
                                                  Amount       Revenue         Amount      Revenue
                                                               (Dollars in Thousands)
Revenue:
Interest and fee income                          $ 31,089          87.6 %     $ 23,406         87.6 %
Insurance income, net                               2,689           7.6 %        2,139          8.0 %
Other income                                        1,712           4.8 %        1,176          4.4 %

Total revenue                                      35,490         100.0 %       26,721        100.0 %

Expenses:
Provision for loan losses                           7,384          20.8 %        4,569         17.1 %
General and administrative expenses
Personnel                                           8,539          24.1 %        6,565         24.6 %
Occupancy                                           2,301           6.5 %        1,710          6.4 %
Advertising                                           632           1.8 %          406          1.5 %
Other                                               2,832           8.0 %        1,587          5.9 %
Consulting and advisory fees                           -             -             177          0.7 %
Interest expense
Senior revolving credit facility and other
notes payable                                       2,705           7.6 %        2,313          8.7 %
Mezzanine debt-related parties                         -             -           1,016          3.8 %

Total interest expense                              2,705           7.6 %        3,329         12.5 %

Total expenses                                     24,393          68.7 %       18,343         68.6 %

Income before taxes                                11,097          31.3 %        8,378         31.4 %
Income taxes                                        4,109          11.6 %        3,193         11.9 %

Net income                                       $  6,988          19.7 %     $  5,185         19.4 %





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                                                          Nine months ended September 30,
                                                          2012                        2011
                                                                 % of                        % of
                                                  Amount       Revenue         Amount      Revenue
                                                               (Dollars in Thousands)
Revenue:
Interest and fee income                          $ 86,333          87.2 %     $ 65,945         87.0 %
Insurance income, net                               7,684           7.8 %        6,266          8.3 %
Other income                                        5,029           5.1 %        3,580          4.7 %

Total revenue                                      99,046         100.0 %       75,791        100.0 %

Expenses:
Provision for loan losses                          18,918          19.1 %       11,894         15.7 %
General and administrative expenses
Personnel                                          24,766          25.0 %       19,381         25.6 %
Occupancy                                           6,281           6.3 %        4,771          6.3 %
Advertising                                         1,857           1.9 %        1,699          2.2 %
Other                                               7,451           7.5 %        4,799          6.3 %
Consulting and advisory fees                        1,451           1.5 %          795          1.0 %
Interest expense
Senior revolving credit facility and other
notes payable                                       7,557           7.6 %        6,027          8.0 %
Mezzanine debt-related parties                      1,030           1.0 %        3,019          4.0 %

Total interest expense                              8,587           8.7 %        9,046         11.9 %

Total expenses                                     69,311          70.0 %       52,385         69.1 %

Income before taxes                                29,735          30.0 %       23,406         30.9 %
Income taxes                                       11,005          11.1 %        8,566         11.3 %

Net income                                       $ 18,730          18.9 %     $ 14,840         19.6 %





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The following tables sets forth certain information derived from the Company's
consolidated financial statements and other operating data and ratios, for the
periods indicated (unaudited):

                           Regional Management Corp.

                            Selected Financial Data

As of and for the Three Months and Nine months ended September 30, 2012 and 2011

                                  (Unaudited)

                             (Dollars in thousands)



                                                     Components of Increase in Interest Income
                                                       Three Months Ended September 30, 2012
                                                 Compared to Three Months Ended September 30, 2011
                                                                Increase (Decrease)
                                                 Volume                   Rate                    Net
Small installment loans                     $          3,916          $        (296 )          $   3,620
Large installment loans                                1,587                     51                1,638
Automobile purchase loans                              1,711                   (276 )              1,435
Furniture and appliance purchase loans                   817                    173                  990

Total increase in interest income           $          8,031          $        (348 )          $   7,683





                                               Three Months Ended September 30,
   Loans Originated (1)                           2012                   2011
   Small installment loans                  $        135,840       $         90,444
   Large installment loans                            23,604                 15,985
   Automobile purchase loans                          34,036                 29,773
   Furniture and appliance purchase loans              9,788                  4,563

   Total finance receivables                $        203,268       $        140,765





                                                           Three Months Ended September 30,
                                                     2012                                    2011
                                                        Percentage of                           Percentage of
                                                       Average  Finance                        Average  Finance
                                                         Receivables                             Receivables
                                        Amount           (Annualized)           Amount           (Annualized)
Net charge-offs as a percentage of
average finance receivables            $   6,032                     6.5 %     $   4,069                     6.0 %

                                                        Percentage of                           Percentage of
                                        Amount          Total Revenue           Amount          Total Revenue
Provision for loan losses              $   7,384                    20.8 %     $   4,569                    17.1 %
General and administrative expenses    $  14,304                    40.3 %     $  10,268                    38.4 %

                                        Amount           Growth Rate            Amount           Growth Rate
Same store finance receivables at
period-end/Growth rate                 $ 348,662                    27.2 %     $ 258,527                    15.4 %
Same store revenue growth rate                                      18.3 %                                  14.6 %




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                                                     Components of Increase in Interest Income
                                                        Nine Months Ended September 30, 2012
                                                 Compared to Nine Months Ended September  30, 2011
                                                                Increase (Decrease)
                                                 Volume                    Rate                   Net
Small installment loans                     $           7,096          $        (154 )          $  6,942
Large installment loans                                 5,054                    966               6,020
Automobile purchase loans                               5,541                   (157 )             5,384
Furniture and appliance purchase loans                  1,858                    184               2,042

Total increase in interest income           $          19,549          $         839            $ 20,388







                                                Nine Months Ended September 30,
   Loans Originated (1)                           2012                   2011
   Small installment loans                  $        291,576       $        222,340
   Large installment loans                            59,289                 41,547
   Automobile purchase loans                          96,834                 93,375
   Furniture and appliance purchase loans             26,692                  9,129

   Total finance receivables                $        474,391       $        366,391





                                                            Nine months ended September 30,
                                                     2012                                    2011
                                                        Percentage of                           Percentage of
                                                       Average  Finance                        Average  Finance
                                                         Receivables                             Receivables
                                        Amount           (Annualized)           Amount           (Annualized)
Net charge-offs as a percentage of
average finance receivables            $  16,086                     6.3 %     $  11,394                     6.0 %

                                                        Percentage of                           Percentage of
                                        Amount          Total Revenue           Amount          Total Revenue
Provision for loan losses              $  18,918                    19.1 %     $  11,894                    15.7 %
General and administrative expenses    $  40,355                    40.7 %     $  30,650                    40.4 %

                                        Amount           Growth Rate            Amount           Growth Rate
Same store finance receivables at
period-end/Growth rate                 $ 348,662                    27.2 %     $ 258,527                    15.4 %
Same store revenue growth rate                                      15.5 %                                  14.5 %




                                                     As of September 30,
          Finance Receivables                         2012          2011
          Small installment loans                  $  158,468     $ 116,927
          Large installment loans                      56,888        35,668
          Automobile purchase loans                   155,344       123,510
          Furniture and appliance purchase loans       26,220         7,341

          Total finance receivables                $  396,920     $ 283,446





                                                                  As of September 30,
                                                       2012                                 2011
                                                         Percentage of                        Percentage of
                                                         Total  Finance                       Total  Finance
                                           Amount         Receivables           Amount         Receivables
Allowance for loan losses                 $ 22,132                   5.6 %     $ 18,500                   6.5 %
Over 90 days contractually delinquent     $  8,309                   2.1 %     $  5,937                   2.1 %
Over 180 days contractually delinquent    $  1,732                   0.4 %     $  1,010                   0.4 %
Number of branches at period end               213                                  167



(1) Represents gross balance of loan originations, including unearned finance

charges

(2) Includes the 19 branches retained following the acquisition of the assets of

    two consumer loan companies in the state of Alabama




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Comparison of September 30, 2012, Versus

September 30, 2011

The following is a discussion of the changes by product type:

• Small Installment Loans - Small installment loans (loans with an original

principal balance of $2,500 or less) outstanding increased by $41.5 million,

or 35.5%, to $158.5 million at September 30, 2012, from $116.9 million at

September 30, 2011. The growth in receivables at the new branches opened in

      2012 contributed to the growth in overall small installment loans
      outstanding.



• Large Installment Loans - Large installment loans outstanding increased by

$21.2 million, or 59.5%, to $56.9 million at September 30, 2012, from
      $35.7 million at September 30, 2011. The increase is primarily due to the
      acquisition of assets from two consumer loan companies in the state of
      Alabama.



• Automobile Purchase Loans - Automobile purchase loans outstanding increased

by $31.8 million, or 25.8%, to $155.3 million at September 30, 2012, from

$123.5 million at September 30, 2011. The increase in automobile purchase

loans outstanding was principally due to our increased emphasis on such

loans, including our new initiatives relating to indirect lending and our

      AutoCredit Source branches.



• Furniture and Appliance Purchase Loans - Furniture and appliance purchase

loans outstanding increased $18.9 million, or 258.9%, to $26.2 million at

September 30, 2012, from $7.3 million at September 30, 2011. The increase in

furniture and appliance purchase loans outstanding resulted from the

additional relationships we established with new furniture and appliance

retailers, as well as an expansion of volume through our existing

relationships.

Comparison of Three Months Ended September 30, 2012, Versus

Three Months Ended September 30, 2011

Income and Revenue


Net income increased to $7.0 million for the three months ended September 30,
2012, or 34.8%, from the three month period ended September 30, 2011. Operating
income (revenue less provision for loan losses and general and administrative
expenses) increased approximately $1.9 million, or 16.1%, over the same period
in 2011.

Total revenues increased to $35.5 million during the quarter ended September 30,
2012, a 32.8% increase over the $26.7 million of total revenues for the
corresponding quarter in 2011. The increase is attributable to the opening of
seven additional branches and the acquisition of 19 net new branches in Alabama
in the three months ended September 30, 2012, compared to the same period of
2011.

Interest and Fee Income

Interest and fee income increased $7.7 million, or 32.8%, to $31.1 million in
the three months ended September 30, 2012, from $23.4 million in the three month
period ended September 30, 2011. The increase in interest and fee income was due
primarily to a 37.5% increase in average finance receivables during the period,
offset by a decrease in the average yield on loans from 34.5% to 33.4%. The
following table sets forth the portions of the increase in interest and fee
income attributable to changes in the finance receivables balance and average
yield for each of our products for the three months ended September 30, 2012,
compared to the three months ended September 30, 2011 (dollars in thousands):



                                                        Three Months Ended
                                                  September 30, 2012 Compared to
                                                Three Months Ended September  30,
                                                     2011 Increase (Decrease)
                                              Volume            Rate             Net
   Small installment loans                  $     3,916       $    (296 )      $ 3,620
   Large installment loans                        1,587              51          1,638
   Automobile purchase loans                      1,711            (276 )        1,435
   Furniture and appliance purchase loans           817             173            990

   Total                                    $     8,031       $    (348 )      $ 7,683



Insurance Income

Insurance income increased $550,000, or 25.7%, to $2.7 million in the three
months ended September 30, 2012 from $2.1 million in the same period of 2011.
However, insurance income as a percentage of average finance receivables
decreased from 3.2% to 2.9% (annualized). The decline is primarily attributable
to the increase in indirect automobile purchase and furniture and appliance
purchase loans where we do not have the opportunity to discuss our insurance
offerings with the customer.



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Other Income


Other income increased $536,000, or 45.6%, to $1.7 million in the three months
ended September 30, 2012 from $1.2 million in the same period of 2011. The
largest component of other income is late charges, which increased $220,000, or
27.1%, to $1.0 million in the three months ended September 30, 2012 from
$813,000 in the same period of 2011. In addition, income from Guaranteed Auto
Protection ("GAP") and collateral protection insurance increased by $57,000.

Provision for Loan Losses


Our provision for loan losses increased $2.8 million, or 61.6%, to $7.4 million
in the three months ended September 30, 2012 from $4.6 million in the comparable
period of 2011. The increase in the provision was made in recognition of growth
in the loan portfolio. Net loans charged-off were 6.5% and 6.0% (annualized) of
average finance receivables for the three months ended September 30, 2012 and
2011 respectively.

General and Administrative Expenses


Our general and administrative expenses, comprising expenses for personnel,
occupancy, advertising, and other expenses, increased $4.0 million, or 39.3%, to
$14.3 million during the three months ended September 30, 2012 from
$10.3 million in the comparable period of 2011. Our efficiency ratio (general
and administrative expenses as a percentage of revenue) increased to 40.3% in
the three months ended September 30, 2012 from 38.4% in the three months ended
September 30, 2011.

Personnel. The largest component of general and administrative expenses is
personnel expense, which increased $2.0 million, or 30.1%, to $8.5 million in
the three months ended September 30, 2012 from $6.6 million for the same period
of 2011. This increase is primarily attributable to the number of new branches
opened. At September 30, 2011, we had 167 branches; whereas, at September 30,
2012 we had 213 branches. However, personnel costs as a percentage of average
finance receivables declined to 9.2% for the three months ended September 30,
2012 from 9.7% in the comparable 2011 period (both percentages annualized).

Occupancy. Occupancy expenses increased $591,000, or 34.6%, to $2.3 million in
the three months ended September 30, 2012 from $1.7 million in the same period
of 2011. The increase in occupancy expenses is the result of 46 additional
branches at September 30, 2012, compared to September 30, 2011. Additionally, we
frequently experience increases in rent as we renew existing leases.

Advertising. Advertising expenses increased $226,000, or 55.7%, to $632,000 in
the three months ended September 30, 2012 from $406,000 in the same period of
2011. The increase in advertising expenses was due primarily to a change in the
timing of a live check campaign.

Other Expenses. Other expenses increased $1.2 million, or 78.4%, to $2.8 million
in the three months ended September 30, 2012 from $1.6 million in the same
period of 2011. The increase in other expenses was due primarily to the costs
associated with the acquisition of the assets of two consumer loan companies in
the state of Alabama and the growth in new branches.

Interest Expense


Interest expense on the senior revolving credit facility and other debt
decreased $624,000, or 18.7%, to $2.7 million in the three months ended
September 30, 2012 from $3.3 million in the same period of 2011. The average
cost of our senior revolving credit facility decreased by 17 basis points from
4.73% for the three months ended September 30, 2011 to 4.56% for the three
months ended September 30, 2012. The primary difference was the mix between our
LIBOR-based portion of the loan and the prime interest rate portion of the loan
and the reduction in the unused line fee as the amount outstanding increased.

Consulting and Advisory Fees

These fee agreements terminated with the closing of the initial public offering on April 2, 2012.


Income Taxes

Income taxes increased $916,000, or 28.7%, to $4.1 million in the three months
ended September 30, 2012 from $3.2 million compared to the same period in 2011.
Although the tax rate decreased from 38.1% to 37.0%, the increase in income
taxes was primarily due to an increase in our net income before taxes.



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Comparison of Nine Months Ended September 30, 2012, Versus

Nine Months Ended September 30, 2011

Income and Revenue


Net income increased to $18.7 million for the nine months ended September 30,
2012, or 26.2%, from the nine month period ended September 30, 2011. Operating
income (revenue less provision for loan losses and general and administrative
expenses) increased approximately $6.5 million, or 19.6%, over the same period
in 2011.

Total revenues increased to $99.0 million during the nine months ended
September 30, 2012, a 30.7% increase over the $75.8 million of total revenues
for the corresponding period in 2011. The increase is attributable to the
opening of 24 additional branches and the acquisition of 19 net new branches in
Alabama in the nine months ended September 30, 2012.

Interest and Fee Income


Interest and fee income increased $20.4 million, or 30.9%, to $86.3 million in
the first nine months of 2012, from $65.9 million in the first nine months of
2011. The increase in interest and fee income was due primarily to a 34.4%
increase in average finance receivables during the period, offset by a decrease
in the average yield on loans from 34.6% to 33.7%. The following table sets
forth the portions of the increase in interest and fee income attributable to
changes in the finance receivables balance and average yield for each of our
products for the nine months ended September 30, 2012, compared to the nine
months ended September 30, 2011 (dollars in thousands):



                                               Nine months ended September 30, 2012
                                                   Compared to Nine months Ended
                                              September 30, 2011 Increase (Decrease)
                                             Volume              Rate              Net
 Small installment loans                  $       7,096       $     (154 )       $  6,942
 Large installment loans                          5,054              966            6,020
 Automobile purchase loans                        5,541             (157 )          5,384
 Furniture and appliance purchase loans           1,858              184            2,042

 Total                                    $      19,549       $      839         $ 20,388



Insurance Income

Insurance income increased $1.4 million, or 22.6%, to $7.7 million in the nine
months ended September 30, 2012 from $6.3 million in the same period of 2011.
Insurance income as a percentage of average finance receivables declined from
3.3% to 3.0% (annualized). The decline is primarily attributable to the increase
in indirect automobile purchase and furniture and appliance purchase loans where
we do not have the opportunity to discuss our insurance offerings with the
customer. Additionally, during the first quarter of the year, we experience
reductions in our small loans as customers use income tax refunds to repay their
loans, reducing insurance revenue, if applicable.

Other Income


Other income increased $1.4 million, or 40.5%, to $5.0 million in the nine
months ended September 30, 2012 from $3.6 million in the same period of 2011.
The largest component of other income is late charges, which increased $702,000,
or 30.2%, to $3.0 million in the nine months ended September 30, 2012 from $2.3
million in the same period of 2011. In addition, income from Guaranteed Auto
Protection ("GAP") and collateral protection insurance increased by $378,000.

Provision for Loan Losses


Our provision for loan losses increased $7.0 million, or 59.1%, to $18.9 million
in the nine months ended September 30, 2012 from $11.9 million in the comparable
period of 2011. The increase in the provision was made in recognition of growth
in the loan portfolio. Net loans charged-off were 6.3% and 6.0% (annualized) of
average finance receivables for the nine months ended September 30, 2012 and
2011 respectively.



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General and Administrative Expenses


Our general and administrative expenses, comprising expenses for personnel,
occupancy, advertising, and other expenses, increased $9.7 million, or 31.7%, to
$40.4 million during the nine months ended September 30, 2012 from $30.7 million
in the comparable period of 2011. Our efficiency ratio (general and
administrative expenses as a percentage of revenue) increased to 40.7% in the
first nine months of 2012 from 40.4% in the first nine months of 2011.

Personnel. The largest component of general and administrative expenses is
personnel expense, which increased $5.4 million, or 27.8%, to $24.8 million in
the nine months ended September 30, 2012 from $19.4 million in for the same
period of 2011. This increase is primarily attributable to the number of new
branches opened. At September 30, 2011 we had 167 branches; whereas, at
September 30, 2012 we had 213 branches. Personnel costs as a percentage of
average finance receivables were 9.7% and 10.2% for the nine months of 2012 and
2011, respectively (both percentages annualized).

Occupancy. Occupancy expenses increased $1.5 million, or 31.6%, to $6.3 million
in the first nine months ended September 30, 2012 from $4.8 million in the same
period of 2011. The increase in occupancy expenses is the result of 46
additional branches at September 30, 2012, compared to September 30, 2011.
Additionally, we frequently experience increases in rent as we renew existing
leases.

Advertising. Advertising expenses increased $158,000, or 9.3%, to $1.9 million
in the nine months ended September 30, 2012 from $1.7 million in the same period
of 2011. The increase in advertising expenses was due primarily to a change in
the timing of a live check campaign.

Other Expenses. Other expenses increased $2.7 million, or 55.3%, to $7.5 million
in the nine months ended September 30, 2012 from $4.8 million in the same period
of 2011. The increase in other expenses was due primarily to the costs
associated with the acquisition of the assets of two consumer loan companies in
the state of Alabama and the growth in new branches.

Interest Expense


Interest expense on the senior revolving credit facility and other debt
decreased $459,000, or 5.1%, to $8.6 million in the nine months ended
September 30, 2012 from $9.0 million in the same period of 2011. The average
cost of our senior revolving credit facility decreased by 15 basis points from
4.80% for the nine months ended September 30, 2011 to 4.65% for the nine months
ended September 30, 2012. The primary difference was the mix between our
LIBOR-based portion of the loan and the prime interest rate portion of the loan
and offset by the reduction in the unused line fee as the amount outstanding
increased.

Consulting and Advisory Fees

The consulting and advisory fees paid to related parties increased $656,000 to
$1.5 million in the nine months ended September 30, 2012 from $795,000 in the
same period of 2011. The increase in advisory and consulting fees is
attributable to the termination fees payable to the sponsors and former majority
stockholders at closing of the initial public offering on April 2, 2012. These
fee agreements terminated with the closing of the initial public offering.

Income Taxes

Income taxes increased $2.4 million, or 28.5%, to $11.0 million in the nine months ended September 30, 2012 from $8.6 million compared to the same period in 2011. The increase in income taxes was due to an increase in our net income before taxes combined with an increase in the tax rate from 36.6% to 37.0%.

Quarterly Information and Seasonality


Our loan volume and corresponding finance receivables follow seasonal trends.
Demand for our loans is typically highest during the fourth quarter, largely due
to customers borrowing money for holiday spending. Loan demand has generally
been the lowest during the first quarter, largely due to the timing of income
tax refunds. During the remainder of the year, our loan volume typically grows
from customer loan activity. In addition, we typically generate higher loan
volumes in the second half of the year from our live check campaigns, which are
timed to coincide with seasonal consumer demand. Consequently, we experience
significant seasonal fluctuations in our operating results and cash needs.

Liquidity and Capital Resources


We have historically financed, and plan to continue to finance, the majority of
our short-term and long-term operating liquidity and capital needs through a
combination of cash flows from operations and borrowings under our senior
revolving credit facility.



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As a holding company, almost all of the funds generated from our operations are
earned by our operating subsidiaries. In addition, our wholly-owned subsidiary
RMC Reinsurance is required to maintain cash reserves against life insurance
policies ceded to it, as determined by the ceding company, and has also
purchased a cash-collateralized letter of credit in favor of the ceding company.
As of September 30, 2012, these reserve requirements totaled $1.3 million.
Additionally, we had a reserve for life insurance claims on our balance sheet of
$200,000, as determined by the third party, unrelated ceding company.

Our primary cash needs relate to the funding of our lending activities and, to a
lesser extent, capital expenditures relating to expanding and maintaining our
branch locations.

Cash Flow

Operating Activities

Net cash provided by operating activities increased by $13.8 million, or 52.8%,
to $40.0 million in the first nine months of 2012 from $26.2 million in the
first nine months of 2011. The increase was primarily due to a $1.1 million
decrease in cash paid for taxes, a $7.0 million increase in provision for loan
losses, and an increase in deferred taxes of $4.3 million.

Investing Activities


Investing activities consist of finance receivables originated and purchased,
net change in restricted cash, purchase of furniture and equipment for new and
existing branches and the purchase of interest rate caps.

Net cash used in investing activities for the first nine months of 2012 was
$108.2 million compared to $50.0 million in the same period of 2011, a net
increase of $58.2 million. The increase is due primarily to a $28.0 million
purchase of the assets of two consumer loan companies, and a successful live
check campaign which contributed to the increase in net originations of finance
receivables.

Financing Activities

Financing activities consist of borrowings and payments on our outstanding indebtedness and the net change in our cash overdraft.


During the nine months ended September 30, 2011, net cash provided by financing
activities was $25.8 million. During the first nine months of 2012, net cash
provided by financing activities was $67.7 million, resulting in a net increase
in net cash provided by financing activities of $41.9 million. The increase in
net cash provided by financing activities was primarily a result of net proceeds
from the initial public offering.

On April 2, 2012, we repaid the mezzanine debt and a portion of the borrowings
under our senior revolving credit facility with proceeds from our initial public
offering.

Financing Arrangements

Senior Revolving Credit Facility


We entered into an amended and restated senior revolving credit facility with a
syndicate of banks in January 2012, which was subsequently amended on July 31,
2012. The amended and restated senior revolving credit facility provides for up
to $325.0 million in availability, with a borrowing base of 85% of eligible
finance receivables, and matures in July 2015. Borrowings under the facility
bear interest, payable monthly, at rates equal to LIBOR of a maturity we elect
between one month and six months, with a LIBOR floor of 1.00%, plus an
applicable margin based on our leverage ratio. Alternatively, we may pay
interest at a rate based on the prime rate plus an applicable margin (which
would have been 2.0% as of September 30, 2012). We also pay an unused line fee
of 0.50% per annum, payable monthly. This fee decreases to 0.375% when the line
exceeds $275 million. The senior revolving credit facility is collateralized by
certain of our assets, including substantially all of our finance receivables
and equity interests of substantially all of our subsidiaries. The credit
agreement contains certain restrictive covenants, including maintenance of
specified interest coverage and debt ratios, restrictions on distributions and
limitations on other indebtedness, maintenance of a minimum allowance for loan
losses and certain other restrictions.

Our outstanding debt under the senior revolving credit facility was $258.3 million at September 30, 2012. At September 30, 2012, we were in compliance with our debt covenants.


We have entered into interest rate caps to manage interest rate risk associated
with a notional amount of $150.0 million of our LIBOR-based borrowings. The
interest rate caps have a strike rate of 6.0% and a maturity of March 4, 2014.
When three-month LIBOR exceeds six percent, the counterparty reimburses us for
the excess over six percent; no payment is required by us or the counterparty
when three-month LIBOR is below six percent. We repaid a portion of the
borrowings under our senior revolving credit facility from a portion of the net
proceeds from our initial public offering in March 2012, which closed on
April 2, 2012.



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Mezzanine Debt


In August 2010, we entered into a $25.8 million mezzanine loan from a sponsor
and three individual stockholders. Our mezzanine debt was repaid in full from
the proceeds of our initial public offering, which closed on April 2, 2012.

Other Financing Arrangements


We have a $1.5 million line of credit with a commercial bank to facilitate our
cash management program, which is secured by a mortgage on our headquarters. The
interest rate is prime plus 0.25%, with a minimum of 5.00%, and interest is
payable monthly. The line of credit matures on January 18, 2015. There are no
significant restrictive covenants associated with this line of credit. Our
outstanding debt under this line of credit was approximately $1.4 million at
September 30, 2012.

Off Balance Sheet Arrangements

We are not a party to any off balance sheet arrangements.

Impact of Inflation


Our results of operations and financial condition are presented based on
historical cost, except for the interest rate cap which is carried at fair
value. While it is difficult to accurately measure the impact of inflation due
to the imprecise nature of the estimates required, we believe the effects of
inflation, if any, on our results of operations and financial condition have
been immaterial.

Related Party Transactions

For a description of our related party transactions, see "Part I. Financial Statements, Note 9, Related Party Transactions."

Critical Accounting Policies


Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States ("U.S. GAAP"). The preparation of these financial statements
requires estimates and judgments that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Management bases estimates on historical experience and
other assumptions it believes to be reasonable under the circumstances and
evaluates these estimates on an on-going basis. Actual results may differ from
these estimates under different assumptions or conditions.

We set forth below those material accounting policies that we believe are the most critical to an investor's understanding of our financial results and condition and that involve a higher degree of complexity and management judgment.

Loan Losses


Finance receivables are equal to the total amount due from the customer, net of
unearned finance and insurance charges. Net finance receivables are equal to the
total amount due from the customer, net of unearned finance and insurance
charges and allowance for loan losses.

Provisions for loan losses are charged to income in amounts sufficient to
maintain an adequate allowance for loan losses on our related finance
receivables portfolio. Loan loss experience, contractual delinquency of finance
receivables, 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 loan losses.

Our loans within each loan product are homogenous and it is not possible to evaluate individual loans. We evaluate losses in each of the four categories of loans in establishing the allowance for loan losses.


In making an evaluation about the portfolio, we consider the trend of
contractual delinquencies and the slow file. The slow file consists of all loans
that are one or more days past due. We use the number of accounts in the slow
file, rather than the dollar amount, to prevent masking delinquencies of smaller
loans compared to larger loans. We evaluate delinquencies and the slow file by
each state and by supervision district within states to identify trends
requiring investigation. Historically, loss rates have been affected by several
factors, including the unemployment rates in the areas in which we operate, the
number of customers filing for bankruptcy protection, and the prices paid for
vehicles at automobile auctions. Management considers each of these factors in
establishing the allowance for loan losses.



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In 2011, we began evaluating the loans of customers in Chapter 13 bankruptcy for
impairment as troubled debt restructurings. We have adopted the policy of
aggregating loans with similar risk characteristics for purposes of computing
the amount of impairment. In connection with the adoption of this practice, we
computed the estimated impairment on our Chapter 13 bankrupt loans in the
aggregate by discounting the projected cash flows at the original contract rates
on the loan using the terms imposed by the bankruptcy court. We applied this
method in the aggregate to each of our four classes of loans.

Our policy for the accounts of customers in bankruptcy is to charge off the
balance of accounts in a confirmed bankruptcy under Chapter 7 of the bankruptcy
code. For customers in a Chapter 13 bankruptcy plan, the bankruptcy court
reduces the post-petition interest rate we can charge, as it does for most
creditors. Additionally, if the bankruptcy court converts a portion of a loan to
an unsecured claim, our policy is to charge off the portion of the unsecured
balance that we deem uncollectible at the time the bankruptcy plan is confirmed.
Once the customer is in a confirmed Chapter 13 bankruptcy plan, we receive
payments with respect to the remaining amount of the loan at the reduced
interest rate from the bankruptcy trustee. We do not believe that accounts in a
confirmed Chapter 13 plan have a higher level of risk than non-bankrupt
accounts. If a customer fails to comply with the terms of the bankruptcy order,
we will petition the trustee to have the customer dismissed from bankruptcy.
Upon dismissal, we restore the account to the original terms and pursue
collection through our normal collection activities.

Prior to June 30, 2011, in making the computations of the present value of cash
payments to be received on bankrupt accounts in each product category, we used
the weighted average interest rates and weighted average remaining term based on
data as of June 30, 2011. Management believes that using current data does not
materially change the results that would be obtained if it had available data
for interest rates and remaining term data as of the applicable periods. Since
June 30, 2011, we have used data for the current quarter.

We fully reserve for all loans at the date that the loan is contractually
delinquent 180 days. We initiate repossession proceedings on certain loans when
an account is seriously delinquent, we have exhausted other means of collection
and, in the opinion of management, the customer is unlikely to make further
payments. We sell substantially all repossessed vehicles through public sales
conducted by independent automobile auction organizations, after the required
post-possession waiting period. Losses on the sale of repossessed collateral are
charged to the allowance for loan losses.

Income Recognition


Interest income is recognized using the interest (actuarial) method, or constant
yield method. Therefore, we recognize revenue from interest at an equal rate
over the term of the loan. Unearned finance charges on pre-compute contracts are
rebated to customers utilizing the Rule of 78s method. The difference between
income recognized under the constant yield method and the Rule of 78s method is
recognized as an adjustment to interest income at the time of rebate. Accrual of
interest income on finance receivables is suspended when no payment has been
received for 90 days or more on a contractual basis. The accrual of income is
not resumed until one or more full contractual monthly payments are received and
the account is less than 90 days contractually delinquent. Interest income is
suspended on finance receivables for which collateral has been repossessed.

We recognize income on credit insurance products using the constant yield method
over the life of the related loan. Rebates are computed using the Rule of 78s
method and any difference between the constant yield method and the Rule of 78s
is recognized in income at the time of rebate.

We charge a fee to automobile dealers for each loan we purchase from that dealer. We defer this fee and accrete it to income using a method that approximates the constant yield method over the life of the loan.

Charges for late fees are recognized as income when collected.

Insurance Operations


Insurance operations include revenue and expense from the sale of optional
insurance products to our customers. These optional products include credit
life, credit accident and health, property insurance and involuntary
unemployment insurance. The premiums and commissions we receive are deferred and
amortized to income over the life of the insurance policy using the constant
yield method.

Stock-Based Compensation

We have a stock option plan for certain members of management. We did not grant
any options in 2009, 2010, or 2011. Upon closing of the initial public offering
in 2012, we granted options to purchase an aggregate of 310,000 shares of our
common stock to certain of our officers and directors. We measure compensation
cost for stock-based awards made under this plan at estimated fair value and
recognize compensation expense over the service period for awards expected to
vest. All grants are made at 100% of fair value at the date of the grant.



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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. In
addition, the estimation of stock-based awards that will ultimately vest
requires judgment, and to the extent actual results or updated estimates differ
from current estimates, such amounts will be recorded as a cumulative adjustment
in the period estimates are revised.

Prior to our initial public offering in March 2012, our stock was not publically
traded. We used the performance of the common stock of a publicly traded company
whose business is comparable to ours to estimate the volatility of our stock.
The risk-free rate is based on the U.S. Treasury yield at the date our board of
directors approved the option awards for the period over which the options are
exercisable.

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 effects
of future tax rate changes are recognized in the period when the enactment of
new rates occurs.

When tax returns are filed, it is highly certain that some positions taken would
be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of
the position that would be ultimately sustained. The benefit of a tax position
is recognized in the financial statements in the period during which, based on
all available evidence, it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other
positions. Tax positions that meet the more-likely-than-not recognition
threshold are measured as the largest amount of tax benefit that is more than
50% likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that
exceeds the amount measured as described above is reflected as a liability for
unrecognized tax benefits in the accompanying balance sheet along with any
associated interest and penalties that would be payable to the taxing
authorities upon examination. As of September 30, 2012, we had not taken any tax
position that exceeds the amount described above.

Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of income.


We file income tax returns in the U.S. federal jurisdiction and various states.
We are generally no longer subject to U.S. federal income tax examinations for
years ended before 2009, or state and local income tax examinations by taxing
authorities before 2008, though we remain subject to examination in Texas for
the 2007 tax year.

Recently Issued Accounting Standards


On May 2, 2012, we filed a Current Report on Form 8-K with the Securities and
Exchange Commission (the "SEC") in which we notified the SEC that, pursuant to
Section 107(b) of the Jumpstart Our Business Startups Act (the "JOBS Act"),
relating to the extension of time to comply with new or revised financial
accounting standards provided under Section 7(a)(2)(B) of the Securities Act of
1933, as amended, and Section 13(a) of the Securities Exchange Act of 1934, as
amended, we have chosen to comply with such standards to the same extent that a
non-emerging growth company is required to comply with such standards.

Accounting Pronouncements Issued and Adopted


In October 2010, the FASB issued ASU 2010-26, Accounting for Costs Associated
with Acquiring or Renewing Insurance Contracts. ASU 2010-26 modifies the
definitions of the type of costs incurred by insurance entities that can be
capitalized in the successful acquisition of new and renewal contracts. ASU
2010-26 requires incremental direct costs of successful contract acquisition, as
well as certain costs related to underwriting, policy issuance and processing,
medical and inspection and sales force contract selling for successful contract
acquisition to be capitalized. These incremental direct costs and other costs
are those that are essential to the contract transaction and would not have been
incurred had the contract transaction not occurred. This guidance was adopted by
the Company for the year beginning January 1, 2012 and will be applied
prospectively. The adoption of this guidance did not have a material impact on
our financial position, results of operations or cash flows.



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In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement, which aligns
disclosures related to fair value between U.S. GAAP and International Financial
Reporting Standards. The ASU includes changes to the wording used to describe
many of the requirements in U.S. GAAP for measuring fair value and changes to
the disclosure of information about fair value measurements. More specifically,
the changes clarify the intent of the FASB regarding the application of existing
fair value measurements and disclosures as well as changing some particular
principles or requirements for measuring fair value or for disclosing
information about fair value measurements. This ASU is effective for interim and
annual periods beginning after December 15, 2011. The adoption of this guidance
did not have a material impact on our consolidated financial statements.

Unaudited Pro Forma Consolidated Financial Information


The Company closed its initial public offering on April 2, 2012. The unaudited
pro forma consolidated statement of income for the nine months ended
September 30, 2012 presents our consolidated result of operations giving pro
forma effect to the initial public offering and the application of the estimated
net proceeds therefrom, as if such transactions occurred at January 1, 2012. The
pro forma adjustments are based on available information and upon assumptions
that our management believes are reasonable in order to reflect, on a pro forma
basis, the impact of these transactions on our historical financial information.

The unaudited pro forma consolidated financial information should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the historical financial statements and related notes
included elsewhere in this Quarterly Report on Form 10-Q.

The unaudited pro forma consolidated financial information is included for
informational purposes only and does not purport to reflect our results of
operations or financial position had we operated as a public company during the
periods presented. The unaudited pro forma consolidated financial information
should not be relied upon as being indicative of our results of operations or
financial position had the initial public offering and the application of the
estimated net proceeds occurred on the dates assumed. The unaudited pro forma
consolidated financial information also does not project our results of
operations or financial position for any future period or date.

The pro forma adjustments give effect to:

• The application of the proceeds from our initial public offering, as

described under "Part II. Other Information, Item 2, Unregistered Sales of

Equity Securities and Use of Proceeds" in the Quarterly Report on Form 10-Q

for the period ended March 31, 2012 (which was filed with the SEC on May 10,

      2012), including:




     •   the repayment of a portion of our outstanding indebtedness and the
         associated reduction in interest expense;



• the termination of our advisory agreement with certain stockholders and

consulting agreements with certain of the individual stockholders and the

associated termination of consulting and advisory fees, each in accordance

with its terms upon the consummation of the initial public offering, which

         termination does not result in any adjustment to our pro forma
         consolidated balance sheet;



• the termination of the right of the individual stockholders to sell their

stock back to us, pursuant to the terms of the shareholders agreement that

         terminated upon the consummation of our initial public offering;




     •   the reduction in the interest rate on our senior revolving credit
         facility, upon the completion of our initial public offering; and




     •   a recalculation of weighted average diluted shares outstanding using a
         value per share of $15.00 rather than the value estimated in the
         historical financial statements.




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             Unaudited Pro Forma Consolidated Statements of Income

                  For the Nine months ended September 30, 2012

                   ($ in Thousands except per share amounts)



                                                                 Pro Forma
                                              Actual            Adjustments              Pro Forma
Revenue
Interest and fee income                    $     86,333        $          -             $     86,333
Insurance income                                  7,684                   -                    7,684
Other income                                      5,029                   -                    5,029

Total revenue                                    99,046                   -                   99,046

Expenses
Provision for loan losses                        18,918                   -                   18,918
General and administrative expenses
Personnel                                        24,766                  140 (1)              24,906
Occupancy                                         6,281                   -                    6,281
Advertising                                       1,857                   -                    1,857
Other                                             7,451                   -                    7,451
Consulting and advisory fees                      1,451               (1,451 )(2)                 -
Interest expense
Senior revolving credit facility and
other debt                                        7,557                 (247 )(3)              7,310
Mezzanine debt-related parties                    1,030               (1,030 )(4)                 -

Total interest expense                            8,587               (1,277 )                 7,310

Total expenses                                   69,311               (2,588 )                66,723

Income before income taxes                       29,735                2,588                  32,323
Income taxes                                     11,005                  942 (5)              11,947

Net income                                 $     18,730        $       1,646            $     20,376

Net income per common share
Basic                                      $       1.64                                 $       1.63

Diluted                                    $       1.60                                 $       1.60

Weighted average shares outstanding:
Basic                                        11,429,063                                   12,486,727

Diluted                                      11,712,565                                   12,770,229




(1) Represents additional compensation expense associated with the grant of

options upon consummation of the initial public offering.

(2) Represents a termination fee of $1,125 combined with the $326 we paid our

former majority stockholders and sponsors for the three months ended

March 31, 2012. The agreements with the former majority stockholders and

sponsors terminated with the completion of the initial public offering.

(3) Reflects reduction in interest expense as a result of payment of $13,229 in

aggregate principal amount of our senior revolving credit facility, offset in

part by an unused line fee of 0.50%. Also reflects a reduction in the

interest rate under our senior revolving credit facility from one month LIBOR

(with a LIBOR floor of 1.00%) plus 3.25% to one month LIBOR (with a LIBOR

floor of 1.00%) plus 3.00%.

(4) Reflects reduction in interest expense as a result of the repayment of the

$25,814 in aggregate principal amount of our mezzanine debt, which accrued

interest at a rate of 15.25% per annum.

(5) Reflects an increase in income taxes as a result of the increase in income

    before taxes.




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