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

The following discussion and analysis should be read in conjunction with, and is
qualified in its entirety by reference to, our unaudited consolidated financial
statements and the related notes that appear elsewhere in this Quarterly Report
on Form 10-Q. These discussions contain forward-looking statements that reflect
our current expectations and that include, but are not limited to, statements
concerning our strategies, future operations, future financial position, future
revenues, projected costs, expectations regarding demand and acceptance for our
financial products, growth opportunities and trends in the market in which we
operate, prospects, and plans and objectives of management. The words
"anticipates," "believes," "estimates," "expects," "intends," "may," "plans,"
"projects," "predicts," "will," "would," "should," "could," "potential,"
"continue," and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. We may not actually achieve the plans, intentions, or
expectations disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements. Our forward-looking
statements involve risks and uncertainties that could cause actual results,
events, and/or performance to differ materially from the plans, intentions, and
expectations disclosed in the forward-looking statements. Such risks and
uncertainties include, without limitation, the risks set forth in our filings
with the SEC, including our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021 (which was filed with the SEC on March 4, 2022), our Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2022 (which was filed
with the SEC on May 6, 2022), our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2022 (which was filed with the SEC on August 5, 2022),
and this Quarterly Report on Form 10-Q. The macroeconomic environment, including
the COVID-19 pandemic, may also magnify many of these risks and uncertainties.
The forward-looking information we have provided in this Quarterly Report on
Form 10-Q pursuant to the safe harbor established under the Private Securities
Litigation Reform Act of 1995 should be evaluated in the context of these
factors. Forward-looking statements speak only as of the date they were made,
and we undertake no obligation to update or revise such statements, except as
required by the federal securities laws.

Overview

We are a diversified consumer finance company that provides installment loan
products primarily to customers with limited access to consumer credit from
banks, thrifts, credit card companies, and other lenders. As of September 30,
2022, we operate under the name "Regional Finance" in 338 branch locations in 17
states across the United States, serving 505,700 active accounts. Most of our
loan products are secured, and each is structured on a fixed-rate, fixed-term
basis with fully amortizing equal monthly installment payments, repayable at any
time without penalty. We source our loans through our omni-channel platform,
which includes our branches, centrally-managed direct mail campaigns, digital
partners, retailers, and our consumer website. We operate an integrated branch
model in which nearly all loans, regardless of origination channel, are serviced
through our branch network. This provides us with frequent contact with our
customers, which we believe improves our credit performance and customer
loyalty. Our goal is to consistently grow our finance receivables and to soundly
manage our portfolio risk, while providing our customers with attractive and
easy-to-understand loan products that serve their varied financial needs.

Our products include small, large, and retail installment loans:

• Small Loans (?$2,500) - As of September 30, 2022, we had 292.0 thousand

small installment loans outstanding, representing $480.2 million in net

finance receivables. This included 156.2 thousand small loan convenience

checks, representing $223.4 million in net finance receivables.

• Large Loans (>$2,500) - As of September 30, 2022, we had 207.9 thousand

large installment loans outstanding, representing $1.1 billion in net

finance receivables. This included 25.2 thousand large loan convenience

checks, representing $81.7 million in net finance receivables.

• Retail Loans - As of September 30, 2022, we had 5.8 thousand retail

purchase loans outstanding, representing $10.9 million in net finance

receivables.

• Optional Insurance Products - We offer optional payment and collateral

protection insurance to our direct loan customers.

Small and large installment loans are our core products and will be the drivers
of future growth. In September 2022, we made the decision to discontinue our
retail loan product offering, effective as of November 2022, to focus on growing
our core loan portfolio. We will continue to own and service our existing
portfolio of retail loans. Our primary sources of revenue are interest and fee
income from our loan products, of which interest and fees relating to small and
large installment loans are the largest component. In addition to interest and
fee income from loans, we derive revenue from optional insurance products
purchased by customers of our direct loan products.

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Outlook

We continually assess the macroeconomic environment in which we operate in order
to appropriately and timely adapt to current market conditions. Macroeconomic
factors, including, but not limited to, inflationary pressures, rising interest
rates, impacts from current geopolitical events outside the U.S., and the
COVID-19 pandemic, may affect our business, liquidity, financial condition, and
results of operations.

The COVID-19 pandemic has resulted in economic disruption and uncertainty. At
the beginning of the pandemic, during the second quarter of 2020, we experienced
a decrease in demand. Since that time, our loan growth has steadily increased.
Our net finance receivables were $1.6 billion at September 30, 2022, $293.4
million higher than at September 30, 2021. However, future consumer demand
remains subject to the uncertainty surrounding the duration and nature of the
pandemic going forward. The extent to which the pandemic will ultimately impact
our business and financial condition will depend on future events that are
difficult to forecast, including, but not limited to, the number and severity of
variant strains of the virus and waves of outbreak, the success of actions taken
to contain, treat, and prevent the spread of the virus, and the speed at which
normal economic and operating conditions return and are sustained.

Current inflationary pressures and rising interest rates have created economic
uncertainty and diminished consumer confidence. Recent geopolitical events
outside of the U.S. have also contributed to volatility in U.S. markets. As
inflation accelerated and geopolitical stability began to deteriorate in the
fourth quarter of 2021, we began to proactively tighten our credit models. We
have principally focused on tightening certain higher-risk, higher-rate customer
segments that have been particularly adversely impacted by a more challenging
economic environment. Earlier this year, we eliminated one higher-risk,
higher-rate digital affiliate and two higher-risk, higher-rate segments within
our direct mail program. Loans originated through the eliminated affiliate and
direct mail segments contributed 30 basis points to our contractual delinquency
rate as of September 30, 2022, and 60 basis points to our net credit loss rate
in the third quarter, despite only representing 1.9% of our total portfolio as
of quarter-end. Our remaining portfolio continues to perform well considering
the current environment, with delinquency and net credit loss rates just above
pre-pandemic levels.

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

Our allowance for credit losses was 11.2% of net finance receivables as of
September 30, 2022, and held $19.0 million of reserves associated with estimated
future macroeconomic impacts on credit losses. Our contractual delinquency as a
percentage of net finance receivables was 7.2% as of September 30, 2022, up from
4.7% as of September 30, 2021, and up from the pre-pandemic level of 6.5% as of
September 30, 2019. Going forward, we may experience changes to the
macroeconomic assumptions within our forecast and changes to our credit loss
performance outlook, both of which could lead to further changes in our
allowance for credit losses, reserve rate, and provision for credit losses
expense.

We proactively diversified our funding over the past few years and continue to
maintain a strong liquidity profile. As of September 30, 2022, we had $181.2
million of available liquidity, comprised of unrestricted cash on hand,
immediate availability to draw down cash from our revolving credit facilities,
and immediate availability to draw down on our warehouse credit facilities. In
addition, we had $565.0 million of unused capacity on our revolving credit
facilities (subject to the borrowing base) as of September 30, 2022. We believe
our liquidity position provides substantial runway to fund our growth
initiatives and to support the fundamental operations of our business.

Online operations continue to be an important part of our customer acquisition
strategy, including remote loan closings in recent years. On the digital front,
we continue to build and expand upon our end-to-end online and mobile
origination capabilities for new and existing customers, along with additional
digital servicing functionality. Combined with remote loan closings, we believe
that these omni-channel sales and servicing capabilities have and will continue
to expand the market reach of our branches, increase our average branch
receivables, and improve our revenues and operating efficiencies, while at the
same time increasing customer satisfaction.

Factors Affecting Our Results of Operations

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

Quarterly Information and Seasonality. Our loan volume and contractual
delinquency follow seasonal trends. Demand for our loans is typically highest
during the second, third, and fourth quarters, which we believe is largely due
to customers borrowing money for vacation, back-to-school, and holiday spending.
Loan demand has generally been the lowest during the first quarter,

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which we believe is largely due to the timing of income tax refunds.
Delinquencies generally reach their lowest point in the first half of the year
and rise in the second half of the year. Changes in quarterly growth or
liquidation could result in larger allowance for credit loss releases in periods
of portfolio liquidation, and larger provisions for credit losses in periods of
portfolio growth. Consequently, we experience seasonal fluctuations in our
operating results. However, changes in macroeconomic factors, including
inflation, rising interest rates, and geopolitical conflict, have impacted our
typical seasonal trends for loan volume and delinquency.

Growth in Loan Portfolio. The revenue that we derive from interest and fees is
largely driven by the balance of loans that we originate. Average net finance
receivables were $1.5 billion for the first nine months of 2022 and $1.2 billion
for the prior-year period. We source our loans through our branches, direct mail
program, retail partners, digital partners, and our consumer website. Our loans
are made almost exclusively in geographic markets served by our network of
branches. Increasing the number of loans per branch and growing our state
footprint allows us to increase the number of customers that we are able to
serve. We grew our state footprint from 13 to 17 states during the nine months
ended September 30, 2022, opening our first branches in Mississippi, Indiana,
California, and Louisiana. We plan expansion into one or two new states over the
next four months. We continue to assess our legacy branch network for clear
opportunities to consolidate operations into larger branches within close
geographic proximity. This branch optimization is consistent with our
omni-channel strategy and builds upon our recent successes in entering new
states with a lighter branch footprint, while still providing customers with
best-in-class service. We plan to add additional branches in new and existing
states where it is favorable for us to conduct business.

Product Mix. We are exposed to different credit risks and charge different
interest rates and fees with respect to the various types of loans we offer. Our
product mix also varies to some extent by state, and we may further diversify
our product mix in the future. The interest rates and fees vary from state to
state, depending on the competitive environment and relevant laws and
regulations.

Asset Quality and Allowance for Credit Losses. Our results of operations are
highly dependent upon the credit quality of our loan portfolio. The credit
quality of our loan portfolio is the result of our ability to enforce sound
underwriting standards, maintain diligent servicing of the portfolio, and
respond to changing economic conditions as we grow our loan portfolio.

The primary underlying factors driving the provision for credit losses for each
loan type are our underwriting standards, the general economic conditions in the
areas in which we conduct business, loan portfolio growth, and the effectiveness
of our collection efforts. We monitor these factors, and the amount and past due
status of all loans, to identify trends that might require us to modify the
allowance for credit losses.

Interest Rates. Our costs of funds are affected by changes in interest rates, as
the interest rates that we pay on certain of our credit facilities are variable.
As a component of our strategy to manage the interest rate risk associated with
future interest payments on our variable-rate debt, we had purchased interest
rate cap contracts. See Note 5, "Interest Rate Caps" of the Notes to the
Consolidated Financial Statements in Part 1, Item 1, "Financial Statements," for
additional information on the Company's interest rate caps.

Operating Costs. Our financial results are impacted by the costs of operations
and head office functions. Those costs are included in general and
administrative expenses within our consolidated statements of income.

Components of Results of Operations

Interest and Fee Income. Our interest and fee income consists primarily of
interest earned on outstanding loans. Accrual of interest income on finance
receivables is suspended when an account becomes 90 days delinquent. If the
account is charged off, the accrued interest income is reversed as a reduction
of interest and fee income.

Most states allow certain fees in connection with lending activities, such as
loan origination fees, acquisition fees, and maintenance fees. Some states allow
for higher fees while keeping interest rates lower. Loan fees are additional
charges to the customer and generally are included in the annual percentage rate
shown in the Truth in Lending disclosure that we make to our customers. The fees
may or may not be refundable to the customer in the event of an early payoff,
depending on state law. Fees are recognized as income over the life of the loan
on the constant yield method.

Insurance Income, Net. Our insurance operations are a material part of our
overall business and are integral to our lending activities. Insurance income,
net consists primarily of earned premiums, net of certain direct costs, from the
sale of various optional payment and collateral protection insurance products
offered to customers who obtain loans directly from us. Insurance income, net
also includes the earned premiums and direct costs associated with the non-file
insurance that we purchase to protect us from credit losses where, following an
event of default, we are unable to take possession of personal property
collateral because our security interest is not perfected. We do not sell
insurance to non-borrowers. Direct costs included in insurance income, net are
claims paid, claims reserves, ceding fees, and premium taxes paid. We do not
allocate to insurance income, net, any other head

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office or branch administrative costs associated with management of insurance
operations, management of our captive insurance company, marketing and selling
insurance products, legal and compliance review, or internal audits.

As reinsurer, we maintain reserves for life insurance claims in an amount
determined by the unaffiliated insurance company. As of September 30, 2022, the
restricted cash balance for these reserves was $1.4 million. The unaffiliated
insurance company maintains the reserves for non-life claims.

Other Income. Our other income consists primarily of late charges assessed on
customers who fail to make a payment within a specified number of days following
the due date of the payment. In addition, fees for extending the due date of a
loan, returned check charges, commissions earned from the sale of an auto club
product, and interest and investment income from restricted cash are included in
other income.

Provision for Credit Losses. Provisions for credit losses are charged to income
in amounts that we estimate as sufficient to maintain an allowance for credit
losses at an adequate level to provide for lifetime expected credit losses on
the related finance receivable portfolio. Credit loss experience, current
conditions, reasonable and supportable economic forecasts, delinquency of
finance receivables, loan portfolio growth, the value of underlying collateral,
and management's judgment are factors used in assessing the overall adequacy of
the allowance and the resulting provision for credit losses. Our provision for
credit losses fluctuates so that we maintain an adequate credit loss allowance
that reflects lifetime expected credit losses for each finance receivable type.
Changes in our delinquency and net credit loss rates may result in changes to
our provision for credit losses. Substantial adjustments to the allowance may be
necessary if there are significant changes in forecasted economic conditions or
loan portfolio performance.

General and Administrative Expenses. Our financial results are impacted by the
costs of operations and head office functions. Those costs are included in
general and administrative expenses within our consolidated statements of
income. Our general and administrative expenses are comprised of four
categories: personnel, occupancy, marketing, and other. We measure our general
and administrative expenses as a percentage of average net finance receivables,
which we refer to as our operating expense ratio.

Our personnel expenses are the largest component of our general and
administrative expenses and consist primarily of the salaries and wages,
overtime, contract labor, relocation costs, incentives, benefits, and related
payroll taxes associated with all of our operations and head office employees.

Our occupancy expenses consist primarily of the cost of renting our facilities,
all of which are leased, and the utility, depreciation of leasehold improvements
and furniture and fixtures, communication services, data processing, and other
non-personnel costs associated with operating our business.

Our marketing expenses consist primarily of costs associated with our direct
mail campaigns (including postage and costs associated with selecting
recipients), digital marketing, maintaining our consumer website, and some local
marketing by branches. These costs are expensed as incurred.

Other expenses consist primarily of legal, compliance, audit, and consulting
costs, as well as software maintenance and support, non-employee director
compensation, electronic payment processing costs, bank service charges, office
supplies, credit bureau charges, and the amortization of software, software
licenses, and implementation costs. We frequently experience fluctuations in
other expenses as we grow our loan portfolio and expand our market footprint.
For a discussion regarding how risks and uncertainties associated with the
current regulatory environment may impact our future expenses, net income, and
overall financial condition, see Part II, Item 1A, "Risk Factors" and the
filings referenced therein.

Interest Expense. Our interest expense consists primarily of paid and accrued
interest for debt, unused line fees, and amortization of debt issuance costs on
debt. Interest expense also includes changes in the fair value of interest rate
caps.

Income Taxes. Income taxes consist of state and federal income taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The change in deferred tax
assets and liabilities is recognized in the period in which the change occurs,
and the effects of future tax rate changes are recognized in the period in which
the enactment of new rates occurs.

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Results of Operations

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

                                      3Q 22                            3Q 21                            YTD 22                             YTD 21
                                              % of                             % of                             % of
                                          Average Net                      Average Net                      Average Net                              % of
                                            Finance                          Finance                          Finance                         Average

Net Finance
Dollars in thousands Amount Receivables Amount Receivables Amount Receivables Amount

Receivables

Revenue

Interest and fee income    $ 116,020               29.6 %   $  99,355               32.0 %   $ 333,422               29.8 %   $ 275,427                   31.6 %
Insurance income, net         11,987                3.1 %       9,418                3.0 %      32,751                2.9 %      26,059                    3.0 %
Other income                   3,445                0.9 %       2,687                0.9 %       8,998                0.8 %       7,381                    0.8 %
Total revenue                131,452               33.6 %     111,460               35.9 %     375,171               33.5 %     308,867                   35.4 %
Expenses
Provision for credit
losses                        48,071               12.3 %      26,096                8.4 %     124,329               11.1 %      58,007                    6.6 %

Personnel                     36,979                9.4 %      29,299                9.4 %     106,574                9.5 %      86,520                    9.9 %
Occupancy                      5,848                1.5 %       6,027                1.9 %      17,812                1.6 %      17,615                    2.0 %
Marketing                      3,940                1.0 %       2,488                0.8 %      11,139                1.0 %       9,974                    1.1 %
Other                         11,397                3.0 %       9,936                3.3 %      31,860                2.9 %      25,873                    3.0 %
Total general and
administrative                58,164               14.9 %      47,750               15.4 %     167,385               15.0 %     139,982                   16.0 %

Interest expense              11,863                3.0 %       8,816                2.8 %      19,368                1.7 %      23,752                    2.8 %
Income before income
taxes                         13,354                3.4 %      28,798                9.3 %      64,089                5.7 %      87,126                   10.0 %
Income taxes                   3,286                0.8 %       6,577                2.1 %      15,256                1.3 %      19,217                    2.2 %
Net income                 $  10,068                2.6 %   $  22,221                7.2 %   $  48,833                4.4 %   $  67,909                    7.8 %

Information explaining the changes in our results of operations from
year-to-year is provided in the following pages.

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The following tables summarize the quarterly trends of our financial results: