UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~December 31, 2020~~September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

Commission file number: 0-26680

NICHOLAS FINANCIAL, INC.

(Exact Name of Registrant as Specified in its Charter)

British Columbia, Canada

59-2506879

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)


2454 McMullen Booth Road, Building C
Clearwater, Florida		33759
(Address of Principal Executive Offices)		(Zip Code)

~~(727)~~ (727) 726-0763

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

NICK

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of ~~February 8,~~November 10, 2021, approximately ~~12.6~~12.7 million common shares, no par value, of the Registrant were outstanding (of which ~~4.9~~5.1 million shares were held by the Registrant’s principal operating subsidiary and pursuant to applicable law, not entitled to vote and ~~7.7~~7.6 million shares were entitled to vote).

NICHOLAS FINANCIAL, INC.

~~Table of Contents~~

FORM 10-Q

TABLE OF CONTENTS


		Page

Part I .	Financial Information
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets as of ~~December 31, 2020~~September 30, 2021 and March 31, ~~2020~~2021	1
	Consolidated Statements of Income for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2021 and 2020 ~~and 2019~~	2
	Consolidated Statements of Shareholders’ Equity for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2021 and 2020 ~~and 2019~~	3
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~December 31,~~September 30, 2021 and 2020 ~~and 2019~~	4
	Notes to the Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2827
Item 4.	Controls and Procedures	2827

Part II .	Other Information
Item 1.	Legal Proceedings	3028
Item 1A.	Risk Factors	3028
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3028
Item 6.	Exhibits	3129

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

ITEM 1. FINANCIAL STATEMENTS

Nicholas Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)


		December 31, 2020 (Unaudited)			March 31, 2020				September 30, 2021 (Unaudited)			March 31, 2021
Assets
Cash		$	20,535		$	16,802			$	15,611		$	22,022
Restricted cash			8,726			7,882				7,240			10,955
Equity investments with readily determinable fair values			4,286			—
Finance receivables, net			172,386			199,781				165,561			170,318
Repossessed assets			805			1,340				859			685
Operating lease right-of-use assets			2,940			2,598				4,801			3,392
Prepaid expenses and other assets			892			1,126				1,192			1,271
Income taxes receivable			308			4,898				240			653
Property and equipment, net			681			482				1,242			859
Deferred income taxes			3,134			3,909				1,722			2,283
Total assets		$	214,693		$	238,818			$	198,468		$	212,438
Liabilities and shareholders’ equity
Credit facility, net of debt issuance costs		$	91,547		$	124,255			$	69,599		$	86,154
Note payable			3,244			-				3,244			3,244
Net long-term debt			94,791			124,255				72,843			89,398
Operating lease liabilities			2,929			2,652				4,817			3,367
Accounts payable and accrued expenses			3,513			4,332				3,719			4,451
Total liabilities			101,233			131,239				81,379			97,216
Shareholders’ equity
Preferred stock, no par: 5,000 shares authorized; none issued			—			—
Common stock, no par: 50,000 shares authorized; 12,653 and 12,639 shares issued, respectively; and 7,726 and 7,806 shares outstanding, respectively			35,014			34,867
Treasury stock: 4,927 and 4,833 common shares, at cost, respectively			(72,186	)		(71,438	)
Preferred stock, 0 par: 5,000 shares authorized; NaN issued										—			—
Common stock, 0 par: 50,000 shares authorized; 12,665 and 12,653 shares issued, respectively; and 7,583 and 7,708 shares outstanding, respectively										35,151			35,064
Treasury stock: 5,082 and 4,945 common shares, at cost, respectively										(73,895	)		(72,343	)
Retained earnings			150,632			144,150				155,833			152,501
Total shareholders’ equity			113,460			107,579				117,089			115,222
Total liabilities and shareholders’ equity		$	214,693		$	238,818			$	198,468		$	212,438

The following table represents the assets and liabilities of our consolidated variable interest entity as follows:	The following table represents the assets and liabilities of our consolidated variable interest entity as follows:							The following table represents the assets and liabilities of our consolidated variable interest entity as follows:

		December 31, 2020 (Unaudited)			March 31, 2020				September 30, 2021 (Unaudited)			March 31, 2021
Assets
Restricted cash		$	8,726		$	7,882			$	7,240		$	10,955
Finance receivables, net			159,117			165,966				131,033			150,706
Repossessed assets			760			1,277				745			631
Total assets		$	168,603		$	175,125			$	139,018		$	162,292
Liabilities
Credit facility, net of debt issuance costs		$	91,547		$	124,255			$	69,599		$	86,154
Accounts payable and accrued expenses			424			597				324			405
Total liabilities		$	91,971		$	124,852			$	69,923		$	86,559

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

Nicholas Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Revenue:
Interest and fee income on finance receivables	$	13,180	$	14,973	$	41,395	$	47,199	$	12,572	$	14,064	$	25,166	$	28,215
Realized gain on equity investments		238		—		238		—
Unrealized gain on equity investments		1,056		—		1,101		—		—		45		—		45
Total revenue		14,474		14,973		42,734		47,199
Total revenue:										12,572		14,109		25,166		28,260
Expenses:
Marketing		341		402		918		1,240		373		358		950		577
Salaries and employee benefits		4,387		4,629		13,337		14,168		4,668		4,798		9,507		8,950
Administrative		2,628		2,839		8,454		10,190		2,780		2,923		5,636		5,826
Provision for credit losses		650		4,597		7,000		12,982		1,395		3,050		2,125		6,350
Depreciation		51		80		172		250		96		52		172		121
Interest expense		1,442		1,886		4,660		6,672		1,121		1,569		2,309		3,218
Total expenses		9,499		14,433		34,541		45,502		10,433		12,750		20,699		25,042
Income before income taxes		4,975		540		8,193		1,697		2,139		1,359		4,467		3,218
Income tax expense		1,190		229		1,711		527		536		92		1,135		521
Net income	$	3,785	$	311	$	6,482	$	1,170	$	1,603	$	1,267	$	3,332	$	2,697
Earnings per share:
Basic	$	0.49	$	0.04	$	0.84	$	0.15	$	0.21	$	0.16	$	0.44	$	0.34
Diluted	$	0.49	$	0.04	$	0.85	$	0.15	$	0.21	$	0.16	$	0.44	$	0.34

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

Nicholas Financial, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(Unaudited)

(In thousands)

	Three Months Ended December 31, 2020
	Common Stock										Total
	Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at September 30, 2020		7,787		$	34,964	$	(71,667	)	$	146,847	$	110,144
Issuance of restricted stock awards		3			—		—			—		—
Share-based compensation		—			50		—			—		50
Treasury stock purchases		(64	)		—		(519	)		—		(519	)
Net income		—			—		—			3,785		3,785
Balance at December 31, 2020		7,726		$	35,014	$	(72,186	)	$	150,632	$	113,460

	Three Months Ended December 31, 2019													Three Months Ended September 30, 2021
	Common Stock										Total			Common Stock										Total
	Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity			Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at September 30, 2019		7,925		$	34,749	$	(70,459	)	$	141,543	$	105,833
Balance at June 30, 2021															7,650		$	35,110	$	(73,008	)	$	154,230	$	116,332
Issuance of restricted stock awards															10			—		—			—		—
Share-based compensation															—			41		—			—		41
Treasury stock															(77	)		—		(887	)		—		(887	)
Net income															—			—		—			1,603		1,603
Balance at September 30, 2021															7,583		$	35,151	$	(73,895	)	$	155,833	$	117,089

														Three Months Ended September 30, 2020
														Common Stock										Total
														Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at June 30, 2020															7,802		$	34,916	$	(71,466	)	$	145,580	$	109,030
Issuance of restricted stock awards															10			—		—			—		—
Share-based compensation															—			48		—			—		48
Treasury stock															(25	)		—		(201	)		—		(201	)
Net income															—			—		—			1,267		1,267
Balance at September 30, 2020															7,787		$	34,964	$	(71,667	)	$	146,847	$	110,144

														Six Months Ended September 30, 2021
														Common Stock										Total
														Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at March 31, 2021															7,708		$	35,064	$	(72,343	)	$	152,501	$	115,222
Issuance of restricted stock awards															12			—		—			—		—
Exercise of stock options		1			5		—			—		5			—			—		—			—		—
Cancellation of restricted stock awards															—			—		—			—		—
Share-based compensation					59							59			—			87		—			—		87
Treasury stock purchases		(24	)		—		(216	)		—		(216	)
Treasury stock															(137	)		—		(1,552	)		—		(1,552	)
Net income		—			—		—			311		311			—			—		—			3,332		3,332
Balance at December 31, 2019		7,902		$	34,813	$	(70,675	)	$	141,854	$	105,992
Balance at September 30, 2021															7,583		$	35,151	$	(73,895	)	$	155,833	$	117,089

	Nine Months Ended December 31, 2020													Six Months Ended September 30, 2020
	Common Stock										Total			Common Stock										Total
	Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity			Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at March 31, 2020		7,806		$	34,867	$	(71,438	)	$	144,150	$	107,579			7,806		$	34,867	$	(71,438	)	$	144,150	$	107,579
Issuance of restricted stock awards		14			—		—			—		—			11			—		—			—		—
Share-based compensation		—			147		—			—		147			—			97		—			—		97
Treasury stock purchases		(94	)		—		(748	)		—		(748	)
Treasury stock															(30	)		—		(229	)		—		(229	)
Net income		—			—		—			6,482		6,482			—			—		—			2,697		2,697
Balance at December 31, 2020		7,726		$	35,014	$	(72,186	)	$	150,632	$	113,460

	Nine Months Ended December 31, 2019
	Common Stock										Total
	Shares			Amount		Treasury Stock			Retained Earnings		Shareholders' Equity
Balance at March 31, 2019		7,910		$	34,660	$	(70,459	)	$	140,684	$	104,885
Issuance of restricted stock awards		39			—		—			—		—
Exercise of stock options		2			5		—			—		5
Cancellation of restricted stock awards		(25	)		—		—			—		—
Share-based compensation		—			148		—			—		148
Treasury stock purchases		(24	)		—		(216	)		—		(216	)
Net income		—			—		—			1,170		1,170
Balance at December 31 2019		7,902		$	34,813	$	(70,675	)	$	141,854	$	105,992
Balance at September 30, 2020															7,787		$	34,964	$	(71,667	)	$	146,847	$	110,144

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

Nicholas Financial, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Nine Months Ended December 31,						Six Months Ended September 30,
	2020			2019			2021			2020
Cash flows from operating activities
Net income	$	6,482		$	1,170		$	3,332		$	2,697
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		172			250			172			121
Amortization of debt issuance costs		322			324			215			214
Amortization of operating lease right-of-use assets		1,198			1,485			678			818
Gain on sale of property and equipment		(13	)		(9	)
Purchase of equity investments		(4,142	)		—
Proceeds from sale of equity investments		1,195			—
Loss on sale of property and equipment								(2	)		(2	)
Unrealized gains on equity securities		(1,101	)		—			—			(45	)
Realized gains on equity securities		(238	)		—
Provision for credit losses		7,000			12,982			2,125			6,350
Amortization of dealer discounts		(4,828	)		(6,138	)		(3,237	)		(3,218	)
Amortization of insurance and fee commissions		(1,770	)		(1,984	)
Amortization of insurance and fees commissions								(1,308	)		(1,207	)
Accretion of purchase price discount		(468	)		(1,453	)		(116	)		(305	)
Deferred income taxes								561			(95	)
Principal reduction on operating lease liabilities		(1,077	)		(1,446	)		(776	)		(738	)
Share-based compensation		147			148			88			97
Changes in operating assets and liabilities:
Repossessed assets								(174	)		484
Accrued interest receivable		536			(199	)		(120	)		347
Repossessed assets		535			517
Prepaid expenses and other assets		48			(1,602	)		78			35
Accounts payable and accrued expenses		(819	)		350			(593	)		(1,203	)
Income taxes receivable		4,590			(15	)		413			3,450
Deferred income taxes		775			527
Unearned insurance and fee commissions		(278	)		182			(36	)		(156	)
Net cash provided by operating activities		8,266			5,089			1,300			7,644
Cash flows from investing activities
Purchase and origination of finance receivables		(60,252	)		(66,572	)		(51,962	)		(40,362	)
Principal payments received		87,455			94,994			59,411			59,297
Net assets acquired from branch acquisitions, primarily loans		—			(20,483	)
Purchase of equity investments								—			(2,968	)
Purchase of property and equipment		(382	)		(81	)		(553	)		(311	)
Proceeds from sale of property and equipment		24			7			—		—
Net cash provided by investing activities		26,845			7,865			6,896			15,656
Cash flows from financing activities
Repayments on credit facility		(33,030	)		(38,950	)		(16,770	)		(17,830	)
Proceeds from the credit facility		—			13,400
Payment of loan origination fees		—			(729	)
Proceeds from note payable		3,244			—
Proceeds from exercise of stock options		—			5
Purchases of treasury stock		(748	)		(216	)
Proceeds from PPP Loan								—			3,244
Repurchases of treasury stock								(1,552	)		(229	)
Net cash used in financing activities		(30,534	)		(26,490	)		(18,322	)		(14,815	)
Net increase (decrease) in cash and restricted cash		4,577			(13,536	)
Net (decrease) increase in cash and restricted cash								(10,126	)		8,485
Cash and restricted cash at the beginning of period		24,684			37,642			32,977			24,684
Cash and restricted cash at the end of period	$	29,261		$	24,106		$	22,851		$	33,169
Supplemental Disclosures:
Interest paid		4,491			5,936			2,160			3,129
Income taxes paid		986			15
Income taxes								161			727
Leased assets obtained in exchange for new operating lease liabilities		1,865			1,024			1,693			1,213

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

Notes to the ~~Consolidated~~Consolidated Financial Statements

~~Note~~ 1. Basis of Presentation

Nicholas Financial, Inc. (“Nicholas Financial – Canada”) or the Company) is a Canadian holding company incorporated under the laws of British Columbia with several wholly-owned United States subsidiaries, including Nicholas Financial, Inc., a Florida corporation (“NFI”). The accompanying consolidated balance sheet as of ~~March 31, 2020,~~September 30, 2021, which has been derived from audited financial statements, and the accompanying unaudited interim consolidated financial statements of Nicholas Financial – Canada, and its wholly-owned subsidiaries (collectively, the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information, with the instructions to Form 10-Q pursuant to the Securities ~~and~~ Exchange Act of 1934, as amended, and with Article 8 of Regulation S-X thereunder. Accordingly, they do not include all of the information and notes to the consolidated financial statements required by U.S. GAAP for complete consolidated financial statements, although the Company believes that the disclosures made are adequate to ensure the information is not misleading. In the opinion of management, all adjustments (consisting of normal recurring ~~accruals)~~adjustments) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending March 31, ~~2021.~~2022. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2020~~2021 as filed with the Securities and Exchange Commission on June 22, ~~2020.~~2021. The March 31, ~~2020~~2021 consolidated balance sheet included herein has been derived from the March 31, ~~2020~~2021 audited consolidated balance sheet included in the aforementioned Form 10-K.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on finance receivables and fair value of the assets and liabilities for business combination.

~~Note~~ 2. Revenue Recognition

Interest income on finance receivables is recognized using the interest method. Accrual of interest income on finance receivables is suspended when a loan is contractually delinquent for 61 days or more, or the collateral is repossessed, whichever is earlier. The Company reverses the accrual of interest income when the loan is contractually delinquent 61 days or more.

The Company defines a non-performing asset as one that is 61 or more days past due, a Chapter 7 bankruptcy account, or a Chapter 13 bankruptcy account that has not been confirmed by the courts, for which the accrual of interest income is suspended. Upon confirmation of a Chapter 13 bankruptcy ~~trustee’s plan~~account (BK13), the account is immediately charged-off. Upon notification of a Chapter 7 bankruptcy, an account is monitored for collectability. In the event the debtors’ balance is reduced by the bankruptcy court, the Company records a loss equal to the amount of principal balance reduction. The remaining balance is reduced as payments are received. In the event an account is dismissed from bankruptcy, the Company will decide whether to begin repossession proceedings or to allow the customer to make regularly scheduled payments.

A dealer discount represents the difference between the finance receivable of a Contract, and the amount of money the Company actually pays for the Contract. The discount negotiated by the Company is a function of the lender, the wholesale value of the vehicle and competition in any given market. In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer, and the value of the automobile in relation to the purchase price and the term of the ~~Contract~~ ~~dealer discount.~~Contract.

The dealer discount is amortized as an adjustment to yield using the interest method over the life of the loan. The average dealer discount associated with new volume for the three months ended September 30, 2021 and ~~nine months ended December 31,~~ 2020 was 6.7% and ~~2019 was 7.5% and 7.9% and 7.4% and 7.9%~~6.8%, respectively, in relation to the total amount ~~financed, respectively.~~financed.

Unearned insurance and fee commissions consist primarily of commissions received from the sale of ancillary products. These products include automobile warranties, roadside assistance programs, accident and health insurance, credit life insurance, ~~and~~ involuntary unemployment insurance ~~coverage.~~coverage, and forced placed automobile insurance. These commissions are amortized over the life of the contract using the effective interest method.

~~Table of Contents~~

~~Note~~ 3. Earnings Per Share

The Company has granted stock compensation awards with nonforfeitable dividend rights which are considered participating securities. Earnings per share is calculated using the two-class method, as such awards are more dilutive under this method than the treasury stock method. Basic earnings per share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per share includes the dilutive effect of additional potential common shares from stock compensation awards. Earnings per share have been computed based on the following weighted average number of common shares outstanding:

Three months ended
December 31,
(In thousands, except
per share amounts)

Nine months ended
December 31,
(In thousands, except
per share amounts)

2020

2019

2020

2019

Numerator:

Net income

$
3,785

$
311

$
6,482

$
1,170

Less: Allocation of earnings to participating securities

(23
)

(2
)

(34
)

(6
)
Net income allocated to common stock

$
3,762

$
309

$
6,448

$
1,164

Basic earnings per share computation:

Net income allocated to common stock

$
3,762

$
309

$
6,448

$
1,164

Weighted average common shares outstanding, including
shares considered participating securities

7,722

7,970

7,703

7,901

Less: Weighted average participating securities outstanding

(48
)

(52
)

(41
)

(40
)
Weighted average shares of common stock

7,674

7,918

7,662

7,861

Basic earnings per share

$
0.49

$
0.04

$
0.84

$
0.15

Diluted earnings per share computation:

Net income allocated to common stock

$
3,762

$
309

$
6,448

$
1,164

Undistributed earnings re-allocated to participating securities

23

2

34

6

Numerator for diluted earnings per share

$
3,785

$
311

$
6,482

$
1,170

Weighted average common shares outstanding for basic
earnings per share

7,674

7,918

7,662

7,861

Incremental shares from stock options

—

1

—

1

Weighted average shares and dilutive potential common shares

7,674

7,919

7,662

7,862

Diluted earnings per share

$
0.49

$
0.04

$
0.85

$
0.15


	Three months ended September 30, (In thousands, except per share amounts)						Six months ended September 30, (In thousands, except per share amounts)
	2021			2020			2021			2020
Numerator
Net income per consolidated statements of income	$	1,603		$	1,267		$	3,332		$	2,697
Percentage allocated to shareholders *		100	%		99	%		100	%		99	%
Numerator for basic and diluted earnings per share	$	1,596		$	1,260		$	3,319		$	2,682

Denominator
Denominator for Basic earnings per share - weighted-average shares outstanding		7,620			7,731			7,622			7,722
Dilutive effect of stock options		—			—			—			—
Denominator for diluted earnings per share		7,620			7,731			7,622			7,722

Per share income from continuing operations
Basic	$	0.21		$	0.16		$	0.44		$	0.34
Diluted		0.21			0.16			0.44			0.34

* Basic weighted-average shares outstanding		7,620			7,731			7,622			7,722
Basic weighted-average shares outstanding and unvested restricted stock units expected to vest		7,652			7,777			7,651			7,766
Percentage allocated to shareholders		100	%		99	%		100	%		99	%

~~Note~~ 4. Finance Receivables

Finance Receivables Portfolio

Finance receivables consist of Contracts and Direct Loans and are detailed as follows:


	(In thousands)
	September 30, 2021			March 31, 2021			September 30, 2020
Finance receivables	$	177,013		$	184,237		$	198,168
Accrued interest receivable		2,405			2,285			2,817
Unearned dealer discounts		(6,787	)		(7,290	)		(7,411	)
Unearned insurance commissions and fees		(2,360	)		(2,396	)		(2,460	)
Purchase price discount		(248	)		(364	)		(610	)
Finance receivables, net of unearned		170,023			176,472			190,504
Allowance for credit losses		(4,462	)		(6,154	)		(11,469	)
Finance receivables, net	$	165,561		$	170,318		$	179,035

(In thousands)

December 31,
2020

March 31,
2020

December 31,
2019

Finance receivables

$
188,626

$
219,366

$
211,813

Accrued interest receivable

2,628

3,164

3,088

Unearned dealer discounts

(7,006
)

(8,056
)

(8,436
)
Unearned insurance and fee commissions

(2,338
)

(2,616
)

(2,644
)
Purchase price discount

(447
)

(915
)

(222
)
Finance receivables, net of unearned

181,463

210,943

203,599

Allowance for credit losses

(9,077
)

(11,162
)

(13,272
)
Finance receivables, net

$
172,386

$
199,781

$
190,327

~~Table of Contents~~

Contracts and Direct Loans each comprise a portfolio segment. The following tables present selected information on the entire portfolio of the Company:


	As of December 31,						As of September 30,
Contract Portfolio	2020			2019			2021			2020
Average APR		22.7	%		22.7	%		22.9	%		22.7	%
Average discount		7.6	%		7.7	%		7.5	%		7.6	%
Average term (months)		51			51			50			51
Number of active contracts		23,388			25,995			20,927			24,656


	As of September 30,
Direct Loan Portfolio	2021			2020
Average APR		29.0	%		27.7	%
Average term (months)		27			27
Number of active contracts		5,006			3,673

As of December 31,

Direct Loan Portfolio

2020

2019

Average APR

28.4
%

27.0
%
Average term (months)

26

26

Number of active contracts

4,126

3,376

The Company purchases Contracts from automobile dealers at a negotiated price that is less than the original principal amount being financed by the purchaser of the automobile. The Contracts are predominantly for used vehicles. As of ~~December 31, 2020,~~September 30, 2021, the average model year of vehicles collateralizing the portfolio was a ~~2011~~2012 vehicle.

Direct Loans are typically for amounts ranging from ~~$500~~$500 to ~~$15,000~~$15,000 and are generally secured by a lien on an automobile, watercraft or other permissible tangible personal property. The majority of Direct Loans are originated with current or former customers under the Company’s automobile financing program. The typical Direct Loan represents a better credit risk than the typical Contract due to the customer’s prior payment history with the Company; however, the underlying collateral is “typically” less valuable. In deciding whether to make a loan, the Company considers the individual’s credit history, job stability, income, and impressions created during a personal interview with a Company loan officer. Additionally, because most of the Direct Loans made by the Company to date have been made to current or former customers, the payment history of the borrower is a significant factor in making the loan decision. As of ~~December 31, 2020,~~September 30, 2021, loans made by the Company pursuant to its Direct Loan program constituted approximately ~~7.6%~~10.7% of the aggregate principal amount of the Company’s loan portfolio. Changes in the allowance for credit losses for both Contracts and Direct Loans were driven primarily by consideration of the composition of the portfolio, current economic conditions, the estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts when determining management’s estimate of probable credit losses and adequacy of the allowance for credit losses. If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision would be recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio. Additionally, credit loss trends over several reporting periods are utilized in estimating future losses and overall portfolio performance. Conversely, the Company could identify abnormalities in the composition of the portfolio, which would indicate the calculation is overstated and management judgement may be required to determine the allowance of credit losses for both Contracts and Direct Loans.

Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment.

~~Table of Contents~~

Allowance for Credit Losses

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts and Direct Loans for the three months ended September 30, 2021 and ~~nine months ended December 31, 2020 and 2019:~~2020:

	Three months ended December 31, 2020									Nine months ended December 31, 2020
	Contracts			Direct Loans			Consolidated			Contracts			Direct Loans			Consolidated
Balance at beginning of period	$	10,977		$	492		$	11,469		$	10,433		$	729		$	11,162
Provision for credit losses		601			49			650			6,951			49			7,000
Charge-offs		(4,411	)		(179	)		(4,590	)		(12,819	)		(477	)		(13,296	)
Recoveries		1,527			21			1,548			4,129			82			4,211
Balance at December 31, 2020	$	8,694		$	383		$	9,077		$	8,694		$	383		$	9,077

	Three months ended December 31, 2019									Nine months ended December 31, 2019									Three months ended September 30, 2021									Six months ended September 30, 2021
	Contracts			Direct Loans			Consolidated			Contracts			Direct Loans			Consolidated			Contracts			Direct Loans			Consolidated			Contracts			Direct Loans			Consolidated
Balance at beginning of period	$	12,680		$	850		$	13,530		$	16,575		$	357		$	16,932		$	5,268		$	(18	)	$	5,250		$	6,001		$	153		$	6,154
Provision for credit losses		4,597			0			4,597			12,177			805			12,982			460			935			1,395			1,190			935			2,125
Charge-offs		(7,350	)		(144	)		(7,494	)		(22,057	)		(483	)		(22,540	)		(3,128	)		(182	)		(3,310	)		(5,901	)		(373	)		(6,274	)
Recoveries		2,626			13			2,639			5,858			40			5,898			1,116			11			1,127			2,426			31			2,457
Balance at December 31, 2019	$	12,553		$	719		$	13,272		$	12,553		$	719		$	13,272
Balance at September 30, 2021																			$	3,716		$	746		$	4,462		$	3,716		$	746		$	4,462

																			Three months ended September 30, 2020									Six months ended September 30, 2020
																			Contracts			Direct Loans			Consolidated			Contracts			Direct Loans			Consolidated
Balance at beginning of period																			$	10,651		$	597		$	11,248		$	10,433		$	729		$	11,162
Provision for credit losses																				3,050			-			3,050			6,350			-			6,350
Charge-offs																				(4,073	)		(142	)		(4,215	)		(8,407	)		(298	)		(8,705	)
Recoveries																				1,349			37			1,386			2,601			61			2,662
Balance at September 30, 2020																			$	10,977		$	492		$	11,469		$	10,977		$	492		$	11,469

The Company uses the trailing six-month charge-offs, annualized, and applies this calculated percentage to ending finance receivables to calculate estimated future probable credit losses for purposes of determining the allowance for credit losses. The ~~Company’s~~Company then takes into consideration the composition of its portfolio, current economic conditions, estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts and adjusts the above, if necessary, to determine management’s total estimate of probable credit losses and its assessment of the overall adequacy of the allowance for credit ~~losses also incorporates~~losses. By including recent trends such as delinquency, non-performing assets, and ~~bankruptcy. The Company~~bankruptcy in its determination, management believes that ~~this approach~~the allowance for credit losses reflects the current trends of incurred losses within the portfolio and ~~aligns the allowance for credit losses~~is better aligned with the portfolio’s performance indicators.

The following table is an assessment of the credit quality by creditworthiness:


	(In thousands)												(In thousands)
	December 31, 2020						December 31, 2019						September 30, 2021						September 30, 2020
	Contracts		Direct Loans		Total		Contracts		Direct Loans		Total		Contracts		Direct Loans		Total		Contracts		Direct Loans		Total
Performing accounts	$	167,071	$	13,925	$	180,996	$	191,773	$	11,229	$	203,002	$	153,991	$	18,646	$	172,637	$	179,723	$	12,509	$	192,232
Non-performing accounts		7,099		302		7,401		8,319		194		8,513		3,949		198		4,147		5,564		211		5,775
Total		174,170		14,227		188,397		200,092		11,423		211,515		157,940		18,844		176,784		185,287		12,720		198,007
Chapter 13 bankruptcy accounts		218		11		229		289		9		298		214		15		229		161		0		161
Finance receivables	$	174,388	$	14,238	$	188,626	$	200,381	$	11,432	$	211,813	$	158,154	$	18,859	$	177,013	$	185,448	$	12,720	$	198,168

A performing account is defined as an account that is less than 61 days past due. The Company defines an automobile contract as delinquent when more than ~~25%~~10% of a payment contractually due by a certain date has not been paid immediately by the ~~immediately~~ following due date, which date may have been extended within limits specified in the servicing agreements or as a result of a deferral. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable.

In certain circumstances, the Company will grant obligors one-month payment extensions. The only modification of terms in those circumstances is to advance the obligor’s next due date by one month and extend the maturity date of the receivable. There are no other concessions, such as a reduction in interest rate, or forgiveness of principal or of accrued interest. Accordingly, the Company considers such extensions to be insignificant delays in payments rather than troubled debt restructurings.

A non-performing account is defined as an account that is contractually delinquent for 61 days or more or is a Chapter 13 bankruptcy account for which the accrual interest income has been suspended. The Company’s charge-off policy is to charge off an account in the month the contract becomes 121 days contractually delinquent.

In the event an account is dismissed from bankruptcy, the Company will decide ~~based on several factors,~~whether to begin repossession proceedings or to allow the customer to ~~resume making~~make regularly scheduled payments.

~~Table of Contents~~

The Company does consider Chapter 13 bankruptcy accounts, for which the corresponding bankruptcy plan has not been confirmed as of the period end, to be troubled debt restructurings and included in the Company’s allowance for credit losses is a specific reserve of approximately $118,000 and $0 for these accounts as of December 31, 2020 and December 31, 2019, respectively.

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and Direct Loans, excluding Chapter 13 bankruptcy accounts:

Contracts

(In thousands, except percentages)

Balance
Outstanding

30 – 59
days

60 – 89
days

90 – 119
days

120+

Total

December 31, 2020

$
174,170

$
12,914

$
4,955

$
2,117

$
28

$
20,014

7.41
%

2.84
%

1.22
%

0.02
%

11.49
%

March 31, 2020

207,247

14,977

4,290

1,893

19

21,179

7.23
%

2.07
%

0.91
%

0.01
%

10.22
%

December 31, 2019

$
200,092

$
16,748

$
5,993

$
2,279

$
47

$
25,067

8.37
%

3.00
%

1.14
%

0.02
%

12.53
%


	Contracts
	(In thousands, except percentages)
	Balance Outstanding		30 – 59 days			60 – 89 days			90 – 119 days			120+			Total
September 30, 2021	$	157,940	$	7,990		$	2,905		$	1,024		$	19		$	11,938
				5.06	%		1.84	%		0.65	%		0.01	%		7.56	%

March 31, 2021	$	170,195	$	6,289		$	2,430		$	896		$	42		$	9,657
				3.70	%		1.43	%		0.53	%		0.02	%		5.67	%

September 30, 2020	$	185,287	$	10,232		$	3,962		$	1,560		$	42		$	15,796
				5.52	%		2.14	%		0.84	%		0.02	%		8.53	%

Direct Loans

Balance
Outstanding

30 – 59
days

60 – 89
days

90 – 119
days

120+

Total

December 31, 2020

$
14,227

$
442

$
188

$
110

$
4

$
744

3.11
%

1.32
%

0.77
%

0.03
%

5.23
%

March 31, 2020

11,844

344

136

59

—

539

2.90
%

1.15
%

0.50
%

—

4.55
%

December 31, 2019

$
11,423

$
331

$
123

$
68

$
3

$
525

2.90
%

1.08
%

0.60
%

0.03
%

4.60
%

~~Note 5. Investments~~

~~Equity Securities~~

The Company adopted ASU 20116-01 on July 1, 2020. The first purchases of equity securities occurred in the second quarter of Fiscal Year 2021, so no prospective basis existed for these equity investments. The purchase of these equity investments was recorded in the Consolidated Balance Sheets at $4.3 million as of December 31, 2020. The Company defined these equity investments as trading securities with changes in fair value were immediately recognized through net income in each quarter.

~~As of December 31, 2020, the carrying values of our equity securities were included in the following line items in our consolidated balance sheet:~~

(In thousands)

Fair Value with Changes Recognized in Income

Measurement Alternative - No Readily Determinable Fair Value

Marketable securities

$
4,286

$
-

Total equity securities

$
4,286

$
-

~~The calculation of net unrealized gains and losses for the period that relate to equity securities still held at December 31, 2020 is as follows (in thousand):~~

Nine Months Ended

December 31,
2020

Unrealized gains on equity securities as of March 31, 2020

$
-

Unrealized gains on equity securities for the nine months ended December 31, 2020

(1,101
)

Unrealized gains on equity securities as of December 31, 2020

$
(1,101
)

~~Table of Contents~~


	Direct Loans
	Balance Outstanding		30 – 59 days			60 – 89 days			90 – 119 days			120+			Total
September 30, 2021	$	18,844	$	416		$	145		$	53		$	—		$	614
				2.21	%		0.77	%		0.28	%		—			3.26	%

March 31, 2021	$	13,909	$	253		$	101		$	81		$	10		$	445
				1.82	%		0.73	%		0.58	%		0.07	%		3.20	%

September 30, 2020	$	12,720	$	349		$	159		$	52		$	—		$	560
				2.74	%		1.25	%		0.41	%		—			4.40	%

~~For the three months ended December 31, 2020, the Company recorded realized gains on equity securities of $0.2 million. Both unrealized and realized gains were reflected in earnings.~~

~~Note 6. Acquisition~~

On April 30, 2019, the Company completed an acquisition of three branches, representing substantially all of the assets, of ML Credit Group, LLC (d/b/a Metrolina Credit Company) (“Metrolina”). Two acquired branches are located in the state of North Carolina and one branch is located in South Carolina. Based on its evaluation of the agreement, the Company accounted for the acquisition as a business combination. The Company allocated the purchase price to acquired assets and liabilities on their fair values. The Company acquired finance receivables, net of $20.1 million, other assets of $0.1 million, assumed liabilities of $0.2 million and incurred approximately $0.3 million in related expenses. The purchase price allocation resulted in goodwill of $0.3 million which the Company determined to be impaired as of March 31, 2020. Finance receivables from the Metrolina acquisition as of December 31, 2020 and March 31, 2020 were $5.9 million and $10.9 million, respectively.

~~Note 7.~~5. Credit Facility

~~Senior Secured~~Ares Credit Facility

On March 29, 2019, NF Funding I, a wholly-owned, special purpose financing subsidiary of NFI entered into a senior secured credit facility (the ~~“Credit~~“Ares Credit Facility”) pursuant to a credit agreement with Ares Agent Services, L.P., as administrative agent and collateral agent, and the lenders that are party thereto (the ~~“Credit~~“Ares Credit Agreement”). ~~The Company’s prior credit facility was paid off in connection with this Credit Facility.~~

Pursuant to the Ares Credit Agreement, the lenders ~~have~~ agreed to extend to NF Funding I a line of credit of up to ~~$175,000,000,~~$175,000,000, which ~~will be~~was used to purchase motor vehicle retail installment sale contracts from NFI on a revolving basis pursuant to a related receivables purchase agreement between NF Funding I and NFI (the “Receivables Purchase Agreement”). Under the terms of the Receivables Purchase Agreement, NFI ~~will sell~~sold to NF Funding I the ~~receivables under the~~ installment sale contracts. NFI ~~will continue to service~~serviced the motor vehicle retail installment sale contracts transferred to NF Funding I pursuant to a related servicing agreement (the “Servicing Agreement”).

The availability of funds under the Ares Credit Facility iswas generally limited to ~~82.5%~~82.5% of the value of non-delinquent receivables, and outstanding advances under the Ares Credit Facility ~~will accrue~~accrued interest at a rate of LIBOR plus ~~3.75%~~3.75%. If LIBOR dropped below 1%, the Company still accrued interest at a rate of 1% plus 3.75%. The commitment period for advances under the Ares Credit Facility is was three ~~years.~~years. At the end of the commitment period, the outstanding balance would ~~be paid off~~convert to a term loan and require monthly principal and interest payments over a four-year amortization period.

In connection with the Ares Credit Facility, NFI ~~has~~ guaranteed NF Funding ~~I ’s~~I’s obligations under the Ares Credit Agreement up to ~~10%~~10% of the highest aggregate principal amount outstanding under the Ares Credit Agreement at any time pursuant to a limited guaranty. The Company iswas also obligated to cover any losses of the lender parties resulting from certain defined “bad acts” of the Company or its subsidiaries, such as fraud, misappropriation of funds or unpermitted disposition of the assets.

Pursuant to athe related security agreement (the “Security Agreement”), NF Funding I granted a security interest in substantially all of its assets as collateral for its obligations under the Ares Credit Facility. In addition, NFI pledged the equity interests of NF Funding I, as additional collateral.

The Ares Credit Agreement and the other loan documents ~~contain~~contained customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, and sales of receivables. If an event of default ~~occurs,~~occurred, the lenders could ~~increase~~have increased borrowing costs, ~~restrict~~restricted NF Funding ~~I ’s~~I’s ability to obtain additional advances under the Ares Credit Facility, ~~accelerate~~accelerated all amounts outstanding under the Ares Credit Facility, ~~enforce~~enforced their interest against collateral pledged under the Ares Credit Facility or ~~enforce~~enforced their rights under the Company’s guarantees.

Once sold to NF Funding I, the assets described above ~~are~~were separate and distinct from the Company’s own assets and ~~will~~were not be available to the Company’s creditors ~~should~~in case of the ~~Company become insolvent,~~Company’s insolvency, although they are presented on a consolidated basis on the Company’s balance ~~sheet.~~sheet see “Note 11-Variable Interest Entity”.

As of September 30, 2021, the Company had aggregate outstanding indebtedness under the Ares Credit Facility of $71.5 million, compared to $88.3 million as of March 31, 2021.

~~Table of Contents~~

Future maturities of debt as of ~~December 31, 2020 for~~September 30, 2021 were as follows:


(in thousands)
FY2022	$	2,882
FY2023		18,243
FY2024		17,883
FY2025		17,883
FY2026		17,883
	$	74,774

As disclosed in Note 14 - Subsequent Events, the ~~fiscal years ended, are as follows:~~

(in thousands)

Quarter Ended December 31,

FY2021

$
—

FY2022

2,701

FY2023

23,993

FY2024

23,450

FY2025

23,450

Thereafter

23,450

$
97,044

~~Note 8. Note Payable~~

~~On May 27, 2020,~~Ares Credit Facility was repaid in full on November 5, 2021 using the ~~Company obtained a loan in the amount of $3,243,900~~proceeds from a ~~bank in connection~~new credit facility with the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP Loan”). Pursuant to the Paycheck Protection Program, all or a portion of the PPP Loan may be forgiven if the Company uses the proceeds of the PPP Loan for its payroll costs and other expenses in accordance with the requirements of the Paycheck Protection Program. The Company used the proceeds of the PPP Loan for payroll costs and other covered expenses and sought full forgiveness of the PPP Loan, but there can be no assurance that the Company will obtain any forgiveness of the PPP Loan.

If the PPP Loan is not fully forgiven, the Company will remain liable for the full and punctual payment of the outstanding principal balance plus accrued and unpaid interest. The PPP Loan accrues interest at a rate per annum equal to 1.00% and an initial payment of accrued and unpaid interest was due on December 27, 2020. The Company submitted the forgiveness application to Fifth ThirdWells Fargo Bank, the lender, on December 7, 2020 and submitted supplemental documentation on January 16, 2021. Therefore, per the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, the deferral period for loan payments was extended to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period (the loan forgiveness covered expired on [December 27, 2020]).N.A.

The outstanding principal balance plus accrued and unpaid interest is due on May 22, 2022. The PPP Loan is unsecured. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The related promissory note contains events of default and other provisions customary for a loan of this type.

Note 9.6. Income Taxes

The Company recorded an income tax expense of approximately ~~$1,190,000~~$536,000 for the three months ended ~~December 31, 2020~~September 30, 2021 compared to income tax expense of approximately ~~$229,000~~$92,000 for the three months ended ~~December 31, 2019.~~September 30, 2020. The Company’s effective tax rate ~~decreased~~increased to ~~23.9%~~25.1% for the three months ended ~~December 31, 2020~~September 30, 2021 from ~~42.4%~~6.8% for the three months ended ~~December 31, 2019. The decrease was primarily attributed to the return to normalized effective tax rate in the current quarter.~~September 30, 2020. The Company recorded an income tax expense of approximately ~~$1,711,000~~$1,135,000 for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 compared to income tax expense of approximately ~~$527,000~~$521,000 for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2020. The Company’s effective tax rate ~~decreased~~increased to ~~20.9%~~25.4% for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 from ~~31.1%~~16.2% for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2020. The ~~decrease~~lower effective tax rate for the three and six months ended September 30, 2020 was ~~primarily~~ attributed to ~~prior year Net Operating Losses recognized in the Fiscal Year of 2021.~~discrete and other non-recurring items.

Note 7. Leases

~~Note 10. Leases~~

The Company maintains lease agreements related to its branch network and for its corporate headquarters. The branch lease agreements range from one to five years and generally contain options to extend from one to three ~~years.~~years. The corporate headquarters lease agreement was renewed ~~in April 2020 and expires in~~ with a lease maturity date of March ~~2023.~~2023. All of the Company’s lease agreements are considered operating leases. None of the Company’s lease payments are dependent on a rate or index that may change after the commencement date, other than the passage of time.

The Company’s lease liability was ~~$2.9~~$4.8 million and $3.4 million as of ~~December~~September 30, 2021 and March 31, ~~2020.~~2021, respectively. This liability is based on the present value of the remaining minimum rental payments using a discount rate that is determined based on the Company’s incremental borrowing ~~rate on its senior revolving credit facility.~~rate. The lease asset was ~~$2.9~~$4.8 million and $3.4 million as of ~~December~~September 30, 2021 and March 31, ~~2020. This asset includes right-of-use assets equaling the lease liability, net of prepaid rent and deferred rents that existed as of the adoption of the new lease standard.~~2021, respectively.

The Company has made several policy elections related to lease assets and liabilities. The Company elected to utilize the package of transition practical expedients, which includes not reassessing the following at adoption: (i) whether existing contracts contained leases, (ii) the existing classification of leases as operating or financing, or (iii) the initial direct costs of leases. In addition, the Company did not use hindsight to determine the lease term or include options to extend for leases existing at the transition date.

~~Table of Contents~~

The Company had elected the practical expedient of combining lease and non-lease components for its real estate leases in calculating the present value of the fixed payments without having to perform an allocation between the types of lease components. Future minimum lease payments under non-cancellable operating leases in effect as of ~~December 31, 2020,~~September 30, 2021, are as follows:


in thousands
FY2022 (remaining six months)	$	749
FY2023		1,452
FY2024		976
FY2025		764
FY2026		463
Thereafter	$	737
Total future minimum lease payments		5,141
Present value adjustment		(324	)
Operating lease liability	$	4,817

in thousands

FY2021

$
378

FY2022

1,235

FY2023

859

FY2024

385

FY2025

272

Thereafter

$
122

Total future minimum lease payments

3,251

Present value adjustment

(322
)
Operating lease liability

$
2,929

The following table reports information about the Company’s lease cost for the three months ended ~~December 31, 2020~~September 30, 2021 (in thousands):


Lease cost:
Operating lease cost	$	365	$	430
Variable lease cost		82		85
Total lease cost	$	447	$	515

The following table reports information about the Company’s lease cost for the ~~nine~~three months ended ~~December 31,~~September 30, 2020 (in thousands):


Lease cost:
Operating lease cost	$	372
Variable lease cost		85
Total lease cost	$	457

The following table reports information about the Company’s lease cost for the six months ended September 30, 2021 (in thousands):


Lease cost:
Operating lease cost	$	820
Variable lease cost		170
Total lease cost	$	990

The following table reports information about the Company’s lease cost for the six months ended September 30, 2020 (in thousands):


Lease cost:
Operating lease cost	$	783
Variable lease cost		182
Total lease cost	$	965

Lease cost:

Operating lease cost

$
1,148

Variable lease cost

264

Total lease cost

$
1,412

The following table reports other information about the Company’s leases for the three months ended ~~December 31, 2020~~September 30, 2021 (dollar amounts in thousands):


Other Lease Information
Operating Lease - Operating Cash Flows (Fixed Payments)	$	380	$	391
Operating Lease - Operating Cash Flows (Liability Reduction)	$	339	$	343
Weighted Average Lease Term - Operating Leases		2.75 years		4.3 years
Weighted Average Discount Rate - Operating Leases		6.5%		6.5%

The following table reports other information about the Company’s leases for the ~~nine~~three months ended ~~December 31,~~September 30, 2020 (dollar amounts in thousands):


Other Lease Information
Operating Lease - Operating Cash Flows (Fixed Payments)	$	1,198	$	390
Operating Lease - Operating Cash Flows (Liability Reduction)	$	1,077	$	352
Weighted Average Lease Term - Operating Leases		2.71 years		2.4 years
Weighted Average Discount Rate - Operating Leases		6.5%		6.5%

12The following table reports other information about the Company’s leases for the six months ended September 30, 2021 (dollar amounts in thousands):


Other Lease Information
Operating Lease - Operating Cash Flows (Fixed Payments)	$	776
Operating Lease - Operating Cash Flows (Liability Reduction)	$	678
Weighted Average Lease Term - Operating Leases		3.7 years
Weighted Average Discount Rate - Operating Leases		6.5%

The following table reports other information about the Company’s leases for the six months ended September 30, 2020 (dollar amounts in thousands):


Other Lease Information
Operating Lease - Operating Cash Flows (Fixed Payments)	$	818
Operating Lease - Operating Cash Flows (Liability Reduction)	$	738
Weighted Average Lease Term - Operating Leases		2.7 years
Weighted Average Discount Rate - Operating Leases		6.5%

~~Table of Contents~~

~~Note 11.~~

8. Fair Value Disclosures

The Company’s financial instruments consist of cash, ~~equity investments,~~ finance receivables, repossessed assets, ~~the Credit Facility,~~ and the ~~note payable.~~credit facility. For each of these financial instruments, the carrying value approximates fair value.

Equity investments occurred in second quarter of Fiscal Year 2021, so no prospective basis existed for these equity investments. The purchase of these equity investments was recorded in the Consolidated Balance Sheets at $4.3 as of December 31, 2020, at fair market value. The Company defined these equity investments as trading securities with changes in fair value were immediately recognized through net income in each quarter, respectively.

Finance receivables, net, approximates fair value based on the price paid to acquire Contracts. The price paid reflects competitive market interest rates and purchase discounts for the Company’s chosen credit grade in the economic environment. This market is highly liquid as the Company acquires individual loans on a daily basis from dealers.

The initial terms of the Contracts generally range from 12 to 72 months. Beginning in December 2017, the maximum initial term of a Contract was reduced to 60 months. The initial terms of the Direct Loans generally range from 12 to 60 months. If liquidated outside of the normal course of business, the amount received may not be the carrying value.

Repossessed assets are valued at the lower of the finance receivable balance prior to repossession or the estimated net realizable value of the repossessed asset. The Company estimates the net realizable value using ~~the projected cash value upon liquidation~~estimated auction wholesale proceeds less costs to sell plus insurance claims outstanding, if any.

~~Based on current market conditions, any new or renewed credit facility would be expected to contain pricing that approximates the Company’s current Credit Facility.~~ Based on these market conditions, the fair value of the Ares Credit Facility as of ~~December 31, 2020~~September 30, 2021 was estimated to be equal to the book value. The interest rate for the Ares Credit Facility is a variable rate based on LIBOR pricing options.


	(In thousands)
	Fair Value Measurement Using
Description	Level 1		Level 2		Level 3		Fair Value		Carrying Value
Cash and restricted cash:
September 30, 2021	$	22,851	$	0	$	0	$	22,851	$	22,851
March 31, 2021	$	32,977	$	0	$	0	$	32,977	$	32,977
Finance receivables:
September 30, 2021	$	0	$	0	$	165,561	$	165,561	$	165,561
March 31, 2021	$	0	$	0	$	170,318	$	170,318	$	170,318
Repossessed assets:
September 30, 2021	$	0	$	0	$	859	$	859	$	859
March 31, 2021	$	0	$	0	$	685	$	685	$	685
Credit facility:
September 30, 2021	$	0	$	0	$	71,530	$	71,530	$	71,530
March 31, 2021	$	0	$	0	$	88,300	$	88,300	$	88,300
Note Payable:
September 30, 2021	$	0	$	0	$	3,244	$	3,244	$	3,244
March 31, 2021	$	0	$	0	$	3,244	$	3,244	$	3,244

The note payable loan in the amount of $3,243,900 from a bank in connection with the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP Loan”). Pursuant to the Paycheck Protection Program, all or a portion of the PPP Loan may be forgiven if the Company uses the proceeds of the PPP Loan for its payroll costs and other expenses in accordance with the requirements of the Paycheck Protection Program.

(In thousands)

Fair Value Measurement Using

Description

Level 1

Level 2

Level 3

Fair
Value

Carrying
Value

Cash and restricted cash:

December 31, 2020

$
29,261

$
-

$
-

$
29,261

$
29,261

March 31, 2020

$
24,684

$
-

$
-

$
24,684

$
24,684

Equity investments with readily determinable fair values

December 31, 2020

$
4,286

$
-

$
-

$
4,286

$
4,286

March 31, 2020

$
-

$
-

$
-

$
-

$
-

Finance receivables:

December 31, 2020

$
-

$
-

$
172,386

$
172,386

$
172,386

March 31, 2020

$
-

$
-

$
199,781

$
199,781

$
199,781

Repossessed assets:

December 31, 2020

$
-

$
-

$
805

$
805

$
805

March 31, 2020

$
-

$
-

$
1,340

$
1,340

$
1,340

Credit facility:

December 31, 2020

$
-

$
93,800

$
-

$
93,800

$
93,800

March 31, 2020

$
-

$
126,830

$
-

$
126,830

$
126,830

Note payable:

December 31, 2020

$
-

$
-

$
3,244

$
3,244

$
3,244

March 31, 2020

$
-

$
-

$
-

$
-

$
-

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. ~~Management has determined that this level to be most appropriate for finance receivables, repossessed assets, and note payable shown in the table above.~~

~~Table of Contents~~

Level 2 assets are financial assets and liabilities that do not have regular market pricing, but whose fair value can be determined based on other data values or market pricing. Management has determined that this level to be most appropriate for the credit facility and note payable shown in the table above.

Level 1 assets are financial assets that have a regular mark to market mechanism for setting a fair market value. These assets are considered to have readily observable, transparent prices and therefore a reliable, fair market value. Management has determined that this level to be most appropriate for cash, restricted cash, and equity investments.

~~12.~~9. Commitments and Contingencies

The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business, none of which, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

The extent to which the COVID-19 pandemic will ultimately impact our business, financial condition, results of operations or cash flows will depend on numerous evolving factors that we are unable to accurately predict at this time. The length and scope of the restrictions imposed by various governments and success of vaccination efforts, ~~to find a suitable vaccine,~~ among other factors, will determine the ultimate severity of the COVID-19 impact on our business. It is likely that prolonged periods of difficult market conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows. ~~The Company has discussed~~For further disclosure on COVID-19, ~~throughout the 10-Q, including but not limited,~~please refer to ~~forward-looking information and~~ Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations.

~~13.~~10. Summary of Significant Accounting Policies

~~Reclassifications~~

~~Certain prior-period amounts have been reclassified to conform to the current presentation. Such reclassifications had no impact on previously reported net income or shareholders’ equity.~~

The significant accounting policies used in preparation of our Consolidated Financial Statements are disclosed in our 2020 Annual Report on Form 10-K. Those significant accounting policies remain unchanged at December 31, 2020, except as described below:

~~Equity Securities~~

Following our adoption of ASU 2016-01 on July 1, 2020, as described in "Recent Adopted Accounting Pronouncements", we account for our investments in equity securities in accordance with ASC 321-10 Investments - Equity Securities. Our equity securities may be classified into two categories and accounted for as follows:

~~Equity securities with a readily determinable fair value are reported at fair value, with both realized and unrealized gains and losses included in earnings. See~~ ~~“Note 5-Investments”~~ ~~for changes in the equity securities.~~

Equity securities without a readily determinable fair value are reported at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer and their impact on fair value. Any dividends received are recorded in realized gains.

Equity investments include our investment in common shares with readily determinable fair values. The fair value of equity investments with readily determinable fair values is primarily obtained from third-party pricing services. For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, we use the valuation techniques permitted under ASC 820 Fair Value Measurement to evaluate the observed transaction(s) and adjust the fair value of the equity investment. ASC 321-10 also provides guidance related to accounting for impairment of equity securities without readily determinable fair values. The qualitative assessment to determine whether impairment exists requires the use of our judgment in certain circumstances. If, after completing the qualitative assessment, we conclude an equity investment without a readily determinable fair value is impaired, a loss for the difference between the equity investment’s carrying value and its fair value may be recognized as a reduction to noninterest income in the Consolidated Statements of Income.

~~Recent Adopted Accounting Pronouncements~~

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. This amendment requires that equity investments be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable, an entity may elect to measure the equity investment at cost, less impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument specific credit risk. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard requires retrospective application for equity investments with readily determinable fair values and prospective application for equity investments without readily determinable fair values. The Company adopted the standard during the year and no prospective basis existed for these equity investments since they were also

~~Table of Contents~~

~~purchased during the fiscal year. The purchase of these equity investments was recorded in the Consolidated Balance Sheets. See Note 10 for further information.~~

Recent Accounting Pronouncements

In June 2016, the FASB issued the ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other things, the amendments in this ASU require the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The ASU also requires additional disclosures related to estimates and judgments used to measure all expected credit losses. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Recently, the FASB voted to delay the implementation date for this accounting standard, for smaller reporting companies, the new effective date is beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements and is collecting and analyzing data that will be needed to produce historical inputs into any models created as a result of adopting this ASU. At this time, the Company believes the adoption of this ASU will likely have a material effect and is expected to increase the overall allowance for credit losses.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitating of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions in which the reference LIBOR or another reference rate is expected to be discontinued as a result of the Reference Rate Reform. This ASU is intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The new guidance was effective immediately and through December 31, 2022. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements.

The Company does not believe there are any other recently issued accounting standards that have not yet been adopted that will have a material impact on the Company’s consolidated financial statements.

~~14.~~ 11. Variable Interest Entity

In March 2019, the Company entered into a new senior secured credit facility collateralized by ~~customer financed~~consumer finance receivables by transferring the receivables into a bankruptcy-remote variable interest entity (VIE). Under the terms of the transaction, all cash collections and other cash proceeds of the customer receivables gowent first to the servicer and the holders of the asset-backed notes, and then to the residual equity holder. The Company ~~retains~~retained the servicing of the portfolio and ~~receives~~received a monthly fee of ~~2.5%~~2.5% (annualized) based on the outstanding balance of the financed receivables, and the Company ~~currently holds~~held all of the residual ~~equity.~~equity as of September 30, 2021. In addition, the Company, rather than the VIE, ~~retains~~retained certain credit insurance income together with certain recoveries related to credit insurance and on charge-offs of the financed receivables, which ~~will~~would continue to be reflected as a reduction of net charge-offs on a consolidated basis for as long as the Company ~~consolidates~~consolidated the VIE.

The Company ~~consolidates~~consolidated the VIE when the Company ~~determines~~determined that it is the primary beneficiary, the Company has the power to direct the activities that most significantly impact the performance of the VIE and it has the obligation to absorb losses and the right to receive significant residual returns.

The assets of the VIE ~~serve~~served as collateral for the obligations of the VIE. The lender ~~has no~~had 0 recourse to assets outside of the VIE.

The following table presents the assets and liabilities held by the VIE (for legal purposes, the assets and the liabilities of the VIE ~~remain~~remained distinct from the Company):


	September 30, 2021 (Unaudited)		March 31, 2021
Assets
Restricted cash	$	7,240	$	10,955
Finance receivables, net		131,033		150,706
Repossessed assets		745		631
Total assets	$	139,018	$	162,292
Liabilities
Credit facility	$	69,599	$	86,154
Accounts payable and accrued expenses		324		405
Total liabilities	$	69,923	$	86,559

December 31, 2020
(Unaudited)

March 31, 2020

Assets

Restricted cash

$
8,726

$
7,882

Finance receivables, net

159,117

165,966

Repossessed assets

760

1,277

Total assets

$
168,603

$
175,125

Liabilities

Credit facility, net of debt issuance costs

$
91,547

$
124,255

Accounts payable and accrued expenses

424

597

Total liabilities

$
91,971

$
124,852

~~Table of Contents~~

Note ~~15.~~12. Stock Plans

In May ~~2019 and August~~ 2019, the Company’s Board of Directors (“Board”) authorized a new stock repurchase program allowing for the repurchase of up to ~~$8.0~~$8.0 million ~~and $1.0 million, respectively,~~ of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective ~~immediately with a total repurchase authorization of $9.0 million.~~immediately.

The timing and actual number of repurchases will depend on a variety of factors, including stock price, corporate and regulatory requirements and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.

In August 2019, the Company’s Board authorized additional repurchases of up to $1.0 million of the Company’s outstanding shares.

The table shown ~~below~~on the next page summarizes treasury share transactions under the Company’s stock repurchase program.

Three months ended December 31,
(In thousands)

2020

2019

Number of Shares

Amount

Number of Shares

Amount

Treasury stock repurchases at the beginning of period

4,863

$
(71,667
)

4,714

$
(70,459
)
Treasury stock purchased

64

(519
)

24

(216
)
Treasury stock repurchases at the end of period

4,927

$
(72,186
)

4,738

$
(70,675
)

Nine months ended December 31,
(In thousands)

2020

2019

Number of Shares

Amount

Number of Shares

Amount

Treasury stock repurchases at the beginning of period

4,833

$
(71,438
)

4,714

$
(70,459
)
Treasury stock purchased

94

(748
)

24

(216
)
Treasury stock repurchases at the end of period

4,927

$
(72,186
)

4,738

$
(70,675
)


	Three months ended September 30, (In thousands)
	2021					2020
	Number of Shares		Amount			Number of Shares		Amount
Treasury shares at the beginning of period		5,005	$	(73,008	)		4,838	$	(71,466	)
Treasury shares purchased		77		(887	)		25		(201	)
Treasury shares at the end of period		5,082	$	(73,895	)		4,863	$	(71,667	)

	Six months ended September 30, (In thousands)
	2021					2020
	Number of Shares		Amount			Number of Shares		Amount
Treasury shares at the beginning of period		4,945	$	(72,343	)		4,833	$	(71,438	)
Treasury shares purchased		137		(1,552	)		30		(229	)
Treasury shares at the end of period		5,082	$	(73,895	)		4,863	$	(71,667	)

For the three months ~~and nine months~~ ended ~~December 31, 2020,~~September 30, 2021, the Company repurchased a total of ~~approximately 64,000~~76,563 shares of common stock at an aggregate cost of ~~approximately $519~~$887 thousand and average cost per share of ~~$8.04~~; ~~repurchased~~$11.25.

Note 13. Note Payable

On May 27, 2020, the Company obtained a ~~total~~loan in the amount of ~~approximately 94,000 shares~~$3,243,900 from a bank in connection with the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP Loan”). Pursuant to the Paycheck Protection Program, all or a portion of ~~common stock at an aggregate cost~~the PPP Loan may be forgiven if the Company uses the proceeds of ~~approximately $748 thousand~~the PPP Loan for its payroll costs and average cost per share of $7.96, respectively. The total shares repurchased through February 8, 2021 under the plan in aggregate is approximately 17,000 shares of common stock for approximately $0.1 million at an average price of $8.56other expenses in accordance with ~~Rule 10b5-1~~the requirements of the Paycheck Protection Program. The Company used the proceeds of the PPP Loan for payroll costs and ~~Rule 10b-18~~other covered expenses and sought full forgiveness of the PPP Loan, but there can be no assurance that the Company will obtain any forgiveness of the PPP Loan. The Company submitted the forgiveness application to Fifth Third Bank, the

lender, on December 7, 2020 and submitted supplemental documentation on January 16, 2021. Currently the application is pending SBA decision. Therefore, per the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, all loan payments are deferred while the Company awaits the SBA’s decision on loan forgiveness. If the PPP Loan is not fully forgiven, the Company will remain liable for the full and punctual payment of the outstanding principal balance plus accrued and unpaid interest.

Unless forgiven, the outstanding principal balance plus accrued and unpaid interest (accruing at the rate of 1.00% per annum) is due on May 22, 2022. The PPP Loan is unsecured. The PPP Loan may be prepaid at any time prior to maturity with 0 prepayment penalties. The related promissory note contains events of default and other provisions customary for a loan of this type.

Note 14. Subsequent Events

On November 5, 2021, Nicholas Financial, Inc., a Florida corporation (“Nicholas-Florida”) and Nicholas Data Services, Inc., a Florida corporation (“NDS” and collectively with Nicholas-Florida, the “Borrowers”), two wholly-owned subsidiaries of Nicholas Financial, Inc. (the “Company”) entered into a senior secured credit facility (the “Credit Facility”) pursuant to a loan and security agreement by and among the Borrowers, Wells Fargo Bank, N.A., as agent, and the lenders that are party thereto (the “Credit Agreement”). A copy of the Credit Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference. The prior credit facility pursuant to a credit agreement among the Company’s subsidiary NF Funding I, LLC, Ares Agent Services, L.P. and the lenders party thereto was paid off in connection with entering into this Credit Facility.

Pursuant to the Credit Agreement, the lenders have agreed to extend to the Borrowers a line of credit of up to $175,000,000. The availability of funds under the ~~Exchange Act~~Credit Facility is generally limited to an advance rate of ~~1934.~~between 80% and 85% of the value of eligible receivables, and outstanding advances under the Credit Facility will accrue interest at a rate equal to the Secured Overnight Financing Rate (SOFR) plus 2.25%. The ~~remaining aggregate~~commitment period for advances under the Credit Facility is three years (the expiration of that time period, the “Maturity Date”).

Pursuant to the Credit Agreement, the Borrowers granted a security interest in substantially all of their assets as collateral for their obligations under the Credit Facility. Furthermore, pursuant to a separate collateral pledge agreement, NDS pledged its equity interest in Nicholas-Florida as additional collateral.

The Credit Agreement and the other loan documents contain customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, and sales of assets. If an event of default occurs, the lenders could increase borrowing costs, restrict the Borrowers’ ability to obtain additional advances under the Credit Facility, accelerate all amounts outstanding under the Credit Facility, enforce their interest against collateral pledged under the Credit Facility or enforce such other rights and remedies as they have under the loan documents or applicable law as secured lenders.

If the lenders terminate the Credit Facility following the occurrence of an event of default under the loan documents, or the Borrowers prepay the loan and terminate the Credit Facility prior to the Maturity Date, then the Borrowers are obligated to pay a termination or prepayment fee in an amount ~~available for repurchases~~equal to a percentage of ~~shares~~$175,000,000, calculated as 2% if the termination or prepayment occurs during year one, 1% if the termination or repayment occurs during year two, and 0.5% if the termination or prepayment occurs thereafter.

In connection with the refinancing and as required under GAAP, the Company expects to recognize a non-cash charge of ~~common stock would be~~ approximately ~~$7.137 million.~~$1.9 million in the quarter ending December 31, 2021, representing the unamortized portion of debt origination costs associated with its prior credit facility.

1615

~~Table of Contents~~

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on management’s current beliefs and assumptions, as well as information currently available to management. When used in this document, the words “anticipate”, “estimate”, “expect”, “will”, “may”, “plan,” “believe”, “intend” and similar expressions are intended to identify forward-looking statements. Although Nicholas Financial, Inc., including its subsidiaries (collectively, the “Company,” “we,” “us,” or “our”) believes that the expectations reflected or implied in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. As a result, actual results could differ materially from those indicated in these forward-looking statements. Forward-looking statements in this ~~Annual~~Quarterly Report may include, without limitation: (1) the projected impact of the novel coronavirus disease (“COVID-19”) outbreak on our customers and our business, (2) projections of revenue, income, and other items relating to our financial position and results of operations, (3) statements of our plans, objectives, strategies, goals and intentions, (4) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (5) statements of expected industry and general economic ~~trends; such~~trends. These statements are subject to certain risks, uncertainties and assumptions that may cause results to differ materially from those expressed or implied in forward-looking statements, including without limitation:



~~future impacts~~the ongoing impact on us, our employees, our customers and the overall economy of the COVID-19 ~~outbreak~~pandemic and measures taken in response thereto, including without limitation the successful delivery of vaccines effective against the different variants of the virus, for which future developments are highly uncertain and difficult to predict;



availability of capital (including the ability to access bank financing);



recently enacted, proposed or future legislation and the manner in which it is implemented, including tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations;



fluctuations in the economy;



the degree and nature of competition and its effects on the Company’s financial results;



fluctuations in interest rates;



effectiveness of our risk management processes and procedures, including the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures;



demand for consumer financing in the markets served by the Company;



our ability to successfully develop and commercialize new or enhanced products and services;



the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements;



increases in the default rates experienced on automobile finance installment contracts (“Contracts”);



higher borrowing costs and adverse financial market conditions impacting our funding and liquidity;



our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables;



regulation, supervision, examination and enforcement of our business by governmental authorities, and adverse regulatory changes in the Company’s existing and future markets, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and other legislative and regulatory developments, including regulations relating to privacy, information security and data protection and the impact of the Consumer Financial Protection Bureau's (the “CFPB”) regulation of our business;



fraudulent ~~activity;~~

activity, employee misconduct or misconduct by third parties;



media and public characterization of consumer installment loans;



failure of third parties to provide various services that are important to our operations;



alleged infringement of intellectual property rights of others and our ability to protect our intellectual ~~property~~

property;



litigation and regulatory actions;



our ability to attract, retain and motivate key officers and employees;



use of third-party vendors and ongoing third-party business relationships;



cyber-attacks or other security breaches;



disruptions in the operations of our computer systems and data centers;



the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company’s reported consolidated financial statements or necessitate material delays or changes in the issuance of the Company’s audited consolidated financial statements;



uncertainties associated with management turnover and the effective succession of senior management;



our ability to realize our intentions regarding strategic ~~alternatives;~~

alternatives, including the failure to achieve anticipated synergies;



our ability to expand our business, including our ability to complete acquisitions and integrate the operations of acquired businesses and to expand into new markets; and



the risk factors discussed under “Item 1A – Risk Factors” in our Annual Report on Form 10-K, and our other filings made with the U.S. Securities and Exchange Commission (“SEC”).

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. All forward-looking statements included in this Quarterly Report are based on information available to the Company as the date of filing of this Quarterly Report, and the Company assumes no obligation to update any such forward-looking statement. Prospective investors should also consult the risk factors described from time to time in the Company’s other filings made with the SEC, including its reports on Forms 10-K, 10-Q, 8-K and annual reports to shareholders.

~~Table of Contents~~

Litigation and Legal Matters

See “Item 1. Legal Proceedings” in Part II of this ~~quarterly report~~Quarterly Report below.

COVID-19

~~While the ultimate magnitude and duration of the impact from COVID-19 on our business remains uncertain, it may negatively affect our business and financial condition.~~

The ~~extension of the~~temporary expansion of unemployment benefits by the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 and the American Rescue Plan Act of 2021 to eligible individuals ~~to receive their weekly unemployment benefit and the fact that unemployed customers received Pandemic Unemployment Compensation (“PUC”) equal to an additional $600 per week through July 2020,~~ collectively had a beneficial effect on the ~~Company. While~~Company; however, the ~~original benefit period for PUC expired in July 2020, eligible individuals can now receive a weekly additional PUC benefit~~impact of ~~$300 from December 27, 2020 through March 13, 2021. Any beneficial impact~~ these benefits ~~have had on the Company will disappear once its~~has mostly disappeared, as our customers no longer qualify for such benefits. The Company continued to experience strong cash collections and experienced positive trending on gross charge-off balances for the ~~nine~~three months ended ~~December 31, 2020.~~September 30, 2021.

In accordance with our policies and procedures, certain borrowers qualify for, and the Company offers, one-month principal payment deferrals on Contracts and Direct Loans. Due to COVID-19, the number of deferments increased to ~~3,125~~3,114 in April 2020 from 724 in March 2020. For the ~~nine months~~year ended ~~December~~March 31, ~~2020~~2021 the Company ~~has~~ experienced an average monthly number of deferments of ~~848,~~696, which would represent approximately ~~3.1%~~2.6% of total Contracts and Direct Loans as of ~~December~~March 31, ~~2020.~~2021. For the three months ended ~~December 31, 2020 and December 31, 2019~~September 30, 2021, the ~~Company granted deferrals to~~average monthly number of deferments was 247, which would represent approximately ~~3.7% and 3.9%, respectively,~~0.95% of total Contracts and Direct ~~Loans. For the nine months ended December 31, 2020 and December 31, 2019 the Company granted deferrals to approximately 27.7% and 9.8%, respectively.~~Loans as of September 30, 2021. The number of deferrals is also influenced by portfolio performance, including but not limited to, inflation, credit quality of loans purchased, competition at the time of Contract acquisition, and general economic conditions.

~~From May through November 2020, the monthly level of one-month principal payment deferrals declined reaching 258 deferments in November.~~ The Company ~~experienced an increase in December 2020 with 446 deferments, which continues to stay under the average monthly number of deferments in the Fiscal Year 2021. The Company anticipates~~believes the number of one-month principal payments deferrals ~~to remain at normal levels during the rest of the Fiscal Year 2021.~~is now largely consistent with pre-pandemic levels.

However, the extent to which the COVID-19 pandemic ~~could impact~~eventually impacts our business, financial condition, results of operations or cash flows will depend on numerous evolving factors that we are unable to accurately predict at this time. The length and scope of the restrictions imposed by various governments and success of vaccination efforts ~~to find a suitable vaccine, and scope and duration of special government benefits to be unemployed,~~ among other factors, will determine the ultimate severity of the COVID-19 impact on our business. It is likely that prolonged periods of difficult market conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.

Regulatory Developments

As previously reported, Title X of the Dodd-Frank Act established the Consumer Financial Protection Bureau (“CFPB”), which became operational on July 21, 2011. Under the Dodd-Frank Act, the CFPB has regulatory, supervisory and enforcement powers over providers of consumer financial products, such as the Contracts and the Direct Loans that we offer, including explicit supervisory authority to examine, audit, and investigate companies offering a consumer financial product such as ourselves. Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits, efforts to create a federal usury cap, applicable to all consumer credit transactions and substantially below rates at which the Company could continue to operate

profitably, are still ongoing. Any federal legislative or regulatory action that severely restricts or prohibits the provision of consumer credit and similar services on terms substantially similar to those we currently provide could if enacted have a material, adverse impact on our business, prospects, results of operations and financial condition. Some consumer advocacy groups have suggested that certain forms of alternative consumer finance products, such as installment loans, should be a regulatory priority and it is possible that at some time in the future the CFPB could propose and adopt rules making such lending or other products that we may offer materially less profitable or impractical. Further, the CFPB may target specific features of loans by rulemaking that could cause us to cease offering certain products. Any such rules could have a material adverse effect on our business, results of operations and financial condition. The CFPB could also adopt rules imposing new and potentially burdensome requirements and limitations with respect to any of our current or future lines of business, which could have a material adverse effect on our operations and financial performance.

On October 5, 2017, the CFPB issued a final rule (the “Rule”) imposing limitations on (i) short-term consumer loans, (ii) longer-term consumer installment loans with balloon payments, and (iii) higher-rate consumer installment loans repayable by a payment authorization. The Rule requires lenders originating short-term loans and longer-term balloon payment loans to evaluate whether each consumer has the ability to repay the loan along with current obligations and expenses (“ability to repay requirements”). The Rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an Annual Percentage Rate over 36% (“payment requirements”). The Rule has significant differences from the CFPB’s proposed rules announced on June 2, 2016, relating to payday, vehicle title, and similar loans.

On February 6, 2019, the CFPB issued two notices of proposed rulemaking regarding potential amendments to the Rule. First, the CFPB is proposing to rescind provisions of the Rule, including the ability to repay requirements. Second, the CFPB is proposing to delay the August 19, 2019 compliance date for part of the Rule, including the ability to repay requirements. These proposed amendments are not yet final and are subject to possible change before any final amendments would be issued and implemented. We cannot predict what the ultimate rulemaking will provide. The Company does not believe that these changes, as currently described by the CFPB, would have a material impact on the Company’s existing lending procedures, because the Company currently underwrites all its loans (including those secured by a vehicle title that would fall within the scope of these proposals) by reviewing the customer’s ability to repay based on the Company’s standards. Any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations. The Company will have to comply with the final rule’s payment requirements since it allows consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism”. The payment provisions of the final rule are expected to go into effect on August 19, 2019. If the payment provisions of the final rule apply, the Company will have to modify its loan payment procedures to comply with the required notices within the mandated timeframes set forth in the final rule.

The CFPB defines a “larger participant” of automobile financing if it has at least 10,000 aggregate annual originations. The Company does not meet the threshold of at least 10,000 aggregate annual direct loan originations, and therefore would not fall under the CFPB’s supervisory authority. The CFPB issued rules regarding the supervision and examination of non-depository “larger participants” in the automobile finance business. The CFPB’s stated objectives of such examinations are: to assess the quality of a larger participant’s compliance management systems for preventing violations of federal consumer financial laws; to identify acts or practices that materially increase the risk of violations of federal consumer finance laws and associated harm to consumers; and to gather facts that help determine whether the larger participant engages in acts or practices that are likely to violate federal consumer financial laws in connection with its automobile finance business. At such time, if we become or the CFPB defines us as a larger participant, we will be subject to examination by the CFPB for, among other things, ECOA compliance; unfair, deceptive or abusive acts or practices (“UDAAP”) compliance; and the adequacy of our compliance management systems.

We have continued to evaluate our existing compliance management systems. We expect this process to continue as the CFPB promulgates new and evolving rules and interpretations. Given the time and effort needed to establish, implement and maintain adequate compliance management systems and the resources and costs associated with being examined by the CFPB, such an examination could likely have a material adverse effect on our business, financial condition and profitability. Moreover, any such examination by the CFPB could result in the assessment of penalties, including fines, and other remedies which could, in turn, have a material effect on our business, financial condition, and profitability.

Critical Accounting Policy

The Company’s critical accounting policy relates to the allowance for credit losses. It is based on management’s opinion of an amount that is adequate to absorb losses incurred in the existing portfolio. Because of the nature of the customers under the Company’s Contracts and Direct Loan program, the Company considers the establishment of adequate reserves for credit losses to be imperative.

~~During the first quarter of fiscal 2019, the~~18

The Company ~~began using the~~uses trailing six-month net ~~charge-off~~charge-offs as a percentage of average finance receivables, annualized and ~~applied~~applies this calculated percentage to ending finance receivables to calculate estimated future probable credit losses for purposes of determining the allowance for credit losses. ~~This change was made to reflect changes in the Company’s lending policies and underwriting standards.~~ The change in the Company’s method for calculating the allowance for credit losses was accounted for as a change in estimate. A trailing six-month net charge-off percentage, annualized, applied to ending finance receivables is also more in line with the industry practice.

~~In addition, the~~ Company then takes into consideration the composition of ~~the~~its portfolio, current economic conditions, ~~the~~ estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts ~~when determining~~and adjusts the above, if necessary, to determine management’s total estimate of probable credit losses and its assessment of the overall adequacy of the allowance for credit losses. Management utilizes significant judgment in determining probable incurred losses and in identifying and evaluating qualitative factors. This approach aligns with the Company’s lending policies and underwriting standards.

If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision ~~would be~~is recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio. Conversely, the Company could identify abnormalities in the composition of the portfolio, which would indicate the calculation is overstated and management judgement may be required to determine the allowance of credit losses for both Contracts and Direct Loans.

Contracts are purchased from many different dealers and are all purchased on an individual Contract-by-Contract basis. Individual Contract pricing is determined by the automobile dealerships and is generally the lesser of the applicable state maximum interest rate, if any, or the maximum interest rate which the customer will accept. In most markets, competitive forces will drive down Contract rates from the maximum rate to a level where an individual competitor is willing to buy an individual Contract. The Company generally purchases Contracts on an individual basis.

The Company utilizes the branch model, which allows for Contract purchasing to be done at the branch level. The Company has detailed underwriting guidelines it utilizes to determine which Contracts to purchase. These guidelines are specific and are designed to provide reasonable assurance that the Contracts that the Company purchases have common risk characteristics. The Company utilizes

~~Table of Contents~~

its District Managers to evaluate their respective branch locations for adherence to these underwriting guidelines, as well as approve underwriting exceptions. The Company also utilizes field auditors to assure adherence to its underwriting guidelines. Any Contract that does not meet the Company’s underwriting guidelines can be submitted by a branch manager for approval from the Company’s District Managers or senior management.

Introduction

For the three months ended ~~December 31, 2020,~~September 30, 2021, the net dilutive earnings per share increased to ~~$0.49~~$0.21 as compared to net dilutive earnings per share of ~~$0.04~~$0.16 for the three months ended ~~December 31, 2019.~~September 30, 2020. Net income was ~~$3.8~~$1.6 million for the three months ended ~~December 31, 2020 and $0.3~~September 30, 2021 as compared to a net income of $1.3 million for the three months ended ~~December 31, 2019. Total revenue~~September 30, 2020. Revenue decreased ~~3.3%~~10.6% to ~~$14.5~~$12.6 million for the three months ended ~~December 31, 2020~~September 30, 2021 as compared to ~~$15.0~~$14.1 million for the three months ended ~~December 31, 2019,~~September 30, 2020, due to a ~~12.1%~~10.7% decrease in finance receivables, compared to the prior year quarter.

For the six months ended September 30, 2021, the net dilutive earnings per share increased to $0.44 as compared to net dilutive earnings per share of $0.34 for the six months ended September 30, 2020. Net income was $3.3 million for the six months ended September 30, 2021 as compared to a net income of $2.7 million for the six months ended September 30, 2020. Revenue decreased 10.8% to $25.2 million for the six months ended September 30, 2021 as compared to $28.3 million for the six months ended September 30, 2020, due to a 13.5% decrease in average finance receivables, compared to the prior year ~~quarter.~~period.

For the nine months ended December 31, 2020, per share diluted earnings increased to $0.85 as compared to $0.15 for the nine months ended December 31, 2019. Net income was $6.5 million and $1.2 million for the nine months ended December 31, 2020 and 2019, respectively. Total revenue decreased 9.5% to $42.7 million for the nine months ended December 31, 2020 as compared to $47.2 million for the nine months ended December 31, 2019, due to a 11.5% decrease in average finance receivables compared to the prior year period.

The Company ~~finance~~finances primary transportation to and from work for the subprime ~~borrower, rather than~~borrower. We do not finance luxury cars, second units or recreational vehicles, which are the first payments customers tend to skip in time of economic insecurity. We finance the main and often only vehicle in the household that is needed to get our customers to and from work. The amounts we finance are much lower than most of our competitors, and therefore the payments are ~~materially~~significantly lower, too. ~~We believe that the~~The combination of financing a ~~“need”~~“need�� over a “want” and making that loan on comparatively affordable terms incentivizes our customers to prioritize their account with us.

Three months ended
December 31,
(In thousands)

Nine months ended
December 31,
(In thousands)

2020

2019

2020

2019

Portfolio Summary

Average finance receivables (1)

$
192,966

$
219,618

$
203,996

$
230,527

Average indebtedness (2)

$
101,522

$
119,518

$
112,476

$
136,164

Interest and fee income on finance receivables

$
13,180

$
14,973

$
41,395

$
47,199

Interest expense

1,442

1,886

4,660

6,672

Net interest and fee income on finance receivables

$
11,738

$
13,087

$
36,735

$
40,527

Gross portfolio yield (3)

27.32
%

27.27
%

27.06
%

27.30
%
Interest expense as a percentage of average finance receivables

2.99
%

3.44
%

3.05
%

3.86
%
Provision for credit losses as a percentage of average finance
receivables

1.35
%

8.37
%

4.58
%

7.51
%
Net portfolio yield (3)

22.98
%

15.46
%

19.43
%

15.93
%
Operating expenses as a percentage of average finance receivables

15.35
%

14.48
%

14.96
%

14.95
%
Pre-tax yield as a percentage of average finance receivables (4)

7.63
%

0.98
%

4.47
%

0.98
%
Net charge-off percentage (5)

6.30
%

8.84
%

5.94
%

9.63
%
Finance receivables

$
188,626

$
211,813

Allowance percentage (6)

4.81
%

6.27
%
Total reserves percentage (7)

8.76
%

10.35
%

Non-GAAP financial measures

From time-to-time the Company uses certain financial measures derived on a basis other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. Such financial measures qualify as “non-GAAP financial measures” as defined in SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company may present these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components to understanding and assessing the Company’s financial

performance. Such non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are, thus, susceptible to varying calculations, any non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies.


	Three months ended September 30, (In thousands)						Six months ended September 30, (In thousands)
	2021			2020			2021			2020
Portfolio Summary
Average finance receivables (1)	$	178,873		$	203,407		$	180,364		$	208,608
Average indebtedness (2)	$	72,044		$	113,233		$	75,611		$	117,983
Interest and fee income on finance receivables	$	12,572		$	14,064		$	25,166		$	28,215
Interest expense		1,121			1,569			2,309			3,218
Net interest and fee income on finance receivables	$	11,451		$	12,495		$	22,857		$	24,997
Gross portfolio yield (3)		28.11	%		27.66	%		27.91	%		27.05	%
Interest expense as a percentage of average finance receivables		2.51	%		3.09	%		2.56	%		3.09	%
Provision for credit losses as a percentage of average finance receivables		3.12	%		6.00	%		2.36	%		6.09	%
Net portfolio yield (3)		22.48	%		18.57	%		22.99	%		17.87	%
Operating expenses as a percentage of average finance receivables		17.70	%		15.99	%		18.04	%		14.84	%
Pre-tax yield as a percentage of average finance receivables (4)		4.78	%		2.58	%		4.95	%		3.03	%
Net charge-off percentage (5)		4.88	%		5.56	%		4.23	%		5.79	%
Finance receivables							$	177,013		$	198,168
Allowance percentage (6)								2.52	%		5.79	%
Total reserves percentage (7)								6.50	%		9.84	%

Note: All three-month and ~~nine-month statement~~six-month of income performance indicators expressed as percentages have been annualized.

~~(1)~~

~~Average finance receivables represent the average of finance receivables throughout the period.~~

(1)

Average finance receivables represent the average of finance receivables throughout the period. (This is considered a non-GAAP financial measure).

~~(2)~~

~~Average indebtedness represents the average outstanding borrowings under the Credit Facility.~~

(2)

Average indebtedness represents the average outstanding borrowings under the Credit Facility. (This is considered a non-GAAP financial measure).

~~(3)~~

Gross portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables. Net portfolio yield represents (a) interest and fee income on finance receivables minus (b) interest expense minus (c) the provision for credit losses, as a percentage of average finance receivables.

(3)

Portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables. Net portfolio yield represents (a) interest and fee income on finance receivables minus (b) interest expense minus (c) the provision for credit losses, as a percentage of average finance receivables. (This is considered a non-GAAP financial measure).

~~(4)~~

~~Pre-tax yield represents net portfolio yield minus operating expenses (marketing, salaries, employee benefits, depreciation, and administrative), as a percentage of average finance receivables.~~

(4)

Pre-tax yield represents net portfolio yield minus operating expenses (marketing, salaries, employee benefits, depreciation, and administrative), as a percentage of average finance receivables. (This is considered a non-GAAP financial measure).

~~(5)~~

~~Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables outstanding during the period, annualized for 12 months.~~

(5)

Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables outstanding during the period. (This is considered a non-GAAP financial measure).

~~(6)~~

~~Allowance percentage represents the allowance for credit losses divided by finance receivables outstanding as of ending balance sheet date.~~

(6)

Allowance percentage represents the allowance for credit losses divided by finance receivables outstanding as of ending balance sheet date.

~~(7)~~

~~Total reserves percentage represents the allowance for credit losses, purchase price discount, and unearned dealer discounts divided by finance receivables outstanding as of ending balance sheet date.~~

(7)

Total reserves percentage represents the allowance for credit losses, purchase price discount, and unearned dealer discounts divided by finance receivables outstanding as of ending balance sheet date.

~~Table of Contents~~

Operating Strategy

~~Beginning in December 2017, the~~The Company ~~elected to remain~~remains committed to its branch-based model and its core product of financing primary transportation to and from work for the subprime ~~borrower.~~borrower through the local independent automobile dealership. The Company strategically employs the use of centralized servicing departments to supplement the branch operations and improve operational efficiencies, but its focus is on its core business model of decentralized operations. The Company’s strategy also includes risk-based pricing ~~based on risk~~ (rate, yield, advance, ~~etc.)~~term, collateral value) and a commitment to the underwriting discipline required for optimal portfolio ~~performance.~~

performance as opposed to chasing competition for the sake of simply generating volume. The Company’s principal goals are to increase its profitability and its long-term shareholder ~~value through~~value. During fiscal 2022, the ~~measured acquisition of Contracts~~Company is focusing on the following items:



maintaining our commitment to the local branch model;



expanding the local branch model into new states;



identifying additional ancillary products to enhance profitability and asset performance;



continuing to focus on strategic acquisitions or bulk portfolio purchases to accelerate total revenue;



ensuring that Direct Loans are available in all our existing ~~markets and broadening~~branch offices based on the ~~geographic area in which its current branches operate.~~ applicable regulatory requirements.

The Company ~~seeks~~continues to ~~strengthen its automobile financing program~~focus on selecting the right markets to have branch locations. As of September 30, 2021, the Company operated brick and mortar branch locations in ~~18 states. These~~17 states ~~include~~— Alabama, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Missouri, Nevada, North Carolina, Ohio, Pennsylvania, South Carolina, and Tennessee, with Idaho, Kansas, Wisconsin, and Utah being expansion states with no local branch office, in which the Company currently operates by employing its core branch-based business model in each market it services, while supporting its branch network with targeted centralized servicing departments. The Company is exploring expansion of automobile financing programs in 3 states—Arizona, New Mexico, and Texas.

Being cognizant of the Company’s increasing operating expenses as a percent of income, as a result of its shrinking portfolio due to the increased focus on deal structure and pricing over volume, the Company decided to exit the states of Texas and Virginia resulting in the closure of four branches, during the fourth quarter of fiscal 2019. The Company left the state of Texas due to primarily operational concerns at the time.

Additionally, the Company merged the Raleigh and Charlotte, NC markets and merged some of the Atlanta, GA branches. The Company also continues to look for expansion opportunities both in states in which it currently operates and in new states. Recently, the Company has expanded operations into Columbia, South Carolina; Milwaukee, Wisconsin; Las Vegas, Nevada and Wichita, Kansas; while continuing to evaluate new states, including Iowa, Arizona, Utah, and Texas. Although the Company cannot assert how many new markets it will enter (if any) in the foreseeable future, it does remain focused on growing the branch network where conditions are favorable.

On April 30, 2019 the Company acquired substantially all of the assets of ML Credit Group, LLC (d/b/a Metrolina Credit Company) (“Metrolina”). Metrolina provides automobile financing to consumers through direct loans and through purchases of retail installment sales contracts originated by automobile dealers in the states of North Carolina and South Carolina. If other opportunities arise, the Company may consider possible acquisitions of portfolios of seasoned Contracts from dealers or lenders in bulk transactions as a means of further penetrating its existing markets or expanding its presence in targeted geographic locations, although it can provide no assurances as to whether or when it will make any such acquisitions.

~~The Company is currently licensed to provide Direct Loans in 18 states— Alabama, Florida, Georgia (over $3,000), Idaho. Illinois, Indiana, Kansas,~~ Kentucky, Michigan, Missouri, North Carolina, Nevada, Ohio, Pennsylvania, South Carolina, Tennessee, Utah and Wisconsin. The Company also originated business in its expansion states of Kansas, and Texas without a physical branch in such markets.

The Company is currently licensed to provide Direct Loans in 14 states— Alabama, Florida, Georgia (over $3,000), Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, and Tennessee. The Company solicits current and former customers in these states for the purpose of ~~selling~~providing Direct Loans to such ~~customers.~~customers, and intends to continue the expansion of its Direct Loan capabilities to the other states in which it acquires Contracts. Even with this targeted expansion, the Company expects its total Direct Loans portfolio to remain between 7%8% and ~~10%~~12% of its total portfolio for the foreseeable future. ~~The Company cannot provide any assurances that it will be able to expand in either its current markets or any targeted new markets.~~

~~Competition~~

The consumer finance industry is highly fragmented and highly competitive. Due to various factors, including the existing low interest rate environment, the competitiveness of the industry continues to increase as new competitors continue to enter the market and certain existing competitors continue to expand their operations. There are numerous financial service companies that provide consumer credit in the markets served by the Company, including banks, credit unions, other consumer finance companies, and captive finance companies owned by automobile manufacturers and retailers. Increased competition for the purchase of Contracts enabled automobile dealers to shop for the best price, resulting in an erosion in the dealer discounts from the initial principal amounts at which the Company was willing to purchase Contracts and higher advance rates. Further, increased competition resulted in the purchase of lower credit quality Contracts. However, with the Company’s change in management during the end of fiscal 2018 and beginning of fiscal 2019, it has placed less emphasis on competition when pricing the dealer discount. The Company instead focuses on purchasing Contracts that are priced to reflect the inherent risk level of the contract, and intends to sacrifice loan volume, if necessary, to maintain that pricing discipline. The table on the next page shows number and principal amount of Contracts purchased, average amount financed, average term, and average APR and discount for the periods presented:

~~Table of Contents~~

Key Performance Indicators on Contracts Purchased

(Purchases in thousands)

Number of

Average

Fiscal Year

Contracts

Principal Amount

Amount

Average

Average

Average

/Quarter

Purchased

Purchased#

Financed*^

APR*

Discount%*

Term*

2021

4,878

$
49,388

$
10,132

23.5

%

7.4

%

46

3

1,483

15,285

10,307

23.4

%

7.5

%

46

2

1,709

17,307

10,127

23.5

%

6.8

%

46

1

1,686

16,796

9,962

23.5

%

8.0

%

46

2020

7,647

$
76,696

$
10,035

23.4

%

7.9

%

47

4

1,991

19,658

9,873

23.5

%

7.9

%

46

3

1,753

17,880

10,200

23.3

%

7.6

%

47

2

2,011

20,104

9,997

23.5

%

7.9

%

46

1

1,892

19,054

10,071

23.4

%

8.3

%

47

2019

7,684

$
77,499

$
10,086

23.5

%

8.2

%

47

4

2,151

21,233

9,871

23.5

%

8.0

%

46

3

1,625

16,476

10,139

23.5

%

8.1

%

47

2

1,761

17,845

10,133

23.5

%

8.4

%

47

1

2,147

21,945

10,221

23.7

%

8.3

%

48

Key Performance Indicators on Direct Loans Originated
(Originations in thousands)

Number of

Principal

Fiscal Year

Loans

Amount

Average Amount

Average

Average

/Quarter

Originated

Originated

Financed*^

APR*

Term*

2021

2,744

$
10,864

$
4,054

29.6

%

24

3

1,265

4,605

3,641

30.9

%

22

2

924

3,832

4,147

29.2

%

25

1

555

2,427

4,373

28.7

%

26

2020

3,142

$
12,638

$
4,017

28.2

%

25

4

720

3,104

4,310

28.6

%

25

3

1,137

4,490

3,949

28.4

%

24

2

739

2,988

4,043

27.4

%

25

1

546

2,056

3,765

28.2

%

24

2019

1,918

$
7,741

$
4,036

26.4

%

25

4

236

1,240

4,654

27.3

%

24

3

738

2,999

4,063

25.9

%

25

2

495

1,805

3,646

26.5

%

25

1

449

1,697

3,779

25.7

%

28

*Each average included in the tables is calculated as a simple average.

~~^Average amount financed is calculated as a single loan amount.~~

~~#Bulk portfolio purchase excluded for period-over-period comparability.~~

Analysis of Credit Losses

The Company uses a trailing six-month charge-off analysis, annualized, to calculate the allowance for credit losses. Management believes that using the trailing six-month charge-off analysis, annualized, will more quickly reflect changes in the portfolio as compared to a trailing twelve-month charge-off analysis.

In addition, the Company takes into consideration the composition of the portfolio, current economic conditions, estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts when determining management’s estimate of probable credit losses and adequacy of the allowance for credit losses. By including recent trends such as delinquency, non-performing assets, and bankruptcy in its determination, management believes that the allowance for credit losses reflects the current trends of incurred losses within the portfolio and is better aligned with the portfolio’s performance indicators.

If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision is recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio. Conversely, the Company could identify abnormalities in the composition of the portfolio, which would indicate the calculation is overstated and management judgement may be required to determine the allowance of credit losses for both Contracts and Direct Loans. The Company’s allowance for credit losses also incorporates recent trends such as delinquency, non-performing assets, and bankruptcy. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators.

~~Table of Contents~~

Non-performing assets are defined as accounts that are contractually delinquent for 61 or more days past due or Chapter 13 bankruptcy accounts. For these accounts, the accrual of interest income is suspended, and any previously accrued interest is reversed. Upon notification of a bankruptcy, an account is monitored for collection with other Chapter 13 accounts. In the event the debtors’ balance is reduced by the bankruptcy court, the Company will record a loss equal to the amount of principal balance reduction. The remaining balance will be reduced as payments are received by the bankruptcy court. In the event an account is dismissed from bankruptcy, the Company will decide based on several factors, whether to begin repossession proceedings or allow the customer to begin making regularly scheduled payments.

The Company defines a Chapter 13 bankruptcy account as a Troubled Debt Restructuring (“TDR”). Beginning March 31, 2018, the Company allocated a specific reserve using a look back method to calculate the estimated losses. Based on this look back, management calculated a specific reserve of approximately $118,000 and $0$86,000 for these accounts as of ~~December 31,~~September 30, 2021 and September 30, 2020, ~~and December 31, 2019,~~ respectively. ~~Based on declining balances of the bankruptcy accounts and the overall portfolio, the Company determine that no additional reserves for bankruptcy accounts was warranted for December 31, 2019.~~

The provision for credit losses decreased ~~from $4.6 million~~ to ~~$0.7~~$1.4 million for the three months ended ~~December 31, 2020~~September 30, 2021 as compared to $3.1 million for the three months ended ~~December 31, 2019.~~September 30, 2020. The decreases were largely due to decreases in the average finance receivables balance and by a decrease in the net charge-off percentage (see note 65 in the Portfolio Summary table in the “Introduction” above for the definition of net charge-off percentage). ~~The Company’s allowance~~

Net charge-offs decreased to 4.23% for ~~credit losses also incorporates recent trends such as delinquency, non-performing assets, and bankruptcy. The Company believes that this approach reflects~~ the ~~current trends~~fiscal year ended September 30, 2021 from 5.79% for the fiscal year ended September 30, 2020, primarily resulting from the Company‘s active management of ~~incurred losses within~~ the ~~portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators.~~

portfolio. The delinquency percentage for Contracts more than twenty-nine days past due, excluding Chapter 13 bankruptcy accounts, as of ~~December 31, 2020~~September 30, 2021 was ~~11.49%~~7.56%, a decrease from ~~12.53%~~8.53% as of ~~December 31, 2019.~~September 30, 2020. The delinquency percentage for Direct Loans more than twenty-nine days past due, excluding Chapter 13 bankruptcy accounts, as of ~~December 31, 2020~~September 30, 2021 was ~~5.23%~~3.26%, ~~an increase~~a decrease from ~~4.60%~~4.40% as of ~~December 31, 2019.~~September 30, 2020. The changes in delinquency percentage for both Contracts and Direct Loans was driven primarily by the Company’s ~~renewed~~continued focus on local branch-based ~~servicing,~~servicing. Based on these actions, improving servicing, and stricter underwriting ~~policies.~~policies, management has seen improvements in the delinquency rates.

~~The Company has continued to see a significant number of competitors with aggressive underwriting in its operating market. See~~ ~~“Note 4—Finance Receivables”~~ ~~for changes in allowance for credit losses, credit quality and delinquencies.~~

In accordance with our policies and procedures, certain borrowers qualify for, and the Company offers, one-month principal payment deferrals on Contracts and Direct Loans. For further information on deferrals, please see the three months ended December 31, 2020 and December 31, 2019 the Company granted deferrals to approximately 3.7% and 3.9%, respectively, of total Contracts and Direct Loans. For the nine months ended December 31, 2020 and December 31, 2019 the Company granted deferrals to approximately 27.7% and 9.8%, respectively. The number of deferrals is also influenced by portfolio performance, including but not limited to, inflation, credit quality of loans purchased, competition at the time of Contract acquisition, and general economic conditions.disclosure under “COVID-19” above.

For the first nine months of Fiscal Year 2021, the Company has granted a lower number of one-month principal payment deferrals each subsequent month, beginning with May 2020 until November 2020 with 258 deferments. The Company experience increase in December 2020 with 446 deferments, which continues to stay under the average monthly number of deferments in the Fiscal Year 2021. Due to COVID-19, the number of deferments increased to 3,125 in April 2020 from 724 in March 2020. For the nine months ended December 31, 2020 the Company has experienced an average monthly number of deferments of 848, which would represent approximately 3.1%, as of December 31, 2020. The Company anticipates the number of one-month principal payments deferrals to remain at normal levels during the rest of the Fiscal Year 2021.21

Three months ended ~~December 31, 2020~~September 30, 2021 compared to three months ended ~~December 31, 2019~~September 30, 2020

Interest and Fee Income ~~and Loan Portfolio~~on Finance Receivables

Interest and fee income on finance receivables, which consist predominantly of finance charge income, decreased ~~12.0%~~10.6% to ~~$13.2~~$12.6 million for the three months ended ~~December 31, 2020~~September 30, 2021, from ~~$15.0~~$14.1 million for the three months ended ~~December 31, 2019.~~September 30, 2020. The decrease was primarily due to a ~~12.1 %~~10.7% decrease in finance receivables to $177.0 million for the three months ended September 30, 2021, when compared to $198.2 million for the corresponding period ended September 30, 2020. The decrease in finance receivables was primarily the result of a reduction in the aggregate dollar amount and volume of Contracts purchased, as the Company continued implementing its strategic focus of financing primary transportation to and from work for the subprime borrower. Continuing this operating strategy allowed us, despite continuing competitive pressure, to acquire Contracts at similar yields (albeit lower discounts) during the three months ended September 30, 2021, compared to the corresponding period ended September 30, 2020, although the combined effect of the same average yield and lower discount could not entirely offset the reduction in the aggregate dollar amount of Contracts purchased.

The gross portfolio yield increased to 28.1% for the three months ended September 30, 2021, compared to 27.7% for the three months ended September 30, 2020. The net portfolio yield increased to 22.5% for the three months ended September 30, 2021, compared to 18.6% for the three months ended September 30, 2020. The net portfolio yield increased primarily due to the decrease in the provision for credit losses, as described under “Analysis of Credit Losses”.

Operating Expenses

Operating expenses decreased to $7.9 million for the three months ended September 30, 2021 compared to $8.1 million for the three months ended September 30, 2020. The decline in operating expenses was primarily attributed to a reduction in administrative, salaries and employee benefits expenses. Operating expenses as a percentage of average finance receivables, however, increased to 17.7% for the three months ended September 30, 2021 from 16.0% for the three months ended September 30, 2020 due to a proportionally greater decline in finance receivables.

Provision Expense

The provision for credit losses decreased to $1.4 million for the three months ended September 30, 2021 from $3.0 million for the three months ended September 30, 2020, largely due to a decrease in the net charge-off percentage to 4.9% for the three months ended September 30, 2021 from 5.6% for the three months ended September 30, 2020.

Interest Expense

Interest expense was $1.1 million for the three months ended September 30, 2021 and $1.6 million for the three months ended September 30, 2020. The following table summarizes the Company’s average cost of borrowed funds:


	Three months ended September 30,						Six months ended September 30,
	2021			2020			2021			2020
Variable interest under the Line of Credit facility		1.00	%		1.79	%		1.00	%		1.71	%
Credit spread under the Line of Credit facility		3.75	%		3.75	%		3.75	%		3.75	%
Average cost of borrowed funds		4.75	%		5.54	%		4.75	%		5.46	%

LIBOR rates have decreased to 0.08%, which represents the one-month LIBOR rate as required under our Ares Credit Facility, as of September 30, 2021 compared to 0.14%, which represents the one-month LIBOR rate as required under our Line of Credit, as of September 30, 2020. For further discussions regarding interest rates see “Note 5—Credit Facility”.

Income Taxes

The Company recorded an income tax expense of approximately $536,000 for the three months ended September 30, 2021 compared to income tax expense of approximately $92,000 for the three months ended September 30, 2020. The Company’s effective tax rate increased to 25.1% for the three months ended September 30, 2021 from 6.8% for the three months ended September 30, 2020.

Six months ended September 30, 2021 compared to six months ended September 30, 2020

Interest Income and Loan Portfolio

Interest and fee income on finance receivables, decreased 10.8% to $25.2 million for the six months ended September 30, 2021 from $28.2 million for the six months ended September 30, 2020. The decrease was primarily due to 13.5% decrease in average finance receivables to ~~$193.0~~$180.4 million for the ~~three~~six months ended ~~December 31, 2020~~September 30, 2021 when compared to ~~$219.6~~$208.6 million for the corresponding period ended ~~December 31, 2019.~~September 30, 2020. The decrease in average finance receivables was primarily the result of a reduction in the aggregate dollar amount and volume of Contracts purchased, as the Company continued implementing its renewed strategic focus of financing primary transportation to and from work for the subprime borrower. This ~~continued~~ shift in focus also allowed us to acquire Contracts at ~~the same~~higher yields ~~with lower discounts~~ during the ~~three~~six months ended ~~December 31, 2020~~September 30, 2021 compared to acquisitions during the corresponding period ended ~~December 31, 2019,~~September 30, 2020, although ~~combination of~~ the ~~same~~increase in average yield ~~and lower discounts~~ could not entirely offset the reduction in the aggregate dollar amount of Contracts purchased.

~~Table of Contents~~

The gross portfolio yield ~~slightly~~ increased to ~~27.32%~~27.9% for the ~~three~~six months ended ~~December 31, 2020~~September 30, 2021, compared to ~~27.27%~~27.1% for the ~~three~~six months ended ~~December 31, 2019.~~September 30, 2020. The net portfolio yield increased to ~~22.98%~~23.0% for the ~~three~~six months ended ~~December 31, 2020~~September 30, 2021 compared to ~~15.46%~~17.9% for the ~~three~~six months ended ~~December 31, 2019. The net portfolio yield increase was primarily due to the decrease in the provision for credit losses, as described under “Analysis of Credit Losses”.~~

~~Operating Expenses~~

~~Operating expenses decreased to $7.4 million for the three months ended December 31,~~September 30, 2020, compared to $8.0 million for the three months ended December 31, 2019. The decrease in operating expenses was primarily attributed to decreases in dealers’ spiffs expenses, professional fees, and repossessions/collections expenses. Operating expenses as a percentage of average finance receivables increased to 15.35% for the three months ended December 31, 2020 from 14.48% for the three months ended December 31, 2019. This increased percentage was caused due to average finance receivables decreasing at a higher rate than the corresponding decrease in operating expenses.

~~Provision Expense~~

The provision for credit losses decreased to $0.7 million for the three months ended December 31, 2020 from $4.6 million for the three months ended December 31, 2019, largely due to a 12.1 % decrease in the average finance receivables and decrease in the net charge-off percentage to 6.30% for the three months ended December 31, 2020 from 8.84% for the three months ended December 31, 2019. The Company’s allowance for credit losses also incorporates recent trends such as delinquency, non-performing assets, and bankruptcy. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators.

~~Interest Expense~~

Interest expense was $1.4 million for the three months ended December 31, 2020 and $1.9 million for the three months ended December 31, 2019. The following table summarizes the Company’s average cost of borrowed funds:

Three months ended
December 31,

2020

2019

Variable interest under the Line of Credit facility

1.93
%

2.56
%
Credit spread under the Line of Credit facility

3.75
%

3.75
%
Average cost of borrowed funds

5.68
%

6.31
%

~~Income Taxes~~

The Company recorded an income tax expense of approximately $1,190,000 for the three months ended December 31, 2020 compared to income tax expense of approximately $229,000 for the three months ended December 31, 2019. The Company’s effective tax rate decreased to 23.9% for the three months ended December 31, 2020 from 42.4% for the three months ended December 31, 2019. The decrease was primarily attributed to the return to normalized effective tax rate in the current quarter.

~~Nine months ended December 31, 2020 compared to nine months ended December 31, 2019~~

~~Interest Income and Loan Portfolio~~

Interest and fee income on finance receivables, decreased 12.3% to $41.4 million for the nine months ended December 31, 2020 from $47.2 million for the nine months ended December 31, 2019. The decrease was primarily due to 11.5% decrease in average finance receivables to $204.0 million for the nine months ended December 31, 2020 when compared to $230.5 million for the corresponding period ended December 31, 2019. The decrease in average finance receivables was primarily the result of a reduction in the aggregate dollar amount and volume of Contracts purchased, as the Company continued implementing its renewed strategic focus of financing primary transportation to and from work for the subprime borrower. The Company has started the expansion of the branch network with several new office expansions and continue to initiate expansion in several other states including Texas, Arizona, Utah, Idaho, and New Mexico.

The gross portfolio yield decreased slightly to 27.06% for the nine months ended December 31, 2020 compared to 27.30% for the nine months ended December 31, 2019. The net portfolio yield increased to 19.43% for the nine months ended December 31, 2020 compared to 15.93% for the nine months ended December 31, 2019, respectively. The net portfolio yield increased primarily due to a decrease in the provision for credit losses, as described under “Analysis of Credit Losses”.

~~Table of Contents~~

Operating Expenses

Operating expenses ~~decreased~~increased to approximately ~~$22.9~~$16.3 million for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 from approximately ~~$25.8~~$15.5 million for the ~~nine~~six months ended ~~December 31, 2019.~~ ~~This decrease was primarily attributed to a decrease in repossession/collections expenses, payroll and its related expenses, and professional fees~~.September 30, 2020. Operating expenses as a percentage of average finance receivables ~~were comparable at 14.96%~~increased to 18.0% for the ~~nine~~six months ended ~~December 31, 2020 and 14.95%~~September 30, 2021 from 14.8% for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2020. These increased percentages were attributed to an increase in salaries and employee benefits expense and a decrease in the average finance receivables balances.

Provision Expense

The provision for credit losses decreased to ~~$7.0~~$2.1 for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 from ~~$13.0~~$6.4 million for the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, largely due to ~~11.5%~~a 13.5% decrease in the average finance receivables and a decrease in the net charge-off percentage to ~~5.94%~~4.2% for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 from ~~9.63%~~5.8% for the ~~nine~~six months ended December 31, 2019. The Company’s allowance for credit losses also incorporates recent trends such as delinquency, non-performing assets, and bankruptcy. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators.September 30, 2020.

Interest Expense

Interest expense was ~~$4.7~~$2.3 million for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 and ~~$6.7~~$3.2 million for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2021. The following table summarizes the Company’s average cost of borrowed funds:


	Nine months ended December 31,						Three months ended September 30,						Six months ended September 30,
	2020			2019			2021			2020			2021			2020
Variable interest under the Line of Credit facility		1.77	%		2.78	%		1.00	%		1.79	%		1.00	%		1.71	%
Credit spread under the Line of Credit facility		3.75	%		3.75	%		3.75	%		3.75	%		3.75	%		3.75	%
Average cost of borrowed funds		5.52	%		6.53	%		4.75	%		5.54	%		4.75	%		5.46	%

Income Taxes

The Company recorded an income tax expense of approximately ~~$1,711,000~~$1,135,000 for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 compared to income tax expense of approximately ~~$527,000~~$521,000 for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2020. The Company’s effective tax rate ~~decreased~~increased to ~~20.9%~~25.4% for the ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021 from ~~31.1%~~16.2% for the ~~nine~~six months ended ~~December 31, 2019. The decrease was primarily attributed to prior year Net Operating Losses recognized in the Fiscal Year of 2021.~~September 30, 2020.

Contract Procurement

~~The~~As of September 30, 2021, the Company purchases Contracts in the 18 states ~~for fiscal year 2021~~ listed in the table ~~on the next page.~~below. The Contracts purchased by the Company are predominantly for used vehicles; for the ~~three and nine-month~~three-month periods ended ~~December 31,~~September 30, 2021 and 2020, ~~and 2019,~~ less than 1% were for new vehicles.

~~Table of Contents~~

The following tables present selected information on Contracts purchased by the Company.


	As of December 31,			Three months ended December 31,				Nine months ended December 31,				As of September 30,		Three months ended September 30,				Six months ended September 30,
	2020			2020		2019		2020		2019		2021		2021		2020		2021		2020
State	Number of branches			Net Purchases (In thousands)				Net Purchases (In thousands)				Number of branches		Net Purchases (In thousands)				Net Purchases (In thousands)
FL		11		$	3,549	$	4,242	$	11,585	$	14,371		11	$	2,798	$	4,099	$	6,232	$	9,024
OH													6		2,885		2,586		6,138		5,352
GA		5			2,126		2,415		7,590		7,396		5		2,403		2,571		5,417		5,886
KY													3		1,135		1,353		2,798		2,351
MO													2		1,332		1,044		2,785		2,104
NC		3			862		1,942		3,138		5,542		3		1,827		964		2,958		2,281
IN													2		1,071		865		2,079		1,520
SC		3			611		1,197		2,812		3,497		3		1,242		1,077		2,212		2,145
OH		6			2,466		2,158		7,517		7,615
AL													2		964		479		1,783		1,232
MI		2			510		807		1,506		2,349		2		513		513		1,303		1,208
ID (a)		—			169		-		256		-
IN		2			547		808		2,149		3,007
KY		3			1,023		798		3,225		2,992
AL		2			728		554		1,702		1,606
NV													1		656		270		1,194		604
TN		1			636		906		1,954		2,439		1		486		685		964		1,531
IL		1			267		244		681		692		1		307		267		746		390
MO		2			1,022		1,072		3,264		3,301
KS (a)		—			14		241		14		804
UT (a)		—			17		—		43		—
NV		1			378		17		978		17
PA		1			272		383		819		1,164		1		372		382		732		896
WI (a)		—	a		88		98		155		249
TX												-			328		-		663		-
WI													1		234		53		520		116
ID													1		203		87		374		87
UT													1		86		12		231		12
AZ												-			38		-		56		-
KS													-		-		-		-		226
Total		43		$	15,285	$	17,882	$	49,388	$	57,041		46	$	18,880	$	17,307	$	39,185	$	36,965

~~(a)~~

~~Purchases in the states of Kansas, Wisconsin, Idaho and Utah are being acquired and serviced through its virtual expansion officed operations based in the Charlotte, North Carolina branch location.~~


	Three months ended September 30, (Purchases in thousands)						Six months ended September 30, (Purchases in thousands)
Contracts	2021			2020			2021			2020
Purchases	$	18,880		$	17,307		$	39,185		$	36,965
Average APR		23.0	%		23.5	%		23.1	%		23.5	%
Average discount		6.7	%		6.8	%		6.9	%		7.4	%
Average term (months)		47			46			47			46
Average amount financed	$	11,061		$	10,127		$	10,745		$	10,045
Number of Contracts		1,707			1,709			3,654			3,395

Three months ended
December 31,
(Purchases in thousands)

Nine months ended
December 31,
(Purchases in thousands)

Contracts

2020

2019

2020

2019

Purchases

$
15,285

$
17,882

$
49,388

$
57,041

Average APR

23.4
%

23.3
%

23.5
%

23.4
%
Average discount

7.5
%

7.6
%

7.4
%

7.9
%
Average term (months)

46

47

46

47

Average amount financed

$
10,307

$
10,200

$
10,132

$
10,089

Number of Contracts

1,483

1,753

4,878

5,656

Direct Loan Origination

The following table presents selected information on Direct Loans originated by the Company.


Direct Loans	Three months ended December 31, (Originations in thousands)						Nine months ended December 31, (Originations in thousands)						Three months ended September 30, (Originations in thousands)						Six months ended September 30, (Originations in thousands)
Originated	2020			2019			2020			2019			2021			2020			2021			2020
Purchases/Originations	$	4,605		$	4,490		$	10,864		$	9,534		$	7,040		$	3,832		$	12,777		$	6,259
Average APR		30.9	%		28.4	%		29.6	%		28.0	%		30.0	%		29.2	%		30.1	%		29.0	%
Average term (months)		22			24			24			24			26			25			26			26
Average amount financed	$	3,641		$	3,949		$	4,054		$	3,919		$	4,433		$	4,147		$	4,396		$	4,260
Number of loans		1,265			1,137			2,744			2,422			1,588			924			2,904			1,479

~~Table of Contents~~

Liquidity and Capital Resources

The Company’s cash flows are summarized as follows:

Nine months ended
December 31,
(In thousands)

2020

2019

Cash provided by (used in):

Operating activities

$
8,266

$
5,089

Investing activities

26,845

7,865

Financing activities

(30,534
)

(26,490
)
Net increase (decrease) in cash

$
4,577

$
(13,536
)


	Six months ended September 30, (In thousands)
	2021			2020
Cash provided by (used in):
Operating activities	$	1,300		$	7,644
Investing activities		6,896			15,656
Financing activities		(18,322	)		(14,815	)
Net (decrease) increase in cash	$	(10,126	)	$	8,485

The Company’s primary use of working capital for the quarter ended ~~December 31, 2020~~September 30, 2021 was funding the purchase of Contracts and bulk asset purchases, which are financed substantially through cash from principal and interest payments received, and the ~~Credit Facility (as defined below).~~Company’s credit facility.

On March 29, 2019, NF Funding I, LLC (“NF Funding I”), a special purpose financing subsidiary of ~~Nicholas Financial,~~NFI, entered into a senior secured credit facility (the ~~“Credit~~“Ares Credit Facility”) pursuant to a credit agreement with Ares Agent Services, L.P., as administrative agent and collateral agent, and the lenders that are party thereto (the ~~“Credit~~“Ares Credit Agreement”). ~~The Company’s prior line of credit was paid off in connection with this Credit Facility.~~

Pursuant to the Ares Credit Agreement, the lenders agreed to extend to ~~the~~ NF Funding I a line of credit of up to $175,000,000, which ~~will be~~was used to purchase Contracts from ~~Nicholas Financial~~NFI on a revolving basis pursuant to a related receivables purchase agreement between NF Funding I and ~~Nicholas Financial~~NFI (the “Receivables Purchase Agreement”). Under the terms of the Receivables Purchase Agreement, ~~Nicholas Financial sells~~NFI sold to NF Funding I the receivables under Contracts. ~~Nicholas Financial continues~~NFI continued to service the Contracts transferred to NF Funding I pursuant to a related servicing agreement (the “Servicing Agreement”).

As of September 30, 2021, the total amount outstanding under the Ares Credit Facility was $71.5 million.

The availability of funds under the Ares Credit Facility iswas generally limited to 82.5% of the value of non-delinquent receivables, and outstanding advances under the Ares Credit Facility ~~will accrue~~accrued interest at a rate of LIBOR plus a credit spread, which was 3.75%. as of September 30, 2021. The commitment period for advances under the Ares Credit Facility iswas three years. At the end of the commitment period, the outstanding balance would ~~be paid off~~have converted to a term loan and required monthly principal and interest payments over a four-year amortization period.

Under the Ares Credit Facility, the Company iswas required to maintain at least $3.5 million of unrestricted cash. ~~Collections~~

On November 5, 2021, NFI and its direct parent, Nicholas Data Services, Inc. (“NDS” and collectively with NFI, the “Borrowers”), entered into a senior secured credit facility (the “WF Credit Facility”) pursuant to a loan and security agreement by and among the Borrowers, Wells Fargo Bank, N.A., as agent, and the lenders that are ~~remitted to restricted cash collection accounts, which totaled $8.7 million as of December 31, 2020.~~

party thereto (the “WF Credit Agreement”). The ~~Company will continue to depend on the availability the~~Ares Credit Facility ~~together~~was paid off in connection with ~~cash from operations,~~entering into the WF Credit Facility.

Pursuant to ~~finance future operations.~~the WF Credit Agreement, the lenders have agreed to extend to the Borrowers a line of credit of up to $175,000,000. The availability of funds under the WF Credit Facility is generally ~~depends on availability calculations~~limited to an advance rate of between 80% and 85% of the value of eligible receivables, and outstanding advances under the WF Credit Facility will accrue interest at a rate equal to the Secured

Overnight Financing Rate (SOFR) plus 2.25%. The commitment period for advances under the WF Credit Facility is three years (the expiration of that time period, the “Maturity Date”).

Pursuant to the WF Credit Agreement, the Borrowers granted a security interest in substantially all of their assets as ~~defined~~collateral for their obligations under the WF Credit Facility. Furthermore, pursuant to a separate collateral pledge agreement, NDS pledged its equity interest in ~~the Credit Agreement. In addition, the~~NFI as additional collateral.

The WF Credit Agreement and the other loan documents contain customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, and sales of ~~receivables.~~ ~~See also “~~ ~~Our~~assets. If an event of default occurs, the lenders could increase borrowing costs, restrict the Borrowers’ ability to obtain additional advances under the WF Credit Facility, ~~is subject~~accelerate all amounts outstanding under the WF Credit Facility, enforce their interest against collateral pledged under the WF Credit Facility or enforce such other rights and remedies as they have under the loan documents or applicable law as secured lenders.

If the lenders terminate the WF Credit Facility following the occurrence of an event of default under the loan documents, or the Borrowers prepay the loan and terminate the WF Credit Facility prior to ~~certain defaults~~the Maturity Date, then the Borrowers are obligated to pay a termination or prepayment fee in an amount equal to a percentage of $175,000,000, calculated as 2% if the termination or prepayment occurs during year one, 1% if the termination or repayment occurs during year two, and ~~negative covenants”~~0.5% if the termination or prepayment occurs thereafter.

The Company will continue to depend on the availability the WF Credit Facility, together with cash from operations, to finance future operations. The availability of funds under the WF Credit Facility generally depends on availability calculations as defined in ~~“1A. Risk Factors” in our Annual Report on Form 10-K, as well as~~the WF Credit Agreement. See also the disclosure in Note 6.5. Credit Facilityin this Form 10-Q, ~~both of~~ which ~~are~~is incorporated herein by reference.

~~Contractual Obligations~~On May 27, 2020, the Company obtained a loan in the amount of $3,243,900 from a bank in connection with the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP Loan”). Pursuant to the Paycheck Protection Program, all or a portion of the PPP Loan may be forgiven if the Company uses the proceeds of the PPP Loan for its payroll costs and other expenses in accordance with the requirements of the Paycheck Protection Program. The Company used the proceeds of the PPP Loan for payroll costs and other covered expenses and sought full forgiveness of the PPP Loan, but there can be no assurance that the Company will obtain any forgiveness of the PPP Loan. The Company submitted the forgiveness application to Fifth Third Bank, the lender, on December 7, 2020 and submitted supplemental documentation on January 16, 2021. Currently the application is pending SBA decision. Therefore, per the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, all loan payments are deferred while the Company awaits the SBA’s decision on loan forgiveness. If the PPP Loan is not fully forgiven, the Company will remain liable for the full and punctual payment of the outstanding principal balance plus accrued and unpaid interest.

Unless forgiven, the outstanding principal balance plus accrued and unpaid interest (accruing at the rate of 1.00% per annum) is due on May 22, 2022. The ~~following table summarizes the Company’s material obligations as~~PPP Loan is unsecured. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The related promissory note contains events of ~~December 31, 2020.~~default and other provisions customary for a loan of this type.

Payments Due by Period
(In thousands)

Total

FY2021

FY2022 & FY2023

FY2024 & FY2025

Thereafter

Operating leases

$
3,251

$
378

$
2,094

$
657

122

Credit facility

93,800

—

23,450

46,900

23,450

Interest on Credit facility

17,316

1,332

9,990

5,328

666

Note payable

3,244

—

3,244

—

—

Interest on Note Payable

16

—

16

—

—

Total

$
117,627

$
1,710

$
38,794

$
52,885

$
24,238

The Company’s Credit Facility matures on March 31, 2022. Interest on outstanding borrowings under the Credit Facility as of December 31, 2020, is based on an effective interest rate of 5.68%, which includes increased pricing through the maturity date. The effective interest rate used in the above table does not contemplate the possibility of entering into interest rate swap agreements in the future.

~~Table of Contents~~

Off-Balance Sheet Arrangements

The Company does not engage in any off-balance sheet financing arrangements.

2726

~~Table of Contents~~

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Market risks relating to the Company’s operations result primarily from changes in interest rates. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes.

~~Interest rate risk~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2020, $93.8 million, or 96.66% of our total debt, was subject to floating interest rates. As a result, a hypothetical increase in LIBOR of 1% or 100 basis points (based on LIBOR rate of 0.15%, which represents one-month LIBOR rate, as of December 31, 2020) would have resulted in an annual increase of interest expense of approximately $0.9+ million.Not Applicable.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures~~.Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures were ~~not~~ effective as of the end of the period covered by this Quarterly Report on Form ~~10-Q~~.10-Q.

Changes in internal control over financial reporting.

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020, the Company reported that its internal control over financial reporting was not effective as of March 31, 2020, as a result of two material weaknesses. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company reported two material weaknesses for the year ended March 31, 2020:


	1)	~~Lack of Comprehensive SOX Compliance Program~~

Deficiencies were identified in key activities which prevented the Company from achieving full compliance with Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.


	2)	~~Test of Design Effectiveness~~

Starting in the fourth quarter of Fiscal 2020, the Company identified several design gaps and design control deficiencies across multiple business processes and information technology general controls, which impacted the testing of operating effectiveness.

~~Remedial Actions~~

~~The Company has taken or is taking the following remedial actions to address the material weaknesses:~~

The Company identified key activities to establish a comprehensive SOX Compliance Program, including but not limited to planning and scoping activities, enterprise risk assessments, initial reporting, which were completed in the first half of Fiscal 2021.

The Company started the test of design effectiveness in the second quarter of Fiscal 2021 and completed these activities during October 2020, which provided adequate time for remediation activities before testing of operating effectiveness.

~~The Company started the test of operating effectiveness in November 2020 and continued into the fourth quarter of Fiscal 2021.~~

~~The Company plans to provide reporting and aggregation of all control deficiencies, including evaluation of them individually and in the aggregate for the fiscal year ended March 31, 2021.~~

The completion of activities to date and scheduled activities for the rest of Fiscal 2021 allowed the Company to determine that the material weakness of the lack of a Comprehensive SOX Compliance Program had been remediated as of September 30, 2020. The Company began testing operating effectiveness (which is linked with the testing of design effectiveness) in November 2020 and continued into the fourth quarter of Fiscal Year 2021. The Company believes to have any open remediating activities completed in the fourth quarter of Fiscal 2021 and testing of the operating effectiveness will be completed for the fiscal year ended March 31, 2021.

Management believes the foregoing efforts will effectively remediate the remaining material weakness. As management continues to evaluate and work to improve internal control over financial reporting, management may determine to take additional measures to

~~Table of Contents~~

address control deficiencies or determine to modify or supplement the remediation plan described above. Management cannot assure you, however, when the Company will remediate such weaknesses, nor can management be certain of whether additional actions will be required or the costs of any such actions.

~~Except as identified above, no~~No change in the Company’s internal control over financial reporting occurred during the Company’s fiscal quarter ended ~~December 31, 2020~~September 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Notwithstanding the remaining material weakness, which still exists as of December 31, 2020, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, have concluded that the consolidated financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with accounting principles generally accepted in the United States.

2927

~~Table of Contents~~

PART II—OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. Legal Proceedings

The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business, that, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2020,~~2021, which could materially affect our business, financial condition ~~and/~~or future ~~operating~~ results. The risks described in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth the information with respect to purchase made by or on behalf foof the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our shares of common stock during the three months ended ~~December 31, 2020.~~

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs

Period

(In thousands, except for average price paid per share)

October 1, 2020 to October 31, 2020

2

$
7.60

2

7,782

November 1, 2020 to November 30, 2020

31

8.05

31

7,533

December 1, 2020 to December 31, 2020

31

8.05

31

7,283

Total

64

$
8.05

64

September 30, 2021.


	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
Period	(In thousands, except for average price paid per share)
July 1, 2021 to July 31, 2021		15	$	11.11		15	$	6,299
August 1, 2021 to August 31, 2021		60		11.72		60		5,596
September 1, 2021 to September 30, 2021		2		10.92		2		5,574
Total		77	$	11.25		77

In May ~~2019 and August~~ 2019, the Company’s Board of Directors (“Board”) authorized a new stock repurchase program allowing for the repurchase of up to $8.0 million ~~and $1.0 million, respectively,~~ of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective ~~immediately with a total repurchase authorization of $9.0 million.~~immediately.

The timing and actual number of sharers will depend on a variety of factors, including stock price, corporate and regulatory requirements and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.

In August 2019, the Company’s Board authorized additional repurchase of up to $1.0 million of the Company’s outstanding shares.

~~Table of Contents~~

ITEM 6. EXHIBITS


~~ITEM 6.~~Exhibit No.	~~EXHIBITS~~

~~Exhibit No.~~		Description

31.1		Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 ~~(1)~~1		Certification of the Principal Executive Officer Pursuant to 18 U.S.C. § 1350

32.2 ~~(1)~~1		Certification of the Principal Financial Officer Pursuant to 18 U.S.C. § 1350

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

~~(1)~~

~~This certification accompanies the Quarterly Report on Form 10-Q and is not filed as part of it.~~

311 This certification accompanies the Quarterly Report on Form 10-Q and is not filed as part of it.

~~Table of Contents~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

NICHOLAS FINANCIAL, INC.

(Registrant)


Date: ~~February 11,~~November 12, 2021		/s/ Douglas Marohn
		Douglas Marohn
		President and Chief Executive Officer
		(Principal Executive Officer)


Date: ~~February 11,~~November 12, 2021		/s/ Irina Nashtatik
		Irina Nashtatik
		Chief Financial Officer
		(Principal Financial Officer)

3230

	(In thousands)
	December 31, 2020			March 31, 2020			December 31, 2019
Finance receivables	$	188,626		$	219,366		$	211,813
Accrued interest receivable		2,628			3,164			3,088
Unearned dealer discounts		(7,006	)		(8,056	)		(8,436	)
Unearned insurance and fee commissions		(2,338	)		(2,616	)		(2,644	)
Purchase price discount		(447	)		(915	)		(222	)
Finance receivables, net of unearned		181,463			210,943			203,599
Allowance for credit losses		(9,077	)		(11,162	)		(13,272	)
Finance receivables, net	$	172,386		$	199,781		$	190,327

	(In thousands)
	Fair Value with Changes Recognized in Income		Measurement Alternative - No Readily Determinable Fair Value
Marketable securities	$	4,286	$	-
Total equity securities	$	4,286	$	-

	Nine Months Ended
	December 31, 2020
Unrealized gains on equity securities as of March 31, 2020	$	-
Unrealized gains on equity securities for the nine months ended December 31, 2020		(1,101	)
Unrealized gains on equity securities as of December 31, 2020	$	(1,101	)

(in thousands)
Quarter Ended December 31,
FY2021	$	—
FY2022		2,701
FY2023		23,993
FY2024		23,450
FY2025		23,450
Thereafter		23,450
	$	97,044

Lease cost:
Operating lease cost	$	1,148
Variable lease cost		264
Total lease cost	$	1,412

Key Performance Indicators on Contracts Purchased
(Purchases in thousands)
		Number of				Average
Fiscal Year		Contracts		Principal Amount		Amount		Average			Average			Average
/Quarter		Purchased		Purchased#		Financed*^		APR*			Discount%*			Term*
2021			4,878	$	49,388	$	10,132		23.5	%		7.4	%		46
	3		1,483		15,285		10,307		23.4	%		7.5	%		46
	2		1,709		17,307		10,127		23.5	%		6.8	%		46
	1		1,686		16,796		9,962		23.5	%		8.0	%		46
2020			7,647	$	76,696	$	10,035		23.4	%		7.9	%		47
4			1,991		19,658		9,873		23.5	%	7.9		%		46
3			1,753		17,880		10,200		23.3	%	7.6		%		47
2			2,011		20,104		9,997		23.5	%	7.9		%		46
1			1,892		19,054		10,071		23.4	%	8.3		%		47
2019			7,684	$	77,499	$	10,086		23.5	%		8.2	%		47
4			2,151		21,233		9,871		23.5	%		8.0	%		46
3			1,625		16,476		10,139		23.5	%		8.1	%		47
2			1,761		17,845		10,133		23.5	%		8.4	%		47
1			2,147		21,945		10,221		23.7	%		8.3	%		48

Key Performance Indicators on Direct Loans Originated (Originations in thousands)
	Number of		Principal
Fiscal Year	Loans		Amount		Average Amount		Average			Average
/Quarter	Originated		Originated		Financed*^		APR*			Term*
2021		2,744	$	10,864	$	4,054		29.6	%		24
3		1,265		4,605		3,641		30.9	%		22
2		924		3,832		4,147		29.2	%		25
1		555		2,427		4,373	28.7		%		26
2020		3,142	$	12,638	$	4,017	28.2		%		25
4		720		3,104		4,310	28.6		%		25
3		1,137		4,490		3,949	28.4		%		24
2		739		2,988		4,043	27.4		%		25
1		546		2,056		3,765	28.2		%		24
2019		1,918	$	7,741	$	4,036	26.4		%		25
4		236		1,240		4,654	27.3		%		24
3		738		2,999		4,063	25.9		%		25
2		495		1,805		3,646	26.5		%		25
1		449		1,697		3,779	25.7		%		28

	Three months ended December 31, (Purchases in thousands)						Nine months ended December 31, (Purchases in thousands)
Contracts	2020			2019			2020			2019
Purchases	$	15,285		$	17,882		$	49,388		$	57,041
Average APR		23.4	%		23.3	%		23.5	%		23.4	%
Average discount		7.5	%		7.6	%		7.4	%		7.9	%
Average term (months)		46			47			46			47
Average amount financed	$	10,307		$	10,200		$	10,132		$	10,089
Number of Contracts		1,483			1,753			4,878			5,656

	Payments Due by Period (In thousands)
	Total		FY2021		FY2022 & FY2023		FY2024 & FY2025		Thereafter
Operating leases	$	3,251	$	378	$	2,094	$	657		122
Credit facility		93,800		—		23,450		46,900		23,450
Interest on Credit facility		17,316		1,332		9,990		5,328		666
Note payable		3,244		—		3,244		—		—
Interest on Note Payable		16		—		16		—		—
Total	$	117,627	$	1,710	$	38,794	$	52,885	$	24,238

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
Period	(In thousands, except for average price paid per share)
October 1, 2020 to October 31, 2020		2	$	7.60		2		7,782
November 1, 2020 to November 30, 2020		31		8.05		31		7,533
December 1, 2020 to December 31, 2020		31		8.05		31		7,283
Total		64	$	8.05		64