BORROWINGS

Revolving Credit Line - Banks

The Company entered into a Credit Agreement on December 23, 2015, as subsequently amended, (the "Credit Agreement") with various financial institutions (the "Lenders"). Subject to the terms of the Credit Agreement, the Lenders have agreed to make available to the Company a revolving credit facility up to a maximum of $170.0 million whereby the Company may periodically borrow and repay funds as needed.

Borrowing availability under the revolving credit facility is limited to eligible receivables (the "Borrowing Base") as defined in the Credit Agreement. Each revolving borrowing can be divided into tranches, including (1) a borrowing that bears interest at prime plus 3.25% ("Base Rate") or (2) a borrowing that bears an interest rate offered in the London Interbank Eurodollar market for the relevant interest period plus 4.25% ("LIBOR"). As of September 30, 2017 and September 30, 2016, the Company's Borrowing Base and available revolving credit line was $136.4 million and $162.8 million, respectively. Outstanding LIBOR borrowings under the Credit Agreement at September 30, 2017 were $115.0 million bearing an interest rate of 5.48%. There were no Base Rate borrowings at September 30, 2017. Outstanding borrowings under the Credit Agreement at September 30, 2016 were $158.0 million bearing a weighted average interest rate of 4.94%. Of the $158.0 million outstanding at September 30, 2016, $145.0 million were LIBOR borrowings with a 4.78% interest rate while the remaining $13.0 million comprised Base Rate borrowings with a 6.75% interest rate. In addition, we are paying the Lenders a 50 basis point quarterly non-use fee for the unused portion of the $170.0 million credit facility. In fiscal year 2017 and 2016 non-use fees were $167 thousand and $205 thousand, respectively.

As a means of managing its exposure to rising interest rates, the Company has a $50 million notional interest rate cap agreement at September 30, 2017 that expires on December 21, 2018. The interest rate cap is indexed to 1-month LIBOR and has a strike rate of 2.5%. The interest rate cap is reflected on the consolidated balance sheet at its estimated fair value of $97 thousand and $174 thousand at September 30, 2017 and September 30, 2016, respectively.

The Credit Agreement is collateralized by all finance receivables and property and equipment of the Company, and will terminate on December 21, 2018 or earlier, if certain events occur, as noted below.

Under the Credit Agreement, we are subject to certain covenants that require, among other things, we maintain specific financial ratios, satisfy certain financial tests and maintain a minimum allowance for credit losses in relation to net charge-offs. There are also certain restrictions on the amount and timing of dividends we may pay. These covenants and other terms, which if not complied with, could result in a default under the Credit Agreement. If a default under the Credit Agreement is not waived by the Lenders, it could result in the acceleration of the indebtedness evidenced by the Credit Agreement.

On September 2, 2015, MCFC entered into a confidential Memorandum of Understanding ("MOU") with its primary federal regulator. Pursuant to the MOU, the Company's senior borrowings are limited to $170.6 million, without prior approval from MCFC's primary federal regulator.

Subordinated Debt

Investment Notes

We have subordinated borrowings through the issuance of investment notes with an outstanding balance, including accrued interest, of $19.7 million at September 30, 2017, and $25.6 million at September 30, 2016. These investment notes are nonredeemable by the holders before maturity, issued at various interest rates and mature one to ten years from date of issue. At our option, we may redeem and retire any or all of the investment notes upon 30 days written notice to the note holders. The average investment note payable was $51,097 and $49,646, with a weighted average interest rate of 9.20% and 9.09% at September 30, 2017 and September 30, 2016, respectively.

Subordinated Debentures

At September 30, 2017 and September 30, 2016, the Company had subordinated debentures outstanding of $9.8 million and $7.3 million, respectively. The debentures have maturities at issuance ranging from one to four years and bear interest rates of 5.5%, 6.5%, 7.5% and 8.0%, at September 30, 2017 and September 30, 2016. The average subordinated debenture payable was $78,360 and $75,619, with a weighted average interest rate of 7.60% and 7.36% at September 30, 2017 and September 30, 2016, respectively.

Subordinated Debt - Parent

We have a $25.0 million line of credit with MCFC. Funding on this line of credit is provided as needed at our discretion, dependent upon the availability of funds from MCFC and is due upon demand. Interest on borrowings is payable monthly and is based on prime or 5.0%, whichever is greater. As of September 30, 2017 and September 30, 2016 the outstanding balance under this line of credit was zero.

Under MCFC's MOU, the Company's subordinated borrowings may not exceed $44.0 million, without prior approval from the Federal Reserve.

Contractual Maturities

A summary of contractual maturities for the revolving credit line and subordinated debt as of September 30, 2017 is as follows. The revolving credit line maturities exclude unamortized debt issuance costs of $0.6 million.



Year Ending September 30,		Revolving Credit Line - Banks		Subordinated Debt		Total
	(dollars in thousands)
2018		$	—	$	910	$	910
2019		115,000		5,464		120,464
2020		—		5,506		5,506
2021		—		10,487		10,487
2022		—		4,969		4,969
2023 and beyond		—		2,182		2,182
Total		$	115,000	$	29,518	$	144,518