1
COMPANY PROFILE
WORLD ACCEPTANCE CORPORATION (“World”), which has continuously operated since 1962, is one of the largest
small-loan consumer finance companies in the United States, helping over one million customers to unlock their “financial good”
annually. World works with its customers to help improve financial wellness, celebrating the hundreds of thousands of customers
who are able to improve their credit each year. Headquartered in Greenville, South Carolina, World offers the strength and
technology of a national financial institution with personalized assistance through its local neighborhood branch network of over
1,000 branches. World is proudly rooted in the communities it serves and sets itself apart as a true financial partner, offering an
ever-expanding menu of customer-focused services and a commitment to teamwork, community, and care.
World emphasizes quality service and building strong personal relationships with its customers. As a result, a substantial
portion of World's new customers are from customer referrals. World's loans are generally under $6,000 (avg. $2,359) with
maturities of less than 27 months (avg. 20 months).
As of July 5, 2023, World operates 1,055 offices in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana,
Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, and Wisconsin.
COMPANY PROFILE
WORLD ACCEPTANCE CORPORATION (“World”), which has continuously operated since 1962, is one of the largest
small-loan consumer finance companies in the United States, helping over one million customers to unlock their “financial good”
annually. World works with its customers to help improve financial wellness, celebrating the hundreds of thousands of customers
who are able to improve their credit each year. Headquartered in Greenville, South Carolina, World offers the strength and
technology of a national financial institution with personalized assistance through its local neighborhood branch network of over
1,000 branches. World is proudly rooted in the communities it serves and sets itself apart as a true financial partner, offering an
ever-expanding menu of customer-focused services and a commitment to teamwork, community, and care.
World emphasizes quality service and building strong personal relationships with its customers. As a result, a substantial
portion of World's new customers are from customer referrals. World's loans are generally under $6,000 (avg. $2,359) with
maturities of less than 27 months (avg. 20 months).
As of July 5, 2023, World operates 1,055 offices in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana,
Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, and Wisconsin.
1
(THIS PAGE INTENTIONALLY LEFT BLANK)
Item No. Contents
PART I
TABLE OF CONTENTS
TO OUR SHAREHOLDERS
Page
(Dollars in thousands, except per share and statistical data)
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
11.
12.
13.
14.
15.
16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
5
16
32
32
32
33
33
36
36
45
46
84
84
85
85
85
85
85
85
86
86
86
Select Statement of Operations Data:
2023
2022
Change (%)
Total revenues
Net income
Diluted earnings per share
Selected Balance Sheet Data:
Gross loans receivable
Total assets
Total debt
Total shareholders' equity
Selected Ratios:
Return on average assets
Return on average shareholders' equity
Shareholders' equity to assets
Statistical Data:
Number of customers at period end
Number of loans made
Number of offices
Years Ended March 31,
616,545
585,187
5.4%
21,232
53,920
-60.6%
3.60
8.47
-57.5%
1,390,016
1,522,789
1,117,318
1,218,296
-8.7%
-8.3%
598,771
696,973
-14.1%
385,227
373,024
3.3%
1.7%
5.8%
34.5%
4.8%
13.4%
30.6%
-64.6%
-56.7%
12.7%
657,628
801,078
-17.9%
1,312,200
1,566,509
-16.2%
1,073
1,167
-8.1%
See our Consolidated Financial Statements and accompanying notes included herein.
2
Item No. Contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Securities
[Reserved]
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
8.
9.
9A.
9B.
9C.
10.
11.
12.
13.
14.
15.
16.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Management's Discussion and Analysis of Financial Condition and Results of Operations
7A.
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
5
16
32
32
32
33
33
36
36
45
46
84
84
85
85
85
85
85
85
86
86
86
TABLE OF CONTENTS
TO OUR SHAREHOLDERS
Page
(Dollars in thousands, except per share and statistical data)
Select Statement of Operations Data:
2023
2022
Change (%)
Years Ended March 31,
Total revenues
Net income
Diluted earnings per share
Selected Balance Sheet Data:
Gross loans receivable
Total assets
Total debt
Total shareholders' equity
Selected Ratios:
Return on average assets
Return on average shareholders' equity
Shareholders' equity to assets
Statistical Data:
Number of customers at period end
Number of loans made
Number of offices
616,545
585,187
5.4%
21,232
53,920
-60.6%
3.60
8.47
-57.5%
1,390,016
1,522,789
1,117,318
1,218,296
-8.7%
-8.3%
598,771
696,973
-14.1%
385,227
373,024
3.3%
1.7%
5.8%
34.5%
4.8%
13.4%
30.6%
-64.6%
-56.7%
12.7%
657,628
801,078
-17.9%
1,312,200
1,566,509
-16.2%
1,073
1,167
-8.1%
See our Consolidated Financial Statements and accompanying notes included herein.
3
To Our Shareholders
Introduction
Shareholders,
In prior letters, I’ve focused on how the philosophy of stewardship helps guide leaders here at World Acceptance to invest in
customers, infrastructure, and management for long-term success. This has proven to be an important message since the last
several years have seen a variety of highly unusual operating environments. These included a pandemic, stimulus fueled economic
growth, inflationary pressures, and the increasing likelihood of an economic recession.
In fiscal 2022, we grew significantly, and maybe a little too rapidly, as we rebounded from pandemic influenced shrinkage in
2021. With 38% loan growth in 2022, our portfolio was heavily weighted toward newer customers and lower yielding larger
loans. While this strategy focused on growing revenue and decreasing operating expenses to maximize net income, credit
performance suffered due to various internal and external pressures. Internal pressures came as the result of the substantial loan
growth, personnel turnover, and credit model challenges. External pressures came from rapid inflation in early fiscal 2023,
customer credit shifts and cash flow impacts of a “stimulus hangover,” and unexpected labor market changes. In any event, those
pressures combined to produce a challenging operating environment and disappointing results.
Credit losses reached record highs in 2023, even as we pivoted to increase yields, decrease credit risk, and focus on operational
improvements. We made these adjustments swiftly during the 1st and 2nd quarters, pushing our team to endure a challenging
transition to a series of tighter operating measures that we predicted would result in improved financial performance several
quarters later.
The good news is that we identified these problems earlier than most in our industry, so we were among the first to make dramatic
underwriting adjustments and shift the focus to restoring credit quality and yields. At the same time, we implemented several
defensive tactics to protect our loan portfolio against the negative effects of the recession that many were predicting.
Today, we are optimistic about the position we are in. Although growth slowed and the portfolio shrank during the summer
months last year for the first time in many years, by the end of fiscal 2023, we saw our first pay defaults for new customers
improve by as much as 37% year over year. Our yields also began to improve, even as we relaxed some underwriting restrictions
and increased loan origination volume.
In a tightening credit market, reduced credit access has ripple effects across communities and reduces economic mobility,
especially for the financially challenged and underserved. To enhance credit mobility, we increased approval rates and
expanded product options for applicants throughout the second half of 2023 and into this fiscal year. We’ll keep testing and
working to expand our customer base, approval rates, and our overall product offerings in the coming months.
We also continue to make significant improvements to our core operations efficiencies. The merging of redundant branches and
expansion of leadership oversight has allowed us to better serve our geographic footprint while lowering expenses. Our G&A
expense as a percent of revenue has declined from 58% in fiscal years 2020 and 2021 to 51% in 2022 and 45% in 2023.
Importantly, revenue increased to $617M, surpassing the prior record of $590M in 2020. This helped to offset a record growth in
provision for credit losses. Provision expenses increased to 42% of revenues in 2023 from 32% in 2022, severely restricting
overall profitability throughout 2023 as delinquencies trended much higher than initially expected. Nonetheless, we continued to
increase operating cash flow to $49 per diluted share in fiscal 2023 from $43 per diluted share in 2022.
The work done in fiscal 2023 to increase overall credit quality has allowed us to operate with a very different mindset today. With
the hard work of protecting the portfolio and reducing credit risk already showing positive signs at the end of 2023, we’re now
focused on strategic growth in the right credit segments, improving efficiencies in marketing and operations, and empowering
our leaders to continue to best serve our customers.
Finally, we’re incredibly proud of the amazing World team and our commitment to each other and our customers. We continue to
win Top Workplaces awards across the country, including being a Top Workplace USA winner for the third year in a row and one
of the Most Trustworthy Companies in America by Newsweek for the second year. These distinctions are earned by our team
members who view World as a family and it’s immensely gratifying to work with great leaders at every level in the company who
value each other and their communities in this way. Our amazing team has worked incredibly hard to protect and right-size the
portfolio in fiscal 2023 and is working equally hard to steward World into a profitable 2024.
Sincerely,
Chad Prashad
President & Chief Executive Officer
4
World Acceptance Corporation, a South Carolina corporation, operates a small-loan consumer finance (installment loan) business
in sixteen states as of March 31, 2023. As used herein, the "Company,” “we,” “our,” “us,” or similar formulations include World
Acceptance Corporation and each of its subsidiaries, except as the context otherwise requires. All references in this report to
“fiscal 2024” are to the Company’s fiscal year ending March 31, 2024; all references in this report to "fiscal 2023" are to the
Company's fiscal year ended March 31, 2023; all references to “fiscal 2022” are to the Company’s fiscal year ended March 31,
2022; all references to “fiscal 2021” are to the Company’s fiscal year ended March 31, 2021; all references to "fiscal 2020" are
to the Company's fiscal year ended March 31, 2020; all references to "fiscal 2019" are to the Company's fiscal year ended March
31, 2019; all references to "fiscal 2018" are to the Company's fiscal year ended March 31, 2018 and all references to "fiscal 2015"
are to the Company's fiscal year ended March 31, 2015.
PART I.
Item 1.
Description of Business
General. The Company, which has continuously operated since July 1962, is now one of the nation's largest small-loan consumer
finance companies, offering short-term small installment loans, medium-term larger installment loans, related credit insurance
and ancillary products and services to individuals. The Company offers traditional installment loans generally between $500 and
$6,000, with the average loan origination being $2,359 in fiscal 2023. The Company operates 1,073 branches in Alabama,
Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas,
Tennessee, Utah, and Wisconsin as of March 31, 2023. The Company generally serves individuals with limited access to other
sources of consumer credit such as banks, credit unions, other consumer finance businesses and credit card lenders. The Company
also offers income tax return preparation services to its loan customers and other individuals.
The traditional installment loan industry is a highly fragmented segment of the consumer lending industry. Installment loan
finance companies generally make loans to individuals of less than $2,000 with maturities of less than 18 months. These
companies approve loans on the basis of the personal creditworthiness of their customers and maintain close contact with
borrowers to encourage the repayment or, when appropriate to meet the borrower’s needs, the refinancing of loans. By contrast,
commercial banks, credit unions and some other consumer finance businesses typically make loans of more than $5,000 with
maturities of greater than one year. Those financial institutions generally approve consumer loans on the security of qualifying
personal property pledged as collateral or impose more stringent credit requirements than those of small-loan consumer finance
companies. As a result of their higher credit standards and specific collateral requirements, commercial banks, credit unions and
other consumer finance businesses typically charge lower interest rates and fees and experience lower delinquency and charge-
off rates than do small-loan consumer finance companies. Traditional installment loan companies generally charge higher interest
rates and fees to compensate for the greater risk of delinquencies and charge-offs and increased loan administration and collection
costs.
The majority of the participants in the industry are independent operators with generally less than 100 branches. We believe that
competition between small-loan consumer finance companies occurs primarily on the basis of the strength of customer
relationships, customer service and reputation in the local community. We believe that our relatively large size affords us a
competitive advantage over smaller companies by increasing our access to, and reducing our cost of capital.
Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and
state laws and regulations, as well as local ordinances. Consumer loan offices are licensed under state laws which, in many states,
establish maximum loan amounts, interest rates, permissible fees and charges and other aspects of the operation of small-loan
consumer finance companies. Furthermore, the industry is subject to numerous federal laws and regulations that affect lending
operations. These federal laws require companies to provide complete disclosure of the terms of each loan to the borrower in
accordance with specified standards prior to the consummation of the loan transaction. Federal laws also prohibit misleading
advertising, protect against discriminatory lending practices and prohibit unfair, deceptive, and abusive credit practices.
Branch Expansion and Consolidation. As of March 31, 2023, the Company had 1,073 branches in 16 states, with over 100
branches located in Texas and Georgia. During fiscal 2023, the Company opened 2 new branches and merged 96 branches into
other existing branches due to their inability to generate sufficient returns or for efficiency reasons. In fiscal 2024, the Company
may open or acquire new branches in its existing market areas or commence operations in new states where it believes
demographic profiles and state regulations are attractive. The Company may merge other branches on a case-by-case basis based
To Our Shareholders
Introduction
Shareholders,
In prior letters, I’ve focused on how the philosophy of stewardship helps guide leaders here at World Acceptance to invest in
customers, infrastructure, and management for long-term success. This has proven to be an important message since the last
several years have seen a variety of highly unusual operating environments. These included a pandemic, stimulus fueled economic
growth, inflationary pressures, and the increasing likelihood of an economic recession.
In fiscal 2022, we grew significantly, and maybe a little too rapidly, as we rebounded from pandemic influenced shrinkage in
2021. With 38% loan growth in 2022, our portfolio was heavily weighted toward newer customers and lower yielding larger
loans. While this strategy focused on growing revenue and decreasing operating expenses to maximize net income, credit
performance suffered due to various internal and external pressures. Internal pressures came as the result of the substantial loan
growth, personnel turnover, and credit model challenges. External pressures came from rapid inflation in early fiscal 2023,
customer credit shifts and cash flow impacts of a “stimulus hangover,” and unexpected labor market changes. In any event, those
pressures combined to produce a challenging operating environment and disappointing results.
Credit losses reached record highs in 2023, even as we pivoted to increase yields, decrease credit risk, and focus on operational
improvements. We made these adjustments swiftly during the 1st and 2nd quarters, pushing our team to endure a challenging
transition to a series of tighter operating measures that we predicted would result in improved financial performance several
quarters later.
The good news is that we identified these problems earlier than most in our industry, so we were among the first to make dramatic
underwriting adjustments and shift the focus to restoring credit quality and yields. At the same time, we implemented several
defensive tactics to protect our loan portfolio against the negative effects of the recession that many were predicting.
Today, we are optimistic about the position we are in. Although growth slowed and the portfolio shrank during the summer
months last year for the first time in many years, by the end of fiscal 2023, we saw our first pay defaults for new customers
improve by as much as 37% year over year. Our yields also began to improve, even as we relaxed some underwriting restrictions
and increased loan origination volume.
In a tightening credit market, reduced credit access has ripple effects across communities and reduces economic mobility,
especially for the financially challenged and underserved. To enhance credit mobility, we increased approval rates and
expanded product options for applicants throughout the second half of 2023 and into this fiscal year. We’ll keep testing and
working to expand our customer base, approval rates, and our overall product offerings in the coming months.
We also continue to make significant improvements to our core operations efficiencies. The merging of redundant branches and
expansion of leadership oversight has allowed us to better serve our geographic footprint while lowering expenses. Our G&A
expense as a percent of revenue has declined from 58% in fiscal years 2020 and 2021 to 51% in 2022 and 45% in 2023.
Importantly, revenue increased to $617M, surpassing the prior record of $590M in 2020. This helped to offset a record growth in
provision for credit losses. Provision expenses increased to 42% of revenues in 2023 from 32% in 2022, severely restricting
overall profitability throughout 2023 as delinquencies trended much higher than initially expected. Nonetheless, we continued to
increase operating cash flow to $49 per diluted share in fiscal 2023 from $43 per diluted share in 2022.
The work done in fiscal 2023 to increase overall credit quality has allowed us to operate with a very different mindset today. With
the hard work of protecting the portfolio and reducing credit risk already showing positive signs at the end of 2023, we’re now
focused on strategic growth in the right credit segments, improving efficiencies in marketing and operations, and empowering
our leaders to continue to best serve our customers.
Finally, we’re incredibly proud of the amazing World team and our commitment to each other and our customers. We continue to
win Top Workplaces awards across the country, including being a Top Workplace USA winner for the third year in a row and one
of the Most Trustworthy Companies in America by Newsweek for the second year. These distinctions are earned by our team
members who view World as a family and it’s immensely gratifying to work with great leaders at every level in the company who
value each other and their communities in this way. Our amazing team has worked incredibly hard to protect and right-size the
portfolio in fiscal 2023 and is working equally hard to steward World into a profitable 2024.
Sincerely,
Chad Prashad
President & Chief Executive Officer
World Acceptance Corporation, a South Carolina corporation, operates a small-loan consumer finance (installment loan) business
in sixteen states as of March 31, 2023. As used herein, the "Company,” “we,” “our,” “us,” or similar formulations include World
Acceptance Corporation and each of its subsidiaries, except as the context otherwise requires. All references in this report to
“fiscal 2024” are to the Company’s fiscal year ending March 31, 2024; all references in this report to "fiscal 2023" are to the
Company's fiscal year ended March 31, 2023; all references to “fiscal 2022” are to the Company’s fiscal year ended March 31,
2022; all references to “fiscal 2021” are to the Company’s fiscal year ended March 31, 2021; all references to "fiscal 2020" are
to the Company's fiscal year ended March 31, 2020; all references to "fiscal 2019" are to the Company's fiscal year ended March
31, 2019; all references to "fiscal 2018" are to the Company's fiscal year ended March 31, 2018 and all references to "fiscal 2015"
are to the Company's fiscal year ended March 31, 2015.
PART I.
Item 1.
Description of Business
General. The Company, which has continuously operated since July 1962, is now one of the nation's largest small-loan consumer
finance companies, offering short-term small installment loans, medium-term larger installment loans, related credit insurance
and ancillary products and services to individuals. The Company offers traditional installment loans generally between $500 and
$6,000, with the average loan origination being $2,359 in fiscal 2023. The Company operates 1,073 branches in Alabama,
Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas,
Tennessee, Utah, and Wisconsin as of March 31, 2023. The Company generally serves individuals with limited access to other
sources of consumer credit such as banks, credit unions, other consumer finance businesses and credit card lenders. The Company
also offers income tax return preparation services to its loan customers and other individuals.
The traditional installment loan industry is a highly fragmented segment of the consumer lending industry. Installment loan
finance companies generally make loans to individuals of less than $2,000 with maturities of less than 18 months. These
companies approve loans on the basis of the personal creditworthiness of their customers and maintain close contact with
borrowers to encourage the repayment or, when appropriate to meet the borrower’s needs, the refinancing of loans. By contrast,
commercial banks, credit unions and some other consumer finance businesses typically make loans of more than $5,000 with
maturities of greater than one year. Those financial institutions generally approve consumer loans on the security of qualifying
personal property pledged as collateral or impose more stringent credit requirements than those of small-loan consumer finance
companies. As a result of their higher credit standards and specific collateral requirements, commercial banks, credit unions and
other consumer finance businesses typically charge lower interest rates and fees and experience lower delinquency and charge-
off rates than do small-loan consumer finance companies. Traditional installment loan companies generally charge higher interest
rates and fees to compensate for the greater risk of delinquencies and charge-offs and increased loan administration and collection
costs.
The majority of the participants in the industry are independent operators with generally less than 100 branches. We believe that
competition between small-loan consumer finance companies occurs primarily on the basis of the strength of customer
relationships, customer service and reputation in the local community. We believe that our relatively large size affords us a
competitive advantage over smaller companies by increasing our access to, and reducing our cost of capital.
Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and
state laws and regulations, as well as local ordinances. Consumer loan offices are licensed under state laws which, in many states,
establish maximum loan amounts, interest rates, permissible fees and charges and other aspects of the operation of small-loan
consumer finance companies. Furthermore, the industry is subject to numerous federal laws and regulations that affect lending
operations. These federal laws require companies to provide complete disclosure of the terms of each loan to the borrower in
accordance with specified standards prior to the consummation of the loan transaction. Federal laws also prohibit misleading
advertising, protect against discriminatory lending practices and prohibit unfair, deceptive, and abusive credit practices.
Branch Expansion and Consolidation. As of March 31, 2023, the Company had 1,073 branches in 16 states, with over 100
branches located in Texas and Georgia. During fiscal 2023, the Company opened 2 new branches and merged 96 branches into
other existing branches due to their inability to generate sufficient returns or for efficiency reasons. In fiscal 2024, the Company
may open or acquire new branches in its existing market areas or commence operations in new states where it believes
demographic profiles and state regulations are attractive. The Company may merge other branches on a case-by-case basis based
5
on profitability or other factors. The Company's ability to continue existing operations and expand its operations in existing or
new states is dependent upon, among other things, laws and regulations that permit the Company to operate its business profitably
and its ability to obtain necessary regulatory approvals and licenses. There can be no assurance that such laws and regulations
will not change in ways that adversely affect the Company or that the Company will be able to obtain any such approvals or
consents. See Part 1, Item 1A, “Risk Factors” for a further discussion of risks to our business and plans for expansion.
The Company's expansion is also dependent upon its ability to identify attractive locations for new branches and to hire suitable
personnel to staff, manage, and supervise new branches. In evaluating a particular community, the Company examines several
factors, including the demographic profile of the community, the existence of an established small-loan consumer finance market
and the availability of suitable personnel.
Product Offerings
Installment Loans. We primarily offer pre-computed and interest bearing consumer installment loans with interest and fee income
from such loans accounting for 82.4%, 83.0%, and 85.4% of our total revenues in fiscal years 2023, 2022, and 2021, respectively.
Our loans are payable in fully-amortizing monthly installments with terms generally from 7 to 27 months and are prepayable at
any time without penalty.
The following table sets forth information about our loan products for fiscal 2023:
Small loans
Large loans
_______________________________________________________
(1) Gross loan net of finance charges.
$
$
Minimum
Origination (1)
Maximum
Origination (1)
2,450
33,450
500 $
2,500 $
Minimum
Term
(Months)
5
10
Maximum
Term
(Months)
31
60
Specific allowable interest, fees, and other charges vary by state. The finance charge is a combination of origination or acquisition
fees, account maintenance fees, monthly account handling fees, interest and other charges permitted by the relevant state laws.
As of March 31, 2021, we no longer offered loans with annual percentage rates, including interest, fees and other charges as
calculated in accordance with the Federal Truth in Lending Act, above 100%. The average annual percentage rate of our portfolio
was 45.8% as of March 31, 2023.
As of March 31, 2023, annual percentage rates applicable to our gross loans receivable as defined by the Truth in Lending Act
were as follows:
Low
High
Amount
Percentage of total
gross loans
receivable
— %
37 %
51 %
61 %
71 %
81 %
91 %
101 %
121 %
36 % $
50 %
60 %
70 %
80 %
90 %
100 %
120 %
>121%
$
680,805,765
316,345,789
121,292,968
57,976,907
19,808,244
91,386,549
102,377,024
9,5561
12,7662
1,390,015,568
48.9
22.8
8.7
4.2
1.4
6.6
7.4
—
—
100
1 Gross loans receivable with an APR between 101% and 120% are a result of acquired loans receivable, and not loans originated
by the Company.
2 Gross loans receivable with an APR of 121% or greater are a result of acquired loans receivable, and not loans originated by the
Company.
6
Insurance Related Operations. The Company, as an agent for an unaffiliated insurance company, markets and sells credit life,
credit accident and health, credit property and auto, unemployment, and accidental death and dismemberment insurance in
connection with its loans in selected states where the sale of such insurance is permitted by law. Credit life insurance provides
for the payment in full of the borrower's credit obligation to the lender in the event of death. The Company offers credit insurance
for all loans originated in Alabama, Idaho, Indiana, Kentucky, New Mexico, Oklahoma, South Carolina, Tennessee, Texas and
Utah, and on a more limited basis in Georgia, Louisiana, Mississippi, and Missouri. Customers in those states typically obtain
such credit insurance through the Company. Charges for such credit insurance are made at filed, authorized rates and are stated
separately in the Company's disclosure to customers, as required by the Truth in Lending Act and by various applicable state
laws. In the sale of insurance policies, the Company, as an agent, writes policies only within limitations established by its agency
contracts with the insurer. The Company does not sell credit insurance to non-borrowers. These insurance policies provide for the
payment of the outstanding balance of the Company's loan upon the occurrence of an insured event. The Company earns a
commission on the sale of such credit insurance, which, for most products, is directly impacted by the claims experience of the
insurance company on policies sold on its behalf by the Company. In states where commissions on certain products are capped,
the commission earned is not directly impacted by the claims experience.
The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in connection
with loans made by the Company. Certain coverages currently sold by the Company on behalf of the unaffiliated insurance carrier
are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional source of income derived
from the earned reinsurance premiums. In fiscal 2023, the captive insurance subsidiary reinsured approximately 11.1% of the
credit insurance sold by the Company and contributed approximately $3.1 million to the Company's total revenue.
The table below shows the types of insurance and ancillary products the Company sells by state as of March 31, 2023:
Credit Accident
Property and
Credit
Accidental
Death &
Automobile
Club
Credit Life
and Health
Auto
Unemployment
Dismemberment Non-file
Membership
Alabama (1)
Georgia
Idaho
Illinois
Indiana
Kentucky
Louisiana
Mississippi
Missouri
New Mexico
Oklahoma (1)
South Carolina
Tennessee (1)
Texas (1)
Utah
Wisconsin
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
_______________________________________________________
(1) Credit insurance is offered for certain loans.
Non-Filing Insurance. The Company typically does not perfect its security interest in collateral securing its smaller loans by filing
UCC financing statements. Non-filing insurance premiums are equal in aggregate amount to the premiums paid by the Company
to purchase non-filing insurance coverage from an unaffiliated insurance company. Under its non-filing insurance coverage, the
Company is reimbursed for losses on loans resulting from its policy not to perfect its security interest in collateral securing the
loans.
Automobile Club Memberships. The Company also offers automobile club memberships to its borrowers in Alabama, Georgia,
Idaho, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee, Texas, South Carolina, Utah
on profitability or other factors. The Company's ability to continue existing operations and expand its operations in existing or
new states is dependent upon, among other things, laws and regulations that permit the Company to operate its business profitably
and its ability to obtain necessary regulatory approvals and licenses. There can be no assurance that such laws and regulations
will not change in ways that adversely affect the Company or that the Company will be able to obtain any such approvals or
consents. See Part 1, Item 1A, “Risk Factors” for a further discussion of risks to our business and plans for expansion.
The Company's expansion is also dependent upon its ability to identify attractive locations for new branches and to hire suitable
personnel to staff, manage, and supervise new branches. In evaluating a particular community, the Company examines several
factors, including the demographic profile of the community, the existence of an established small-loan consumer finance market
and the availability of suitable personnel.
Product Offerings
Installment Loans. We primarily offer pre-computed and interest bearing consumer installment loans with interest and fee income
from such loans accounting for 82.4%, 83.0%, and 85.4% of our total revenues in fiscal years 2023, 2022, and 2021, respectively.
Our loans are payable in fully-amortizing monthly installments with terms generally from 7 to 27 months and are prepayable at
any time without penalty.
The following table sets forth information about our loan products for fiscal 2023:
Small loans
Large loans
_______________________________________________________
(1) Gross loan net of finance charges.
Minimum
Maximum
Origination (1)
Origination (1)
$
$
500 $
2,500 $
2,450
33,450
Minimum
Maximum
Term
(Months)
Term
(Months)
5
10
31
60
Specific allowable interest, fees, and other charges vary by state. The finance charge is a combination of origination or acquisition
fees, account maintenance fees, monthly account handling fees, interest and other charges permitted by the relevant state laws.
As of March 31, 2021, we no longer offered loans with annual percentage rates, including interest, fees and other charges as
calculated in accordance with the Federal Truth in Lending Act, above 100%. The average annual percentage rate of our portfolio
was 45.8% as of March 31, 2023.
were as follows:
As of March 31, 2023, annual percentage rates applicable to our gross loans receivable as defined by the Truth in Lending Act
Low
High
Amount
Percentage of total
gross loans
receivable
— %
37 %
51 %
61 %
71 %
81 %
91 %
101 %
121 %
36 % $
50 %
60 %
70 %
80 %
90 %
100 %
120 %
>121%
$
680,805,765
316,345,789
121,292,968
57,976,907
19,808,244
91,386,549
102,377,024
9,5561
12,7662
1,390,015,568
48.9
22.8
8.7
4.2
1.4
6.6
7.4
—
—
100
1 Gross loans receivable with an APR between 101% and 120% are a result of acquired loans receivable, and not loans originated
2 Gross loans receivable with an APR of 121% or greater are a result of acquired loans receivable, and not loans originated by the
by the Company.
Company.
Insurance Related Operations. The Company, as an agent for an unaffiliated insurance company, markets and sells credit life,
credit accident and health, credit property and auto, unemployment, and accidental death and dismemberment insurance in
connection with its loans in selected states where the sale of such insurance is permitted by law. Credit life insurance provides
for the payment in full of the borrower's credit obligation to the lender in the event of death. The Company offers credit insurance
for all loans originated in Alabama, Idaho, Indiana, Kentucky, New Mexico, Oklahoma, South Carolina, Tennessee, Texas and
Utah, and on a more limited basis in Georgia, Louisiana, Mississippi, and Missouri. Customers in those states typically obtain
such credit insurance through the Company. Charges for such credit insurance are made at filed, authorized rates and are stated
separately in the Company's disclosure to customers, as required by the Truth in Lending Act and by various applicable state
laws. In the sale of insurance policies, the Company, as an agent, writes policies only within limitations established by its agency
contracts with the insurer. The Company does not sell credit insurance to non-borrowers. These insurance policies provide for the
payment of the outstanding balance of the Company's loan upon the occurrence of an insured event. The Company earns a
commission on the sale of such credit insurance, which, for most products, is directly impacted by the claims experience of the
insurance company on policies sold on its behalf by the Company. In states where commissions on certain products are capped,
the commission earned is not directly impacted by the claims experience.
The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in connection
with loans made by the Company. Certain coverages currently sold by the Company on behalf of the unaffiliated insurance carrier
are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional source of income derived
from the earned reinsurance premiums. In fiscal 2023, the captive insurance subsidiary reinsured approximately 11.1% of the
credit insurance sold by the Company and contributed approximately $3.1 million to the Company's total revenue.
The table below shows the types of insurance and ancillary products the Company sells by state as of March 31, 2023:
Unemployment
X
Credit
Property and
Auto
X
X
X
Credit Life
X
X
X
Credit Accident
and Health
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Alabama (1)
Georgia
Idaho
Illinois
Indiana
Kentucky
Louisiana
Mississippi
Missouri
New Mexico
Oklahoma (1)
South Carolina
Tennessee (1)
Texas (1)
Utah
Wisconsin
_______________________________________________________
(1) Credit insurance is offered for certain loans.
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Accidental
Death &
Dismemberment Non-file
X
X
X
X
X
X
X
X
X
Automobile
Club
Membership
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Non-Filing Insurance. The Company typically does not perfect its security interest in collateral securing its smaller loans by filing
UCC financing statements. Non-filing insurance premiums are equal in aggregate amount to the premiums paid by the Company
to purchase non-filing insurance coverage from an unaffiliated insurance company. Under its non-filing insurance coverage, the
Company is reimbursed for losses on loans resulting from its policy not to perfect its security interest in collateral securing the
loans.
Automobile Club Memberships. The Company also offers automobile club memberships to its borrowers in Alabama, Georgia,
Idaho, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee, Texas, South Carolina, Utah
7
and Wisconsin, as an agent for an unaffiliated automobile club. Club memberships entitle members to automobile breakdown
coverage, towing reimbursement and related services. The Company is paid a commission on each membership sold, but has no
responsibility for administering the club, paying benefits or providing services to club members. The Company primarily sells
automobile club memberships to borrowers.
Tax Preparation Services and Advances. The Company also offers income tax return preparation and electronic filing
services. This program is provided in all but a few of the Company’s branches. The Company prepared approximately 75,000,
81,000 and 77,000 returns in fiscal years 2023, 2022, and 2021, respectively. Net revenue generated by the Company from this
program during fiscal 2023, 2022, and 2021 amounted to approximately $24.0 million, $24.5 million, and $20.6 million,
respectively. In addition, our tax customers are eligible to receive an interest and fee-free tax advance loan which is generally a
percentage of the anticipated tax refund amount. The Company believes that this is a beneficial service for its existing customer
base as well as non-loan customers, and it plans to continue to promote this program.
The following table sets forth information about our tax advance loan product for fiscal 2023:
Tax advance loans
Minimum
Origination
$
500 $
Maximum
Origination
5,000
Minimum
Term
(Months)
8
Maximum
Term
(Months)
8
Loan Receivables. The following table sets forth the composition of the Company's gross loans receivable by state at March 31
of each year from 2014 through 2023:
State
2023
2022
2021
2020
At March 31,
2018
2019
2017
2016
2015
2014
Alabama
Georgia
Idaho (1)
Illinois
Indiana
Kentucky
Louisiana
Mississippi (2)
Missouri
New Mexico
Oklahoma
South Carolina
Tennessee
Texas
Utah (3)
Wisconsin
Total
6 %
13
1
10
2
6
4
2
7
4
6
8
9
20
1
1
100 %
7 %
13
1
10
3
6
3
2
7
2
6
8
10
20
1
1
100 %
6 %
13
1
8
2
7
3
2
8
2
6
10
11
19
1
1
100 %
5 %
13
1
8
2
8
3
1
8
2
6
10
11
19
1
2
100 %
5 %
13
1
7
2
8
3
1
7
2
7
9
12
21
—
2
100 %
5 %
14
—
7
2
9
2
1
7
2
7
10
13
19
—
2
100 %
4 %
15
—
7
2
10
2
1
7
2
7
11
13
18
—
1
100 %
6 %
13
—
7
1
10
2
—
8
2
8
10
13
19
—
1
100 %
5 %
13
—
7
1
10
2
—
8
2
8
11
13
19
—
1
100 %
4 %
13
—
8
1
9
2
—
7
2
7
12
13
21
—
1
100 %
_______________________________________________________
(1) The Company commenced operations in Idaho in October 2014.
(2) The Company commenced operations in Mississippi in September 2013.
(3) The Company commenced operations in Utah in October 2018.
8
The following table sets forth the total number of loans, the average gross loan balance, and the gross loan balance by state at
March 31, 2023:
Alabama
Georgia
Idaho
Illinois
Indiana
Kentucky
Louisiana
Mississippi
Missouri
New Mexico
Oklahoma
South Carolina
Tennessee
Texas
Utah
Wisconsin
Total
Total
Number
of Loans
Average
Gross Loan
Balance
Gross Loan
Balance
(thousands)
46,330 $
1,889 $
82,572
6,366
43,232
19,835
42,577
29,886
21,252
32,402
25,979
40,078
50,623
60,203
162,921
4,389
9,300
2,182
1,709
3,185
1,723
2,096
1,752
1,348
2,992
2,164
2,014
2,141
2,050
1,698
2,017
1,952
87,538
180,202
10,877
137,705
34,176
89,235
52,368
28,650
96,944
56,230
80,718
108,365
123,409
276,596
8,854
18,149
677,945 $
2,050 $ 1,390,016
Seasonality. The Company's highest loan demand generally occurs from October to December, its third fiscal quarter. Loan
demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the
Company experiences significant seasonal fluctuations in its operating results and cash needs. Operating results for the
Company's third fiscal quarter are generally lower than in other quarters, and operating results for its fourth fiscal quarter are
generally higher than in other quarters.
Operations
Lending Operations. The Company seeks to provide short-term consumer installment loans to the segment of the population that
has limited access to other sources of credit. In evaluating the creditworthiness of potential customers, the Company primarily
examines the individual's discretionary income, length of current employment and/or sources of income, duration of residence,
and prior credit experience. Loans are made to individuals on the basis of their discretionary income and other factors and are
limited to amounts we believe that customers can reasonably be expected to repay from that income given our assessment of their
stability and ability and willingness to pay. The Company also generates a proprietary credit score in assisting loan decisions to
potential new customers that evaluates key attributes such as payment history, outstanding debt, length of credit history, number
of credit inquiries as well as credit mix. All loan applicants are required to complete standardized credit applications online, in
person, or by telephone. Each of the Company's local branches are equipped to perform rapid background, employment, and
credit bureau checks and approve loan applications promptly. The Company's employees verify the applicant's sources of income
and credit history. Substantially all new customers are required to submit a listing of personal property that will serve as collateral
to secure the loan, but the Company does not rely on the value of such collateral in the loan approval process and generally does
not perfect its security interest in that collateral. Accordingly, if the customer were to default in the repayment of the loan, the
Company may not be able to recover the outstanding loan balance by resorting to the sale of collateral.
New Loans to Current and Former Customers. The Company believes that development and continual reinforcement of personal
relationships with customers improves the Company's ability to monitor their creditworthiness, reduce credit risk, and generate
customer loyalty. It is not unusual for the Company to have made a number of loans to the same customer over the course of
several years, many of which were refinanced with a new loan after the borrower had reduced the existing loan's outstanding
and Wisconsin, as an agent for an unaffiliated automobile club. Club memberships entitle members to automobile breakdown
coverage, towing reimbursement and related services. The Company is paid a commission on each membership sold, but has no
responsibility for administering the club, paying benefits or providing services to club members. The Company primarily sells
automobile club memberships to borrowers.
Tax Preparation Services and Advances. The Company also offers income tax return preparation and electronic filing
services. This program is provided in all but a few of the Company’s branches. The Company prepared approximately 75,000,
81,000 and 77,000 returns in fiscal years 2023, 2022, and 2021, respectively. Net revenue generated by the Company from this
program during fiscal 2023, 2022, and 2021 amounted to approximately $24.0 million, $24.5 million, and $20.6 million,
respectively. In addition, our tax customers are eligible to receive an interest and fee-free tax advance loan which is generally a
percentage of the anticipated tax refund amount. The Company believes that this is a beneficial service for its existing customer
base as well as non-loan customers, and it plans to continue to promote this program.
The following table sets forth information about our tax advance loan product for fiscal 2023:
Minimum
Maximum
Origination
Origination
(Months)
(Months)
$
500 $
5,000
8
8
Minimum
Maximum
Term
Term
Tax advance loans
of each year from 2014 through 2023:
Loan Receivables. The following table sets forth the composition of the Company's gross loans receivable by state at March 31
State
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
6 %
7 %
6 %
13
5 %
13
5 %
13
5 %
4 %
6 %
5 %
4 %
At March 31,
Alabama
Georgia
Idaho (1)
Illinois
Indiana
Kentucky
Louisiana
Mississippi (2)
Missouri
New Mexico
Oklahoma
South Carolina
Tennessee
Texas
Utah (3)
Wisconsin
Total
13
1
10
2
6
4
2
7
4
6
8
9
1
1
20
13
1
10
3
6
3
2
7
2
6
8
10
20
1
1
1
8
2
7
3
2
8
2
6
10
11
19
1
1
1
8
2
8
3
1
8
2
6
10
11
19
1
2
1
7
2
8
3
1
7
2
7
9
12
21
—
2
14
—
7
2
9
2
1
7
2
7
10
13
19
—
2
15
—
10
7
2
2
1
7
2
7
11
13
18
—
1
13
—
7
1
10
2
—
8
2
8
10
13
19
—
1
13
—
7
1
10
2
—
8
2
8
11
13
19
—
1
13
—
8
1
9
2
7
2
7
—
12
13
21
—
1
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
_______________________________________________________
(1) The Company commenced operations in Idaho in October 2014.
(2) The Company commenced operations in Mississippi in September 2013.
(3) The Company commenced operations in Utah in October 2018.
The following table sets forth the total number of loans, the average gross loan balance, and the gross loan balance by state at
March 31, 2023:
Total
Number
of Loans
Average
Gross Loan
Balance
Alabama
Georgia
Idaho
Illinois
Indiana
Kentucky
Louisiana
Mississippi
Missouri
New Mexico
Oklahoma
South Carolina
Tennessee
Texas
Utah
Wisconsin
Total
46,330 $
82,572
6,366
43,232
19,835
42,577
29,886
21,252
32,402
25,979
40,078
50,623
60,203
162,921
4,389
9,300
677,945 $
Gross Loan
Balance
(thousands)
1,889 $
87,538
2,182
180,202
1,709
10,877
3,185
137,705
1,723
34,176
2,096
89,235
1,752
52,368
1,348
28,650
2,992
96,944
2,164
56,230
2,014
80,718
2,141
108,365
2,050
123,409
1,698
276,596
2,017
8,854
1,952
18,149
2,050 $ 1,390,016
Seasonality. The Company's highest loan demand generally occurs from October to December, its third fiscal quarter. Loan
demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the
Company experiences significant seasonal fluctuations in its operating results and cash needs. Operating results for the
Company's third fiscal quarter are generally lower than in other quarters, and operating results for its fourth fiscal quarter are
generally higher than in other quarters.
Operations
Lending Operations. The Company seeks to provide short-term consumer installment loans to the segment of the population that
has limited access to other sources of credit. In evaluating the creditworthiness of potential customers, the Company primarily
examines the individual's discretionary income, length of current employment and/or sources of income, duration of residence,
and prior credit experience. Loans are made to individuals on the basis of their discretionary income and other factors and are
limited to amounts we believe that customers can reasonably be expected to repay from that income given our assessment of their
stability and ability and willingness to pay. The Company also generates a proprietary credit score in assisting loan decisions to
potential new customers that evaluates key attributes such as payment history, outstanding debt, length of credit history, number
of credit inquiries as well as credit mix. All loan applicants are required to complete standardized credit applications online, in
person, or by telephone. Each of the Company's local branches are equipped to perform rapid background, employment, and
credit bureau checks and approve loan applications promptly. The Company's employees verify the applicant's sources of income
and credit history. Substantially all new customers are required to submit a listing of personal property that will serve as collateral
to secure the loan, but the Company does not rely on the value of such collateral in the loan approval process and generally does
not perfect its security interest in that collateral. Accordingly, if the customer were to default in the repayment of the loan, the
Company may not be able to recover the outstanding loan balance by resorting to the sale of collateral.
New Loans to Current and Former Customers. The Company believes that development and continual reinforcement of personal
relationships with customers improves the Company's ability to monitor their creditworthiness, reduce credit risk, and generate
customer loyalty. It is not unusual for the Company to have made a number of loans to the same customer over the course of
several years, many of which were refinanced with a new loan after the borrower had reduced the existing loan's outstanding
9
balance by making multiple payments. In determining whether to refinance existing loans, the Company typically requires loans
to be current on a recency basis, and repeat customers are generally required to complete a new credit application if they have
not completed one within the prior year.
A refinancing represents a new loan transaction with a present customer in which a portion of the new loan proceeds is used to
repay the balance of an existing loan and the remaining portion is advanced to the customer. In many cases the existing customer’s
past performance and established creditworthiness with the Company qualifies that customer for a larger loan. For fiscal 2023,
2022, and 2021, the percentages of the Company's loan originations that were refinancings of existing loans were 71.4%, 63.9%,
and 69.2%, respectively.
The Company allows refinancing of delinquent loans on a case-by-case basis for those customers who otherwise satisfy the
Company's credit standards. Each such refinancing is carefully examined before approval in an effort to avoid increasing credit
risk. A delinquent loan generally may be refinanced only if the customer has made payments that, together with any credits of
insurance premiums or other charges to which the customer is entitled in connection with the refinancing, reduce the balance due
on the loan to an amount equal to or less than the original cash advance made in connection with the loan. The Company does
not allow the amount of the new loan to exceed the original amount of the existing loan. The Company believes that refinancing
delinquent loans for certain customers who have made periodic payments allows the Company to increase its average loans
outstanding and its interest, fees and other income without experiencing a significant increase in loan losses. These refinancings
also provide a resolution to temporary financial setbacks for these borrowers and sustain their credit rating. Refinancings of
delinquent loans represented 1.4%, 1.1%, and 1.5% of the Company’s loan volume in fiscal 2023, 2022, and 2021, respectively.
Approximately 16.9%, 15.0%, and 14.7% of the Company's loans were generated through the origination of new loans to previous
customers in fiscal 2023, 2022, and 2021, respectively.
Collection Operations. To reduce late payment risk, local branch staff encourage customers to inform the Company in advance
of expected payment problems. Local branch staff also promptly contact delinquent customers following any payment due date
and thereafter remain in close contact with such customers through phone calls or letters until payment is received or some other
resolution is reached. The Company also has a centralized collections team that primarily focuses on customers who have become
more than 90 days past due on a recency basis. In Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi,
Missouri, New Mexico, Oklahoma, Tennessee, Utah, and Wisconsin, the Company is permitted under state laws to garnish
customers' wages, within certain circumstances, for repayment of loans, but the Company does not otherwise generally resort to
litigation for collection purposes and rarely attempts to foreclose on collateral.
Monitoring and Supervision. Several levels of management monitor and supervise the operations of each of the Company's
branches. Senior management has access to daily delinquency, loan volume, charge-off, and other statistical data on a
consolidated, state and branch level. District managers evaluate branch performance in their geographic area, communicate
regularly with branch managers regarding operations and submit standardized reports detailing their efforts and findings to the
Company's senior management. Regional vice presidents monitor the performance of all branches within their states and
communicate regularly with district managers. The Company takes a risk-based approach to determine internal audit frequency.
Each branch undergoes periodic audits which include an examination of cash balances and compliance with Company loan
approval, review and collection procedures, and compliance with federal and state laws and regulations.
Staff and Training. Local branches are staffed with a minimum of two employees. The branch manager supervises and administers
operations of the branch and is responsible for approving all borrower loan applications and requests for increases in the amount
of credit extended. Each branch generally has one or two financial service representatives who take loan applications, process
loan applications, apply payments, and assist in the preparation of operational reports, collection efforts, and marketing
activities. Larger branches may employ additional financial service representatives.
New employees are required to review detailed training materials that explain the Company's operating policies and
procedures. The Company tests each employee on the training materials during the first year of employment. In addition, each
branch associate completes an online training session and attends periodic training sessions outside the branch. The Company
utilizes an enhanced training tool, which provides continuous, real-time, online training to all locations. This allows for more
training opportunities to be available to all employees throughout the course of their career with the Company.
10
Advertising. The Company actively advertises through direct mail, digital platforms and by email and SMS/text, targeting both
its present and former customers and potential customers who have used other sources of consumer credit. In addition to the
general promotion of its loans for last-minute needs, back-to-school needs and other uses, the Company advertises extensively
during the October through December holiday season and in connection with new branch openings. The Company believes its
advertising contributes significantly to its ability to compete effectively with other providers of small-loan consumer
credit. Advertising expenses as a percent of revenue were approximately 1.0%, 3.1%, and 3.3% in fiscal 2023, 2022, and 2021,
respectively.
Competition. The small-loan consumer finance industry is highly fragmented, with numerous competitors. The majority of the
Company's competitors are independent operators with generally less than 100 branches. Competition from community banks
and credit unions is limited because they typically do not make loans of less than $5,000. We believe that online lending could
be affecting the consumer lending market within which we operate. While it currently appears online lenders are marketing to a
different customer segment than that of our primary customers, some of our customers may overlap.
The Company believes that competition between small-loan consumer finance companies occurs primarily on the basis of the
strength of customer relationships, customer service, and reputation in the local community. The Company believes that its
relatively larger size affords it a competitive advantage over smaller companies by increasing its access to, and reducing its cost
of, capital.
Several of the states in which the Company currently operates limit the size of loans made by small-loan consumer finance
companies and prohibit the extension of more than one loan to a customer by any one company. As a result, many customers
borrow from more than one finance company, which enables the Company, subject to the limitations of various consumer
protection and privacy statutes, including, but not limited to, the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act, to
obtain information on the credit history of specific customers from other consumer finance companies.
Human Capital Resources
Our Mission. At World Acceptance Corporation, our employees (who we call our “Team Members”) create possibilities by
embracing our mission to partner with customers to unlock their financial good. Creating a culture of opportunity for our Team
Members is key to supporting this mission.
Team Members. As a people-focused finance company, we value our Team Members by investing in competitive compensation
and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication. We
strive to build and maintain a high-performing culture and believe in operating by strong values.
We value feedback from our team and participate in an annual engagement survey that resulted in being named by Energage as a
Top Workplaces USA winner in 2023, 2022, and 2021.
During fiscal 2023, our human capital efforts were focused on accelerating the transformation of our technology for workforce
management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly
changing needs of the business. The Company maintains strong relations with its employees and seeks to hire people who will
become long-term employees, and, as a result, the vast majority of our field leadership has been promoted from within.
As of March 31, 2023, we employed 3,075 full and part-time employees across our sixteen-state footprint, approximately 287 of
whom were corporate Team Members located in our main corporate office in Greenville, South Carolina and approximately 2,788
of whom were branch-based Team Members located in 16 states throughout the United States. None of our Team Members belong
to a union or are party to any collective bargaining or similar agreement.
We strive toward having a powerful and diverse team of Team Members, knowing we are better together with our combined
wisdom and intellect. With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting,
and valuing the differences between people.
balance by making multiple payments. In determining whether to refinance existing loans, the Company typically requires loans
to be current on a recency basis, and repeat customers are generally required to complete a new credit application if they have
not completed one within the prior year.
A refinancing represents a new loan transaction with a present customer in which a portion of the new loan proceeds is used to
repay the balance of an existing loan and the remaining portion is advanced to the customer. In many cases the existing customer’s
past performance and established creditworthiness with the Company qualifies that customer for a larger loan. For fiscal 2023,
2022, and 2021, the percentages of the Company's loan originations that were refinancings of existing loans were 71.4%, 63.9%,
and 69.2%, respectively.
The Company allows refinancing of delinquent loans on a case-by-case basis for those customers who otherwise satisfy the
Company's credit standards. Each such refinancing is carefully examined before approval in an effort to avoid increasing credit
risk. A delinquent loan generally may be refinanced only if the customer has made payments that, together with any credits of
insurance premiums or other charges to which the customer is entitled in connection with the refinancing, reduce the balance due
on the loan to an amount equal to or less than the original cash advance made in connection with the loan. The Company does
not allow the amount of the new loan to exceed the original amount of the existing loan. The Company believes that refinancing
delinquent loans for certain customers who have made periodic payments allows the Company to increase its average loans
outstanding and its interest, fees and other income without experiencing a significant increase in loan losses. These refinancings
also provide a resolution to temporary financial setbacks for these borrowers and sustain their credit rating. Refinancings of
delinquent loans represented 1.4%, 1.1%, and 1.5% of the Company’s loan volume in fiscal 2023, 2022, and 2021, respectively.
Approximately 16.9%, 15.0%, and 14.7% of the Company's loans were generated through the origination of new loans to previous
customers in fiscal 2023, 2022, and 2021, respectively.
Collection Operations. To reduce late payment risk, local branch staff encourage customers to inform the Company in advance
of expected payment problems. Local branch staff also promptly contact delinquent customers following any payment due date
and thereafter remain in close contact with such customers through phone calls or letters until payment is received or some other
resolution is reached. The Company also has a centralized collections team that primarily focuses on customers who have become
more than 90 days past due on a recency basis. In Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi,
Missouri, New Mexico, Oklahoma, Tennessee, Utah, and Wisconsin, the Company is permitted under state laws to garnish
customers' wages, within certain circumstances, for repayment of loans, but the Company does not otherwise generally resort to
litigation for collection purposes and rarely attempts to foreclose on collateral.
Monitoring and Supervision. Several levels of management monitor and supervise the operations of each of the Company's
branches. Senior management has access to daily delinquency, loan volume, charge-off, and other statistical data on a
consolidated, state and branch level. District managers evaluate branch performance in their geographic area, communicate
regularly with branch managers regarding operations and submit standardized reports detailing their efforts and findings to the
Company's senior management. Regional vice presidents monitor the performance of all branches within their states and
communicate regularly with district managers. The Company takes a risk-based approach to determine internal audit frequency.
Each branch undergoes periodic audits which include an examination of cash balances and compliance with Company loan
approval, review and collection procedures, and compliance with federal and state laws and regulations.
Staff and Training. Local branches are staffed with a minimum of two employees. The branch manager supervises and administers
operations of the branch and is responsible for approving all borrower loan applications and requests for increases in the amount
of credit extended. Each branch generally has one or two financial service representatives who take loan applications, process
loan applications, apply payments, and assist in the preparation of operational reports, collection efforts, and marketing
activities. Larger branches may employ additional financial service representatives.
New employees are required to review detailed training materials that explain the Company's operating policies and
procedures. The Company tests each employee on the training materials during the first year of employment. In addition, each
branch associate completes an online training session and attends periodic training sessions outside the branch. The Company
utilizes an enhanced training tool, which provides continuous, real-time, online training to all locations. This allows for more
training opportunities to be available to all employees throughout the course of their career with the Company.
Advertising. The Company actively advertises through direct mail, digital platforms and by email and SMS/text, targeting both
its present and former customers and potential customers who have used other sources of consumer credit. In addition to the
general promotion of its loans for last-minute needs, back-to-school needs and other uses, the Company advertises extensively
during the October through December holiday season and in connection with new branch openings. The Company believes its
advertising contributes significantly to its ability to compete effectively with other providers of small-loan consumer
credit. Advertising expenses as a percent of revenue were approximately 1.0%, 3.1%, and 3.3% in fiscal 2023, 2022, and 2021,
respectively.
Competition. The small-loan consumer finance industry is highly fragmented, with numerous competitors. The majority of the
Company's competitors are independent operators with generally less than 100 branches. Competition from community banks
and credit unions is limited because they typically do not make loans of less than $5,000. We believe that online lending could
be affecting the consumer lending market within which we operate. While it currently appears online lenders are marketing to a
different customer segment than that of our primary customers, some of our customers may overlap.
The Company believes that competition between small-loan consumer finance companies occurs primarily on the basis of the
strength of customer relationships, customer service, and reputation in the local community. The Company believes that its
relatively larger size affords it a competitive advantage over smaller companies by increasing its access to, and reducing its cost
of, capital.
Several of the states in which the Company currently operates limit the size of loans made by small-loan consumer finance
companies and prohibit the extension of more than one loan to a customer by any one company. As a result, many customers
borrow from more than one finance company, which enables the Company, subject to the limitations of various consumer
protection and privacy statutes, including, but not limited to, the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act, to
obtain information on the credit history of specific customers from other consumer finance companies.
Human Capital Resources
Our Mission. At World Acceptance Corporation, our employees (who we call our “Team Members”) create possibilities by
embracing our mission to partner with customers to unlock their financial good. Creating a culture of opportunity for our Team
Members is key to supporting this mission.
Team Members. As a people-focused finance company, we value our Team Members by investing in competitive compensation
and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication. We
strive to build and maintain a high-performing culture and believe in operating by strong values.
We value feedback from our team and participate in an annual engagement survey that resulted in being named by Energage as a
Top Workplaces USA winner in 2023, 2022, and 2021.
During fiscal 2023, our human capital efforts were focused on accelerating the transformation of our technology for workforce
management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly
changing needs of the business. The Company maintains strong relations with its employees and seeks to hire people who will
become long-term employees, and, as a result, the vast majority of our field leadership has been promoted from within.
As of March 31, 2023, we employed 3,075 full and part-time employees across our sixteen-state footprint, approximately 287 of
whom were corporate Team Members located in our main corporate office in Greenville, South Carolina and approximately 2,788
of whom were branch-based Team Members located in 16 states throughout the United States. None of our Team Members belong
to a union or are party to any collective bargaining or similar agreement.
We strive toward having a powerful and diverse team of Team Members, knowing we are better together with our combined
wisdom and intellect. With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting,
and valuing the differences between people.
11
As of March 31, 2023, our Team Members had the following gender, race and ethnicity demographics:
Female
Male
Undeclared
White
Hispanic or Latino
Black or African American
Other Race/Ethnicity
Not provided
Gender - All Team Members
Race/Ethnicity - All Team Members
85.94%
13.96%
0.10%
55.76%
22.27%
16.31%
4.65%
1.01%
Total Rewards. We provide a comprehensive suite of benefits designed to help Team Members and their families stay healthy,
meet their financial goals, protect their income and help them balance their work and personal lives. We provide competitive pay,
as well as a wide array of benefits including the following:
• Healthcare benefits, including medical, dental and vision, and flexible spending accounts
• A 401(k) Plan (with an employer matching contribution)
• Company-paid basic life insurance and long-term and short-term disability
• Vacation, sick and holiday paid-time off, as well as volunteer paid time off and paid parental leave
• Time off donation program for Team Members experiencing medical emergencies
Financial assistance program for Team Members impacted by natural disasters
•
Training and Development. We believe the development of our Team Members is key to our future success and are focused on
delivering programs designed to increase our internal talent pools at all levels within the organization. Some examples of these
programs include:
• BOLT – developing high performing and high potential Account Specialists to prepare them for Branch Manager roles
• Emerging Leaders – developing high performing and high potential Branch Managers to prepare them for District
Manager roles
Information about our Executive Officers. The names and ages, positions, terms of office and periods of service of each of the
Company's executive officers (and other business experience for executive officers who have served as such for less than five
years) are set forth below. The term of office for each executive officer expires upon the earlier of the appointment and
qualification of a successor or such officer's death, resignation, retirement, or removal.
12
Name and Age
Position
R. Chad Prashad (42)
President and Chief
Executive Officer
Period of Service as Executive Officer and
Pre-Executive Officer Experience (if an
Executive Officer for Less Than Five Years)
President and Chief Executive Officer since
•
•
June 2018
2018
Senior Vice President, Chief Strategy &
Analytics Officer from February 2018 to June
• Vice President of Analytics from June 2014
to February 2018
•
Senior Director of Strategy Development for
Resurgent Capital Services (a consumer debt
managing and servicing company) from 2013
to June 2014
• Director of Legal Strategy for Resurgent
Capital Services from 2009 to 2013
and Strategy Officer and Treasurer since
October 2018
•
Senior Vice President, Chief Financial
Officer and Treasurer from November 2015
to October 2018
• Vice President, Chief Financial Officer and
Treasurer from December 2013 to November
2015
• Director of Finance - Corporate and
Investment Banking Division of Bank of
Tokyo-Mitsubishi UFJ in 2013
•
Senior Manager of PricewaterhouseCoopers
from 2011 to 2013; Manager of
PricewaterhouseCoopers from 2008 to 2011
Operations Officer since February 2018
• Executive Vice President of Branch
Operations from September 2016 to February
2018
•
•
Senior Vice President, Southeastern Division
from November 2015 to September 2016
Senior Vice President, Central Division from
June 2005 to November 2015; Vice
President, Operations –Tennessee and
Kentucky from April 2002 to June 2005
•
Senior Vice President, Secretary and General
Counsel since August 2018
• General Counsel and Chief Compliance
Officer for Shellpoint Mortgage Servicing
from December 2015 to August 2018
• General Counsel for Global Lending Services
from May 2015 to December 2015;
Managing Counsel for Resurgent Capital
Services, June 2009 to May 2015
John L. Calmes Jr. (43)
Executive Vice President,
• Executive Vice President, Chief Financial
Chief Financial and
Strategy Officer, and
Treasurer
D. Clinton Dyer (50)
Executive Vice President
• Executive Vice President and Chief Branch
and Chief Branch
Operations Officer
Luke J. Umstetter (43)
Senior Vice President,
General Counsel, Chief
Compliance Officer and
Secretary
As of March 31, 2023, our Team Members had the following gender, race and ethnicity demographics:
Female
Male
Undeclared
White
Hispanic or Latino
Black or African American
Other Race/Ethnicity
Not provided
Gender - All Team Members
Race/Ethnicity - All Team Members
85.94%
13.96%
0.10%
55.76%
22.27%
16.31%
4.65%
1.01%
• Healthcare benefits, including medical, dental and vision, and flexible spending accounts
• A 401(k) Plan (with an employer matching contribution)
• Company-paid basic life insurance and long-term and short-term disability
• Vacation, sick and holiday paid-time off, as well as volunteer paid time off and paid parental leave
• Time off donation program for Team Members experiencing medical emergencies
•
Financial assistance program for Team Members impacted by natural disasters
Training and Development. We believe the development of our Team Members is key to our future success and are focused on
delivering programs designed to increase our internal talent pools at all levels within the organization. Some examples of these
programs include:
Manager roles
Information about our Executive Officers. The names and ages, positions, terms of office and periods of service of each of the
Company's executive officers (and other business experience for executive officers who have served as such for less than five
years) are set forth below. The term of office for each executive officer expires upon the earlier of the appointment and
qualification of a successor or such officer's death, resignation, retirement, or removal.
Name and Age
Position
R. Chad Prashad (42)
President and Chief
Executive Officer
Total Rewards. We provide a comprehensive suite of benefits designed to help Team Members and their families stay healthy,
meet their financial goals, protect their income and help them balance their work and personal lives. We provide competitive pay,
John L. Calmes Jr. (43)
as well as a wide array of benefits including the following:
Executive Vice President,
Chief Financial and
Strategy Officer, and
Treasurer
Period of Service as Executive Officer and
Pre-Executive Officer Experience (if an
Executive Officer for Less Than Five Years)
•
•
•
•
President and Chief Executive Officer since
June 2018
Senior Vice President, Chief Strategy &
Analytics Officer from February 2018 to June
2018
Vice President of Analytics from June 2014
to February 2018
Senior Director of Strategy Development for
Resurgent Capital Services (a consumer debt
managing and servicing company) from 2013
to June 2014
• Director of Legal Strategy for Resurgent
Capital Services from 2009 to 2013
• Executive Vice President, Chief Financial
•
and Strategy Officer and Treasurer since
October 2018
Senior Vice President, Chief Financial
Officer and Treasurer from November 2015
to October 2018
• Vice President, Chief Financial Officer and
Treasurer from December 2013 to November
2015
• Director of Finance - Corporate and
•
Investment Banking Division of Bank of
Tokyo-Mitsubishi UFJ in 2013
Senior Manager of PricewaterhouseCoopers
from 2011 to 2013; Manager of
PricewaterhouseCoopers from 2008 to 2011
• BOLT – developing high performing and high potential Account Specialists to prepare them for Branch Manager roles
• Emerging Leaders – developing high performing and high potential Branch Managers to prepare them for District
D. Clinton Dyer (50)
Executive Vice President
and Chief Branch
Operations Officer
• Executive Vice President and Chief Branch
Operations Officer since February 2018
• Executive Vice President of Branch
Operations from September 2016 to February
2018
Senior Vice President, Southeastern Division
from November 2015 to September 2016
Senior Vice President, Central Division from
June 2005 to November 2015; Vice
President, Operations –Tennessee and
Kentucky from April 2002 to June 2005
Senior Vice President, Secretary and General
Counsel since August 2018
•
•
•
• General Counsel and Chief Compliance
Officer for Shellpoint Mortgage Servicing
from December 2015 to August 2018
• General Counsel for Global Lending Services
from May 2015 to December 2015;
Managing Counsel for Resurgent Capital
Services, June 2009 to May 2015
Luke J. Umstetter (43)
Senior Vice President,
General Counsel, Chief
Compliance Officer and
Secretary
13
A. Lindsay Caulder (47)
Senior Vice President,
Human Resources
•
Senior Vice President, Human Resources
since October 2018
• Vice President, Human Resources from
February 2016 to October 2018
• Divisional Vice President - Human Resources
of Family Dollar Corporation, a nationwide
variety retail chain, from 2012 to 2016
• Director - Learning and Talent Acquisition of
Family Dollar Corporation from 2009-2012
Jason E. Childers (48)
Senior Vice President,
Information Technology
•
Senior Vice President, Information
Technology since October 2018
Scott McIntyre (46)
Senior Vice President,
Accounting
• Vice President of IT Strategic Solutions from
•
•
April 2016 to October 2018
Partner and Head of IT at Sabal Financial
Group, LP from March 2009 until April 2016
Senior Vice President of Accounting since
October 2018
• Vice President of Accounting-US from June
2013 to October 2018
• Controller-US from June 2011 to June 2013
Government Regulation
Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and
state statutes, ordinances, and regulations. See Part I, Item 1A, “Risk Factors”, for a discussion of the risks related to our extensive
regulation.
State Regulations and Legislation. The Company is subject to numerous state laws and regulations that affect our lending
activities. Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and
operations. Further, there is a trend of increased state regulation on loan origination, servicing, and collection procedures, as well
as more detailed reporting and examinations, and coordination of examinations among the states. Failure to comply with
applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment against us
of civil, monetary, or other penalties. Generally, state regulations also establish minimum capital requirements for each local
branch. Accordingly, the ability of the Company to expand by acquiring existing branches and opening new branches will depend
in part on obtaining the necessary regulatory approvals.
For example, Texas regulation requires the approval of the Texas Consumer Credit Commissioner for the acquisition, directly or
indirectly, of more than 10% of the voting or common stock of a consumer finance company. A Louisiana statute prohibits any
person from acquiring control of 25% or more of the shares of stock of a licensed consumer lender, such as the Company, without
first obtaining a license as a consumer lender. The overall effect of these laws, and similar laws in other states, is to make it more
difficult to acquire a consumer finance company than it might be to acquire control of an unregulated company.
All of the Company's branches are licensed under the laws of the state in which the branch is located. Licenses in these states are
subject to renewal every year and may be revoked for failure to comply with applicable state and federal laws and regulations. In
the states in which the Company currently operates, licenses may be revoked only after an administrative hearing.
The Company and its operations are regulated by a variety of state agencies in the jurisdictions in which the Company operates,
including those related to banking, finance, financial institutions and consumer credit. These state regulatory agencies audit the
Company's local branches from time to time, and most state agencies perform an annual compliance audit of the Company's
operations in that state.
Insurance Regulations. The Company is also subject to state regulations governing insurance agents in the states in which it sells
credit insurance. State insurance regulations require that insurance agents be licensed, govern the commissions that may be paid
to agents in connection with the sale of credit insurance and limit the premium amount charged for such insurance. The Company's
captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies,
where the subsidiary is organized and domiciled.
14
In addition, state authorities regulate and supervise the Company's insurance operations. The extent of such regulation varies by
product and by state, but relate primarily to the following: licensing; conduct of business, including marketing and sales practices;
periodic financial and market conduct examination of the affairs of insurers; form and content of required financial reports;
standards of solvency; limitations on the payment of dividends and other affiliate transactions; types of products offered; approval
of policy forms and premium rates; formulas used to calculate any unearned premium refund due to an insured customer;
permissible investments; deposits of securities for the benefit of policyholders; reserve requirements for unearned premiums,
losses, and other purposes; and claims processing.
Consumer finance companies are affected by changes in state and federal statutes and regulations. The Company actively
participates in trade associations and in lobbying efforts in the states in which it operates and at the federal level. There have
been, and the Company expects that there will continue to be, media attention, initiatives, discussions, proposals, and legislation
regarding the entire consumer credit industry, as well as our particular installment loan business, and possible significant changes
to the laws and regulations that govern our business, or the authority exercised pursuant to those laws and regulations. In some
cases, proposed or pending legislative or regulatory changes have been introduced that would, if enacted, have a material adverse
effect on, or possibly even eliminate, our ability to continue our current business. We can give no assurance that the laws and
regulations that govern our business, or the interpretation or administration of those laws and regulations, will remain unchanged
or that any such future changes will not materially and adversely affect, or in the worst case, eliminate, the Company’s lending
practices, operations, profitability, or prospects. See “Federal legislation” below and Part I, Item 1A, “Risk Factors,” for a further
discussion of the potential impact of regulatory changes on our business.
Federal legislation. In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations
that affect our lending operations. These laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Military
Lending Act, the Fair Credit Reporting Act, and the regulations thereunder, and the Federal Trade Commission's Credit Practices
Rule. These laws require the Company to provide complete disclosure of the principal terms of each loan to the borrower prior
to the consummation of the loan transaction, prohibit misleading advertising, protect against discriminatory lending practices,
and prohibit unfair, deceptive, or abusive credit practices. Violations of these statutes and regulations may result in actions for
damages, claims for refund of payments made, certain fines and penalties, injunctions against certain practices, and the potential
forfeiture of rights to repayment of loans.
Although these laws and regulations remained substantially unchanged for many years, over the last several years, the laws and
regulations directly affecting our lending activities have been under review and are subject to change as a result of various
developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the
political and media focus on issues of consumer and borrower protection. See Part I, Item 1A, “Risk Factors".
Various legislative proposals addressing consumer credit transactions have been passed in recent years or are currently pending
in the U.S. Congress. Congressional members continue to receive pressure from consumer activists and other industry opposition
groups to adopt legislation to address various aspects of consumer credit transactions. The Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (commonly referred to
as the CFPB), which has sweeping regulatory, supervisory, and enforcement powers over providers of consumer financial
products and services, including explicit supervisory authority to examine and require registration of non-depository lenders and
to promulgate rules that can affect the practices and activities of lenders. The CFPB continues to actively engage in the
announcement and implementation of various plans and initiatives generally in the area of consumer financial transactions. Some
of these CFPB announced plans and initiatives, if implemented, would directly affect certain loan products we currently offer and
subject us to the CFPB’s supervisory authority. See Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Regulatory Matters,” for more information regarding the CFPB's regulatory initiatives.
In addition to the grant of certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue
administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can
obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of
affirmative relief) and monetary penalties. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations
thereunder, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations
of state law.
A. Lindsay Caulder (47)
Senior Vice President,
Human Resources
Jason E. Childers (48)
Senior Vice President,
Information Technology
•
Senior Vice President, Information
Technology since October 2018
Scott McIntyre (46)
Senior Vice President,
Accounting
•
Senior Vice President, Human Resources
since October 2018
• Vice President, Human Resources from
February 2016 to October 2018
• Divisional Vice President - Human Resources
of Family Dollar Corporation, a nationwide
variety retail chain, from 2012 to 2016
• Director - Learning and Talent Acquisition of
Family Dollar Corporation from 2009-2012
•
•
• Vice President of IT Strategic Solutions from
April 2016 to October 2018
Partner and Head of IT at Sabal Financial
Group, LP from March 2009 until April 2016
Senior Vice President of Accounting since
October 2018
• Vice President of Accounting-US from June
2013 to October 2018
• Controller-US from June 2011 to June 2013
Government Regulation
regulation.
Small-loan consumer finance companies are subject to extensive regulation, supervision, and licensing under various federal and
state statutes, ordinances, and regulations. See Part I, Item 1A, “Risk Factors”, for a discussion of the risks related to our extensive
State Regulations and Legislation. The Company is subject to numerous state laws and regulations that affect our lending
activities. Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and
operations. Further, there is a trend of increased state regulation on loan origination, servicing, and collection procedures, as well
as more detailed reporting and examinations, and coordination of examinations among the states. Failure to comply with
applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment against us
of civil, monetary, or other penalties. Generally, state regulations also establish minimum capital requirements for each local
branch. Accordingly, the ability of the Company to expand by acquiring existing branches and opening new branches will depend
in part on obtaining the necessary regulatory approvals.
For example, Texas regulation requires the approval of the Texas Consumer Credit Commissioner for the acquisition, directly or
indirectly, of more than 10% of the voting or common stock of a consumer finance company. A Louisiana statute prohibits any
person from acquiring control of 25% or more of the shares of stock of a licensed consumer lender, such as the Company, without
first obtaining a license as a consumer lender. The overall effect of these laws, and similar laws in other states, is to make it more
difficult to acquire a consumer finance company than it might be to acquire control of an unregulated company.
All of the Company's branches are licensed under the laws of the state in which the branch is located. Licenses in these states are
subject to renewal every year and may be revoked for failure to comply with applicable state and federal laws and regulations. In
the states in which the Company currently operates, licenses may be revoked only after an administrative hearing.
The Company and its operations are regulated by a variety of state agencies in the jurisdictions in which the Company operates,
including those related to banking, finance, financial institutions and consumer credit. These state regulatory agencies audit the
Company's local branches from time to time, and most state agencies perform an annual compliance audit of the Company's
operations in that state.
Insurance Regulations. The Company is also subject to state regulations governing insurance agents in the states in which it sells
credit insurance. State insurance regulations require that insurance agents be licensed, govern the commissions that may be paid
to agents in connection with the sale of credit insurance and limit the premium amount charged for such insurance. The Company's
captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies,
where the subsidiary is organized and domiciled.
In addition, state authorities regulate and supervise the Company's insurance operations. The extent of such regulation varies by
product and by state, but relate primarily to the following: licensing; conduct of business, including marketing and sales practices;
periodic financial and market conduct examination of the affairs of insurers; form and content of required financial reports;
standards of solvency; limitations on the payment of dividends and other affiliate transactions; types of products offered; approval
of policy forms and premium rates; formulas used to calculate any unearned premium refund due to an insured customer;
permissible investments; deposits of securities for the benefit of policyholders; reserve requirements for unearned premiums,
losses, and other purposes; and claims processing.
Consumer finance companies are affected by changes in state and federal statutes and regulations. The Company actively
participates in trade associations and in lobbying efforts in the states in which it operates and at the federal level. There have
been, and the Company expects that there will continue to be, media attention, initiatives, discussions, proposals, and legislation
regarding the entire consumer credit industry, as well as our particular installment loan business, and possible significant changes
to the laws and regulations that govern our business, or the authority exercised pursuant to those laws and regulations. In some
cases, proposed or pending legislative or regulatory changes have been introduced that would, if enacted, have a material adverse
effect on, or possibly even eliminate, our ability to continue our current business. We can give no assurance that the laws and
regulations that govern our business, or the interpretation or administration of those laws and regulations, will remain unchanged
or that any such future changes will not materially and adversely affect, or in the worst case, eliminate, the Company’s lending
practices, operations, profitability, or prospects. See “Federal legislation” below and Part I, Item 1A, “Risk Factors,” for a further
discussion of the potential impact of regulatory changes on our business.
Federal legislation. In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations
that affect our lending operations. These laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Military
Lending Act, the Fair Credit Reporting Act, and the regulations thereunder, and the Federal Trade Commission's Credit Practices
Rule. These laws require the Company to provide complete disclosure of the principal terms of each loan to the borrower prior
to the consummation of the loan transaction, prohibit misleading advertising, protect against discriminatory lending practices,
and prohibit unfair, deceptive, or abusive credit practices. Violations of these statutes and regulations may result in actions for
damages, claims for refund of payments made, certain fines and penalties, injunctions against certain practices, and the potential
forfeiture of rights to repayment of loans.
Although these laws and regulations remained substantially unchanged for many years, over the last several years, the laws and
regulations directly affecting our lending activities have been under review and are subject to change as a result of various
developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the
political and media focus on issues of consumer and borrower protection. See Part I, Item 1A, “Risk Factors".
Various legislative proposals addressing consumer credit transactions have been passed in recent years or are currently pending
in the U.S. Congress. Congressional members continue to receive pressure from consumer activists and other industry opposition
groups to adopt legislation to address various aspects of consumer credit transactions. The Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (commonly referred to
as the CFPB), which has sweeping regulatory, supervisory, and enforcement powers over providers of consumer financial
products and services, including explicit supervisory authority to examine and require registration of non-depository lenders and
to promulgate rules that can affect the practices and activities of lenders. The CFPB continues to actively engage in the
announcement and implementation of various plans and initiatives generally in the area of consumer financial transactions. Some
of these CFPB announced plans and initiatives, if implemented, would directly affect certain loan products we currently offer and
subject us to the CFPB’s supervisory authority. See Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Regulatory Matters,” for more information regarding the CFPB's regulatory initiatives.
In addition to the grant of certain regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue
administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can
obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of
affirmative relief) and monetary penalties. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations
thereunder, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations
of state law.
15
Although the Dodd-Frank Act prohibits the CFPB from setting interest rates on consumer loans, 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 small-
loan consumer credit and similar services on terms substantially similar to those we currently provide would, if enacted, have a
material, adverse impact on our business, prospects, results of operations and financial condition. Any federal law that would
impose a national 36% or similar annualized credit rate cap on our services would, if enacted, almost certainly eliminate our
ability to continue our current operations. See Part I, Item 1A, “Risk Factors” - Federal legislative or regulatory proposals,
initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to
comply with existing or future federal laws and regulations, could force us to modify, suspend, or cease part or all of our
nationwide operations,” for further information regarding the potential impact of adverse legislative and regulatory changes.
Available Information. The Company maintains an Internet website, “www.LoansByWorld.com,” where interested persons will
be able to access free of charge, among other information, the Company’s annual reports on Form 10-K, its quarterly reports on
Form 10-Q, and its current reports on Form 8-K as well as amendments to these filings via a link to a third-party website. These
documents are available for access as soon as reasonably practicable after we electronically file these documents with the
SEC. The Company files these reports with the SEC via the SEC’s EDGAR filing system, and such reports also may be accessed
via the SEC’s EDGAR database at www.sec.gov/edgar. Information included on or linked to our website is not incorporated by
reference into this annual report.
Item 1A. Risk Factors
Forward-Looking Statements
This annual report contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995 that are based on management’s beliefs and assumptions, as well as information currently available to
management. Statements other than those of historical fact, including, but not limited to those identified by the use of words such
as “anticipate,” “estimate,” “intend,” “plan,” “expect,” “believe,” “may,” “will,” “should,” “would,” “could,” and any variations
of the foregoing and similar expressions, are forward-looking statements. Although we believe that the expectations reflected in
any such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Any
such statements are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our actual financial results, performance or financial condition
may vary materially from those anticipated, estimated, expected or implied by any forward-looking statements. Therefore, you
should not rely on any of these forward-looking statements.
Investors should consider the risk factors described in this annual report, in addition to the other information presented in this
annual report and the other reports and registration statements the Company files with or furnishes to the SEC from time to time,
in evaluating us, our business, and an investment in our securities. Any of the risk factors described in this annual report, as well
as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in harm to
our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could
cause investors to lose all or part of their investment in our Company. These factors, among others, could also cause actual results
to differ materially from those we have experienced in the past or those we may express or imply from time to time in any forward-
looking statements we make. Investors are advised that it is impossible to identify or predict all risks, and those risks not currently
known to us or those we currently deem immaterial could also affect us in the future. The following risks should not be construed
as exclusive and should be read with the other cautionary statements that are in this annual report on Form 10-K. The Company
does not undertake any obligation to update forward-looking statements, except as may be required by law, whether as a result of
new information, future developments, or otherwise.
Media and public characterization of consumer installment loans as being predatory or abusive could have a materially
adverse effect on our business, prospects, results of operations and financial condition.
Consumer activist groups and various other media sources continue to advocate for governmental and regulatory action to prohibit
or severely restrict our products and services. These critics frequently characterize our products and services as predatory or
16
abusive toward consumers. If this negative characterization of the consumer installment loans we make and/or ancillary services
we provide becomes widely accepted by government policy makers or is embodied in legislative, regulatory, policy or litigation
developments that adversely affect our ability to continue offering our products and services or the profitability of these products
and services, our business, results of operations and financial condition would be materially and adversely affected. Furthermore,
our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action regarding
consumer lending may adversely impact perceptions of our business even if such actions are not targeted at our operations and
do not directly impact us.
Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial
condition. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions
and policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. In response to elevated
inflation, the Federal Reserve Board has increased interest rates on several occasions since early 2022. The Federal Reserve Board
has indicated that it will raise rates further, if deemed necessary, to combat continued inflation growth.
In addition, our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes
in economic conditions or other factors that affect our borrowing costs. Changes in monetary policy, including changes in interest
rates, could influence the amount of interest we pay on our revolving credit facility or any other floating interest rate obligations
we may incur. Our profitability and liquidity could be materially adversely affected during any period of higher interest rates. See
Part II, Item 7A, “Quantitative and Qualitative Disclosure About Market Risk” for additional information regarding our interest
rate risk.
We are exposed to credit risk in our lending activities.
Our ability to collect on loans to individuals, our single largest asset group, depends on the ability and willingness of our borrowers
to repay such loans. Our customers generally do not qualify for, or have difficulty qualifying for, credit from traditional sources
of consumer credit. These traditional sources of consumer credit typically impose more stringent credit requirements than the
personal loan products that we provide. As a result, the historical delinquency and default experience on our loans may be higher
than those experienced by financial products arising from traditional sources of consumer credit.
Any material adverse change in the ability or willingness of a significant portion of our borrowers to meet their obligations to us,
whether due to changes in economic conditions, unemployment rates, the cost of consumer goods (particularly, but not limited
to, food and energy costs) and inflationary pressures, disposable income, interest rates, health crises, natural disasters, acts of war
or terrorism, political or social conditions, divorce, death, or other causes over which we have no control, would have a material
adverse impact on our earnings and financial condition. Additionally, delinquency and default experience on our loans is likely
to be more sensitive to changes in the economic climate in the areas in which our borrowers reside. Although new customers are
required to submit a listing of personal property that will serve as collateral to secure their loans, the Company does not rely on
the value of such collateral in the loan approval process and generally does not perfect its security interest in that collateral.
Additionally, increases in the size of the loans we offer and average loan size could increase the chance a borrower does not meet
their obligations to us and could further increase our credit risk. Additional information regarding our credit risk is included in
Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Allowance for Credit
Losses.”
Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events,
underwriting risks and dependence on a primary distribution channel.
Insurance claims and policyholder liabilities are difficult to predict and may exceed the related reserves set aside for claims
(losses) and associated expenses for claims adjudication (loss adjustment expenses). Additionally, events such as cyber security
attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial
condition and results of operations. Other risks relating to our insurance operations include changes to laws and regulations
applicable to us, as well as changes to the regulatory environment, such as: changes to laws or regulations affecting capital and
Although the Dodd-Frank Act prohibits the CFPB from setting interest rates on consumer loans, 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 small-
loan consumer credit and similar services on terms substantially similar to those we currently provide would, if enacted, have a
material, adverse impact on our business, prospects, results of operations and financial condition. Any federal law that would
impose a national 36% or similar annualized credit rate cap on our services would, if enacted, almost certainly eliminate our
ability to continue our current operations. See Part I, Item 1A, “Risk Factors” - Federal legislative or regulatory proposals,
initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to
comply with existing or future federal laws and regulations, could force us to modify, suspend, or cease part or all of our
nationwide operations,” for further information regarding the potential impact of adverse legislative and regulatory changes.
Available Information. The Company maintains an Internet website, “www.LoansByWorld.com,” where interested persons will
be able to access free of charge, among other information, the Company’s annual reports on Form 10-K, its quarterly reports on
Form 10-Q, and its current reports on Form 8-K as well as amendments to these filings via a link to a third-party website. These
documents are available for access as soon as reasonably practicable after we electronically file these documents with the
SEC. The Company files these reports with the SEC via the SEC’s EDGAR filing system, and such reports also may be accessed
via the SEC’s EDGAR database at www.sec.gov/edgar. Information included on or linked to our website is not incorporated by
reference into this annual report.
Item 1A. Risk Factors
Forward-Looking Statements
This annual report contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995 that are based on management’s beliefs and assumptions, as well as information currently available to
management. Statements other than those of historical fact, including, but not limited to those identified by the use of words such
as “anticipate,” “estimate,” “intend,” “plan,” “expect,” “believe,” “may,” “will,” “should,” “would,” “could,” and any variations
of the foregoing and similar expressions, are forward-looking statements. Although we believe that the expectations reflected in
any such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Any
such statements are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our actual financial results, performance or financial condition
may vary materially from those anticipated, estimated, expected or implied by any forward-looking statements. Therefore, you
should not rely on any of these forward-looking statements.
Investors should consider the risk factors described in this annual report, in addition to the other information presented in this
annual report and the other reports and registration statements the Company files with or furnishes to the SEC from time to time,
in evaluating us, our business, and an investment in our securities. Any of the risk factors described in this annual report, as well
as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in harm to
our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could
cause investors to lose all or part of their investment in our Company. These factors, among others, could also cause actual results
to differ materially from those we have experienced in the past or those we may express or imply from time to time in any forward-
looking statements we make. Investors are advised that it is impossible to identify or predict all risks, and those risks not currently
known to us or those we currently deem immaterial could also affect us in the future. The following risks should not be construed
as exclusive and should be read with the other cautionary statements that are in this annual report on Form 10-K. The Company
does not undertake any obligation to update forward-looking statements, except as may be required by law, whether as a result of
new information, future developments, or otherwise.
Media and public characterization of consumer installment loans as being predatory or abusive could have a materially
adverse effect on our business, prospects, results of operations and financial condition.
Consumer activist groups and various other media sources continue to advocate for governmental and regulatory action to prohibit
or severely restrict our products and services. These critics frequently characterize our products and services as predatory or
abusive toward consumers. If this negative characterization of the consumer installment loans we make and/or ancillary services
we provide becomes widely accepted by government policy makers or is embodied in legislative, regulatory, policy or litigation
developments that adversely affect our ability to continue offering our products and services or the profitability of these products
and services, our business, results of operations and financial condition would be materially and adversely affected. Furthermore,
our industry is highly regulated, and announcements regarding new or expected governmental and regulatory action regarding
consumer lending may adversely impact perceptions of our business even if such actions are not targeted at our operations and
do not directly impact us.
Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
Interest rate risk arises from the possibility that changes in interest rates will affect our results of operations and financial
condition. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions
and policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. In response to elevated
inflation, the Federal Reserve Board has increased interest rates on several occasions since early 2022. The Federal Reserve Board
has indicated that it will raise rates further, if deemed necessary, to combat continued inflation growth.
In addition, our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes
in economic conditions or other factors that affect our borrowing costs. Changes in monetary policy, including changes in interest
rates, could influence the amount of interest we pay on our revolving credit facility or any other floating interest rate obligations
we may incur. Our profitability and liquidity could be materially adversely affected during any period of higher interest rates. See
Part II, Item 7A, “Quantitative and Qualitative Disclosure About Market Risk” for additional information regarding our interest
rate risk.
We are exposed to credit risk in our lending activities.
Our ability to collect on loans to individuals, our single largest asset group, depends on the ability and willingness of our borrowers
to repay such loans. Our customers generally do not qualify for, or have difficulty qualifying for, credit from traditional sources
of consumer credit. These traditional sources of consumer credit typically impose more stringent credit requirements than the
personal loan products that we provide. As a result, the historical delinquency and default experience on our loans may be higher
than those experienced by financial products arising from traditional sources of consumer credit.
Any material adverse change in the ability or willingness of a significant portion of our borrowers to meet their obligations to us,
whether due to changes in economic conditions, unemployment rates, the cost of consumer goods (particularly, but not limited
to, food and energy costs) and inflationary pressures, disposable income, interest rates, health crises, natural disasters, acts of war
or terrorism, political or social conditions, divorce, death, or other causes over which we have no control, would have a material
adverse impact on our earnings and financial condition. Additionally, delinquency and default experience on our loans is likely
to be more sensitive to changes in the economic climate in the areas in which our borrowers reside. Although new customers are
required to submit a listing of personal property that will serve as collateral to secure their loans, the Company does not rely on
the value of such collateral in the loan approval process and generally does not perfect its security interest in that collateral.
Additionally, increases in the size of the loans we offer and average loan size could increase the chance a borrower does not meet
their obligations to us and could further increase our credit risk. Additional information regarding our credit risk is included in
Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Allowance for Credit
Losses.”
Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events,
underwriting risks and dependence on a primary distribution channel.
Insurance claims and policyholder liabilities are difficult to predict and may exceed the related reserves set aside for claims
(losses) and associated expenses for claims adjudication (loss adjustment expenses). Additionally, events such as cyber security
attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial
condition and results of operations. Other risks relating to our insurance operations include changes to laws and regulations
applicable to us, as well as changes to the regulatory environment, such as: changes to laws or regulations affecting capital and
17
reserve requirements; frequency and type of regulatory monitoring and reporting; consumer privacy, use of customer data and
data security; benefits or loss ratio requirements; insurance producer licensing or appointment requirements; required disclosures
to consumers; and collateral protection insurance (i.e., insurance some of our lender companies purchase, at the customer’s
expense, on that customer’s loan collateral for the periods of time the customer fails to adequately, as required by his loan, insure
his collateral).
experiencing inflationary pressures not seen in a significant period of time. We cannot predict the timing or the duration of any
inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions. During
an economic downturn or recession, demand for credit products often decreases and credit losses in the financial services industry
generally increase. Additionally, during an economic downturn, our loan servicing costs and collection costs may increase as we
may have to expend greater time and resources on these activities.
If our estimates of credit losses are not adequate to absorb actual losses, our provision for credit losses would increase, which
would adversely affect our results of operations.
To estimate the appropriate level of allowance for credit losses, we consider known and relevant internal and external factors that
affect loan collectability, including the total amount of loan receivables outstanding, historical loan receivable charge-offs, our
current collection patterns, and economic trends. Our methodology for establishing our allowance for credit losses is based on
the guidance in ASC 326, and, in part, on our historic loss experience. If customer behavior changes as a result of economic,
political, social, or other conditions, or if we are unable to predict how these conditions may affect our allowance for credit losses,
our allowance for credit losses may be inadequate. Our allowance for credit losses is an estimate, and if actual credit losses are
materially greater than our allowance for credit losses, our provision for credit losses would increase, which would result in a
decline in our future earnings, and thus our results of operations could be adversely affected. Neither state regulators nor federal
regulators regulate our allowance for credit losses. Additional information regarding our allowance for credit losses is included
in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Allowance for Credit
Losses.”
In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments (CECL). This ASU significantly changed the way that entities are required to measure credit losses.
This standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred
loss” approach previously required. The new approach requires entities to measure all expected credit losses for financial assets
based on historical experience, current conditions, and reasonable forecasts of collectability. As such, the expected credit loss
model requires earlier recognition of credit losses than the incurred loss approach. CECL became effective for the Company April
1, 2020. Our financial results may be negatively affected as weak or deteriorating economic conditions are forecasted and alter
our expectations for credit losses. In addition, due to the expansion of the time horizon over which we are required to estimate
future credit losses under CECL, we may experience increased volatility in our future provisions for credit losses.
The concentration of our revenues in certain states could adversely affect us.
We currently operate consumer installment loan branches in sixteen states in the United States. Any adverse legislative or
regulatory change in any one of our states or an economic downturn or catastrophic event that disproportionately affects one or
more of our states, including in any of our larger states, could have a material adverse effect on our business, prospects, and
results of operations or financial condition. See Part I, Item 1, “Description of Business” for information regarding the size of our
business in the various states in which we operate.
We may be unable to execute our business strategy due to economic conditions and these economic conditions could have a
material adverse effect on our business, financial position, results of operations, and cash flows.
Uncertainty and deterioration in general economic conditions in the U.S. historically have created a difficult operating
environment for consumer lending. Our financial performance generally, and in particular the ability of our borrowers to make
payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we
operate and in the United States as a whole. Many factors, including factors that are beyond our control, may impact our financial
position, liquidity, and results of operations and depend on management’s ability to execute our business strategy. The U.S.
economy is undergoing a period of significant uncertainty. These macro-economic factors include general inflation,
unemployment levels, housing markets, commodity prices, energy costs, volatile interest rates, natural disasters, acts of war and
terrorism. Additionally, many of our customers are primarily non-prime borrowers, who have historically been more likely to be
affected by adverse macro-economic factors than prime borrowers. Currently, due to a number of factors, the global economy is
18
Key factors involved in the execution of our business strategy include achieving our desired loan volume and pricing strategies,
the use of effective credit risk management techniques, marketing and servicing strategies, continued investment in technology
to support operating efficiency, and continued access to funding and liquidity sources. Although our pricing strategy is intended
to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints, there can
be no assurance that this strategy will have its intended effect. Our failure or inability to execute any element of our business
strategy, due to economic conditions or otherwise, could materially adversely affect our financial position, liquidity, and results
Our ability to execute our growth strategy is subject to significant risks, including some beyond our control, and may be
of operations.
adversely affected.
Our growth strategy includes opening and acquiring branches in existing and new markets and is subject to significant risks, some
of which are beyond our control, including:
•
•
•
•
•
the prevailing laws and regulatory environment of each state in which we operate or seek to operate, and, to the extent
applicable, federal laws and regulations, which are subject to change at any time;
our ability to obtain and maintain any regulatory approvals, government permits, or licenses that may be required;
the degree of competition in new markets and its effect on our ability to attract new customers;
our ability to obtain adequate financing for our expansion plans; and
our ability to attract, train, and retain qualified personnel to staff our new operations.
We currently lack product and business diversification; as a result, our revenues and earnings may be disproportionately
negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies.
Our primary business activity is offering small consumer installment loans together with, in some states in which we operate,
related ancillary products. Thus, any developments, whether regulatory, economic or otherwise, that would hinder, reduce the
profitability of, or limit our ability to operate our small consumer installment loan business on the terms currently conducted
would have a direct and adverse impact on our business, profitability, and perhaps even our viability. Our current lack of product
and business diversification could inhibit our opportunities for growth, reduce our revenues and profits, and make us more
susceptible to earnings fluctuations than many other financial institutions whose operations are more diversified.
A reduction in demand for our products and a failure by us to adapt to such reduction could adversely affect our business and
results of operations.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in
customer preferences or financial condition, regulatory restrictions that decrease customer access to particular products, or the
availability of competing products, including through alternative or competing marketing channels. For example, we are highly
dependent upon selecting and maintaining attractive branch locations. These locations are subject to local market conditions,
including the employment available in the area, housing costs, traffic patterns, crime, and other demographic influences, any of
which may quickly change, thereby negatively impacting demand for our products in the area. Should we fail to adapt to
significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and our
operations could be harmed. Even if we do make changes to existing products or introduce new products and channels to fulfill
customer demand, customers may resist or may reject such products. Moreover, the effect of any product change on the results
of our business may not be fully ascertainable until the change has been in effect for some time, and by that time it may be too
late to make further modifications to such product without causing further harm to our business, results of operations, and financial
condition.
reserve requirements; frequency and type of regulatory monitoring and reporting; consumer privacy, use of customer data and
data security; benefits or loss ratio requirements; insurance producer licensing or appointment requirements; required disclosures
to consumers; and collateral protection insurance (i.e., insurance some of our lender companies purchase, at the customer’s
expense, on that customer’s loan collateral for the periods of time the customer fails to adequately, as required by his loan, insure
his collateral).
experiencing inflationary pressures not seen in a significant period of time. We cannot predict the timing or the duration of any
inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions. During
an economic downturn or recession, demand for credit products often decreases and credit losses in the financial services industry
generally increase. Additionally, during an economic downturn, our loan servicing costs and collection costs may increase as we
may have to expend greater time and resources on these activities.
If our estimates of credit losses are not adequate to absorb actual losses, our provision for credit losses would increase, which
would adversely affect our results of operations.
To estimate the appropriate level of allowance for credit losses, we consider known and relevant internal and external factors that
affect loan collectability, including the total amount of loan receivables outstanding, historical loan receivable charge-offs, our
current collection patterns, and economic trends. Our methodology for establishing our allowance for credit losses is based on
the guidance in ASC 326, and, in part, on our historic loss experience. If customer behavior changes as a result of economic,
political, social, or other conditions, or if we are unable to predict how these conditions may affect our allowance for credit losses,
our allowance for credit losses may be inadequate. Our allowance for credit losses is an estimate, and if actual credit losses are
materially greater than our allowance for credit losses, our provision for credit losses would increase, which would result in a
decline in our future earnings, and thus our results of operations could be adversely affected. Neither state regulators nor federal
regulators regulate our allowance for credit losses. Additional information regarding our allowance for credit losses is included
in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Allowance for Credit
Losses.”
In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments (CECL). This ASU significantly changed the way that entities are required to measure credit losses.
This standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred
loss” approach previously required. The new approach requires entities to measure all expected credit losses for financial assets
based on historical experience, current conditions, and reasonable forecasts of collectability. As such, the expected credit loss
model requires earlier recognition of credit losses than the incurred loss approach. CECL became effective for the Company April
1, 2020. Our financial results may be negatively affected as weak or deteriorating economic conditions are forecasted and alter
our expectations for credit losses. In addition, due to the expansion of the time horizon over which we are required to estimate
future credit losses under CECL, we may experience increased volatility in our future provisions for credit losses.
The concentration of our revenues in certain states could adversely affect us.
We currently operate consumer installment loan branches in sixteen states in the United States. Any adverse legislative or
regulatory change in any one of our states or an economic downturn or catastrophic event that disproportionately affects one or
more of our states, including in any of our larger states, could have a material adverse effect on our business, prospects, and
results of operations or financial condition. See Part I, Item 1, “Description of Business” for information regarding the size of our
business in the various states in which we operate.
We may be unable to execute our business strategy due to economic conditions and these economic conditions could have a
material adverse effect on our business, financial position, results of operations, and cash flows.
Uncertainty and deterioration in general economic conditions in the U.S. historically have created a difficult operating
environment for consumer lending. Our financial performance generally, and in particular the ability of our borrowers to make
payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we
operate and in the United States as a whole. Many factors, including factors that are beyond our control, may impact our financial
position, liquidity, and results of operations and depend on management’s ability to execute our business strategy. The U.S.
economy is undergoing a period of significant uncertainty. These macro-economic factors include general inflation,
unemployment levels, housing markets, commodity prices, energy costs, volatile interest rates, natural disasters, acts of war and
terrorism. Additionally, many of our customers are primarily non-prime borrowers, who have historically been more likely to be
affected by adverse macro-economic factors than prime borrowers. Currently, due to a number of factors, the global economy is
Key factors involved in the execution of our business strategy include achieving our desired loan volume and pricing strategies,
the use of effective credit risk management techniques, marketing and servicing strategies, continued investment in technology
to support operating efficiency, and continued access to funding and liquidity sources. Although our pricing strategy is intended
to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints, there can
be no assurance that this strategy will have its intended effect. Our failure or inability to execute any element of our business
strategy, due to economic conditions or otherwise, could materially adversely affect our financial position, liquidity, and results
of operations.
Our ability to execute our growth strategy is subject to significant risks, including some beyond our control, and may be
adversely affected.
Our growth strategy includes opening and acquiring branches in existing and new markets and is subject to significant risks, some
of which are beyond our control, including:
•
•
•
•
•
the prevailing laws and regulatory environment of each state in which we operate or seek to operate, and, to the extent
applicable, federal laws and regulations, which are subject to change at any time;
our ability to obtain and maintain any regulatory approvals, government permits, or licenses that may be required;
the degree of competition in new markets and its effect on our ability to attract new customers;
our ability to obtain adequate financing for our expansion plans; and
our ability to attract, train, and retain qualified personnel to staff our new operations.
We currently lack product and business diversification; as a result, our revenues and earnings may be disproportionately
negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies.
Our primary business activity is offering small consumer installment loans together with, in some states in which we operate,
related ancillary products. Thus, any developments, whether regulatory, economic or otherwise, that would hinder, reduce the
profitability of, or limit our ability to operate our small consumer installment loan business on the terms currently conducted
would have a direct and adverse impact on our business, profitability, and perhaps even our viability. Our current lack of product
and business diversification could inhibit our opportunities for growth, reduce our revenues and profits, and make us more
susceptible to earnings fluctuations than many other financial institutions whose operations are more diversified.
A reduction in demand for our products and a failure by us to adapt to such reduction could adversely affect our business and
results of operations.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in
customer preferences or financial condition, regulatory restrictions that decrease customer access to particular products, or the
availability of competing products, including through alternative or competing marketing channels. For example, we are highly
dependent upon selecting and maintaining attractive branch locations. These locations are subject to local market conditions,
including the employment available in the area, housing costs, traffic patterns, crime, and other demographic influences, any of
which may quickly change, thereby negatively impacting demand for our products in the area. Should we fail to adapt to
significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and our
operations could be harmed. Even if we do make changes to existing products or introduce new products and channels to fulfill
customer demand, customers may resist or may reject such products. Moreover, the effect of any product change on the results
of our business may not be fully ascertainable until the change has been in effect for some time, and by that time it may be too
late to make further modifications to such product without causing further harm to our business, results of operations, and financial
condition.
19
Our policies and procedures for underwriting, processing, and servicing loans are subject to potential failure or
circumvention, which may adversely affect our results of operations.
We rely on certain inputs and verifications in the underwriting process to be performed by individual personnel at the branch
level or a centralized location. If the training or supervision of our personnel fails to be effective, or if we are unable to attract
and retain qualified employees, it is possible that our underwriting criteria would be improperly applied to a greater percentage
of such applications. If such improper applications were to increase, delinquency and losses on our loan portfolio could increase
and could increase significantly. In addition, we rely on certain third-party service providers in connection with loan underwriting
and origination. Any error or failure by a third-party service provider in providing loan underwriting and origination services may
cause us to originate loans to borrowers that do not meet our underwriting standards.
In addition, in deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely heavily
on information provided by customers, counterparties, and other third parties, including credit bureaus and data aggregators, the
inaccuracy or incompleteness of which may adversely affect our results of operations. We further rely on representations of
customers and counterparties as to the accuracy and completeness of that information. If a significant percentage of our customers
were to intentionally or negligently misrepresent any of this information, or provide incomplete information, and our internal
processes were to fail to detect such misrepresentations in a timely manner, or any or all of the other components of the
underwriting process described above were to fail, it could result in our approval of a loan that, based on our underwriting criteria,
we would not have otherwise made. As a result, our results of operations and financial condition could be negatively impacted.
We operate in a highly competitive market, and we cannot ensure that the competitive pressures we face will not have a
material adverse effect on our results of operations, financial condition and liquidity.
The consumer lending industry is highly competitive. We compete with other consumer finance companies as well as other types
of financial institutions that offer similar consumer financial products and services. Some of these competitors may have greater
financial, technical, and marketing resources than we possess. Some competitors may also have a lower cost of funds and access
to funding sources that may not be available to us. While banks and credit card companies have decreased their lending to non-
prime customers in recent years, there is no assurance that such lenders will not resume those lending activities. Further, because
of increased regulatory pressure on payday lenders, many of those lenders are starting to make more traditional installment
consumer loans in order to reduce regulatory scrutiny of their practices, which could increase competition in markets in which
we operate. We cannot be sure that the competitive pressures we face will not have a material adverse effect on our results of
operations, financial condition, and liquidity.
We depend on secure information technology, and an attack on or a breach of those systems or those of third-party vendors
could result in significant losses, unauthorized disclosure of confidential customer information, and reputational damage,
which could materially adversely affect our business, financial condition and/or results of operations, and could lead to
significant financial and legal exposure and reputational harm.
Our operations rely heavily on the secure collection, processing, storage, and transmission of personal, confidential, and other
information about us, our customers and third parties with which we do business. We process a significant number of customer
transactions on a continuous basis through our computer systems and networks and are subject to increasingly more risk related
to security systems as we enhance our mobile payment technologies and otherwise attempt to keep pace with rapid technological
changes in the financial services industry.
While we commit resources to the design, implementation, maintenance, and monitoring of our networks and systems, we may
be required to expend significant additional resources in the future to modify and enhance our security controls in response to
new or more sophisticated threats, new regulations related to cybersecurity and other developments. Additionally, there is no
guarantee that our security controls can provide absolute security.
Despite the measures we implement to protect our systems and data, we may not be able to anticipate, identify, prevent or detect
cyber-attacks, ransomware, computer viruses or other security breaches, particularly because the techniques used by attackers
change frequently and often are not immediately detected, and because cyber-attacks can originate from a wide variety of sources,
including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign
20
governments. Such third parties may seek to gain unauthorized access to our systems directly, by fraudulently inducing
employees, customers, or other users of our systems, or by using equipment or security passwords belonging to employees,
customers, third-party service providers, or other users of our systems. Or, they may seek to disrupt or disable our services through
attacks such as denial-of-service attacks and ransomware attacks. In addition, we may be unable to identify, or may be
significantly delayed in identifying, cyber-attacks and incidents due to the increasing use of techniques and tools that are designed
to circumvent controls, to avoid detection, and to remove or obfuscate forensic artifacts. As a result, our computer systems,
software and networks, as well as those of third-party vendors we utilize, may be vulnerable to unauthorized access, computer
viruses, malicious attacks and other events that could have a security impact beyond our control. Our staff, technologies, systems,
networks, and those of third-parties we utilize also may become the target of cyber-attacks, unauthorized access, malicious code,
computer viruses, denial of service attacks, ransomware, and physical attacks that could result in information security breaches,
the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and
other information, or otherwise disrupt our or our customers’ operations. We also routinely transmit and receive personal,
confidential and proprietary information through third parties, which may be vulnerable to interception, misuse, or mishandling.
If one or more of such events occur, personal, confidential, and other information processed and stored in, and transmitted through
our computer systems and networks, or those of third-party vendors, could be compromised or could cause interruptions or
malfunctions in our operations that could result in significant losses, loss of confidence and business from customers, customer
dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation and brand.
In the event personal, confidential, or other information is threatened, intercepted, misused, mishandled, or compromised, we
may be required to expend significant additional resources to modify our protective measures, to investigate the circumstances
surrounding the event, and implement mitigation and remediation measures. We also may be subject to fines, penalties, litigation
(including securities fraud class action lawsuits), regulatory investigation costs and settlements and financial losses that are either
not insured against or not fully covered through any insurance maintained by us. If one or more of such events occur, our business,
financial condition and/or results of operations could be significantly and adversely affected.
Any interruption of our information systems could adversely affect us.
Our business and reputation may be materially impacted by information system failures or network disruptions. We rely heavily
on communications and information systems to conduct our business. Each branch is part of an information network that is
designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis, and report revenues and
expenses to our headquarters. Any failure or interruption of these systems, including any failure of our back-up systems, network
outages, slow performance, breaches, unauthorized access, misuse, computer viruses, or other failures or disruptions could result
in disruption to our business or the loss or theft of confidential information, including customer information. A disruption could
impair our ability to offer and process our loans, provide customer service, perform collections or other necessary business
activities, which could result in a loss of customer confidence or business, subject us to additional regulatory scrutiny or negative
publicity, or expose us to civil litigation and possible financial liability, or otherwise materially adversely affect our financial
condition and operating results. Furthermore, we may not be able to immediately detect any such breach, which may increase the
losses that we would suffer. In addition, our existing insurance policies may not reimburse us for all of the damages that we might
incur as a result of a breach or other information system failure or network disruption.
We may not be able to make technological improvements as quickly as some of our competitors, which could harm our ability
to compete with our competitors and adversely affect our results of operations, financial condition, and liquidity.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven
products and services. The effective use of technology increases efficiency and enables financial and lending institutions to better
serve customers and reduce costs. Our future success and, in particular, the success of our centralized operations, will depend, in
part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy
customer demands for convenience, as well as to create additional efficiencies in our operations. We may not be able to effectively
implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing
these products and services to our existing and new customers. Failure to successfully keep pace with technological change
affecting the financial services industry could harm our ability to compete with our competitors and adversely affect our results
of operations, financial condition, and liquidity.
Our policies and procedures for underwriting, processing, and servicing loans are subject to potential failure or
circumvention, which may adversely affect our results of operations.
We rely on certain inputs and verifications in the underwriting process to be performed by individual personnel at the branch
level or a centralized location. If the training or supervision of our personnel fails to be effective, or if we are unable to attract
and retain qualified employees, it is possible that our underwriting criteria would be improperly applied to a greater percentage
of such applications. If such improper applications were to increase, delinquency and losses on our loan portfolio could increase
and could increase significantly. In addition, we rely on certain third-party service providers in connection with loan underwriting
and origination. Any error or failure by a third-party service provider in providing loan underwriting and origination services may
cause us to originate loans to borrowers that do not meet our underwriting standards.
In addition, in deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely heavily
on information provided by customers, counterparties, and other third parties, including credit bureaus and data aggregators, the
inaccuracy or incompleteness of which may adversely affect our results of operations. We further rely on representations of
customers and counterparties as to the accuracy and completeness of that information. If a significant percentage of our customers
were to intentionally or negligently misrepresent any of this information, or provide incomplete information, and our internal
processes were to fail to detect such misrepresentations in a timely manner, or any or all of the other components of the
underwriting process described above were to fail, it could result in our approval of a loan that, based on our underwriting criteria,
we would not have otherwise made. As a result, our results of operations and financial condition could be negatively impacted.
We operate in a highly competitive market, and we cannot ensure that the competitive pressures we face will not have a
material adverse effect on our results of operations, financial condition and liquidity.
The consumer lending industry is highly competitive. We compete with other consumer finance companies as well as other types
of financial institutions that offer similar consumer financial products and services. Some of these competitors may have greater
financial, technical, and marketing resources than we possess. Some competitors may also have a lower cost of funds and access
prime customers in recent years, there is no assurance that such lenders will not resume those lending activities. Further, because
of increased regulatory pressure on payday lenders, many of those lenders are starting to make more traditional installment
consumer loans in order to reduce regulatory scrutiny of their practices, which could increase competition in markets in which
we operate. We cannot be sure that the competitive pressures we face will not have a material adverse effect on our results of
operations, financial condition, and liquidity.
We depend on secure information technology, and an attack on or a breach of those systems or those of third-party vendors
could result in significant losses, unauthorized disclosure of confidential customer information, and reputational damage,
which could materially adversely affect our business, financial condition and/or results of operations, and could lead to
significant financial and legal exposure and reputational harm.
Our operations rely heavily on the secure collection, processing, storage, and transmission of personal, confidential, and other
information about us, our customers and third parties with which we do business. We process a significant number of customer
transactions on a continuous basis through our computer systems and networks and are subject to increasingly more risk related
to security systems as we enhance our mobile payment technologies and otherwise attempt to keep pace with rapid technological
changes in the financial services industry.
While we commit resources to the design, implementation, maintenance, and monitoring of our networks and systems, we may
be required to expend significant additional resources in the future to modify and enhance our security controls in response to
new or more sophisticated threats, new regulations related to cybersecurity and other developments. Additionally, there is no
guarantee that our security controls can provide absolute security.
Despite the measures we implement to protect our systems and data, we may not be able to anticipate, identify, prevent or detect
cyber-attacks, ransomware, computer viruses or other security breaches, particularly because the techniques used by attackers
change frequently and often are not immediately detected, and because cyber-attacks can originate from a wide variety of sources,
including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign
governments. Such third parties may seek to gain unauthorized access to our systems directly, by fraudulently inducing
employees, customers, or other users of our systems, or by using equipment or security passwords belonging to employees,
customers, third-party service providers, or other users of our systems. Or, they may seek to disrupt or disable our services through
attacks such as denial-of-service attacks and ransomware attacks. In addition, we may be unable to identify, or may be
significantly delayed in identifying, cyber-attacks and incidents due to the increasing use of techniques and tools that are designed
to circumvent controls, to avoid detection, and to remove or obfuscate forensic artifacts. As a result, our computer systems,
software and networks, as well as those of third-party vendors we utilize, may be vulnerable to unauthorized access, computer
viruses, malicious attacks and other events that could have a security impact beyond our control. Our staff, technologies, systems,
networks, and those of third-parties we utilize also may become the target of cyber-attacks, unauthorized access, malicious code,
computer viruses, denial of service attacks, ransomware, and physical attacks that could result in information security breaches,
the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and
other information, or otherwise disrupt our or our customers’ operations. We also routinely transmit and receive personal,
confidential and proprietary information through third parties, which may be vulnerable to interception, misuse, or mishandling.
If one or more of such events occur, personal, confidential, and other information processed and stored in, and transmitted through
our computer systems and networks, or those of third-party vendors, could be compromised or could cause interruptions or
malfunctions in our operations that could result in significant losses, loss of confidence and business from customers, customer
dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation and brand.
In the event personal, confidential, or other information is threatened, intercepted, misused, mishandled, or compromised, we
may be required to expend significant additional resources to modify our protective measures, to investigate the circumstances
surrounding the event, and implement mitigation and remediation measures. We also may be subject to fines, penalties, litigation
(including securities fraud class action lawsuits), regulatory investigation costs and settlements and financial losses that are either
not insured against or not fully covered through any insurance maintained by us. If one or more of such events occur, our business,
financial condition and/or results of operations could be significantly and adversely affected.
to funding sources that may not be available to us. While banks and credit card companies have decreased their lending to non-
Any interruption of our information systems could adversely affect us.
Our business and reputation may be materially impacted by information system failures or network disruptions. We rely heavily
on communications and information systems to conduct our business. Each branch is part of an information network that is
designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis, and report revenues and
expenses to our headquarters. Any failure or interruption of these systems, including any failure of our back-up systems, network
outages, slow performance, breaches, unauthorized access, misuse, computer viruses, or other failures or disruptions could result
in disruption to our business or the loss or theft of confidential information, including customer information. A disruption could
impair our ability to offer and process our loans, provide customer service, perform collections or other necessary business
activities, which could result in a loss of customer confidence or business, subject us to additional regulatory scrutiny or negative
publicity, or expose us to civil litigation and possible financial liability, or otherwise materially adversely affect our financial
condition and operating results. Furthermore, we may not be able to immediately detect any such breach, which may increase the
losses that we would suffer. In addition, our existing insurance policies may not reimburse us for all of the damages that we might
incur as a result of a breach or other information system failure or network disruption.
We may not be able to make technological improvements as quickly as some of our competitors, which could harm our ability
to compete with our competitors and adversely affect our results of operations, financial condition, and liquidity.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven
products and services. The effective use of technology increases efficiency and enables financial and lending institutions to better
serve customers and reduce costs. Our future success and, in particular, the success of our centralized operations, will depend, in
part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy
customer demands for convenience, as well as to create additional efficiencies in our operations. We may not be able to effectively
implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing
these products and services to our existing and new customers. Failure to successfully keep pace with technological change
affecting the financial services industry could harm our ability to compete with our competitors and adversely affect our results
of operations, financial condition, and liquidity.
21
We are subject to data privacy laws, which may significantly increase our compliance and technology costs resulting in a
material adverse effect on our results of operations and financial condition.
In pursuing these transactions, we may experience, among other things:
We are subject to various federal and state privacy, data protection, and information security laws and regulations, including
requirements concerning security breach notification. Various federal and state regulatory agencies require us to notify customers
in the event of a security breach. Moreover, federal and state legislators are increasingly considering and implementing new
guidance, laws, and regulations. Compliance with current or future privacy, data protection and information security laws
affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could
materially and adversely affect our profitability. Our failure to comply with privacy, data protection and information security laws
may require us to change our business practices or operational structure, and could subject us to potentially significant regulatory
and/or governmental investigations and/or actions, litigation, fines, sanctions, and damage to our reputation.
We are also subject to the risk of theft or misuse of physical customer and employee records at our facilities.
Our branch offices and centralized headquarters have physical and electronic customer records necessary for day-to-day
operations that contain extensive confidential information about our customers. We also retain physical records in various storage
locations. The loss or theft of customer information and data from our branch offices, headquarters, or other storage locations
could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial
liability, which could have a material adverse effect on our results of operations, financial condition and liquidity. In addition, if
we cannot locate original documents (or copies, in some cases) for certain loans receivables, we may not be able to collect on
those loans receivables.
Our off-site data center and centralized IT functions are susceptible to disruption by catastrophic events, which could have a
material adverse effect on our business, results of operations, and financial condition.
Our information systems, and administrative and management processes could be disrupted if a catastrophic event, such as severe
weather, natural disaster, power outage, act of war or terror or similar event, destroyed or severely damaged our
infrastructure. Any such catastrophic event or other unexpected disruption of our headquarters' functions or off-site data center
could have a material adverse effect on our business, results of operations, and financial condition.
A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and
such shareholders may have interests which conflict with the interests of our other security holders.
As of March 31, 2023, based on filings made with the SEC and other information made available to us, Prescott General Partners,
LLC and its affiliates beneficially owned approximately 43.8% of our common stock. As a result, these shareholders are able to
significantly influence matters presented to shareholders, including the election and removal of directors, the approval of
significant corporate transactions, such as any reclassification, reorganization, merger, consolidation or sale of all or substantially
all of our assets, and the control of our management and affairs, including executive compensation arrangements. Their interests
may conflict with the interests of our other security holders.
Initiating and processing potential acquisitions may be unsuccessful or difficult, leading to losses and increased delinquencies,
which could have a material adverse effect on our results of operations.
We have previously acquired, and in the future may acquire, assets or businesses, including large portfolios of loans receivables,
either through the direct purchase of such assets or the purchase of the equity of a company with such a portfolio. Since we will
not have originated or serviced the loans we acquire, we may not be aware of legal or other deficiencies related to origination or
servicing, and our due diligence efforts of the acquisition prior to purchase may not uncover those deficiencies. Further, we may
have limited recourse against the seller of the portfolio.
22
•
•
•
•
•
•
overvaluing potential targets;
data into our information systems;
difficulties in integrating any acquired companies or branches into our existing business, including integration of account
inability to realize the benefits we anticipate in a timely fashion, or at all;
unexpected losses due to the acquisition of loan portfolios with loans originated using less stringent underwriting criteria;
significant costs, charges, or write-downs; or
unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be
available for the ongoing development and expansion of our existing operations.
Risks Related to our Indebtedness
We depend to a substantial extent on borrowings under our revolving credit agreement to fund our liquidity needs.
Our revolving credit agreement allows us to borrow up to $685.0 million, with an accordion feature permitting the maximum
aggregate commitments to increase to $785.0 million provided that certain conditions are met, through June 7, 2024. Pursuant to
the terms of our revolving credit agreement, we are required to comply with a number of covenants and conditions, including a
minimum borrowing base calculation. If our existing sources of liquidity become insufficient to satisfy our financial needs or our
access to these sources becomes unexpectedly restricted, we may need to try to raise additional capital in the future. If such an
event were to occur, we can give no assurance that such alternate sources of liquidity would be available to us at all or on favorable
terms. Additional information regarding our liquidity risk is included in Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations-Liquidity and Capital Resources.”
Our current debt and any additional debt we may incur in the future could negatively impact our business, prevent us from
satisfying our debt obligations and adversely affect our financial condition.
We may incur a substantial amount of debt in the future. As of March 31, 2023, the Company's debt outstanding was $595.3
million, net of $3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and a total debt-to-
equity ratio of approximately 1.6 to 1. The amount of debt we may incur in the future could have important consequences,
including the following:
•
•
be impaired;
our ability to obtain additional financing for working capital, debt refinancing, share repurchases or other purposes could
a substantial portion of our cash flows from operations will be dedicated to paying principal and interest on our debt,
• we may be vulnerable to interest rate increases, as borrowings under our revolving credit agreement bear interest at
reducing funds available for other purposes;
variable rates, as may any future debt that we incur;
• we may be at a competitive disadvantage to competitors that are not as highly leveraged;
• we could be more vulnerable to adverse developments in our industry or in general economic conditions;
• we may be restricted from taking advantage of business opportunities or making strategic acquisitions;
• we may be limited in our flexibility in planning for, or reacting to, changes in our business and the industry in which we
• we may have difficulty satisfying our obligations under the debt if accelerated upon the occurrence of an event of default;
operate;
and
• we may be more vulnerable to periods of negative or slow growth in the general economy or in our business.
In addition, meeting our anticipated liquidity requirements is contingent upon our continued compliance with our revolving credit
agreement. An acceleration of our debt would have a material adverse effect on our liquidity and our ability to continue as a going
concern. If our debt obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional
indebtedness, the consequences described above could be magnified.
We are subject to data privacy laws, which may significantly increase our compliance and technology costs resulting in a
In pursuing these transactions, we may experience, among other things:
material adverse effect on our results of operations and financial condition.
We are subject to various federal and state privacy, data protection, and information security laws and regulations, including
requirements concerning security breach notification. Various federal and state regulatory agencies require us to notify customers
in the event of a security breach. Moreover, federal and state legislators are increasingly considering and implementing new
guidance, laws, and regulations. Compliance with current or future privacy, data protection and information security laws
affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could
materially and adversely affect our profitability. Our failure to comply with privacy, data protection and information security laws
may require us to change our business practices or operational structure, and could subject us to potentially significant regulatory
and/or governmental investigations and/or actions, litigation, fines, sanctions, and damage to our reputation.
We are also subject to the risk of theft or misuse of physical customer and employee records at our facilities.
Our branch offices and centralized headquarters have physical and electronic customer records necessary for day-to-day
operations that contain extensive confidential information about our customers. We also retain physical records in various storage
locations. The loss or theft of customer information and data from our branch offices, headquarters, or other storage locations
could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial
liability, which could have a material adverse effect on our results of operations, financial condition and liquidity. In addition, if
we cannot locate original documents (or copies, in some cases) for certain loans receivables, we may not be able to collect on
those loans receivables.
Our off-site data center and centralized IT functions are susceptible to disruption by catastrophic events, which could have a
material adverse effect on our business, results of operations, and financial condition.
Our information systems, and administrative and management processes could be disrupted if a catastrophic event, such as severe
weather, natural disaster, power outage, act of war or terror or similar event, destroyed or severely damaged our
infrastructure. Any such catastrophic event or other unexpected disruption of our headquarters' functions or off-site data center
could have a material adverse effect on our business, results of operations, and financial condition.
A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and
such shareholders may have interests which conflict with the interests of our other security holders.
As of March 31, 2023, based on filings made with the SEC and other information made available to us, Prescott General Partners,
LLC and its affiliates beneficially owned approximately 43.8% of our common stock. As a result, these shareholders are able to
significantly influence matters presented to shareholders, including the election and removal of directors, the approval of
significant corporate transactions, such as any reclassification, reorganization, merger, consolidation or sale of all or substantially
all of our assets, and the control of our management and affairs, including executive compensation arrangements. Their interests
may conflict with the interests of our other security holders.
Initiating and processing potential acquisitions may be unsuccessful or difficult, leading to losses and increased delinquencies,
which could have a material adverse effect on our results of operations.
We have previously acquired, and in the future may acquire, assets or businesses, including large portfolios of loans receivables,
either through the direct purchase of such assets or the purchase of the equity of a company with such a portfolio. Since we will
not have originated or serviced the loans we acquire, we may not be aware of legal or other deficiencies related to origination or
servicing, and our due diligence efforts of the acquisition prior to purchase may not uncover those deficiencies. Further, we may
have limited recourse against the seller of the portfolio.
•
•
•
•
•
•
overvaluing potential targets;
difficulties in integrating any acquired companies or branches into our existing business, including integration of account
data into our information systems;
inability to realize the benefits we anticipate in a timely fashion, or at all;
unexpected losses due to the acquisition of loan portfolios with loans originated using less stringent underwriting criteria;
significant costs, charges, or write-downs; or
unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be
available for the ongoing development and expansion of our existing operations.
Risks Related to our Indebtedness
We depend to a substantial extent on borrowings under our revolving credit agreement to fund our liquidity needs.
Our revolving credit agreement allows us to borrow up to $685.0 million, with an accordion feature permitting the maximum
aggregate commitments to increase to $785.0 million provided that certain conditions are met, through June 7, 2024. Pursuant to
the terms of our revolving credit agreement, we are required to comply with a number of covenants and conditions, including a
minimum borrowing base calculation. If our existing sources of liquidity become insufficient to satisfy our financial needs or our
access to these sources becomes unexpectedly restricted, we may need to try to raise additional capital in the future. If such an
event were to occur, we can give no assurance that such alternate sources of liquidity would be available to us at all or on favorable
terms. Additional information regarding our liquidity risk is included in Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations-Liquidity and Capital Resources.”
Our current debt and any additional debt we may incur in the future could negatively impact our business, prevent us from
satisfying our debt obligations and adversely affect our financial condition.
We may incur a substantial amount of debt in the future. As of March 31, 2023, the Company's debt outstanding was $595.3
million, net of $3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and a total debt-to-
equity ratio of approximately 1.6 to 1. The amount of debt we may incur in the future could have important consequences,
including the following:
•
•
our ability to obtain additional financing for working capital, debt refinancing, share repurchases or other purposes could
be impaired;
a substantial portion of our cash flows from operations will be dedicated to paying principal and interest on our debt,
reducing funds available for other purposes;
• we may be vulnerable to interest rate increases, as borrowings under our revolving credit agreement bear interest at
variable rates, as may any future debt that we incur;
• we may be at a competitive disadvantage to competitors that are not as highly leveraged;
• we could be more vulnerable to adverse developments in our industry or in general economic conditions;
• we may be restricted from taking advantage of business opportunities or making strategic acquisitions;
• we may be limited in our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
• we may have difficulty satisfying our obligations under the debt if accelerated upon the occurrence of an event of default;
and
• we may be more vulnerable to periods of negative or slow growth in the general economy or in our business.
In addition, meeting our anticipated liquidity requirements is contingent upon our continued compliance with our revolving credit
agreement. An acceleration of our debt would have a material adverse effect on our liquidity and our ability to continue as a going
concern. If our debt obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional
indebtedness, the consequences described above could be magnified.
23
Although the terms of our revolving credit agreement contain restrictions on our ability to incur additional debt, as well as any
future debt that we incur, these restrictions are subject, or likely to be subject, in the case of any future debt, to exceptions that
could permit us to incur a substantial amount of additional debt. In addition, our existing and future debt agreements will not
prevent us from incurring certain liabilities that do not constitute indebtedness as defined for purposes of those debt agreements.
If new debt or other liabilities are added to our current debt levels, the risks associated with our having substantial debt could
intensify. As of March 31, 2023, we had $318.7 million available for borrowing under our revolving credit agreement, subject to
borrowing base limitations and other specified terms and conditions.
We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced
to take other actions to satisfy our obligations under such debt.
Our ability to make scheduled payments on the principal of, to pay interest on, or to refinance our indebtedness will depend in
part on our cash flows from operations, which are subject to regulatory, economic, financial, competitive, and other factors beyond
our control. We may not generate a level of cash flows from operations sufficient to permit us to meet our debt service obligations.
If we are unable to generate sufficient cash flows from operations to service our debt, we may be required to sell assets, refinance
all or a portion of our existing debt, obtain additional financing, or obtain additional equity capital on terms that may be onerous
or highly dilutive. There can be no assurance that any refinancing will be possible or that any asset sales or additional financing
can be completed on acceptable terms or at all.
The terms of our debt limit how we conduct our business.
Our revolving credit agreement contains covenants that restrict our ability to, among other things:
incur and guarantee debt;
pay dividends or make other distributions on or redeem or repurchase our stock;
•
•
• make investments or acquisitions;
•
•
• merge with or into other companies;
•
• make capital expenditures.
create liens on our assets;
sell assets;
enter into transactions with shareholders and other affiliates; and
Our revolving credit agreement also imposes requirements that we maintain specified financial measures not in excess of, or not
below, specified levels. In particular, our revolving credit agreement requires, among other things, that we maintain (i) at all times
a specified minimum consolidated net worth, (ii) as of the end of each fiscal quarter, a minimum ratio of consolidated net income
available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges
for that period of not less than a specified minimum, (iii) at all times a specified maximum ratio of total debt on a consolidated
basis to consolidated adjusted net worth and (iv) at all times a specified maximum collateral performance indicator. These
covenants limit the manner in which we can conduct our business and could prevent us from engaging in favorable business
activities or financing future operations and capital needs and impair our ability to successfully execute our strategy and operate
our business.
The indenture governing our 7.0% senior notes due 2026 (the “Notes”) contains certain covenants that, among other things, limit
the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified
stock and preferred stock; (ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt
or make certain investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict
dividends, loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or
otherwise dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these
covenants are subject to a number of important detailed qualifications and exceptions.
24
A breach of any of the covenants in our revolving credit agreement would result in an event of default thereunder. Any event of
default would permit the creditors to accelerate the related debt, which could also result in the acceleration of any other or future
debt containing a cross-acceleration or cross-default provision. In addition, an event of default under our revolving credit
agreement would permit the lenders thereunder to terminate all commitments to extend further credit under the revolving credit
agreement. Furthermore, if we were unable to repay the amounts due and payable under the revolving credit agreement or any
other secured debt we may incur, the lenders thereunder could cause the collateral agent to proceed against the collateral securing
that debt. In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient
assets to repay that debt, and our financial condition, liquidity and results of operations would suffer. A breach of our covenants
under the Notes would have similar consequences. Additional information regarding our revolving credit facility and Notes is
included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources.”
The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships,
causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position,
liquidity and results of operations.
Turbulence in the global or domestic capital markets or other macro-economic factors can result in disruptions in the financial
sector, including bank failures, and can affect lenders with which we have relationships, including members of the syndicate of
banks that are lenders under our revolving credit agreement. Disruptions in the financial sector may increase our exposure to
credit risk and adversely affect the ability of lenders to perform under the terms of their lending arrangements with us. Failure by
our lenders to perform under the terms of our lending arrangements could cause us to incur additional costs that may adversely
affect our liquidity, financial condition, and results of operations. There can be no assurance that future disruptions in the financial
sector will not occur that could have adverse effects on our business. Additional information regarding our liquidity and related
risks is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources.”
Risks Related to Legal Proceedings and Regulation
Federal legislative or regulatory proposals, initiatives, actions, or changes that are adverse to our operations or result in
adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us
to modify, suspend, or cease part or all of our nationwide operations.
We are subject to numerous federal laws and regulations that affect our lending operations. From time to time, we may become
involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by
federal and state government and self-regulatory agencies. Should we become subject to such an investigation, examination, or
proceeding, the matter could result in material adverse consequences to us, including, but not limited to, increased compliance
costs, adverse judgments, significant settlements, fines, penalties, injunction, or other actions.
Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly
affecting our lending activities have been under review and subject to change in recent years as a result of various developments
and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and
media focus on issues of consumer and borrower protection. Any changes in such laws and regulations could force us to modify,
suspend, or cease part or, in the worst case, all of our existing operations. It is also possible that the scope of federal regulations
could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities.
In July 2010 the Dodd-Frank Act was enacted. The Dodd-Frank Act restructured and enhanced the regulation and supervision of
the financial services industry and created the CFPB, an agency with sweeping regulatory and enforcement authority over
consumer financial transactions. The CFPB’s rulemaking and enforcement authority extends to certain non-depository
institutions, including us. The CFPB is specifically authorized, among other things, to take actions to prevent companies providing
consumer financial products or services and their service providers from engaging in unfair, deceptive or abusive acts or practices
in connection with consumer financial products and services, and to issue rules requiring enhanced disclosures for consumer
financial products or services. The CFPB also has authority to interpret, enforce, and issue regulations implementing enumerated
Although the terms of our revolving credit agreement contain restrictions on our ability to incur additional debt, as well as any
future debt that we incur, these restrictions are subject, or likely to be subject, in the case of any future debt, to exceptions that
could permit us to incur a substantial amount of additional debt. In addition, our existing and future debt agreements will not
prevent us from incurring certain liabilities that do not constitute indebtedness as defined for purposes of those debt agreements.
If new debt or other liabilities are added to our current debt levels, the risks associated with our having substantial debt could
intensify. As of March 31, 2023, we had $318.7 million available for borrowing under our revolving credit agreement, subject to
borrowing base limitations and other specified terms and conditions.
We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced
to take other actions to satisfy our obligations under such debt.
Our ability to make scheduled payments on the principal of, to pay interest on, or to refinance our indebtedness will depend in
part on our cash flows from operations, which are subject to regulatory, economic, financial, competitive, and other factors beyond
our control. We may not generate a level of cash flows from operations sufficient to permit us to meet our debt service obligations.
If we are unable to generate sufficient cash flows from operations to service our debt, we may be required to sell assets, refinance
all or a portion of our existing debt, obtain additional financing, or obtain additional equity capital on terms that may be onerous
or highly dilutive. There can be no assurance that any refinancing will be possible or that any asset sales or additional financing
can be completed on acceptable terms or at all.
The terms of our debt limit how we conduct our business.
Our revolving credit agreement contains covenants that restrict our ability to, among other things:
incur and guarantee debt;
pay dividends or make other distributions on or redeem or repurchase our stock;
•
•
•
•
•
• make investments or acquisitions;
create liens on our assets;
sell assets;
• merge with or into other companies;
enter into transactions with shareholders and other affiliates; and
• make capital expenditures.
Our revolving credit agreement also imposes requirements that we maintain specified financial measures not in excess of, or not
below, specified levels. In particular, our revolving credit agreement requires, among other things, that we maintain (i) at all times
a specified minimum consolidated net worth, (ii) as of the end of each fiscal quarter, a minimum ratio of consolidated net income
available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges
for that period of not less than a specified minimum, (iii) at all times a specified maximum ratio of total debt on a consolidated
basis to consolidated adjusted net worth and (iv) at all times a specified maximum collateral performance indicator. These
covenants limit the manner in which we can conduct our business and could prevent us from engaging in favorable business
activities or financing future operations and capital needs and impair our ability to successfully execute our strategy and operate
our business.
The indenture governing our 7.0% senior notes due 2026 (the “Notes”) contains certain covenants that, among other things, limit
the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified
stock and preferred stock; (ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt
or make certain investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict
dividends, loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or
otherwise dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these
covenants are subject to a number of important detailed qualifications and exceptions.
A breach of any of the covenants in our revolving credit agreement would result in an event of default thereunder. Any event of
default would permit the creditors to accelerate the related debt, which could also result in the acceleration of any other or future
debt containing a cross-acceleration or cross-default provision. In addition, an event of default under our revolving credit
agreement would permit the lenders thereunder to terminate all commitments to extend further credit under the revolving credit
agreement. Furthermore, if we were unable to repay the amounts due and payable under the revolving credit agreement or any
other secured debt we may incur, the lenders thereunder could cause the collateral agent to proceed against the collateral securing
that debt. In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient
assets to repay that debt, and our financial condition, liquidity and results of operations would suffer. A breach of our covenants
under the Notes would have similar consequences. Additional information regarding our revolving credit facility and Notes is
included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources.”
The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships,
causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position,
liquidity and results of operations.
Turbulence in the global or domestic capital markets or other macro-economic factors can result in disruptions in the financial
sector, including bank failures, and can affect lenders with which we have relationships, including members of the syndicate of
banks that are lenders under our revolving credit agreement. Disruptions in the financial sector may increase our exposure to
credit risk and adversely affect the ability of lenders to perform under the terms of their lending arrangements with us. Failure by
our lenders to perform under the terms of our lending arrangements could cause us to incur additional costs that may adversely
affect our liquidity, financial condition, and results of operations. There can be no assurance that future disruptions in the financial
sector will not occur that could have adverse effects on our business. Additional information regarding our liquidity and related
risks is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources.”
Risks Related to Legal Proceedings and Regulation
Federal legislative or regulatory proposals, initiatives, actions, or changes that are adverse to our operations or result in
adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us
to modify, suspend, or cease part or all of our nationwide operations.
We are subject to numerous federal laws and regulations that affect our lending operations. From time to time, we may become
involved in formal and informal reviews, investigations, examinations, proceedings, and information-gathering requests by
federal and state government and self-regulatory agencies. Should we become subject to such an investigation, examination, or
proceeding, the matter could result in material adverse consequences to us, including, but not limited to, increased compliance
costs, adverse judgments, significant settlements, fines, penalties, injunction, or other actions.
Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly
affecting our lending activities have been under review and subject to change in recent years as a result of various developments
and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and
media focus on issues of consumer and borrower protection. Any changes in such laws and regulations could force us to modify,
suspend, or cease part or, in the worst case, all of our existing operations. It is also possible that the scope of federal regulations
could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities.
In July 2010 the Dodd-Frank Act was enacted. The Dodd-Frank Act restructured and enhanced the regulation and supervision of
the financial services industry and created the CFPB, an agency with sweeping regulatory and enforcement authority over
consumer financial transactions. The CFPB’s rulemaking and enforcement authority extends to certain non-depository
institutions, including us. The CFPB is specifically authorized, among other things, to take actions to prevent companies providing
consumer financial products or services and their service providers from engaging in unfair, deceptive or abusive acts or practices
in connection with consumer financial products and services, and to issue rules requiring enhanced disclosures for consumer
financial products or services. The CFPB also has authority to interpret, enforce, and issue regulations implementing enumerated
25
consumer laws, including certain laws that apply to our business. Further, the CFPB has authority to designate non-depository
“larger participants” in certain markets for consumer financial services and products for purposes of the CFPB’s supervisory
authority under the Dodd-Frank Act. Such designated “larger participants” are subject to reporting and on-site compliance
examinations by the CFPB, which may result in increased compliance costs and potentially greater enforcement risks based on
these supervisory activities. Although the CFPB has not yet developed a “larger participant” rule that directly covers the
Company’s installment lending business, the Company believes that the implementation of any such rules would likely bring the
Company’s business under the CFPB’s direct supervisory authority. In addition, even in the absence of a “larger participant” rule,
the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable
cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12 USC 5514(a)(1)(C). In
2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities and the CFPB is
attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB has notified the Company
that it is seeking to establish such supervisory authority over the Company. The Company disagrees that the CFPB has reasonable
cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the CFPB. If the
CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to, among other
things, examination by the CFPB.
Although the Dodd-Frank Act prohibits the CFPB from setting interest rates on consumer loans, 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 small-
loan consumer credit and similar services on terms substantially similar to those we currently provide would, if enacted, have a
material adverse impact on our business, prospects, results of operations, and financial condition. Any federal law that would
impose a maximum annualized credit rate cap in the range of 36% on our products would, if enacted, almost certainly eliminate
our ability to continue our current operations. Given the uncertainty associated with the manner in which various expected
provisions of the Dodd-Frank Act have been and are expected to continue to be implemented by the various regulatory agencies
and through regulations, the full extent of the impact such requirements will have on our operations remains unclear; however,
these regulations have increased and are expected to further increase our cost of doing business and time spent by management
on regulatory matters, which may have a material adverse effect on the Company’s operations and results.
In 2017, the CFPB issued a final rule (the "Rule") under its unfair, deceptive and abusive acts and practices rulemaking authority
relating to payday, vehicle title, and similar loans. The final rule originally required lenders originating short-term loans and
longer-term balloon payment loans to first make a good-faith reasonable determination that the consumer has the ability to repay
the covered loan along with current obligations and expenses (“ability to repay requirements”); however, the ability to repay
requirements was rescinded in July 2020. The final 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”). Although the Company does not make loans with terms of 45 days or less or obtain
access to a customer’s bank account or paycheck for repayment of any of its loans, it does make some vehicle-secured loans with
an annual percentage rate within the scope of the final rule. The final rule has significant differences from the CFPB’s proposed
rules announced on June 2, 2016. Implementation of the Rule’s payment requirements may require changes to the Company’s
practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans,
the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the
profitability of such loans. Additionally, any further regulatory changes could have effects beyond those currently contemplated
that could further materially and adversely impact our business and operations.
In addition to the specific matters described above, other aspects of our business may be the subject of future CFPB rule-making.
The enactment of one or more of such regulatory changes, or the exercise of broad regulatory authority by regulators, including
but not limited to, the CFPB, having jurisdiction or supervisory authority over the Company’s business or discretionary consumer
financial transactions, generically, could materially and adversely affect our business, results of operations and prospects. See
Part I, Item 1, “Description of Business-Government Regulation” for more information regarding legislation we are subject to
and related risks.
Litigation and regulatory actions, including challenges to the arbitration clauses in our customer agreements, could subject
us to significant class actions, fines, penalties, judgments and requirements resulting in increased expenses and potential
material adverse effects on our business, results of operations and financial condition.
profitability, or prospects.
26
In the normal course of business, from time to time, we have been involved in various legal actions, including arbitration, class
actions and other litigation, arising in connection with our business activities. All such legal proceedings are inherently
unpredictable and, regardless or the merits of the claims, litigation is often expensive, time consuming, disruptive to our
operations and resources, and distracting to management. If resolved against us, such legal proceedings could result in excessive
verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition
and how we operate our business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we
operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may
increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive
damages may be sought.
Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict,
judgment, or settlement that may be entered against us, that such coverage will prove to be adequate, or that such coverage will
continue to remain available on acceptable terms, if at all. If in any legal proceeding we incur liability or defense costs that exceed
our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our
business, financial condition, and results of operations.
Certain legal actions include claims for substantial compensatory and punitive damages, or claims for indeterminate amounts of
damages. While the arbitration provisions in our customer agreements historically have limited our exposure to consumer class
action litigation, there can be no assurance that we will be successful in enforcing our arbitration clause in the future. There may
also be legislative, administrative or regulatory efforts to directly or indirectly prohibit the use of pre-dispute arbitration clauses,
or we may be compelled as a result of competitive pressure or reputational concerns to voluntarily eliminate pre-dispute
arbitration clauses.
Additionally, if we are subject to regulatory actions or other litigation, we may not be able to maintain all requisite licenses and
permits or obtain additional licenses and permits necessary for future business operations, and the failure to satisfy those or other
regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations.
Material changes in laws or regulations applicable to us could also subject us to additional licensing, registration and other
regulatory requirements in the future or could adversely affect our business, financial condition, and results of operations.
Unfavorable state legislation, executive orders, or regulatory actions, adverse outcomes in litigation or regulatory proceedings
or failure to comply with existing laws and regulations could force us to cease, suspend or modify our operations in a state,
potentially resulting in a material adverse effect on our business, results of operations and financial condition.
In addition to federal laws and regulations, we are subject to numerous state laws and regulations that affect our lending activities.
Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.
Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the
assessment against us of civil, monetary, or other penalties, including the suspension or revocation of our licenses to lend in one
or more jurisdictions.
As discussed elsewhere in this report, the Company’s operations are subject to extensive state and federal laws and regulations,
and changes in those laws or regulations or their application could have a material adverse effect on the Company’s business,
results of operations, prospects, or ability to continue operations in the jurisdictions affected by these changes. See Part I, Item 1,
“Description of Business-Government Regulation” for more information regarding this legislation and related risks.
Passage of adverse legislation, such as rate caps on financial lending products or similar initiatives, in any of the states in which
we operate could have a material adverse effect on the Company’s business, results of operations, prospects, or ability to continue
operations in the jurisdictions affected by such changes. We can give no assurance that the laws and regulations that govern our
business, or the interpretation or administration of those laws and regulations, will remain unchanged or that any such future
changes will not materially and adversely affect or in the worst case, eliminate the Company’s lending practices, operations,
consumer laws, including certain laws that apply to our business. Further, the CFPB has authority to designate non-depository
“larger participants” in certain markets for consumer financial services and products for purposes of the CFPB’s supervisory
authority under the Dodd-Frank Act. Such designated “larger participants” are subject to reporting and on-site compliance
examinations by the CFPB, which may result in increased compliance costs and potentially greater enforcement risks based on
these supervisory activities. Although the CFPB has not yet developed a “larger participant” rule that directly covers the
Company’s installment lending business, the Company believes that the implementation of any such rules would likely bring the
Company’s business under the CFPB’s direct supervisory authority. In addition, even in the absence of a “larger participant” rule,
the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable
cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12 USC 5514(a)(1)(C). In
2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities and the CFPB is
attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB has notified the Company
that it is seeking to establish such supervisory authority over the Company. The Company disagrees that the CFPB has reasonable
cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the CFPB. If the
CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to, among other
things, examination by the CFPB.
Although the Dodd-Frank Act prohibits the CFPB from setting interest rates on consumer loans, 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 small-
loan consumer credit and similar services on terms substantially similar to those we currently provide would, if enacted, have a
material adverse impact on our business, prospects, results of operations, and financial condition. Any federal law that would
impose a maximum annualized credit rate cap in the range of 36% on our products would, if enacted, almost certainly eliminate
our ability to continue our current operations. Given the uncertainty associated with the manner in which various expected
provisions of the Dodd-Frank Act have been and are expected to continue to be implemented by the various regulatory agencies
and through regulations, the full extent of the impact such requirements will have on our operations remains unclear; however,
these regulations have increased and are expected to further increase our cost of doing business and time spent by management
on regulatory matters, which may have a material adverse effect on the Company’s operations and results.
In 2017, the CFPB issued a final rule (the "Rule") under its unfair, deceptive and abusive acts and practices rulemaking authority
relating to payday, vehicle title, and similar loans. The final rule originally required lenders originating short-term loans and
longer-term balloon payment loans to first make a good-faith reasonable determination that the consumer has the ability to repay
the covered loan along with current obligations and expenses (“ability to repay requirements”); however, the ability to repay
requirements was rescinded in July 2020. The final 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”). Although the Company does not make loans with terms of 45 days or less or obtain
access to a customer’s bank account or paycheck for repayment of any of its loans, it does make some vehicle-secured loans with
an annual percentage rate within the scope of the final rule. The final rule has significant differences from the CFPB’s proposed
rules announced on June 2, 2016. Implementation of the Rule’s payment requirements may require changes to the Company’s
practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans,
the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the
profitability of such loans. Additionally, any further regulatory changes could have effects beyond those currently contemplated
that could further materially and adversely impact our business and operations.
In addition to the specific matters described above, other aspects of our business may be the subject of future CFPB rule-making.
The enactment of one or more of such regulatory changes, or the exercise of broad regulatory authority by regulators, including
but not limited to, the CFPB, having jurisdiction or supervisory authority over the Company’s business or discretionary consumer
financial transactions, generically, could materially and adversely affect our business, results of operations and prospects. See
Part I, Item 1, “Description of Business-Government Regulation” for more information regarding legislation we are subject to
and related risks.
Litigation and regulatory actions, including challenges to the arbitration clauses in our customer agreements, could subject
us to significant class actions, fines, penalties, judgments and requirements resulting in increased expenses and potential
material adverse effects on our business, results of operations and financial condition.
In the normal course of business, from time to time, we have been involved in various legal actions, including arbitration, class
actions and other litigation, arising in connection with our business activities. All such legal proceedings are inherently
unpredictable and, regardless or the merits of the claims, litigation is often expensive, time consuming, disruptive to our
operations and resources, and distracting to management. If resolved against us, such legal proceedings could result in excessive
verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition
and how we operate our business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we
operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may
increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive
damages may be sought.
Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict,
judgment, or settlement that may be entered against us, that such coverage will prove to be adequate, or that such coverage will
continue to remain available on acceptable terms, if at all. If in any legal proceeding we incur liability or defense costs that exceed
our insurance coverage or that are not within the scope of our insurance coverage, it could have a material adverse effect on our
business, financial condition, and results of operations.
Certain legal actions include claims for substantial compensatory and punitive damages, or claims for indeterminate amounts of
damages. While the arbitration provisions in our customer agreements historically have limited our exposure to consumer class
action litigation, there can be no assurance that we will be successful in enforcing our arbitration clause in the future. There may
also be legislative, administrative or regulatory efforts to directly or indirectly prohibit the use of pre-dispute arbitration clauses,
or we may be compelled as a result of competitive pressure or reputational concerns to voluntarily eliminate pre-dispute
arbitration clauses.
Additionally, if we are subject to regulatory actions or other litigation, we may not be able to maintain all requisite licenses and
permits or obtain additional licenses and permits necessary for future business operations, and the failure to satisfy those or other
regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations.
Material changes in laws or regulations applicable to us could also subject us to additional licensing, registration and other
regulatory requirements in the future or could adversely affect our business, financial condition, and results of operations.
Unfavorable state legislation, executive orders, or regulatory actions, adverse outcomes in litigation or regulatory proceedings
or failure to comply with existing laws and regulations could force us to cease, suspend or modify our operations in a state,
potentially resulting in a material adverse effect on our business, results of operations and financial condition.
In addition to federal laws and regulations, we are subject to numerous state laws and regulations that affect our lending activities.
Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.
Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the
assessment against us of civil, monetary, or other penalties, including the suspension or revocation of our licenses to lend in one
or more jurisdictions.
As discussed elsewhere in this report, the Company’s operations are subject to extensive state and federal laws and regulations,
and changes in those laws or regulations or their application could have a material adverse effect on the Company’s business,
results of operations, prospects, or ability to continue operations in the jurisdictions affected by these changes. See Part I, Item 1,
“Description of Business-Government Regulation” for more information regarding this legislation and related risks.
Passage of adverse legislation, such as rate caps on financial lending products or similar initiatives, in any of the states in which
we operate could have a material adverse effect on the Company’s business, results of operations, prospects, or ability to continue
operations in the jurisdictions affected by such changes. We can give no assurance that the laws and regulations that govern our
business, or the interpretation or administration of those laws and regulations, will remain unchanged or that any such future
changes will not materially and adversely affect or in the worst case, eliminate the Company’s lending practices, operations,
profitability, or prospects.
27
In addition, any adverse change in existing laws or regulations, or any adverse interpretation or litigation relating to existing laws
and regulations in any state in which we operate, could subject us to liability for prior operating activities or could lower or
eliminate the profitability of our operations going forward by, among other things, reducing the amount of interest and fees we
can charge in connection with our loans. If these or other factors lead us to close our branches in a state, then in addition to the
loss of net revenues attributable to that closing, we would also incur closing costs such as lease cancellation payments and we
would have to write off assets that we could no longer use. If we were to suspend rather than permanently cease our operations
in a state, we may also have continuing costs associated with maintaining our branches and our employees in that state, with little
or no revenues to offset those costs.
Changes in local laws and regulations or interpretations of local laws and regulations could negatively impact our business,
results of operations, and financial condition.
In addition to state and federal laws and regulations, our business is subject to various local laws and regulations, such as local
zoning regulations. Local zoning boards and other local governing bodies have been increasingly restricting the permitted
locations of consumer finance companies. Any future actions taken to require special use permits for or impose other restrictions
on our ability to provide products could adversely affect our ability to expand our operations or force us to attempt to relocate
existing branches. If we were forced to relocate any of our branches, in addition to the costs associated with the relocation, we
may be required to hire new employees in the new areas, which may adversely impact the operations of those branches. Relocation
of an existing branch may also hinder our collection abilities, as our business model relies in part on the locations of our branches
being close to where our customers live in order to successfully collect on outstanding loans.
Changes in laws or regulations may have a material adverse effect on all aspects of our business in a particular state and on our
overall business, financial condition, and results of operations, including our ability to generate new loans and the manner in
which existing loans are serviced and collected.
We may be exposed to liabilities under follow-on litigation from our previous settlement with the SEC and DOJ for our
previously disclosed FCPA issue in Mexico, which could have a material adverse effect on our business and liquidity.
On August 6, 2020, the Company announced that it had reached resolution with both the SEC and the DOJ with respect to the
FCPA matter in Mexico. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Regulatory Matters,” for more information.
The Company could face additional third-party claims by shareholders and/or other stakeholders of the Company relating to this
settlement. Any such litigation may be expensive and would likely consume significant time and attention of the Company’s
senior management. We may incur substantial expenses responding to such actions, which may have a material impact on our
business.
Our use of third-party vendors and service providers is subject to regulatory review.
The CFPB and other regulators have issued regulatory guidance focusing on the need for financial institutions to perform due
diligence and ongoing monitoring of third-party vendor and service provider relationships, which increases the scope of
management involvement and decreases the benefit that we receive from using third-party vendors. Moreover, if our regulators
conclude that we have not met the standards for oversight of our third-party vendors, we could be subject to enforcement actions,
civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have a material adverse
effect on our business, reputation, financial condition and operating results. Further, federal and state regulators have been
scrutinizing the practices of lead aggregators and providers recently. If regulators place restrictions on certain practices by lead
aggregators or providers, our ability to use them as a source for applicants could be affected.
Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting us to monetary loss,
significant legal liability, regulatory scrutiny, and reputational harm.
may be negatively affected.
There is a risk that our employees or third-party contractors could engage in misconduct that adversely affects our business. Due
to the general decentralized nature in which the loan application process occurs, employee misconduct or error in the application
or closing process could also result in the origination of loans that do not satisfy our underwriting standards, which could in turn
28
have a material adverse effect on our results of operations and financial condition. Additionally, for example, if an employee or
a third-party contractor were to engage in, or be accused of engaging in, illegal or suspicious activities including fraud or theft,
we could suffer direct losses from the activity. Additionally, we could be subject to regulatory sanctions and suffer serious harm
to our reputation, financial condition, customer relationships and ability to attract future customers. Employee or third-party
misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate
supervisory systems and procedures to inform employees of applicable rules or to detect violations of such rules. Our branches
have experienced employee fraud from time to time, and it is not always possible to deter employee or third-party misconduct.
The precautions that we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees
or third-party contractors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our
reputation and our business.
General Risk Factors
Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage,
monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related
risks, as well as regulatory and operational risks related to our business, assets, and liabilities. Our risk management policies,
procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified,
or identify additional risks to which we may become subject in the future.
We may experience significant turnover in our senior management, and our business may be adversely affected by the
transitions in our senior management team.
Executive leadership transitions can be inherently difficult to manage and may cause disruption to our business. In addition,
management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution,
and our results of operations and financial condition could be negatively impacted as a result. The loss of services of one or more
other members of senior management, or the inability to attract qualified permanent replacements, could have a material adverse
effect on our business. If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we
could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition.
The search for permanent replacements could also result in significant recruiting and relocation costs.
The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we
cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.
Our future success significantly depends on the continued service and performance of our key management personnel.
Competition for these employees is intense. Our operating results could be adversely affected by higher employee turnover or
increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in
part on our ability to retain the services of our key management, operational, compliance, finance, and administrative personnel.
We have built our business on a set of core values, and we attempt to hire employees who are committed to these values. We want
to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers. In
order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior
management, and operational positions. As our employees gain experience and develop their knowledge and skills, they become
highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and
competitive compensation and benefits. If costs to retain our skilled employees increase, then our business and financial results
Changes in federal, state and local tax law, interpretations of existing tax law, or adverse determinations by tax authorities,
could increase our tax burden or otherwise adversely affect our financial condition or results of operations.
In addition, any adverse change in existing laws or regulations, or any adverse interpretation or litigation relating to existing laws
and regulations in any state in which we operate, could subject us to liability for prior operating activities or could lower or
eliminate the profitability of our operations going forward by, among other things, reducing the amount of interest and fees we
can charge in connection with our loans. If these or other factors lead us to close our branches in a state, then in addition to the
loss of net revenues attributable to that closing, we would also incur closing costs such as lease cancellation payments and we
would have to write off assets that we could no longer use. If we were to suspend rather than permanently cease our operations
in a state, we may also have continuing costs associated with maintaining our branches and our employees in that state, with little
or no revenues to offset those costs.
Changes in local laws and regulations or interpretations of local laws and regulations could negatively impact our business,
results of operations, and financial condition.
In addition to state and federal laws and regulations, our business is subject to various local laws and regulations, such as local
zoning regulations. Local zoning boards and other local governing bodies have been increasingly restricting the permitted
locations of consumer finance companies. Any future actions taken to require special use permits for or impose other restrictions
on our ability to provide products could adversely affect our ability to expand our operations or force us to attempt to relocate
existing branches. If we were forced to relocate any of our branches, in addition to the costs associated with the relocation, we
may be required to hire new employees in the new areas, which may adversely impact the operations of those branches. Relocation
of an existing branch may also hinder our collection abilities, as our business model relies in part on the locations of our branches
being close to where our customers live in order to successfully collect on outstanding loans.
Changes in laws or regulations may have a material adverse effect on all aspects of our business in a particular state and on our
overall business, financial condition, and results of operations, including our ability to generate new loans and the manner in
which existing loans are serviced and collected.
We may be exposed to liabilities under follow-on litigation from our previous settlement with the SEC and DOJ for our
previously disclosed FCPA issue in Mexico, which could have a material adverse effect on our business and liquidity.
On August 6, 2020, the Company announced that it had reached resolution with both the SEC and the DOJ with respect to the
FCPA matter in Mexico. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Regulatory Matters,” for more information.
The Company could face additional third-party claims by shareholders and/or other stakeholders of the Company relating to this
settlement. Any such litigation may be expensive and would likely consume significant time and attention of the Company’s
senior management. We may incur substantial expenses responding to such actions, which may have a material impact on our
business.
Our use of third-party vendors and service providers is subject to regulatory review.
The CFPB and other regulators have issued regulatory guidance focusing on the need for financial institutions to perform due
diligence and ongoing monitoring of third-party vendor and service provider relationships, which increases the scope of
management involvement and decreases the benefit that we receive from using third-party vendors. Moreover, if our regulators
conclude that we have not met the standards for oversight of our third-party vendors, we could be subject to enforcement actions,
civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have a material adverse
effect on our business, reputation, financial condition and operating results. Further, federal and state regulators have been
scrutinizing the practices of lead aggregators and providers recently. If regulators place restrictions on certain practices by lead
aggregators or providers, our ability to use them as a source for applicants could be affected.
Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting us to monetary loss,
significant legal liability, regulatory scrutiny, and reputational harm.
There is a risk that our employees or third-party contractors could engage in misconduct that adversely affects our business. Due
to the general decentralized nature in which the loan application process occurs, employee misconduct or error in the application
or closing process could also result in the origination of loans that do not satisfy our underwriting standards, which could in turn
have a material adverse effect on our results of operations and financial condition. Additionally, for example, if an employee or
a third-party contractor were to engage in, or be accused of engaging in, illegal or suspicious activities including fraud or theft,
we could suffer direct losses from the activity. Additionally, we could be subject to regulatory sanctions and suffer serious harm
to our reputation, financial condition, customer relationships and ability to attract future customers. Employee or third-party
misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate
supervisory systems and procedures to inform employees of applicable rules or to detect violations of such rules. Our branches
have experienced employee fraud from time to time, and it is not always possible to deter employee or third-party misconduct.
The precautions that we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees
or third-party contractors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our
reputation and our business.
General Risk Factors
Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage,
monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related
risks, as well as regulatory and operational risks related to our business, assets, and liabilities. Our risk management policies,
procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified,
or identify additional risks to which we may become subject in the future.
We may experience significant turnover in our senior management, and our business may be adversely affected by the
transitions in our senior management team.
Executive leadership transitions can be inherently difficult to manage and may cause disruption to our business. In addition,
management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution,
and our results of operations and financial condition could be negatively impacted as a result. The loss of services of one or more
other members of senior management, or the inability to attract qualified permanent replacements, could have a material adverse
effect on our business. If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we
could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition.
The search for permanent replacements could also result in significant recruiting and relocation costs.
The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we
cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.
Our future success significantly depends on the continued service and performance of our key management personnel.
Competition for these employees is intense. Our operating results could be adversely affected by higher employee turnover or
increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in
part on our ability to retain the services of our key management, operational, compliance, finance, and administrative personnel.
We have built our business on a set of core values, and we attempt to hire employees who are committed to these values. We want
to hire and retain employees who will fit our culture of compliance and of providing exceptional service to our customers. In
order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior
management, and operational positions. As our employees gain experience and develop their knowledge and skills, they become
highly desired by other businesses. Therefore, to retain our employees, we must provide a satisfying work environment and
competitive compensation and benefits. If costs to retain our skilled employees increase, then our business and financial results
may be negatively affected.
Changes in federal, state and local tax law, interpretations of existing tax law, or adverse determinations by tax authorities,
could increase our tax burden or otherwise adversely affect our financial condition or results of operations.
29
We are subject to taxation at the federal, state and local levels. Furthermore, we are subject to regular review and audit by tax
authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ
materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our cash flows
and financial results.
Absence of dividends could reduce our attractiveness to investors.
Since 1989, we have not declared or paid cash dividends on our common stock and may not pay cash dividends in the foreseeable
future. As a result, our common stock may be less attractive to certain investors than the stock of dividend-paying companies.
Investors may need to rely on sales of their common stock after price appreciation, which may not occur, as the only way to
Damage to our reputation could negatively impact our business.
realize future gains on their investment.
Maintaining a strong reputation is critical to our ability to attract and retain customers, investors, and employees. Harm to our
reputation can arise from many sources, including employee misconduct, misconduct by third-party service providers or other
vendors, litigation or regulatory actions, failure by us to meet minimum standards of service and quality, inadequate protection
of customer information, and compliance failures. Negative publicity regarding our Company (or others engaged in a similar
business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect
on our business, results of operations, and financial condition.
We have goodwill, which is subject to periodic review and testing for impairment.
At March 31, 2023, our total assets contained $7.4 million of goodwill. Under GAAP, goodwill is subject to periodic review and
testing to determine if it is impaired. Unfavorable trends in our industry and unfavorable events or disruptions to our operations
resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in goodwill impairment
charges.
If we fail to maintain appropriate controls and procedures, we may not be able to accurately report our financial results, which
could have a material adverse effect on our operations, financial condition, and the trading price of our common stock.
We are required to maintain disclosure controls and procedures and internal control over financial reporting. Section 404(a) of
the Sarbanes Oxley Act requires us to include in our annual reports on Form 10-K an assessment by management of the
effectiveness of our internal control over financial reporting. Section 404(b) of the Sarbanes Oxley Act requires us to engage our
independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting. We
expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us
to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over
financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting.
If we identify a material weakness in our controls and procedures, our ability to record, process, summarize, and report financial
information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected. In
addition, remediation of a material weakness would require our management to devote significant time and incur significant
expense. A material weakness is a deficiency, or a combination of deficiencies, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we are
unable to maintain effective controls and procedures we could lose investor confidence in the accuracy and completeness of our
financial reports, and we may be subject to investigation or sanctions by the SEC. Any such consequence or other negative effect
could adversely affect our operations, financial condition, and the trading price of our common stock.
Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our
branches and increases our costs of operations, which could have an adverse effect on our business, results of operations and
financial condition.
The annual turnover as of March 31, 2023 among our branch employees was approximately 47.1%. This turnover increases our
cost of operations and makes it more difficult to operate our branches. If we are unable to keep our employee turnover rates
consistent with historical levels or if unanticipated problems arise from our high employee turnover, our business, results of
operations, and financial condition could be adversely affected.
30
Various provisions of our charter documents and applicable laws could delay or prevent a change of control that shareholders
may favor.
Provisions of our articles of incorporation, South Carolina law, and the laws in several of the states in which our operating
subsidiaries are incorporated could delay or prevent a change of control that the holders of our common stock may favor or may
impede the ability of our shareholders to change our management. In particular, our articles of incorporation and South Carolina
law, among other things, authorize our board of directors to issue preferred stock in one or more series, without shareholder
approval, and will require the affirmative vote of holders of two-thirds of our outstanding shares of voting stock, to approve our
merger or consolidation with another corporation. Additional information regarding the similar effect of laws in certain states in
which we operate is described in Part 1, Item 1, “Description of Business - Government Regulation.”
Overall stock market volatility may materially and adversely affect the market price of our common stock.
The Company’s common stock price has been and is likely to continue to be subject to significant volatility. Securities markets
worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or
political conditions, could reduce the market price of shares of our common stock in spite of our operating performance.
Additionally, a variety of factors could cause the price of the common stock to fluctuate, perhaps substantially, including: general
market fluctuations resulting from factors not directly related to the Company’s operations or the inherent value of its common
stock; state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse
to our operations or the broader consumer finance industry in general; announcements of developments related to our business;
fluctuations in our operating results and the provision for credit losses; low trading volume in our common stock; decreased
availability of our common stock resulting from stock repurchases and concentrations of ownership by large or institutional
investors; general conditions in the financial service industry; disruption to the domestic financial services industry, the domestic
or global economy, including inflationary pressures, or the domestic or global credit or capital markets; changes in financial
estimates by securities analysts; our failure to meet the expectations of securities analysts or investors; negative commentary
regarding our Company and corresponding short-selling market behavior; adverse developments in our relationships with our
customers; investigations or legal proceedings brought against the Company or its officers; or significant changes in our senior
management team.
Changes to accounting rules, regulations or interpretations could significantly affect our financial results.
New accounting rules or regulations, changes to existing accounting rules or regulations, and changing interpretations of existing
rules and regulations have been issued or occurred and may continue to be issued or occur in the future. Our methodology for
valuing our receivables and otherwise accounting for our business is subject to change depending upon the changes in, and
interpretation of, accounting rules, regulations, or interpretations. Any such changes to accounting rules, regulations, or
interpretations could negatively affect our reported results of operations and could negatively affect our financial condition
through increased cost of compliance.
In addition, the FASB may propose changes to financial accounting and reporting standards that govern key aspects of our
financial statements, including areas where assumptions or estimates are required. As a result of changes to financial accounting
or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain
assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record
and report our results of operations and financial condition.
We are subject to taxation at the federal, state and local levels. Furthermore, we are subject to regular review and audit by tax
Absence of dividends could reduce our attractiveness to investors.
authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ
materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our cash flows
and financial results.
Damage to our reputation could negatively impact our business.
Maintaining a strong reputation is critical to our ability to attract and retain customers, investors, and employees. Harm to our
reputation can arise from many sources, including employee misconduct, misconduct by third-party service providers or other
vendors, litigation or regulatory actions, failure by us to meet minimum standards of service and quality, inadequate protection
of customer information, and compliance failures. Negative publicity regarding our Company (or others engaged in a similar
business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect
on our business, results of operations, and financial condition.
We have goodwill, which is subject to periodic review and testing for impairment.
At March 31, 2023, our total assets contained $7.4 million of goodwill. Under GAAP, goodwill is subject to periodic review and
testing to determine if it is impaired. Unfavorable trends in our industry and unfavorable events or disruptions to our operations
resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in goodwill impairment
charges.
If we fail to maintain appropriate controls and procedures, we may not be able to accurately report our financial results, which
could have a material adverse effect on our operations, financial condition, and the trading price of our common stock.
We are required to maintain disclosure controls and procedures and internal control over financial reporting. Section 404(a) of
the Sarbanes Oxley Act requires us to include in our annual reports on Form 10-K an assessment by management of the
effectiveness of our internal control over financial reporting. Section 404(b) of the Sarbanes Oxley Act requires us to engage our
independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting. We
expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us
to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over
financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting.
If we identify a material weakness in our controls and procedures, our ability to record, process, summarize, and report financial
information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected. In
addition, remediation of a material weakness would require our management to devote significant time and incur significant
expense. A material weakness is a deficiency, or a combination of deficiencies, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we are
unable to maintain effective controls and procedures we could lose investor confidence in the accuracy and completeness of our
financial reports, and we may be subject to investigation or sanctions by the SEC. Any such consequence or other negative effect
could adversely affect our operations, financial condition, and the trading price of our common stock.
Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our
branches and increases our costs of operations, which could have an adverse effect on our business, results of operations and
financial condition.
The annual turnover as of March 31, 2023 among our branch employees was approximately 47.1%. This turnover increases our
cost of operations and makes it more difficult to operate our branches. If we are unable to keep our employee turnover rates
consistent with historical levels or if unanticipated problems arise from our high employee turnover, our business, results of
operations, and financial condition could be adversely affected.
Since 1989, we have not declared or paid cash dividends on our common stock and may not pay cash dividends in the foreseeable
future. As a result, our common stock may be less attractive to certain investors than the stock of dividend-paying companies.
Investors may need to rely on sales of their common stock after price appreciation, which may not occur, as the only way to
realize future gains on their investment.
Various provisions of our charter documents and applicable laws could delay or prevent a change of control that shareholders
may favor.
Provisions of our articles of incorporation, South Carolina law, and the laws in several of the states in which our operating
subsidiaries are incorporated could delay or prevent a change of control that the holders of our common stock may favor or may
impede the ability of our shareholders to change our management. In particular, our articles of incorporation and South Carolina
law, among other things, authorize our board of directors to issue preferred stock in one or more series, without shareholder
approval, and will require the affirmative vote of holders of two-thirds of our outstanding shares of voting stock, to approve our
merger or consolidation with another corporation. Additional information regarding the similar effect of laws in certain states in
which we operate is described in Part 1, Item 1, “Description of Business - Government Regulation.”
Overall stock market volatility may materially and adversely affect the market price of our common stock.
The Company’s common stock price has been and is likely to continue to be subject to significant volatility. Securities markets
worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or
political conditions, could reduce the market price of shares of our common stock in spite of our operating performance.
Additionally, a variety of factors could cause the price of the common stock to fluctuate, perhaps substantially, including: general
market fluctuations resulting from factors not directly related to the Company’s operations or the inherent value of its common
stock; state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse
to our operations or the broader consumer finance industry in general; announcements of developments related to our business;
fluctuations in our operating results and the provision for credit losses; low trading volume in our common stock; decreased
availability of our common stock resulting from stock repurchases and concentrations of ownership by large or institutional
investors; general conditions in the financial service industry; disruption to the domestic financial services industry, the domestic
or global economy, including inflationary pressures, or the domestic or global credit or capital markets; changes in financial
estimates by securities analysts; our failure to meet the expectations of securities analysts or investors; negative commentary
regarding our Company and corresponding short-selling market behavior; adverse developments in our relationships with our
customers; investigations or legal proceedings brought against the Company or its officers; or significant changes in our senior
management team.
Changes to accounting rules, regulations or interpretations could significantly affect our financial results.
New accounting rules or regulations, changes to existing accounting rules or regulations, and changing interpretations of existing
rules and regulations have been issued or occurred and may continue to be issued or occur in the future. Our methodology for
valuing our receivables and otherwise accounting for our business is subject to change depending upon the changes in, and
interpretation of, accounting rules, regulations, or interpretations. Any such changes to accounting rules, regulations, or
interpretations could negatively affect our reported results of operations and could negatively affect our financial condition
through increased cost of compliance.
In addition, the FASB may propose changes to financial accounting and reporting standards that govern key aspects of our
financial statements, including areas where assumptions or estimates are required. As a result of changes to financial accounting
or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain
assumptions or estimates we previously used in preparing our financial statements, which could negatively impact how we record
and report our results of operations and financial condition.
31
If assumptions or estimates we use in preparing our financial statements are incorrect or are required to change, our reported
results of operations and financial condition may be adversely affected.
General
We are required to use certain assumptions and estimates in preparing our financial statements under GAAP, including
determining allowances for credit losses, the fair value of financial instruments, asset impairment, reserves related to litigation
and other legal matters, the fair value of share-based compensation, valuation of income, and other taxes and regulatory exposures.
In addition, significant assumptions and estimates are involved in determining certain disclosures required under GAAP, including
those involving the fair value of our financial instruments. If the assumptions or estimates underlying our financial statements are
incorrect, the actual amounts realized on transactions and balances subject to those estimates will be different, and this could have
a material adverse effect on our results of operations and financial condition.
In addition, the FASB may propose changes to several financial accounting and reporting standards that govern key aspects of
our financial statements, including areas where assumptions or estimates are required. As a result of changes to financial
accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to
change certain assumptions or estimates we previously used in preparing our financial statements, which could negatively impact
how we record and report our results of operations and financial condition.
The future issuance of additional shares of our common stock in connection with potential acquisitions or otherwise will
dilute all other shareholders.
Except in certain circumstances, we are not restricted from issuing additional shares of common stock, including any securities
that are convertible into or exchangeable for, or that represent the right to receive, common stock. The market price of shares of
our common stock could decline as a result of sales of a large number of shares of common stock in the market or the perception
that such sales could occur. We intend to continue to evaluate acquisition opportunities and may issue shares of common stock in
connection with these acquisitions. Any shares of common stock issued in connection with acquisitions, the exercise of
outstanding stock options, or otherwise would dilute the percentage ownership held by our existing shareholders.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
Our headquarters is located in approximately 45,000 square feet of leased space in downtown Greenville, South Carolina. This
lease expires on January 31, 2030 and includes two five-year renewal options. We also lease approximately 8,000 square feet of
space in Greenville, South Carolina which expires in January 31, 2032.
As of March 31, 2023, we had 1,073 branches, most of which are leased and are classified as operating leases. Our branch leases
generally provide for an initial three-to-five-year term with renewal options. Our branches are typically located in shopping
centers, malls and the first floors of downtown buildings. Branches have an average size of 1,600 square feet. We own all of the
furniture, fixtures and computer terminals located in each of its branches.
Item 3.
Legal Proceedings
Derivative Litigation
On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World
Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as
defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed, and
summarized below under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Regulatory Matters,” the complaint alleges violations of South Carolina law, including breaches of fiduciary duties
and corporate waste, and that the Company has suffered damages as a result of those alleged breaches. On April 19, 2023, the
Court preliminarily approved a Stipulation and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among:
the plaintiff, derivatively on behalf of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the
Stipulation will result in a non-material payment by the Company.
32
In addition, from time to time the Company is involved in litigation matters relating to claims arising out of its operations in the
normal course of business.
Estimating an amount or range of possible losses resulting from litigation, government actions, and other legal proceedings is
inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for
monetary damages, may involve fines, penalties, or damages that are discretionary in amount, involve a large number of claimants
or significant discretion by regulatory authorities, represent a change in regulatory policy or interpretation, present novel legal
theories, are in the early stages of the proceedings, are subject to appeal or could result in a change in business practices. In
addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due
to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive
rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these
reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range
of possible losses resulting from, currently pending claims. Based on information currently available, the Company does not
believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results
of operations or financial conditions. However, in light of the inherent uncertainties involved in such matters, an adverse outcome
in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or
cash flows in any particular reporting period.
Item 4.
Mine Safety Disclosures
None.
PART II.
Securities
Market Information
Holders
Dividends
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Since November 26, 1991, the Company’s common stock has traded on NASDAQ and is currently listed on the NASDAQ Global
Select Market (“NASDAQ”) under the symbol WRLD.
As of May 26, 2023, there were 23 holders of record of our common stock and a significant number of persons or entities who
hold their stock in nominee or “street” names through various brokerage firms.
Since April 1989, the Company has not declared or paid any cash dividends on its common stock. Its policy has been to retain
earnings for use in its business and selectively use cash to repurchase its common stock on the open market. In addition, the
Company’s revolving credit agreement and indenture governing the Notes contain certain restrictions on the payment of cash
dividends on its capital stock. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources.” In the future, the Company’s Board of Directors may determine whether to pay
cash dividends based on conditions then existing, including the Company’s earnings, financial condition, capital requirements
and other relevant factors.
If assumptions or estimates we use in preparing our financial statements are incorrect or are required to change, our reported
General
results of operations and financial condition may be adversely affected.
We are required to use certain assumptions and estimates in preparing our financial statements under GAAP, including
determining allowances for credit losses, the fair value of financial instruments, asset impairment, reserves related to litigation
and other legal matters, the fair value of share-based compensation, valuation of income, and other taxes and regulatory exposures.
In addition, significant assumptions and estimates are involved in determining certain disclosures required under GAAP, including
those involving the fair value of our financial instruments. If the assumptions or estimates underlying our financial statements are
incorrect, the actual amounts realized on transactions and balances subject to those estimates will be different, and this could have
a material adverse effect on our results of operations and financial condition.
In addition, the FASB may propose changes to several financial accounting and reporting standards that govern key aspects of
our financial statements, including areas where assumptions or estimates are required. As a result of changes to financial
accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to
change certain assumptions or estimates we previously used in preparing our financial statements, which could negatively impact
how we record and report our results of operations and financial condition.
The future issuance of additional shares of our common stock in connection with potential acquisitions or otherwise will
dilute all other shareholders.
Except in certain circumstances, we are not restricted from issuing additional shares of common stock, including any securities
that are convertible into or exchangeable for, or that represent the right to receive, common stock. The market price of shares of
our common stock could decline as a result of sales of a large number of shares of common stock in the market or the perception
that such sales could occur. We intend to continue to evaluate acquisition opportunities and may issue shares of common stock in
connection with these acquisitions. Any shares of common stock issued in connection with acquisitions, the exercise of
outstanding stock options, or otherwise would dilute the percentage ownership held by our existing shareholders.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
Our headquarters is located in approximately 45,000 square feet of leased space in downtown Greenville, South Carolina. This
lease expires on January 31, 2030 and includes two five-year renewal options. We also lease approximately 8,000 square feet of
space in Greenville, South Carolina which expires in January 31, 2032.
As of March 31, 2023, we had 1,073 branches, most of which are leased and are classified as operating leases. Our branch leases
generally provide for an initial three-to-five-year term with renewal options. Our branches are typically located in shopping
centers, malls and the first floors of downtown buildings. Branches have an average size of 1,600 square feet. We own all of the
furniture, fixtures and computer terminals located in each of its branches.
Item 3.
Legal Proceedings
Derivative Litigation
On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World
Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as
defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed, and
summarized below under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Regulatory Matters,” the complaint alleges violations of South Carolina law, including breaches of fiduciary duties
and corporate waste, and that the Company has suffered damages as a result of those alleged breaches. On April 19, 2023, the
Court preliminarily approved a Stipulation and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among:
the plaintiff, derivatively on behalf of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the
Stipulation will result in a non-material payment by the Company.
In addition, from time to time the Company is involved in litigation matters relating to claims arising out of its operations in the
normal course of business.
Estimating an amount or range of possible losses resulting from litigation, government actions, and other legal proceedings is
inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for
monetary damages, may involve fines, penalties, or damages that are discretionary in amount, involve a large number of claimants
or significant discretion by regulatory authorities, represent a change in regulatory policy or interpretation, present novel legal
theories, are in the early stages of the proceedings, are subject to appeal or could result in a change in business practices. In
addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due
to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive
rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these
reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range
of possible losses resulting from, currently pending claims. Based on information currently available, the Company does not
believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results
of operations or financial conditions. However, in light of the inherent uncertainties involved in such matters, an adverse outcome
in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or
cash flows in any particular reporting period.
Item 4.
Mine Safety Disclosures
None.
PART II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Since November 26, 1991, the Company’s common stock has traded on NASDAQ and is currently listed on the NASDAQ Global
Select Market (“NASDAQ”) under the symbol WRLD.
Holders
As of May 26, 2023, there were 23 holders of record of our common stock and a significant number of persons or entities who
hold their stock in nominee or “street” names through various brokerage firms.
Dividends
Since April 1989, the Company has not declared or paid any cash dividends on its common stock. Its policy has been to retain
earnings for use in its business and selectively use cash to repurchase its common stock on the open market. In addition, the
Company’s revolving credit agreement and indenture governing the Notes contain certain restrictions on the payment of cash
dividends on its capital stock. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources.” In the future, the Company’s Board of Directors may determine whether to pay
cash dividends based on conditions then existing, including the Company’s earnings, financial condition, capital requirements
and other relevant factors.
33
Issuer Purchases of Equity Securities
Stock Performance Graph
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remained available for repurchase under prior repurchase authorizations.
As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share
repurchase program. The timing and actual number of shares repurchased will depend on a variety of factors, including the stock
price, corporate and regulatory requirements, available funds, alternative uses of capital, restrictions under the Company's debt
agreements, and other market and economic conditions. The Company’s stock repurchase program may be suspended or
discontinued at any time.
The repurchase authorization does not have a stated expiration date. The following table details purchases of the Company's
common stock, if any, made by the Company during the three months ended March 31, 2023:
(a)
Total number of
shares purchased
(b)
Average price paid
per share
(c)
Total number of
shares purchased
as part of publicly
announced
plans or programs
(d)
Approximate dollar
value of shares
that may yet be
purchased
under the plans or
programs
January 1 through January
31, 2023
February 1 through February
28, 2023
March 1 through March 31,
2023
Total for the quarter
— $
—
—
— $
—
—
—
—
— $
1,123,544
—
—
—
1,123,544
1,123,544
34
Issuer Purchases of Equity Securities
Stock Performance Graph
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remained available for repurchase under prior repurchase authorizations.
As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share
repurchase program. The timing and actual number of shares repurchased will depend on a variety of factors, including the stock
price, corporate and regulatory requirements, available funds, alternative uses of capital, restrictions under the Company's debt
agreements, and other market and economic conditions. The Company’s stock repurchase program may be suspended or
discontinued at any time.
The repurchase authorization does not have a stated expiration date. The following table details purchases of the Company's
common stock, if any, made by the Company during the three months ended March 31, 2023:
(a)
(b)
Total number of
shares purchased
Average price paid
per share
(c)
Total number of
shares purchased
as part of publicly
announced
plans or programs
(d)
Approximate dollar
value of shares
that may yet be
purchased
under the plans or
programs
January 1 through January
31, 2023
28, 2023
2023
February 1 through February
March 1 through March 31,
Total for the quarter
— $
—
—
— $
—
—
—
—
— $
1,123,544
—
—
—
1,123,544
1,123,544
35
Item 6.
[Reserved]
Comparison of Fiscal 2023 Versus Fiscal 2022
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net income for fiscal 2023 was $21.2 million, a 60.6% decrease from the $53.9 million earned during fiscal 2022. The decrease
in net income from was primarily due to a $73.3 million increase in the provision for credit losses partially offset by a $31.4
General
The Company's financial performance continues to be dependent in large part upon the growth in its outstanding loans receivable,
the maintenance of loan quality and acceptable levels of operating expenses. Since March 31, 2019, gross loans receivable have
increased at a 5.36% annual compounded rate from $1.13 billion to $1.39 billion at March 31, 2023. We believe we were able to
improve our gross loans receivable growth rates through acquisitions, improved marketing processes, and analytics. The
Company plans to enter into new markets through opening new branches and acquisitions as opportunities arise.
million increase in revenue.
$21.4 million.
Operating income (revenues less provision for credit losses and general and administrative expenses) during fiscal 2023 decreased
Total revenues increased $31.36 million, or 5.4%, to $616.55 million in fiscal 2023, from $585.19 million in fiscal 2022. At
March 31, 2023, the Company had 1,073 branches in operation, a decrease of 94 branches from March 31, 2022.
The Company offers an income tax return preparation and electronic filing program in all but a few of its branches. The Company
prepared approximately 75,000, 81,000, and 77,000 returns in each of the fiscal years 2023, 2022, and 2021,
respectively. Revenues from the Company’s tax preparation business in fiscal 2023 amounted to approximately $24.0 million, a
2.2% decrease over the $24.5 million earned during fiscal 2022.
Interest and fee income during fiscal 2023 increased by $22.7 million, or 4.7%, from fiscal 2022. The increase was primarily due
to an increase in average net loans receivable, which increased 11.6% during fiscal 2023 compared to fiscal 2022. Interest and
fee income was also impacted by a shift to larger, lower interest rate loans. The large loan portfolio increased from 51.8% of the
overall portfolio as of March 31, 2022, to 58.1% as of March 31, 2023.
The following table sets forth certain information derived from the Company's consolidated statements of operations and balance
sheets, as well as operating data and ratios, for the periods indicated:
Gross loans receivable
Average gross loans receivable (1)
Net loans receivable (2)
Average net loans receivable (3)
Expenses as a percentage of total revenue:
Provision for credit losses
General and administrative
Interest expense
Operating income as a % of total revenue (4)
Loan volume (5)
Net charge-offs as percent of average net loans receivable
Return on average assets (trailing 12 months)
Return on average equity (trailing 12 months)
Branches opened or acquired (merged or closed), net
2023
Years Ended March 31,
2022
(Dollars in thousands)
2021
$ 1,390,016
$ 1,555,655
$ 1,013,341
$ 1,133,051
$ 1,522,789
$ 1,377,740
$ 1,119,758
$ 1,014,984
$ 1,104,746
$ 1,143,186
$
825,382
$
848,732
42.1 %
45.3 %
8.2 %
12.6 %
31.8 %
51.3 %
5.7 %
16.9 %
16.3 %
57.7 %
4.9 %
26.0 %
3,078,672
3,267,860
2,371,981
23.7 %
1.7 %
5.8 %
(94)
14.2 %
4.8 %
13.4 %
(38)
14.1 %
9.1 %
22.8 %
(38)
Insurance commissions and other income increased by $8.7 million, or 8.7%, from fiscal 2022 to fiscal 2023. Insurance
commissions increased by $10.9 million, or 19.3%, from fiscal 2022 to fiscal 2023 due to an increase in loan volume in states
where we offer our insurance products along with the shift towards larger loans. The sale of insurance products is limited to large
loans in several states in which we operate. Other income decreased by $2.2 million, or 5.1%, from fiscal 2022 to fiscal 2023
primarily due to a decrease in tax preparation income of $0.5 million and a decrease in revenue from the Company's motor club
product of $5.1 million offset by a $4.0 million gain from acquisitions.
The provision for losses during fiscal 2023 increased by $73.3 million, or 39.3%, from the previous year. This increase can mostly
be attributed to an increase in charge-off rates during the year. Accounts that were 91 days or more past due represented 3.5%
and 4.5% of our loan portfolio on a recency basis at March 31, 2023 and March 31, 2022, respectively. The Company's year-over-
year net charge-off ratio (net charge-offs as a percentage of average net loans receivable) increased from 14.2% for the year ended
March 31, 2022 to 23.7% for the year ended March 31, 2023.
Net charge-offs and the net charge-off rate were negatively impacted by a higher proportion of new borrowers at the beginning
of the current fiscal year. New borrowers are our riskiest customer type and typically perform worse than our longer tenured
customers. Additionally, new borrowers originated in the prior fiscal year performed worse than expected due to macro-economic
factors. Customers who are new borrowers to the Company (less than two years since their first origination at the time of their
current loan) as a percentage of the year-end portfolio decreased 20.8% year over year. These "new to World" customers now
account for 25.1% of the portfolio, a decrease from 31.7% last year. Customers who were with the Company for less than five
months have decreased 54.9% from 13.1% to 5.9%. The reduction of new borrowers in the portfolio as well as better performance
of the new borrowers originated in the current fiscal year should result in lower net-charge offs in fiscal year 2024.
The net charge-off rate for the past ten fiscal years averaged 16.0%, with a high of 23.7% (fiscal 2023) and a low of 12.8% (fiscal
2015). In fiscal 2023 the charge-off rate was 23.7%. The following table presents the Company's net charge-off ratios since 2013.
Branches open (at period end)
_______________________________________________________
(1) Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period, excluding
tax advances.
(2) Net loans receivable is defined as gross loans receivable less unearned interest and deferred fees.
(3) Average net loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees
over the indicated period, excluding tax advances.
(4) Operating income is computed as total revenue less provision for credit losses and general and administrative expenses.
(5) Loan volume includes all loan balances originated by the Company. It does not include loans purchased through acquisitions.
1,205
1,073
1,167
36
Item 6.
[Reserved]
General
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Comparison of Fiscal 2023 Versus Fiscal 2022
Net income for fiscal 2023 was $21.2 million, a 60.6% decrease from the $53.9 million earned during fiscal 2022. The decrease
in net income from was primarily due to a $73.3 million increase in the provision for credit losses partially offset by a $31.4
million increase in revenue.
The Company's financial performance continues to be dependent in large part upon the growth in its outstanding loans receivable,
the maintenance of loan quality and acceptable levels of operating expenses. Since March 31, 2019, gross loans receivable have
increased at a 5.36% annual compounded rate from $1.13 billion to $1.39 billion at March 31, 2023. We believe we were able to
improve our gross loans receivable growth rates through acquisitions, improved marketing processes, and analytics. The
Company plans to enter into new markets through opening new branches and acquisitions as opportunities arise.
Operating income (revenues less provision for credit losses and general and administrative expenses) during fiscal 2023 decreased
$21.4 million.
Total revenues increased $31.36 million, or 5.4%, to $616.55 million in fiscal 2023, from $585.19 million in fiscal 2022. At
March 31, 2023, the Company had 1,073 branches in operation, a decrease of 94 branches from March 31, 2022.
The Company offers an income tax return preparation and electronic filing program in all but a few of its branches. The Company
prepared approximately 75,000, 81,000, and 77,000 returns in each of the fiscal years 2023, 2022, and 2021,
respectively. Revenues from the Company’s tax preparation business in fiscal 2023 amounted to approximately $24.0 million, a
2.2% decrease over the $24.5 million earned during fiscal 2022.
Interest and fee income during fiscal 2023 increased by $22.7 million, or 4.7%, from fiscal 2022. The increase was primarily due
to an increase in average net loans receivable, which increased 11.6% during fiscal 2023 compared to fiscal 2022. Interest and
fee income was also impacted by a shift to larger, lower interest rate loans. The large loan portfolio increased from 51.8% of the
overall portfolio as of March 31, 2022, to 58.1% as of March 31, 2023.
The following table sets forth certain information derived from the Company's consolidated statements of operations and balance
sheets, as well as operating data and ratios, for the periods indicated:
Gross loans receivable
Average gross loans receivable (1)
Net loans receivable (2)
Average net loans receivable (3)
Expenses as a percentage of total revenue:
Provision for credit losses
General and administrative
Interest expense
Operating income as a % of total revenue (4)
Loan volume (5)
Net charge-offs as percent of average net loans receivable
Return on average assets (trailing 12 months)
Return on average equity (trailing 12 months)
Branches opened or acquired (merged or closed), net
Years Ended March 31,
2023
2022
2021
(Dollars in thousands)
$ 1,390,016
$ 1,555,655
$ 1,013,341
$ 1,133,051
$ 1,522,789
$ 1,377,740
$ 1,119,758
$ 1,014,984
$ 1,104,746
$ 1,143,186
$
$
825,382
848,732
3,078,672
3,267,860
2,371,981
42.1 %
45.3 %
8.2 %
12.6 %
23.7 %
1.7 %
5.8 %
(94)
31.8 %
51.3 %
5.7 %
16.9 %
14.2 %
4.8 %
13.4 %
(38)
16.3 %
57.7 %
4.9 %
26.0 %
14.1 %
9.1 %
22.8 %
(38)
Branches open (at period end)
_______________________________________________________
1,073
1,167
1,205
(1) Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period, excluding
tax advances.
(2) Net loans receivable is defined as gross loans receivable less unearned interest and deferred fees.
(3) Average net loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees
over the indicated period, excluding tax advances.
(4) Operating income is computed as total revenue less provision for credit losses and general and administrative expenses.
(5) Loan volume includes all loan balances originated by the Company. It does not include loans purchased through acquisitions.
Insurance commissions and other income increased by $8.7 million, or 8.7%, from fiscal 2022 to fiscal 2023. Insurance
commissions increased by $10.9 million, or 19.3%, from fiscal 2022 to fiscal 2023 due to an increase in loan volume in states
where we offer our insurance products along with the shift towards larger loans. The sale of insurance products is limited to large
loans in several states in which we operate. Other income decreased by $2.2 million, or 5.1%, from fiscal 2022 to fiscal 2023
primarily due to a decrease in tax preparation income of $0.5 million and a decrease in revenue from the Company's motor club
product of $5.1 million offset by a $4.0 million gain from acquisitions.
The provision for losses during fiscal 2023 increased by $73.3 million, or 39.3%, from the previous year. This increase can mostly
be attributed to an increase in charge-off rates during the year. Accounts that were 91 days or more past due represented 3.5%
and 4.5% of our loan portfolio on a recency basis at March 31, 2023 and March 31, 2022, respectively. The Company's year-over-
year net charge-off ratio (net charge-offs as a percentage of average net loans receivable) increased from 14.2% for the year ended
March 31, 2022 to 23.7% for the year ended March 31, 2023.
Net charge-offs and the net charge-off rate were negatively impacted by a higher proportion of new borrowers at the beginning
of the current fiscal year. New borrowers are our riskiest customer type and typically perform worse than our longer tenured
customers. Additionally, new borrowers originated in the prior fiscal year performed worse than expected due to macro-economic
factors. Customers who are new borrowers to the Company (less than two years since their first origination at the time of their
current loan) as a percentage of the year-end portfolio decreased 20.8% year over year. These "new to World" customers now
account for 25.1% of the portfolio, a decrease from 31.7% last year. Customers who were with the Company for less than five
months have decreased 54.9% from 13.1% to 5.9%. The reduction of new borrowers in the portfolio as well as better performance
of the new borrowers originated in the current fiscal year should result in lower net-charge offs in fiscal year 2024.
The net charge-off rate for the past ten fiscal years averaged 16.0%, with a high of 23.7% (fiscal 2023) and a low of 12.8% (fiscal
2015). In fiscal 2023 the charge-off rate was 23.7%. The following table presents the Company's net charge-off ratios since 2013.
37
Advertising expense totaled $6.1 million for fiscal 2023, a $12.2 million, or 66.7%, decrease over fiscal 2022. The
decrease was primarily due to decreased spending in our digital marketing and new customer acquisition programs.
Amortization of intangible assets totaled $4.5 million for fiscal 2023, a $0.5 million, or 10.9%, decrease over fiscal
2022, which primarily relates to a corresponding decrease in intangible assets acquired in the current fiscal year
compared to the previous fiscal year.
Other expense totaled $39.1 million for fiscal 2023, a $2.4 million, or 5.8%, decrease over fiscal 2022.
Interest expense increased by $17.0 million, or 51.0%, during fiscal 2023 when compared to the previous fiscal year as a result
of an increase in average debt outstanding of 26.1% and an increase in the effective interest rate from 5.7% to 7.1%.
Income tax expense decreased $5.7 million, or 49.3% for fiscal 2023 compared to the prior fiscal year. The effective tax rate
increased to 21.8% for fiscal 2023 compared to 17.8% for fiscal 2022. The increase was primarily due to the Adoption of ASU
2023-02 in the current fiscal year which requires the recognition of tax credit investments as a portion of income tax expense
rather than pretax other expense, along with a decrease in the permanent tax benefit related to non-qualified stock option exercises
and vesting of restricted stock recognized in the current fiscal year. This was partially offset by a decrease in the disallowed
executive compensation under Section 162(m) in the current fiscal year.
Comparison of Fiscal 2022 Versus Fiscal 2021
For a comparison of our results of operations for the years ended March 31, 2022 and March 31, 2021, see Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the fiscal year ended March 31, 2022 (which was filed with the SEC on May 27, 2022).
Regulatory Matters
Mexico Investigation
CFPB Rulemaking Initiative
As previously disclosed, in August 2020, the Company reached a resolution with both the SEC and the DOJ regarding allegations
primarily involving the Company's former subsidiary in Mexico (the Company divested its operations in Mexico in 2018). The
DOJ declined to prosecute the Company given its voluntary self-disclosure and full remediation. Pursuant to a settlement and
cease and desist order with the SEC, the Company paid $21,726,000 to the SEC in August of 2020.
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 originally required 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”); however, the ability to repay requirements was rescinded in July 2020. 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”). Implementation of the Rule’s
payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially
and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or
frequency with which it could, refinance any such loans, and the profitability of such loans.
In July 2020, the CFPB rescinded provisions of the Rule governing the ability to repay requirements. Currently, the payment
requirements are scheduled to take effect in June 2022. However, on October 19, 2022, a three-judge panel of the U.S. Court of
Appeals for the Fifth Circuit ruled, in Community Financial Services Association of America v. Consumer Financial Protection
Bureau, that the funding mechanism for the CFPB violates the appropriations clause of the U.S. Constitution, and as a result
_______________________________________________________
2015 In fiscal 2015, the Company's net charge-off rate decreased to 12.8%. The net charge-off rate benefited from a change in branch
level incentives during the year, which allowed branch managers to continue collection efforts on accounts that are 91 days or more
past due without having their monthly bonus negatively impacted. As expected, the change resulted in an increase in accounts 91 days
or more past due and fewer net charge-offs during fiscal 2015. We estimate the net charge-off rate would have been approximately
14.0% for fiscal 2015 excluding the impact of the change.
2023 In fiscal 2023, the Company's net charge-off rate increased to 23.7%. This increase is primarily attributable to the higher proportion
of new borrowers at the beginning of the current fiscal year. Additionally, new borrowers originated in the prior fiscal year performed
worse than expected due to macro-economic factors.
General and administrative expenses during fiscal 2023 decreased by $20.5 million, or 6.8%, over the previous fiscal year. General
and administrative expenses, when divided by average open branches, increased 0.3% from fiscal 2022 to fiscal 2023 and, overall,
general and administrative expenses as a percent of total revenues decreased to 45.3% in fiscal 2023 from 51.3% in fiscal 2022.
The change in general and administrative expense is explained in greater detail below.
Personnel expense totaled $177.7 million for fiscal 2023, a $5.4 million, or 2.9%, decrease over fiscal 2022. The
decrease was largely due to an $8.5 million decrease in stock compensation expense and a $6.8 million decrease in bonus
expense, offset by an $8.5 million increase in salary expense. On July 1, 2022, we increased base wages for our financial
service representatives to a minimum of approximately $15 an hour and eliminated the monthly bonus for the same
position.
Occupancy and equipment expense totaled $52.1 million for fiscal 2023, remaining relatively flat when compared to
fiscal year 2022. Occupancy and equipment expense is generally a function of the number of branches the Company has
open throughout the year. In fiscal 2023, the expense per average open branch increased to $46.7 thousand, up from
$43.4 thousand in fiscal 2022.
38
Advertising expense totaled $6.1 million for fiscal 2023, a $12.2 million, or 66.7%, decrease over fiscal 2022. The
decrease was primarily due to decreased spending in our digital marketing and new customer acquisition programs.
Amortization of intangible assets totaled $4.5 million for fiscal 2023, a $0.5 million, or 10.9%, decrease over fiscal
2022, which primarily relates to a corresponding decrease in intangible assets acquired in the current fiscal year
compared to the previous fiscal year.
Other expense totaled $39.1 million for fiscal 2023, a $2.4 million, or 5.8%, decrease over fiscal 2022.
Interest expense increased by $17.0 million, or 51.0%, during fiscal 2023 when compared to the previous fiscal year as a result
of an increase in average debt outstanding of 26.1% and an increase in the effective interest rate from 5.7% to 7.1%.
Income tax expense decreased $5.7 million, or 49.3% for fiscal 2023 compared to the prior fiscal year. The effective tax rate
increased to 21.8% for fiscal 2023 compared to 17.8% for fiscal 2022. The increase was primarily due to the Adoption of ASU
2023-02 in the current fiscal year which requires the recognition of tax credit investments as a portion of income tax expense
rather than pretax other expense, along with a decrease in the permanent tax benefit related to non-qualified stock option exercises
and vesting of restricted stock recognized in the current fiscal year. This was partially offset by a decrease in the disallowed
executive compensation under Section 162(m) in the current fiscal year.
Comparison of Fiscal 2022 Versus Fiscal 2021
For a comparison of our results of operations for the years ended March 31, 2022 and March 31, 2021, see Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the fiscal year ended March 31, 2022 (which was filed with the SEC on May 27, 2022).
Regulatory Matters
Mexico Investigation
As previously disclosed, in August 2020, the Company reached a resolution with both the SEC and the DOJ regarding allegations
primarily involving the Company's former subsidiary in Mexico (the Company divested its operations in Mexico in 2018). The
DOJ declined to prosecute the Company given its voluntary self-disclosure and full remediation. Pursuant to a settlement and
cease and desist order with the SEC, the Company paid $21,726,000 to the SEC in August of 2020.
CFPB Rulemaking Initiative
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 originally required 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”); however, the ability to repay requirements was rescinded in July 2020. 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”). Implementation of the Rule’s
payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially
and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or
frequency with which it could, refinance any such loans, and the profitability of such loans.
In July 2020, the CFPB rescinded provisions of the Rule governing the ability to repay requirements. Currently, the payment
requirements are scheduled to take effect in June 2022. However, on October 19, 2022, a three-judge panel of the U.S. Court of
Appeals for the Fifth Circuit ruled, in Community Financial Services Association of America v. Consumer Financial Protection
Bureau, that the funding mechanism for the CFPB violates the appropriations clause of the U.S. Constitution, and as a result
39
_______________________________________________________
2015 In fiscal 2015, the Company's net charge-off rate decreased to 12.8%. The net charge-off rate benefited from a change in branch
level incentives during the year, which allowed branch managers to continue collection efforts on accounts that are 91 days or more
past due without having their monthly bonus negatively impacted. As expected, the change resulted in an increase in accounts 91 days
or more past due and fewer net charge-offs during fiscal 2015. We estimate the net charge-off rate would have been approximately
14.0% for fiscal 2015 excluding the impact of the change.
2023 In fiscal 2023, the Company's net charge-off rate increased to 23.7%. This increase is primarily attributable to the higher proportion
of new borrowers at the beginning of the current fiscal year. Additionally, new borrowers originated in the prior fiscal year performed
worse than expected due to macro-economic factors.
General and administrative expenses during fiscal 2023 decreased by $20.5 million, or 6.8%, over the previous fiscal year. General
and administrative expenses, when divided by average open branches, increased 0.3% from fiscal 2022 to fiscal 2023 and, overall,
general and administrative expenses as a percent of total revenues decreased to 45.3% in fiscal 2023 from 51.3% in fiscal 2022.
The change in general and administrative expense is explained in greater detail below.
Personnel expense totaled $177.7 million for fiscal 2023, a $5.4 million, or 2.9%, decrease over fiscal 2022. The
decrease was largely due to an $8.5 million decrease in stock compensation expense and a $6.8 million decrease in bonus
expense, offset by an $8.5 million increase in salary expense. On July 1, 2022, we increased base wages for our financial
service representatives to a minimum of approximately $15 an hour and eliminated the monthly bonus for the same
position.
Occupancy and equipment expense totaled $52.1 million for fiscal 2023, remaining relatively flat when compared to
fiscal year 2022. Occupancy and equipment expense is generally a function of the number of branches the Company has
open throughout the year. In fiscal 2023, the expense per average open branch increased to $46.7 thousand, up from
$43.4 thousand in fiscal 2022.
vacated the Rule. On February 27, 2023, the U.S. Supreme Court announced that it would grant the CFPB’s petition for certiorari,
to decide the constitutionality of the CFPB’s funding mechanism. Because all CFPB rulemakings depend on the expenditure of
CFPB funds, there is a risk that if the Court finds the CFPB’s funding mechanism to be unconstitutional, prior CFPB activities,
including the promulgation of regulations impacting the lending market and upon which lenders, such as the Company, have
relied in conducting their activities, may also be deemed unconstitutional. Although the Court could issue is decision at any time
after oral argument, which is anticipated to occur as part of the Court’s October 2023 Term, it is possible that a decision may not
be issued until the end of the Court’s term in June 2024. To the extent that the Rule is reinstated and takes effect, any regulatory
changes could have effects beyond those currently contemplated that could further materially and adversely impact our business
and operations. Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements
if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the
definition of having a “leveraged payment mechanism” under the Rule. If the payment provisions of the Rule apply, the Company
will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the
final rule.
The CFPB also has stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending
market for purposes of its supervision program. This initiative was classified as “inactive” on the CFPB’s Spring 2018 rulemaking
agenda and has remained inactive since, but the CFPB indicated that such action was not a decision on the merits. Though the
likelihood and timing of any such rulemaking is uncertain, the Company believes that the implementation of such rules would
likely bring the Company’s business under the CFPB’s supervisory authority which, among other things, would subject the
Company to reporting obligations to, and on-site compliance examinations by, the CFPB. In addition, even in the absence of a
“larger participant” rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where
the CFPB has reasonable cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12
USC 5514(a)(1)(C). In 2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities
and the CFPB is attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB has notified
the Company that it is seeking to establish such supervisory authority over the Company. The Company disagrees that the CFPB
has reasonable cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the
CFPB. If the CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to,
among other things, examination by the CFPB. See Part I, Item 1, “Description of Business - Government Regulation - Federal
legislation,” for a further discussion of these matters and the federal regulations to which the Company’s operations are subject
and Part I, Item 1A, “Risk Factors,” for more information regarding these regulatory and related risks.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow seasonal trends. The Company's highest loan demand
typically occurs from October through December, its third fiscal quarter. Loan demand has generally been the lowest and loan
repayment highest from January to March, its fourth fiscal quarter. Loan volume and average balances typically remain relatively
level during the remainder of the year. This seasonal trend affects quarterly operating performance through corresponding
fluctuations in interest and fee income and insurance commissions earned and the provision for credit losses recorded, as well as
fluctuations in the Company's cash needs. Consequently, operating results for the Company's third fiscal quarter generally are
significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other
quarters.
40
The following table sets forth, on a quarterly basis, certain items included in the Company's unaudited Consolidated Financial
Statements and shows the number of branches open during fiscal years 2023 and 2022.
At or for the Three Months Ended
2023
2022
June
30,
September
December
30,
31,
March
31,
June
30,
September
December
30,
31,
March
31,
(Dollars in thousands)
Total revenues $ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656
$ 85,822 $
68,620 $
59,609 $ 45,412 $ 30,266 $
42,044 $ 56,459 $ 57,439
$ 73,174
$
71,218
$
66,475
$ 68,607
$ 73,351
$
74,989
$ 74,703
$ 76,934
$
(8,803) $
(1,366) $
5,759 $ 25,643 $ 15,771 $
12,439 $
7,327 $ 18,382
$ 1,641,798 $ 1,598,362 $ 1,553,985 $ 1,390,016 $ 1,223,139 $ 1,394,827 $ 1,606,111 $ 1,522,789
1,146
1,104
1,084
1,073
1,205
1,202
1,202
1,167
Provision for
credit losses
General and
administrative
expenses
Net income
(loss)
Gross loans
receivable
Number of
branches open
Critical Accounting Policies
The Company’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the
finance company industry. The significant accounting policies used in the preparation of the Consolidated Financial Statements
are discussed in Note 1 to the Consolidated Financial Statements. Certain critical accounting policies involve significant judgment
by the Company’s management, including the use of estimates and assumptions which affect the reported amounts of assets,
liabilities, revenues, and expenses. As a result, changes in these estimates and assumptions could significantly affect the
Company’s financial position and results of operations. The Company considers its policies regarding the allowance for credit
losses, share-based compensation, and income taxes to be its most critical accounting policies due to the significant degree of
management judgment involved.
Allowance for Credit Losses
Accounting policies related to the allowance for credit losses are considered to be critical as these policies involve considerable
subjective judgement and estimation by management. As discussed in Note 1 to the Consolidated Financial Statements included
in this report, our policies related to the allowances for credit losses changed on April 1, 2020 in connection with the adoption of
a new accounting standard update as codified in ASC 326. In the case of loans, the allowance for credit losses is a contra-asset
valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the
net amount expected to be collected. The amount of the allowance account represents management’s best estimate of current
expected credit losses on these financial instruments considering available information, from internal and external sources,
relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes
historical credit loss experience, current conditions, and reasonable and supportable forecasts.
Share-Based Compensation
The Company measures compensation cost for share-based awards at fair value and recognizes compensation over the service
period for awards expected to vest. The fair value of restricted stock is based on the number of shares granted and the quoted
price of our common stock at the time of grant, and the fair value of stock options is determined using the Black-Scholes valuation
vacated the Rule. On February 27, 2023, the U.S. Supreme Court announced that it would grant the CFPB’s petition for certiorari,
to decide the constitutionality of the CFPB’s funding mechanism. Because all CFPB rulemakings depend on the expenditure of
CFPB funds, there is a risk that if the Court finds the CFPB’s funding mechanism to be unconstitutional, prior CFPB activities,
including the promulgation of regulations impacting the lending market and upon which lenders, such as the Company, have
relied in conducting their activities, may also be deemed unconstitutional. Although the Court could issue is decision at any time
after oral argument, which is anticipated to occur as part of the Court’s October 2023 Term, it is possible that a decision may not
be issued until the end of the Court’s term in June 2024. To the extent that the Rule is reinstated and takes effect, any regulatory
changes could have effects beyond those currently contemplated that could further materially and adversely impact our business
and operations. Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements
if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the
definition of having a “leveraged payment mechanism” under the Rule. If the payment provisions of the Rule apply, the Company
will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the
final rule.
The CFPB also has stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending
market for purposes of its supervision program. This initiative was classified as “inactive” on the CFPB’s Spring 2018 rulemaking
agenda and has remained inactive since, but the CFPB indicated that such action was not a decision on the merits. Though the
likelihood and timing of any such rulemaking is uncertain, the Company believes that the implementation of such rules would
likely bring the Company’s business under the CFPB’s supervisory authority which, among other things, would subject the
Company to reporting obligations to, and on-site compliance examinations by, the CFPB. In addition, even in the absence of a
“larger participant” rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where
the CFPB has reasonable cause to determine that the institution is engaged in “conduct that poses risks to consumers” under 12
USC 5514(a)(1)(C). In 2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities
and the CFPB is attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB has notified
the Company that it is seeking to establish such supervisory authority over the Company. The Company disagrees that the CFPB
has reasonable cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the
CFPB. If the CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to,
among other things, examination by the CFPB. See Part I, Item 1, “Description of Business - Government Regulation - Federal
legislation,” for a further discussion of these matters and the federal regulations to which the Company’s operations are subject
and Part I, Item 1A, “Risk Factors,” for more information regarding these regulatory and related risks.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow seasonal trends. The Company's highest loan demand
typically occurs from October through December, its third fiscal quarter. Loan demand has generally been the lowest and loan
repayment highest from January to March, its fourth fiscal quarter. Loan volume and average balances typically remain relatively
level during the remainder of the year. This seasonal trend affects quarterly operating performance through corresponding
fluctuations in interest and fee income and insurance commissions earned and the provision for credit losses recorded, as well as
fluctuations in the Company's cash needs. Consequently, operating results for the Company's third fiscal quarter generally are
significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other
quarters.
The following table sets forth, on a quarterly basis, certain items included in the Company's unaudited Consolidated Financial
Statements and shows the number of branches open during fiscal years 2023 and 2022.
At or for the Three Months Ended
2023
2022
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
(Dollars in thousands)
Total revenues $ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656
Provision for
credit losses
General and
administrative
expenses
59,609 $ 45,412 $ 30,266 $
42,044 $ 56,459 $ 57,439
$ 85,822 $
$ 74,703
$ 73,174
$ 68,607
$ 73,351
$ 76,934
68,620 $
74,989
66,475
71,218
$
$
$
Net income
(loss)
Gross loans
receivable
Number of
branches open
$
(8,803) $
(1,366) $
5,759 $ 25,643 $ 15,771 $
12,439 $
7,327 $ 18,382
$ 1,641,798 $ 1,598,362 $ 1,553,985 $ 1,390,016 $ 1,223,139 $ 1,394,827 $ 1,606,111 $ 1,522,789
1,146
1,104
1,084
1,073
1,205
1,202
1,202
1,167
Critical Accounting Policies
The Company’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the
finance company industry. The significant accounting policies used in the preparation of the Consolidated Financial Statements
are discussed in Note 1 to the Consolidated Financial Statements. Certain critical accounting policies involve significant judgment
by the Company’s management, including the use of estimates and assumptions which affect the reported amounts of assets,
liabilities, revenues, and expenses. As a result, changes in these estimates and assumptions could significantly affect the
Company’s financial position and results of operations. The Company considers its policies regarding the allowance for credit
losses, share-based compensation, and income taxes to be its most critical accounting policies due to the significant degree of
management judgment involved.
Allowance for Credit Losses
Accounting policies related to the allowance for credit losses are considered to be critical as these policies involve considerable
subjective judgement and estimation by management. As discussed in Note 1 to the Consolidated Financial Statements included
in this report, our policies related to the allowances for credit losses changed on April 1, 2020 in connection with the adoption of
a new accounting standard update as codified in ASC 326. In the case of loans, the allowance for credit losses is a contra-asset
valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the
net amount expected to be collected. The amount of the allowance account represents management’s best estimate of current
expected credit losses on these financial instruments considering available information, from internal and external sources,
relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes
historical credit loss experience, current conditions, and reasonable and supportable forecasts.
Share-Based Compensation
The Company measures compensation cost for share-based awards at fair value and recognizes compensation over the service
period for awards expected to vest. The fair value of restricted stock is based on the number of shares granted and the quoted
price of our common stock at the time of grant, and the fair value of stock options is determined using the Black-Scholes valuation
41
model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free
interest rate and expected life, changes to which can materially affect the fair value estimate. Actual results, and future changes
in estimates, may differ substantially from our current estimates.
Income Taxes
Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax
liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense.
Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. Management
exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and
assets. These judgments and estimates are re-evaluated on a periodic basis as regulatory and business factors change.
Pursuant to ASC 740, a deferred tax asset or liability is generally recognized for the estimated future tax effects attributable to
temporary differences, net operating losses, and tax credit carryforwards. Deferred tax assets are to be reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Significant judgment is required in assessing the realizability of the Company’s deferred tax assets.
The Company considers all available evidence, both positive and negative, in assessing the extent to which a valuation allowance
should be applied against its deferred tax asset. If, based on its assessment, the Company determines that it is more likely than
not (intended to mean a likelihood that is more than 50%) that some portion or all of the deferred tax asset will not be realized, a
valuation allowance is established. The ultimate realization of deferred tax assets is dependent upon generation of future taxable
income of the appropriate character during the periods in which the temporary differences become deductible. Management
considers the timing of the reversal of deferred liabilities, projected future taxable income, tax planning strategies, and the ability
to carryback tax attributes in making this assessment.
No assurance can be given that either the tax returns submitted by management or the income tax reported on the Consolidated
Financial Statements will not be adjusted by either adverse rulings, changes in the tax code, or assessments made by the Internal
Revenue Service or by state or foreign taxing authorities. The Company is subject to potential adverse adjustments including, but
not limited to: an increase in the statutory federal or state income tax rates, the permanent non-deductibility of amounts currently
considered deductible either now or in future periods, and the dependency on the generation of future taxable income in order to
ultimately realize deferred income tax assets.
Under FASB ASC 740, the Company includes the current and deferred tax impact of its tax positions in the financial statements
when it is more likely than not (likelihood of greater than 50%) that such positions will be sustained by taxing authorities, with
full knowledge of relevant information, based on the technical merits of the tax position. While the Company supports its tax
positions by unambiguous tax law, prior experience with the taxing authority, and analysis that considers all relevant facts,
circumstances and regulations, management must still rely on assumptions and estimates to determine the overall likelihood of
success and proper quantification of a given tax position.
Liquidity and Capital Resources
The Company has financed and continues to finance its operations, acquisitions and branch expansion through a combination of
cash flows from operations and borrowings from its institutional lenders. The Company has generally applied its cash flows from
operations to fund its loan volume, fund acquisitions, repay long-term indebtedness and repurchase its common stock. As the
Company's gross loans receivable increased from $1.21 billion at March 31, 2020 to $1.39 billion at March 31, 2023, net cash
provided by operating activities for fiscal years 2023, 2022, and 2021 was $291.6 million, $272.4 million, and $227.0 million,
respectively.
On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”). The
Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended.
The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and
certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company
42
may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole
premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At
any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus
accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1,
2023, the Company may use the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of
the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus
accrued and unpaid interest, if any, to, but not including, the date of redemption.
We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility
and for general corporate purposes.
During fiscal 2023, the Company repurchased and extinguished $9.0 million of its Notes, net of $0.1 million unamortized debt
issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.2 million. In accordance with
ASC 470, the Company recognized the $1.8 million gain on extinguishment as a component of interest expense in the Company's
Consolidated Statements of Operations.
The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability
of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock; (ii) pay
dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain investments; (iv)
transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends, loans and other
distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise dispose of all or
substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants are subject to a number
of important detailed qualifications and exceptions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and
an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share
repurchases up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income
for the period commencing January 1, 2019. As of March 31, 2023, subject to further approval from our Board of Directors, we
could repurchase approximately $29.2 million of shares under the terms of our debt facilities. Additional share repurchases can
be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit
facility and the Notes.
The Company acquired $28.3 million in loans receivable, net during fiscal 2023. The Company believes that attractive
opportunities to acquire new branches or receivables from its competitors or to acquire branches in communities not currently
served by the Company will continue to become available as conditions in local economies and the financial circumstances of
owners change.
The Company has a revolving credit facility with a syndicate of banks. The revolving credit facility provides for revolving
borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes a
$300,000 letter of credit under a $1.5 million subfacility.
Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10% and an applicable
margin of 3.5% with a minimum rate of 4.5%. At March 31, 2023, the aggregate commitments under the revolving credit facility
were $685.0 million. The $300,000 letter of credit outstanding under the subfacility expires on December 31, 2023; however, it
automatically extends for one year on the expiration date. The borrowing base limitation is equal to the product of (a) the
Company’s eligible loans receivables, less unearned finance charges, insurance premiums and insurance commissions, and (b) an
advance rate percentage that ranges from 70% (decreasing to as low as 62% for the calendar months ending October 31, 2022
through June 30, 2023) to 80% based on a collateral performance indicator, as more completely described below. Further, under
the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against
the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to
certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.
model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free
interest rate and expected life, changes to which can materially affect the fair value estimate. Actual results, and future changes
in estimates, may differ substantially from our current estimates.
Income Taxes
Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax
liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense.
Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. Management
exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and
assets. These judgments and estimates are re-evaluated on a periodic basis as regulatory and business factors change.
Pursuant to ASC 740, a deferred tax asset or liability is generally recognized for the estimated future tax effects attributable to
temporary differences, net operating losses, and tax credit carryforwards. Deferred tax assets are to be reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Significant judgment is required in assessing the realizability of the Company’s deferred tax assets.
The Company considers all available evidence, both positive and negative, in assessing the extent to which a valuation allowance
should be applied against its deferred tax asset. If, based on its assessment, the Company determines that it is more likely than
not (intended to mean a likelihood that is more than 50%) that some portion or all of the deferred tax asset will not be realized, a
valuation allowance is established. The ultimate realization of deferred tax assets is dependent upon generation of future taxable
income of the appropriate character during the periods in which the temporary differences become deductible. Management
considers the timing of the reversal of deferred liabilities, projected future taxable income, tax planning strategies, and the ability
to carryback tax attributes in making this assessment.
No assurance can be given that either the tax returns submitted by management or the income tax reported on the Consolidated
Financial Statements will not be adjusted by either adverse rulings, changes in the tax code, or assessments made by the Internal
Revenue Service or by state or foreign taxing authorities. The Company is subject to potential adverse adjustments including, but
not limited to: an increase in the statutory federal or state income tax rates, the permanent non-deductibility of amounts currently
considered deductible either now or in future periods, and the dependency on the generation of future taxable income in order to
ultimately realize deferred income tax assets.
Under FASB ASC 740, the Company includes the current and deferred tax impact of its tax positions in the financial statements
when it is more likely than not (likelihood of greater than 50%) that such positions will be sustained by taxing authorities, with
full knowledge of relevant information, based on the technical merits of the tax position. While the Company supports its tax
positions by unambiguous tax law, prior experience with the taxing authority, and analysis that considers all relevant facts,
circumstances and regulations, management must still rely on assumptions and estimates to determine the overall likelihood of
success and proper quantification of a given tax position.
Liquidity and Capital Resources
The Company has financed and continues to finance its operations, acquisitions and branch expansion through a combination of
cash flows from operations and borrowings from its institutional lenders. The Company has generally applied its cash flows from
operations to fund its loan volume, fund acquisitions, repay long-term indebtedness and repurchase its common stock. As the
Company's gross loans receivable increased from $1.21 billion at March 31, 2020 to $1.39 billion at March 31, 2023, net cash
provided by operating activities for fiscal years 2023, 2022, and 2021 was $291.6 million, $272.4 million, and $227.0 million,
respectively.
On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”). The
Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended.
The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and
certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company
may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole
premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At
any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus
accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1,
2023, the Company may use the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of
the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus
accrued and unpaid interest, if any, to, but not including, the date of redemption.
We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility
and for general corporate purposes.
During fiscal 2023, the Company repurchased and extinguished $9.0 million of its Notes, net of $0.1 million unamortized debt
issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.2 million. In accordance with
ASC 470, the Company recognized the $1.8 million gain on extinguishment as a component of interest expense in the Company's
Consolidated Statements of Operations.
The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability
of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock; (ii) pay
dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain investments; (iv)
transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends, loans and other
distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise dispose of all or
substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants are subject to a number
of important detailed qualifications and exceptions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and
an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share
repurchases up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income
for the period commencing January 1, 2019. As of March 31, 2023, subject to further approval from our Board of Directors, we
could repurchase approximately $29.2 million of shares under the terms of our debt facilities. Additional share repurchases can
be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit
facility and the Notes.
The Company acquired $28.3 million in loans receivable, net during fiscal 2023. The Company believes that attractive
opportunities to acquire new branches or receivables from its competitors or to acquire branches in communities not currently
served by the Company will continue to become available as conditions in local economies and the financial circumstances of
owners change.
The Company has a revolving credit facility with a syndicate of banks. The revolving credit facility provides for revolving
borrowings of up to the lesser of (a) the aggregate commitments under the facility and (b) a borrowing base, and it includes a
$300,000 letter of credit under a $1.5 million subfacility.
Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10% and an applicable
margin of 3.5% with a minimum rate of 4.5%. At March 31, 2023, the aggregate commitments under the revolving credit facility
were $685.0 million. The $300,000 letter of credit outstanding under the subfacility expires on December 31, 2023; however, it
automatically extends for one year on the expiration date. The borrowing base limitation is equal to the product of (a) the
Company’s eligible loans receivables, less unearned finance charges, insurance premiums and insurance commissions, and (b) an
advance rate percentage that ranges from 70% (decreasing to as low as 62% for the calendar months ending October 31, 2022
through June 30, 2023) to 80% based on a collateral performance indicator, as more completely described below. Further, under
the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against
the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to
certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.
43
For the year ended March 31, 2023, the effective interest rate, including the commitment fee, on borrowings under the revolving
credit facility was 7.0%. The Company pays a commitment fee equal to 0.50% per annum of the daily unused portion of the
commitments. On March 31, 2023, $307.9 million was outstanding under this facility, and there was $318.7 million of unused
borrowing availability under the borrowing base limitations.
The Company’s obligations under the revolving credit facility, together with treasury management and hedging obligations owing
to any lender under the revolving credit facility or any affiliate of any such lender, are required to be guaranteed by each of the
Company’s wholly-owned subsidiaries. The obligations of the Company and the subsidiary guarantors under the revolving credit
facility, together with such treasury management and hedging obligations, are secured by a first-priority security interest in
substantially all assets of the Company and the subsidiary guarantors.
The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including
covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness,
incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make
acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in
the nature of its business, and engage in transactions with affiliates. The agreement allows the Company to incur subordinated
debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject
to limitations on amount imposed by the financial covenants under the agreement. The agreement's financial covenants include
(i) a minimum consolidated net worth of $325.0 million on and after December 31, 2020; (ii) a maximum ratio of total debt to
consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for the fiscal quarters ending March 31, 2023 and June
30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023, and 2.25 to 1.0 for the fiscal quarter ending December 31,
2023); (iii) a maximum collateral performance indicator of 26.0% as of the end of each calendar month (increasing to 28.0% for
the calendar months ending October 31, 2022 through June 30, 2023); and (iv) a minimum fixed charges coverage ratio of 1.25
to 1.0 for the fiscal quarter ended December 31, 2022, 1.15 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30,
2023, 1.50 to 1.0 for the fiscal quarter ending September 30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023,
and 2.75 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters must be at
least 2.0 to 1.0 in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.
The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty days
past due and (b) an eight-month rolling average net charge-off rate. The Company was in compliance with these covenants at
March 31, 2023 and does not believe that these covenants will materially limit its business and expansion strategy.
The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations,
violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain
ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt,
certain changes of control of the Company, and the occurrence of certain regulatory events (including the entry of any stay, order,
judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating, holding, pledging, collecting or
enforcing its eligible loans receivables that is material to the Company or any subsidiary) which remains unvacated, undischarged,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause
a material adverse change.
The Company believes that cash flow from operations and borrowings under its revolving credit facility or other sources will be
adequate to fund the expected cash requirements from contractual and other obligations and cost of opening or acquiring new
branches, including funding initial operating losses of new branches and funding loans receivable originated by those branches
and the Company's other branches (for the next 12 months and for the foreseeable future beyond that). Except as otherwise
discussed in this report including, but not limited to, any discussions in Part 1, Item 1A, "Risk Factors" (as supplemented by any
subsequent disclosures in information the Company files with or furnishes to the SEC from time to time), management is not
currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or
could be reasonably likely to result in, any material adverse effect on the Company’s liquidity.
44
Share Repurchase Program
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations.
As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share
repurchase program. The timing and actual number of shares of common stock repurchased will depend on a variety of factors,
including the stock price, corporate and regulatory requirements, restrictions under the Company's debt agreements and other
market and economic conditions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and
an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share
repurchases up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income
for the period commencing January 1, 2019. As of March 31, 2023, subject to further approval from our Board of Directors, we
could repurchase approximately $29.2 million of shares under the terms of our debt facilities. Additional share repurchases can
be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit
facility and the Notes. Our first priority is to ensure we have enough capital to fund loan growth. To the extent we have excess
capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors. As of March 31, 2023, the
Company's debt outstanding was $595.3 million, net of $3.5 million unamortized debt issuance costs related to the unsecured
senior notes payable, and its shareholders' equity was $385.2 million resulting in a debt-to-equity ratio of 1.6:1.0. Management
will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the
Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.
Inflation
The Company does not believe that inflation, within reasonably anticipated rates, will have a materially adverse effect on its
financial condition. Although inflation would increase the Company’s operating costs in absolute terms and may impact the ability
or willingness of borrowers to repay their loans, the Company expects that the same decrease in the value of money would result
in an increase in the size of loans demanded by its customer base. It is reasonable to anticipate that such a change in customer
preference would result in an increase in total loan receivables and an increase in absolute revenues to be generated from that
larger amount of loans receivable. The Company believes that this increase in absolute revenues should offset any increase in
operating costs. In addition, because the Company’s loans have a relatively short contractual term and average life, it is unlikely
that loans made at any given point in time will be repaid with significantly inflated dollars.
Legal Matters
discussion of legal matters.
Interest Rate Risk
From time to time the Company is involved in litigation relating to claims arising out of its operations in the normal course of
business. See Part I, Item 3, “Legal Proceedings” and Note 16 to our audited Consolidated Financial Statements for further
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our operations expose us to a variety of market risks, including the effects of changes in interest rates. We monitor and manage
these financial exposures as an integral part of our overall risk management program.
The Company’s outstanding debt under its revolving credit facility was $307.9 million at March 31, 2023. Interest on borrowings
under this facility is based on the greater of 4.5% or one month SOFR plus 0.10% and an applicable margin of 3.5%.
Based on the outstanding balance under the Company's revolving credit facility at March 31, 2023, a change of 1% in the interest
rate would cause a change in interest expense of approximately $3.1 million on an annual basis.
For the year ended March 31, 2023, the effective interest rate, including the commitment fee, on borrowings under the revolving
Share Repurchase Program
credit facility was 7.0%. The Company pays a commitment fee equal to 0.50% per annum of the daily unused portion of the
commitments. On March 31, 2023, $307.9 million was outstanding under this facility, and there was $318.7 million of unused
borrowing availability under the borrowing base limitations.
The Company’s obligations under the revolving credit facility, together with treasury management and hedging obligations owing
to any lender under the revolving credit facility or any affiliate of any such lender, are required to be guaranteed by each of the
Company’s wholly-owned subsidiaries. The obligations of the Company and the subsidiary guarantors under the revolving credit
facility, together with such treasury management and hedging obligations, are secured by a first-priority security interest in
substantially all assets of the Company and the subsidiary guarantors.
The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including
covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness,
incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make
acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in
the nature of its business, and engage in transactions with affiliates. The agreement allows the Company to incur subordinated
debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject
to limitations on amount imposed by the financial covenants under the agreement. The agreement's financial covenants include
(i) a minimum consolidated net worth of $325.0 million on and after December 31, 2020; (ii) a maximum ratio of total debt to
consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for the fiscal quarters ending March 31, 2023 and June
30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023, and 2.25 to 1.0 for the fiscal quarter ending December 31,
2023); (iii) a maximum collateral performance indicator of 26.0% as of the end of each calendar month (increasing to 28.0% for
the calendar months ending October 31, 2022 through June 30, 2023); and (iv) a minimum fixed charges coverage ratio of 1.25
to 1.0 for the fiscal quarter ended December 31, 2022, 1.15 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30,
2023, 1.50 to 1.0 for the fiscal quarter ending September 30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023,
and 2.75 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters must be at
least 2.0 to 1.0 in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity.
The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty days
past due and (b) an eight-month rolling average net charge-off rate. The Company was in compliance with these covenants at
March 31, 2023 and does not believe that these covenants will materially limit its business and expansion strategy.
The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations,
violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain
ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt,
certain changes of control of the Company, and the occurrence of certain regulatory events (including the entry of any stay, order,
judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating, holding, pledging, collecting or
enforcing its eligible loans receivables that is material to the Company or any subsidiary) which remains unvacated, undischarged,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause
a material adverse change.
The Company believes that cash flow from operations and borrowings under its revolving credit facility or other sources will be
adequate to fund the expected cash requirements from contractual and other obligations and cost of opening or acquiring new
branches, including funding initial operating losses of new branches and funding loans receivable originated by those branches
and the Company's other branches (for the next 12 months and for the foreseeable future beyond that). Except as otherwise
discussed in this report including, but not limited to, any discussions in Part 1, Item 1A, "Risk Factors" (as supplemented by any
subsequent disclosures in information the Company files with or furnishes to the SEC from time to time), management is not
currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or
could be reasonably likely to result in, any material adverse effect on the Company’s liquidity.
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations.
As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its current share
repurchase program. The timing and actual number of shares of common stock repurchased will depend on a variety of factors,
including the stock price, corporate and regulatory requirements, restrictions under the Company's debt agreements and other
market and economic conditions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and
an excellent use of excess cash when the opportunity arises. However, our revolving credit facility and the Notes limit share
repurchases up to $90.0 million from March 26, 2021 through June 30, 2022 plus up to 50% of consolidated adjusted net income
for the period commencing January 1, 2019. As of March 31, 2023, subject to further approval from our Board of Directors, we
could repurchase approximately $29.2 million of shares under the terms of our debt facilities. Additional share repurchases can
be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit
facility and the Notes. Our first priority is to ensure we have enough capital to fund loan growth. To the extent we have excess
capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors. As of March 31, 2023, the
Company's debt outstanding was $595.3 million, net of $3.5 million unamortized debt issuance costs related to the unsecured
senior notes payable, and its shareholders' equity was $385.2 million resulting in a debt-to-equity ratio of 1.6:1.0. Management
will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the
Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.
Inflation
The Company does not believe that inflation, within reasonably anticipated rates, will have a materially adverse effect on its
financial condition. Although inflation would increase the Company’s operating costs in absolute terms and may impact the ability
or willingness of borrowers to repay their loans, the Company expects that the same decrease in the value of money would result
in an increase in the size of loans demanded by its customer base. It is reasonable to anticipate that such a change in customer
preference would result in an increase in total loan receivables and an increase in absolute revenues to be generated from that
larger amount of loans receivable. The Company believes that this increase in absolute revenues should offset any increase in
operating costs. In addition, because the Company’s loans have a relatively short contractual term and average life, it is unlikely
that loans made at any given point in time will be repaid with significantly inflated dollars.
Legal Matters
From time to time the Company is involved in litigation relating to claims arising out of its operations in the normal course of
business. See Part I, Item 3, “Legal Proceedings” and Note 16 to our audited Consolidated Financial Statements for further
discussion of legal matters.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our operations expose us to a variety of market risks, including the effects of changes in interest rates. We monitor and manage
these financial exposures as an integral part of our overall risk management program.
Interest Rate Risk
The Company’s outstanding debt under its revolving credit facility was $307.9 million at March 31, 2023. Interest on borrowings
under this facility is based on the greater of 4.5% or one month SOFR plus 0.10% and an applicable margin of 3.5%.
Based on the outstanding balance under the Company's revolving credit facility at March 31, 2023, a change of 1% in the interest
rate would cause a change in interest expense of approximately $3.1 million on an annual basis.
45
Part II
Item 8.
Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
ASSETS
Cash and cash equivalents
Gross loans receivable
Less:
Unearned interest, insurance and fees
Allowance for credit losses
Loans receivable, net
Operating lease right‐of‐use assets, net
Finance lease right‐of‐use assets, net
Property and equipment, net
Deferred income taxes, net
Other assets, net
Goodwill
Intangible assets, net
Total assets
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
Senior unsecured notes payable, net
Income taxes payable
Operating lease liability
Finance lease liability
Accounts payable and accrued expenses
Total liabilities
Commitments and contingencies (Notes 9 and 16)
Shareholders' equity:
March 31,
2023
2022
$ 16,508,935 $ 19,236,322
1,390,015,568 1,522,788,860
(376,674,349) (403,030,844)
(125,552,733) (134,242,862)
887,788,486 985,515,154
85,631,304
607,512
24,476,231
39,801,457
35,901,704
7,370,791
19,756,114
$ 1,117,318,141 $ 1,218,296,589
81,289,240
—
23,926,080
41,722,361
43,422,669
7,370,791
15,289,579
$ 307,910,824 $ 396,972,746
287,352,892 295,393,991
7,384,169
87,399,049
80,067
58,042,139
732,091,404 845,272,161
2,532,766
83,735,002
—
50,559,920
Revenues:
Interest and fee income
Insurance and other income, net
Total revenues
Expenses:
Provision for credit losses
General and administrative expenses:
Occupancy and equipment
Personnel
Advertising
Amortization of intangible assets
Other
Total general and administrative expenses
Interest expense
Total expenses
Income taxes
Net income
Basic
Diluted
Basic
Diluted
Net income per common share:
Weighted average common shares outstanding:
Preferred stock, no par value Authorized 5,000,000, no shares issued or outstanding
—
—
Years Ended March 31,
2023
2022
2021
$ 508,335,681 $ 485,666,579 $ 451,113,502
108,209,683
99,520,174
76,876,904
616,545,364 585,186,753 527,990,406
259,463,199 186,207,341
86,244,714
177,690,957 183,058,343 184,620,515
52,106,567
52,084,641
56,160,268
6,096,083
18,298,212
17,190,676
4,466,535
5,010,275
5,474,240
39,113,656
41,523,834
41,197,730
279,473,798 299,975,305 304,643,429
50,462,594
33,424,788
25,698,836
589,399,591 519,607,434 416,586,979
5,913,783
11,659,482
23,120,599
$ 21,231,990 $ 53,919,837 $ 88,282,828
$
$
3.69 $
3.60 $
8.88 $
8.47 $
13.59
13.23
5,749,492
5,898,670
6,072,170
6,364,066
6,493,898
6,672,110
Income before income taxes
27,145,773
65,579,319 111,403,427
Common stock, no par value Authorized 95,000,000 shares; issued and outstanding
6,231,082 and 6,348,314 shares at March 31, 2023 and March 31, 2022, respectively
Additional paid-in capital
Retained earnings
Total shareholders' equity
—
—
288,071,839 280,907,085
92,117,343
385,226,737 373,024,428
97,154,898
Total liabilities and shareholders' equity
$ 1,117,318,141 $ 1,218,296,589
See accompanying notes to Consolidated Financial Statements.
46
See accompanying notes to Consolidated Financial Statements.
Part II
Item 8.
Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
ASSETS
Cash and cash equivalents
Gross loans receivable
Less:
Unearned interest, insurance and fees
Allowance for credit losses
Loans receivable, net
Operating lease right‐of‐use assets, net
Finance lease right‐of‐use assets, net
Property and equipment, net
Deferred income taxes, net
Other assets, net
Goodwill
Intangible assets, net
Total assets
Liabilities:
Senior notes payable
Senior unsecured notes payable, net
Income taxes payable
Operating lease liability
Finance lease liability
Accounts payable and accrued expenses
Total liabilities
LIABILITIES & SHAREHOLDERS' EQUITY
Commitments and contingencies (Notes 9 and 16)
Shareholders' equity:
Preferred stock, no par value Authorized 5,000,000, no shares issued or outstanding
Common stock, no par value Authorized 95,000,000 shares; issued and outstanding
6,231,082 and 6,348,314 shares at March 31, 2023 and March 31, 2022, respectively
Additional paid-in capital
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying notes to Consolidated Financial Statements.
March 31,
2023
2022
$ 16,508,935 $ 19,236,322
1,390,015,568 1,522,788,860
(376,674,349) (403,030,844)
(125,552,733) (134,242,862)
887,788,486 985,515,154
81,289,240
85,631,304
—
607,512
23,926,080
41,722,361
43,422,669
7,370,791
15,289,579
24,476,231
39,801,457
35,901,704
7,370,791
19,756,114
$ 1,117,318,141 $ 1,218,296,589
$ 307,910,824 $ 396,972,746
287,352,892 295,393,991
2,532,766
7,384,169
83,735,002
87,399,049
—
80,067
50,559,920
58,042,139
732,091,404 845,272,161
—
—
—
—
288,071,839 280,907,085
97,154,898
92,117,343
385,226,737 373,024,428
$ 1,117,318,141 $ 1,218,296,589
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues:
Interest and fee income
Insurance and other income, net
Total revenues
Expenses:
Provision for credit losses
General and administrative expenses:
Personnel
Occupancy and equipment
Advertising
Amortization of intangible assets
Other
Total general and administrative expenses
Interest expense
Total expenses
Years Ended March 31,
2022
2021
2023
$ 508,335,681 $ 485,666,579 $ 451,113,502
108,209,683
76,876,904
616,545,364 585,186,753 527,990,406
99,520,174
259,463,199 186,207,341
86,244,714
177,690,957 183,058,343 184,620,515
56,160,268
17,190,676
5,474,240
41,197,730
279,473,798 299,975,305 304,643,429
52,106,567
6,096,083
4,466,535
39,113,656
52,084,641
18,298,212
5,010,275
41,523,834
50,462,594
25,698,836
589,399,591 519,607,434 416,586,979
33,424,788
Income before income taxes
27,145,773
65,579,319 111,403,427
Income taxes
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
5,913,783
11,659,482
23,120,599
$ 21,231,990 $ 53,919,837 $ 88,282,828
$
$
3.69 $
3.60 $
8.88 $
8.47 $
13.59
13.23
5,749,492
5,898,670
6,072,170
6,364,066
6,493,898
6,672,110
See accompanying notes to Consolidated Financial Statements.
47
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Balances at March 31, 2022
Proceeds from exercise of stock options, net
of cancellations
Common stock repurchases
Restricted common stock expense under
stock option plan, net of cancellations
($2,543,001)
Stock option expense
Cumulative effect of adoption of
ASU 2023-02
Net income
Balances at March 31, 2023
Balances at March 31, 2021
Proceeds from exercise of stock options
Common stock repurchases
Restricted common stock expense under
stock option plan, net of cancellations
($5,072,230)
Stock option expense
Net income
Balances at March 31, 2022
Balances at March 31, 2020
Proceeds from exercise of stock options, net
Common stock repurchases
Restricted common stock expense under
stock option plan, net of cancellations
($3,173,735)
Stock option expense
Cumulative effect of adoption of ASC 326
Net income
Balances at March 31, 2021
Year ended March 31, 2023
Common
Stock
Shares
6,348,314
Additional
Paid-in Capital
$ 280,907,085
Retained
Earnings
92,117,343
Total
Shareholders'
373,024,428
7,569
(73,643)
(51,158)
—
654,920
—
—
(14,314,089)
654,920
(14,314,089)
4,067,525
2,442,309
—
—
4,067,525
2,442,309
—
—
6,231,082
—
—
$ 288,071,839
(1,880,346)
21,231,990
97,154,898
(1,880,346)
21,231,990
385,226,737
Year ended March 31, 2022
Common
Stock
Shares
6,805,294
154,699
(589,533)
Additional
Paid-in
$ 255,590,674
12,805,646
—
Retained
Earnings
149,336,767
—
(111,139,261)
Total Shareholders'
Equity
404,927,441
12,805,646
(111,139,261)
(22,146)
—
—
6,348,314
9,036,852
3,473,913
—
$ 280,907,085
—
—
53,919,837
92,117,343
9,036,852
3,473,913
53,919,837
373,024,428
Year ended March 31, 2021
Common
Stock
Shares
7,807,834
165,237
(1,129,875)
Additional
Paid-in
$ 227,214,577
12,268,554
—
Retained
Earnings
184,748,490
—
(102,452,302)
Total Shareholders'
Equity
411,963,067
12,268,554
(102,452,302)
(37,902)
—
—
—
6,805,294
12,302,869
3,804,674
—
—
$ 255,590,674
—
—
(21,242,249)
88,282,828
149,336,767
12,302,869
3,804,674
(21,242,249)
88,282,828
404,927,441
See accompanying notes to Consolidated Financial Statements.
48
Finance lease right-of-use assets, net transferred to property and equipment, net
See accompanying notes to Consolidated Financial Statements.
Compensation related to stock option and restricted stock plans, net of taxes and
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flow from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on extinguishment of senior unsecured notes payable
Loss on assets held for sale
Amortization of intangible assets
Amortization of historic tax credits
Accrued unearned interest
Amortization of deferred loan costs
Amortization of debt issuance costs
Provision for credit losses
Depreciation
Amortization of finance leases
Gain on asset acquisition, net of income tax
Loss on sale of property and equipment
Deferred income tax expense (benefit)
adjustments
Gain on sale of loans receivable
Gain on company-owned life insurance
Change in accounts:
Other assets, net
Income taxes payable and receivable
Accounts payable and accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Increase in loans receivable, net
Cash paid for acquisitions, primarily loans
Purchases of property and equipment
Proceeds from sale of property and equipment
Proceeds from the sale of assets held for sale
Proceeds from the sale of loans receivable
Proceeds from company-owned life insurance
Net cash used in investing activities
Cash flow from financing activities:
Borrowings from senior notes payable
Payments on senior notes payable
Payments for extinguished senior unsecured notes payable
Issuance of senior unsecured notes payable
Debt issuance costs associated with senior unsecured notes payable
Payments for debt extinguishment costs
Debt issuance costs associated with senior notes payable
Proceeds from exercise of stock options
Payments for taxes related to net share settlement of equity awards
Repurchase of common stock
Repayment of finance lease
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosures:
Interest paid during the year
Income taxes paid during the year
Years Ended March 31,
2023
2022
2021
$ 21,231,990 $ 53,919,837 $ 88,282,828
4,466,535
—
—
3,213,737
(1,831,277)
15,526,336
1,654,916
38,633
5,010,275
3,930,753
(9,032,020)
—
16,911,599
1,095,325
259,463,199 186,207,341
6,239,266
204,552
(3,993,168)
11,837
6,253,175
407,624
—
419,975
(2,102,085)
(14,808,715)
37,579
5,474,240
1,736,384
9,698,671
—
17,101,722
659,292
86,244,714
6,537,957
407,624
—
2,812,404
5,651,362
9,052,835
17,582,995
19,281,278
—
—
(24,667)
(104,113)
(106,885)
(1,064,897)
(9,147,152)
(4,851,403)
(7,482,219)
(8,193,529)
(4,191,692)
17,001,850
(4,234,933)
6,610,559
(18,258,393)
291,553,786 272,446,541 226,953,724
(152,154,050) (436,311,573)
(23,131,758)
(10,859,984)
(5,827,773)
(6,070,414)
(56,143,765)
(19,774,252)
(11,683,858)
529,781
—
—
—
245,935
1,104,895
—
—
346,943
2,810,391
449,327
1,997,279
(180,583,800) (451,891,141)
(81,997,935)
313,862,948 515,315,246 310,984,250
(402,924,870) (523,350,000) (357,076,750)
(7,171,700)
—
— 300,000,000
(5,119,647)
(19,656)
(22,850)
(1,139,008)
654,920
(2,543,001)
—
—
12,805,646
(5,072,230)
(784,250)
12,268,554
(3,173,735)
—
—
—
—
(14,314,089) (111,139,261) (102,452,302)
(80,067)
(505,286)
(594,024)
(113,697,373) 182,934,468 (140,828,257)
(2,727,387)
19,236,322
3,489,868
15,746,454
4,127,532
11,618,922
$ 16,508,935 $ 19,236,322 $ 15,746,454
$ 51,761,768 $ 21,318,911 $ 24,993,898
$ 10,783,143 $ 30,941,852 $ 14,857,555
$
402,960 $
— $
—
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year ended March 31, 2023
Balances at March 31, 2022
6,348,314
$ 280,907,085
92,117,343
373,024,428
Additional
Paid-in Capital
Retained
Earnings
Total
Shareholders'
Proceeds from exercise of stock options, net
of cancellations
Common stock repurchases
Restricted common stock expense under
stock option plan, net of cancellations
($2,543,001)
Stock option expense
Cumulative effect of adoption of
ASU 2023-02
Net income
Balances at March 31, 2023
6,231,082
$ 288,071,839
Common
Stock
Shares
7,569
(73,643)
(51,158)
—
—
—
Common
Stock
Shares
654,920
—
654,920
—
(14,314,089)
(14,314,089)
4,067,525
2,442,309
—
—
4,067,525
2,442,309
—
—
(1,880,346)
21,231,990
97,154,898
(1,880,346)
21,231,990
385,226,737
Year ended March 31, 2022
Additional
Paid-in
Retained
Earnings
Total Shareholders'
Equity
Balances at March 31, 2021
6,805,294
$ 255,590,674
149,336,767
Proceeds from exercise of stock options
154,699
12,805,646
—
Common stock repurchases
(589,533)
—
(111,139,261)
Restricted common stock expense under
stock option plan, net of cancellations
($5,072,230)
Stock option expense
Net income
Balances at March 31, 2022
6,348,314
$ 280,907,085
(22,146)
—
—
9,036,852
3,473,913
—
—
—
53,919,837
92,117,343
Year ended March 31, 2021
Common
Stock
Shares
Additional
Paid-in
Retained
Earnings
Total Shareholders'
Equity
Balances at March 31, 2020
7,807,834
$ 227,214,577
184,748,490
Proceeds from exercise of stock options, net
165,237
12,268,554
—
Common stock repurchases
(1,129,875)
—
(102,452,302)
Restricted common stock expense under
stock option plan, net of cancellations
($3,173,735)
Stock option expense
Cumulative effect of adoption of ASC 326
Net income
Balances at March 31, 2021
(37,902)
12,302,869
3,804,674
—
—
—
—
(21,242,249)
88,282,828
—
—
—
6,805,294
$ 255,590,674
149,336,767
See accompanying notes to Consolidated Financial Statements.
404,927,441
12,805,646
(111,139,261)
9,036,852
3,473,913
53,919,837
373,024,428
411,963,067
12,268,554
(102,452,302)
12,302,869
3,804,674
(21,242,249)
88,282,828
404,927,441
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flow from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2023
Years Ended March 31,
2022
2021
$ 21,231,990 $ 53,919,837 $ 88,282,828
Loss on assets held for sale
Amortization of intangible assets
Amortization of historic tax credits
Accrued unearned interest
Gain on extinguishment of senior unsecured notes payable
Amortization of deferred loan costs
Amortization of debt issuance costs
Provision for credit losses
Depreciation
Amortization of finance leases
Gain on asset acquisition, net of income tax
Loss on sale of property and equipment
Deferred income tax expense (benefit)
—
4,466,535
—
3,213,737
(1,831,277)
15,526,336
1,654,916
38,633
5,010,275
3,930,753
(9,032,020)
—
16,911,599
1,095,325
259,463,199 186,207,341
6,253,175
407,624
—
419,975
(14,808,715)
6,239,266
204,552
(3,993,168)
11,837
(2,102,085)
37,579
5,474,240
1,736,384
9,698,671
—
17,101,722
659,292
86,244,714
6,537,957
407,624
—
2,812,404
5,651,362
Compensation related to stock option and restricted stock plans, net of taxes and
adjustments
Gain on sale of loans receivable
Gain on company-owned life insurance
9,052,835
—
(104,113)
17,582,995
—
(106,885)
19,281,278
(24,667)
(1,064,897)
Change in accounts:
Other assets, net
Income taxes payable and receivable
Accounts payable and accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Increase in loans receivable, net
Cash paid for acquisitions, primarily loans
Purchases of property and equipment
Proceeds from sale of property and equipment
Proceeds from the sale of assets held for sale
Proceeds from the sale of loans receivable
Proceeds from company-owned life insurance
Net cash used in investing activities
Cash flow from financing activities:
Borrowings from senior notes payable
Payments on senior notes payable
Payments for extinguished senior unsecured notes payable
Issuance of senior unsecured notes payable
Debt issuance costs associated with senior unsecured notes payable
Payments for debt extinguishment costs
Debt issuance costs associated with senior notes payable
Proceeds from exercise of stock options
Payments for taxes related to net share settlement of equity awards
Repurchase of common stock
Repayment of finance lease
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosures:
Interest paid during the year
Income taxes paid during the year
Finance lease right-of-use assets, net transferred to property and equipment, net
(9,147,152)
(4,851,403)
(7,482,219)
(4,234,933)
6,610,559
(18,258,393)
291,553,786 272,446,541 226,953,724
(8,193,529)
(4,191,692)
17,001,850
(152,154,050) (436,311,573)
(10,859,984)
(6,070,414)
245,935
1,104,895
—
—
(180,583,800) (451,891,141)
(23,131,758)
(5,827,773)
529,781
—
—
—
(56,143,765)
(19,774,252)
(11,683,858)
346,943
2,810,391
449,327
1,997,279
(81,997,935)
(7,171,700)
—
— 300,000,000
(5,119,647)
—
—
12,805,646
(5,072,230)
313,862,948 515,315,246 310,984,250
(402,924,870) (523,350,000) (357,076,750)
—
—
(19,656)
—
(22,850)
—
(1,139,008)
(784,250)
654,920
12,268,554
(2,543,001)
(3,173,735)
(14,314,089) (111,139,261) (102,452,302)
(594,024)
(113,697,373) 182,934,468 (140,828,257)
4,127,532
11,618,922
$ 16,508,935 $ 19,236,322 $ 15,746,454
3,489,868
15,746,454
(2,727,387)
19,236,322
(505,286)
(80,067)
$ 51,761,768 $ 21,318,911 $ 24,993,898
$ 10,783,143 $ 30,941,852 $ 14,857,555
—
$
402,960 $
— $
See accompanying notes to Consolidated Financial Statements.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company's accounting and reporting policies are in accordance with GAAP and conform to general practices within
the finance company industry. The following is a description of the more significant of these policies used in preparing the
Consolidated Financial Statements.
For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three
months or less from the date of original issuance to be cash equivalents. As of March 31, 2023 and 2022, the Company had
$8.3 million and $7.8 million, respectively, in restricted cash associated with its captive insurance subsidiary that reinsures
a portion of the credit insurance sold in connection with loans made by the Company.
Nature of Operations
Loans and Interest and Fee Income
The Company is a small-dollar consumer finance (installment loan) company headquartered in Greenville, South Carolina
that offers short-term small loans, medium-term larger loans, related credit insurance products and ancillary products and
services to individuals who have limited access to other sources of consumer credit. It also offers income tax return
preparation services to its customer base and to others.
As of March 31, 2023, the Company operated 1,073 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky,
Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, and
Wisconsin. Branches in the aforementioned states operate under one of the following names: World Finance Corporation or
World Finance.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of World Acceptance Corporation and its wholly-owned
subsidiaries (the “Company”). Subsidiaries consist of operating entities in various states and WAC Insurance Company,
Ltd. (a captive reinsurance company). All significant inter-company balances and transactions have been eliminated in
consolidation.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates. The most significant item subject to such estimates and assumptions that could materially change in the
near term is the allowance for credit losses.
Reclassification
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.
Business Segments
The Company reports operating segments in accordance with FASB ASC Topic 280. Operating segments are components
of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and assess performance. FASB ASC Topic 280 requires that a public
enterprise report a measure of segment profit or loss, certain specific revenue and expense items, segment assets, information
about the way that the operating segments were determined and other items.
The Company has one reportable segment. The other revenue generating activities of the Company, including the sale of
insurance products, income tax preparation, and the automobile club, are done within the existing branch network in
conjunction with or as a complement to the lending operations. There is no discrete financial information available for these
activities, and they do not meet the criteria under FASB ASC Topic 280 to be considered operating segments.
50
The Company is licensed to originate consumer loans in the states of Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky,
Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Utah, and Wisconsin. During
fiscal 2023, 2022, and 2021, the Company originated loans generally ranging up to $6,000 with terms of 60 months or
fewer. Experience indicates that a majority of the consumer loans are refinanced, and the Company accounts for the majority
of the refinancings as new loans. Generally, a customer must make multiple payments in order to qualify for
refinancing. Furthermore, the Company's lending policy has predetermined lending amounts so that in most cases a
refinancing will result in advancing additional funds. The Company believes that the advancement of additional funds
constitutes more than a minor modification to the terms of the existing loan if the present value of the cash flows under the
terms of the new loan will be 10% or more of the present value of the remaining cash flows under the terms of the original
loan.
The following table sets forth information about our loan products for fiscal 2023:
Small loans
Large loans
Tax advance loans
Small loans
Large loans
Tax advance loans
Total gross loans
Minimum
Maximum
Term
Origination
Origination
(Months)
Term
(Months)
Minimum
Maximum
$
500 $
2,500
500
2,450
33,450
5,000
5
10
8
31
60
8
2023
580,107,889 $
807,345,625
2,562,054
2022
727,852,627
789,112,912
5,823,321
1,390,015,568 $
1,522,788,860
$
$
Gross loans receivable at March 31, 2023 and 2022 consisted of the following:
Fees received and direct costs incurred for the origination of loans are deferred and amortized to interest income over the
contractual lives of the loans using the interest method. Unamortized amounts are recognized in interest income at the time
that loans are refinanced or paid in full except for those refinancings that do not constitute a more than minor modification.
Loans are carried at the gross amount outstanding, reduced by unearned interest and insurance income, net of deferred
origination fees and direct costs, and an allowance for credit losses. Net unamortized deferred origination costs were $4.9
million and $6.9 million as of March 31, 2023 and 2022, respectively.
The Company recognizes interest and fee income using the interest method. Charges for late payments are recognized in
interest and fee income when collected.
With the exception of tax advance loans, which are interest free, the Company offers its loans at the prevailing statutory
rates for terms not to exceed 60 months. Management believes that the carrying value approximates the fair value of its loan
portfolio.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three
months or less from the date of original issuance to be cash equivalents. As of March 31, 2023 and 2022, the Company had
$8.3 million and $7.8 million, respectively, in restricted cash associated with its captive insurance subsidiary that reinsures
a portion of the credit insurance sold in connection with loans made by the Company.
Loans and Interest and Fee Income
The Company is licensed to originate consumer loans in the states of Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky,
Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Utah, and Wisconsin. During
fiscal 2023, 2022, and 2021, the Company originated loans generally ranging up to $6,000 with terms of 60 months or
fewer. Experience indicates that a majority of the consumer loans are refinanced, and the Company accounts for the majority
of the refinancings as new loans. Generally, a customer must make multiple payments in order to qualify for
refinancing. Furthermore, the Company's lending policy has predetermined lending amounts so that in most cases a
refinancing will result in advancing additional funds. The Company believes that the advancement of additional funds
constitutes more than a minor modification to the terms of the existing loan if the present value of the cash flows under the
terms of the new loan will be 10% or more of the present value of the remaining cash flows under the terms of the original
loan.
The following table sets forth information about our loan products for fiscal 2023:
Small loans
Large loans
Tax advance loans
Minimum
Origination
$
Maximum
Origination
2,450
33,450
5,000
500 $
2,500
500
Minimum
Term
(Months)
5
10
8
Maximum
Term
(Months)
31
60
8
Gross loans receivable at March 31, 2023 and 2022 consisted of the following:
Small loans
Large loans
Tax advance loans
Total gross loans
2023
580,107,889 $
807,345,625
2,562,054
1,390,015,568 $
2022
727,852,627
789,112,912
5,823,321
1,522,788,860
$
$
Fees received and direct costs incurred for the origination of loans are deferred and amortized to interest income over the
contractual lives of the loans using the interest method. Unamortized amounts are recognized in interest income at the time
that loans are refinanced or paid in full except for those refinancings that do not constitute a more than minor modification.
Loans are carried at the gross amount outstanding, reduced by unearned interest and insurance income, net of deferred
origination fees and direct costs, and an allowance for credit losses. Net unamortized deferred origination costs were $4.9
million and $6.9 million as of March 31, 2023 and 2022, respectively.
The Company recognizes interest and fee income using the interest method. Charges for late payments are recognized in
interest and fee income when collected.
With the exception of tax advance loans, which are interest free, the Company offers its loans at the prevailing statutory
rates for terms not to exceed 60 months. Management believes that the carrying value approximates the fair value of its loan
portfolio.
51
The Company's accounting and reporting policies are in accordance with GAAP and conform to general practices within
the finance company industry. The following is a description of the more significant of these policies used in preparing the
Consolidated Financial Statements.
Nature of Operations
The Company is a small-dollar consumer finance (installment loan) company headquartered in Greenville, South Carolina
that offers short-term small loans, medium-term larger loans, related credit insurance products and ancillary products and
services to individuals who have limited access to other sources of consumer credit. It also offers income tax return
preparation services to its customer base and to others.
As of March 31, 2023, the Company operated 1,073 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky,
Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, and
Wisconsin. Branches in the aforementioned states operate under one of the following names: World Finance Corporation or
World Finance.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of World Acceptance Corporation and its wholly-owned
subsidiaries (the “Company”). Subsidiaries consist of operating entities in various states and WAC Insurance Company,
Ltd. (a captive reinsurance company). All significant inter-company balances and transactions have been eliminated in
consolidation.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates. The most significant item subject to such estimates and assumptions that could materially change in the
near term is the allowance for credit losses.
Reclassification
Business Segments
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 Company reports operating segments in accordance with FASB ASC Topic 280. Operating segments are components
of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and assess performance. FASB ASC Topic 280 requires that a public
enterprise report a measure of segment profit or loss, certain specific revenue and expense items, segment assets, information
about the way that the operating segments were determined and other items.
The Company has one reportable segment. The other revenue generating activities of the Company, including the sale of
insurance products, income tax preparation, and the automobile club, are done within the existing branch network in
conjunction with or as a complement to the lending operations. There is no discrete financial information available for these
activities, and they do not meet the criteria under FASB ASC Topic 280 to be considered operating segments.
Nonaccrual Policy
Debt Issuance Costs
The accrual of interest is discontinued when a loan is 61 days or more past the contractual due date. When the interest
accrual is discontinued, all unpaid accrued interest is reversed against interest income. While a loan is on nonaccrual status,
interest income is recognized only when a payment is received. Once a loan moves to nonaccrual status, it remains in
nonaccrual status until it is paid out, charged off or refinanced.
Allowance for Credit Losses
Refer to Note 2, “Allowance for Credit Losses and Credit Quality Information”, for information regarding the Company's
adoption of the CECL allowance model on April 1, 2020 and a description of the methodology it utilizes.
and $0.7 million, respectively.
Intangible Assets and Goodwill
In accordance with ASC 835, debt issuance costs related to the senior unsecured notes payable are presented as a direct
deduction from its carrying value in the Consolidated Balance Sheets. Unamortized debt issuance costs related to the senior
unsecured notes payable as of March 31, 2023 and 2022 were $3.5 million and 4.6 million, respectively.
As the Company intends to pay down the senior notes payable throughout the contractual arrangement, debt issuance costs
related to this arrangement are presented as an asset within Other assets in the Consolidated Balance Sheets as discussed
above. Unamortized debt issuance costs related to the senior notes payable as of March 31, 2023 and 2022 were $1.2 million
Impaired Loans
The Company defines impaired loans as bankrupt accounts and accounts 91 days or more past due on a recency basis. In
accordance with the Company’s charge-off policy, once a loan is deemed uncollectible, 100% of the net investment is
charged off, except in the case of a borrower who has filed for bankruptcy. As of March 31, 2023 and 2022, bankrupt
accounts that had not been charged off were approximately $6.8 million and $5.4 million, respectively. Bankrupt accounts
91 days or more past due on a recency basis are reserved at 100% of the gross loan balance. The Company also considers
any accounts 91 days or more past due on a recency basis to be impaired, and such accounts are reserved at 100% of the
gross loan balance, less a rehab rate for defaulted loans that do not charge-off.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is recorded using
the straight-line method over the estimated useful life of the related asset as follows: buildings, 25 to 40 years; furniture and
fixtures, 5 to 10 years; equipment, 3 to 7 years; and vehicles, 3 years. Amortization of leasehold improvements is recorded
using the straight-line method over the lesser of the estimated useful life of the asset, which is generally five years, or the
lease term, which is generally three to five years. Additions to premises and equipment and major replacements or
improvements are added at cost. Maintenance, repairs, and minor replacements are charged to operating expense as
incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in Insurance and other income, net in the Consolidated Statements of Operations.
Leases
For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains
a lease. The Company records ROU assets and lease liabilities for its leases, which are initially recognized based on the
discounted future lease payments over the term of the lease. The Company uses its effective annual or fourth quarter interest
rate as the discount rate when evaluating leases. Refer to Note 9, "Leases", for further discussion of the discount rate.
Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is
reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU assets and
lease obligations for its short-term equipment leases, which are defined as leases with an initial term of 12 months or less.
Further, the Company has elected to not separate lease from non-lease components. Variable lease costs include expenses
such as common area maintenance, utilities, and repairs and maintenance.
Other Assets
Other assets include cash surrender value of life insurance policies, HTC investments, prepaid expenses, debt issuance costs
related to the senior notes payable, and other deposits and receivables.
52
Intangible assets include the cost of acquiring existing customers ("customer lists") and the fair value assigned to non-
compete agreements. Customer lists are amortized on a straight line or accelerated basis over their estimated period of
benefit, ranging from 8 to 23 years with a weighted average of approximately 9.4 years. Non-compete agreements are
amortized on a straight line basis over the term of the agreement, ranging from 3 to 5.3 years with a weighted average of
approximately 4.7 years.
Customer lists are allocated at a branch level and are evaluated for impairment at a branch level when a triggering event
occurs, in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment loss to the customer
list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair value of the customer
list allocated to a branch is less than $100,000, and management believes that in the event a triggering event were to occur,
the impairment loss to an unamortized customer list would be immaterial.
Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company
believes approximates the fair value. The fair value of the customer lists is based on a valuation model that utilizes the
Company’s historical data to estimate the value of any acquired customer lists. In a business combination, the remaining
excess of the purchase price over the fair value of the tangible assets, customer list, and non-compete agreements is allocated
to goodwill. The branches the Company acquires are small, privately-owned branches, which do not have sufficient
historical data to determine customer attrition. The Company believes that the customers acquired have the same
characteristics and perform similarly to its customers. Therefore, the Company utilized the attrition patterns of its customers
when developing the estimate of attrition for acquired customers. This estimation method is re-evaluated periodically.
The Company evaluates goodwill annually for impairment in the fourth quarter of the fiscal year using the market value-
based approach. The Company has one reporting unit, and the Company has multiple components, the lowest level of which
is individual branches. The Company’s components are aggregated for impairment testing as they have similar economic
characteristics.
Impairment of Long-Lived Assets
The Company assesses impairment of long-lived assets, including property and equipment and intangible assets, whenever
changes or events indicate that the carrying amount may not be recoverable. The Company assesses impairment of these
assets generally at the branch level based on the operating cash flows of the branch and the Company’s plans for branch
closings. The Company will write down such assets to fair value if, based on an analysis, the sum of the expected future
undiscounted cash flows is less than the carrying amount of the assets. The Company did not record any impairment charges
for the fiscal years ended March 31, 2023, 2022, or 2021.
Fair Value of Financial Instruments
FASB ASC Topic 825 requires disclosures about the fair value of all financial instruments, regardless of whether the
financial instrument is recognized on the balance sheet, for which it is practicable to estimate that value. In cases where
quoted market prices are not available, fair values are based on estimates using present value or other valuation
techniques. The Company’s financial instruments for the periods reported consist of the following: cash and cash
equivalents, loans receivable, senior notes payable, and senior unsecured notes payable.
Nonaccrual Policy
Debt Issuance Costs
The accrual of interest is discontinued when a loan is 61 days or more past the contractual due date. When the interest
accrual is discontinued, all unpaid accrued interest is reversed against interest income. While a loan is on nonaccrual status,
interest income is recognized only when a payment is received. Once a loan moves to nonaccrual status, it remains in
nonaccrual status until it is paid out, charged off or refinanced.
In accordance with ASC 835, debt issuance costs related to the senior unsecured notes payable are presented as a direct
deduction from its carrying value in the Consolidated Balance Sheets. Unamortized debt issuance costs related to the senior
unsecured notes payable as of March 31, 2023 and 2022 were $3.5 million and 4.6 million, respectively.
As the Company intends to pay down the senior notes payable throughout the contractual arrangement, debt issuance costs
related to this arrangement are presented as an asset within Other assets in the Consolidated Balance Sheets as discussed
above. Unamortized debt issuance costs related to the senior notes payable as of March 31, 2023 and 2022 were $1.2 million
and $0.7 million, respectively.
Refer to Note 2, “Allowance for Credit Losses and Credit Quality Information”, for information regarding the Company's
adoption of the CECL allowance model on April 1, 2020 and a description of the methodology it utilizes.
Intangible Assets and Goodwill
Intangible assets include the cost of acquiring existing customers ("customer lists") and the fair value assigned to non-
compete agreements. Customer lists are amortized on a straight line or accelerated basis over their estimated period of
benefit, ranging from 8 to 23 years with a weighted average of approximately 9.4 years. Non-compete agreements are
amortized on a straight line basis over the term of the agreement, ranging from 3 to 5.3 years with a weighted average of
approximately 4.7 years.
Customer lists are allocated at a branch level and are evaluated for impairment at a branch level when a triggering event
occurs, in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment loss to the customer
list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair value of the customer
list allocated to a branch is less than $100,000, and management believes that in the event a triggering event were to occur,
the impairment loss to an unamortized customer list would be immaterial.
Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company
believes approximates the fair value. The fair value of the customer lists is based on a valuation model that utilizes the
Company’s historical data to estimate the value of any acquired customer lists. In a business combination, the remaining
excess of the purchase price over the fair value of the tangible assets, customer list, and non-compete agreements is allocated
to goodwill. The branches the Company acquires are small, privately-owned branches, which do not have sufficient
historical data to determine customer attrition. The Company believes that the customers acquired have the same
characteristics and perform similarly to its customers. Therefore, the Company utilized the attrition patterns of its customers
when developing the estimate of attrition for acquired customers. This estimation method is re-evaluated periodically.
The Company evaluates goodwill annually for impairment in the fourth quarter of the fiscal year using the market value-
based approach. The Company has one reporting unit, and the Company has multiple components, the lowest level of which
is individual branches. The Company’s components are aggregated for impairment testing as they have similar economic
characteristics.
Impairment of Long-Lived Assets
The Company assesses impairment of long-lived assets, including property and equipment and intangible assets, whenever
changes or events indicate that the carrying amount may not be recoverable. The Company assesses impairment of these
assets generally at the branch level based on the operating cash flows of the branch and the Company’s plans for branch
closings. The Company will write down such assets to fair value if, based on an analysis, the sum of the expected future
undiscounted cash flows is less than the carrying amount of the assets. The Company did not record any impairment charges
for the fiscal years ended March 31, 2023, 2022, or 2021.
Fair Value of Financial Instruments
FASB ASC Topic 825 requires disclosures about the fair value of all financial instruments, regardless of whether the
financial instrument is recognized on the balance sheet, for which it is practicable to estimate that value. In cases where
quoted market prices are not available, fair values are based on estimates using present value or other valuation
techniques. The Company’s financial instruments for the periods reported consist of the following: cash and cash
equivalents, loans receivable, senior notes payable, and senior unsecured notes payable.
53
Allowance for Credit Losses
Impaired Loans
The Company defines impaired loans as bankrupt accounts and accounts 91 days or more past due on a recency basis. In
accordance with the Company’s charge-off policy, once a loan is deemed uncollectible, 100% of the net investment is
charged off, except in the case of a borrower who has filed for bankruptcy. As of March 31, 2023 and 2022, bankrupt
accounts that had not been charged off were approximately $6.8 million and $5.4 million, respectively. Bankrupt accounts
91 days or more past due on a recency basis are reserved at 100% of the gross loan balance. The Company also considers
any accounts 91 days or more past due on a recency basis to be impaired, and such accounts are reserved at 100% of the
gross loan balance, less a rehab rate for defaulted loans that do not charge-off.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is recorded using
the straight-line method over the estimated useful life of the related asset as follows: buildings, 25 to 40 years; furniture and
fixtures, 5 to 10 years; equipment, 3 to 7 years; and vehicles, 3 years. Amortization of leasehold improvements is recorded
using the straight-line method over the lesser of the estimated useful life of the asset, which is generally five years, or the
lease term, which is generally three to five years. Additions to premises and equipment and major replacements or
improvements are added at cost. Maintenance, repairs, and minor replacements are charged to operating expense as
incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in Insurance and other income, net in the Consolidated Statements of Operations.
Leases
Other Assets
For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains
a lease. The Company records ROU assets and lease liabilities for its leases, which are initially recognized based on the
discounted future lease payments over the term of the lease. The Company uses its effective annual or fourth quarter interest
rate as the discount rate when evaluating leases. Refer to Note 9, "Leases", for further discussion of the discount rate.
Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is
reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU assets and
lease obligations for its short-term equipment leases, which are defined as leases with an initial term of 12 months or less.
Further, the Company has elected to not separate lease from non-lease components. Variable lease costs include expenses
such as common area maintenance, utilities, and repairs and maintenance.
Other assets include cash surrender value of life insurance policies, HTC investments, prepaid expenses, debt issuance costs
related to the senior notes payable, and other deposits and receivables.
Loans receivable are originated at prevailing market rates and have an average life of less than twelve months. Given the
short-term nature of these loans, they are continually repriced at current market rates. The Company’s senior notes payable
has a variable rate based on a margin over SOFR and reprices with any changes in SOFR. The fair value of the senior
unsecured notes payable is estimated based on quoted prices in markets that are not active.
Insurance Premiums and Commissions
Insurance premiums for credit life, accident and health, property and unemployment insurance written in connection with
certain loans, net of refunds and applicable advance insurance commissions retained by the Company, are remitted monthly
to an insurance company. All commissions are recorded to unearned insurance commissions and recognized as insurance
income over the life of the related insurance contracts. The Company recognizes insurance income using the Rule of 78s
method for credit life (decreasing term), credit accident and health, unemployment insurance and the Pro Rata method for
credit life (level term) and credit property.
Non-filing Insurance
Non-filing insurance premiums are charged on certain loans in lieu of recording and perfecting the Company's security
interest in the assets pledged. The premiums and recoveries are remitted to a third party insurance company and are not
reflected in the accompanying Consolidated Financial Statements (see Note 8).
Claims paid by the third party insurance company result in a reduction to credit losses. Certain losses related to such loans,
which are not recoverable through life, accident and health, property, or unemployment insurance claims, are reimbursed
through non-filing insurance claims subject to policy limitations. Any remaining losses are charged to the allowance for
credit losses.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in which the change in judgment related to
additional facts and circumstances occurs.
Earnings Per Share
Recently Adopted Accounting Standards
Earnings per share (“EPS”) is computed in accordance with FASB ASC Topic 260. Basic EPS includes no dilution and is
computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in the earnings of the Company. Potential common stock
included in the diluted EPS computation consists of stock options and restricted stock, which are computed using the
treasury stock method. See Note 11 for the reconciliation of the numerators and denominators for basic and dilutive EPS
calculations.
Stock-Based Compensation
FASB ASC Topic 718-10 requires companies to recognize in the income statement the grant-date fair value of stock options
and other equity-based compensation issued to employees. FASB ASC Topic 718-10 does not change the accounting
guidance for share-based payment transactions with parties other than employees provided in FASB ASC Topic 718-10.
Under FASB ASC Topic 718-10, the way an award is classified will affect the measurement of compensation cost. Liability-
basis.
54
classified awards are remeasured to fair value at each balance-sheet date until the award is settled. Equity-classified awards
are measured at grant-date fair value, amortized over the subsequent vesting period, and are not subsequently remeasured.
The fair value of non-vested stock awards for the purposes of recognizing stock-based compensation expense is the market
price of the stock on the grant date. The fair value of options is estimated on the grant date using the Black-Scholes option
pricing model (see Note 12). The Company accounts for forfeitures as they occur. At March 31, 2023, the Company had
several share-based employee compensation plans, which are described more fully in Note 12.
Share Repurchases
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase
authorizations. As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its
current share repurchase program. The timing and actual number of shares of common stock repurchased will depend on a
variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the revolving credit
facility and other market and economic conditions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy
and an excellent use of excess cash when the opportunity arises. As of March 31, 2023 our debt outstanding was $595.3
million, net of $3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and our
shareholders' equity was $385.2 million resulting in a debt-to-equity ratio of 1.6:1.0.
Concentration of Risk
The Company generally serves individuals with limited access to other sources of consumer credit such as banks, credit
unions, other consumer finance businesses and credit card lenders. During the year ended March 31, 2023, the Company
operated in sixteen states in the United States. For fiscal years ended March 31, 2023, 2022, and 2021, gross loan receivable
within the Company's four largest states accounted for approximately 52% of the Company's gross loans receivable balance.
The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The Company has
not experienced losses in such accounts, which are maintained with large domestic banks. Management believes the
Company’s exposure to credit risk is minimal for these accounts.
Advertising Costs
Advertising costs are expensed when incurred. Advertising costs were approximately $6.1 million, $18.3 million, and
$17.2 million for fiscal years 2023, 2022, and 2021, respectively.
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
In March 2023, the FASB issued ASU No. 2023-02, Investments- Equity Method and Joint Venture (Topic 323). The
amendments in this ASU permit reporting entities to elect to account for their tax equity investments, regardless of the tax
credit program from which the income tax credits are received, using the proportional amortization method if certain
conditions are met. For public business entities, the amendments are effective for fiscal years beginning after December 15,
2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. If an entity
adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that
interim period. The amendments in this pronouncement must be applied on either a modified retrospective or retrospective
Loans receivable are originated at prevailing market rates and have an average life of less than twelve months. Given the
short-term nature of these loans, they are continually repriced at current market rates. The Company’s senior notes payable
has a variable rate based on a margin over SOFR and reprices with any changes in SOFR. The fair value of the senior
unsecured notes payable is estimated based on quoted prices in markets that are not active.
Insurance Premiums and Commissions
Insurance premiums for credit life, accident and health, property and unemployment insurance written in connection with
certain loans, net of refunds and applicable advance insurance commissions retained by the Company, are remitted monthly
to an insurance company. All commissions are recorded to unearned insurance commissions and recognized as insurance
income over the life of the related insurance contracts. The Company recognizes insurance income using the Rule of 78s
method for credit life (decreasing term), credit accident and health, unemployment insurance and the Pro Rata method for
credit life (level term) and credit property.
Non-filing Insurance
Non-filing insurance premiums are charged on certain loans in lieu of recording and perfecting the Company's security
interest in the assets pledged. The premiums and recoveries are remitted to a third party insurance company and are not
reflected in the accompanying Consolidated Financial Statements (see Note 8).
Claims paid by the third party insurance company result in a reduction to credit losses. Certain losses related to such loans,
which are not recoverable through life, accident and health, property, or unemployment insurance claims, are reimbursed
through non-filing insurance claims subject to policy limitations. Any remaining losses are charged to the allowance for
credit losses.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in which the change in judgment related to
additional facts and circumstances occurs.
Earnings Per Share
Earnings per share (“EPS”) is computed in accordance with FASB ASC Topic 260. Basic EPS includes no dilution and is
computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in the earnings of the Company. Potential common stock
included in the diluted EPS computation consists of stock options and restricted stock, which are computed using the
treasury stock method. See Note 11 for the reconciliation of the numerators and denominators for basic and dilutive EPS
calculations.
Stock-Based Compensation
FASB ASC Topic 718-10 requires companies to recognize in the income statement the grant-date fair value of stock options
and other equity-based compensation issued to employees. FASB ASC Topic 718-10 does not change the accounting
guidance for share-based payment transactions with parties other than employees provided in FASB ASC Topic 718-10.
Under FASB ASC Topic 718-10, the way an award is classified will affect the measurement of compensation cost. Liability-
classified awards are remeasured to fair value at each balance-sheet date until the award is settled. Equity-classified awards
are measured at grant-date fair value, amortized over the subsequent vesting period, and are not subsequently remeasured.
The fair value of non-vested stock awards for the purposes of recognizing stock-based compensation expense is the market
price of the stock on the grant date. The fair value of options is estimated on the grant date using the Black-Scholes option
pricing model (see Note 12). The Company accounts for forfeitures as they occur. At March 31, 2023, the Company had
several share-based employee compensation plans, which are described more fully in Note 12.
Share Repurchases
On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s
outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase
authorizations. As of March 31, 2023, the Company had $1.1 million in aggregate remaining repurchase capacity under its
current share repurchase program. The timing and actual number of shares of common stock repurchased will depend on a
variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the revolving credit
facility and other market and economic conditions.
The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy
and an excellent use of excess cash when the opportunity arises. As of March 31, 2023 our debt outstanding was $595.3
million, net of $3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and our
shareholders' equity was $385.2 million resulting in a debt-to-equity ratio of 1.6:1.0.
Concentration of Risk
The Company generally serves individuals with limited access to other sources of consumer credit such as banks, credit
unions, other consumer finance businesses and credit card lenders. During the year ended March 31, 2023, the Company
operated in sixteen states in the United States. For fiscal years ended March 31, 2023, 2022, and 2021, gross loan receivable
within the Company's four largest states accounted for approximately 52% of the Company's gross loans receivable balance.
The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The Company has
not experienced losses in such accounts, which are maintained with large domestic banks. Management believes the
Company’s exposure to credit risk is minimal for these accounts.
Advertising Costs
Advertising costs are expensed when incurred. Advertising costs were approximately $6.1 million, $18.3 million, and
$17.2 million for fiscal years 2023, 2022, and 2021, respectively.
Recently Adopted Accounting Standards
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
In March 2023, the FASB issued ASU No. 2023-02, Investments- Equity Method and Joint Venture (Topic 323). The
amendments in this ASU permit reporting entities to elect to account for their tax equity investments, regardless of the tax
credit program from which the income tax credits are received, using the proportional amortization method if certain
conditions are met. For public business entities, the amendments are effective for fiscal years beginning after December 15,
2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. If an entity
adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that
interim period. The amendments in this pronouncement must be applied on either a modified retrospective or retrospective
basis.
55
The Company adopted this ASU as of April 1, 2022 using the modified retrospective approach. The adoption of this ASU
resulted in a $1.9 million cumulative adjustment to the opening balance of retained earnings. Refer to Note 10 for further
details.
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
recency basis and year of origination at March 31, 2023:
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
$ 1,200,504,088 $ 62,076,656 $ 1,998,218 $
148,662 $
23,046 $
6,863 $ 1,264,757,533
40,791,746
4,689,867
160,956
42,700
8,504
2,988
45,696,761
26,319,250
2,572,733
92,088
40,281
884
—
29,025,236
Loans
Current
30 - 60 days past
61 - 90 days past
due
due
91 or more days
past due
41,832,821
5,944,645
160,361
29,494
4,430
2,233
47,973,984
Total
$ 1,309,447,905 $ 75,283,901 $ 2,411,623 $
261,137 $
36,864 $
12,084 $ 1,387,453,514
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
1,932,607 $
3,524 $
— $
— $
— $
— $
1,936,131
609,844
736
—
4,845
409
10,089
19,194 $
—
—
—
— $
—
—
—
— $
—
—
—
— $
—
—
—
— $
610,580
4,845
10,498
2,562,054
$ 1,390,015,568
Tax advance loans
Current
$
30 - 60 days past
due
due
61 - 90 days past
91 or more days
past due
Total
$
2,542,860 $
Total gross loans
Recently Issued Accounting Standards Not Yet Adopted
Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. The amendments
in this update eliminate the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40,
Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan
refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public
business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of
origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial
Instruments—Credit Losses—Measured at Amortized Cost. For entities that have adopted the amendments in Update 2016-
13, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years and should be applied prospectively, with the exception of the transition method related to the
recognition and measurement of troubled debt restructurings in which an entity has the option to apply a modified
retrospective transition method. Early adoption is permitted. We are currently evaluating the impact the adoption of this
update will have on our Consolidated Financial Statements.
We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our
business or are not expected to have a material effect on the Consolidated Financial Statements as a result of future adoption.
(2) Allowance for Credit Losses and Credit Quality Information
The following is a summary of gross loans receivable by Customer Tenure as of:
$
Customer Tenure
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Tax advance loans
Total gross loans
$
March 31, 2023
81,803,668 $
133,650,188
135,396,187
244,414,255
792,189,216
2,562,054
1,390,015,568 $
March 31, 2022
198,740,475
133,665,566
204,940,323
214,956,857
764,662,319
5,823,320
1,522,788,860
During the first quarter of fiscal 2021, we adopted ASU 2016-13, which replaces the incurred loss methodology for
determining our provision for credit losses and allowance for credit losses with an expected loss methodology that is referred
to as the CECL model, using the modified retrospective approach. Upon adoption, the total allowance for credit losses
increased by $28.6 million, with no impact to the Consolidated Statements of Operations.
Based on the Company’s loan products, the purpose and the term, current payment performance is used to assess the
capability of the borrower to repay contractual obligations of the loan agreements as scheduled. Current payment
performance is monitored by management on a daily basis. On an as needed basis, qualitative information may be taken
into consideration if new information arises related to the customer’s ability to repay the loan. The Company’s payment
performance buckets are as follows: current, 30-60 days past due, 61-90 days past due, 91 days or more past due.
56
details.
Recently Issued Accounting Standards Not Yet Adopted
Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. The amendments
in this update eliminate the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40,
Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan
refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public
business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of
origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial
Instruments—Credit Losses—Measured at Amortized Cost. For entities that have adopted the amendments in Update 2016-
13, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years and should be applied prospectively, with the exception of the transition method related to the
recognition and measurement of troubled debt restructurings in which an entity has the option to apply a modified
retrospective transition method. Early adoption is permitted. We are currently evaluating the impact the adoption of this
update will have on our Consolidated Financial Statements.
We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our
business or are not expected to have a material effect on the Consolidated Financial Statements as a result of future adoption.
(2) Allowance for Credit Losses and Credit Quality Information
The following is a summary of gross loans receivable by Customer Tenure as of:
$
Customer Tenure
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Tax advance loans
Total gross loans
$
March 31, 2023
81,803,668 $
133,650,188
135,396,187
244,414,255
792,189,216
2,562,054
1,390,015,568 $
March 31, 2022
198,740,475
133,665,566
204,940,323
214,956,857
764,662,319
5,823,320
1,522,788,860
During the first quarter of fiscal 2021, we adopted ASU 2016-13, which replaces the incurred loss methodology for
determining our provision for credit losses and allowance for credit losses with an expected loss methodology that is referred
to as the CECL model, using the modified retrospective approach. Upon adoption, the total allowance for credit losses
increased by $28.6 million, with no impact to the Consolidated Statements of Operations.
Based on the Company’s loan products, the purpose and the term, current payment performance is used to assess the
capability of the borrower to repay contractual obligations of the loan agreements as scheduled. Current payment
performance is monitored by management on a daily basis. On an as needed basis, qualitative information may be taken
into consideration if new information arises related to the customer’s ability to repay the loan. The Company’s payment
performance buckets are as follows: current, 30-60 days past due, 61-90 days past due, 91 days or more past due.
The Company adopted this ASU as of April 1, 2022 using the modified retrospective approach. The adoption of this ASU
resulted in a $1.9 million cumulative adjustment to the opening balance of retained earnings. Refer to Note 10 for further
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
recency basis and year of origination at March 31, 2023:
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
$ 1,200,504,088 $ 62,076,656 $ 1,998,218 $
148,662 $
23,046 $
6,863 $ 1,264,757,533
40,791,746
4,689,867
160,956
42,700
8,504
2,988
45,696,761
26,319,250
2,572,733
92,088
40,281
884
—
29,025,236
41,832,821
160,361
$ 1,309,447,905 $ 75,283,901 $ 2,411,623 $
5,944,645
29,494
261,137 $
4,430
36,864 $
2,233
47,973,984
12,084 $ 1,387,453,514
Loans
Current
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Term Loans By Origination
Tax advance loans
Current
$
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
1,932,607 $
3,524 $
— $
— $
— $
— $
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Total gross loans
609,844
736
—
4,845
409
2,542,860 $
10,089
19,194 $
$
—
—
—
— $
—
—
—
— $
—
—
—
— $
—
—
—
— $
Total
1,936,131
610,580
4,845
10,498
2,562,054
$ 1,390,015,568
57
Term Loans By Origination
Loans
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
Current
$ 1,174,237,761 $ 53,652,011 $ 1,554,144 $ 64,233 $
5,142 $
1,491 $ 1,229,514,782
47,346,331 3,661,493
77,857
6,714
—
51,092,395
33,012,804 3,030,052
44,129
7,643
—
36,094,628
—
—
30 - 60 days past
61 - 90 days past
due
due
91 or more days
past due
Total
$ 1,309,447,906 $ 75,283,901 $ 2,411,623 $ 261,137 $ 36,863 $ 12,084 $ 1,387,453,514
54,851,010 14,940,345
735,493 182,547
31,721
10,593
70,751,709
Term Loans By Origination
Tax advance loans
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
Current
$
1,932,607 $
— $
— $
— $
— $
— $
1,932,607
609,844
—
—
—
409
19,194
—
—
—
— $
—
—
—
— $
—
—
—
— $
Total
$
2,542,860 $
19,194 $
30 - 60 days past
61 - 90 days past
due
due
91 or more days
past due
Total gross loans
—
—
609,844
—
—
— $
19,603
2,562,054
$ 1,390,015,568
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
recency basis and year of origination at March 31, 2022:
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2023:
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
$ 1,322,332,136 $ 34,273,199 $ 2,665,078 $ 152,105 $
21,539 $
3,972 $ 1,359,448,029
49,517,859 2,114,463
247,291
28,011
2,664
—
51,910,288
36,707,960
989,136
130,763
13,031
5,594
—
37,846,484
64,238,626 3,239,753
24,377
$ 1,472,796,581 $ 40,616,551 $ 3,291,728 $ 217,524 $
248,596
5,386
35,183 $
4,001
67,760,739
7,973 $ 1,516,965,540
Loans
Current
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Tax advance loans
Current
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Total gross loans
$
$
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
4,737,741 $
7,033 $
— $
— $
— $
— $
4,744,774
1,060,811
1,334
—
432
2,922
5,801,474 $
13,047
21,846 $
—
—
—
— $
—
—
—
— $
—
—
—
— $
—
1,062,145
—
432
—
— $
15,969
5,823,320
$ 1,522,788,860
58
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
$ 1,322,332,136 $ 34,273,199 $ 2,665,078 $ 152,105 $
21,539 $
3,972 $ 1,359,448,029
49,517,859 2,114,463
247,291
28,011
2,664
—
51,910,288
36,707,960
989,136
130,763
13,031
5,594
—
37,846,484
Loans
Current
30 - 60 days past
61 - 90 days past
due
due
91 or more days
past due
64,238,626 3,239,753
248,596
24,377
5,386
4,001
67,760,739
Total
$ 1,472,796,581 $ 40,616,551 $ 3,291,728 $ 217,524 $
35,183 $
7,973 $ 1,516,965,540
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
Current
$
4,737,741 $
7,033 $
— $
— $
— $
— $
4,744,774
Tax advance loans
30 - 60 days past
61 - 90 days past
due
due
91 or more days
past due
Total gross loans
1,060,811
1,334
—
432
Total
$
5,801,474 $
2,922
13,047
21,846 $
—
—
—
— $
—
—
—
— $
—
—
—
— $
—
1,062,145
—
432
—
— $
15,969
5,823,320
$ 1,522,788,860
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
recency basis and year of origination at March 31, 2022:
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2023:
Term Loans By Origination
Loans
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
Current
$ 1,174,237,761 $ 53,652,011 $ 1,554,144 $ 64,233 $
5,142 $
1,491 $ 1,229,514,782
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Tax advance loans
Current
30 - 60 days past
due
61 - 90 days past
due
91 or more days
past due
Total
Total gross loans
47,346,331 3,661,493
77,857
6,714
33,012,804 3,030,052
44,129
7,643
—
—
—
51,092,395
—
36,094,628
54,851,010 14,940,345
70,751,709
$ 1,309,447,906 $ 75,283,901 $ 2,411,623 $ 261,137 $ 36,863 $ 12,084 $ 1,387,453,514
735,493 182,547
31,721
10,593
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
$
1,932,607 $
— $
— $
— $
— $
— $
Total
1,932,607
609,844
—
—
—
—
— $
19,603
2,562,054
$ 1,390,015,568
609,844
—
—
—
409
2,542,860 $
19,194
19,194 $
$
—
—
—
— $
—
—
—
— $
—
—
—
— $
59
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2022:
The allowance for credit losses is applied to amortized cost, which is defined as the amount at which a financing receivable
is originated, and net of deferred fees and costs, collection of cash, and charge-offs. Amortized cost also includes interest
Term Loans By Origination
earned but not collected.
Loans
Current
30 - 60
days past
due
61 - 90
days past
due
91 or more
days past
due
Total
Tax advance
loans
Current
30 - 60
days past
due
61 - 90
days past
due
91 or more
days past
due
Total
Total gross
loans
Up to
1
Year Ago
Between
1 and 2
Years Ago
$ 1,290,448,366 $ 29,913,995 $ 1,994,474 $
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
Total
68,836 $
9,586 $
699 $ 1,322,435,956
57,225,953
1,508,794
91,118
5,519
45,276,797
1,271,187
96,233
986
—
—
—
58,831,384
—
46,645,203
79,845,465
1,109,903
$ 1,472,796,581 $ 40,616,550 $ 3,291,728 $
7,922,574
142,183
217,524 $
25,598
35,184 $
7,274
89,052,997
7,973 $ 1,516,965,540
Up to
1
Year Ago
Term Loans By Origination
Between
3 and 4
Years Ago
Between
2 and 3
Years Ago
Between
1 and 2
Years Ago
Between
4 and 5
Years Ago
More than
5
Years Ago
$
4,737,741 $
— $
— $
— $
— $
— $
Total
4,737,741
1,060,329
—
—
—
3,404
5,801,474 $
21,846
21,846 $
$
—
—
—
— $
—
—
—
— $
—
—
—
— $
—
1,060,329
—
—
—
— $
25,250
5,823,320
$ 1,522,788,860
60
Credit risk is inherent in the business of extending loans to borrowers and is continuously monitored by management and
reflected within the allowance for credit losses for loans. The allowance for credit losses is an estimate of expected losses
inherent within the Company’s gross loans receivable portfolio. In estimating the allowance for credit losses, loans with
similar risk characteristics are aggregated into pools and collectively assessed. The Company’s loan products have generally
the same terms; therefore, the Company looks to borrower characteristics as a way to disaggregate loans into pools sharing
similar risks.
In determining the allowance for credit losses, the Company examined four borrower risk metrics as noted below.
To determine how well each metric predicts default risk, the Company used loss rate data over an observation period of
twelve months at the loan level. The information value was then calculated for each metric. From this analysis, management
determined the metric that had the strongest predictor of default risk was Customer Tenure. The Customer Tenure buckets
used in the allowance for credit loss calculation are:
1. Borrower type
2. Active months
3. Prior loan performance
4. Customer Tenure
1. 0 to 5 months
2. 6 to 17 months
3. 18 to 35 months
4. 36 to 59 months
5. 60+ months
Management will continue to monitor this credit metric on a quarterly basis.
Management estimates an allowance for each Customer Tenure bucket by performing a historical migration analysis of
loans in that bucket for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. All loans
that are greater than 90 days past due on a recency basis and not written off as of the reporting date are reserved for at 100%
of the outstanding balance, net of a calculated Rehab Rate. Management considers whether current credit conditions might
suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new borrowers,
60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of gross
loans that are acquired loans. From time to time, the Company will make changes, as deemed appropriate, to our new
borrower (NB) underwriting guidance. As a result, management also considers whether a change in our NB underwriting
might suggest a change is needed to the allowance for credit losses. As of March 31, 2023, there were no current credit
conditions or other factors considered significant enough to warrant a change to the allowance for credit losses.
Due to the short term nature of the loan portfolio, forecasted changes in macro-economic variables such as unemployment
do not have a significant impact on loans outstanding at the end of a particular reporting period. Therefore, management
develops a reasonable and supportable forecast of losses by comparing the most recent 6-month loss curves as compared to
historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical migration
rates should be adjusted. If an adjustment is made as a result of the forecast, then the Company has elected to immediately
revert back to historical experience past the forecast period.
The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2022:
Term Loans By Origination
The allowance for credit losses is applied to amortized cost, which is defined as the amount at which a financing receivable
is originated, and net of deferred fees and costs, collection of cash, and charge-offs. Amortized cost also includes interest
earned but not collected.
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
$ 1,290,448,366 $ 29,913,995 $ 1,994,474 $
68,836 $
9,586 $
699 $ 1,322,435,956
57,225,953
1,508,794
91,118
5,519
—
58,831,384
45,276,797
1,271,187
96,233
986
—
46,645,203
—
—
79,845,465
7,922,574
1,109,903
Total
$ 1,472,796,581 $ 40,616,550 $ 3,291,728 $
142,183
217,524 $
25,598
35,184 $
7,274
89,052,997
7,973 $ 1,516,965,540
Term Loans By Origination
Up to
1
Year Ago
Between
1 and 2
Years Ago
Between
2 and 3
Years Ago
Between
3 and 4
Years Ago
Between
4 and 5
Years Ago
More than
Years Ago
5
Total
$
4,737,741 $
— $
— $
— $
— $
— $
4,737,741
1,060,329
—
3,404
—
—
21,846
21,846 $
—
—
—
— $
—
—
—
— $
—
—
—
— $
Total
$
5,801,474 $
—
1,060,329
—
—
—
— $
25,250
5,823,320
$ 1,522,788,860
Loans
Current
30 - 60
days past
due
61 - 90
days past
due
91 or more
days past
due
Tax advance
loans
Current
30 - 60
days past
due
61 - 90
days past
due
91 or more
days past
due
Total gross
loans
Credit risk is inherent in the business of extending loans to borrowers and is continuously monitored by management and
reflected within the allowance for credit losses for loans. The allowance for credit losses is an estimate of expected losses
inherent within the Company’s gross loans receivable portfolio. In estimating the allowance for credit losses, loans with
similar risk characteristics are aggregated into pools and collectively assessed. The Company’s loan products have generally
the same terms; therefore, the Company looks to borrower characteristics as a way to disaggregate loans into pools sharing
similar risks.
In determining the allowance for credit losses, the Company examined four borrower risk metrics as noted below.
1. Borrower type
2. Active months
3. Prior loan performance
4. Customer Tenure
To determine how well each metric predicts default risk, the Company used loss rate data over an observation period of
twelve months at the loan level. The information value was then calculated for each metric. From this analysis, management
determined the metric that had the strongest predictor of default risk was Customer Tenure. The Customer Tenure buckets
used in the allowance for credit loss calculation are:
1. 0 to 5 months
2. 6 to 17 months
3. 18 to 35 months
4. 36 to 59 months
5. 60+ months
Management will continue to monitor this credit metric on a quarterly basis.
Management estimates an allowance for each Customer Tenure bucket by performing a historical migration analysis of
loans in that bucket for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. All loans
that are greater than 90 days past due on a recency basis and not written off as of the reporting date are reserved for at 100%
of the outstanding balance, net of a calculated Rehab Rate. Management considers whether current credit conditions might
suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new borrowers,
60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of gross
loans that are acquired loans. From time to time, the Company will make changes, as deemed appropriate, to our new
borrower (NB) underwriting guidance. As a result, management also considers whether a change in our NB underwriting
might suggest a change is needed to the allowance for credit losses. As of March 31, 2023, there were no current credit
conditions or other factors considered significant enough to warrant a change to the allowance for credit losses.
Due to the short term nature of the loan portfolio, forecasted changes in macro-economic variables such as unemployment
do not have a significant impact on loans outstanding at the end of a particular reporting period. Therefore, management
develops a reasonable and supportable forecast of losses by comparing the most recent 6-month loss curves as compared to
historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical migration
rates should be adjusted. If an adjustment is made as a result of the forecast, then the Company has elected to immediately
revert back to historical experience past the forecast period.
61
The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at
March 31, 2023:
The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2023:
Total Past Due Total Loans
81,803,669
133,650,188
135,396,186
237,962,419
798,641,052
Over 90
7,329,327 $ 17,188,354 $
19,703,355
8,520,559
15,270,366
6,206,041
20,110,811
7,525,438
50,423,095
18,392,619
Days Past Due - Recency Basis
61 - 90
4,407,751 $
4,655,441
3,727,331
4,713,501
11,521,212
30 - 60
5,451,276 $
6,527,355
5,336,994
7,871,872
20,509,264
Customer Tenure
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Current
$ 64,615,315 $
113,946,833
120,125,820
217,851,608
748,217,957
Days Past Due - Contractual Basis
Loans
Current
30 - 60
61 - 90
Over 90
Total Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
$ 61,850,144 $
5,320,659 $
4,864,498 $ 9,768,369 $ 19,953,526 $
109,694,389
115,711,781
212,104,582
730,153,886
6,892,610
5,721,694
8,751,303
5,613,468 11,449,721 23,955,799
4,499,010
9,463,701 19,684,405
5,917,982 11,188,551 25,857,836
24,406,129
15,199,670 28,881,367 68,487,166
81,803,670
133,650,188
135,396,186
237,962,418
798,641,052
Total Past
Due
Tax advance loans
1,932,607
609,844
—
19,603
629,447
2,562,054
Total gross loans
$ 1,231,447,389 $ 51,702,239 $ 36,094,628 $ 70,771,312 $ 158,568,179 $
1,390,015,568
Unearned interest,
insurance and fees
$ (333,704,639) $ (14,010,568) $
(9,781,128) $ (19,178,014)
(42,969,710) $
(376,674,349)
Total net loans
$ 897,742,750 $ 37,691,671 $ 26,313,500 $ 51,593,298 $ 115,598,469 $
1,013,341,219
The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2022:
Days Past Due - Contractual Basis
Loans
Current
30 - 60
61 - 90
Over 90
Total Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
$ 140,570,461 $ 14,090,712 $ 15,380,836 $ 28,698,466 $ 58,170,014 $
112,465,841
177,565,328
188,849,569
702,984,756
6,032,347
8,067,815
6,994,891
4,922,939 10,244,439 21,199,725
6,273,351 13,033,829 27,374,995
4,624,136
8,467,431 20,086,458
23,645,619
15,443,941 28,608,833 67,698,393
198,740,475
133,665,566
204,940,323
208,936,027
770,683,149
Total Past
Due
Tax advance loans
4,737,742
1,060,329
—
25,249
1,085,578
5,823,320
Total gross loans
$ 1,327,173,697 $ 59,891,713 $ 46,645,203 $ 89,078,247 $ 195,615,163 $
1,522,788,860
Unearned interest,
insurance and fees
$ (351,258,109) $ (15,851,316) $ (12,345,412) $ (23,576,007)
(51,772,735) $
(403,030,844)
Total net loans
$ 975,915,588 $ 44,040,397 $ 34,299,791 $ 65,502,240 $ 143,842,428 $
1,119,758,016
Percentage of period-
end gross loans
receivable
3.9%
3.1%
5.8%
12.8%
$
$
Tax advance loans
Total gross loans
1,936,131
1,266,693,664
610,580
46,307,341
4,845
29,030,081
10,498
2,562,054
625,923
47,984,482 123,321,904 1,390,015,568
Unearned interest,
insurance and fees
Total net loans
Percentage of period-
end gross loans
receivable
(376,674,349)
(343,255,876)
$ 923,437,788 $ 33,758,714 $ 21,163,344 $ 34,981,373 $ 89,903,431 $ 1,013,341,219
(12,548,627)
(33,418,473)
(13,003,109)
(7,866,737)
3.3%
2.1%
3.5%
8.9%
Percentage of period-
end gross loans
receivable
3.7%
2.6%
5.1%
11.4%
The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at
March 31, 2022:
Customer Tenure
Current
Days Past Due - Recency Basis
61 - 90
30 - 60
Over 90
Total Past Due Total Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
$ 145,168,588 $ 13,450,365 $ 14,196,717 $ 25,924,805 $ 53,571,887 $ 198,740,475
133,665,566
116,065,794
204,940,323
183,697,553
208,936,027
193,820,229
770,683,149
720,695,865
4,148,743
4,903,686
3,452,087
11,145,251
7,902,330
9,118,270
5,712,662
19,102,672
5,548,699
7,220,814
5,951,049
19,739,361
17,599,772
21,242,770
15,115,798
49,987,284
Tax advance loans
Total gross loans
4,744,774
1,364,192,803
1,062,145
52,972,433
432
37,846,916
15,969
5,823,320
1,078,546
67,776,708 158,596,057 1,522,788,860
Unearned interest,
insurance and fees
Total net loans
Percentage of period-
end gross loans
receivable
(361,055,818)
(403,030,844)
$ 1,003,136,985 $ 38,952,417 $ 27,830,114 $ 49,838,500 $ 116,621,030 $ 1,119,758,016
(10,016,802)
(17,938,208)
(14,020,016)
(41,975,027)
3.5%
2.5%
4.5%
10.4%
62
The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at
March 31, 2023:
The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2023:
Days Past Due - Contractual Basis
Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Tax advance loans
Total gross loans
Unearned interest,
insurance and fees
Total net loans
Percentage of period-
end gross loans
receivable
Current
$ 61,850,144 $
109,694,389
115,711,781
212,104,582
730,153,886
30 - 60
5,320,659 $
6,892,610
5,721,694
8,751,303
24,406,129
Total Past
Due
Over 90
61 - 90
4,864,498 $ 9,768,369 $ 19,953,526 $
5,613,468 11,449,721 23,955,799
4,499,010
9,463,701 19,684,405
5,917,982 11,188,551 25,857,836
15,199,670 28,881,367 68,487,166
1,932,607
629,447
$ 1,231,447,389 $ 51,702,239 $ 36,094,628 $ 70,771,312 $ 158,568,179 $
609,844
19,603
—
$ (333,704,639) $ (14,010,568) $
(42,969,710) $
$ 897,742,750 $ 37,691,671 $ 26,313,500 $ 51,593,298 $ 115,598,469 $
(9,781,128) $ (19,178,014)
$
3.7%
2.6%
5.1%
11.4%
Total Loans
81,803,670
133,650,188
135,396,186
237,962,418
798,641,052
2,562,054
1,390,015,568
(376,674,349)
1,013,341,219
The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a
contractual basis and year of origination at March 31, 2022:
Days Past Due - Contractual Basis
Days Past Due - Recency Basis
Customer Tenure
Current
30 - 60
61 - 90
Over 90
Total Past Due Total Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
$ 64,615,315 $
5,451,276 $
4,407,751 $
7,329,327 $ 17,188,354 $
81,803,669
113,946,833
120,125,820
217,851,608
748,217,957
6,527,355
4,655,441
8,520,559
19,703,355
133,650,188
5,336,994
3,727,331
6,206,041
15,270,366
135,396,186
7,871,872
4,713,501
7,525,438
20,110,811
237,962,419
20,509,264
11,521,212
18,392,619
50,423,095
798,641,052
Tax advance loans
1,936,131
610,580
4,845
10,498
625,923
2,562,054
Total gross loans
1,266,693,664
46,307,341
29,030,081
47,984,482 123,321,904 1,390,015,568
Unearned interest,
insurance and fees
(343,255,876)
(12,548,627)
(7,866,737)
(13,003,109)
(33,418,473)
(376,674,349)
Total net loans
$ 923,437,788 $ 33,758,714 $ 21,163,344 $ 34,981,373 $ 89,903,431 $ 1,013,341,219
Percentage of period-
end gross loans
receivable
March 31, 2022:
3.3%
2.1%
3.5%
8.9%
The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at
Days Past Due - Recency Basis
Customer Tenure
Current
30 - 60
61 - 90
Over 90
Total Past Due Total Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
$ 145,168,588 $ 13,450,365 $ 14,196,717 $ 25,924,805 $ 53,571,887 $ 198,740,475
116,065,794
183,697,553
193,820,229
720,695,865
5,548,699
7,220,814
5,951,049
4,148,743
4,903,686
3,452,087
7,902,330
17,599,772
133,665,566
9,118,270
21,242,770
204,940,323
5,712,662
15,115,798
208,936,027
19,739,361
11,145,251
19,102,672
49,987,284
770,683,149
Tax advance loans
4,744,774
1,062,145
432
15,969
1,078,546
5,823,320
Total gross loans
1,364,192,803
52,972,433
37,846,916
67,776,708 158,596,057 1,522,788,860
Unearned interest,
insurance and fees
(361,055,818)
(14,020,016)
(10,016,802)
(17,938,208)
(41,975,027)
(403,030,844)
Total net loans
$ 1,003,136,985 $ 38,952,417 $ 27,830,114 $ 49,838,500 $ 116,621,030 $ 1,119,758,016
Percentage of period-
end gross loans
receivable
3.5%
2.5%
4.5%
10.4%
Over 90
61 - 90
$ 140,570,461 $ 14,090,712 $ 15,380,836 $ 28,698,466 $ 58,170,014 $
112,465,841
4,922,939 10,244,439 21,199,725
177,565,328
6,273,351 13,033,829 27,374,995
188,849,569
4,624,136
8,467,431 20,086,458
702,984,756
15,443,941 28,608,833 67,698,393
6,032,347
8,067,815
6,994,891
23,645,619
Loans
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Tax advance loans
Total gross loans
Unearned interest,
insurance and fees
Total net loans
Percentage of period-
end gross loans
receivable
Total Loans
198,740,475
133,665,566
204,940,323
208,936,027
770,683,149
5,823,320
1,522,788,860
(403,030,844)
1,119,758,016
4,737,742
1,085,578
$ 1,327,173,697 $ 59,891,713 $ 46,645,203 $ 89,078,247 $ 195,615,163 $
1,060,329
Total Past
Due
25,249
Current
30 - 60
—
$ (351,258,109) $ (15,851,316) $ (12,345,412) $ (23,576,007)
(51,772,735) $
$ 975,915,588 $ 44,040,397 $ 34,299,791 $ 65,502,240 $ 143,842,428 $
$
3.9%
3.1%
5.8%
12.8%
63
The Company elected not to record an allowance for credit losses for accrued interest as outlined in ASC 326-20-30-5A.
Loans are placed on nonaccrual status when management determines that the full payment of principal and collection of
interest according to contractual terms is no longer likely. The accrual of interest is discontinued when a loan is 61 days or
more past the contractual due date. When the interest accrual is discontinued, all unpaid accrued interest is reversed against
interest income. While a loan is on nonaccrual status, interest income is recognized only when a payment is received. Once
a loan moves to nonaccrual status, it remains in nonaccrual status until it is paid out, charged off or refinanced. During the
twelve months ended March 31, 2023 and March 31, 2022, the Company reversed a total of $36.5 million and $30.6 million,
respectively of unpaid accrued interest against interest income.
The following table presents the amortized cost basis of loans on nonaccrual status as of March 31, 2023 and March 31,
2022, as well as interest income recognized on nonaccrual loans for the years ended March 31, 2023, 2022, and 2021:
Nonaccrual Loans Receivable
Interest Income
Recognized
Fiscal 2023
Interest Income
Recognized
Fiscal 2022
Interest Income
Recognized
Fiscal 2021
Depreciation expense was approximately $6.2 million, $6.3 million, and $6.5 million for the years ended March 31, 2023,
$
Customer Tenure As of March 31, 2023 As of March 31, 2022
0 to 5 months
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
15,781,494 $
18,288,714
15,551,806
19,175,410
49,855,801
45,227,510 $
15,879,250
20,745,106
14,232,388
47,565,819
2,032,098 $
1,815,167
2,385,356
2,326,640
7,047,726
1,485,356 $
1,662,082
2,292,776
1,602,011
5,615,521
1,705,371
2,433,144
2,195,160
1,609,059
6,747,722
Tax advance loans
Unearned interest,
insurance and fees
$
Total
19,603
25,249
—
—
—
(32,158,640)
86,514,188 $
(38,026,011)
105,649,311 $
—
15,606,987 $
—
12,657,746 $
—
14,690,456
As of March 31, 2023 and March 31, 2022, there were no loans receivable 61 days or more past due, not on nonaccrual
status, and no loans receivable with no related allowance for credit losses.
The following is a summary of the changes in the allowance for credit losses for the years ended March 31, 2023, 2022, and
2021:
Balance at beginning of period
Impact of ASC 326 adoption
Provision for credit losses
Charge-offs(3)
Recoveries(4)
Net charge-off
Balance at end of period
2021
2023
—
2022
$ 134,242,862 $ 91,722,288 $ 96,487,856
—
28,628,368
259,463,199 186,207,341
86,244,714
(302,380,145) (164,747,552) (141,270,125)
21,631,475
(268,153,328) (143,686,767) (119,638,650)
$ 125,552,733 $ 134,242,862 $ 91,722,288
21,060,785
34,226,817
3) The Company saw a significant increase in charge-offs in fiscal 2023 primarily due to the higher proportion of new
borrowers at the beginning of the current fiscal year. Additionally, new borrowers originated in the prior fiscal year
performed worse than expected due to macro-economic factors.
4) Recoveries for the year ended March 31, 2023 include $15.8 million in proceeds related to the sale of charge-offs, for
which $8.4 million relates to bulk sales of charge-offs from prior periods and $7.4 million relates to recurring sales of
charge-offs. This gain on sale is included as a component of Provision for credit losses in the Consolidated Statements
of Operations.
64
(3) Property and Equipment
Property and equipment consist of:
Land
Building and leasehold improvements
Furniture and equipment
Less accumulated depreciation and amortization
Total
2022, and 2021, respectively.
(4)
Intangible Assets
assets:
March 31, 2023 March 31, 2022
$
100,443 $
18,504,321
56,482,568
75,087,332
(51,161,252)
$
23,926,080 $
100,443
18,477,313
56,273,499
74,851,255
(50,375,024)
24,476,231
The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible
March 31, 2023
March 31, 2022
Gross
Carrying
Amount
Net
Accumulated
Amortization
Intangible
Asset
Gross
Carrying
Amount
Net
Accumulated
Amortization
Intangible
Asset
Cost of customer lists
$ 55,730,620 $ (40,950,350) $ 14,780,270 $ 55,730,620 $ (36,907,598) $ 18,823,022
Value assigned to non-
compete agreements
Total
$ 66,258,763 $ (50,969,184) $ 15,289,579 $ 66,258,763 $ (46,502,649) $ 19,756,114
10,528,143
(10,018,834)
509,309 10,528,143
(9,595,051)
933,092
The estimated amortization expense for intangible assets for future fiscal years ended March 31 is as follows: $4.2 million
for 2024; $3.8 million for 2025; $3.2 million for 2026; $2.7 million for 2027; $0.9 million for 2028; and an aggregate of
As of March 31, 2023 and 2022, goodwill was $7.4 million. There were no goodwill additions during fiscal 2023 and 2022.
The Company performed an annual impairment test during the fourth quarters of fiscal 2023 and 2022 and determined none
$0.5 million for the years thereafter.
(5) Goodwill
of its recorded goodwill was impaired.
(6) Debt
Senior Notes Payable; Revolving Credit Facility
At March 31, 2023, the Company's senior notes payable consisted of a $685.0 million senior revolving credit facility, which
has an accordion feature permitting the maximum aggregate commitments to increase to $785.0 million provided that certain
conditions are met. At March 31, 2023, $307.9 million was outstanding under the facility, not including a $300.0 thousand
outstanding standby letter of credit related to workers compensation. To the extent that the letter of credit is drawn upon,
the disbursement will be funded by the credit facility. There are no amounts due related to the letter of credit as of March 31,
2023. The letter of credit expires on December 31, 2023; however, it automatically extends for one year on the expiration
date. Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10% and an
applicable margin of 3.5%, with a minimum rate of 4.5%. The revolving credit facility has a commitment fee of 0.50% per
annum on the unused portion of the commitment. Commitment fees on the unused portion of the borrowing totaled $1.29
million, $1.34 million, and $1.30 million for the years ended March 31, 2023, 2022, and 2021, respectively. Borrowings
under the revolving credit facility mature on June 7, 2024.
Loans are placed on nonaccrual status when management determines that the full payment of principal and collection of
interest according to contractual terms is no longer likely. The accrual of interest is discontinued when a loan is 61 days or
more past the contractual due date. When the interest accrual is discontinued, all unpaid accrued interest is reversed against
interest income. While a loan is on nonaccrual status, interest income is recognized only when a payment is received. Once
a loan moves to nonaccrual status, it remains in nonaccrual status until it is paid out, charged off or refinanced. During the
twelve months ended March 31, 2023 and March 31, 2022, the Company reversed a total of $36.5 million and $30.6 million,
respectively of unpaid accrued interest against interest income.
The following table presents the amortized cost basis of loans on nonaccrual status as of March 31, 2023 and March 31,
2022, as well as interest income recognized on nonaccrual loans for the years ended March 31, 2023, 2022, and 2021:
Nonaccrual Loans Receivable
Interest Income
Interest Income
Interest Income
Recognized
Fiscal 2023
Recognized
Fiscal 2022
Recognized
Fiscal 2021
Customer Tenure As of March 31, 2023 As of March 31, 2022
0 to 5 months
$
15,781,494 $
45,227,510 $
2,032,098 $
1,485,356 $
6 to 17 months
18 to 35 months
36 to 59 months
60+ months
Tax advance loans
Unearned interest,
insurance and fees
18,288,714
15,551,806
19,175,410
49,855,801
19,603
15,879,250
20,745,106
14,232,388
47,565,819
25,249
(32,158,640)
(38,026,011)
1,815,167
2,385,356
2,326,640
7,047,726
1,662,082
2,292,776
1,602,011
5,615,521
—
—
—
—
1,705,371
2,433,144
2,195,160
1,609,059
6,747,722
—
—
Total
$
86,514,188 $
105,649,311 $
15,606,987 $
12,657,746 $
14,690,456
As of March 31, 2023 and March 31, 2022, there were no loans receivable 61 days or more past due, not on nonaccrual
status, and no loans receivable with no related allowance for credit losses.
The following is a summary of the changes in the allowance for credit losses for the years ended March 31, 2023, 2022, and
2021:
Balance at beginning of period
Impact of ASC 326 adoption
Provision for credit losses
Charge-offs(3)
Recoveries(4)
Net charge-off
Balance at end of period
2023
2022
2021
$ 134,242,862 $ 91,722,288 $ 96,487,856
—
—
259,463,199 186,207,341
28,628,368
86,244,714
(302,380,145) (164,747,552) (141,270,125)
34,226,817
21,060,785
21,631,475
(268,153,328) (143,686,767) (119,638,650)
$ 125,552,733 $ 134,242,862 $ 91,722,288
3) The Company saw a significant increase in charge-offs in fiscal 2023 primarily due to the higher proportion of new
borrowers at the beginning of the current fiscal year. Additionally, new borrowers originated in the prior fiscal year
performed worse than expected due to macro-economic factors.
4) Recoveries for the year ended March 31, 2023 include $15.8 million in proceeds related to the sale of charge-offs, for
which $8.4 million relates to bulk sales of charge-offs from prior periods and $7.4 million relates to recurring sales of
charge-offs. This gain on sale is included as a component of Provision for credit losses in the Consolidated Statements
of Operations.
The Company elected not to record an allowance for credit losses for accrued interest as outlined in ASC 326-20-30-5A.
(3) Property and Equipment
Property and equipment consist of:
Land
Building and leasehold improvements
Furniture and equipment
March 31, 2023 March 31, 2022
$
100,443 $
18,504,321
56,482,568
75,087,332
(51,161,252)
23,926,080 $
100,443
18,477,313
56,273,499
74,851,255
(50,375,024)
24,476,231
Less accumulated depreciation and amortization
Total
$
Depreciation expense was approximately $6.2 million, $6.3 million, and $6.5 million for the years ended March 31, 2023,
2022, and 2021, respectively.
(4)
Intangible Assets
The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible
assets:
March 31, 2023
March 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Intangible
Asset
Gross
Carrying
Amount
Accumulated
Amortization
Net
Intangible
Asset
$ 55,730,620 $ (40,950,350) $ 14,780,270 $ 55,730,620 $ (36,907,598) $ 18,823,022
933,092
10,528,143
$ 66,258,763 $ (50,969,184) $ 15,289,579 $ 66,258,763 $ (46,502,649) $ 19,756,114
509,309 10,528,143
(10,018,834)
(9,595,051)
Cost of customer lists
Value assigned to non-
compete agreements
Total
The estimated amortization expense for intangible assets for future fiscal years ended March 31 is as follows: $4.2 million
for 2024; $3.8 million for 2025; $3.2 million for 2026; $2.7 million for 2027; $0.9 million for 2028; and an aggregate of
$0.5 million for the years thereafter.
(5) Goodwill
As of March 31, 2023 and 2022, goodwill was $7.4 million. There were no goodwill additions during fiscal 2023 and 2022.
The Company performed an annual impairment test during the fourth quarters of fiscal 2023 and 2022 and determined none
of its recorded goodwill was impaired.
(6) Debt
Senior Notes Payable; Revolving Credit Facility
At March 31, 2023, the Company's senior notes payable consisted of a $685.0 million senior revolving credit facility, which
has an accordion feature permitting the maximum aggregate commitments to increase to $785.0 million provided that certain
conditions are met. At March 31, 2023, $307.9 million was outstanding under the facility, not including a $300.0 thousand
outstanding standby letter of credit related to workers compensation. To the extent that the letter of credit is drawn upon,
the disbursement will be funded by the credit facility. There are no amounts due related to the letter of credit as of March 31,
2023. The letter of credit expires on December 31, 2023; however, it automatically extends for one year on the expiration
date. Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10% and an
applicable margin of 3.5%, with a minimum rate of 4.5%. The revolving credit facility has a commitment fee of 0.50% per
annum on the unused portion of the commitment. Commitment fees on the unused portion of the borrowing totaled $1.29
million, $1.34 million, and $1.30 million for the years ended March 31, 2023, 2022, and 2021, respectively. Borrowings
under the revolving credit facility mature on June 7, 2024.
65
For the years ended March 31, 2023, 2022, and 2021 the Company’s effective interest rate, including the commitment fee,
was 7.0%, 5.0%, and 5.8% respectively, and the unused amount available under the revolver at March 31, 2023 was $318.7
million.
Substantially all of the Company's assets are pledged as collateral for borrowings under the revolving credit agreement.
obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events,
Senior Unsecured Notes Payable
On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”).
The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as
amended. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the
Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is
payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to
November 1, 2023, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the
principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to,
but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes
at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of
redemption. In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity
offerings to redeem up to 40.0% of the aggregate principal amount of the Notes issued under the indenture at a redemption
price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not
including, the date of redemption.
We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit
facility and for general corporate purposes.
As of March 31, 2023, the aggregate annual maturities of the Company's debt arrangements for each of the five fiscal years
subsequent to March 31, 2023 were as follows:
During fiscal 2023, the Company repurchased and extinguished $9.0 million of its Notes, net of $0.1 million unamortized
debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.2 million. In
accordance with ASC 470, the Company recognized the $1.8 million gain on extinguishment as a component of interest
expense in the Company's Consolidated Statements of Operations.
Debt Covenants
The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including
covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee
indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and
consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt
documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows the
Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains
specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement.
The agreement's financial covenants include (i) a minimum consolidated net worth of $325.0 million on and after December
31, 2020; (ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for
the fiscal quarters ending March 31, 2023 and June 30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023,
2.25 to 1.0 for the fiscal quarter ending December 31, 2023); (iii) a maximum collateral performance indicator of 26.0% as
of the end of each calendar month (increasing to 28% for the calendar months ending October 31, 2022 through June 30,
2023); and (iv) a minimum fixed charges coverage ratio of 1.25 to 1.0 for the fiscal quarter ended December 31, 2022, 1.15
to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 1.50 to 1.0 for the fiscal quarter ending September
30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023, and 2.75 to 1.0 for each fiscal quarter thereafter, where
the ratio for the most recent four consecutive fiscal quarters must be at least 2.0 to 1.0 in order for the Company to declare
dividends or purchase any class or series of its capital stock or other equity.
The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty
days past due and (b) an eight-month rolling average net charge-off rate.
66
The Company was in compliance with these covenants at March 31, 2023 and does not believe that these covenants will
materially limit its business and expansion strategy.
The agreement contains events of default including, without limitation, nonpayment of principal, interest or other
judgments, certain ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions
of subordinated debt, certain changes of control of the Company, and the occurrence of certain regulatory events (including
the entry of any stay, order, judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating,
holding, pledging, collecting or enforcing its eligible loans receivables that is material to the Company or any subsidiary)
which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date
of its entry and is reasonably likely to cause a material adverse change.
The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the
ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock;
(ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain
investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends,
loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise
dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants
are subject to a number of important detailed qualifications and exceptions.
Debt Maturities
2024
2025
2026
2027
2028
Total future debt payments
(7)
Insurance and Other Income
Insurance revenue
Tax return preparation revenue
Auto club membership revenue
Other
Insurance and other income
$
$
—
—
—
307,910,824
290,860,000
598,770,824
2023
2022
2021
$ 67,153,063 $ 56,270,249 $ 44,214,454
23,970,639
9,661,126
7,424,855
24,498,059
14,758,783
3,993,083
20,555,226
7,863,145
4,244,079
$ 108,209,683 $ 99,520,174 $ 76,876,904
Insurance and other income for the years ending March 31, 2023, 2022, and 2021 consist of:
The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in
connection with loans made by the Company. Certain coverages currently sold by the Company on behalf of the unaffiliated
insurance carrier are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional
source of income derived from the earned reinsurance premiums. Insurance premiums are ceded to the reinsurance
subsidiary as written and revenue is recognized over the life of the related insurance contracts. As of March 31, 2023, 2022,
and 2021, the amount of net written premiums by the reinsurance subsidiary were $9.0 million, $9.8 million, and $5.9
million, respectively, and the amount of earned premiums were $9.1 million, $7.6 million, and $6.0 million, respectively.
The Company maintains a cash reserve for claims in an amount determined by the ceding company, and as of March 31,
2023 and 2022, the cash reserves were $5.7 million and $6.4 million, respectively.
Substantially all of the Company's assets are pledged as collateral for borrowings under the revolving credit agreement.
million.
Senior Unsecured Notes Payable
On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”).
The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as
amended. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the
Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is
payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to
November 1, 2023, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the
principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to,
but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes
at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of
redemption. In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity
offerings to redeem up to 40.0% of the aggregate principal amount of the Notes issued under the indenture at a redemption
price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not
including, the date of redemption.
We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit
facility and for general corporate purposes.
During fiscal 2023, the Company repurchased and extinguished $9.0 million of its Notes, net of $0.1 million unamortized
debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $7.2 million. In
accordance with ASC 470, the Company recognized the $1.8 million gain on extinguishment as a component of interest
expense in the Company's Consolidated Statements of Operations.
Debt Covenants
The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including
covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee
indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and
consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt
documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows the
Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains
specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement.
The agreement's financial covenants include (i) a minimum consolidated net worth of $325.0 million on and after December
31, 2020; (ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for
the fiscal quarters ending March 31, 2023 and June 30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023,
2.25 to 1.0 for the fiscal quarter ending December 31, 2023); (iii) a maximum collateral performance indicator of 26.0% as
of the end of each calendar month (increasing to 28% for the calendar months ending October 31, 2022 through June 30,
2023); and (iv) a minimum fixed charges coverage ratio of 1.25 to 1.0 for the fiscal quarter ended December 31, 2022, 1.15
to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 1.50 to 1.0 for the fiscal quarter ending September
30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023, and 2.75 to 1.0 for each fiscal quarter thereafter, where
the ratio for the most recent four consecutive fiscal quarters must be at least 2.0 to 1.0 in order for the Company to declare
dividends or purchase any class or series of its capital stock or other equity.
The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty
days past due and (b) an eight-month rolling average net charge-off rate.
For the years ended March 31, 2023, 2022, and 2021 the Company’s effective interest rate, including the commitment fee,
was 7.0%, 5.0%, and 5.8% respectively, and the unused amount available under the revolver at March 31, 2023 was $318.7
The Company was in compliance with these covenants at March 31, 2023 and does not believe that these covenants will
materially limit its business and expansion strategy.
The agreement contains events of default including, without limitation, nonpayment of principal, interest or other
obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events,
judgments, certain ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions
of subordinated debt, certain changes of control of the Company, and the occurrence of certain regulatory events (including
the entry of any stay, order, judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating,
holding, pledging, collecting or enforcing its eligible loans receivables that is material to the Company or any subsidiary)
which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date
of its entry and is reasonably likely to cause a material adverse change.
The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the
ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock;
(ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain
investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends,
loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise
dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants
are subject to a number of important detailed qualifications and exceptions.
Debt Maturities
As of March 31, 2023, the aggregate annual maturities of the Company's debt arrangements for each of the five fiscal years
subsequent to March 31, 2023 were as follows:
2024
2025
2026
2027
2028
Total future debt payments
—
307,910,824
—
290,860,000
—
598,770,824
$
$
(7)
Insurance and Other Income
Insurance and other income for the years ending March 31, 2023, 2022, and 2021 consist of:
Insurance revenue
Tax return preparation revenue
Auto club membership revenue
Other
Insurance and other income
2021
2023
2022
$ 67,153,063 $ 56,270,249 $ 44,214,454
20,555,226
7,863,145
4,244,079
$ 108,209,683 $ 99,520,174 $ 76,876,904
24,498,059
14,758,783
3,993,083
23,970,639
9,661,126
7,424,855
The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in
connection with loans made by the Company. Certain coverages currently sold by the Company on behalf of the unaffiliated
insurance carrier are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional
source of income derived from the earned reinsurance premiums. Insurance premiums are ceded to the reinsurance
subsidiary as written and revenue is recognized over the life of the related insurance contracts. As of March 31, 2023, 2022,
and 2021, the amount of net written premiums by the reinsurance subsidiary were $9.0 million, $9.8 million, and $5.9
million, respectively, and the amount of earned premiums were $9.1 million, $7.6 million, and $6.0 million, respectively.
The Company maintains a cash reserve for claims in an amount determined by the ceding company, and as of March 31,
2023 and 2022, the cash reserves were $5.7 million and $6.4 million, respectively.
67
$
$
2023
6,732,057 $
1,143,332 $
$ 12,026,092 $
2022
8,804,046 $
982,025 $
6,336,549 $
2021
7,072,647
959,620
5,223,484
Insurance premiums written
Recoveries on claims paid
Claims paid
(9) Leases
(8) Non-filing Insurance
The following table reports other information about the Company's leases for the years ended March 31, 2023, 2022, and
The Company maintains non-filing insurance coverage with an unaffiliated insurance company. The following is a summary
of the non-filing insurance activity for the years ended March 31, 2023, 2022, and 2021:
2021:
Other Lease Information
Cash paid for amounts included in the
measurement of lease liabilities
Operating cash flows from finance leases
Operating cash flows from operating
Financing cash flows from finance leases
Right-of-use assets obtained in exchange
for new finance lease liabilities
Right-of-use assets obtained in exchange
for new operating lease liabilities
finance leases
operating leases
Weighted average remaining lease term —
Weighted-average discount rate (monthly)
— finance leases
Weighted-average discount rate —
operating leases
$
$
2023
2022
2021
$
26,476,133
$
27,936,317
$
1,423
26,394,643
80,067
19,994
27,411,037
505,286
—
$
—
$
28,211,828
58,544
27,559,260
594,024
—
16,924,511
$
15,381,953
$
12,482,167
7.1 years
— %
6.0 %
0.4 years
7.3 years
6.0 %
6.1 %
0.8 years
7.3 years
6.4 %
6.3 %
Weighted-average remaining lease term —
—
The aggregate annual lease obligations as of fiscal year March 31, 2023, are as follows:
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease liability
Imputed interest
Total discounted lease liability
Operating
23,157,355
18,479,719
15,057,068
11,178,325
8,640,247
27,716,477
104,229,191
20,494,189
83,735,002
$
$
$
Accounting Policies and Matters Requiring Management's Judgment
The Company uses its effective annual or fourth quarter interest rate to determine the discount rate when evaluating leases
under Topic 842. Management applies its effective interest rate to leases entered for the entirety of the subsequent year. For
example, fiscal 2022’s fourth quarter effective interest rate of 6.0% was used in the determination of lease type as well as
the discount rate when calculating the present value of lease payments for all leases entered into in fiscal 2023. Note that in
fiscal 2023, it was determined most reasonable to use fiscal 2022's fourth quarter effective interest rate as the Notes was not
effective until September 27, 2021.
Based on its historical practice, the Company believes it is reasonably certain to exercise a given option associated with a
given office space lease. Therefore, the Company classifies all lease options for office space as “reasonably certain” unless
it has specific knowledge to the contrary for a given lease. The Company does not believe it is reasonably certain to exercise
any options associated with its office equipment leases.
Periodic Disclosures
The Company's operating leases consist of real estate leases for office space as well as office equipment. Both the branch
real estate and office equipment lease terms generally range from three years to five years, and generally contain options to
extend which mirror the original terms of the lease.
During the second quarter of fiscal 2023, the lease terms associated with the Company's finance leases expired and the
Company exercised its purchase option to acquire the IT equipment. Because it was reasonably certain that the Company
would obtain the assets at the end of their lease terms, the right-of-use assets are amortized over the useful life of the assets,
rather than over the lease terms.
The following table reports information about the Company's lease costs for the years ended March 31, 2023, 2022, and
2021:
(10) Income Taxes
2023
2022
2021
The Company had no leases with related parties as of fiscal year March 31, 2023 or 2022.
Lease Cost
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
$
$
$
205,975 $
204,552
1,423
27,408,284 $
—
3,710,560
31,324,819 $
427,619 $
407,624
19,995
27,529,425 $
—
3,629,903
31,586,947 $
466,168
407,624
58,544
27,977,226
1,800
3,621,748
32,066,942
68
As discussed in Note 1, the Company adopted ASU 2023-02, Investments- Equity Method and Joint Ventures, on a modified
retrospective basis effective April 1, 2022. Prior to the adoption of this pronouncement, the Company recognized its HTC
investment under the flow through method over the five-year investment period on a straight-line basis as a component of
other expense. With the adoption of this ASU, the Company now recognizes the investment of the HTC under the
proportional amortization method which allows the investment to be recognized in proportion to the tax credit as a
component of income tax expense. During the current fiscal year, the Company recorded a cumulative adjustment of
$1.9 million to the opening balance of retained earnings, which represents the net difference between the investment
amortization under the two methods through the April 1, 2022 adoption date. As of March 31, 2023, Investment in HTC
was $23.0 million, which is included as a component of Other assets, net in the Consolidated Balance Sheets. For the fiscal
year ended March 31, 2023, the Company recognized net amortization of $2.1 million and $1.9 million of tax benefits from
these investments in income tax expense and also recognized the $1.9 million of tax benefits from these investments in
Income taxes payable in the Consolidated Statements of Cash Flows. The Company did not recognize any non-tax related
activity or have any significant modifications to its investments during the current fiscal year.
(8) Non-filing Insurance
Insurance premiums written
Recoveries on claims paid
Claims paid
(9) Leases
The Company maintains non-filing insurance coverage with an unaffiliated insurance company. The following is a summary
of the non-filing insurance activity for the years ended March 31, 2023, 2022, and 2021:
2023
2022
6,732,057 $
8,804,046 $
2021
7,072,647
1,143,332 $
982,025 $
959,620
$
$
$ 12,026,092 $
6,336,549 $
5,223,484
Accounting Policies and Matters Requiring Management's Judgment
The Company uses its effective annual or fourth quarter interest rate to determine the discount rate when evaluating leases
under Topic 842. Management applies its effective interest rate to leases entered for the entirety of the subsequent year. For
example, fiscal 2022’s fourth quarter effective interest rate of 6.0% was used in the determination of lease type as well as
the discount rate when calculating the present value of lease payments for all leases entered into in fiscal 2023. Note that in
fiscal 2023, it was determined most reasonable to use fiscal 2022's fourth quarter effective interest rate as the Notes was not
effective until September 27, 2021.
Based on its historical practice, the Company believes it is reasonably certain to exercise a given option associated with a
given office space lease. Therefore, the Company classifies all lease options for office space as “reasonably certain” unless
it has specific knowledge to the contrary for a given lease. The Company does not believe it is reasonably certain to exercise
any options associated with its office equipment leases.
Periodic Disclosures
The Company's operating leases consist of real estate leases for office space as well as office equipment. Both the branch
real estate and office equipment lease terms generally range from three years to five years, and generally contain options to
extend which mirror the original terms of the lease.
During the second quarter of fiscal 2023, the lease terms associated with the Company's finance leases expired and the
Company exercised its purchase option to acquire the IT equipment. Because it was reasonably certain that the Company
would obtain the assets at the end of their lease terms, the right-of-use assets are amortized over the useful life of the assets,
rather than over the lease terms.
The following table reports information about the Company's lease costs for the years ended March 31, 2023, 2022, and
2021:
Lease Cost
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
2023
2022
2021
$
$
$
205,975 $
204,552
1,423
—
3,710,560
31,324,819 $
427,619 $
407,624
19,995
—
3,629,903
31,586,947 $
27,408,284 $
27,529,425 $
466,168
407,624
58,544
27,977,226
1,800
3,621,748
32,066,942
The following table reports other information about the Company's leases for the years ended March 31, 2023, 2022, and
2021:
2023
2022
2021
$
$
$
Other Lease Information
Cash paid for amounts included in the
measurement of lease liabilities
Operating cash flows from finance leases
Operating cash flows from operating
Financing cash flows from finance leases
Right-of-use assets obtained in exchange
for new finance lease liabilities
Right-of-use assets obtained in exchange
for new operating lease liabilities
Weighted-average remaining lease term —
finance leases
Weighted average remaining lease term —
operating leases
Weighted-average discount rate (monthly)
— finance leases
Weighted-average discount rate —
operating leases
26,476,133
1,423
26,394,643
80,067
—
16,924,511
—
$
$
$
7.1 years
— %
6.0 %
27,936,317
19,994
27,411,037
505,286
—
$
$
28,211,828
58,544
27,559,260
594,024
—
15,381,953
$
12,482,167
0.4 years
7.3 years
6.0 %
6.1 %
0.8 years
7.3 years
6.4 %
6.3 %
The aggregate annual lease obligations as of fiscal year March 31, 2023, are as follows:
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease liability
Imputed interest
Total discounted lease liability
Operating
23,157,355
18,479,719
15,057,068
11,178,325
8,640,247
27,716,477
104,229,191
20,494,189
83,735,002
$
$
$
The Company had no leases with related parties as of fiscal year March 31, 2023 or 2022.
(10) Income Taxes
As discussed in Note 1, the Company adopted ASU 2023-02, Investments- Equity Method and Joint Ventures, on a modified
retrospective basis effective April 1, 2022. Prior to the adoption of this pronouncement, the Company recognized its HTC
investment under the flow through method over the five-year investment period on a straight-line basis as a component of
other expense. With the adoption of this ASU, the Company now recognizes the investment of the HTC under the
proportional amortization method which allows the investment to be recognized in proportion to the tax credit as a
component of income tax expense. During the current fiscal year, the Company recorded a cumulative adjustment of
$1.9 million to the opening balance of retained earnings, which represents the net difference between the investment
amortization under the two methods through the April 1, 2022 adoption date. As of March 31, 2023, Investment in HTC
was $23.0 million, which is included as a component of Other assets, net in the Consolidated Balance Sheets. For the fiscal
year ended March 31, 2023, the Company recognized net amortization of $2.1 million and $1.9 million of tax benefits from
these investments in income tax expense and also recognized the $1.9 million of tax benefits from these investments in
Income taxes payable in the Consolidated Statements of Cash Flows. The Company did not recognize any non-tax related
activity or have any significant modifications to its investments during the current fiscal year.
69
Income tax expense (benefit) consists of:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
Current
Deferred
Total
liabilities at March 31, 2023 and 2022 are presented below:
Year ended March 31, 2023
Federal
State and local
Year ended March 31, 2022
Federal
State and local
Year ended March 31, 2021
Federal
State and local
$
$
7,135,030
880,838
8,015,868
(1,430,623)
(671,462)
(2,102,085)
5,704,407
209,376
5,913,783
Deferred tax assets:
Allowance for credit losses
Unearned insurance commissions
$ 22,262,110
4,206,087
$ 26,468,197
(11,892,354)
(2,916,361)
(14,808,715)
10,369,756
1,289,726
11,659,482
$ 16,443,592
1,025,645
$ 17,469,237
4,077,609
1,573,753
5,651,362
20,521,201
2,599,398
23,120,599
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported
income tax expense for March 31, 2023, 2022 and 2021 are summarized as follows:
2023
2022
$ 5,700,613 $ 13,771,657 $ 23,394,720
2021
328,026
(200,203)
(162,619)
(1,151,234)
732,504
(73,644)
740,340
2,053,524
(1,173,435)
—
(2,107,263)
1,203,203
(996,769)
746,619
$ 5,913,783 $ 11,659,482 $ 23,120,599
1,489,800
(1,193,021)
(470,916)
(555,252)
1,918,618
(3,237,682)
(63,722)
Expected income tax
Increase (reduction) in income taxes resulting from:
State tax (excluding state tax credits), net of federal benefit
Federal tax credits, net
State tax credits
Uncertain tax positions
Executive compensation limitation under Section 162(m)
Excess tax benefits related to equity compensation
Other, net
70
Accrued expenses primarily related to employee benefits
Reserve for uncollectible interest
Lease liability
Intangible assets
Foreign tax credit carryforward
Capital loss carryforward
State net operating loss carryforwards
Gross deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Fair value adjustment for loans receivable
Property and equipment
Deferred loan origination costs
Prepaid expenses
Right-of-use asset
Other
Gross deferred tax liabilities
Deferred income taxes, net
2023
2022
$ 31,239,616 $ 33,481,188
14,589,099
15,453,501
12,444,567
12,549,474
1,124,879
1,261,035
20,675,974
21,575,596
660,312
254,986
3,254,926
3,254,926
7,966,326
7,966,326
4,851,747
3,849,158
96,807,446
99,646,190
(15,209,271)
(14,723,244)
81,598,175
84,922,946
(11,371,461)
(13,896,840)
(4,611,006)
(1,212,809)
(1,766,564)
(4,875,859)
(1,708,369)
(1,785,906)
(20,072,506)
(21,273,281)
(841,468)
(1,581,234)
(39,875,814)
(45,121,489)
$ 41,722,361 $ 39,801,457
At March 31, 2023, the Company had state net operating loss carryforwards of approximately $84.7 million. A deferred tax
asset of approximately $4.9 million was recorded to reflect the benefit of these losses. Of this $4.9 million, $0.9 million is
expected to be recognized. Approximately $1,000 of the state net operating loss carryforward will expire in 2025 with the
remaining carryforward expiring between 2031 and 2041.
The valuation allowance for deferred tax assets increased by $0.5 million for the year ended March 31, 2023 when compared
to March 31, 2022. The valuation allowance at March 31, 2023 and 2022 was $15.2 million and $14.7 million,
respectively. The valuation allowance against the total deferred tax assets as of March 31, 2023 consisted of $4 million from
state net operating loss carryforwards in the amount of $63 million which expire from 2025 to 2041, a foreign tax credit
carryforward of $3.3 million arising in relation to the Section 965 calculation ("Transition Tax") during fiscal 2018 which
expires in 2028, $7.7 million related to the $37.0 million capital loss carryforward from the sale of the Mexican operations
in fiscal 2019 which expires in 2024 and $0.2 million related to the $0.9 million capital loss on the sale of the former
headquarters buildings which expire from 2026 to 2027. The Company does not expect to generate enough foreign source
income, state taxable income in the respective jurisdictions or capital gains in future tax years to realize these tax attributes.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. In
order to fully realize the deferred tax asset, the Company will need to generate future taxable income of the appropriate
character prior to the expiration of the deferred tax assets governed by the tax code.
Income tax expense (benefit) consists of:
Year ended March 31, 2023
Federal
State and local
Year ended March 31, 2022
Federal
State and local
Year ended March 31, 2021
Federal
State and local
Expected income tax
Increase (reduction) in income taxes resulting from:
State tax (excluding state tax credits), net of federal benefit
Federal tax credits, net
State tax credits
Uncertain tax positions
Executive compensation limitation under Section 162(m)
Excess tax benefits related to equity compensation
Other, net
Current
Deferred
Total
$
$
7,135,030
880,838
8,015,868
(1,430,623)
(671,462)
(2,102,085)
5,704,407
209,376
5,913,783
$ 22,262,110
(11,892,354)
10,369,756
4,206,087
(2,916,361)
1,289,726
$ 26,468,197
(14,808,715)
11,659,482
$ 16,443,592
1,025,645
$ 17,469,237
4,077,609
1,573,753
5,651,362
20,521,201
2,599,398
23,120,599
2023
2022
2021
$ 5,700,613 $ 13,771,657 $ 23,394,720
328,026
1,489,800
2,053,524
(200,203)
(162,619)
(1,151,234)
(1,193,021)
(1,173,435)
(470,916)
(555,252)
—
(2,107,263)
732,504
1,918,618
1,203,203
(73,644)
(3,237,682)
740,340
(63,722)
(996,769)
746,619
$ 5,913,783 $ 11,659,482 $ 23,120,599
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported
income tax expense for March 31, 2023, 2022 and 2021 are summarized as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities at March 31, 2023 and 2022 are presented below:
2023
2022
Deferred tax assets:
Allowance for credit losses
Unearned insurance commissions
Accrued expenses primarily related to employee benefits
Reserve for uncollectible interest
Lease liability
Intangible assets
Foreign tax credit carryforward
Capital loss carryforward
State net operating loss carryforwards
Gross deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Fair value adjustment for loans receivable
Property and equipment
Deferred loan origination costs
Prepaid expenses
Right-of-use asset
Other
Gross deferred tax liabilities
$ 31,239,616 $ 33,481,188
15,453,501
12,549,474
1,261,035
21,575,596
254,986
14,589,099
12,444,567
1,124,879
20,675,974
660,312
3,254,926
7,966,326
4,851,747
96,807,446
(15,209,271)
81,598,175
3,254,926
7,966,326
3,849,158
99,646,190
(14,723,244)
84,922,946
(11,371,461)
(4,611,006)
(1,212,809)
(1,766,564)
(20,072,506)
(841,468)
(39,875,814)
(13,896,840)
(4,875,859)
(1,708,369)
(1,785,906)
(21,273,281)
(1,581,234)
(45,121,489)
Deferred income taxes, net
$ 41,722,361 $ 39,801,457
At March 31, 2023, the Company had state net operating loss carryforwards of approximately $84.7 million. A deferred tax
asset of approximately $4.9 million was recorded to reflect the benefit of these losses. Of this $4.9 million, $0.9 million is
expected to be recognized. Approximately $1,000 of the state net operating loss carryforward will expire in 2025 with the
remaining carryforward expiring between 2031 and 2041.
The valuation allowance for deferred tax assets increased by $0.5 million for the year ended March 31, 2023 when compared
to March 31, 2022. The valuation allowance at March 31, 2023 and 2022 was $15.2 million and $14.7 million,
respectively. The valuation allowance against the total deferred tax assets as of March 31, 2023 consisted of $4 million from
state net operating loss carryforwards in the amount of $63 million which expire from 2025 to 2041, a foreign tax credit
carryforward of $3.3 million arising in relation to the Section 965 calculation ("Transition Tax") during fiscal 2018 which
expires in 2028, $7.7 million related to the $37.0 million capital loss carryforward from the sale of the Mexican operations
in fiscal 2019 which expires in 2024 and $0.2 million related to the $0.9 million capital loss on the sale of the former
headquarters buildings which expire from 2026 to 2027. The Company does not expect to generate enough foreign source
income, state taxable income in the respective jurisdictions or capital gains in future tax years to realize these tax attributes.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. In
order to fully realize the deferred tax asset, the Company will need to generate future taxable income of the appropriate
character prior to the expiration of the deferred tax assets governed by the tax code.
71
As of March 31, 2023, 2022, and 2021, the Company had $1.1 million, $2.2 million, and $3.1 million of total gross
unrecognized tax benefits including interest, respectively. Of these totals, approximately $0.9 million, $2.0 million, and
$2.6 million, respectively, represents the amount of net unrecognized tax benefits that are permanent in nature and, if
recognized, would affect the annual effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at March 31, 2023, 2022, and 2021 are
presented below:
2023
2022
2021
Unrecognized tax benefit balance beginning of year
Gross increases for tax positions of current year
Settlements with tax authorities
Lapse of statute of limitations
Unrecognized tax benefit balance end of year
$ 1,616,116 $ 1,811,244 $ 4,351,811
36,541
— (1,968,702)
129,146
—
153,754
(927,037)
(348,882)
(608,406)
$ 818,225 $ 1,616,116 $ 1,811,244
At March 31, 2023, approximately $0.5 million of gross unrecognized tax benefits are expected to be resolved during the
next 12 months through settlements with taxing authorities or the expiration of the statute of limitations. The Company’s
continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of March
31, 2023, 2022, and 2021, the Company had $0.3 million, $0.6 million, and $1.2 million accrued for gross interest,
respectively, of which $0.1 million, $0.2 million, and $0.3 million represented the current period expense for the periods
ended March 31, 2023, 2022, and 2021.
The Company is subject to U.S. income tax, as well as various other state and local jurisdictions. With the exception of a
few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax
authorities for years before 2018, although carryforward attributes that were generated prior to 2018 may still be adjusted
upon examination by the taxing authorities if they either have been or will be used in a future period.
(11) Earnings Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted EPS calculations:
For the year ended March 31, 2023
Shares
(Denominator)
Income
(Numerator)
Per Share
Amount
Basic EPS
Net income available to common shareholders
$ 21,231,990
5,749,492 $
3.69
Effect of dilutive securities options and restricted stock
—
149,178
Diluted EPS
Net income available to common shareholders including dilutive
securities
$ 21,231,990
5,898,670 $
3.60
72
For the year ended March 31, 2022
Income
Shares
(Numerator)
(Denominator)
Per Share
Amount
Net income available to common shareholders
$ 53,919,837
6,072,170 $
8.88
Effect of dilutive securities options and restricted stock
—
291,896
Net income available to common shareholders including dilutive
$ 53,919,837
6,364,066 $
8.47
For the year ended March 31, 2021
Income
Shares
(Numerator)
(Denominator)
Per Share
Amount
Net income available to common shareholders
$ 88,282,828
6,493,898 $
13.59
Effect of dilutive securities options and restricted stock
—
178,212
Net income available to common shareholders including dilutive
$ 88,282,828
6,672,110 $
13.23
Options to purchase 333,072, 412,015, and 608,087 shares of common stock at various prices were outstanding during the
years ended March 31, 2023, 2022, and 2021, respectively, but were not included in the computation of diluted EPS because
the option exercise price was antidilutive.
Basic EPS
Diluted EPS
securities
Basic EPS
Diluted EPS
securities
(12) Benefit Plans
Retirement Plan
The Company provides a defined contribution employee benefit plan (401(k) plan) covering full-time employees, whereby
employees can invest up to the maximum designated for that year. The Company matches 50% of each employee's
contributions up to the first 6% of the employee's eligible compensation, providing a maximum employer contribution of
3% of compensation. The Company's expense under this plan was $1.7 million, $1.8 million, and $1.6 million, for the years
ended March 31, 2023, 2022, and 2021, respectively.
Supplemental Executive Retirement Plan
The Company has instituted two supplemental executive retirement plans, which are non-qualified executive benefit plans
in which the Company agrees to pay certain executives additional benefits in the future, usually at retirement, in return for
continued employment by the executives. The SERPs are unfunded plans, and, as such, there are no specific assets set aside
by the Company in connection with the establishment of the plans. The executives have no rights under the agreements
beyond those of a general creditor of the Company. For the years ended March 31, 2023, 2022, and 2021, contributions of
$0.5 million, $0.5 million, and $0.6 million, respectively, were charged to expense related to the SERP. The unfunded
liability, which is included as a component of accounts payable and accrued expenses in the Company's Consolidated
Balance Sheets was $5.7 million and $5.9 million as of March 31, 2023 and 2022, respectively.
As of March 31, 2023, 2022, and 2021, the Company had $1.1 million, $2.2 million, and $3.1 million of total gross
unrecognized tax benefits including interest, respectively. Of these totals, approximately $0.9 million, $2.0 million, and
$2.6 million, respectively, represents the amount of net unrecognized tax benefits that are permanent in nature and, if
recognized, would affect the annual effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at March 31, 2023, 2022, and 2021 are
presented below:
Unrecognized tax benefit balance beginning of year
Gross increases for tax positions of current year
Settlements with tax authorities
Lapse of statute of limitations
Unrecognized tax benefit balance end of year
2023
2022
2021
$ 1,616,116 $ 1,811,244 $ 4,351,811
129,146
153,754
36,541
—
— (1,968,702)
(927,037)
(348,882)
(608,406)
$ 818,225 $ 1,616,116 $ 1,811,244
At March 31, 2023, approximately $0.5 million of gross unrecognized tax benefits are expected to be resolved during the
next 12 months through settlements with taxing authorities or the expiration of the statute of limitations. The Company’s
continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of March
31, 2023, 2022, and 2021, the Company had $0.3 million, $0.6 million, and $1.2 million accrued for gross interest,
respectively, of which $0.1 million, $0.2 million, and $0.3 million represented the current period expense for the periods
ended March 31, 2023, 2022, and 2021.
The Company is subject to U.S. income tax, as well as various other state and local jurisdictions. With the exception of a
few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax
authorities for years before 2018, although carryforward attributes that were generated prior to 2018 may still be adjusted
upon examination by the taxing authorities if they either have been or will be used in a future period.
(11) Earnings Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted EPS calculations:
For the year ended March 31, 2023
Income
Shares
(Numerator)
(Denominator)
Per Share
Amount
Basic EPS
Diluted EPS
securities
Net income available to common shareholders
$ 21,231,990
5,749,492 $
3.69
Effect of dilutive securities options and restricted stock
—
149,178
Net income available to common shareholders including dilutive
$ 21,231,990
5,898,670 $
3.60
For the year ended March 31, 2022
Shares
(Denominator)
Income
(Numerator)
Per Share
Amount
Basic EPS
Net income available to common shareholders
$ 53,919,837
6,072,170 $
8.88
Effect of dilutive securities options and restricted stock
—
291,896
Diluted EPS
Net income available to common shareholders including dilutive
securities
$ 53,919,837
6,364,066 $
8.47
For the year ended March 31, 2021
Shares
(Denominator)
Income
(Numerator)
Per Share
Amount
Basic EPS
Net income available to common shareholders
$ 88,282,828
6,493,898 $
13.59
Effect of dilutive securities options and restricted stock
—
178,212
Diluted EPS
Net income available to common shareholders including dilutive
securities
$ 88,282,828
6,672,110 $
13.23
Options to purchase 333,072, 412,015, and 608,087 shares of common stock at various prices were outstanding during the
years ended March 31, 2023, 2022, and 2021, respectively, but were not included in the computation of diluted EPS because
the option exercise price was antidilutive.
(12) Benefit Plans
Retirement Plan
The Company provides a defined contribution employee benefit plan (401(k) plan) covering full-time employees, whereby
employees can invest up to the maximum designated for that year. The Company matches 50% of each employee's
contributions up to the first 6% of the employee's eligible compensation, providing a maximum employer contribution of
3% of compensation. The Company's expense under this plan was $1.7 million, $1.8 million, and $1.6 million, for the years
ended March 31, 2023, 2022, and 2021, respectively.
Supplemental Executive Retirement Plan
The Company has instituted two supplemental executive retirement plans, which are non-qualified executive benefit plans
in which the Company agrees to pay certain executives additional benefits in the future, usually at retirement, in return for
continued employment by the executives. The SERPs are unfunded plans, and, as such, there are no specific assets set aside
by the Company in connection with the establishment of the plans. The executives have no rights under the agreements
beyond those of a general creditor of the Company. For the years ended March 31, 2023, 2022, and 2021, contributions of
$0.5 million, $0.5 million, and $0.6 million, respectively, were charged to expense related to the SERP. The unfunded
liability, which is included as a component of accounts payable and accrued expenses in the Company's Consolidated
Balance Sheets was $5.7 million and $5.9 million as of March 31, 2023 and 2022, respectively.
73
For the three years presented, the unfunded liability was estimated using the following assumptions: an annual salary
increase of 3.5% for all 3 years; a discount rate of 6.0% for all 3 years; and a retirement age of 65.
The Performance Share performance targets are set forth below.
Executive Deferred Compensation Plan
The Company has an Executive Deferral Plan. Eligible executives and directors may elect to defer all or a portion of their
incentive compensation to be paid under the Executive Deferral Plan. As of March 31, 2023 and 2022 no executive or
director had deferred any compensation under this plan.
Stock Incentive Plans
The Company has a 2008 Stock Option Plan, a 2011 Stock Option Plan, and a 2017 Stock Incentive Plan for the benefit of
certain directors, officers, and key employees. Under these plans, a total of 3,350,000 shares of authorized common stock
have been reserved for issuance pursuant to grants approved by the Compensation Committee. Stock options granted under
these plans have a maximum duration of ten years, may be subject to certain vesting requirements, which are generally three
to six years for officers, non-employee directors, and key employees, and are priced at the market value of the Company's
common stock on the option's grant date. At March 31, 2023 there were a total of 145,031 shares of common stock available
for grant under the plans.
Stock-based compensation is recognized as provided under FASB ASC Topic 718-10 and FASB ASC Topic 505-50. FASB
ASC Topic 718-10 requires all share-based payments to employees, including grants of employee stock options, to be
recognized as compensation expense over the requisite service period (generally the vesting period) in the Consolidated
Financial Statements based on their grant date fair values. The Company has applied the Black-Scholes valuation model in
determining the grant date fair value of the stock option awards. Compensation expense is recognized only for those options
expected to vest.
Long-term Incentive Program and Non-Employee Director Awards
On October 15, 2018, the Compensation Committee and Board approved and adopted a new long-term incentive program
that seeks to motivate and reward certain employees and to align management’s interest with shareholders’ by focusing
executives on the achievement of long-term results. The program is comprised of four components: Service Options,
Performance Options, Restricted Stock, and Performance Shares.
Pursuant to this program, the Compensation Committee approved certain grants of Service Options, Performance Options,
Restricted Stock and Performance Shares under the World Acceptance Corporation 2011 Stock Option Plan and the World
Acceptance Corporation 2017 Stock Incentive Plan to certain employee directors, vice presidents of operations, vice
presidents, senior vice presidents, and executive officers. Separately, the Compensation Committee approved certain grants
of Service Options and Restricted Stock to certain non-employee directors of the Company.
Under the long-term incentive program, up to 100% of the shares of restricted stock subject to the Performance Shares shall
vest, if at all, based on the achievement of two trailing earnings per share performance targets established by the
Compensation Committee that are based on earnings per share (measured at the end of each calendar quarter, commencing
with the calendar quarter ending September 30, 2019) for the previous four calendar quarters. The Performance Shares are
eligible to vest over the Performance Share Measurement Period and subject to each respective employee’s continued
employment at the Company through the last day of the Performance Share Measurement Period (or as otherwise provided
under the terms of the applicable award agreement or applicable employment agreement).
74
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
Restricted Stock Eligible for Vesting
(Percentage of Award)
$16.35
$20.45
40%
60%
The Restricted Stock awards will vest in six equal annual installments, beginning on the first anniversary of the grant date,
subject to each respective employee’s continued employment at the Company through each applicable vesting date or
otherwise provided under the terms of the applicable award agreement or applicable employment agreement.
The Service Options will vest in six equal annual installments, beginning on the first anniversary of the grant date, subject
to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise
provided under the terms of the applicable award agreement or applicable employment agreement. The option price is equal
to the fair market value of the common stock on the grant date and the Service Options shall have a 10-year term.
The Performance Options shall fully vest if the Company attains the trailing earnings per share target over four consecutive
calendar quarters occurring between September 30, 2018 and March 31, 2025 as described below. Such performance target
was established by the Compensation Committee and will be measured at the end of each calendar quarter commencing on
September 30, 2019. The Performance Options are eligible to vest over the Option Measurement Period, subject to each
respective employee’s continued employment at the Company through the last day of the Option Measurement Period or as
otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The option
price is equal to the fair market value of the common stock on the grant date and the Performance Options shall have a 10-
year term. The Performance Option performance target is set forth below.
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
$25.30
Options Eligible for Vesting
(Percentage of Award)
100%
The weighted-average fair value at the grant date for options issued during the years ended March 31, 2023, 2022, and 2021
was $53.57, $99.14, and $58.48 per share, respectively. This fair value was estimated at grant date using the weighted-
Stock Options
average assumptions listed below.
Dividend yield
Expected volatility
Average risk-free interest rate
Expected life
2023
0 %
57.21 %
3.64 %
2022
0 %
57.82 %
1.02 %
2021
0 %
57.53 %
0.59 %
5.8 years
6.0 years
6.3 years
The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating
the expected life. The expected life represents the period of time that options are expected to be outstanding after the grant
date. The risk-free rate reflects the interest rate at grant date on zero coupon U.S. governmental bonds having a remaining
life similar to the expected option term.
For the three years presented, the unfunded liability was estimated using the following assumptions: an annual salary
The Performance Share performance targets are set forth below.
increase of 3.5% for all 3 years; a discount rate of 6.0% for all 3 years; and a retirement age of 65.
Executive Deferred Compensation Plan
The Company has an Executive Deferral Plan. Eligible executives and directors may elect to defer all or a portion of their
incentive compensation to be paid under the Executive Deferral Plan. As of March 31, 2023 and 2022 no executive or
director had deferred any compensation under this plan.
Stock Incentive Plans
The Company has a 2008 Stock Option Plan, a 2011 Stock Option Plan, and a 2017 Stock Incentive Plan for the benefit of
certain directors, officers, and key employees. Under these plans, a total of 3,350,000 shares of authorized common stock
have been reserved for issuance pursuant to grants approved by the Compensation Committee. Stock options granted under
these plans have a maximum duration of ten years, may be subject to certain vesting requirements, which are generally three
to six years for officers, non-employee directors, and key employees, and are priced at the market value of the Company's
common stock on the option's grant date. At March 31, 2023 there were a total of 145,031 shares of common stock available
for grant under the plans.
Stock-based compensation is recognized as provided under FASB ASC Topic 718-10 and FASB ASC Topic 505-50. FASB
ASC Topic 718-10 requires all share-based payments to employees, including grants of employee stock options, to be
recognized as compensation expense over the requisite service period (generally the vesting period) in the Consolidated
Financial Statements based on their grant date fair values. The Company has applied the Black-Scholes valuation model in
determining the grant date fair value of the stock option awards. Compensation expense is recognized only for those options
expected to vest.
Long-term Incentive Program and Non-Employee Director Awards
On October 15, 2018, the Compensation Committee and Board approved and adopted a new long-term incentive program
that seeks to motivate and reward certain employees and to align management’s interest with shareholders’ by focusing
executives on the achievement of long-term results. The program is comprised of four components: Service Options,
Performance Options, Restricted Stock, and Performance Shares.
Pursuant to this program, the Compensation Committee approved certain grants of Service Options, Performance Options,
Restricted Stock and Performance Shares under the World Acceptance Corporation 2011 Stock Option Plan and the World
Acceptance Corporation 2017 Stock Incentive Plan to certain employee directors, vice presidents of operations, vice
presidents, senior vice presidents, and executive officers. Separately, the Compensation Committee approved certain grants
of Service Options and Restricted Stock to certain non-employee directors of the Company.
Under the long-term incentive program, up to 100% of the shares of restricted stock subject to the Performance Shares shall
vest, if at all, based on the achievement of two trailing earnings per share performance targets established by the
Compensation Committee that are based on earnings per share (measured at the end of each calendar quarter, commencing
with the calendar quarter ending September 30, 2019) for the previous four calendar quarters. The Performance Shares are
eligible to vest over the Performance Share Measurement Period and subject to each respective employee’s continued
employment at the Company through the last day of the Performance Share Measurement Period (or as otherwise provided
under the terms of the applicable award agreement or applicable employment agreement).
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
$16.35
$20.45
Restricted Stock Eligible for Vesting
(Percentage of Award)
40%
60%
The Restricted Stock awards will vest in six equal annual installments, beginning on the first anniversary of the grant date,
subject to each respective employee’s continued employment at the Company through each applicable vesting date or
otherwise provided under the terms of the applicable award agreement or applicable employment agreement.
The Service Options will vest in six equal annual installments, beginning on the first anniversary of the grant date, subject
to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise
provided under the terms of the applicable award agreement or applicable employment agreement. The option price is equal
to the fair market value of the common stock on the grant date and the Service Options shall have a 10-year term.
The Performance Options shall fully vest if the Company attains the trailing earnings per share target over four consecutive
calendar quarters occurring between September 30, 2018 and March 31, 2025 as described below. Such performance target
was established by the Compensation Committee and will be measured at the end of each calendar quarter commencing on
September 30, 2019. The Performance Options are eligible to vest over the Option Measurement Period, subject to each
respective employee’s continued employment at the Company through the last day of the Option Measurement Period or as
otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The option
price is equal to the fair market value of the common stock on the grant date and the Performance Options shall have a 10-
year term. The Performance Option performance target is set forth below.
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
$25.30
Options Eligible for Vesting
(Percentage of Award)
100%
Stock Options
The weighted-average fair value at the grant date for options issued during the years ended March 31, 2023, 2022, and 2021
was $53.57, $99.14, and $58.48 per share, respectively. This fair value was estimated at grant date using the weighted-
average assumptions listed below.
Dividend yield
Expected volatility
Average risk-free interest rate
Expected life
2023
0 %
57.21 %
3.64 %
5.8 years
2022
0 %
57.82 %
1.02 %
6.0 years
2021
0 %
57.53 %
0.59 %
6.3 years
The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating
the expected life. The expected life represents the period of time that options are expected to be outstanding after the grant
date. The risk-free rate reflects the interest rate at grant date on zero coupon U.S. governmental bonds having a remaining
life similar to the expected option term.
75
Option activity for the year ended March 31, 2023 was as follows:
A summary of the status of the Company’s restricted stock as of March 31, 2023 and changes during the year ended March
Options outstanding, beginning of year
Granted
Exercised
Forfeited
Expired
Options outstanding, end of period
Options exercisable, end of period
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
104.38
96.07
84.84
119.93
88.88
104.41
100.22
5.82 $
5.07 $
589,526
441,097
Shares
348,743 $
16,490
(8,523)
(21,523)
(20,445)
314,742(5) $
114,757 $
31, 2023, are presented below:
Outstanding at March 31, 2022
Granted during the period
Vested during the period
Forfeited during the period
Outstanding at March 31, 2023
Total Stock-Based Compensation
Shares
Weighted Average Fair
Value at Grant Date
552,502 $
3,250
(65,518)
(29,620)
460,614 $
102.51
129.85
104.13
112.70
101.82
5) Of the 314,742 options outstanding, 86,811 are not yet exercisable based solely on fulfilling a service condition and
another 113,174 are not yet exercisable based solely on fulfilling the performance condition described further above.
2021 was as follows:
Total stock-based compensation included as a component of net income during the years ended March 31, 2023, 2022, and
The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between
the closing stock price on March 31, 2023 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by option holders had all option holders exercised their options as of March 31, 2023. This
amount will change as the stock's market price changes. The total intrinsic value of options exercised during the years ended
March 31, 2023, 2022, and 2021 was as follows:
2023
$493,418
2022
$17,494,865
2021
$9,996,167
As of March 31, 2023, total unrecognized stock-based compensation expense related to non-vested stock options amounted
to approximately $3.1 million, which is expected to be recognized over a weighted-average period of approximately 1.8
years.
Restricted Stock
During fiscal 2023, the Company granted 3,250 shares of restricted stock (which are equity classified), to certain vice
presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair
value of $129.85 per share.
During fiscal 2022, the Company granted 4,062 shares of restricted stock (which are equity classified) to certain vice
presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair
value of $188.38 per share.
During fiscal 2021, the Company granted 52,735 shares of restricted stock (which are equity classified) to certain executive
officers, with a grant date weighted average fair value of $106.28 per share.
Compensation expense related to restricted stock is based on the number of shares expected to vest and the fair market value
of the common stock on the grant date. The Company recognized compensation expense of $6.6 million, $14.1 million, and
$15.5 million for the years ended March 31, 2023, 2022, and 2021, respectively, which is included as a component of general
and administrative expenses in the Company's Consolidated Statements of Operations.
As of March 31, 2023, there was approximately $4.4 million of unrecognized compensation cost related to unvested restricted
stock awards, which is expected to be recognized over the next 1.3 years based on current estimates.
76
Stock-based compensation related to equity classified units:
Stock-based compensation related to stock options
Stock-based compensation related to restricted stock
2023
2022
2021
$
2,442,309 $ 3,473,913 $
3,804,674
6,610,526 14,109,082
15,476,604
Total stock-based compensation related to equity classified awards
$
9,052,835 $ 17,582,995 $ 19,281,278
(13) Acquisitions
The Company evaluates each set of assets and activities it acquires to determine if the set meets the definition of a business
according to FASB ASC Topic 805-10-55. Acquisitions meeting the definition of a business are accounted for as a business
combination while all other acquisitions are accounted for as an asset purchase.
The following table sets forth the acquisition activity of the Company for the years ended March 31, 2023, 2022, and 2021:
Acquisitions:
Number of asset purchases
Total acquisitions
Purchase price
Tangible assets:
Loans receivable, net
2023
2022
2021
50
50
50
50
50
50
$ 23,131,758 $ 10,859,984 $ 19,774,252
28,322,554 9,631,112 15,210,973
Purchase price amount over (below) carrying value of net tangible
assets(6)
$ (5,190,796) $ 1,228,872 $ 4,563,279
Customer lists
Non-compete agreements
$
— $
952,872 $ 4,365,779
—
276,000
197,500
6) As a result of the asset purchases during fiscal 2023, the Company recorded a $5.2 million gain, net of $1.2 million
income tax, which is included as a component of Insurance and other income, net in the Consolidated Statements of
Operations. The transactions resulted in a gain as the acquired loan portfolios were purchased at a discount. As an
immediate gain would be recognized on the net loans acquired if the cost below fair value was allocated, it was not
determined appropriate to reduce the basis of the net loans acquired.
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Options outstanding, beginning of year
Granted
Exercised
Forfeited
Expired
Options outstanding, end of period
Options exercisable, end of period
Shares
348,743 $
16,490
(8,523)
(21,523)
(20,445)
314,742(5) $
114,757 $
104.38
96.07
84.84
119.93
88.88
104.41
100.22
5.82 $
5.07 $
589,526
441,097
5) Of the 314,742 options outstanding, 86,811 are not yet exercisable based solely on fulfilling a service condition and
another 113,174 are not yet exercisable based solely on fulfilling the performance condition described further above.
The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between
the closing stock price on March 31, 2023 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by option holders had all option holders exercised their options as of March 31, 2023. This
amount will change as the stock's market price changes. The total intrinsic value of options exercised during the years ended
March 31, 2023, 2022, and 2021 was as follows:
2023
$493,418
2022
$17,494,865
2021
$9,996,167
As of March 31, 2023, total unrecognized stock-based compensation expense related to non-vested stock options amounted
to approximately $3.1 million, which is expected to be recognized over a weighted-average period of approximately 1.8
years.
Restricted Stock
value of $129.85 per share.
value of $188.38 per share.
During fiscal 2023, the Company granted 3,250 shares of restricted stock (which are equity classified), to certain vice
presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair
During fiscal 2022, the Company granted 4,062 shares of restricted stock (which are equity classified) to certain vice
presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair
During fiscal 2021, the Company granted 52,735 shares of restricted stock (which are equity classified) to certain executive
officers, with a grant date weighted average fair value of $106.28 per share.
Compensation expense related to restricted stock is based on the number of shares expected to vest and the fair market value
of the common stock on the grant date. The Company recognized compensation expense of $6.6 million, $14.1 million, and
$15.5 million for the years ended March 31, 2023, 2022, and 2021, respectively, which is included as a component of general
and administrative expenses in the Company's Consolidated Statements of Operations.
As of March 31, 2023, there was approximately $4.4 million of unrecognized compensation cost related to unvested restricted
stock awards, which is expected to be recognized over the next 1.3 years based on current estimates.
Option activity for the year ended March 31, 2023 was as follows:
A summary of the status of the Company’s restricted stock as of March 31, 2023 and changes during the year ended March
31, 2023, are presented below:
Outstanding at March 31, 2022
Granted during the period
Vested during the period
Forfeited during the period
Outstanding at March 31, 2023
Total Stock-Based Compensation
Shares
Weighted Average Fair
Value at Grant Date
552,502 $
3,250
(65,518)
(29,620)
460,614 $
102.51
129.85
104.13
112.70
101.82
Total stock-based compensation included as a component of net income during the years ended March 31, 2023, 2022, and
2021 was as follows:
Stock-based compensation related to equity classified units:
Stock-based compensation related to stock options
Stock-based compensation related to restricted stock
Total stock-based compensation related to equity classified awards
2023
2022
2021
$
$
3,804,674
2,442,309 $ 3,473,913 $
6,610,526 14,109,082
15,476,604
9,052,835 $ 17,582,995 $ 19,281,278
(13) Acquisitions
The Company evaluates each set of assets and activities it acquires to determine if the set meets the definition of a business
according to FASB ASC Topic 805-10-55. Acquisitions meeting the definition of a business are accounted for as a business
combination while all other acquisitions are accounted for as an asset purchase.
The following table sets forth the acquisition activity of the Company for the years ended March 31, 2023, 2022, and 2021:
Acquisitions:
Number of asset purchases
Total acquisitions
Purchase price
Tangible assets:
Loans receivable, net
2023
2022
2021
50
50
50
50
50
50
$ 23,131,758 $ 10,859,984 $ 19,774,252
28,322,554 9,631,112 15,210,973
Purchase price amount over (below) carrying value of net tangible
assets(6)
$ (5,190,796) $ 1,228,872 $ 4,563,279
Customer lists
Non-compete agreements
$
— $
—
952,872 $ 4,365,779
197,500
276,000
6) As a result of the asset purchases during fiscal 2023, the Company recorded a $5.2 million gain, net of $1.2 million
income tax, which is included as a component of Insurance and other income, net in the Consolidated Statements of
Operations. The transactions resulted in a gain as the acquired loan portfolios were purchased at a discount. As an
immediate gain would be recognized on the net loans acquired if the cost below fair value was allocated, it was not
determined appropriate to reduce the basis of the net loans acquired.
77
Acquisitions that are accounted for as business combinations typically result in one or more new branches. In such cases,
the Company typically retains the existing employees and the branch location from the acquisition. The purchase price is
allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition
date. The remainder is allocated to goodwill.
Acquisitions that are accounted for as asset purchases are typically limited to acquisitions of loan portfolios. The purchase
price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition
date. In an asset purchase, no goodwill is recorded.
The Company’s acquisitions include tangible assets (generally loans and furniture and equipment) and intangible assets
(generally non-compete agreements, customer lists, and goodwill), both of which are recorded at their fair values, which
are estimated pursuant to the processes described below.
Acquired loans are valued at the net loan balance. Given the short-term nature of these loans, generally twelve months, and
that these loans are priced at current rates, management believes the net loan balances approximate their fair value. Under
CECL, acquired loans are included in the reserve calculations for all other loan types (excluding TALs). Management
includes recent acquisition activity compared to historical activity when considering reasonable and supportable forecasts
as it relates to assessing the adequacy of the allowance for expected credit losses. The Company did not acquire any loans
that would qualify as PCDs during the period.
Furniture and equipment are valued at the specific purchase price as agreed to by both parties at the time of acquisition,
which management believes approximates their fair values.
Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company
believes approximates the fair value.
(15) Quarterly Information (Unaudited)
Customer lists are valued with a valuation model that utilizes the Company’s historical data to estimate the value of any
acquired customer lists. Customer lists are allocated at a branch level and are evaluated for impairment at a branch level
when a triggering event occurs in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment
loss to the customer list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair
value of the customer list allocated to an office is less than $100,000, and management believes that in the event a triggering
event were to occur, the impairment loss to an unamortized customer list would be immaterial.
The results of all acquisitions have been included in the Company’s Consolidated Financial Statements since the respective
acquisition date. The pro forma impact of these branches as though they had been acquired at the beginning of the periods
presented would not have a material effect on the results of operations as reported.
(14) Fair Value
Fair Value Disclosures
The Company may carry certain financial instruments and derivative assets and liabilities at fair value. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair
value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value.
Fair value measurements are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the
assets or liabilities. These levels are:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly.
These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are less active.
• Level 3 – Unobservable inputs for assets or liabilities reflecting the reporting entity’s own assumptions.
78
The Company’s financial instruments consist of cash and cash equivalents, loans receivable, the senior notes payable, and
the senior unsecured notes payable. Loans receivable are originated at prevailing market rates and have an average life of
less than twelve months. Given the short-term nature of these loans, they are continually repriced at current market rates.
The Company’s senior notes payable has a variable rate based on a margin over SOFR and reprices with any changes in
SOFR. The fair value of the senior unsecured notes payable is estimated based on quoted prices in markets that are not
active. The Company also considered its creditworthiness in its determination of fair value.
The carrying amounts and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and
their level within the fair value hierarchy are summarized below.
ASSETS
Cash and cash equivalents
Loans receivable, net
LIABILITIES
Senior unsecured notes payable
Senior notes payable
1
3
2
3
March 31, 2023
March 31, 2022
Input Level Carrying Value
Estimated Fair
Value
Carrying Value
Estimated Fair
Value
$
16,508,935 $
16,508,935 $
19,236,322 $
19,236,322
887,788,486
887,788,486
985,515,154
985,515,154
290,860,000
218,127,548
307,910,824
307,910,824
300,000,000
396,972,746
264,639,000
396,972,746
There were no other significant assets or liabilities measured at fair value as of March 31, 2023 and 2022.
The following sets forth selected quarterly operating data:
Fiscal 2023
Fiscal 2022
First
Second Third
Fourth
First
Second Third
Fourth
(Dollars in thousands, except for earnings per share data)
Total revenues
$ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656
85,822 68,620 59,609 45,412 30,266 42,044 56,459 57,439
administrative expenses 73,174 71,218 66,475 68,607 73,351 74,989 74,703 76,934
Interest expense
11,174 13,032 14,070 12,185
5,501
6,714 10,166 11,044
Net income (loss)
$ (8,803) $ (1,366) $ 5,759 $ 25,643 $ 15,771 $ 12,439 $ 7,327 $ 18,382
(3,449)
(246)
619
8,990
4,770
1,641
391
4,857
Provision for credit
losses
General and
Income tax expense
(benefit)
Net income (loss) per
common share:
Basic
Diluted
$
$
(1.53) $
(0.24) $
(1.53) $
(0.24) $
1.00 $
0.98 $
4.44 $
4.37 $
2.56 $
2.44 $
2.04 $
1.94 $
1.20
1.14
3.10
2.97
The Company's highest loan demand occurs generally from October through December, its third fiscal quarter. Loan demand
is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the Company
experiences significant seasonal fluctuations in its operating results and cash needs. Operating results from the Company's
third fiscal quarter are generally lower than in other quarters and operating results for its fourth fiscal quarter are generally
higher than in other quarters.
The Company’s financial instruments consist of cash and cash equivalents, loans receivable, the senior notes payable, and
the senior unsecured notes payable. Loans receivable are originated at prevailing market rates and have an average life of
less than twelve months. Given the short-term nature of these loans, they are continually repriced at current market rates.
The Company’s senior notes payable has a variable rate based on a margin over SOFR and reprices with any changes in
SOFR. The fair value of the senior unsecured notes payable is estimated based on quoted prices in markets that are not
active. The Company also considered its creditworthiness in its determination of fair value.
The carrying amounts and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and
their level within the fair value hierarchy are summarized below.
March 31, 2023
March 31, 2022
Input Level Carrying Value
Estimated Fair
Value
Carrying Value
Estimated Fair
Value
ASSETS
Cash and cash equivalents
Loans receivable, net
LIABILITIES
Senior unsecured notes payable
Senior notes payable
1
3
2
3
$
16,508,935 $
887,788,486
16,508,935 $
887,788,486
19,236,322 $
985,515,154
19,236,322
985,515,154
290,860,000
307,910,824
218,127,548
307,910,824
300,000,000
396,972,746
264,639,000
396,972,746
There were no other significant assets or liabilities measured at fair value as of March 31, 2023 and 2022.
Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company
believes approximates the fair value.
(15) Quarterly Information (Unaudited)
The following sets forth selected quarterly operating data:
Fiscal 2023
Fiscal 2022
First
Second Third
Fourth
First
Second Third
Fourth
(Dollars in thousands, except for earnings per share data)
Total revenues
$ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656
Acquisitions that are accounted for as business combinations typically result in one or more new branches. In such cases,
the Company typically retains the existing employees and the branch location from the acquisition. The purchase price is
allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition
date. The remainder is allocated to goodwill.
Acquisitions that are accounted for as asset purchases are typically limited to acquisitions of loan portfolios. The purchase
price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition
date. In an asset purchase, no goodwill is recorded.
The Company’s acquisitions include tangible assets (generally loans and furniture and equipment) and intangible assets
(generally non-compete agreements, customer lists, and goodwill), both of which are recorded at their fair values, which
are estimated pursuant to the processes described below.
Acquired loans are valued at the net loan balance. Given the short-term nature of these loans, generally twelve months, and
that these loans are priced at current rates, management believes the net loan balances approximate their fair value. Under
CECL, acquired loans are included in the reserve calculations for all other loan types (excluding TALs). Management
includes recent acquisition activity compared to historical activity when considering reasonable and supportable forecasts
as it relates to assessing the adequacy of the allowance for expected credit losses. The Company did not acquire any loans
that would qualify as PCDs during the period.
Furniture and equipment are valued at the specific purchase price as agreed to by both parties at the time of acquisition,
which management believes approximates their fair values.
Customer lists are valued with a valuation model that utilizes the Company’s historical data to estimate the value of any
acquired customer lists. Customer lists are allocated at a branch level and are evaluated for impairment at a branch level
when a triggering event occurs in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment
loss to the customer list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair
value of the customer list allocated to an office is less than $100,000, and management believes that in the event a triggering
event were to occur, the impairment loss to an unamortized customer list would be immaterial.
The results of all acquisitions have been included in the Company’s Consolidated Financial Statements since the respective
acquisition date. The pro forma impact of these branches as though they had been acquired at the beginning of the periods
presented would not have a material effect on the results of operations as reported.
(14) Fair Value
Fair Value Disclosures
The Company may carry certain financial instruments and derivative assets and liabilities at fair value. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair
value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value.
assets or liabilities. These levels are:
Fair value measurements are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly.
These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are less active.
• Level 3 – Unobservable inputs for assets or liabilities reflecting the reporting entity’s own assumptions.
Provision for credit
losses
General and
administrative expenses 73,174 71,218 66,475 68,607 73,351 74,989 74,703 76,934
6,714 10,166 11,044
Interest expense
Income tax expense
(benefit)
The Company's highest loan demand occurs generally from October through December, its third fiscal quarter. Loan demand
is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the Company
experiences significant seasonal fluctuations in its operating results and cash needs. Operating results from the Company's
third fiscal quarter are generally lower than in other quarters and operating results for its fourth fiscal quarter are generally
higher than in other quarters.
79
$
$
(1.53) $
(1.53) $
(0.24) $
(0.24) $
1.00 $
0.98 $
4.44 $
4.37 $
2.56 $
2.44 $
2.04 $
1.94 $
1.20
1.14
3.10
2.97
4,857
$ (8,803) $ (1,366) $ 5,759 $ 25,643 $ 15,771 $ 12,439 $ 7,327 $ 18,382
Net income (loss)
Net income (loss) per
common share:
Basic
Diluted
85,822 68,620 59,609 45,412 30,266 42,044 56,459 57,439
11,174 13,032 14,070 12,185
(3,449)
1,641
4,770
8,990
5,501
(246)
619
391
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a –
15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of internal control over financial reporting
as of March 31, 2023. Our assessment was based on criteria established in the Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and board of directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any
assumptions regarding internal control over financial reporting in future periods based on an evaluation of effectiveness in a prior
period are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Based on using the COSO criteria, we believe our internal control over financial reporting as of March 31, 2023 was effective.
Our independent registered public accounting firm has audited the Consolidated Financial Statements included in this Annual
Report and has issued an attestation report on the effectiveness of our internal control over financial reporting, as stated in their
report.
By: /s/ R. Chad Prashad
R. Chad Prashad
President and Chief Executive Officer
Executive Vice President and Chief Financial and Strategy Officer
Date: June 1, 2023
Date: June 1, 2023
By: /s/ John L. Calmes, Jr.
John L. Calmes, Jr.
(16) Commitments and Contingencies
Derivative Litigation
On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World
Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as
defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed,
the complaint alleges violations of South Carolina law, including breaches of fiduciary duties and corporate waste, and that
the Company has suffered damages as a result of those alleged breaches. The complaint seeks unspecified monetary
damages from the individual defendants, equitable and/or injunctive relief, disgorgement of compensation from the
individual defendants, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary
damages from the Company. However, the Company may be required to advance, and ultimately be responsible for, the
legal fees and costs incurred by the individual defendants. On April 19, 2023, the Court preliminarily approved a Stipulation
and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among: the plaintiff, derivatively on behalf
of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the Stipulation will result in a non-
material payment by the Company.
General
In addition, from time to time, the Company is involved in litigation matters relating to claims arising out of its operations
in the normal course of business.
Estimating an amount or range of possible losses resulting from litigation, government actions, and other legal proceedings
is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate
claims for monetary damages, may involve fines, penalties, or damages that are discretionary in amount, involve a large
number of claimants or significant discretion by regulatory authorities, represent a change in regulatory policy or
interpretation, present novel legal theories, are in the early stages of the proceedings, are subject to appeal or could result in
a change in business practices. In addition, because most legal proceedings are resolved over extended periods of time,
potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome
of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength
or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome
of, or reasonably estimate the possible losses or a range of possible losses resulting from, any currently pending claims.
Based on information currently available, the Company does not believe that any reasonably possible losses arising from
currently pending legal matters will be material to the Company’s results of operations or financial conditions. However, in
light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could
materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular
reporting period.
(17) Assets Held for Sale
In the fourth quarter of fiscal 2020 the Company moved its corporate headquarters from properties it owned outright in
Greenville, South Carolina to leased office space in downtown Greenville, South Carolina. Under ASC 360-10, the
properties met the criteria for classification as held for sale as of March 31, 2020.
During the second quarter of fiscal 2021 the Company completed the sale of two of the three buildings held for sale, resulting
in an aggregate loss of $37.0 thousand. The loss on sale of assets held for sale is included as a component of Insurance and
other income, net in the Company's Consolidated Statement of Operations. During the second quarter of fiscal 2022 the
Company completed the sale of the last held for sale building, and recorded $39.0 thousand loss on sale which is included
as a component of Insurance and other income, net in the Consolidated Statements of Operations. As of March 31, 2023
and 2022, there were no assets held for sale.
(18) Subsequent Events
Management is not aware of any significant events occurring subsequent to the balance sheet date that would have a material
effect on the financial statements thereby requiring adjustment or disclosure.
80
(16) Commitments and Contingencies
Derivative Litigation
On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World
Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as
defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed,
the complaint alleges violations of South Carolina law, including breaches of fiduciary duties and corporate waste, and that
the Company has suffered damages as a result of those alleged breaches. The complaint seeks unspecified monetary
damages from the individual defendants, equitable and/or injunctive relief, disgorgement of compensation from the
individual defendants, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary
damages from the Company. However, the Company may be required to advance, and ultimately be responsible for, the
and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among: the plaintiff, derivatively on behalf
of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the Stipulation will result in a non-
material payment by the Company.
General
in the normal course of business.
In addition, from time to time, the Company is involved in litigation matters relating to claims arising out of its operations
Estimating an amount or range of possible losses resulting from litigation, government actions, and other legal proceedings
is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate
claims for monetary damages, may involve fines, penalties, or damages that are discretionary in amount, involve a large
number of claimants or significant discretion by regulatory authorities, represent a change in regulatory policy or
interpretation, present novel legal theories, are in the early stages of the proceedings, are subject to appeal or could result in
a change in business practices. In addition, because most legal proceedings are resolved over extended periods of time,
potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome
of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength
or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome
of, or reasonably estimate the possible losses or a range of possible losses resulting from, any currently pending claims.
Based on information currently available, the Company does not believe that any reasonably possible losses arising from
currently pending legal matters will be material to the Company’s results of operations or financial conditions. However, in
light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could
materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular
reporting period.
(17) Assets Held for Sale
In the fourth quarter of fiscal 2020 the Company moved its corporate headquarters from properties it owned outright in
Greenville, South Carolina to leased office space in downtown Greenville, South Carolina. Under ASC 360-10, the
properties met the criteria for classification as held for sale as of March 31, 2020.
During the second quarter of fiscal 2021 the Company completed the sale of two of the three buildings held for sale, resulting
in an aggregate loss of $37.0 thousand. The loss on sale of assets held for sale is included as a component of Insurance and
other income, net in the Company's Consolidated Statement of Operations. During the second quarter of fiscal 2022 the
Company completed the sale of the last held for sale building, and recorded $39.0 thousand loss on sale which is included
as a component of Insurance and other income, net in the Consolidated Statements of Operations. As of March 31, 2023
and 2022, there were no assets held for sale.
(18) Subsequent Events
Management is not aware of any significant events occurring subsequent to the balance sheet date that would have a material
effect on the financial statements thereby requiring adjustment or disclosure.
legal fees and costs incurred by the individual defendants. On April 19, 2023, the Court preliminarily approved a Stipulation
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a –
15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of internal control over financial reporting
as of March 31, 2023. Our assessment was based on criteria established in the Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes those policies and procedures that:
dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and board of directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any
assumptions regarding internal control over financial reporting in future periods based on an evaluation of effectiveness in a prior
period are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Based on using the COSO criteria, we believe our internal control over financial reporting as of March 31, 2023 was effective.
Our independent registered public accounting firm has audited the Consolidated Financial Statements included in this Annual
Report and has issued an attestation report on the effectiveness of our internal control over financial reporting, as stated in their
report.
By: /s/ R. Chad Prashad
R. Chad Prashad
President and Chief Executive Officer
Date: June 1, 2023
By: /s/ John L. Calmes, Jr.
John L. Calmes, Jr.
Executive Vice President and Chief Financial and Strategy Officer
Date: June 1, 2023
81
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of World Acceptance Corporation and its subsidiaries (the
Company) as of March 31, 2023 and 2022, the related consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 2023, and the related notes to the consolidated financial statements and
schedules (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each
of the three years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United
States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013,
and our report dated June 1, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 1 and 2 to the financial statements, the Company established an allowance for credit losses of $125.6
million as of March 31, 2023, which was estimated using the Company’s current expected credit loss (CECL) model. The
Company’s CECL model estimates the allowance for credit losses for each Customer Tenure bucket using a historical migration
analysis for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. The Company’s CECL
model also includes a reserve at 100% of the outstanding balance of all loans greater than 90 days past due on a recency basis
and not written off as of the reporting date, net of a calculated Rehab Rate. Management considers whether current credit
conditions might suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new
borrowers, 60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of
gross loans that are acquired loans as compared to metrics in the historical migration period (qualitative factors). Management
also considers whether a change in new borrower underwriting might suggest a change is needed to the allowance for credit
losses. Management also utilizes a reasonable and supportable forecast by comparing the most recent 6-month loss curves as
compared to historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical
migration rates should be adjusted. Management utilized significant judgment in evaluating reasonable and supportable forecasts
and qualitative factors.
We identified the Company’s allowance for credit losses as a critical audit matter as auditing management’s judgments in
evaluating reasonable and supportable forecasts and qualitative factors regarding the allowance for credit losses required a high
degree of auditor judgment and increased extent of audit effort.
Our audit procedures related to the Company’s allowance for credit losses, specifically the reasonable and supportable forecasts
and qualitative factors, included the following, among others:
• We obtained an understanding of the relevant controls related to the allowance for credit losses, and tested such controls
for design and operating effectiveness, including those controls over (a) review and approval of the appropriateness of
the assumptions of the CECL model and (b) the management review and approval of the computed allowance for credit
losses including the assessment of reasonable and supportable forecasts and qualitative factors.
• We tested the completeness and accuracy of data inputs for qualitative factors into the CECL model by comparing to
internal data sources.
source data.
• We evaluated reasonable and supportable forecasts and qualitative factors for reasonableness by comparing to internal
• We evaluated the accuracy of the delinquency amounts used within the CECL model by testing the recency aging
calculation on a sample of loans.
/s/ RSM US LLP
We have served as the Company's auditor since 2014.
Raleigh, North Carolina
June 1, 2023
82
To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries
Opinion on the Internal Control Over Financial Reporting
We have audited World Acceptance Corporation and subsidiaries' (the Company’s) internal control over financial reporting as of
March 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of March 31, 2023 and 2022 and the related consolidated statements
of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2023, and our report
dated June 1, 2023 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Raleigh, North Carolina
June 1, 2023
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of World Acceptance Corporation and its subsidiaries (the
Company) as of March 31, 2023 and 2022, the related consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 2023, and the related notes to the consolidated financial statements and
schedules (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each
of the three years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013,
and our report dated June 1, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over
States of America.
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 1 and 2 to the financial statements, the Company established an allowance for credit losses of $125.6
million as of March 31, 2023, which was estimated using the Company’s current expected credit loss (CECL) model. The
Company’s CECL model estimates the allowance for credit losses for each Customer Tenure bucket using a historical migration
analysis for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. The Company’s CECL
model also includes a reserve at 100% of the outstanding balance of all loans greater than 90 days past due on a recency basis
and not written off as of the reporting date, net of a calculated Rehab Rate. Management considers whether current credit
conditions might suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new
borrowers, 60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of
gross loans that are acquired loans as compared to metrics in the historical migration period (qualitative factors). Management
also considers whether a change in new borrower underwriting might suggest a change is needed to the allowance for credit
losses. Management also utilizes a reasonable and supportable forecast by comparing the most recent 6-month loss curves as
compared to historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical
migration rates should be adjusted. Management utilized significant judgment in evaluating reasonable and supportable forecasts
and qualitative factors.
We identified the Company’s allowance for credit losses as a critical audit matter as auditing management’s judgments in
evaluating reasonable and supportable forecasts and qualitative factors regarding the allowance for credit losses required a high
degree of auditor judgment and increased extent of audit effort.
Our audit procedures related to the Company’s allowance for credit losses, specifically the reasonable and supportable forecasts
and qualitative factors, included the following, among others:
• We obtained an understanding of the relevant controls related to the allowance for credit losses, and tested such controls
for design and operating effectiveness, including those controls over (a) review and approval of the appropriateness of
the assumptions of the CECL model and (b) the management review and approval of the computed allowance for credit
losses including the assessment of reasonable and supportable forecasts and qualitative factors.
• We tested the completeness and accuracy of data inputs for qualitative factors into the CECL model by comparing to
internal data sources.
source data.
• We evaluated reasonable and supportable forecasts and qualitative factors for reasonableness by comparing to internal
• We evaluated the accuracy of the delinquency amounts used within the CECL model by testing the recency aging
calculation on a sample of loans.
/s/ RSM US LLP
We have served as the Company's auditor since 2014.
Raleigh, North Carolina
June 1, 2023
To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries
Opinion on the Internal Control Over Financial Reporting
We have audited World Acceptance Corporation and subsidiaries' (the Company’s) internal control over financial reporting as of
March 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of March 31, 2023 and 2022 and the related consolidated statements
of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2023, and our report
dated June 1, 2023 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Raleigh, North Carolina
June 1, 2023
83
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The Company had no disagreements on accounting or financial disclosure matters with its independent registered public
accounting firm to report under this Item 9.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of our principal executive officer and principal financial officer, as of
the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are effective to
provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated
and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Management assessed our internal control over financial reporting as of March 31, 2023, the end of our fiscal year. Management
based its assessment on criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included evaluation of elements
such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies,
and our overall control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end
of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with GAAP. Management’s Report on Internal Control over Financial
Reporting is included in Part II, Item 8 of this Form 10-K. We reviewed the results of management’s assessment with the Audit
Compliance Committee of our Board of Directors.
Attestation Report of Public Accounting Firm
Our independent registered public accounting firm, RSM US LLP, independently assessed the effectiveness of the Company’s
internal control over financial reporting. RSM US LLP has issued an attestation report concurring with management’s assessment,
which is included at the end of Part II, Item 8 of this Form 10-K.
Inherent Limitations on Effectiveness of Controls
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control
84
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and
instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of
any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of
the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information
None.
Not Applicable.
PART III.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10.
Directors, Executive Officers and Corporate Governance
Information contained under the captions “Proposal 1 - Election of Directors,” “Corporate Governance,” and “Delinquent Section
16(a) Reports” in the Proxy Statement is incorporated herein by reference in response to this Item 10. The information in response
to this Item 10 regarding the executive officers of the Company is contained in Item 1, Part I hereof under the caption “Information
about our Executive Officers.”
Item 11.
Executive Compensation
Information contained under the captions “Corporate Governance,” “Executive Compensation,” “Director Compensation,” and
“Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference in response to this Item 11.
The “Report of the Compensation Committee” in the Proxy Statement, which shall be deemed furnished, but not filed herewith,
is incorporated herein by reference in response to this Item 11.
Item 12.
Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters
Information contained under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information” in the Proxy Statement is incorporated by reference herein in response to this Item 12.
For additional information on our stock option plans, see Note 12 in the Notes to Consolidated Financial Statements for the year
ended March 31, 2023.
Item 13. Certain Relationships and Related Transactions and Director Independence
Information contained under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance”
in the Proxy Statement is incorporated by reference in response to this Item 13.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The Company had no disagreements on accounting or financial disclosure matters with its independent registered public
accounting firm to report under this Item 9.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of our principal executive officer and principal financial officer, as of
the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are effective to
provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated
allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Management assessed our internal control over financial reporting as of March 31, 2023, the end of our fiscal year. Management
based its assessment on criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included evaluation of elements
such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies,
and our overall control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end
of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with GAAP. Management’s Report on Internal Control over Financial
Reporting is included in Part II, Item 8 of this Form 10-K. We reviewed the results of management’s assessment with the Audit
Compliance Committee of our Board of Directors.
Attestation Report of Public Accounting Firm
Our independent registered public accounting firm, RSM US LLP, independently assessed the effectiveness of the Company’s
internal control over financial reporting. RSM US LLP has issued an attestation report concurring with management’s assessment,
which is included at the end of Part II, Item 8 of this Form 10-K.
Inherent Limitations on Effectiveness of Controls
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and
instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of
any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of
the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information
and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to
None.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Not Applicable.
PART III.
Item 10.
Directors, Executive Officers and Corporate Governance
Information contained under the captions “Proposal 1 - Election of Directors,” “Corporate Governance,” and “Delinquent Section
16(a) Reports” in the Proxy Statement is incorporated herein by reference in response to this Item 10. The information in response
to this Item 10 regarding the executive officers of the Company is contained in Item 1, Part I hereof under the caption “Information
about our Executive Officers.”
Item 11.
Executive Compensation
Information contained under the captions “Corporate Governance,” “Executive Compensation,” “Director Compensation,” and
“Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference in response to this Item 11.
The “Report of the Compensation Committee” in the Proxy Statement, which shall be deemed furnished, but not filed herewith,
is incorporated herein by reference in response to this Item 11.
Item 12.
Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters
Information contained under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information” in the Proxy Statement is incorporated by reference herein in response to this Item 12.
For additional information on our stock option plans, see Note 12 in the Notes to Consolidated Financial Statements for the year
ended March 31, 2023.
Item 13. Certain Relationships and Related Transactions and Director Independence
Information contained under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance”
in the Proxy Statement is incorporated by reference in response to this Item 13.
85
Item 14.
Principal Accountant Fees and Services
SIGNATURES
Information contained under the proposal captioned "Ratification of Appointment of Independent Registered Public Accounting
Firm” in the Proxy Statement is incorporated by reference in response to this Item 14.
Pursuant to the requirements of Section 13 or 15(d) 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.
PART IV.
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) The following Consolidated Financial Statements of the Company and Report of Independent Registered Public
Accounting Firm are filed as part of this Annual Report under Item 8.
Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2023 and 2022
Consolidated Statements of Operations for the fiscal years ended March 31, 2023, 2022, and 2021
Consolidated Statements of Shareholders' Equity for the fiscal years ended March 31, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2023, 2022, and 2021
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 49)
(a)(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under
the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial
Statements.
(a)(3) Exhibits
The list of exhibits filed as a part of this Form 10-K is set forth on the Exhibit Index immediately preceding the signatures to this
Form 10-K and is incorporated by reference in this Item 15(a)(3).
(b)
Exhibits
Date: June 1, 2023
Date: June 1, 2023
The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.
(c)
Separate Financial Statements and Schedules
Financial statement schedules have been omitted since the required information is included in our Consolidated Financial
Statements contained in Item 8 of this Annual Report on Form 10-K.
Item 16.
Form 10-K Summary
None.
86
WORLD ACCEPTANCE CORPORATION
By: /s/ R. Chad Prashad
R. Chad Prashad
President and Chief Executive Officer
Date: June 1, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
President, Chief Executive Officer and Director
Executive Vice President and Chief Financial and Strategy
Signing on behalf of the registrant and as principal
Signing on behalf of the registrant and as principal financial
Date: June 1, 2023
Date: June 1, 2023
/s/ John L. Calmes, Jr.
John L. Calmes, Jr.
Officer
officer
/s/ R. Chad Prashad
R. Chad Prashad
executive officer
/s/ Scott McIntyre
Scott McIntyre
Senior Vice President of Accounting
Signing on behalf of the registrant and as principal
accounting officer
Date: June 1, 2023
/s/ Ken R. Bramlett, Jr.
Ken R. Bramlett, Jr.
/s/ Scott J. Vassalluzzo
Scott J. Vassalluzzo
Chairman of the Board of Directors and a Director
Director
Date: June 1, 2023
Date: June 1, 2023
/s/ Charles D. Way
Charles D. Way
Director
/s/ Beth Neuhoff
Beth Nuehoff
Director
/s/ Darrell Whitaker
Darrell Whitaker
Director
/s/ Benjamin Robinson
Benjamin Robinson
Director
Date: June 1, 2023
Date: June 1, 2023
Item 14.
Principal Accountant Fees and Services
SIGNATURES
Information contained under the proposal captioned "Ratification of Appointment of Independent Registered Public Accounting
Firm” in the Proxy Statement is incorporated by reference in response to this Item 14.
Pursuant to the requirements of Section 13 or 15(d) 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.
PART IV.
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) The following Consolidated Financial Statements of the Company and Report of Independent Registered Public
Accounting Firm are filed as part of this Annual Report under Item 8.
Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2023 and 2022
Consolidated Statements of Operations for the fiscal years ended March 31, 2023, 2022, and 2021
Consolidated Statements of Shareholders' Equity for the fiscal years ended March 31, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2023, 2022, and 2021
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 49)
(a)(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under
the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial
The list of exhibits filed as a part of this Form 10-K is set forth on the Exhibit Index immediately preceding the signatures to this
Form 10-K and is incorporated by reference in this Item 15(a)(3).
The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.
(c)
Separate Financial Statements and Schedules
Financial statement schedules have been omitted since the required information is included in our Consolidated Financial
Statements contained in Item 8 of this Annual Report on Form 10-K.
Statements.
(a)(3) Exhibits
(b)
Exhibits
Item 16.
Form 10-K Summary
None.
WORLD ACCEPTANCE CORPORATION
By: /s/ R. Chad Prashad
R. Chad Prashad
President and Chief Executive Officer
Date: June 1, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
/s/ R. Chad Prashad
R. Chad Prashad
President, Chief Executive Officer and Director
Signing on behalf of the registrant and as principal
executive officer
/s/ John L. Calmes, Jr.
John L. Calmes, Jr.
Executive Vice President and Chief Financial and Strategy
Officer
Signing on behalf of the registrant and as principal financial
officer
Date: June 1, 2023
Date: June 1, 2023
/s/ Scott McIntyre
Scott McIntyre
Senior Vice President of Accounting
Signing on behalf of the registrant and as principal
accounting officer
Date: June 1, 2023
/s/ Ken R. Bramlett, Jr.
Ken R. Bramlett, Jr.
Chairman of the Board of Directors and a Director
/s/ Scott J. Vassalluzzo
Scott J. Vassalluzzo
Director
Date: June 1, 2023
Date: June 1, 2023
/s/ Charles D. Way
Charles D. Way
Director
/s/ Beth Neuhoff
Beth Nuehoff
Director
/s/ Darrell Whitaker
Darrell Whitaker
Director
Date: June 1, 2023
Date: June 1, 2023
/s/ Benjamin Robinson
Benjamin Robinson
Director
Date: June 1, 2023
Date: June 1, 2023
87
BOARD OF DIRECTORS
Ken R. Bramlett Jr.
Private Investor
Elizabeth R. Neuhoff
Retired - President and CEO
Neuhoff Communications
Scott J. Vassalluzzo
Managing Member
Prescott General Partners, LLC
Charles D. Way
Private Investor
R. Chad Prashad
President and Chief Executive Officer
World Acceptance Corporation
Darrell E. Whitaker
President and Chief Operating Officer
IMI Resort Holdings, Inc.
Benjamin E. Robinson, III
Private Investor
CORPORATE OFFICERS
R. Chad Prashad
President and Chief Executive Officer
Katie Deuben
Deputy General Counsel
John L. Calmes, Jr.
Executive Vice President, Chief Financial and
Strategy Officer and Treasurer
D. Clinton Dyer
Executive Vice President,
Chief Branch Operations Officer
Luke J. Umstetter
Senior Vice President, General Counsel,
Chief Compliance Officer and Secretary
Scott McIntyre
Senior Vice President, Accounting
Robert D. Edwards
Vice President, Operations Performance
Brian D. Hoff
Vice President, IT Business Applications
Keith T. Littrell
Vice President, Tax and Assistant Secretary
J. Tobin Turner
Vice President, Strategy and Analytics
Thomas M. Wagner, Jr.
Vice President, Customer Success
A. Lindsay Caulder
Senior Vice President, Human Resources
Rodney D. Ernest
Senior Vice President of Operations
Jason E. Childers
Senior Vice President, Information Technology
Jeff L. Tinney
Senior Vice President of Operations
Jackie C. Willyard
Senior Vice President of Operations
Victoria G. Hammond
Senior Vice President, Marketing
Denise Bice
Vice President, Strategic IT Initiatives
Zachary W. Denton
Vice President, Predictive Analytics
88
Common Stock
Executive Offices
World Acceptance Corporation’s common stock trades on the
Nasdaq Global Select Market under the symbol: WRLD. As of
World Acceptance Corporation
Post Office Box 6429 (29606)
July 5, 2023, there were 23 shareholders of record, and the
104 South Main Street, Suite 400 (29601)
Company believes there are a significant number of persons or
Greenville, South Carolina
entities who hold their stock in nominee or “street” names
(864) 298-9800
Transfer Agent
Equiniti
6201 15th Avenue
Brooklyn, New York 11219
(718) 921-8200
Legal Counsel
Alston & Bird, LLP
The Atlantic Building
950 F Street, NW
Washington, DC 20004-1404
Independent Registered
Public Accounting Firm
RSM US LLP
5444 Wade Park Blvd, Suite 350
Raleigh, NC 27607
Annual Report on Form 10-K
through various brokerage firms. On this date, there were
6,240,497 shares of common stock outstanding.
The table below reflects the stock prices published by Nasdaq
by quarter for the last two fiscal years. The last reported sales
price on July 5, 2023, was $130.08.
Market Price of Common Stock
Fiscal 2023
Quarter
First
Second
Third
Fourth
Quarter
First
Second
Third
Fourth
Fiscal 2022
High
Low
$
209.88
$ 107.96
146.66
108.08
111.99
89.25
58.44
63.75
High
Low
$
175.00
$
123.17
209.00
265.00
243.00
156.92
150.26
162.89
The Company has never paid a dividend on its Common Stock.
The Company presently intends to retain its earnings to
finance the growth and development of its business and does
not expect to pay cash dividends in the foreseeable future. The
Company’s debt agreements also contain certain limitations on
the Company’s ability to pay dividends.
For Further Information
Secretary and General Counsel
World Acceptance Corporation
legal@worldacceptance.com
(864) 298-9800
A copy of the Company’s Annual Report on Form 10-K, as
filed with
the Securities and Exchange Commission
(“SEC”), may be obtained without charge by writing to the
Corporate Secretary at the executive offices of the Company,
or may be viewed at the SEC’s website (SEC.gov). In addition
to the copy contained herein, the Form 10-K can also be
reviewed or downloaded from the Company’s website:
http://www.loansbyworld.com.
Scott J. Vassalluzzo
Managing Member
Prescott General Partners, LLC
Charles D. Way
Private Investor
R. Chad Prashad
President and Chief Executive Officer
World Acceptance Corporation
Darrell E. Whitaker
President and Chief Operating Officer
IMI Resort Holdings, Inc.
BOARD OF DIRECTORS
Ken R. Bramlett Jr.
Private Investor
Elizabeth R. Neuhoff
Retired - President and CEO
Neuhoff Communications
Benjamin E. Robinson, III
Private Investor
CORPORATE OFFICERS
R. Chad Prashad
President and Chief Executive Officer
Katie Deuben
Deputy General Counsel
John L. Calmes, Jr.
Robert D. Edwards
Executive Vice President, Chief Financial and
Vice President, Operations Performance
Strategy Officer and Treasurer
D. Clinton Dyer
Executive Vice President,
Chief Branch Operations Officer
Luke J. Umstetter
Senior Vice President, General Counsel,
Chief Compliance Officer and Secretary
Scott McIntyre
Senior Vice President, Accounting
Brian D. Hoff
Vice President, IT Business Applications
Keith T. Littrell
Vice President, Tax and Assistant Secretary
J. Tobin Turner
Vice President, Strategy and Analytics
Thomas M. Wagner, Jr.
Vice President, Customer Success
A. Lindsay Caulder
Rodney D. Ernest
Senior Vice President, Human Resources
Senior Vice President of Operations
Jason E. Childers
Jeff L. Tinney
Senior Vice President, Information Technology
Senior Vice President of Operations
Jackie C. Willyard
Senior Vice President of Operations
Victoria G. Hammond
Senior Vice President, Marketing
Denise Bice
Vice President, Strategic IT Initiatives
Zachary W. Denton
Vice President, Predictive Analytics
Common Stock
Executive Offices
World Acceptance Corporation’s common stock trades on the
Nasdaq Global Select Market under the symbol: WRLD. As of
July 5, 2023, there were 23 shareholders of record, and the
Company believes there are a significant number of persons or
entities who hold their stock in nominee or “street” names
through various brokerage firms. On this date, there were
6,240,497 shares of common stock outstanding.
The table below reflects the stock prices published by Nasdaq
by quarter for the last two fiscal years. The last reported sales
price on July 5, 2023, was $130.08.
Market Price of Common Stock
Fiscal 2023
Quarter
First
Second
Third
Fourth
Fiscal 2022
Quarter
First
Second
Third
Fourth
High
Low
$
209.88
$ 107.96
146.66
108.08
111.99
89.25
58.44
63.75
High
Low
$
175.00
$
123.17
209.00
265.00
243.00
156.92
150.26
162.89
World Acceptance Corporation
Post Office Box 6429 (29606)
104 South Main Street, Suite 400 (29601)
Greenville, South Carolina
(864) 298-9800
Transfer Agent
Equiniti
6201 15th Avenue
Brooklyn, New York 11219
(718) 921-8200
Legal Counsel
Alston & Bird, LLP
The Atlantic Building
950 F Street, NW
Washington, DC 20004-1404
Independent Registered
Public Accounting Firm
RSM US LLP
5444 Wade Park Blvd, Suite 350
Raleigh, NC 27607
Annual Report on Form 10-K
A copy of the Company’s Annual Report on Form 10-K, as
filed with
the Securities and Exchange Commission
(“SEC”), may be obtained without charge by writing to the
Corporate Secretary at the executive offices of the Company,
or may be viewed at the SEC’s website (SEC.gov). In addition
to the copy contained herein, the Form 10-K can also be
reviewed or downloaded from the Company’s website:
http://www.loansbyworld.com.
The Company has never paid a dividend on its Common Stock.
The Company presently intends to retain its earnings to
finance the growth and development of its business and does
not expect to pay cash dividends in the foreseeable future. The
Company’s debt agreements also contain certain limitations on
the Company’s ability to pay dividends.
For Further Information
Secretary and General Counsel
World Acceptance Corporation
legal@worldacceptance.com
(864) 298-9800
89
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)