WORLD ACCEPTANCE CORP - Quarter Report: 2022 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________________

Form 10-Q

__________________________________

(Mark One)


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

For the quarterly period ended December 31, 2022


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

For the transition period from ______________ to ______________

Commission File Number: 000-19599

WORLD ACCEPTANCE CORPORATION

(Exact name of registrant as specified in its charter.)


South Carolina						57-0425114
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


104 S Main Street
Greenville,	South Carolina	29601
(Address of principal executive offices)
(Zip Code)


(864)			298-9800
(registrant's telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	WRLD	The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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

Large Accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of outstanding shares of the issuer’s common stock, no par value, as of January 30, 2023 was 6,228,609.

WORLD ACCEPTANCE CORPORATION

FORM 10-Q

TABLE OF CONTENTS


Item No.	Contents	Page
	GLOSSARY OF DEFINED TERMS	4

	PART I - FINANCIAL INFORMATION
1.	Consolidated Financial Statements (unaudited):	5
	Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022	5
	Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and December 31, 2021	7

	Consolidated Statements of Shareholders' Equity for the three and nine months ended December 31, 2022 and December 31, 2021	8
	Consolidated Statements of Cash Flows for the nine months ended December 31, 2022 and December 31, 2021	10
	Notes to Consolidated Financial Statements	12
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
3.	Quantitative and Qualitative Disclosures about Market Risk	43
4.	Controls and Procedures	43

	PART II - OTHER INFORMATION
1.	Legal Proceedings	44
1A.	Risk Factors	44
2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
3.	Defaults Upon Senior Securities	44
4.	Mine Safety Disclosures	44
5.	Other Information	44
6.	Exhibits	44

	EXHIBIT INDEX	45

	SIGNATURES	46

Introductory Note: As used herein, the "Company," "we," "our," "us," or similar formulations include World Acceptance Corporation and each of its subsidiaries, unless otherwise expressly noted or the context otherwise requires that it include only World Acceptance Corporation. All references in this report to "fiscal 2023" are to the Company’s fiscal year ending March 31, 2023; all references in this report 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; and all references to "fiscal 2019" are to the Company’s fiscal year ended March 31, 2019.

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GLOSSARY OF DEFINED TERMS

The following terms may be used throughout this Report, including consolidated financial statements and related notes.


Term			Definition
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
CECL			Current Expected Credit Loss
CEO			Chief Executive Officer
CFO			Chief Financial Officer
CFPB			U.S. Consumer Financial Protection Bureau
Compensation Committee			Compensation and Stock Option Committee
Customer Tenure			The number of years since a customer was first serviced by the Company
DOJ			U.S. Department of Justice

ERISA			Employee Retirement Income Security Act
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FICO			The Fair Isaac Corporation
G&A			General and administrative
GAAP			U.S. generally accepted accounting principles
IRS			U.S. Internal Revenue Service
LIBOR			London Interbank Offered Rate
Notes			$300 million in aggregate principal amount of 7.0% unsecured senior notes due 2026
Option Measurement Period			The 6.5 year performance period beginning on September 30, 2018 and ending on March 31, 2025 over which the Performance Options are eligible to vest, following certification by the Compensation Committee of achievement
PCD			Purchased Assets with Credit Deterioration
Performance Options			Performance-based stock options
Performance Share Measurement Period			The 6.5 year performance period beginning on September 30, 2018 and ending on March 31, 2025 over which the Performance Shares are eligible to vest, following certification by the Compensation Committee of achievement
Performance Shares			Service- and performance-based restricted stock awards
Rehab Rate			Percentage of 91 days or more delinquent that do not charge off
Restricted Stock			Service-based restricted stock awards
SEC			U.S. Securities and Exchange Commission
Service Options			Service-based stock options
SOFR			Secured Overnight Finance Rate
SPV			Special Purpose Vehicle
TAL			Tax Advance Loan

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PART I. FINANCIAL INFORMATION

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 31, 2022		March 31, 2022
ASSETS
Cash and cash equivalents	$	20,961,825	$	19,236,322
Gross loans receivable	1,553,984,727		1,522,788,860
Less:
Unearned interest, insurance and fees	(431,297,470)		(403,030,844)
Allowance for credit losses	(144,539,543)		(134,242,862)
Loans receivable, net	978,147,714		985,515,154
Income taxes receivable	2,790,043		—
Operating lease right‐of‐use assets, net	83,437,329		85,631,304
Finance lease right‐of‐use assets, net	—		607,512
Property and equipment, net	24,377,670		24,476,231
Deferred income taxes, net	42,385,118		39,801,457
Other assets, net	41,104,168		35,901,704
Goodwill	7,370,791		7,370,791
Intangible assets, net	16,403,420		19,756,114


Total assets	$	1,216,978,078	$	1,218,296,589

LIABILITIES & SHAREHOLDERS' EQUITY

Liabilities:
Senior notes payable	$	426,490,205	$	396,972,746
Senior unsecured notes payable, net	296,050,414		295,393,991
Income taxes payable	—		7,384,169
Operating lease liability	86,010,194		87,399,049
Finance lease liability	—		80,067
Accounts payable and accrued expenses	48,801,124		58,042,139

Total liabilities	857,351,937		845,272,161

Commitments and contingencies

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 6,228,609 and 6,348,314 shares at December 31, 2022 and March 31, 2022, respectively	—		—
Additional paid-in capital	286,232,769		280,907,085
Retained earnings	73,393,372		92,117,343

Total shareholders' equity	359,626,141		373,024,428

Total liabilities and shareholders' equity	$	1,216,978,078	$	1,218,296,589

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See accompanying notes to consolidated financial statements.

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WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021

Revenues:
Interest and fee income	$	126,201,028	$	128,147,374	$	386,867,966	$	355,435,289
Insurance and other income, net	20,295,432		20,424,437		68,449,330		60,622,784
Total revenues	146,496,460		148,571,811		455,317,296		416,058,073

Expenses:
Provision for credit losses	59,608,655		56,458,533		214,051,068		128,767,870
General and administrative expenses:
Personnel	40,700,713		44,383,906		131,173,726		136,361,580
Occupancy and equipment	12,932,456		12,613,622		39,658,067		39,155,558
Advertising	1,323,671		6,847,777		4,541,863		15,902,321
Amortization of intangible assets	1,114,540		1,275,784		3,352,694		3,736,113
Other	10,367,857		9,108,390		31,749,024		27,413,963
Total general and administrative expenses	66,439,237		74,229,479		210,475,374		222,569,535

Interest expense	14,070,458		10,166,125		38,277,223		22,380,850
Total expenses	140,118,350		140,854,137		462,803,665		373,718,255

Income (loss) before income taxes	6,378,110		7,717,674		(7,486,369)		42,339,818

Income tax expense (benefit)	619,136		390,942		(3,076,486)		6,802,166

Net income (loss)	$	5,758,974	$	7,326,732	$	(4,409,883)	$	35,537,652

Net income (loss) per common share:
Basic	$	1.00	$	1.20	$	(0.77)	$	5.81
Diluted	$	0.98	$	1.14	$	(0.77)	$	5.53
Weighted average common shares outstanding:
Basic	5,761,954		6,118,591		5,743,094		6,119,971
Diluted	5,857,490		6,403,788		5,743,094		6,424,067

See accompanying notes to consolidated financial statements.

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WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


	Three months ended December 31, 2022
	Common Stock
	Shares	Additional Paid-in Capital		Retained Earnings		Total Shareholders' Equity
Balances at September 30, 2022	6,281,721	$	288,947,268	$	67,634,398	$	356,581,666
Proceeds from exercise of stock options, net of cancellations	1,296	82,825		—		82,825
Common stock repurchases	—	—		—		—
Restricted common stock expense under stock option plan, net of cancellations ($2,543,001)	(54,408)	(3,222,444)		—		(3,222,444)
Stock option expense	—	425,120		—		425,120

Net income	—	—		5,758,974		5,758,974
Balances at December 31, 2022	6,228,609	$	286,232,769	$	73,393,372	$	359,626,141


	Three months ended December 31, 2021
	Common Stock
	Shares	Additional Paid-in Capital		Retained Earnings		Total Shareholders' Equity
Balances at September 30, 2021	6,724,140	$	272,572,177	$	146,435,164	$	419,007,341
Proceeds from exercise of stock options	31,981	3,033,142		—		3,033,142
Common stock repurchases	(93,722)	—		(19,347,606)		(19,347,606)
Restricted common stock expense under stock option plan, net of cancellations ($4,922,017)	(25,306)	(1,277,438)		—		(1,277,438)
Stock option expense	—	664,094		—		664,094

Net income	—	—		7,326,732		7,326,732
Balances at December 31, 2021	6,637,093	$	274,991,975	$	134,414,290	$	409,406,265

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	Nine months ended December 31, 2022
	Common Stock
	Shares	Additional Paid-in Capital		Retained Earnings		Total Shareholders' Equity
Balances at March 31, 2022	6,348,314	$	280,907,085	$	92,117,343	$	373,024,428
Proceeds from exercise of stock options, net of cancellations	5,596	486,372		—		486,372
Common stock repurchases	(73,643)	—		(14,314,088)		(14,314,088)
Restricted common stock expense under stock option plan, net of cancellations ($2,543,001)	(51,658)	2,969,433		—		2,969,433
Stock option expense	—	1,869,879		—		1,869,879

Net loss	—	—		(4,409,883)		(4,409,883)
Balances at December 31, 2022	6,228,609	$	286,232,769	$	73,393,372	$	359,626,141



	Nine months ended December 31, 2021
	Common Stock
	Shares	Additional Paid-in Capital		Retained Earnings		Total Shareholders' Equity
Balances at March 31, 2021	6,805,294	$	255,590,674	$	149,336,767	$	404,927,441
Proceeds from exercise of stock options	143,103	11,715,720		—		11,715,720
Common stock repurchases	(289,158)	—		(50,460,129)		(50,460,129)
Restricted common stock expense under stock option plan, net of cancellations ($5,072,230)	(22,146)	5,168,510		—		5,168,510
Stock option expense	—	2,517,071		—		2,517,071



Net income	—	—		35,537,652		35,537,652
Balances at December 31, 2021	6,637,093	$	274,991,975	$	134,414,290	$	409,406,265

See accompanying notes to consolidated financial statements.

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WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended December 31,
	2022		2021
Cash flow from operating activities:
Net income (loss)	$	(4,409,883)	$	35,537,652
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Loss on assets held for sale	—		38,633
Amortization of intangible assets	3,352,694		3,736,113
Amortization of historic tax credits	4,570,599		2,950,970
Accrued unearned interest	(2,253,757)		(15,537,322)
Amortization of deferred loan cost	12,187,196		11,892,564
Amortization of debt issuance costs	1,170,040		698,667
Provision for credit losses	214,051,068		128,767,870
Depreciation	4,648,277		4,721,570
Amortization of finance leases	204,552		305,718
Gain on asset acquisition, net of income tax	(3,708,344)		—

Loss on sale of property and equipment	21,261		368,589
Deferred income tax benefit	(3,665,493)		(9,815,411)
Compensation related to stock option and restricted stock plans, net of taxes and adjustments	7,382,313		12,757,811


Change in accounts:
Other assets, net	(8,261,768)		(9,058,328)
Income taxes payable/ receivable	(10,174,212)		(9,984,485)
Accounts payable and accrued expenses	(9,241,015)		10,026,683
Net cash provided by operating activities	205,873,528		167,407,294
Cash flows from investing activities:
Increase in loans receivable, net	(189,511,989)		(421,230,379)

Cash paid for acquisitions, primarily loans	(22,314,902)		(10,857,067)

Purchases of property and equipment	(4,517,809)		(4,480,906)

Proceeds from sale of assets held for sale	—		1,104,895
Proceeds from sale of property and equipment	349,792		186,145

Net cash used in investing activities	(215,994,908)		(435,277,312)
Cash flow from financing activities:
Borrowings from senior notes payable	251,431,701		407,216,540
Payments on senior notes payable	(221,914,242)		(387,050,000)
Issuance of senior unsecured notes payable	—		300,000,000
Debt issuance costs associated with senior unsecured notes payable	(104,656)		(5,119,649)
Debt issuance costs associated with senior notes payable	(1,115,136)		—
Proceeds from exercise of stock options	486,372		11,715,720
Payments for taxes related to net share settlement of equity awards	(2,543,001)		(5,072,230)
Repayment of finance lease	(80,067)		(439,048)
Repurchase of common stock	(14,314,088)		(50,460,130)


Net cash provided by financing activities	11,846,883		270,791,203

Net change in cash and cash equivalents	1,725,503		2,921,185
Cash and cash equivalents at beginning of period	19,236,322		15,746,454

Cash and cash equivalents at end of period	$	20,961,825	$	18,667,639

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Supplemental Disclosures:
Interest paid during the period	$	42,834,034	$	16,020,205
Income taxes paid during the period	$	10,772,869	$	26,884,025
Finance lease right-of-use assets, net transferred to property and equipment, net	$	402,960	$	—

See accompanying notes to consolidated financial statements.

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WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements of the Company at December 31, 2022 and for the three and nine months then ended were prepared in accordance with the instructions for Form 10-Q and are unaudited; however, in the opinion of management all adjustments (consisting only of items of a normal, recurring nature) necessary for a fair presentation of the financial position at December 31, 2022, and the results of operations and cash flows for the periods ended December 31, 2022 and 2021, have been included. The results for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

The preparation of consolidated 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 consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The consolidated financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended March 31, 2022, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, as filed with the SEC. The Company applies the accounting policies contained in Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended March 31, 2022. The Company believes that the disclosures are adequate to make the information presented not misleading.

NOTE 2 – 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. During the second quarter of fiscal 2022, the Company completed the sale of the last held for sale building, and recorded a $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 December 31, 2022 and March 31, 2022, there were no assets held for sale.

NOTE 3 – SUMMARY OF SIGNIFICANT POLICIES

Nature of Operations

The Company is a small-loan consumer finance 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. The Company offers income tax return preparation services to its loan customers and other individuals.

Seasonality

The Company's loan volume and corresponding loans receivable follow seasonal trends. The Company's highest loan demand generally occurs 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. Loan volume and average balances remain relatively level during the remainder of the year. 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.

Loans receivable, net

Loans receivable 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. 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 income at the time that loans are refinanced or paid in full except for those

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refinancings that do not constitute a more than minor modification. Net unamortized deferred origination fees and costs were $5.6 million and $6.9 million as of December 31, 2022 and March 31, 2022, respectively.

From time to time, the Company may sell charged off loans receivable, which are accounted for as a sale in accordance with ASC 860, Transfers and Servicing.

Allowance for credit losses

Refer to Note 5, “Loans Receivable and Allowance for Credit Losses,” for information regarding the Company's CECL allowance model and a description of the methodology it utilizes.

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.

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.

NOTE 4 – FAIR VALUE

Fair Value Disclosures

The Company may carry certain financial instruments and derivative assets and liabilities at fair value measured on a recurring or nonrecurring basis. 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 measures 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.

The Company’s financial instruments consist of cash and cash equivalents, loans receivable, net, senior notes payable, and senior unsecured notes payable. Loans receivable are originated at prevailing market rates and have an average life of approximately 8 months. Given the short-term nature of these loans, they are continually repriced at current market rates. The

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Company’s revolving credit facility 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 considers its creditworthiness in its estimation 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.


		December 31, 2022				March 31, 2022
	Input Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
ASSETS
Cash and cash equivalents	1	$	20,961,825	$	20,961,825	$	19,236,322	$	19,236,322
Loans receivable, net	3	978,147,714		978,147,714		985,515,154		985,515,154

LIABILITIES
Senior unsecured notes payable	2	300,000,000		169,959,000		300,000,000		264,639,000
Senior notes payable	3	426,490,205		426,490,205		396,972,746		396,972,746

There were no other significant assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2022 or March 31, 2022.

NOTE 5 – LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The following is a summary of gross loans receivable by Customer Tenure as of:


Customer Tenure	December 31, 2022		March 31, 2022
0 to 5 months	$	110,657,069	$	198,740,475
6 to 17 months	162,246,317		133,665,566
18 to 35 months	155,283,336		204,940,323
36 to 59 months	259,585,830		208,936,027
60+ months	866,191,770		770,683,149

Tax advance loans	20,405		5,823,320
Total gross loans	$	1,553,984,727	$	1,522,788,860

Current payment performance is used to assess the capability of the borrower to repay contractual obligations of the loan agreements as scheduled, which 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 following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a recency basis and year of origination at December 31, 2022:

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	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	$	1,315,496,157	$	62,868,377	$	2,458,233	$	168,195	$	14,977	$	9,377	$	1,381,015,316
30 - 60 days past due	51,922,222		6,178,714		256,692		56,562		19,357		1,314		58,434,861
61 - 90 days past due	35,259,645		3,682,972		175,892		45,534		1,175		—		39,165,218
91 or more days past due	66,796,641		8,345,331		182,449		17,029		5,211		2,266		75,348,927
Total	$	1,469,474,665	$	81,075,394	$	3,073,266	$	287,320	$	40,720	$	12,957	$	1,553,964,322

	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 5 Years Ago		Total
Current	$	—	$	—	$	—	$	—	$	—	$	—	$	—
30 - 60 days past due	—		—		—		—		—		—		—
61 - 90 days past due	—		—		—		—		—		—		—
91 or more days past due	20,280		125		—		—		—		—		20,405
Total	$	20,280	$	125	$	—	$	—	$	—	$	—	$	20,405
Total gross loans													$	1,553,984,727

The following table provides 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:

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	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	$	1,322,332,136	$	34,273,199	$	2,665,078	$	152,105	$	21,539	$	3,972	$	1,359,448,029
30 - 60 days past due	49,517,859		2,114,463		247,291		28,011		2,664		—		51,910,288
61 - 90 days past due	36,707,960		989,136		130,763		13,031		5,594		—		37,846,484
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
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 5 Years Ago		Total
Current	$	4,737,741	$	7,033	$	—	$	—	$	—	$	—	$	4,744,774
30 - 60 days past due	1,060,811		1,334		—		—		—		—		1,062,145
61 - 90 days past due	—		432		—		—		—		—		432
91 or more days past due	2,922		13,047		—		—		—		—		15,969
Total	$	5,801,474	$	21,846	$	—	$	—	$	—	$	—	$	5,823,320
Total gross loans													$	1,522,788,860

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 December 31, 2022:

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	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	$	1,296,198,737	$	55,931,922	$	2,010,305	$	69,180	$	4,343	$	1,511	$	1,354,215,998
30 - 60 days past due	52,162,519		3,578,939		86,368		8,801		—		—		55,836,627
61 - 90 days past due	39,792,091		3,560,584		91,067		3,929		—		—		43,447,671
91 or more days past due	81,321,318		18,003,948		885,526		205,410		36,378		11,446		100,464,026
Total	$	1,469,474,665	$	81,075,393	$	3,073,266	$	287,320	$	40,721	$	12,957	$	1,553,964,322

	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 5 Years Ago		Total
Current	$	—	$	—	$	—	$	—	$	—	$	—	$	—
30 - 60 days past due	—		—		—		—		—		—		—
61 - 90 days past due	—		—		—		—		—		—		—
91 or more days past due	20,280		125		—		—		—		—		20,405
Total	$	20,280	$	125	$	—	$	—	$	—	$	—	$	20,405
Total gross loans													$	1,553,984,727

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:

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	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	$	1,290,448,366	$	29,913,995	$	1,994,474	$	68,836	$	9,586	$	699	$	1,322,435,956
30 - 60 days past due	57,225,953		1,508,794		91,118		5,519		—		—		58,831,384
61 - 90 days past due	45,276,797		1,271,187		96,233		986		—		—		46,645,203
91 or more days past due	79,845,465		7,922,574		1,109,903		142,183		25,598		7,274		89,052,997
Total	$	1,472,796,581	$	40,616,550	$	3,291,728	$	217,524	$	35,184	$	7,973	$	1,516,965,540

	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 5 Years Ago		Total
Current	$	4,737,741	$	—	$	—	$	—	$	—	$	—	$	4,737,741
30 - 60 days past due	1,060,329		—		—		—		—		—		1,060,329
61 - 90 days past due	—		—		—		—		—		—		—
91 or more days past due	3,404		21,846		—		—		—		—		25,250
Total	$	5,801,474	$	21,846	$	—	$	—	$	—	$	—	$	5,823,320
Total gross loans													$	1,522,788,860

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.

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 looked 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 uses 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

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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-day delinquencies, FICO scores and average loan size as compared to metrics in the historical migration period. Due to the short term nature of the loan portfolio, forecasted changes in macroeconomic 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. Additionally, changes to the Company's customer underwriting guidelines are considered to forecast credit losses. 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 table presents a roll forward of the allowance for credit losses for the three and nine months ended December 31, 2022 and 2021:


	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021
Beginning balance	$	155,892,100	$	114,660,240	$	134,242,862	$	91,722,288

Provision for credit losses	59,608,655		56,458,533		214,051,068		128,767,870
Charge-offs	(86,382,882)		(42,359,511)		(228,732,404)		(102,226,061)
Recoveries1	15,421,670		4,521,934		24,978,017		15,017,099
Net charge-offs	(70,961,212)		(37,837,577)		(203,754,387)		(87,208,962)
Ending Balance	$	144,539,543	$	133,281,196	$	144,539,543	$	133,281,196

The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at December 31, 2022:


			Days Past Due - Recency Basis
Customer Tenure	Current		30 - 60		61 - 90		Over 90		Total Past Due		Total Loans
0 to 5 months	$	82,998,807	$	7,076,046	$	5,952,005	$	14,630,210	$	27,658,261	$	110,657,068
6 to 17 months	134,510,770		8,584,660		6,300,110		12,850,778		27,735,548		162,246,318
18 to 35 months	131,660,006		7,375,720		5,497,643		10,749,967		23,623,330		155,283,336
36 to 59 months	233,507,760		9,554,628		6,062,913		10,460,529		26,078,070		259,585,830
60+ months	798,337,974		25,843,806		15,352,549		26,657,441		67,853,796		866,191,770

Tax advance loans	—		—		—		20,405		20,405		20,405
Total gross loans	1,381,015,317		58,434,860		39,165,220		75,369,330		172,969,410		1,553,984,727
Unearned interest, insurance and fees	(383,291,034)		(16,218,182)		(10,870,030)		(20,918,224)		(48,006,436)		(431,297,470)
Total net loans	$	997,724,283	$	42,216,678	$	28,295,190	$	54,451,106	$	124,962,974	$	1,122,687,257

Percentage of period-end gross loans receivable			3.8%		2.5%		4.9%		11.1%

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:

1 Recoveries during the three and nine months ended December 31, 2022 include $11.4 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 $3 million relates to recurring sales of charge-offs during the three months ended December 31, 2022. This gain on sale is included as a component of Provision for credit losses in the Consolidated Statements of Operations.

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			Days Past Due - Recency Basis
Customer Tenure	Current		30 - 60			61 - 90			Over 90			Total Past Due			Total Loans
0 to 5 months	$	145,168,588	$	13,450,365		$	14,196,717		$	25,924,805		$	53,571,887		$	198,740,475
6 to 17 months	116,065,794		5,548,699			4,148,743			7,902,330			17,599,772			133,665,566
18 to 35 months	183,697,553		7,220,814			4,903,686			9,118,270			21,242,770			204,940,323
36 to 59 months	193,820,229		5,951,049			3,452,087			5,712,662			15,115,798			208,936,027
60+ months	720,695,865		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		%

The following table is an aging analysis on a contractual basis at amortized cost of the Company’s gross loans receivable at December 31, 2022:


			Days Past Due - Contractual Basis
Customer Tenure	Current		30 - 60		61 - 90		Over 90		Total Past Due			Total Loans
0 to 5 months	$	80,387,487	$	6,499,221	$	6,107,020	$	17,663,341	$	30,269,582		$	110,657,069
6 to 17 months	131,366,771		8,013,659		6,864,901		16,000,987		30,879,547			162,246,318
18 to 35 months	128,007,181		6,759,902		5,969,417		14,546,835		27,276,154			155,283,335
36 to 59 months	229,416,636		9,123,648		6,838,567		14,206,979		30,169,194			259,585,830
60+ months	785,037,923		25,440,198		17,667,766		38,045,883		81,153,847			866,191,770

Tax advance loans	—		—		—		20,405		20,405			20,405
Total gross loans	1,354,215,998		55,836,628		43,447,671		100,484,430		199,768,729			1,553,984,727
Unearned interest, insurance and fees	(375,853,072)		(15,497,061)		(12,058,594)		(27,888,743)		(55,444,398)			(431,297,470)
Total net loans	$	978,362,926	$	40,339,567	$	31,389,077	$	72,595,687	$	144,324,331		$	1,122,687,257

Percentage of period-end gross loans receivable			3.6%		2.8%		6.5%		12.9		%

The following table is an aging analysis on a contractual basis at amortized cost of the Company’s gross loans receivable at March 31, 2022:

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			Days Past Due - Contractual Basis
Customer Tenure	Current		30 - 60			61 - 90			Over 90			Total Past Due			Total Loans
0 to 5 months	$	140,570,461	$	14,090,712		$	15,380,836		$	28,698,466		$	58,170,014		$	198,740,475
6 to 17 months	112,465,841		6,032,347			4,922,939			10,244,439			21,199,725			133,665,566
18 to 35 months	177,565,328		8,067,815			6,273,351			13,033,829			27,374,995			204,940,323
36 to 59 months	188,849,569		6,994,891			4,624,136			8,467,431			20,086,458			208,936,027
60+ months	702,984,756		23,645,619			15,443,941			28,608,833			67,698,393			770,683,149

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		%

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 revenue 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 three months ended December 31, 2022 and December 31, 2021, the Company reversed a total of $9.4 million and $9.7 million, respectively, of unpaid accrued interest against interest income. During the nine months ended December 31, 2022 and December 31, 2021, the Company reversed a total of $29.9 million and $20.3 million, respectively, of unpaid accrued interest against interest income.

The following table presents the amortized cost basis of loans on nonaccrual status as of the beginning of the reporting period and the end of the reporting period, as well as year-to-date interest income recognized on nonaccrual loans for the three and nine months ended December 31, 2022 and 2021:


	Nonaccrual Loans Receivable
Customer Tenure	As of December 31, 2022		As of March 31, 2022		Interest Income Recognized for the three months ended December 31, 2022		Interest Income Recognized for the three months ended December 31, 2021		Interest Income Recognized for the nine months ended December 31, 2022		Interest Income Recognized for the nine months ended December 31, 2021
0 to 5 months	$	24,968,705	$	45,227,510	$	480,947	$	293,649	$	1,522,535	$	858,871
6 to 17 months	23,995,420		15,879,250		450,877		325,759		1,216,091		1,151,316
18 to 35 months	21,946,855		20,745,106		544,689		504,974		1,741,780		1,414,201
36 to 59 months	22,662,926		14,232,388		555,085		325,291		1,575,766		978,378
60+ months	60,891,846		47,565,819		1,711,201		1,193,860		5,006,238		3,782,122

Tax advance loans	144,466		25,249		—		—		—		—
Unearned interest, insurance and fees	(42,910,972)		(38,026,011)		—		—		—		—
Total	$	111,699,246	$	105,649,311	$	3,742,799	$	2,643,533	$	11,062,410	$	8,184,888

As of December 31, 2022 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.

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NOTE 6 – LEASES

Accounting Policies and Matters Requiring Management's Judgment

The Company uses its effective annual interest rate, adjusted for certain assumptions, as the discount rate when evaluating leases under Topic 842. Management applies the adjusted effective annual interest rate to leases entered for the entirety of the subsequent year.

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 generally 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.

The Company's finance leases consist of IT equipment which have a three year lease term and do not contain an option to extend the lease term, but do contain an option to purchase the IT equipment at the expiration of the lease term. 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 have amortized over the useful life of the asset, rather than over the lease term.

The following table reports information about the Company's lease cost for the three and nine months ended December 31, 2022 and 2021:


	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021
Lease Cost
Finance lease cost	$	—	$	105,639	$	205,975	$	323,880
Amortization of right-of-use assets	—		101,906		204,552		305,718
Interest on lease liabilities	—		3,733		1,423		18,162
Operating lease cost	$	6,746,965	$	6,723,789	$	21,013,997	$	20,421,780

Variable lease cost	$	920,991	$	904,015	$	2,772,620	$	2,690,848

Total lease cost	$	7,667,956	$	7,733,443	$	23,992,592	$	23,436,508

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The following table reports other information about the Company's leases for the three and nine months ended December 31, 2022 and 2021:


	Three months ended December 31,						Nine months ended December 31,
	2022			2021			2022			2021
Other Lease Information
Cash paid for amounts included in the measurement of lease liabilities	$	6,550,184		$	6,825,474		$	19,998,398		$	20,796,373
Operating cash flows from finance leases	—			3,733			1,423			18,162
Operating cash flows from operating leases	6,550,184			6,684,414			19,916,908			20,339,163
Financing cash flows from finance leases	—			137,327			80,067			439,048
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	—		$	—		$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,447,091		$	2,763,875		$	13,912,470		$	11,840,569
Weighted-average remaining lease term — finance leases	—			0.5 years			—			0.5 years
Weighted average remaining lease term — operating leases	7.1 years			7.1 years			7.1 years			7.1 years
Weighted-average discount rate — finance leases	—		%	6.1		%	—		%	6.1		%
Weighted-average discount rate — operating leases	6.1		%	6.1		%	6.1		%	6.1		%

The aggregate annual lease obligations as of December 31, 2022, are as follows:


	Operating

Remainder of 2023	$	6,357,453
2024	22,784,456
2025	18,108,324
2026	14,629,113
2027	10,545,420
Thereafter	35,219,893
Total undiscounted lease liability	$	107,644,659
Imputed interest	21,634,465
Total discounted lease liability	$	86,010,194

The Company had no finance lease obligations at December 31, 2022. The Company had no leases with related parties at December 31, 2022 or March 31, 2022.

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NOTE 7 – AVERAGE SHARE INFORMATION

The following is a summary of the basic and diluted average common shares outstanding:


	Three months ended December 31,		Nine months ended December 31,
	2022	2021	2022	2021
Basic:
Weighted average common shares outstanding (denominator)	5,761,954	6,118,591	5,743,094	6,119,971

Diluted:
Weighted average common shares outstanding	5,761,954	6,118,591	5,743,094	6,119,971
Dilutive potential common shares2	95,536	285,197	—	304,096
Weighted average diluted shares outstanding (denominator)	5,857,490	6,403,788	5,743,094	6,424,067

Options to purchase 332,275 and 376,307 shares of common stock at various prices were outstanding during the three months ended December 31, 2022 and 2021 respectively, but were not included in diluted shares outstanding because the option exercise price exceeded the market value of the shares.

Options to purchase 338,154 and 431,858 shares of common stock at various prices were outstanding during the nine months ended December 31, 2022 and 2021 respectively, but were not included in diluted shares outstanding because the option exercise price exceeded the market value of the shares.

2 Dilutive potential common shares have been excluded from the weighted average diluted shares outstanding calculation for the nine months ended December 31, 2022. In accordance with ASC 260-10-45, shares which would otherwise be considered dilutive are deemed anti-dilutive when the entity incurs a loss from continuing operations in the period reported.

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NOTE 8 – STOCK-BASED COMPENSATION

Stock Incentive Plans

The Company maintains a 2008 Stock Option Plan, a 2011 Stock Option Plan and a 2017 Stock Incentive Plan for the benefit of certain non-employee 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 term of 10 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 December 31, 2022, there were a total of 144,629 shares of common stock remaining 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 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, in fiscal 2019, 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 of the Company’s non-employee directors.

Under the long-term incentive program, up to 100% of the shares of restricted stock subject to the Performance Shares will 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).

The Performance Share performance targets are set forth below.


Trailing 4-Quarter EPS Targets for September 30, 2018 through March 31, 2025			Restricted Stock Eligible for Vesting (Percentage of Award)
$16.35			40%
$20.45			60%

The Restricted Stock awards 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 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 have a 10-year term.

The Performance Options will 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 described below. Such performance target was established by the Compensation Committee and will be measured at the end of each calendar quarter commencing on

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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 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			Options Eligible for Vesting (Percentage of Award)
$25.30			100%

Stock Options

The weighted-average fair value at the grant date for options issued during the three months ended December 31, 2022 and 2021 was $44.23 and $101.73, respectively. The weighted-average fair value at the grant date for options issued during the nine months ended December 31, 2022 and 2021 was $53.51 and $97.65, respectively.

Fair value was estimated at grant date using the weighted-average assumptions listed below:


	Three months ended December 31,		Nine months ended December 31,
	2022	2021	2022	2021

Dividend Yield	—%	—%	—%	—%
Expected Volatility	57.46%	55.71%	57.09%	58.11%
Average risk-free rate	3.91%	1.22%	3.59%	0.92%
Expected Life	5.8 years	6.0 years	5.8 years	6.1 years

The expected stock price volatility is based on the historical volatility of the Company's common 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.

Option activity for the nine months ended December 31, 2022 was as follows:


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value

Options outstanding, beginning of period	348,743		$	104.38
Granted during period	15,090		96.15
Exercised during period	(6,550)		84.67
Forfeited during period	(20,636)		119.94
Expired during period	(12,372)		77.78
Options outstanding, end of period	324,275	3	$	104.42	5.9 years	$	262,799
Options exercisable, end of period	122,853		$	100.21	5.0 years	$	233,927

The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on December 31, 2022 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 December 31, 2022. This amount will change as the market price of the common stock changes. The total intrinsic value of options exercised during the periods ended December 31, 2022 and 2021 was as follows:

3 Of the 324,275 options outstanding, 88,248 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.

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	December 31, 2022		December 31, 2021

Three months ended	$	51,106	$	4,529,120
Nine months ended	$	481,572	$	16,070,389

As of December 31, 2022, total unrecognized stock-based compensation expense related to non-vested stock options amounted to approximately $3.6 million, which is expected to be recognized over a weighted-average period of approximately 2.0 years.

Restricted Stock

During the nine months of fiscal 2023, the Company granted 2,750 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 $138.76 per share.

During fiscal 2022, the Company granted 4,062 shares of restricted stock (which are equity classified) to certain vice presidents with a grant date weighted average fair value of $188.38 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 benefit of $0.7 million and compensation expense of $3.6 million for the three months ended December 31, 2022 and 2021, respectively, which is included as a component of general and administrative expenses in the Company’s Consolidated Statements of Operations. The Company recognized compensation expense of $5.5 million and $10.2 million for the nine months ended December 31, 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 December 31, 2022, there was approximately $5.4 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over the next 1.6 years based on current estimates.

A summary of the status of the Company’s restricted stock as of December 31, 2022, and changes during the nine months ended December 31, 2022, are presented below:


	Shares	Weighted Average Fair Value at Grant Date

Outstanding at March 31, 2022	552,502	$	102.51
Granted during the period	2,750	138.76
Vested during the period	(65,518)	104.13
Forfeited during the period	(29,620)	112.70
Outstanding at December 31, 2022	460,114	$	101.84

Total Stock-Based Compensation

Total stock-based compensation included as a component of net income (loss) during the three and nine month periods ended December 31, 2022 and 2021 was as follows:

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	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021
Stock-based compensation related to equity classified awards:
Stock-based compensation related to stock options	$	425,120	$	664,094	$	1,869,879	$	2,517,071
Stock-based compensation related to restricted stock, net of adjustments and exclusive of cancellations4	(679,443)		3,644,579		5,512,434		10,240,740
Total stock-based compensation related to equity classified awards	$	(254,323)	$	4,308,673	$	7,382,313	$	12,757,811

NOTE 9 – 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 asset purchases.

The following table sets forth the Company's acquisition activity for the nine months ended December 31, 2022 and 2021.


	Nine months ended December 31,
	2022		2021
Acquisitions:

Number of loan portfolios acquired through asset purchases	43		50
Total acquisitions	43		50

Purchase price	$	22,314,902	$	10,859,984

Tangible assets:
Loans receivable, net	27,105,078		9,631,112



Purchase price amount over (below) carrying value of net tangible assets5	$	(4,790,176)	$	1,228,872

Customer lists	$	—	$	952,872
Non-compete agreements	$	—	$	276,000

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 market 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 market 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.

4 The $(679,443) for the three months ended December 31, 2022 represents $2.8 million in forfeiture credit, offset by $2.1 million in current period expense.

5 As a result of the asset purchases during the first and second quarters of fiscal 2023, the Company recorded a $4.8 million gain, net of $1.1 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.

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Acquired loans are valued at the net loan balance. Given the short-term nature of these loans, generally 8 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 their fair value.

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 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.

The estimated 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.

NOTE 10 – DEBT

Senior Notes Payable; Revolving Credit Facility

At December 31, 2022, the Company had a $685.0 million senior revolving credit facility. The revolving credit facility was amended in connection with the Company’s Notes offering (described below) on September 27, 2021 to permit the issuance of the Notes described below and increase the amount of permitted borrowings under the accordion feature from $685.0 million to $785.0 million. On November 23, 2022, the revolving credit agreement was amended (the "Ninth Amendment") to, among other things, (1) change the required ratio for net income available for fixed charges to fixed charges to 1.25 to 1.0 for the fiscal quarter ending 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 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 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; (2) change the ratio of total debt to consolidated adjusted net worth to 2.5 to 1.0 for the fiscal quarter ending December 31, 2022, 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, and 2.5 to 1.0 for each fiscal quarter thereafter; (3) require a collateral performance indicator of less than or equal to 28% for the calendar months ending October 31, 2022 through June 30, 2023 and 26% thereafter; and (4) decrease the advance rate to as low as 62% from 74% for the calendar months ending October 31, 2022 through June 30, 2023.

At December 31, 2022, $426.5 million was outstanding under the Company's credit facility, not including a $300.0 thousand outstanding standby letter of credit related to workers compensation under a $1.5 million sub-facility. 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 December 31, 2022. The letter of credit expired on December 31, 2021; 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 .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 $0.9 million and $1.0 million for the nine months ended December 31, 2022 and 2021, respectively.

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For the nine months ended December 31, 2022 and fiscal year ended March 31, 2022, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 6.8% annualized and 5.5%, respectively, and the unused amount available under the revolving credit facility at December 31, 2022 was $258.2 million. Borrowings under the revolving credit facility mature on June 7, 2024.

Substantially all of the Company’s assets are pledged as collateral for borrowings under the revolving credit agreement.

Senior Unsecured Notes Payable

On September 27, 2021, we issued $300.0 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.

Debt Covenants

The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including covenants that generally 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 also contains financial covenants, including (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 as further discussed below; (iii) a maximum collateral performance indicator as further discussed below; and (iv) a minimum fixed charges coverage ratio as further discussed below.

As discussed above, on November 23, 2022, the Company entered into the Ninth Amendment to, among other things, (1) change the required ratio for net income available for fixed charges to fixed charges to 1.25 to 1.0 for the fiscal quarter ending 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 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 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; (2) change the ratio of total debt to consolidated adjusted net worth to 2.5 to 1.0 for the fiscal quarter ending December 31, 2022, 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, and 2.5 to 1.0 for each fiscal quarter thereafter; (3) require a collateral performance indicator of less than or equal to 28% for the calendar months ending October 31, 2022 through June 30, 2023 and 26% thereafter; and (4) decrease the advance rate to as low as 62% from 74% for the calendar months ending October 31, 2022 through June 30, 2023.

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 December 31, 2022 and does not believe that these covenants will materially limit its business and expansion strategy.

The revolving credit agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default and cross-acceleration to other debt, bankruptcy and

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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 finance 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. If it is determined that a violation of any applicable law has occurred, such violation may give rise to an event of default under our credit agreement if such violation were to result in a material adverse change on our business, operations, results of operations, assets, liabilities, or condition (financial or otherwise), or a material impairment of the Company’s and the subsidiaries’ ability to perform their obligations under the agreement or related documents, or if the amount of any settlement, penalties, fines, or other payments resulted in the Company failing to satisfy any financial covenants.

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

The aggregate annual maturities of the Company's debt arrangements as of December 31, 2022 are as follows:


Remainder of 2023	$	—
2024	—
2025	426,490,205
2026	—
2027	300,000,000
Total future debt payments	$	726,490,205

NOTE 11 – INCOME TAXES

As of December 31, 2022 and March 31, 2022, the Company had $1.1 million and $2.2 million, respectively, of total gross unrecognized tax benefits including interest. Approximately $0.8 million and $2.0 million, respectively, represent the amount of net unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate. At December 31, 2022, approximately $0.5 million of gross unrecognized tax benefits are expected to be resolved during the next twelve months through the expiration of the statute of limitations and settlement with taxing authorities. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2022, the Company had approximately $271.5 thousand accrued for gross interest and reversed $284.0 thousand during the nine months ended December 31, 2022.

The Company is subject to U.S. income taxes, as well as taxes in 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.

The Company’s effective income tax rate totaled 9.7% for the quarter ended December 31, 2022 compared to 5.1% for the prior year quarter. The increase is primarily due to the permanent benefit related to non-qualified stock option exercises and vesting of restricted stock as discrete items in the prior year quarter. This was partially offset by the effects of pretax book earnings relative to the effects of various permanent items including a decrease in the disallowed executive compensation under Section 162(m) and the recognition of additional Federal Historic Tax Credits when compared to the prior year quarter.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Derivative Litigation

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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.

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. However, in light of the inherent uncertainties involved, 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.

NOTE 13 – 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Information

This report on Form 10-Q, including "Management’s Discussion and Analysis of Financial Condition and Results of Operations," 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 those identified by words such as “anticipate,” “estimate,” “intend,” “plan,” “expect,” “believe,” “may,” “will,” “should,” "would," "could," "continue," "forecast," and any variation of the foregoing and similar expressions are forward-looking statements. Although the Company believes that the expectations reflected in any such forward-looking statements are reasonable, it 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, the Company’s actual financial results, performance or financial condition may vary materially from those anticipated, estimated or expected. Therefore, you should not rely on any of these forward-looking statements.

Among the key factors that could cause our actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements are the following: the ongoing impact of the COVID-19 pandemic and the mitigation efforts by governments and related effects on our financial condition, business operations and liquidity, our customers, our employees, and the overall economy; recently enacted, proposed or future legislation and the manner in which it is implemented; changes in the U.S. tax code; the nature and scope of regulatory authority, particularly discretionary authority, that may be exercised by regulators, including, but not limited to, the Securities and Exchange Commission (SEC), Department of Justice, U.S. Consumer Financial Protection Bureau, and individual state regulators having jurisdiction over the Company; the unpredictable nature of regulatory proceedings and litigation, employee misconduct or misconduct by third parties, uncertainties associated with management turnover and the effective succession of senior management; media and public characterization of consumer installment loans, labor unrest the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company’s reported consolidated financial statements or necessitate material delays or changes in the issuance of the Company’s audited consolidated financial statements; the Company's assessment of its internal control over financial reporting; changes in interest rates; the impact of inflation; risks relating to the acquisition or sale of assets or businesses or other strategic initiatives, including increased loan delinquencies or net charge-offs, the loss of key personnel, integration or migration issues, the failure to achieve anticipated synergies, increased costs of servicing, incomplete records, and retention of customers; risks inherent in making loans, including repayment risks and value of collateral; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; our dependence on debt and the potential impact of limitations in the Company’s amended revolving credit facility or other impacts on the Company's ability to borrow money on favorable terms, or at all; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquency and charge-offs); the impact of extreme weather events and natural disasters; changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company). These and other risks are discussed in more detail in Part I, Item 1A “Risk Factors” in the Company's most recent annual report on Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC, and in the Company’s other reports filed with, or furnished to, the SEC from time to time. The Company does not undertake any obligation to update any forward-looking statements it may make.

Results of Operations

The following table sets forth certain information derived from the Company's consolidated statements of operations and balance sheets (unaudited), as well as operating data and ratios, for the periods indicated:

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	Three months ended December 31,						Nine months ended December 31,
	2022			2021			2022			2021
	(Dollars in thousands)
Gross loans receivable	$	1,553,985		$	1,606,111		$	1,553,985		$	1,606,111
Average gross loans receivable (1)	1,562,199			1,493,234			1,585,306			1,319,026
Net loans receivable (2)	1,122,687			1,172,679			1,122,687			1,172,679
Average net loans receivable (3)	1,131,636			1,094,014			1,153,443			970,992

Expenses as a percentage of total revenue:
Provision for credit losses	40.7		%	38.0		%	47.0		%	30.9		%
General and administrative	45.4		%	50.0		%	46.2		%	53.5		%
Interest expense	9.6		%	6.8		%	8.4		%	5.4		%
Operating income as a % of total revenue (4)	14.0		%	12.0		%	6.8		%	15.6		%

Loan volume (5)	787,775			976,118			2,476,631			2,531,815

Net charge-offs as percent of average net loans receivable on an annualized basis	25.1		%	13.8		%	23.6		%	12.0		%

Return on average assets (trailing 12 months)	1.1		%	7.4		%	1.1		%	7.4		%

Return on average equity (trailing 12 months)	3.8		%	20.1		%	3.8		%	20.1		%

Branches opened or acquired (merged or closed), net	(20)			—			(83)			(3)

Branches open (at period end)	1,084			1,202			1,084			1,202

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(1) Average gross loans receivable has 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 has 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.

Comparison of three months ended December 31, 2022 versus three months ended December 31, 2021

Gross loans outstanding increased to $1.55 billion as of December 31, 2022, a 3.2% decrease from the $1.61 billion of gross loans outstanding as of December 31, 2021. During the three months ended December 31, 2022 our unique borrowers decreased by 4.9% compared to an increase of 7.7% during the three months ended December 31, 2021.

Net income for the three months ended December 31, 2022 decreased to net income of $5.8 million, a 21.4% decrease from a net income of $7.3 million for the same period of the prior year. Operating income, which is revenue less provision for credit losses and general and administrative expenses, increased by $2.6 million, or 14.3%, compared to the same period of the prior fiscal year.

Revenues for the three months ended December 31, 2022 decreased by $2.1 million, or 1.4%, to $146.5 million from $148.6 million for the same period of the prior year. The decrease was primarily due to a 4.8% decrease in average gross earning loans (total gross loans less gross loans 60 days or more contractually past due and tax advances).

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Interest and fee income for the three months ended December 31, 2022 decreased by $1.9 million, or 1.5%, from the same period of the prior year due to a decrease in loans outstanding. The decrease was primarily due to a 4.8% decrease in average gross earning loans (total gross loans less gross loans 60 days or more contractually past due and tax advances).

Insurance and other income for the three months ended December 31, 2022 decreased by $0.1 million, or 0.6%, from the same period of the prior year. Insurance income increased by approximately $2.8 million, or 19.5%, during the three months ended December 31, 2022 when compared to the three months ended December 31, 2021. Insurance income increased due to a shift to larger loans over the twelve months ending December 31, 2022. The sale of insurance products are limited to large loans in several of our states. The large loan portfolio increased from 49.5% of the overall portfolio as of December 31, 2021 to 56.4% as of December 31, 2022. Other income decreased by $2.9 million. Other income decreased due to a decrease in sales of our motor club product as a result of lower originations during the quarter.

The provision for credit losses increased $3.1 million, or 5.6%, to $59.6 million from $56.5 million when comparing the third quarter of fiscal 2023 to the third quarter of fiscal 2022. The table below itemizes the key components of the CECL allowance and provision impact during the quarter.


CECL Allowance and Provision (Dollars in millions)	FY 2023	FY 2022	Difference	Reconciliation
Beginning Allowance - September 30	$155.9	$114.7	$41.2
Change due to Growth	$(4.3)	$17.4	$(21.7)	$(21.7)
Change due to Expected Loss Rate on Performing Loans	$(7.5)	$(10.9)	$3.4	$3.4
Change due to 90 day past due	$0.4	$12.2	$(11.8)	$(11.8)
Ending Allowance - December 31	$144.5	$133.4	$11.1	$(30.1)
Net Charge-offs	$71.0	$37.8	$33.2	$33.2
Provision	$59.6	$56.5	$3.1	$3.1
Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter (see above reconciliation).

The provision benefited from a decrease in the portfolio and changes in expected loss rates on our performing loans. The three most important factors impacting the expected loss rates on performing loans are recent actual loss performance, changes in Customer Tenure mix, and a seasonality factor. The table below includes the seasonality factor for each quarter end.


Quarter End			Seasonality Factor
March 31			0.943738
June 30			1.080301
September 30			1.047518
December 31			0.938281

Expected loss rates by Customer Tenure bucket also increased due to actual loss rates increasing as credit normalizes. Actual loss rates increased at substantially lower rates in the third quarter compared to the first and second quarter. This was offset by a decreasing seasonality factor and by a shift in portfolio mix to more tenured customers.

Net charge-offs for the quarter increased 33.2 million, from $37.8 million in the third quarter of fiscal 2022 to $71.0 million in the third quarter of fiscal 2023. Net charge-offs as a percentage of average net loan receivables on an annualized basis increased from 13.8% in the third quarter of fiscal 2022 to 25.1% in the third quarter of fiscal 2023. Net charge-offs during the period include $11.4 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 $3 million relates to recurring sales of charge-offs during the three months ended December 31, 2022.

The Company's allowance for credit losses as a percentage of net loans was 12.9% at December 31, 2022 compared to 11.4% at December 31, 2021. Accounts that were 61 days or more past due on a recency basis were 7.4% of the portfolio at December 31, 2022 and 6.4% of the portfolio at December 31, 2021. Accounts that were 61 days or more past due on a contractual basis were 9.3% of the portfolio at December 31, 2022 compared to 7.8% of the portfolio at December 31, 2021.

G&A expenses for the three months ended December 31, 2022 decreased by $7.8 million, or 10.5%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses decreased from 50.0% during the three months ended December 31, 2021 to 45.4% during the three months ended December 31, 2022. G&A expenses per average open branch

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decreased by 1.6% when comparing the two three-month periods. The change in G&A expense is explained in greater detail below.

Personnel expense totaled $40.7 million for the three months ended December 31, 2022, a $3.7 million, or 8.3%, decrease over the three months ended December 31, 2021. Benefit expense decreased approximately $0.1 million, or 1.7%, when comparing the quarterly periods ended December 31, 2022 and 2021. Incentive expense decreased $6.9 million, or 62.8%. This was offset by a $2.2 million, or 7.5%, increase in salary expense when comparing the two quarterly periods ended December 31, 2022 and 2021. The decrease in incentives expense is mostly due to a $3.1 million decrease in share based compensation related to forfeiture of shares during the third quarter of fiscal 2023. Additionally, 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. The increase in salary expense is mostly due to the increased based wages for our Financial Service Representatives as mentioned above and our headcount as of December 31, 2022, increased 0.8% compared to December 30, 2021.

Occupancy and equipment expense totaled $12.9 million for the three months ended December 31, 2022, a $0.3 million, or 2.5%, increase over the three months ended December 31, 2021. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. The current year includes $0.4 million in expense related to the merger of branches during the quarter. For the three months ended December 31, 2022, the average open branches decreased 9.1% compared to the three months ended December 31, 2021.

Advertising expense decreased $5.5 million, or 80.7%, in the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022 due to decreased spending on new customer acquisition programs.

Amortization of intangible assets totaled $1.1 million for the three months ended December 31, 2022, a $161.2 thousand, or 12.6%, decrease over the three months ended December 31, 2021.

Other expense totaled $10.4 million for the three months ended December 31, 2022, a $1.3 million, or 13.8%, increase over the three months ended December 31, 2021.

Interest expense for the three months ended December 31, 2022 increased by $3.9 million, or 38.4%, from the corresponding three months of the previous year. The increase in interest expense was due to a 14.6% increase in the average debt outstanding, from $640.8 million to $734.3 million, and a 21.4% increase in the effective interest rate from 6.3% to 7.6%. The Company’s senior debt-to-equity ratio increased from 1.8:1 at December 31, 2021 to 2.0:1 at December 31, 2022.

Other key return ratios for the three months ended December 31, 2022 included a 1.1% return on average assets and a return on average equity of 3.8% (both on a trailing 12-month basis), as compared to a 7.4% return on average assets and a return on average equity of 20.1% (both on a trailing 12-month basis) for the three months ended December 31, 2021.

The Company’s effective income tax rate increased to 9.7% for the three months ended December 31, 2022 compared to 5.1% for the corresponding period of the previous year. The increase is primarily due to the permanent benefit related to non-qualified stock option exercises and vesting of restricted stock as discrete items in the prior year quarter. This was partially offset by the effects of pretax book earnings relative to the effects of various permanent items including a decrease in the disallowed executive compensation under Section 162(m) and the recognition of additional Federal Historic Tax Credits when compared to the prior year quarter.

Comparison of nine months ended December 31, 2022 versus nine months ended December 31, 2021

Gross loans outstanding increased to $1.55 billion as of December 31, 2022, a 3.2% decrease from the $1.61 billion of gross loans outstanding as of December 31, 2021. During the nine months ended December 31, 2022 our number of unique borrowers in the portfolio decreased by 13.7% compared to an increase of 4.4% during the nine months ended December 31, 2021.

Net income (loss) for the nine months ended December 31, 2022 decreased to a net loss of $4.4 million, a 112.4% decrease from a net income of $35.5 million reported for the same period of the prior year. Operating income (revenue less provision for credit losses and general and administrative expenses) decreased by $33.9 million, or 52.4%.

Revenues increased by $39.3 million, or 9.4%, to $455.3 million during the nine months ended December 31, 2022 from $416.1 million for the same period of the prior year. The increase was primarily due to an increase in average net loans outstanding.

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Interest and fee income for the nine months ended December 31, 2022 increased by $31.4 million, or 8.8%, from the same period of the prior year. Interest and fee income was impacted by a shift to larger, lower interest rate loans. Average net loans outstanding increased by 18.8% for the nine months ended December 31, 2022 compared to the nine-month period ended December 31, 2021.

Insurance and other income for the nine months ended December 31, 2022 increased by $7.8 million, or 12.9%, from the same period of the prior year. Insurance income increased by approximately $10.5 million, or 25.7%, during the nine months ended December 31, 2022 when compared to the nine months ended December 31, 2021. Insurance income benefited from the shift to larger loans mentioned above. Other income decreased by $2.6 million due to a decreases in the sale of our motor club product and tax preparation business revenue, offset by a $3.7 million bargain purchase gain during the nine months ended December 31, 2022.

G&A expenses for the nine months ended December 31, 2022 decreased by $12.1 million, or 5.4%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses decreased from 53.5% during the first nine months of fiscal 2022 to 46.2% during the first nine months of fiscal 2023. G&A expenses per average open branch increased by 1.1% when comparing the two nine-month periods. The change in G&A expense is explained in greater detail below.

Personnel expense totaled $131.2 million for the nine months ended December 31, 2022, a $5.2 million, or 3.8%, decrease over the nine months ended December 31, 2021. Salary expense increased approximately $7.1 million, or 8.2%, when comparing the two nine month periods ended December 31, 2022 and 2021. Our headcount as of December 31, 2022, increased 0.8% compared to December 31, 2021. Benefit expense decreased approximately $1.2 million, or 4.7%, when comparing the nine month periods ended December 31, 2022 and 2021. Incentive expense decreased $12.6 million, or 36.8% mostly due to a decrease in share based compensation related to forfeiture of shares and a reduction in branch level bonuses.

Occupancy and equipment expense totaled $39.7 million for the nine months ended December 31, 2022, a $0.5 million, or 1.3%, increase over the nine months ended December 31, 2021. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. For the nine months ended December 31, 2022, the average occupancy and equipment expense per branch increased to $35.2 thousand, up from $32.5 thousand for the nine months ended December 31, 2021. The prior year includes $0.4 million more in write down of signage as a result of rebranding our offices when comparing the two nine-month periods. The current year includes $1.5 million in expense related to the merger of branches during the nine months ended December 31, 2022.

Advertising expense totaled $4.5 million for the nine months ended December 31, 2022, a $11.4 million, or 71.4%, decrease over the nine months ended December 31, 2021. The decrease is due to decreased spending on new customer acquisition programs during the period.

Amortization of intangible assets totaled $3.4 million for the nine months ended December 31, 2022, a $383.4 thousand, or 10.3%, decrease over the nine months ended December 31, 2021.

Other expense totaled $31.7 million for the nine months ended December 31, 2022, a $4.3 million, or 15.8%, increase over the nine months ended December 31, 2021.

Interest expense for the nine months ended December 31, 2022 increased by $15.9 million, or 71.0%, from the corresponding nine months of the previous year. The increase in interest expense was due to a 41.0% increase in the average debt outstanding, from $530.0 million to $747.4 million, offset by a 23.1% increase in the effective interest rate from 5.5% to 6.8%.

Other key return ratios for the first nine months of fiscal 2023 included a 1.1% return on average assets and a return on average equity of 3.8% (both on a trailing 12-month basis), as compared to a 7.4% return on average assets and a return on average equity of 20.1% (both on a trailing 12-month basis) for the first nine months of fiscal 2022.

The Company’s effective income tax rate increased to 41.1% for the nine months ended December 31, 2022 compared to 16.1% for the corresponding period of the previous year. The increase is primarily due to the permanent benefit related to non-qualified stock option exercises and vesting of restricted stock as discrete items in the prior year. This was partially offset by the effects of pretax book earnings relative to the effects of various permanent items including a decrease in the disallowed executive compensation under Section 162(m) and the recognition of additional Federal Historic Tax Credits when compared to the prior year.

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Regulatory Matters

CFPB Rulemaking Initiatives

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 were 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”). However, on October 19, 2022, a three-judge panel of the Fifth Circuit Court of Appeals held in Cmty. Fin.l Servs. Ass’n of Am., Ltd. v. Consumer Fin. Prot. Bureau, that the CFPB’s funding structure violated the U.S. Constitution’s Appropriations Clause, which requires that all expenditures of federal funds be approved by Congress. On this ground, it vacated the Rule. The decision will be binding in the Fifth Circuit’s jurisdiction, covering Louisiana, Texas and Mississippi, and persuasive in other circuits until there’s a competing case to contradict it. The CFPB has filed a certiorari petition asking the U.S. Supreme Court to review the Fifth Circuit’s panel decision and hear arguments in April 2023. Implementation of the Rule’s payment requirements is uncertain, but if it were to take effect it could 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.

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.

In its Fall 2015 rulemaking agenda, the CFPB stated that it expected to conduct a rulemaking to identify larger participants in the installment lending market for purposes of its supervision program. However, this initiative was classified as “inactive” on the CFPB’s Spring 2018 rulemaking, and its Fall 2022 rulemaking agenda showed no planned activity in this area. 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.

See Part I, Item 1, “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,” in the Company’s Form 10-K for the year ended March 31, 2021 for more information regarding these regulatory and related risks.

Liquidity and Capital Resources

The Company has historically financed and continues to finance its operations, acquisitions and branch expansion primarily through a combination of cash flows from operations and borrowings from its institutional lenders. As discussed below, the Company has also issued debt securities to finance its operations and repay a portion of its outstanding indebtedness. 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. Net cash provided by operating activities for the nine months ended December 31, 2022 was $205.9 million.

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.

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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.

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 to up to 50% of consolidated adjusted net income for the period commencing January 1, 2019. As of December 31, 2022, subject to further approval from our Board of Directors, we could repurchase approximately $16.4 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 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 $300.0 thousand 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 .10% and an applicable margin of 3.5% with a minimum rate of 4.5%. At December 31, 2022, the aggregate commitments under the revolving credit facility were $685.0 million. The $300.0 thousand letter of credit outstanding under the subfacility expired on December 31, 2021; 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 finance receivables, less unearned finance charges, insurance premiums and insurance commissions applicable to such eligible finance receivables, and (b) an advance rate percentage that ranges from 62% 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.

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 domestic 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 the amount incurred that are imposed by the financial covenants under the agreement. The agreement also contains financial covenants, including (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 as further discussed below; (iii) a maximum collateral performance indicator as further discussed below; and (iv) a minimum fixed charges coverage ratio as further discussed below.

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As further discussed in Note 10 to the Consolidated Financial Statements, on November 23, 2022, the Company entered into the Ninth Amendment to, among other things, (1) change the required ratio for net income available for fixed charges to fixed charges to 1.25 to 1.0 for the fiscal quarter ending 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 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 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; (2) change the ratio of total debt to consolidated adjusted net worth to 2.5 to 1.0 for the fiscal quarter ending December 31, 2022, 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, and 2.5 to 1.0 for each fiscal quarter thereafter; (3) require a collateral performance indicator of less than or equal to 28% for the calendar months ending October 31, 2022 through June 30, 2023 and 26% thereafter; and (4) decrease the advance rate to as low as 62% from 74% for the calendar months ending October 31, 2022 through June 30, 2023.

The Company was in compliance with these covenants at December 31, 2022 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 and cross-acceleration 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 finance 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 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" in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K (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.

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 remained available for repurchase under prior repurchase authorizations. As of December 31, 2022 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 revolving credit agreement, and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.

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. 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. As of December 31, 2022, subject to further approval from our Board of Directors, we could repurchase approximately $16.4 million of shares under the terms of our debt facilities. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors. As of December 31, 2022, the Company's debt outstanding was $722.5 million, net of $3.9 million unamortized debt issuance costs related to the unsecured senior notes payable, and its shareholders' equity was $359.6 million resulting in a debt-to-equity ratio of 2.0:1.0. 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

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The Company does not believe that inflation, within reasonably anticipated rates, will have a material, adverse effect on its financial condition. Although inflation would increase the Company’s operating costs in absolute terms, 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 loans receivable and an increase in absolute revenue to be generated from that larger amount of loans receivable. The Company believes that this increase in absolute revenue 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.

Quarterly Information and Seasonality

See Note 3 to the unaudited Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

See Note 3 to the unaudited Consolidated Financial Statements.

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. Certain 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, revenue, 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. 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 the Company’s common stock at the time of grant, and the fair value of stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free interest rate and expected life, changes to which can materially affect the fair value estimate. Actual results and future changes in estimates may differ substantially from the Company’s 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.

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 IRS, 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

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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 Topic 740, the Company will include 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 of what it considers to be 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.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company’s outstanding debt under its revolving credit facility was $426.5 million at December 31, 2022. Interest on borrowing under this facility is based on the greater of 4.5% or one month SOFR plus .10% and an applicable margin of 3.5%. Based on the outstanding balance at December 31, 2022, a change of 1.0% in the interest rate would cause a change in interest expense of approximately $4.3 million on an annual basis.

Item 4. Controls and Procedures

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.

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation, with the participation of our CEO and CFO, as of the end of the period covered by this report, our CEO and CFO 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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 12 to the unaudited Consolidated Financial Statements included in this report for information regarding legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

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

The Company's credit agreements contain certain limits on share repurchases. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources."

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 December 31, 2022:


	(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(1)
October 1 through October 31, 2022	—	$	—	—	$	1,123,544
November 1 through November 30, 2022	—	—		—	1,123,544
December 1 through December 30, 2022	—	—		—	1,123,544
Total for the quarter	—	$	—	—

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the accompanying exhibit index are filed as part of the Quarterly Report on Form 10-Q.

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EXHIBIT INDEX

Exhibit
Number

Exhibit Description

Filed
Herewith

Incorporated by Reference

Form or
Registration
Number

Exhibit

Filing
Date

3.01

Second Amended and Restated Articles of Incorporation of World Acceptance Corporation, as amended

S-8

3.1

07-29-03

3.02

Eighth Amended and Restated Bylaws of World Acceptance Corporation

10-Q

3.01

11-08-18

3.03

Ninth Amendment to Amended and Restated Revolving Credit Facility dated November 23, 2022

8-K

10.1

11-23-22

31.01

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.02

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial and Strategy Officer

32.01

Section 1350 Certification of Chief Executive Officer

32.02

Section 1350 Certification of Chief Financial and Strategy Officer

101.01

The following materials from the Company's Quarterly Report for the fiscal quarter ended December 31, 2022, formatted in Inline XBRL:

(i)

Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022;

(ii)

Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and December 31, 2021;

(iii)

Consolidated Statements of Shareholders' Equity for the three and nine months ended December 31, 2022 and December 31, 2021;

(iv)

Consolidated Statements of Cash Flows for the nine months ended December 31, 2022 and December 31, 2021; and

(v)

Notes to the Consolidated Financial Statements.

104.01

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
+			Management Contract or other compensatory plan required to be filed under Item 6 of this report and Item 601 of Regulation S-K of the Securities and Exchange Commission.

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SIGNATURES

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


WORLD ACCEPTANCE CORPORATION

	By: /s/ Scott McIntyre
	Scott McIntyre
	Senior Vice President of Accounting
	Signing on behalf of the registrant and as principal accounting officer
	Date:	February 3, 2023