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World Acceptance Corporation
WRLD
#6577
Rank
$0.69 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$137.49
Share price
-2.89%
Change (1 day)
6.10%
Change (1 year)
๐Ÿ’ณ Financial services
Categories
  1. World Acceptance Corporation
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q2

World Acceptance Corporation - 10-Q quarterly report FY2022 Q2


Text size:
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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 September 30, 2021
OR
☐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 Carolina29601
(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 classTrading SymbolName of each exchange on which registered
Common Stock, no par valueWRLD
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.
1

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 October 29, 2021 was 6,699,409.

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 WORLD ACCEPTANCE CORPORATION
FORM 10-Q

TABLE OF CONTENTS
Item No.ContentsPage
GLOSSARY OF DEFINED TERMS
4
PART I - FINANCIAL INFORMATION 
1.Consolidated Financial Statements (unaudited):
5
 Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021
5
 Consolidated Statements of Operations for the three and six months ended September 30, 2021 and September 30, 2020
7
 Consolidated Statements of Shareholders' Equity for the three and six months ended September 30, 2021 and September 30, 2020
8
 Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and September 30, 2020
10
 Notes to Consolidated Financial Statements
12
2.Management's Discussion and Analysis of Financial Condition and Results of Operations
32
3.Quantitative and Qualitative Disclosures about Market Risk
41
4.Controls and Procedures
41
PART II - OTHER INFORMATION
1.Legal Proceedings
42
1A.Risk Factors
42
2.Unregistered Sales of Equity Securities and Use of Proceeds
42
3.Defaults Upon Senior Securities
42
4.Mine Safety Disclosures
42
5.Other Information
42
6.Exhibits
42
EXHIBIT INDEX
43
SIGNATURES
44

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 2022" are to the Company’s fiscal year ending March 31, 2022; all references in this report to "fiscal 2021" are to the Company's fiscal year ended March 31, 2021; and all references to "fiscal 2020" are to the Company’s fiscal year ended March 31, 2020.

3
GLOSSARY OF DEFINED TERMS

The following terms may be used throughout this Report, including consolidated financial statements and related notes.
TermDefinition
ASCAccounting Standards Codification
ASUAccounting Standards Update
CECLCurrent Expected Credit Loss
CEOChief Executive Officer
CFOChief Financial Officer
CFPBU.S. Consumer Financial Protection Bureau
Compensation CommitteeCompensation and Stock Option Committee
Customer TenureThe number of years since a customer was first serviced by the Company
DOJU.S. Department of Justice
EBITDAEarnings before interest, taxes, depreciation, and amortization
ERISAEmployee Retirement Income Security Act
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FICOthe Fair Isaac Corporation
G&AGeneral and administrative
GAAPU.S. generally accepted accounting principles
IRSU.S. Internal Revenue Service
LIBORLondon Interbank Offered Rate
Option Measurement PeriodThe 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
PCDPurchased Assets with Credit Deterioration
Performance OptionsPerformance-based stock options
Performance Share Measurement PeriodThe 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 SharesService- and performance-based restricted stock awards
Rehab RatePercentage of 91 days or more delinquent that do not charge off
Restricted StockService-based restricted stock awards
SECU.S. Securities and Exchange Commission
Service OptionsService-based stock options
TALTax Advance Loan

4
PART I.  FINANCIAL INFORMATION

WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 September 30, 2021March 31, 2021
ASSETS  
Cash and cash equivalents$16,886,215 $15,746,454 
Gross loans receivable1,394,827,136 1,104,746,261 
Less:  
Unearned interest, insurance and fees(370,017,101)(279,364,584)
Allowance for credit losses(114,660,240)(91,722,288)
Loans receivable, net910,149,795 733,659,389 
Operating lease right‐of‐use assets, net (Note 6)88,197,277 90,055,572 
Finance lease right‐of‐use assets, net (Note 6)810,101 1,013,901 
Property and equipment, net25,066,530 25,326,136 
Deferred income taxes, net34,248,014 24,992,742 
Other assets, net35,544,370 31,423,134 
Goodwill7,370,791 7,370,791 
Intangible assets, net22,306,060 23,537,517 
Assets held for sale (Note 2)— 1,143,528 
Total assets$1,140,579,153 $954,269,164 
 
LIABILITIES & SHAREHOLDERS' EQUITY  
Liabilities:  
Senior notes payable$275,705,753 $405,007,500 
Senior unsecured notes payable, net294,897,327 — 
Income taxes payable8,258,170 11,575,861 
Operating lease liability (Note 6)89,754,406 91,132,722 
Finance lease liability (Note 6)283,632 585,353 
Accounts payable and accrued expenses52,672,524 41,040,287 
Total liabilities721,571,812 549,341,723 
Commitments and contingencies (Notes 6 and 12)
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 6,724,140 and 6,805,294 shares at September 30, 2021 and March 31, 2021, respectively
— — 
Additional paid-in capital272,572,177 255,590,674 
Retained earnings146,435,164 149,336,767 
Total shareholders' equity419,007,341 404,927,441 
Total liabilities and shareholders' equity$1,140,579,153 $954,269,164 

5
See accompanying notes to consolidated financial statements.

6
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30,Six months ended September 30,
2021202020212020
Revenues:  
Interest and fee income$118,113,200 $108,885,851 $227,287,915 $218,746,307 
Insurance income, net and other income19,713,684 15,555,201 40,198,347 29,561,547 
Total revenues137,826,884 124,441,052 267,486,262 248,307,854 
Expenses:   
Provision for credit losses42,043,526 26,090,367 72,309,337 51,751,027 
General and administrative expenses:  
Personnel45,745,551 46,832,893 91,977,674 91,454,916 
Occupancy and equipment12,934,959 13,515,468 26,541,936 26,696,974 
Advertising5,294,835 5,255,613 9,054,544 7,867,780 
Amortization of intangible assets1,245,545 1,286,118 2,460,329 2,668,246 
Other9,767,969 8,402,448 18,305,573 18,212,603 
Total general and administrative expenses74,988,859 75,292,540 148,340,056 146,900,519 
Interest expense6,713,653 5,892,790 12,214,725 11,454,667 
Total expenses123,746,038 107,275,697 232,864,118 210,106,213 
Income before income taxes14,080,846 17,165,355 34,622,144 38,201,641 
Income taxes1,640,754 3,766,735 6,411,224 9,293,372 
Net income$12,440,092 $13,398,620 $28,210,920 $28,908,269 
Net income per common share:   
Basic$2.04 $2.01 $4.61 $4.27 
Diluted$1.94 $1.96 $4.38 $4.20 
Weighted average common shares outstanding:  
Basic6,083,255 6,680,969 6,120,665 6,773,704 
Diluted6,413,079 6,853,425 6,434,211 6,890,265 

See accompanying notes to consolidated financial statements.

7
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three months ended September 30, 2021
Common Stock
SharesAdditional Paid-in CapitalRetained EarningsTotal Shareholders' Equity
Balances at June 30, 20216,693,703 $261,446,129 144,024,733 405,470,862 
Proceeds from exercise of stock options87,628 6,873,724 — 6,873,724 
Common stock repurchases(61,187)— (10,029,661)(10,029,661)
Restricted common stock expense under stock option plan, net of cancellations ($12,724)
3,996 3,342,974 — 3,342,974 
Stock option expense— 909,350 — 909,350 
Net income— — 12,440,092 12,440,092 
Balances at September 30, 20216,724,140 $272,572,177 146,435,164 419,007,341 
Three months ended September 30, 2020
Common Stock
SharesAdditional Paid-in CapitalRetained EarningsTotal Shareholders' Equity
Balances at June 30, 20207,451,588 $231,678,312 159,564,603 391,242,915 
Proceeds from exercise of stock options15,571 1,006,825 — 1,006,825 
Common stock repurchases(460,120)— (43,235,638)(43,235,638)
Restricted common stock expense under stock option plan, net of cancellations ($90,720)
(4,959)3,776,190 — 3,776,190 
Stock option expense— 1,086,239 — 1,086,239 
Net loss— — 13,398,620 13,398,620 
Balances at September 30, 20207,002,080 $237,547,566 129,727,585 367,275,151 
Six months ended September 30, 2021
Common Stock
SharesAdditional Paid-in CapitalRetained EarningsTotal Shareholders' Equity
Balances at March 31, 20216,805,294 $255,590,674 149,336,767 $404,927,441 
Proceeds from exercise of stock options111,122 8,682,578 — 8,682,578 
Common stock repurchases(195,436)— (31,112,523)(31,112,523)
Restricted common stock expense under stock option plan, net of cancellations ($150,213)
3,160 6,445,948 — 6,445,948 
Stock option expense— 1,852,977 — 1,852,977 
Net income— — 28,210,920 28,210,920 
Balances at September 30, 20216,724,140 $272,572,177 146,435,164 $419,007,341 
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Six months ended September 30, 2020
Common Stock
SharesAdditional Paid-in CapitalRetained EarningsTotal Shareholders' Equity
Balances at March 31, 20207,807,834 $227,214,577 184,748,490 $411,963,067 
Proceeds from exercise of stock options15,571 1,006,825 — 1,006,825 
Common stock repurchases(786,418)— (62,686,925)(62,686,925)
Restricted common stock expense under stock option plan, net of cancellations ($284,079)
(34,907)7,193,190 — 7,193,190 
Stock option expense— 2,132,974 — 2,132,974 
Cumulative effect of adoption of ASC 326— — (21,242,249)(21,242,249)
Net income— — 28,908,269 28,908,269 
Balances at September 30, 20207,002,080 $237,547,566 129,727,585 $367,275,151 

See accompanying notes to consolidated financial statements.

9
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
10
(Unaudited)
Six months ended September 30,
 20212020
Cash flow from operating activities:  
Net income$28,210,920 $28,908,269 
Adjustments to reconcile net income to net cash provided by operating activities:  
Loss on assets held for sale38,633 — 
Amortization of intangible assets2,460,329 2,668,246 
Amortization of investment in historic tax credits1,955,692 868,192 
Amortization of debt issuance costs301,996 315,015 
Provision for credit losses72,309,337 51,751,027 
Depreciation3,355,606 3,477,512 
Loss on sale of property and equipment337,181 34,058 
Deferred income tax expense (benefit)(9,255,272)1,218,798 
Compensation related to stock option and restricted stock plans, net of taxes and adjustments8,449,138 9,610,243 
Change in accounts:  
Other assets, net(5,887,792)1,984,942 
Income taxes payable(3,317,691)(242,285)
Accounts payable and accrued expenses11,632,237 (20,387,516)
Net cash provided by operating activities110,590,314 80,206,501 
Cash flows from investing activities:  
Increase in loans receivable, net(239,168,631)19,745,335 
Net assets acquired from acquisitions, primarily loans(9,631,112)(5,786,847)
Increase in intangible assets from acquisitions(1,228,872)(1,150,091)
Purchases of property and equipment(3,382,481)(4,760,009)
Proceeds from sale of assets held for sale1,104,895 — 
Proceeds from sale of property and equipment153,100 2,947,225 
Net cash provided by (used in) investing activities(252,153,101)10,995,613 
Cash flow from financing activities:  
Borrowings from senior notes payable239,248,253 144,676,750 
Payments on senior notes payable(368,550,000)(170,876,750)
Issuance of senior unsecured notes payable300,000,000 — 
Debt issuance costs associated with senior unsecured notes payable(5,113,826)— 
Debt issuance costs associated with senior notes payable— (376,750)
Proceeds from exercise of stock options8,682,578 1,006,825 
Payments for taxes related to net share settlement of equity awards(150,213)(284,079)
Repayment of finance lease(301,721)(292,201)
Repurchase of common stock(31,112,523)(62,686,925)
Net cash provided by (used in) financing activities142,702,548 (88,833,130)
Net change in cash and cash equivalents1,139,761 2,368,984 
Cash and cash equivalents at beginning of period15,746,454 11,618,922 
Cash and cash equivalents at end of period$16,886,215 $13,987,906 
Supplemental Disclosures:
Interest paid during the period$11,251,918 $11,283,327 
Income taxes paid during the period$19,204,025 $8,731,860 
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 September 30, 2021 and for the three and six 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 September 30, 2021, and the results of operations and cash flows for the periods ended September 30, 2021 and 2020, 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, 2021, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, 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, 2021. The Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications have been made to the amounts previously reported to conform to the current period presentation.

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 income, net and other income in the consolidated statements of operations.

The following table reconciles the major classes of assets held for sale to the amounts presented in the Consolidated Balance Sheets:
September 30, 2021March 31, 2021
Assets held for sale:
Property and equipment, net$— $1,143,528 
Total assets held for sale$— $1,143,528 

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
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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 refinancings that do not constitute a more than minor modification.

Allowance for credit losses

Refer to Note 5, “Finance Receivables and Allowance for Credit Losses,” in this Quarterly Report on Form 10-Q for information regarding the Company's adoption of the CECL allowance model on April 1, 2020 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

We reviewed all 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 eight months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company’s revolving credit facility has a variable rate based on a margin over LIBOR and reprices with any changes in LIBOR. 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.

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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.
September 30, 2021March 31, 2021
Input LevelCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
ASSETS
Cash and cash equivalents1$16,886,215 $16,886,215 $15,746,454 $15,746,454 
Loans receivable, net3910,149,795 910,149,795 733,659,389 733,659,389 
LIABILITIES
Senior unsecured notes payable2300,000,000 296,100,000 — — 
Senior notes payable3275,705,753 275,705,753 405,007,500 405,007,500 

The carrying amounts and estimated fair values of amounts the Company measures at fair value on a non-recurring basis, which are limited to the Company's assets held for sale, are summarized below.
September 30, 2021March 31, 2021
Input LevelCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
ASSETS
Assets held for sale2$— $— $1,143,528 $1,143,528 

The Company re-valued its corporate headquarters in Greenville, South Carolina as of March 31, 2020 in conjunction with its reclassification of the related assets as held for sale. The observable inputs the Company used in its revaluation were the agreed-upon prices to sell the assets.

There were no other significant assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2021 or March 31, 2021.

NOTE 5 – FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

The following is a summary of gross loans receivable by Customer Tenure as of:
Customer TenureSeptember 30, 2021March 31, 2021
0 to 5 months$160,762,921 $92,378,097 
6 to 17 months112,721,013 106,742,121 
18 to 35 months231,750,261 169,361,910 
36 to 59 months176,611,569 130,655,627 
60+ months712,329,556 597,292,495 
Tax advance loans651,816 8,316,011 
Total gross loans$1,394,827,136 $1,104,746,261 

During the first quarter of fiscal 2021, we adopted ASU 2016-13, which replaces the incurred loss methodology for determining our provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model, using the modified retrospective approach. Upon adoption, the total allowance for credit losses increased by $28.6 million, with no impact to the consolidated statement of operations.

Based on the Company’s loan products, the purpose and the term, current payment performance is used to assess the capability of the borrower to repay contractual obligations of the loan agreements as scheduled. Current payment performance is monitored by management on a daily basis. On an as needed basis, qualitative information may be taken into consideration if new information arises related to the customer’s ability to repay the loan. The Company’s payment performance buckets are as follows: current, 30-60 days past due, 61-90 days past due, 91 days or more past due.


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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 September 30, 2021:
Term Loans By Origination
LoansUp 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$1,228,611,816 $38,665,263 $3,003,845 $123,756 $27,237 $789 $1,270,432,706 
30 - 60 days past due50,891,660 2,815,418 387,851 20,553 7,382 — 54,122,864 
61 - 90 days past due29,152,214 1,842,430 213,683 21,298 7,099 — 31,236,724 
91 or more days past due33,967,099 4,059,648 299,904 43,950 10,341 2,084 38,383,026 
Total$1,342,622,789 $47,382,759 $3,905,283 $209,557 $52,059 $2,873 $1,394,175,320 
Term Loans By Origination
Tax advance loansUp 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$38,954 $46 $— $— $— $— 39,000 
30 - 60 days past due37,718 — — — — — 37,718 
61 - 90 days past due33,254 — 164 — — — 33,418 
91 or more days past due534,716 6,964 — — — — 541,680 
Total$644,642 $7,010 $164 $— $— $— $651,816 
Total gross loans$1,394,827,136 


























15

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, 2021:
Term Loans By Origination
LoansUp 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$970,526,682 $45,769,052 $2,102,732 $154,890 $14,444 $831 $1,018,568,631 
30 - 60 days past due21,862,634 2,011,261 153,417 21,426 3,500 2,069 24,054,307 
61 - 90 days past due18,039,010 1,208,936 88,119 11,800 571 — 19,348,436 
91 or more days past due31,126,328 3,120,210 183,434 14,028 14,708 168 34,458,876 
Total$1,041,554,654 $52,109,459 $2,527,702 $202,144 $33,223 $3,068 $1,096,430,250 
Term Loans By Origination
Tax advance loansUp 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$7,583,075 $9,360 $— $— $— $— 7,592,435 
30 - 60 days past due686,667 1,423 — — — — 688,090 
61 - 90 days past due— — 321 — — — 321 
91 or more days past due— 34,509 656 — — — 35,165 
Total$8,269,742 $45,292 $977 $— $— $— $8,316,011 
Total gross loans$1,104,746,261 



























16
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 September 30, 2021:
Term Loans By Origination
LoansUp 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$1,213,267,088 $34,694,764 $2,379,587 $67,338 $8,304 $789 $1,250,417,870 
30 - 60 days past due55,615,259 1,988,198 160,947 3,115 — — 57,767,519 
61 - 90 days past due32,795,445 1,479,744 139,530 5,452 — — 34,420,171 
91 or more days past due40,944,995 9,220,054 1,225,219 133,652 43,756 2,084 51,569,760 
Total$1,342,622,787 $47,382,760 $3,905,283 $209,557 $52,060 $2,873 $1,394,175,320 
Term Loans By Origination
Tax advance loansUp 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$18,447 $— $— $— $— $— $18,447 
30 - 60 days past due29,569 — — — — — 29,569 
61 - 90 days past due27,070 — — — — — 27,070 
91 or more days past due569,557 7,009 164 — — — 576,730 
Total$644,643 $7,009 $164 $— $— $— $651,816 
Total gross loans$1,394,827,136 



























17
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, 2021:

Term Loans By Origination
LoansUp 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$948,353,853 $39,661,944 $1,522,148 $83,073 $1,790 $831 $989,623,639 
30 - 60 days past due29,300,148 1,872,816 72,187 1,322 — — 31,246,473 
61 - 90 days past due23,075,264 1,363,196 75,343 567 — — 24,514,370 
91 or more days past due40,825,388 9,211,503 858,024 117,183 31,433 2,237 51,045,768 
Total$1,041,554,653 $52,109,459 $2,527,702 $202,145 $33,223 $3,068 $1,096,430,250 
Term Loans By Origination
Tax advance loansUp 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$7,583,075 $— $— $— $— $— $7,583,075 
30 - 60 days past due686,667 — — — — — 686,667 
61 - 90 days past due— — — — — — — 
91 or more days past due— 45,292 977 — — — 46,269 
Total$8,269,742 $45,292 $977 $— $— $— $8,316,011 
Total gross loans$1,104,746,261 

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
18
3.18 to 35 months
4.36 to 59 months
5.60+ months

Management will continue to monitor this credit metric on a quarterly basis.

Management estimates an allowance for each Customer Tenure bucket by performing a historical migration analysis of loans in that bucket for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. All loans that are greater than 90 days past due on a recency basis and not written off as of the reporting date are reserved for at 100% of the outstanding balance, net of a calculated Rehab Rate. Management considers whether current credit conditions might suggest a change is needed to the allowance for credit losses by monitoring trends in 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. 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 on our gross loans receivable for the three and six months ended September 30, 2021 and 2020:
Three months ended September 30,Six months ended September 30,
2021202020212020
Beginning balance97,852,630 $112,686,597 $91,722,288 $96,487,856 
Impact of ASC 326 adoption— — — 28,628,368 
Provision for credit losses42,043,526 26,090,367 72,309,337 51,751,027 
Charge-offs(29,849,610)(33,793,503)(59,866,550)(77,625,445)
Recoveries4,613,694 4,617,898 10,495,165 10,359,553 
Net charge-offs(25,235,916)(29,175,605)(49,371,385)(67,265,892)
Ending Balance$114,660,240 $109,601,359 $114,660,240 $109,601,359 

The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at September 30, 2021:
Days Past Due - Recency Basis
Customer TenureCurrent30 - 6061 - 90Over 90Total Past DueTotal Loans
0 to 5 months$130,841,492 $11,360,208 $8,223,747 $10,337,474 $29,921,429 $160,762,921 
6 to 17 months95,146,387 6,583,447 4,574,435 6,416,744 17,574,626 112,721,013 
18 to 35 months209,934,364 9,798,948 5,441,891 6,575,058 21,815,897 231,750,261 
36 to 59 months164,431,451 5,847,505 2,881,394 3,451,219 12,180,118 176,611,569 
60+ months670,079,012 20,532,756 10,115,257 11,602,531 42,250,544 712,329,556 
Tax advance loans38,999 37,718 33,418 541,681 612,817 651,816 
Total gross loans1,270,471,705 54,160,582 31,270,142 38,924,707 124,355,431 1,394,827,136 
Unearned interest, insurance and fees(337,028,327)(14,367,617)(8,295,284)(10,325,873)(32,988,774)(370,017,101)
Total net loans$933,443,378 $39,792,965 $22,974,858 $28,598,834 $91,366,657 $1,024,810,035 
Percentage of period-end gross loans receivable3.9%2.2%2.8%8.9%







19
The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at March 31, 2021:

Days Past Due - Recency Basis
Customer TenureCurrent30 - 6061 - 90Over 90Total Past DueTotal Loans
0 to 5 months$72,702,970 $4,799,102 $5,680,380 $9,195,642 $19,675,124 $92,378,094 
6 to 17 months94,466,209 3,187,347 2,798,411 6,290,155 12,275,913 106,742,122 
18 to 35 months158,217,605 3,570,696 2,592,402 4,981,208 11,144,306 169,361,911 
36 to 59 months123,542,346 2,432,489 1,753,291 2,927,501 7,113,281 130,655,627 
60+ months569,639,500 10,064,674 6,523,952 11,064,370 27,652,996 597,292,496 
Tax advance loans7,592,435 688,090 321 35,165 723,576 8,316,011 
Total gross loans1,026,161,065 24,742,398 19,348,757 34,494,041 78,585,196 1,104,746,261 
Unearned interest, insurance and fees(259,492,219)(6,256,776)(4,892,850)(8,722,739)(19,872,365)(279,364,584)
Total net loans$766,668,846 $18,485,622 $14,455,907 $25,771,302 $58,712,831 $825,381,677 
Percentage of period-end gross loans receivable2.2%1.8%3.1%7.1%

The following table is an aging analysis on a contractual basis at amortized cost of the Company’s gross loans receivable at September 30, 2021:
Days Past Due - Contractual Basis
Customer TenureCurrent30 - 6061 - 90Over 90Total Past DueTotal Loans
0 to 5 months$129,295,224 $11,569,048 $8,382,893 $11,515,755 $31,467,696 $160,762,920 
6 to 17 months93,069,152 6,780,420 4,840,146 8,031,296 19,651,862 112,721,014 
18 to 35 months206,576,798 10,391,728 6,019,523 8,762,211 25,173,462 231,750,260 
36 to 59 months161,763,230 6,386,089 3,383,798 5,078,453 14,848,340 176,611,570 
60+ months659,713,466 22,640,234 11,793,811 18,182,045 52,616,090 712,329,556 
Tax advance loans18,447 29,569 27,070 576,730 633,369 651,816 
Total gross loans1,250,436,317 57,797,088 34,447,241 52,146,490 144,390,819 1,394,827,136 
Unearned interest, insurance and fees(331,713,378)(15,332,302)(9,138,099)(13,833,322)(38,303,723)(370,017,101)
Total net loans$918,722,939 $42,464,786 $25,309,142 $38,313,168 $106,087,096 $1,024,810,035 
Percentage of period-end gross loans receivable4.1%2.5%3.7%10.3 %















20
The following table is an aging analysis on a contractual basis at amortized cost of the Company’s gross loans receivable at March 31, 2021:
Days Past Due - Contractual Basis
Customer TenureCurrent30 - 6061 - 90Over 90Total Past DueTotal Loans
0 to 5 months$70,532,439 $5,245,878 $6,019,264 $10,580,514 $21,845,656 $92,378,095 
6 to 17 months90,679,304 3,936,937 3,267,446 8,858,434 16,062,817 106,742,121 
18 to 35 months153,922,334 4,471,202 3,488,629 7,479,745 15,439,576 169,361,910 
36 to 59 months120,168,698 3,229,253 2,337,625 4,920,052 10,486,930 130,655,628 
60+ months554,320,865 14,363,203 9,401,406 19,207,022 42,971,631 597,292,496 
Tax advance loans7,583,075 686,667 — 46,269 732,936 8,316,011 
Total gross loans997,206,715 31,933,140 24,514,370 51,092,036 107,539,546 1,104,746,261 
Unearned interest, insurance and fees(252,170,339)(8,075,147)(6,199,113)(12,919,985)(27,194,245)(279,364,584)
Total net loans$745,036,376 $23,857,993 $18,315,257 $38,172,051 $80,345,301 $825,381,677 
Percentage of period-end gross loans receivable2.9%2.2%4.6%9.7 %


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 September 30, 2021, the Company reversed a total of $6.8 million of unpaid accrued interest against interest income. During the six months ended September 30, 2021, the Company reversed a total of $10.6 million 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 and the amortized cost basis of nonaccrual loans without related expected credit loss. It also shows year-to-date interest income recognized on nonaccrual loans:
Nonaccrual Financial Assets
Customer TenureAs of September 30, 2021As of March 31, 2021Financial Assets 61 Days or More Past Due, Not on Nonaccrual StatusNonaccrual Financial Assets With No Allowance as of September 30, 2021Interest Income
Recognized
0 to 5 months$20,180,823 $17,256,243 $— $— $565,222 
6 to 17 months13,153,496 13,153,363 — — 825,557 
18 to 35 months15,190,793 12,048,132 — — 909,227 
36 to 59 months8,807,368 8,156,159 — — 653,087 
60+ months31,343,442 31,947,750 — — 2,588,262 
Tax advance loans654,037 46,269 — — — 
Unearned interest, insurance and fees(23,697,282)(20,889,617)— — 
Total$65,632,677 $61,718,299 $— $— $5,541,355 
21
NOTE 6 – LEASES

Accounting Policies and Matters Requiring Management's Judgment

When determining the economic life of a lease the Company adopts a convention of applying an economic life equal to the useful life as specified in its accounting policy. Refer to Note 1, “Property and Equipment,” to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2021 for a description of the Company's accounting policy regarding useful lives.

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 does not believe it is reasonably certain to exercise any options associated with its office equipment leases.

Periodic Disclosures

The Company's leases consist of real estate leases for office space as well as office equipment leases, most of which were classified as operating at September 30, 2021. Both the real estate and office equipment leases range from three years to five years, and generally contain options to extend which mirror the original terms of the lease.

The following table reports information about the Company's lease cost for the three and six months ended September 30, 2021 and 2020:
Three months ended September 30,Six months ended September 30,
 2021202020212020
Lease Cost
Finance lease cost$107,812 $117,764 $218,241 $237,895 
Amortization of right-of-use assets101,906 101,906 203,812 203,812 
Interest on lease liabilities5,906 15,858 14,429 34,083 
Operating lease cost$6,873,545 $7,018,273 $13,697,991 $14,087,935 
Short-term lease cost— — — 1,800 
Variable lease cost854,470 897,723 1,786,833 1,777,373 
Total lease cost$7,943,639 $8,151,524 $15,921,306 $16,342,898 

22
The following table reports other information about the Company's leases for the three and six months ended September 30, 2021 and 2020:
Three months ended September 30,Six months ended September 30,
 2021202020212020
Other Lease Information
Cash paid for amounts included in the measurement of lease liabilities$6,996,542 $7,075,461 $13,970,899 $14,175,452 
Operating cash flows from finance leases5,906 15,858 14,429 34,083 
Operating cash flows from operating leases6,843,534 6,912,319 13,654,749 13,849,168 
Financing cash flows from finance leases147,102 147,284 301,721 292,201 
Right-of-use assets obtained in exchange for new finance lease liabilities— — — — 
Right-of-use assets obtained in exchange for new operating lease liabilities$5,620,818 $3,509,052 $9,076,694 $7,632,494 
Weighted-average remaining lease term — finance leases0.6 years1.2 years0.6 years1.2 years
Weighted average remaining lease term — operating leases7.1 years7.2 years7.1 years7.2 years
Weighted-average discount rate (monthly) — finance leases6.3 %6.4 %6.3 %6.4 %
Weighted-average discount rate — operating leases6.2 %6.5 %6.2 %6.5 %

The following table reports information about the maturity of the Company's operating and finance leases as of September 30, 2021:
Operating LeaseFinance Lease
Fiscal 2022$13,122,453 $203,565 
Fiscal 202323,020,199 80,067 
Fiscal 202418,818,997 — 
Fiscal 202514,192,214 — 
Fiscal 202610,213,933 — 
Fiscal 20276,121,179 — 
Thereafter27,238,079 — 
Total undiscounted lease liability112,727,054 283,632 
Imputed interest22,972,648 — 
Total discounted lease liability$89,754,406 $283,632 

The Company had no leases with related parties at September 30, 2021 or March 31, 2021.

23
NOTE 7 – AVERAGE SHARE INFORMATION

The following is a summary of the basic and diluted average common shares outstanding:
Three months ended September 30,Six months ended September 30,
2021202020212020
Basic:  
Weighted average common shares outstanding (denominator)6,083,255 6,680,969 6,120,665 6,773,704 
Diluted:  
Weighted average common shares outstanding6,083,255 6,680,969 6,120,665 6,773,704 
Dilutive potential common shares329,824 172,456 313,546 116,561 
Weighted average diluted shares outstanding (denominator)6,413,079 6,853,425 6,434,211 6,890,265 

Options to purchase 426,382 and 637,322 shares of common stock at various prices were outstanding during the three months ended September 30, 2021 and 2020 respectively, but were not included in diluted shares outstanding because the option exercise price exceeded the market value of the shares. 

Options to purchase 459,785 and 639,654 shares of common stock at various prices were outstanding during the six months ended September 30, 2021 and 2020 respectively, but were not included in diluted shares outstanding because the option exercise price exceeded the market value of the shares. 

24
NOTE 8 – STOCK-BASED COMPENSATION

Stock Incentive Plans

The Company has a 2008 Stock Option Plan, a 2011 Stock Option Plan and a 2017 Stock Incentive Plan for the benefit of certain non-employee directors, officers, and key employees. Under these plans, a total of 3,350,000 shares of common stock have been authorized and reserved for issuance pursuant to grants approved by the Compensation Committee of the Board of Directors. Stock options granted under these plans have a maximum duration 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 September 30, 2021, there were a total of 156,166 shares of common stock available for grant under the plans.

Stock-based compensation is recognized as provided under FASB ASC Topic 718-10 and FASB ASC Topic 505-50. FASB ASC Topic 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the consolidated financial statements based on their grant date fair values. The Company has applied the Black-Scholes valuation model in determining the grant date fair value of the stock option awards. Compensation expense is recognized only for those options expected to vest.

Long-term Incentive Program and Non-Employee Director Awards

On October 15, 2018, the Compensation Committee and Board approved and adopted a new long-term incentive program that sought to motivate and reward certain employees and to align management’s interest with shareholders' interest by focusing executives on the achievement of long-term results. The program is comprised of four components: Service Options, Performance Options, Restricted Stock, and Performance Shares.

Pursuant to this program, the Compensation Committee approved certain grants of Service Options, Performance Options, Restricted Stock and Performance Shares under the World Acceptance Corporation 2011 Stock Option Plan and the World Acceptance Corporation 2017 Stock Incentive Plan to certain employee directors, vice presidents of operations, vice presidents, senior vice presidents, and executive officers. Separately, the Compensation Committee approved certain grants of Service Options and Restricted Stock to certain 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 shall vest, if at all, based on the achievement of two trailing earnings per share performance targets established by the Compensation Committee that are based on earnings per share (measured at the end of each calendar quarter, commencing with the calendar quarter ending September 30, 2019) for the previous four calendar quarters. The Performance Shares are eligible to vest over the Performance Share Measurement Period and subject to each respective employee’s continued employment at the Company through the last day of the applicable 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)
$16.3540%
$20.4560%

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
25
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)
$25.30100%

Stock Options

The weighted-average fair value at the grant date for options issued during the three months ended September 30, 2021 and 2020 was $100.55 and $47.61, respectively. The weighted-average fair value at the grant date for options issued during the six months ended September 30, 2021 and 2020 was $97.25 and $47.31, respectively.

Fair value was estimated at grant date using the weighted-average assumptions listed below:
Three months ended September 30,Six months ended September 30,
2021202020212020
Dividend Yield—%—%—%—%
Expected Volatility57.86%56.19%58.35%56.17%
Average risk-free rate0.83%0.35%0.89%0.36%
Expected Life6.1 years6.2 years6.1 years6.2 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 six months ended September 30, 2021 was as follows:
 SharesWeighted Average Exercise
Price		Weighted Average
Remaining
Contractual Term		Aggregate Intrinsic Value
Options outstanding, beginning of period500,168 $93.89   
Granted during period17,899 180.33   
Exercised during period(111,122)78.14   
Forfeited during period(7,750)100.79   
Expired during period— —   
Options outstanding, end of period399,195 $102.02 6.8 years$34,964,006 
Options exercisable, end of period103,323 $85.31 4.6 years$10,773,204 
 
The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on September 30, 2021 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 September 30, 2021. This amount will change as the market price of the common stock changes. The total intrinsic value of options exercised during the periods ended September 30, 2021 and 2020 was as follows:
26
September 30,
2021		September 30,
2020
Three months ended$9,519,593 $496,721 
Six months ended$11,541,269 $496,721 
 
As of September 30, 2021, total unrecognized stock-based compensation expense related to non-vested stock options amounted to approximately $7.8 million, which is expected to be recognized over a weighted-average period of approximately 3.2 years.

Restricted Stock

During the first six months of fiscal 2022, the Company granted 4,062 shares of restricted stock (which are equity classified) to certain vice presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair value of $188.38 per share.

During fiscal 2021, the Company granted 52,735 shares of restricted stock (which are equity classified) to certain vice presidents with a grant date weighted average fair value of $106.28 per share.

Compensation expense related to restricted stock is based on the number of shares expected to vest and the fair market value of the common stock on the grant date. The Company recognized compensation expense of $3.4 million and $3.9 million for the three months ended September 30, 2021 and 2020, 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 $6.6 million and $7.5 million for the six months ended September 30, 2021 and 2020, respectively, which is included as a component of general and administrative expenses in the Company’s consolidated statements of operations.

As of September 30, 2021, there was approximately $21.4 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over the next 2.6 years based on current estimates.

A summary of the status of the Company’s restricted stock as of September 30, 2021, and changes during the six months ended September 30, 2021, are presented below:
 SharesWeighted Average Fair Value at Grant Date
Outstanding at March 31, 2021614,739 $101.99 
Granted during the period4,062 188.38 
Vested during the period(2,808)118.21 
Forfeited during the period— — 
Outstanding at September 30, 2021615,993 $102.49 
 
Total Stock-Based Compensation

Total stock-based compensation included as a component of net income during the three and six month periods ended September 30, 2021 and 2020 was as follows:
Three months ended September 30,Six months ended September 30,
2021202020212020
Stock-based compensation related to equity classified awards:
Stock-based compensation related to stock options$909,350 $1,086,239 $1,852,977 $2,132,974 
Stock-based compensation related to restricted stock, net of adjustments and exclusive of cancellations3,355,698 3,940,404 6,596,161 7,477,269 
Total stock-based compensation related to equity classified awards$4,265,048 $5,026,643 $8,449,138 $9,610,243 

NOTE 9 – ACQUISITIONS
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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 six months ended September 30, 2021 and 2020.
 Six months ended September 30,
20212020
Acquisitions:
Number of branches acquired through business combinations— — 
Number of loan portfolios acquired through asset purchases50 15 
Total acquisitions50 15 
Purchase price$10,859,984 $6,936,938 
Tangible assets: 
Loans receivable, net9,631,112 5,786,847 
Property and equipment— — 
Total tangible assets9,631,112 5,786,847 
Excess of purchase prices over carrying value of net tangible assets$1,228,872 $1,150,091 
Customer lists$952,872 1,070,091 
Non-compete agreements$276,000 80,000 
Goodwill$— — 

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.

Acquired loans are valued at the net loan balance. Given the short-term nature of these loans, generally eight 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 PCD's 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.

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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 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 September 30, 2021, the Company's senior notes payable consisted of 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 permitted under the accordion feature from $685.0 million to $785.0 million. At September 30, 2021, $275.7 million was outstanding under the Company's revolving credit facility, not including a $300.0 thousand outstanding standby letter of credit related to workers compensation. To the extent that the letter of credit is drawn upon, the disbursement will be funded by the credit facility. There are no amounts due related to the letter of credit as of September 30, 2021. The letter of credit expires 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 LIBOR plus 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 $0.6 million and $0.8 million for the six months ended September 30, 2021 and 2020, respectively. The amended and restated revolving credit agreement provides for a process to transition to a new benchmark interest rate from LIBOR.

For the six months ended September 30, 2021 and fiscal year ended March 31, 2021, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 5.0% annualized and 5.8%, respectively, and the unused amount available under the revolver at September 30, 2021 was $409.0 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 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
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documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement also contains financial covenants, including: (i) a minimum consolidated net worth of $325,000,000; (ii) a minimum fixed charge coverage ratio of 2.75 to 1.0 (iii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0; and (iv) a maximum collateral performance indicator of 24.0%, as of the end of each calendar month. 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 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 Company was in compliance with these covenants at September 30, 2021 and March 31, 2021 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. 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.

NOTE 11 – INCOME TAXES

As of September 30, 2021 and March 31, 2021, the Company had $3.3 million and $3.1 million, respectively, of total gross unrecognized tax benefits including interest. Approximately $2.7 million and $2.6 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 September 30, 2021, approximately $0.7 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 September 30, 2021, the Company had approximately $1.4 million accrued for gross interest, of which $118.4 thousand was accrued during the six months ended September 30, 2021.
 
The Company is subject to U.S. income taxes, as well as various other state and local jurisdictions. With the exception of a few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2016, although carryforward attributes that were generated prior to 2016 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 11.7% for the quarter ended September 30, 2021 compared to 21.9% for the prior year quarter. The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises as a discrete item in the current quarter, the recognition of Federal Historic Tax Credits in the current quarter and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment being treated as a discrete item in the prior year quarter. This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current quarter and the recognition of the permanent tax benefit related to the exclusion of life insurance proceeds in the prior year quarter.

NOTE 12 – COMMITMENTS AND CONTINGENCIES
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Derivative Litigation

On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed, the complaint alleges violations of South Carolina law, including breaches of fiduciary duties and corporate waste, and that the Company has suffered damages as a result of those alleged breaches. The complaint seeks unspecified monetary damages from the individual defendants, equitable and/or injunctive relief, disgorgement of compensation from the individual defendants, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from the Company. However, the Company may be required to advance, and ultimately be responsible for, the legal fees and costs incurred by the individual defendants.

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, as well as those identified by the words “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; 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, 2021 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 September 30,Six months ended September 30,
 2021202020212020
 (Dollars in thousands)
Gross loans receivable$1,394,827 $1,109,366 $1,394,827 $1,109,366 
Average gross loans receivable (1)
1,314,397 1,088,191 1,230,307 1,105,573 
Net loans receivable (2)
1,024,810 819,666 1,024,810 819,666 
Average net loans receivable (3)
965,588 805,346 908,381 821,808 
Expenses as a percentage of total revenue:
Provision for credit losses30.5 %21.0 %27.0 %20.8 %
General and administrative54.4 %60.5 %55.5 %59.2 %
Interest expense4.9 %4.7 %4.6 %4.6 %
Operating income as a % of total revenue (4)
15.1 %18.5 %17.5 %20.0 %
Loan volume (5)
801,487 647,024 1,555,696 1,110,507 
Net charge-offs as percent of average net loans receivable on an annualized basis10.5 %14.5 %10.9 %16.4 %
Return on average assets (trailing 12 months)8.6 %4.5 %8.6 %4.5 %
Return on average equity (trailing 12 months)22.4 %11.8 %22.4 %11.8 %
Branches opened or acquired (merged or closed), net(3)(8)(3)(11)
Branches open (at period end)1,202 1,232 1,202 1,232 
_______________________________________________________
(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 September 30, 2021 versus three months ended September 30, 2020

Gross loans outstanding increased to $1.39 billion as of September 30, 2021, a 25.7% increase from the $1.11 billion of gross loans outstanding as of September 30, 2020. During the three months ended September 30, 2021 our unique borrowers increased by 8.2% compared to an decrease of 3.7% during the three months ended September 30, 2020.

Net income for the three months ended September 30, 2021 decreased to $12.4 million, a 7.2% decrease from $13.4 million for the same period of the prior year. Operating income (revenue less provision for credit losses and general and administrative expenses) decreased by $2.3 million, or 9.8%.

Revenues for the three months ended September 30, 2021 increased by $13.4 million, or 10.8%, to $137.8 million from $124.4 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 three months ended September 30, 2021 increased by $9.2 million, or 8.5%, from the same period of the prior year. Interest and fee income was impacted by a shift to larger lower interest rate loans. Net loans outstanding at September 30, 2021 increased by 25.0% over the balance at September 30, 2020. Average net loans outstanding increased by 19.9% for the three months ended September 30, 2021 compared to the three-month period ended September 30, 2020.

Insurance commissions and other income for the three months ended September 30, 2021 increased by $4.2 million, or 26.7%, from the same period of the prior year. Insurance commissions increased by approximately $3.1 million, or 28.6%, during the three months ended September 30, 2021 when compared to the three months ended September 30, 2020. Insurance revenue increased due to a shift to larger loans during the quarter. The sale of insurance products are limited to large loans in several of our states. The large loan portfolio increased from 39.8% of the overall portfolio as of September 30, 2020 to 47.6% as of September 30, 2021. Other income increased by $1.1 million. Sales of our motor club product increased by $2.1 million as sales opportunities increased, similar to our insurance products, with the increase in large loan originations. The Company recorded a gain on company owned life insurance of $1.1 million in the prior year due to the death of a former executive.

On April 1, 2020, the Company replaced its incurred loss methodology with a current expected credit loss ("CECL") methodology to accrue for expected losses. The provision for credit losses increased $16.0 million, or 61.1%, to $42.0 million from $26.1 million when comparing the second quarter of fiscal 2022 to the second quarter of fiscal 2021. The provision increased during the quarter primarily due to significant loan growth during the quarter. CECL requires expected losses to be accrued at the time of origination. This increase was offset by a $3.9 million decrease in net charge-offs. Net charge-offs as a percentage of average net loans receivable on an annualized basis decreased from 14.5% in the second quarter of fiscal 2021 to 10.5% in the second quarter of fiscal 2022. The charge-off rate during the quarter benefited from the increased average tenure and reduced credit risk of customers in the portfolio as of June 30, 2021. We are experiencing lower losses on loans that were in the portfolio as of October 1, 2020 than initially predicted under our CECL methodology through September 30, 2021.

The Company's allowance for credit losses as a percentage of net loans was 11.2% at September 30, 2021 compared to 13.4% at September 30, 2020. Accounts that were 61 days or more past due on a recency basis were 5.0% of the portfolio at September 30, 2021 and 4.5% of the portfolio at September 30, 2020. Accounts that were 61 days or more past due on a contractual basis were 6.2% of the portfolio at September 30, 2021 compared to 6.2% of the portfolio at September 30, 2020.

G&A expenses for the three months ended September 30, 2021 decreased by $0.3 million, or 0.4%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses decreased from 60.5% during the three months ended September 30, 2020 to 54.4% during the three months ended September 30, 2021. G&A expenses per average open branch increased by 2.2% when comparing the two three-month periods. The change in G&A expense is explained in greater detail below.

Personnel expense totaled $45.7 million for the three months ended September 30, 2021, a $1.1 million, or 2.3%, decrease over the three months ended September 30, 2020. Salary expense decreased approximately $0.8 million, or 2.5%, when comparing the two quarterly periods ended September 30, 2021 and 2020. Our headcount as of September 30, 2021, decreased 7.5% compared to September 30, 2020. Benefit expense increased approximately $0.4 million, or 4.4%, when comparing the quarterly periods ended September 30, 2021 and 2020. Incentive expense decreased $0.8 million, or 6.5%.

Occupancy and equipment expense totaled $12.9 million for the three months ended September 30, 2021, a $0.6 million, or 4.3%, decrease over the three months ended September 30, 2020. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. For the three months ended September 30, 2021, the average occupancy and equipment expense per branch decreased to $10.7 thousand, down from $10.9 thousand for the three months ended September 30, 2020.

Advertising expense remained flat in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021. The Company anticipated an increase in demand during the quarter and increased marketing accordingly. Marketing spend remained neutral as the Company shifted to lower cost channels.

Amortization of intangible assets totaled $1.2 million for the three months ended September 30, 2021, a $40.6 thousand, or 3.2%, decrease over the three months ended September 30, 2020.

Other expense totaled $9.8 million for the three months ended September 30, 2021, a $1.4 million, or 16.3%, increase over the three months ended September 30, 2020. Other expense increased $0.4 million due to an increase in travel
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costs during the quarter and $0.3 million due to an increase in credit investigation costs as a result of an increase in customer applications during the quarter.
Interest expense for the three months ended September 30, 2021 increased by $0.8 million, or 13.9%, from the corresponding three months of the previous year. The increase in interest expense was due to a 37.8% increase in the average debt outstanding, from $380.7 million to $524.7 million, offset by a 17.1% decrease in the effective interest rate from 6.1% to 5.0%. The Company’s senior debt-to-equity ratio increased from at 1.2:1 at September 30, 2020 to 1.4:1 at September 30, 2021.

Other key return ratios for the three months ended September 30, 2021 included a 8.6% return on average assets and a return on average equity of 22.4% (both on a trailing 12-month basis), as compared to a 4.5% return on average assets and a return on average equity of 11.8% (both on a trailing 12-month basis) for the three months ended September 30, 2020.

The Company’s effective income tax rate decreased to 11.7% for the three months ended September 30, 2021 compared to 21.9% for the corresponding period of the previous year. The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises as a discrete item in the current quarter, the recognition of Federal Historic Tax Credits in the current quarter and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment being treated as a discrete item in the prior year quarter. This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current quarter and the recognition of the permanent tax benefit related to the exclusion of life insurance proceeds in the prior year quarter.


Comparison of six months ended September 30, 2021 versus six months ended September 30, 2020

Gross loans outstanding increased to $1.39 billion as of September 30, 2021, a 25.7% increase from the $1.11 billion of gross loans outstanding as of September 30, 2020. During the six months ended September 30, 2021 our number of unique borrowers in the portfolio increased by 7.1% compared to a decrease of 17.2% during the six months ended September 30, 2020.

Net income for the six months ended September 30, 2021 decreased to $28.2 million, a 2.4% decrease from the $28.9 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 $2.8 million, or 5.7%.

Revenues increased by $19.2 million, or 7.7%, to $267.5 million during the six months ended September 30, 2021 from $248.3 million for the same period of the prior year. The increase was primarily due to an increase in average net loans outstanding.

Interest and fee income for the six months ended September 30, 2021 increased by $8.5 million, or 3.9%, from the same period of the prior year. Interest and fee income was impacted by a shift to larger, lower interest rate loans. Net loans outstanding at September 30, 2021 increased by 25.0% over the balance at September 30, 2020. Average net loans outstanding increased by 10.5% for the six months ended September 30, 2021 compared to the six-month period ended September 30, 2020.

Insurance commissions and other income for the six months ended September 30, 2021 increased by $10.6 million, or 36.0%, from the same period of the prior year. Insurance commissions increased by approximately $5.1 million, or 24.4%, during the six months ended September 30, 2021 when compared to the six months ended September 30, 2020. Insurance commissions benefited from the shift to larger loans mentioned above. Other income increased by $5.5 million. Sales of our motor club product increased by $4.6 million as sales opportunities increased, similar to our insurance products, with the increase in large loan originations. Revenue from our tax preparation business increased by $1.3 million in the first half of fiscal 2022 from $2.8 million in the first half of fiscal 2021, or 47.7%. This was largely driven by a delay in the individual income tax filing season which resulted in a higher number of tax preparations being completed in the first quarter of fiscal 2022.

On April 1, 2020, the Company replaced its incurred loss methodology with a current expected credit loss ("CECL") methodology to accrue for expected losses. The provision for credit losses increased $20.6 million, or 39.7%, to $72.3 million from $51.8 million when comparing the first half of fiscal 2022 to the first half of fiscal 2021. The provision increased during the first half of the year primarily due to significant loan growth during the period. CECL requires expected losses to be accrued at the time of origination. This increase was offset by a $17.9 million decrease in net charge-offs. Net charge-offs as a percentage of average net loans receivable on an annualized basis decreased from 16.4% in the first half of fiscal 2021 to 10.9% in the first half of fiscal 2022. The charge-off rate during the quarter benefited from the increased average tenure and reduced credit risk of customers in the portfolio as of March 31, 2021. We are experiencing lower losses on loans that were in the portfolio as of October 1, 2020 than initially predicted under our CECL methodology through September 30, 2021.

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G&A expenses for the six months ended September 30, 2021 increased by $1.4 million, or 1.0%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses decreased from 59.2% during the first six months of fiscal 2021 to 55.5% during the first six months of fiscal 2022. G&A expenses per average open branch increased by 3.9% when comparing the two six-month periods. The change in G&A expense is explained in greater detail below.

Personnel expense totaled $92.0 million for the six months ended September 30, 2021, a $0.5 million, or 0.6%, increase over the six months ended September 30, 2020. Salary expense decreased approximately $1.9 million, or 3.2%, when comparing the two six month periods ended September 30, 2021 and 2020. Our headcount as of September 30, 2021, decreased 7.5% compared to September 30, 2020. Benefit expense increased approximately $2.1 million, or 12.9%, when comparing the six month periods ended September 30, 2021 and 2020. Incentive expense increased $1.5 million, or 6.9% due to an increase in branch level bonuses offset by a decrease in share-based compensation.

Occupancy and equipment expense totaled $26.5 million for the six months ended September 30, 2021, a $0.2 million, or 0.6%, decrease over the six months ended September 30, 2020. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. For the six months ended September 30, 2021, the average occupancy and equipment expense per branch increased to $22.0 thousand, up from $21.5 thousand for the six months ended September 30, 2020.

Advertising expense totaled $9.1 million for the six months ended September 30, 2021, a $1.2 million, or 15.1%, increase over the six months ended September 30, 2020. The Company anticipated an increase in demand during the period and increased marketing spend accordingly.

Amortization of intangible assets totaled $2.5 million for the six months ended September 30, 2021, a $207.9 thousand, or 7.8%, decrease over the six months ended September 30, 2020.

Other expense totaled $18.3 million for the six months ended September 30, 2021, an $0.1 million, or 0.5%, increase over the six months ended September 30, 2020.
Interest expense for the six months ended September 30, 2021 increased by $0.8 million, or 6.6%, from the corresponding six months of the previous year. The increase in interest expense was due to a 21.1% increase in the average debt outstanding, from $390.6 million to $473.1 million offset by a 13.0% decrease in the effective interest rate from 5.8% to 5.0%.

Other key return ratios for the first six months of fiscal 2022 included a 8.6% return on average assets and a return on average equity of 22.4% (both on a trailing 12-month basis), as compared to a 4.5% return on average assets and a return on average equity of 11.8% (both on a trailing 12-month basis) for the first six months of fiscal 2021.

The Company’s effective income tax rate decreased to 18.5% for the six months ended September 30, 2021 compared to 24.3% for the corresponding period of the previous year. The decrease is primarily due to the permanent tax benefit related to non-qualified stock option exercises recorded as a discrete item in the current period, the recognition of Federal Historic Tax Credits in the current period and lower than estimated Federal Historic Tax Credits for fiscal 2020 with the provision to return adjustment recorded in the prior year. This was partially offset by an increase in the disallowed executive compensation under Section 162(m) in the current period and the recognition of the permanent tax benefit related to the exclusion of life insurance proceeds in the prior year.
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 requires lenders originating short-term loans and longer-term balloon payment loans to evaluate whether each consumer has the ability to repay the loan along with current obligations and expenses (“ability to repay requirements”). The Rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an Annual Percentage Rate over 36% (“payment requirements”). The Company does not believe that the Rule will have a material impact on the Company’s existing lending procedures, because the Company currently does not make short-term consumer loans or longer-term consumer installment loans with balloon payments that would subject the Company to the Rule’s ability to repay requirements. The Company also currently underwrites all its loans (including those secured by a vehicle title that would fall within the scope of
36
these proposals) by reviewing the customer’s ability to repay based on the Company’s standards. However, implementation of the Rule’s payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

Further, on June 6, 2019, the CFPB amended the Rule to delay the August 19, 2019 compliance date for part of the Rule’s provisions, including the ability to repay requirements. The new compliance date for the ability to repay requirements is November 19, 2020. In addition, on February 6, 2019, the CFPB issued a notice of proposed rulemaking proposing to rescind provisions of the Rule governing the ability to repay requirements. The comment period for this proposed rulemaking closed in May 2019. According to the CFPB’s Fall 2019 rulemaking agenda, the CFPB is reviewing the approximately 190,000 comments it received and expected to take final action in April 2020 with respect to this proposal. However, no final action has been taken as of yet. Any regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations. Unless rescinded or otherwise amended, the Company will have to comply with the Rule’s payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a “leveraged payment mechanism” under the Rule. If the payment provisions of the Rule apply, the Company will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the final rule.

The CFPB also announced on July 7, 2020 that it will undertake new research focusing on identifying information that could be disclosed to consumers during the small dollar lending process to allow them to make the most informed choices. Depending on the outcome of this research and future action taken by the CFPB, implementation of new disclosures may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, and the profitability of such loans.

The CFPB is currently working under an acting director as the new administration’s nominee awaits congressional confirmation. These changes in the CFPB leadership could result in a change in priorities for the agency, including the Rule discussed above or other initiatives of 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 six months ended September 30, 2021 was $110.6 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.

On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 40% of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0% of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

37
We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility.

The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock; (ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends, loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants are subject to a number of important detailed qualifications and exceptions.

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises. Under the terms of our revolving credit facility and the Notes we have, subject to certain restrictions, the ability to make share repurchases of up to $90.0 million through June 30, 2022 . 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 $300,000 letter of credit under a $1.5 million subfacility.

Subject to a borrowing base formula, the Company may borrow at the rate of LIBOR plus 3.5% with a minimum rate of 4.5%. The Company’s amended and restated revolving credit agreement provides procedures for determining a replacement or alternative rate in the event LIBOR is unavailable or discontinued or if the administrative agent elects to replace LIBOR prior to its discontinuation. There can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR. We intend to monitor the developments with respect to the potential phasing out of LIBOR and will work to limit any negative impacts that could result during any transition away from LIBOR. At September 30, 2021, the aggregate commitments under the revolving credit facility were $685.0 million. The $300,000 letter of credit outstanding under the subfacility expires on December 31, 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 74% 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.

For the six months ended September 30, 2021 and fiscal year ended March 31, 2021, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 5.0% annualized and 5.8%, respectively, and the unused amount available under the revolver at September 30, 2021 was $409.0 million. Borrowings under the revolving credit facility mature on June 7, 2024.

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 also contains financial covenants, including (i) a minimum consolidated net worth of $325.0 million; (ii) a minimum fixed charge coverage ratio of 2.75 to 1.0; (iii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0; and (iv) a maximum collateral performance indicator of 24% as of the end of each calendar month. 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.

38
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 September 30, 2021 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 June 16, 2021, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company’s outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations. As of September 30, 2021, the Company had $15.5 million in aggregate remaining repurchase capacity. The timing and actual number of shares of common stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the revolving credit facility and other market and economic conditions.

The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises. Under the terms of our revolving credit facility and the Notes, we have, subject to certain restrictions, the ability to make share repurchases of at least $90.0 million through June 30, 2022. Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the revolving credit facility and the Notes. Our first priority is to ensure we have enough capital to fund loan growth. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors. As of September 30, 2021, the Company's debt outstanding was $570.6 million and its shareholders' equity was $419.0 million resulting in a debt-to-equity ratio of 1.4:1.0. Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.
 
Inflation

The Company does not believe that inflation, within reasonably anticipated rates, will have a 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. We 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. That increase in absolute revenue should offset any increase in operating costs. In addition, because the Company’s loans have a relatively short contractual term, 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.

39
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. As discussed in Note 3 – Summary of Significant Policies, to our unaudited Consolidated Financial Statements included in this report, our policies related to the allowances for credit losses changed on April 1, 2020 in connection with the adoption of a new accounting standard update as codified in ASC 326. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance account represents management’s best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions, and reasonable and supportable forecasts.
 
Share-Based Compensation

The Company measures compensation cost for share-based awards at fair value and recognizes compensation over the service period for awards expected to vest. The fair value of restricted stock is based on the number of shares granted and the quoted price of 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 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.

40
Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company’s outstanding debt under its revolving credit facility was $275.7 million at September 30, 2021. Interest on borrowing under this facility is based on the greater of 4.5% or one month LIBOR plus an applicable margin of 3.5%. Based on the outstanding balance at September 30, 2021, a change of 1.0% in the interest rate would cause a change in interest expense of approximately $2.8 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.

41
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, 2021.


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 following table details purchases of the Company's common stock made by the Company during the three months ended September 30, 2021:
(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)
July 1 through July 31, 202161,187 $163.89 61,187 $15,462,540 
August 1 through August 31, 2021— — — 15,462,540 
September 1 through September 30, 2021— — — 15,462,540 
Total for the quarter61,187 $163.89 61,187 


On June 16, 2021, the Board of Directors authorized the Company to repurchase up to $30.0 million of the Company's outstanding common stock in addition to the amount that remained available for repurchase under prior repurchase authorizations. As of September 30, 2021, the Company had $15.5 million remaining in aggregate repurchase capacity under its authorizations. The timing and actual number of shares of common stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, available funds, alternative uses of capital, restrictions under the revolving credit agreement, and other market and economic conditions. The share repurchase program does not have an expiration date and may be suspended, modified or discontinued at any time at the Company’s discretion without prior notice.

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.

42
Table of Contents
EXHIBIT INDEX
Exhibit
Number		Exhibit DescriptionFiled
Herewith		Incorporated by Reference
Form or
Registration
Number		ExhibitFiling
Date
3.01S-83.107-29-03
3.0210-Q3.0111-08-18
31.01*
31.02*
32.01*
32.02*
101.01The following materials from the Company's Quarterly Report for the fiscal quarter ended September 30, 2021, formatted in Inline XBRL:*
 (i)Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021;  
 (ii)Consolidated Statements of Operations for the three and six months ended September 30, 2021 and September 30, 2020;  
 (iii)Consolidated Statements of Shareholders' Equity for the three and six months ended September 30, 2021 and September 30, 2020;  
 (iv)Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and September 30, 2020; and  
 (v)Notes to the Consolidated Financial Statements.  
104.01Cover 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.

43
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:November 5, 2021

44

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