WORLD ACCEPTANCE CORP 10-K

Item 8. Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS March 31, 2023 2022 ASSETS Cash and cash equivalents $ 16,508,935 $ 19,236,322 Gross loans receivable 1,390,015,568 1,522,788,860 Less: Unearned interest, insurance and fees ( 376,674,349 ) ( 403,030,844 ) Allowance for credit losses ( 125,552,733 ) ( 134,242,862 ) Loans receivable, net 887,788,486 985,515,154 Operating lease right‐of‐use assets, net 81,289,240 85,631,304 Finance lease right‐of‐use assets, net — 607,512 Property and equipment, net 23,926,080 24,476,231 Deferred income taxes, net 41,722,361 39,801,457 Other assets, net 43,422,669 35,901,704 Goodwill 7,370,791 7,370,791 Intangible assets, net 15,289,579 19,756,114 Total assets $ 1,117,318,141 $ 1,218,296,589 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Senior notes payable $ 307,910,824 $ 396,972,746 Senior unsecured notes payable, net 287,352,892 295,393,991 Income taxes payable 2,532,766 7,384,169 Operating lease liability 83,735,002 87,399,049 Finance lease liability — 80,067 Accounts payable and accrued expenses 50,559,920 58,042,139 Total liabilities 732,091,404 845,272,161 Commitments and contingencies (Notes 9 and 16) Shareholders' equity: Preferred stock, no par value Authorized 5,000,000 , no shares issued or outstanding — — Common stock, no par value Authorized 95,000,000 shares; issued and outstanding 6,231,082 and 6,348,314 shares at March 31, 2023 and March 31, 2022, respectively — — Additional paid-in capital 288,071,839 280,907,085 Retained earnings 97,154,898 92,117,343 Total shareholders' equity 385,226,737 373,024,428 Total liabilities and shareholders' equity $ 1,117,318,141 $ 1,218,296,589 See accompanying notes to Consolidated Financial Statements. 39 Table of Contents CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended March 31, 2023 2022 2021 Revenues: Interest and fee income $ 508,335,681 $ 485,666,579 $ 451,113,502 Insurance and other income, net 108,209,683 99,520,174 76,876,904 Total revenues 616,545,364 585,186,753 527,990,406 Expenses: Provision for credit losses 259,463,199 186,207,341 86,244,714 General and administrative expenses: Personnel 177,690,957 183,058,343 184,620,515 Occupancy and equipment 52,106,567 52,084,641 56,160,268 Advertising 6,096,083 18,298,212 17,190,676 Amortization of intangible assets 4,466,535 5,010,275 5,474,240 Other 39,113,656 41,523,834 41,197,730 Total general and administrative expenses 279,473,798 299,975,305 304,643,429 Interest expense 50,462,594 33,424,788 25,698,836 Total expenses 589,399,591 519,607,434 416,586,979 Income before income taxes 27,145,773 65,579,319 111,403,427 Income taxes 5,913,783 11,659,482 23,120,599 Net income $ 21,231,990 $ 53,919,837 $ 88,282,828 Net income per common share: Basic $ 3.69 $ 8.88 $ 13.59 Diluted $ 3.60 $ 8.47 $ 13.23 Weighted average common shares outstanding: Basic 5,749,492 6,072,170 6,493,898 Diluted 5,898,670 6,364,066 6,672,110 See accompanying notes to Consolidated Financial Statements. 40 Table of Contents 41 Table of Contents CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Year ended March 31, 2023 Common Stock Shares Additional Paid-in Capital Retained Earnings Total Shareholders' Equity Balances at March 31, 2022 6,348,314 $ 280,907,085 92,117,343 373,024,428 Proceeds from exercise of stock options, net of cancellations 7,569 654,920 — 654,920 Common stock repurchases ( 73,643 ) — ( 14,314,089 ) ( 14,314,089 ) Restricted common stock expense under stock option plan, net of cancellations ($ 2,543,001 ) ( 51,158 ) 4,067,525 — 4,067,525 Stock option expense — 2,442,309 — 2,442,309 Cumulative effect of adoption of ASU 2023-02 — — ( 1,880,346 ) ( 1,880,346 ) Net income — — 21,231,990 21,231,990 Balances at March 31, 2023 6,231,082 $ 288,071,839 97,154,898 385,226,737 Year ended March 31, 2022 Common Stock Shares Additional Paid-in Capital Retained Earnings Total Shareholders' Equity Balances at March 31, 2021 6,805,294 $ 255,590,674 149,336,767 404,927,441 Proceeds from exercise of stock options 154,699 12,805,646 — 12,805,646 Common stock repurchases ( 589,533 ) — ( 111,139,261 ) ( 111,139,261 ) Restricted common stock expense under stock option plan, net of cancellations ($ 5,072,230 ) ( 22,146 ) 9,036,852 — 9,036,852 Stock option expense — 3,473,913 — 3,473,913 Net income — — 53,919,837 53,919,837 Balances at March 31, 2022 6,348,314 $ 280,907,085 92,117,343 373,024,428 42 Table of Contents Year ended March 31, 2021 Common Stock Shares Additional Paid-in Capital Retained Earnings Total Shareholders' Equity Balances at March 31, 2020 7,807,834 $ 227,214,577 184,748,490 411,963,067 Proceeds from exercise of stock options, net 165,237 12,268,554 — 12,268,554 Common stock repurchases ( 1,129,875 ) — ( 102,452,302 ) ( 102,452,302 ) Restricted common stock expense under stock option plan, net of cancellations ($ 3,173,735 ) ( 37,902 ) 12,302,869 — 12,302,869 Stock option expense — 3,804,674 — 3,804,674 Cumulative effect of adoption of ASC 326 — — ( 21,242,249 ) ( 21,242,249 ) Net income — — 88,282,828 88,282,828 Balances at March 31, 2021 6,805,294 $ 255,590,674 149,336,767 404,927,441 See accompanying notes to Consolidated Financial Statements. 43 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended March 31, 2023 2022 2021 Cash flow from operating activities: Net income $ 21,231,990 $ 53,919,837 $ 88,282,828 Adjustments to reconcile net income to net cash provided by operating activities: Loss on assets held for sale — 38,633 37,579 Amortization of intangible assets 4,466,535 5,010,275 5,474,240 Amortization of historic tax credits — 3,930,753 1,736,384 Accrued unearned interest 3,213,737 ( 9,032,020 ) 9,698,671 Gain on extinguishment of senior unsecured notes payable ( 1,831,277 ) — — Amortization of deferred loan costs 15,526,336 16,911,599 17,101,722 Amortization of debt issuance costs 1,654,916 1,095,325 659,292 Provision for credit losses 259,463,199 186,207,341 86,244,714 Depreciation 6,239,266 6,253,175 6,537,957 Amortization of finance leases 204,552 407,624 407,624 Gain on asset acquisition, net of income tax ( 3,993,168 ) — — Loss on sale of property and equipment 11,837 419,975 2,812,404 Deferred income tax expense (benefit) ( 2,102,085 ) ( 14,808,715 ) 5,651,362 Compensation related to stock option and restricted stock plans, net of taxes and adjustments 9,052,835 17,582,995 19,281,278 Gain on sale of loans receivable — — ( 24,667 ) Gain on company-owned life insurance ( 104,113 ) ( 106,885 ) ( 1,064,897 ) Change in accounts: Other assets, net ( 9,147,152 ) ( 8,193,529 ) ( 4,234,933 ) Income taxes payable and receivable ( 4,851,403 ) ( 4,191,692 ) 6,610,559 Accounts payable and accrued expenses ( 7,482,219 ) 17,001,850 ( 18,258,393 ) Net cash provided by operating activities 291,553,786 272,446,541 226,953,724 Cash flows from investing activities: Increase in loans receivable, net ( 152,154,050 ) ( 436,311,573 ) ( 56,143,765 ) Cash paid for acquisitions, primarily loans ( 23,131,758 ) ( 10,859,984 ) ( 19,774,252 ) Purchases of property and equipment ( 5,827,773 ) ( 6,070,414 ) ( 11,683,858 ) Proceeds from sale of property and equipment 529,781 245,935 346,943 Proceeds from the sale of assets held for sale — 1,104,895 2,810,391 Proceeds from the sale of loans receivable — — 449,327 Proceeds from company-owned life insurance — — 1,997,279 Net cash used in investing activities ( 180,583,800 ) ( 451,891,141 ) ( 81,997,935 ) Cash flow from financing activities: Borrowings from senior notes payable 313,862,948 515,315,246 310,984,250 Payments on senior notes payable ( 402,924,870 ) ( 523,350,000 ) ( 357,076,750 ) Payments for extinguished senior unsecured notes payable ( 7,171,700 ) — — Issuance of senior unsecured notes payable — 300,000,000 — Debt issuance costs associated with senior unsecured notes payable ( 19,656 ) ( 5,119,647 ) — Payments for debt extinguishment costs ( 22,850 ) — — Debt issuance costs associated with senior notes payable ( 1,139,008 ) — ( 784,250 ) Proceeds from exercise of stock options 654,920 12,805,646 12,268,554 Payments for taxes related to net share settlement of equity awards ( 2,543,001 ) ( 5,072,230 ) ( 3,173,735 ) Repurchase of common stock ( 14,314,089 ) ( 111,139,261 ) ( 102,452,302 ) Repayment of finance lease ( 80,067 ) ( 505,286 ) ( 594,024 ) 44 Table of Contents Net cash provided by (used in) financing activities ( 113,697,373 ) 182,934,468 ( 140,828,257 ) Net change in cash and cash equivalents ( 2,727,387 ) 3,489,868 4,127,532 Cash and cash equivalents at beginning of year 19,236,322 15,746,454 11,618,922 Cash and cash equivalents at end of year $ 16,508,935 $ 19,236,322 $ 15,746,454 Supplemental Disclosures: Interest paid during the year $ 51,761,768 $ 21,318,911 $ 24,993,898 Income taxes paid during the year $ 10,783,143 $ 30,941,852 $ 14,857,555 Finance lease right-of-use assets, net transferred to property and equipment, net $ 402,960 $ — $ — See accompanying notes to Consolidated Financial Statements. 45 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 46 Table of Contents (1) Summary of Significant Accounting Policies The Company's accounting and reporting policies are in accordance with GAAP and conform to general practices within the finance company industry. The following is a description of the more significant of these policies used in preparing the Consolidated Financial Statements. Nature of Operations The Company is a small-dollar consumer finance (installment loan) company headquartered in Greenville, South Carolina that offers short-term small loans, medium-term larger loans, related credit insurance products and ancillary products and services to individuals who have limited access to other sources of consumer credit. It also offers income tax return preparation services to its customer base and to others. As of March 31, 2023, the Company operated 1,073 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, and Wisconsin. Branches in the aforementioned states operate under one of the following names: World Finance Corporation or World Finance. Principles of Consolidation The Consolidated Financial Statements include the accounts of World Acceptance Corporation and its wholly-owned subsidiaries (the “Company”). Subsidiaries consist of operating entities in various states and WAC Insurance Company, Ltd. (a captive reinsurance company). All significant inter-company balances and transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant item subject to such estimates and assumptions that could materially change in the near term is the allowance for credit losses. Reclassification Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications had no impact on previously reported net income or shareholders' equity. Business Segments The Company reports operating segments in accordance with FASB ASC Topic 280. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. FASB ASC Topic 280 requires that a public enterprise report a measure of segment profit or loss, certain specific revenue and expense items, segment assets, information about the way that the operating segments were determined and other items. The Company has one reportable segment. The other revenue generating activities of the Company, including the sale of insurance products, income tax preparation, and the automobile club, are done within the existing branch network in conjunction with or as a complement to the lending operations. There is no discrete financial information available for these activities, and they do not meet the criteria under FASB ASC Topic 280 to be considered operating segments. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less from the date of original issuance to be cash equivalents. As of March 31, 2023 and 2022, the Company had $ 8.3 million and $ 7.8 million, respectively, in restricted cash associated with its captive insurance subsidiary that reinsures a portion of the credit insurance sold in connection with loans made by the Company. 47 Table of Contents Loans and Interest and Fee Income The Company is licensed to originate consumer loans in the states of Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Utah, and Wisconsin. During fiscal 2023, 2022, and 2021, the Company originated loans generally ranging up to $ 6,000 with terms of 60 months or fewer. Experience indicates that a majority of the consumer loans are refinanced, and the Company accounts for the majority of the refinancings as new loans. Generally, a customer must make multiple payments in order to qualify for refinancing. Furthermore, the Company's lending policy has predetermined lending amounts so that in most cases a refinancing will result in advancing additional funds. The Company believes that the advancement of additional funds constitutes more than a minor modification to the terms of the existing loan if the present value of the cash flows under the terms of the new loan will be 10% or more of the present value of the remaining cash flows under the terms of the original loan. The following table sets forth information about our loan products for fiscal 2023: Minimum Origination Maximum Origination Minimum Term (Months) Maximum Term (Months) Small loans $ 500 $ 2,450 5 31 Large loans 2,500 33,450 10 60 Tax advance loans 500 5,000 8 8 Gross loans receivable at March 31, 2023 and 2022 consisted of the following: 2023 2022 Small loans $ 580,107,889 $ 727,852,627 Large loans 807,345,625 789,112,912 Tax advance loans 2,562,054 5,823,321 Total gross loans $ 1,390,015,568 $ 1,522,788,860 Fees received and direct costs incurred for the origination of loans are deferred and amortized to interest income over the contractual lives of the loans using the interest method. Unamortized amounts are recognized in interest income at the time that loans are refinanced or paid in full except for those refinancings that do not constitute a more than minor modification. Loans are carried at the gross amount outstanding, reduced by unearned interest and insurance income, net of deferred origination fees and direct costs, and an allowance for credit losses. Net unamortized deferred origination costs were $ 4.9 million and $ 6.9 million as of March 31, 2023 and 2022, respectively. The Company recognizes interest and fee income using the interest method. Charges for late payments are recognized in interest and fee income when collected. With the exception of tax advance loans, which are interest free, the Company offers its loans at the prevailing statutory rates for terms not to exceed 60 months. Management believes that the carrying value approximates the fair value of its loan portfolio. Nonaccrual Policy The accrual of interest is discontinued when a loan is 61 days or more past the contractual due date. When the interest accrual is discontinued, all unpaid accrued interest is reversed against interest income. While a loan is on nonaccrual status, interest income is recognized only when a payment is received. Once a loan moves to nonaccrual status, it remains in nonaccrual status until it is paid out, charged off or refinanced. 48 Table of Contents Allowance for Credit Losses Refer to Note 2, “Allowance for Credit Losses and Credit Quality Information”, for information regarding the Company's adoption of the CECL allowance model on April 1, 2020 and a description of the methodology it utilizes. Impaired Loans The Company defines impaired loans as bankrupt accounts and accounts 91 days or more past due on a recency basis. In accordance with the Company’s charge-off policy, once a loan is deemed uncollectible, 100% of the net investment is charged off, except in the case of a borrower who has filed for bankruptcy. As of March 31, 2023 and 2022, bankrupt accounts that had not been charged off were approximately $ 6.8 million and $ 5.4 million, respectively. Bankrupt accounts 91 days or more past due on a recency basis are reserved at 100% of the gross loan balance. The Company also considers any accounts 91 days or more past due on a recency basis to be impaired, and such accounts are reserved at 100% of the gross loan balance, less a rehab rate for defaulted loans that do not charge-off. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful life of the related asset as follows: buildings, 25 to 40 years; furniture and fixtures, 5 to 10 years; equipment, 3 to 7 years; and vehicles, 3 years. Amortization of leasehold improvements is recorded using the straight-line method over the lesser of the estimated useful life of the asset, which is generally five years , or the lease term, which is generally three to five years . Additions to premises and equipment and major replacements or improvements are added at cost. Maintenance, repairs, and minor replacements are charged to operating expense as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in Insurance and other income, net in the Consolidated Statements of Operations. Leases For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records ROU assets and lease liabilities for its leases, which are initially recognized based on the discounted future lease payments over the term of the lease. The Company uses its effective annual or fourth quarter interest rate as the discount rate when evaluating leases. Refer to Note 9, "Leases", for further discussion of the discount rate. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU assets and lease obligations for its short-term equipment leases, which are defined as leases with an initial term of 12 months or less. Further, the Company has elected to not separate lease from non-lease components. Variable lease costs include expenses such as common area maintenance, utilities, and repairs and maintenance. Other Assets Other assets include cash surrender value of life insurance policies, HTC investments, prepaid expenses, debt issuance costs related to the senior notes payable, and other deposits and receivables. Debt Issuance Costs In accordance with ASC 835, debt issuance costs related to the senior unsecured notes payable are presented as a direct deduction from its carrying value in the Consolidated Balance Sheets. Unamortized debt issuance costs related to the senior unsecured notes payable as of March 31, 2023 and 2022 were $ 3.5 million and 4.6 million, respectively. As the Company intends to pay down the senior notes payable throughout the contractual arrangement, debt issuance costs related to this arrangement are presented as an asset within Other assets in the Consolidated Balance Sheets as discussed above. Unamortized debt issuance costs related to the senior notes payable as of March 31, 2023 and 2022 were $ 1.2 million and $ 0.7 million, respectively. 49 Table of Contents Intangible Assets and Goodwill Intangible assets include the cost of acquiring existing customers ("customer lists") and the fair value assigned to non-compete agreements. Customer lists are amortized on a straight line or accelerated basis over their estimated period of benefit, ranging from 8 to 23 years with a weighted average of approximately 9.4 years. Non-compete agreements are amortized on a straight line basis over the term of the agreement, ranging from 3 to 5.3 years with a weighted average of approximately 4.7 years. Customer lists are allocated at a branch level and are evaluated for impairment at a branch level when a triggering event occurs, in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment loss to the customer list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair value of the customer list allocated to a branch is less than $100,000, and management believes that in the event a triggering event were to occur, the impairment loss to an unamortized customer list would be immaterial. Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company believes approximates the fair value. The fair value of the customer lists is based on a valuation model that utilizes the Company’s historical data to estimate the value of any acquired customer lists. In a business combination, the remaining excess of the purchase price over the fair value of the tangible assets, customer list, and non-compete agreements is allocated to goodwill. The branches the Company acquires are small, privately-owned branches, which do not have sufficient historical data to determine customer attrition. The Company believes that the customers acquired have the same characteristics and perform similarly to its customers. Therefore, the Company utilized the attrition patterns of its customers when developing the estimate of attrition for acquired customers. This estimation method is re-evaluated periodically. The Company evaluates goodwill annually for impairment in the fourth quarter of the fiscal year using the market value-based approach. The Company has one reporting unit, and the Company has multiple components, the lowest level of which is individual branches. The Company’s components are aggregated for impairment testing as they have similar economic characteristics. Impairment of Long-Lived Assets The Company assesses impairment of long-lived assets, including property and equipment and intangible assets, whenever changes or events indicate that the carrying amount may not be recoverable. The Company assesses impairment of these assets generally at the branch level based on the operating cash flows of the branch and the Company’s plans for branch closings. The Company will write down such assets to fair value if, based on an analysis, the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets. The Company did not record any impairment charges for the fiscal years ended March 31, 2023, 2022, or 2021. Fair Value of Financial Instruments FASB ASC Topic 825 requires disclosures about the fair value of all financial instruments, regardless of whether the financial instrument is recognized on the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. The Company’s financial instruments for the periods reported consist of the following: cash and cash equivalents, loans receivable, senior notes payable, and senior unsecured notes payable. Loans receivable are originated at prevailing market rates and have an average life of less than twelve months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company’s senior notes payable has a variable rate based on a margin over SOFR and reprices with any changes in SOFR. The fair value of the senior unsecured notes payable is estimated based on quoted prices in markets that are not active. 50 Table of Contents Insurance Premiums and Commissions Insurance premiums for credit life, accident and health, property and unemployment insurance written in connection with certain loans, net of refunds and applicable advance insurance commissions retained by the Company, are remitted monthly to an insurance company. All commissions are recorded to unearned insurance commissions and recognized as insurance income over the life of the related insurance contracts. The Company recognizes insurance income using the Rule of 78s method for credit life (decreasing term), credit accident and health, unemployment insurance and the Pro Rata method for credit life (level term) and credit property. Non-filing Insurance Non-filing insurance premiums are charged on certain loans in lieu of recording and perfecting the Company's security interest in the assets pledged. The premiums and recoveries are remitted to a third party insurance company and are not reflected in the accompanying Consolidated Financial Statements (see Note 8). Claims paid by the third party insurance company result in a reduction to credit losses. Certain losses related to such loans, which are not recoverable through life, accident and health, property, or unemployment insurance claims, are reimbursed through non-filing insurance claims subject to policy limitations. Any remaining losses are charged to the allowance for credit losses. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment related to additional facts and circumstances occurs. Earnings Per Share Earnings per share (“EPS”) is computed in accordance with FASB ASC Topic 260. Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings of the Company. Potential common stock included in the diluted EPS computation consists of stock options and restricted stock, which are computed using the treasury stock method. See Note 11 for the reconciliation of the numerators and denominators for basic and dilutive EPS calculations. Stock-Based Compensation FASB ASC Topic 718-10 requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees. FASB ASC Topic 718-10 does not change the accounting guidance for share-based payment transactions with parties other than employees provided in FASB ASC Topic 718-10. Under FASB ASC Topic 718-10, the way an award is classified will affect the measurement of compensation cost. Liability-classified awards are remeasured to fair value at each balance-sheet date until the award is settled. Equity-classified awards are measured at grant-date fair value, amortized over the subsequent vesting period, and are not subsequently remeasured. The fair value of non-vested stock awards for the purposes of recognizing stock-based compensation expense is the market price of the stock on the grant date. The fair value of options is estimated on the grant date using the Black-Scholes option pricing model (see Note 12). The Company accounts for forfeitures as they occur. At March 31, 2023, the Company had several share-based employee compensation plans, which are described more fully in Note 12. Share Repurchases 51 Table of Contents On February 24, 2022, the Board of Directors authorized the Company to repurchase up to $ 30.0 million of the Company’s outstanding common stock, inclusive of the amount that remains available for repurchase under prior repurchase authorizations. As of March 31, 2023, the Company had $ 1.1 million in aggregate remaining repurchase capacity under its current share repurchase program. The timing and actual number of shares of common stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the revolving credit facility and other market and economic conditions. The Company continues to believe stock repurchases are a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises. As of March 31, 2023 our debt outstanding was $ 595.3 million, net of $ 3.5 million unamortized debt issuance costs related to the unsecured senior notes payable, and our shareholders' equity was $ 385.2 million resulting in a debt-to-equity ratio of 1.6 :1.0. Concentration of Risk The Company generally serves individuals with limited access to other sources of consumer credit such as banks, credit unions, other consumer finance businesses and credit card lenders. During the year ended March 31, 2023, the Company operated in sixteen states in the United States. For fiscal years ended March 31, 2023, 2022, and 2021, gross loan receivable within the Company's four largest states accounted for approximately 52 % of the Company's gross loans receivable balance. The Company maintains amounts in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced losses in such accounts, which are maintained with large domestic banks. Management believes the Company’s exposure to credit risk is minimal for these accounts. Advertising Costs Advertising costs are expensed when incurred. Advertising costs were approximately $ 6.1 million, $ 18.3 million, and $ 17.2 million for fiscal years 2023, 2022, and 2021, respectively. Recently Adopted Accounting Standards Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method In March 2023, the FASB issued ASU No. 2023-02, Investments- Equity Method and Joint Venture (Topic 323) . The amendments in this ASU permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. If an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period. The amendments in this pronouncement must be applied on either a modified retrospective or retrospective basis. The Company adopted this ASU as of April 1, 2022 using the modified retrospective approach. The adoption of this ASU resulted in a $ 1.9 million cumulative adjustment to the opening balance of retained earnings. Refer to Note 10 for further details. Recently Issued Accounting Standards Not Yet Adopted Troubled Debt Restructurings and Vintage Disclosures In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures . The amendments in this update eliminate the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors , while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost . For entities that have adopted the amendments in Update 2016-13, the amendments in this update are effective for fiscal years 52 Table of Contents beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively, with the exception of the transition method related to the recognition and measurement of troubled debt restructurings in which an entity has the option to apply a modified retrospective transition method. Early adoption is permitted. We are currently evaluating the impact the adoption of this update will have on our Consolidated Financial Statements. We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on the Consolidated Financial Statements as a result of future adoption. 53 Table of Contents (2) Allowance for Credit Losses and Credit Quality Information The following is a summary of gross loans receivable by Customer Tenure as of: Customer Tenure March 31, 2023 March 31, 2022 0 to 5 months $ 81,803,668 $ 198,740,475 6 to 17 months 133,650,188 133,665,566 18 to 35 months 135,396,187 204,940,323 36 to 59 months 244,414,255 214,956,857 60+ months 792,189,216 764,662,319 Tax advance loans 2,562,054 5,823,320 Total gross loans $ 1,390,015,568 $ 1,522,788,860 During the first quarter of fiscal 2021, we adopted ASU 2016-13, which replaces the incurred loss methodology for determining our provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model, using the modified retrospective approach. Upon adoption, the total allowance for credit losses increased by $ 28.6 million, with no impact to the Consolidated Statements of Operations. Based on the Company’s loan products, the purpose and the term, current payment performance is used to assess the capability of the borrower to repay contractual obligations of the loan agreements as scheduled. Current payment performance is monitored by management on a daily basis. On an as needed basis, qualitative information may be taken into consideration if new information arises related to the customer’s ability to repay the loan. The Company’s payment performance buckets are as follows: current, 30-60 days past due, 61-90 days past due, 91 days or more past due. The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a recency basis and year of origination at March 31, 2023: Term Loans By Origination Loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,200,504,088 $ 62,076,656 $ 1,998,218 $ 148,662 $ 23,046 $ 6,863 $ 1,264,757,533 30 - 60 days past due 40,791,746 4,689,867 160,956 42,700 8,504 2,988 45,696,761 61 - 90 days past due 26,319,250 2,572,733 92,088 40,281 884 — 29,025,236 91 or more days past due 41,832,821 5,944,645 160,361 29,494 4,430 2,233 47,973,984 Total $ 1,309,447,905 $ 75,283,901 $ 2,411,623 $ 261,137 $ 36,864 $ 12,084 $ 1,387,453,514 Term Loans By Origination Tax advance loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,932,607 $ 3,524 $ — $ — $ — $ — $ 1,936,131 30 - 60 days past due 609,844 736 — — — — 610,580 61 - 90 days past due — 4,845 — — — — 4,845 91 or more days past due 409 10,089 — — — — 10,498 Total $ 2,542,860 $ 19,194 $ — $ — $ — $ — $ 2,562,054 Total gross loans $ 1,390,015,568 54 Table of Contents The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a recency basis and year of origination at March 31, 2022: Term Loans By Origination Loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,322,332,136 $ 34,273,199 $ 2,665,078 $ 152,105 $ 21,539 $ 3,972 $ 1,359,448,029 30 - 60 days past due 49,517,859 2,114,463 247,291 28,011 2,664 — 51,910,288 61 - 90 days past due 36,707,960 989,136 130,763 13,031 5,594 — 37,846,484 91 or more days past due 64,238,626 3,239,753 248,596 24,377 5,386 4,001 67,760,739 Total $ 1,472,796,581 $ 40,616,551 $ 3,291,728 $ 217,524 $ 35,183 $ 7,973 $ 1,516,965,540 Term Loans By Origination Tax advance loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 4,737,741 $ 7,033 $ — $ — $ — $ — $ 4,744,774 30 - 60 days past due 1,060,811 1,334 — — — — 1,062,145 61 - 90 days past due — 432 — — — — 432 91 or more days past due 2,922 13,047 — — — — 15,969 Total $ 5,801,474 $ 21,846 $ — $ — $ — $ — $ 5,823,320 Total gross loans $ 1,522,788,860 The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a contractual basis and year of origination at March 31, 2023: 55 Table of Contents Term Loans By Origination Loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,174,237,761 $ 53,652,011 $ 1,554,144 $ 64,233 $ 5,142 $ 1,491 $ 1,229,514,782 30 - 60 days past due 47,346,331 3,661,493 77,857 6,714 — — 51,092,395 61 - 90 days past due 33,012,804 3,030,052 44,129 7,643 — — 36,094,628 91 or more days past due 54,851,010 14,940,345 735,493 182,547 31,721 10,593 70,751,709 Total $ 1,309,447,906 $ 75,283,901 $ 2,411,623 $ 261,137 $ 36,863 $ 12,084 $ 1,387,453,514 Term Loans By Origination Tax advance loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,932,607 $ — $ — $ — $ — $ — $ 1,932,607 30 - 60 days past due 609,844 — — — — — 609,844 61 - 90 days past due — — — — — — — 91 or more days past due 409 19,194 — — — — 19,603 Total $ 2,542,860 $ 19,194 $ — $ — $ — $ — $ 2,562,054 Total gross loans $ 1,390,015,568 The following tables provide a breakdown of the Company’s gross loans receivable by current payment performance on a contractual basis and year of origination at March 31, 2022: 56 Table of Contents Term Loans By Origination Loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 1,290,448,366 $ 29,913,995 $ 1,994,474 $ 68,836 $ 9,586 $ 699 $ 1,322,435,956 30 - 60 days past due 57,225,953 1,508,794 91,118 5,519 — — 58,831,384 61 - 90 days past due 45,276,797 1,271,187 96,233 986 — — 46,645,203 91 or more days past due 79,845,465 7,922,574 1,109,903 142,183 25,598 7,274 89,052,997 Total $ 1,472,796,581 $ 40,616,550 $ 3,291,728 $ 217,524 $ 35,184 $ 7,973 $ 1,516,965,540 Term Loans By Origination Tax advance loans Up to 1 Year Ago Between 1 and 2 Years Ago Between 2 and 3 Years Ago Between 3 and 4 Years Ago Between 4 and 5 Years Ago More than 5 Years Ago Total Current $ 4,737,741 $ — $ — $ — $ — $ — $ 4,737,741 30 - 60 days past due 1,060,329 — — — — — 1,060,329 61 - 90 days past due — — — — — — — 91 or more days past due 3,404 21,846 — — — — 25,250 Total $ 5,801,474 $ 21,846 $ — $ — $ — $ — $ 5,823,320 Total gross loans $ 1,522,788,860 The allowance for credit losses is applied to amortized cost, which is defined as the amount at which a financing receivable is originated, and net of deferred fees and costs, collection of cash, and charge-offs. Amortized cost also includes interest earned but not collected. Credit risk is inherent in the business of extending loans to borrowers and is continuously monitored by management and reflected within the allowance for credit losses for loans. The allowance for credit losses is an estimate of expected losses inherent within the Company’s gross loans receivable portfolio. In estimating the allowance for credit losses, loans with similar risk characteristics are aggregated into pools and collectively assessed. The Company’s loan products have generally the same terms; therefore, the Company looks to borrower characteristics as a way to disaggregate loans into pools sharing similar risks. In determining the allowance for credit losses, the Company examined four borrower risk metrics as noted below. 1. Borrower type 2. Active months 3. Prior loan performance 4. Customer Tenure To determine how well each metric predicts default risk, the Company used loss rate data over an observation period of twelve months at the loan level. The information value was then calculated for each metric. From this analysis, management determined the metric that had the strongest predictor of default risk was Customer Tenure. The Customer Tenure buckets used in the allowance for credit loss calculation are: 1. 0 to 5 months 2. 6 to 17 months 3. 18 to 35 months 4. 36 to 59 months 5. 60+ months 57 Table of Contents Management will continue to monitor this credit metric on a quarterly basis. Management estimates an allowance for each Customer Tenure bucket by performing a historical migration analysis of loans in that bucket for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. All loans that are greater than 90 days past due on a recency basis and not written off as of the reporting date are reserved for at 100% of the outstanding balance, net of a calculated Rehab Rate. Management considers whether current credit conditions might suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new borrowers, 60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of gross loans that are acquired loans. From time to time, the Company will make changes, as deemed appropriate, to our new borrower (NB) underwriting guidance. As a result, management also considers whether a change in our NB underwriting might suggest a change is needed to the allowance for credit losses. As of March 31, 2023, there were no current credit conditions or other factors considered significant enough to warrant a change to the allowance for credit losses. Due to the short term nature of the loan portfolio, forecasted changes in macro-economic variables such as unemployment do not have a significant impact on loans outstanding at the end of a particular reporting period. Therefore, management develops a reasonable and supportable forecast of losses by comparing the most recent 6-month loss curves as compared to historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical migration rates should be adjusted. If an adjustment is made as a result of the forecast, then the Company has elected to immediately revert back to historical experience past the forecast period. The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at March 31, 2023: Days Past Due - Recency Basis Customer Tenure Current 30 - 60 61 - 90 Over 90 Total Past Due Total Loans 0 to 5 months $ 64,615,315 $ 5,451,276 $ 4,407,751 $ 7,329,327 $ 17,188,354 $ 81,803,669 6 to 17 months 113,946,833 6,527,355 4,655,441 8,520,559 19,703,355 133,650,188 18 to 35 months 120,125,820 5,336,994 3,727,331 6,206,041 15,270,366 135,396,186 36 to 59 months 217,851,608 7,871,872 4,713,501 7,525,438 20,110,811 237,962,419 60+ months 748,217,957 20,509,264 11,521,212 18,392,619 50,423,095 798,641,052 Tax advance loans 1,936,131 610,580 4,845 10,498 625,923 2,562,054 Total gross loans 1,266,693,664 46,307,341 29,030,081 47,984,482 123,321,904 1,390,015,568 Unearned interest, insurance and fees ( 343,255,876 ) ( 12,548,627 ) ( 7,866,737 ) ( 13,003,109 ) ( 33,418,473 ) ( 376,674,349 ) Total net loans $ 923,437,788 $ 33,758,714 $ 21,163,344 $ 34,981,373 $ 89,903,431 $ 1,013,341,219 Percentage of period-end gross loans receivable 3.3 % 2.1 % 3.5 % 8.9 % The following table is an aging analysis on a recency basis at amortized cost of the Company’s gross loans receivable at March 31, 2022: 58 Table of Contents Days Past Due - Recency Basis Customer Tenure Current 30 - 60 61 - 90 Over 90 Total Past Due Total Loans 0 to 5 months $ 145,168,588 $ 13,450,365 $ 14,196,717 $ 25,924,805 $ 53,571,887 $ 198,740,475 6 to 17 months 116,065,794 5,548,699 4,148,743 7,902,330 17,599,772 133,665,566 18 to 35 months 183,697,553 7,220,814 4,903,686 9,118,270 21,242,770 204,940,323 36 to 59 months 193,820,229 5,951,049 3,452,087 5,712,662 15,115,798 208,936,027 60+ months 720,695,865 19,739,361 11,145,251 19,102,672 49,987,284 770,683,149 Tax advance loans 4,744,774 1,062,145 432 15,969 1,078,546 5,823,320 Total gross loans 1,364,192,803 52,972,433 37,846,916 67,776,708 158,596,057 1,522,788,860 Unearned interest, insurance and fees ( 361,055,818 ) ( 14,020,016 ) ( 10,016,802 ) ( 17,938,208 ) ( 41,975,027 ) ( 403,030,844 ) Total net loans $ 1,003,136,985 $ 38,952,417 $ 27,830,114 $ 49,838,500 $ 116,621,030 $ 1,119,758,016 Percentage of period-end gross loans receivable 3.5 % 2.5 % 4.5 % 10.4 % The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a contractual basis and year of origination at March 31, 2023: Days Past Due - Contractual Basis Loans Current 30 - 60 61 - 90 Over 90 Total Past Due Total Loans 0 to 5 months $ 61,850,144 $ 5,320,659 $ 4,864,498 $ 9,768,369 $ 19,953,526 $ 81,803,670 6 to 17 months 109,694,389 6,892,610 5,613,468 11,449,721 23,955,799 133,650,188 18 to 35 months 115,711,781 5,721,694 4,499,010 9,463,701 19,684,405 135,396,186 36 to 59 months 212,104,582 8,751,303 5,917,982 11,188,551 25,857,836 237,962,418 60+ months 730,153,886 24,406,129 15,199,670 28,881,367 68,487,166 798,641,052 Tax advance loans 1,932,607 609,844 — 19,603 629,447 2,562,054 Total gross loans $ 1,231,447,389 $ 51,702,239 $ 36,094,628 $ 70,771,312 $ 158,568,179 $ 1,390,015,568 Unearned interest, insurance and fees $ ( 333,704,639 ) $ ( 14,010,568 ) $ ( 9,781,128 ) $ ( 19,178,014 ) $ ( 42,969,710 ) $ ( 376,674,349 ) Total net loans $ 897,742,750 $ 37,691,671 $ 26,313,500 $ 51,593,298 $ 115,598,469 $ 1,013,341,219 Percentage of period-end gross loans receivable 3.7 % 2.6 % 5.1 % 11.4 % The following table provides a breakdown of the Company’s gross loans receivable by current payment performance on a contractual basis and year of origination at March 31, 2022: 59 Table of Contents Days Past Due - Contractual Basis Loans Current 30 - 60 61 - 90 Over 90 Total Past Due Total Loans 0 to 5 months $ 140,570,461 $ 14,090,712 $ 15,380,836 $ 28,698,466 $ 58,170,014 $ 198,740,475 6 to 17 months 112,465,841 6,032,347 4,922,939 10,244,439 21,199,725 133,665,566 18 to 35 months 177,565,328 8,067,815 6,273,351 13,033,829 27,374,995 204,940,323 36 to 59 months 188,849,569 6,994,891 4,624,136 8,467,431 20,086,458 208,936,027 60+ months 702,984,756 23,645,619 15,443,941 28,608,833 67,698,393 770,683,149 Tax advance loans 4,737,742 1,060,329 — 25,249 1,085,578 5,823,320 Total gross loans $ 1,327,173,697 $ 59,891,713 $ 46,645,203 $ 89,078,247 $ 195,615,163 $ 1,522,788,860 Unearned interest, insurance and fees $ ( 351,258,109 ) $ ( 15,851,316 ) $ ( 12,345,412 ) $ ( 23,576,007 ) $ ( 51,772,735 ) $ ( 403,030,844 ) Total net loans $ 975,915,588 $ 44,040,397 $ 34,299,791 $ 65,502,240 $ 143,842,428 $ 1,119,758,016 Percentage of period-end gross loans receivable 3.9 % 3.1 % 5.8 % 12.8 % The Company elected not to record an allowance for credit losses for accrued interest as outlined in ASC 326-20-30-5A. Loans are placed on nonaccrual status when management determines that the full payment of principal and collection of interest according to contractual terms is no longer likely. The accrual of interest is discontinued when a loan is 61 days or more past the contractual due date. When the interest accrual is discontinued, all unpaid accrued interest is reversed against interest income. While a loan is on nonaccrual status, interest income is recognized only when a payment is received. Once a loan moves to nonaccrual status, it remains in nonaccrual status until it is paid out, charged off or refinanced. During the twelve months ended March 31, 2023 and March 31, 2022, the Company reversed a total of $ 36.5 million and $ 30.6 million, respectively of unpaid accrued interest against interest income. The following table presents the amortized cost basis of loans on nonaccrual status as of March 31, 2023 and March 31, 2022, as well as interest income recognized on nonaccrual loans for the years ended March 31, 2023, 2022, and 2021: Nonaccrual Loans Receivable Customer Tenure As of March 31, 2023 As of March 31, 2022 Interest Income Recognized Fiscal 2023 Interest Income Recognized Fiscal 2022 Interest Income Recognized Fiscal 2021 0 to 5 months $ 15,781,494 $ 45,227,510 $ 2,032,098 $ 1,485,356 $ 1,705,371 6 to 17 months 18,288,714 15,879,250 1,815,167 1,662,082 2,433,144 18 to 35 months 15,551,806 20,745,106 2,385,356 2,292,776 2,195,160 36 to 59 months 19,175,410 14,232,388 2,326,640 1,602,011 1,609,059 60+ months 49,855,801 47,565,819 7,047,726 5,615,521 6,747,722 Tax advance loans 19,603 25,249 — — — Unearned interest, insurance and fees ( 32,158,640 ) ( 38,026,011 ) — — — Total $ 86,514,188 $ 105,649,311 $ 15,606,987 $ 12,657,746 $ 14,690,456 As of March 31, 2023 and March 31, 2022, there were no loans receivable 61 days or more past due, not on nonaccrual status, and no loans receivable with no related allowance for credit losses. The following is a summary of the changes in the allowance for credit losses for the years ended March 31, 2023, 2022, and 2021: 60 Table of Contents 2023 2022 2021 Balance at beginning of period $ 134,242,862 $ 91,722,288 $ 96,487,856 Impact of ASC 326 adoption — — 28,628,368 Provision for credit losses 259,463,199 186,207,341 86,244,714 Charge-offs 1 ( 302,380,145 ) ( 164,747,552 ) ( 141,270,125 ) Recoveries 2 34,226,817 21,060,785 21,631,475 Net charge-off ( 268,153,328 ) ( 143,686,767 ) ( 119,638,650 ) Balance at end of period $ 125,552,733 $ 134,242,862 $ 91,722,288 (3) Property and Equipment Property and equipment consist of: March 31, 2023 March 31, 2022 Land $ 100,443 $ 100,443 Building and leasehold improvements 18,504,321 18,477,313 Furniture and equipment 56,482,568 56,273,499 75,087,332 74,851,255 Less accumulated depreciation and amortization ( 51,161,252 ) ( 50,375,024 ) Total $ 23,926,080 $ 24,476,231 Depreciation expense was approximately $ 6.2 million, $ 6.3 million, and $ 6.5 million for the years ended March 31, 2023, 2022, and 2021, respectively. (4) Intangible Assets The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets: March 31, 2023 March 31, 2022 Gross Carrying Amount Accumulated Amortization Net Intangible Asset Gross Carrying Amount Accumulated Amortization Net Intangible Asset Cost of customer lists $ 55,730,620 $ ( 40,950,350 ) $ 14,780,270 $ 55,730,620 $ ( 36,907,598 ) $ 18,823,022 Value assigned to non-compete agreements 10,528,143 ( 10,018,834 ) 509,309 10,528,143 ( 9,595,051 ) 933,092 Total $ 66,258,763 $ ( 50,969,184 ) $ 15,289,579 $ 66,258,763 $ ( 46,502,649 ) $ 19,756,114 The estimated amortization expense for intangible assets for future fiscal years ended March 31 is as follows: $ 4.2 million for 2024; $ 3.8 million for 2025; $ 3.2 million for 2026; $ 2.7 million for 2027; $ 0.9 million for 2028; and an aggregate of $ 0.5 million for the years thereafter. 1 The Company saw a significant increase in charge-offs in fiscal 2023 primarily due to the higher proportion of new borrowers at the beginning of the current fiscal year. Additionally, new borrowers originated in the prior fiscal year performed worse than expected due to macro-economic factors. 2 Recoveries for the year ended March 31, 2023 include $ 15.8 million in proceeds related to the sale of charge-offs, for which $ 8.4 million relates to bulk sales of charge-offs from prior periods and $ 7.4 million relates to recurring sales of charge-offs. This gain on sale is included as a component of Provision for credit losses in the Consolidated Statements of Operations. 61 Table of Contents (5) Goodwill As of March 31, 2023 and 2022, goodwill was $ 7.4 million. There were no goodwill additions during fiscal 2023 and 2022. The Company performed an annual impairment test during the fourth quarters of fiscal 2023 and 2022 and determined none of its recorded goodwill was impaired. (6) Debt Senior Notes Payable; Revolving Credit Facility At March 31, 2023, the Company's senior notes payable consisted of a $ 685.0 million senior revolving credit facility, which has an accordion feature permitting the maximum aggregate commitments to increase to $ 785.0 million provided that certain conditions are met. At March 31, 2023, $ 307.9 million was outstanding under the facility, not including a $ 300.0 thousand outstanding standby letter of credit related to workers compensation. To the extent that the letter of credit is drawn upon, the disbursement will be funded by the credit facility. There are no amounts due related to the letter of credit as of March 31, 2023. The letter of credit expires on December 31, 2023; however, it automatically extends for one year on the expiration date. Subject to a borrowing base formula, the Company may borrow at the rate of one month SOFR plus 0.10 % and an applicable margin of 3.5 %, with a minimum rate of 4.5 %. The revolving credit facility has a commitment fee of 0.50 % per annum on the unused portion of the commitment. Commitment fees on the unused portion of the borrowing totaled $ 1.29 million, $ 1.34 million, and $ 1.30 million for the years ended March 31, 2023, 2022, and 2021, respectively. Borrowings under the revolving credit facility mature on June 7, 2024 . For the years ended March 31, 2023, 2022, and 2021 the Company’s effective interest rate, including the commitment fee, was 7.0 %, 5.0 %, and 5.8 % respectively, and the unused amount available under the revolver at March 31, 2023 was $ 318.7 million. Substantially all of the Company's assets are pledged as collateral for borrowings under the revolving credit agreement. Senior Unsecured Notes Payable On September 27, 2021, we issued $ 300 million in aggregate principal amount of 7.0 % senior notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s existing and certain of its future subsidiaries that guarantee the revolving credit facility. Interest on the notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2022. At any time prior to November 1, 2023, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount plus a make-whole premium, as described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. At any time on or after November 1, 2023, the Company may redeem the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, at any time prior to November 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 40.0 % of the aggregate principal amount of the Notes issued under the indenture at a redemption price equal to 107.0 % of the principal amount of Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. We used the net proceeds from this offering to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes. During fiscal 2023, the Company repurchased and extinguished $ 9.0 million of its Notes, net of $ 0.1 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $ 7.2 million. In accordance with ASC 470, the Company recognized the $ 1.8 million gain on extinguishment as a component of interest expense in the Company's Consolidated Statements of Operations. Debt Covenants The agreement governing the Company’s revolving credit facility contains affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows 62 Table of Contents the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement. The agreement's financial covenants include (i) a minimum consolidated net worth of $ 325.0 million on and after December 31, 2020; (ii) a maximum ratio of total debt to consolidated adjusted net worth of 2.5 to 1.0 (decreasing to 2.25 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 2.0 to 1.0 for the fiscal quarter ending September 30, 2023, 2.25 to 1.0 for the fiscal quarter ending December 31, 2023); (iii) a maximum collateral performance indicator of 26.0 % as of the end of each calendar month (increasing to 28 % for the calendar months ending October 31, 2022 through June 30, 2023); and (iv) a minimum fixed charges coverage ratio of 1.25 to 1.0 for the fiscal quarter ended December 31, 2022, 1.15 to 1.0 for the fiscal quarters ending March 31, 2023 and June 30, 2023, 1.50 to 1.0 for the fiscal quarter ending September 30, 2023, 2.0 to 1.0 for the fiscal quarter ending December 31, 2023, and 2.75 to 1.0 for each fiscal quarter thereafter, where the ratio for the most recent four consecutive fiscal quarters must be at least 2.0 to 1.0 in order for the Company to declare dividends or purchase any class or series of its capital stock or other equity. The collateral performance indicator is equal to the sum of (a) a three-month rolling average rate of receivables at least sixty days past due and (b) an eight-month rolling average net charge-off rate. The Company was in compliance with these covenants at March 31, 2023 and does not believe that these covenants will materially limit its business and expansion strategy. The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt, certain changes of control of the Company, and the occurrence of certain regulatory events (including the entry of any stay, order, judgment, ruling or similar event related to the Company’s or any of its subsidiaries’ originating, holding, pledging, collecting or enforcing its eligible loans receivables that is material to the Company or any subsidiary) which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause a material adverse change. The indenture governing the Notes contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness or issue certain disqualified stock and preferred stock; (ii) pay dividends or distributions or redeem or purchase capital stock; (iii) prepay subordinated debt or make certain investments; (iv) transfer and sell assets; (v) create or permit to exist liens; (vi) enter into agreements that restrict dividends, loans and other distributions from their subsidiaries; (vii) engage in a merger, consolidation or sell, transfer or otherwise dispose of all or substantially all of their assets; and (viii) engage in transactions with affiliates. However, these covenants are subject to a number of important detailed qualifications and exceptions. Debt Maturities As of March 31, 2023, the aggregate annual maturities of the Company's debt arrangements for each of the five fiscal years subsequent to March 31, 2023 were as follows: 2024 $ — 2025 307,910,824 2026 — 2027 290,860,000 2028 — Total future debt payments $ 598,770,824 63 Table of Contents (7) Insurance and Other Income Insurance and other income for the years ending March 31, 2023, 2022, and 2021 consist of: 2023 2022 2021 Insurance revenue $ 67,153,063 $ 56,270,249 $ 44,214,454 Tax return preparation revenue 23,970,639 24,498,059 20,555,226 Auto club membership revenue 9,661,126 14,758,783 7,863,145 Other 7,424,855 3,993,083 4,244,079 Insurance and other income $ 108,209,683 $ 99,520,174 $ 76,876,904 The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in connection with loans made by the Company. Certain coverages currently sold by the Company on behalf of the unaffiliated insurance carrier are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional source of income derived from the earned reinsurance premiums. Insurance premiums are ceded to the reinsurance subsidiary as written and revenue is recognized over the life of the related insurance contracts. As of March 31, 2023, 2022, and 2021, the amount of net written premiums by the reinsurance subsidiary were $ 9.0 million, $ 9.8 million, and $ 5.9 million, respectively, and the amount of earned premiums were $ 9.1 million, $ 7.6 million, and $ 6.0 million, respectively. The Company maintains a cash reserve for claims in an amount determined by the ceding company, and as of March 31, 2023 and 2022, the cash reserves were $ 5.7 million and $ 6.4 million, respectively. (8) Non-filing Insurance The Company maintains non-filing insurance coverage with an unaffiliated insurance company. The following is a summary of the non-filing insurance activity for the years ended March 31, 2023, 2022, and 2021: 2023 2022 2021 Insurance premiums written $ 6,732,057 $ 8,804,046 $ 7,072,647 Recoveries on claims paid $ 1,143,332 $ 982,025 $ 959,620 Claims paid $ 12,026,092 $ 6,336,549 $ 5,223,484 (9) Leases Accounting Policies and Matters Requiring Management's Judgment The Company uses its effective annual or fourth quarter interest rate to determine the discount rate when evaluating leases under Topic 842. Management applies its effective interest rate to leases entered for the entirety of the subsequent year. For example, fiscal 2022’s fourth quarter effective interest rate of 6.0 % was used in the determination of lease type as well as the discount rate when calculating the present value of lease payments for all leases entered into in fiscal 2023. Note that in fiscal 2023, it was determined most reasonable to use fiscal 2022's fourth quarter effective interest rate as the Notes was not effective until September 27, 2021. Based on its historical practice, the Company believes it is reasonably certain to exercise a given option associated with a given office space lease. Therefore, the Company classifies all lease options for office space as “reasonably certain” unless it has specific knowledge to the contrary for a given lease. The Company does not believe it is reasonably certain to exercise any options associated with its office equipment leases. Periodic Disclosures The Company's operating leases consist of real estate leases for office space as well as office equipment. Both the branch real estate and office equipment lease terms generally range from three years to five years , and generally contain options to extend which mirror the original terms of the lease. During the second quarter of fiscal 2023, the lease terms associated with the Company's finance leases expired and the Company exercised its purchase option to acquire the IT equipment. Because it was reasonably certain that the Company 64 Table of Contents would obtain the assets at the end of their lease terms, the right-of-use assets are amortized over the useful life of the assets, rather than over the lease terms. The following table reports information about the Company's lease costs for the years ended March 31, 2023, 2022, and 2021: 2023 2022 2021 Lease Cost Finance lease cost $ 205,975 $ 427,619 $ 466,168 Amortization of right-of-use assets 204,552 407,624 407,624 Interest on lease liabilities 1,423 19,995 58,544 Operating lease cost $ 27,408,284 $ 27,529,425 $ 27,977,226 Short-term lease cost — — 1,800 Variable lease cost 3,710,560 3,629,903 3,621,748 Total lease cost $ 31,324,819 $ 31,586,947 $ 32,066,942 The following table reports other information about the Company's leases for the years ended March 31, 2023, 2022, and 2021: 2023 2022 2021 Other Lease Information Cash paid for amounts included in the measurement of lease liabilities $ 26,476,133 $ 27,936,317 $ 28,211,828 Operating cash flows from finance leases 1,423 19,994 58,544 Operating cash flows from operating leases 26,394,643 27,411,037 27,559,260 Financing cash flows from finance leases 80,067 505,286 594,024 Right-of-use assets obtained in exchange for new finance lease liabilities $ — $ — $ — Right-of-use assets obtained in exchange for new operating lease liabilities $ 16,924,511 $ 15,381,953 $ 12,482,167 Weighted-average remaining lease term — finance leases — 0.4 years 0.8 years Weighted average remaining lease term — operating leases 7.1 years 7.3 years 7.3 years Weighted-average discount rate (monthly) — finance leases — % 6.0 % 6.4 % Weighted-average discount rate — operating leases 6.0 % 6.1 % 6.3 % The aggregate annual lease obligations as of fiscal year March 31, 2023, are as follows: Operating 2024 $ 23,157,355 2025 18,479,719 2026 15,057,068 2027 11,178,325 2028 8,640,247 Thereafter 27,716,477 Total undiscounted lease liability $ 104,229,191 Imputed interest 20,494,189 Total discounted lease liability $ 83,735,002 The Company had no leases with related parties as of fiscal year March 31, 2023 or 2022. 65 Table of Contents (10) Income Taxes As discussed in Note 1, the Company adopted ASU 2023-02, Investments- Equity Method and Joint Ventures , on a modified retrospective basis effective April 1, 2022. Prior to the adoption of this pronouncement, the Company recognized its HTC investment under the flow through method over the five-year investment period on a straight-line basis as a component of other expense. With the adoption of this ASU, the Company now recognizes the investment of the HTC under the proportional amortization method which allows the investment to be recognized in proportion to the tax credit as a component of income tax expense. During the current fiscal year, the Company recorded a cumulative adjustment of $ 1.9 million to the opening balance of retained earnings, which represents the net difference between the investment amortization under the two methods through the April 1, 2022 adoption date. As of March 31, 2023, Investment in HTC was $ 23.0 million, which is included as a component of Other assets, net in the Consolidated Balance Sheets. For the fiscal year ended March 31, 2023, the Company recognized net amortization of $ 2.1 million and $ 1.9 million of tax benefits from these investments in income tax expense and also recognized the $ 1.9 million of tax benefits from these investments in Income taxes payable in the Consolidated Statements of Cash Flows. The Company did not recognize any non-tax related activity or have any significant modifications to its investments during the current fiscal year. Income tax expense (benefit) consists of: Current Deferred Total Year ended March 31, 2023 Federal $ 7,135,030 ( 1,430,623 ) 5,704,407 State and local 880,838 ( 671,462 ) 209,376 $ 8,015,868 ( 2,102,085 ) 5,913,783 Year ended March 31, 2022 Federal $ 22,262,110 ( 11,892,354 ) 10,369,756 State and local 4,206,087 ( 2,916,361 ) 1,289,726 $ 26,468,197 ( 14,808,715 ) 11,659,482 Year ended March 31, 2021 Federal $ 16,443,592 4,077,609 20,521,201 State and local 1,025,645 1,573,753 2,599,398 $ 17,469,237 5,651,362 23,120,599 The differences between income taxes expected at the U.S. federal statutory income tax rate of 21 % and the reported income tax expense for March 31, 2023, 2022 and 2021 are summarized as follows: 2023 2022 2021 Expected income tax $ 5,700,613 $ 13,771,657 $ 23,394,720 Increase (reduction) in income taxes resulting from: State tax (excluding state tax credits), net of federal benefit 328,026 1,489,800 2,053,524 Federal tax credits, net ( 200,203 ) ( 1,193,021 ) ( 1,173,435 ) State tax credits ( 162,619 ) ( 470,916 ) — Uncertain tax positions ( 1,151,234 ) ( 555,252 ) ( 2,107,263 ) Executive compensation limitation under Section 162(m) 732,504 1,918,618 1,203,203 Excess tax benefits related to equity compensation ( 73,644 ) ( 3,237,682 ) ( 996,769 ) Other, net 740,340 ( 63,722 ) 746,619 $ 5,913,783 $ 11,659,482 $ 23,120,599 66 Table of Contents The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2023 and 2022 are presented below: 2023 2022 Deferred tax assets: Allowance for credit losses $ 31,239,616 $ 33,481,188 Unearned insurance commissions 14,589,099 15,453,501 Accrued expenses primarily related to employee benefits 12,444,567 12,549,474 Reserve for uncollectible interest 1,124,879 1,261,035 Lease liability 20,675,974 21,575,596 Intangible assets 660,312 254,986 Foreign tax credit carryforward 3,254,926 3,254,926 Capital loss carryforward 7,966,326 7,966,326 State net operating loss carryforwards 4,851,747 3,849,158 Gross deferred tax assets 96,807,446 99,646,190 Less valuation allowance ( 15,209,271 ) ( 14,723,244 ) Net deferred tax assets 81,598,175 84,922,946 Deferred tax liabilities: Fair value adjustment for loans receivable ( 11,371,461 ) ( 13,896,840 ) Property and equipment ( 4,611,006 ) ( 4,875,859 ) Deferred loan origination costs ( 1,212,809 ) ( 1,708,369 ) Prepaid expenses ( 1,766,564 ) ( 1,785,906 ) Right-of-use asset ( 20,072,506 ) ( 21,273,281 ) Other ( 841,468 ) ( 1,581,234 ) Gross deferred tax liabilities ( 39,875,814 ) ( 45,121,489 ) Deferred income taxes, net $ 41,722,361 $ 39,801,457 At March 31, 2023, the Company had state net operating loss carryforwards of approximately $ 84.7 million. A deferred tax asset of approximately $ 4.9 million was recorded to reflect the benefit of these losses. Of this $ 4.9 million, $ 0.9 million is expected to be recognized. Approximately $ 1,000 of the state net operating loss carryforward will expire in 2025 with the remaining carryforward expiring between 2031 and 2041. The valuation allowance for deferred tax assets increased by $ 0.5 million for the year ended March 31, 2023 when compared to March 31, 2022. The valuation allowance at March 31, 2023 and 2022 was $ 15.2 million and $ 14.7 million, respectively. The valuation allowance against the total deferred tax assets as of March 31, 2023 consisted of $ 4 million from state net operating loss carryforwards in the amount of $ 63 million which expire from 2025 to 2041, a foreign tax credit carryforward of $ 3.3 million arising in relation to the Section 965 calculation ("Transition Tax") during fiscal 2018 which expires in 2028, $ 7.7 million related to the $ 37.0 million capital loss carryforward from the sale of the Mexican operations in fiscal 2019 which expires in 2024 and $ 0.2 million related to the $ 0.9 million capital loss on the sale of the former headquarters buildings which expire from 2026 to 2027. The Company does not expect to generate enough foreign source income, state taxable income in the respective jurisdictions or capital gains in future tax years to realize these tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of the appropriate character prior to the expiration of the deferred tax assets governed by the tax code. As of March 31, 2023, 2022, and 2021, the Company had $ 1.1 million, $ 2.2 million, and $ 3.1 million of total gross unrecognized tax benefits including interest, respectively. Of these totals, approximately $ 0.9 million, $ 2.0 million, and $ 2.6 million, respectively, represents the amount of net unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate. 67 Table of Contents A reconciliation of the beginning and ending amount of unrecognized tax benefits at March 31, 2023, 2022, and 2021 are presented below: 2023 2022 2021 Unrecognized tax benefit balance beginning of year $ 1,616,116 $ 1,811,244 $ 4,351,811 Gross increases for tax positions of current year 129,146 153,754 36,541 Settlements with tax authorities — — ( 1,968,702 ) Lapse of statute of limitations ( 927,037 ) ( 348,882 ) ( 608,406 ) Unrecognized tax benefit balance end of year $ 818,225 $ 1,616,116 $ 1,811,244 At March 31, 2023, approximately $ 0.5 million of gross unrecognized tax benefits are expected to be resolved during the next 12 months through settlements with taxing authorities or the expiration of the statute of limitations. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of March 31, 2023, 2022, and 2021, the Company had $ 0.3 million, $ 0.6 million, and $ 1.2 million accrued for gross interest, respectively, of which $ 0.1 million, $ 0.2 million, and $ 0.3 million represented the current period expense for the periods ended March 31, 2023, 2022, and 2021. The Company is subject to U.S. income tax, as well as various other state and local jurisdictions. With the exception of a few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018, although carryforward attributes that were generated prior to 2018 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. 68 Table of Contents (11) Earnings Per Share The following is a reconciliation of the numerators and denominators of the basic and diluted EPS calculations: For the year ended March 31, 2023 Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS Net income available to common shareholders $ 21,231,990 5,749,492 $ 3.69 Effect of dilutive securities options and restricted stock — 149,178 Diluted EPS Net income available to common shareholders including dilutive securities $ 21,231,990 5,898,670 $ 3.60 For the year ended March 31, 2022 Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS Net income available to common shareholders $ 53,919,837 6,072,170 $ 8.88 Effect of dilutive securities options and restricted stock — 291,896 Diluted EPS Net income available to common shareholders including dilutive securities $ 53,919,837 6,364,066 $ 8.47 For the year ended March 31, 2021 Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS Net income available to common shareholders $ 88,282,828 6,493,898 $ 13.59 Effect of dilutive securities options and restricted stock — 178,212 Diluted EPS Net income available to common shareholders including dilutive securities $ 88,282,828 6,672,110 $ 13.23 Options to purchase 333,072 , 412,015 , and 608,087 shares of common stock at various prices were outstanding during the years ended March 31, 2023, 2022, and 2021, respectively, but were not included in the computation of diluted EPS because the option exercise price was antidilutive. 69 Table of Contents (12) Benefit Plans Retirement Plan The Company provides a defined contribution employee benefit plan (401(k) plan) covering full-time employees, whereby employees can invest up to the maximum designated for that year. The Company matches 50 % of each employee's contributions up to the first 6 % of the employee's eligible compensation, providing a maximum employer contribution of 3 % of compensation. The Company's expense under this plan was $ 1.7 million, $ 1.8 million, and $ 1.6 million, for the years ended March 31, 2023, 2022, and 2021, respectively. Supplemental Executive Retirement Plan The Company has instituted two supplemental executive retirement plans, which are non-qualified executive benefit plans in which the Company agrees to pay certain executives additional benefits in the future, usually at retirement, in return for continued employment by the executives. The SERPs are unfunded plans, and, as such, there are no specific assets set aside by the Company in connection with the establishment of the plans. The executives have no rights under the agreements beyond those of a general creditor of the Company. For the years ended March 31, 2023, 2022, and 2021, contributions of $ 0.5 million, $ 0.5 million, and $ 0.6 million, respectively, were charged to expense related to the SERP. The unfunded liability, which is included as a component of accounts payable and accrued expenses in the Company's Consolidated Balance Sheets was $ 5.7 million and $ 5.9 million as of March 31, 2023 and 2022, respectively. For the three years presented, the unfunded liability was estimated using the following assumptions: an annual salary increase of 3.5 % for all 3 years; a discount rate of 6.0 % for all 3 years; and a retirement age of 65 . Executive Deferred Compensation Plan The Company has an Executive Deferral Plan. Eligible executives and directors may elect to defer all or a portion of their incentive compensation to be paid under the Executive Deferral Plan. As of March 31, 2023 and 2022 no executive or director had deferred any compensation under this plan. Stock Incentive Plans The Company has a 2008 Stock Option Plan, a 2011 Stock Option Plan, and a 2017 Stock Incentive Plan for the benefit of certain directors, officers, and key employees. Under these plans, a total of 3,350,000 shares of authorized common stock have been reserved for issuance pursuant to grants approved by the Compensation Committee. Stock options granted under these plans have a maximum duration of ten years , may be subject to certain vesting requirements, which are generally three to six years for officers, non-employee directors, and key employees, and are priced at the market value of the Company's common stock on the option's grant date. At March 31, 2023 there were a total of 145,031 shares of common stock available for grant under the plans. Stock-based compensation is recognized as provided under FASB ASC Topic 718-10 and FASB ASC Topic 505-50. FASB ASC Topic 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the Consolidated Financial Statements based on their grant date fair values. The Company has applied the Black-Scholes valuation model in determining the grant date fair value of the stock option awards. Compensation expense is recognized only for those options expected to vest. Long-term Incentive Program and Non-Employee Director Awards On October 15, 2018, the Compensation Committee and Board approved and adopted a new long-term incentive program that seeks to motivate and reward certain employees and to align management’s interest with shareholders’ by focusing executives on the achievement of long-term results. The program is comprised of four components: Service Options, Performance Options, Restricted Stock, and Performance Shares. Pursuant to this program, the Compensation Committee approved certain grants of Service Options, Performance Options, Restricted Stock and Performance Shares under the World Acceptance Corporation 2011 Stock Option Plan and the World Acceptance Corporation 2017 Stock Incentive Plan to certain employee directors, vice presidents of operations, vice presidents, senior vice presidents, and executive officers. Separately, the Compensation Committee approved certain grants of Service Options and Restricted Stock to certain non-employee directors of the Company. 70 Table of Contents Under the long-term incentive program, up to 100 % of the shares of restricted stock subject to the Performance Shares shall vest, if at all, based on the achievement of two trailing earnings per share performance targets established by the Compensation Committee that are based on earnings per share (measured at the end of each calendar quarter, commencing with the calendar quarter ending September 30, 2019) for the previous four calendar quarters. The Performance Shares are eligible to vest over the Performance Share Measurement Period and subject to each respective employee’s continued employment at the Company through the last day of the Performance Share Measurement Period (or as otherwise provided under the terms of the applicable award agreement or applicable employment agreement). The Performance Share performance targets are set forth below. Trailing 4-Quarter EPS Targets for September 30, 2018 through March 31, 2025 Restricted Stock Eligible for Vesting (Percentage of Award) $ 16.35 40 % $ 20.45 60 % The Restricted Stock awards will vest in six equal annual installments, beginning on the first anniversary of the grant date, subject to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The Service Options will vest in six equal annual installments, beginning on the first anniversary of the grant date, subject to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The option price is equal to the fair market value of the common stock on the grant date and the Service Options shall have a 10 -year term. The Performance Options shall fully vest if the Company attains the trailing earnings per share target over four consecutive calendar quarters occurring between September 30, 2018 and March 31, 2025 as described below. Such performance target was established by the Compensation Committee and will be measured at the end of each calendar quarter commencing on September 30, 2019. The Performance Options are eligible to vest over the Option Measurement Period, subject to each respective employee’s continued employment at the Company through the last day of the Option Measurement Period or as otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The option price is equal to the fair market value of the common stock on the grant date and the Performance Options shall have a 10 -year term. The Performance Option performance target is set forth below. Trailing 4-Quarter EPS Targets for September 30, 2018 through March 31, 2025 Options Eligible for Vesting (Percentage of Award) $ 25.30 100 % Stock Options The weighted-average fair value at the grant date for options issued during the years ended March 31, 2023, 2022, and 2021 was $ 53.57 , $ 99.14 , and $ 58.48 per share, respectively. This fair value was estimated at grant date using the weighted-average assumptions listed below. 2023 2022 2021 Dividend yield 0 % 0 % 0 % Expected volatility 57.21 % 57.82 % 57.53 % Average risk-free interest rate 3.64 % 1.02 % 0.59 % Expected life 5.8 years 6.0 years 6.3 years The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected life represents the period of time that options are expected to be outstanding after the grant date. The risk-free rate reflects the interest rate at grant date on zero coupon U.S. governmental bonds having a remaining life similar to the expected option term. 71 Table of Contents Option activity for the year ended March 31, 2023 was as follows: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Options outstanding, beginning of year 348,743 $ 104.38 Granted 16,490 96.07 Exercised ( 8,523 ) 84.84 Forfeited ( 21,523 ) 119.93 Expired ( 20,445 ) 88.88 Options outstanding, end of period 314,742 3 $ 104.41 5.82 $ 589,526 Options exercisable, end of period 114,757 $ 100.22 5.07 $ 441,097 The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on March 31, 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by option holders had all option holders exercised their options as of March 31, 2023. This amount will change as the stock's market price changes. The total intrinsic value of options exercised during the years ended March 31, 2023, 2022, and 2021 was as follows: 2023 2022 2021 $ 493,418 $ 17,494,865 $ 9,996,167 As of March 31, 2023, total unrecognized stock-based compensation expense related to non-vested stock options amounted to approximately $ 3.1 million, which is expected to be recognized over a weighted-average period of approximately 1.8 years. Restricted Stock During fiscal 2023, the Company granted 3,250 shares of restricted stock (which are equity classified), to certain vice presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair value of $ 129.85 per share. During fiscal 2022, the Company granted 4,062 shares of restricted stock (which are equity classified) to certain vice presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair value of $ 188.38 per share. During fiscal 2021, the Company granted 52,735 shares of restricted stock (which are equity classified) to certain executive officers, with a grant date weighted average fair value of $ 106.28 per share. Compensation expense related to restricted stock is based on the number of shares expected to vest and the fair market value of the common stock on the grant date. The Company recognized compensation expense of $ 6.6 million, $ 14.1 million, and $ 15.5 million for the years ended March 31, 2023, 2022, and 2021, respectively, which is included as a component of general and administrative expenses in the Company's Consolidated Statements of Operations. As of March 31, 2023, there was approximately $ 4.4 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over the next 1.3 years based on current estimates. 3 Of the 314,742 options outstanding, 86,811 are not yet exercisable based solely on fulfilling a service condition and another 113,174 are not yet exercisable based solely on fulfilling the performance condition described further above. 72 Table of Contents A summary of the status of the Company’s restricted stock as of March 31, 2023 and changes during the year ended March 31, 2023, are presented below: Shares Weighted Average Fair Value at Grant Date Outstanding at March 31, 2022 552,502 $ 102.51 Granted during the period 3,250 129.85 Vested during the period ( 65,518 ) 104.13 Forfeited during the period ( 29,620 ) 112.70 Outstanding at March 31, 2023 460,614 $ 101.82 Total Stock-Based Compensation Total stock-based compensation included as a component of net income during the years ended March 31, 2023, 2022, and 2021 was as follows: 2023 2022 2021 Stock-based compensation related to equity classified units: Stock-based compensation related to stock options $ 2,442,309 $ 3,473,913 $ 3,804,674 Stock-based compensation related to restricted stock 6,610,526 14,109,082 15,476,604 Total stock-based compensation related to equity classified awards $ 9,052,835 $ 17,582,995 $ 19,281,278 73 Table of Contents (13) Acquisitions The Company evaluates each set of assets and activities it acquires to determine if the set meets the definition of a business according to FASB ASC Topic 805-10-55. Acquisitions meeting the definition of a business are accounted for as a business combination while all other acquisitions are accounted for as an asset purchase. The following table sets forth the acquisition activity of the Company for the years ended March 31, 2023, 2022, and 2021: 2023 2022 2021 Acquisitions: Number of asset purchases 50 50 50 Total acquisitions 50 50 50 Purchase price $ 23,131,758 $ 10,859,984 $ 19,774,252 Tangible assets: Loans receivable, net 28,322,554 9,631,112 15,210,973 Purchase price amount over (below) carrying value of net tangible assets 4 $ ( 5,190,796 ) $ 1,228,872 $ 4,563,279 Customer lists $ — $ 952,872 $ 4,365,779 Non-compete agreements — 276,000 197,500 Acquisitions that are accounted for as business combinations typically result in one or more new branches. In such cases, the Company typically retains the existing employees and the branch location from the acquisition. The purchase price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition date. The remainder is allocated to goodwill. Acquisitions that are accounted for as asset purchases are typically limited to acquisitions of loan portfolios. The purchase price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair values at the acquisition date. In an asset purchase, no goodwill is recorded. The Company’s acquisitions include tangible assets (generally loans and furniture and equipment) and intangible assets (generally non-compete agreements, customer lists, and goodwill), both of which are recorded at their fair values, which are estimated pursuant to the processes described below. Acquired loans are valued at the net loan balance. Given the short-term nature of these loans, generally twelve months , and that these loans are priced at current rates, management believes the net loan balances approximate their fair value. Under CECL, acquired loans are included in the reserve calculations for all other loan types (excluding TALs). Management includes recent acquisition activity compared to historical activity when considering reasonable and supportable forecasts as it relates to assessing the adequacy of the allowance for expected credit losses. The Company did not acquire any loans that would qualify as PCDs during the period. Furniture and equipment are valued at the specific purchase price as agreed to by both parties at the time of acquisition, which management believes approximates their fair values. Non-compete agreements are valued at the stated amount paid to the other party for these agreements, which the Company believes approximates the fair value. 4 As a result of the asset purchases during fiscal 2023, the Company recorded a $ 5.2 million gain, net of $ 1.2 million income tax, which is included as a component of Insurance and other income, net in the Consolidated Statements of Operations. The transactions resulted in a gain as the acquired loan portfolios were purchased at a discount. As an immediate gain would be recognized on the net loans acquired if the cost below fair value was allocated, it was not determined appropriate to reduce the basis of the net loans acquired. 74 Table of Contents Customer lists are valued with a valuation model that utilizes the Company’s historical data to estimate the value of any acquired customer lists. Customer lists are allocated at a branch level and are evaluated for impairment at a branch level when a triggering event occurs in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment loss to the customer list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair value of the customer list allocated to an office is less than $100,000, and management believes that in the event a triggering event were to occur, the impairment loss to an unamortized customer list would be immaterial. The results of all acquisitions have been included in the Company’s Consolidated Financial Statements since the respective acquisition date. The pro forma impact of these branches as though they had been acquired at the beginning of the periods presented would not have a material effect on the results of operations as reported. (14) Fair Value Fair Value Disclosures The Company may carry certain financial instruments and derivative assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value measurements are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are less active. • Level 3 – Unobservable inputs for assets or liabilities reflecting the reporting entity’s own assumptions. The Company’s financial instruments consist of cash and cash equivalents, loans receivable, the senior notes payable, and the senior unsecured notes payable. Loans receivable are originated at prevailing market rates and have an average life of less than twelve months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company’s senior notes payable has a variable rate based on a margin over SOFR and reprices with any changes in SOFR. The fair value of the senior unsecured notes payable is estimated based on quoted prices in markets that are not active. The Company also considered its creditworthiness in its determination of fair value. The carrying amounts and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and their level within the fair value hierarchy are summarized below. March 31, 2023 March 31, 2022 Input Level Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value ASSETS Cash and cash equivalents 1 $ 16,508,935 $ 16,508,935 $ 19,236,322 $ 19,236,322 Loans receivable, net 3 887,788,486 887,788,486 985,515,154 985,515,154 LIABILITIES Senior unsecured notes payable 2 290,860,000 218,127,548 300,000,000 264,639,000 Senior notes payable 3 307,910,824 307,910,824 396,972,746 396,972,746 There were no other significant assets or liabilities measured at fair value as of March 31, 2023 and 2022. 75 Table of Contents (15) Quarterly Information (Unaudited) The following sets forth selected quarterly operating data: Fiscal 2023 Fiscal 2022 First Second Third Fourth First Second Third Fourth (Dollars in thousands, except for earnings per share data) Total revenues $ 157,918 $ 151,258 $ 146,532 $ 160,837 $ 129,659 $ 137,827 $ 149,046 $ 168,656 Provision for credit losses 85,822 68,620 59,609 45,412 30,266 42,044 56,459 57,439 General and administrative expenses 73,174 71,218 66,475 68,607 73,351 74,989 74,703 76,934 Interest expense 11,174 13,032 14,070 12,185 5,501 6,714 10,166 11,044 Income tax expense (benefit) ( 3,449 ) ( 246 ) 619 8,990 4,770 1,641 391 4,857 Net income (loss) $ ( 8,803 ) $ ( 1,366 ) $ 5,759 $ 25,643 $ 15,771 $ 12,439 $ 7,327 $ 18,382 Net income (loss) per common share: Basic $ ( 1.53 ) $ ( 0.24 ) $ 1.00 $ 4.44 $ 2.56 $ 2.04 $ 1.20 3.10 Diluted $ ( 1.53 ) $ ( 0.24 ) $ 0.98 $ 4.37 $ 2.44 $ 1.94 $ 1.14 2.97 The Company's highest loan demand occurs generally from October through December, its third fiscal quarter. Loan demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Consequently, the Company experiences significant seasonal fluctuations in its operating results and cash needs. Operating results from the Company's third fiscal quarter are generally lower than in other quarters and operating results for its fourth fiscal quarter are generally higher than in other quarters. (16) Commitments and Contingencies Derivative Litigation On September 25, 2020, a shareholder filed a derivative complaint in South Carolina state court, Paul Parshall v. World Acceptance et al., against the Company as the nominal defendant and certain current and former directors and officers as defendants. Pointing to the Company’s resolution with the SEC and DOJ of the Mexico investigation previously disclosed, the complaint alleges violations of South Carolina law, including breaches of fiduciary duties and corporate waste, and that the Company has suffered damages as a result of those alleged breaches. The complaint seeks unspecified monetary damages from the individual defendants, equitable and/or injunctive relief, disgorgement of compensation from the individual defendants, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from the Company. However, the Company may be required to advance, and ultimately be responsible for, the legal fees and costs incurred by the individual defendants. On April 19, 2023, the Court preliminarily approved a Stipulation and Agreement of Settlement dated March 31, 2023 (the “Stipulation”), by and among: the plaintiff, derivatively on behalf of the Company; (ii) the individual defendants; and (iii) the Company. If approved, the Stipulation will result in a non-material payment by the Company. General In addition, from time to time, the Company is involved in litigation matters relating to claims arising out of its operations in the normal course of business. 76 Table of Contents Estimating an amount or range of possible losses resulting from litigation, government actions, and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve fines, penalties, or damages that are discretionary in amount, involve a large number of claimants or significant discretion by regulatory authorities, represent a change in regulatory policy or interpretation, present novel legal theories, are in the early stages of the proceedings, are subject to appeal or could result in a change in business practices. In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, any currently pending claims. Based on information currently available, the Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results of operations or financial conditions. However, in light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period. (17) Assets Held for Sale In the fourth quarter of fiscal 2020 the Company moved its corporate headquarters from properties it owned outright in Greenville, South Carolina to leased office space in downtown Greenville, South Carolina. Under ASC 360-10, the properties met the criteria for classification as held for sale as of March 31, 2020. During the second quarter of fiscal 2021 the Company completed the sale of two of the three buildings held for sale, resulting in an aggregate loss of $ 37.0 thousand. The loss on sale of assets held for sale is included as a component of Insurance and other income, net in the Company's Consolidated Statement of Operations. During the second quarter of fiscal 2022 the Company completed the sale of the last held for sale building, and recorded $ 39.0 thousand loss on sale which is included as a component of Insurance and other income, net in the Consolidated Statements of Operations. As of March 31, 2023 and 2022, there were no assets held for sale. 77 Table of Contents (18) Subsequent Events Management is not aware of any significant events occurring subsequent to the balance sheet date that would have a material effect on the financial statements thereby requiring adjustment or disclosure. 78 Table of Contents MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a – 15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of internal control over financial reporting as of March 31, 2023. Our assessment was based on criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any assumptions regarding internal control over financial reporting in future periods based on an evaluation of effectiveness in a prior period are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on using the COSO criteria, we believe our internal control over financial reporting as of March 31, 2023 was effective. Our independent registered public accounting firm has audited the Consolidated Financial Statements included in this Annual Report and has issued an attestation report on the effectiveness of our internal control over financial reporting, as stated in their report. By: /s/ R. Chad Prashad By: /s/ John L. Calmes, Jr. R. Chad Prashad John L. Calmes, Jr. President and Chief Executive Officer Executive Vice President and Chief Financial and Strategy Officer Date: June 1, 2023 Date: June 1, 2023 79 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of World Acceptance Corporation and its subsidiaries (the Company) as of March 31, 2023 and 2022, the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2023, and the related notes to the consolidated financial statements and schedules (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated June 1, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses As described in Notes 1 and 2 to the financial statements, the Company established an allowance for credit losses of $125.6 million as of March 31, 2023, which was estimated using the Company’s current expected credit loss (CECL) model. The Company’s CECL model estimates the allowance for credit losses for each Customer Tenure bucket using a historical migration analysis for the twelve most recent historical twelve-month migration periods, adjusted for seasonality. The Company’s CECL model also includes a reserve at 100% of the outstanding balance of all loans greater than 90 days past due on a recency basis and not written off as of the reporting date, net of a calculated Rehab Rate. Management considers whether current credit conditions might suggest a change is needed to the allowance for credit losses by monitoring trends in first pay success for new borrowers, 60-89 day delinquencies on a recency basis, FICO scores, percent of loan balances that are paying and percentage of gross loans that are acquired loans as compared to metrics in the historical migration period (qualitative factors). Management also considers whether a change in new borrower underwriting might suggest a change is needed to the allowance for credit losses. Management also utilizes a reasonable and supportable forecast by comparing the most recent 6-month loss curves as compared to historical loss curves to see if there are significant changes in borrower behavior that may indicate the historical migration rates should be adjusted. Management utilized significant judgment in evaluating reasonable and supportable forecasts and qualitative factors. We identified the Company’s allowance for credit losses as a critical audit matter as auditing management’s judgments in evaluating reasonable and supportable forecasts and qualitative factors regarding the allowance for credit losses required a high degree of auditor judgment and increased extent of audit effort. Our audit procedures related to the Company’s allowance for credit losses, specifically the reasonable and supportable forecasts and qualitative factors, included the following, among others: 80 Table of Contents • We obtained an understanding of the relevant controls related to the allowance for credit losses, and tested such controls for design and operating effectiveness, including those controls over (a) review and approval of the appropriateness of the assumptions of the CECL model and (b) the management review and approval of the computed allowance for credit losses including the assessment of reasonable and supportable forecasts and qualitative factors. • We tested the completeness and accuracy of data inputs for qualitative factors into the CECL model by comparing to internal data sources. • We evaluated reasonable and supportable forecasts and qualitative factors for reasonableness by comparing to internal source data. • We evaluated the accuracy of the delinquency amounts used within the CECL model by testing the recency aging calculation on a sample of loans. /s/ RSM US LLP We have served as the Company's auditor since 2014 . Raleigh, North Carolina June 1, 2023 81 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of World Acceptance Corporation and subsidiaries Opinion on the Internal Control Over Financial Reporting We have audited World Acceptance Corporation and subsidiaries' (the Company’s) internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2023 and 2022 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2023, and our report dated June 1, 2023 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Raleigh, North Carolina June 1, 2023 82 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The Company had no disagreements on accounting or financial disclosure matters with its independent registered public accounting firm to report under this Item 9.