10-K 1 form10k.htm WORLD ACCEPTANCE CORP 10-K 3-31-2011 form10k.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
Form 10-K

(Mark One)

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

For the fiscal year ended March 31, 2011
OR
 
o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _____________

Commission file number 0-19599

WORLD ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)

 
South Carolina
 
570425114
 
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
108 Frederick Street
     
 
Greenville, South Carolina
 
29607
 
 
(Address of principal executive offices)
 
(Zip Code)
 
 
  (864) 298-9800  
 
(Registrant's telephone number, including area code)
 
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 
Title of Each Class
 
Name of Each Exchange on Which Registered
 
 
Common Stock, no par value
 
The NASDAQ Stock Market LLC
 
     
(NASDAQ Global Select Market)
 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   Yes o No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

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

Large accelerated filer o
Accelerated filer                   x
Non-accelerated filer   o
Smaller reporting company o
 
(Do not check if smaller reporting company)

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

The aggregate market value of voting stock held by non-affiliates of the registrant as of September 30, 2010, computed by reference to the closing sale price on such date, was $44.16.  (For purposes of calculating this amount only, all directors and executive officers as of September 30, 2010 have been treated as affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.)  As of June 3, 2011, 15,428,365 shares of the registrant’s Common Stock, no par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement pertaining to the 2011 Annual Meeting of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A are incorporated herein by reference into Part III hereof.
 


 
 

 
 
WORLD ACCEPTANCE CORPORATION
Form 10-K Report


Item No.
Page
   
PART I
 
     
1.
2
     
1A.
13
     
1B.
17
     
2.
17
     
3.
17
     
4.
17
     
PART II
 
     
5.
17
     
6.
19
     
7.
19
     
7A.
30
     
8.
31
     
9.
68
     
9A.
68
     
9B.
69
     
PART III
 
     
10.
70
     
11.
70
     
12.
70
     
13.
70
     
14.
70
     
PART IV
 
     
15.
70
 
 
Introduction

World Acceptance Corporation, a South Carolina corporation, operates a small-loan consumer finance business in twelve states and Mexico.  As used herein, the "Company,” “we,” “our,” “us,” or similar formulations include World Acceptance Corporation and each of its subsidiaries, except that when used with reference to the Common Stock or other securities described herein and in describing the positions held by management or agreements of the Company, it includes only World Acceptance Corporation.  All references in this report to "fiscal 2011" are to the Company's fiscal year ended March 31, 2011 and all references to “fiscal 2010” are to the Company’s fiscal year ending March 31, 2010.

The Company maintains an Internet website, “www.worldacceptance.com,” where interested persons will be able to access free of charge, among other information, the Company’s annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, as well as amendments to these filings, via a link to a third party website.  These documents are available for access as soon as reasonably practicable after we electronically file these documents with the Securities and Exchange Commission (“SEC”).  The Company files these reports with the SEC via the SEC’s EDGAR filing system, and such reports also may be accessed via the SEC’s EDGAR database at www.sec.gov.  The Company will also provide either electronic or paper copies free of charge upon written request to P.O. Box 6429, Greenville, SC 29606-6429.

PART I.


General.  The Company is engaged in the small-loan consumer finance business, offering short-term small loans, medium-term larger loans, related credit insurance and ancillary products and services to individuals.  The Company generally offers standardized installment loans of between $300 and $4,000 through 1,067 offices in South Carolina, Georgia, Texas, Oklahoma, Louisiana, Tennessee, Illinois, Missouri, New Mexico, Kentucky, Alabama, Wisconsin, and Mexico as of March 31, 2011.  The Company generally serves individuals with limited access to consumer credit from banks, savings and loans, other consumer finance businesses and credit card lenders.  In the U.S. offices, the Company also offers income tax return preparation services to its customers and others.
 
Small-loan consumer finance companies operate in a highly structured regulatory environment.  Consumer loan offices are individually licensed under state laws, which, in many states, establish allowable interest rates, fees and other charges on small loans made to consumers and maximum principal amounts and maturities of these loans.  The Company believes that virtually all participants in the small-loan consumer finance industry charge the maximum rates permitted under applicable state laws in those states with interest rate limitations.

The small-loan consumer finance industry is a highly fragmented segment of the consumer lending industry.  Small-loan consumer finance companies generally make loans to individuals of up to $1,500 with maturities of one year or less.  These companies approve loans on the basis of the personal creditworthiness of their customers and maintain close contact with borrowers to encourage the repayment or refinancing of loans.  By contrast, commercial banks, savings and loans and other consumer finance businesses typically make loans of more than $5,000 with maturities of more than one year.  Those financial institutions generally approve consumer loans on the security of qualifying personal property pledged as collateral or impose more stringent credit requirements than those of small-loan consumer finance companies.  As a result of their higher credit standards and specific collateral requirements, commercial banks, savings and loans and other consumer finance businesses typically charge lower interest rates and fees and experience lower delinquency and charge-off rates than do small-loan consumer finance companies.  Small-loan consumer finance companies generally charge higher interest rates and fees to compensate for the greater credit risk of delinquencies and charge-offs and increased loan administration and collection costs.

Expansion.  During fiscal 2011, the Company opened 73 new offices.  Six offices were purchased and two offices were merged into existing offices due to their inability to grow to profitable levels.  In fiscal 2012, the Company plans to open or acquire at least 63 new offices in the United States by increasing the number of offices in its existing market areas or commencing operations in new states where it believes demographic profiles and state regulations are attractive.  In addition, the Company plans to open approximately 10 new offices in Mexico in fiscal 2012.  The Company's ability to continue existing operations and expand its operations in existing or new states is dependent upon, among other things, laws and regulations that permit the Company to operate its business profitably and its ability to obtain necessary regulatory approvals and licenses; however, there can be no assurance that such laws and regulations will not change in ways that adversely affect the Company or that the Company will be able to obtain any such approvals or consents.  See Part 1, Item 1A, “Risk Factors” for a further discussion of risks to our business and plans for expansion.

 
The Company's expansion is also dependent upon its ability to identify attractive locations for new offices and to hire suitable personnel to staff, manage and supervise new offices.  In evaluating a particular community, the Company examines several factors, including the demographic profile of the community, the existence of an established small-loan consumer finance market and the availability of suitable personnel to staff, manage and supervise the new offices.  The Company generally locates new offices in communities already served by at least one other small-loan consumer finance company.

The small-loan consumer finance industry is highly fragmented in the twelve states in which the Company currently operates.  The Company believes that its competitors in these markets are principally independent operators with generally less than 100 offices.  The Company also believes that attractive opportunities to acquire offices from competitors in its existing markets and to acquire offices in communities not currently served by the Company will become available as conditions in the local economies and the financial circumstances of the owners change.

The following table sets forth the number of offices of the Company at the dates indicated:

   
At March 31,
 
State
 
2002
   
2003
   
2004
   
2005
   
2006
   
2007
   
2008
   
2009
   
2010
   
2011
 
South Carolina
    62       65       65       65       68       89       92       93       95       97  
Georgia
    52       52       74       76       74       96       97       100       101       103  
Texas
    136       142       150       164       168       183       204       223       229       247  
Oklahoma
    46       45       47       51       58       62       70       80       82       82  
Louisiana
    20       20       20       20       24       28       34       38       38       40  
Tennessee
    40       45       51       55       61       72       80       92       95       103  
Illinois
    29       28       30       33       37       40       58       61       64       68  
Missouri
    22       22       26       36       38       44       49       57       62       66  
New Mexico
    12       16       19       20       22       27       32       37       39       44  
Kentucky
    22       30       30       36       41       45       52       58       61       66  
Alabama (1)
    -       5       14       21       26       31       35       42       44       51  
Colorado (2)
    -       -       -       2       -       -       -       -       -       -  
Wisconsin (4)
    -       -       -       -       -       -       -       -       -       5  
Mexico (3)
    -       -       -       -       3       15       35       63       80       95  
Total
    441       470       526       579       620       732       838       944       990       1,067  

(1)
The Company commenced operations in Alabama in January 2003.
(2)
The Company commenced operations in Colorado in August 2004 and ceased operations in April 2005.
(3)
The Company commenced operations in Mexico in September 2005.
(4)
The Company commenced operations in Wisconsin in December 2010.

Loan and Other Products.  In each state in which it operates and in Mexico, the Company offers consumer installment loans that are standardized by amount and maturity in an effort to reduce documentation and related processing costs.  The Company's loans are consumer installment loans that are payable in fully amortizing monthly installments with terms generally of 4 to 36 months, and all loans are prepayable at any time without penalty.  In fiscal 2011, the Company's average originated gross loan size and term were approximately $1,134 and 11 months, respectively.  Several state laws regulate lending terms, including the maximum loan amounts and interest rates and the types and maximum amounts of fees, insurance premiums and other costs that may be charged.  As of March 31, 2011, the annual percentage rates on loans offered by the Company, which include interest, fees and other charges as calculated for the purposes of the requirements of the federal Truth in Lending Act, ranged from 22% to 210% depending on the loan size, maturity and the state in which the loan is made.  In addition, in certain states, the Company sells credit insurance in connection with its loans as agent for an unaffiliated insurance company, which may increase its returns on loans originated in those states.

 
Specific allowable charges vary by state and, consistent with industry practice, the Company generally charges at or close to the maximum rates allowable under applicable state law in those states that limit loan rates.  Statutes in Texas and Oklahoma allow for indexing the maximum loan amounts to the Consumer Price Index.  The Company’s loan products are pre-computed loans in which the finance charge is a combination of origination or acquisition fees, account maintenance fees, monthly account handling fee and other charges permitted by the relevant state laws.

As of March 31, 2011, annual percentage rates applicable to our gross loans receivable, as defined by the Truth in Lending Act were as follows:

Low
   
High
   
US
   
Mexico
   
Total
   
Percentage of total gross loans receivable
 
  0 %     36 %   $ 207,122,160     $ -     $ 207,122,160       23.67 %
  36 %     50 %     180,510,627       79       180,510,706       20.63 %
  51 %     80 %     182,816,961       1,263,957       184,080,918       21.03 %
  81 %     99 %     212,373,370       959,016       213,332,386       24.38 %
  99 %     149 %     31,880,496       49,211,865       81,092,361       9.27 %
  149 %     210 %     8,907,149       -       8,907,149       1.02 %
                                             
                $ 823,610,763     $ 51,434,917     $ 875,045,680       100 %

The Company, as an agent for an unaffiliated insurance company, markets and sells credit life, credit accident and health, credit property, and unemployment insurance in connection with its loans in selected states where the sale of such insurance is permitted by law.  Credit life insurance provides for the payment in full of the borrower's credit obligation to the lender in the event of death.  Credit accident and health insurance provides for repayment of loan installments to the lender that come due during the insured's period of income interruption resulting from disability from illness or injury.  Credit property insurance insures payment of the borrower's credit obligation to the lender in the event that the personal property pledged as security by the borrower is damaged or destroyed by a covered event.  Unemployment insurance provides for repayment of loan installments to the lender that come due during the insured’s period of involuntary unemployment.  The Company requires each customer to obtain certain specific credit insurance in the amount of the loan for all loans originated in Georgia, and encourages customers to obtain credit insurance for loans originated in South Carolina, Louisiana, Alabama and Kentucky and on a limited basis in Tennessee, Oklahoma, and New Mexico.  Customers in those states typically obtain such credit insurance through the Company.  Charges for such credit insurance are made at maximum authorized rates and are stated separately in the Company's disclosure to customers, as required by the Truth in Lending Act and by various applicable state laws.  In South Carolina, Georgia, Louisiana, Kentucky and Alabama, the Company also charges non-file premiums in connection with certain loans in lieu of recording and perfecting the Company’s security interest in the asset pledged.  The premiums are remitted to a third party insurance company for non-file insurance coverage. In the sale of insurance policies, the Company, as agent, writes policies only within limitations established by its agency contracts with the insurer.  The Company does not sell credit insurance to non-borrowers.

The Company also markets automobile club memberships to its borrowers in Georgia, Tennessee, New Mexico, Alabama, Texas, and Kentucky as an agent for an unaffiliated automobile club.  Club memberships entitle members to automobile breakdown and towing reimbursement and related services.  The Company is paid a commission on each membership sold, but has no responsibility for administering the club, paying benefits or providing services to club members.  The Company does not market automobile club memberships to non-borrowers.

In fiscal 1995 the Company implemented its World Class Buying Club and began marketing certain electronic products and appliances to its Texas borrowers.  Since implementation, the Company has expanded this program to Georgia, Tennessee, New Mexico, Alabama and Missouri.  The program is not offered in the other states where the Company operates, as it is not permitted by the state regulations in those states.  Borrowers participating in this program can purchase a product from a limited selection of items maintained in the branch offices or offered through a catalog available at a branch office and can finance the purchase with a retail installment sales contract provided by the Company.  Other than the limited product samples maintained in the branch offices, products sold through this program are shipped directly by the suppliers to the Company's customers and, accordingly, the Company is not required to maintain any inventory to support the program.  The Company believes that maintaining a limited number of items on hand in each of its participating offices has enhanced sales under this program and plans to continue this practice in the future.

 
Another service offered by the Company is income tax return preparation.  This program is provided in all but a few of the Company’s U.S offices.  The Company prepared 48,000, 62,000 and 61,000 returns in each of the fiscal years 2011, 2010 and 2009, respectively.   Net revenue generated by the Company from this program during fiscal 2011, 2010 and 2009 amounted to approximately $7.8 million, $10.9 million and $9.9 million, respectively.  The Company believes that this is a beneficial service for its existing customer base, as well as non-loan customers, and it plans to continue to promote this program.

Loan Activity.  The following table sets forth the composition of the Company's gross loans receivable by state at March 31 of each year from 2002 through 2011:

   
At March 31,
 
State
 
2002
   
2003
   
2004
   
2005
   
2006
   
2007
   
2008
   
2009
   
2010
   
2011
 
South Carolina
    19 %     15 %     14 %     12 %     11 %     13 %     12 %     11 %     12 %     12 %
Georgia
    12       12       13       13       13       14       15       14       14       13  
Texas
    24       23       21       20       24       23       22       21       20       19  
Oklahoma
    5       5       5       5       6       5       5       6       6       7  
Louisiana
    3       3       3       3       3       3       3       3       2       2  
Tennessee
    12       14       15       18       15       15       14       14       14       14  
Illinois
    5       5       5       5       5       6       6       6       6       6  
Missouri
    5       5       6       6       6       5       6       6       6       6  
New Mexico
    3       3       3       3       3       3       3       3       3       2  
Kentucky
    12       13       12       12       11       9       9       9       9       9  
Alabama (1)
    -       2       3       3       3       3       3       4       4       4  
Mexico (2)
    -       -       -       -       -       1       2       3       4       6  
Wisconsin (3)
    -       -       -       -       -       -       -       -       -       -  
Total
    100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %

(1)
The Company commenced operations in Alabama in January 2003.
(2)
The Company commenced operations in Mexico in September 2005.
(3)
The Company commenced operations in Wisconsin in December 2010.


The following table sets forth the total number of loans, the average loan balance and the gross loan balance by state at March 31, 2011:

   
Total Number of Loans
   
Average Gross Loan Balance
   
Gross Loan Balance (thousands)
 
South Carolina
    82,759     $ 1,211     $ 100,232  
Georgia
    90,363       1,299       117,409  
Texas
    213,151       792       168,789  
Oklahoma
    53,601       1,058       56,692  
Louisiana
    25,914       747       19,369  
Tennessee
    96,882       1,232       119,346  
Illinois
    43,913       1,282       56,296  
Missouri
    41,292       1,241       51,247  
New Mexico
    26,692       773       20,644  
Kentucky
    51,495       1,511       77,807  
Alabama
    38,045       929       35,330  
Wisconsin
    589       765       450  
Mexico
    102,619       469       51,435  
Total
    867,315     $ 1,009     $ 875,046  

For fiscal 2011, 2010 and 2009, 94.5%, 95.9% and 96.9%, respectively, of the Company’s revenues were attributable to U.S. customers and 5.5%, 4.1% and 3.1%, respectively, were attributable to customers in Mexico.  For further information regarding potential risks associated with the Company’s operations in Mexico, see Part I, Item 1A, “Risk FactorsOur continued expansion into Mexico may increase the risks inherent in conducting international operations, contribute materially to increased costs and negatively affect our business, prospects, results of operations and financial condition, and “Our use of derivatives exposes us to credit and market risk,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Quantitative and Qualitative Disclosures about Market Risk–Foreign Currency Exchange Rate Risk.”

Seasonality.  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.

Lending and Collection Operations.  The Company seeks to provide short-term loans to the segment of the population that has limited access to other sources of credit.  In evaluating the creditworthiness of potential customers, the Company primarily examines the individual's discretionary income, length of current employment, duration of residence and prior credit experience.  Loans are made to individuals on the basis of the customer's discretionary income and other factors and are limited to amounts that the customer can reasonably be expected to repay from that income.  All of the Company's new customers are required to complete standardized credit applications in person or by telephone at local Company offices.  Each of the Company's local offices is equipped to perform immediate background, employment and credit checks and approve loan applications promptly, often while the customer waits. The Company's employees verify the applicant's employment and credit histories through telephone checks with employers, other employment references and a variety of credit services.  Substantially all new customers are required to submit a listing of personal property that will be pledged as collateral to secure the loan, but the Company does not rely on the value of such collateral in the loan approval process and generally does not perfect its security interest in that collateral.  Accordingly, if the customer were to default in the repayment of the loan, the Company may not be able to recover the outstanding loan balance by resorting to the sale of collateral.  The Company generally approves less than 50% of applications for loans to new customers.

The Company believes that the development and continual reinforcement of personal relationships with customers improve the Company's ability to monitor their creditworthiness, reduce credit risk and generate repeat loans.  It is not unusual for the Company to have made a number of loans to the same customer over the course of several years, many of which were refinanced with a new loan after the borrower had made multiple payments.  In determining whether to refinance existing loans, the Company typically requires loans to be current on a recency basis, and repeat customers are generally required to complete a new credit application if they have not completed one within the prior two years.

 
In fiscal 2011, approximately 84.3% of the Company's loans were generated through refinancings of outstanding loans and the origination of new loans to previous customers.  A refinancing represents a new loan transaction with a present customer in which a portion of the new loan proceeds is used to repay the balance of an existing loan and the remaining portion is advanced to the customer.  The Company actively markets the opportunity for borrowers to refinance existing loans prior to maturity, thereby allowing borrowers to access their established credit.  Generally refinancing are for the same amount financed as the borrower’s existing loan and, because the Company’s loans are fully amortizing, the transaction results in both the full repayment of the borrower’s existing loan and an advance of new proceeds to the borrower.  The Company also recognizes that some borrower’s initially borrowed less than their creditworthiness qualified them for and that some borrower’s creditworthiness has improved since the origination of the existing loan.  In these cases, where the borrower has paid down a portion of the existing loan, and after completion of a new credit application and credit investigation, the Company may offer a new loan with an amount financed greater than that of the existing loan thereby not only fully paying the borrower’s existing loan but also increasing the advance of new proceeds to the borrower.  In either case, the Company benefits by maintaining a good customer relationship, increasing its amount of loans outstanding and increasing its potential for the realization of fees and other income.  For fiscal 2011, 2010 and 2009, the percentages of the Company's loan originations that were refinancings of existing loans were 75.9%, 76.4% and 75.0%, respectively.

The Company allows refinancing of delinquent loans on a case-by-case basis for those customers who otherwise satisfy the Company's credit standards.  Each such refinancing is carefully examined before approval in an effort to avoid increasing credit risk.  A delinquent loan may generally be refinanced only if the customer has made payments which, together with any credits of insurance premiums or other charges to which the customer is entitled in connection with the refinancing, reduce the balance due on the loan to an amount equal to or less than the original cash advance made in connection with the loan.  The Company does not allow the amount of the new loan to exceed the original amount of the existing loan.  The Company believes that refinancing delinquent loans for certain customers who have made periodic payments allows the Company to increase its average loans outstanding and its interest, fee and other income without experiencing a significant increase in loan losses.  These refinancings also provide a resolution to temporary financial setbacks for these borrowers and sustain their credit rating.  Because they are allowed on a selective basis only, refinancings of delinquent loans amounted to less than 2% of the Company’s loan volume in fiscal 2011.

To reduce late payment risk, local office staff encourage customers to inform the Company in advance of expected payment problems.  Local office staff also promptly contact delinquent customers following any payment due date and thereafter remain in close contact with such customers through phone calls, letters or personal visits to the customer's residence or place of employment until payment is received or some other resolution is reached.  When representatives of the Company make personal visits to delinquent customers, the Company's policy is to encourage the customers to return to the Company's office to make payment.  Company employees are instructed not to accept payment outside of the Company's offices except in unusual circumstances.  In Georgia, Oklahoma, Illinois, and Missouri, Tennessee, and Kentucky the Company is permitted under state laws to garnish customers' wages for repayment of loans, but the Company does not otherwise generally resort to litigation for collection purposes, and rarely attempts to foreclose on collateral.

Insurance-related Operations.  In Georgia, Louisiana, South Carolina, Kentucky, and on a limited basis, Alabama, New Mexico, Oklahoma, Texas, and Tennessee, the Company sells credit insurance to customers in connection with its loans as an agent for an unaffiliated insurance company.  These insurance policies provide for the payment of the outstanding balance of the Company's loan upon the occurrence of an insured event.  The Company earns a commission on the sale of such credit insurance, which is based in part on the claims experience of the insurance company on policies sold on its behalf by the Company.

The Company has a wholly-owned, captive insurance subsidiary that reinsures a portion of the credit insurance sold in connection with loans made by the Company.  Certain coverages currently sold by the Company on behalf of the unaffiliated insurance carrier are ceded by the carrier to the captive insurance subsidiary, providing the Company with an additional source of income derived from the earned reinsurance premiums.  In fiscal 2011, the captive insurance subsidiary reinsured approximately 1.4% of the credit insurance sold by the Company and contributed approximately $1.1 million to the Company's total revenues.

 
The Company typically does not perfect its security interest in collateral securing its smaller loans by filing Uniform Commercial Code (“UCC”) financing statements.  Statutes in Georgia, Louisiana, South Carolina, Tennessee, Missouri, Kentucky and Alabama permit the Company to charge a non-file or non-recording insurance premium in connection with certain loans originated in these states.  These premiums are equal in aggregate amount to the premiums paid by the Company to purchase non-file insurance coverage from an unaffiliated insurance company.  Under its non-file insurance coverage, the Company is reimbursed for losses on loans resulting from its policy not to perfect its security interest in collateral pledged to secure the loans.

Information Technology. ParaData Financial Systems, a wholly owned subsidiary, is a financial services software company headquartered near St. Louis, Missouri. Using the proprietary data processing software package developed by ParaData, the Company is able to fully automate all of its loan account processing and collection reporting.  The system provides thorough management information and control capabilities.  ParaData also markets its financial services data processing system to other financial services companies, but experiences significant fluctuations from year to year in the amount of revenues generated from sales of the system to third parties.  Such revenues have historically not been material to the Company.

Monitoring and Supervision.  The Company's loan operations are organized into Southern, Central, and Western Divisions, and Mexico.  The Southern Division consists of South Carolina, Georgia, Louisiana and Alabama; the Central Division consists of Tennessee, Illinois, Missouri, Wisconsin, and Kentucky; and the Western Division consists of Texas, Oklahoma, and New Mexico.  Several levels of management monitor and supervise the operations of each of the Company's offices.  Branch managers are directly responsible for the performance of their respective offices.  District supervisors are responsible for the performance of 8 to 11 offices in their districts, typically communicate with the branch managers of each of their offices at least weekly and visit the offices at least monthly.  The Vice Presidents of Operations monitor the performance of all offices within their states (or partial state in the case of Texas), primarily through communication with district supervisors.  These Vice Presidents of Operations typically communicate with the district supervisors of each of their districts weekly and visit each of their offices quarterly.

Senior management receives daily delinquency, loan volume, charge-off, and other statistical reports consolidated by state and has access to these daily reports for each branch office.  At least six times per fiscal year, district supervisors audit the operations of each office in their geographic area and submit standardized reports detailing their findings to the Company's senior management.  At least once per year, each office undergoes an audit by the Company's internal auditors.  These audits include an examination of cash balances and compliance with Company loan approval, review and collection procedures and compliance with federal and state laws and regulations.

Staff and Training.  Local offices are generally staffed with three to four employees.  The branch manager supervises operations of the office and is responsible for approving all loan applications.  Each office generally has one or two assistant managers who contact delinquent customers, review loan applications and prepare operational reports.  Each office also generally has a customer service representative who takes loan applications, processes loan applications, processes payments, assists in the preparation of operational reports, assists in collection efforts, and assists in marketing activities.  Larger offices may employ additional assistant managers and customer service representatives.

New employees are required to review a detailed training manual that outlines the Company's operating policies and procedures.  The Company tests each employee on the training manual during the first year of employment.  In addition, each branch provides in-office training sessions once every week and periodic training sessions outside the office.  The Company has also implemented an enhanced training tool known as World University which provides continuous, real-time, effective online training to all locations.  This allows for more training opportunities to be available to all employees throughout the course of their career with the Company.

Advertising.  The Company actively advertises through direct mail, targeting both its present and former customers and potential customers who have used other sources of consumer credit.  The Company obtains or acquires mailing lists from third party sources.  In addition to the general promotion of its loans for vacations, back-to-school needs and other uses, the Company advertises extensively during the October through December holiday season and in connection with new office openings.  The Company believes its advertising contributes significantly to its ability to compete effectively with other providers of small-loan consumer credit.  Advertising expenses were approximately 2.7% of total revenues in fiscal 2011, 2.9% in fiscal 2010 and 3.3% in fiscal 2009.

 
Competition.  The small-loan consumer finance industry is highly fragmented, with numerous competitors.  The majority of the Company's competitors are independent operators with generally less than 100 offices.  Competition from community banks is limited because banks typically do not make loans of less than $5,000.

The Company believes that competition between small-loan consumer finance companies occurs primarily on the basis of the strength of customer relationships, customer service and reputation in the local community, rather than pricing, as participants in this industry generally charge interest rates and fees that are permitted by applicable laws.  The Company believes that its relatively larger size affords it a competitive advantage over smaller companies by increasing its access to, and reducing its cost of, capital.  In addition the Company’s in-house integrated computer system provides data processing and the Company’s in-house print shop provides direct mail and other printed items at a substantially reduced cost to the Company.

Several of the states in which the Company currently operates limit the size of loans made by small-loan consumer finance companies and prohibit the extension of more than one loan to a customer by any one company.  As a result, many customers borrow from more than one finance company, enabling the Company, subject to the limitations of various consumer protection and privacy statutes including, but not limited to the federal Fair Credit Reporting Act and the Gramm-Leach-Bliley Act, to obtain information on the credit history of specific customers from other consumer finance companies.

Government Regulation.

U. S. Operations.  Small-loan consumer finance companies are subject to extensive regulation, supervision and licensing under various federal and state statutes, ordinances and regulations.  In general, these statutes establish maximum loan amounts and interest rates and the types and maximum amounts of fees, insurance premiums and other fees that may be charged.  In addition, state laws regulate collection procedures, the keeping of books and records and other aspects of the operation of small-loan consumer finance companies.  Generally, state regulations also establish minimum capital requirements for each local office.  State agency approval is required to open new branch offices.  Accordingly, the ability of the Company to expand by acquiring existing offices and opening new offices will depend in part on obtaining the necessary regulatory approvals.

A Texas regulation requires the approval of the Texas Consumer Credit Commissioner for the acquisition, directly or indirectly, of more than 10% of the voting or common stock of a consumer finance company.  A Louisiana statute prohibits any person from acquiring control of 50% or more of the shares of stock of a licensed consumer lender, such as the Company, without first obtaining a license as a consumer lender.  The overall effect of these laws, and similar laws in other states, is to make it more difficult to acquire a consumer finance company than it might be to acquire control of a nonregulated corporation.

Each of the Company's branch offices is separately licensed under the laws of the state in which the office is located.   Licenses granted by the regulatory agencies in these states are subject to renewal every year and may be revoked for failure to comply with applicable state and federal laws and regulations.  In the states in which the Company currently operates, licenses may be revoked only after an administrative hearing.

The Company and its operations are regulated by several state agencies, including the Industrial Loan Division of the Office of the Georgia Insurance Commissioner, the Consumer Finance Division of the South Carolina Board of Financial Institutions, the South Carolina Department of Consumer Affairs, the Texas Office of the Consumer Credit Commissioner, the Oklahoma Department of Consumer Credit, the Louisiana Office of Financial Institutions, the Tennessee Department of Financial Institutions, the Missouri Division of Finance, the Consumer Credit Division of the Illinois Department of Financial Institutions, the Consumer Credit Bureau of the New Mexico Financial Institutions Division, the  Kentucky  Department  of  Financial  Institutions, the  Alabama  State Banking Department, and the Wisconsin Department of Financial Institutions.  These state regulatory agencies audit the Company's local offices from time to time, and each state agency performs an annual compliance audit of the Company's operations in that state.

Insurance. The Company is also subject to state regulations governing insurance agents in the states in which it sells credit insurance.  State insurance regulations require that insurance agents be licensed, govern the commissions that may be paid to agents in connection with the sale of credit insurance and limit the premium amount charged for such insurance.  The Company's captive insurance subsidiary is regulated by the insurance authorities of the Turks and Caicos Islands of the British West Indies, where the subsidiary is organized and domiciled.

 
Consumer finance companies are affected by changes in state and federal statutes and regulations. The Company actively participates in trade associations and in lobbying efforts in the states in which it operates and at the federal level.  There have been, and the Company expects that there will continue to be, media attention, initiatives, discussions and proposals regarding the entire consumer credit industry, as well as our particular business, and possible significant changes to the laws and regulations that govern our business.  In some cases, proposed or pending legislative or regulatory changes have been introduced that would, if enacted,  have a material adverse effect on, or possibly even eliminate, our ability to continue our current business.  We can give no assurance that the laws and regulations that govern our business will remain unchanged or that any such future changes will not materially and adversely affect or in the worst case, eliminate, the Company’s lending practices, operations, profitability or prospects.   See “Federal Legislation” below and Part I, Item 1A, “Risk Factors,” for a further discussion of the potential impact of regulatory changes on our business.

State legislation.  We are subject to numerous state laws and regulations that affect our lending activities.  Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.  Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment against us of civil, monetary or other penalties.

During the past year, several state legislative and regulatory proposals were introduced which, had they become law, would have had a material adverse impact on our operations and ability to continue to conduct business in the relevant state.  Although to date none of these state initiatives have been successful, state legislatures continue to receive pressure to adopt similar legislation that would affect our lending operations.
 
In addition, any adverse change in existing laws or regulations, or any adverse interpretation or litigation relating to existing laws and regulations in any state in which we operate, could subject us to liability for prior operating activities or could lower or eliminate the profitability of our operations going forward by, among other things, reducing the amount of interest and fees we can charge in connection with our loans.  If these or other factors lead us to close our offices in a state, then in addition to the loss of net revenues attributable to that closing, we would also incur closing costs such as lease cancellation payments and we would have to write off assets that we could no longer use.  If we were to suspend rather than permanently cease our operations in a state, we may also have continuing costs associated with maintaining our offices and our employees in that state, with little or no revenues to offset those costs.

Federal legislation.  In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations that affect our lending operations.  These laws include the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act and the regulations thereunder and the Federal Trade Commission's Credit Practices Rule.  These laws require the Company to provide complete disclosure of the principal terms of each loan to the borrower, prior to the consummation of the loan transaction, prohibit misleading advertising, protect against discriminatory lending practices and proscribe unfair credit practices.  Among the principal disclosure items under the Truth in Lending Act are the terms of repayment, the final maturity, the total finance charge and the annual percentage rate charged on each loan.  The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status.  Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection.  The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. The Credit Practices Rule limits the types of property a creditor may accept as collateral to secure a consumer loan.  Violations of the statutes and regulations described above may result in actions for damages, claims for refund of payments made, certain fines and penalties, injunctions against certain practices and the potential forfeiture of rights to repayment of loans.

Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly affecting our lending activities have been under review and subject to change as a result of recent developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and media focus on issues of consumer and borrower protection.  See Part I, Item 1A, “Risk Factors - Media and public perception of consumer installment loans as being predatory or abusive could materially adversely affect our business, prospects, results of operations and financial condition” below.  Any changes in such laws and regulations could force us to modify, suspend or cease part or, in the worst case, all of our existing operations.  It is also possible that the scope of federal regulations could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities.  The enactment of one or more of such regulatory changes could materially and adversely affect our business, results of operations and prospects.

 
Various legislative proposals addressing consumer credit transactions have recently been passed or are currently pending in the U.S. Congress. Congressional members continue to receive pressure from consumer activists and other industry opposition groups to adopt legislation to address various aspects of consumer credit transactions.  As part of a sweeping package of financial industry reform regulations, Congress passed and the President signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”). This created, among other things, a new federal regulatory entity, the Bureau of Consumer Financial Protection (commonly referred to as the CFPB) with virtually unlimited power to regulate and enforce the form and content of all consumer financial transactions.  Although the effective operational date for the CFPB is July 21, 2011, the President has yet to nominate and the Senate has yet to confirm a Director for the Bureau (an essential precondition for the Bureau to exercise its sweeping regulatory powers). The President has appointed Ms. Elizabeth Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau and she is currently in the process of staffing the Bureau and may be setting the tone for its eventual regulatory and enforcement policies. There are numerous uncertainties regarding the ultimate structure and powers of the Bureau and its leadership, arising in part from the unprecedented nature of such a regulator and in part from political controversy regarding the Bureau.  It is impossible to predict how these uncertainties will be resolved, and what, if any, long-term effect the creation of such an unprecedented federal regulator will have on the Company’s operations and on access to consumer credit in general; however, there can be no assurance that any such regulatory entity will not exercise its powers in a manner that will, either directly or indirectly, have a material and adverse effect on, or eliminate altogether, the Company’s ability to operate its business profitably or on terms substantially similar to those on which it currently operates.   Although the Dodd-Frank Act prohibits the new federal regulator from setting interest rates on consumer loans, bills that would create a federal usury cap, applicable to all consumer credit transactions and substantially below rates at which the Company could continue to operate profitably, are still pending in both houses of Congress.  Any federal legislative or regulatory action that severely restricts or prohibits the provision of small-loan consumer credit and similar services on terms substantially similar to those we currently provide would, if enacted, have a material adverse impact on our business, prospects, results of operations and financial condition.  Any federal law that would impose a national 36% or similar annualized credit rate cap on our services, such as those currently pending in Congress or in similar congressional bills, would, if enacted, almost certainly eliminate our ability to continue our current operations.  See Part I, Item 1A, “Risk Factors – Federal legislative or regulatory proposals, initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us to modify, suspend or cease part or all of our nationwide operations,” for further information regarding the potential impact of adverse legislative and regulatory changes.

Mexico Operations.  Effective May 1, 2008, World Acceptance Corporation de Mexico, S. de R.L. de C.V. was converted to WAC de Mexico, S.A. de C.V., SOFOM, E.N.R. (“WAC de Mexico SOFOM”), and due to such conversion, this entity is now organized as a Sociedad Financiera de Objeto Múltiple, Entidad No Regulada (Multiple Purpose Financial Company, Non-Regulated Entity or “SOFOM, ENR”). Mexican law provides for administrative regulation of companies which are organized as SOFOM, ENRs. As such, WAC de Mexico SOFOM is mainly governed by different federal statutes, including the General Law of Auxiliary Credit Activities and Organizations, the Law for the Transparency and Order of Financial Services, the General Law of Credit Instruments and Operations, and the Law of Protection and Defense to the User of Financial Services. SOFOM, ENRs are also subject to regulation by and surveillance of the National Commission for the Protection and Defense of Users of Financial Services (“CONDUSEF”).  CONDUSEF, among others, acts as mediator and arbitrator in disputes between financial lenders and customers, and resolves claims filed by loan customers. CONDUSEF also prevents unfair and discriminatory lending practices, and regulates, among others, the form of loan contracts, consumer disclosures, advertisement, and certain operating procedures of SOFOM, ENRs, with such regulations pertaining primarily to consumer protection and adequate disclosure and transparency in the terms of borrowing.  Neither CONDUSEF nor federal statutes impose interest rate caps on loans granted by SOFOM, ENRs.  The consumer loan industry, as with most businesses in Mexico, is also subject to other various regulations in the areas of tax compliance, anti-money laundering, and employment matters, among others, by various federal, state and local governmental agencies. Generally, federal regulations control over the state statutes with respect to the consumer loan operations of  SOFOM, ENRs.

 
Employees.  As of March 31, 2011, the Company had 3,292 U.S. employees, none of whom were represented by labor unions and 762 employees in Mexico, all of whom were represented by a Mexico based labor union.  The Company considers its relations with its personnel to be good.  The Company seeks to hire people who will become long-term employees.  The Company experiences a high level of turnover among its entry-level personnel, which the Company believes is typical of the small-loan consumer finance industry.

Executive Officers of the Company.  The names and ages, positions, terms of office and periods of service of each of the Company's executive officers (and other business experience for executive officers who have served as such for less than five years) are set forth below.  The term of office for each executive officer expires upon the earlier of the appointment and qualification of a successor or such officers' death, resignation, retirement or removal.

       
Period of Service as Executive Officer and
       
Pre-executive Officer Experience (if an
Name and Age
 
Position
 
Executive Officer for Less Than Five Years)
         
A. Alexander McLean, III (59)
 
Chief Executive Officer;
 
Chief Executive Officer since March 2006;
   
Chairman and Director
 
Executive Vice President from August 1996
       
until March 2006; Senior Vice President from
       
July 1992 until August 1996; CFO from June
       
1989 until March 2006; Director since June
       
1989; and Chairman since August 2007.
         
Kelly M. Malson (40)
 
Senior Vice President and
 
Senior Vice President and Chief Financial
   
Chief Financial Officer
 
Officer since May 2009; Vice President and
       
CFO from March 2006 to May 2009; Vice
       
President of Internal Audit from September
       
2005 to March 2006.
         
Mark C. Roland (54)
 
President and Chief
 
President since March 2006; Chief Operating
   
Operating Officer
 
Officer since April 2005; Executive Vice
   
and Director
 
President from April 2002 to March 2006;
       
Senior Vice President from January 1996 to
       
April 2002; Director from August 2007
       
until August 2011.
         
Jeff L. Tinney (48)
 
Senior Vice President,
 
Senior Vice President, Western Division, since
   
Western Division
 
June 2007; Vice President, Operations – Texas
       
and New Mexico from June 2001 to June
       
2007; Vice President, Operations – Texas and
       
Louisiana from April 1998 to June 2001.
         
D. Clinton Dyer (38)
 
Senior Vice President,
 
Senior Vice President, Central Division since
   
Central Division
 
June 2005; Vice President, Operations –
       
Tennessee and Kentucky from April 2002 to
       
June 2005; Supervisor of Nashville District
       
from September 2001 to March 2002;
       
Manager in Nashville from January 1997 to
       
August 2001.
         
James D. Walters (43)
 
Senior Vice President,
 
Senior Vice President, Southern Division since
   
Southern Division
 
April 2005; Vice President, Operations –
       
South Carolina and Alabama from August
       
1998 to March 2005.
         
Francisco Javier Sauza Del Pozo (56)
 
Senior Vice President,
 
Senior Vice President, Mexico since May
   
Mexico
 
2008; Vice President of Operations from April
       
2005 to May 2008; President of Border
       
Consulting Group from July 2004 to March
 
     
2005.
 
Available Information. The information regarding our website and availability of our filings with the SEC as described in the second paragraph under “Introduction” above is incorporated by reference into this Item 1 of Part I.


Forward-Looking Statements

This annual report contains various “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, that are based on management’s beliefs and assumptions, as well as information currently available to management.  Statements other than those of historical fact, as well as those identified by the use of words such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “may,” “will,” “should,” and similar expressions, are forward-looking statements.  Although we believe that the expectations reflected in any such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.  Any such statements are subject to certain risks, uncertainties and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual financial results, performance or financial condition may vary materially from those anticipated, estimated or expected.  Among the key factors that could cause our actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements are the following: recently enacted, proposed, or future legislative or regulatory actions, changes or developments; changes in interest rates; risks relating to expansion and foreign operations; risks inherent in making loans, including repayment risks and value of collateral; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting charge-offs); changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company); and the unpredictable nature of litigation.  These and other risks are discussed below in more detail below in this “Risk Factors” section and in the Company’s other filings made from time to time with the SEC.  The Company does not undertake any obligation to update any forward-looking statements it may make.

Investors should consider the following risk factors, in addition to the other information presented in this annual report and the other reports and registration statements we file from time to time with the SEC, in evaluating us, our business and an investment in our securities.   Any of the following risks, as well as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in harm to our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company. These factors, among others, could also cause actual results to differ from those we have experienced in the past or those we may express or imply from time to time in any forward-looking statements we make.  Investors are advised that it is impossible to identify or predict all risks, and that risks not currently known to us or that we currently deem immaterial also could affect us in the future.

Unfavorable state legislative or regulatory actions or changes, adverse outcomes in litigation or regulatory proceedings or failure to comply with existing laws and regulations could force us to cease, suspend or modify our operations in a state, potentially resulting in a material adverse effect on our business, results of operations and financial condition.
 
We are subject to numerous state laws and regulations that affect our lending activities.  Many of these regulations impose detailed and complex constraints on the terms of our loans, lending forms and operations.  Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment against us of civil, monetary or other penalties including the suspension or revocation of our licenses to lend in one or more jurisdictions.

Changes in the laws under which we currently operate or the enactment of new laws governing our operations resulting from state political activities and legislative or regulatory initiatives could have a material adverse effect on all aspects of our business in a particular state.  See Part 1, Item 1, “Description of Business–Government Regulation” for further discussion of such current state activities and initiatives.

 
Federal legislative or regulatory proposals, initiatives, actions or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us to modify, suspend or cease part or all of our nationwide operations.

In addition to state and local laws and regulations, we are subject to numerous federal laws and regulations that affect our lending operations.  Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly affecting our lending activities have been under review and subject to change as a result of recent developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and media focus on issues of consumer and borrower protection.  Any changes in such laws and regulations could force us to modify, suspend or cease part, or, in the worst case, all of our existing operations.  It is also possible that the scope of federal regulations could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities.  The enactment of one or more of such regulatory changes could materially and adversely affect our business, results of operations and prospects.

Changes in the laws under which we currently operate or the enactment of new laws governing our operations resulting from federal political activities and legislative or regulatory initiatives could have a material adverse effect on all aspects of our operations.  See Part 1, Item 1, “Description of Business–Government Regulation” for further discussion of such current federal activities and initiatives.

Our continued expansion into Mexico may increase the risks inherent in conducting international operations, contribute materially to increased costs and negatively affect our business, prospects, results of operations and financial condition.

Although our operations in Mexico accounted for only 5.5% of our revenues during fiscal 2011 and 5.9% of our gross loans receivable at March 31, 2011, we intend to continue opening offices and expanding our presence in Mexico.  In doing so, we may expose an increasing portion of our business to risks inherent in conducting international operations, including currency fluctuations and devaluations, unsettled political conditions, communication and translation errors due to language barriers, compliance with differing legal and regulatory regimes and differing cultural attitudes toward regulation and compliance.

We are subject to interest rate risk resulting from general economic conditions and policies of various governmental and regulatory agencies.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board.  Changes in monetary policy, including changes in interest rates, could influence the amount of interest we pay on our revolving credit facility or any other floating interest rate obligations we may incur, which would increase our operating costs and decrease our operating margins.  See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding our interest rate risk.

Our use of derivatives exposes us to credit and market risk.

We use derivatives to manage our exposure to interest rate risk and foreign currency fluctuations.  By using derivative instruments, the Company is exposed to credit and market risk.  Additional information regarding our exposure to credit and market risk is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Quantitative and Qualitative Disclosures About Market Risk.”

We depend to a substantial extent on borrowings under our revolving credit agreement to fund our liquidity needs.

We have an existing revolving credit agreement committed through August 31, 2012 that allows us to borrow up to $225.0 million, assuming we are in compliance with a number of covenants and conditions.   If our existing sources of liquidity become insufficient to satisfy our financial needs or our access to these sources becomes unexpectedly restricted, we may need to try to raise additional debt or equity in the future.  If such an event were to occur, we can give no assurance that such alternate sources of liquidity would be available to us at all or on favorable terms.  Additional information regarding our liquidity risk is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources.”

 
Our debt agreements contain restrictions and limitations that could affect our ability to operate our business.

Our revolving credit agreement and junior subordinated note payable contain a number of covenants that could adversely affect our business and the flexibility to respond to changing business and economic conditions or opportunities.  Among other things, these covenants limit our ability to declare or pay dividends, redeem our subordinated debt, incur additional debt or enter into a merger, consolidation or sale of substantial assets.  In addition, if we were to breach any covenants or obligations under our revolving credit agreement or junior subordinated note payable and such breaches were to result in an event of default, our lenders could cause all amounts outstanding to become due and payable, subject to applicable grace periods.  This could trigger cross-defaults under our other existing or future debt instruments and materially and adversely affect our financial condition and ability to continue operating our business as a going concern.  Additional information regarding our revolving credit facility and other indebtedness is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources.”

Adverse conditions in the capital and credit markets generally, any particular liquidity problems affecting one or more members of the syndicate of banks that are members of the Company’s credit facility or other factors outside our control, could affect the Company’s ability to meet its liquidity needs and its cost of capital.

The severe turmoil that has persisted in the domestic and global credit and capital markets and broader economy since 2008 has negatively affected corporate liquidity, equity values, credit agency ratings and confidence in financial institutions in general.  In addition to cash generated from operations, the Company depends on borrowings from institutional lenders to finance its operations, acquisitions and office expansion plans.  The Company is not insulated from the pressures and potentially negative consequences of the recent financial crisis and similar risks beyond our control that have and may continue to affect the capital and credit markets, the broader economy, the financial services industry or the segment of that industry in which we operate. Additional information regarding our liquidity and related risks is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources.”

We are exposed to credit risk in our lending activities.

Our ability to collect on loans to individuals, our single largest asset group, depends on the willingness and repayment ability of our borrowers.  Any material adverse change in the ability or willingness of a significant portion of our borrowers to meet their obligations to us, whether due to changes in economic conditions, unemployment rates, the cost of consumer goods (particularly, but not limited to, food and energy costs), disposable income, interest rates, natural disasters, acts of war or terrorism, or other causes over which we have no control, would have a material adverse impact on our earnings and financial condition. Additional information regarding our credit risk is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operation–Liquidity and Capital Resources.”

If our estimates of loan losses are not adequate to absorb actual losses, our provision for loan losses would increase.  This would result in a decline in our future revenues and earnings.

We maintain an allowance for loan losses for loans we make directly to consumers.  This allowance is an estimate. If our actual loan losses exceed the assumption used to establish the allowance,  our provision for loan losses would increase, which would result in a decline in our future revenues and earnings. Additional information regarding our allowance for loan losses is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Credit Quality.”

The concentration of our revenues in certain states could adversely affect us.

We currently operate consumer installment loan offices in 12 states in the United States.  Any adverse legislative or regulatory change in any one of our states but particularly in any of our larger states could have a material adverse effect on our business, prospects, results of operation or financial condition.

 
We have a significant amount of goodwill, which is subject to periodic review and testing for impairment.

A portion of our total assets at March 31, 2011 is comprised of goodwill.  Under generally accepted accounting principles, goodwill is subject to periodic review and testing to determine if it is impaired.  Unfavorable trends in our industry and unfavorable events or disruptions to our operations resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in significant goodwill impairment charges.

Controls and procedures may fail or be circumvented.

Controls and procedures are particularly important for small-loan consumer finance companies. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurance that the objectives of the system are met.  Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We currently lack product and business diversification; as a result, our revenues and earnings may be disproportionately negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies.

Our primary business activity is offering consumer installment loans.  Our current lack of product and business diversification could inhibit our opportunities for growth, reduce our revenues and profits and make us more susceptible to earnings fluctuations than many other financial institutions whose operations are more diversified.

Interruption of, or a breach in security relating to, our information systems could adversely affect us.

We rely heavily on communications and information systems to conduct our business.  Each office is part of an information network that is designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis and report revenues and expenses to our headquarters.  Any failure, interruption or breach in security of these systems, including any failure of our back-up systems, could result in failures or disruptions in our customer relationship management, general ledger, loan and other systems and could result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Our centralized headquarters functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations and financial condition.

Our headquarters building is located in Greenville, South Carolina.  Our information systems and administrative and management processes are primarily provided to our offices from this centralized location, and they could be disrupted if a catastrophic event, such as a tornado, power outage or act of terror, destroyed or severely damaged our headquarters.  Any such catastrophic event or other unexpected disruption of our headquarters functions could have a material adverse effect on our business, results of operations and financial condition.

Various provisions of our charter documents and applicable laws could delay or prevent a change of control that shareholders may favor.

Provisions of our articles of incorporation, South Carolina law, and the laws in several of the states in which our operating subsidiaries are incorporated could delay or prevent a change of control that the holders of our common stock may favor or may impede the ability of our shareholders to change our management.  In particular, our articles of incorporation and South Carolina law, among other things, authorize our board of directors to issue preferred stock in one or more series, without shareholder approval, and will require the affirmative vote of holders of two-thirds of our outstanding shares of voting stock to approve our merger or consolidation with another corporation.  Additional information regarding the similar effect of laws in certain states in which we operate is described in Part 1, Item 1, “Description of Business – Government Regulation.”

Overall stock market volatility may materially and adversely affect the market price of our common stock.

The Company’s common stock price has been and is likely to continue to be subject to significant volatility.  A variety of factors could cause the price of the common stock to fluctuate, perhaps substantially, including: general market fluctuations resulting from factors not directly related to the Company’s operations or the inherent value of its common stock; state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse to our operations; announcements of developments related to our business; adverse public perceptions or media coverage related to our products and services; fluctuations in our operating results and the provision for loan losses; low trading volume in our common stock; general conditions in the financial service industry, the domestic or global economy or the domestic or global credit or capital markets; changes in financial estimates by securities analysts; our failure to meet the expectations of securities analysts or investors; negative commentary regarding our Company and corresponding short-selling market behavior; legal proceedings brought against the Company or its officers; or significant changes in our senior management team.

 

None.


The Company owns its headquarters facility of approximately 21,000 square feet and a printing and mailing facility of approximately 13,000 square feet in Greenville, South Carolina, and all of the furniture, fixtures and computer terminals located in each branch office.  As of March 31, 2011, the Company had 1,067 branch offices, most of which are leased pursuant to short-term operating leases.  During the fiscal year ended March 31, 2011, total lease expense was approximately $17.8 million, or an average of approximately $17,300 per office.  The Company's leases generally provide for an initial three to five-year term with renewal options.  The Company's branch offices are typically located in shopping centers, malls and the first floors of downtown buildings.  Branches in the U.S. offices generally have a uniform physical layout with an average size of 1,500 square feet and in Mexico with an average size of 1,725 square feet.


From time to time the Company is involved in routine litigation relating to claims arising out of its operations in the normal course of business.  See Note 19 to our audited Consolidated Financial Statements for discussion of current litigation.


PART II.


Since November 26, 1991, the Company's common stock has traded on NASDAQ, currently on the NASDAQ Global Select Market ("NASDAQ"), under the symbol WRLD.  As of­ June 3, 2011, there were 57 holders of record of Common Stock and a significant number of persons or entities who hold their stock in nominee or “street” names through various brokerage firms.

Since April 1989, the Company has not declared or paid any cash dividends on its common stock.  Its policy has been to retain earnings for use in its business and on occasion, repurchase its common stock on the open market.  In the future, the Company's Board of Directors will determine whether to pay cash dividends based on conditions then existing, including the Company's earnings, financial condition, capital requirements and other relevant factors.  In addition, the Company's credit agreements contain certain restrictions on the payment of cash dividends on its capital stock.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources.”

On May 23, 2011, the Board of Directors authorized the Company to repurchase up to $25 million of the Company’s common stock.  This repurchase authorization follows, and is in addition to, a similar repurchase authorization of $25 million announced on April 26, 2011.  After taking into account all shares repurchased through June 3, 2011 (including pending repurchase orders subject to settlement), the Company has $16.0 million in aggregate remaining repurchase capacity under all of the company’s outstanding repurchase authorizations.  The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements and other market and economic conditions.   Although the repurchase authorizations above have no stated expiration date, the Company’s stock repurchase program may be suspended or discontinued at any time.  The following table provides information with respect to purchases made by the Company of shares of the Company’s common stock during the three month period ended March 31, 2011:

 
Issuer Purchases of Equity Securities
                       
   
Total Number of Shares Purchased
   
Average Price per Share
   
Total Number of Shares Purchased as part of Publicly Announced Plans or Programs
   
Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
 
                         
January 1 through January 31, 2011
    -     $ -       -     $ 17,624,203  
February 1 through February 28, 2011
    48,200       60.42       48,200       14,712,074  
March 1 through March 31, 2011
    241,200       60.07       241,200       222,827  
                                 
Total for the quarter
    289,400     $ 60.13       289,400          

The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements and other market and economic conditions.  The Company’s stock repurchase program is not subject to specific targets or any expiration date, but may be suspended or discontinued at any time.

The table below reflects the stock prices published by NASDAQ by quarter for the last two fiscal years.  The last reported sale price on June 2, 2011 was $64.76.

Market Price of Common Stock
 
Fiscal 2011
 
Quarter
 
High
   
Low
 
             
First
  $ 41.56     $ 31.56  
Second
    46.08       36.74  
Third
    55.24       37.27  
Fourth
    65.95       50.12  
 
Market Price of Common Stock
 
Fiscal 2010
 
Quarter
 
High
   
Low
 
                 
First
  $ 30.87     $ 16.09  
Second
    28.16       18.12  
Third
    37.42       23.25  
Fourth
    44.10       35.67  
 

Selected Consolidated Financial and Other Data

(Amounts in thousands, except per share amounts)

   
Years Ended March 31,
 
                               
   
2011
   
2010
   
2009
   
2008
   
2007
 
                               
Statement of Operations Data:
                             
Interest and fee income
  $ 424,594     $ 375,031     $ 331,454     $ 292,457     $ 247,007  
Insurance commissions and other income
    66,851       65,605       60,698       53,590       45,311  
Total revenues
    491,445       440,636       392,152       346,047       292,318  
Provision for loan losses
    95,908       90,299       85,476       67,542       51,925  
General and administrative expenses
    237,515       217,012       200,216       179,218       153,627  
Interest expense
    14,773       13,881       14,886       15,938       11,696  
Total expenses
    348,196       321,192       300,578       262,698       217,248  
                                         
Income before income taxes
    143,249       119,444       91,574       83,349       75,070  
Income taxes
    52,000       45,783       35,081       33,096       28,897  
Net income
  $ 91,249     $ 73,661     $ 56,493     $ 50,253     $ 46,173  
Net income per common share (diluted)
  $ 5.63     $ 4.45     $ 3.43     $ 2.89     $ 2.51  
Diluted weighted average shares
    16,210       16,546       16,464       17,375       18,394  
Balance Sheet Data (end of period):
                                       
Loans receivable, net of unearned and deferred fees
  $ 646,072     $ 571,086     $ 498,433     $ 445,091     $ 378,038  
Allowance for loan losses
    (48,355 )     (42,897 )     (38,021 )     (33,526 )     (27,840 )
Loans receivable, net
    597,717       528,189       460,412       411,565       350,198  
Total assets
    666,397       593,052       526,094       478,881       402,026  
Total debt
    187,430       170,642       197,042       197,078       148,840  
Shareholders' equity
    442,575       382,948       296,335       244,801       228,731  
Other Operating Data:
                                       
As a percentage of average net loans receivable:
                                 
Provision for loan losses
    15.1 %     16.3 %     17.6 %     15.8 %     14.5 %
Net charge-offs
    14.3 %     15.5 %     16.7 %     14.5 %     13.3 %
Number of offices open at year-end
    1,067       990       944       838       732  


General

The Company's financial performance continues to be dependent in large part upon the growth in its outstanding loans receivable,  the maintenance of loan quality and acceptable levels of operating expenses.  Since March 31, 2006, gross loans receivable have increased at a 16.0% annual compounded rate from $416.3 million to $875.0 million at March 31, 2011.  The increase reflects both the higher volume of loans generated through the Company's existing offices and the contribution of loans generated from new offices opened or acquired over the period.  During this same five-year period, the Company has grown from 620 offices to 1,067 offices as of March 31, 2011.  During fiscal 2012, the Company plans to open approximately 63 new offices in the United States and 10 new offices in Mexico and also to evaluate acquisition as opportunities arise.

The Company's ParaData Financial Systems subsidiary provides data processing systems to 103 separate finance companies, including the Company, and currently supports approximately 1,652 individual branch offices in 44 states and Mexico.  ParaData’s revenue is highly dependent upon its ability to attract new customers, which often requires substantial lead time, and as a result its revenue may fluctuate from year to year.  Its net revenues from system sales and support amounted to $1.9 million, $1.8 million and $2.0 million in fiscal 2011, 2010 and 2009, respectively.  ParaData’s net revenue to the Company will continue to fluctuate on a year to year basis.  ParaData continues to provide state-of-the-art data processing support for the Company’s in-house integrated computer system at a substantially reduced cost to the Company.

 
The Company offers an income tax return preparation and electronic filing program in all but a few of its offices.  The Company prepared approximately 48,000, 62,000 and 61,000 returns in each of the fiscal years 2011, 2010 and 2009, respectively.  Revenues from our tax preparation business decreased by $3.0 million or 29.3% during fiscal 2011 due to a 24% decline in the number of returns prepared.  This decrease resulted, primarily, from an increase in compensation from tax preparers who continued to offer an instant loan on tax refunds, which the Company was unable to offer this year.  Next year, it is expected that the refund anticipation loans will not be available for any tax preparer, so the Company should not have this competitive disadvantage going forward.

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

   
Years Ended March 31,
 
   
2011
   
2010
   
2009
 
   
(Dollars in thousands)
 
Average gross loans receivable (1)
  $ 860,538       750,504       658,587  
Average net loans receivable (2)
    633,748       553,650       486,776  
                         
Expenses as a percentage of  total revenues:
                       
Provision for loan losses
    19.5 %     20.5 %     21.8 %
General and administrative
    48.3 %     49.2 %     51.1 %
Total interest expense
    3.0 %     3.2 %     3.8 %
                         
Operating margin (3)
    32.2 %     30.3 %     27.1 %
Return on average assets
    13.9 %     12.7 %     10.9 %
                         
Offices opened and acquired, net
    77       46       106  
Total offices (at period end)
    1,067       990       944  


 
(1)
Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period.
 
(2)
Average net loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period.
 
(3)
Operating margin is computed as total revenues less provision for loan losses and general and administrative expenses as a percentage of total revenues.

Comparison of Fiscal 2011 Versus Fiscal 2010

Net income was $91.2 million during fiscal 2011, a 23.9% increase over the $73.7 million earned during fiscal 2010.  This increase resulted primarily from an increase in operating income (revenues less provision for loan losses and general and administrative expenses) of $24.7 million, or 18.5%, offset by a $0.9 million increase in interest expense, and a $6.2 million increase in income tax expense.

Total revenues increased to $491.4 million in fiscal 2011, a $50.8 million, or 11.5%, increase over the $440.6 million in fiscal 2010.   Revenues from the 937 offices open throughout both fiscal years increased by 9.0%.  At March 31, 2011, the Company had 1,067 offices in operation, an increase of 77 offices from March 31, 2010.

Interest and fee income during fiscal 2011 increased by $49.6 million, or 13.2%, over fiscal 2010.  This increase resulted from an increase of $80.1 million, or 14.5%, in average net loans receivable between the two fiscal years.  The increase in average loans receivable was attributable to the Company’s internal growth.  During fiscal 2011, internal growth increased because the Company opened 73 new offices and the average loan balance increased from $971 to $1,009.

 
Insurance commissions and other income increased by $1.2 million, or 1.9%, over the two fiscal years.  Insurance commissions increased by $4.5 million, or 12.1%, as a result of the increase in loan volume in states where credit insurance is sold. Other income decreased by $3.3 million, or 11.4%, over the two years, primarily due to a $3.1 million decrease in tax preparation revenue.  This decrease was due to a 24.0% reduction in the number of tax returns prepared by the Company compared with the prior year, primarily due to increased competition from tax preparers who offered an instant loan on tax refunds.  Consequently, tax preparation revenue declined to $7.8 million during fiscal 2011 from $10.9 million in the fiscal 2010.

The provision for loan losses during fiscal 2011 increased by $5.6 million, or 6.2%, from the previous year.  This increase resulted from a combination of increases in both the allowance for loan losses and the amount of loans charged off.  Net charge-offs for fiscal 2011 amounted to $90.6 million, a 5.8% increase over the $85.6 million charged off during fiscal 2010. During the current fiscal year, the Company also had a reduction in our year-over-year loan loss ratios. Annualized net charge-offs as a percentage of average net loans decreased from 15.5% during fiscal 2010 to 14.3% during fiscal 2011.  The current year charge-off ratio of 14.3% is below historical levels, and the Company does not expect the ratio to decrease meaningfully below this level.  Historically from fiscal 2002 to fiscal 2006, the charge-offs as a percent of average loans ranged from 14.6% to 14.8%. In fiscal 2007 the Company experienced a temporary decline to 13.3%, which was attributed to a change in the bankruptcy law but returned to 14.5% in fiscal 2008.  In fiscal 2009 the ratio increased to 16.7%, the highest in the Company’s history as a result of the difficult economic environment and higher energy costs that our customers faced, but has been declining during fiscal 2010 and fiscal 2011. Accounts that were 61 days or more past due were 2.4% on a recency basis and were 3.8% on a contractual basis at both March 31, 2011 and March 31, 2010.
 
General and administrative expenses during fiscal 2011 increased to $237.5 million, or 9.4%, over the previous fiscal year.  This increase was due primarily to costs associated with the new offices opened or acquired during the fiscal year.  General and administrative expenses, when divided by average open offices, increased slightly when comparing the two fiscal years and, overall, general and administrative expenses as a percent of total revenues decreased from 49.2% in fiscal 2010 to 48.3% during fiscal 2011.  This decrease resulted from management’s ongoing monitoring and control of expenses and continued leveraging of fixed expenses.

Interest expense increased by $0.9 million, or 6.4%, during fiscal 2011, as compared to the previous fiscal year as a result of an increase in average debt outstanding of 4.0% and a slight increase in average interest rates.  Average interest rates increased from 6.5% in fiscal 2010 to 6.7% in fiscal 2011.

Income tax expense increased $6.2 million, or 13.6%, primarily from an increase in pre-tax income.  The effective rate decreased to 36.3% in fiscal 2011 from 38.3% in fiscal 2010 due partially to an income tax settlement with the state of South Carolina for tax years March 31, 1997 through March 31, 2006, which resulted in the Company recognizing a tax benefit of approximately $900,000.

Comparison of Fiscal 2010 Versus Fiscal 2009

Net income was $73.7 million during fiscal 2010, a 30.4% increase over the $56.5 million earned during fiscal 2009.  This increase resulted primarily from an increase in operating income of $26.9 million, or 25.2%, and a $1.0 million decrease in interest expense, offset by an increase in income tax expense.

Total revenues increased to $440.6 million in fiscal 2010, a $48.5 million, or 12.4%, increase over the $392.2 million in fiscal 2009.   Revenues from the 834 offices open throughout both fiscal years increased by 8.1%.  At March 31, 2010, the Company had 990 offices in operation, an increase of 46 offices from March 31, 2009.

Interest and fee income during fiscal 2010 increased by $43.6 million, or 13.1%, over fiscal 2009.  This increase resulted from an increase of $66.9 million, or 13.7%, in average net loans receivable between the two fiscal years.  The increase in average loans receivable was attributable to the Company’s internal growth.  During fiscal 2010, internal growth increased because the Company opened 48 new offices and the average loan balance increased from $917 to $971.

Insurance commissions and other income increased by $4.9 million, or 8.1%, over the two fiscal years.  Insurance commissions increased by $4.8 million, or 14.7%, as a result of the increase in loan volume in states where credit insurance is sold. Other income increased slightly, but there were various changes within other income when comparing the two years, including:

 
 
·
Revenue from tax preparation increased approximately $1.0 million, or 10%.
 
·
In fiscal 2010, a $1.1 million gain on the interest rate swaps was recorded compared to an approximate $800,000 loss is fiscal 2009.
 
·
In fiscal 2010, the Company extinguished $18.0 million par value of its convertible notes at a $2.2 million gain, compared to fiscal 2009, during which $15.0 million par value of the convertible notes were extinguished at a $4.0 million gain.
 
·
In fiscal 2009, a $1.5 million gain was recognized on the sale of a foreign currency option.  There was no such gain recorded during fiscal 2010.

See Note 8 to the Consolidated Financial Statements for further discussion regarding this extinguishment of debt.

The provision for loan losses during fiscal 2010 increased by $4.8 million, or 5.6%, from the previous year.  This increase resulted from a combination of increases in both the allowance for loan losses and the amount of loans charged off.  Net charge-offs for fiscal 2010 amounted to $85.6 million, a 5.6% increase over the $81.1 million charged off during fiscal 2009. Accounts that were 61 days or more past due decreased from 2.7% to 2.4% on a recency basis and from 4.2% to 3.8% on a contractual basis when comparing March 31, 2010 to March 31, 2009. During fiscal 2010, we had a reduction in our year-over-year loan losses. Annualized net charge-offs as a percentage of average net loans decreased from 16.7% during fiscal 2009 to 15.5% during fiscal 2010.
 
During fiscal year 2010 our charge-offs as a percent of average net loans decreased to 15.5% from 16.7% in fiscal 2009.  We believe our customer base is highly impacted by the cost of basic commodities such as food and energy and unemployment.  The cost of basic commodities rose steeply during the first several months of our fiscal 2009, which had a negative impact on our customer’s ability to repay outstanding loans.  This, in turn, drove our charge-off ratio up significantly over our historical experience.  After moderating in the second half of fiscal 2009, the costs of basic commodities rose more gradually during fiscal 2010 allowing our customers to adapt to such costs increases and better manage their ability to repay outstanding loans.  The rate of unemployment has also stabilized.  We believe these were major factors in the reduction of our charge-off ratio during fiscal 2010.

General and administrative expenses during fiscal 2010 increased by $16.8 million, or 8.4%, over the previous fiscal year.  This increase was due primarily to costs associated with the new offices opened or acquired during the fiscal year.  General and administrative expenses, when divided by average open offices, increased slightly when comparing the two fiscal years and, overall, general and administrative expenses as a percent of total revenues decreased from 51.1% in fiscal 2009 to 49.2% during fiscal 2010.  This decrease resulted from the reduction of branch openings during fiscal 2010 and management’s ongoing monitoring and control of expenses.
Interest expense decreased by $1.0 million, or 6.7%, during fiscal 2010, as compared to the previous fiscal year as a result of a decrease in average debt outstanding of 4.5% and a slight decrease in average interest rates.  Average interest rates decreased from 6.7% in fiscal 2009 to 6.5% in fiscal 2010.

Income tax expense increased $10.7 million, or 30.5%, primarily from an increase in pre-tax income.  The effective rate remained consistent at 38.3% in both fiscal 2010 and fiscal 2009.

Critical Accounting Policies

The Company’s accounting and reporting policies are in accordance with U.S. generally accepted accounting principles and conform to general practices within the finance company industry.  The significant accounting policies used in the preparation of the consolidated financial statements are discussed in Note 1 to the consolidated financial statements.  Certain critical accounting policies involve significant judgment by the Company’s management, including the use of estimates and assumptions which affect the reported amounts of assets, liabilities, revenues, and expenses.  As a result, changes in these estimates and assumptions could significantly affect the Company’s financial position and results of operations.  The Company considers its policies regarding the allowance for loan losses, share-based compensation, and income taxes to be its most critical accounting policies due to the significant degree of management judgment involved.

 
Allowance for Loan Losses

The Company has developed policies and procedures for assessing the adequacy of the allowance for loan losses that take into consideration various assumptions and estimates with respect to the loan portfolio.   The Company’s assumptions and estimates may be affected in the future by changes in economic conditions, among other factors.  For additional discussion concerning the allowance for loan losses, see “Credit Quality” below.

Share-Based Compensation

The Company measures compensation cost for share-based awards at fair value and recognizes compensation over the service period for awards expected to vest. The fair value of restricted stock is based on the number of shares granted and the quoted price of our common stock, and the fair value of stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the input of highly subjective assumptions, including expected volatility, risk-free interest rate and expected life, changes to which can materially affect the fair value estimate. In addition, the estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period that the estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results, and future changes in estimates, may differ substantially from our current estimates.

Income Taxes
 
Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. Management exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments and estimates are re-evaluated on a periodic basis as regulatory and business factors change.

No assurance can be given that either the tax returns submitted by management or the income tax reported on the Consolidated Financial Statements will not be adjusted by either adverse rulings by the U.S. Tax Court, changes in the tax code, or assessments made by the Internal Revenue Service (“IRS”) or state taxing authorities. The Company is subject to potential adverse adjustments, including but not limited to: an increase in the statutory federal or state income tax rates, the permanent non-deductibility of amounts currently considered deductible either now or in future periods, and the dependency on the generation of future taxable income in order to ultimately realize deferred income tax assets.
 
The Company adopted FASB ASC 740-10, on April 1, 2007. Under FASB ASC 740, the Company includes the current and deferred tax impact of its tax positions in the financial statements when it is more likely than not (likelihood of greater than 50%) that such positions will be sustained by taxing authorities, with full knowledge of relevant information, based on the technical merits of the tax position. While the Company supports its tax positions by unambiguous tax law, prior experience with the taxing authority, and analysis that considers all relevant facts, circumstances and regulations, management must still rely on assumptions and estimates to determine the overall likelihood of success and proper quantification of a given tax position.

Credit Quality

The Company’s delinquency and net charge-off ratios reflect, among other factors, changes in the mix of loans in the portfolio, the quality of receivables, the success of collection efforts, bankruptcy trends and general economic conditions.

Delinquency is computed on the basis of the date of the last full contractual payment on a loan (known as the recency method) and on the basis of the amount past due in accordance with original payment terms of a loan (known as the contractual method).  Management closely monitors portfolio delinquency using both methods to measure the quality of the Company's loan portfolio and the probability of credit losses.

 
The following table classifies the gross loans receivable of the Company that were delinquent on a recency and contractual basis for at least 61 days at March 31, 2011, 2010, and 2009:

   
At March 31,
 
   
2011
   
2010
   
2009
 
   
(Dollars in thousands)
 
                   
Recency basis:
                 
61-90 days past due
  $ 12,894       11,094       11,304  
91 days or more past due
    8,297       7,337       6,661  
Total
  $ 21,191       18,431       17,965  
                         
Percentage of period-end gross loans receivable
    2.4 %     2.4 %     2.7 %
                         
Contractual basis:
                       
61-90 days past due
  $ 16,564       14,548       14,223  
91 days or more past due
    16,625       14,985       13,673  
Total
  $ 33,189       29,533       27,896  
                         
Percentage of period-end gross loans receivable
    3.8 %     3.8 %     4.2 %

Loans are charged off at the earlier of when such loans are deemed to be uncollectible or when six months have elapsed since the date of the last full contractual payment.  The Company’s charge-off policy has been consistently applied and no significant changes have been made to the policy during the periods reported. Management considers the charge-off policy when evaluating the appropriateness of the allowance for loan losses.  Charge-offs as a percent of average net loans decreased from 15.5% in fiscal 2010 to 14.3% in fiscal 2011.

In fiscal 2011, approximately 84.3% of the Company’s loans were generated through refinancings of outstanding loans and the origination of new loans to previous customers.  A refinancing represents a new loan transaction with a present customer in which a portion of the new loan proceeds is used to repay the balance of an existing loan and the remaining portion is advanced to the customer.  For fiscal 2011, 2010, and 2009, the percentages of the Company’s loan originations that were refinancings of existing loans were 75.9%, 76.4% and 75.0%, respectively.  The Company’s refinancing policies, while limited by state regulations, in all cases consider the customer’s payment history and require that the customer has made multiple payments on the loan being considered for refinancing.  A refinancing is considered a current refinancing if the customer is no more than 45 days delinquent on a contractual basis.  Delinquent refinancings may be extended to customers who are more than 45 days past due on a contractual basis if the customer completes a new application and the manager believes that the customer’s ability and intent to repay has improved.  It is the Company’s policy to not refinance delinquent loans in amounts greater than the original amounts financed.  In all cases, a customer must complete a new application every two years.  During fiscal 2011, delinquent refinancings represented 1.6% of the Company’s total loan volume compared to 2.0% in fiscal 2010.

Charge-offs, as a percentage of loans made by category, are greatest on loans made to new borrowers and less on loans made to former borrowers and refinancings.  This is as expected due to the payment history experience available on repeat borrowers.   However,  as  a  percentage  of  total  loans  charged off,   refinancings represent the greatest percentage due to the volume of loans made in this category.  The following table depicts the charge-offs as a percent of loans made by category and as a percent of total charge-offs during fiscal 2011:

 
   
 
Loan Volume by Category
   
Percent of Total Charge-offs
   
Charge-off as a Percent of Total Loans Made by Category
 
                   
Refinancing
    75.9 %     76.6 %     4.7 %
Former borrowers
    8.4 %     4.8 %     3.2 %
New borrowers
    15.7 %     18.6 %     9.3 %
      100.0 %     100.0 %        

The Company maintains an allowance for loan losses in an amount that, in management’s opinion, is adequate to cover losses inherent in the existing loan portfolio.  The Company charges against current earnings, as a provision for loan losses, amounts added to the allowance to maintain it at levels expected to cover probable losses of principal.  When establishing the allowance for loan losses, the Company takes into consideration the growth of the loan portfolio, the mix of the loan portfolio, current levels of charge-offs, current levels of delinquencies, and current economic factors.  In accordance with FASB ASC Topic 450, the Company accrues an estimated loss if it is probable and can be reasonably estimated.  It is probable that there are losses in the existing portfolio.  To estimate the losses, the Company uses historical information for net charge-offs and average loan life.  This method is based on the fact that many customers refinance their loans prior to the contractual maturity.  Average contractual loan terms are approximately eleven months and the average loan life is approximately four months.  Based on this method, the Company had an allowance for loan losses that approximated six months of average net charge-offs at March 31, 2011, 2010, and 2009. Therefore, at each year end the Company had an allowance for loan losses that covered estimated losses for its existing loans based on historical charge-offs and average lives.  In addition, the entire loan portfolio turns over approximately three times during a typical twelve-month period.  Therefore, a large percentage of loans that are charged off during any fiscal year are not on the Company’s books at the beginning of the fiscal year.  The Company believes that it is not appropriate to provide for losses on loans that have not been originated, that twelve months of net charge-offs are not needed in the allowance, and that the method employed is in accordance with generally accepted accounting principles.

 
The following is a summary of the changes in the allowance for loan losses for the years ended March 31, 2011, 2010, and 2009:

   
At March 31,
 
   
2011
   
2010
   
2009
 
                   
Balance at beginning of period
  $ 42,896,819       38,020,770       33,526,147  
Provision for loan losses
    95,908,363       90,298,934       85,476,092  
Loan losses
    (100,044,691 )     (94,782,185 )     (88,728,498 )
Recoveries
    9,475,131       9,139,923       7,590,928  
Translation adjustment
    119,372       219,377       (306,340 )
Allowance on acquired loans
    -       -       462,441  
Balance at end of period
  $ 48,354,994       42,896,819       38,020,770  
                         
Allowance as a percentage of loans receivable, net of unearned and deferred fees
    7.5 %     7.5 %     7.6 %
Net of charge-offs as a percentage of average loans receivable (1)
    14.3 %     15.5 %     16.7 %
 

(1)
Average loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period.

Quarterly Information and Seasonality

The Company's loan volume and corresponding loans receivable follow seasonal trends.  The Company's highest loan demand typically occurs from October through December, its third fiscal quarter.  Loan demand has generally been the lowest and loan repayment highest from January to March, its fourth fiscal quarter.  Loan volume and average balances typically remain relatively level during the remainder of the year.  This seasonal trend affects quarterly operating performance through corresponding fluctuations in interest and fee income and insurance commissions earned and the provision for loan losses recorded, as well as fluctuations in the Company's cash needs.  Consequently, operating results for the Company's third fiscal quarter generally are significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other quarters.

 
The following table sets forth, on a quarterly basis, certain items included in the Company's unaudited consolidated financial statements and shows the number of offices open during fiscal years 2011 and 2010.

   
At or for the Three Months Ended
 
   
2011
   
2010
 
   
June
   
September
   
December
   
March
   
June
   
September
   
December
   
March
 
    30,     30,     31,     31,     30,     30,     31,     31,  
   
(Dollars in thousands)
 
                                                                 
Total revenues
  $ 110,398       118,066       126,039       136,942       100,230       104,206       112,310       123,890  
Provision for loan losses
    19,698       27,275       31,962       16,973       20,428       25,156       29,633       15,082  
General and administrative expenses
    57,298       56,091       61,393       62,733       53,333       51,755       55,537       56,387  
Net income
    18,714       20,235       18,064       34,236       14,635       14,612       14,751       29,663  
                                                                 
Gross loans receivable
  $ 824,941       868,192       965,434       875,046       726,057       754,854       838,864       770,265  
Number of offices open
    1,010       1,034       1,054       1,067       949       966       975       990  

Recently Issued Accounting Pronouncements

See “Item 8.  Financial Statements and Supplementary Data. Note 1. Summary of Significant Accounting Policies,” of the Consolidated Financial Statements for the impact of new accounting pronouncements.

Liquidity and Capital Resources

The Company has financed and continues to finance its operations, acquisitions and office expansion through a combination of cash flows from operations and borrowings from its institutional lenders.  The Company has generally applied its cash flows from operations to fund its increasing loan volume, fund acquisitions, repay long-term indebtedness, and repurchase its common stock.  As the Company's gross loans receivable increased from $416.3  million at March 31, 2006 to $875.0 million at March 31, 2011, net cash provided by operating activities for fiscal years 2011, 2010 and 2009 was $199.8 million, $183.6 million and $153.9 million, respectively.

The Company's primary ongoing cash requirements relate to the funding of new offices and acquisitions, the overall growth of loans outstanding, the repayment or repurchase of long-term indebtedness and the repurchase of its common stock.  As of March 31, 2011, approximately 7.8 million shares have been repurchased since 2000 for an aggregate purchase price of approximately $204.5 million. During fiscal 2011 the Company repurchased 1.3 million shares for $53.3 million.  In August 2010, the Board of Directors authorized the Company to repurchase up to $20 million of common stock.  In addition, as previously announced, subsequent to the end of fiscal 2011, on May 23, 2011 and April 26, 2011, the Board of Directors authorized the Company to repurchase up to $50 million of additional common stock. Through June 3, 2011 (including pending repurchase orders subject to settlement), the Company repurchased shares of its common stock for approximately $34.2 million.  See Note 20 – Subsequent Events to the Consolidated Financial Statements.  The Company believes stock repurchases to be a viable component of the Company’s long-term financial strategy and an excellent use of excess cash when the opportunity arises.  In addition, the Company plans to open approximately 63 branches in the United States, 10 branches in Mexico, and evaluate acquisition opportunities in fiscal 2012.  Expenditures by the Company to open and furnish new offices generally averaged approximately $25,000 per office during fiscal 2011.  New offices have also required from $100,000 to $400,000 to fund outstanding loans receivable originated during their first 12 months of operation.

The Company acquired six offices and fourteen loan portfolios from competitors in eight states in eleven separate transactions during fiscal 2011. Gross loans receivable purchased in these transactions were approximately $3.9 million in the aggregate at the dates of purchase.  The Company believes that attractive opportunities to acquire new offices or receivables from its competitors or to acquire offices in communities not currently served by the Company will continue to become available as conditions in local economies and the financial circumstances of owners change.

 
The Company has a $225.0 million base credit facility with a syndicate of banks.  The credit facility will expire on August 31, 2012.  Funds borrowed under the revolving credit facility bear interest, at the Company's option, at either the agent bank's prime rate per annum or the LIBOR rate plus 3.0% per annum with a minimum 4.0% interest rate.  During fiscal 2011, the effective interest rate on borrowings under the revolving credit facility, including the impact of interest swap, was 4.4%.   The Company pays a commitment fee equal to 0.375% per annum of the daily unused portion of the revolving credit facility.  Amounts outstanding under the revolving credit facility may not exceed specified percentages of eligible loans receivable.  On March 31, 2011, $82.3 million was outstanding under this facility, and there was $142.7 million of unused borrowing availability under the borrowing base limitations.

The Company has a $75 million junior subordinated note payable with a bank, which will mature on September 17, 2015.  Funds borrowed under the junior subordinated note payable bear interest at LIBOR plus 4.875% per annum.  At March 31, 2011, the interest rate on borrowings under the junior subordinated note payable was 5.2%.   The Company is required to pay an unused line fee at a rate between 25 basis points and 37.5 basis points per annum (based on whether the usage rate for a month is equal to or greater than 65% or less than 65%) on the average daily unused portion of the maximum amount of the commitments under the junior subordinated note payable. Amounts outstanding under the junior subordinated note payable may not exceed specified percentages of eligible loans receivable.  On March 31, 2011, $30.0 million was outstanding and there was $45.0 million of unused borrowing availability under the borrowing base limitations.  The initial $30.0 million draw on the junior subordinated note payable was used to pay down the outstanding balance on the revolving credit facility.  Beginning September 17, 2011 the maximum available borrowings will be reduced by $5.0 million annually.

The Company's credit agreements contain a number of financial covenants including minimum net worth and fixed charge coverage requirements.  The credit agreements also contain certain other covenants, including covenants that impose limitations on the Company with respect to (i) declaring or paying dividends or making distributions on or acquiring common or preferred stock or warrants or options; (ii) redeeming or purchasing or prepaying principal or interest on subordinated debt; (iii) incurring additional indebtedness; and (iv) entering into a merger, consolidation or sale of substantial assets or subsidiaries.  The Company was in compliance with these agreements at March 31, 2011 and does not believe that these agreements will materially limit its business and expansion strategy.

On October 2, 2006, the Company amended its senior credit facility in connection with the issuance of $110 million in aggregate principal amount of its 3% convertible senior subordinated notes due October 1, 2011 (the “Convertible Senior Notes”).  As of March 31, 2011, $77.0 million in aggregate principal amount of the Convertible Senior Notes remained outstanding.  See Note 7 to the Consolidated Financial Statements included in this report for more information regarding this transaction and the terms of the Convertible Senior Notes.

The following table summarizes the Company’s contractual cash obligations by period (in thousands):

   
Fiscal Year Ended March 31,
 
                                           
   
2012
   
2013
   
2014
   
2015
   
2016
   
Thereafter
   
Total
 
                                           
Convertible notes payable
  $ 77,000     $ -     $ -     $ -     $ -     $ -     $ 77,000  
Maturities of notes payable
    -       82,250       -       -       -       -       82,250  
Junior subordinated note payable
    -       -       -       -       30,000       -       30,000  
Interest payments
    6,191       2,997       1,541       1,541       642       -       12,912  
Minimum lease payments
    16,422       10,737       4,517       828       270       -       32,774  
                                                         
Total
  $ 99,613     $ 95,984     $ 6,058     $ 2,369     $ 30,912     $ -     $ 234,936  
 
 
The Company believes that cash flow from operations and borrowings under its revolving credit facility and  junior subordinated note payable will be adequate for the next twelve months, and for the foreseeable future thereafter, to fund the expected cost of opening or acquiring new offices, including funding initial operating losses of new offices and funding loans receivableoriginated by those offices and the Company's other offices.  Except as otherwise discussed in this report, including in Part 1, Item 1A, “Risk Factors,” management is not currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or could be reasonably likely to result in, the Company’s liquidity increasing or decreasing in any material way.  From time to time, the Company has needed and obtained, and expects that it will continue to need on a recurring basis, an increase in the borrowing limits under its revolving credit facility.  The Company has successfully obtained such increases in the past and anticipates that it will be able to do so in the future as the need arises; however, there can be no assurance that this additional funding will be available (or available on reasonable terms) if and when needed. See Part I, Item 1A, “Risk Factors,” for a further discussion of risks and contingencies that could affect our business, financial condition and liquidity.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

As of March 31, 2011, the Company’s financial instruments consist of the following:  cash and cash equivalents, loans receivable, senior notes payable, convertible senior subordinated notes payable, junior subordinated note payable, and interest rate swaps.  Fair value approximates carrying value for all of these instruments, except the convertible senior subordinated notes payable, for which the fair value of $85.6 million represents the quoted market price. Loans receivable are originated at prevailing market rates and have an average life of approximately four months.  Given the short-term nature of these loans, they are continually repriced at current market rates.   The Company’s outstanding debt under its revolving credit facility was $82.3 million at March 31, 2011.  Interest on borrowings under this facility is based, at the Company’s option, on the prime rate or LIBOR plus 3.0%, with a minimum rate of 4.0%. The Company’s outstanding debt under its junior subordinated note payable was $30.0 million at March 31, 2011.  Interest on borrowings under this facility is based on LIBOR plus 4.875%.

Based on the outstanding balance at March 31, 2011, a change of 1% in the LIBOR interest rate would cause a change in interest expense of approximately $537,000 on an annual basis.

In December 2008, the Company entered into a $20 million interest rate swap to convert a variable rate of one month LIBOR to a fixed rate of 2.4%.  In accordance with FASB ASC Topic 815-10-15, the Company records derivatives at fair value, as other assets or liabilities, on the consolidated balance sheets.  Since the Company is not utilizing hedge accounting under FASB ASC Topic 815-10-15, changes in the fair value of the derivative instrument are included in other income.  As of March 31, 2011 the fair value of the interest rate swap was a liability of $0.3 million and included in other liabilities.  The change in fair value from the beginning of the year, recorded as an unrealized gain in other income, was approximately $1.0 million.

On October 10, 2006, the Company issued $110 million convertible senior subordinated notes due October 1, 2011 to qualified institutional brokers in accordance with Rule 144A of the Securities Act of 1933.  The coupon rate on the Convertible Notes is fixed at 3% and is payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2007.  During fiscal 2009 and fiscal 2010, the company repurchased and cancelled $33.0 million, respectively, of the convertible senior subordinated notes.  See Note 8 to the Consolidated Financial Statements for more information regarding these repurchases.

Foreign Currency Exchange Rate Risk

In September 2005 the Company began opening offices in Mexico, where local businesses utilize the Mexican peso as their functional currency.  The consolidated financial statements of the Company are denominated in U.S. dollars and are therefore subject to fluctuation as the U.S. dollar and Mexican peso foreign exchange rate changes.  International revenues were approximately 5.5% of total revenues for the year ended March 31, 2011 and net loans denominated in Mexican pesos were approximately $32.3 million (USD) at March 31, 2011.
 
 
The Company’s foreign currency exchange rate exposures may change over time as business practices evolve and could have a material effect on its financial results.  There have been, and there may continue to be, period-to-period fluctuations in the relative portions of Mexican revenues.
 
Because earnings are affected by fluctuations in the value of the U.S. dollar against foreign currencies, an analysis was performed assuming a hypothetical 10% increase or decrease in the value of the U.S. dollar relative to the Mexican peso in which the Company’s transactions in Mexico are denominated.  At March 31, 2011, the analysis indicated that such market movements would not have had a material effect on the consolidated financial statements.  The actual effects on the consolidated financial statements in the future may differ materially from results of the analysis for the year ended March 31, 2011.  The Company will continue to monitor and assess the effect of currency fluctuations and may institute further hedging alternatives.

Inflation

The Company does not believe that inflation, within reasonably anticipated rates, will have a material adverse effect on its financial condition.  Although inflation would increase the Company’s operating costs in absolute terms, the Company expects that the same decrease in the value of money would result in an increase in the size of loans demanded by its customer base.  It is reasonable to anticipate that such a change in customer preference would result in an increase in total loan receivables and an increase in absolute revenues to be generated from that larger amount of loans receivable.  That increase in absolute revenues should offset any increase in operating costs.  In addition, because the Company’s loans are relatively short in both contractual term and average life, it is unlikely that loans made at any given point in time will be repaid with significantly inflated dollars.

Legal Matters

From time to time the Company is involved in routine litigation relating to claims arising out of its operations in the normal course of business.  See Note 19 to our audited Consolidated Financial Statements for discussion of current litigation.


“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures about Market Risk” of this report is incorporated by reference in response to this Item 7A.
 
 
Part II
 
 
CONSOLIDATED BALANCE SHEETS

   
March 31,
 
   
2011
   
2010
 
ASSETS
           
             
Cash and cash equivalents
  $ 8,030,580       5,445,168  
Gross loans receivable
    875,045,680       770,265,207  
Less:
               
Unearned interest and fees
    (228,974,132 )     (199,179,293 )
Allowance for loan losses
    (48,354,994 )     (42,896,819 )
Loans receivable, net
    597,716,554       528,189,095  
Property and equipment, net
    23,366,207       22,985,830  
Deferred income taxes
    14,480,025       11,642,590  
Other assets, net
    10,804,113       11,559,684  
Goodwill
    5,634,586       5,616,380  
Intangible assets, net
    6,364,890       7,613,518  
Total assets
  $ 666,396,955       593,052,265  
                 
LIABILITIES & SHAREHOLDERS' EQUITY
               
                 
Liabilities:
               
Senior notes payable
    82,250,000       99,150,000  
Convertible senior subordinated notes payable
    77,000,000       77,000,000  
Discount on convertible subordinated notes payable
    (1,819,600 )     (5,507,959 )
Net of discount
    75,180,400       71,492,041  
Junior subordinated note payable
    30,000,000       -  
Income taxes payable
    13,097,419       14,043,486  
Accounts payable and accrued expenses
    23,293,967       25,418,784  
Total liabilities
    223,821,786       210,104,311  
                 
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 15,711,365 and 16,521,553 shares at March 31, 2011 and March 31, 2010, respectively
    -       -  
Additional paid-in capital
    47,352,738       27,112,822  
Retained earnings
    395,086,232       357,179,568  
Accumulated other comprehensive income/(loss)
    136,199       (1,344,436 )
Total shareholders' equity
    442,575,169       382,947,954  
Commitments and contingencies
               
                 
Total liabilities and shareholders' equity
  $ 666,396,955       593,052,265  

See accompanying notes to consolidated financial statements

 
CONSOLIDATED STATEMENTS OF OPERATIONS

   
Years Ended March 31,
 
   
2011
   
2010
   
2009
 
                   
Revenues:
                 
Interest and fee income
  $ 424,594,245       375,030,993       331,453,835  
Insurance commissions and other income
    66,850,858       65,605,147       60,698,020  
Total revenues
    491,445,103       440,636,140       392,151,855  
                         
Expenses:
                       
Provision for loan losses
    95,908,363       90,298,934       85,476,092  
General and administrative expenses:
                       
Personnel
    159,160,492       142,482,669       130,674,094  
Occupancy and equipment
    31,115,076       28,468,673       25,577,437  
Advertising
    13,056,444       12,842,759       13,067,079  
Amortization of intangible assets
    1,949,444       2,242,517       2,454,872  
Other
    32,233,478       30,975,389       28,443,267  
Total general and administrative expenses
    237,514,934       217,012,007       200,216,749  
                         
Interest expense
    14,772,694       13,881,224       14,885,634  
Total expenses
    348,195,991       321,192,165       300,578,475  
                         
                         
Income before income taxes
    143,249,112       119,443,975       91,573,380  
Income taxes
    51,999,932       45,782,667       35,080,790  
Net income
  $ 91,249,180       73,661,308       56,492,590  
                         
Net income per common share:
                       
Basic
  $ 5.76       4.52       3.48  
Diluted
  $ 5.63       4.45       3.43  
                         
Weighted average common shares outstanding:
                       
Basic
    15,833,983       16,304,207       16,239,883  
Diluted
    16,210,233       16,545,703       16,464,403  

See accompanying notes to consolidated financial statements.
 
 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

   
Additional Paid-in Capital
   
Retained Earnings
   
Accumulated Other Comprehensive Income (Loss), net
   
Total Shareholders' Equity
   
Total Comprehensive Income