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World Acceptance Corp. (NASDAQ:WRLD)

F1Q14 Earnings Call

July 25, 2013 10:00 AM ET

Executives

Sandy McLean – Chairman and CEO

Kelly Malson – SVP, CFO and Treasurer

Mark Roland – President and COO

Analysts

Bob Ramsey – FBR

John Rowan – Sidoti & Company

Bill Dezellem – Tieton Capital Management

Andrew Shapiro – Lawndale Capital Management

John Heck – Stevens

Brian Steck – Mangrove Partners

Douglas Smith Northern Capital

Operator

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the World Acceptance Corporation-Sponsored First Quarter Press Release Conference Call. This call is being recorded. And at this time, all participants have been placed on listen-only mode. A question-and-answer session will follow the presentation by the Corporation’s CEO and his other officers.

Before we begin, the Corporation has requested that I make the following announcement. The comments made during this conference may contain certain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act that represents the Corporation’s expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties.

Statements other than those of historical facts, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should or any variation of the foregoing and similar expressions are forward-looking statements.

Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include the factors discussed in today’s earnings press release and in the risk factor section of the Corporation’s most recent Form 10-K/A and other reports filed with or furnished to the SEC from time-to-time. The Corporation does not undertake any obligation to update any forward-looking statements it makes.

At this time, it is my pleasure to turn the floor over to your host, Sandy McLean, CEO.

Sandy McLean

Thank you, Paula and welcome to our first quarter conference call. As you know we have already released our press release and as part of that release, we have also released a summary of our quarterly results. So, at this point in time, I’d like to open the call up to questions. Paula?

Question-and-Answer-Session

Thank you. (Operator Instructions) And our first question will come from Bob Ramsey, FBR.

Bob Ramsey – FBR

Hey, good morning.

Sandy McLean

Hi, Bob.

Bob Ramsey – FBR

The first question I have for you was it seems that the will yields were higher this quarter than they have been and I was just curious if there was anything unusual or any reason for the yields to be sort of up a little bit this quarter?

Sandy McLean

Well, actually if I think if you will, the yields are pretty much level with the same quarter of last year, but I don’t want to necessarily imply this. That’s the case, because as we continue to – our mix continues the shift towards those large loan balances, we expect to continue to see a decline in yields. But there is one offsetting factor, a great deal of our growth is now coming from Mexico.

Mexico now represents about 10% of our offices and about 9% of our total assets and certainly I think our growth in balances in Mexico were over a 100%. We went by 40% or 50% and our growth in the US has been slowing.

But in addition to that, as you know we converted from the cash to accrual method of accounting and that has in fact accomplished what we anticipated. For instance in the month of April our total consolidated revenue was $48 million.

Last year, in the month of May, our total consolidated revenue was $48 million and then throughout the June it was $48.2 million. So there is some – this is more consistent. On a monthly earnings and we believe we will see more consistency on our quarterly earnings.

However, last year, for the same three months, April revenue was $42 million, May revenue was about $45 million and our June revenue was about $46 million and of course that variation came from the timing of the days and the months and so forth. Anyway the bottom-line of all this is, that probably with some quarterly fluctuations in the revenue during the last year, that you were aware of and you’ve been seeing for quite some time.

So on a comparative basis, I would say that, some of the revenue may not have been reflected on a same timely better way in the last quarter, in the May it shifted and went to the next quarter. But anyway, we should see less fluctuations and it’s hard to quantify exactly what that amount, it’s been truly on a comparative basis, somewhere between $1 or $1.2 million. But it’s not easy to quantify. So…

Bob Ramsey – FBR

But remind me, sorry, I was just trying to say remind me how the loan yields in Mexico compared to the US as a whole and you are saying it varied by state, but just US versus Mexico?

Sandy McLean

Well, in Mexico the yields are close to like 80% way above and in the US alone they are closer to the 50% to 60% range.

Bob Ramsey – FBR

Okay, that’s helpful.

Sandy McLean

That will provide some of the declining yields that we’ve seen in the US.

Bob Ramsey – FBR

And I guess, similarly I was surprised that, I guess even in absolute dollar terms, the insurance and other fees were down modestly year-over-year but they were down year-over-year. Is that a reflection of more business coming out of Mexico geographic chest or more of the large installment loans or is there something else going on that held back the insurance and other fees this quarter?

Sandy McLean

It’s a combination of things, but if you really had to drive it to one particular product, it would be in our motor club. We have actually offering the product differently in different states and of that one product is down more – I don’t know how much it’s down, but it’s down – a quarter of a million. Other than that, the insurance should reflect what’s going on in the mix.

Bob Ramsey – FBR

Okay and then last question and I’ll back out. But I know you all, when you did file the 10-K, talked about evaluating how you are going to treat, I don’t know what the right term is, but small dollars, loan renewals and I was just curious if you can kind of quantify over the last year or in this quarter and some period of time, how much of your volume is the smaller dollar loan renewals. Just trying to get a sense of how meaningful that impact is?

Sandy McLean

That’s subject to interpretation. I believe that, if you look at our renewals, the percent of renewals that fall into that category of less than 10% is around 15%. There are other parties that may interpret that a little more stricter in how you define what constitutes that loan- of what constitutes the new loan that’s being made and that would say, it would be somewhere around 25%.

So, somewhere between that, but I believe it’s closer to that but I believe it’s closer to that 15% range and it’s something that is a result of our not following that as closely and properly as we have in the past which did in fact contribute to the material weakness that was identified then it’s something that we will be addressing in detail and make sure we have proper control surrounding that.

Bob Ramsey – FBR

Okay, that is helpful. And then if I think about, what the impact would be of doing less of that sort of business. Maybe 25% of originations, I guess would include sort of originating the original or the outstanding loan plus a little bit more, but it’s not the 25% of originations is from that small dollar that advance to the customer. Right, it’s the total of – to repay the old loan plus the small dollar advance.

Sandy McLean

That’s correct. None of these, we are not talking about new form of borrowers. This is strictly renewals and the way it’s measured is the amount of the new loan compared to what you are paying off should be at least greater than that 10% level to qualify as a true renewal under the accounting guidelines.

Bob Ramsey – FBR

Okay, and if you just continue to try this, which I know is one of the options you are looking at, how will that affect your credit?

Sandy McLean

I don’t believe it would affect the cash flow, but certain people may have running into difficulties and they – if they are not allowed to renew it, it creates a lot of pressure on them. I don’t know, whatever I said will be speculative. I am not sure it’s just not something that we have monitored as closely as we should have over a long period of time. I do not believe it will represent a material impact on our operations or results.

Bob Ramsey – FBR

Great. Thank you, Sandy. I’ll hop back up.

Sandy McLean

Okay.

Operator

And moving on we’ll go to John Rowan, Sidoti & Company.

John Rowan – Sidoti & Company

Good morning.

Sandy McLean

Good morning.

John Rowan – Sidoti & Company

Sandy, just to kind of clarify what you are talking about as far as the options if you will for those 10% loans. In the amended 10-K that you filed, did you talk about an exceptional report? Can you just maybe layout what the options are for you with regard to the renewals that are sub-10% whether it’s not making a loan or if you just have to create and exception report. I just want to be clear as to what exact type of options we are talking about for those specific loans?

Sandy McLean

I move to Kelly. I mean, she was more involved in this and where we hadn’t actually established what procedures in controls and so forth that we ultimately will adopt. But I am going to let her address some of those various options.

Kelly Malson

John this is Kelly. Regarding the exception report, what the intent would be is, one is from an operational standpoint we determine exactly what we want to do regarding small dollar renewals. If from a GAAP accounting standpoint they don’t need the threshold. Those loans will be flagged. That way I can identify what the dollar amount and the volume are and we can consider any accounting or additional accounting treatment that we may need to do for those loans.

John Rowan – Sidoti & Company

Okay, but that’s – so to that scenario, you still make that loan now, correct?

Kelly Malson

Under that scenario, yes.

Sandy McLean

Other options are to generate monthly reports to identify these loans and find out the less than a certain level the dollar amount and from an operations and procedural standpoint or decide whether or not this is beneficial and if not it will discontinue, but we can create programming edits that will make sure it can kick in, kick out and even not allow those type of loans or either allow them under a certain supervisory approvals.

There are a quite a few options in the way that we can address this. But like I say, regardless of whichever direction we hit, I’d continue to say I don’t believe it to have a significant impact on the overall operations of the company.

John Rowan – Sidoti & Company

Okay. So moving on from this issue, going back to the change in accounting. Obviously you mentioned how it’s leveled out your revenues. But is it, was there any effect on the loan portfolio in the quarter?

Sandy McLean

No.

John Rowan – Sidoti & Company

No, okay. And then one last question, are you guys getting any closer to moving into any new states?

Sandy McLean

Yes.

John Rowan – Sidoti & Company

Which ones?

Sandy McLean

When we like to we get a light here. So we actually visit with the regulators of our next state this past week and we will welcomed by those regulators and in the process delivered our first rights of application and they appear to welcome us and we are very excited about the future licenseship.

John Rowan – Sidoti & Company

Okay, thank you very much.

Operator

(Operator Instructions) Moving on from Tieton Capital Management we will go to Bill Dezellem.

Bill Dezellem – Tieton Capital Management

Thank you. That’s Tieton Capital Management. I’d like to jump into the charge-offs if we could please and I guess two opposite questions. The first one is, what do you believe is driving the Mexican charge-offs downward and then conversely if you are in the States,, what do you believe are driving the charge-offs upward?

Sandy McLean

Okay, these acumens are one more easily in Mexico, because we offer a couple of different products down there. One of the products is the normal installment loan that’s being offered through our normal traditional offices that another one is a kind of a payroll deduct loans. It’s offered through certain unions and the union related loans are – they have a payroll deduct aspect to it and they are generally a lower yielding.

But they generally have a little larger balances and they generally have less charge-offs associated with it. Plus I believe, in Mexico, I was actually down there recently meeting with the managers in our Appreciation Day and the people now are beginning to get every year they get more and more experienced and they are more comfortable with the policies and procedures and I think we are just doing a better job down there.

As far as what’s going on in the US, it’s a whole lot different thing. It’s hard to quantify. I don’t think we are the only company within this segment that’s experiencing some increases in charge-offs.

But I don’t know that directly because we are the only – we are one of the fee public companies in the space and we had as we’ve said in the remarks, this is the second quarter of year-over-year increases in charge-offs and some we are concerned with and monitoring closely, but I cannot offer an explanation as to what’s going on.

We are also seeing a kind of decrease or reduction in our loan volume. So, I don’t know whether, that we had a drop-off in demand or whether something going on with the economies but it’s hard to put our hands on at this point. But we are monitoring very closely and as time goes on, maybe we’ll get a better direction on where this is going.

Bill Dezellem – Tieton Capital Management

Thank you.

Operator

And next we’ll go to Andrew Shapiro with Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Hi, thank you. A little bit bigger picture questions, if you could help me with is, just if you could discuss the regulatory environment and just call out, I guess the regulatory risks or headwinds are in both the United States and Mexico.

With respect to the United States, the CFPB finally got congressionally approval either and there has been this media attention on ProPublica article, marketplace et cetera on your sector.

And then in Mexico, where things have been thriving, if you could discuss the – I guess relative regulatory environment which should be probably currently more the wild west, but I don’t know if there are regulatory headwinds or risks that you may be facing?

Sandy McLean

Let’s start with Mexico first. I believe that it’s – from a regulatory standpoint it’s very stable and we are not receiving any type of issues developed and so forth. Our history down there is certainly not as long as it is in the US and things may change dramatically but we are not seeing any evidence to that whatsoever at this point.

Andrew Shapiro – Lawndale Capital Management

Okay.

Sandy McLean

And then as far as the US, obviously the confirmation of Cordray is the Director of the CFPB was a big event. But I don’t think it as stated in the remark, I don’t think it’s a parable necessarily an event for world. We’ve been not acting under the assumption that he may get ultimately confirmed anyway and he – thus far he has not expressed any significant issues with the installment lending industry.

But there is no question that this installment lending industry is one – that comes under his authority and supervision and regulations and rulemaking and I anticipate it’s important in the not so near future whether it’s this year or next that we will probably be visited that bureau and they now would expect that they will determine at that point in time that we are offering a very valuable fair transparent beneficial service to our customers.

He remains mention of the ProPublica article. I don’t think that was directed towards the industry. I think that was the direct charge or attack on World Acceptance Corporation. And it’s unfortunate that it organization structures that – say that they don’t do an analysis or do some research on a company and have predetermined this conclusions.

And within that article and I go back through this because it was all addressed when this all came out the last quarter and before, but we mentioned that we make – went to great strides to try to answer some of their questions. And what they did is, they reached out to several disgruntled former customers and two or three disgruntled former employees, several of which have been terminated for improper behavior.

And they chose to ignore our responses and draw their conclusions based on these anecdotal adverts. So, it’s nothing we can do about those articles. We can fight them in the press and to do so this delays the length of the time that it’s there. And we can live with that.

But what becomes especially important is that when people with responsibility and authority then draw conclusions about this company based on the conclusions of a obviously slanted report. Then that gives us great deal for concern and hopefully, when it’s all said and done, the CFPB will make their decisions not based on anecdotal evidence such as inflammatory and highly distorted pictured.

It was painted by this article. But they will do so based on what they see when they come to visit this company.

Andrew Shapiro – Lawndale Capital Management

Okay and then just as a follow-up, to the extent there is restrictions, regulations you opted to reduce some of the renewals as you kind of discussed here and I am not probably cognizant of the – if it’s accounting precepts or its actual operating changes. If the borrower is unable to go to you the traditional method, is that they basically go next door to the installment or some of other form of subprime lender?

And similarly your competitors have that same issue where they don’t have whether or not renewing someone that these people are basically coming down the hallway to you guys and you are making the cash or credit standards. You are making the loans and so the likelihood of the payoffs remains high and it’s not going to be an impact on your loan losses?

Sandy McLean

I’ll try to answer the question, I understand it correctly but, if a customer is having difficulty in making a payment with us, that meaning he has some kind of economic – personal economic crisis or challenge that he is faced with. And normally the process would be for them to come in and visit our office and find out what’s going on and how we can work with that customer and so forth.

The likelihood if he is faced with that economic crisis or challenge at that point in time, the likelihood that him going to another installment lender who also goes through various thorough underwriting standards, the likelihood of him being able to get a loan from a competitor is not very great.

So, the customer would generally be better off, probably his only alternative generally would be to work with us and – lot of our customers go through difficult times all the time and we work with them in any other way. If they need time to make the payment and we’ll certainly work with them.

Mark Roland

If it’s bad and he could…

Sandy McLean

I’m sorry.

Mark Roland

Sandy, this is Mark, may I interject?

Sandy McLean

Yes please.

Mark Roland

One thing that we may not have made clear is that, South Carolina, one of our oldest states has operated for the last 15 or 16 years under a restriction on renewals of less than 10% and although we don’t disclosed it by state results necessarily, I will tell you that South Carolina runs the lowest delinquency in the lowest bad debt and charge-off percentages in the company.

So that restriction if applied nationwide, I would assume over time with South Carolina which means the impact to me once we get our customers used to that process and our individual branch employees used to the process would be negligible. And we’ve already done it in one of our largest states and all the states for the last 15 or16 years.

Andrew Shapiro – Lawndale Capital Management

That’s helpful. Thanks.

Operator

And moving on we’ll go John Heck with Stevens.

John Heck – Stevens

Morning, thanks for taking my questions. Forgive me if you gave this out, but and I’m just interested if you have this handy. Do you have the end of quarter share count available?

Kelly Malson

This is Kelly and yes, I do have the end of share count. At June 30, shares outstanding were 11,775,627 shares.

John Heck – Stevens

Great, thank you. Just going back a little bit into the credit. I understand, Sandy you just said something watching in the charge-off level. But what are you seeing in terms of delinquency rates and even a little deeper delinquency roll rates when someone hits 30, do they tend to go to 30 to 60 more frequently than they have before.

And do you think it’s just sort of this seasoning customer base? Is there something going on in the economy that’s causing a redress? Or is it just a reversion to the mean because you’ve been running generally lower than average charge-offs?

Sandy McLean

I think Mark – Mark is not here on location with us. So, that’s why he had interjected in the – Mark you are still there? If there, I think you are in a better position to answer that than I am, would you do so?

Mark Roland

Okay. We monitor delinquency roll rates on a daily basis and right now, the general perception is that there is some weakened demand for borrowers to be renewing their loans for whatever reason and we can’t put our finger exactly on it. The reduction isn’t dramatic.

It’s small, but it’s noticeable. The delinquency rates have crept up a 0.5% or so across various categories. And again, you can’t put a finger on it. There is a not a geographic concentration in any particular area. It’s a cost to the company and it happened to in our association meaning with a particular state right now with probably 200 lenders like World Acceptance, so we have a slightly smaller scale.

And they are all experiencing roughly the same thing and no one – I mean the collective brain trust done here is a million years of people with experience in this industry and it’s just difficult to determine right now why this is occurring.

Sandy McLean

But that way and I’d like to add to that Mark, these are not unprecedented however. I mean, as we mentioned in the prepared remarks, over the last 10 or 11 years, we have had quarterly charge-off ratios at or above these levels three to four times. So, this is not like this is we are charting new territory.

John Heck – Stevens

Yeah, understood and last question is, with respect to the material weakness and you guys talked about procedurally what it might mean for certain renewals and so forth, do you have to invest in any new – like accounting g software or systems that we should think about are is just once you just got the data, you just need to call it and analyze it in different ways?

Sandy McLean

We have the systems, we have the data and we just need to determine operationally what is the best way to approach this and from the impact of accounting and so forth. This situation is well under control.

John Heck – Stevens

Okay, thank you guys very much.

Operator

And moving on from Mangrove Partners we’ll go to Brian Steck.

Brian Steck – Mangrove Partners

Hi, thank you guys for taking my call. My first question, Kelly, it’s probably better for you. I was just hoping to better understand the reference in your prepared remarks about the 10% cash flow threshold as required for accounting guidelines to qualify the new loan. Can you just shed a little bit of light, so I can better understand exactly what that means?

Kelly Malson

Yes, the simplest way to explain it is that when a customer renews a loan they would need to have at least 10% equity in their loan when they renew it. If they have less than 10% equity, then loan is treated as a modification and so you would treated as this – the life of the loan has just been extended.

Brian Steck – Mangrove Partners

And so, if it was a loan that was being rolled at a point in which it was 45 days delinquent and was modified because it had less than 10% equity, would it stay in the delinquencies?

Kelly Malson

Yes, it would stay in the delinquency.

Brian Steck – Mangrove Partners

And so in your answer to a prior question about this loans potentially being flagged and different accounting treatments being applied to them. Is there anything other than a delinquent loan continuing to be categorized as a delinquent loan if in fact there was a modification rather than a renewed new loan?

Kelly Malson

The only other impact which is not material is, if there was a change in the yield in that loan, then you would have to modify the yield amount. However, on these renewals, as you all know, we renew them at the same dollar amount. So therefore the yield effect I believe the same.

Sandy McLean

Any unearned things could be written off. And the remaining unearned administrative charges or origination fees would need, they would not be captured as earnings that would need to be rolled over into the new loan and amortized over the remaining life of the new loan.

Brian Steck – Mangrove Partners

So is that an income recognition issue or is that actually an income change issue?

Kelly Malson

It would be a recognition, but based on our analysis it was less than 1 million bucks.

Brian Steck – Mangrove Partners

And then, Sandy, you had estimated that this impact was somewhere between 15% and 25%. Was that of total renewal volume or was that of total loan origination volume?

Sandy McLean

That is total, it’s based on the number of renewals not loan volumes per se, it’s number of renewals.

Brian Steck – Mangrove Partners

As a percentage of your total renewal volume, that’s helpful. I mean, one last question, looking at the amended 10-K, I noticed that the average life of a loan was close in fiscal 2013 to be eight months. I know that it been four months going back over a decade. What prompted that change?

Kelly Malson

What prompted that change, was first of all, taking into consideration that a certain percentage of our loans would need to be treated as a modification. The second item is related to the fact that we’ve been going into say that we offer larger loans and therefore the contract term of those loans are longer and therefore the life of those loans are longer.

Sandy McLean

And the original estimate was based on total loan volume divided by average loans outstanding it would come up with basically the portfolio was turning roughly three times a year and therefore the loans returning roughly three times a year then that would imply that the life of those loans were somewhere around four months.

One of the difficulties we faced once this weakness was identified and one of the reasons that it took so long between the – when we were supposed to initially file and when we ultimately filed, is we had to do a great deal of program and to go in and actually calculate on an average basis the true life of these loans including the impact of – if this is a new loan it didn’t meet the 10% test and you had to go back to a previous point in time and move forward.

And it was a great deal of complicated program that it had to be written, and tested and wedded and that was one of the largest things that created the delay in this process. So, I think the answer to your question, it is a combination of the change in mix and so forth. The answer to your question, it was before it was an estimate based on logical assumptions and ultimately it became a truly accurate assessment of the actual fact based on the loans outstanding at a particularly point in time.

Brian Steck – Mangrove Partners

I noticed that, it seem the change from four months to eight months surprised me and so I went and did a calculation very similar to what I think you just described by looking at the total loan origination volume for the year and dividing it by average balances for the year and came up with something like 4.3 months for 2013. So perhaps offline we – Kelly, we could catch up later and if you could help me, I can understand how I can back into that number as now represented to eight months, that would be great.

Kelly Malson

Okay.

Brian Steck – Mangrove Partners

That’s all my questions. Thank you.

Sandy McLean

I will also add to that, a great deal of time and effort went into the programming and I think it will need to continue to look at all aspects to that programming because this was done based on the loans outstanding at a given point in time and if you look at loans at various points in times, that average may turn out to be different and depending on whether – there is a lot of factors that go into it and Kelly will be happy to discuss that further details.

Operator

(Operator Instructions) Moving on we’ll go to Doug Smith with Northern Capital

Douglas Smith Northern Capital

Hi, thank you. Good morning. My question is, was there any change this year that prompted the auditors to flag the material weakness in documentation for the allowance? Or in other words, why did this crop up as an issue?

Sandy McLean

As you know, we’ve had the same – for roughly, over 20 years, maybe 40 years if you go back through in a long period of time and as a result of the PCAOB during – we were audited by that. They were reviewed by the PCAOB a couple of years ago and everything went fine and then they came back in for follow-up audit and I think at that point in time, there was some question as to whether our documentation was satisfactory.

And after a lot of looking at it that we recognized that we had this weakness that we had to address and once it was addressed, we had to follow-through with the process to come to prove to ourselves as well as everyone else that this did not cause a material misstatement in our financial statements, which ultimately turned out to be the case.

Douglas Smith Northern Capital

Okay, and can you talk about how much effort is involved in the remediation plans that the 10-K describes, it sounds like it’s going to take several quarters, but it was unclear to me if you are saying that you remediate the problem and you just need several quarters to confirm that or it’s going to take few more quarters to figure it out?

Sandy McLean

I think, we could establish the programming immediately to the going in and say the system will allow certain types of renewals and so forth. But operationally that may not be the best approach I think, given that we have this weakness that we got to address we want to address it in a comprehensive manner to make sure that has an impacts on either our operations and on our customers.

Douglas Smith Northern Capital

Okay, are you comfortable that the allowance is accurate today or with the ongoing work, it maybe ongoing work…

Sandy McLean

We were not comfortable that the allowance was correct we would not be issuing our quarterly financials, nor we will have issued our fiscal year financials without recording any changes.

Douglas Smith Northern Capital

Okay, and just lastly, can you help us understand why you do these less than 10% cash out renewals? It sounds like it doesn’t have a full impact.

Sandy McLean

It has not been a conscious decision to do so or not to do so. Generally, we make a renewal when a customer comes in and request a renewal. I mean, it could be that his need at that point in time, is not that large but that amount of money is very important to him at that particular point in time and we will go through that renewal process at our customers’ request.

If it turns out that it did not meet these 10% guidelines it has never been that much of an issue except in the State of South Carolina where they have that prohibition. Granted if we did not properly address the accounting aspects of that, we will not have to do so.

Mark Roland

And I am sorry to interject. This is Mark Roland again. It’s difficult, I guess, at some income levels to understand what’s going on at other levels. But, if you would think about a $1200 net loan and somebody has paid interest sufficiently to borrow a $150 when they need, it’s two track tires on the primary vehicle.

So somebody can get alert that it’s greater or less than 10% is not entering that borrower’s mind and – it has not been really been a factored in our decision either. It’s a $150 that the borrower has paid in sufficient equity to borrow that money, just as if he had a MasterCard and he had $150 left on a $1200 credit limit, we will work, Kelly, Sandy and I together, to determine the appropriate operational procedures to mitigate that circumstance.

And whatever that maybe, again, as I indicated, South Carolina already has these prohibitions in place and we know we can deal with it.

Douglas Smith Northern Capital

Great. Thank you very much.

Operator

And we do have a follow-up from Bob Ramsey with FBR.

Bob Ramsey – FBR

Thanks for taking the follow-up. I just wanted to ask real quickly to what extent repurchase activity in the second quarter may or may not has been affected by the non-timely filing? I wasn’t sure if that affected your ability to buy back stock or not.

Kelly Malson

Bob, we were already in a blackout because of the normal quarterly blackout. And so, during that timeframe, we were not purchasing stocks.

Bob Ramsey – FBR

Okay. And then, once you come out of your normal quarterly blackout, there would be nothing that would prevent you from doing whatever you chose to do anyway?

Kelly Malson

Once we are not blacked out, then we will evaluate repurchasing stocks.

Bob Ramsey – FBR

Okay, great. And then, Sandy, I know you mentioned that growth has sort been slower and we talked about that last quarter as well and obviously it didn’t see the reacceleration coming out of the tax refund pay downs you are hoping for. Just curious if you had any insight as we roll the quarter forward in terms of why borrowers aren’t borrowing this much or just any thoughts around growth?

Sandy McLean

Bob, that’s all around growth as we need it, but as far as – I will not give it up. I am sorry, I really can’t provide any.

Ramsey – FBR

Yeah. Okay, in the immediate term then, is thinking of growth and sort of 9% to 10% year-over-year pace this is sort of the right ballpark?

Sandy McLean

Bob, we can get back out again, but it’s certainly based on what we’ve been doing in the last two three quarters, it wouldn’t be unreasonable.

Bob Ramsey – FBR

All right, thank you very much. I appreciate the follow-ups.

Operator

And moving on, we’ll have a follow-up from Andrew Shapiro with Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Yes, hi. Forgive me if this is in your initial script, because I missed the first part of the call. But, what is the current buyback authorization that the Board has given, is it’s in terms of dollars or shares and what that amount is that’s left? And do your loan covenants contain certain barriers and to what extent or how much room do you have left on under your current balance sheet and income statements with respect to those covenants?

Kelly Malson

This is Kelly. And we currently have approximately $30 million remaining under the authorization and based on our loan covenants we have sufficient room for that authorization.

Sandy McLean

However there are – the covenants are somewhat restrictive and I think the bank group is taking a look at some of those restrictions and hopefully by the end of August there will be some relief in those going forward, but there could be no assurance that that will take place. But it’s not accurate.

Andrew Shapiro – Lawndale Capital Management

Right, and what particular, you have many covenants, but what particular covenants out of the ones that seem to handcuff the expanding the buyback. What are covenants that you are at risk of bouncing up against with respect to buyback activity?

Sandy McLean

This is an asset-based facility, therefore our outstanding cannot exceed a certain percent of our eligible net loans receivable and then above or beyond that, there is a requirement that we have a minimum of excess availability. And that’s the part that we are working with.

Andrew Shapiro – Lawndale Capital Management

Okay. But it’s not any debt-to-equity or any other kind of net worth ratios?

Sandy McLean

They are also, but that is not restrictive at this point in time.

Andrew Shapiro – Lawndale Capital Management

Okay, great. Thank you.

Operator

And with that, there are no further questions. I will turn it back over to our presenters for any additional or closing comments.

Sandy McLean

I just want to say thank you for your interest in World and your interest in our first quarter results and I hope everybody had a good day. Paula, I’ll turn it over to you.

Operator

Thank you and thank you for your participation. Before concluding this morning’s teleconference, the Corporation has asked to again remind you that the comments made during this conference may contain certain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act that represents the Corporation’s expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties. Statements other than those of historical facts as well as those identified by the words anticipate, estimate, intends, plans, expects, believe, may, will, and should or any variation of the foregoing and similar expressions are forward-looking statements.

Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include the factors discussed in today’s earnings press release and in the risks factor section of the Corporation’s most recent Form 10-K/A and other reports filed with or furnished to the SEC from time-to-time. The Corporation does not undertake any obligation to update any forward-looking statements it makes.

This concludes the World Acceptance Corporation’s quarterly teleconference.

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