World Acceptance Corporation Reports Fiscal 2021 Third Quarter Results

World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its third fiscal quarter and nine months ended December 31, 2020.

Portfolio results

Third quarter of fiscal 2021 results reflect the increase in loan demand and improved operating environment compared to the early months of the COVID-19 pandemic. Gross loans outstanding decreased to $1.26 billion as of December 31, 2020, a 7.9% decrease from the $1.37 billion of gross loans outstanding as of December 31, 2019. This is compared to a 9.0% increase as of quarter ended December 31, 2019, when compared with the quarter ended December 31, 2018. Gross loans increased $155.2 million, or 14.0%, sequentially over the prior quarter as customer demand stabilized, representing the largest gross loan increase during a third quarter in a decade.

Our customer base decreased by 18.3% year-over-year as of December 31, 2020, compared to 7.2% growth for the comparable period ended December 31, 2019. Excluding the direct impact of portfolio acquisitions, the customer base decreased 18.5% year-over-year as of December 31, 2020, compared to 8.9% growth for the comparable period ended December 31, 2019. During the quarter ended December 31, 2020, the number of unique borrowers in the portfolio increased by 8.4% compared to an increase of 4.3% during the quarter ended December 31, 2019.

The following table includes the change in the number of loan originations by customer type for the following comparative quarterly periods:

	Q3 FY 2021 vs. Q3 FY 2020		Q3 FY 2020 vs. Q3 FY 2019		Q2 FY 2021 vs. Q2 FY 2020
New Customers	(27.3)%		3.9%		(46.9)%
Former Customers	3.5%		13.9%		2.3%
Refinance Customers	(21.6)%		6.4%		(19.7)%

Refinance loan volume is in-line with the 18.3% reduction in the customer base year-over-year

As of December 31, 2020, we had 1,230 branches open. For branches open throughout both periods, same store gross loans decreased 7.6% in the twelve months ended December 31, 2020, compared to an 8.2% increase for the twelve-month period ended December 31, 2019. For branches open throughout both periods, the customer base over the twelve-month period ended December 31, 2020, decreased 18.0% compared to a 5.4% increase for the twelve months ended December 31, 2019.

Three-month financial results

Net income for the third quarter of fiscal 2021 increased by $20.8 million to $14.5 million compared to a loss of $6.3 million for the same quarter of the prior year. Net income per diluted share increased to $2.25 per share in the third quarter of fiscal 2021 compared to a loss of $0.87 per share for the same quarter of the prior year (which was negatively impacted by an $8 million accrual related to the investigation into our Mexico operations).

Earnings per share for the quarter benefited from our share repurchase program. The Company repurchased 238,452 shares of its common stock on the open market at an aggregate purchase price of approximately $26.2 million during the third quarter of fiscal 2021. This follows a repurchase of 786,418 shares in the first half of fiscal 2021 at an aggregate purchase price of approximately $62.7 million and the repurchase of 1,520,679 shares in fiscal 2020 at an aggregate purchase price of approximately $197.4 million. The Company had approximately 6.2 million common shares outstanding excluding approximately 0.6 million unvested restricted shares as of December 31, 2020.

Total revenues for the third quarter of fiscal 2021 decreased to $130.9 million, a 10.9% decrease from the $147.0 million reported for the same quarter of the prior year. The revenues from the 1,222 branches open throughout both quarterly periods (revenue from comparable branches) decreased by 8.2%. Interest and fee income declined 11.8%, from $130.2 million in the third quarter of fiscal 2020 to $114.9 million in the third quarter of fiscal 2021, primarily due to a decrease in average earning loans. Insurance and other income decreased by 4.2% to $16.1 million in the third quarter of fiscal 2021 compared to $16.8 million in the third quarter of fiscal 2020. Sales of our motor club product increased by $1.3 million as we expanded the number of states in which we offer the product. Insurance revenue decreased due to lower loan volume during the third quarter of fiscal 2021.

Accounts 61 days or more past due decreased to 5.2% on a recency basis at December 31, 2020, compared to 7.0% at December 31, 2019. Total delinquency on a recency basis decreased to 8.9% at December 31, 2020, compared to 10.9% at December 31, 2019. Our allowance for credit losses compared to net loans was 12.2% at December 31, 2020, compared to 11.2% at December 31, 2019.

On April 1, 2020, the Company replaced its incurred loss methodology with a current expected credit loss ("CECL") methodology to accrue for expected losses. The provision for credit losses decreased $26.4 million, or 47.7%, to $28.9 million from $55.2 million when comparing the third quarter of fiscal 2021 to the third quarter of fiscal 2020. The provision decreased during the quarter due primarily to an $18.6 million decrease in net charge-offs as well as an improvement in delinquency. Net charge-offs as a percentage of average net loans on an annualized basis decreased from 18.1% in the third quarter of fiscal 2020 to 11.6% in the third quarter of fiscal 2021. The charge-off rate during the quarter benefited from the reduced number of lower tenured customers in the portfolio as of September 30, 2020. Loans that were 90 days past due on a recency basis increased $7.4 million during the quarter compared to an $11.4 million increase in the third fiscal quarter of the prior year. We are experiencing lower losses on loans that were in the portfolio as of April 1, 2020, than initially predicted under our CECL methodology through December 31, 2020. As a result of this positive performance and additional federal stimulus announced in December, we have decreased our expected future credit losses by approximately $6.5 million during the quarter. However, due to the ongoing uncertainty created by the pandemic, we have maintained the overall allowance for credit loss at the high end of the calculated range of expected losses as of December 31, 2020.

The table below is updated to use the customer tenure based methodology that aligns with our CECL methodology. After experiencing rapid growth of the portfolio during the prior two years, primarily in new customers, the gross loan balance declined in the first nine months of fiscal 2021 as a result of the ongoing pandemic and its effect on the overall economy. The tables below illustrate the changes in the weighting within the portfolio as well as the relative impact on charge-offs within the vintages over the last five years.

Gross Loan Balance By Customer Tenure at Origination
As of	Less Than 2 Years	More Than 2 Years	Total
12/31/2015	$331,120,618	$793,079,740	$1,124,200,358
12/31/2016	$302,649,934	$762,474,846	$1,065,124,780
12/31/2017	$336,582,487	$790,836,894	$1,127,419,381
12/31/2018	$426,884,909	$832,020,730	$1,258,905,639
12/31/2019	$489,940,306	$882,877,242	$1,372,817,549
12/31/2020	$413,509,916	$851,073,804	$1,264,583,720

Year-Over-Year Growth (Decline) in Gross Loan Balance by Customer Tenure at Origination
12 Month Period Ended	Less Than 2 Years	More Than 2 Years	Total
12/31/2015	$(27,513,624)	$(11,520,082)	$(39,033,706)
12/31/2016	$(28,470,684)	$(30,604,893)	$(59,075,578)
12/31/2017	$33,932,553	$28,362,048	$62,294,601
12/31/2018	$90,302,422	$41,183,836	$131,486,258
12/31/2019	$63,055,398	$50,856,512	$113,911,910
12/31/2020	$(76,430,390)	$(31,803,439)	$(108,233,829)

Portfolio Mix by Customer Tenure at Origination
As of	Less Than 2 Years	More Than 2 Years
12/31/2015	29.5%	70.5%
12/31/2016	28.4%	71.6%
12/31/2017	29.9%	70.1%
12/31/2018	33.9%	66.1%
12/31/2019	35.7%	64.3%
12/31/2020	32.7%	67.3%

The table below includes the charge-off rate of each vintage (the actual gross charge-off balance in the subsequent twelve months divided by the starting gross loan balance) indexed to the December 31, 2016, vintage.

Actual Gross Charge-off Rate During Following 12 Months; Indexed to 12/31/2016 Vintage
12 Months Beginning	Less Than 2 Years	More Than 2 Years	Total
12/31/2015	1.91	1.01	1.28
12/31/2016	1.52	0.80	1.00
12/31/2017	1.58	0.76	1.00
12/31/2018	1.73	0.77	1.09
12/31/2019	1.71	0.77	1.10

The increase in overall charge-off rate over the last twelve months is primarily due to the elevated weighting of the lower tenure portion of the portfolio as of December 31, 2019, while the charge-off rates within the tenure buckets are within historical norms. The 12 month charge-off rates remain elevated despite the lower charge-off rates experienced during Q2 and Q3 of fiscal 2021 due to elevated loss rates during Q4 of fiscal 2020 and Q1 of fiscal 2021. We continue to expect the long-term value of our newly added customers to exceed our investment return threshold.

General and administrative (“G&A”) expenses decreased $12.7 million, or 14.0%, to $77.9 million in the third quarter of fiscal 2021 compared to $90.6 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses decreased from 61.6% during the third quarter of fiscal 2020 to 59.5% during the third quarter of fiscal 2021. G&A expenses per average open branch decreased