Unassociated Document
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, 2008
 
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 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, 2007, computed by reference to the closing sale price on such date, was $33.08. (For purposes of calculating this amount only, all directors and executive officers are treated as affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.) As of May 30, 2008, 16,350,460 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 2008 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

Table of Contents

Item No.
  
Page
     
PART I
  
     
1.
Business
1
     
1A.
Risk Factors
9
     
1B.
Unresolved Staff Comments
14
     
2.
Properties
14
     
3.
Legal Proceedings
14
     
4.
Submission of Matters to a Vote of Security Holders
14
     
PART II
  
     
5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
14
     
6.
Selected Financial Data
15
     
7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
16
     
7A.
Quantitative and Qualitative Disclosures About Market Risk
26
     
8.
Financial Statements and Supplementary Data
27
     
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
55
     
9A.
Controls and Procedures
55
   
 
9B.
Other Information
55
   
 
PART III
 
   
 
10.
Directors, Executive Officers and Corporate Governance
56
   
 
11.
Executive Compensation
56
   
 
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
56
   
 
13.
Certain Relationships and Related Transactions, and Director Independence
56
   
 
14.
Principal Accountant Fees and Services
57
   
 
PART IV
 
   
 
15.
Exhibits and Financial Statement Schedules
57
 
 
Introduction

World Acceptance Corporation, a South Carolina corporation, operates a small-loan consumer finance business in eleven 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 2008" are to the Company's fiscal year ended March 31, 2008.
 
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 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.

Item 1. Description of Business

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 $130 and $3,000 through 838 offices in South Carolina, Georgia, Texas, Oklahoma, Louisiana, Tennessee, Illinois, Missouri, New Mexico, Kentucky, Alabama and Mexico as of March 31, 2008. The Company generally serves individuals with limited access to consumer credit from banks, savings and loans, other consumer finance businesses and credit card lenders. The Company also offers income tax return preparation services and access to refund anticipation loans through a third party bank 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 $1,000 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 $1,000 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 2008, the Company opened 95 new offices. Thirteen other offices were purchased and two offices were closed or merged into other existing offices due to their inability to grow to profitable levels. The Company plans to open or acquire at least 70 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 25 new offices in Mexico. The Company's ability to expand operations into new states is dependent upon its ability to obtain necessary regulatory approvals and licenses, and there can be no assurance that the Company will be able to obtain any such approvals or consents.
 
1

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 eleven 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
  
1999
 
2000
 
2001
 
2002
 
2003
 
2004
 
2005
 
2006
 
2007
 
2008
  
                                           
South Carolina
    
63
    
63
    
62
    
62
    
65
    
65
    
65
    
68
    
89
    
92
  
Georgia
    
49
    
48
    
48
    
52
    
52
    
74
    
76
    
74
    
96
    
97
  
Texas
    
131
    
135
    
135
    
136
    
142
    
150
    
164
    
168
    
183
    
204
  
Oklahoma
    
40
    
43
    
43
    
46
    
45
    
47
    
51
    
58
    
62
    
70
  
Louisiana
    
20
    
21
    
20
    
20
    
20
    
20
    
20
    
24
    
28
    
34
  
Tennessee
    
30
    
35
    
38
    
40
    
45
    
51
    
55
    
61
    
72
    
80
  
Illinois
    
20
    
30
    
30
    
29
    
28
    
30
    
33
    
37
    
40
    
58
  
Missouri
    
16
    
18
    
22
    
22
    
22
    
26
    
36
    
38
    
44
    
49
  
New Mexico
    
10
    
13
    
12
    
12
    
16
    
19
    
20
    
22
    
27
    
32
  
Kentucky (1)
    
-
    
4
    
10
    
22
    
30
    
30
    
36
    
41
    
45
    
52
  
Alabama (2)
    
-
    
-
    
-
    
-
    
5
    
14
    
21
    
26
    
31
    
35
  
Colorado (3)
    
-
    
-
    
-
    
-
    
-
    
-
    
2
    
-
    
-
    
-
  
Mexico (4)
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
3
    
15
    
35
  
                                                               
Total
    
379
    
410
    
420
    
441
    
470
    
526
    
579
    
620
    
732
    
838
  
 
(1)
The Company commenced operations in Kentucky in March 2000.
(2)
The Company commenced operations in Alabama in January 2003.
(3)
The Company commenced operations in Colorado in August 2004 and ceased operations in April 2005.
(4)
The Company commenced operations in Mexico in September 2005.

Loan and Other Products. In each state in which it operates and in Mexico, the Company offers loans that are standardized by amount and maturity in an effort to reduce documentation and related processing costs. All of the Company's loans are payable in monthly installments with terms of 4 to 36 months, and all loans are prepayable at any time without penalty. In fiscal 2008, the Company's average originated loan size and term were approximately $959 and eleven months, respectively. 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, 2008, the annual percentage rates on loans offered by the Company, which include interest, fees and other charges as calculated for the purposes of federal consumer loan disclosure requirements, ranged from 30% to 215% 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 the maximum rates allowable under applicable state law. Statutes in Texas and Oklahoma allow for indexing the maximum loan amounts to the Consumer Price Index. Fees charged by the Company include origination and account
maintenance fees, monthly handling charges.
 
2

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. In South Carolina, Georgia, Louisiana, Kentucky and Alabama, the Company originates non-file insurance, which is collected by the Company and paid as premiums to an unaffiliated insurance company. 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 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 generally 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 various state regulations. Borrowers participating in this program can purchase a product from a catalog available at a branch office or by direct mail and can finance the purchase with a retail installment sales contract provided by the Company. 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. In fiscal 2004, on a limited basis, the Company began to maintain a few inventory items in each of its branch offices participating in the program. Having certain items on hand enhanced sales and will continue to be done on a limited basis in the future.

Since fiscal 1997, the Company has expanded its product line to include larger balance, lower risk, and lower yielding individual consumer loans. These loans typically average $1,000 to $3,000, with terms of generally 18 to 24 months, compared to $300 to $1,000, with terms generally of 8 to 12 month terms for the smaller loans. The Company offers these larger loans in all states except Texas, where they are not profitable under the Company’s lending criteria and strategy. Additionally, the Company has purchased numerous larger loan offices and has made several bulk purchases of larger loans receivable. As of March 31, 2008, the larger class of loans accounted for approximately $156.0 million of gross loans receivable, a 17.0% increase over the balance outstanding at March 31, 2007. This portfolio now represents 26.0% of the total loan balances as of the end of the fiscal year. Management believes that these loans provide lower expense and loss ratios, thus providing positive contributions. While the Company does not intend to change its primary lending focus from its small-loan business, it does intend to continue expanding the larger loan product line as part of its ongoing growth strategy.

Another service offered by the Company is income tax return preparation, electronic filing and access to refund anticipation loans. Begun as an experiment in fiscal 1999, this program is now provided in all but a few of the Company’s offices. The number of returns completed has grown from 16,000 in fiscal 2000 to approximately 65,000 in fiscal 2008, and the net revenues to the Company from this service grew from approximately $800,000 to $9.7 million over these same periods. 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 and expand the program.

3

Loan Activity and Seasonality. The following table sets forth the composition of the Company's gross loans receivable by state at March 31 of each year from 1999 through 2008:

   
At March 31,
  
                                           
State
  
1999
 
2000
 
2001
 
2002
 
2003
 
2004
 
2005
 
2006
 
2007
 
2008
  
                                           
South Carolina
    
22
%
  
21
%
  
21
%
  
19
%
  
15
%
  
14
%
  
12
%
  
11
%
  
13
%
  
12
%
Georgia
    
16
    
15
    
12
    
12
    
12
    
13
    
13
    
13
    
14
    
15
  
Texas
    
31
    
28
    
25
    
24
    
23
    
21
    
20
    
24
    
23
    
22
  
Oklahoma
    
7
    
6
    
6
    
5
    
5
    
5
    
5
    
6
    
5
    
5
  
Louisiana
    
4
    
3
    
3
    
3
    
3
    
3
    
3
    
3
    
3
    
3
  
Tennessee
    
12
    
13
    
11
    
12
    
14
    
15
    
18
    
15
    
15
    
14
  
Illinois
    
3
    
4
    
5
    
5
    
5
    
5
    
5
    
5
    
6
    
6
  
Missouri
    
2
    
3
    
4
    
5
    
5
    
6
    
6
    
6
    
5
    
6
  
New Mexico
    
3
    
3
    
3
    
3
    
3
    
3
    
3
    
3
    
3
    
3
  
Kentucky (1)
    
-
    
4
    
10
    
12
    
13
    
12
    
12
    
11
    
9
    
9
  
Alabama (2)
    
-
    
-
    
-
    
-
    
2
    
3
    
3
    
3
    
3
    
3
  
Colorado (3)
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Mexico (4)
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
1
    
2
  
Total
    
100
%
  
100
%
  
100
%
  
100
%
  
100
%
  
100
%
  
100
%
  
100
%
  
100
%
  
100
%

(1)
The Company commenced operations in Kentucky in March 2000.
(2)
The Company commenced operations in Alabama in January 2003.
(3)
The Company commenced operations in Colorado in August 2004 and ceased operations in April 2005.
(4)
The Company commenced operations in Mexico in September 2005.

The following table sets forth the total number of loans and the average loan balance by state at March 31, 2008:

   
Total Number
 
Average Gross Loan
 
 
 
of Loans
 
Balance
  
           
South Carolina
    
80,297
  
$
903
  
Georgia
    
76,846
    
1,147
  
Texas
    
192,539
    
687
  
Oklahoma
    
44,005
    
737
  
Louisiana
    
21,767
    
785
  
Tennessee
    
80,060
    
1,049
  
Illinois
    
36,828
    
911
  
Missouri
    
33,857
    
1,041
  
New Mexico
    
23,029
    
792
  
Kentucky
    
40,441
    
1,272
  
Alabama
    
23,640
    
862
  
Mexico
    
30,326
    
467
  
Total
    
683,635
  
$
877
  

For fiscal 2008, 2007 and 2006, 98.2%, 99.2% and 99.9% of the Company’s revenues were attributable to U.S. customers and 1.8%, 0.8% and 0.1% were attributable to customers in Mexico. For further information regarding potential risks associated with the Company’s operations in Mexico, see Pat I, Item 1A, Risk Factors. “Our use of derivatives exposes us to credit and market risk” and “Our continued expansion into Mexico may increase the risks inherent in conducting international operations,” 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.”

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.

4

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 two or three 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 2008, approximately 83.0% 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 to refinance existing loans prior to maturity, thereby increasing the amount borrowed and increasing the fees and other income realized. For fiscal 2008, 2007 and 2006, the percentages of the Company's loan originations that were refinancings of existing loans were 73.3%, 74.3% and 75.6%, 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. While allowed on a selective basis, refinancings of delinquent loans amounted to less than 1.9% of the Company’s loan volume in fiscal 2008.

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, and Illinois, 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.

5
 
Insurance-related Operations. In Georgia, Louisiana, South Carolina, Kentucky, and on a limited basis, Alabama, New Mexico, Oklahoma, 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 2008, the captive insurance subsidiary reinsured approximately 2% of the credit insurance sold by the Company and contributed approximately 558,000 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. The Company generally perfects its security interest in collateral on larger loan transactions (typically greater than $1,000) by filing UCC financing statements.

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, 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 and must approve all credit applications. 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. Each of the state 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 office in their states 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.

In fiscal 1994 the Company converted all of its loan offices to a new computer system following its acquisition of Paradata Financial Systems, a small software company located near St. Louis, Missouri. This system uses a proprietary data processing software package developed by Paradata, and has enabled the Company to fully automate all loan account processing and collection reporting. The system also provides significantly enhanced management information and control capabilities. The Company also markets the system to other finance companies, but experiences significant fluctuations from year to year in the amount of revenues generated from sales of the system to third parties and does not expect such revenues to be material.

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 one 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.

6

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 training sessions outside the office for one full day every six months.

Compensation. The Company administers a performance-based compensation program for all of its district supervisors and branch managers. The Company annually reviews the performance of branch managers and adjusts their base salaries based upon a number of factors, including office loan growth, delinquencies and profitability.
 
Branch managers also receive incentive compensation based upon office profitability and delinquencies. In addition, branch managers are paid a cash bonus for training personnel who are promoted to branch manager positions. Assistant managers and customer service representatives are paid a base salary and incentive compensation based primarily upon their office's loan volume and delinquency ratio.

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 3.7% of total revenues in fiscal 2008, 3.5% in 2007, and 3.5% in 2006.

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 nationwide consumer finance businesses is limited because these companies typically do not make loans of less than $1,000.

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 comparable interest rates and fees. 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.

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 to obtain information on the credit history of specific customers from other consumer finance companies.

Government Regulation. 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.
 
7

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 Commission, 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, and the Alabama State Banking Department. 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. Effective May 1, 2008, World Acceptance Corporation de Mexico was converted to WAC de Mexico, S.A. de C.V., SOFOM, E.N.R.

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.

The Company is subject to extensive federal regulation as well, including 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 every prospective borrower, 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.

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. Although the Company is not aware of any pending or proposed legislation that would have a material adverse effect on the Company's business, there can be no assurance that future regulatory changes will not adversely affect the Company's lending practices, operations, profitability or prospects.

Employees. As of March 31, 2008, the Company had 2,716 U.S. employees, none of whom were represented by labor unions and 301 employees in Mexico, all of whom were represented by a 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. 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 (56)
  
Chief Executive Officer;
Chairman and Director
  
Chief Executive Officer since March 2006; 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 (37)
  
Vice President and Chief
Financial Officer
  
Vice President and CFO since March 2006; Vice
President of Internal Audit from September 2005 to March 2006; Financial Compliance Manager,
Itron Inc., from July 2004 to August 2005; Senior
Manager, KPMG LLP from April 2002 until July 2004

8

Mark C. Roland (51)
  
President and Chief Operating Officer and Director
 
  
President since March 2006; Chief Operating
Officer since April 2005; Executive Vice
President from April 2002 to March 2006; Senior Vice
President from January 1996 to April 2002
         
Jeff Tinney (45)
  
Senior Vice President,
Western Division
  
Senior Vice President, Western Division, since
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; Vice President, Operations – Louisiana from January 1997 to April 1998
         
Daniel Clinton Dyer (35)
  
Senior Vice President,
Central Division
  
Senior Vice President, Central Division since
June 2005; Vice President, Operations –
Tennessee and Missouri 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 Daniel Walters (40)
  
Senior Vice President,
Southern Division
  
Senior Vice President, Southern Division since
April 2005; Vice President, Operations – South
Carolina and Alabama from August 1998 to
March 2005.
         
Francisco J. Sauza (53)
  
Senior Vice President
  
Vice President of Operations since April 2005; President of Border Consulting Group from July 2004 to March 2005; Senior Manager of KPMG and BearingPoint Consulting from January 2000 to June 2004; Partner of Atlanta Consulting Group from February 1998 to January 2000.
 
Item 1A. Risk Factors

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: changes in interest rates; risks inherent in making loans, including repayment risks and value of collateral; recently enacted, proposed or future legislation; 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 under “Risk Factors” and in the Company’s other filings made from time to time with the Securities and Exchange Commission (“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.
 
9
 
We face liquidity risk resulting from market conditions or other events.

Downturns, uncertainties or turmoil in the corporate credit markets or broader economy, political or social unrest or other events, most of which are beyond our control, could negatively affect the level or cost of our liquidity, which would adversely affect our ongoing ability to service debt, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences. Any substantial, unexpected and/or prolonged change in the level or cost of liquidity could have a material adverse effect on our financial condition and results of operations. Additional information regarding liquidity risk is included in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

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 and other note payable or any other floating interest rate obligations we may incur, but such changes could also affect our ability to originate loans. If the interest we pay on our revolving credit facility increases, our earnings would be adversely affected because the Company is generally charging the maximum fees allowed by the respective state’s regulatory agency. Additional information regarding interest rate risk is included in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures about Market Risk and Inflation.”

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. We use interest rate swaps for interest rate risk management and options to hedge foreign currency fluctuation risk. 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 the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk.”

We are exposed to credit risk in our lending activities.

There are inherent risks associated with 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. A material adverse change in the ability of a significant portion of our borrowers to meet their obligations to us, due to changes in economic conditions, the cost of consumer goods, interest rates, natural disasters, acts of war, or other causes over which we have no control, would have a material adverse impact on our earnings and financial condition.

Controls and procedures may fail or be circumvented.

Controls and procedures are particularly important for small-loan consumer finance companies. Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances 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.

The locations where we have offices may cease to be attractive as demographic patterns change.

The success of our offices is significantly influenced by location. Current locations may not continue to be attractive as demographic patterns change. It is possible that the neighborhood or economic conditions where our offices are located could change in the future, potentially resulting in reduced revenues in those locations.

10

If we lose the services of any of our key management personnel, our business could suffer.
 
Our future success significantly depends on the continued services and performance of our key management personnel. Our future performance will depend on our ability to motivate and retain these and other key officers and key team members, particularly divisional senior vice-presidents and regional vice-presidents of operations. Competition for these employees is intense. The loss of the services of members of our senior management or key team members or the inability to attract additional qualified personnel as needed could materially harm our business.
 
Regular turnover among our managers and employees at our offices makes it more difficult for us to operate our offices and increases our costs of operations, which could have an adverse effect on our business, results of operations and financial condition.

The annual turnover as of March 31, 2008 among our office employees was approximately 45.4%. This turnover increases our cost of operations and makes it more difficult to operate our offices. If we are unable to keep our employee turnover rates consistent with historical levels or if unanticipated problems arise from our high employee turnover, our business, results of operations and financial condition could be adversely affected.

The concentration of our revenues in certain states could adversely affect us.
 
 Our offices operated in 11 states and Mexico during the year ended March 31, 2008, and our 4 largest states (measured by total revenues) accounted for approximately 62.0% of our total revenues. While we believe we have a diverse geographic presence, for the near term we expect that significant revenues will continue to be generated by certain states, largely due to the currently prevailing economic, demographic, regulatory, competitive and other conditions in those states. Changes in these or any other conditions in the markets in which we operate could lead to a reduction in demand for loans, a decline in our revenues or an increase in our provision for loan losses, any of which could result in a deterioration of our results of operations or financial condition.

Our ability to manage our growth may deteriorate, and our ability to execute our growth strategy may be adversely affected.

We have experienced substantial growth in recent years. Our growth strategy, which is based on rapidly opening and acquiring a large number of offices in existing and new markets, is subject to significant risks. We cannot assure you that we will be able to expand our market presence in our current markets or successfully enter new markets through the opening of new offices or acquisitions. Moreover, the start-up costs and the losses from initial operations attributable to each newly opened office place demands upon our liquidity and cash flow, and we cannot assure you that we will be able to satisfy these demands.

In addition, our ability to execute our growth strategy will depend on a number of other factors, some of which are beyond our control, including:

·
the prevailing laws and regulatory environment of each state in which we operate or seek to operate, which are subject to change at any time;
·
our ability to obtain and maintain any regulatory approvals, government permits or licenses that may be required;
·
the degree of competition in new markets and its effect on our ability to attract new customers;
·
our ability to compete for expansion opportunities in suitable locations;
·
our ability to recruit, train and retain qualified personnel;
·
our ability to adapt our infrastructure and systems to accommodate our growth; and
·
our ability to obtain adequate financing for our expansion plans.

We cannot assure you that our systems, procedures, controls and existing space will be adequate to support expansion of our operations. Our growth has placed significant demands on all aspects of our business, including our administrative, technical and financial personnel and systems. Additional expansion may further strain our management, financial and other resources. Our future results of operations will substantially depend on the ability of our officers and key employees to manage changing business conditions and to implement and improve our technical, administrative, financial control and reporting systems. In addition, we cannot assure you that we will be able to implement our business strategy profitably in geographic areas we do not currently serve.
 
11

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. The occurrence of any failures, interruptions or security breaches of our information systems could damage our reputation, 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 of these catastrophic events could have a material adverse effect on our business, results of operations and financial condition.

Legislative or regulatory actions or changes with adverse results 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 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, money or other penalties. In addition, any adverse change in existing laws or regulations, or 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 lower or eliminate the profitability of 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, in addition to the loss of net revenues attributable to that closing, we would 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.

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 September 2009 that allows us to borrow up to $187.0 million, assuming we are in compliance with a number of covenants and conditions. Because we typically use substantially all of our available cash generated from our operations to repay borrowings on our revolving credit agreement on a current basis, we have limited cash balances and we expect that a significant portion of our liquidity needs will be funded primarily from borrowings under our revolving credit agreement. As of March 31, 2008, we had approximately $82.5 million available for future borrowings under this agreement, excluding the seasonal line which expires each March 31. Due to the seasonal nature of our business, our borrowings are historically the highest during the third quarter and the lowest during the fourth quarter. If our existing sources of liquidity are insufficient to satisfy our financial needs, we may need to try to raise additional debt or equity in the future.

Our revolving credit agreement contains restrictions and limitations that could significantly affect our ability to operate our business.

Our revolving credit agreement contains a number of significant covenants that could adversely affect our business. These covenants impose limitations on the Company with respect to:

·  
Declaring or paying dividends or making distributions on or acquiring common or preferred stock or warrants or options;
·  
Redeeming or purchasing or prepaying principal or interest on subordinated debt
·  
Incurring additional indebtedness; and
·  
Entering into a merger, consolidation or sale of substantial assets or subsidiaries.
 
12

The breach of any covenants or obligation in our revolving credit agreement will result in a default. If there is an event of default under our revolving credit agreement, the lenders under the revolving credit agreement could cause all amounts outstanding thereunder to become due and payable, subject to applicable grace periods. This could trigger cross-defaults under our other existing or future debt instruments. As a result, our ability to respond to changing business and economic conditions and to secure additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might further our growth strategy. If we are unable to repay, refinance or restructure our indebtedness under our revolving credit agreement, the lenders under that agreement could proceed against the collateral securing that indebtedness. Our obligations under the revolving credit agreement are guaranteed by each of our existing and future subsidiaries. The borrowings under the revolving credit agreement and the subsidiary guarantees are secured by substantially all of our assets and the assets of the subsidiary guarantors. In addition, borrowings under the revolving credit agreement are secured by a pledge of substantially all of the capital stock, or similar equity interests, of the subsidiary guarantors. In the event of our insolvency, liquidation, dissolution or reorganization, the lenders under our revolving credit agreement and any other existing or future debt of ours would be entitled to payment in full from our assets before distributions, if any, were made to our stockholders.

If our estimates of loan losses are not adequate to absorb losses, our provision for loan losses would increase. This would result in a decline in our future revenues and earnings, which also could have a material adverse effect on our stock price.

We maintain an allowance for loan losses for loans we make directly to consumers. To estimate the appropriate allowance for loan losses, we consider the amount of outstanding loan balances owed to us, historical delinquency and charge-off trends, and other factors discussed in our consolidated financial statements.

As of March 31, 2008, our allowance for loan losses was $33.5 million. These amounts, however, are estimates. If our actual loan losses are greater than our allowance for loan losses, our provision for loan losses would increase. This would result in a decline in our future revenues and earnings, which also could have a material adverse effect on our stock price.

Our business is seasonal in nature, which causes our revenues, collection rates and earnings to fluctuate. These fluctuations could have a material adverse effect on our results of operations and stock price.

Our business is seasonal because demand for small consumer loans is highest in the third quarter of each year, corresponding to the holiday seasons, and lowest in the fourth quarter of each year, corresponding to our customers' receipt of income tax refunds. Our provision for loan losses is historically lowest as a percentage of revenues in the fourth quarter of each year, corresponding to our customers' receipt of income tax refunds, and increase as a percentage of revenues for the remainder of each year. This seasonality requires us to manage our cash flows over the course of the year. If our revenues or collections were to fall substantially below what we would normally expect during certain periods, our ability to service our debt and meet our other liquidity requirements may be adversely affected, which could have a material adverse effect on our results of operations and stock price.

In addition, our quarterly results have fluctuated in the past and are likely to continue to fluctuate in the future because of the seasonal nature of our business. Therefore, our quarterly revenues and results of operations are difficult to forecast, which, in turn could cause our future quarterly results to not meet the expectations of securities analysts or investors. Our failure to meet such expectations could cause a material drop in the market price of our common stock.
 
Absence of dividends could reduce our attractiveness to investors.

Since 1989, we have not declared or paid cash dividends on our common stock and may not pay cash dividends in the foreseeable future. As a result, our common stock may be less attractive to certain investors than the stock of dividend-paying companies.

Various provisions and laws could delay or prevent a change of control that stockholders may favor.

Provisions of our articles of incorporation and South Carolina law could delay or prevent a change of control that the holders of our common stock may favor or may impede the ability of our stockholders 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.
 
13

Our continued expansion into Mexico may increase the risks inherent in conducting international operations.
 
Although our operations in Mexico accounted for only 1.8% of our revenues and 2.4% of our gross loans receivable for the year ended March 31, 2008, 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. Among the additional risks potentially affecting our Mexican operations are changes in local economic conditions, disruption from political unrest and difficulty in enforcing agreements due to differences in the Mexican legal and regulatory regimes compared to those of the U.S. Our success in conducting foreign operations will depend, in large part, on our ability to succeed in differing economic, social and political conditions. Among other things, we face potential difficulties in staffing and managing local operations, and we have to design local solutions to manage credit risks posed by local customers. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business.
 
Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

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, 2008, the Company had 838 branch offices, most of which are leased pursuant to short-term operating leases. During the fiscal year ended March 31, 2008, total lease expense was approximately $12.2 million, or an average of approximately $15,000 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 1,600 square feet.

Item 3. Legal Proceedings

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 in which damages in various amounts are claimed. However, the Company believes that it is not presently a party to any pending legal proceedings that would have a material adverse effect on its financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to the Company's security holders during the fourth fiscal quarter ended March 31, 2008.

PART II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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 May 23, 2008, there were 10,200 holders of record of Common Stock and approximately 3,300 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 19, 2008, the Board of Directors authorized the Company to repurchase up to $10 million of the Company’s common stock. This repurchase authorization follows, and is in addition to, similar repurchase authorizations of $10 million announced February 12, 2008 and November 12, 2007. After taking into account all shares repurchased through May 30, 2008, the Company has $11.0 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, 2008:

           
(c) Total Number
  
(d) Approximate Dollar
  
   
(a) Total
 
(b) Average
 
of Shares Purchased
 
Value of Shares
 
 
 
Number of
 
Price Paid
 
as Part of Publicly
 
That May Yet be
 
 
 
Shares
 
per
 
Announced Plans
 
Purchased Under the
 
 
 
Purchased
 
Share
 
or Programs
 
Plans or Programs
  
                   
January 1 through January 31, 2008
    
-
    
-
    
-
    
11,547,976
  
                           
February 1 through February 29, 2008
    
190,000
    
30.82
    
190,000
    
15,693,026
(1)
                           
March 1 through March 31, 2008
    
495,000
    
29.75
    
495,000
    
964,709
  
                           
Total for the Quarter
    
685,000
  
$
30.05
    
685,000
        

(1) Includes additional $10 million authorized on February 12, 2008.
 
The table below reflects the stock prices published by NASDAQ by quarter for the last two fiscal years. The last reported sale price on May 23, 2008 was $43.93.

Market Price of Common Stock
 
Fiscal 2008
  
Quarter
 
High
 
 Low
  
           
First
  
$
45.74
  
$
39.27
  
Second
    
43.16
    
27.76
  
Third
    
35.59
    
26.40
  
Fourth
    
35.50
    
19.89
  

Fiscal 2007
  
Quarter
 
High
 
 Low
  
           
First
  
$
36.90
  
$
25.12
  
Second
    
47.30
    
33.90
  
Third
    
50.81
    
43.60
  
Fourth
    
49.10
    
37.00
  
 
14
Item 6. Selected Financial Data

Selected Consolidated Financial and Other Data

(Dollars in thousands, except per share amounts)
 
   
Years Ended March 31,
  
   
2008
 
2007
 
2006
 
2005
 
2004
 
Statement of Operations Data:
                      
Interest and fee income
  
$
292,457
  
$
247,007
  
$
204,450
  
$
177,582
  
$
151,499
  
Insurance commissions and other income
    
53,590
    
45,311
    
38,822
    
33,176
    
27,653
  
Total revenues
    
346,047
    
292,318
    
243,272
    
210,758
    
179,152
  
Provision for loan losses
    
67,542
    
51,925
    
46,026
    
40,037
    
33,481
  
General and administrative expenses
    
179,219
    
153,627
    
128,514
    
112,223
    
96,313
  
Interest expense
    
11,569
    
9,596
    
7,137
    
4,640
    
3,943
  
Total expenses
    
258,330
    
215,148
    
181,677
    
156,900
    
133,737
  
                                 
Income before income taxes
    
87,717
    
77,170
    
61,595
    
53,858
    
45,415
  
Income taxes
    
34,721
    
29,274
    
23,080
    
19,868
    
16,650
  
Net income
  
$
52,996
  
$
47,896
  
$
38,515
  
$
33,990
  
$
28,765
  
Net income per common share (diluted)
  
$
3.05
  
$
2.60
  
$
2.02
  
$
1.74
  
$
1.49
  
Diluted weighted average shares
    
17,375
    
18,394
    
19,098
    
19,558
    
19,347
  
                                 
Balance Sheet Data (end of period):
                                
Loans receivable, net of unearned and deferred fees
  
$
445,091
  
$
378,038
  
$
312,746
  
$
267,024
  
$
236,528
  
Allowance for loan losses
    
(33,526
)
  
(27,840
)
  
(22,717
)
  
(20,673
)
  
(17,261
)
Loans receivable, net
    
411,565
    
350,198
    
290,029
    
246,351
    
219,267
  
Total assets
    
486,110
    
411,116
    
332,784
    
293,507
    
261,969
  
Total debt
    
214,900
    
171,200
    
100,600
    
83,900
    
95,032
  
Shareholders' equity
    
234,305
    
215,493
    
210,430
    
189,711
    
156,580
  
                                 
Other Operating Data:
                                
As a percentage of average loans receivable:
                                
Provision for loan losses
    
15.8
%
  
14.5
%
  
15.4
%
  
15.3
%
  
15.1
%
Net charge-offs
    
14.5
%
  
13.3
%
  
14.8
%
  
14.6
%
  
14.7
%
Number of offices open at year-end
    
838
    
732
    
620
    
579
    
526
  
 
15
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General  

The Company's financial performance continues to be dependent in large part upon the growth in its outstanding loans receivable, the ongoing introduction of new products and services for marketing to its customer base, the maintenance of loan quality and acceptable levels of operating expenses. Since March 31, 2003, gross loans receivable have increased at a 16.3% annual compounded rate from $266.8 million to $599.5 million at March 31, 2008. 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 470 offices to 838 offices as of March 31, 2008. During fiscal 2009, the Company plans to open or acquire approximately 70 new offices in the United States and 25 new offices in Mexico.

The Company attempts to identify new products and services for marketing to its customer base. In addition to new insurance-related products, which have been introduced in selected states over the last several years, the Company sells and finances electronic items and appliances to its existing customer base in many states where it operates. This program is called the “World Class Buying Club.” Total loan volume under this program was $16.2 million during fiscal 2008, a 12.6% increase from the prior fiscal year. While this represents less than 1% of the Company’s total loan volume, it remains a very profitable program, which the Company plans to continue to emphasize in fiscal 2009 and beyond.

The Company's ParaData Financial Systems subsidiary provides data processing systems to 113 separate finance companies, including the Company, and currently supports approximately 1,493 individual branch offices in 45 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 greatly from year to year. Its net revenues from system sales and support amounted to $2.2 million, $2.5 million and $2.3 million in fiscal 2008, 2007 and 2006, respectively. ParaData’s pretax income (loss) to the Company also can fluctuate greatly. It was $(255,000), $112,000 and $308,000, in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. ParaData’s net revenue and resulting net income (loss) to the Company will continue to fluctuate on a year to year basis. While ParaData may or may not remain profitable, it will continue 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.

Since fiscal 1997, the Company has expanded its product line to include larger balance, lower risk, and lower yielding individual consumer loans. These loans typically average $1,000 to $3,000, with terms of generally 18 to 24 months, compared to smaller loans, which average $300 to $1,000, with terms of generally 8 to 12 months. The Company offers the larger loans in all states except Texas, where they are not profitable under our lending criteria and strategy. Additionally, the Company has purchased over the years numerous larger loan offices and has made several bulk purchases of larger loans receivable. As of March 31, 2008, the larger loan category accounted for approximately $156.0 million of gross loans receivable, a 17.0% increase over the balance outstanding at March 31, 2007. At the end of the current fiscal year, this portfolio was 26.0% of the total loan balances, a slight decrease from the previous year mix of 26.4%. Management believes that these loans provide lower expense and loss ratios, and thus provide positive contributions. While the Company does not intend to change its primary lending focus from its small-loan business, it does intend to continue expanding the larger loan product line as part of its ongoing growth strategy.

In fiscal 1999, the Company tested an income tax return preparation and refund anticipation loan program in 40 of its offices. Based on the results of this test, the Company expanded this program in fiscal 2000 into substantially all of its offices. The Company prepared approximately 65,000, 60,000 and 57,000 returns in each of the fiscal years 2008, 2007 and 2006, respectively. Net revenue generated by the Company from this program during fiscal 2008 amounted to approximately $9.7 million. The Company believes that this profitable business provides a beneficial service to its existing customer base and plans to continue to promote and expand the program in the future.

16

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,
  
   
2008
  
2007
  
2006
  
 
  
(Dollars in thousands) 
  
               
Average gross loans receivable (1)
  
$
576,050
    
480,120
    
396,582
  
Average net loans receivable (2)
    
426,524
    
358,047
    
298,267
  
                     
Expenses as a percentage of total revenue:
                    
Provision for loan losses
    
19.5
%
  
17.8
%
  
18.9
%
General and administrative
    
51.8
%
  
52.6
%
  
52.8
%
Total interest expense
    
3.3
%
  
3.3
%
  
2.9
%
                     
Operating margin (3)
    
28.7
%
  
29.7
%
  
28.3
%
Return on average assets
    
11.3
%
  
12.5
%
  
11.9
%
                     
Offices opened and acquired, net
    
106
    
112
    
41
  
Total offices (at period end)
    
838
    
732
    
620
  
 
 
(1)
Average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period.
 
(2)
Average 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 2008 Versus Fiscal 2007

Net income was $53.0 million during fiscal 2008, a 10.6% increase over the $47.9 million earned during fiscal 2007. This increase resulted from an increase in operating income (revenues less provision for loan losses and general and administrative expenses) of $12.5 million, or 14.4%, offset by an increase in interest expense and income taxes.

Total revenues increased to $346.0 million in fiscal 2008, a $53.7 million, or 18.4%, increase over the $292.3 million in fiscal 2007. Revenues from the 645 offices open throughout both fiscal years increased by 8.9%. At March 31, 2008, the Company had 838 offices in operation, an increase of 106 offices from March 31, 2007.
 
Interest and fee income during fiscal 2008 increased by $45.5 million, or 18.4%, over fiscal 2007. This increase resulted from an increase of $68.5 million, or 19.1%, in average net loans receivable between the two fiscal years. The increase in average loans receivable was attributable to the Company acquiring approximately $3.1 million in net loans and internal growth. During fiscal 2008, internal growth increased because the Company opened 95 new offices and the average loan balance increased from $837 to $877.

Insurance commissions and other income increased by $8.3 million, or 18.3%, over the two fiscal years. Insurance commissions increased by $6.0 million, or 24.5%, as a result of the increase in loan volume in states where credit insurance is sold. Other income increased by $2.3 million, or 11.0%, over the two years, primarily due to an increase in fees received from income tax return preparation of $1.5 million, an increase in motor club product sales of $1.1 million and an $0.8 million increase in World Class Buying Club sales. This increase was offset by a $1.8 million loss related to our interest rate swap.

The provision for loan losses during fiscal 2008 increased by $15.6 million, or 30.1%, 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 2008 amounted to $62.0 million, a 29.8% increase over the $47.7 million charged off during fiscal 2007. Net charge-offs as a percentage of average loans increased from 13.3% to 14.5% when comparing the two annual periods. The 1.2 percentage point increase is a continuation of the trend the Company has seen during each of the quarters during the fiscal year. The current trend is more in line with historical losses of 14.8% in 2006, 14.6% in 2005, 14.7% in 2004 and 14.6% in 2003. Delinquencies on a recency basis increased from 2.2% to 2.6% and on a contractual basis increased from 3.6% to 4.0% at March 31, 2007 and March 31, 2008, respectively.

17

General and administrative expenses during fiscal 2008 increased by $25.6 million, or 16.7%, 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, decreased by 0.6% when comparing the two fiscal years and, overall, general and administrative expenses as a percent of total revenues decreased from 52.6% in fiscal 2007 to 51.8% during fiscal 2008. This decrease resulted from a higher growth in revenue than in expenses.

Interest expense increased by $2.0 million, or 20.6%, during fiscal 2008, as compared to the previous fiscal year as a result of an increase in average debt outstanding of 40.2%. Average interest rates decreased from 6.3% in fiscal 2007 to 5.4% in fiscal 2008.

Income tax expense increased $5.4 million, or 18.6%, primarily from an increase in pre-tax income and a charge of $1.5 million related to a tax examination. A state jurisdiction has completed its examinations and issued a proposed assessment for tax years 2001 through 2006. The Company is in the very initial process of responding to the state taxing authority. In consideration of the proposed assessment, net income for this year was reduced by this charge of $1.5 million and the total gross unrecognized tax benefits has increased by $2.3 million as a result of this examination. At this time, it is too early to predict the outcome on this tax issue and any future recoverability of this charge. Until the tax issue is resolved, the Company expects to accrue approximately $40,000 per quarter for interest and penalties. As a result, the Company’s effective income tax rate increased to 39.6% for the year ended March 31, 2008 from 37.9% for the prior year.

Comparison of Fiscal 2007 Versus Fiscal 2006
 
Net income was $47.9 million during fiscal 2007, a 24.4% increase over the $38.5 million earned during fiscal 2006. This increase resulted from an increase in operating income of $18.0 million, or 26.2%, offset by an increase in interest expense and income taxes.

Total revenues increased to $292.3 million in fiscal 2007, a $49.0 million, or 20.2%, increase over the $243.3 million in fiscal 2006. Revenues from the 566 offices open throughout both fiscal years increased by 12.5%. At March 31, 2007, the Company had 732 offices in operation, an increase of 112 offices from March 31, 2006.
 
Interest and fee income during fiscal 2007 increased by $42.6 million, or 20.8%, over fiscal 2006. This increase resulted from an increase of $59.8 million, or 20.0%, in average net loans receivable between the two fiscal years. The increase in average loans receivable was attributable to the Company acquiring approximately $16.1 million in net loans, of which $12.5 million related to one acquisition, and internal growth. During fiscal 2007, internal growth increased because the Company opened 68 new offices and the average loan balance increased from $804 to $837.

Insurance commissions and other income increased by $6.5 million, or 16.7%, over the two fiscal years. Insurance commissions increased by $4.6 million, or 23.2%, as a result of the increase in loan volume in states where credit insurance may be sold. Other income increased by $1.9 million, or 9.9%, over the two years, primarily due to an increase in fees received from income tax return preparation of $570,000, an increase in motor club product sales of $1.3 million and a $1.3 million increase in World Class Buying Club sales. This increase was offset by a $400,000 loss related to our interest rate swap. Comparative results were also affected by the Company recording a $393,000 gain from a life insurance claim in fiscal 2006, while no similar gain was recorded in fiscal 2007.

The provision for loan losses during fiscal 2007 increased by $5.9 million, or 12.8%, 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 2007 amounted to $47.8 million, a 7.5% increase over the $44.4 million charged off during fiscal 2006, however, net charge-offs as a percentage of average loans decreased from 14.8% to 13.3% when comparing the two annual periods. The decrease in the charge-off ratio was mainly attributable to a decrease in bankruptcy related charge-offs from $8.8 million in fiscal 2006 to $5.0 million in fiscal 2007. The Company does not expect the charge-off ratio to remain at its current levels because it believes that bankruptcy trends will begin to rise in fiscal 2008. Delinquencies on a recency basis increased from 2.1% to 2.2% and on a contractual basis increased from 3.4% to 3.5% at March 31, 2006 and March 31, 2007, respectively.

General and administrative expenses during fiscal 2007 increased by $25.1 million, or 19.5%, 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 by 5.2% when comparing the two fiscal years and, overall, general and administrative expenses as a percent of total revenues decreased from 52.8% in fiscal 2006 to 52.6% during fiscal 2007. This decrease resulted from a higher growth in revenue than in expenses.

Interest expense increased by $2.5 million, or 34.5%, during fiscal 2007, as compared to the previous fiscal year as a result of an increase in average debt outstanding of 33.3%. Average interest rates increased slightly from 6.27% in fiscal 2006 to 6.33% in fiscal 2007.

18

The Company’s effective income tax rate increased to 37.9% during fiscal 2007 from 37.5% during the previous fiscal year. This increase resulted primarily from increased state income taxes.

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 and share-based compensation, 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 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.

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, 2008, 2007, and 2006:

   
At March 31,
  
   
2008
  
2007
  
2006
  
   
(Dollars in thousands)
  
Recency basis:
              
61-90 days past due
  
$
10,414
    
7,732
    
5,886
  
91 days or more past due
    
5,003
    
3,495
    
2,672
  
                     
Total
  
$
15,417
    
11,227
    
8,558
  
                     
Percentage of period-end gross loans receivable
    
2.6
%
  
2.2
%
  
2.1
%
Contractual basis:
                    
61-90 days past due
  
$
12,838
    
9,684
    
7,664
  
91 days or more past due
    
11,123
    
8,209
    
6,654
  
                     
Total
  
$
23,961
    
17,893
    
14,318
  
                     
Percentage of period-end gross loans receivable
    
4.0
%
  
3.5
%
  
3.4
%

19
 
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.

The Company experienced an increase in contractual delinquency from 3.5% at March 31, 2007 to 4.0% at March 31, 2008. The delinquency rate on a recency basis also increased from 2.2% at the end of fiscal 2007 to 2.6% at the end of the current fiscal year. Charge-offs as a percent of average loans increased from 13.3% in fiscal 2007 to 14.5% in fiscal 2008.

In fiscal 2008, approximately 83.0% of the Company’s loans were generated through renewals of outstanding loans and the origination of new loans to previous customers. A renewal 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 2008, 2007, and 2006, the percentages of the Company’s loan originations that were renewals of existing loans were 73.3%, 74.3% and 75.6%, respectively. The Company’s renewal policies, while limited by state regulations, in all cases consider our customer’s payment history and require that our customer have made at least one payment on the loan being considered for renewal. A renewal is considered a current renewal if the customer is no more than 45 days delinquent on a contractual basis. Delinquent renewals may be extended to customers that 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 renew 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 2008, delinquent renewals represented 1.9% of the Company’s total loan volume compared to 1.9% in fiscal 2007.

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 renewals. This is as expected due to the payment history experience available on repeat borrowers. However, as a percentage of total loans charged off, renewals 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 2008:

   
Loan Volume
  
       Percent of       
  
Percent of Total
  
   
by Category
  
Total Charge-offs
  
Loans Made by Category
  
               
Renewals
    
73.3
%
  
71.6
%
  
4.7
%
Former borrowers
    
9.7
%
  
5.9
%
  
3.2
%
New borrowers
    
17.0
%
  
22.5
%
  
9.6
%
     
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 Statement of Accounting Standards No. 5 “Accounting for Contingencies” (SFAS No. 5), 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 renew their loans prior to the contractual maturity. Average contractual loan terms are approximately nine 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, 2008, 2007, and 2006. 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 3 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 Company records acquired loans at fair value based on current interest rates, less an allowance for uncollectibility and collection costs.

20

The Company follows Statement of Position No. 03-3 (SOP 03-3), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” which prohibits carryover or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of the SOP. Management believes that a loan has shown deterioration if it is over 60 days delinquent. The Company believes that loans acquired have not shown evidence of deterioration of credit quality since origination, and therefore, are not within the scope of SOP 03-3 because there is no consideration paid for acquired loans over 60 days delinquent. For the years ended March 31, 2008, 2007 and 2006, the Company recorded adjustments of approximately $0.1 million, $0.9 million and $0.4 million, respectively, to the allowance for loan losses in connection with acquisitions in accordance generally accepted accounting principles. These adjustments represent the allowance for loan losses on acquired loans which are not within the scope of SOP 03-3.

The Company believes that its allowance for loan losses is adequate to cover losses in the existing portfolio at March 31, 2008.

The following is a summary of the changes in the allowance for loan losses for the years ended March 31, 2008, 2007, and 2006:

   
March 31,
  
   
2008
  
2007
  
2006
  
               
Balance at the beginning of the year
  
$
27,840,239
    
22,717,192
    
20,672,740
  
Provision for loan losses
    
67,541,805
    
51,925,080
    
46,025,912
  
Loan losses
    
(68,985,269
)
  
(53,979,375
)
  
(49,267,992
)
Recoveries
    
6,989,297
    
6,227,742
    
4,849,244
  
Allowance on acquired loans
    
140,075
    
949,600
    
437,288
  
Balance at the end of the year
  
$
33,526,147
    
27,840,239
    
22,717,192
  
Allowance as a percentage of loans receivable, net of unearned and deferred fees
    
7.5
%
  
7.4
%
  
7.3
%
Net charge-offs as a percentage of average loans receivable (1)
    
14.5
%
  
13.3
%
  
14.8
%
 
(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.

21

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 2008 and 2007.

   
At or for the Three Months Ended
  
   
2008
  
2007
  
   
First,
  
Second,
  
Third,
  
Fourth,
  
First,
  
Second,
  
Third,
  
Fourth,
  
 
  
(Dollars in thousands)
  
                                   
Total revenues
  
$
76,389
    
80,198
    
88,043
    
101,417
    
63,837
    
67,208
    
74,103
    
87,170
  
Provision for loan losses
    
14,217
    
18,416
    
23,224
    
11,685
    
11,167
    
13,813
    
18,365
    
8,580
  
General and administrative expenses
    
42,191
    
41,930
    
47,470
    
47,628
    
34,847
    
35,289
    
41,460
    
42,031
  
Net income
    
10,850
    
10,466
    
7,288
    
24,392
    
9,987
    
9,861
    
7,011
    
21,037
  
                                                   
Gross loans receivable
  
$
544,964
    
571,319
    
663,217
    
599,509
    
447,840
    
470,275
    
560,741
    
505,788
  
Number of offices open
    
782
    
817
    
831
    
838
    
641
    
678
    
730
    
732
  

Recently Issued Accounting Pronouncements

 Business Combinations

In December 2007, the Financial Accounting Standards Board issued SFAS No. 141 (revised 2007), Business Combinations, which replaces SFAS No. 141, Business Combinations. SFAS No. 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. SFAS No. 141R also requires acquisition-related costs and restructuring costs that the acquirer expected, but was not obligated to incur at the acquisition date, to be recognized separately from the business combination. In addition, SFAS No. 141R amends SFAS No. 109, Accounting for Income Taxes, to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital. SFAS No. 141R applies prospectively to business combinations in fiscal years beginning on or after December 15, 2008 and would therefore impact our accounting for future acquisitions beginning in fiscal 2010.

Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a common definition of fair value and a framework for measuring assets and liabilities at fair values when a particular standard prescribes it. In addition, the Statement prescribes a more enhanced disclosure of fair value measures, and requires a more expanded disclosure when non-market data is used to assess fair values.

The provisions of SFAS 157 for financial assets and liabilities, as well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements, are effective for the first fiscal period beginning after November 15, 2007. The provisions for non-financial assets and liabilities are effective for the first fiscal period beginning after November 15, 2008. We are required to adopt SFAS 157 for financial assets and liabilities in the first quarter of fiscal 2009 and are currently assessing the impact on our Consolidated Financial Statements.

Noncontrolling Interest in consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 clarifies the accounting for noncontrolling interests and establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, including classification as a component of equity. SFAS 160 is effective for fiscal years beginning after December 15, 2008, our fiscal 2010. The Company is in the process of determining the effect, if any, that the adoption of SFAS 160 will have on our Consolidated Financial Statements.

22

Disclosures about Derivative Instruments and Hedging Activities

Statement 161, which amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under Statement 133, and how derivative instruments and related hedged items affect a company's financial position, financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company's strategies and objectives for using derivative instruments. The Statement expands the current disclosure framework in Statement 133. Statement 161 is effective prospectively for periods beginning on or after November 15, 2008.

Fair Value Option for Financial Assets and Financial Liabilities

On February 15, 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities,” which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the first fiscal period beginning after November 15, 2007. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.

Convertible Debt Instruments

On May 9, 2008, the FASB issued FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to any convertible debt instrument that at conversion may be settled wholly or partly with cash, requires cash-settleable convertibles to be separated into their debt and equity components at issuance and prohibits the use of the fair-value option for such instruments. FSP APB 14-1 is effective for the first fiscal period beginning after December 15, 2008 and must be applied retrospectively to all periods presented with a cumulative effect adjustment being made as of the earliest period presented. We will be required to adopt FSP APB 14-1 in the first quarter of fiscal 2010 and are currently assessing the impact on our Consolidated Financial Statements.

Useful Life of Intangible Assets

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3,”Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 applies to all recognized intangible assets and its guidance is restricted to estimating the useful life of recognized intangible assets. FSP FAS 142-3 is effective for the first fiscal period beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. We will be required to adopt FSP FAS 142-3 to intangible assets acquired beginning with the first quarter of fiscal 2010.

Liquidity and Capital Resources

The Company has financed and continues to finance its operations, acquisitions and office expansion through a combination of cash flow from operations and borrowings from its institutional lenders. The Company has generally applied its cash flow 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 $226.3 million at March 31, 2002 to $599.5 million at March 31, 2008, net cash provided by operating activities for fiscal years 2006, 2007 and 2008 was $98.0 million, $110.1 million and $136.0 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 of long-term indebtedness and the repurchase of its common stock. In November 2007 and February 2008, the Board of Directors authorized the Company to increase its share repurchase program by an additional $10 million, respectively. As of March 31, 2008, 6,165,444 shares have been repurchased since 2000 for respective aggregate purchase price of approximately $141.8 million. During fiscal 2008 the Company repurchased 1,375,100 shares for $41.9 million. 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 or acquire approximately 70 branches in the United States and 25 branches in Mexico. Expenditures by the Company to open and furnish new offices generally averaged approximately $25,000 per office during fiscal 2008. New offices have also required from $100,000 to $400,000 to fund outstanding loans receivable originated during their first 12 months of operation.

23

The Company acquired a net of 13 offices and a number of loan portfolios from competitors in 5 states in 11 separate transactions during fiscal 2008. Gross loans receivable purchased in these transactions were approximately $4.5 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 $187.0 million base credit facility with a syndicate of banks. In addition to the base revolving credit commitment, there is a $30 million seasonal revolving credit commitment available November 15 of each year through March 31 of the immediately succeeding year to cover the increase in loan demand during this period. The credit facility will expire on September 30, 2009. 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 1.80% per annum. At March 31, 2008, the interest rate on borrowings under the revolving credit facility was 5.25%. 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, 2008, $104.5 million was outstanding under this facility, and there was $82.5 million of unused borrowing availability under the borrowing base limitations, excluding the seasonal line which expires each March 31.

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, 2008 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. See Note 7 to the Consolidated Financial Statements included in this report for more information regarding this transaction.

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

   
Fiscal Year Ended March 31,
  
   
2009
  
2010
  
2011
  
2012
  
2013
  
Thereafter
  
Total
  
                               
Convertible Senior Subordinated
Notes Payable
  
$
-
  
$
-
  
$
-
  
$
110,000
  
$
-
  
$
-
  
$
110,000
  
                                             
Maturities of
Notes Payable
    
200
    
104,700
    
-
    
-
    
-
    
-
    
104,900
  
                                             
Interest Payments on Convertible
                                            
Senior Subordinated Notes Payable
    
3,300
    
3,300
    
3,300
    
3,300
    
-
    
-
    
13,200
  
                                             
Interest Payments on
Notes Payable
    
5,525
    
2,744
    
-
    
-
    
-
    
-
    
8,269
  
                                             
Minimum Lease Payments
    
11,305
    
7,464
    
3,473
    
978
    
272
    
-
    
23,492
  
                                             
Total
  
$
20,330
  
$
118,208
  
$
6,773
  
$
114,278
  
$
272
  
$
-
  
$
259,861
  

On April 1, 2007, the Company adopted FIN No. 48.As of March 31, 2008, the Company’s contractual obligations relating to FIN 48 included unrecognized tax benefits of $8.8 million which are expected to be settled in greater than one year.While the settlement of the obligation is expected to be in excess of one year, the precise timing of the settlement is indeterminable.

24
 
The Company believes that cash flow from operations and borrowings under its revolving credit facility 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 receivable originated by those offices and the Company's other offices. Management is not currently aware of any trends, demands, commitments, events or uncertainties that it believes will result in, or are 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 periodic 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. 

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s financial instruments consist of the following: cash, loans receivable, senior notes payable, convertible senior subordinated notes payable, an other note payable, an interest rate swap and a foreign currency option. Fair value approximates carrying value for all of these instruments, except the convertible senior subordinated notes payable, for which the fair value 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 $104.5 million at March 31, 2008. Interest on borrowings under this facility is based, at the Company’s option, on the prime rate or LIBOR plus 1.80%.

Based on the outstanding balance at March 31, 2008, a change of 1% in the interest rates would cause a change in interest expense of approximately $745,000 on an annual basis.

In October 2005, the Company entered into an interest rate swap to economically hedge the variable cash flows associated with $30 million of its LIBOR-based borrowings. This swap converted the $30 million from a variable rate of one-month LIBOR to a fixed rate of 4.755% for a period of five years. In accordance with SFAS 133, 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 SFAS 133, changes in the fair value of the derivative instrument are included in other income. As of March 31, 2008 the fair value of the interest rate swap was a liability of $1.7 million and included in other liabilities. The change in fair value from the beginning of the year, recorded as an unrealized loss in other income, was approximately $1.8 million.

On October 10, 2006, the Company issued $110 million convertible senior subordinated notes due October 1, 2011 (the “Convertible Notes”) to qualified institutional brokers in accordance with Rule 144A of the Securities Act of 1933. Interest 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.
 
The Company has another note payable which has a balance of $400,000 at March 31, 2008, and carries an interest rate equal to LIBOR + 2.00%.

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 less than 2% of total revenues for the year ended March 31, 2008 and net loans denominated in Mexican pesos were approximately $9.1 million (USD) at March 31, 2008.
 
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.
 
On May 9, 2007, we hedged our foreign exchange risk by purchasing a $3 million foreign exchange currency option with a strike rate of 11.18 Mexican peso per US dollar. This option expires on May 9, 2008. Changes in the fair value of this option are recorded as a component of earnings since the Company did not apply hedge accounting under SFAS 133. The fair value of the option at March 31, 2008, and the change in the fair value of the option in fiscal 2008 was less than $100,000.
 
25

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, 2008, 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, 2008. 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 has a material adverse effect on its financial condition or results of operations. The primary impact of inflation on the operations of the Company is reflected in increased operating costs. While increases in operating costs would adversely affect the Company's operations, the consumer lending laws of two of the eleven states in which the Company operates allow indexing of maximum loan amounts to the Consumer Price Index. These provisions will allow the Company to make larger loans at existing interest rates in those states, which could partially offset the potential increase in operating costs due to inflation.

Legal Matters 

As of March 31, 2008, the Company and certain of its subsidiaries have been named as defendants in various legal actions arising from their normal business activities in which damages in various amounts are claimed. Although the amount of any ultimate liability with respect to such matters cannot be determined, the Company believes that any such liability will not have a material adverse effect on the Company’s consolidated financial condition or results of operations taken as a whole.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

“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.

26
 
Part II

Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

   
March 31,
  
   
2008
  
2007
  
Assets
          
Cash and cash equivalents
  
$
7,589,575
    
5,779,032
  
Gross loans receivable
    
599,508,969
    
505,788,440
  
Less:
              
Unearned interest and deferred fees
    
(154,418,105
)
  
(127,750,015
)
Allowance for loan losses
    
(33,526,147
)
  
(27,840,239
)
Loans receivable, net
    
411,564,717
    
350,198,186
  
Property and equipment, net
    
18,654,010
    
14,310,458
  
Deferred income taxes
   
22,134,066
    
14,507,000
  
Other assets, net
    
10,818,057
    
10,221,562
  
Goodwill
    
5,352,675
    
5,039,630
  
Intangible assets, net
    
9,997,327
    
11,060,139
  
               
   
$
486,110,427
    
411,116,007
  
Liabilities and Shareholders' Equity
              
Liabilities:
              
Senior notes payable
    
104,500,000
    
60,600,000
  
Convertible senior subordinated notes payable
    
110,000,000
    
110,000,000
  
Other notes payable
    
400,000
    
600,000
  
Income taxes payable
    
18,039,242
    
8,015,514
  
Accounts payable and accrued expenses
    
18,865,913
    
16,407,846
  
Total liabilities
    
251,805,155
    
195,623,360
  
               
Shareholders' equity:
              
Preferred stock, no par value
              
Authorized 5,000,000 shares, no shares issued or outstanding
    
-
    
-
  
Common stock, no par value
              
Authorized 95,000,000 shares; issued and outstanding 16,278,684 and 17,492,521 shares at March 31, 2008 and 2007, respectively
   
-
    
-
  
Additional paid-in capital
    
1,323,001
    
5,770,665
  
Retained earnings
    
232,812,768
    
209,769,808
  
Accumulated other comprehensive income (loss), net of tax
    
169,503
    
(47,826
)
Total shareholders' equity
    
234,305,272
    
215,492,647
  
Commitments and contingencies
              
   
$
486,110,427
    
411,116,007
  

See accompanying notes to consolidated financial statements.

27

CONSOLIDATED STATEMENTS OF OPERATIONS

   
Years Ended March 31,
  
   
2008
  
2007
  
2006
  
               
Revenues:
              
Interest and fee income
  
$
292,457,259
    
247,007,668
    
204,450,428
  
Insurance commissions and other income
    
53,589,595
    
45,310,752
    
38,821,587
  
Total revenues
    
346,046,854
    
292,318,420
    
243,272,015
  
Expenses:
                    
Provision for loan losses
    
67,541,805
    
51,925,080
    
46,025,912
  
General and administrative expenses:
                    
Personnel
    
119,483,185
    
102,824,945
    
84,817,025
  
Occupancy and equipment
    
21,554,655
    
17,397,672
    
14,166,977
  
Data processing
    
2,112,399
    
2,159,712
    
2,108,740
  
Advertising
    
12,647,576
    
10,277,796
    
8,592,492
  
Amortization of intangible assets
    
2,505,465
    
2,885,202
    
2,860,555
  
Other
    
20,915,465
    
18,081,517
    
15,968,496
  
     
179,218,745
    
153,626,844
    
128,514,285
  
Interest expense
    
11,569,110
    
9,596,116
    
7,136,853
  
Total expenses
    
258,329,660
    
215,148,040
    
181,677,050
  
                     
Income before income taxes
    
87,717,194
    
77,170,380
    
61,594,965
  
Income taxes
    
34,721,036
    
29,274,000
    
23,080,000
  
Net income
  
$
52,996,158
    
47,896,380
    
38,514,965
  
                     
Net income per common share:
                    
Basic
  
$
3.11
    
2.66
    
2.08
  
Diluted
  
$
3.05
    
2.60
    
2.02
  
                     
Weighted average shares outstanding:
                    
Basic
    
17,044,122
    
18,018,370
    
18,493,389
  
Diluted
    
17,374,746
    
18,393,728
    
19,098,087
  
 

See accompanying notes to consolidated financial statements.
 
28

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
 
                       
Balances at March 31, 2005
  
$
11,964,056
    
177,747,137
    
-
    
189,711,193
        
                                 
Proceeds from exercise of stock options (190,397 shares), including tax benefits of $1,205,288
    
3,045,527
    
-
    
-
    
3,045,527
        
Common stock repurchases
(800,400 shares)
    
(13,800,225
)
  
(6,991,249
)
  
-
    
(20,791,474
)
      
Other comprehensive loss
    
-
    
-
    
(50,092
)
  
(50,092
)
  
(50,092
)
Net income
    
-
    
38,514,965
    
-
    
38,514,965
    
38,514,965
  
Total comprehensive income
    
-
    
-
    
-
    
-
    
38,464,873