World Acceptance Corporation

02/09/2026 | Press release | Distributed by Public on 02/09/2026 15:11

Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Information
This report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains various "forward-looking statements," within the meaning of The Private Securities Litigation Reform Act of 1995, that are based on management's beliefs and assumptions, as well as information currently available to management. Statements other than those of historical fact, including those identified by words such as "anticipate," "estimate," "intend," "plan," "expect," "project," "believe," "may," "will," "should," "would," "could," "continue," "probable," "forecast," and any variation of the foregoing and similar expressions, are forward-looking statements. Although the Company believes that the expectations reflected in any such forward-looking statements are reasonable, it 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, the Company's actual financial results, performance or financial condition may vary materially from those anticipated, estimated or expected. Therefore, you should not rely on any of these forward-looking statements.
Among the key factors that could cause our actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements are the following: recently enacted, proposed or future legislation and the manner in which it is implemented, including pursuant to policies of the new U.S. administration; changes in the U.S. tax code; the nature and scope of regulatory authority, particularly discretionary authority, that is or may be exercised by regulators, including, but not limited to, the U.S. Consumer Financial Protection Bureau, and individual state regulators having jurisdiction over the Company; the unpredictable nature of regulatory examinations, proceedings and litigation; employee misconduct or misconduct by third parties; uncertainties associated with management turnover and the effective succession of senior management; media and public characterization of consumer installment loans; labor unrest; the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company's reported consolidated financial statements or necessitate material delays or changes in the issuance of the Company's audited consolidated financial statements; the Company's assessment of its internal control over financial reporting; changes in interest rates; the impact of inflation; risks relating to the acquisition or sale of assets or businesses or other strategic initiatives, including increased loan delinquencies or net charge-offs, the loss of key personnel, integration or migration issues, the failure to achieve anticipated synergies, increased costs of servicing, incomplete records, and retention of customers; risks inherent in making loans, including repayment risks and value of collateral; cybersecurity threats or incidents, including the potential or actual misappropriation of assets or sensitive information, corruption of data or operational disruption and the costs of the associated response thereto; our dependence on debt and the potential impact of limitations in the Company's credit facilities or other impacts on the Company's ability to borrow money on favorable terms, or at all; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquency and charge-offs); the impact of extreme weather events and natural disasters; changes in the Company's markets and general changes in the economy (particularly in the markets served by the Company).
These and other risks are discussed in more detail in Part I, Item 1A "Risk Factors" in the Company's fiscal 2025 Annual Report, and in the Company's other reports filed with, or furnished to, the SEC from time to time. The Company does not undertake any obligation to update any forward-looking statements it may make, except to the extent required by law.
Results of Operations
The following table sets forth certain information derived from the Company's Consolidated Statements of Operations and Consolidated Balance Sheets (unaudited), as well as operating data and ratios, for the periods indicated:
Three months ended December 31, Nine months ended December 31,
2025 2024 2025 2024
(Dollars in thousands)
Gross loans receivable $ 1,402,316 $ 1,381,462 $ 1,402,316 $ 1,381,462
Average gross loans receivable (1)
1,348,387 1,336,375 1,294,836 1,299,519
Net loans receivable (2)
1,035,734 1,020,018 1,035,734 1,020,018
Average net loans receivable (3)
998,690 987,833 960,838 961,767
Expenses as a percentage of total revenue:
Provision for credit losses 36.4 % 31.8 % 37.2 % 34.1 %
General and administrative 55.3 % 48.5 % 54.0 % 43.8 %
Interest expense 9.1 % 8.1 % 9.0 % 7.9 %
Operating income as a % of total revenue (4)
8.3 % 19.7 % 8.8 % 22.1 %
Loan volume (5)
$ 832,849 $ 777,197 $ 2,314,154 $ 2,161,632
Net charge-offs as percent of average net loans receivable on an annualized basis 18.7 % 17.2 % 18.4 % 17.1 %
Return on average assets (trailing 12 months) 4.0 % 7.5 % 4.0 % 7.5 %
Return on average equity (trailing 12 months) 10.6 % 19.2 % 10.6 % 19.2 %
Branches opened or acquired (merged or closed), net - (10) (11) (13)
Branches open (at period end) 1,013 1,035 1,013 1,035
_______________________________________________________
(1)Average gross loans receivable has been determined by averaging month-end gross loans receivable over the indicated period, excluding TALs.
(2)Net loans receivable is defined as gross loans receivable less unearned interest and deferred fees.
(3)Average net loans receivable has been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period, excluding TALs.
(4)Operating income is computed as total revenue less provision for credit losses and general and administrative expenses.
(5)Loan volume includes all loan balances originated by the Company. It does not include loans purchased through acquisitions.
Comparison of three months ended December 31, 2025 versus three months ended December 31, 2024
Gross loans outstanding increased to $1.4 billion as of December 31, 2025, a 1.5% increase from the $1.38 billion of gross loans outstanding as of December 31, 2024, which is a substantial improvement from the 4.0% year over year decrease as of March 31, 2025. During the most recent quarter, gross loans outstanding increased sequentially 6.6%, or $86.8 million, from $1.32 billion as of September 30, 2025, compared to an increase of 6.6%, or $85.6 million, in the comparable quarter of the prior year. During the most recent quarter, our new and current customer borrowing increased when comparing the same quarter of fiscal 2025. Specifically, during the quarter, new and refinance customer loan volume increased 16.6% and 8.0% respectively, compared to the same quarter of fiscal 2025. Our customer base increased by 4.1% during the twelve-month period ended December 31, 2025, compared to an increase of 3.7% for the comparable period ended December 31, 2024. During the three months ended December 31, 2025 our unique borrowers increased by 4.2% compared to an increase of 6.2% during the three months ended December 31, 2024.
The $0.9 million net loss for the three months ended December 31, 2025 is a 106.8% decrease from net income of $13.4 million for the same period of the prior year. Operating income, which is revenue less provision for credit losses and general and administrative expenses, decreased by $15.5 million, or 56.9%, compared to the same period of the prior year. Our results of operations were negatively impacted by an increase in provision for credit losses, largely related to our new loan growth;
however, we expect solid returns on our fiscal 2026 originations given early payment performance and yield. Further, the current third quarter included $5.4 million in share based compensation expense, which is a $5.0 million increase compared to the same quarter of the prior year due to share grants in December of 2024 and June of 2025.
Revenues for the three months ended December 31, 2025 increased by $2.6 million, or 1.9%, to $141.3 million from $138.6 million for the same period of the prior year. Interest and fee income for the three months ended December 31, 2025 increased by $3.6 million, or 2.9%, from the same period of the prior year due to an increase in outstanding balances and interest yields.
Insurance and other income for the three months ended December 31, 2025 decreased by $1.0 million, or 5.9%, from the same period of the prior year. Insurance income remained relatively flat at $12.5 million during the three months ended December 31, 2025 when compared to the three months ended December 31, 2024. Other income decreased $1.0 million, or 25.5%, to $2.8 million in the third quarter of fiscal 2026, compared to $3.8 million in the third quarter of fiscal 2025.
The provision for credit losses increased $7.3 million, or 16.6%, to $51.4 million from $44.1 million when comparing the third quarter of fiscal 2026 to the third quarter of fiscal 2025. The table below itemizes the key components of the CECL allowance and provision impact during the quarter.
CECL Allowance and Provision (Dollars in millions) Q3 FY 2026 Q3 FY 2025 Difference Reconciliation
Beginning Allowance - September 30 $117.8 $114.5 $3.3
Change due to Growth $7.7 $7.6 $0.1 $0.1
Change due to Expected Loss Rate on Performing Loans $(2.0) $(5.6) $3.6 $3.6
Change due to 90 days past due $(0.9) $(0.3) $(0.6) $(0.6)
Ending Allowance - December 31 $122.6 $116.2 $6.4 $3.1
Net Charge-offs $46.6 $42.4 $4.2 $4.2
Provision $51.4 $44.1 $7.3 $7.3
Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter (see above reconciliation).
The provision was negatively impacted by an increase in net charge-offs and growth in new customers during the quarter. Our 0-5 month customers increased as a percentage of the portfolio from 8.6% as of September 30, 2025 to 9.9% as of December 31, 2025. This led to an increase in the overall expected loss rates of the portfolio during the quarter.
Net charge-offs for the quarter increased $4.2 million, from $42.4 million in the third quarter of fiscal 2025 to $46.6 million in the third quarter of fiscal 2026. Net charge-offs as a percentage of average net loan receivables on an annualized basis increased to 18.7% in the third quarter of fiscal 2026 from 17.2% in the third quarter of fiscal 2025. Net charge-offs increased due to the increase in new customers in the twelve months ending September 30, 2025.
The Company's allowance for credit losses as a percentage of net loans was 11.8% at December 31, 2025 compared to 11.4% at December 31, 2024. Accounts that were 61 days or more past due on a recency basis decreased to 5.6% at December 31, 2025 compared to 5.7% at December 31, 2024. Recency delinquency on accounts at least 90 days past due remained relatively flat at 3.4% at December 31, 2025, compared to December 31, 2024. Recency delinquency on accounts 0 to 60 days past due decreased from 20.0% at December 31, 2024, to 18.1% at December 31, 2025.
G&A expenses for the three months ended December 31, 2025 increased by $10.8 million, or 16.1%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses increased from 48.5% during the three months ended December 31, 2024 to 55.3% during the three months ended December 31, 2025. G&A expenses per average open branch increased by 19.1% when comparing the two three-month periods. The change in G&A expense is explained in greater detail below.
Personnelexpense totaled $51.3 million for the three months ended December 31, 2025, a $10.2 million, or 24.9%, increase over the three months ended December 31, 2024. Salary expense increased approximately $2.8 million, or 8.7%, during the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024. Our headcount as of December 31, 2025 increased 10.2% compared to December 31, 2024. Benefit expense increased approximately $0.8 million, or 10.1%, when comparing the quarterly periods ended December 31, 2025 and 2024. Incentive expense increased $6.9 million in the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025. The increase in incentive expense is primarily due to a $5.0 million increase in share based compensation expense. Share based compensation expense increased due to share grants in December of 2024 and June of 2025. There was also a
significant increase in field level incentives. Over the last several months we have increased headcount in the field to further improve branch level performance.
Occupancy and equipmentexpense totaled $12.4 million for the three months ended December 31, 2025, a $0.1 million, or 1.2%, increase over the three months ended December 31, 2024.
Advertisingexpense decreased $0.7 million, or 15.5%, in the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025 due to increased efficiency in our customer acquisition programs.
Amortization of intangible assetstotaled $0.8 million for the three months ended December 31, 2025, a $0.2 million, or 17.2%, decrease over the three months ended December 31, 2024.
Otherexpense totaled $9.8 million for the three months ended December 31, 2025, a $1.3 million, or 15.3%, increase over the three months ended December 31, 2024.
Interest expense for the three months ended December 31, 2025 increased by $1.5 million, or 13.2%, from the corresponding three months of the previous year. Interest expense primarily increased due to a 17.1% increase in the average debt outstanding for the quarter, partially offset by a 2.8% decrease in the effective interest rate from 8.4% to 8.1%. The average debt outstanding increased from $534.0 million to $625.4 million when comparing the quarters ended December 31, 2024 and 2025. The Company's debt-to-equity ratio increased from 1.3:1 at December 31, 2024 to 1.9:1 at December 31, 2025.
Other key return ratios for the three months ended December 31, 2025 included a 4.0% return on average assets and a return on average equity of 10.6% (both on a trailing 12-month basis), as compared to a 7.5% return on average assets and a return on average equity of 19.2% (both on a trailing 12-month basis) for the three months ended December 31, 2024.
The Company's effective income tax rate was 10.1% for the three months ended December 31, 2025 compared to 16.4% for the corresponding period of the previous year. The change was the result of a decrease in pretax book income relative to the effects of various permanent items, including an increase in disallowed executive compensation under Section 162(m) and the permanent tax benefit related to nonqualified stock option exercises and vesting of restricted stock treated as discrete items in the current quarter.
Comparison of nine months ended December 31, 2025 versus nine months ended December 31, 2024
Gross loans outstanding increased to $1.40 billion as of December 31, 2025, a 1.5% increase from the $1.38 billion of gross loans outstanding as of December 31, 2024.
Net loss for the nine months ended December 31, 2025 decreased to $1.5 million from the $45.5 million net income reported for the same period of the prior year. Operating income (revenue less provision for credit losses and general and administrative expenses) decreased by $52.4 million, or 59.3%. The significant decrease is primarily the result of an $18.5 million reversal of share based compensation expense in the second quarter of the previous year associated with the forfeiture of the shares granted in the second tranche of our performance-based share plan that resulted in negative share based compensation expense of $18.6 million. Share based compensation expense for the nine months ended December 31, 2025 was $14.6 million, a $33.2 million increase compared to the same period of the prior year, mainly due to the prior year reversal noted above and share grants in December 2024 and June 2025. The nine month period ended December 31, 2025 also included a $3.7 million expense for the early redemption of our long-term notes, which includes a $3.0 million early call penalty and a $0.7 million write-off of the remaining unamortized debt issuance costs. Net loss was also negatively impacted by a $15.6 million increase in provision for credit losses, largely related to our new loan growth; however, we expect solid returns on our fiscal 2025 and 2026 originations given early payment performance and yield.
Revenues increased by $8.6 million, or 2.2%, to $408.2 million during the nine months ended December 31, 2025 from $399.6 million for the same period of the prior year. The increase was primarily due to an increase in outstanding balances and interest yields.
Interest and fee income for the nine months ended December 31, 2025 increased by $12.8 million, or 3.7%, from the same period of the prior year. Net loans outstanding at December 31, 2025 increased by 1.5% over the balance at December 31, 2024. Average net loans outstanding decreased by 0.1% for the nine months ended December 31, 2025 compared to the nine-month period ended December 31, 2024.
Insurance commissions and other income for the nine months ended December 31, 2025 decreased by $4.2 million, or 8.0%, from the same period of the prior year. Insurance commissions decreased by approximately $1.8 million, or 4.9%, during the nine months ended December 31, 2025 when compared to the nine months ended December 31, 2024. Other income decreased by $2.3 million, or 16.2%, during the nine months ended December 31, 2025 when compared to the nine months ended December 31, 2024.
The provision for credit losses increased $15.6 million, or 11.4%, to $151.8 million from $136.2 million when comparing the first three quarters of fiscal 2026 to the first three quarters of fiscal 2025. Net charge-offs as a percentage of average net loans receivable on an annualized basis increased from 17.1% in the first three quarters of fiscal 2025 to 18.4% in the first three quarters of fiscal 2026.
G&A expenses for the nine months ended December 31, 2025 increased by $45.4 million, or 25.9%, from the corresponding period of the previous year. As a percentage of revenues, G&A expenses increased from 43.8% during the first nine months of fiscal 2025 to 54.0% during the first nine months of fiscal 2026. G&A expenses per average open branch increased by 29.4% when comparing the two nine-month periods. The change in G&A expense is explained in greater detail below.
Personnelexpense totaled $145.1 million for the nine months ended December 31, 2025, a $45.3 million, or 45.4%, increase over the nine months ended December 31, 2024. Salary expense increased approximately $5.5 million, or 5.9%, when comparing the two nine month periods ended December 31, 2025 and 2024. Our headcount as of December 31, 2025 increased 10.2% compared to December 31, 2024. The increase is the result of annual salary increases and increased headcount in the field to further improve branch level performance. Benefit expense increased approximately $2.3 million, or 10.0%, when comparing the nine month periods ended December 31, 2025 and 2024. Incentive expense increased $38.0 million when comparing the nine month periods ended December 31, 2025 and 2024. The increase in incentive expense is primarily due to a $33.2 million increase in share based compensation expense. Share based compensation expense increased due to share grants in December of 2024 and June of 2025, and because the prior year period included a $18.5 million reversal of share based compensation expense associated with the forfeiture of the shares granted in the second tranche of our performance-based share plan.
Occupancy and equipmentexpense totaled $36.0 million for the nine months ended December 31, 2025, a $0.7 million, or 2.0%, decrease over the nine months ended December 31, 2024. Occupancy and equipment expense is generally a function of the number of branches the Company has open throughout the period. For the nine months ended December 31, 2025, the average occupancy and equipment expense per branch totaled $35.5 thousand, a $0.2 thousand, or 0.7%, increase when compared to the nine months ended December 31, 2024.
Advertisingexpense totaled $8.2 million for the nine months ended December 31, 2025, a $0.7 million, or 7.8%, decrease over the nine months ended December 31, 2024 due to increased efficiency in our customer acquisition programs.
Amortization of intangible assetstotaled $2.4 million for the nine months ended December 31, 2025, a $0.5 million, or 16.7%, decrease over the nine months ended December 31, 2024.
Otherexpense totaled $28.6 million for the nine months ended December 31, 2025, a $2.1 million, or 7.8%, increase over the nine months ended December 31, 2024.
Interest expense for the nine months ended December 31, 2025 increased by $5.2 million, or 16.6%, from the corresponding nine months of the previous year. Interest expense primarily increased due to a $3.0 million early call penalty on our long-term notes, and a $0.7 million write-off of the remaining unamortized debt issuance costs during the second quarter of fiscal 2026. Additionally, there was a 4.7% increase in the average debt outstanding, from $508.5 million to $532.7 million. The increase in interest expense was partially offset by a 3.4% decrease in the effective interest rate from 8.5% to 8.2%.
Other key return ratios for the first nine months of fiscal 2026 included a 4.0% return on average assets and a return on average equity of 10.6% (both on a trailing 12-month basis), as compared to a 7.5% return on average assets and a return on average equity of 19.2% (both on a trailing 12-month basis) for the first nine months of fiscal 2025.
The Company's effective income tax rate was a negative 100.8% for the nine months ended December 31, 2025 compared to 20.1% for the corresponding period of the previous year. The Company finalized a settlement with various taxing authorities that resulted in an increase in the reserve under ASC 740-10 (unrecognized tax positions) which is treated as a discrete item in the current period, along with a decrease in pretax book income relative to the effects of various permanent items including an increase in disallowed executive compensation under Section 162(m) in the current period. This was partially offset by the
permanent tax benefit related to nonqualified stock option exercises and vesting of restricted stock treated as discrete items in the current period.
Regulatory Matters
CFPB Rulemaking Initiatives
On October 5, 2017, the CFPB issued a final rule (the "Rule") imposing limitations on (i) short-term consumer loans, (ii) longer-term consumer installment loans with balloon payments, and (iii) higher-rate consumer installment loans repayable by a payment authorization. The Rule originally required lenders originating short-term loans and longer-term balloon payment loans to evaluate whether each consumer has the ability to repay the loan along with current obligations and expenses ("ability to repay requirements"); however, the ability to repay requirements was rescinded in July 2020. The Rule also curtails repeated unsuccessful attempts to debit consumers' accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an annual percentage rate over 36% ("payment requirements"). Implementation of the Rule's payment requirements may require changes to the Company's practices and procedures for such loans, which could materially and adversely affect the Company's ability to make such loans, the cost of making such loans, the Company's ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.
In July 2020, the CFPB rescinded provisions of the Rule governing the ability to repay requirements. The payment requirements were scheduled to take effect in June 2022. However, on October 19, 2022, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit ruled, in Community Financial Services Association of America v. Consumer Financial Protection Bureau, that the funding mechanism for the CFPB violates the appropriations clause of the U.S. Constitution, and as a result, vacated the Rule. On October 3, 2023, the U.S. Supreme Court held oral argument to decide the constitutionality of the CFPB's funding mechanism. On May 16, 2024, the Supreme Court held that the funding mechanism for the CFPB complies with the appropriations clause of the U.S. Constitution, reversing the judgment of the Court of Appeals, and remanding the cause for further proceedings. Subsequently, the U.S. Court of Appeals for the Fifth Circuit set March 30, 2025 as the effective date of the Rule. On March 28, 2025, the CFPB announced that it will not prioritize enforcement or supervision of the remaining provisions of the Rule, which took effect on March 30, 2025. Accordingly, the Company will have to comply with the Rule's payment requirements if it continues to allow consumers to set up future recurring payments online for certain covered loans such that it meets the definition of having a "leveraged payment mechanism" under the Rule. If the payment provisions of the Rule apply, the Company will have to modify its loan payment procedures to comply with the required notices and mandated timeframes set forth in the final rule.
The CFPB also has stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending market for purposes of its supervision program. This initiative was classified as "inactive" on the CFPB's Spring 2018 rulemaking agenda and has remained inactive since, but the CFPB indicated that such action was not a decision on the merits. Though the likelihood and timing of any such rulemaking is uncertain, the Company believes that the implementation of such rules would likely bring the Company's business under the CFPB's supervisory authority which, among other things, would subject the Company to reporting obligations to, and on-site compliance examinations by, the CFPB. In addition, even in the absence of a "larger participant" rule, the CFPB has the power to order individual nonbank financial institutions to submit to supervision where the CFPB has reasonable cause to determine that the institution is engaged in "conduct that poses risks to consumers" under 12 USC 5514(a)(1)(C). In 2022, the CFPB announced that it had begun using this "dormant authority" to examine nonbank entities and the CFPB is attempting to expand the number of nonbank entities it currently supervises. Specifically, the CFPB previously notified the Company that it was seeking to establish such supervisory authority over the Company. Since then, the CFPB issued a public designation order setting forth its determination that the Company has met the legal requirements for supervision (the "Order"). Pursuant to the terms of the Order, the CFPB has supervisory authority over the Company pursuant to section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010 until such time as the Order is terminated consistent with 12 C.F.R. 1091.113. Importantly, on May 12, 2025, the CFPB withdrew the Order, indicating that the CFPB "is shifting its supervisory priorities to focus on pressing threats to consumers" and that supervision of the Company "is not consistent with these priorities."
See Part I, Item 1, "Business Government Regulation Federal legislation," for a further discussion of these matters and the federal regulations to which the Company's operations are subject and Part I, Item 1A, "Risk Factors," in each case, in the Company's fiscal 2025 Annual Report for more information regarding these regulatory and related risks.
Liquidity and Capital Resources
The Company has historically financed and continues to finance its operations, acquisitions and branch expansion primarily through a combination of cash flows from operations and borrowings from its institutional lenders. As discussed below, the Company has also issued debt securities to finance its operations and repay a portion of its outstanding indebtedness. The Company has generally applied its cash flows from operations to fund its loan volume, fund acquisitions, repay long-term indebtedness, and repurchase its common stock. Net cash provided by operating activities for the nine months ended December 31, 2025 was $164.8 million.
As of December 31, 2025, the Company's debt outstanding was $677.2 million and its shareholders' equity was $351.6 million resulting in a debt-to-equity ratio of 1.9:1.0. Management will continue to monitor the Company's debt-to-equity ratio and is committed to maintaining a debt level that will allow the Company to continue to execute its business objectives, while not putting undue stress on its consolidated balance sheet.
The Company believes that attractive opportunities to acquire new branches or receivables from its competitors or to acquire branches 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.
As of December 31, 2025, the Company had two credit facilities: the Revolving Credit Facility and the Warehouse Facility. The Revolving Credit Facility provides, among other things, aggregate commitments of the Lenders of $640.0 million, with an accordion feature that can increase the aggregate commitments by $150.0 million (for a total commitment, if the full accordion is borrowed, of $790.0 million).
Subject to a borrowing base formula, the Company could borrow at the rate of one month SOFR plus 0.10% and an applicable margin of 3.5% with a minimum rate of 4.5% under the Revolving Credit Agreement. At December 31, 2025, the aggregate commitments under the Revolving Credit Agreement were $640.0 million. The borrowing base limitation was equal to the product of (a) the Company's eligible finance receivables, less unearned finance charges, insurance premiums and insurance commissions applicable to such eligible finance receivables, and (b) an advance rate percentage that ranges from 70% to 80% based on a collateral performance indicator equal to the sum of, for the Company and certain of its subsidiaries (a) a three-month rolling average rate of receivables at least sixty days past due and (b) an eight-month rolling average net charge-off rate. The Company had $789.7 thousand in outstanding standby letters of credit which include (i) $200.0 thousand related to worker's compensation expiring on October 16, 2026 and (ii) $589.7 thousand related to the Company's investment in captive insurance expiring on April 12, 2026. Both letters of credit automatically extend for one year on their expiration dates. Further, under the Revolving Credit Agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.
For the nine months ended December 31, 2025 and fiscal year ended March 31, 2025, the Company's effective interest rate, including the commitment fee and amortization of debt issuance costs, as it relates to the Revolving Credit Agreement was 8.3% annualized and 9.5%, respectively. At December 31, 2025, the unused amount available under the Revolving Credit Facility was $63.5 million. Borrowings under the Revolving Credit Facility have a maturity date of July 22, 2028.
The Company's obligations under the Revolving Credit Agreement, together with treasury management and hedging obligations owing to any lender under the Revolving Credit Agreement or any affiliate of any such lender, are required to be guaranteed by each of the Company's wholly-owned domestic subsidiaries (other than special purpose subsidiaries). The obligations of the Company and the subsidiary guarantors under the Revolving Credit Agreement, together with such treasury management and hedging obligations, are secured by a first-priority security interest in substantially all assets of the Company and the subsidiary guarantors.
The Warehouse Facility provides for a revolving $175.0 million warehouse facility and is secured by certain consumer loan receivables that were directly originated by certain of the Company's subsidiaries. As of December 31, 2025, the Company may borrow at the rate of one-month SOFR plus 0.11448% and an applicable margin of 3.00%, with a minimum rate of 4.00%. The Credit Agreement has a commitment fee of 0.50% per annum on the unused portion of the commitment.
For the nine months ended December 31, 2025, the Company's effective interest rate, including the commitment fee and amortization of debt issuance costs, as it relates to the Credit Agreement was 6.3%. At December 31, 2025, the unused amount available under the Warehouse Facility was $73.5 million. Borrowings under the Warehouse Facility have an expected maturity date of September 29, 2027.
The Company continues to believe stock repurchases are a viable component of the Company's long-term financial strategy and an excellent use of excess cash when the opportunity arises. Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the Revolving Credit Agreement. Our first priority is
to ensure we have enough capital to fund loan growth. As of December 31, 2025, subject to further approval from our Board of Directors, we could repurchase approximately $61.1 million of shares under the terms of our Revolving Credit Agreement. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.
The Company believes that cash flow from operations and borrowings under its credit facilities or other sources will be adequate to fund the expected cost of opening or acquiring new branches, including funding initial operating losses of new branches and funding loans receivable originated by those branches and the Company's other branches (for the next 12 months and for the foreseeable future beyond that). Except as otherwise discussed in (i) this report including, but not limited to, any discussions in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and (ii) Part I, Item 1A, "Risk Factors" in the Company's fiscal 2025 Annual Report (as supplemented by any subsequent disclosures in information the Company files with or furnishes to the SEC from time to time), management is not currently aware of any trends, demands, commitments, events or uncertainties that it believes will or could result in, or are or could be reasonably likely to result in, any material adverse effect on the Company's liquidity.
Revolving Credit Facility
The Revolving Credit Agreement contains a number of affirmative and negative covenants that, among other things, restrict our ability to incur liens, incur indebtedness, pay dividends and repurchase or redeem capital stock, make certain restricted payments, merge or consolidate, dispose of assets, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement allows the Company to incur subordinated debt that matures after the termination date of the Revolving Credit Agreement and that contains specified subordinated terms, subject to limitations on amount imposed by the financial covenants under the Revolving Credit Agreement. In addition, the Revolving Credit Agreement requires the Company to (i) keep and maintain a Consolidated Net Worth of $325.0 million, (ii) have a ratio of Net Income Available for Fixed Charges to Fixed Charges of not less than 2.25 to 1.00, (iii) not permit the aggregate unpaid principal amount of Total Debt to exceed 225.0% of Consolidated Adjusted Net Worth, and (iv) maintain an Asset Quality Indicator (Consolidated) of less than or equal to 26.0%. Each of the capitalized terms used and not defined herein have the meanings set forth in the Revolving Credit Agreement.
The Company was in compliance with these covenants at December 31, 2025, after giving effect to an agreement related to the treatment of the payment of early call premiums in connection with Redemption, and does not believe that these covenants will materially limit its business and expansion strategy.
The Revolving Credit Agreement also contains customary events of default (subject to certain materiality thresholds and cure periods), including among others, (a) non-payment, (b) non-compliance with covenants, (c) a breach of a representation or warranty, (d) an insolvency event involving the Company, (e) a change in control of the Company, (f) failure of the Company to maintain certain financial covenants, (g) cross-default to other debt, (h) invalidity of subordination provisions of subordinated debt, (i) the occurrence of certain regulatory events (including an order or judgment entered against the Company with respect to the financial receivables generally or any category of receivables that is material to the business) which remains unvacated, undischarged, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry and is reasonably likely to cause a material adverse change, and (j) payment defaults resulting in acceleration of securitizations or warehouse facilities that remain continuing for more than 30 days.
Warehouse Facility
The Credit Agreement contains affirmative and negative covenants, including covenants that generally restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, engage in mergers and consolidations, make acquisitions or other investments, or fund benefit plans. The Company's financial covenants under the Credit Agreement include (i) a minimum net worth of $305.0 million; (ii) a maximum ratio of debt to net worth of 2.25 to 1.0 as of the end of each fiscal quarter; (iii) a minimum liquidity amount of $35.0 million; and (iv) a minimum of unrestricted cash and cash equivalents of $5.0 million. The Credit Agreement also contains covenants that require the Company, as Servicer, with respect to any collection period to maintain certain delinquency ratios, payment ratios and annualized net charge-off ratios. A failure to maintain such ratios may result in a Level I Trigger Event, Level II Trigger Event, or Level III Trigger Event. Each of the capitalized terms used and not defined herein have the meanings set forth in the Credit Agreement.
The Company was in compliance with these covenants at December 31, 2025 and does not believe that these covenants will materially limit its business and expansion strategy.
The Credit Agreement also contains customary events of default (subject to certain materiality thresholds and cure periods), including among others, (a) non-payment, (b) non-compliance with covenants, (c) failure of the Administrative Agent to maintain a first-priority perfected security interest in any material portion of the collateral (subject to permitted liens), (d) the occurrence of a servicer termination event, (e) a breach of a representation or warranty, (f) an insolvency event involving the
Company, the Borrower, or the Originators, (g) a change in control of the Company or the Borrower, (h) an event of default under a material financing agreement of the Company, the Borrower, or the Originators, (i) failure of the Company, as Servicer, to maintain certain financial covenants, and (j) the Company, the Borrower, or the Originators have one or more final non-appealable judgments entered against it by a court of competent jurisdiction in excess of the specified monetary thresholds. The remedies for such events of default are also customary for this type of transaction and include acceleration of the Borrower's outstanding obligations under the Credit Agreement.
Notes Redemption
On September 27, 2021, we issued $300 million in aggregate principal amount of 7.0% senior notes due November 2026. The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act.
On July 22, 2025, an irrevocable notice of full redemption (the "Notice") of the Notes was delivered to the holders of the Notes. The Notice called for the redemption of all of the outstanding Notes (the "Redemption") on August 29, 2025 (the "Redemption Date") at a redemption price equal to 101.750% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to but not including, the Redemption Date. The aggregate principal amount of the Notes redeemed was $168.3 million. The Redemption was made in accordance with the terms and conditions of the Notes and the indenture governing the Notes. As a result of the Redemption, the Company recognized an additional $3.7 million in interest expense, for which $3.0 million represents an early redemption premium and $0.7 million represents the write-off of the remaining unamortized debt issuance costs associated with the Notes.
During the nine months ended December 31, 2025 and prior to the Redemption, the Company repurchased and extinguished $17.0 million of its Notes, net of $0.1 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $17.0 million. During fiscal 2025, the Company repurchased and extinguished $89.0 million of its Notes, net of $0.6 million unamortized debt issuance costs related to the extinguished debt, on the open market for a reacquisition price of $88.0 million.
No loss on extinguishment was recognized for the three months ended December 31, 2025. For the nine months ended December 31, 2025, the Company recognized a $3.7 million loss on extinguishment. For the three and nine months ended December 31, 2024, the Company recognized a $50.0 thousand loss on extinguishment and a $1.2 million gain on extinguishment, respectively. In accordance with ASC 470, the Company recognized the gain and loss on extinguishments as a component of interest expense in the Company's Consolidated Statements of Operations.
Share Repurchase Program
On July 22, 2025, the Board of Directors authorized the Company to repurchase up to $100.0 million of the Company's outstanding common stock, inclusive of the amount that remained available for repurchase under prior repurchase authorizations. As of December 31, 2025, the Company had $18.4 million in aggregate remaining repurchase capacity under its current share repurchase program. The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, available funds, alternative uses of capital, restrictions under the Revolving Credit Agreement, and other market and economic conditions. The Company's stock repurchase program may be suspended or discontinued at any time.
On September 3, 2025, in accordance with its share repurchase program, the Company, after approval by the Audit and Compliance Committee, repurchased 347,064 shares of its common stock for $60.0 million from Prescott Associates L.P., Idoya Partners L.P., Prescott International Partners L.P., and Prescott Investors, Inc. Profit Sharing (the "Sellers") in a privately negotiated transaction. The Sellers are affiliates of Prescott General Partners, LLC, who, along with its affiliates, beneficially own approximately 43.6% of the Company's common stock as of December 31, 2025. The $172.88 price per share, was the closing market price at September 3, 2025.
The Company continues to believe stock repurchases are a viable component of the Company's long-term financial strategy and an excellent use of excess cash when the opportunity arises. Additional share repurchases can be made subject to compliance with, among other things, applicable restricted payment covenants under the Revolving Credit Agreement. Our first priority is to ensure we have enough capital to fund loan growth. As of December 31, 2025, subject to further approval from our Board of Directors, we could repurchase approximately $61.1 million of shares under the terms of our Revolving Credit Agreement. To the extent we have excess capital, we may repurchase stock, if appropriate and as authorized by our Board of Directors.
Inflation
The Company does not believe that inflation will have a materially adverse effect on its financial condition, unless changes in inflation are particularly severe and sudden in nature. Although inflation would increase the Company's operating costs in absolute terms, the Company expects that the same decrease in the value of money would result in an increase in the size of
loans demanded by its customer base. It is reasonable to anticipate that such a change in customer preference would result in an increase in total loans receivable and an increase in absolute revenue to be generated from that larger amount of loans receivable. The Company believes that this increase in absolute revenue should offset any increase in operating costs. In addition, because the Company's loans have a relatively short contractual term and average life, it is unlikely that loans made at any given point in time will be repaid with significantly inflated dollars.
Quarterly Information and Seasonality
See Note 2 to the Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
There were no new accounting pronouncements recently adopted. See Note 2 to the Consolidated Financial Statements for information regarding recently issued accounting standards not yet adopted.
Critical Accounting Policies
The Company's accounting and reporting policies are in accordance with GAAP and conform to general practices within the finance company industry. Certain 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, revenue, 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 credit losses, share-based compensation and income taxes to be its most critical accounting policies due to the significant degree of management judgment involved.
Allowance for Credit Losses
Accounting policies related to the allowance for credit losses are considered to be critical as these policies involve considerable subjective judgment and estimation by management. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions, qualitative factors, and reasonable and supportable forecasts.
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 the Company's common stock at the time of grant, and the fair value of stock options is determined using the Black-Scholes valuation model. The Black-Scholes model requires the input of assumptions, including expected volatility, risk-free interest rate and expected life.
Income Taxes
Management uses certain assumptions and estimates in determining income taxes payable or refundable, deferred income tax liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. Management exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments and estimates are re-evaluated on a periodic basis as regulatory and business factors change.
No assurance can be given that either the tax returns submitted by management or the income tax reported on the consolidated financial statements will not be adjusted by either adverse rulings, changes in the tax code, or assessments made by the IRS, state, or foreign taxing authorities. The Company is subject to potential adverse adjustments, including but not limited to: an increase in the statutory federal or state income tax rates, the permanent non-deductibility of amounts currently considered deductible either now or in future periods, and the dependency on the generation of future taxable income in order to ultimately realize deferred income tax assets.
Under FASB ASC Topic 740, the Company will include the current and deferred tax impact of its tax positions in the financial statements when it is more likely than not (likelihood of greater than 50%) that such positions will be sustained by taxing authorities, with full knowledge of relevant information, based on the technical merits of the tax position. While the Company supports its tax positions by unambiguous tax law, prior experience with the taxing authority, and analysis of what it considers to be all relevant facts, circumstances and regulations, management must still rely on assumptions and estimates to determine the overall likelihood of success and proper quantification of a given tax position.
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