World Acceptance Corp (WRLD) 2013 Q1 法說會逐字稿

Good morning and welcome to the World Acceptance Corporation's sponsored first quarter press release conference call. This call is being recorded.

At this time, all participants have been placed on listen-only mode. A question-and-answer session will follow the presentation by the corporation's CEO, and its other officers.

Before we begin, the corporation has requested I make the following announcement. The comments made during this conference may contain certain forward-looking statements within the meaning in section 27A of the Securities and Exchange Act that represent the corporation's expectations and beliefs concerning future events.

Those forward-looking statements are about matters that are inherently subject to risks and uncertainties that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include changes in the timing and amount of revenues that may be recognized by the corporation, changes in current revenue and expense trends, changes in the corporation's markets and changes in the economy.

Such factors are discussed in greater detail in the corporation's filings with the Securities and Exchange Commission.

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

Thank you, Sam. And once again, welcome to the World Acceptance Corporation's fiscal 2013 first quarter conference call. As usual Mark and Kelly, our President and our CFO are with me along with other members of our management team.

I'll spend just a few minutes reviewing our quarterly result, after which, we'll be happy to answer any questions.

To begin, I am very pleased to be able to report another very good quarter for your company. Our results during the first quarter of fiscal 2013 continue with many of the trends that we experienced during fiscal 2012.

We're glad to be able to report the ongoing expansion of our office net worth, moderate growth in our receivable portfolio, ongoing control of our operating expenses as well as maintaining our improved level of loan loss ratios.

Net income for the first fiscal quarter was $23.6 million, or $1.63 per diluted share, compared with $20.2 million or $1.27 per diluted share for the first quarter of fiscal 2012. This represents the 12.1% increase in net income, a 28.3% increase in net income per diluted share when comparing the two quarterly periods.

The large difference between the growth in net income and the growth in diluted EPS, is the ongoing benefit from our share repurchase program.

During the quarter, the company repurchased 908,000 shares at an aggregate price of $61.7 million. This combined with a 3.2 million-share repurchase during fiscal 2012 has provided a great deal of EPS accretion during the quarter.

The benefits from the repurchase program should continue during the remainder of the fiscal year and beyond. Additionally, of the $113 million increase in our credit facility that was announced during the quarter, $100 million was added primarily for the use of share repurchases.

Of that $100 million, $38 million remains and can be used for share repurchases during the rest of fiscal 2013. The timing of these repurchases will depend upon our rate of loan growth during the next two quarters.

Gross loans amounted to $1.03 billion at June 30, 2012, a 9.4% increase over the $939 million outstanding the June 30, 2011, a 5.6% increase since the beginning of the fiscal year.

During the quarter, we continued to see a slight shift in the mix as we look in our own portfolio. At June 30, 2012, the mix consisted of 67.7% small loans, 31% larger loans, and 1.3% sales finance. This compared to 70.8%, 27.8% and 1.4% at June 30,2011.

Additionally, the overall 9.4% growth in loan balances came from a 4.6% increase in small loans, a 21.7% increase in larger loans, and a 6.9% increase in the sales finance portfolio.

Equally in the quarter, 9.4% growth in loans resulted from a 5.1% increase in customers and 4.3% increase in average balances outstanding.

While the shift to the larger balance loans has led to a decline in our interest in fees as a percent of average net loans, this is partially offset by an increase in our commissions from our insurance products as well as a slight decline in our loan loss ratios.

Acquisitions continue to be an important factor in our overall growth strategy. However, the company did not make any significant purchases during the first fiscal quarter which is consistent with the acquisition activity during the first quarter of fiscal 2012.

The expansion of our branch network during the first fiscal quarter was in line with our projections. We began fiscal 2013 with 1,137 offices opened in -- and merged to -- total of 1,145 offices at June 30, 2012. Our plan for fiscal 2013 are to open 55 offices in the US, 10 in Mexico, plus evaluate acquisitions as opportunities arise.

Total revenue for the quarter amounted to $133.8 million which is a 7.9% increase over the $123.2 million during the first quarter of the prior fiscal year.

Revenues from the 1,064 offices open throughout both quarterly periods increased by 6.0%. Delinquencies and charge offs remained relatively flat during the first quarter of fiscal 2013. Accounts that were 61 days or more past due, remained the same at 2.6% on a recency basis and increased slightly from 3.7% to 3.8% on a contractual basis at the end of the two quarters.

Net charge off as a percentage of average net loans on an annualized basis decreased slightly from 12.5% to 12.2% when comparing the two quarterly periods. General and administrative expenses amounted to $69.2 million in the first fiscal quarter, a 7.2% increase of the $64.5 million in the same quarter of the prior fiscal year. As a percentage or revenues, our G&A decreased from 52.4% during the first quarter of fiscal 2012, to 52.1% during the current quarter.

Our G&A per average open office increased by 1.2% when comparing to two fiscal quarters. We continue to be very pleased with the progress being made in our Mexican operations. We have 104 offices open as of June 30, 2012. One closed during the current quarter.

We now have approximately 119,000 accounts and approximately $62.17 million in gross loans outstanding. This represents a 10.5% increase of accounts and a 12% increase in ledger over the last year.

During the past 12 months, there has been a strengthening as the value of the dollar to the pesos. The growth in the Mexican ledger balance would have been 28% in a constant exchange rate environment.

Revenues in Mexico grew by 5% in US dollars and by 21.2% Mexican pesos when comparing the two quarters. Net charge off as a percent of average net volume of an annualized basis decreased slightly from 16.3% to 16.2% when comparing the two quarters.

Additionally, our 61-day delinquencies are 4.5% and 7.3% on a recency and contractual basis respectively, up slightly from the prior year.

As expected, this was two of the areas that were beginning to generate enhanced profits. During the quarter excluding company charges, pre tax earnings amounted to $1.2 million, a 60% increase over the $770,000 in pre tax earnings during the first quarter of fiscal 2012.

This profitability should continue to improve as we grow outstanding receivables in our existing offices. Company's return on average assets of 13.8% and return on average equity of 24.9% on a trailing 12 month basis continues the excellent historical trend during the first quarter of fiscal 2013.

Finally, I'd like to provide a brief update on the regulatory and legislative landscape, the company's greatest risk factor.

Unfortunately or fortunately, depending on how you look at it, there is very little for this -- new to report at this time.

At the state level, there is very little activity with no material legislation pending in any of the states where we currently operate.

There is a ballot initiative in the state of Missouri that is proposing a 36% rate cap on all consumer credit products. A trial court judge has ruled that the economic impact study prepared into junction with the referendum was not done correctly, therefore the signatures obtained to date were not valid. This ruling is being reviewed at the appellate court with a decision expected shortly.

At the federal level the primary focus and concern is the ongoing development at the Consumer Financial Protection Bureau. We will continue to work with the National Trade Associations, the American Financial Services Association and National Installment Lenders Association. We are meeting with key regulators as the process moves forward, and are providing comments and all the inputs as new regulations are created and implemented.

We continue to believe that the value of the vital service we provide, that is providing credit opportunities to so many individuals that have limited access to the credit markets will continue to be recognized by this bureau as it progresses in its oversight over non-bank financial services.

At this point in time, any of us will be glad to answer any questions. Thank you.

(Operator Instructions)

And we'll take our first question from John Rowan with Sidoti & Company.

Good morning everyone.

Good morning, John.

Can you just go over the customer growth and balance growth figures again? I didn't get them down.

Hold on one second. Shall we go through the whole paragraph? Or are you interested in the mix?

No. You said the growth was based on, I think it was 5% growth in customers and X% growth in balance outstanding.

5.1% increase in customers and a 4.3% increase in average balances outstanding.

Okay. Okay, so that's that. Just to be clear, with some of the concerns that have been recently reached on media outlets, the OTT has no regulatory authority over World, correct?

That's correct.

Okay. And the CFPB -- are we still waiting for the definition of large participants in the installment loans base before we even pass judgments as to whether or not they technically have regulatory authority over World?

That is correct.

Okay. Okay, so that's that.

They have regulatory authority over World, but whether or not we will -- I'm sorry --

No, keep going.

Okay. Go ahead.

Okay. And then the period on shares outstanding, I'm just curious if there were any material repurchases made after the June quarter and what we should expect kind of -- so I can understand the range of what we're looking for, for the second quarter in terms of shares outstanding.

We are in a blackout period from the 20th of the month through the day after the press release. I know there have been no shares repurchase since the end of the quarter.

Okay.

As I said, it is our intent is to spend at least the $38 million that we set aside for that purchase, but a lot depends upon the growth and the timing of the growth.

So I'm not prepared to tell you exactly when we'll be in the market and not and so forth, but certainly, it will be an ongoing process.

Okay, I'm just curios too based on the timing of repurchases what the period on shares look like, diluted shares.

Okay. Kelly needs to tell me that.

Bear with me, John.

Yes. While you're getting that, let me ask you the next question. You said that there was $38 million left from the $100 million that you had set aside for repurchases. Is that what's left under I guess what you would assume would be -- assume that you had $100 million authorization? Or is that's just what's left from the revolver that you had set aside for repurchases?

The revolver -- there's $13 million remaining under the current Board authorization. But it would be my expectation that as that is depleted the Board would approve the additional $25 million as -- on this outcome.

Okay.

And John, as of June 30 the shares outstanding were 13,060,192,

Okay. And that's the non-diluted number. Is dilution still running around 400,000 shares?

And the dilution number runs between 300,000 and 400,000, yes.

Okay. And then one last question, I guess Sandy, do you see any effect from gas prices at all?

Certainly, it can't hurt. But Mark would be in a better -- what do you think Mark?

I think in the range that gas prices have been in for the last quarter, I mean that's kind of baking the cake, they're rising here. I don't know what they're doing elsewhere.

We've seen about a $0.20 to $0.25 rise in the last three weeks, so it's just something that we watch. It's not -- at roughly $3, it's not a tremendous impact.

Okay, all right. Thank you.

And we'll take our next question from [Greg Golden] with [CRC].

Hi guys, thanks for taking my call. I was a little confused by your answer on the earlier question about the regulation from the CFPB, you are regulated by the CFPB or they have the potential to regulate you. Is that correct?

That is correct.

Okay. Which kind of leads me to my first of two questions. The CFPB came out in I believe February with examination procedures for short-term small dollar lending, how is this going to --

That's not correct. I believe it was examination procedures for payday loan product.

I believe the name of the document is Procedures for Short-Term Small-Dollar Lending with the assumption that it will be primarily for payday, do you feel you're not covered by that?

If you read the preamble of that whole thing, it defines exactly what that document is intended to cover which includes only loans that are secured by deferred presentment.

But I mean, from that, if and when they decide to come in from a supervisory standpoint to World, I would certainly anticipate that some of the audit cap lines presented in that document would be well relevant to us also.

Okay. Sorry about that error. That was kind of my assumption. Do you feel there are any business practices you need to change, modify, I guess, any evolution to mitigate any potential regulatory scrutiny?

I mean we believe that our practices are very transparent. And they're not complicated contracts, but as time goes on, and as we get further direction from the CFPB and what they're looking at and so forth, they may or may not be.

But we've been a regulated industry for the past 50 years, and we've been audited at the state level throughout that entire period of time and have had a great relationship with our state regulators. And I would anticipate going forward to have the same type of cooperative relationship with the CFPB if and when they start visiting our offices.

Okay thank you. My second question is, maybe the Consumer Federation of America produced an overview listing I guess primarily the failures in the Military Lending Act. One main suggestion is to expand the regulation, and include installment loans -- it's broadly, it's using the Act as a template for consumer protection.

Reading from page 6 of that report, I guess 36% is a magic number, but the Act bans rates higher than 36%, military allotment, prepayment penalties, I would assume that would include the rule of 78s, restrictions on -- and a ban on mandatory arbitration.

Your own business practices seem to rely relatively heavily on this. If the world changes, how can you roll with the punches?

Well I mean depending upon the nature of changes, we may or may not be able to provide products. Once again, it depends on how you define 36% of the included ancillary products. If you remember, the Department of Defense actually set up the guidelines from the original military bill that was passed as part of the Talent amendments several years ago.

And the Department of Defense recognized the need of installment loans and did not include them. They specifically excluded three products.

But if in fact, a bill is passed that changes that, then depending on how it's changed and so forth, this could certainly have an impact on our ability to provide loans to the military.

Can you continue to provide loans without the rule of 78, if that was the key issue? I know this has been raised 100 times, but given the way the world looks now, I think there was a -- could you provide loans to military if you were allowed, let's say allotment where you could dock their pay, but couldn't use the rule of 78s, would that still remain a profitable business for you?

Certainly, we can -- the rule of 78s was designed to approximate the interest method and certainly, if the states or even the federal level came in and said that we're no longer allowing that, could World continue to operate? Certainly we could.

Operate and -- okay, this is, I guess, I don't want to get too small-ball but one of your competitors, Regions, operates in states where they don't need the rule of 78s.

We do both. We do both currently.

Okay, I'm sorry about that, but what states do you operate in that don't allow the rule of 78s?

I don't really want this to become a continuing debate about the possibilities that may take place at this point in time. We don't know what the CFPB can do. So --

And let's say if you operated now that -- rule of 78, I didn't realize that.

I don't want to be debating with you, please. I think we discussed that --

You made up the actual statement, I asked for a clarification. I apologize.

For example, Illinois is not a rule of 78s state. Thank you.

Okay. I'm finished with my questions. Thank you.

And we'll take our next question from Bob Ramsey with FBR Capital Markets.

Hey, good morning guys. I think you had mentioned last quarter that you were looking at entering a new state with a larger installment loan product. And just haven't heard anything on that and was curious where those plans stand right now.

That state is Indiana. And we have submitted an application and we have a few details that we have to get before our application is complete and then we'll be waiting for the regulators over there to tell us whether or not our application is approved.

Okay, great. And you did highlight your de novo branch plans earlier on the call and activity, this quarter seemed a little slow. Maybe how should we think about the ramp through the rest of the year?

The actual openings, you're right are -- actually they were kind of on target, but as far as leases that have already been completed and whatever, it's in the high 30s, 38 or 39 in the US. So it's just a matter of timing of when they open. We've got 38 or 39 completed and four or five that are currently in negotiation.

So we should see a ramp up in the openings in the second quarter.

It's the goal to get the offices in the US opened prior to the third fiscal quarter because of the importance of the growth season, the Christmas season and so forth, and that is not as important in Mexico, so the timing there will be possibly a little slower.

Okay. And in terms of loan growth, I guess Cash America is a little bit different business model, but they were talking this morning about slowing consumer loan demand in United States. I'm just curious what your thoughts are on loan growth outlook, loan demand from you consumers and what you're seeing on that front?

Well we have over the last I guess close to 20 years since we've been a public company, we have kind of maintained somewhere around mid teens loan growth, and in the last couple of years, it's been closer to the low teen type of growth, and then for the first quarter has obviously less than 10%.

So I would certainly say that there has been a slowing. But I don't necessarily believe that this is an ongoing long term trend.

In the short run, would you expect it to continue around the pace of this quarter? Or could it drop a little bit slower still?

I don't like to make predictions because I have -- I can say that we've seen somewhat of an increase in the month of July, but I don't know if that's representative of what to expect for the entire quarter.

Okay, great. And then maybe last question, I know you all have seen all the news around Capital One's enforcement action which pertained to deceptive telephone sales practices by an outside third party provider they used on payment protection plans. I was hoping you could contrast sort of those sales practices with your own model given -- I do think they're very different.

Sure. Obviously, Capital One is a credit card issuer. It used a third party vendor for the marketing of these products. And if you look at the alleged practices in the consent order if they are in fact actually and accurately portrayed and probably I would have to agree that some of those practices were deceptive.

We don't handle installment loan -- provider. All of our transactions are closed in the office person to person and the individual actually specifically signs -- provides his signature next to each product that he chooses to take. So in most cases, it's a voluntary product, the customer knows exactly what they're getting in the call center. So I think that our practices are substantially different.

Great. Thank you very much, Sandy.

Thanks.

And let's take our next question from Bill Armstrong with CL King & Associates.

Good morning. My question have all been answered thank you.

Okay.

And we'll take our next question from Doug Smith with Northland Capital.

Hi, good morning Sandy and Kelly. Thanks for taking my question.

Sure, good morning.

I'd just like to understand a little better the contribution of credit insurance to your overall revenue and net income.

So for example, I can see the $47 million of commissioned revenue which is what you recorded last year, and --

In the first quarter, $17.5 million of the $132.8 million total revenues came from insurance and other income. And Kelly what was the breakdown between the insurance?

The insurance represented $12.4, and the other was $5 million.

Okay. Does that revenue mostly fall to the bottom line? Or are there costs associated with it?

Our commission is associated with it. I mean we are an agent for a third party insurance company. So obviously, the insurance company that writes the insurance has a profit less any claims associated with it. So does that fall to the bottom?

Any part of the revenue can -- consider, could say, falls to the bottom line, but certain amount of it is used for expenses and so forth.

It just depends on how you look at it. I mean there are no costs associated with that net revenue number that's there.

Sure. And then there's another component which is your lending the customer an additional amount to pay for the insurance premium. Is that correct?

That's not correct. We actually make a loan for a certain amount, and if that customer chooses to buy the insurance, part of the proceeds of the loan are retained from the amount financed.

Got it. Okay. I think we're saying the same thing. But there's a component of interest income that's tied to lending on the insurance premium.

The interest income is calculated on the amount financed. So if in fact part of that amount financed is used to pay the premium on the insurance product then yes, some of the income would be associated to those proceeds also.

Wait, if the customer deemed voluntarily not to elect that insurance, we would still earn the finance charge on that portion of the amount financed regardless of whether it was used to go to the borrower or to go to the insurance company in the form of a premium.

Okay. And how much of the loan balance, of your loan balance do you think is associated with the portion that goes toward the insurance premium?

I couldn't begin to tell you.

In a number of states, there is no insurance.

I couldn't begin to tell you -- it's all part of the amount financed.

Since we know the dollars of commission you're receiving, can we kind of back into the amount of the premium based on the commission rate?

No, we can't --

And would you know roughly what commission rate you're getting paid?

Yes, but that's proprietary information.

Okay. I mean you deal with Life of the South right? Your insurance provider's Life of the South right?

That's correct.

And they're a public company.

That's correct.

I mean it looks like they pay out about six -- for every dollar of premium, they're paying out $0.64 as commission to their customers, of which you're one of them. I'm just wondering if that math --

Again, that's proprietary information. This is confidential information, I can't discuss it. I mean that would be an indication of what they do for all their customers so that certainly, we might be somewhere in that range.

Right. So if you're getting $47 million of commission on an annual basis, and the commission rate is say 60%, that implies you're getting, there's $80 million of premium that's being paid -- in other words your financing $80 million of premium. Is that -- do you think I'm in the ballpark?

If those assumptions were correct, that would certainly be the case.

Okay. I mean I'm starting to think it's obviously wrong -- about that.

If in fact the assumptions you're making are correct, then the math would be correct.

Okay. And then, so $80 million -- if you're financing $80 million of premium, that's over -- that could be 15% of your loan balance.

Our loan volume last year was $2.1 billion.

Net loans?

Loan volume. This is the amount of loans that we made during the course of the year.

What I'm trying to get is what percentage of the average loan balance of any given period is -- consists of lending for the insurance premium.

I can't answer that question.

Okay.

I don't know the answer to that question. But roughly, if your number of $80 million is accurate, then that percentage is of $2.2 billion of loan balance.

Just help us think about what is the total impact in net income from credit insurance?

I guess it would be the $12 million in the first quarter. If it disappeared, that revenue would disappear.

Okay, but also, there'd be an interest income component -- disappear as well.

No. As that borrower would simply receive those proceeds as part of the amount financed as opposed to being paid to a third party insurance carrier.

Presumably the borrower. I mean the borrower is borrowing the amount that they need and if they decided not to get credit insurance, they're just not going to -- they're not going to borrow more than they need.

Whatever you say. If you want.

Okay. Thank you for helping. I appreciate it.

Sure.

And we'll take our next question from John Hecht with Stevens.

Good morning guys, thanks for taking the questions. First one is, I think you mentioned how much the exchange rate impacted the operating income out of Mexico. Can you repeat that figure?

So yes, I think I mentioned the impact on what -- on the balance. They would have had 28% growth in the constant exchange rate environment as opposed to the 12% growth. But I'm not sure --

That's the figure I was looking for.

Let's look at our revenues in Mexico grew about 5% US dollars, and 21% in Mexican pesos.

So the impact is that on the overall operating income of consolidated basis. I could tell you, but I cannot tell right now. I don't know.

Those figures should be good enough for me to get a sense. And most of my questions have been asked, but I guess the final one is, your credit charge offs and delinquencies have been relatively consistent despite somewhat of a choppy economy.

I'm wondering what you attribute this to, and what factors should we look forward that would shake the trends?

Well, if you go back and look over the last 15 years, our charge off ratios have been relatively stable except in fiscal 2008 and fiscal -- or is it '09 and '10?

No, I think it's fiscal '08 and '09. And to a large extent, we attribute that to the turmoil that was going on at that period of time, as well as to the dramatic increase in gas, and other commodity prices.

So I think that is a very big component of what makes our ratios like they are. But we have not really changed our underwriting guidelines throughout the history of our company.

We try to determine the ability, stability and willingness of the individual to make this loan. And once they meet that criteria, as long as they remain employed and so forth and we believe that he has, he will repay that loan.

But everybody, a lot of our customers run into the circumstances that are unanticipated, and for that reason, when they get in those difficulties, that we have our charge offs.

Can I predict what may come in future that may have an impact? I think inflation would certainly be a big factor.

Okay, and inflation and -- given what you're saying, what about shocks to unemployment or things, I mean are those things we should look for? And final question on that would be, given what we're seeing in the economy and your customer base, it seems like you're suggesting that for the visible future, we should expect these consistent trends to persist.

Like I say, I try to avoid projecting what the future may hold because it's just very difficult to know what's going to happen in the next month of so. But currently, I see no reason for anything to change. But like I said, I try to avoid that.

I guess that that measurement is what we've been able to accomplish in the past.

Okay. Appreciate that. Thanks.

Okay.

And we'll take our next question from Bill Dezellem with Tieton Capital Management.

Thank you. Would you please remind us in general terms do charge offs tend to be lower or higher with the larger loan balances?

They tend to be lower because as with a larger balance, you would certainly have to rate a higher threshold of underwriting. Plus, generally there would be better collateral in place against the loan. And that's certainly one of the reasons for those larger balances. They have a lower yield associated with them.

Most of the larger loan products do have those ancillary products so in the event that a customer gets in trouble whether its an accident or unemployment or disability and so forth, then those products are there to make the payment or pay off the loan. So that adds to their process.

And so as you are growing your larger loan balance, we actually could see where your charge offs would go below the historic levels? Is that a fair way to be thinking about this just from a big picture perspective that if your large loan balances continue to grow as a percentage of the total business, that we may be able to, over time, see charge offs lower than what they historically have been over the business' life span?

If in fact, a mix would continue to change dramatically, and I don't believe that it will change dramatically, but if did, then yes, you would see three things happen. Number one, you would see the top line interest in fee income begin to drop because the yields on larger loans will be smaller.

The second thing is, you would see the proceeds -- revenue from ancillary products possibly go up because you cannot sell those ancillary products on a great deal of the smaller loans, but they are allowed to be sold on the larger loans. So you may see an increase in those -- other income.

And third, you could possibly see a reduction in the charge off ratios, and four, you could see reduction in the G&A to revenue because certainly, you're dealing with less customers with larger balances for the same size offices. So theoretically, you may have some type of economies of scale on a per office location.

But it would take a fairly dramatic mix change to do that, but we would anticipate -- we see that in Kentucky today, and we would anticipate seeing in Indiana, if we are allowed to get a license there. And we see that within our exiting portfolio between the smaller and larger loans.

So basically from a conceptual perspective, my thesis was directionally correct, but from your perspective, the materiality of it, is probably not that significant certainly at this point.

Not at this point, but depending of future growth and expansion it could become more significant. At what point it becomes a material in nature, is yet to be determined.

And actually let me take the question one step further if I may. You mentioned the four areas that you would see adjustments in the P&L, how about if we take it all the way to the bottom line? If that worked out to be a net -- more net income? Or a net -- less net income?

I think that what you would see and it may be equal to more or less income on a dollar basis, but over time, I think you would see a reduction to your return on assets just like our return on assets on a smaller loan product as we've been in the 9% and 10% range, whereas the bank who uses much larger loans with much lower yields at much higher leverage, either typically hope to have between 1% and 2% return on assets. It's not too much a function of what happens to the bottom line as any returns as to what may happen.

That's helpful. Thank you for the time.

And we'll take our next question from Henry Coffee with Sterne Agee.

Yes, good morning Sandy. I know you've obviously watched this discussion for about 20 years. Has the rhetoric, except the fact that it's kind of being done on the Internet and at the federal level, two questions, has the rhetoric changed that dramatically over the years from consumer advocates or it's still kind of the same set of issues?

And then secondly, I know there were hearings on a bill in the House that would in essence created a kind of a national corporate -- national template for a installment loan bill, have you looked at that, and can you give us some sense of what the Safe Harbors embedded in that might be, and how you would deal with pending developments of that bill?

I guess first, let's take the first question, the rhetoric, I mean I don't know how to answer that. I think there's always been some ongoing discussions and so forth about various products. I don't know how to answer that. I don't think things have changed dramatically, but certainly there's been more of a heightened focus over the last few years due to the growth and the pay day lending industries certainly.

But now focuses are at the national level where historically, it's been at the state level. So I guess that's certainly a change that we've seen over a period of time.

And as far as the bill you're referring to, I am aware of it. It is to provide a national charter. And I don't know a lot more about it. I know that. I think the pay lending industry is possibly more interested in it than World would be, but I really think very much more than that. It's not that familiar with all the details.

Alright. Thank you.

And we'll take our next question from Jordan Hymowitz with Philadelphia Financial.

Thanks, guys. Most of my questions have been answered. My only question is, do you know what percent of people that take out a loan with you do elect credit insurance?

What percent of the people -- I do not know that because we offer five or six different products in various combinations throughout basically 10 of our 12 states. And certainly a lot of them have no -- a lot of smaller loans don't have any insurance. It would vary across the board between in a state where if it's a larger loan where credit insurance is allowed, and it was possibly in a state where we could require it, but not necessarily be required from us, and it would be a higher percentage than in another state. But specifically, I can't answer that question.

Okay. Thank you very much.

Thanks.

And let's take our next question from Les Bryant with UBS Financial Services.

I've been a shareholder, and also investment adviser for 40 years and I've been one of your shareholders for 18 or so. And I'm very happy with your growth, and with that you're doing.

One question I have is, you're kind of sopping up a lot of the marketability of the shares in as much as we're up close to $70.

Do you have any -- are you trying to go private or are you -- cut down on the marketability or are you planning maybe to do a -- split stock one of these days and make a more market cap out of it?

Any idea, the shareholders, any idea what your long term aims are?

No, we're not trying to go private through individual repurchases. And I believe when you get to the point you find those shares, those last few shares, it's going to be really expensive, but no, that is not the intent.

What we're doing is we are taking advantage of what I believe is a very good price on our stock. And as long as it continues to be accretive to the shareholders, then we will continue to utilize any available excess cash for that purchase, I mean for that purpose.

I do not anticipate a stock split because I don't believe it really accomplishes that much, it just basically, it does double the amount of shares outstanding, but it basically divides that value of that share in half. So I do not anticipate a split either.

So as far as our long term goals, we're not extremely highly leveraged. At this point in time, we're approaching a one to one debt to equity ratio which is pretty high for us, for financial institutions, it's still extremely low.

So I think there's still a great deal of capacity out there if we only moved forward in that direction. However, I think the key driver is, is this a good value investment for our shareholders going forward. And that will be the main thing that determines whether or not we will be purchasing shares.

Okay. The marketability of the shares, you're not a believer that the lower price creates a higher PE ratio?

It may -- you'd be better off telling me that, you've been in the --

That's my belief and I've been around a long time. There's a certain price, and I talk to my clients and so forth too, and they say, I won't buy a $65, $70 stock, give me something cheaper.

And they think it's high priced even though the PE ratio and I explain to them, is low.

I will take that as under advisement and we will discuss it at the Board level, but I can't say at this point in time that I personally agree, but then again, I respect anybody who's been in this business for 40 years. You've gotten to know more than I do.

Well, that's my opinion and most of the books on investment do believe they prove that out. And approximately in terms of $20, $30 or so, very palatable to a buyer where a $60, $70 stock even with a lower PE is not as palatable. Just for your information. And thank you.

Thank you very much.

And we'll take our next question from Isaac Boltansky with Compass Point Research & Trading

Good morning, thanks for taking my call. I just --

We can't hear you.

I apologize. Can you hear me now?

Yes.

First, thank you for taking my call. So I have two quick questions. Number one, you mentioned that you had been communicating with the CFPB through your trade association. How do you have direct contact with them to date?

To date, I have been involved in a few meetings with various individuals at the bureau, but always, so far, it's always been through AFSA. I have not personally met with them on an individual basis.

Great. Thank you. And my follow up would just be -- and I know that you don't want to look too far into the future, but I still have to ask. Are you currently operating that you will be eventually designated as a larger participant?

We're not operating any different one way or the other. We're assuming possibly at some point in time, the CFPB will be coming back, check our practices and so forth because it is -- what constitutes a larger -- but I'd like to think our practices today, are in compliance with the things that they'd be looking at.

Understood, perfect. Thank you for your time.

And we'll take our next question from Bill Armstrong with CL King & Associates.

Hi. Can you just remind us what is the dollar cut off between a loan and a large loan in your definition?

In our definition, it's generally in the $1,500 range, but there are certain state lower grades that require to be different. But generally in that range, $1,500.

Right. Okay, thanks.

And at this time, there are no other questions in queue.

Well I appreciate you all for the interest in World and your listening today. Thank you very much. Sam, I'll turn it over to you.

Thank you for your participation. Before concluding this morning's teleconference, the corporation has asked me to again remind you that the comments made during conference may contain certain forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act that represent the corporation's expectations and beliefs concerning future events.

Those forward-looking statements are about matters that are inherently subject to risks and uncertainties that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include changes in the timing and amount of revenues that may be recognized by the corporation, changes in current revenue and expense trends, changes in the corporation's markets and changes in the economy.

Such factors are discussed in greater detail in the corporation's filings with the Securities and Exchange Commission.

This concludes the World Acceptance Corporation quarterly teleconference.