Good morning, and welcome to the World Acceptance Corporation sponsored Second Quarter Press Release Conference Call. This call is being recorded. At this time all participants have been placed on listen-only mode. Before we begin the Corporation has requested that I make the following announcement.

The comments made during this conference call may contain certain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 that represent the Corporation's expectations and beliefs concerning future events.

Such forward-looking statements are about matters that are inherently subject to risks and uncertainties.

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

Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraph discussing forward-looking statements, in today’s earnings press release and in the Risk Factors section of the Corporation’s most recent Form 10-K for the fiscal year ended March 31, 2015 and subsequent reports filed with or furnished to the SEC from time-to-time.

The Corporation does not undertake any obligation to update any forward-looking statements it makes. At this time it is my pleasure to turn the floor over to your host, Janet Lewis Matricciani, CEO..

Good morning and welcome to our conference call for the second quarter of our fiscal year 2016. I assume that everyone on the line has read our press release as I will not read that or repeat the information within it. This quarter we have combined information in our usual earnings script into our press release.

So it is the same amount of information but in one document for simplicity, we expect to do the same in future quarters. As I did last earnings call and as will be usual going forward, I'll add some details on our recent activities and successes beyond what is written in our earnings release.

I've now traveled to all of our states while talking about our vision and direction which we call the new world of World. It is now my 29th day as Chief Executive Officer and it is a perfectly reasonable question to ask what would be different under new management.

So let me address what we are planning to do to build on our already strong foundation in order to continue to make our company more profitable and even stronger. I shared this new vision and the philosophy to support it with every member of our company via email on my first day as CEO.

These concepts were built by listening very hard to our executive team, VPO’s, senior leaders in the field, branch employees, industry experts and other knowledgeable folks within our industry and beyond, and I'll give it at a high level here. As we want to be the best in class in our industry, we need to meet the customers where they are.

And this means finding them where they are and allowing them to choose how they [indiscernible]. To find new customers we plan to use direct mail, local advertising, the Internet and another digital and media channels. And we will also use all channels available to serve our customers in the best possible manner.

That means branches for in-person payment, postal service for mailing payment, the telephone for pay by phone payment, the Internet for online payment, debit card for convenience payment, texting for customized messaging, and collection centers for very late or charged off customers. We’ll thrive to be the best in class when serving our customers.

We believe we have a sound and robust compliance department. Our customer complaints are tracked through to resolution; we will focus additional training to help build even better customer relationships in branches specifically where complaints occur. We want to ensure we treat our customers with fairness and compassionate at every single interaction.

We need to hire the right people and create the right incentives for them to stay as our people are by far the single most important asset we have.

We’d also constantly look at process improvements and be strategic in everything we do by examining our operations at every level to find best practices and share those companywide, by providing support to our branch employees with immediate feedback of our day-to-day operations through our branch support center which is right now rolling out in test phase [Alabama] [ph] and this will help employees run stronger branches, and by using data analytics to identify trends in performance at every level to target and improve our performance.

We plan to [indiscernible] the leverage of the strength of our brand name and reputation. We hope to build on our stability, consistency and reputation the best in class customer service since 1962 to draw in new customers to our 1,346 branches.

We anticipate using focused groups to better understand the market, build on strength and mitigate weaknesses, and above all promote a culture of collaboration, communication, caring, sharing and fun, so that we all come to work excited and happy every day.

In conclusion continuing to innovate and improve on our already solid foundation will allow us to become even stronger. We are about to start the next chapter in our lives as a company that listens and adapts.

Listens to our employees, customers, market experts, [spenders] [ph] and all contact points of our business adapts to where the market is going. So we will constantly ask ourselves, how can we do better? The company this ask this everyday does better every day and today is at the top of its game.

We are already making improvements in marketing and have built an entirely new prospect model that includes mailing new customers with characteristics that we have not thought before and this growth season, we're testing that model before rolling it out across the board.

We're also testing a wider variety of new creative pieces than in the past, including target specific and event specific marketing.

We launched our new consumer friendly Web site on August the 12th and have made it responsive, such that it works well with mobile devices and that allows us to rank higher in searches in accordance with Google's new ranking methodology.

Finally, before moving to open the floor to questions, I would be remiss if I did not say something about the CFPB, this is likely to come up in your questions otherwise. Our management team and advisors are fully cooperating with the CFPB’s investigation into World Acceptance. In the meantime our focus remains the same.

We're committed to serving our customers and ensuring we provide the best experience possible. And now I would like to open the line for questions..

[Operator Instructions] We'll take our first question from John Rowan from Janney. Your line is open..

Just to go back to the comment on the support facilities or the support functions being centralized into a facility in Alabama when you talk about moving late stage delinquency collections into a centralized facility that's what we're talking about right, this new facility in Alabama?.

No, sorry. Let me add some clarity to that. We have set up in our head office in Greenville what we call a branch support center so that all questions from branches about operations and where a branch is uncertain how to do something whether it be operations, IT, marketing, or want more information, can be answered quickly and efficiently.

In order to roll this out we are starting by offering this service to Alabama and it will become a companywide offering..

Okay.

What was - the comment about the late stage delinquencies being centralized, did I hear that correctly?.

I don't believe that we plan to continue our operations as they are regarding our collections’ activities..

Is that still done in the branch?.

Yes, asides from our sale of charged off accounts which we've talked about, collections’ activities are managed in branches and we also have two collection centers, one in Georgia, and one in Alabama..

Okay, and then the insurance revenue, I mean it was down insurance [indiscernible] was down 23% year-over-year, what's changing there, I know we've obviously seen negative numbers for the last few quarters but the rate of decline is actually pretty sharp this quarter?.

Right, so a lot of that is driven by -- so one thing is, we have been growing our small loan portfolio more this quarter than we have in the past.

We've also seen a decline in our large loan portfolios, that's driving some of that, so we originated fewer new large loans as well as the [indiscernible] some volumes within that large loan portfolio has also declined that's a lot of what's driving that..

Okay, and then I'm going to ask a CFPB question in another way, have you had any communication with your lenders regarding the ability to buy back stock or the credit facility and where we stand vis-à-vis the NORA letter?.

Sure, so yes we've had conversations with our bank group since the receiving of the NORA letter, they are aware of kind of the high level things that CFPB is looking at and I don't believe until there's absolute clarity in a resolution of the CID that they will allow us to buy shares back, I still think that until we have that clarity, it will be kind of more or the same..

And then wrapping up this CID and the NORA letter do you guys have a timeframe on it? I mean with other instances the NORA letter was relatively close to when there was an actual fine levied.

I just want to understand if you guys are internally thinking about the timeframe to get this resolved?.

No, we don't have a timeframe for this, and we haven't been told the timeframe. So we don't think it is appropriate for us to speculate information there in the market on how long this time has taken for other companies, but I think we've no particular knowledge ourselves so it wouldn't be appropriate for us to say anymore on timing..

[Operator Instructions] We'll go next to Henry Coffey from Sterne, Agee. Your line is open..

When you look at loan quality issues obviously some of that insight you gave us in terms of what is and what should be, is your assessment of the new charge-off program that it is working?.

You mean the [indiscernible] module?.

You are getting -- I mean the numbers suggest that but I was wondering what your view on the change is? Is it working? Is it producing better results? Is it….

So obviously yes, so you can look at our annualized net charge-offs, and they are improving as well as our delinquencies compared to this quarter last year which is the first apples-to- apples comparison we've had since the change in the incentive program. So, it certainly appears that it is working.

We see more sort of those late stage delinquencies being rehabilitated and start paying again so the indication is that it has been working..

If you look at the states in which you sell insurance products and add on products and what's the other one, auto club, what is the most relevant state to talk about Georgia or would you preferably focus on different one?.

We don’t usually do a state level analysis or state level recommendation, we look at that from a operating perspective..

So let me ask the question this way. In the state of Georgia if I make a, say if I borrow $600 can you walk through so that I don’t have to call your branches, can you walk through the pricing structure for me.

What products would be sold to me, what would the interest and fees look like?.

We don’t get in that level of detail on the call. We can discuss that little detail off the call..

Okay, I'll give you a check in later.

Has there been any behavioral changes in the branches around the sale of insurance products or is it just due to the fact that you got less renewals and lower volumes of large loans?.

It’s the latter, we haven’t had any changes in our policy or activities around the sale of our optional insurance products..

Thank you. We will go next to Randy Heck from Goodnow Investment. Your line is open..

The first is in your text you pointed out that the first time -- number of loans to first time borrowers and former borrowers was 150,000 which is up 2.3% year-over-year.

Is that the -- when is the last time you had growth in that metric?.

It’s been a few quarters, I can’t -- I do believe there is one - there has been one quarter in the last 12 months, I can't recall exactly which one..

So do -- is that -- I mean should we be encouraged that some of these efforts whether it's utilizing the Internet, another technology that may be finally turning the corner?.

Well I think we are all encouraged by the increase in former borrowers and new borrowers.

It's hard to note specifically what to attribute it to but we believe our marketing initiatives and our improved west side and our testing activities where more than half our customers have signed up for texting and enjoy having that service are definitely helpful to us as we look at our growth..

Okay.

Secondly the -- someone else earlier asked a question about insurance being down a lot but I see this it was only down $860,000, the decline was primarily because of the reversal of the sold receivables, is that correct?.

That's correct, yes..

Okay.

And then, John, I would imagine legal expenses are up you talked -- there was an expense, because of that buyback, of a net of 1.5 million you've got these $5 million provision which just seems to me one-time, there is another charge of 1.3 million, your interest expense is also up year-over-year because of the revised deal, so -- and you also had a reversal on the other side of the ledger you had a reversal of the long-term comp but net-net by my math your earnings, other things being equal, were up in the quarter a few million bucks, is that a fair assessment?.

Yes, I think that's fair, yes, considering those factors yes..

Thank you. [Operator Instructions] We will take a follow-up question from John Rowan with Janney. Your line is open..

I just wanted to follow-up on the loan growth figure, so loan growth is down [2.6%] [ph] year-over-year, can you guys kind of segment that to what's currency driven, what might be driven by lower insurance add on products which obviously drive part of that loan balance, and what's really more of the organic [indiscernible] domestic number?.

Right, so I will say as we say in the earnings release the growth in Mexico was significantly hurt by the move in FX, just on the insurance comment it wouldn’t impact the gross loan amount, right, the way that works is that if a customer chooses to buy insurance it will reduce the cash proceeds that they receive so whether they do or don’t choose to select insurance wouldn’t have an impact on their gross loan amount.

So there has been sort of the renewed focus on growing our small loans and so obviously those -- we are seeing some growth there but we are seeing some declines in the large loans, so that's why you are seeing kind of that reversal in the shift in the mix, where we were for a long time increasingly building the large loan portfolio, now we're starting to grow that small loan portfolio again..

Okay, and then just obviously I know there are several programs in line to bolster loan growth, but I mean you've had a very long trend of lower numbers year-over-year and 13 consecutive quarters were down on a sequential basis.

I just want to understand, at what point do you guys look at the branch staffing and say we have to cut cost or when do you get to that point where you have to look at which branches are affective and which ones are just don't have enough loan balance to warrant a certain staffing level?.

John, look we do this every day. It's not just about growth, it's called good corporate management.

So we for the revenue side and for the cost side, we look at all of our branches and where we feel we gain in efficiency and reduce cost and it makes sense to combine two branches we do it, where we think it makes sense to open a new branch, we do that, these are all profitability decisions.

So, while we focus on revenue we have also closed some branches and merged some branches and also put in some new branches and we also do look at our employees and our branches and make sure we have the right staffing for the size of the branches that is an everyday ongoing activity that we track and improve..

Thank you. We'll take our next question from Clifford Sosin with CAS Investment. Your line is open..

Can you guys, just provide us an update on the charged off loan sale program the context to the $1.5 million I guess reversal and the prospect for that program has impact on your charge offs going forward?.

Yes, so we continue to sell our charged off accounts, we have a very good relationship with the buyer. We did take a reduction or discount and we bought back some of those accounts, this is a new process, so we bought back the accounts that didn't have full documentation and reporting but as I said, we have a good relationship with the buyer.

We continue to sell them forward flow at a discounted rate. And we expect that to continue. We really can’t give much more detail on this as this is not material for us..

I guess, when it was announced, you guys described the amount of proceeds you would expect to get on an annual run rate basis, now I guess if you sign this charged off loan at a discounted rate can you update us on the annual benefit that you would be getting?.

Sure, yes, I'll give it to you some of the numbers to the end of the fiscal year, for the third quarter our fiscal third quarter, we expect those proceeds to be around $800,000 and then $1.9 million for the fiscal fourth quarter..

Okay, and so what would that make it, just help me get to the annual number, I don’t have the other?.

Well, so for the second half of the year 2.7 million..

Okay, so if I doubled that I’d be about right?.

Right, well, the program only runs through kind of the first quarter of next year I believe..

Do you guys believe that your partner is making good enough economics that there's a likelihood this program will continue or do you think this program is likely to be discontinued?.

We can't speak to their performance..

Okay..

Obviously there is -- at the end there is a wider market for it whether it is with this buyer or another buyer, there is the potential to sell in the future..

Yes, in fact adding to that we were the first in our industry segment to market this and now we see that some competitors are following our lead. So we expect there to be a marketplace for this and we're pleased with our decision to be the first to start this process..

And on a slightly different topic, do you mind just sharing with us the mix of the decline in insurance [now there] [ph] between WCBC, Paradata, and I guess [indiscernible] gain on sale and anything else you think might be worth calling out?.

Sure, so if you look at, so we look out at the quarter, and I believe Randy said insurance was down around 800,000, WCBC was down around 1 million for the quarter. We actually had a pickup in Paradata with income of around $500,000 and the motor club was down around $300,000 and then obviously you have the 1.5 million associated with the JH..

Thank you. [Operator Instructions] And we have no further questions at that this time. Thank you for your participation. This does conclude the World Acceptance Corporation quarterly teleconference..

Thank you very much..