3
The Company's expansion is also dependent upon its ability to identify attractive locations for new offices and to hire suitable personnel to staff, manage and supervise new offices. In evaluating a particular community, the Company examines several factors, including the demographic profile of the community, the existence of an established small-loan consumer finance market and the availability of suitable personnel to staff, manage and supervise the new offices. The Company generally locates new offices in communities already served by at least one other small-loan consumer finance company.
As already noted, the small-loan consumer finance industry is highly fragmented in the twelve states in which the Company currently operates. The Company believes that its competitors in these markets are principally independent operators with generally less than 100 offices. The Company also believes that attractive opportunities to acquire offices from competitors in its existing markets and to acquire offices in communities not currently served by the Company will become available as conditions in the local economies and the financial circumstances of the owners change.
The following table sets forth the number of offices of the Company at the dates indicated:
At March 31,
State
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
South Carolina
65
65
68
89
92
93
95
97
Georgia
52
74
76
96
100
101
103
105
Texas
142
150
164
168
183
204
223
229
247
262
Oklahoma
45
47
51
58
62
70
80
82
Louisiana
20
24
28
34
38
40
44
Tennessee
55
61
72
Illinois
30
33
37
64
75
Missouri
22
26
36
49
57
66
New Mexico
16
19
27
32
39
Kentucky
41
Alabama
5
14
21
31
35
42
Colorado (1)
-
2
Wisconsin (2)
Mexico (3)
3
15
63
Total
470
526
579
620
732
838
944
990
1,067
1,137
(1)
The Company commenced operations in Colorado in August 2004 and ceased operations in April 2005.
(2)
The Company commenced operations in Wisconsin in December 2010.
(3)
The Company commenced operations in Mexico in September 2005.
Loan and Other Products. In each state in which it operates and in Mexico, the Company offers consumer installment loans that are standardized by amount and maturity in an effort to reduce documentation and related processing costs. The Company's loans are consumer installment loans that are payable in fully amortizing monthly installments with terms generally of 4 to 36 months, and all loans are prepayable at any time without penalty. In fiscal 2012, the Company's average originated gross loan size and term were approximately $1,180 and 12 months, respectively. Several state laws regulate lending terms, including the maximum loan amounts and interest rates and the types and maximum amounts of fees and other costs that may be charged. As of March 31, 2012, the annual percentage rates on loans offered by the Company, which include interest, fees and other charges as calculated for the purposes of the requirements of the federal Truth in Lending Act, ranged from 24% to 204% depending on the loan size, maturity and the state in which the loan is made. In addition, in certain states, the Company, as agent for an unaffiliated insurance company, sells credit insurance in connection with its loan transactions. The commissions from the premiums for those insurance products may increase the Company’s overall returns on loan transactions originated in those states.
4
Specific allowable charges vary by state and, consistent with industry practice, the Company generally charges at or close to the maximum rates allowable under applicable state law in those states that limit loan rates. Statutes in Texas and Oklahoma allow for indexing the maximum loan amounts to the Consumer Price Index. The Company’s loan products are pre-computed loans in which the finance charge is a combination of origination or acquisition fees, account maintenance fees, monthly account handling fee and other charges permitted by the relevant state laws.
As of March 31, 2012, annual percentage rates applicable to our gross loans receivable, as defined by the Truth in Lending Act were as follows:
Low
High
US
Mexico
Total
Percentage of total
gross loans
receivable
The Company, as an agent for an unaffiliated insurance company, markets and sells credit life, credit accident and health, credit property, and unemployment insurance in connection with its loans in selected states where the sale of such insurance is permitted by law. Credit life insurance provides for the payment in full of the borrower's credit obligation to the lender in the event of death. Credit accident and health insurance provides for repayment of loan installments to the lender that come due during the insured's period of income interruption resulting from disability from illness or injury. Credit property insurance insures payment of the borrower's credit obligation to the lender in the event that the personal property pledged as security by the borrower is damaged or destroyed by a covered event. Unemployment insurance provides for repayment of loan installments to the lender that come due during the insured’s period of involuntary unemployment. The Company requires each customer to obtain certain specific credit insurance in the amount of the loan for all loans originated in Georgia under the Georgia Industrial Loan Act, and encourages customers to obtain credit insurance for all loans originated in South Carolina, Louisiana, Alabama and Kentucky and on a limited basis in Tennessee, Oklahoma, and Texas. Customers in those states typically obtain such credit insurance through the Company. Charges for such credit insurance are made at maximum authorized rates and are stated separately in the Company's disclosure to customers, as required by the Truth in Lending Act and by various applicable state laws. In the sale of insurance policies, the Company, as an agent, writes policies only within limitations established by its agency contracts with the insurer. The Company does not sell credit insurance to non-borrowers.
In South Carolina, Georgia, Louisiana, Kentucky and Alabama, the Company also charges its borrowers for its non-file premiums in connection with certain loans in lieu of recording and perfecting the Company’s security interest in the loan collateral. The premiums are remitted to a third party insurance company for non-file insurance coverage.
The Company also markets automobile club memberships to its borrowers in Georgia, Tennessee, New Mexico, Louisiana, Alabama, Texas, and Kentucky as an agent for an unaffiliated automobile club. Club memberships entitle members to automobile breakdown and towing reimbursement and related services. The Company is paid a commission on each membership sold, but has no responsibility for administering the club, paying benefits or providing services to club members. The Company does not market automobile club memberships to non-borrowers.
5
The table below shows the insurance types available in each state the Company operates:
Credit Life
Credit Accident
and Health
Credit Property
Unemployment
Non-file
Premiums
Automobile
Club
Membership
Georgia (1)
X
Texas (2)
Oklahoma (2)
Tennessee (2)
New Mexico (2)
Wisconsin
|
(1)
|
Customers are required to obtain certain credit insurance coverages in the amount of the loan for all loans originated under the Georgia Industrial Loan Act.
|
|
(1)
|
Customers are required to obtain certain credit insurance coverages in the amount of the loan for all loans originated under the Georgia Industrial Loan Act.
|
(1)
Customers are required to obtain certain credit insurance coverages in the amount of the loan for all loans originated under the Georgia Industrial Loan Act.
|
(2)
|
Credit insurance is provided for certain loans.
|
|
(2)
|
Credit insurance is provided for certain loans.
|
(2)
Credit insurance is provided for certain loans.
In fiscal 1995, the Company implemented its World Class Buying Club and began marketing certain electronic products and appliances to its Texas borrowers. Since implementation, the Company has expanded this program to Georgia, Tennessee, New Mexico and Missouri. The program is not offered in the other states where the Company operates, as it is not permitted by the state regulations in those states. Borrowers participating in this program can purchase a product from a limited selection of items maintained in the branch offices or offered through a catalog available at a branch office and can finance the purchase with a retail installment sales contract provided by the Company. Other than the limited product samples maintained in the branch offices, products sold through this program are shipped directly by the suppliers to the Company's customers and, accordingly, the Company is not required to maintain a large inventory to support the program. The Company believes that maintaining a limited number of items on hand in each of its participating offices has enhanced sales under this program and plans to continue this practice in the future.