1、Fiscal Year 2012 Annual Report on Form 10-KProxy Statement for the 2013 Annual Meeting of StockholdersRegional Management Corp.509 W.Butler Road Greenville,SC 29607509 West Butler Road,Greenville,South Carolina 29607 Phone(864)422-8011,Fax(864)422-8035 March 21,2013 Dear Stockholder:2012 was an hist
2、oric year for Regional Management Corp.,as we completed our first year as a publicly-traded company and achieved another record performance in revenue and net income.For the year,we recorded revenue of$136.0 million,up 29%from the prior year,and pro forma net income,excluding one-time items,of$27.0
3、million.We increased our finance receivables by nearly 43%,and our active accounts grew 41%from the prior year-end.Let me briefly take you through what made 2012 so successful for Regional.In January 2012,we completed the acquisition of a net 19 consumer lending locations in Alabama,along with$28 mi
4、llion in receivables.Right from the start of the year,we more than doubled our presence in this key state,and the acquired branches performed well throughout the year.On March 28,2012,we completed our successful initial public offering and officially became a publicly-traded entity on the New York S
5、tock Exchange.It was a long journey to get to this stage,and Id like to personally thank our founder,Richard Godley,for his initial vision and tireless work in building Regional,as well as Palladium Equity Partners,LLC and Parallel Investment Partners,LLC for using their resources and knowledge to b
6、ring us to this level.With the hard work of the IPO out of the way,we set our sights on expanding the Regional brand during the next nine months of 2012,and we delivered.In May 2012,we entered our seventh stateNew Mexicoand for the year,we built 32 de novo branches throughout the Southeast and South
7、west.During the second half of the year,we also conducted two of the most successful live check campaigns in Regionals history,which we believe will begin to pay significant dividends for us in 2013 and beyond by adding thousands of brand-new customers and active accounts.And I would be remiss if I
8、did not mention the performance of our RMC Retail business unit,which saw its receivables nearly triple from the end of 2011.We started the RMC Retail unit at the end of 2009,and three years later,we have nearly$30 million in RMC Retail finance receivables on our books.We appreciate the support of a
9、ll of our stockholders as we work diligently to provide you with long-term value.We look forward to seeing you soon at our first annual stockholder meeting.Best regards,Thomas F.Fortin Chief Executive Officer As strong as 2012 was,we believe the outlook is even brighter for 2013.At the beginning of
10、the year,we entered our eighth stateGeorgiaand we have announced our plans to expand throughout our footprintwith 35 to 45 de novo branches during the year.We have started to receive the benefits from our successful holiday live check campaign,which should have a positive impact on our 2013 results.
11、Overall,ourgrowth trajectory remains strong,our balance sheet remains healthy,and we are excited for what the future will bring to Regional.This annual report to stockholders contains forward-looking statements and non-GAAP financial information.Please see page 1 of our Annual Report on Form 10-K,wh
12、ich accompanies this annual report to stockholders,for information regarding forward-looking statements and page 62 of our Annual Report on Form 10-K for a reconciliation of pro forma net income to actual net income.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K ANNUAL
13、REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31,2012OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission File Number:001-35477Regional Management Corp.(Exac
14、t name of registrant as specified in its charter)Delaware57-0847115(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)509 West Butler RoadGreenville,South Carolina29607(Address of principal executive offices)(Zip Code)(864)422-8011(Registrants telephone nu
15、mber,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock,$0.10 par valueNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is
16、a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Sect
17、ion 13 or 15(d)of the SecuritiesExchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submi
18、tted electronically and posted on its corporate Web site,if any,every InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding12 months(or for such shorter period that the registrant was required to submit and post s
19、uch files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(229.405 of this chapter)is notcontained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statementsincorporated by reference in P
20、art III of this Form 10-K or any amendment to the Form 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smallerreporting company.See the definitions of“large accelerated filer,”“accelerated filer,”and“smaller reporting
21、company”in Rule 12b-2of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filer(do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No As of June 29,201
22、2(the last business day of the registrants most recently completed second fiscal quarter),the aggregate market valueof the common stock held by non-affiliates of the registrant was$80,359,188 based upon the closing sale price as reported on the NewYork Stock Exchange.As of March 8,2013,there were 12
23、,486,727 shares of the registrants common stock outstanding.Documents Incorporated by ReferenceCertain information required by Part III of this Annual Report on Form 10-K is incorporated herein by reference to the Proxy Statementfor the 2013 Annual Meeting of the Companys stockholders,which is expec
24、ted to be filed pursuant to Regulation 14A within 120 daysafter the end of the registrants fiscal year ended December 31,2012.REGIONAL MANAGEMENT CORP.ANNUAL REPORT ON FORM 10-KFiscal Year Ended December 31,2012TABLE OF CONTENTSPageForward-Looking Statements1PART IITEM 1.Business1ITEM 1A.Risk Factor
25、s21ITEM 1B.Unresolved Staff Comments38ITEM 2.Properties38ITEM 3.Legal Proceedings39ITEM 4.Mine Safety Disclosures39PART IIITEM 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchasesof Equity Securities40ITEM 6.Selected Financial Data42ITEM 7.Managements Discussion an
26、d Analysis of Financial Condition and Results of Operations44ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk63ITEM 8.Financial Statements and Supplementary Data64ITEM 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure91ITEM 9A.Controls and Proce
27、dures91ITEM 9B.Other Information91PART IIIITEM 10.Directors,Executive Officers and Corporate Governance92ITEM 11.Executive Compensation92ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters92ITEM 13.Certain Relationships and Related Transactions,and D
28、irector Independence92ITEM 14.Principal Accounting Fees and Services92PART IVITEM 15.Exhibits,Financial Statement Schedules93Signatures94Exhibit Index96Form 10-KFORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K includes“forward-looking statements”within the meaning of the safeharbor provisio
29、ns of the Private Securities Litigation Reform Act of 1995,including,but not limited to,certaindisclosures contained in Item 1,“Business,”Item 1A,“Risk Factors,”and Item 7,“Managements Discussionand Analysis of Financial Condition and Results of Operations.”These forward-looking statements include,b
30、utare not limited to,statements about our strategies,future operations,future financial position,future revenues,projected costs,expectations regarding demand and acceptance for our financial products,growth opportunitiesand trends in the market in which we operate,prospects,plans and objectives of
31、management,representations,and contentions,and are not historical facts.Forward-looking statements typically are identified by the use ofterms such as“may,”“will,”“should,”“could,”“expect,”“plan,”“anticipate,”“believe,”“estimate,”“predict,”“potential,”“continue,”and similar words,although some forwa
32、rd-looking statements are expressed differently.We may not actually achieve the plans,intentions,or expectations disclosed in our forward-looking statements,and you should not place undue reliance on our forward-looking statements.Forward-looking statementsincluded herein represent managements curre
33、nt judgment and expectations,but our actual results,events,andperformance could differ materially from the plans,intentions,and expectations disclosed in the forward-lookingstatements that we make.These forward-looking statements involve risks and uncertainties that could cause ouractual results to
34、differ materially from those in the forward-looking statements,including without limitation,therisks set forth in Item 1A,“Risk Factors”in this Annual Report on Form 10-K.We do not intend to update any ofthese forward-looking statements or publicly announce the results of any revisions to these forw
35、ard-lookingstatements,other than as is required under the federal securities laws.The following discussion should be read in conjunction with,and is qualified in its entirety by reference to,our audited consolidated financial statements,including the notes thereto.PART IITEM 1.BUSINESS.OverviewRegio
36、nal Management Corp.(together with its subsidiaries,“Regional,”the“Company,”“we,”“us,”and“our”)was incorporated in South Carolina on March 25,1987,and converted into a Delaware corporation onAugust 23,2011.We are a diversified specialty consumer finance company providing a broad array of loanproduct
37、s primarily to customers with limited access to consumer credit from banks,thrifts,credit cardcompanies,and other traditional lenders.We began operations in 1987 with four branches in South Carolina andhave expanded our branch network to 221 locations with over 245,000 active accounts across South C
38、arolina,Texas,North Carolina,Tennessee,Alabama,Oklahoma,and New Mexico as of December 31,2012.Most of ourloan products are secured and each is structured on a fixed rate,fixed term basis with fully amortizing equalmonthly installment payments,repayable at any time without penalty.Our loans are sourc
39、ed through our multiplechannel platform,including in our branches,through direct mail campaigns,independent and franchiseautomobile dealerships,online credit application networks,furniture and appliance retailers,and our consumerwebsite.We operate an integrated branch model in which all loans,regard
40、less of origination channel,areserviced and collected through our branch network,providing us with frequent in-person contact with ourcustomers,which we believe improves our credit performance and customer loyalty.Our goal is to consistentlyand soundly grow our finance receivables and manage our por
41、tfolio risk while providing our customers withattractive and easy-to-understand loan products that serve their varied financial needs.Our diversified product offerings include:Small Installment Loans We offer standardized small installment loans ranging from$300 to$2,500,with terms of up to 36 month
42、s,which are secured by non-essential household goods.We originate theseloans both through our branches,via our consumer website,by customer referrals,and through mailinglive checks to pre-screened individuals who are able to enter into a loan by depositing these checks.As of1December 31,2012,we had
43、approximately 181,000 small installment loans outstanding representing$190.3 million in finance receivables or an average of approximately$1,000 per loan.In 2012,interestand fee income from small installment loans contributed$65.9 million to our total revenue.Large Installment Loans We offer large i
44、nstallment loans through our branches ranging from$2,500to$20,000,with terms of between 18 and 60 months,which are secured by a vehicle in addition tonon-essential household goods.As of December 31,2012,we had approximately 19,000 largeinstallment loans outstanding representing$57.4 million in finan
45、ce receivables or an average ofapproximately$3,000 per loan.In 2012,interest and fee income from large installment loanscontributed$16.9 million to our total revenue.Automobile Purchase Loans We offer automobile purchase loans of up to$27,500,generally withterms of between 36 and 72 months,which are
46、 secured by the purchased vehicle.Our automobilepurchase loans are offered through a network of dealers in our geographic footprint,including over2,200 independent and approximately 1,200 franchise automobile dealerships as of December 31,2012.Our automobile purchase loans include both direct loans,
47、which are sourced through a dealershipand closed at one of our branches,and indirect loans,which are originated and closed at a dealership inour network without the need for the customer to visit one of our branches.As of December 31,2012,we had approximately 18,000 automobile purchase loans outstan
48、ding representing$159.8 million infinance receivables or an average of approximately$8,900 per loan.In 2012,interest and fee incomefrom automobile purchase loans contributed$32.2 million to our total revenue.Furniture and Appliance Purchase Loans We offer indirect furniture and appliance purchase lo
49、ans ofup to$7,500,with terms of between six and 48 months,which are secured by the purchased furnitureor appliance.These loans are offered through a network of approximately 625 furniture and applianceretailers,including 102 franchise locations of the largest furniture retailer in the United States.
50、Sincelaunching this product in November 2009,our portfolio has grown to approximately 27,000 furnitureand appliance purchase loans outstanding representing$30.0 million in finance receivables or anaverage of approximately$1,100 per loan as of December 31,2012.In 2012,interest and fee incomefrom furn
51、iture and appliance loans contributed$4.2 million to our total revenue.Insurance Products We offer our customers optional payment protection insurance relating to manyof our loan products.In 2012,insurance income,net,was$10.8 million,or 8.0%of our total revenue.We report operating segments in accord
52、ance with Financial Accounting Standards Board,or FASB,Accounting Standards Codification,or ASC,Topic 280.We have one reportable segment,which is the consumerfinance segment.Our other revenue generating activities,including insurance operations,are performed in theexisting branch network in conjunct
53、ion with or as a complement to the lending operations.For financialinformation regarding the results of our only reportable segment,the consumer finance segment,for each of thelast three fiscal years,refer to Item 6,“Selected Financial Data”and Item 8,“Financial Statements andSupplementary Data”of t
54、his Annual Report on Form 10-K.Our IndustryWe operate in the consumer finance industry serving the large and growing population of non-prime andunderbanked consumers who have limited access to credit from banks,thrifts,credit card companies,and othertraditional lenders.According to the Federal Depos
55、it Insurance Corporation,or FDIC,there were approximately51 million adults living in underbanked households in the United States in 2011.Furthermore,difficult economicconditions in recent years have resulted in an increase in the number of non-prime consumers in the UnitedStates.While the number of
56、non-prime consumers in the United States has grown,the supply of consumer credit tothis demographic has contracted.Following deregulation of the U.S.banking industry in the 1980s,many banksand finance companies that traditionally provided small denomination consumer credit refocused their businesses
57、2Form 10-Kon larger loans with lower comparative origination costs and lower charge-off rates.Tightened creditrequirements imposed by banks,thrifts,credit card companies,and other traditional lenders that began during therecession in 2008 and 2009 have further reduced the supply of consumer credit f
58、or the growing number of non-prime and underbanked individuals.We believe the large and growing number of potential customers in our target market,combined with thedecline in available consumer credit,provides an attractive market opportunity for our diversified productofferingsinstallment lending,a
59、utomobile purchase lending,and furniture and appliance purchase lending.Installment Lending.Installment lending to underbanked and other non-prime consumers is one of the mosthighly fragmented sectors of the consumer finance industry.We believe that installment loans are providedthrough approximatel
60、y 8,000 to 10,000 individually-licensed finance company branches in the United States.Providers of installment loans,such as Regional,generally offer loans with longer terms and lower interest ratesthan other alternatives available to underbanked consumers,such as title,payday,and pawn lenders.Autom
61、obile Purchase Lending.Automobile finance comprises one of the largest consumer finance marketsin the United States.The automobile purchase loan sector is generally segmented by the credit characteristics ofthe borrower.Automobile purchase loans are typically initiated or arranged through automobile
62、 dealersnationwide who rely on financing to drive their automobile sales.Furniture and Appliance Purchase Lending.The furniture and appliance industry represents a largeconsumer market with limited financing options for non-prime consumers.Most furniture retailers do not providetheir own financing,b
63、ut instead partner with large banks and credit card companies who generally limit theirlending activities to prime borrowers.As a result,non-prime customers often do not qualify for financing fromthese traditional lenders.Continued demand for furniture and appliances,combined with constraints on the
64、availability of credit for non-prime consumers,presents a growth opportunity for furniture and appliancepurchase loans.Our Business Model and OperationsIntegrated Branch Model Offers Advantages Over Traditional Lenders.Our branch network,with 221locations across seven states as of December 31,2012,s
65、erves as the foundation of our multiple channel platformand the primary point of contact with our over 245,000 active accounts.By integrating underwriting,servicing,and collections at the branch level,our employees are able to maintain a relationship with our customersthroughout the life of a loan.F
66、or loans originated at a branch,underwriting decisions are typically made by ourlocal branch manager.Our branch managers combine our sound,company-wide underwriting standards andflexibility within our guidelines to consider each customers unique circumstances.This tailored branch-levelunderwriting a
67、pproach allows us to both reject certain marginal loans that would otherwise be approved solelybased on a credit report or automated loan approval system,as well as to selectively extend loans to customerswith prior credit challenges who might otherwise be denied credit.In addition,all loans,regardl
68、ess of originationchannel,are serviced and collected through our branches,which allows us to maintain frequent,in-person contactwith our customers.We believe this frequent-contact,relationship-driven lending model provides greater insightinto potential payment difficulties and allows us to more effe
69、ctively pursue payment solutions,which improvesour overall credit performance.Additionally,with approximately 70%of monthly payments made in-person atour branches,we have frequent opportunities to assess the borrowing needs of our customers and offer new loanproducts as their credit profiles evolve.
70、Multiple Channel Platform.We offer a diversified range of loan products through our multiple channelplatform,which enables us to efficiently reach existing and new customers throughout our markets.We beganbuilding our strategically located branch network over 25 years ago and have expanded to 221 br
71、anches as ofDecember 31,2012.Our automobile purchase loans are offered through a network of dealers in ourgeographic footprint,including over 2,200 independent and approximately 1,200 franchise auto dealerships as3of December 31,2012.We have recently begun to expand this channel by offering indirect
72、 automobilepurchase loans,which are closed at the dealership without the need for the customer to visit a branch.Inaddition,we have relationships with approximately 625 furniture and appliance retailers that offer ourfurniture and appliance purchase loans in their stores at the point of sale.We have
73、 also further developed andrefined our direct mail campaigns,including pre-screened live check mailings and mailings of invitations toapply for a loan,which enable us to market our products to hundreds of thousands of customers on a cost-effective basis.Finally,we have developed our consumer website
74、 to promote our products and facilitate loanapplications.We believe that our multiple channel platform provides us with a competitive advantage bygiving us broader access to our existing customers and multiple avenues for attracting new customers,enabling us to grow our finance receivables,revenues,
75、and earnings while we maintain consistent creditperformance through our integrated branch model.Attractive Products for Customers with Limited Access to Credit.Our flexible loan products,ranging from$300 to$27,500 with terms of up to 72 months,are competitively priced,easy to understand,and incorpor
76、atefeatures designed to meet the varied financial needs and credit profiles of a broad array of consumers.Thisproduct diversity distinguishes us from monoline competitors and provides us with the ability to offer ourcustomers new loan products as their credit profiles evolve,building customer loyalt
77、y.We believe that the rates on our products are significantly more attractive than many other credit optionsavailable to our customers,such as payday,pawn,or title loans.We also differentiate ourselves from suchalternative financial service providers by reporting our customerspayment performance to
78、credit bureaus,providing our customers the opportunity to improve their credit score by establishing a responsible paymenthistory with us and ultimately to gain access to a wider range of credit options,including our own.We believethis opportunity for our customers to potentially improve their credi
79、t history,combined with our competitivepricing and terms,distinguish us in the consumer finance market and provide us with a competitive advantage.Demonstrated Organic Growth.We have grown our finance receivables by 127.6%from$192.3 million atDecember 31,2008 to$437.6 million at December 31,2012.Our
80、 growth has come both from expanding ourbranch network and developing new channels and products.From 2008 to 2012,we grew our year-end branch count from 112 branches to 221 branches,a compoundannual growth rate,or CAGR,of 18.5%.We opened or acquired 51 net new branches in 2012.We have alsogrown our
81、existing branch revenues.Historically,our branches have rapidly increased their outstanding financereceivables during the early years of operations and generally have quickly achieved profitability.We have also grown by adding new channels and products,which are then serviced at the local branch lev
82、el.We introduced direct automobile purchase loans in 1998,and we have recently expanded our product offerings toinclude indirect automobile purchase loans.Indirect automobile purchase loans allow customers to obtain a loanat a dealership without visiting one of our branches.We opened two AutoCredit
83、Source branches in early 2011and two additional AutoCredit Source branches in 2012,which focus solely on originating,underwriting,andservicing indirect automobile purchase loans.In January 2013,we opened AutoCredit Source branches inAtlanta,Georgia and Austin,Texas.As of December 31,2012,we had esta
84、blished over 444 indirect dealerrelationships through our AutoCredit Source branches.Gross loan originations from our live check program havegrown from$52.5 million in 2008 to$223.7 million in 2012,a CAGR of 43.7%,as we have increased thevolume and sophistication of our live check marketing campaign
85、s.We also introduced a consumer websiteenabling customers to complete a loan application online.Since the launch of our website in late 2008,we havereceived more than 42,000 applications resulting in loans representing$10.3 million in gross finance receivables.Consistent Portfolio Performance.Throug
86、h over 25 years of experience in the consumer finance industry,we have established conservative and sound underwriting and lending practices to carefully manage our creditexposure as we grow our business,develop new products,and enter new markets.We generally do not make4Form 10-Kloans to customers
87、with less than one year with their current employer and at their current residence,although wealso consider numerous other factors in evaluating a potential customers creditworthiness,such asunencumbered income and a credit report detailing the applicants credit history.Our sound underwritingstandar
88、ds focus on our customersability to affordably make loan payments out of their discretionary incomewith the value of pledged collateral serving as a credit enhancement rather than the primary underwritingcriterion.Portfolio performance is improved by our regular in-person contact with customers at o
89、ur branches,which helps us to anticipate repayment problems before they occur,and allows us to proactively work withcustomers to develop solutions prior to default,using repossession only as a last option.In addition,ourcentralized management information system enables regular monitoring of branch p
90、ortfolio metrics.Our stateoperations vice presidents and district supervisors monitor loan underwriting,delinquencies,and charge-offs ofeach branch in their respective regions on a daily basis.In addition,the compensation received by our branchmanagers and assistant managers has a significant perfor
91、mance component and is closely tied to credit quality,among other defined performance targets.We believe our frequent-contact,relationship-driven lending model,combined with regular monitoring andalignment of employee incentives,improves our overall credit performance.Despite the challenges posed by
92、 thesharp economic downturn beginning in 2008,our annual net charge-offs since January 1,2008 remainedconsistent,ranging from 6.5%to 8.6%of our average finance receivables.In 2012,our net charge-offs as apercentage of average finance receivables were 6.5%.Our credit loss provision as a percentage of
93、 total revenuefor 2012 was 20.4%.We believe that our consistent portfolio performance demonstrates the resiliency of ourbusiness model throughout economic cycles.Experienced Management Team.Our executive and senior operations management teams consist ofindividuals highly experienced in installment l
94、ending and other consumer finance services.We believe ourexecutive management teams experience has allowed us to consistently grow our business while deliveringhigh-quality service to our customers and carefully managing our credit risk.Our executive management teamhas centralized a number of busine
95、ss procedures,such as marketing and direct mail campaigns,which wereformerly conducted at each branch,allowing us to enhance control over our individual branches.Ourmanagement team has also strengthened our underwriting procedures and improved the data monitoring that weapply across our business,inc
96、luding for our direct mail campaigns and our branch location analysis.As ofDecember 31,2012,our state operations vice presidents averaged more than 22 years of industry experience andmore than 18 years of service at Regional,while our district supervisors averaged more than 17 years of industryexper
97、ience and more than four years of service with Regional.Our StrategiesGrow Our Branch Network.We intend to continue growing the revenue and profitability of our branchnetwork by increasing volume at our existing branches,opening new branches within our existing geographicfootprint,and expanding our
98、operations into new states.Establishing local contact with our customers throughthe expansion of our branch network is key to our frequent-contact,relationship-driven lending model and isembodied in our marketing tagline:“Your Hometown Credit Source.”Existing Branches We intend to continue increasin
99、g same-store revenues,by further buildingrelationships in the communities in which we operate and capitalizing on opportunities to offer ourcustomers new loan products as their credit profiles evolve.From 2008 to 2012,we opened 109 newbranches,and we expect revenues at these branches will continue t
100、o grow faster than our overall same-store revenue growth rate as these branches mature.New Branches We believe there is sufficient demand for consumer finance services to continue ourpattern of new branch growth and branch acquisitions in the states where we currently operate,allowing us to capitali
101、ze on our existing infrastructure and experience in these markets.We alsoanalyze detailed demographic and market data to identify favorable locations for new branches.5Opening new branches allows us to generate both direct lending at the branches,as well as to createnew origination opportunities by
102、establishing relationships through the branches with automobiledealerships and furniture and appliance retailers in the community.New States We intend to explore opportunities for growth in several states outside of our existinggeographic footprint that enjoy favorable interest rate and regulatory e
103、nvironments,such as Kentucky,Louisiana,Mississippi,Missouri,and Virginia.We do not expect to expand into states withunfavorable interest rate or regulatory environments even if those states are otherwise attractive for ourbusiness.In 2011,we opened our first branch in Oklahoma,and in 2012,we opened
104、our first branch inNew Mexico.In January 2013,we opened an AutoCredit Source branch in Georgia.We also believe that the highly fragmented nature of the consumer finance industry and the evolvingcompetitive,regulatory,and economic environment provide attractive opportunities for growth through branch
105、acquisitions although we have no present agreement or plan concerning any specific acquisition.Continue to Expand and Capitalize on Our Diverse Channels and Products.We intend to continue toexpand and capitalize on our multiple channel platform and broad array of offerings as follows:Automobile Purc
106、hase Loans We source our automobile purchase loans through a network of over3,400 dealers as of December 31,2012.We have hired dedicated marketing personnel to developrelationships with these dealers and to expand our automobile financing network.We will also seek tocapture a larger percentage of th
107、e financing activity of dealers in our existing network by continuing toimprove our relationships with dealers and our response time for loan applications.We intend tocontinue to expand the number of franchise dealer relationships through our AutoCredit Sourcebranches to grow our loan portfolio thro
108、ugh increased penetration.Live Check Program We continue to refine our screening criteria and tracking for direct mailcampaigns,which we believe has enabled us to improve response rates and credit performance andallowed us to more than triple the annual number of live checks that we mailed since 200
109、7.In 2012,wemailed over 1.9 million live checks as well as over 25,000 invitations to apply for loans.We intend tocontinue to increase our use of live checks to grow our loan portfolio by adding new customers andincreasing volume at our branches,creating opportunities to offer new loan products to o
110、ur existingcustomers.In addition,we mail live checks in new markets shortly before opening new branches,which we believe helps our new branches to more quickly develop a customer base and build financereceivables.Other than with respect to the State of Georgia,the use of live checks is not subject t
111、osubstantial regulation in any of the states in which we currently operate or any states into which weexpect to expand,but is subject to regulation in other jurisdictions.We are not aware of any pendinglegislation in any of the states in which we operate that would affect our use of live checks.Furn
112、iture and Appliance Purchase Loans As of December 31,2012,we had a network ofapproximately 625 furniture and appliance retail locations through which we offer our furniture andappliance loans.We intend to continue to grow our network of furniture and appliance retailers byhaving our dedicated market
113、ing personnel continue to solicit new retailers,obtain referrals throughrelationships with our existing retail partners,and to a lesser extent,reach retailers through trade showsand industry associations.We believe that the furniture and appliance purchase lending markets arecurrently substantially
114、underpenetrated,particularly with respect to non-prime customers,due to thelimited number of lenders providing financing to these customers and the recent curtailment of creditprovided by prime financing sources.Online Sourcing We developed a new channel in late 2008 by offering an online loan appli
115、cation onour consumer website to serve customers who seek to reach us over the Internet.We intend to continueto develop and expand our online marketing efforts and increase traffic to our consumer websitethrough the use of tools such as search engine optimization and paid online advertising.6Form 10
116、-KWe believe the expansion of our channels and products,supported by the growth of our branch network,will provide us with opportunities to reach new customers as well as to offer new loan products to our existingcustomers as their credit profiles evolve.We plan to continue to develop and introduce
117、new products that areresponsive to the needs of our customers in the future.Continue to Focus on Sound Underwriting and Credit Control.We intend to continue to leverage our corecompetencies in sound underwriting and credit management developed through over 25 years of lendingexperience as we seek to
118、 profitably grow our share of the consumer finance market.Our philosophy is toemphasize sound underwriting standards focused on a customers ability to affordably make loan payments,towork with customers experiencing payment difficulties,and to use repossession only as a last option.Forexample,we per
119、mit customers to defer payments or refinance past due loans under certain circumstances,although we do not offer customers experiencing payment difficulties the opportunity to modify their loans toreduce the amount of principal or interest that they owe.A deferral extends the due date of the loan by
120、 one monthand allows the customer to maintain his or her credit rating in good standing.In addition to deferrals,we also allow customers to refinance loans.While we typically only allowcustomers to refinance if their loan is current,we allow customers to refinance past due loans on a limited basis i
121、fthose customers otherwise satisfy our credit standards(other than with respect to the delinquency).We believethat refinancing past due loans for certain deserving customers who have made periodic payments allows us tohelp customers to resolve temporary financial setbacks and to repair or sustain th
122、eir credit.During 2012,werefinanced only$4.1 million of past due loans,representing approximately 0.8%of our total loan volume forfiscal 2012.As of December 31,2012,the outstanding gross balance of such refinancings was only$2.7 million,or less than 1.0%of gross finance receivables as of such date.I
123、n accordance with this philosophy,we intend to continue to refine our underwriting standards to assess anindividuals creditworthiness and ability to repay a loan.In recent years,we have implemented several newprograms to continue improving our underwriting standards and loan collection rates,includi
124、ng our branch“scorecard”program that systematically monitors a range of operating,credit quality,and performance metrics.Our management information system enables us to regularly review loan volumes,collections,anddelinquencies.We believe this central oversight,combined with our branch-level servici
125、ng and collections,improves credit performance.We plan to continue to develop strategies to further improve our soundunderwriting standards and loan collection rates as we expand.Our ProductsSmall Installment Loans.We offer small installment loans ranging from$300 to$2,500 through ourbranches as wel
126、l as through our live check program.Our small installment loans are standardized by amount,rate,and maturity to reduce documentation and related processing costs and to conform with state lending laws.They are payable in fixed rate,fully amortizing equal monthly installments with terms of up to 36 m
127、onths,andare repayable at any time without penalty.In 2012,the average originated net loan size and term for our smallinstallment loans were$1,179 and 17 months,respectively.Our small installment loans include loans originatedthrough our live check campaigns,which had an average originated net loan
128、size and term of$1,226 and 16months for 2012.The weighted average yield we earned on our portfolio of small installment loans was 47.8%in2012.The interest rates,fees and other charges,maximum principal amounts,and maturities for our smallinstallment loans vary from state to state,depending upon rele
129、vant laws and regulations.The majority of our small installment loans are made to customers who visit one of our branches andcomplete a standardized credit application.Customers may also complete and submit a small installment loanapplication by phone or on our consumer website before completing the
130、 loan in one of our branches.Wecarefully evaluate each potential customers creditworthiness by examining the individuals unencumberedincome,length of current employment,duration of residence,and a credit report detailing the applicants credithistory.7Our small installment loan approval process is ba
131、sed on the customers creditworthiness rather than thevalue of collateral pledged.Loan amounts are established based on underwriting standards designed to allowcustomers to affordably make their loan payments out of their discretionary income.In addition,for small installment loans originated at our
132、branches,we require our customers to submit a listof their non-essential household goods and pledge these goods as collateral.We do not perfect our securityinterests by filing UCC financing statements in these goods and instead typically collect a non-file insurance feeand obtain non-file insurance.
133、Each of our branches is equipped to perform immediate background,employment,and credit checks,andapprove small installment loan applications promptly while the customer waits.Our employees verify theapplicants employment and credit histories through telephone checks with employers,other employmentre
134、ferences,supporting documentation,such as paychecks and earnings summaries,and a variety of third-partycredit reporting agencies.We also source small installment loans through our live check mailing campaigns to pre-screenedindividuals.These campaigns are often timed to coincide with seasonal demand
135、 for loans to finance vacations,back-to-school needs,and holiday spending.We also launch live check campaigns in conjunction with openingnew branches to help build an initial customer base.Customers can cash or deposit live checks at theirconvenience,thereby agreeing to the terms of the loan as prom
136、inently set forth on the check.Each individual wesolicit for a live check loan has been pre-screened through a major credit bureau to meet our thoroughunderwriting criteria.In addition to screening each potential live check recipients credit score and bankruptcyhistory,we also use a proprietary mode
137、l that assesses 27 different attributes of potential recipients.When acustomer enters into a loan by cashing or depositing the live check,our personnel gather additional contact andother information on the borrower to assist us in servicing the loan and offering other products to meet thecustomers f
138、inancing needs.Small installment loans originated through our live check program are secured bycertain non-essential household goods.The following table sets forth the composition of our finance receivables for small installment loans by stateat December 31 of each year from 2008 through 2012:AT DEC
139、EMBER 31,20082009201020112012South Carolina.53%47%43%40%31%Texas.26%27%29%29%31%North Carolina.19%21%20%21%21%Tennessee.2%4%5%6%7%Alabama.1%3%4%9%Oklahoma.1%New Mexico.Total.100%100%100%100%100%8Form 10-KThe following table sets forth the total number of small installment loans,finance receivables,a
140、nd averageper loan for our small installment loans by state at December 31,2012:TOTALNUMBEROF LOANSFINANCERECEIVABLESAVERAGEPER LOAN(In thousands)South Carolina.59,001$58,132$985Texas.57,00459,1561,038North Carolina.31,56240,3061,277Tennessee.13,25513,168993Alabama.17,44616,390939Oklahoma.2,0062,428
141、1,277New Mexico.793759957Total.181,067$190,339$1,051Large Installment Loans.We also offer large installment loans through our branches in amounts rangingfrom$2,500 to$20,000.Our large installment loans are payable in fixed rate,fully amortizing equal monthlyinstallments with terms of 18 to 60 months
142、,and are repayable at any time without penalty.We require our largeinstallment loans to be secured by a vehicle,which may be an automobile,motorcycle,boat,or all-terrainvehicle,as well as certain non-essential household goods.In 2012,our average originated net loan size and termfor large installment
143、 loans were$3,503 and 32 months,respectively.The weighted average yield we earned onour portfolio of large installment loans was 30.0%for 2012.Potential customers apply for a large installment loan by visiting one of our branches,where they areinterviewed by one of our employees who evaluates the cu
144、stomers creditworthiness,including a review of acredit bureau report,before extending a loan.As with our small installment loans,large installment loans aremade to individuals based on the customers unencumbered income,length of current employment,duration ofresidence,and prior credit experience and
145、 credit report history.Loan amounts are established based onunderwriting standards designed to allow customers to affordably make their loan payments out of theirdiscretionary income.Our branches perform the same immediate verifications that we perform for smallinstallment loans in order to approve
146、large installment loan applications promptly.Our branch employees will perform an in-person appraisal of the collateral pledged for a large installmentloan using our multipoint checklist and will use one or more third-party valuation sources,such as the NationalAutomobile Dealers Association Apprais
147、al Guides,to determine an estimate of the collaterals value.Regardlessof the value of the vehicle,we will not lend in excess of our assessment of the borrowers ability to repay.We perfect all first-lien security interests in each pledged vehicle by retaining the title to the collateral in ourfiles u
148、ntil the loan is fully repaid.In certain states,we offer large installment loans secured by second-liensecurity interests on vehicles,in which case we instead seek to perfect our security interest by recording our lienon the title.We work with customers experiencing payment difficulties to help them
149、 to find a solution and viewrepossession only as a last option.In the event we do elect to repossess a vehicle,we use third-party vendors.Wethen sell our repossessed vehicle inventory through public sales conducted by independent automobile auctionorganizations after the required post-repossession w
150、aiting period.Any excess proceeds from the sale of thecollateral are returned to the customer.9The following table sets forth the composition of our finance receivables for large installment loans by stateat December 31 of each year from 2008 through 2012:AT DECEMBER 31,20082009201020112012South Car
151、olina.72%62%57%49%30%Texas.11%11%9%9%6%North Carolina.15%24%26%27%22%Tennessee.2%2%4%8%7%Alabama.1%4%7%35%Oklahoma.New Mexico.Total.100%100%100%100%100%The following table sets forth the total number of large installment loans,finance receivables,and averageper loan for our large installment loans b
152、y state at December 31,2012:TOTALNUMBEROF LOANSFINANCERECEIVABLESAVERAGEPER LOAN(In thousands)South Carolina.5,207$17,297$3,322Texas.1,1583,3332,878North Carolina.3,94112,6393,207Tennessee.1,1944,0053,354Alabama.7,89120,0592,542Oklahoma.38952,500New Mexico.Total.19,429$57,428$2,956Automobile Purchas
153、e Loans.Our automobile purchase loans are offered through a network of dealers inour geographic footprint,including over 2,200 independent and approximately 1,200 franchise automobiledealerships as of December 31,2012.These loans are offered in amounts up to$27,500 and are secured by thefinanced veh
154、icle.They are payable in fixed rate,fully amortizing equal monthly installments with termsgenerally of 36 to 72 months,and are repayable at any time without penalty.In 2012,our average originated netloan size and term for automobile purchase loans were$11,584 and 55 months,respectively.The weighteda
155、verage yield we earned on our portfolio of automobile purchase loans was 22.2%for 2012.Direct Automobile Purchase Loans.We have business relationships with dealerships throughout ourgeographic footprint that offer our loans to their customers in need of financing.These dealers will contact one ofour
156、 local branches to initiate a loan application when they have identified a customer that meets our writtenunderwriting standards.Applications for direct automobile purchase loans may also be received through one ofthe online credit application networks in which we participate,such as DealerTrack and
157、 RouteOne.We willreview the application and requested loan terms and propose modifications,if necessary,before providing initialapproval inviting the dealer and the customer to come to a local branch to close the loan.Our branch employeesinterview the customer to verify information in the dealers cr
158、edit application,obtain a credit bureau report on thecustomer,and inspect the vehicle to confirm that the customers order accurately describes the vehicle beforeclosing the loan.Our branch employees will perform the same in-person appraisal of the pledged vehicle thatthey would perform for a vehicle
159、 securing a large installment loan.Indirect Automobile Purchase Loans.Since late 2010,we have also offered indirect automobile purchaseloans,which allow customers and dealers to complete a loan at the dealership without the need to visit one of our10Form 10-Kbranches.We only offer indirect loans thr
160、ough larger franchise dealers within our geographic footprint.Theselarger franchise dealers collect credit applications from their customers and either forward the applications to usspecifically or,more commonly,submit the applications to numerous potential lenders through online creditapplication n
161、etworks,such as DealerTrack and RouteOne.In early 2011,we introduced AutoCredit Sourcebranches in the Dallas-Ft.Worth,Texas and Charlotte,North Carolina metropolitan areas,which focus solely onoriginating,underwriting,and servicing indirect automobile purchase loans.Since opening these two newAutoCr
162、edit Source branches,we have already established over 444 indirect dealer relationships through ourAutoCredit Source branches.We opened two additional AutoCredit Source branches in Texas in January 2012,and in January 2013,we opened AutoCredit Source branches in the Atlanta,Georgia and Austin,Texasm
163、etropolitan areas.In our other markets,indirect automobile purchase loan applications are processed by ourcentralized underwriting department.Once the loan is approved,the dealer closes the loan on a standardizedretail installment sales contract at the point of sale.Subsequently,we purchase the loan
164、 and then service andcollect on it locally either through an AutoCredit Source branch or our nearest branch.Automobile purchase loans are made to individuals based on the customers unencumbered income,length of current employment,duration of residence,and prior credit experience and credit report hi
165、story.Loanamounts are established based on underwriting standards designed to allow customers to affordably make theirloan payments out of their discretionary income.We perfect our collateral by recording our lien and retaining thevehicles title.Our underwriting standards,however,are primarily based
166、 on the creditworthiness of the borrowerand we view repossession only as a last option.The following table sets forth the composition of our finance receivables for automobile purchase loansby state at December 31 of each year from 2008 through 2012:AT DECEMBER 31,20082009201020112012South Carolina.
167、64%61%64%55%48%Texas.7%5%5%13%19%North Carolina.29%32%27%26%26%Tennessee.2%3%4%3%Alabama.1%2%4%Oklahoma.New Mexico.Total.100%100%100%100%100%The following table sets forth the total number of automobile purchase loans,finance receivables,andaverage per loan for our automobile purchase loans by state
168、 at December 31,2012:TOTALNUMBEROF LOANSFINANCERECEIVABLESAVERAGEPER LOAN(In thousands)South Carolina.9,274$76,900$8,292Texas.2,40429,95312,460North Carolina.4,66741,7258,940Tennessee.6095,5059,040Alabama.5635,68010,089Oklahoma.57414,800New Mexico.Total.17,522$159,837$9,12211Furniture and Appliance
169、Purchase Loans.We began offering loans to finance the purchase of furnitureand appliances in late 2009.Our furniture and appliance purchase loans are indirect installment loans structuredas retail installment sales contracts that are offered in amounts of up to$7,500.They are payable in fixed rate,f
170、ully amortizing equal monthly installments with terms of between six and 48 months,and are repayable at anytime without penalty.In 2012,our average originated net loan size and term for furniture and appliance purchaseloans were$1,520 and 26 months,respectively.The weighted average yield we earned o
171、n our portfolio offurniture and appliance purchase loans was 20.4%for 2012.Our furniture and appliance purchase loans provide financing for customers who may not qualify for primefinancing from traditional lenders.We believe that the furniture and appliance purchase lending markets areunderserved by
172、 sources of non-prime financing.As compared to other limited sources of non-prime financing,our furniture and appliance loans often offer more attractive interest rates and terms to customers.Our furniture and appliance purchase loans are indirect loans made through a retailer at the point of salewi
173、thout the need for the customer to visit one of our branches,similar to our indirect automobile purchase loans.We partner with furniture and appliance retailers who offer our furniture and appliance purchase loans directly totheir customers.As of December 31,2012,we provided furniture and appliance
174、purchase loans to customers atapproximately 625 furniture and appliance retail locations,including 102 franchise store locations of the largestfurniture retailer in the United States.By providing a source of non-prime financing,we are often able to helpour retailer partners complete sales to custome
175、rs who may not otherwise have been able finance their purchase.Our retail partners typically submit applications to us online or via facsimile while the customer waits.If acustomer is not accepted by a retailers prime financing provider,we will evaluate the customers credit based onthe same applicat
176、ion data,without the need for the customer to complete an additional form.Underwriting forour furniture and appliance purchase loans is conducted through a centralized underwriting team,RMC Retail.We individually evaluate the creditworthiness of potential furniture and appliance purchase loan custom
177、ersusing the same information and resources as for our other loan products,including a credit bureau report,beforeproviding a response to the retailer within ten minutes.If we approve the loan,the retailer completes ourstandardized retail installment sales contract,which includes recording a securit
178、y interest in the purchasedfurniture or appliance.Loan amounts are established based on underwriting standards designed to allowcustomers to affordably make their loan payments out of their discretionary income.The collections of suchloans are performed within our branches.We work with customers exp
179、eriencing payment difficulties to helpthem to find a solution and view repossession of the collateral only as a last option.The following table sets forth the total number of furniture and appliance purchase loans,the financereceivables,and average per loan for our furniture and appliance purchase l
180、oans by state at December 31,2012:TOTALNUMBEROF LOANSFINANCERECEIVABLESAVERAGEPER LOAN(In thousands)South Carolina.1,873$2,140$1,143Texas.17,02819,0311,118North Carolina.5,4495,9261,088Tennessee.1,2141,2981,069Alabama.1,2651,3721,085Oklahoma.931211,301New Mexico.62671,081Total.26,984$29,955$1,11012F
181、orm 10-KOptional Credit Insurance Products.We offer our customers a number of different optional insuranceproducts and other payment protection in connection with our loans.The insurance products we offer customersare voluntary and not a condition of the loan.Our insurance products,including the typ
182、es of products offered andthe terms and conditions thereof,vary from state to state in compliance with applicable laws and regulations.Wedo not sell insurance to non-borrowers.In 2012,insurance income,net,was$10.8 million,or 7.9%of our totalrevenue.We market and sell insurance policies as an agent f
183、or an unaffiliated third-party insurance company.Thepolicies are then ceded to our wholly-owned reinsurance subsidiary,RMC Reinsurance,Ltd.,which then bearsthe full risk of the policy.For the sale of insurance policies,we,as agent,write policies only within thelimitations established by our agency c
184、ontracts with the unaffiliated third-party insurance company.Credit Life Insurance,Credit Accident and Health Insurance,and Involuntary UnemploymentInsurance.We market and sell optional credit life insurance,credit accident and health insurance,and involuntaryunemployment insurance in connection wit
185、h our loans in selected markets.Credit life insurance provides for thepayment in full of the borrowers credit obligation to the lender in the event of the borrowers death.Credit accidentand health insurance,which is only offered in conjunction with credit life insurance,provides for the repayment of
186、loan installments to the lender that come due during an insureds period of income interruption resulting fromdisability from illness or injury.Involuntary unemployment insurance provides for repayment of loan installmentsin the event the borrower is no longer employed as the result of a layoff or re
187、duction in workforce.All customerspurchasing these types of insurance from us sign a statement on the loan contract affirming that they understand thattheir purchase of insurance is not a condition of our granting the loan.Collateral Protection Collision Insurance.Before we originate an automobile p
188、urchase loan or largeinstallment loan,we require the borrower to provide proof of acceptable liability and collision insurance on thevehicle securing the loan.While we do not offer automobile insurance to our customers,we will obtain collateralprotection collision insurance,or CPI,on behalf of custo
189、mers who permit their other insurance coverage to lapse.If we obtain CPI for a vehicle,the customer has the opportunity to provide proof of insurance to cancel the CPIand receive a refund of all unearned premiums.Property Insurance.We also require that our customers provide proof of acceptable insur
190、ance for anypersonal property securing a loan.Customers can provide proof of such insurance purchased from a third party(such as homeowners or renters insurance)or can purchase the property insurance that we offer.Our BranchesOur branches are generally conveniently located in visible,high traffic lo
191、cations,such as shopping centers.We do not need to keep large amounts of cash at our branches because we disburse our loans by check,ratherthan by cash payment.As a result,our branches have an open,welcoming,and hospitable layout without theneed for secure booths separating our customers from our em
192、ployees.The following table sets forth the number of branches as of the dates indicated:AT DECEMBER 31,20082009201020112012South Carolina.5958616969Texas.3031354456North Carolina.1818192426Tennessee.56101820Alabama.491442Oklahoma.16New Mexico.2Total.11211713417022113During the period presented in th
193、e table above,we grew net branches by 109 branches.In 2012,we openedor acquired 51 net new branches,including our first branch in New Mexico.In January 2012,we completed theacquisition of the assets of two consumer finance companies located in Alabama,consisting of 23 branches,fourof which were merg
194、ed into existing Regional offices.In evaluating whether to locate a branch in a particular community,we examine several factors,includingthe demographic profile of the community,demonstrated demand for consumer finance,the regulatory andpolitical climate,and the availability of suitable employees to
195、 staff,manage,and supervise the new branch.Wealso look for a concentration of independent and franchise automobile dealers as well as furniture and applianceretailers in order to build our sales finance business.The following table sets forth the average finance receivables per branch based on matur
196、ity:AGE OF BRANCH(AS OF DECEMBER 31,2012)AVERAGE FINANCERECEIVABLES PERBRANCH AS OFDECEMBER 31,2012PERCENTAGE INCREASEFROM NEWER CATEGORYNUMBER OFBRANCHES(In thousands)Branches open less than oneyear.$91151Branches open one to threeyears.$1,80998.6%53Branches open three to fiveyears.$2,30627.5%22Bra
197、nches open five years ormore.$2,57311.6%95The average contribution to operating income from our branches has historically increased as our branchesmature.The following table sets forth the average operating income contribution per branch for the twelvemonths ended December 31,2012,based on maturity
198、of the branch.AGE OF BRANCH(AS OF DECEMBER 31,2012)AVERAGE BRANCHOPERATING INCOMECONTRIBUTIONPERCENTAGE INCREASEFROM NEWER CATEGORYNUMBER OFBRANCHESBranches open less thanone year.$36,00051Branches open one tothree years.$187,000419.4%53Branches open three tofive years.$338,00080.5%22Branches open f
199、ive yearsor more.$509,00050.6%95We calculate the average branch contribution as total revenues generated by the branch less the expensesdirectly attributable to the branch,including the provision for losses associated with loans closed at the branchand operating expenses such as personnel,lease,and
200、interest expenses.General corporate overhead,includingmanagement salaries,are not attributable to any individual branch.Accordingly,the sum of branch contributionsfrom all of our branches is greater than our income before taxes.Payment and Loan CollectionsWe have implemented company-wide payment and
201、 loan collection policies and practices,which aredesigned to maintain consistent portfolio performance and to facilitate regulatory compliance.Our districtsupervisors and state vice presidents oversee the training of each branch employee in these policies and practices,which include standard procedu
202、res for communicating with customers in person,over the telephone,and by mail.14Form 10-KOur corporate procedures require the maintenance of a log of collection activity for each account.Our state vicepresidents,district supervisors,and internal audit teams regularly review these records to ensure c
203、ompliance withour company procedures,which are designed to comply with applicable regulatory requirements.Our corporatepolicies also include encouraging customers to visit our branches to make payments.We estimate that approximately 70%of monthly loan payments are received from customers in person a
204、tour branches,with the remaining payments generally made by mail.Encouraging payment at the branch allowsus to maintain regular contact with our customers and further develop our overall relationship with them.Webelieve that the development and continual reinforcement of personal relationships with
205、customers improves ourability to monitor their creditworthiness,reduces credit risk,and generates opportunities to offer new loanproducts to our customers as their credit profiles evolve.To reduce late payment risk,branch employeesencourage customers to inform us in advance of expected payment probl
206、ems.Branch employees also promptly contact customers following the first missed payment due date andthereafter remain in close contact with such customers,including through phone calls and letters.Our branchemployees also contact a delinquent customer at his or her place of employment and contact ot
207、her referenceslisted on the customers loan application.We use third-party skip tracing services to locate delinquent customersin the event that our branch employees are unable to do so.In certain cases,we seek a legal judgment againstdelinquent customers.We obtain security interests for most of our
208、loans,and we perfect the security interests in vehicles securinglarge installment loans and automobile purchase loans.Our district supervisors and internal audit teams regularlyreview collateral documentation on our loan products to customers to confirm compliance with our guidelines.We perfect all
209、first-lien security interests in each pledged vehicle by retaining the title to the collateral in our filesuntil the loan is fully repaid.In certain states,we offer large installment loans secured by second-lien securityinterests on vehicles,in which case we instead seek to perfect our security inte
210、rest by recording our lien on thetitle.We only initiate repossession efforts when an account is seriously delinquent,we have exhausted othermeans of collection,and in the opinion of management,the customer is unlikely to make further payments.Since2010,we have sold substantially all repossessed vehi
211、cles through public sales conducted by independentautomobile auction organizations,after the required post-repossession waiting period.Losses on the sale ofrepossessed collateral are charged to the allowance for credit losses.In certain cases,we permit our existing customers to refinance their loans
212、.Our refinancings of existingloans are divided into three categories:refinancings of loans in an amount greater than the original loan amount,renewals of existing loans that are current,and renewals of existing loans that are past due,which represented15.0%,32.4%,and 0.6%,respectively,of our loan or
213、iginations in 2012.Any refinancing of a loan in an amount greater than the original amount generally requires an underwritingreview to determine a customers qualification for the increased loan amount.Furthermore,we obtain a new creditreport and may complete a new application on renewals of existing
214、 loans if they have not completed one within theprior two years.While we typically only allow customers to refinance if their loan is current,we allow customers torefinance past due loans on a limited basis if those customers otherwise satisfy our credit standards(other thanwith respect to the delin
215、quency).We believe that refinancing past due loans for certain deserving customers whohave made periodic payments allows us to help customers to resolve temporary financial setbacks and to repairor sustain their credit.During 2012,we refinanced only$4.1 million of past due loans,and as of December 3
216、1,2012,the outstanding balance of such refinancings was only$2.7 million,or less than 1%of gross financereceivables as of such date.We fully reserve on our financial statements for accounts upon 180 days of contractual delinquency.However,we continue to pursue payments on such loans,which we believe
217、 improves overall recoveries.Accounts may only be charged off by our district supervisors or state vice presidents following review of the15collection work applied to them.We continue to attempt to collect on charged-off loans centrally,and we do notsell any of our charged-off accounts to third-part
218、y debt purchasers,nor do we place any debt with third-partycollection agencies.Information TechnologySince 1999,we have used a data processing software package developed and owned by ParaData FinancialSystems and have invested in customizing the ParaData software to improve the management of our spe
219、cificprocesses and product types.The ParaData software is also used by many of our competitors.With this softwarepackage,we are able to fully automate all of our loan account processing and servicing.The system providesthorough management information and control capabilities,including monitoring of
220、all loans made,collections,delinquencies,and other functions.We believe that the ParaData loan management system is adequate for ourcurrent business needs.CompetitionThe consumer finance industry is highly fragmented,with numerous competitors.The competition we facefor each of our loan products is d
221、istinct.Small and Large Installment Loans.The small and large installment loan industry is highly fragmented inthe seven states in which we operated as of December 31,2012.Our largest installment loan competitor in mostof the markets in which we operate is World Acceptance Corp.,an installment finan
222、ce lender with approximately1,137 branches,approximately half of which are located in states that we serve.Additionally,we compete withSecurity Finance Corporation for small installment loans as well as for automobile purchase loans.We believethat Security Finance Corporation has in excess of 1,100
223、branches nationwide.We also compete with a handfulof private competitors with between 100 to 250 branches in certain of the states in which we operate.We believethat the majority of our competitors are independent operators with generally less than 100 branches.We believethat competition between ins
224、tallment consumer loan companies occurs primarily on the basis of price,breadth ofloan product offerings,flexibility of loan terms offered,and the quality of customer service provided.Whileunderbanked customers may also use alternative financial services providers,such as title lenders,paydaylenders
225、,and pawn shops,their products offer different terms and typically carry substantially higher interest ratesthan our installment loans.Accordingly,we believe alternative financial services providers are not an attractivealternative for customers who meet our underwriting standards,which are generall
226、y stricter than the underwritingstandards of alternative financial services providers.Our small and large installment loans also compete to alesser extent with online or peer-to-peer lenders and issuers of non-prime credit cards.Automobile Purchase Loans.In the automobile purchase loan industry,we c
227、ompete with numerousfinancial service companies,including non-prime auto lenders,dealers that provide financing,captive financecompanies owned by automobile manufacturers,banks,and to a limited extent,credit unions.Competitionamong automobile purchase lenders is largely on the basis of interest rate
228、s charged,the quality of creditaccepted,the flexibility of loan terms offered,the speed of approval,and the quality of customer serviceprovided.Much of the automobile purchase loan marketplace has shifted to processing loan applicationsgenerated at dealers through such online credit application netw
229、orks as DealerTrack or RouteOne where promptservice and response times to dealers and their customers are essential to compete in this market.Furniture and Appliance Purchase Loans.In the furniture and appliance purchase loan industry,there arecurrently only a small number of lenders dedicated to no
230、n-prime furniture and appliance purchase loans.To theextent customers require furniture and appliance financing but do not qualify for a retailers prime sources offinancing,the main alternatives are rent-to-own financing providers and credit card companies.Our furniture andappliance purchase loans a
231、re typically made at competitive rates,and competition is largely on the same basis asautomobile purchase loans.Point-of-sale financing decisions must be made rapidly while the customer is on the16Form 10-Ksales floor.We provide responses to customers in less than ten minutes,and we staff RMC Retail
232、,our centralizedfurniture and appliance purchase loan underwriting team,with multiple shifts seven days per week during peakretail furniture shopping hours to ensure rapid response times.SeasonalityOur loan volume and corresponding finance receivables follow seasonal trends.Demand for our loans isty
233、pically highest during the fourth quarter,largely due to holiday spending.Loan demand has generally been thelowest during the first quarter,largely due to decreases in demand as a result of the timing of income tax refunds.During the remainder of the year,our loan volume typically grows from custome
234、r loan activity.In addition,wetypically generate higher loan volumes in the second half of the year from our live check campaigns,which aretimed to coincide with seasonal consumer demand.Consequently,we experience significant seasonal fluctuationsin our operating results and cash needs.EmployeesAs o
235、f December 31,2012,we had approximately 912 employees,none of whom were represented by laborunions.We consider our relations with our personnel to be good.We experience a high level of turnover amongour entry-level employees,which we believe is typical of the consumer finance industry.Staff and Trai
236、ning.Local branches are generally staffed with three to four employees.The branch manageroversees operations of the branch and is responsible for approving all loan applications.Each branch has one ortwo assistant managers who contact delinquent customers,review loan applications,and prepare operati
237、onalreports.Each branch also has a customer service representative who takes loan applications,processes loanapplications,processes payments,and assists in the preparation of operational reports,collection efforts,andmarketing activities.Larger volume branches may employ additional assistant manager
238、s and customer servicerepresentatives.New employees are tested on a detailed training manual that outlines our operating policies andprocedures during the first year of employment.In addition,each branch provides weekly in-branch trainingsessions and periodic training sessions outside the branch.Our
239、 training of assistant managers focuses upondeveloping the skills necessary to allow for the future promotion of the assistant mangers to branch managers.Monitoring and Supervision.We have robust oversight structures and procedures in place to ensurecompliance with our operational standards and poli
240、cies and the applicable regulatory requirements in each state.All of our loans are prepared using our loan management software,which is programmed to compute fees,interest rates,and other loan terms in compliance with our underwriting standards and applicable regulations.Wework with our regulatory c
241、ounsel to develop standardized forms and agreements for each state,ensuringconsistency and compliance.Our loan operations are organized by geography.As of March 2013,we have one state vice president foreach of South Carolina,North Carolina,and Texas;one state vice president to oversee New Mexico and
242、Oklahoma,and one state vice president to oversee Alabama and Tennessee.Several levels of managementmonitor and supervise the operations of each of our branches.Branch managers are directly responsible for theperformance of their respective branches.District supervisors are responsible for the perfor
243、mance of between sixand ten branches in their districts,communicating with the branch managers of each of their branches at leastweekly,and visiting the branches at least monthly.Our state vice presidents monitor the performance of all ofour branches,primarily through communications with district su
244、pervisors.These state vice presidentscommunicate with the district supervisors of each of their districts at least weekly and visit each of their branchesat least quarterly.Our information technology platform enables us to regularly monitor our portfolio,which webelieve improves our credit performan
245、ce.At least once per year,each branch undergoes an audit by our internal auditors.These audits include anexamination of cash balances and compliance with our loan approval,review and collection procedures,andcompliance with state and federal laws and regulations.Branches that do not receive a satisf
246、actory grade fromour internal audit team are automatically re-audited within 90 days in order to confirm operational improvements.17In 2009,we introduced a“scorecard”program to systematically monitor a range of operating metrics ateach branch.Our scorecard system currently tracks 15 different dimens
247、ions of operations,including theperformance and compliance of each branch on a series of underwriting metrics.Our headquarters staff providescentral oversight by reconciling on a daily basis all account payments,cash balances,and bank deposits for eachof our branches.Senior management receives daily
248、 delinquency,loan volume,charge-off,and other statisticalreports consolidated by state and has access to these daily reports for each branch.On a monthly basis,districtsupervisors audit the operations of each branch in their geographic area and submit standardized reports detailingtheir findings to
249、senior management.District supervisors and state vice presidents meet with the executivemanagement team once per quarter to review branch scorecard results as well as to discuss other operational andfinancial performance results against our targets and historical standards.Remedial plans are put in
250、place tocorrect any underperformance.Government RegulationConsumer finance companies are subject to extensive regulation,supervision,and licensing under variousstate and federal statutes,ordinances,and regulations.Many of these regulations impose detailed constraints onthe terms of our loans or the
251、retail installment sales contracts that we purchase,lending forms,and operations.The software that we use to originate loans is designed to ensure compliance with all applicable lendingregulations.State Lending Regulation.In general,state statutes establish maximum loan amounts and interest rates an
252、dthe types and maximum amounts of fees,insurance premiums,and other fees that may be charged for both directand indirect lending.Specific allowable charges vary by state.Statutes in Texas allow for indexing the maximumsmall loan amounts to the Consumer Price Index and set maximum rates for automobil
253、e purchase loans based onthe age of the vehicle.Except in the states of North Carolina and New Mexico,our direct loan products are pre-computed loans in which the finance charge is a combination of origination or acquisition fees,accountmaintenance fees,monthly account handling fees,and other charge
254、s permitted by the relevant state laws.Directloans in North Carolina and New Mexico are structured as simple interest loans as prescribed by state law.In addition,state laws regulate the keeping of books and records and other aspects of the operation ofconsumer finance companies.State and federal la
255、ws regulate account collection practices.Generally,stateregulations also establish minimum capital requirements for each local branch.State agency approval is requiredto open new branches.Each of our branches is separately licensed under the laws of the state in which the branch is located.Licenses
256、granted by the regulatory agencies in these states are subject to renewal every year and may be revokedfor failure to comply with applicable state and federal laws and regulations.In the states in which we currentlyoperate,licenses may be revoked only after an administrative hearing.We believe we ar
257、e in compliance withstate law and regulations applicable to our lending operations in each state.We and our operations are regulated by several state agencies,including the Consumer Finance Division ofthe South Carolina State Board of Financial Institutions,the South Carolina Department of Consumer
258、Affairs,theNorth Carolina Office of the Commissioner of Banks,the Texas Office of the Consumer Credit Commissioner,the Tennessee Department of Financial Institutions,the Alabama State Banking Department,the OklahomaDepartment of Consumer Credit,and the New Mexico Regulation and Licensing Department,
259、FinancialInstitutions Division.These state regulatory agencies audit our branches from time to time,and each state agencyperforms an annual compliance audit of our operations in that state.Insurance Regulation.Charges for credit insurance and similar payment protection products are made atauthorized
260、 statutory rates and are stated separately in our disclosure to customers,as required by the Truth inLending Act and by various applicable state laws.18Form 10-KWe are also subject to state regulations governing insurance agents in the states in which we sell insurance.State insurance regulations re
261、quire that insurance agents be licensed and limit the premium amount charged forsuch insurance.Our captive insurance subsidiary is regulated by the insurance authorities of the Turks and CaicosIslands of the British West Indies,where the subsidiary is organized and domiciled.Dodd-Frank Wall Street R
262、eform and Consumer Protection Act of 2010.At the federal level,Congressenacted comprehensive financial regulatory reform legislation on July 21,2010.A significant focus of the newlaw,known as the Dodd-Frank Act,is heightened consumer protection.The Dodd-Frank Act established a newbody,called the Con
263、sumer Financial Protection Bureau,or the CFPB,which has regulatory,supervisory,andenforcement powers over providers of consumer financial products and services,including explicit supervisoryauthority to examine and require registration of non-depository lenders and promulgate rules that can affect t
264、hepractices and activities of lenders.Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits,some consumer advocacy groups have suggested that various forms of alternative financial services or specificfeatures of consumer loan products should be a re
265、gulatory priority,and it is possible that at some time in thefuture the CFPB could propose and adopt rules making such lending services materially less profitable orimpractical,which may include installment finance loans or other products that we offer.The Dodd-Frank Act also gives the CFPB the auth
266、ority to examine and regulate large nondepositoryfinancial companies and gives the CFPB authority over anyone deemed by rule to be a“larger participant of amarket for other consumer financial products or services.”The CFPB contemplates regulating the installmentlending industry as part of the“consum
267、er credit and related activities”market.However,this so-called“largerparticipant rule”will not impose substantive consumer protection requirements,but rather will provide to theCFPB the authority to supervise larger participants in certain markets,including by requiring reports andconducting examina
268、tions to ensure,among other things,that they are complying with existing federal consumerfinancial law.While the CFPB has defined a“larger participant”standard in the“debt collection”and“consumerreporting”markets,it has not yet acted to define“larger participant”in the“consumer credit and relatedact
269、ivities”market.The rule will likely cover only the largest installment lenders.We do not yet know whetherthe definition of larger participant will cover us.In addition to the grant of certain regulatory powers to the CFPB,the Dodd-Frank Act gives the CFPBauthority to pursue administrative proceeding
270、s or litigation for violations of federal consumer financial laws.Inthese proceedings,the CFPB can obtain cease and desist orders(which can include orders for restitution orrescission of contracts,as well as other kinds of affirmative relief)and monetary penalties.Other Federal Laws and Regulations.
271、In addition to the Dodd-Frank Act and state and local laws andregulations,numerous other federal laws and regulations affect our lending operations.These laws include theTruth in Lending Act,the Equal Credit Opportunity Act,the Fair Credit Reporting Act,the Gramm-Leach-BlileyAct,and in each case the
272、 regulations thereunder,and the Federal Trade Commissions Credit Practices Rule.These laws require us to provide complete disclosure of the principal terms of each loan to the borrower,prior tothe consummation of the loan transaction,prohibit misleading advertising,protect against discriminatory len
273、dingpractices,and proscribe unfair credit practices.Under the Truth in Lending Act and Regulation Z promulgated thereunder,we must disclose certainmaterial terms related to a credit transaction,including,but not limited to,the annual percentage rate,financecharge,amount financed,total of payments,th
274、e number and amount of payments,and payment due dates torepay the indebtedness.Under the Equal Credit Opportunity Act and Regulation B promulgated thereunder,wecannot discriminate against any credit applicant on the basis of any protected category,such as race,color,religion,national origin,sex,mari
275、tal status,or age.We are also required to make certain disclosures regardingconsumer rights and advise customers whose credit applications are not approved of the reasons for the rejection.Under the Fair Credit Reporting Act,we must provide certain information to customers whose credit applications1
276、9are not approved on the basis of a report obtained from a consumer reporting agency,promptly update any creditinformation reported to a credit reporting agency about a customer,and have a process by which customers mayinquire about credit information furnished by us to a consumer reporting agency.U
277、nder the Gramm-Leach-BlileyAct,we must protect the confidentiality of our customersnonpublic personal information and discloseinformation on our privacy policy and practices,including with regard to the sharing of customersnonpublicpersonal information with third parties.This disclosure must be made
278、 to customers at the time the customerrelationship is established and,in some cases,at least annually thereafter.The Federal Trade CommissionsCredit Practices Rule limits the types of property we may accept as collateral to secure a consumer loan.Violations of these statutes and regulations may resu
279、lt in actions for damages,claims for refund of paymentsmade,certain fines and penalties,injunctions against certain practices,and the potential forfeiture of rights torepayment of loans.Additional InformationThe Companys principal internet address is .The information contained on,or that can be acce
280、ssed through,the Companys website is not incorporated by reference into this Annual Reporton Form 10-K.The Company has included its website address as a factual reference and does not intend it as anactive link to its website.The Company provides its annual reports on Form 10-K,quarterly reports on
281、Form 10-Q,and current reports on Form 8-K,and all amendments to those reports,free of charge ,as soon as reasonably practicable after they are electronically filed,or furnishedto,the Securities and Exchange Commission.20Form 10-KITEM 1A.RISK FACTORS.We operate in a rapidly changing environment that
282、involves a number of risks,some of which are beyondour control.This discussion highlights some of the risks which may affect future operating results.These are therisks and uncertainties we believe are most important for you to consider,but the risks described below are notthe only risks facing our
283、company.Additional risks and uncertainties not presently known to us,which wecurrently deem immaterial,or which are similar to those faced by other companies in our industry or business ingeneral,may also impair our business operations.If any of the following risks or uncertainties actually occurs,o
284、ur business,financial condition,and operating results would likely suffer.You should carefully consider therisks described below together with the other information set forth in this Annual Report on Form 10-K.Risks Related to Our BusinessWe have grown significantly in recent years and our delinquen
285、cy and charge-off rates and overall resultsof operations may be adversely affected if we do not manage our growth effectively.We have experienced substantial growth in recent years,opening or acquiring 17 branches in 2010,36 in2011,and a net 51 in 2012,and we intend to continue our growth strategy i
286、n the future.As we increase thenumber of branches we operate,we will be required to find new,or relocate existing,employees to operate ourbranches and allocate resources to train and supervise those employees.The success of a branch dependssignificantly on the manager overseeing its operations and o
287、n our ability to enforce our underwriting standardsand implement controls over branch operations.Recruiting suitable managers for new branches can bechallenging,particularly in remote areas and areas where we face significant competition.Furthermore,theannual turnover in 2012 among our branch manage
288、rs was approximately 24%,and turnover rates of managers inour new branches may be similar or higher.Increasing the number of branches that we operate may divide theattention of our senior management or strain our ability to adapt our infrastructure and systems to accommodateour growth.If we are unab
289、le to promote,relocate,or recruit suitable managers and oversee their activitieseffectively,our delinquency and charge-off rates may increase and our overall results of operations may beadversely impacted.We face significant risks in implementing our growth strategy,some of which are outside our con
290、trol.We intend to continue our growth strategy,which is based on opening and acquiring branches in existingand new markets and introducing new products and channels.Our ability to execute this growth strategy issubject to significant risks,some of which are beyond our control,including:the prevailin
291、g laws and regulatory environment of each state in which we operate or seek to operateand,to the extent applicable,federal laws and regulations,which are subject to change at any time;the degree of competition in new markets and its effect on our ability to attract new customers;our ability to ident
292、ify attractive locations for new branches;our ability to recruit qualified personnel,in particular in remote areas and areas where we face a greatdeal of competition;andour ability to obtain adequate financing for our expansion plans.For example,North Carolina requires a“needs and convenience”assess
293、ment of a new lending license andlocation prior to the granting of the license,which adds time and expense to opening de novo locations.Inaddition,certain states into which we may expand limit the number of lending licenses granted.There can be noassurance that if we apply for a license for a new br
294、anch,whether in one of the states where we currently operateor in a state into which we would like to expand,we would be granted a license to operate.We also cannot becertain that any such license,even if granted,would be obtained in a timely manner or without burdensomeconditions or limitations.In
295、addition,we may not be able to obtain and maintain any regulatory approvals,government permits,or licenses that may be required.21We face strong direct and indirect competition.The consumer finance industry is highly competitive,and the barriers to entry for new competitors arerelatively low in the
296、markets in which we operate.We compete for customers,locations,and other importantaspects of our business with many other local,regional,national,and international financial institutions,many ofwhom have greater financial resources than we do.Our installment loan operations compete with other instal
297、lment lenders as well as with alternative financialservices providers(such as payday and title lenders,check advance companies,and pawnshops),online or peer-to-peer lenders,issuers of non-prime credit cards,and other competitors.We believe that future regulatorydevelopments in the consumer finance i
298、ndustry may cause lenders that currently focus on alternative financialservices to begin to offer installment loans.In addition,if companies in the installment loan business attempt toprovide more attractive loan terms than is standard across the industry,we may lose customers to thosecompetitors.In
299、 installment loans,we compete primarily on the basis of price,breadth of loan product offerings,flexibility of loan terms offered,and the quality of customer service provided.Our automobile purchase loan operations compete with numerous financial services providers,includingnon-prime auto lenders,de
300、alers that provide financing,captive finance companies owned by automobilemanufacturers,banks,and to a limited extent,credit unions.Our furniture and appliance purchase loan operationscompete with store and third-party credit cards,prime lending sources,rent-to-own finance providers,and othercompeti
301、tors.Although the furniture and appliance purchase loan market includes few competitors serving non-prime borrowers,there are numerous competitors offering non-prime automobile purchase loans.For automobilepurchase loans and furniture and appliance purchase loans,we compete primarily on the basis of
302、 interest ratescharged,the quality of credit accepted,the flexibility of loan terms offered,the speed of approval,and the qualityof customer service provided.If we fail to compete successfully,we could face lower sales and may decide or be compelled to materiallyalter our lending terms to our custom
303、ers,which could result in decreased profitability.A substantial majority of our revenue is generated by our branches in South Carolina,Texas,and NorthCarolina.Our branches in South Carolina accounted for 45%of our revenue in 2012.In addition,our branches inTexas and North Carolina accounted for 24%a
304、nd 16%,respectively,of our revenue in 2012.Furthermore,all ofour operations are in five Southeastern and three Southwestern states.As a result,we are highly susceptible toadverse economic conditions in those areas.For example,the unemployment rate in South Carolina,which was8.4%in December 2012,is a
305、mong the highest in the country.High unemployment rates may reduce the numberof qualified borrowers to whom we will extend loans,which would result in reduced loan originations.Adverseeconomic conditions may increase delinquencies and charge-offs and decrease our overall loan portfolio quality.If an
306、y of the adverse regulatory or legislative events described in this“Risk Factors”section were to occur inSouth Carolina,Texas,or North Carolina,it could materially adversely affect our business,results of operations,and financial condition.For example,if interest rates in South Carolina,which are cu
307、rrently not capped,were tobe capped,our business,results of operations,and financial condition would be materially and adverselyaffected.Our business could suffer if we are unsuccessful in making,continuing,and growing relationships withautomobile dealers and furniture and appliance retailers.Our au
308、tomobile purchase loans and furniture and appliance purchase loans are reliant on our relationshipswith automobile dealers and furniture and appliance retailers.In particular,our automobile purchase loanoperations depend in large part upon our ability to establish and maintain relationships with rep
309、utable dealerswho direct customers to our branches or originate loans at the point of sale,which we subsequently purchase.22Form 10-KAlthough we have relationships with certain automobile dealers,none of our relationships are exclusive,some ofthem are newly established,and they may be terminated at
310、any time.As a result of the recent economic downturnand contraction of credit to both dealers and their customers,there has been an increase in dealership closuresand our existing dealer base has experienced decreased sales and loan volume in the past and may experiencedecreased sales and loan volum
311、e in the future,which may have an adverse effect on our business,our results ofoperations,and financial condition.Our furniture and appliance purchase loan business model is based on our ability to enter into agreementswith individual furniture and appliance retailers to provide financing to custome
312、rs in their stores.Although ourrelationships with independent licensees of a major U.S.furniture retailer are currently a significant source of ourfurniture and appliance purchase loans,we do not have a relationship with the retailer itself or its manufacturingaffiliate and instead depend on non-exc
313、lusive relationships with individual licensees of the retailer,each of whichmay be terminated at any time.If a competitor were to offer better service or more attractive loan products to ourfurniture and appliance retailer partners,it is possible that our retail partners would terminate their relati
314、onshipswith us.If we are unable to continue to grow our existing relationships and develop new relationships,our resultsof operations,financial condition,and ability to continue to expand could be adversely affected.Regular turnover among our managers and other employees at our branches makes it mor
315、e difficult forus to operate our branches and increases our costs of operations,which could have an adverse effect on ourbusiness,results of operations,and financial condition.Our workforce is comprised primarily of employees who work on an hourly basis.In certain areas where weoperate,there is sign
316、ificant competition for employees.In the past,we have lost employees and candidates tocompetitors who have been willing to pay higher compensation than we pay.Our ability to continue to expandour operations depends on our ability to attract,train,and retain a large and growing number of qualifiedemp
317、loyees.The turnover among all of our branch employees was approximately 43%in 2010,37%in 2011,and38%in 2012.This turnover increases our cost of operations and makes it more difficult to operate our branches.Our customer service representative and assistant manager roles have historically experienced
318、 high turnover.Wemay not be able to retain and cultivate personnel at these ranks for future promotion to branch manager.If ouremployee turnover rates increase above historical levels or if unanticipated problems arise from our highemployee turnover and we are unable to readily replace such employee
319、s,our business,results of operations,financial condition,and ability to continue to expand could be adversely affected.We are subject to government regulations concerning our hourly and our other employees,includingminimum wage,overtime,and health care laws.We are subject to applicable rules and reg
320、ulations relating to our relationship with our employees,includingminimum wage and break requirements,health benefits,unemployment and sales taxes,overtime,and workingconditions and immigration status.Legislated increases in the federal minimum wage and increases in additionallabor cost components,s
321、uch as employee benefit costs,workerscompensation insurance rates,compliance costsand fines,as well as the cost of litigation in connection with these regulations,would increase our labor costs.Unionizing and collective bargaining efforts have received increased attention nationwide in recent period
322、s.Should our employees become represented by unions,we would be obligated to bargain with those unions withrespect to wages,hours,and other terms and conditions of employment,which is likely to increase our laborcosts.Moreover,as part of the process of union organizing and collective bargaining,stri
323、kes,and other workstoppages may occur,which would cause disruption to our business.Similarly,many employers nationally insimilar retail environments have been subject to actions brought by governmental agencies and privateindividuals under wage-hour laws on a variety of claims,such as improper class
324、ification of workers as exemptfrom overtime pay requirements and failure to pay overtime wages properly,with such actions sometimesbrought as class actions,and these actions can result in material liabilities and expenses.Should we be subject toemployment litigation,such as actions involving wage-ho
325、ur,overtime,break,and working time,it may distractour management from business matters and result in increased labor costs.In addition,we currently sponsor23employer-subsidized premiums for major medical programs for eligible salaried personnel and“mini-medical”(limited benefit)programs for eligible
326、 hourly employees who elect health care coverage through our insuranceprograms.As a result of regulatory changes,we may not be able to continue to offer health care coverage to ouremployees on affordable terms or at all.If we are unable to locate,attract,train,or retain qualified personnel,orif our
327、costs of labor increase significantly,our business,results of operations,and financial condition may beadversely affected.Our live check direct mail strategy exposes us to certain risks.A significant portion of our growth in our small installment loans has been achieved through our direct mailcampai
328、gns,which involve mailing to pre-screened recipients“live checks,”which customers can sign and cash ordeposit thereby agreeing to the terms of the loan,which are disclosed on the front and back of the check.We uselive checks to seed new branch openings and attract new customers and those with higher
329、 credit in ourgeographic footprint.Loans initiated through live checks represented 32.6%of the value of our originated loans.We expect that live checks will represent a greater percentage of our small installment loans in the future.Thereare several risks associated with the use of live checks inclu
330、ding the following:it is more difficult to maintain sound underwriting standards with live check customers,and thesecustomers have historically presented a higher risk of default than customers that originate loans in ourbranches,as we do not meet a live check customer prior to soliciting them and e
331、xtending a loan tothem,and we may not be able to verify certain elements of their financial condition,including theircurrent employment status or life circumstances;we rely on a software-based model and credit information from a third-party credit bureau that is morelimited than a full credit report
332、 to pre-screen potential live check recipients,which may not be aseffective or may be inaccurate or outdated;we face limitations on the number of potential borrowers who meet our lending criteria withinproximity to our branches;we may not be able to continue to access the demographic and credit file
333、 information that we use togenerate our mailing lists due to expanded regulatory or privacy restrictions;live checks pose a greater risk of fraud as the live checks may be fraudulently replicated;we depend on one bank to issue and clear our live checks and any failure by that bank to properlyprocess the live checks could limit the ability of a recipient to cash the check and enter into a loan with
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