Cash America 2010 Annual Report Download - page 81

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52
Consumer Loan Activities:
Consumer loan fees increased $7.3 million, or 2.0%, to $371.9 million in 2009, as compared to $364.6 million
in 2008. The increase in revenue from consumer loan fees is primarily due to growth in the e-commerce segment from
the online lending and MLOC businesses in the United States. Offsetting this increase was a 16.4% decrease in
consumer loan fees from the Company’s retail services segment, which is due to several factors, including the closure
of 56 consumer loan retail services locations during 2008, regulatory changes in certain markets for the consumer loan
product that resulted in lower consumer loan fees per loan, and the Company’s adjustments in underwriting criteria for
the consumer loan product in late 2008 to reduce risk of loan losses. These factors caused a decrease in revenue on the
consumer loan product in 2009 compared to 2008. In particular, the short-term unsecured consumer loan product
offered at retail services locations in Ohio under the Ohio Second Mortgage Loan statute has a lower annualized yield
than the short-term unsecured consumer loan product offered in Ohio prior to December 2008, which resulted in lower
consumer loan fees at the Ohio retail services locations, despite an increase in consumer loans written at these
locations. In addition, the adjustments in underwriting criteria for the consumer loan product in late 2008 resulted in a
decrease in consumer loans written but lowered the levels of losses in 2009. Management also believes that a
generally soft economic environment and higher unemployment levels may have led to fewer qualifying consumer
loan customers during 2009. These factors contributed to the decrease in the number of short-term unsecured
consumer loans written, which resulted in reduced consumer loan fees at the Company’s consumer loan retail services
locations, and, to a lesser extent, reduced growth in the Company’s e-commerce segment.
Consumer loan fees and consumer loan loss provision. The consumer loan loss provision decreased by $9.9
million, to $130.8 million in 2009, from $140.7 million in 2008, primarily due to adjustments in underwriting criteria,
an improved mix of customers, which was more heavily weighted to customers with better repayment histories and a
lower concentration of customers with no performance history, lower defaults (loans not paid when due) and a higher
percentage of collections on loans that were past due during 2009. The loss provision as a percentage of consumer
loan fees decreased to 35.2% in 2009 from 38.6% in 2008.
The following table sets forth consumer loan fees, by channel and segment, adjusted for the deduction of the
loan loss provision for years ended December 31, 2009 and 2008 (dollars in thousands):
Year Ended December 31,
2009 2008
Retail
Services
Segment
Online
Lending MLOC
Total E-
Commerce
Segment
Total
Company
Retail
Services
Segment
Online
Lending MLOC
Total E-
Commerce
Segment
Total
Company
Consumer loan fees $ 117,997 $ 241,268 $ 12,591 $ 253,859 $ 371,856 $ 141,134 $ 221,319 $ 2,150 $ 223,469 $ 364,603
Loan loss provision 21,642 104,454 4,720 109,174 130,816 33,553 106,189 981 107,170 140,723
Loss adjusted consumer
loan fees $ 96,355 $ 136,814 $ 7,871 $ 144,685 $ 241,040 $ 107,581 $ 115,130 $ 1,169 $ 116,299 $ 223,880
Year over year change - $ $ (11,226) $ 21,684 $ 6,702 $ 28,386 $ 17,160 $ (10,523) $ 33,276 $ 1,169 $ 34,445 $ 23,922
Year over year change - % (10.4)% 18.8% 573.3% 24.4% 7.7% (8.9)% 40.7% — 42.1% 12.0%
Loan loss provision as %
of consumer loan fees 18.3% 43.3% 37.5% 43.0% 35.2% 23.8% 48.0% 45.6% 48.0% 38.6%
Combined consumer loans. In addition to reporting financial results in accordance with GAAP, the Company
has provided combined consumer loan balances and combined consumer loans written, which are non-GAAP
measures that include (i) Company-owned consumer loans, which are GAAP measures that consist of consumer loans
written by the Company and the Company's participation interests in consumer loans written by a third-party lender’s
MLOC product, and (ii) consumer loans guaranteed by the Company, which are GAAP measures that consist of
consumer loans written by third-party lenders through the CSO program that the Company guarantees. Management
believes these measures are useful in evaluating the consumer loan portfolio on an aggregate basis, including its
evaluation of the loss provision for the Company-owned portfolio and third-party lender-owned portfolios that the