Cash America 2011 Annual Report Download - page 39

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and MLOC receivables are considered nonperforming as of the payment due date when payment of an amount due has
not been made as of that date (after allowing for normal payment processing time). An installment loan is considered
nonperforming if the customer does not make two consecutive payments.
Where permitted by law, a customer may choose to renew a performing short-term consumer loan before it is
considered nonperforming by agreeing to pay the current finance charge for the right to make payment of the
outstanding principal balance at a later date plus an additional finance charge. If a performing loan is renewed, the
renewal is considered a new loan. In some instances in the United Kingdom, customers agree to repay a new short-term
loan in two payments (which the Company also considers short-term loans), and in these cases the Company considers
the obligation to make the first payment as a new single-payment loan and the obligation to make the second payment as
a renewal of that loan because the customer pays a finance charge when each payment is made, similar to a renewed
loan. If a performing loan is renewed but the customer fails to pay that loan's current finance charge as of its due date
(after allowing for normal payment processing time), the loan that was renewed is reclassified as nonperforming to the
extent of that loan's unpaid finance charge.
The Company does not provide for any grace period when determining the performance status of a consumer
loan (other than allowing for normal payment processing time). Nonperforming loans may not be renewed, and if
during its attempt to collect on a nonperforming loan the Company extends the time for payment through a payment plan
or a promise to pay, it is still considered nonperforming. Nonperforming loans are analyzed by stage of collection.
Actual loss experience based on historical loss rates for each discrete group is calculated and adjusted for recent default
trends. The required allowance is calculated by applying the resulting adjusted loss rates to each discrete loan group and
aggregating the results. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded
as a “Consumer loan loss provision” in the consolidated statements of income. The Company fully reserves and
generally charges off all consumer loans once they have been classified as nonperforming for 60 consecutive days. If a
loan is deemed uncollectible before it is fully reserved, it is charged off at that point. All loans included in
nonperforming loans have an age of one to 59 days from the date they became nonperforming loans, as defined above.
Recoveries on loans previously charged to the allowance are credited to the allowance when collected.
Due to the nature of the short-term consumer loan product and the high volume of loans written, seasonal trends
are evident in quarter-to-quarter performance. Typically, in the normal business cycle, sequential losses, as measured by
the current period loss provision as a percentage of combined loans written in the period, are lowest in the first quarter
and increase throughout the year, with the final two quarters experiencing the peak levels of losses. See “Item 7.
Management’s Discussion and Analysis—Loss Experience” for additional information about the seasonality of
consumer loan losses.
See “Item 8. Financial Statements and Supplementary Data—Note 5” for further discussion related to allowance
and liability for estimated losses.
Check Cashing and Other Financial Services. The Company provides check cashing and other financial
services through its retail services locations and through its Mr. Payroll subsidiary. Other financial services include the
sale of stored-value cards, money orders and money transfers, among others. When the Company provides a check
cashing service to its customers, it charges check cashing fees based on the type and face amount of the check being
cashed. The Company receives check cashing fees from both check cashing locations it owns and many of its retail
services locations. In addition, each Mr. Payroll franchisee pays royalties to Mr. Payroll based on the gross revenues of
check cashing services provided within the franchisee’s facility.
Financial Information on Segments and Areas
Additional financial information regarding the Company’s operating segments and each of the geographic areas
in which the Company does business is provided in “Item 8. Financial Statements and Supplementary Data—Note 19.”