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Advance America, Cash Advance Centers, Inc. – ‘10-K’ for 12/31/05

On:  Thursday, 3/16/06, at 4:19pm ET   ·   For:  12/31/05   ·   Accession #:  1047469-6-3578   ·   File #:  1-32363

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 3/16/06  Advance America Cash Advance… Inc 10-K       12/31/05   11:1.1M                                   Merrill Corp/New/FA

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

COMMISSION FILE NUMBER 001-32363

ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: 864-342-5600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ý No o

        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o No ý

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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 ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý    Accelerated filer o    Non-accelerated filer o

        Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes o No ý

        As of June 30, 2005, the aggregate market value of voting stock (based upon the last reported sales price on the New York Stock Exchange) held by nonaffiliates of the registrant was $855,800,448.

        At March 14, 2006, there were 82,352,285 shares of the registrant's Common Stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Certain information required by Part III of this report is incorporated herein by reference from the registrant's Proxy Statement for the registrant's Annual Meeting of Stockholders to be held on May 18, 2006.

ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.
Form 10-K
For the year ended December 31, 2005

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FORWARD-LOOKING STATEMENTS

        The matters discussed in this Annual Report on Form 10-K that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "expect," "intend," "plan," "believe," "project," "anticipate," "may," "will," "should," "would," "could," "estimate," "continue" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should read statements that contain these words carefully, because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other "forward-looking" information.

        The factors listed in "Item 1A. Risk Factors," as well as any cautionary language in this Annual Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward-looking statements as a result of various factors, including, but not limited to, those described in "Item 1A. Risk Factors."

        Forward-looking statements speak only as of the date of this Annual Report. Except as required under federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Annual Report, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this Annual Report or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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PART I

ITEM 1.    BUSINESS.

Overview

        We are the largest provider of payday cash advance services in the United States, as measured by the number of centers operated. As of December 31, 2005, we operated 2,604 centers in 36 states. Payday cash advances are small-denomination, short-term, unsecured advances that typically are due on the customer's next payday. We provide these services primarily to middle-income working individuals. We do not franchise any of our centers. We focus primarily on payday cash advance services and do not provide pawn lending, title lending or similar services. We believe our primary focus on payday cash advance services is a competitive strength that has allowed us to better reach and service our primary market of middle-income customers. The table below shows selected demographics of the customers we serve:

(1)

Based on a study performed for us of the approximately 52% of customers served during the twelve months ended April 2005 for whom this information was available.

(2)

Percent of population 25 years old and older who are high school graduates or higher.

        Our goal is to attract customers by offering straightforward, rapid access to temporary funding while providing high-quality, professional customer service. We believe that our payday cash advance services represent a competitive source of liquidity to the customer relative to other credit alternatives, which typically include overdraft privileges or bounced check protection, late bill payments, checks returned for insufficient funds and short-term collateralized loans.

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        The following table presents key operating data for our business:

        Our centers, which we design to have the appearance of a mainstream financial institution, are typically located in middle-income shopping areas with high retail activity. As of December 31, 2005, we operated 2,524 centers under the "Advance America" brand and 80 centers under the "National Cash Advance" brand.

Our Industry

        The payday cash advance services industry has grown steadily since the early 1990s in response to a shortage of available short-term consumer credit alternatives from traditional banking institutions. The rapid increase in the charges associated with having insufficient funds in one's bank account, as well as other late/penalty fees charged by financial institutions and merchants, have also helped increase customer demand for payday cash advances. A payday cash advance typically involves a single charge, unlike other alternatives that often require collateral, origination and administration fees, interest payments, additional incremental charges and prepayment penalties and charges for other services such as credit life insurance. Other alternatives, such as bounced checks and late bill payments, may also have negative credit consequences. We believe customers use short-term payday cash advances because they provide a simple, quick and confidential way to meet short-term cash needs between paydays while avoiding the potentially higher costs and negative credit consequences of other alternatives.

        We believe many banks and other traditional financial institutions have reduced or eliminated their provision of small-denomination, short-term consumer loans, in part due to the costs associated with originating these loans. As a result, a significant number of companies have begun to offer these loans, or payday cash advances, to lower-income and middle-income individuals. The providers of these types of loans are fragmented and range from specialty finance offices, like our centers, to retail stores in other industries that offer these types of loans as ancillary services. Because of the relatively low cost of entry and the regulatory safe harbor that many state statutes provide for payday cash advances, the payday cash advance services industry has experienced significant growth in the number of payday cash advance centers. Businesses offering payday cash advances and short-term loans over the internet as well as by telephone have also begun to compete in the payday cash advance services industry.

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        We believe the payday cash advance services industry is growing, fueled by overall increases in the population and increased consumer and legislative acceptance of payday cash advances. The number of jurisdictions with specific legislation and/or regulations permitting payday cash advances or small loans has grown from 16 states in 1997, the year in which we commenced operations, to 39 states and the District of Columbia as of December 31, 2005.

Competitive Strengths

        Market Leader with Economies of Scale.    With 2,604 centers located in 36 states as of December 31, 2005, we are the largest provider of payday cash advance services in the United States, as measured by the number of centers operated, with approximately twice as many centers as the next largest provider of payday cash advance services. We believe our scale provides us with a leadership position in the industry, allows us to leverage our brand name in opening centers in existing and new markets and enables us to benefit from economies of scale and to enter favorable relationships with landlords, strategic vendors and other suppliers. We have centralized most center support functions, including marketing and advertising, accounting and finance, treasury management, human resources, regulatory compliance, information technology support and customer support systems. We believe these centralization efforts will enable us to continue to expand our network of centers while controlling our costs.

        Successful Execution of Growth Strategy.    We believe we have successfully executed an effective growth strategy, including identifying attractive locations for new centers, rapidly entering into new leases and establishing the necessary processes and systems to manage the overall growth process. We use our database of over 3.5 million customer records to analyze market opportunities and make management decisions regarding expanding our network of centers. In 2005, we opened 361 new centers in 32 states, and in 2004, we opened 469 new centers in 29 states.

        Continued Focus on Government Affairs.    We have experience with the legislative and regulatory environment in all of the states in which we operate as well as at the federal level. We are a founding member of the Community Financial Services Association of America ("CFSA"), an industry trade group comprised of our company and more than 100 other companies engaged in the payday cash advance services industry. Our internal government affairs team, together with the CFSA, seeks to encourage favorable legislation that permits us to operate profitably within a balanced regulatory framework. In 2005, 2004 and 2003, payday cash advance legislation we supported was adopted in 9 states, 15 states and five states, respectively. We have added to the size of our internal government affairs team to provide more complete coverage of state legislatures. Our approach is to continue to work with policymakers and grass roots organizations to provide a predictable, favorable legislative environment for the payday cash advance services industry.

        Ability to Respond Rapidly to Regulatory Changes.    Our regulatory department, along with our internal government affairs team and outside counsel, monitors the various state and federal legislatures and rule-making bodies to keep abreast of changes in laws and regulations relevant to our business. Our organization is designed to be able to respond rapidly to these regulatory developments. We believe that our strong internal regulatory team enables us to seize opportunities for growth in new jurisdictions, permits us to conduct our business in compliance with often changing laws and regulations and allows us to react quickly to those changes.

        Rigorous Implementation of Center-Level Controls.    We believe that our management information systems, our cash management systems and our internal compliance systems are critical to our success and continued growth. We employ a proprietary point-of-sale system used to record transactions in our centers. This information is recorded daily and analyzed at our centers and at our headquarters. We also employ a third-party cash reconciliation software system to balance and monitor cash receipts and disbursements. The principal benefits from our use of these two systems are our quick recognition of

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variances from expected operating results, our early detection of theft and fraud and our ability to monitor compliance with various federal and state laws.

        Geographical Diversification of Our Centers.    With centers located in 36 states as of December 31, 2005, we believe we have developed a significant presence throughout the United States that helps us to mitigate the risk and possible financial impact of unfavorable changes in state legislation or in the economic environment of a particular region or state and allows us to take advantage of competitive opportunities in those markets. For the year ended December 31, 2005, California, which accounted for approximately 11% of our total revenues, was the only state that accounted for more than 10% of our total revenues.

Business Strategy

        Continue to Open Centers Systematically. A key objective of our growth strategy is to become the leading provider of payday cash advance services in each market we enter by rapidly opening proprietary, wholly owned centers. We do not intend to franchise our centers. We opened 361 centers in 2005, and we expect to continue our rapid roll-out of new centers. We believe that internal development of new centers is currently more economical than acquiring and integrating existing centers. However, from time to time we may also consider opportunities to acquire payday cash advance companies or businesses. We believe that by offering the convenience of a high density of centers, as well as exceptional customer service, we will maintain a high level of customer satisfaction.

        Drive New Center Operating Performance.    In our approximately 830 operating centers that opened in 2005 and 2004, we are striving to match the operating performance of our centers that have been open at least 24 months. To do this, our employees are evaluated and compensated, in part, based on their achievement of operational goals, which we adjust each year to account for the continued improvement in our business. The three key metrics we reward are (1) maintaining a high level of compliance with applicable laws and regulations, (2) meeting stated growth objectives and (3) meeting collection targets. We believe that by focusing on these specific goals and tying them to employee compensation, we can achieve operating performance in our newer centers comparable to the operating performance at our mature centers.

        Maximize the Efficiency of Our Infrastructure.    We have made significant investments in technology, infrastructure and monitoring/compliance systems that we believe are highly scalable. As we expand our network of centers, we expect that our general and administrative expenses will decline as a percentage of our net revenues.

        Support Improvement of the Legislative and Regulatory Environment.    As of December 31, 2005, 39 states and the District of Columbia had specific laws that permitted payday cash advances or allowed a form of payday cash advances under small loan laws. Our goal is to work with policymakers and grass roots organizations to facilitate the implementation of a balanced, visible and predictable regulatory framework that protects the interests of the customers we serve while allowing us to operate profitably in every state.

Our Services

        In most states in which we conduct business we make payday cash advances directly to our customers (which we refer to as the standard business model). In other states we have acted as a marketing, processing and servicing agent through our centers for Federal Deposit Insurance Corporation ("FDIC") supervised, state-chartered banks that make payday cash advances and installment loans to their customers pursuant to the authority of the laws of the state in which they are located and federal interstate banking laws, regulations and guidelines (which we refer to as the agency business model). We refer to the banks for which we have acted as agent as the lending banks. The

7

lending bank for which we market, process and service payday cash advances and installment loans in Pennsylvania will cease originating payday cash advances and installment loans in March 2006. The lending bank for which we market, process and service payday cash advances and installment loans in Arkansas will cease originating installment loans in April 2006 and will cease originating payday cash advances in June 2006.

        We provide payday cash advances and charge fees and/or interest as specified by the laws of the states where we operate under the standard business model. In the states where we have operated under the agency business model, the lending banks provide payday cash advances and installment loans and charge fees and/or interest as specified by the laws of the states in which they are located and consistent with the regulatory authority of the FDIC and federal banking law. The permitted size of a payday cash advance varies by state and ranges from $50 to $1,000. The permitted fees and/or interest on a payday cash advance also varies by state and ranges from 10% to 22% of the amount of the payday cash advance.

        Additional fees that we may collect include fees for returned checks and late fees. The returned check fee varies by state and ranges up to $30. The lending bank or we, as the case may be, charge the customers this fee if the check is deposited and is returned due to non-sufficient funds ("NSF") in the customers' accounts or other reasons. In three states, we are permitted to charge a late fee on the payday cash advance, the amount of which varies by state. In Texas, where we provide credit services as a Credit Services Organization ("CSO"), the third-party lender charges a late fee on its loan in accordance with state law. In two other states, a late fee is charged by the lending bank on the installment loan, the amount of which is determined by the lending bank. For the years ended December 31, 2005 and 2004, total NSF fees collected by us, the third-party lender in Texas and the lending banks were approximately $2.8 million and $2.4 million, respectively, and total late fees collected by us, the third-party lender in Texas and the lending banks were approximately $254,000 and $75,000, respectively.

        We provide payday cash advance services and small-denomination, short-term unsecured consumer credit because we believe that many consumers have limited access to alternative sources of liquidity. To obtain a payday cash advance, a new customer first completes an application that includes personal information such as his or her name, address, phone number, employment information or source of income, and references. This information is entered into our information system. The new customer then presents the required documentation, usually proof of identification, a pay stub or other evidence of income, and a bank statement, to our center employee. In order for a new customer to be approved for a payday cash advance, he or she is required to have a bank account and a regular source of income, such as a job.

        Under the standard business model, we determine whether to approve a payday cash advance to our customers. Using this model, we do not undertake any evaluation of the creditworthiness of our customers in determining whether to approve customers for payday cash advances, other than requiring proof of identification, bank account and income source, as described above. However, we consider the customer's income in determining the amount of the payday cash advance. Under the agency business model, the lending banks use third-party credit scores to evaluate and approve each customer's application. We currently act as a CSO in our centers in Texas. As a CSO, we offer a fee-based credit services package to assist customers in trying to improve their credit and in obtaining an extension of consumer credit through a third-party lender, who determines whether to approve the loan and establishes all of the loan underwriting criteria and terms, conditions and features of the loan agreement with the customer.

        After the documents presented by the customer have been reviewed for completeness and accuracy and copied for record-keeping purposes and the payday cash advance has been approved, the customer enters into an agreement governing the terms of the payday cash advance. The customer then writes a

8

personal check to cover the amount of the payday cash advance plus charges for applicable fees and/or interest, and makes an appointment to return on a specified due date, typically his or her next payday, to repay the advance plus the applicable charges. At the specified due date, the customer is required to pay off the payday cash advance in full, which is usually accomplished by the customer returning to the center with cash.

        In our CSO centers, we also assist the customer by agreeing to reimburse the lender for the full amount of the loan and all related fees that are not collected from the customers. If the customer has chosen the consumer-reporting option, we report the repayment information from the lender to Payment Reporting Builds Credit, Inc. ("PRBC"), a consumer credit reporting agency. Reporting to PRBC may assist the customer in improving his or her credit if the customer repays the loan in accordance with its terms and if that positive repayment is viewed favorably by users of the PRBC report. In addition, we provide access to free financial tools, services and information to help customers with their personal finances, budgets and credit ratings.

        Upon a repayment in full, we are obligated to return the customer's personal check to the customer. If the customer does not repay the outstanding payday cash advance in full on or before the due date, we will seek to collect from the customer the amount of the advance or loan and any applicable fees, including late and NSF fees due, and may deposit the customer's personal check.

Collection Procedures

        As part of the closing process for each payday cash advance or loan, we typically establish the expectation with the customer that they will return by scheduling an appointment for them to return to our center to repay their payday cash advance or loan on its due date. The day before the due date, we generally call the customer to confirm their appointment.

        If the customer does not return to repay the amount due, the center manager has the discretion to either (1) commence past-due collection efforts, which typically may proceed for up to 14 days in most states, or (2) deposit the customer's personal check. If the center manager has decided to commence past-due collection efforts in place of depositing the customer's personal check, center employees typically contact the customer by telephone or in person to obtain a payment or a promise to pay, and attempt to exchange the customer's check for a cashier's check if funds are available.

        If at the end of this past-due collection period, the center has been unable to collect the amount due, the customer's check is then deposited. Additional collection efforts are not required if the customer's deposited check clears. If the customer's check does not clear and is returned because of non-sufficient funds in the customer's account or because of a closed account or a stop-payment order, additional collection efforts begin. These additional collection efforts are carried out by the center employees and typically include contacting the customer by telephone or in person to obtain payment or a promise to pay, sending a series of collection letters to the customer, and attempting to exchange the customer's check for a cashier's check if funds become available.

9

Center Operations

Centers

        With 2,604 centers as of December 31, 2005, we operate the largest network of payday cash advance centers in the United States. The following table illustrates the growth of our center network since December 31, 2003:

(1)

We operated under the agency business model in Arkansas and North Carolina since April 14, 2001 and September 12, 2001, respectively. Prior to these dates, we operated in Arkansas and North Carolina under the standard business model. We have only operated in Georgia and Pennsylvania under the agency business model. We operated in Texas under the agency business model until July 2005, when we

10

began operating as a CSO. We have operated in Michigan under the standard business model since June 27, 2005. Prior to this date, we operated in Michigan under the agency business model.

(2)

The lending banks for which we market, process and service payday cash advances and installment loans in Arkansas and Pennsylvania will discontinue offering advances and loans.

(3)

In May 2004, a Georgia law went into effect that essentially prohibits payday cash advance services in the state and effectively restricts our ability to act as marketing, processing and servicing agent for a lending bank in the state. As a result, we suspended operations and subsequently closed our 89 centers in Georgia.

(4)

As of December 22, 2005, we ceased operations as marketing, processing and servicing agent for a lending bank in North Carolina.

Internal Compliance Audit

        We have a staff of internal regulatory auditors based throughout the United States whose function is to monitor compliance by our centers with applicable federal and state laws and regulations, the CFSA's Best Practices and our company policies and procedures. The auditors conduct periodic unannounced audits of our centers. They typically spend one to two days in each center, although the time may vary if a more extensive investigation is needed. The auditors typically review customer files, reports, held checks, cash controls and compliance with state specific legal requirements and disclosures. Upon completion of an audit, the auditor will conduct an exit interview with the center personnel and/or the divisional director and discuss issues found during the review. As part of the internal audit program, reports for management regarding audit results are prepared to help to identify compliance issues that need to be addressed and areas for further training.

Relationship with the Lending Banks

        Under marketing, processing and servicing agreements ("MP&S Agreements") with the lending banks under the agency business model, we have been compensated by the lending banks for marketing, processing and servicing the payday cash advances and installment loans the lending banks make to their customers. Approximately 15.9%, 24.4% and 26.0% of our total revenues in the years ended December 31, 2005, 2004 and 2003, respectively, were derived from marketing, processing and servicing fees paid to us by these lending banks. As of December 31, 2004, the lending banks were offering their payday cash advances in 540 of our centers in Arkansas, Michigan, North Carolina, Pennsylvania and Texas. However, as of December 31, 2005, the lending banks were offering their payday cash advances and installment loans in only 131 of our centers in Arkansas and Pennsylvania. In response to revised guidance issued by the FDIC in March 2005 (the "Revised Guidance"), we began instead to offer check-cashing and deferred-presentment services in our centers in Michigan in June 2005 and CSO services in our centers in Texas in July 2005. Additionally, the lending bank in North Carolina ceased operations in December 2005. In response to a more recent communication from the FDIC, the lending bank for which we market, process and service payday cash advances and installment loans in Pennsylvania will cease originating payday cash advances and installment loans in March 2006 and the lending bank for which we market, process and service payday cash advances and installment loans in Arkansas will cease originating installment loans and payday cash advances in April 2006 and June 2006, respectively.

        Although we have marketed, processed and serviced payday cash advances offered, made and funded by the lending banks under the agency business model, each lending bank is responsible for evaluating each of its customers' applications and determining whether the payday cash advance or installment loan was approved. The lending banks for whom we have acted as agent utilize an automated third-party credit scoring system to evaluate and approve each customer application. We are not involved in the lending banks' payday cash advance and installment loan approval process, are not involved in determining the approval procedures or criteria of the lending banks and generally do not

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fund or acquire any payday cash advances or installment loans from the lending banks. The payday cash advances and installment loans are repayable solely to the lending banks and are assets of the lending banks. Consequently, the lending banks' payday cash advances and installment loans are not included in our payday cash advance and installment loan portfolio nor are they reflected on our balance sheet within our advances and fees receivable, net. Historically, the lending banks have been contractually obligated for a portion of the payday cash advance and installment loan losses. Those obligations, denominated as a percent of fees and interest charged to the customers, have typically ranged between 8% and 20%. Under our current MP&S Agreement with the lending bank in Pennsylvania, the lending bank continues to be contractually obligated for losses up to 8.5% of fees and interest. Subsequent to July 2005, under our MP&S Agreements with the lending bank in Arkansas and North Carolina, the lending bank has been contractually obligated for all losses. In aggregate, this percentage was 11.5%, 13.2% and 10.1% for the years ended December 31, 2005, 2004, and 2003, respectively. If the amount of uncollected payday cash advances and installment loans exceed the lending bank's contractual obligation, we could be obligated to pay the lending bank the outstanding amount of the advances plus its fees and/or interest receivable on the advances, less its contractually obligated portion of the losses. As of December 31, 2005, our contingent liability to the lending bank in Pennsylvania amounted to $17.0 million, which was not included on our balance sheet. We also could be obligated to pay this amount to the lending bank if, as a result of a change in law, regulation or otherwise, the lending bank's payday cash advances and installment loans were to become uncollectible.

Competition

        We believe that the principal competitive factors in the payday cash advance services industry are location, customer service, convenience, speed and confidentiality. We face intense competition in an industry with low barriers to entry, and we believe that the payday cash advance market is becoming more competitive as the payday cash advance services industry matures and consolidates. We also compete with services offered by traditional financial institutions, such as overdraft protection, and with other payday cash advance providers, small loan providers, credit unions, short-term consumer lenders and other financial services entities and retail businesses that offer consumer loans or other products and services that are similar to ours. Businesses offering payday cash advances and short-term loans over the internet as well as by phone have begun to compete with us in the business of making payday cash advances.

        The payday cash advance services industry is highly fragmented. In March 2006, Stephens, Inc. estimated that there were approximately 23,000 outlets (including our own centers) in the United States. Our network of 2,604 centers as of December 31, 2005 represents the largest network of such centers in the United States. We believe that our two largest single service payday cash advance company competitors, Check 'n Go and Check into Cash, have over 1,300 and 1,200 payday cash advance centers, respectively. Another competitor is QC Holdings, Inc., which we believe has over 500 locations in the United States. The remaining competitors are local chains and single-unit operators.

        To a lesser extent, we compete with other companies that offer payday cash advances as an ancillary financial product to complement their primary business of cashing checks, selling money orders, providing money transfer services or offering similar financial services. These competitors include Dollar Financial Corp. and ACE Cash Express, Inc.

        Our centers also have been facing increased competition from banks that offer their account holders payday cash advances as well as other products such as overdraft privileges and bounced check protection, which are similar in effect to our payday cash advance services.

        Because of the relatively low cost of entry and the regulatory safe harbor that many state statutes provide for payday cash advances, the payday cash advance services industry has experienced significant growth in the number of centers.

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Marketing and Advertising

        We design our marketing efforts to increase our revenues by (1) introducing new customers to our services and (2) creating customer loyalty. We believe that our mass media advertising campaigns (primarily through television, direct mail and the yellow pages) increase demand for our payday cash advance services. Our advertising expenditures occur primarily during key seasonal periods, such as the back-to-school and holiday seasons in the third and fourth quarters of each year, when consumers are most likely to have short-term liquidity needs.

        We utilize marketing promotions at our centers with, we believe, high-impact, consumer relevant, point-of-purchase materials. In addition, we provide our centers with promotional materials such as brochures, pens, key chains and coupons for use in local marketing. Local marketing also includes attendance at, and sponsorship of, community events such as blood drives, food drives, voter registration programs and other charitable events.

        Drawing on statistical data from our transaction database, we use direct marketing strategies to advertise to prospective customers who have demographic characteristics similar to the customers we serve.

Information Systems

        We employ a proprietary point-of-sale system that is used to record transactions in our centers. The point-of-sale system is also used at our headquarters to develop information for management. We also employ a third-party cash reconciliation software system to reconcile bank accounts and monitor cash receipts and disbursements.

        The point-of-sale system is designed to facilitate customer service and speed the dissemination of information for cash flow purposes. This system records and monitors the details of every transaction, reduces the risk of transaction errors, and provides automated, integrated transactions that are designed to ensure standardization and compliance with applicable state and federal regulations.

        Transaction data gathered by our point-of-sale system is integrated into our management information system, general ledger and cash reconciliation software. Our point-of-sale system and cash reconciliation software systems allow us to:

•

monitor daily revenue, deposits and disbursements on a company, state and center basis;



•

monitor and manage daily exception reports, which record cash shortages, late deposits, unusual disbursements and other items;



•

determine, on a daily basis, the amount of cash needed at each center, enabling centralized treasury personnel to maintain an optimum amount of cash in each location; and



•

facilitate compliance with regulatory requirements and company policies and procedures.

        We maintain and test a disaster recovery plan for our critical networked systems, the documentation for which is hosted on a third-party vendor website. Our back-up data tapes are housed by a third party at an off-site location. We also own backup computer equipment and real-time data storage that is housed at an off-site facility to provide us with access to needed systems in the event of an emergency that disables our headquarters' equipment.

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Security

        Security and loss prevention play a critical role in the daily operations of our centers. Each center is provided with 24-hour third-party monitoring. Physical security provided to each center includes: digital safes, wired hold-up alarm buttons and secure locking systems. Additionally, most of our centers are equipped with 24-hour security cameras.

        Because our business requires us to maintain a significant supply of cash in each of our centers, we are subject to the risk of cash shortages resulting from employee and third-party theft and errors. Cash shortages from employee and third-party theft and errors were approximately $1.6 million (0.25% of total revenues) in 2005, $1.2 million (0.21% of total revenues) in 2004 and $1.7 million (0.35% of total revenues) in 2003.

Human Resources

        Our center operations are divided into zones, regions and divisions, which we believe allows for a more effective management process. A zone has approximately 450 to 600 centers and may include centers in more than one state. As of December 31, 2005, we had five zones, each with a zone director who is responsible for the operations, administration, staffing and general supervision of the centers in his or her zone. Regions typically include 50 to 150 centers organized into five to 10 divisions and are supervised by regional directors who report to a zone director. Divisions typically include 7 to 18 centers and are supervised by divisional directors who report to a regional director. Determination of region and division alignment is usually based upon geographic considerations. Regions and divisions generally do not cross state lines. As of December 31, 2005, our five zones included 29 regions and 206 divisions.

        A typical center is staffed with a manager and an assistant manager. Managers are responsible for the daily operations of the center. As volume increases, additional personnel, called customer service representatives, are added. Our policy is to add a customer service representative once a center has approximately 350 payday cash advances outstanding at one time. Thereafter, one additional customer service representative is added for every 100 to 150 additional payday cash advances at a particular center.

Employees

        As of February 28, 2006, we had approximately 6,500 employees, including approximately 6,000 center employees, 211 divisional directors, 27 regional directors, five zone directors and approximately 250 corporate employees and support personnel.

        We consider our employee relations to be satisfactory. Our employees are not covered by a collective-bargaining agreement and we have never experienced any organized work stoppage, strike or labor dispute.

Intellectual Property and other Proprietary Rights

        We use a number of trademarks, logos and slogans in our business. AARC, Inc., one of our subsidiaries, owns all of our intellectual property and has entered into a trademark license agreement with each of our operating subsidiaries to use this intellectual property. Unauthorized use of our intellectual property by third parties may damage our brand and our reputation and could result in a loss of customers. It may be possible for third parties to obtain and use our intellectual property without our authorization. Third parties have in the past infringed or misappropriated our intellectual property or similar proprietary rights. For example, competitors of ours have used our name and other trademarks of ours on their websites to advertise their financial services. We believe infringements and misappropriations will continue to occur in the future.

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Other

        Advance America, Cash Advance Centers, Inc. is a Delaware corporation that was incorporated on August 11, 1997. Our principal executive offices are located at 135 North Church Street, Spartanburg, South Carolina 29306. Our telephone number at that location is (864) 342-5600. We maintain an internet website at www.advanceamericacash.com. We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the "SEC"). Information on our website is not incorporated by reference into this Annual Report. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding us at www.sec.gov. In addition, any materials we file with the SEC may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Government Regulation

        Payday cash advances are subject to extensive state and federal regulation. The regulation of payday cash advance companies is intended primarily for the protection of consumers rather than investors in our common stock and our creditors and is constantly changing as new regulations are introduced at the federal, state and local level and existing regulations are repealed, amended and modified. This evolving regulatory landscape creates various uncertainties and risks for the operation of our business, any of which could have a material adverse effect on our business, results of operations or financial condition. See "Item 1A. Risk Factors" and "Item 3. Legal Proceedings."

State Regulation

        Our business is regulated under a variety of enabling state statutes, including payday advance, check cashing, small loan, and credit services organization state laws, all of which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As of December 31, 2005, 39 states and the District of Columbia had specific laws that permitted payday cash advances or allowed a form of payday cash advances under small loan laws. As of December 31, 2005, we operated in 35 of these 39 states. In one of these 35 states, we operated under the agency business model, serving as marketing, processing and servicing agent through our centers for a lending bank. We do not currently conduct business in the remaining four states or in the District of Columbia because we do not believe it is economically attractive to operate in these jurisdictions due to specific legislative restrictions such as interest rate ceilings, an unattractive population density or unattractive location characteristics. The remaining 11 states do not have laws specifically authorizing the payday cash advance business. Despite the lack of specific payday advance laws, other laws may permit us to do business in these states. As of December 31, 2005, we operated in one of these 11 states under the agency business model, serving as marketing, processing and servicing agent through our centers for a lending bank.

        The scope of state regulation, including the terms on which payday cash advances may be made, varies from state to state. Most states that regulate payday cash advances establish allowable fees and/or interest and other charges to consumers for payday cash advances. In addition, many states regulate the maximum amount, maturity and renewal or extension of payday cash advances. The terms of payday cash advances vary from state to state in order to comply with the laws and regulations of the states in which we operate.

        The states with specific payday cash advance laws typically limit the principal amount of a payday cash advance and set maximum fees and interest rates that customers may be charged. Some states also

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limit a customer's ability to renew a payday cash advance and require various disclosures to consumers. State statutes often specify minimum and maximum maturity dates for payday cash advances and, in some cases, specify mandatory cooling-off periods between transactions. Our collection activities regarding past-due amounts are subject to consumer protection laws and state regulations relating to debt collection practices. In addition, some states restrict payday cash advance advertising content.

        During the last few years, legislation has been adopted in some states that prohibits or severely restricts payday cash advance services. In May 2004, a new law became effective in Georgia that effectively prohibits payday cash advance services in the state and effectively restricted our ability to act as marketing, processing and servicing agent for a lending bank in the state. See "Item 3. Legal Proceedings." As a result, we closed our 89 centers in Georgia. Many bills have also been introduced in state legislatures. In 2005, bills that severely restrict or effectively prohibit payday cash advance services were introduced in 26 states. In addition, two states have sunset provisions in their payday cash advance laws that require renewal of the laws by the state legislatures at periodic intervals. Future laws prohibiting payday cash advance services or making them unprofitable could be passed in any other state at any time or existing payday cash advance laws could expire or be amended.

        Statutes authorizing payday cash advance services typically provide state agencies that regulate banks and financial institutions with significant regulatory powers to administer and enforce the law. In most states, we are required to apply for a license, file periodic written reports regarding business operations and undergo comprehensive state examinations to ensure that we comply with applicable laws. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways or issue new administrative rules, even if not contained in state statutes, that impact the way we do business and may force us to terminate or modify our operations in particular states. They may also impose rules that are generally adverse to our industry.

        In some cases, we may also rely on the interpretations of the staff of state regulatory bodies with respect to the laws and regulations of their respective jurisdictions. These staff interpretations generally are not binding legal authority and may be subject to challenge in administrative or judicial proceedings. Additionally, as the staff of state regulatory bodies change, it is possible that their interpretations of applicable laws and regulations may also change and negatively affect our business.

        State attorneys general and banking regulators have begun to scrutinize the payday cash advance services industry and may take actions against the industry that could require us to cease or suspend operations in their respective states. On December 22, 2005, the North Carolina Commissioner of Banks issued an order directing our North Carolina subsidiary to cease operation of our centers in the state. As a result, our North Carolina subsidiary ceased all business activities in North Carolina and we closed our 117 centers. The New Mexico attorney general proposed regulations in September 2005 that would effectively prohibit payday cash advances in the state. If the regulations as written withstand legal challenge by the industry and are implemented, our New Mexico subsidiary may be forced to cease all business activities in the state. It is possible that other actions taken against the industry in the future by other state attorneys general could require us to suspend or cease operations in such jurisdictions and have a negative effect on our financial condition.

        State-specific legislative or regulatory action can reduce our revenues and/or margins in a state, cause us to temporarily operate at a loss in a state, or even cause us to cease or suspend our operations in a state. From time to time, we may also choose to operate in a state even if legislation or regulations cause us to lose money on our operations in that state. The passage of a 2002 Indiana statute established a prohibitive rate structure for making payday cash advances in the state. Beginning on May 1, 2002, we provided payday cash advances in that state while experiencing a consistent loss in revenue until a new, less restrictive, law was passed in March 2004.

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Federal Regulation

        Our payday cash advance services are subject to a variety of federal laws and regulations, such as the Truth-in-Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act ("FDCPA"), the Gramm-Leach-Bliley Act ("GLBA") and the regulations promulgated for each. Among other things, these laws require disclosure of the principal terms of each transaction to every customer, prohibit misleading advertising, protect against discriminatory lending practices and proscribe unfair credit practices. TILA and Regulation Z, adopted under TILA, require disclosure of, among other things, the pertinent elements of consumer credit transactions, including the dollar amount of the finance charge and the charge expressed in terms of an annual percentage rate ("APR").

        Our marketing efforts and the representations we make about our payday cash advance services also are subject to federal and state unfair and deceptive practices statutes. The Federal Trade Commission ("FTC") enforces the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce the analogous state statutes. In December 2002, the FTC requested that certain payday cash advance providers, including us, respond to a series of questions and document requests concerning their operations.

        Additionally, since 1999, various anti-payday cash advance legislation has been introduced in the U.S. Congress, with recent legislation specifically targeting the agency relationships between banks and payday cash advance companies. Congressional members continue to receive pressure from consumer advocates and other industry opposition groups to adopt such legislation.

        The lending banks for which we have acted as marketing, processing and servicing agent are subject to extensive federal and state banking regulations. As state-chartered banks, the lending banks are subject to supervision by the FDIC. Additionally, the lending banks are subject to regular examination by other state and federal regulatory authorities.

        In July 2003 and March 2005, the FDIC issued guidance governing permissible agency arrangements between state-chartered banks and marketing, processing and servicing agents for the banks' payday cash advances, such as us. In July 2005, the lending banks implemented new procedures and limits in response to the FDIC guidance and began offering installment loans as an alternative credit product. In February 2006, we became aware that the FDIC is further investigating the offering of payday cash advances and alternative credit products by agency banks and has instructed certain lending banks, including the lending banks for whom we act as a marketing, processing and servicing agent, to discontinue offering payday cash advances and alternative credit products if they cannot adequately address the FDIC's continuing concerns regarding those products. In response to the FDIC's latest actions, BankWest, Inc. ("BankWest"), the lending bank for whom we act as a marketing, processing and servicing agent in Pennsylvania, has decided to discontinue offering payday cash advances and installment loans as of the close of business on March 27, 2006, and First Fidelity Bank ("Fidelity"), for whom we act as a marketing, processing and servicing agent in Arkansas, has decided to discontinue offering installment loans on April 8, 2006 and payday cash advances on June 24, 2006. We will continue servicing any payday cash advances and installment loans in Arkansas and Pennsylvania that are outstanding at the time the respective lending banks cease originations. We are studying alternative methods for conducting business in Arkansas and Pennsylvania. We are currently not able to estimate what operational changes would be required or the impact of those changes. See "Item 1A. Risk Factors" and "Note 17. Subsequent Events" contained in "Item 8. Financial Statements and Supplementary Data."

Local Regulation

        In addition to state and federal laws and regulations, our business is subject to various local rules and regulations such as local zoning regulations. These local rules and regulations are subject to change

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and vary widely from state to state and city to city. In October 2005, for example, the Jacksonville, Florida, City Council passed an ordinance attempting to regulate payday cash advances in the city, which, if enforced, will substantially impair our ability to transact business in that area. As a result, we filed an action against Jacksonville for declaratory and injunctive relief. This action is still pending. See "Item 3. Legal Proceedings."

Environmental, Health and Safety Matters

        We are subject to general provisions of federal laws and regulations to ensure a safe and healthful work environment for employees. In addition, we comply with those state laws that require a written health and safety program or other mandated safety requirements. To reduce the possibility of physical injury or property damage resulting from robberies, our Loss Prevention department has established operational procedures, conducts periodic safety training and awareness programs for employees, hires security guards as needed and regularly monitors the marketplace for new technology or methods of improving workplace safety.

        Other than standard cleaning products, we do not use chemicals or other agents governed by federal, state or local environmental laws in conducting business operations. Based upon these measures, we believe that our centers are in substantial compliance with all applicable environmental, health and safety requirements.

ITEM 1A.    RISK FACTORS.

Risks Related to Our Business and Industry

The closure of our centers in North Carolina and the lending banks ceasing to originate payday cash advances and installment loans in Pennsylvania and Arkansas will adversely affect our business, results of operations and financial condition.

        The closure of our centers in North Carolina in December 2005, the planned cessation of originations by BankWest, the lending bank for whom we act as a marketing, processing and servicing agent in Pennsylvania, effective as of the close of business on March 27, 2006, and the planned cessation of installment loan and payday cash advance originations by Fidelity, the lending bank for whom we act as a marketing, processing and servicing agent in Arkansas, in April 2006 and June 2006, respectively, will result in a significant loss of revenue. Those three states collectively accounted for $72.5 million and $59.0 million in net revenues during 2004 and 2005, respectively. We estimate that our net revenues will be reduced by approximately $2.3 million for each month that we are not able to operate under the agency business model in Pennsylvania and $0.5 million for each month that we are not able to operate under the agency business model in Arkansas. Furthermore, center expenses average approximately $1.3 million per month in Pennsylvania and $0.4 million per month in Arkansas. These expenses will continue to be incurred while we service payday cash advances and installments loans that are outstanding when the lending banks stop originating additional advances and loans. We estimate that severance, lease cancellation, write-down of the undepreciated costs of fixed assets and the cost to vacate the premises will approximate $2.9 million if it becomes necessary to shut down operations in Pennsylvania and $0.7 million if it becomes necessary to shut down operations in Arkansas. In 2005, we incurred approximately $2.7 million in expenses related to closing our North Carolina centers. The amount of impairment of goodwill, if any, cannot be determined at this time.

        At this time it is unclear what options may be available to us to meet customer demand for small-denomination, short-term loans in these states. Defending the legality of the agency business model, finding new lending bank partners and pursuing alternative products and services may take significant time, management attention and financial resources. Further, we may not be successful in any of these efforts.

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Our agency relationships with the lending banks are highly regulated and subject to the oversight of the FDIC and any changes in laws and regulations governing these relationships or the position of the FDIC could have a material adverse effect on our business, results of operations and financial condition.

        The lending banks for which we have acted as marketing, processing and servicing agent are subject to extensive federal and state banking regulations. Additionally, as state-chartered banks, the lending banks are subject to supervision by the FDIC as well as regular examination by other state and federal regulatory authorities.

        In July 2003 and March 2005, the FDIC issued guidance governing permissible agency arrangements between state-chartered banks and marketing, processing and servicing agents for the banks' payday cash advances, such as us. In July 2005, the lending banks for whom we act as a marketing, processing and servicing agent implemented new policies, limits and procedures and began offering installment loans as an alternative credit product in response to the FDIC guidance. In February 2006, we became aware that the FDIC is further investigating the offering of payday cash advances and installment loans by agency banks and has instructed certain lending banks to discontinue offering payday cash advances and alternative credit products if they cannot adequately address the FDIC's continuing concerns regarding those products. Despite the decision of the lending banks to stop originating payday cash advances and installment loans in response to the FDIC's instructions, it is possible that the FDIC or other regulators could take further action against the lending banks and us. Any such further action could have a material adverse effect on our business, results of operations and financial condition.

Our failure to efficiently and profitably introduce or manage a check-cashing, credit services business or other alternative methods for conducting business could have a material adverse effect on our business, results of operations and financial condition.

        In June 2005, we began offering check-cashing and deferred-presentment services directly to customers in Michigan and in July 2005 we began offering credit services as a CSO to customers in Texas. In addition, in response to the FDIC's most recent instruction to certain banks to discontinue offering new payday cash advances and alternative credit products, we are studying alternative methods for conducting business in Arkansas and Pennsylvania. Each of these changes and alternative methods of conducting business are subject to risk and uncertainty and require significant investment in time and capital. Due to our lack of experience in offering these alternative services, we cannot assure you that we will be able to successfully implement any of these changes. We also cannot assure you that we will be able to identify or implement any alternative methods of conducting business in Arkansas or Pennsylvania. Furthermore, we cannot anticipate the demand for any of these new services, nor do we know if we will be able to offer these new services in an efficient manner or on a profitable or as profitable basis. Our failure to do so, or low customer demand for any of these new services, could have a material adverse effect on our business, results of operations and financial condition.

The payday cash advance services industry is highly regulated under state law. Changes in state laws and regulations could have a material adverse effect on our business, results of operations and financial condition.

        Our business is regulated under a variety of enabling state statutes, including payday advance, check-cashing, small loan, and credit services organization state laws, all of which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As of December 31, 2005, 39 states and the District of Columbia had specific laws that permitted payday cash advances or allowed a form of payday cash advances under small loan laws. As of December 31, 2005, we operated in 35 of these 39 states. In one of these 35 states, we operated under the agency business model, serving as marketing, processing and servicing agent through our centers for a lending bank. We do not currently conduct business in the remaining four states or in the District of

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Columbia because we do not believe it is economically attractive to operate in these jurisdictions due to specific legislative restrictions such as interest rate ceilings, an unattractive population density or unattractive location characteristics. The remaining 11 states do not have laws specifically authorizing the payday cash advance business. Despite the lack of specific payday advance laws, other laws may permit us to do business in these states. As of December 31, 2005, we operated in one of these 11 states under the agency business model, serving as marketing, processing and servicing agent through our centers for a lending bank.

        During the last few years, legislation has been adopted in some states that prohibits or severely restricts payday cash advance services. In May 2004, a new law became effective in Georgia that essentially prohibits payday cash advance services in the state and restricted our ability to act as marketing, processing and servicing agent for a lending bank in the state. See "Item 3. Legal Proceedings." As a result, we closed our 89 centers in Georgia. Many bills have also been introduced in state legislatures. In 2005, bills that severely restrict or effectively prohibit payday cash advance services were introduced in 26 states. In addition, two states have sunset provisions in their payday cash advance laws that require renewal of the laws by the state legislatures at periodic intervals. Future laws prohibiting payday cash advance services or making them unprofitable could be passed in any other state at any time or existing payday cash advance laws could expire or be amended, any of which would have a material adverse effect on our business, results of operations and financial condition.

        Statutes authorizing payday cash advance services typically provide state agencies that regulate banks and financial institutions with significant regulatory powers to administer and enforce the law. In most states, we are required to apply for a license, file periodic written reports regarding business operations and undergo comprehensive state examinations to ensure that we comply with applicable laws. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways or issue new administrative rules, even if not contained in state statutes, that impact the way we do business and may force us to terminate or modify our operations in particular states. They may also impose rules that are generally adverse to our industry. Any new licensing requirements or rules could have a material adverse effect on our business, results of operations and financial condition.

        In some cases, we rely on the interpretations of the staff of state regulatory bodies with respect to the laws and regulations of their respective jurisdictions. These staff interpretations generally are not binding legal authority and may be subject to challenge in administrative or judicial proceedings. Additionally, as the staff of state regulatory bodies change, it is possible that their interpretations of applicable laws and regulations also may change and negatively affect our business. As a result, our reliance on staff interpretations could have a material adverse effect on our business, results of operations and financial condition.

        Additionally, state attorneys general and banking regulators have begun to scrutinize payday cash advance services and take actions that could require us to modify, suspend or cease operations in their respective states. See "Item 3. Legal Proceedings."

The payday cash advance services industry is also regulated under federal law and subject to federal and state unfair and deceptive practices statutes. Our failure to comply with such regulations or changes in federal laws and regulations could have a material adverse effect on our business, results of operations and financial condition.

        Although states provide the primary regulatory framework under which we offer payday cash advance services, certain federal laws also impact our business. See "Item 1. Business-Federal Regulation." Because payday cash advances are viewed as extensions of credit, we must comply with the federal Truth-in-Lending Act and Regulation Z adopted under that Act. Additionally, we are subject to the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair Credit

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Reporting Act and the Gramm-Leach-Bliley Act. Any failure to comply with any of these federal laws and regulations could have a material adverse effect on our business, results of operations and financial condition.

        Additionally, since 1999, various anti-payday cash advance legislation has been introduced in the U.S. Congress. Congressional members continue to receive pressure from consumer advocates and other industry opposition groups to adopt such legislation. Any federal legislative or regulatory action that restricts or prohibits payday cash advance services could have a material adverse impact on our business, results of operations and financial condition.

        Our marketing efforts and the representations we make about our payday cash advance services also are subject to federal and state unfair and deceptive practices statutes. The Federal Trade Commission ("FTC") enforces the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce the analogous state statutes. If we are found to have violated any of these statutes, that violation could have a material adverse effect on our business, results of operations and financial condition.

The payday cash advance services industry is subject to various local rules and regulations. Changes in these local regulations could have a material adverse effect on our business, results of operations and financial condition.

        In addition to state and federal laws and regulations, our business can be subject to various local rules and regulations such as local zoning regulations. Any actions taken in the future by local zoning boards or other local governing bodies to require special use permits for, or impose other restrictions on, payday cash advance service providers could have a material adverse effect on our business, results of operations and financial condition.

Current and future litigation and regulatory proceedings against us could have a material adverse effect on our business, results of operations and financial condition.

        Our business is subject to lawsuits and regulatory proceedings that could generate adverse publicity and cause us to incur substantial expenditures. See "Item 3. Legal Proceedings." Adverse rulings in some of these lawsuits or regulatory proceedings could significantly impair our business or force us to cease doing business in one or more states.

        We are likely to be subject to further litigation and proceedings in the future. The consequences of an adverse ruling in any current or future litigation or proceeding could cause us to have to refund fees and/or interest collected on payday cash advances, refund the principal amount of payday cash advances, pay treble or other multiple damages, pay monetary penalties and/or modify or terminate our operations in particular states. We may also be subject to adverse publicity. Defense of any lawsuits or proceedings, even if successful, would require substantial time and attention of our senior officers and other management personnel that would otherwise be spent on other aspects of our business and would require the expenditure of significant amounts for legal fees and other related costs. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

Legislative or regulatory action or an adverse result in litigation or regulatory proceedings could cause us to cease, suspend or modify our operations in a state, potentially resulting in a material adverse effect on our business, results of operations and financial condition.

        If we close our centers in a state, in addition to the loss of net revenues attributable to that closing, we would incur closing costs such as severance payments and lease cancellation payments and we would have to write off assets that we could no longer use. If we were to suspend rather than

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permanently cease our operations in a state, we may also have continuing costs associated with maintaining our centers and our employees in that state, with little or no revenues.

        From time to time, we may also choose to operate in a state even if legislation or regulations cause us to lose money on our operations in that state. The passage of a 2002 Indiana statute established a rate structure at which we could not operate on a profitable basis. However, we continued to provide payday cash advances in the state while experiencing operating losses until a new, less restrictive, law was passed in March 2004. Any of these actions or events could have a material adverse effect on our business, results of operations and financial condition.

We lack product and business diversification; as a result, our future revenues and earnings may be disproportionately negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies.

        Our primary business activity is offering payday cash advance services. If we are unable to maintain and grow our payday cash advance services business, our future revenues and earnings could decline. Our lack of product and business diversification could inhibit our opportunities for growth, reduce our revenues and profits and make us more susceptible to earnings fluctuations than many of our competitors who are more diversified and provide other services such as pawn lending, title lending or other similar services. External factors, such as changes in laws and regulations, new entrants and enhanced competition, could also make it more difficult for us to operate as profitably as a more diversified company could operate. Any internal or external change in the payday cash advance services industry could result in a decline in our future revenues and earnings, which could have a material adverse effect on our stock price.

Competition in the retail financial services industry could cause us to lose market share or reduce our interest and fees, possibly resulting in a decline in our future revenues and earnings.

        The industry in which we operate has low barriers to entry and is highly fragmented and very competitive. We believe that the market may become even more competitive as the industry grows and/or consolidates. We compete with services provided by traditional financial institutions, such as overdraft protection, and with other payday cash advance providers, small loan providers, credit unions, short-term consumer lenders, other financial service entities and other retail businesses that offer consumer loans or other products and services that are similar to ours. We also compete with companies offering payday cash advances and short-term loans over the internet as well as by phone. Some of these competitors have larger local or regional customer bases, more locations and substantially greater financial, marketing and other resources than we have. As a result of this increasing competition, we could lose market share or we may need to reduce our interest and fees, possibly resulting in a decline in our future revenues and earnings.

The concentration of our revenues in certain states could adversely affect us.

        Our centers operated in 37 states (prior to the closure of our centers in North Carolina) during the year ended December 31, 2005, and our five largest states (measured by total revenues) accounted for approximately 41% of our total revenues, with California, our largest state (measured by total revenues), representing approximately 11% of our total revenues. While we believe we have a diverse geographic presence, for the near term we expect that significant revenues will continue to be generated by certain states, largely due to the currently prevailing economic, demographic, regulatory, competitive and other conditions in those states. Furthermore, our five largest states, as measured by revenues, are not in all instances our five largest states as measured by the number of centers operated. Changes to prevailing economic, demographic, regulatory or any other conditions in the markets in which we operate could lead to a reduction in demand for our payday cash advance services, a decline in our revenues or an increase in our provision for doubtful accounts and agency bank losses that could result in a deterioration of our financial condition.

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Media reports and public perception of payday cash advances as being predatory or abusive could materially adversely affect our business, results of operations and financial condition.

        Over the past few years, consumer advocacy groups and certain media reports have advocated with increasing frequency governmental and regulatory action to prohibit or severely restrict payday cash advances. The consumer groups and media reports typically focus on the cost to a consumer for a payday cash advance. The consumer groups and media reports typically characterize these payday cash advances as predatory or abusive toward consumers. If this negative characterization of payday cash advances becomes widely accepted by consumers, demand for payday cash advance services could significantly decrease, which could materially adversely affect our business, results of operations and financial condition. Negative perception of payday cash advances or other activities could also result in increased regulatory scrutiny and increased litigation, and encourage restrictive local zoning rules and make it more difficult to obtain government approvals necessary to open new centers. These trends could materially adversely affect our business, results of operations and financial condition.

The provision for doubtful accounts and agency bank losses may increase and net income may decrease if we are unable to collect customers' personal checks that are returned due to non-sufficient funds ("NSF") in the customers' accounts or other reasons.

        For the years ended December 31, 2005 and 2004, we deposited approximately 5.5% and 5.0%, respectively, of all the customer checks we received and approximately 79% and 78%, respectively, of these deposited customer checks were returned unpaid because of non-sufficient funds in the customers' bank accounts or because of closed accounts or stop-payment orders. Total charge-offs, net of recoveries, for the years ended December 31, 2005 and 2004 were approximately $100.5 million and $83.4 million, respectively. If the number of customer checks that we deposit increases or the percent of the customers' returned checks that we charge-off increases, our provision for doubtful accounts and agency bank losses will increase and our net income will decrease.

We are subject to credit risk as a result of our arrangements with lending banks. The lending banks' failure to honor their obligations to us could have a material adverse effect on our business, results of operations and financial condition.

        Under the agency business model, all charges of fees and/or interest paid by a lending bank's customers are deposited directly in the lending bank's bank account. We invoice the lending bank for the marketing, processing and servicing fees payable to us by such bank. In addition, the lending bank in Pennsylvania is responsible for making payments to us if actual payday cash advance and installment loan losses are less than the bank's contractually obligated portion of the losses. We are subject to the risk that the lending banks may fail to pay all or a portion of the amounts due to us or that they fail to pay us on a timely basis. Any such failure could have a material adverse effect on our business, results of operations and financial condition.

If our estimates of payday cash advance, installment loan or check-cashing, deferred-presentment or credit services losses are not adequate to absorb losses, our provision for doubtful accounts and agency bank losses would increase. This would result in a decline in our future revenues and earnings, which could have a material adverse effect on our stock price.

        We maintain an allowance for doubtful accounts for estimated losses for payday cash advances we make directly to consumers and check-cashing, deferred-presentment and other credit services we offer under the standard business model and an accrual for excess bank losses for our share of losses on payday cash advances and installment loans we market, process and service for lending banks under the agency business model. To estimate the appropriate allowance for doubtful accounts and accrual for excess bank losses, we consider the amount of outstanding payday cash advances owed to us, the amount of payday cash advances and installment loans owed to the lending banks and serviced by us,

23

the contract with each lending bank, historical payday cash advances or installment loans we have charged off, our current collection patterns and the current economic trends in the markets we serve.

        As of December 31, 2005, our allowance for doubtful accounts was $45.6 million and the accrual for excess bank losses that was reported in our current liabilities in our balance sheet was $1.4 million. These amounts, however, are estimates, and we have less experience upon which to base our estimates of losses from installment loans, check-cashing, deferred-presentment or credit services. If our actual payday cash advance, check-cashing, deferred-presentment or credit services losses are greater than our allowance for doubtful accounts, our provision for doubtful accounts and agency bank losses would increase. This would result in a decline in our future revenues and earnings, which could have a material adverse effect on our stock price.

        With respect to the payday cash advances and installment loans that we market, process and service for the lending bank in Pennsylvania, as of December 31, 2005, our aggregate contingent liability was $17.0 million, and this amount was not included on our balance sheet. We could be obligated to pay this amount to the lending bank if the lending bank's payday cash advances and installment loans were to become uncollectible.

Our ability to manage our growth may deteriorate, and our ability to execute our growth strategy may be adversely affected.

        We have experienced substantial growth in recent years. Our growth strategy, which is based on rapidly opening a large number of centers in existing and new markets, is subject to significant risks. We cannot assure you that we will be able to expand our market presence in our current markets or successfully enter new markets through the opening of new centers or acquisitions. Moreover, the start-up costs and the losses from initial operations attributable to each newly opened center place demands upon our liquidity and cash flow, and we cannot assure you that we will be able to satisfy these demands.

        In addition, our ability to execute our growth strategy will depend on a number of other factors, some of which may be beyond our control, including:

•

the prevailing laws and regulatory environment of each state in which we operate or seek to operate, which are subject to change at any time;



•

our ability to obtain and maintain any regulatory approvals, government permits or licenses that may be required;



•

our ability to manage a check-cashing and deferred-presentment business and credit service organization business and identify and implement alternative methods for doing business in Pennsylvania, Arkansas or any other state;



•

the degree of competition in new markets and its effect on our ability to attract new customers;



•

our ability to compete for expansion opportunities in suitable locations;



•

our ability to recruit, train and retain qualified personnel;



•

our ability to adapt our infrastructure and systems to accommodate our growth; and



•

our ability to obtain adequate financing for our expansion plans.

        We cannot assure you that our systems, procedures, controls and existing space will be adequate to support expansion of our operations. Our growth has placed significant demands on all aspects of our business, including our administrative, technical and financial personnel and systems. Additional expansion may further strain our management, financial and other resources. Our future results of operations will substantially depend on the ability of our officers and key employees to manage changing business conditions and to implement and improve our technical, administrative, financial

24

control and reporting systems. In addition, we cannot assure you that we will be able to implement our business strategy profitably in geographic areas we do not currently serve.

We may incur substantial additional debt, which could adversely affect our business, results of operations and financial condition by limiting our ability to obtain financing in the future and react to changes in our business.

        We may incur substantial additional debt in the future. As of December 31, 2005, our total debt was approximately $44.6 million and our stockholders' equity was approximately $303.0 million. Due to the seasonal nature of our business, our total debt is historically the lowest during the first calendar quarter and then increases during the remainder of the year. If we incur substantial additional debt, it could have important consequences to our business. For example, it could:

•

restrict our operational flexibility through restrictive covenants that will limit our ability to make acquisitions, explore certain business opportunities, dispose of assets and take other actions;



•

limit our flexibility in planning for, or reacting to, changes in our business;



•

limit our ability to borrow additional funds in the future, if we need them, due to applicable financial and restrictive covenants in our debt instruments;



•

make us vulnerable to interest rate increases, because a portion of our borrowings is, and will continue to be, at variable rates of interest;



•

require us to dedicate a substantial portion of our cash flow from operations to payments on our debt obligations, which will reduce our funds available for working capital, capital expenditures and our growth strategy; and



•

place us at a disadvantage compared to our competitors that have proportionately less debt.

        The terms of our debt limit our ability to incur additional debt but do not prohibit us from incurring additional debt. When debt levels increase, the related risks that we now face will also increase.

        If we fail to generate sufficient cash flow from future operations to meet our debt service obligations, we may need to seek refinancing of all or a portion of our indebtedness or obtain additional financing in order to meet our obligations with respect to our indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness or obtain additional financing on satisfactory terms or at all.

We depend on loans and cash management services from banks to operate our business. If banks decide to stop making loans and/or providing cash management services to companies in the payday cash advance services industry, it could have a material adverse affect on our business, results of operations and financial condition.

        We depend on borrowings under our revolving credit facility to fund payday cash advances, capital expenditures to build new centers and other needs. One major regional bank announced that it had revised its credit policies to prohibit future loans to companies engaged in the payday cash advance services or car title lending industries in a letter that the bank filed with the Federal Reserve Board in connection with the bank's application for approval of an acquisition. The bank's letter referred to comments filed by certain consumer advocacy organizations in connection with the bank's application, and stated that it had revised its credit policies "after considering the potential reputational risks and consumer harm" that could result from lending to companies in these industries. While this bank is not one of our existing lenders under our revolving credit facility, if our current or potential credit banks decided not to lend money to companies in the payday cash advance services industry, we could face higher borrowing costs, limitations on our ability to grow our business as well as possible cash shortages, any of which could have a material adverse effect on our business, results of operations and

25

financial condition. This bank also no longer provides cash management services, including operating depository accounts, to payday advance companies. There are other banks that have notified us and other companies in the payday cash advance and check cashing industries that they will no longer maintain bank accounts for these companies due to reputational risks and increased compliance costs of servicing money services businesses and other cash intensive industries. While none of our larger depository banks has requested that we close our bank accounts or put other restrictions on how we use their services, if any of our larger current or future depository banks were to take such action, we could face higher costs of managing our cash and limitations on our ability to grow our business, both of which could have a material adverse effect on our business, results of operations and financial condition.

We depend to a substantial extent on borrowings under our revolving credit facility to fund our liquidity needs.

        We have an existing revolving credit facility that allows us to borrow up to $265.0 million, assuming we are in compliance with a number of covenants and conditions. Because we typically use substantially all of our available cash generated from our operations to repay borrowings on our revolving credit facility on a current basis, we have limited cash balances and we expect that a substantial portion of our liquidity needs, including any amounts to pay any future cash dividends on our common stock, will be funded primarily from borrowings under our revolving credit facility. As of December 31, 2005, we had approximately $212.5 million available for future borrowings under this facility. Due to the seasonal nature of our business, our borrowings are historically the lowest during the first calendar quarter and increase during the remainder of the year. If our existing sources of liquidity are insufficient to satisfy our financial needs, we may need to raise additional debt or equity in the future.

Our revolving credit facility contains restrictions and limitations that could significantly affect our ability to operate our business.

        Our revolving credit facility contains a number of significant covenants that could adversely affect our business. These covenants restrict our ability, and the ability of our subsidiaries to, among other things:

•

incur additional debt;



•

create liens;



•

effect mergers or consolidations;



•

make investments, acquisitions or dispositions;



•

pay dividends or make other payments;



•

enter into certain sale and leaseback transactions;



•

become subject to further restrictions on the creation of liens; and



•

have foreign subsidiaries.

        The breach of any covenants or obligation in our revolving credit facility will result in a default. If there is an event of default under our revolving credit facility, the lenders under the revolving credit facility could cause all amounts outstanding there under to be due and payable, subject to applicable grace periods. This could trigger cross-defaults under our other existing or future debt instruments. As a result, our ability to respond to changing business and economic conditions and to secure additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might further our growth strategy. If we are unable to repay, refinance or restructure our indebtedness under our revolving credit facility, the lenders under that facility could proceed against the collateral securing that indebtedness. Our obligations under the revolving credit facility are

26

guaranteed by each of our existing and future subsidiaries. The borrowings under the revolving credit facility and the subsidiary guarantees are secured by substantially all of our assets and the assets of the subsidiary guarantors. In addition, borrowings under the revolving credit facility are secured by a pledge of substantially all of the capital stock, or similar equity interests, of the subsidiary guarantors. In the event of our insolvency, liquidation, dissolution or reorganization, the lenders under our revolving credit facility and any other existing or future debt of ours would be entitled to payment in full from our assets before distributions, if any, were made to our stockholders.

Our business is seasonal in nature, which causes our revenues, collection rates and earnings to fluctuate. These fluctuations could have a material adverse effect on our results of operations and stock price.

        Our business is seasonal due to the impact of fluctuating demand for payday cash advances and fluctuating collection rates throughout the year. Demand has historically been highest in the third and fourth quarters of each year, corresponding to the back-to-school and holiday seasons, and lowest in the first quarter of each year, corresponding to our customers' receipt of income tax refunds. Our provision for doubtful accounts and agency bank losses, allowance for doubtful accounts and accrual for excess bank losses are historically lowest as a percentage of revenues in the first quarter of each year, corresponding to our customers' receipt of income tax refunds, and increase as a percentage of revenues for the remainder of each year. This seasonality requires us to manage our cash flows over the course of the year. If our revenues or collections were to fall substantially below what we would normally expect during certain periods, our ability to service our debt, pay dividends on our common stock and meet our other liquidity requirements may be adversely affected, which could have a material adverse effect on our results of operations and stock price.

        In addition, our quarterly results have fluctuated in the past and are likely to continue to fluctuate in the future because of the seasonal nature of our business. Therefore, our quarterly revenues and results of operations are difficult to forecast, which, in turn could cause our future quarterly results to not meet the expectations of securities analysts or investors. Our failure to meet expectations could cause a material drop in the market price of our common stock.

Because we maintain a significant supply of cash in our centers, we may be subject to cash shortages due to employee and third-party theft and errors. We also may be subject to liability as a result of crimes at our centers.

        Because our business requires us to maintain a significant supply of cash in each of our centers, we are subject to the risk of cash shortages resulting from employee and third-party theft and errors. Although we have implemented various programs to reduce these risks, maintain insurance coverage for theft and provide security for our employees and facilities, we cannot assure you that employee and third-party theft and errors will not occur. Cash shortages from employee and third-party theft and errors were approximately $1.6 million (0.25% of total revenues) in 2005, $1.2 million (0.21% of total revenues) in 2004 and $1.7 million (0.35% of total revenues) in 2003. Theft and errors could lead to cash shortages and could adversely affect our business, results of operations and financial condition. It is also possible that crimes such as armed robberies may be committed at our centers. We could experience liability or adverse publicity arising from such crimes. For example, we may be liable if an employee, customer or bystander suffers bodily injury, emotional distress or death. Any such event may have a material adverse effect on our business, results of operations and financial condition.

Any disruption in the availability of our information systems could adversely affect operations at our centers.

        We rely upon our information systems to manage and operate our centers and business. Each center is part of an information network that is designed to permit us to maintain adequate cash inventory, reconcile cash balances on a daily basis and report revenues and expenses to our headquarters. Our back-up systems and security measures could fail to prevent a disruption in our

27

information systems. Any disruption in our information systems could adversely affect our business, results of operations and financial condition.

Our centralized headquarters functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations and financial condition.

        Our headquarters building is located in Spartanburg, South Carolina. Our information systems and administrative and management processes are primarily provided to our zone and regional management and to our centers from this centralized location, and they could be disrupted if a catastrophic event, such as a tornado, power outage or act of terror, destroyed or severely damaged our headquarters. Any of these catastrophic events could have a material adverse effect on our business, results of operations and financial condition.

Potential future acquisitions could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition.

        We may consider acquisitions of companies, technologies and products that we feel could accelerate our ability to compete or allow us to enter new markets. Acquisitions involve numerous risks, including:

•

difficulties in integrating operations, technologies, accounting and personnel;



•

difficulties in supporting and transitioning customers of our acquired companies;



•

diversion of financial and management resources from existing operations;



•

risks of entering new markets;



•

potential loss of key employees; and



•

inability to generate sufficient revenues to offset acquisition costs.

        Acquisitions also frequently result in the recording of goodwill and other intangible assets that are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate, either of which could have a material adverse effect on our business, results of operations and financial condition.

Regular turnover among our managers and employees at our centers makes it more difficult for us to operate our centers and increases our costs of operations, which could have an adverse effect on our business, results of operations and financial condition.

        The annual turnover as of December 31, 2005, among our center managers was approximately 54% and among our other center employees was approximately 102%. Approximately 50% of the turnover has traditionally occurred in the first six months following the hire date of our center managers and employees. This turnover increases our cost of operations and makes it more difficult to operate our centers. If we are unable to retain our employees in the future, our business, results of operations and financial condition could be adversely affected.

We used to be taxed as an S corporation under Subchapter S of the Internal Revenue Code and claims of taxing authorities related to our prior status as an S corporation could harm us.

        Between October 1, 2001, and the closing of our initial public offering ("IPO") on December 21, 2004, we were taxed as a "pass-through" entity under Subchapter S of the Internal Revenue Code.

28

Currently, we are taxed as a C corporation under Subchapter C of the Internal Revenue Code, which is applicable to most corporations and treats the corporation as an entity that is separate and distinct from its stockholders. If our tax returns for the years in which we were an S corporation were to be audited by the Internal Revenue Service or another taxing authority and we were determined not to have qualified for, or to have violated, our S corporation status, we could be obligated to pay back taxes, interest and penalties. These amounts could include taxes on all of our net income while we were an S corporation. We currently estimate that the net income during the period we were an S corporation was approximately $225.0 million to $235.0 million. Any such claims could result in additional costs to us and could have a material adverse effect on our business, results of operations and financial condition.

        Until we file our final income tax return as an S corporation, the amount of deferred income tax liability recorded as a result of our conversion from an S corporation to a C corporation remains an estimate. Any change in this deferred income tax liability will result in a change in income tax expense when the final S corporation income tax return is filed. This should occur in the third quarter of 2006.

Risks Related to Our Common Stock

Our executive officers and directors may be able to exert significant influence over our future direction.

        Our executive officers and directors together with certain trusts for the benefit of some of the family members of certain directors, control approximately 35% of our outstanding common stock. As a result, these stockholders, if they act together, may be able to influence any matter requiring our stockholders' approval, including the election of directors and approval of significant corporate transactions. As a result, this concentration of ownership may delay, prevent or deter a change in control, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or its assets and might reduce the market price of our common stock.

Applicable laws and our certificate of incorporation and bylaws may discourage takeovers and business combinations that our stockholders might consider in their best interest.

        State laws and our certificate of incorporation and bylaws may delay, defer, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For instance, they may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

        State laws and our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our directors. These provisions may facilitate entrenchment of directors that may delay, defer or prevent a change in our control, which may not be in the best interests of our stockholders.

        The following provisions that are included in our certificate of incorporation and bylaws have anti-takeover effects and may delay, defer or prevent a takeover attempt that our stockholders might consider in their best interests. In particular, our certificate of incorporation and bylaws:

•

permit our board of directors to issue one or more series of preferred stock;



•

prohibit stockholders from filling vacancies on our board of directors;



•

prohibit stockholders from calling special meetings of stockholders and from taking action by written consent;



•

impose advance notice requirements for stockholder proposals and nominations of directors to be considered at stockholder meetings; and

29

•

require the approval by the holders of at least 80% of the voting power of our outstanding capital stock entitled to vote on the matter for the stockholders to amend the provisions of our bylaws and certificate of incorporation described in the second through fourth bullet points above and in this bullet point.

        In addition, many of our subsidiaries are licensed by, and subject to, the regulatory and supervisory jurisdiction of the states where they do business. Under change in control statutes of some of these states, any person, acting alone or with others, who is seeking to acquire, directly or indirectly, 5% or more of our outstanding common stock may need to be approved by the authorities within those states. As a result, prospective investors who intend to acquire a substantial portion of our common stock may need to be aware of and to comply with those state requirements, to the extent applicable.

        In addition, Section 203 of the General Corporation Law of the State of Delaware may limit the ability of an "interested stockholder" to engage in business combinations with us. An interested stockholder is defined to include persons owning 15% or more of our outstanding voting stock.

We can redeem your common stock if you are or if you become a disqualified person.

        Federal and state laws and regulations applicable to providers of payday cash advance services may now or in the future restrict direct or indirect ownership or control of providers of payday cash advance services by disqualified persons (such as convicted felons). Our certificate of incorporation provides that we may redeem shares of your common stock to the extent deemed necessary or advisable, in the sole judgment of our Board of Directors, to prevent the loss of, or to secure the reinstatement or renewal of, any license or permit from any governmental agency that is conditioned upon some or all of the holders of our common stock possessing prescribed qualifications or not possessing prescribed disqualifications. The redemption price will be the average closing sale price per share of our common stock during the 20-trading-day period ending on the second business day preceding the redemption date fixed by our Board of Directors. At the discretion of our Board of Directors, the redemption price may be paid in cash, debt or equity securities or a combination of cash and debt or equity securities.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

        None.

ITEM 2.    PROPERTIES.

        Our average center size is approximately 1,500 square feet. We try to locate our centers in highly visible, accessible locations. Our centers, which we design to have the appearance of a mainstream financial institution, are typically located in middle-income shopping areas with high retail activity. Other tenants in these shopping areas typically include grocery stores, discount retailers and national video rental stores. All of our centers are leased, with typical lease terms of three years with an option to renew at the end of the lease term. Our leases usually require that we pay all maintenance costs, insurance costs and property taxes.

        See "Item 1. Business—Center Operations—Centers" for a listing of the number of centers we operated in the various states as of December 31, 2005.

        We own our corporate headquarters in Spartanburg, South Carolina. Our headquarters building, which is approximately 75,000 square feet, and related land are subject to a mortgage payable to a lender, the principal amount of which was approximately $6.2 million at December 31, 2005. The mortgage is payable in 180 monthly installments of approximately $66,400, including principal and interest, and bears interest at a fixed rate of 7.30% over its term. The mortgage matures on June 10, 2017. The carrying amount of our corporate headquarters (land, land improvements and building) was approximately $5.6 million and $5.4 million at December 31, 2004 and 2005, respectively.

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        We believe that our facilities, equipment, furniture and fixtures and aircraft are in good condition and well maintained, and that our offices are sufficient to meet our present needs.

ITEM 3.    LEGAL PROCEEDINGS.

        We are involved in several active lawsuits, including lawsuits arising out of actions taken by state regulatory authorities and are involved in various other legal proceedings with state and federal regulators. The use of the terms "we," "us" or "our" in this Item 3 include the parent Company and the respective subsidiary where the context so requires.

BankWest, Inc. et al. vs. Baker et al.

        A Georgia statute, effective May 2004, essentially prohibits payday cash advance services in the state and effectively restricts our ability to act as a marketing, processing and servicing agent for a lending bank in the state. In April 2004, we, along with a lending bank, BankWest, and other banks and agents involved in providing payday cash advances in Georgia, filed an action in the U.S. District Court for the Northern District of Georgia against the Attorney General of Georgia and the Georgia Secretary of State seeking a declaration that the Georgia anti-payday cash advance law is unconstitutional, preempted by federal law and should not be enforced. The District Court denied the request. As a result, BankWest and our Georgia subsidiary suspended operations in Georgia in 2004. The District Court's order was appealed to the U.S. Court of Appeals for the Eleventh Circuit, and in June 2005, a two judge majority of a three judge panel affirmed the District Court's order. In December 2005, the Eleventh Circuit granted Petitions for Rehearing En Banc, vacated the majority's opinion and set the matter for oral argument in June 2006.

Kucan et al. vs. Advance America, Cash Advance Centers of North Carolina, Inc. et al.

        On July 27, 2004, John Kucan, Welsie Torrence and Terry Coates, each of whom was a customer of Republic Bank & Trust Company ("Republic"), a lending bank for whom we marketed, processed and serviced payday cash advances in North Carolina, filed a putative class action lawsuit in the General Court of Justice for the Superior Court Division for New Hanover County, North Carolina, against us and William M. Webster, IV, our Vice Chairman, alleging, among other things, that the relationship between our North Carolina subsidiary and Republic was a "rent a charter" relationship and therefore Republic was not the "true lender" on the payday cash advances it offered. The lawsuit also claims that the payday cash advances were made, administered and collected in violation of numerous North Carolina consumer protection laws. The lawsuit seeks an injunction barring the subsidiary from continuing to do business in North Carolina, the return of the principal amount of the payday cash advances made to the plaintiff class since August 2001, the return of any interest or fees associated with those advances, treble damages, attorneys' fees and other unspecified costs. On December 30, 2005, the court issued an Order granting defendants' motion for arbitration, staying the proceedings and denying class certification. The plaintiffs have appealed this Order to the North Carolina Court of Appeals.

King and Strong vs. Advance America, Cash Advance Centers of Georgia, Inc. et al.

        On August 6, 2004, Tahisha King and James E. Strong, who were customers of BankWest, the lending bank for whom we marketed, processed and serviced payday cash advances in Georgia, filed a putative class action lawsuit in the State Court of Cobb County, Georgia, against us, Mr. Webster and other unnamed officers, directors, owners and "stakeholders," alleging various causes of action including that our Georgia subsidiary made illegal payday loans in Georgia in violation of Georgia's usury law, the Georgia Industrial Loan Act and Georgia's Racketeer Influenced and Corrupt Organizations Act. The complaint alleges that BankWest was not the "true lender" on the advances that were marketed, processed and serviced for BankWest in Georgia and we were the "de facto" lender. The complaint seeks compensatory damages, attorneys' fees, punitive damages and the trebling

31

of any compensatory damages. We removed the state court action to the U.S. District Court for the Northern District of Georgia, Atlanta Division, however the action was remanded back to the State Court of Cobb County in December 2005. The action will now proceed in state court.

Glasscock vs. Advance America, Cash Advance Centers of Georgia, Inc. et al.

        Our Georgia subsidiary is involved in another case in Georgia that, although not a class action lawsuit, contains essentially the same allegations as the King and Strong case. On March 10, 2003, Angela Glasscock, a customer of BankWest, filed an adversary proceeding in the U.S. Bankruptcy Court for the Southern District of Georgia alleging that the Georgia subsidiary was making payday cash advances in Georgia in violation of the Georgia Industrial Loan Act. BankWest intervened into the case and subsequently both our Georgia subsidiary and BankWest filed a motion for summary judgment that was granted in September 2005. In its holding, the court ruled that BankWest, was the "true lender." Plaintiffs have appealed this ruling and briefing is being completed. Although the amount in controversy in the case is only $350, the underlying claims of Ms. Glasscock, if validated by the appellate court, could serve as a basis for future claims against us.

Betts and Reuter vs. McKenzie Check Advance of Florida, LLC et al.

        We, our subsidiary McKenzie Check Advance of Florida, LLC ("McKenzie"), and certain of our officers, directors and employees are defendants in a putative class-action lawsuit commenced by former customers, Wendy Betts and Donna Reuter, in Florida. This putative class action was filed by Ms. Betts and Ms. Reuter in February 2001 in the Circuit Court of Palm Beach County and alleges that McKenzie, by and through the actions of certain of our officers, directors and employees, engaged in unfair and deceptive trade practices and violated Florida's criminal usury statute, Consumer Finance Act, and Racketeer Influenced and Corrupt Organizations Act. The suit seeks unspecified damages, and McKenzie or the other defendants could be required to refund fees and/or interest collected, refund the principal amount of payday cash advances, pay multiple damages and pay other monetary penalties. Defendants' motion for summary judgment was originally granted as to Ms. Betts' claims but later reversed by a Florida appellate court. This decision is currently on appeal to the Florida Supreme Court. Ms. Reuter's claims were originally dismissed and defendants' motion to compel arbitration granted by the state trial court. This ruling is currently on appeal to the Florida Supreme Court. The Florida Supreme Court stayed the appeal of Ms. Reuter's claims pending the U.S. Supreme Court's review of Buckeye Check Cashing, Inc., v. Cardegna, et al. ("Buckeye"), which held that a substantially similar arbitration agreement was unenforceable. On February 21, 2006, the U.S. Supreme Court reversed the Florida Supreme Court's holding in Buckeye. The U.S. Supreme Court held that where a contract contained an arbitration clause, any challenge to the validity of the contract is a question for an arbitrator rather than a state or federal court. We believe the U.S. Supreme Court's decision in Buckeye should be binding on Ms. Reuter's claims and that the Florida Supreme Court will reach a decision that is consistent with the U.S. Supreme Court's ruling in Buckeye.

Reuter and Betts vs. Advance America, Cash Advance Centers of Florida, Inc. et al.

        A second Florida lawsuit was filed in August 2004 in the Circuit Court of Palm Beach County by former customers Gerald Betts and Ms. Reuter against us, our subsidiary Advance America, Cash Advance Centers of Florida, Inc., and certain of our officers and directors. The allegations are nearly identical to those alleged in the first Betts and Reuter lawsuit. We have filed motions to dismiss, to stay the proceedings pending determination of dispositive actions by the Florida Supreme Court in the original Betts and Reuter case, and to compel arbitration. Proceedings in this case have been stayed pending the disposition of the appeals in the original Betts and Reuter case.

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North Carolina Commissioner of Banks Investigation

        In August 2004, the North Carolina Attorney General's Office, in conjunction with the Commissioner of Banks for North Carolina, issued a subpoena to us to produce documents, respond to written questions and have a corporate representative appear for a deposition regarding the relationship between our North Carolina subsidiary and the lending bank in North Carolina, Republic, to determine whether our operations in North Carolina are in compliance with North Carolina law. On February 1, 2005, the Commissioner of Banks initiated a contested case against our North Carolina subsidiary for alleged violations of the North Carolina Consumer Finance Act. On December 22, 2005, at the conclusion of the contested case, the Commissioner of Banks ordered that our North Carolina subsidiary immediately cease and desist operating. A Notice of Appeal to the North Carolina State Banking Commission was immediately filed and is pending. In accordance with the Commissioner of Bank's Order, we ceased all business operations in North Carolina on December 22, 2005.

New Mexico Attorney General Proposed Rules and Regulations Governing the Extension of Credit For Small Loans

        On February 10, 2006, we joined four other payday cash advance service providers in a lawsuit against the New Mexico Attorney General requesting immediate injunctive relief from the enforcement of the Proposed Rules and Regulations Governing the Extension of Credit for Small Loans. The Proposed Rules recently promulgated by the Attorney General attempt to severely limit the payday loan industry in New Mexico. If we are unsuccessful in our attempt to obtain temporary or permanent relief from the Proposed Rules, we will be unable to operate profitably in New Mexico.

United States Department of Labor Investigations

        In 2005, the United States Department of Labor initiated three investigations from its district offices in the field regarding the payment of overtime wages to certain employees. We have been cooperating with these ongoing investigations that could result in the payment of back wages, civil monetary penalties and other enforcement action.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

        Our common stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "AEA." Our common stock was initially offered to the public on December 15, 2004 at a price of $15.00. The following table sets forth the quarterly high and low sales prices of our common stock as reported by NYSE since our initial public offering ("IPO"), as well as the quarterly cash dividend declared per share since our IPO:

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        At March 8, 2006, there were approximately 200 holders of record of our common stock, and there were approximately 6,500 beneficial holders of the common stock held in nominee or street name.

        We are not required to pay any dividends. Any determination to pay dividends, and the amounts of any dividends, will be at the sole discretion of our Board of Directors and will depend on a number of factors, including: our subsidiaries' payment of dividends to us; our net income, results of operations and cash flows and our other cash needs; our financial position and capital requirements; general business conditions and the outlook for our company; any legal, tax, regulatory and any other factors our Board of Directors deems relevant. In addition, our revolving credit facility restricts our ability to pay dividends depending on the absence of any default or event of default, our net income, the ratio of our consolidated senior funded debt to our consolidated EBITDA and our consolidated fixed charge coverage ratio (as defined in our revolving credit facility). Our Board of Directors may at any time modify or revoke our dividend policy.

        Prior to our IPO in December 2004, we paid cash dividends to our existing stockholders of approximately all of the income we earned while we were an S corporation and on which the existing stockholders were taxed. These cash dividends included approximately $79.8 million and $101.5 million in the years ended December 31, 2004 and 2003, respectively. We paid no dividends in 2004 following our IPO.

        On February 17, 2006, our Board of Directors declared a quarterly cash dividend of $0.11 per common share, which was paid on March 10, 2006, to stockholders of record on February 27, 2006.

        The following table sets forth information about our stock repurchases for the year ended December 31, 2005:

(1)

Based on trade date.

(2)

On May 4, 2005, we announced a stock repurchase program pursuant to which we were authorized to repurchase up to $50.0 million of our outstanding common stock.

        See "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," for information about our equity compensation plans.

ITEM 6.    SELECTED FINANCIAL DATA.

        The following tables set forth our summary consolidated financial information and other financial and statistical data for the periods ended and as of the dates indicated. The financial information for the years ended December 31, 2005, 2004 and 2003, and as of December 31, 2005 and 2004, has been derived from our audited financial statements included elsewhere in this report. The financial

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information for the years ended December 31, 2002 and 2001, and as of December 31, 2003, 2002 and 2001 has been derived from our audited financial statements not included in this report. The historical selected financial information may not be indicative of our future performance and should be read in conjunction with the information contained in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data."

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(1)

Effective October 1, 2001, we filed an election to convert to S corporation status for federal and most state income tax purposes under Subchapter S of the Internal Revenue Code. Under Subchapter S, our stockholders pay federal and state income tax on our taxable income. In connection with our initial public offering on December 21, 2004, we revoked our Subchapter S election and once again became a C corporation taxed under Subchapter C of the Internal Revenue Code. We have provided unaudited proforma data as if we were a C corporation for the year ended December 31, 2004.

(2)

Pro forma income tax expense shown here has been determined as if we had been a C corporation rather than an S corporation in 2004. Proforma income tax expense for the year ended December 31, 2004 includes actual income tax expense of $3.8 million for subsidiaries that continued to be taxed as C corporations. Proforma income tax expense for 2004 includes income tax expense of $8.4 million due to our conversion to a C corporation on December 21, 2004. The effective tax rates used are based on the statutory federal income tax rate plus applicable state income taxes (net of federal benefit) plus the non-deductibility of certain expenses (principally lobbying and meals and entertainment) less income from our special purpose entity not included in our tax returns.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

        The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes in "Item 8. Financial Statements and Supplementary Data." This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by these forward-looking statements. Please see "Item 1A. Risk Factors" and "—Forward-Looking Statements" for discussions of the uncertainties, risks and assumptions associated with these statements.

Overview

        Headquartered in Spartanburg, South Carolina, we are the largest provider of payday cash advance services in the United States as measured by the number of centers operated. Our centers provide, directly or on behalf of a lending bank, small-denomination, short-term, unsecured cash advances that are typically due on the customers' next payday. As of December 31, 2005, we operated 2,604 centers in 36 states.

        Our payday cash advance centers provide, directly or on behalf of a lending bank, small-denomination, short-term, unsecured cash advances that are typically due on the customers' next payday. In most states we conduct our business under the authority of a variety of enabling state statutes including payday advance, check-cashing, small loan and credit services organization state laws (which we refer to as the standard business model). In other states in which we conduct business, we act as a marketing, processing and servicing agent through our centers for FDIC supervised, state-chartered banks that make payday cash advances and installment loans to their customers pursuant to the authority of the laws of the states in which they are located and federal interstate banking laws, regulations and guidelines (which we refer to as the agency business model). In the agency business model, we refer to the banks for which we act as agent as the lending banks. As of December 31, 2005, we were offering payday cash advances under enabling state statutes in 2,473 of our 2,604 centers and serving as agent for the lending banks under the agency business model in our 131 centers located in Arkansas and Pennsylvania.

        We have historically derived our revenues from (1) fees and/or interest paid to us directly by our customers under the standard business model including, beginning in July 2005, in our capacity as a CSO, and (2) marketing, processing and servicing fees paid to us by the lending banks under the agency business model. We in turn are paid a marketing, processing and servicing fee by the lending bank. Our total revenues for the years ended December 31, 2003, 2004 and 2005 consisted of:

        Our expenses relate primarily to the operation of our centers. These expenses include salaries and related payroll costs, occupancy expense related to our leased centers, center depreciation expense, advertising expense and other center expenses that consist principally of costs related to center openings and closings, communications, delivery, supplies, travel, bank charges, various compliance and collection costs and costs associated with theft.

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Recent Changes in Agency Business Model States

        We have modified our operations in several states in response to the FDIC's increased scrutiny of the agency business model. In late June and early July 2005, we underwent several operational changes in the five states where we previously conducted business under the agency business model as a result of the Revised Guidance issued by the FDIC in March 2005 to FDIC supervised institutions that offer payday cash advances, including the lending banks for which we then acted as agent. The Revised Guidance limits the frequency of customer usage of payday cash advances and the period that a customer may have payday cash advances outstanding from any lender. In response to the Revised Guidance, lending banks began offering alternative longer-term credit products, which have generally taken the form of installment loans. These changes affected our operations in Arkansas, Michigan, North Carolina, Pennsylvania and Texas.

        We historically operated in Pennsylvania as a marketing, processing and servicing agent for BankWest, in Arkansas as a marketing, processing and servicing agent for Venture Bank, a Washington bank ("Venture"), and in North Carolina as a marketing, processing and servicing agent for Republic Bank & Trust, a Kentucky bank ("Republic"). Effective July 1, 2005, we amended our MP&S Agreement with BankWest with respect to Pennsylvania, primarily to allow us to also act as a marketing, processing and servicing agent for a new installment loan product offered by BankWest in our 101 centers in Pennsylvania. On June 30, 2005, we terminated our MP&S Agreement with Venture and we entered into a new MP&S Agreement with Fidelity to operate as a marketing, processing and servicing agent for payday cash advances and installment loans made by Fidelity in our 30 centers in Arkansas. Effective July 6, 2005, we terminated our MP&S Agreement with Republic and entered into a new MP&S Agreement with Fidelity to operate as a marketing, processing and servicing agent for payday cash advances and installment loans made by Fidelity in our 117 centers in North Carolina.

        Pursuant to our MP&S Agreements with Fidelity, Fidelity has been contractually obligated for all losses on payday cash advances and installment loans to its customers in Arkansas and North Carolina.

        Under the terms of the revised MP&S Agreements with BankWest and Fidelity, we have acted as marketing, processing and servicing agent for payday cash advances and installment loans that were offered by them in Pennsylvania, Arkansas and North Carolina during the second half of 2005 pursuant to policies and procedures that were adopted by the lending banks in response to the Revised Guidance. The installment loans generally have bi-weekly payments amortized over a four-month period. Depending on the lending bank, fees charged to the customer for the installment loan product range from $55 to $65 per $100 advance plus an additional origination fee of $25 to $30 per transaction. Although the total fee is higher than for a payday cash advance, total revenues are reduced because of the longer duration of the installment product. The Revised Guidance limits the number of payday cash advances that may be made and requires more stringent underwriting standards to qualify for an installment loan. Accordingly, our marketing, processing and servicing fees decreased during the last half of 2005 and are expected to continue to decrease through the first quarter of 2006 when the installment loan product becomes fully implemented.

        We have historically operated in Michigan as marketing, processing and servicing agent for Fidelity. Effective June 26, 2005, we terminated our MP&S Agreement with Fidelity regarding Michigan. Under the terminated agreement, Fidelity was the lender and recorded advances and fees receivable on its balance sheet, and Fidelity was contractually obligated for uncollectible accounts in amounts determined as a percentage of fees and interest charged by Fidelity to its customers. The amount by which losses exceeded Fidelity's contractual obligation was included on our balance sheet as an accrual for excess bank losses. In connection with terminating the MP&S Agreement with Fidelity, we purchased from Fidelity its payday cash advance accounts receivable for Michigan for approximately $7.7 million and Fidelity no longer has any obligations for losses with respect to those accounts.

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        In late June 2005, we began offering check-cashing and deferred-presentment services directly to customers in our centers in Michigan. The approval process for us to provide customers with check-cashing and deferred-presentment services in Michigan is similar to the process we use to provide payday cash advances under our standard business model. The amount of the fee charged by us varies based on whether the check cashed is a government check, a payroll check or a personal check, and for a personal check we charge interest for the period of time that we agree with the customer to hold the check before presenting it to the bank. Customers also have the opportunity to repurchase the check from us. The profitability of our check-cashing and deferred-presentment business and average fees, check amounts and duration for which we hold checks is similar to the corresponding amounts under our standard business model. Following this change in operations, we include our Michigan centers and our check-cashing and deferred-presentment business under our standard business model.

        Because of the recent adoption of a new affirmative payday lending law in Michigan, we expect to begin offering payday cash advances in Michigan some time in the middle of 2006. Due to the limits on fees and charges included in the initial version of that law, we expect that our revenues in Michigan will be lower when the law is initially implemented.

        Beginning in July 2005, we ceased conducting business under the agency business model in our 208 centers in Texas, and began conducting business in those centers through a wholly owned subsidiary that has registered as a CSO under Texas law. As a CSO, we offer a fee-based credit services package to assist customers in trying to improve their credit and in obtaining an extension of consumer credit through a third-party lender. In connection with commencing operations as a CSO in Texas, we have entered into a credit services organization agreement ("CSO Agreement") with an unaffiliated third-party lender. The CSO Agreement governs the terms by which we refer customers in Texas to that lender, on a non-exclusive basis, for a possible extension of credit, process loan applications, and commit to reimburse the lender for any loans or related fees that are not collected from such customers.

        Under the CSO model, the third-party lender determines whether to approve the loan and establishes all of the loan underwriting criteria. All of the terms, conditions and features of the loan agreements between the lender and the customers are determined by the lender. The customer writes a personal check payable to the lender in the amount of the loan, including interest for the anticipated duration of the loan and the credit services fee owed to us, which we hold on behalf of the lender pending repayment of the loan. We also assist customers by agreeing to reimburse the lender for the full amount of the loan and all related fees that are not collected from the customers.

        When the loan becomes due, the customer returns to the CSO center to repay the loan and we return to the customer his or her check. If the customer does not return to the CSO center to repay the loan we may then begin collection efforts to obtain from the customer payment of the loan and any applicable late and non-sufficient funds ("NSF") fees due. If we are unsuccessful in collecting the payments, we will reimburse the lender, and we then may continue our collection efforts.

        Under our prior MP&S Agreement with the lending bank in Texas for payday cash advances, the lending bank was contractually obligated for uncollectible payday cash advance accounts in amounts determined as a percentage of fees and interest charged by the lending bank to its customers, which historically have been sufficient to cover all losses incurred. Under the CSO Agreement, we are contractually obligated for all losses incurred by the lender with respect to loans it makes to customers referred by us. The profitability of the CSO product is similar to the results historically generated under our standard business model.

Recent Suspensions and Closings

        In May 2004, a Georgia law became effective that prohibits payday cash advance services in the state and restricts our ability to act as marketing, processing and servicing agent for a lending bank in

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the state. Accordingly, we suspended operations at our 89 centers in Georgia, three of which we closed in 2004 and the remaining 86 of which we closed in 2005. Our Georgia operations have not generated revenue since we ceased operations there in May 2004. We recorded an impairment of assets charge in 2004 of approximately $1.3 million to write-off the undepreciated costs of the Georgia centers, and the lease cancellation and other closing costs were approximately $0.4 million in 2005.

        The following is a summary of financial information for our operations in Georgia for the years ended December 31, 2003, 2004 and 2005 (in thousands):

        In August 2004, the North Carolina Attorney General's office, in conjunction with the Commissioner of Banks for North Carolina, commanded an investigation of the agency business model operations of our centers in North Carolina. In September 2005, the lending bank for which we marketed, processed and serviced payday cash advances and installment loans in our North Carolina centers suspended its payday cash advance and installment loan originations. On December 22, 2005, the North Carolina Commissioner of Banks issued an order directing us to cease operations in the state. As a result, we ceased all of our business activities in North Carolina and closed 117 centers. We estimate that severance, lease cancellation, write-down of the undepreciated costs for fixed assets and the cost to vacate the premises will be approximately $3.1 million, of which $2.7 million was recorded as of December 31, 2005.

        The following is a summary of financial information for our operations in North Carolina for the years ended December 31, 2003, 2004 and 2005 (in thousands):

        On March 1, 2005, the FDIC issued Revised Guidance to FDIC supervised institutions that offer payday cash advances, including the lending banks for which we then acted as an agent. In February 2006, the FDIC instructed BankWest, the lending bank for which we market, process and service payday cash advances and installment loans in Pennsylvania, and Fidelity, the lending bank for which we market, process and service payday cash advances and installment loans in Arkansas, to discontinue offering payday cash advances and alternative credit products if they cannot adequately address the FDIC's concerns.

        BankWest has elected to cease its payday cash advance and installment loan originations as of the close of business on March 27, 2006. We expect to continue, through August 2006, to service all of BankWest's payday cash advances and installment loans that are outstanding as of March 27, 2006.

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        The following is a summary of financial information for our operations in Pennsylvania for the years ended December 31, 2003, 2004 and 2005 (in thousands):

        In addition, Fidelity has decided to discontinue offering installment loans in April 2006 and discontinue offering payday cash advances in June 2006. We expect to continue, through September 2006, to service all of Fidelity's payday cash advances and installment loans that are outstanding as of these dates.

        The following is a summary of financial information for our operations in Arkansas for the years ended December 31, 2003, 2004 and 2005 (in thousands):