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Continued growth in the company's capital structure and volume of business is readily apparent from the first glance at this report. It has generally been a rather difficult year in the automobile industry and our ability to increase our volume of business and our capital structure is largely the result of our momentum from 1959.

Consolidated net income of $413,421 is 3.64% higher than 1958 but fell below 1959 by 16.89%. Our larger volume and increased gross income enabled us to hold our earnings fairly stable in a year when factors beyond our control cost rather heavily. Interest rates were very high during most of 1960. We actually expended $547,000 more for interest and debt expense than the preceding year. One of the favorable things in the outlook is that this trend has now reversed itself and we look forward to lower money costs in 1961.

Earnings available for the common stock amounted to $2.26 per share which enabled us to maintain our dividend rate of $1.00 per share and add substantially to our retained earnings. The total volume of business for 1960 amounted to $76,803,173 or 11.18% above the previous high record of 1959. Elsewhere in this report you will see a breakdown by classifications of this volume and you will find that our direct loan business has increased substantially. Total outstandings at the end of the year amounted to $39,908,016 which is an increase of $7,000,000 over the preceding year. This is our second largest annual gain and is a notable achievement in the unsettled automobile market. Another fine record was holding our loss ratio down to .79% in a year when losses skyrocketed for most companies and ratios twice this high were common in the industry.

Total capital funds increased $2,221,103 to an all-time high of $10,745,363. This was achieved principally through the sale of $1,000,000 of Capital Debentures, Series D, to residents of the State of Iowa and the sale of a $1,000,000 subordinated note to an insurance company in New York.

A year ago everybody was talking about the "sizzling '60's" and applying many glamorous adjectives to the prospects of the next decade. We have met the challenge with an increase in our capital funds of more than 25% and a growth in volume of almost 12%. We are not pessimistic about the next two years. We believe the final six or eight months of 1961 will be marked by good business and expanding profits and 1962 ought to be one of our best.

1960 marked another milestone. We made our first contribution to the Profit Sharing Stock Bonus Plan. This is one more fulfillment in the plans of management to make Interstate attractive to the best available employees because only as we attract and hold men and women in this organization who serve our dealers and customers with greater efficiency, courtesy and speed will our company continue to grow. Loyalty is a two-way street and we are striving to make our company the most attractive and to merit the greatest loyalty from all of our staff and employees.

Yours very truly,

President

An annual two-day meeting in Dubuque of men from our branches has been an outstanding feature of the company's planning and educational program. The enthusiasm and inspiration built up through close association between field men, branch managers, officers and staff at these meetings is a powerful intangible force which cannot be measured. At the meeting held last September we arranged the picture of branch managers above and wish to use this opportunity to present these men to our stockholders.

Total finance volume again exceeded the previous year and set a new all-time high of $76,803,173 or 11.18% above the previous record high of 1959. A breakdown of this total is presented on the "Highlights" page. Of special note here are the increases in volume of retail sales contracts, 11.91%, and installment loans, 26.51%. These are our "bread and butter" as opposed to wholesale, which is essentially a non-profit service function for our dealers and which increased only 9.63%. The expansion of installment loan activities has been given particular attention by your company over the past few years and these figures indicate very favorable progress in this direction.

The effect on automobile retail sales volume from compact car introductions by all major manufacturers in 1960 can be more clearly appreciated by referring to the following comparisons of 1960 and 1959 volume as released by the Federal Reserve Bank of Chicago for the Seventh Federal Reserve District comprising Illinois, Iowa, Wisconsin, Indiana and Michigan.

"In the first six months of 1960, dollar volume of automobile dealers was less than 2 per cent above last year while the number of new passenger cars delivered was 11 per cent higher. This reflected the lower average price of both new and used cars. In the 1959 model year, only 3 per cent of all passenger cars carried basic retail prices of less than $2,000. In the 1960 model year, nearly one-fifth were in this class. In the third quarter, deliveries of new cars were 4 per cent above last year while dollar sales of all automobile retailers were 6 per cent less."