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1960

1959

Consolidated Earnings:

Earnings from operations before interest
and taxes

Earnings before taxes on income......
Net earnings after taxes on income....
Preferred dividends

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Net earnings applicable to common stock
Net earnings per share.

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Dividends paid per share.

1.00

2.48**

.83**

Book value per share.

24.89

23.40**

Interest charges - times earned.

Reserve for unearned finance charges

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- to capital funds less noncurrent assets

Senior debt to capital funds.

Losses to discount liquidations.

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8.39 Mos.

8.84 Mos.

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Highlights

1960

1959

Volume of Business:

Finance:

Motor retail installment receivables.

$19,179,578

Other retail installment receivables...

2,340,699

Direct installment loans on motor, etc...

14,074,674

Bulk purchase receivables.

..........

177,162

Motor and other wholesale loans.

23,491,146

$20,841,479
2,191,773
13,795,410
1,142,425
23,884,544

201,812

256,354

Capital loans

Insurance - net premiums written:

Automobile

$ 2,764,054

Life

Accident and Health.

1,677,965
1,148,123

$ 3,413,132
1,351,724
746,051

Operating Ratios:

to discounts

Receivables Outstanding:

Reserve for losses

Senior debt

Motor retail installment receivables.

$19,973,739

$19,188,226

Number

Other retail installment receivables.

Number

16,236
1,812,037
6.738

15,103
1,949,373

7,315

Direct installment loans on motor, etc....
Number

10,900,328

Motor and other wholesale loans.

16,842
3,488,846

10,114,736
15,847
2,758,346

liquidation of:

Capital loans

207,628

188,563

Total receivables outstanding. $36,382,580

$34,199,246

*Restated to give effect to retroactive federal income tax assessment. **Adjusted for 20% stock dividend in February, 1960.

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Consolidated net earnings for the year ended October 31, 1960
amounted to $534,932.10, practically the same as the re-stated
net earnings of $535,146.54 earned during the year ended Octo-
ber 31, 1959. After deducting dividends paid to the preferred
stockholders amounting to $161,512.74, the net earnings applica-
ble to common stock amounted to $373,419.36 or $2.49 per share,
compared to $2.48 per share earned the previous year. In Feb-
ruary, 1960, a 20% stock dividend was distributed, increasing
the number of common stock shares outstanding from 125,000
to 150,000. Cash dividends amounting to $1.00 per share were
paid on the increased number of shares. The book value per
share of common stock outstanding at October 31, 1960 was
$24.89, compared to the adjusted book value of $23.40 a year
earlier.

Net earnings before provision for taxes amounted to $991,032.10,
an increase of 21.35% above the $816,640.63 earned during the
previous year. This increase in pre-tax earnings was completely
absorbed by a 62% increase in the provision for taxes on income,
leaving the net earnings after taxes at the same level as the pre-
vious year. The increase in pre-tax earnings was achieved in
spite of a severe increase in the cost of borrowed funds and
higher credit losses. The interest rate charged by commercial
banks to prime borrowers remained at 5%, the highest rate in
the Company's history, until August 25, 1960 when it dropped to
4%. This higher rate was the primary cause of the increase

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The direct loan division and the insurance divisions made sub-
stantial contributions to the pre-tax earnings and more than
offset the decline experienced by the sales discount division.
This program of diversification, instituted several years ago,
will be continued and expanded in future years and will enable
the Company to accept the challenges presented by changing
conditions in a much stronger position than ever before.

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in cost of borrowings of $382,152.43 or 31% over the previous year. The used car market suffered a decline in value as this market felt the effect of the American made compact cars being manufactured and sold in volume quantities for the first time. The provision for credit losses increased $106,593.52 or 27% from the previous year.

FINANCIAL:

Total capital funds were increased by $1,774,060.36 during the year and
at October 31, 1960 amounted to $11,549,164.54, the highest in the Com-
pany's history. This increase resulted from the sale of $2,000,000.00 of
subordinated notes during the year and earnings retained in the business
reduced by obligatory payments on subordinated debt and redemption of
preferred stock.

During the year a $1,000,000 issue of 6% Capital Notes, due March 1, 1975,
was sold through a public offering. In March, 1960, an issue of $1,000,000
of 62% Subordinated Notes was sold by private placement to an institu-
tional investor. Short-term borrowings increased by $1,575,000 and
amounted to $20,810,000, or approximately 81% of the committed lines of
credit. 80% of the short-term borrowing was from commercial banks, open
market borrowings were covered 2.1 times by unused bank lines of credit.

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CAPITAL FUNDS:

$11,549,164.54

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The ratio of senior debt to capital funds was 2.4 to 1 and the ratio of senior debt to capital funds less noncurrent assets was 3.1 to 1 at the year end.

The increase in capital funds and the anticipated availability of additional
short-term borrowings has placed the Company in an excellent position to
expand its lending facilities and accelerate the growth pattern established

in the past.

VOLUME AND OUTSTANDINGS:

Total finance volume, exclusive of bulk purchases, declined $1,627,110 or
2.7% from the record high set in 1959. The number of contracts financed
remained practically the same as the preceding year. The dollar volume of
retail installment notes purchased from dealers decreased 8%, reflecting
the smaller balances financed on compact cars and the general slowdown
in automobile sales during the last quarter of the fiscal year. It is expected
that automobile sales will lag during the first half of the new year and
then pick up to approximately the same level as 1960.

Total finance receivables outstanding increased 6.38% to $36,382,580.87 at
October 31, 1960. Retail installment receivables amounted to 60% of this
total, direct installment loans 30%, and wholesale loans 9.6%. Of the retail
and direct installment loan balances outstanding, 37.69% were secured
with new automobiles as collateral, 45.03% were collateralized with used
cars and 17.28% had other security, principally household goods.

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VOLUME

$62,111,987.00

1958

1959

1960

OUTSTANDING

30

25

20

15

AAA

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1958

1959

1960

DEFERRED INCOME AND RESERVE FOR LOSSES:

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The reserve for unearned finance charges, deferred income, increased
7.97% from $3,132,984.01 to $3,382,799.32 at the year end. This reserve
amounted to 10.35% of the related receivables outstanding, compared to
10.02% a year earlier. The reserve will be taken into gross earnings as the
outstanding receivables are liquidated and will serve to stabilize earnings
in future periods.

The Company continued its policy of maintaining the reserve for credit
losses at 2% of the related receivables outstanding and at year end amounted
to $653,585.47. This reserve is deemed adequate to cover credit losses
arising from the normal liquidation of the receivables.

The trend of increasing credit losses was accelerated during the year,
primarily due to generally less favorable economic conditions and the
depressed market for used cars, with the resultant decline in values.
Receivable balances of $487,869.38 were considered uncollectible and
charged to the reserve for losses. The overall ratio of losses charged off to
receivables liquidated was 1.55%, compared to 1.01% during the previous

year.

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