UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: September 30, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to

Commission file number: 333-103293

Pioneer Financial Services, Inc.

(Exact name of Registrant as specified in its charter)

Missouri		44-0607504
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4700 Belleview Avenue, Suite 300, Kansas City, Missouri		64112
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (816) 756-2020

Securities registered pursuant to section 12 (b) of the Act: None

Securities registered pursuant to section 12 (g) of the Act:

Title of Each Class

None

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

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

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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of September 30, 2013
Common Stock, no par value		One Share

As of September 30, 2013, one share of the Registrant’s common stock is outstanding. The market value of voting and non-voting common equity held by non-affiliates is zero and the registrant is a wholly owned subsidiary of MidCountry Financial Corp.

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PART I

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the fiscal year ended September 30, 2013 (“report”) contains forward-looking statements within the meaning of federal securities law. Words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “predict,” or other similar words, identify forward-looking statements. Forward-looking statements appear in a number of places in this report and include statements regarding our intent, belief or current expectation about, among other things, trends affecting the markets in which we operate our business, financial condition and growth strategies. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those predicted in the forward-looking statements as a result of various factors, including those set forth in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When considering forward-looking statements, you should keep these factors in mind as well as the other cautionary statements in this report. You should not place undue reliance on any forward-looking statement. We are not obligated to update forward-looking statements, except as required by federal securities laws.

ITEM 1. BUSINESS

General

Pioneer Financial Services, Inc. (“PFS”), a corporation formed under the laws of Missouri in 1932, is a wholly owned subsidiary of MidCountry Financial Corp., a Georgia corporation (“MCFC”). PFS, with its wholly owned subsidiaries (collectively “we,” “us,” “our” or the “Company”), purchases consumer loans and retail installment contracts, on a worldwide basis, made primarily to active-duty or career retired U.S. military personnel or U.S. Department of Defense employees. We intend to hold these consumer loans and retail installment contracts until repaid.

We purchase consumer loans and retail installment contracts primarily from two different sources. Our largest source of consumer loans is the Consumer Banking Division (“CBD”) (formerly known as the Military Banking Division and Pioneer Military Lending Division) of MidCountry Bank (“MCB”), a federally chartered savings bank and wholly owned subsidiary of our parent, MCFC. Historically CBD originated these consumer loans through a network of loan production offices and via the Internet. Military customers use loan proceeds to purchase consumer goods and services. We also purchase retail installment contracts from retail merchants that sell consumer goods to active-duty or career retired U.S. military personnel or U.S. Department of Defense employees. In October 2013, CBD closed its loan production offices to focus resources on internet and retail efforts to grow the business.

We are not associated with, nor are we endorsed by, the U.S. military or U.S. Department of Defense. However, we do seek to maintain a positive, supportive relationship with the military community.

As of September 30, 2013, Thomas H. Holcom, Jr., Chairman of the Board of Directors (the “Board”) and Chief Executive Officer, Joseph B. Freeman, President and Chief Operating Officer, and Laura V. Stack, Chief Financial Officer, were our executive officers and are responsible for our policy-making decisions. None of these officers are compensated by us. Mr. Holcom is an employee of MCFC, while Mr. Freeman and Ms. Stack are employees of CBD. CBD and MCFC provide compensation and remuneration for services to these executive officers and all the employees of CBD or MCFC (with respect to Mr. Holcom, Jr.). We pay fees to CBD for management and record keeping services. On December 18, 2013, Mr. Holcom, Jr. notified us that he intends to resign from his positions with PFS effective January 2, 2014. The Board has appointed Joseph B. Freeman as the Chief Executive Officer of PFS and Robert F. Hatcher as the Chairman of the Board effective January 2, 2014. On December 18, 2014, the sole shareholder elected Timothy L. Stanley as a director of PFS and to serve as Vice Chairman of the Board.

Lending and Servicing Operations

Primary Supplier of Loans

We have retained CBD as our primary supplier of loans. We entered into the Loan Sale and Master Services Agreement (“LSMS Agreement”) with CBD whereby we purchase loans originated by CBD and CBD services these loans on our behalf. Under the LSMS Agreement, PFS has the exclusive right to purchase loans originated by CBD that meet our lending criteria (which was developed from our past customer credit repayment experience and is periodically revalidated based on current portfolio performance). These criteria require the following:

· All borrowers are primarily active-duty, career retired U.S. military personnel or U.S. Department of Defense employees;

· All potential borrowers must complete standardized credit applications online via the Internet; and

· A review must be conducted on all applicants’ military service history.

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To the extent CBD originates loans under these underwriting criteria, we have the exclusive right to purchase such loans. Loans purchased from CBD are referred to as “military loans.” See “Item 1A—Risk Factors.”

Loan Purchasing

General. We have more than 26 years of experience in underwriting, originating, monitoring and servicing consumer loans to the military market and have developed a deep understanding of the military and the military lifestyle. Through this extensive knowledge of our customer base, we developed a proprietary scoring model that focuses on the unique characteristics of the military market, as well as traditional credit scoring variables that are currently utilized by CBD when originating loans in this market.

For the loans we purchase, CBD uses our proprietary lending criteria and scoring model when it originates loans. Under these guidelines, in evaluating the creditworthiness of potential customers, CBD primarily examines the individual’s debt-to-income ratio, discretionary income, military rank, time served in the military and prior credit experience. Loans are limited to amounts that the customer could reasonably be expected to repay from discretionary income. However, when we purchase loans from CBD, we cannot predict when or whether a customer may unexpectedly leave the military or when or whether other events may occur that could result in a loan not being repaid prior to a customer’s departure from the military. The average customer loan balance was $2,817 at September 30, 2013, repayable in equal monthly installments and with an average remaining term of 16 months.

A risk in all consumer lending and retail sales financing transactions is the customer’s unwillingness or inability to repay obligations. Unwillingness to repay is usually evidenced by a consumer’s historical credit repayment record. An inability to repay occurs after initial credit evaluation and funding and usually results from lower income due to early separation from the military or reduction in rank, major medical expenses, or divorce. Occasionally, these types of events are so economically severe that the customer files for protection under the bankruptcy laws. Underwriting guidelines are used at the time the customer applies for a loan to help minimize the risk of unwillingness or inability to repay. These guidelines are developed from past customer credit repayment experience and are periodically revalidated based on current portfolio performance. CBD uses these guidelines to predict the relative likelihood of credit applicants repaying their obligation. We purchase loans made to consumers who fit our lending criteria. The amount and interest rate of the military loan or retail sales finance transaction purchased are set by CBD or the retail merchant based upon our underwriting guidelines considering the estimated credit risk assumed.

As a customer service, we purchase a new loan from CBD for an existing borrower who has demonstrated a positive payment history with us and where the transaction creates an economic benefit to the customer after fully underwriting the new loan request to ensure proper debt ratio, credit history and payment performance. We will not purchase refinanced loans made to cure delinquency or for the sole purpose of creating fee income. Generally, we purchase refinanced loans when a portion of the new loan proceeds is used to repay the balance of the existing loan and the remaining portion is advanced to the customer. Approximately 34.9% of the amount of military loans we purchased in fiscal 2013 were refinancing of outstanding loans.

Military Loans Purchased from CBD. We purchase military loans from CBD if they meet our lending criteria. We have granted CBD rights to use our lending criteria and extensive experience with lending to the military marketplace. Pursuant to the LSMS Agreement, we granted CBD rights to use our underwriting model and lending system; however, we retained ownership of this model and the lending system. Using our model and system, CBD originates these loans directly over the Internet. Military loans typically have maximum terms of 48 months and an average origination amount of approximately $3,400. We pay a $30.00 fee for each military loan purchased from CBD to reimburse CBD for loan origination costs.

Retail Installment Contracts. We purchase retail installment contracts that meet our quality standards and return on investment objectives from approximately 120 active retail merchant locations. Retail installment contracts are finance receivable notes generated during the purchase of consumer goods by active-duty or retired career U.S. military personnel or U.S. Department of Defense employees. These customers have demonstrated an apparent need to finance a retail purchase and a willingness to use credit. We generally acquire these contracts without recourse to the originating merchant. However, reserve agreements with many retail merchants allow us to withhold funds from the merchant’s proceeds to create reserves to be used in the event a customer defaults and the loan is deemed uncollectible. Retail installment contracts typically have maximum terms of 48 months and an average origination amount of approximately $2,200.

Management and Record Keeping Services

We have retained CBD to provide management and recordkeeping services in accordance with the LSMS Agreement. CBD services our finance receivables and we pay fees for these management and recordkeeping services. Also, as part of its compensation for performing these management and recordkeeping services, CBD retains a portion of ancillary revenue, including late charges and insufficient funds fees, associated with these loans and retail installment contracts.

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On June 21, 2013, we entered into an amended and restated LSMS Agreement with CBD. For the period April 1, 2013 to March 31, 2014, we pay CBD a monthly servicing fee in an amount equal to 0.68% (8.14% annually) of the outstanding principal balance of the military loans and retail installment contracts serviced as of the last day of each month. After March 31, 2014, the monthly servicing fee is 0.43% (5.14% annually). The fee may be adjusted annually on the basis of the annual increase or decrease in the Consumer Price Index (“CPI”). Prior to April 1, 2013, we paid a monthly fee equal to 0.7% (8.4% annually). We also pay an annual relationship fee of $33.86 for each loan and retail installment contract owned by us at the end of the prior fiscal year. The relationship fee for July 1, 2013 through September 30, 2013 is based on our portfolio as of June 20, 2013. After September 30, 2013 the relationship fee will be based on our portfolio on the last day of the fiscal year. The fee may be adjusted annually on the basis of the annual increase or decrease in the CPI.

To facilitate CBD’s servicing of the military loans and retail installment contracts, we have granted CBD (i) the non-exclusive rights to use certain intellectual property, including our trade names and service marks, and (ii) the right to use our Daybreak loan processing system (“Daybreak”) and related hardware and software. We have also granted CBD non-exclusive rights to market additional products and services to our customers. We retain all other borrower relationships.

Credit Loss Experience

We closely monitor portfolio delinquency and loss rates in measuring the quality of our portfolio and the potential for ultimate credit losses. We attempt to control customer delinquencies through careful evaluation of the loans we purchase and credit history at the time the loan is originated and we continue this evaluation during the time CBD services the loan, including through collection efforts after charge-off has occurred.

Debt Protection Product

In June of 2010, CBD began offering a debt protection product to customers. This product replaced the credit insurance products previously offered to customers. If our customers are killed, injured, divorced, unexpectedly discharged or have not received their pay, we will have payment obligations. The liability we establish for possible claims related to debt protection operations and the corresponding charges to noninterest income, net to maintain this amount are evaluated quarterly. See “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations—Sources of Income—Non-interest income, net.”

Reinsurance Operations

Prior to June 2010, one of our subsidiaries reinsured substantially all of the credit life, credit accident and health insurance policies sold by CBD on behalf of Assurant Group, an unaffiliated insurance carrier. This line of business provided us with an additional source of income from the earned reinsurance premiums. If a customer is killed, injured or becomes ill, including during war, our subsidiary will have payment obligations. The liability we may have for possible losses related to our reinsurance operations and the corresponding charges to our income to maintain this amount are immaterial to our overall business. See “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations—Sources of Income—Non-interest income, net.” In June 2010, CBD ceased selling reinsurance products.

Regulation

General

CBD and retail merchants who originate military loans and retail installment contracts are subject to extensive regulation, supervision and licensing by the Office of the Comptroller of the Currency (“OCC”), Board of Governors of the Federal Reserve System (the “Federal Reserve”) and other state and federal agencies. Failure to comply with these requirements can lead to, among other sanctions, termination or suspension of licenses, consumer litigation and administrative enforcement actions. If CBD cannot make loans or dealers are unable to finance active-duty or career retired U.S. military personnel and U.S. Department of Defense employees, this will have a material adverse impact on our business, results of operations and cash flow. See “Item 1A. -Risk Factors.”

Financial Reform Regulations

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010 and many provisions became effective on July 21, 2011. This financial reform law has changed the current regulatory environment and has affected the lending, deposit, investment, trading and operating activities of financial and depositary institutions and their holding companies and affiliates. See “Item 1A. Risk Factors.”

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Reinsurance Regulations

Our reinsurance subsidiary is subject to laws and regulations of the insurance authorities in the State of Nevada. These regulations cover such matters as its capitalization, reserve requirements, affiliate transactions, and permitted investments. They also place restrictions on the amount of dividends that the reinsurance subsidiary can pay to us and requires us to maintain a certain capital structure. As of September 30, 2013, the reinsurance subsidiary had the ability to pay us up to $1.3 million in dividends pursuant to these laws and regulations.

Other Regulations

Once we purchase finance receivables, we are obligated to comply with the Gramm-Leach-Bliley Act (the “GLB Act”), which was signed into law at the end of 1999 and contains comprehensive consumer financial privacy restrictions. Various federal enforcement agencies, including the Federal Trade Commission (“FTC”), have issued final regulations to implement the GLB Act. These restrictions fall into two basic categories. First, we must provide various notices to customers about privacy policies and practices. Second, the GLB Act restricts us from disclosing non-public personal information about the customer to non-affiliated third parties, with certain exceptions. If we violate this law, regulators may require us to discontinue disclosing information improperly and, in certain circumstances, customers may have a private right of action if such disclosure is made without the consent of the customer. We are also subject to federal and state securities and disclosure laws and regulations.

Compliance

We have procedures and controls in place to monitor compliance with laws and regulations. However, because these laws and regulations are complex and often subject to interpretation, or because of a result of unintended errors, we may, from time to time, inadvertently violate these laws and regulations. If more restrictive laws, rules and regulations are enacted or more restrictive judicial and administrative interpretations of those laws are issued, compliance with the laws could become more expensive or difficult. Furthermore, changes in these laws and regulations could require changes in the way we conduct our business, and we cannot predict the impact such changes would have on our profitability.

CBD and the retail merchants who originate military loans and retail installment contracts purchased by us also must comply with both state and federal credit and trade practice statutes and regulations. If retail merchants fail to comply with these statutes and regulations, consumers may have rights of rescission and other remedies. In such cases, we have rights under our agreements with these merchants to require the merchant to repurchase the related retail installment contracts and to pay us for any damages we may incur or litigation costs, including attorney’s fees and costs. However, if we are unable to enforce our agreement with the merchant, resulting consumer recession rights and remedies could have an adverse effect on our business, results of operation, financial condition and cash flow.

Competition

We, along with our primary vendor, CBD, compete with independent finance companies, banks, thrift institutions, credit unions, credit card issuers, leasing companies, manufacturers, and vendors. Among our competitors are larger consumer finance companies that operate on a nationwide basis, as well as numerous regional and local consumer finance companies. We are also in direct competition with some companies that, like us, exclusively market products to military personnel. Some of these competitors are large companies that have greater capital, technological resources, and marketing resources than us. These competitors may also have access to additional capital at a lower cost.

Competition also varies by delivery system and geographic region. For example, some competitors deliver their services exclusively via the Internet, while others exclusively through a branch network. In addition, CBD competes with other banks and consumer finance companies on the basis of overall pricing of loans, including interest rates and fees and general convenience of obtaining the loan.

Employee Relations

CBD employees perform services for us and we pay management and record keeping services fees to CBD. We had no employees as of September 30, 2013. We do engage certain consultants on a contract basis.

Availability of Reports, Certain Committee Charters and Other Information

We make our Securities and Exchange Commission (“SEC”) public filings available on our website, www.investpioneer.com. We have this information available in an extensible business reporting language (“XBRL”).

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The SEC maintains an internet site at www.sec.gov that contains reports and other information regarding us. We will also provide printed copies of all our SEC filings to any investors upon request to Pioneer Financial Services, Inc., 4700 Belleview Ave, Suite 300, Kansas City, Missouri 64112, Attention: Investments.

ITEM 1A. — Risk Factors

Our operations are subject to a number of risks, including but not limited to those described below. If any of the following risks actually occur, our business, financial condition or operating results and our ability to repay the notes could be materially adversely affected.

We, CBD, and our retail merchants are subject to extensive laws, regulations and governmental supervision by federal and state agencies in the conduct of business operations, which regulations are costly, time consuming and intended to protect borrowers and depositors. Failure to comply with regulatory policies and rules could result in further restrictions on our business, damage our reputation, and have an adverse effect on our business, results of operations, and financial condition.

We, as a wholly owned subsidiary of a thrift holding company, and CBD, as a division of a federal savings bank, are currently supervised by the Office of the Comptroller of the Currency (the “OCC”) and regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Our loan purchasing operations, CBD’s lending operations and our retail merchants are also subject to regulation by federal and state finance and consumer protection authorities and various laws and judicial and administrative decisions imposing various requirements and restrictions on operations, including the requirement to obtain and maintain certain licenses and qualifications. These regulations are primarily designed to protect depositors, borrowers and the financial system as a whole. We are also regulated by state and federal securities regulators, and will continue to be as long as our investment notes are outstanding. These laws and regulations govern or affect, among other things:

· the manner in which CBD may offer and sell products and services;

· the interest rates that we may charge customers;

· terms of loans, including fees, maximum amounts, and minimum durations;

· the number of simultaneous or consecutive loans and required waiting periods between loans;

· disclosure practices;

· privacy of personal customer information;

· the types of products and services that we and CBD may offer;

· collection practices; and

· approval or granting of required licenses.

Changes to statutes, regulations or regulatory policies, including interpretation, implementation and enforcement of statutes, regulations or policies, could affect us in substantial and unpredictable ways, including limiting the types of financial services and products we and CBD may offer and increasing the ability of competitors to offer competing financial services and products. Compliance with these regulations is expensive and requires the time and attention of management. These costs divert capital and focus away from efforts intended to grow our business. Because these laws and regulations are complex and often subject to interpretation, or because of a result of unintended errors, we and CBD may, from time to time, inadvertently violate these laws, regulations and policies, as each are interpreted by our regulators. If we and CBD do not successfully comply with laws, regulations or policies, our compliance costs could increase, our operations could be limited and we may suffer damage to our reputation. If more restrictive laws, rules and regulations are enacted or more restrictive judicial and administrative interpretations of those laws are issued, compliance with the laws could become more expensive or difficult. Furthermore, changes in these laws and regulations could require changes in the way we and CBD conduct our business and we cannot predict the impact such changes would have on our profitability.

In June 2013, MCB received a letter from the OCC (the “OCC Letter”) regarding certain former business practices of CBD that the OCC alleged violated Section 5 of the FTC Act. In July 2013, MCB responded in writing to the OCC regarding its analysis of the former business practices and stated that it did not believe it engaged in practices that rose to the level of a violation of law. Nevertheless, in its response letter, MCB did propose certain potential methods of financial remediation to certain customers, if deemed necessary by the OCC. At that time, MCB recorded an accrual in the amount of $5 million. Management for MCB believes that it is probable that it will be required to make remediation payments above the $5 million accrual; however, MCB management is unable to reasonably estimate the potential additional exposure as no information has been received from the OCC nor is able to predict when such information could be expected from the OCC. Therefore, MCB has not increased the $5 million accrual recorded in June 2013; however, the amount of this accrual is subject to change as discussions with the OCC continue.

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Any final resolution of these issues could have a material impact on MCB’s financial condition and results of operations which could impact our business, financial condition and results of operations.

As long as our investment notes are outstanding, we are subject to federal and state securities laws and regulations and failure to comply with or changes in such laws and regulations may adversely affect us or increase substantially the disclosure required by us.

We are regulated by state and federal securities regulators. These regulations are designed to protect investors in securities (such as the investment notes) which we sell. Congress, state legislatures and foreign, federal and state regulatory agencies continually review laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including interpretation, implementation and enforcement of statutes, regulations or policies, could affect us in substantial and unpredictable ways including limiting the types of securities we may issue or increasing substantially the disclosure required by us.

Compliance with new and existing laws and regulations may increase our costs, reduce our revenue and increase compliance challenges.

Under the current regulatory environment, financial institutions and their non-banking affiliates are subject to significantly increased legislation oversight and regulation. We expect this oversight and regulation of our business and our affiliates’ businesses to continue to expand in scope and complexity. Accordingly, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Federal Reserve, the OCC and the Consumer Financial Protection Bureau (the “CFPB”) have increased the scope of their examinations of banks, holding companies and their non-banking affiliates. In connection with these examinations, regulators have begun identifying areas in which lenders could improve lending practices and disclosures to borrowers in connection with charging fees, collecting accounts and offering financial products, among other practices.

We are working diligently to institute best practices and to improve clarity and transparency to existing and potential customers. However, a wide and increasing array of banking and consumer lending laws apply to almost every aspect of our business. This coupled with the uncertainty of the meaning of regulations issued in connection with the Dodd-Frank Act and the need for additional rule making creates ambiguity as to whether the charging of fees, offering of financial products and certain other practices were done in a sufficiently transparent manner.

In August 2012 as a part of their annual exam of MCB, the OCC asked questions regarding compliance with consumer protection regulations. MCB timely responded to those questions in September 2012. Based on its review of the responsive information, the OCC sent a letter to MCB, dated June 24, 2013, requesting additional information regarding compliance matters and asserting certain violations of laws and regulations with respect to past sales and marketing practices in the Nevada branch and loan production offices of the CBD. The letter seeks additional information to enable the OCC to determine what, if any, action might be taken at MCB. As a result, CBD is likely to be subject to penalties and liability for prior operating activities. In addition, any formal action by the OCC would damage CBD’s reputation and adversely impact CBD’s ability to originate loans. If these consequences were to occur, it would have an adverse material impact on CBD’s and our financial condition, business and results of operations.

Changes in laws and regulations or the interpretation and enforcement of laws and regulations could negatively affect our business, results of operations and financial condition.

The laws and regulations directly affecting our and CBD’s activities are under review and are subject to change, especially as a result of current economic conditions, changes in the make-up of the current executive and legislative branches, and the political focus on issues of consumer and borrower protection. In addition, consumer advocacy groups and various other media sources continue to advocate for governmental and regulatory action to prohibit or severely restrict various financial products, including the loan products offered by CBD, and the manner in which such products are offered. Any changes in such laws and regulations could force us and CBD to modify, suspend or cease product offerings. It is also possible that the scope of federal regulations could change or expand in such a way as to alter what has traditionally been state law regulation of our business activities. The enactment of one or more of such regulatory changes, whether affecting us or CBD, may adversely affect our business, results of operations, and prospects.

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States and the federal government may also seek to impose new requirements or interpret or enforce existing requirements in new ways. For example, the application of general principles of equity relating to the protection of consumers and the interpretation of whether a practice is unfair or deceptive may vary in the future. Changes in current laws or regulations or the implementation of new laws or regulations in the future may restrict our or CBD’s ability to continue current methods of operation or expand operations. Additionally, changes to these laws and regulations, or the enforcement thereof, could subject us or CBD to liability for prior operating activities or lower or eliminate the profitability of operations going forward by, among other things, reducing the amount of interest and fees that we may charge in connection with our loans.

Changes in laws or regulations, and the enforcement thereof, may have an adverse effect on our overall business, results of operations, and financial condition, even in the event that the direct impact of any such change is felt only by CBD. Changes in laws or regulations, or the enforcement thereof, which impacts the ability of CBD to offer financial products or impacts the profitability of such products will likely have a material adverse effect on our overall business, results of operations, and financial condition.

The Dodd-Frank Act eliminated the Office of Thrift Supervision (“OTS”), mandates increased capital requirements, created a new Consumer Financial Protection Bureau (“CFPB”) and resulted in many new laws and regulations that have increased our costs of operations.

The Dodd-Frank Act was signed into law on July 21, 2010. This financial reform law has materially changed the current bank regulatory environment and has affected the lending, deposit, investment, trading and operating activities of financial and depositary institutions and their holding companies and affiliates. Many provisions of the Dodd-Frank Act became effective on July 21, 2011 (the “Transfer Date”).

Certain provisions of the Dodd-Frank Act have had an impact on us, and such impact has been, and will continue to be significant. The Dodd-Frank Act eliminated the OTS, which was the primary federal regulator for MCB and its affiliates, including our parent, which is a thrift holding company. Oversight of federally chartered thrift institutions, like MCB, has been transferred to the OCC, the primary federal regulator for national banks. The Federal Reserve now has exclusive authority to regulate all bank and thrift holding companies and their non-bank subsidiaries. As a result, MCB and our parent are now subject to regulation and supervision by the OCC and Federal Reserve, respectively, instead of the OTS. These changes occurred on the Transfer Date. The application and administration of laws and regulations by the Federal Reserve and the OCC may vary, as compared to past application and administration by the OTS. It is possible that the OCC may regulate certain activities in ways that are more restrictive than the OTS has in the past. This has caused us to incur increased costs or become more restricted in certain activities than we have been in the past.

Under prior OTS regulations, our parent was not subject to specific capital requirements; however, the Dodd-Frank Act requires the Federal Reserve to create new regulatory capital requirements that our parent must achieve and maintain.

On July 2, 2013, the Federal Reserve approved a final rule that establishes an integrated regulatory capital framework that addresses shortcomings in certain capital requirements. The rule implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. The major provisions of the new rule applicable to MCB and MCFC are:

· The new rule implements higher minimum capital requirements, includes a new common equity tier 1 capital requirement, and establishes criteria that instruments must meet in order to be considered common equity tier 1 capital, additional tier 1 capital, or tier 2 capital. These enhancements will both improve the quality and increase the quantity of capital required to be held by banking organizations, better equipping the U.S. banking system to deal with adverse economic conditions. The new minimum capital to risk-weighted assets (“RWA”) requirements are a common equity tier 1 capital ratio of 4.5 percent and a tier 1 capital ratio of 6.0 percent, which is an increase from 4.0 percent, and a total capital ratio that remains at 8.0 percent. The minimum leverage ratio (tier 1 capital to total assets) is 4.0 percent. The new rule maintains the general structure of the current prompt corrective action (“PCA”) framework while incorporating these increased minimum requirements.

· The new rule improves the quality of capital by implementing changes to the definition of capital. Among the most important changes are stricter eligibility criteria for regulatory capital instruments that would disallow the inclusion of instruments such as trust preferred securities in tier 1 capital going forward, and new constraints on the inclusion of minority interests, mortgage-servicing assets (“MSAs”), deferred tax assets (“DTAs”), and certain investments in the capital of unconsolidated financial institutions. In addition, the new rule requires that most regulatory capital deductions be made from common equity tier 1 capital.

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· Under the new rule, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. This buffer will help to ensure that banking organizations conserve capital when it is most needed, allowing them to better weather periods of economic stress. The buffer is measured relative to RWA. Phase-in of the capital conservation buffer requirements will begin on January 1, 2016. A banking organization with a buffer greater than 2.5 percent would not be subject to limits on capital distributions or discretionary bonus payments; however, a banking organization with a buffer of less than 2.5 percent would be subject to increasingly stringent limitations as the buffer approaches zero. The new rule also prohibits a banking organization from making distributions or discretionary bonus payments during any quarter if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter. When the new rule is fully phased in, the minimum capital requirements plus the capital conservation buffer will exceed the PCA well-capitalized thresholds.

· The new rule also increases the risk weights for past-due loans, certain commercial real estate loans, and some equity exposures, and makes selected other changes in risk weights and credit conversion factors.

The Dodd-Frank Act also mandates that the Federal Reserve conduct regular bank-type examinations of activities of non-bank affiliates. Accordingly, the Federal Reserve will examine our activities. The Dodd-Frank Act also created the CFPB and authorized it to promulgate and enforce consumer protection regulations relating to financial products, which will affect both bank and non-bank finance companies. We are now subject to the consumer regulations promulgated by the CFPB.

The Dodd-Frank Act also weakens the federal preemption of state laws and regulations previously available to national banks and federal thrifts. Most importantly to us, it has eliminated federal preemption for subsidiaries, affiliates and agents of national banks and federal thrifts. Because our existing business model relied upon such federal preemption, these changes have a significant impact upon us and have required us to change some of our current business operations. Certain state laws became applicable to us on the Transfer Date and require us to become licensed and regulated in various states as a small loan lender if we purchase certain consumer loans originated by MCB.

While the Dodd-Frank Act has been signed into law and became effective on the Transfer Date, many provisions of the law remain to be implemented through the rulemaking process at various regulatory agencies. We are unable to predict what the final form of those rules will be when fully implemented by the respective regulatory agencies. Certain aspects of the new legislation, including, without limitation, the costs of compliance with disclosure and reporting requirements and examinations, has had a significant impact on our business, financial condition and results of operations. Additionally, we cannot predict whether there will be additional proposed laws or reforms that would affect the U.S. financial system or financial institutions, whether or when such changes may be adopted, how such changes may be interpreted and enforced or how such changes would affect us. However, the regulatory burden and cost of compliance with the new federal regulations, and with state statutes and regulations which were previously preempted, has increased significantly.

The Dodd-Frank Act authorizes the CFPB to adopt rules and regulations that could potentially have an impact on our and CBD’s ability to offer short-term consumer loans and have an adverse effect on our operations and financial performance.

Title X of the Dodd-Frank Act establishes the CFPB, which became operational on the Transfer Date. Under the Dodd-Frank Act, the CFPB has regulatory, supervisory, and enforcement powers over providers of consumer financial products, including explicit supervisory authority to examine and require registration of installment lenders. Included in the powers afforded to the CFPB is the authority to adopt rules describing specified acts and practices as being “unfair,” “deceptive,” or “abusive,” and hence unlawful. Specifically, the CFPB has the authority to declare an act or practice abusive if it, among other things, materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or takes unreasonable advantage of a lack of understanding on the part of the consumer of the product or service. Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits, some consumer advocacy groups have suggested that certain forms of alternative consumer finance products, such as installment loans, should be a regulatory priority, and it is possible that at some time in the future the CFPB could propose and adopt rules making such lending or other products less profitable or impractical. The CFPB may target specific features of loans or loan practices, such as refinancings, by rulemaking that could cause us to cease offering certain products or engaging in certain practices. Any such rules may have an adverse effect on our business, results of operations, and financial condition.

In addition to the Dodd-Frank Act’s grant of regulatory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative

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relief) and monetary penalties ranging from $5,000 per day for minor violations of federal consumer financial laws (including the CFPB’s own rules) to $25,000 per day for reckless violations and $1 million per day for knowing violations. The CFPB has this examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. However, institutions that have assets of $10 billion or less, such as MCFC and MCB, will continue to be supervised in this area by their primary federal regulators (in the case of MCFC, the Federal Reserve, and in the case of MCB, the OCC). Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). If the CFPB or one or more state or federal officials find that we or MCB have violated the foregoing or other laws, they could exercise their enforcement powers in ways that would have a material adverse effect on us. Any exercise by a state or federal regulator or other official of its enforcement powers against MCB would also have an indirect material adverse effect on us by limiting the amount of loan products which we may be able to purchase from CBD in the future.

On January 5, 2012, the CFPB launched a federal supervision program for nonbanks that offer or provide consumer financial products or services. Under the CFPB’s nonbank supervision program, the CFPB will conduct individual examinations and may also require reports from businesses to determine what businesses require greater focus by the CFPB. The frequency and scope of any such examinations will depend on the CFPB’s analysis of risks posed to consumers based on factors such as a particular nonbank’s volume of business, types of products or services, and the extent of state oversight.

State regulators may take actions that adversely affect our business.

As a division of a federal savings bank, the CBD is exempt from state licensing and most state regulatory requirements. However, as a result of regulatory changes resulting from the Dodd- Frank Act, as an assignee of certain consumer loans originated by our affiliate, the CBD, we are subject to various state licensing requirements and certain state consumer protection laws. State regulators may assert that certain state statutes or regulations apply to us or to loans purchased by us from the CBD. State regulators may take actions against us seeking to enforce state statutes and regulations that could adversely affect our business (including reduced loan volume and damage to our reputation), results of operations, financial condition and cash flow.

We may experience reduced availability under the SSLA due to a decreased willingness to lend by our bank group as a result of any formal action by the OCC against the CBD.

We currently fund our operations in large part through bank debt. We cannot guarantee that such financing will be available in the future. Our bank debt is comprised of individual loans from lenders, which are party to our Secured Senior Lending Agreement (the “SSLA”). The SSLA is an uncommitted credit facility that provides common terms and conditions pursuant to which individual banks that are a party to this agreement may choose to make loans to us in the future. No lender has an obligation to make any additional future loans to us. As of September 30, 2013, we could request up to $74.7 million in additional funds and remain in compliance with the terms of the SSLA. No lender has a contractual obligation to lend us these additional funds. In addition, we have borrowings of $15.1 million from withdrawing banks who previously participated in our credit facility. If banks party to the SSLA chose not to make loans to us in the future due to any formal action by the OCC against the CBD or otherwise, our liquidity may be insufficient to satisfy our capital needs. In such case, we may need to raise capital from other sources. There is no assurance that alternative sources of liquidity will be available to us.

Defaults by MCFC or its subsidiaries, other than PFS, in their respective credit agreements may negatively impact our liquidity and reduce our availability under the SSLA due to a decreased willingness to lend by our bank group.

In connection with the execution of the SSLA, MCFC entered into an Unlimited Continuing Guaranty. MCFC guaranteed the bank debt and accrued interest under the SSLA in accordance with the terms of the Unlimited Continuing Guaranty. MCFC also guarantees the bank debt of its other non-PFS subsidiaries. The banks that are party to the SSLA may choose not to make loans to us in the future due to a default by MCFC or its other non-PFS subsidiaries, where MCFC is also the guarantor of their respective bank debt. In such case, we may need to raise capital from other sources. There is no assurance that alternative sources of liquidity will be available to us. As of September 30, 2013, Heights Finance Holding Co, and its subsidiaries (collectively “Heights”), a non-PFS subsidiary of MCFC, was in technical default of its credit agreement as it relates to MCFC’s ultimate parent guarantee. Heights entered into a Forbearance Agreement with its lenders that terminates on February 28, 2014.

We may experience limited availability of financing and fluctuation in our funding costs, as a result of continuing economic conditions.

Over the past few years, events in the debt markets and the economy generally have caused significant dislocations, illiquidity and volatility in the domestic and wider global financial markets. The downturn in the general economy has affected the financial strength of many banks and retailers. Any further economic downturn may adversely affect the financial resources of such. The profitability of our business and our ability to purchase loans currently depends on our ability to access bank debt at competitive rates, and we cannot guarantee that such financing will be available in the future. With the ongoing strains in the financial markets, we see liquidity, capital and earnings challenges for some banks in our credit group that may reduce their ability to participate in the credit facility or may cause a decrease in their willingness to lend at the current levels. If our existing sources of liquidity become insufficient to satisfy our financial needs or our access to these sources become restricted, we may need to raise capital from other sources. There is no assurance that alternate sources of liquidity will be available to us.

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MCFC is operating under confidential Memoranda of Understanding.

On February 26, 2009, MCFC entered into a Memorandum of Understanding (“MOU”) with its primary federal regulator to address certain concerns reflected in its regulatory report. The MOU requires MCFC through its board to comply with the requirements of the MOU. The MOU is an informal agreement and is not publicly available. The provisions of the MOU restrict MCFC and may limit funds available to MCB to originate loans. Non-compliance with the MOU could result in a formal enforcement action. A formal enforcement action could have a material adverse impact on our business, results of operations, financial condition and cash flow and could require us to change our business model.

Continued or worsening general business and economic conditions could have a material adverse effect on our business, financial position, results of operations, and cash flows, and may increase loan defaults and affect the value and liquidity of your investment.

Over the past few years, the global economy has experienced a significant recession, as well as a severe, ongoing disruption in the credit markets, downgrade of US Treasury by Standard and Poor’s Financial Services LLC (“S&P”) in connection with the United States debt levels, and a material and adverse effect on the jobs market and individual borrowers. While the United States economy may technically have come out of the recession, the recovery is fragile and may not be sustainable for any specific period of time, and could slip into an even more significant recession. Our financial performance generally, and in particular the ability of our borrowers to make payments on outstanding loans, is highly dependent upon the business and economic environments in the markets where we operate and in the United States as a whole.

During an economic downturn or recession, credit losses in the financial services industry generally increase and demand for credit products often decreases. Declining asset values, defaults on consumer loans, and the lack of market and investor confidence, as well as other factors, have all combined to decrease liquidity. As a result of these factors, some banks and other lenders have suffered significant losses, and the strength and liquidity of many financial institutions worldwide has weakened. Additionally, our loan servicing costs and collection costs may increase as we may have to expend greater time and resources on these activities. Our underwriting criteria, policies and procedures, and product offerings may not sufficiently protect our growth and profitability during a sustained period of economic downturn or recession. Any continued or further economic downturn will adversely affect the financial resources of our customers and may result in the inability of our customers to make principal and interest payments on, or refinance, the outstanding debt when due.

Conditions in the marketplace remain historically weak, and there can be no assurance that they will improve in the near term. Should such conditions worsen or continue to remain weak, they may continue to adversely affect the credit quality of our loans.

A reduction in demand for our products and our failure to adapt to such reduction could adversely affect our business and results of operations.

The demand for the products we and CBD offer may be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products, or the availability of competing products. Should we or CBD fail to adapt to significant changes in customer demand for, or access to, our or CBD’s products, our revenues could decrease significantly and our operations could be harmed. Even if we and CBD do make changes to existing products or introduce new products to fulfill customer demand, customers may resist or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and by that time, it may be too late to make further modifications to such products without causing further harm to our business, results of operations, and financial condition.

Changes in government priorities may affect military spending, the size of the military, and laws regulating loans to military personnel, and our financial condition and results of operations could suffer as a result.

We purchase and own loans made to active duty United States military and Department of Defense employees. Changes in priorities may affect the amount that the United States government spends on defense and could cause the size of the United States military to decrease. In such an event, our customer base may suffer a corresponding contraction and our current military customers may face increased difficulties in repaying outstanding obligations. Further, any announced military drawdown, or even the perception by military personnel that a drawdown may in the future occur, may cause an immediate decrease in demand for our and CBD’s products. The occurrence of any of these events may have a material adverse impact on our business, financial condition, and results of operations.

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In addition, certain federal laws and regulations impose limitations on loans made to active duty military personnel, active duty reservists, and members of the National Guard and their immediate families. Further regulation of lending to members of the military and their families will impact our business, results of operations, and financial condition.

We face intense competition from financial institutions, financial services companies, and other organizations offering products and services similar to those offered by us and CBD, which could prevent us from sustaining or growing our businesses.

The financial services industry, including consumer lending and consumer finance, is highly competitive, and we encounter strong competition for loans and other financial services in all of our market areas and distribution channels. Our principal competitors include commercial banks, savings banks, savings and loan associations, and consumer finance companies, including those that lend exclusively to military personnel, as well as a wide range of other financial institutions, such as credit card companies. Many of our competitors are larger than us and have greater access to capital and other resources. If we and CBD are unable to compete effectively, we will lose market share and our income from loans and other products may diminish.

Our ability to compete successfully depends on a number of factors, including, among other things:

· the ability to adapt successfully to regulatory and technological changes within the financial services industry generally;

· the ability to develop, maintain, and build upon long-term customer relationships based on top quality service and high ethical standards;

· the scope, relevance, and pricing of products and services offered to meet customer needs and demands;

· the rate at which CBD introduces new products and services relative to our competitors;

· customer satisfaction with our level of service; and

· industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

In addition, in July 2013, the Dodd-Frank Act’s three-year moratorium on banks affiliated with non-financial businesses expired. When the Dodd-Frank Act was enacted in 2010, a moratorium was imposed that prohibited the Federal Deposit Insurance Corporation from approving deposit insurance for certain banks controlled by non-financial commercial enterprises. The expiration of the moratorium could result in an increase of traditionally non-financial enterprises entering the banking space, which could increase the number of our competitors. There can be no assurance that the competitive pressures we face will not have a material adverse effect on our results of operations, financial condition and liquidity.

We may be limited in our ability to collect on our loan portfolio, all of which is unsecured.

Legal and practical limitations may limit our ability to collect on our loan portfolio, resulting in increased loan losses, decreased revenues, and decreased earnings. State and federal laws and regulations restrict our collection efforts. In addition, the consumer loans that we hold are not secured by collateral or guaranteed or insured by any third party, making it more difficult for us to collect on our loan portfolio. Since the loans are unsecured, borrowers may choose to repay obligations under other indebtedness before repaying loans to us because our borrowers have no collateral at risk. Further, given the relatively small size of some of our loans, the costs of collecting a loan may be high relative to the amount of the loan. These factors may increase our loan losses, which would have a material adverse effect on our results of operations and financial condition.

There is a risk of default on the retail installment contracts that we purchase.

There is an inherent risk that a portion of the retail installment contracts that we hold will be in default or be subject to certain claims or defenses that the borrower may assert against the originator of the contract, or us as the holder of the contract. We face the risk that if high unemployment or adverse economic developments occur or continue in one or more of our markets, a large number of retail installment contracts will be in default. In addition, most of the borrowers under these contracts have some negative credit history. There can be no assurance that our allowance for credit losses will prove sufficient to cover actual losses in the future on these contracts.

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Our allowance for loan losses may not be adequate to cover actual loan losses, which may require us to take additional charges to our earnings and adversely impact our financial condition and results of operations.

Management determines our provision for loan losses based upon an analysis of general market conditions, the credit quality of our loan investment portfolio, and the performance of our customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating, and other conditions, which may be beyond our control, and such losses may exceed our allowance for estimated loan losses. There can be no assurance that the allowance will prove sufficient to cover actual loan losses in the future. Significant increases to the provision for loan losses may be necessary if material adverse changes in general economic conditions occur or the performance of our loan investment portfolio further deteriorates.

We are dependent on our key officers and the loss of services of any member of our team may have an adverse effect on our operations.

Our success depends in large part on the retention of our key officers, including: Joseph B. Freeman, our current President and Chief Operating Officer and our Chief Executive Officer effective January 2, 2014, and Laura V. Stack, our Chief Financial Officer. Our key officers play a key role with CBD and the loss of one or more of such officers could have a material adverse impact to us. There is no assurance that we will be able to retain our current key officers or attract additional officers as needed.

In addition, under the SSLA, Change in Control is defined to include any date after which Mr. Freeman is no longer serving as the highest ranking officer position of PFS. A Change in Control under the SSLA is an event of default. If Mr. Freeman ceases to serve as the highest ranking officer of PFS, other than the result of his death or disability, the participating banks are no longer obligated to make further advances under the SSLA and may exercise their remedies under the SSLA for an event of default, including (subject to applicable cure periods), declaring the entire principal and interest due under the SSLA immediately due and payable. There is no assurance that we will be able to retain Mr. Freeman or obtain relief from this provision of the SSLA from our lenders if he ceases serving as our highest ranking executive officer.

We face risks of interest rate fluctuations, and if we are not able to adequately protect our portfolio from changes in interest rates, our results of operations could be adversely affected and impair our ability to pay interest and principal on the investment notes.

Our earnings are significantly dependent on our net interest income, as we realize income primarily from the difference between the rate of interest we receive on the loans we own and the interest rate we must pay on our outstanding bank debt and investment notes. We may be unable to predict future fluctuations in market interest rates, which are affected by many factors, including inflation, economic growth, employment rates, fiscal and monetary policy and disorder and instability in domestic and foreign financial markets. Sustained, significant increases in market rates could unfavorably impact our liquidity and profitability. Any significant reduction in our profitability would have a material adverse impact on our business, results of operation, financial condition and cash flow. This would also diminish our ability to pay interest and principal on our outstanding investment notes.

Fluctuations in our expenses and other costs may hurt our financial results.

Our expenses and other costs will directly affect our earnings. Many factors can influence the amount of our expenses. As our business develops and changes, we expect additional expenses will arise from regulatory compliance, structural reorganization, and a reevaluation of business strategies. Other factors that can affect the amount of our expenses include those related to legal and administrative cases and proceedings, which can be expensive to pursue or defend. In addition, changes in accounting policies can significantly affect how we calculate expenses and earnings.

CBD and other vendors from which we purchase consumer loans and retail installment contracts have in place policies and procedures for underwriting, processing, and servicing loans and retail installment contracts which are subject to potential failure or circumvention, which may lead to greater loan delinquencies and charge-offs.

All of CBD’s underwriting activities and credit extension decisions are made at its Nevada branch. CBD trains their employees to make loans that conform to our underwriting standards. Such training includes critical aspects of state and federal regulatory compliance, cash handling, account management, and customer relations. Although CBD has standardized employee manuals, CBD primarily relies on supervisors to train and supervise employees, rather than centralized or standardized training programs. Therefore, the quality of training and supervision may vary depending upon the amount of time apportioned to training and supervision and individual interpretations of operations policies and procedures. CBD cannot be certain that every loan is made in accordance with our underwriting standards and rules. CBD has in the past experienced some instances of loans extended that varied from our underwriting standards. Variances in underwriting standards and lack of supervision could expose us to greater delinquencies and charge-offs than we have historically experienced.

In addition, underwriting decisions are based on information provided by customers and counterparties, the inaccuracy or incompleteness of which may adversely affect our results of operations. In deciding whether to extend credit or enter into other transactions with customers and counterparties, CBD and retail merchants rely on information furnished to them by or on behalf of

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customers and counterparties, including financial information. CBD and retail merchants also rely on representations of customers and counterparties as to the accuracy and completeness of that information. Our earnings and our financial condition could be negatively impacted to the extent the information furnished to our vendors by and on behalf of customers and counterparties is not correct or complete.

CBD may modify underwriting and servicing standards and does not have to lend to the traditional customers who meet our business model and lending criteria, which may have a material adverse effect on our business operations, cash flow, results of operations, financial condition and profitability.

Except as permitted by the SSLA, we have the exclusive rights to purchase all the loans made to U.S. active duty military, retired military and U.S. Department of Defense employees that are originated by CBD and that meet our business model, systems and our lending criteria. In addition, we have retained CBD to service all loans we own. However, CBD is not obligated to continue to use these lending criteria or business models indefinitely. CBD does have the right to modify these criteria, systems and models. CBD may also originate for its own account loans that are not deemed to be military loans made in the ordinary course of business as previously conducted by us. If CBD does modify the models significantly, we may not be willing to purchase such loans. No assurance can be given that if CBD does modify the lending criteria and business models and systems that these modifications would be successful, and such modifications may have a material adverse impact on our business, financial condition and results of operations.

A significant portion of CBD’s loan customers are active-duty military or federal government employees who could be instructed not to do business with CBD or us, our access to the Government Allotment System could be denied or the federal government could significantly reduce active duty forces.

When they deem it to be in the best interest of their personnel, military commanders and supervisors of federal employees may instruct their personnel, formally or informally, not to patronize a business. If military commanders or federal employee supervisors at any given level determine that CBD’s Internet site to be off limits, we and CBD would be unable to do new business with the potential customers they command or supervise. Additionally, approximately 42% of our borrowers make their monthly loan payments through the Government Allotment System. Military commanders or federal employee supervisors could deny those they command or supervise access to these programs, increasing our credit risk on the loans we own. The federal government also establishes troop levels for our active duty military customers and we could be adversely affected if these levels were significantly reduced. Without access to sufficient new customers or to the Government Allotment System, CBD may be forced to discontinue lending to the U.S. military and we may be forced to liquidate our portfolio of military loans and retail installment contracts.

If a customer leaves the military prior to repaying the military loan, there is an increased risk that the loan will not be repaid.

The terms of repayment on the loans we purchase are generally structured so the entire loan amount is repaid prior to the customer’s estimated separation from the military. If, however, a customer unexpectedly leaves the military or other events occur that result in the loan not being repaid prior to the customer’s departure from the military, there is an increased chance that the loan will not be repaid. Because we do not know whether or when a customer will leave the military early, we cannot institute policies or procedures to ensure that the entire loan is repaid before the customer leaves the military. Further, as military personnel anticipate not being able to reenlist, many may become more financially conservative, potentially resulting in them stopping payment on current loans and/or resulting in a reduction of demand for future loans. As of September 30, 2013 we had approximately $12.5 million, or 3.4% of our total portfolio, from customers who had advised us of their separation from the military prior to repaying their loan. If that amount increases or the number of customers who separate from the military prior to their scheduled separation date materially increases, our charge-offs may increase. This would have a material adverse effect on our business, cash flow, results of operations and financial condition.

We have restrictions on the payments we may make to our parent, MCFC. Our ability to disperse our working capital could reduce our profitability and diminish our ability to pay interest and principal on the investment notes.

As of September 30, 2013, our sole shareholder, MCFC, owned the outstanding share of our common stock. Accordingly, MCFC is able to exercise significant control over our affairs including, but not limited to, the election of directors, operational decisions and decisions regarding the investment notes. The SSLA, among other things, limits the amounts that we can pay to MCFC each year. The SSLA prohibits us from paying MCFC more than $750,000 for strategic planning services, professional services, product identification and branding and service charges. We are also prohibited from paying MCFC more than $1,640,000 for the reimbursement of direct allocated amounts for shared services beginning with fiscal 2013, plus 7% per annum thereafter. Other than

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the covenants contained in the SSLA, there are no significant contractual limits on the amounts we can pay to our parent or other affiliates.

We purchase loans that were made primarily to the military market, which traditionally has higher delinquencies than customers in other markets, resulting in higher charge-offs, a reduction in profitability and impairment of our ability to pay interest and principal on the investment notes.

A large portion of our loan customers are unable to obtain financing from traditional sources, due to factors such as their age, frequent relocations and lack of credit history. Historically, we have experienced higher delinquency rates than traditional financial institutions. When we purchase loans, we depend on underwriting standards and collection procedures designed to mitigate the higher credit risk associated with lending to these borrowers. However, these standards and procedures may not offer adequate protection against risks of default. Higher than anticipated delinquencies, foreclosures or losses on the loans we own could reduce our profitability and have a material adverse impact on our business, financial condition and results of operations. Such adverse effects could also restrict our ability to pay interest and principal on our outstanding investment notes.

If a large number of borrowers are wounded in combat, our profits may be adversely affected.

Our debt protection product will cancel the outstanding debt of our customer’s loan in the event of accidental loss of life or disability for loans originated by CBD with this product. Our debt protection product includes additional covered events such as unforeseen military discharge, divorce and in certain instances where our customers do not, under no fault of the customer, receive pay (“no-pay-due”). These events trigger payment of the loan as they become due during a customer’s disability due to illness or injury, including war-related injuries, and pay the balance in the event of death, including war-related fatalities. Therefore, if a large number of borrowers are injured and disabled in combat, our profitability would be impaired, which could have a material adverse impact on our business, results of operation, financial condition and cash flow and may impair our ability to pay interest and principal on our outstanding investment notes.

Failure of third-party service providers upon which we rely could adversely affect our business.

We rely on certain third-party service providers, and such reliance can expose us to risks. Specifically, if any of our third-party service providers are unable to provide their services timely and effectively, or at all, it could have an adverse effect on our business, financial condition, results of operations and cash flows.

Our business is dependent on technology and our ability to invest in technological improvements, the failure of which may adversely affect our business, financial condition, and results of operations.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. We depend in part upon our ability to address the needs of our customers by using technology to provide products and services that satisfy their operational needs. Many of our competitors have substantially greater resources to invest in technological improvements and third-party support. There can be no assurance that we will continue to effectively implement new technology-driven products and services or successfully market these products and services to our customers. For example, in an effort to further enhance our information technology capabilities, we have engaged a third party to provide assistance with the evaluation of our existing Daybreak lending system, which may ultimately result in the conversion to a new lending system. Converting to a new lending system will cause us to incur a significant expense, and if the conversion is unsuccessful, our business, financial condition, and results of operations may be adversely affected.

We also rely on our computer systems and the technology of online and third-party service providers. Our daily operations depend on the operational effectiveness of their technology. For example, we rely on these computer systems to accurately track and record our assets and liabilities. If our computer systems or outside technology sources become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may be impaired, which could affect our business, financial condition, and results of operations.

Security breaches, cyber-attacks, or fraudulent activity could result in damage to our operations or lead to reputational damage.

Security breaches or cyber-attacks with respect to our or CBD’s facilities, computer networks, and databases could cause harm to our business and reputation and result in a loss of customers. We have instituted security measures to protect our systems and to assure our customers that these systems are secure. However, we may still be vulnerable to theft and unauthorized entry to our facilities,

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PART II

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

Our outstanding common stock is held by MCFC and, accordingly, there is no established public trading market for it. We have not sold or repurchased any of our common stock since our acquisition by MCFC. During fiscal 2013 and fiscal 2012, we declared and paid dividends to MCFC in the amount of $24.6 million and $6.8 million, respectively. Our ability to pay dividends is limited by the terms and conditions of the SSLA. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Senior Indebtedness — Bank Debt.”

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with our audited consolidated financial statements and the related notes, with other financial data included in this report and with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The data is as of and for the five fiscal years ended September 30, 2013, 2012, 2011, 2010 and 2009.

	As of and for the Years Ended September 30,
	2013			2012			2011			2010			2009

Consolidated balance sheet data:
Gross finance receivables	$	364,197,688		$	396,803,008		$	405,233,539		$	387,040,886		$	364,786,170
Allowance for credit losses	(31,400,000		)	(29,000,000		)	(25,396,255		)	(24,496,256		)	(24,621,255		)
Total assets	380,984,410			403,479,130			397,327,580			399,103,986			385,325,136
Senior indebtedness:
Revolving credit line - banks	19,240,000			19,450,000			—			21,373,000			20,770,000
Amortizing term notes	187,581,690			186,230,677			214,490,826			210,667,743			221,187,023
Junior indebtedness:
Investment notes	63,907,784			67,428,441			59,724,991			40,028,349			33,306,309
Subordinated debt - parent	—			—			—			11,900,000			—
Total stockholder’s equity	104,672,483			119,935,040			114,737,162			106,531,894			100,487,092
Consolidated statement of operations data:
Revenue:
Interest income and fees	$	109,769,658		$	113,249,059		$	114,121,026		$	105,460,224		$	99,689,511
Interest expense	18,276,134			19,250,406			19,202,745			18,019,188			17,854,730
Net interest income before provision for credit losses	$	91,493,524		$	93,998,653		$	94,918,281		$	87,441,036		$	81,834,781
Provision for credit losses	36,424,082			34,617,355			25,565,703			22,432,831			23,454,336
Net interest income	$	55,069,442		$	59,381,298		$	69,352,578		$	65,008,205		$	58,380,445
Net non-interest income	1,938,716			4,809,573			7,366,584			6,296,353			4,387,710
Non-interest expense	43,309,269			46,119,256			48,090,960			45,520,912			42,014,037
Income before income taxes	13,698,889			18,071,615			28,628,202			25,783,646			20,754,118
Provision for income taxes	4,294,287			6,044,312			11,524,389			9,221,419			7,417,566
Net income:	$	9,404,602		$	12,027,303		$	17,103,813		$	16,562,227		$	13,336,552

Net income per share:
Basic and diluted	$	9,404,602		$	12,027,303		$	17,103,813		$	16,562,227		$	13,336,552
Cash dividends per common share (1)	$	24,618,033		$	6,773,313		$	8,845,387		$	10,560,722		$	3,517,834

(1) Number of shares outstanding is one.

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

Overview

On a worldwide basis, we purchase consumer loans made primarily to active-duty or career retired U.S. military personnel or U.S. Department of Defense employees. Our largest source of military loans is CBD, an affiliate who historically originated direct loans through a network of loan production offices and via the Internet. Military personnel use these loan proceeds to purchase goods and services. In October 2013, CBD closed its loan production offices to focus resources on internet and retail efforts to grow the business.

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In June 2013, we entered into an Amended and Restated LSMS Agreement with CBD that outlines the terms of the sale and serving of these loans. We also purchase retail installment contracts from retail merchants that sell consumer goods to active-duty or retired career U.S. military personnel or U.S. Department of Defense employees. We plan to hold these military loans and retail installment contracts until repaid.

Our finance receivables are effectively unsecured and consist of loans originated by CBD or purchased from retail merchants. All finance receivables have fixed interest rates and typically have a maturity of less than 48 months. During fiscal year 2013, the average size of a loan when acquired was approximately $3,400. A large portion of the loans we purchase are made to customers who are unable to obtain financing from traditional sources due to factors such as their time in grade, frequent relocations and lack of credit history. These factors may not allow them to build relationships with traditional sources of financing.

Improvement of our profitability is dependent upon the growth and quality of finance receivables we are able to acquire from CBD or retail merchants.

Sources of Income

We generate revenues primarily from interest income earned on the military loans purchased from CBD, loans previously originated by us and retail installment contracts purchased from retail merchants. We also earn revenues from debt protection fees. For purposes of the following discussion, “revenues” means the sum of our finance income and debt protection premiums and fees.

Interest income and fees. Interest income and fees consists of interest and origination revenue earned on the military loans and retail installment contracts we own (referred to throughout individually as “loan” or collectively as “loans” or “finance receivables”). Our interest revenue is based on the risk adjusted interest rates charged customers for loans that we purchase. Interest rates vary by loan and are based on many factors, including the overall degree of credit risk assumed and the interest rates allowed in the state where the loan is originated. Our finance income comprised approximately 98.3% of our total revenues in fiscal 2013.

Non-interest income, net. Non-interest income, net consists of revenue from debt protection income and related expenses. Debt protection income and related expenses comprised approximately 1.7% of our total revenues in fiscal 2013.

Finance Receivables

Our finance receivables are comprised of loans purchased from CBD (collectively referred to below as “military loans”) and retail installment contracts purchased from our network of retail merchants. The following table sets forth certain information about the components of our finance receivables as of the end of the periods presented:

	As of and for the Years Ended September 30,
	2013			2012			2011

Finance receivables:
Total finance receivables balance	$	364,197,688		$	396,803,008		$	405,233,539
Average note balance	$	2,817		$	2,767		$	2,699
Total interest income and fees	$	109,769,658		$	113,249,059		$	114,121,026
Total number of notes	129,305			143,419			150,155

Military loans:
Total military receivables	$	348,544,188		$	369,361,165		$	370,601,538
Percent of total finance receivables	95.70		%	93.08		%	91.45		%
Average note balance	$	2,956		$	2,949		$	2,898
Number of notes	117,900			125,267			127,878

Retail installment contracts:
Total retail installment contract receivables	$	15,653,500		$	27,441,843		$	34,632,001
Percent of total finance receivables	4.30		%	6.92		%	8.55		%
Average note balance	$	1,373		$	1,512		$	1,555
Number of notes	11,405			18,152			22,277

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In the normal course of business, we receive customer payments through the Federal Government Allotment System on the first day of each month. If the first day of the month falls on a weekend or holiday, our customer payments are posted on the last business day of the preceding month. On September 30, 2011, we collected $14.1 million in customer loan payments in advance of the payment due date, October 1, 2012. This payment and use of cash is reflected on the balance sheet as a reduction of “Net finance receivables” in the amount of $11.2 million and corresponding “Accrued interest receivable” in the amount of $2.9 million. The above table does not reflect the October 1, 2011 payment received on September 30, 2011. There were no Federal Government Allotment System payments received in advance of the payment due dates on September 30, 2013 or September 30, 2012.

Net Interest Margin

The principal component of our profitability is net interest margin, which is the difference between the interest earned on our finance receivables and the interest paid on borrowed funds. Some states and federal statutes regulate the interest rates that may be charged to our customers. In addition, competitive market conditions also impact the interest rates.

Our interest expense is sensitive to general market interest rate fluctuations. These general market fluctuations directly impact our cost of funds. Our inability to increase the annual percentage rate earned on new and existing finance receivables restricts our ability to react to increases in cost of funds. Accordingly, increases in market interest rates generally will narrow interest rate spreads and lower profitability, while decreases in market interest rates generally will widen interest rate spreads and increase profitability.

The following table presents a three-year history of data relating to our net interest margin as of and for the fiscal years presented.

	As of and for the Years Ended September 30,
	2013		2012		2011

Total finance receivables balance	$	364,197,688	$	396,803,008	$	405,233,539
Average total finance receivables (1)	374,327,173		397,901,171		396,998,708
Average interest bearing liabilities (1)	261,660,027		272,719,215		281,790,007
Total interest income and fees	109,769,658		113,249,059		114,121,026
Total interest expense	18,276,134		19,250,406		19,202,745

(1) Averages are computed using month-end balances and exclude any early allotment payments.

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Results of Operations

Year Ended September 30, 2013 Compared to Year Ended September 30, 2012.

Total Finance Receivables. Our aggregate finance receivables decreased 8.2% to $364.2 million on September 30, 2013 from $396.8 million on September 30, 2012 due to lower demand for military loans, a decline in ancillary product sales and a reduced number of locations in our retail merchant network. Demand has been impacted by the fragile state of the United States’ economic recovery and uncertainty amongst our military customers regarding the future size of the United States military. Our primary supplier of loans, CBD, saw a $9.3 million or 2.3% decrease in military loan originations during fiscal 2013 from $398.3 million during fiscal 2012. Our acquisition of retail installment contracts decreased during fiscal 2013 by $12.9 million or 50.7% compared to fiscal 2012 due to a reduced number of locations in our retail merchant network. Our aggregate average finance receivables decreased during this period to $374.3 million in fiscal 2013 from $397.9 million in fiscal 2012, a decrease of $23.6 million or 5.9%.

Total Interest Income and Fees. Total interest income and fees in fiscal 2013 represented 98.3% of our revenue compared to 96.0% in fiscal 2012. Interest income and fees decreased to $109.8 million from $113.2 million in fiscal 2012, a decrease of $3.4 million or 3.0%. This decrease is primarily due to the 5.2% overall decline in originations from fiscal 2012 and a decline in the corresponding origination fee income and a decrease in aggregate average finance receivables of 5.9%.

Interest Expense. Interest expense in fiscal 2013 decreased to $18.3 million from $19.3 million in fiscal 2012, a decrease of $1.0 million or 5.2%. This decrease is primarily due to a decrease in average interest bearing liabilities of $11.1 million or 4.1%. Our junior subordinated investment notes decreased to $63.9 million at September 30, 2013 compared to $67.4 million at September 30, 2012. The weighted average interest rate of our junior subordinated investment notes was 9.15% at September 30, 2013 compared to 6.11% for our amortizing term notes at September 30, 2013. The weighted average interest rates for the junior subordinated investment notes and amortizing term notes at September 30, 2012 were 9.06% and 6.25%, respectively.

Provision for Credit Losses. The provision for credit losses increased to $36.4 million in fiscal 2013 from $34.6 million in fiscal 2012, an increase of $1.8 million or 5.2%. Net charge-offs increased to $34.0 million in fiscal 2013 compared to $31.0 million in fiscal 2012, an increase of $3.0 million or 9.7%. The net charge-off ratio increased to 9.1% in fiscal 2013 compared to 7.8% in fiscal 2012. Our increase in net charge-offs in fiscal 2013 compared to fiscal 2012 was due primarily to an increase in customers who separated from the military prior to repaying their loan. See further discussion in “Credit Loss Experience and Provision for Credit Losses.”

Debt Protection Income, net. Debt protection income, net consists of debt protection revenue, claims benefit expenses and third party commissions. Debt protection revenue totaled $5.7 million in fiscal 2013 compared to $8.3 million in fiscal 2012, a decrease of $2.6 million or 31.3%. The decline in debt protection revenue is due primarily to a reduction in the number of customers purchasing the product. Claims benefit expenses increased to $3.3 million in fiscal 2013 compared to $2.9 million in fiscal 2012, an increase of $0.4 million or 13.8%. The increase in claims benefit expenses is due to continued loss development for covered benefits.

Other Revenue. The $0.2 million decline in other revenue from fiscal 2012 to fiscal 2013 is due primarily to a decrease in investment income. Total investments declined $2.7 million from September 30, 2012 to September 30, 2013.

Non-Interest Expense. Non-interest expenses in fiscal 2013 decreased to $43.3 million compared to $46.1 million in fiscal 2012, a decrease of $2.8 million or 6.1%. The decrease was due primarily to a $2.8 million decrease in management fees which is the result of a 5.9% decrease in aggregate average finance receivables.

Provision for Income Taxes. The Company’s effective tax rate (“ETR”) was 31.4% in fiscal 2013 compared to 33.5% in fiscal 2012. This decrease is primarily due to the recording of $0.6 million in fiscal 2013 from favorable state audit settlements and the redetermination of state apportionment factors related to previously filed state tax returns. A $0.2 million net decrease in uncertain tax positions (“UTP”) was also recorded in fiscal 2013 versus a $0.5 million net decrease in UTP being recorded in fiscal 2012. These reserve adjustments relate to the expiration of tax statutes of limitations.

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Delinquency Experience

Our customers are required to make monthly payments of interest and principal. Our servicer, CBD, under our supervision, analyzes our delinquencies on a recency delinquency basis utilizing our guidelines. A loan is delinquent under the recency method when a full payment (95% or more of the contracted payment amount) has not been received for 30 days after the last full payment. The increase in delinquent balances, 60 days or more past due, for fiscal 2013 is due primarily to a $1.3 million increase in delinquent military loans from customers who had advised us of their separation from the military. As of September 30, 2013 and September 30, 2012, we had approximately $7.5 million and $6.2 million in delinquent loans, 60 days or more past due, respectively, from customers who had advised us of their separation from the military prior to repaying their loan. See “Non-performing Assets.” below.

The following table sets forth the three-year history of our delinquency experience for accounts of which payments are 60 days or more past due.

	As of and for the Years Ended September 30,
	2013			2012			2011

Total finance receivables	$	364,197,688		$	396,803,008		$	405,233,539
Total finance receivables balances 60 days or more past due	17,064,857			15,227,342			13,953,957
Total finance receivables balances 60 days or more past due as a percent of total finance receivables	4.69		%	3.84		%	3.44		%

Credit Loss Experience and Provision for Credit Losses

General. The allowance for credit losses is maintained at an amount that management considers sufficient to cover losses inherent in the outstanding finance receivable portfolio. We utilize a statistical model based on potential credit risk trends incorporating historical factors to estimate losses. These results and management’s judgment are used to estimate inherent losses and in establishing the current provision and allowance for credit losses. These estimates are influenced by factors outside our control, such as economic conditions, current or future military deployments and completion of military service prior to repayment of a loan. There is uncertainty inherent in these estimates, making it reasonably possible that they could change in the near term. See “Item 1A. Risk Factors.”

Military Loans. Our charge-off policy is to charge-off military loans at 180 days past due, on a recency delinquency basis, or earlier if management deems it appropriate. Charge-offs can occur when a customer leaves the military prior to repaying the finance receivable or is subject to longer term and more frequent deployments. When purchasing loans we cannot predict when or whether a customer may depart from the military early. Accordingly, we cannot implement policies or procedures for CBD to follow to ensure that we will be repaid in full prior to a customer leaving the military, nor can we predict when a customer may be subject to deployment at a duration or frequency that causes a default on their loans.

The following table shows a three-year historical picture of net charge-offs on military loans and net charge-offs as a percentage of military loans:

	As of and for the Years Ended September 30,
	2013			2012			2011

Military loans:
Military loans charged-off	$	35,562,807		$	32,610,926		$	26,348,867
Less recoveries	3,393,341			3,124,601			3,693,170
Net charge-offs	$	32,169,466		$	29,486,325		$	22,655,697
Average military receivables (1)	$	351,673,579		$	366,816,242		$	358,241,610
Percentage of net charge-offs to average military receivables	9.15		%	8.04		%	6.32		%

(1) Averages are computed using month-end balances and exclude any early allotment payments.

Retail Installment Contracts. Under many of our arrangements with retail merchants, we may withhold a percentage (usually between five and ten percent) of the principal amount of the retail installment contract purchased. The amounts withheld from a particular retail merchant are recorded in a specific reserve account. As of September 30, 2013, the aggregate amount of retail

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merchant reserves totaled $0.5 million, a decrease of $0.8 million, or 66.7%, from the same period last year. The decrease is due to reduced acquisitions of retail installment contracts, a reduced number of locations in our retail merchant network as well as increased utilization of the dealer reserves for non-performing contracts. This represents a 2.0% reserve as a percentage of average retail installment contract receivables. Any losses incurred on the retail installment contracts purchased from that retail merchant are charged against its reserve account. Upon the retail merchant’s request, and no more often than annually, we will pay the retail merchant the amount by which its reserve account exceeds 15% of the aggregate outstanding balance on all retail installment contracts purchased from them, less losses we have sustained, or reasonably could sustain, due to debtor defaults, collection expenses, delinquencies and breaches of our agreement with the retail merchant.

Our allowance for credit losses is utilized to the extent that the loss on any individual retail installment contract exceeds the retail merchant’s aggregate reserve account at the time of the loss.

The following table shows a three-year historical picture of net charge-offs on retail installment contracts and net charge-offs as a percentage of retail installment contracts:

	As of and for the Years Ended September 30,
	2013			2012			2011
Retail installment contracts:
Contracts charged-off	$	2,352,507		$	1,923,227		$	2,515,911
Less recoveries	497,891			395,942			505,904
Net charge-offs	$	1,854,616		$	1,527,285		$	2,010,007
Average retail installment contract receivables (1)	$	22,653,593		$	31,084,929		$	38,757,098
Percentage of net charge-offs to average retail installment contract receivables	8.19		%	4.91		%	5.19		%

(1) Averages are computed using month-end balances and exclude any early allotment payments.

Former Military. As of September 30, 2013 and September 30, 2012, we had approximately $12.5 million, or 3.4% of our total portfolio, and $9.8 million, or 2.5% of our total portfolio, respectively, from customers who had advised us of their separation from the military prior to repaying their loan. See “Non-performing Assets.” below.

Our net charge-offs as a percentage of average finance receivables has increased due primarily to an increase in customers who separated from the military prior to repaying their loan. Military loan net charge-offs, from customers who had advised us of their separation from the military, were $20.4 million and represented 59.9% of net charge-offs in fiscal 2013 compared to $17.1 million and 55.2% in fiscal 2012. Unemployment after the customer’s separation from the military and a subsequent halt in loan payments has contributed to higher delinquencies and net charge-offs. Our allowance for credit losses on military loans increased $2.6 million to $30.1 million at September 30, 2013 compared to $27.5 million at September 30, 2012 due primarily to the $3.3 million increase in net-charge offs from customers who had advised us of their separation from the military.

Allowance for Credit Losses. The following table sets forth the three-year history of our allowance for credit losses:

	As of and for the Years Ended September 30,
	2013			2012			2011

Average total finance receivables (1)	$	374,327,173		$	397,901,171		$	396,998,708
Provision for credit losses	36,424,082			34,617,355			25,565,703
Net charge-offs	34,024,082			31,013,610			24,665,704
Net charge-offs as a percentage of average total finance receivables	9.09		%	7.79		%	6.21		%
Allowance for credit losses	$	31,400,000		$	29,000,000		$	25,396,255
Allowance as a percentage of average total finance receivables	8.39		%	7.29		%	6.40		%

(1) Averages are computed using month-end balances and exclude any early allotment payments.

The allowance for credit losses in fiscal 2013 increased to $31.4 million from $29.0 million at the end of fiscal 2012 and was due primarily to the increase in net charge-offs from customers who had advised us of their separation from the military. See further discussion in “Credit Loss Experience and Provision for Credit Losses.

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The following table sets forth the three year history of the components of our allowance for credit losses:

	As of and for the Years Ended September 30,
	2013		2012		2011

Balance, beginning of period	$	29,000,000	$	25,396,255	$	24,496,256
Finance receivables charged-off	37,915,314		34,534,153		28,864,778
Less recoveries	3,891,232		3,520,543		4,199,074
Net charge-offs	34,024,082		31,013,610		24,665,704
Provision for credit losses	36,424,082		34,617,355		25,565,703
Balance, end of period	$	31,400,000	$	29,000,000	$	25,396,255

Non-performing Assets

The accrual of interest income is suspended when a full payment on either military loans or retail installment contracts has not been received for 90 days or more and the interest due exceeds 60 days of interest charges. Non-performing assets represent those finance receivables of which both the accrual of interest income has been suspended and for which no full payment of principal or interest has been received for more than 90 days, on a recency basis (95% or more of the contracted payment amount has not been received for 30 days after the last full payment). Non-performing assets increased to $12.3 million at September 30, 2013 from $11.3 million at September 30, 2012.

Loan Acquisition

Asset growth is an important factor in determining our future revenues. We are dependent upon CBD and retail merchants to increase their originations for our future growth. In connection with purchasing the loans, we pay CBD a fee in the amount of $30.00 for each military consumer loan originated by CBD and purchased by us. This fee may be adjusted annually on the basis of the annual increase or decrease in CBD’s deferred acquisition cost analysis. For fiscal 2013, loans purchased from CBD and retail merchants decreased to $401.6 million from $423.8 million in fiscal 2012, a decrease of $22.2 million or 5.2%. The primary reason for this decrease is due to lower than expected demand for military loans. Demand has been impacted by the fragile state of the United States economic recovery and uncertainty amongst our military customers regarding the future size of the United States military.

The following table sets forth the three-year history of overall purchases of military loans and retail installment contracts, including those refinanced:

	For the Years Ended September 30,
	2013		2012		2011

Total loans acquired:
Gross balance	$	401,605,228	$	423,763,549	$	456,475,598
Number of finance receivable notes	119,042		120,931		129,899
Average note amount	$	3,374	$	3,504	$	3,514

Military loans:
Gross balance	$	389,045,683	$	398,285,584	$	425,588,411
Number of finance receivable notes	113,374		109,218		116,834
Average note amount	$	3,432	$	3,647	$	3,643

Retail installment contracts:
Gross balance	$	12,559,545	$	25,477,965	$	30,887,187
Number of finance receivable notes	5,668		11,713		13,065
Average note amount	$	2,216	$	2,175	$	2,364

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Liquidity and Capital Resources

A relatively high ratio of borrowings to invested capital is customary in the consumer finance industry. Our principal use of cash is to purchase military loans and retail installment contracts. We use borrowings to fund the difference, if any, between the cash used to purchase military loans and retail installment contracts and operations, and the cash generated from loan repayments and operations. Cash used in investing activities in fiscal 2013 was approximately $9.5 million and cash used in financing activities was $29.5 million which was funded from operating activities of $38.8 million. Cash used in investing activities in fiscal 2012 was approximately $36.6 million and cash used in financing activities was $10.2 million which was funded from $47.6 million of cash from operating activities.

The majority of our liquidity requirements are secured by our funding through the SSLA. Additional sources of funds may be generated through our sales of investment notes and borrowings with MCFC. Our available credit facility decreased $28.0 million in fiscal 2013 due primarily to one bank that withdrew from the SSLA. In addition, we must repay borrowings of $15.1 million from withdrawing banks who previously participated in the SSLA. Further, we have decreased our investment notes to $63.9 million in 2013 from $67.4 million in 2012, a decrease of $3.5 million or 5.2%.

Our SSLA lenders have been informed that MCB has reviewed and responded to a letter from the OCC (the “OCC Letter”) regarding certain former business practices of the CBD that the OCC believes violated Section 5 of the Federal Trade Commission Act. MCB has responded to the OCC that it does not believe the former business practices rose to the level of a violation of law, and to date has not received further formal correspondence from the OCC regarding such response. Because the SSLA is an uncommitted facility, individual banks that are party to this agreement have no obligation to make any future loans to us. If our lenders perceive that as a result of the OCC Letter, the CBD’s ability to originate and service consumer loans will be adversely affected, or any financial or other consumer remediation must be made by MCB, one or more of our lenders may choose to reduce or cease their participation. As a result, we may experience diminished availability under the SSLA. See “Item 1A—Risk Factors.”

Senior Indebtedness — Bank Debt

On June 12, 2009, we entered into the SSLA with the lenders listed in the SSLA (“the lenders”) and UMB Bank, N.A. (the “Agent”). The SSLA replaced and superseded the Senior Lending Agreement, dated as of June 9, 1993, as subsequently amended and restated (the “SLA”). On June 21, 2013, the Company entered into the thirty-sixth amendment to the SSLA, which 1) permitted the declaration and payment of a $20.0 million one-time unrestricted dividend from the Company to MCFC on or before June 30, 2013; 2) amended the revolving credit line interest rate to be 4% or prime, whichever is greater, for all new borrowings after June 21, 2013; 3) amended the amortizing term notes interest rate to be 5.25% or 270 basis points over the 90-day moving average of like-term treasury notes, whichever is greater, for all new borrowings after June 21, 2013; and 4) consented to the amended and restated LSMS Agreement. A one-time dividend of $20.0 million was paid to MCFC on June 28, 2013. Prior to June 21, 2013, the interest rate on the revolving credit line was 5% or prime, whichever was greater, and the interest rate on amortizing notes was 6.25% or 270 basis points over the 90-day moving average of like-term treasury notes, whichever was greater. The term of the current SSLA ends on March 31, 2014 and is automatically extended annually unless any lender gives written notice of its objection by March 1 of each calendar year.

Our assets secure the loans extended under the SSLA for the benefit of the lenders and other holders of the notes issued pursuant to the SSLA (the “Senior Debt”). The facility is an uncommitted facility that provides common terms and conditions pursuant to which the individual lenders that are a party to the SSLA may choose to make loans to us in the future. Any lender may elect not to participate in any future fundings at any time without penalty. As of September 30, 2013, we could request up to $74.7 million in additional funds and remain in compliance with the terms of the SSLA. No lender, however, has any contractual obligation to lend us these additional funds.

As of September 30, 2013, the lenders have indicated a willingness to participate in fundings up to an aggregate of $308.9 million during the next 12 months, including $206.8 million which is currently outstanding. In addition, we have borrowings of $15.1 million which need to be repaid from withdrawing banks who had previously participated in the SSLA.

The aggregate notional balance outstanding under amortizing notes was $187.6 million and $186.2 million at September 30, 2013 and 2012, respectively. Interest on the amortizing notes is fixed at 270 basis points over the 90-day moving average of like-term treasury notes when issued. The interest rate for notes created after June 12, 2009 and before June 21, 2013 may not be less than 6.25%; prior to June 12, 2009 the interest rate was variable. The interest rate for notes created after June 21, 2013 may not be less than 5.25%. All amortizing notes have terms not to exceed 48 months, payable in equal monthly principal and interest payments. There were 349 and 374 amortizing term notes outstanding at September 30, 2013 and 2012, respectively, with a weighted-average interest rate of 6.11% and 6.25%, respectively. In addition, we are paying our lenders a quarterly uncommitted availability fee in an amount equal to ten basis points multiplied by the quarterly average aggregate outstanding principal amount of all amortizing notes

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held by the lenders. We paid our lenders $0.6 million and $0.5 million in uncommitted availability fees for fiscal 2013 and 2012, respectively.

Substantially all of our assets secure this debt under the SSLA. The SSLA also limits, among other things, our ability to (1) incur additional debt from the lenders beyond that allowed by specific financial ratios and tests, (2) borrow or incur other additional debt except as permitted in the SSLA, (3) pledge assets, (4) pay dividends, (5) consummate certain asset sales and dispositions, (6) merge, consolidate or enter into a business combination with any other person, (7) pay fees to MCFC each year except as provided in the SSLA, (8) purchase, redeem, retire or otherwise acquire any of our outstanding equity interests, (9) issue additional equity interests, (10) guarantee the debt of others without reasonable compensation and only in the ordinary course of business or (11) enter into agreements with our affiliates.

Under the SSLA, we are subject to certain financial covenants that require that we, among other things, maintain specific financial ratios and satisfy certain financial tests. In part, these covenants require us to: (1) maintain an allowance for credit losses equal to or greater than the allowance for credit losses shown on our audited financial statements as of the end of our most recent fiscal year and at no time less than 5.25% of our consolidated net receivables, unless otherwise required by U.S. Generally Accepted Accounting Principals (“U.S. GAAP”), (2) limit our senior indebtedness as of the end of each quarter to not greater than four times our tangible net worth, (3) maintain a positive net income in each fiscal year, (4) limit our senior indebtedness as of the end of each quarter to not greater than 80% of our consolidated receivables, and (5) maintain a consolidated total required capital of at least $75 million plus 50% of the cumulative positive net income earned by us during each of our fiscal years ending after September 30, 2008, which is approximately $109.2 million as of September 30, 2013. Any part of the 50% of positive net income not distributed by us as a dividend for any fiscal year within 120 days after the last day of such fiscal year must be added to our consolidated total required capital and may not be distributed as a dividend or otherwise. No part of the consolidated total required may be distributed as a dividend.

We may not make any payment to MCFC in any fiscal year for services performed or reasonable expenses incurred in an aggregate amount greater than $750,000 plus reimbursable expenses. Such amount may be increased on each anniversary of the SSLA by the percentage increase in the CPI published by the United States Bureau of Labor for the calendar year then most recently ended. The breach of any of these covenants could result in a default under the SSLA, in which event the lenders could seek to declare all amounts outstanding to be immediately due and payable. As of September 30, 2013, we were in compliance with all loan covenants.

If an event of default has occurred, the Agent has the right, on behalf of all holders of the Senior Debt, to immediately take possession and control of the collateral. If the Agent notifies us of an event of default, the interest rate on all Senior Debt will automatically increase to a default rate equal to 2% above the interest rate otherwise payable on such Senior Debt. The default rate will remain in effect so long as any event of default has not been cured.

In connection with the execution of the SSLA, MCFC entered into an Unlimited Continuing Guaranty. MCFC guaranteed the Senior Debt and accrued interest in accordance with the terms of the Unlimited Continuing Guaranty. Under the Unlimited Continuing Guaranty, MCFC also agreed to indemnify the lenders and the Agent for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the lenders or the Agent for payments made under the Senior Debt that are rescinded or must be repaid by lenders to us. If MCFC is required to satisfy any of borrowers’ obligations under the Senior Debt, the lenders and the Agent will assign without recourse the related Senior Debt to MCFC.

Concurrently, in connection with the execution of the SSLA, MCFC entered into a Negative Pledge Agreement in favor of the Agent. Under the Negative Pledge Agreement, MCFC represented that it will not pledge, sell, assign or transfer its ownership of all or any part of our issued and outstanding capital stock and will not otherwise or further encumber any of such capital stock beyond the currently existing negative pledge thereof in favor of Branch Banking and Trust Company, a North Carolina banking corporation headquartered in Winston-Salem, North Carolina (“BB&T”). Once the pledge of our capital stock to BB&T is terminated, MCFC will pledge all of our capital stock to the Agent for the benefit of the lenders to secure payment of all Senior Debt.

In the third quarter of fiscal 2010, we amended the SSLA to allow additional banks to become parties to the SSLA under a modified non-voting role. We have identified each lender that has voting rights under the SSLA as “voting bank(s)” and lenders that do not have voting rights under the SSLA, as “non-voting bank(s)”. While all voting and non-voting banks have the same rights to the collateral and are party to the same terms and conditions of the SSLA, all of the non-voting banks acknowledge and agree that they have no right to vote on any matter nor to prohibit or hinder any action by us, or the voting banks. As of September 30, 2013 and

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September 30, 2012, we had 17 non-voting banks from which we initially borrowed $47.5 million. The amortized balance of these notes as of September 30, 2013 and 2012 was $16.8 million and $28.8 million, respectively.

The following table sets forth a three-year history of the total borrowings and availability under the SSLA and the former Senior Lending Agreement:

	As of and for the Years Ended September 30,
							Actual			Pro forma(1)
	September 30,			September 30,			September 30,			September 30,
	2013			2012			2011			2011

Revolving credit line:
Total facility	$	43,250,000		$	45,250,000		$	40,000,000		$	40,000,000
Balance at end of period	19,240,000			19,450,000			—			14,100,000
Maximum available credit(2)	24,010,000			25,800,000			40,000,000			25,900,000

Term notes:(3)
Voting banks	$	233,750,000		$	251,750,000		$	227,500,000		$	227,500,000
Withdrawing banks	15,119,184			16,500,354			14,851,545			14,851,545
Non-voting banks	16,788,465			28,784,604			36,822,797			36,822,797
Total facility	$	265,657,649		$	297,034,958		$	279,174,342		$	279,174,342
Balance at end of period	187,581,690			186,230,677			214,490,826			214,490,826
Maximum available credit(2)	78,075,959			110,804,281			64,683,516			64,683,516

Total revolving and term notes:(3)
Voting banks	$	277,000,000		$	297,000,000		$	267,500,000		$	267,500,000
Withdrawing banks	15,119,184			16,500,354			14,851,545			14,851,545
Non-voting banks	16,788,465			28,784,604			36,822,797			36,822,797
Total facility	$	308,907,649		$	342,284,958		$	319,174,342		$	319,174,342
Balance, end of period	206,821,690			205,680,677			214,490,826			228,590,826
Maximum available credit(2)	102,085,959			136,604,281			104,683,516			90,583,516
Credit facility available(4)	74,680,040			102,714,990			102,714,645			90,583,516
Percent utilization of voting banks	63.1		%	65.4		%	61.6		%	66.1		%
Percent utilization of the total facility	67.0		%	60.1		%	67.2		%	71.6		%

(1) Total facility pro forma assumes the early allotment payments received September 30, 2011 were not received untildue on October 1, 2011.

(2) Maximum available credit assumes proceeds in excess of the amounts shown below under “Credit facility available” are used to increase qualifying finance receivables and all terms of the SSLA are met, including maintaining a senior indebtedness to consolidated net receivable ratio of not more than 80.0%.

(3) Includes 48-month amortizing term notes.

(4) Credit facility available is based on the existing asset borrowing base and maintaining a senior indebtedness to consolidated net notes receivable ratio of 80.0%.

Subordinated Debt - Parent. Our SSLA allows for a revolving line of credit with MCFC. Funding on this line of credit is provided as needed at our discretion and dependent upon the availability of MCFC and is due upon demand. The maximum principal balance of this facility is $25.0 million. Interest is payable monthly and is based on prime or 5.0%, whichever is greater. As of September 30, 2013 and 2012, the outstanding balance under this facility was zero.

Investment Notes. We fund certain capital and financial needs through the sale of investment notes. These notes have varying fixed interest rates and are subordinate to all senior indebtedness. We can redeem these notes at any time upon 30 days written notice. On January 11, 2013, the Securities and Exchange Commission (“SEC”) declared effective our post-effective amendment to our amended registration statement originally filed with the SEC in January 2011 (“2013 Registration Statement”). Pursuant to this 2013 Registration Statement, along with the accompanying prospectus, we registered an offering of our investment notes, with a maximum offering price of $50 million, on a continuous basis with an expected termination date of January 28, 2014,

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unless terminated earlier at our discretion. As of September 30, 2013, we had outstanding $63.9 million (with accrued interest), of which $28.3 million is from our recent offering. These notes had a weighted average interest rate of 9.15% as of September 30, 2013.

Dividends From Subsidiaries. Our reinsurance subsidiary is subject to the laws and regulations of the state of Nevada that limit the amount of dividends our reinsurance subsidiary can pay to us and require us to maintain a certain capital structure. In the past, these regulations have not had a material impact on our reinsurance subsidiary or its ability to pay dividends to us. We do not expect these regulations will have a material impact on our business or the business of our reinsurance subsidiary in the future.

Impact of Inflation and General Economic Conditions

Although inflation has not had a material adverse effect on our financial condition or results of operations, increases in the inflation rate generally are associated with increased interest rates. A significant and sustained increase in interest rates could unfavorably impact our profitability by reducing the interest rate spread between the rate of interest we receive on military loans and retail installment contracts and interest rates paid under our SSLA and investment notes. Inflation also may negatively affect our operating expenses. With the ongoing strains in the financial markets, we see liquidity, capital and earnings challenges for some lenders in our credit group which may reduce their ability to participate in the credit or may cause a decrease in their willingness to lend at the current levels. In addition, we have borrowings of $15.1 million from withdrawing banks who previously participated in the SSLA. See “Liquidity and Capital Resources.”

Critical Accounting Policies

General. Our accounting and reporting policies are in accordance with U.S. GAAP and conform to general practices within the finance company industry. The significant accounting policies used in the preparation of the consolidated financial statements are discussed in Note 1 to the Consolidated Financial Statements. Critical accounting policies require management to make estimates and assumptions, which affect the reported amounts of assets, liabilities, income and expenses. As a result, changes in these estimates and assumptions could significantly affect our financial position and results of operations.

Allowance for Credit Losses and Provision for Credit Losses. We consider our policy regarding the allowance and resulting provision for credit losses to be our most important accounting policy due to the significant degree of management judgment applied in establishing the allowance and the provision.

We utilize a statistical model which incorporates historical factors to forecast probable losses or credit risk trends to determine the appropriate amount of allowance for credit losses.

We evaluate the finance receivable portfolio quarterly. Our portfolio consists of a large number of relatively small, homogenous accounts. No account is large enough to warrant individual evaluation for impairment. We consider numerous qualitative and quantitative factors in estimating losses in our finance receivable portfolio, including the following:

· Prior credit losses and recovery experience;

· Current economic conditions;

· Current finance receivable delinquency trends; and

· Demographics of the current finance receivable portfolio.

We also use several ratios to aid in the process of evaluating prior finance receivable loss and delinquency experience. Each ratio is useful, but each has its limitations. These ratios include:

· Delinquency ratio — finance receivables 60 days or more past due, on a recency basis, as a percentage of finance receivables;

· Allowance ratio — allowance for finance receivable losses as a percentage of finance receivables;

· Charge-off ratio — net charge-offs as a percentage of the average of finance receivables at the beginning of each month during the period; and

· Charge-off coverage — allowance for finance receivable losses to net charge-offs.

In addition to these models, we exercise our judgment, based on our experience in the consumer finance industry, when determining the amount of the allowance for credit losses. We consider this estimate to be a critical accounting estimate that affects our net income in total and the pretax operating income of our business. See “Credit Loss Experience and Provision for Credit Losses.”

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Goodwill and Other Intangible Assets. Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as acquisitions. Other intangible assets represent other identifiable assets. Goodwill is not amortized over an estimated useful life, but rather tested at least annually for impairment. Intangible assets other than goodwill, which are determined to have finite lives, continue to be amortized on straight-line or accelerated bases over their estimated useful lives. Recoverability of these assets is assessed only when events have occurred that may give rise to impairment.

Under the provisions of Accounting Standard Codification (“ASC”) 350, Intangibles — Goodwill and Other, goodwill is tested for impairment annually and more frequently if events and circumstances indicate that the asset may be impaired and that the carrying value may not be recoverable. A two-step impairment test is performed on goodwill. We have one reporting unit. In the first step, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to the reporting unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If upon completing the second step of the impairment test the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.

The fair value of our reporting unit was determined using the income approach and the market approach. The income approach is a valuation technique whereby we calculate the fair value the reporting unit based on the present value of estimated future cash flows, which are formed by evaluating historical trends, current budgets, operating plans and industry data. The market approach is a valuation technique whereby we calculate the fair value the reporting unit by comparing it to publicly traded companies in similar lines of business or to comparable transactions or assets. The fair value analysis requires us to make various assumptions about net interest margins, net charge-offs, growth rates and discount rates. While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting unit, it is possible that a material change could occur, including if actual experience differs from the assumptions used in our analyses. These differences could have a material adverse impact on the consolidated results of operations and could result in a material impairment to our goodwill and other intangible assets.

Management evaluated our goodwill at September 30, 2013, and determined that there was no impairment, as the estimated fair value exceeded the carrying value.

Contractual Obligations

We have the following payment obligations under current financing arrangements as of September 30, 2013:

			Payments Due By Period
Contractual obligations:	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Debt	$	251,285,320	$	89,181,452	$	145,084,103	$	585,305	$	16,434,460
Interest on Debt (1)	17,646,268		5,855,440		10,138,368		56,828		1,595,632
Total contractual cash obligations	$	268,931,588	$	95,036,892	$	155,222,471	$	642,133	$	18,030,092

(1) Interest on long term debt is calculated using the weighted average interest rate of 6.11% for amortizing term notes and 9.15% for investment notes as of September 30, 2013.

			Amount of Commitment Expiration Per Period
Other commercial commitments:	Total Amounts Committed		Less than 1 year		1-3 years		4-5 years		Over 5 years
Lines of credit	$	19,240,000	$	19,240,000	$	—	$	—	$	—
Interest on lines of credit (1)	769,600		769,600
Total lines of credit	$	20,009,600	$	20,009,600	$	—	$	—	$	—

(1) Interest on lines of credit is calculated using the fixed rate of 4.00% as of September 30, 2013.

Impact of New and Emerging Accounting Pronouncements Not Yet Adopted

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component and by the respective line items of net income. The standard was effective for fiscal years, and interim periods within those years,

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PIONEER FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2013 AND 2012

	As of September 30,
	2013			2012

ASSETS

Cash and cash equivalents - non-restricted	$	1,922,956		$	2,136,520
Cash and cash equivalents - restricted	623,333			727,857
Investments - non-restricted	1,718,741			3,360,773
Investments - restricted	—			1,024,134
Gross finance receivables	364,197,688			396,803,008
Less:
Unearned fees	(18,125,776		)	(35,892,490		)
Allowance for credit losses	(31,400,000		)	(29,000,000		)
Net finance receivables	314,671,912			331,910,518

Furniture and equipment, net	383,241			565,027
Net deferred tax asset	13,880,388			13,377,298
Prepaid and other assets	10,002,570			7,913,040
Deferred acquisition costs	2,508,789			5,485,083
Goodwill	31,474,280			31,474,280
Intangibles, net	3,798,200			5,504,600

Total assets	$	380,984,410		$	403,479,130

LIABILITIES AND STOCKHOLDER’S EQUITY

Liabilities:
Revolving credit line - banks	$	19,240,000		$	19,450,000
Accounts payable	191,394			536,919
Accrued expenses and other liabilities	5,391,059			9,898,053
Amortizing term notes	187,581,690			186,230,677
Investment notes	63,907,784			67,428,441

Total liabilities	276,311,927			283,544,090

Stockholder’s equity:
Common stock, no par value; 1 share issued and outstanding	86,394,200			86,394,200
Accumulated other comprehensive income	9,284			58,410
Retained earnings	18,268,999			33,482,430

Total stockholder’s equity	104,672,483			119,935,040

Total liabilities and stockholder’s equity	$	380,984,410		$	403,479,130

See Notes to Consolidated Financial Statements

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PIONEER FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended September 30,
	2013			2012			2011

Interest income and fees	$	109,769,658		$	113,249,059		$	114,121,026

Interest expense	18,276,134			19,250,406			19,202,745

Net interest income before provision for credit losses	91,493,524			93,998,653			94,918,281
Provision for credit losses	36,424,082			34,617,355			25,565,703
Net interest income	55,069,442			59,381,298			69,352,578

Debt protection income, net
Debt protection revenue	5,689,751			8,346,102			7,589,289
Claims paid and change in reserves	(3,255,256		)	(2,944,824		)	(1,607,426		)
Third party commissions	(612,742		)	(898,811		)	(235,662		)
Total debt protection income, net	1,821,753			4,502,467			5,746,201

Other revenue	116,963			307,106			1,620,383

Total non-interest income, net	1,938,716			4,809,573			7,366,584

Non-interest expense
Management and record keeping services fee	36,815,003			39,655,079			39,532,624
Professional and regulatory fees	1,862,702			1,229,501			1,416,654
Amortization of intangibles	1,706,400			2,235,600			2,973,600
Other operating expenses	2,925,164			2,999,076			4,168,082
Total non-interest expense	43,309,269			46,119,256			48,090,960

Income before income taxes	13,698,889			18,071,615			28,628,202
Provision for income taxes	4,294,287			6,044,312			11,524,389
Net income	$	9,404,602		$	12,027,303		$	17,103,813

Net income per share, basic and diluted (1)	$	9,404,602		$	12,027,303		$	17,103,813

(1) Number of shares outstanding is one.

See Notes to Consolidated Financial Statements

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PIONEER FINANCIAL SERVICES, INC.

Consolidated Statements of Stockholder’s Equity

For the years ended September 30, 2013, 2012 and 2011

									Accumulated
									Other
						Retained			Comprehensive
	Total			Common Stock		Earnings			Income

Balance, September 30, 2010	$	106,531,894		$	86,394,200	$	19,970,014		$	167,680

Total comprehensive income	17,050,655			—		17,103,813			(53,158		)
Dividends paid to parent	(8,845,387		)	—		(8,845,387		)	—

Balance, September 30, 2011	$	114,737,162		$	86,394,200	$	28,228,440		$	114,522

Total comprehensive income	11,971,191			—		12,027,303			(56,112		)
Dividends paid to parent	(6,773,313		)	—		(6,773,313		)	—

Balance, September 30, 2012	$	119,935,040		$	86,394,200	$	33,482,430		$	58,410

Total comprehensive income	9,355,476			—		9,404,602			(49,126		)
Dividends paid to parent	(24,618,033		)	—		(24,618,033		)	—

Balance, September 30, 2013	$	104,672,483		$	86,394,200	$	18,268,999		$	9,284

See Notes to Consolidated Financial Statements

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PIONEER FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended September 30,
	2013			2012			2011
Cash flows from operating activities:
Net income	$	9,404,602		$	12,027,303		$	17,103,813
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Provision for credit losses on finance receivables	36,424,082			34,617,355			25,565,703
Depreciation and amortization	1,844,088			2,245,002			2,893,041
Gain on investments sold - non-restricted	(35,304		)	—			—
Deferred income taxes	(476,638		)	(4,799,458		)	(2,625,901		)
Interest accrued on investment notes	2,587,342			2,388,051			2,055,904
Changes in:
Accounts payable and accrued expenses	(4,852,519		)	2,060,371			(228,399		)
Deferred acquisition costs	2,976,294			432,777			(1,309,561		)
Unearned premium reserves	(6,954,811		)	1,627,569			3,062,168
Prepaids and other assets	(2,089,530		)	(2,954,215		)	1,242,520

Net cash provided by operating activities	38,827,606			47,644,755			47,759,288

Cash flows from investing activities:
Finance receivables purchased from affiliate	(235,076,964		)	(239,616,353		)	(251,013,073		)
Finance receivables purchased from retail merchants	(11,363,029		)	(23,326,384		)	(29,026,308		)
Finance receivables repaid	234,209,328			225,492,066			250,664,133
Capital expenditures	(30,202		)	(542,020		)	(25,920		)
Change in restricted cash	104,524			(31,279		)	(27,187		)
Investments purchased - non-restricted	—			(249,000		)	(790,238		)
Investments matured and sold - restricted	—			—			130,237
Investments matured and sold - non-restricted	2,613,197			1,685,000			2,200,000
Net cash used in investing activities	(9,543,146		)	(36,587,970		)	(27,888,356		)

Cash flows from financing activities:
Net borrowings/(repayments) under lines of credit	(210,000		)	19,450,000			(21,373,000		)
Proceeds from borrowings	97,797,175			79,002,245			142,131,268
Repayment of borrowings	(102,467,166		)	(101,856,038		)	(118,565,582		)
Repayment of subordinated debt - parent	—			—			(13,900,000		)
Dividends paid to parent	(24,618,033		)	(6,773,313		)	(8,845,387		)

Net cash used in financing activities	(29,498,024		)	(10,177,106		)	(20,552,701		)

Net increase/(decrease) in cash and equivalents	(213,564		)	879,679			(681,769		)

Cash and cash equivalents - non-restricted, Beginning of period	2,136,520			1,256,841			1,938,610

Cash and cash equivalents - non-restricted, End of period	$	1,922,956		$	2,136,520		$	1,256,841

Additional cash flow information:
Interest paid	$	15,814,447		$	16,468,662		$	16,449,222
Income taxes paid	$	7,431,763		$	9,844,816		$	13,727,467

See Notes to Consolidated Financial Statements

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Investments - Restricted

We classify our restricted government bonds as available-for-sale and record them at fair value. Unrealized gains and losses are recorded as accumulated other comprehensive income in the shareholder’s equity section of our balance sheet, net of related income tax effects. If the fair value of any investment security declines below cost and we consider the decline to be other than temporary, we reduce the investment security to its fair value, and record a loss.

Investments were restricted pursuant to the agreement with Assurant. As of September 30, 2013, the amount required per the agreement with Assurant was zero.

Finance Receivables

Finance receivables are carried at amortized cost and are adjusted for unamortized direct origination fees and reduced for finance charges on pre-computed finance receivables, unearned dealer discounts, allowances for credit losses, debt protection reserves and unearned fees. Debt protection reserves and unearned fees applicable to credit risk on consumer receivables are treated as a reduction of finance receivables in the consolidated balance sheet since the payments on such policies generally, are used to reduce outstanding receivables.

Allowance for Credit Losses

We maintain an allowance for credit losses, which represents management’s best estimate of inherent losses in the outstanding finance receivable portfolio. The allowance for credit losses is reduced by actual credit losses and is increased by the provision for credit losses and recoveries of previous losses. The provision for finance receivable losses are charged to earnings to bring the total allowance to a level considered necessary by management. As the portfolio of total finance receivables consists of military loans and retail installment contracts, a large number of relatively small, homogenous accounts, the finance receivables are evaluated for impairment as two separate components: military loans and retail installment contracts. Management considers numerous factors in estimating losses in our credit portfolio, including the following:

· Prior credit losses and recovery experience;

· Current economic conditions;

· Current finance receivable delinquency trends; and

· Demographics of the current finance receivable portfolio.

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as purchases. Other intangible assets represent premiums paid for other identifiable assets (see Note 6: Goodwill and Other Intangible Assets for more details). Goodwill is not amortized over an estimated useful life, but rather is tested annually for impairment as of September 30th, or when there are indicators of impairment. Intangible assets other than goodwill, which are determined to have finite lives, are amortized on straight-line or accelerated basis over their estimated useful lives between three and ten years. Amortizing intangibles are assessed for impairment only when events have occurred that may give rise to impairment. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that operation. If such cash flows are less than such carrying amounts, long-lived assets, including such intangibles, are written down to their respective fair values.

Deferred Policy Acquisition Costs

The costs of acquiring the debt protection fees and insurance policies are primarily related to the production of new and renewal business and have been deferred to the extent that such costs are deemed recoverable from future revenue. Such costs principally include debt protection commission and third party servicing fees. Costs deferred on property and casualty and credit policies are amortized over the term of the related policies in relation to the premiums and fees earned. Deferred policy acquisition costs are written off to current period results of operations if such costs are deemed to be not recoverable from future investment income.

Debt Protection - Insurance Claims and Reserves

Life and health reserves for credit coverage consist principally of future policy benefit reserves and reserves for estimates of future payments on incurred claims reported and unreported but not yet paid. Such estimates are developed using actuarial principles and assumptions based on past experience adjusted for current trends. Any change in the probable ultimate liabilities is reflected in net income in the period in which the change in probable ultimate liabilities was determined.

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Revenue Recognition

Interest Income on Finance Receivables

Interest income on finance receivables is recognized as revenue on an accrual basis using the effective yield method. The deferred fees, net of costs, are accreted into income using the effective yield method over the estimated life of the finance receivable. If a finance receivable, net of costs, liquidates before accretion is completed, we charge or credit any unaccreted net deferred fees or costs to income at the date of liquidation. We stop accruing interest income on finance receivables when a payment has not been received for 90 days, and the interest due exceeds an amount equal to 60 days of interest charges. The accrual is resumed when a full payment (95% or more of the contracted payment amount) is received.

Debt Protection and Reinsurance Income

CBD sells life, accident and health protection along with other exclusive coverages that are unique to our customers. Under an agreement, we assume from CBD, all risks on debt protection, credit accident, health insurance and all other coverage’s written on the military loans. Unearned fees and premiums are recognized as non-interest income over the period of risk in proportion to the amount of debt protection provided.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recorded at currently enacted tax rates applicable to the period in which assets or liabilities are expected to be realized or settled. Deferred tax assets and liabilities are adjusted to reflect changes in statutory tax rates resulting in income adjustments in the period such changes are enacted.

The Company’s operations are included in the consolidated federal income tax return of its parent, and various combined state returns. Income taxes are paid to or refunded by its parent pursuant to the terms of a tax-sharing agreement, approved by the Board of Directors, under which taxes approximate the amount that would have been computed on a separate company basis. The Company receives a benefit at the federal and state rate in the current year for net losses incurred in that year to the extent losses can be utilized in the consolidated federal income tax return or combined state income tax return of the parent. In the event the parent incurs a consolidated net loss in the current or future years, income tax incurred in the current and prior years may be available for recoupment by the Company.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable earnings, and tax planning strategies.

The provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, prescribes a comprehensive financial statement model of how a company should recognize, measure, present, and disclose uncertain tax positions that the company has taken or expects to take in its income tax returns. The Company recognizes tax benefits that meet the “more likely than not” recognition threshold as defined within FASB ASC 740. In the preparation of income tax returns, tax positions are taken based on interpretation of federal and state income tax laws for which the outcome is uncertain. Management periodically reviews and evaluates the status of uncertain tax positions and makes estimates of amounts ultimately due or owed. The benefits of tax positions are recorded in income tax expense in the consolidated financial statements, net of the estimates of ultimate amounts due or owed, including any applicable interest and penalties. Changes in the estimated amounts due or owed may result from closing of the statute of limitations on tax returns, new legislation, and clarification of existing legislation through government pronouncements, the courts, and through the examination process.

The parent and its subsidiaries currently file income tax returns in the United States federal jurisdiction, and most state jurisdictions. These tax returns, which often require interpretation due to their complexity, are subject to changes in income tax regulations or in how the regulations are interpreted. In the normal course of business, the parent and its subsidiaries are routinely subject to examinations and challenges from federal and state taxing authorities regarding the amount of taxes due in connection with the businesses they are engaged in. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions taken by financial services organizations. The challenges made by taxing authorities may result in adjustments to the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. The Company does not believe any adjustments that may result from these examinations will be material to the Company.

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The following table represents finance receivables for the periods presented:

	As of September 30,
	2013			2012

Finance Receivables:
Military loans	$	348,544,188		$	369,361,165
Retail installment contracts	15,653,500			27,441,843
Gross finance receivables	364,197,688			396,803,008

Less:
Net deferred loan fees and dealer discounts	(8,380,793		)	(19,843,416		)
Unearned debt protection fees	(6,119,025		)	(13,073,836		)
Debt protection claims and policy reserves	(3,625,958		)	(2,975,238		)
Total unearned fees	(18,125,776		)	(35,892,490		)

Finance receivables - net of unearned fees	346,071,912			360,910,518

Allowance for credit losses	(31,400,000		)	(29,000,000		)

Net finance receivables	$	314,671,912		$	331,910,518

Management has an established methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in the finance receivable portfolio. Our portfolio consists of a large number of relatively small, homogenous accounts. No account is large enough to warrant individual evaluation for impairment. For purposes of determining the allowance for credit losses, we have segmented the finance receivable portfolio by military loans and retail installment contracts.

The allowance for credit losses for military loans and retail installment contracts is maintained at an amount that management considers sufficient to cover estimated losses inherent in the finance receivable portfolio. Our allowance for credit losses is sensitive to risk ratings assigned to evaluated segments, economic assumptions and delinquency trends driving statistically modeled reserves. We consider numerous qualitative and quantitative factors in estimating losses in our finance receivable portfolio, including the following:

· Prior credit losses and recovery experience;

· Current economic conditions;

· Current finance receivable delinquency trends; and

· Demographics of the current finance receivable portfolio.

We also use internally developed data in this process. We utilize a statistical model based on potential credit risk trends, growth rate and charge off data, when incorporating historical factors to estimate losses. These results and management’s judgment are used to project inherent losses and to establish the allowance for credit losses for each segment of our finance receivables.

As part of the on-going monitoring of the credit quality of our entire finance receivable portfolio, management tracks certain credit quality indicators of our customers including trends related to (1) net charge-offs, (2) non-performing loans and (3) payment history.

There is uncertainty inherent in these estimates, making it possible that they could change in the near term. We make regular enhancements to our allowance estimation methodology that have not resulted in material changes to our allowance.

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The following table sets forth changes in the components of our allowance for credit losses on finance receivables as of the end of the periods presented:

	As of and for the Years Ended September 30,
	2013									2012
	Military Loans			Retail Contracts			Total			Military Loans			Retail Contracts			Total

Allowance for credit losses:
Balance, beginning of period	$	27,457,485		$	1,542,515		$	29,000,000		$	22,970,255		$	2,426,000		$	25,396,255
Finance receivables charged-off	(35,562,807		)	(2,352,507		)	$	(37,915,314	)	(32,610,926		)	(1,923,227		)	(34,534,153		)
Recoveries	3,393,341			497,891			$	3,891,232		3,124,601			395,942			3,520,543
Provision	34,769,835			1,654,247			$	36,424,082		33,973,555			643,800			34,617,355
Balance, end of period	$	30,057,854		$	1,342,146		$	31,400,000		$	27,457,485		$	1,542,515		$	29,000,000

Finance receivables:	348,544,188			15,653,500			364,197,688			369,361,165			27,441,843			396,803,008
Allowance for credit losses	(30,057,854		)	(1,342,146		)	(31,400,000		)	(27,457,485		)	(1,542,515		)	(29,000,000		)
Balance net of allowance	$	318,486,334		$	14,311,354		$	332,797,688		$	341,903,680		$	25,899,328		$	367,803,008

The accrual of interest income is suspended when a full payment on either military loans or retail installment contracts has not been received for 90 days or more and the interest due exceeds 60 days of interest charges. Non-performing assets represent those finance receivables of which both the accrual of interest income has been suspended and for which no full payment of principal or interest has been received for more than 90 days, on a recency basis (95% or more of the contracted payment amount has not been received for 30 days after the last full payment). As of September 30, 2013, we had $11.2 million in military assets and $1.1 million in retail installment contracts that were non-performing loans compared to $10.3 million in military loans and $1.0 million in retail installment contracts as of September 30, 2012.

We did not have any finance receivables greater than 90 days past due accruing interest as of September 30, 2013 or 2012. The accrual of interest is resumed and the account is considered current when a full payment is received. We consider a loan impaired after 180 days past due and it is removed from our finance receivable portfolio, including any accrued interest, and charged against income. We do not restructure troubled debt as a form of curing delinquencies.

The following table reflects the amount of accrued interest receivable for non-performing loans as of the periods presented:

	As of September 30,
	2013			2012

Total accrued interest receivable	$	9,232,043		$	7,376,775

Accrued interest on non-performing assets:
Military loans	846,622			631,330
As percent of total accrued interest receivable	9.2		%	8.6		%

Retail installment contracts	31,954			13,060
As percent of total accrued interest receivable	0.3		%	0.2		%

Total accrued interest on non-performing assets	$	878,576		$	644,390

Total non-performing as a percent of total accrued interest	9.5		%	8.7		%

A large portion of our customers are unable to obtain financing from traditional sources due to factors such as time in grade, frequent relocations and lack of credit history. These factors may not allow them to build relationships with traditional sources of financing. As a result, our receivables do not have a credit risk profile that can be easily measured by the credit quality indicators normally used by the financial markets. We manage the risk by closely monitoring the performance of the portfolio and through the underwriting process.

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The following reflects the credit quality of the Company’s finance receivables:

	As of and for Years Ending September 30,
	2013			2012

Total finance receivables:
Gross balance	$	364,197,688		$	396,803,008
Performing	351,877,162			385,494,584
Non-performing (90 days delinquent)	12,320,526			11,308,424
Non-performing loans as a percent of gross balance	3.38		%	2.85		%

Military loans:
Gross balance	$	348,544,188		$	369,361,165
Performing	337,321,177			359,107,844
Non-performing (90 days delinquent)	11,223,011			10,253,321
Non-performing loans as a percent of gross balance	3.22		%	2.78		%

Retail installment contracts:
Gross balance	$	15,653,500		$	27,441,843
Performing	14,555,985			26,386,740
Non-performing (90 days delinquent)	1,097,515			1,055,103
Non-performing loans as a percent of gross balance	7.01		%	3.84		%

As of September 30, 2013, and 2012 the past due finance receivables are as follows:

	Age Analysis of Past Due Financing Receivables
	As of September 30, 2013
	60-89 Days		90-180 Days		Total 60-180 Days		0-59 Days		Total
	Past Due		Past Due		Past Due		Past Due		Finance Receivables

Finance receivables:
Military loans	$	4,402,518	$	11,223,011	$	15,625,529	$	332,918,659	$	348,544,188
Retail installment contracts	341,813		1,097,515		1,439,328		14,214,172		15,653,500
Total	$	4,744,331	$	12,320,526	$	17,064,857	$	347,132,831	$	364,197,688

	Age Analysis of Past Due Financing Receivables
	As of September 30, 2012
	60-89 Days		90-180 Days		Total 60-180 Days		0-59 Days		Total
	Past Due		Past Due		Past Due		Past Due		Finance Receivables

Finance receivables:
Military loans	$	3,538,602	$	10,253,321	$	13,791,923	$	355,569,242	$	369,361,165
Retail installment contracts	380,317		1,055,103		1,435,420		26,006,423		27,441,843
Total	$	3,918,919	$	11,308,424	$	15,227,343	$	381,575,665	$	396,803,008

Additionally, CBD uses our underwriting criteria, which were developed from our past customer credit repayment experience and are periodically evaluated based on current portfolio performance. These criteria require the following:

· All borrowers are primarily active duty, or career retired U.S. military personnel or U.S. Defense Department employees;

· All potential borrowers must complete standardized credit applications online via the Internet; and

· A review must be conducted on all applicants’ military service history. This includes a review of status including rank and time in grade. Other review procedures may be conducted as deemed necessary.

These indicators are used to help minimize the risk of unwillingness or inability to repay for both military loans and retail installment contracts. These guidelines were developed from past customer credit repayment experience and are periodically revalidated based on current portfolio performance. Loans are limited to amounts that the customer could reasonably be expected to repay from discretionary income.

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The liability for unpaid claims and claim adjustment expenses is estimated using an actuarially computed amount payable on claims reported prior to the balance sheet date that have not yet been settled, claims reported subsequent to the balance sheet date that have been incurred during the period ended, and an estimate (based on prior experience) of incurred but unreported claims relating to such period.

Activity in the liability for unpaid claims and claim adjustment expenses for our debt protection and reinsurance products are summarized as follows:

	As of and for the Years ended September 30,
	2013		2012		2011

Balance, beginning of period	$	2,975,238	$	1,759,026	$	653,926

Claim amount incurred, related to
Prior periods	1,408,375		962,354		906,342
Current period	1,817,715		1,980,567		984,708
Total	3,226,090		2,942,921		1,891,050

Claim amount paid, related to
Prior periods	1,124,298		564,645		376,690
Current period	1,451,072		1,162,064		409,260
Total	2,575,370		1,726,709		785,950

Balance, end of period	$	3,625,958	$	2,975,238	$	1,759,026

NOTE 3: INVESTMENTS - RESTRICTED

Assurant processes and administers insurance transactions and activity on behalf of the Company. Pursuant to applicable insurance regulations, we are required to maintain a 102% of unearned premium and insurance claim and policy reserves, with a qualified financial institution which, as of September 30, 2013 was zero.

We record our restricted investments at fair value. The following table represents the restricted investments as of September 30, 2013 and 2012:

	As of September 30, 2013								As of September 30, 2012
			Gross		Gross						Gross		Gross
			Unrealized		Unrealized						Unrealized		Unrealized
	Book Value		Gains		(Losses)		Fair Value		Book Value		Gains		(Losses)		Fair Value
Restricted investments:
U.S. government bonds	$	—	$	—	$	—	$	—	$	983,144	$	40,990	$	—	$	1,024,134
Total restricted investments	$	—	$	—	$	—	$	—	$	983,144	$	40,990	$	—	$	1,024,134

During fiscal 2013 and 2012, we did not recognize any material realized gains or losses or receive proceeds from sales on restricted investments. In fiscal 2013 and 2012, we received authorization, pursuant to applicable insurance regulations, to transfer $1.0 million and $1.9 million, respectively, in book value of U.S. government bonds from restricted to non-restricted.

NOTE 4: INVESTMENTS - NON-RESTRICTED

Non-restricted investments are comprised of certificates of deposit and U.S. government bonds. We have total non-restricted investments of $1.7 million and $3.4 million as of September 30, 2013 and 2012, respectively. As of September 30, 2013, non-restricted investments of $1.4 million will mature within one year and $0.3 million will mature after one year and before five years.

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We record our U.S. government bond investments at fair value. The following table represents the non-restricted investments as of September 30, 2013 and 2012:

	As of September 30, 2013								As of September 30, 2012
			Gross		Gross						Gross		Gross
			Unrealized		Unrealized						Unrealized		Unrealized
	Book Value		Gains (1)		(Losses)		Fair Value		Book Value		Gains		(Losses)		Fair Value
Non-restricted investments:
Certificates of deposit	$	100,000	$	—			$	100,000	$	594,000	$	—	$	—	$	594,000
U.S. government bonds	1,604,458		14,283				$	1,618,741	2,717,902		48,871		—		2,766,773
Total non-restricted investments	$	1,704,458	$	14,283	$	—	$	1,718,741	$	3,311,902	$	48,871	$	—	$	3,360,773

(1) The unrealized gain on investments of $14,283 net of tax of $4,999 represents the accumulated other comprehensive income of $9,284.

During fiscal 2013, the Company received $1.0 million in proceeds from the sale of U.S. government bonds and realized a gain of $0.04 million. An additional $1.6 million in proceeds was received from investment maturities. During fiscal 2012, we did not recognize any material realized gains or losses or receive proceeds from sales on non-restricted investments. In fiscal 2013 and 2012, we received authorization, pursuant to applicable insurance regulations, to transfer $1.0 million and $1.9 million, respectively, in book value of U.S. government bonds from restricted to non-restricted.

NOTE 5: FURNITURE AND EQUIPMENT

Cost and accumulated depreciation of property and equipment at September 30, 2013 and 2012 is as follows:

	As of and For the Years Ended September 30,
	2013			2012

Furniture and equipment	$	41,200		$	41,200
Computer software	1,709,386			1,174,169
Work in process	—			505,014
	1,750,586			1,720,383

Less accumulated depreciation	(1,367,345		)	(1,155,356		)

Furniture and equipment - net	$	383,241		$	565,027

Furniture and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method. Estimated useful lives are 7 years for furniture and equipment, and 3 years for computer software. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Depreciation expense was $0.2 million and $0.1 million for the years ended September 30, 2013 and 2012, respectively.

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS

In connection with the Transaction, MCFC paid the shareholders of Pioneer Funding Inc., (the “Sellers”) approximately $68.8 million in cash and 882,353 shares of MCFC’s common stock. Under the related purchase agreement, MCFC was also required to pay the Sellers an additional $5 million in contingent payments, of which $4 million was contributed to us and $1 million to CBD. The final contingent payment was made on March 31, 2009. The total purchase price was $90,229,762.

The fair value assigned to intangible assets acquired and assumed liabilities is supported by valuations using estimates and assumptions provided by management.

We test goodwill for impairment annually and more frequently if events and circumstances indicate that the asset may be impaired and that the carrying value may not be recoverable. Under the provisions of ASC-350, Intangibles — Goodwill and Other, a two-step impairment test is performed on goodwill. In the first step, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to the reporting unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If upon completing the second step of the impairment test the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.

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Due to the Transaction, we recorded goodwill and amortizable intangible assets in the form of customer, agent and vendor relationships, trade name, technology for the lending system and the value of business acquired. Goodwill and intangible assets at September 30, 2013 and 2012 are as follows:

	As of and for the Years Ended September 30,
	2013							2012
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Value		Amount		Amortization			Value

Customer relationships	$	11,000,000	$	(9,600,416	)	$	1,399,584	$	11,000,000	$	(8,881,052	)	$	2,118,948
Agent relationships	700,000		(579,508		)	120,492		700,000		(525,464		)	174,536
Vendor relationships	1,700,000		(1,408,780		)	291,220		1,700,000		(1,275,244		)	424,756
Trade name	7,000,000		(5,013,096		)	1,986,904		7,000,000		(4,373,880		)	2,626,120
Technology	4,000,000		(4,000,000		)	—		4,000,000		(3,839,760		)	160,240

Total amortizable intangibles	$	24,400,000	$	(20,601,800	)	$	3,798,200	$	24,400,000	$	(18,895,400	)	$	5,504,600

Goodwill	$	31,474,280	$	—		$	31,474,280	$	31,474,280	$	—		$	31,474,280

Amortization expense was $1.7 million and $2.2 million in fiscal 2013 and fiscal 2012, respectively. Amortization expense of currently recorded amortizable intangibles is expected to be as follows:

Years Ended	Annual Amortization
September 30,	Expense

2014	1,243,000
2015	1,027,000
2016	847,000
2017	681,200

Total	$	3,798,200

Management evaluated goodwill at September 30, 2013, and determined that there was no impairment as the estimated fair value exceeded the carrying value. There were no impairments of amortizable intangible assets, as of September 30, 2013.

NOTE 7: BORROWINGS

Secured Senior Lending Agreement

On June 12, 2009, we entered into the SSLA with the lenders listed on the SSLA (“the lenders”) and UMB Bank, N.A. (the “Agent”). The SSLA replaced and superseded the Senior Lending Agreement, dated as of June 9, 1993, as subsequently amended and restated (the “SLA”). The term of the current SSLA ends March 31, 2014 and is automatically extended annually unless any lender gives written notice of its objection by March 1 of each calendar year. Our assets secure the loans extended under the SSLA for the benefit of the lenders and other holders of the notes issued pursuant to the SSLA (the “Senior Debt”). The facility is an uncommitted credit facility that provides common terms and conditions pursuant to which the individual lenders that are a party to the SSLA may choose to make loans to us in the future. Any lender may elect not to participate in future fundings at any time without penalty. If a lender were to choose not to participate in future fundings, the outstanding amortizing notes would be repaid based on the original terms of the note. Any existing borrowings from that lender under the revolving credit line are payable in 12 equal monthly installments. As of September 30, 2013, we could request up to $74.7 million in additional funds and remain in compliance with the terms of the SSLA. No lender, however, has any contractual obligation to lend us these additional funds.

As of September 30, 2013, the lenders have indicated a willingness to participate in fundings up to an aggregate of $308.9 million during the next 12 months, including $206.8 million that is currently outstanding. Included in this amount are borrowings of $15.1 million from withdrawing banks that previously participated in the SSLA.

Our SSLA allows additional banks to become parties to the SSLA under a modified non-voting role. We have identified each lender that has voting rights under the SSLA as “voting bank(s)” and lenders that do not have voting rights under the SSLA, as “non-voting bank(s)”. While all voting and non-voting banks have the same rights to the collateral and are a party to the same terms and

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conditions of the SSLA, all of the non-voting banks acknowledge and agree that they have no right to vote on any matter nor to prohibit or limit any action by us, or the voting banks. As of September 30, 2013, we had 17 non-voting banks with an outstanding principal balance of $16.8 million.

On June 21, 2013, the Company entered into the thirty-sixth amendment (the “Amendment”) to the SSLA. The Amendment (i) permitted the declaration and payment of a $20.0 million one-time unrestricted dividend from the Company to MCFC on or before June 30, 2013; (ii) amended the revolving credit line interest rate to be 4% or prime, whichever is greater, for all new borrowings after June 21, 2013; (iii) amended the amortizing term notes interest rate to be 5.25% or 270 basis points over the 90-day moving average of like-term treasury notes, whichever is greater, for all new borrowings after June 21, 2013; and (iv) consented to the amended and restated LSMS Agreement. A one-time dividend of $20.0 million was paid to MCFC on June 28, 2013 and funded through the revolving credit line. Prior to June 21, 2013, the interest rate on the revolving credit line was 5% or prime, whichever was greater, and the interest rate on amortizing notes was 6.25% or 270 basis points over the 90-day moving average of like-term treasury notes, whichever was greater.

The aggregate notional balance outstanding under amortizing notes was $187.6 million and $186.2 million at September 30, 2013 and 2012, respectively. There were 349 and 354 amortizing term notes outstanding at September 30, 2013 and 2012, respectively, with a weighted-average interest rate of 6.11% and 6.25%, respectively. Interest on the amortizing notes is fixed at 270 basis points over the 90-day moving average of like-term treasury notes when issued. The interest rate may not be less than 5.25%. All amortizing notes have terms not to exceed 48 months, payable in equal monthly principal and interest payments. Interest on amortizing notes is payable monthly. In addition, we are paying our lenders a quarterly uncommitted availability fee in an amount equal to ten basis points multiplied by the quarterly average aggregate outstanding principal amount of all amortizing notes held by the lenders. For the year ended September 30, 2013, we incurred $0.6 million in uncommitted availability fees.

Advances outstanding under the revolving credit line were $19.2 million and $19.5 million at September 30, 2013 and 2012, respectively. When a lender elects not to participate in future fundings, any existing borrowings from that lender under the revolving credit line are payable in 12 equal monthly installments. Interest on borrowings under the revolving credit line is payable monthly and is based on prime or 4.00%, whichever is greater. Interest on borrowings was 4.00% at September 30, 2013 and 5.00% at September 30, 2012.

Substantially all of our assets secure the debt under the SSLA. The SSLA also limits, among other things, our ability to (1) incur additional debt from the lenders beyond that allowed by specific financial ratios and tests, (2) borrow or incur other additional debt except as permitted in the SSLA, (3) pledge assets, (4) pay dividends, (5) consummate certain asset sales and dispositions, (6) merge, consolidate or enter into a business combination with any other person, (7) pay to MCFC service charge fees each year except as provided in the SSLA, (8) purchase, redeem, retire or otherwise acquire any of our outstanding equity interests, (9) issue additional equity interests, (10) guarantee the debt of others without reasonable compensation and only in the ordinary course of business or (11) enter into management agreements with our affiliates.

Under the SSLA, we are subject to certain financial covenants that require that we, among other things, maintain specific financial ratios and satisfy certain financial tests. In part, these covenants require us to: (1) maintain an allowance for credit losses equal to or greater than the allowance for credit losses shown on our audited financial statements as of the end of our most recent fiscal year and at no time less than 5.25% of our consolidated net finance receivables, unless otherwise required by generally accepted accounting principles (“GAAP”), (2) limit our senior indebtedness as of the end of each quarter to not greater than four times our tangible net worth, (3) maintain a positive net income in each fiscal year, (4) limit our senior indebtedness as of the end of each quarter to not greater than 80% of our consolidated net finance receivables, and (5) maintain a consolidated total required capital of at least $75 million plus 50% of the cumulative positive net income earned by us during each of our fiscal years ending after September 30, 2008. Any part of the 50% of positive net income not distributed by us as a dividend for any fiscal year within 120 days after the last day of such fiscal year must be added to our consolidated total required capital and may not be distributed as a dividend or otherwise. No part of the consolidated total required capital may be distributed as a dividend.

We may not make any payment to MCFC in any fiscal year for services performed or reasonable expenses incurred in an aggregate amount greater than $750,000 plus reimbursable expenses. Such amount may be increased by the CPI published by the United States Bureau of Labor for the calendar year then most recently ended. Except as required by law, we may not stop purchasing small loans to military families from CBD, unless the lenders consent to such action.

The breach of any of these covenants could result in a default under the SSLA, in which event the lenders could seek to declare all amounts outstanding to be immediately due and payable. As of September 30, 2013, we were in compliance with all loan covenants.

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increase to a default rate equal to 2% above the interest rate otherwise payable on such Senior Debt. The default rate will remain in effect so long as any event of default has not been cured.

In connection with the execution of the SSLA, MCFC entered into an Unlimited Continuing Guaranty. MCFC guaranteed the Senior Debt and accrued interest in accordance with the terms of the Unlimited Continuing Guaranty. Under the Unlimited Continuing Guarantee, MCFC also agreed to indemnify the lenders and the Agent for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the lenders or the Agent for payments made under the Senior Debt that are rescinded or must be repaid by lenders to us. If MCFC is required to satisfy any of borrowers’ obligations under the Senior Debt, the lenders and the Agent will assign without recourse the related Senior Debt to MCFC.

Concurrently, in connection with the execution of the SSLA, MCFC entered into a Negative Pledge Agreement in favor of the Agent. Under the Negative Pledge Agreement, MCFC represented that it will not pledge, sell, assign or transfer its ownership of all or any part of the issued and outstanding capital stock of the Company and will not otherwise or further encumber any of such capital stock beyond the currently existing negative pledge thereof in favor of Branch Banking and Trust, a North Carolina banking corporation headquartered in Winston-Salem, North Carolina (“BB&T”). Once the pledge of the capital stock of the Company to BB&T is terminated, MCFC will pledge all of its capital stock in the Company to the Agent for the benefit of the lenders to secure payment of all Senior Debt.

Subordinated Debt - Parent

In fiscal year 2011, we amended our SSLA to convert the parent note from a term facility to a revolving line of credit. Funding on this line of credit is provided as needed at our discretion and dependent upon the availability of funds from our parent and is due upon demand. The maximum principal balance on this facility is $25.0 million. Interest is payable monthly and is based on prime or 5.0%, whichever is greater. As of September 30, 2013 and 2012, the outstanding balance under this facility was zero.

Investment Notes

We have borrowings through the issuance of investment notes (with accrued interest) with an outstanding notional balance of $63.9 million, which includes a $0.2 million purchase adjustment as of September 30, 2013 and $67.4 million, which includes a $0.3 million purchase adjustment as of September 30, 2012. The purchase adjustments relate to fair value adjustments recorded as part of the Transaction. These investment notes are nonredeemable before maturity by the holders, issued at various rates and mature 1 to 10 years from date of issue. At our option, we may redeem and retire any or all of the debt upon 30 days written notice. The average investment note payable was $51,834 and $53,539, with a weighted average interest rate of 9.15% and 9.06% at September 30, 2013 and 2012, respectively. Interest is paid either monthly or annually at the option of the note holder.

On January 11, 2013, the SEC declared effective our post-effective amendment to our amended registration statement originally filed with the SEC in January 2011 (“2013 Registration Statement”). Pursuant to this 2013 Registration Statement, along with the accompanying prospectus, we registered an offering of our investment notes, with a maximum aggregate offering price of $50 million, on a continuous basis with an expected termination date of January 28, 2014, unless terminated earlier at our discretion. As of September 30, 2013, we have issued 470 investment notes in conjunction with this offering since 2011 with an aggregate value of $28.3 million.

Maturities

A summary of maturities for the amortizing notes and investment notes (net of purchase price adjustments) at September 30, 2013, follows:

	Amortizing Notes		Amortizing Notes		Amortizing Notes
	SSLA Lenders		Withdrawing Banks		Non-Voting Banks		Investment Notes		Total
2014	$	57,817,295	$	7,786,553	$	12,284,314	$	11,293,290	$	89,181,452
2015	47,964,071		5,404,636		4,224,060		14,965,652		72,558,419
2016	33,199,148		1,787,854		280,091		15,248,504		50,515,597
2017	16,693,526		140,142		—		5,176,419		22,010,087
2018	—		—		—		585,305		585,305
2019 and beyond	—		—		—		16,434,460		16,434,460
Total	$	155,674,040	$	15,119,185	$	16,788,465	$	63,703,630	$	251,285,320

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NOTE 8: INCOME TAXES

The provision for income taxes for the years ended September 30, 2013, 2012, and 2011, consisted of the following:

	For the Year Ended September 30, 2013
	Federal			State			Valuation Allowance		Total
Current	$	5,775,675		$	(1,004,750	)	$	—	$	4,770,925
Deferred	(714,032		)	226,479			10,915		(476,638		)
Total	$	5,061,643		$	(778,271	)	$	10,915	$	4,294,287

	For the Year Ended September 30, 2012
	Federal			State			Valuation Allowance		Total
Current	$	10,548,636		$	295,134		$	—	$	10,843,770
Deferred	(4,373,222		)	(436,398		)	10,162		(4,799,458		)
Total	$	6,175,414		$	(141,264	)	$	10,162	$	6,044,312

	For the Year Ended September 30, 2011
	Federal			State			Valuation Allowance		Total
Current	$	10,555,061		$	3,595,229		$	—	$	14,150,290
Deferred	(2,134,522		)	(491,379		)	—		(2,625,901		)
Total	$	8,420,539		$	3,103,850		$	—	$	11,524,389

The actual tax expense for the years ended 2013, 2012, and 2011 differs from the computed ‘expected’ tax expense (benefit) for those years (computed by applying the applicable United States federal corporate tax rates of 35% to income before income taxes) as follows:

	As of and for the Years Ended September 30,
	2013			2012			2011
Computed ‘expected’ tax expense	$	4,794,611		$	6,325,065		$	10,019,871
State tax (net of federal tax effect)	(418,565		)	(240,378		)	2,226,005
Other tax benefit	(81,759		)	(40,375		)	(721,487		)
Total	$	4,294,287		$	6,044,312		$	11,524,389

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of September 30, 2013 and 2012 are presented below:

	As of and for the Years Ended September 30,
	2013			2012
Deferred tax assets:
Allowance for credit losses	$	11,914,542		$	11,234,048
Unearned insurance reserves	2,763,914			3,480,446
Uncertain tax positions	174,328			302,110
Fair value adjustment of acquisitions	76,928			109,709
State net operating losses and credits	34,357			26,680
Loan origination & policy acquisition costs	—			26,220
Other	304,338			176,769
Total deferred tax assets	15,268,407			15,355,982
Valuation allowance	(21,077		)	(10,162		)
Deferred tax assets, net of valuation allowance	15,247,330			15,345,820

Deferred tax liabilities:
Amortization - intangible assets	1,240,550			1,858,674
Depreciation	55,640			13,675
Other	70,752			96,173
Total deferred tax liabilities	1,366,942			1,968,522

Net deferred tax assets	$	13,880,388		$	13,377,298

As of September 30, 2013, the Company had state net operating loss carryforwards of approximately $597,000, and state alternative minimum tax (AMT) credit carryforwards of approximately $1,000. The net operation loss carryforwards begin expiring in 2019 through 2033.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary difference become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The Company is included in the consolidated federal income tax return and, for certain states, combined state tax returns of its parent. Under the benefits-for-loss approach, net operating losses and other tax attributes of the Company are characterized as realized when utilized by the parent. Therefore, recognition of deferred tax assets is based on all available evidence as it relates to both the parent and the Company. As the Company is party to a tax sharing agreement with its parent that will reimburse it for any losses utilized in the parent’s consolidated tax returns, management believes it is more likely than not that the Company will realize the benefits of those deductible differences based on the Parent’s historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, with the exception of certain state differences. Accordingly, at September 30, 2013 and 2012, the Company recorded a valuation allowance on these deferred tax assets of $21,000 and $10,000, respectively.

As of September 30, 2013, 2012 and 2011, the reserve for uncertain tax positions was approximately $500,000, $900,000, and $1.7 million, respectively. The reserve for uncertain tax positions is included in accrued expenses and other liabilities in the consolidated balance sheet as of September 30, 2013, 2012, and 2011. The Company had approximately $107,000 of unrecognized tax benefit that if realized would affect the effective tax rate. Interest and penalties recognized are recorded as a component of income tax expense (benefit) in the amount of approximately $(20,000), $(137,000) and $43,000 for the year ended September 30, 2013, 2012, and 2011 respectively.

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A reconciliation of unrecognized tax benefits for fiscal year 2013, 2012 and 2011 is as follows:

	As of and for the Years Ended September 30,
	2013			2012			2011
Balance, beginning of period	$	702,000		$	1,368,200		$	520,200
Increase of tax positions taken in current periods	29,600			9,800			13,000
Increase of tax positions taken in prior periods	594,000			86,100			1,060,000
Decrease of tax positions taken in current periods	—			—			—
Decrease of tax positions taken in prior periods	(557,800		)	—			—
Decrease due to lapse of applicable statute of limitations	(421,800		)	(762,100		)	(225,000		)
Balance, end of period	$	346,000		$	702,000		$	1,368,200

In addition, the Company has accrued cumulative interest and penalties of approximately $174,000, $193,000, and $330,000 as of September 30, 2013, 2012 and 2011, respectively.

The Company does not believe a significant increase or decrease in the uncertain tax positions will occur in the next twelve months.

The parent’s federal income tax returns are open and subject to examination by the Internal Revenue Service for the tax year ended September 30, 2010 and later. MCFC and its subsidiaries state returns are generally open and subject to examinations for the tax year ended September 30, 2009 and later for major state jurisdictions. The Company does not believe any adjustments that may result from these examinations will be material to the Company.

NOTE 9: RELATED PARTY TRANSACTIONS

Our Chief Executive Officer, Thomas H. Holcom, Jr., and certain of his immediate family members own investment notes issued by us. Amounts held by these related parties totaled $549,713 and $843,292 at September 30, 2013 and 2012, respectively. These investment notes will mature in 2014, 2015 and 2021, and bear a weighted average interest rate of 5.82%. Carol Jackson, a member of the MCFC Board of Directors, owns investment notes issued by us. Amounts held by her totaled $585,906 and $541,250 at September 30, 2013 and 2012, respectively. These investment notes will mature in 2014 and bear a weighted average interest rate of 8.25% (See Note 7 to the consolidated financial statements).

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We entered into an amended and restated Loan Sale and Master Services Agreement (“LSMS Agreement”) with CBD in June 2013. Under the LSMS Agreement, we buy certain military loans that CBD originates and receive management and record keeping services from CBD. The following table represents the related party transactions associated with this agreement and other related party transactions for the periods presented.

	As of and for the Years Ended September 30,
	2013		2012		2011
Loan purchasing:
Loans purchased from CBD	$	235,076,964	$	239,616,353	$	251,013,073

Management and record keeping services:
Monthly servicing to CBD (1)	$	31,381,573	$	33,820,834	$	33,609,257
Monthly relationship fee to CBD (2)	4,759,230		5,084,245		5,173,367
Monthly management fee to MCFC (3)	674,200		750,000		750,000
Total management and record keeping services	$	36,815,003	$	39,655,079	$	39,532,624

Other transactions:
Fees paid to CBD in connection with loans purchased ($30.00 each loan purchased)	$	3,401,220	$	3,276,540	$	3,630,526
Tax payments to MCFC	7,431,763		9,844,816		13,727,467
Dividends paid to MCFC	24,618,033		6,773,313		8,845,387
Expenses reimbursed to MCFC (4)	979,300		745,932		472,776
Total other transactions	$	36,430,316	$	20,640,601	$	26,676,156

(1) Monthly servicing fee to CBD was 0.68% of outstanding principal for the six months ended September 30, 2013. Prior to April 1, 2013, the monthly servicing fee was 0.7% of outstanding principal.

(2) Monthly relationship fee to CBD is equal to $2.82 for each loan owned at June 21, 2013 for the three months ended September 30, 2013. Prior to June, 21, 2013, the monthly relationship fee was $2.82 for each loan owned at the prior fiscal year end.

(3) $750,000 annual maximum for fiscal years 2013, 2012 and 2011.

(4) $1,640,000 annual maximum for fiscal year 2013, plus 7% per annum thereafter.

NOTE 10: LITIGATION

We are subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not have a material adverse effect on the financial position, results of operations or cash flow.

NOTE 11: DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity on potentially favorable or unfavorable terms.

Fair value estimates are made at a point in time, based on relevant market data and information about the financial instrument. Fair values should be calculated based on the value of one trading unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various financial instruments. No readily available market exists for a significant portion of the Company’s financial instruments. Fair value estimates for these instruments are based on judgments regarding current economic conditions, interest rate risk characteristics, loss experience, and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. Changes in assumptions could significantly affect the estimates.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:

· Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

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· Level 3 — Unobservable inputs reflect the Company’s judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including the Company’s own data.

The Company’s policy is to recognize transfers in and transfers out as of the ending of the reporting period. During fiscal 2013, there were no significant transfers in or out of Levels 1, 2 or 3.

The following methods and assumptions were used to estimate the fair value of its financial instruments:

Cash and Cash Equivalents — The carrying value approximates fair value due to their liquid nature and classified as Level 1.

Investments - Restricted — Fair value for U.S. government bond investments are based on quoted prices for similar assets in active markets and classified as Level 2.

Investments - Non-Restricted — Fair value for U.S. government bond investments are based on quoted prices for similar assets in active markets and classified as Level 2. The carrying value of certificates of deposit approximates fair value due to their liquid nature and classified as Level 1.

Finance Receivables — The fair value of finance receivables are estimated by discounting the receivables using current rates at which similar finance receivables would be made to borrowers with similar credit ratings and for the same remaining maturities as of fiscal year end. In addition, the best estimate of losses inherent in the portfolio is deducted when computing the estimated fair value of finance receivables. If the Company’s finance receivables were measured at fair value in the financial statements these finance receivables would be classified as Level 3 in the fair value hierarchy.

Amortizing Term Notes — The fair value of the amortizing term notes with fixed interest rates are estimated using the discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. If the Company’s amortizing term notes were measured at fair value in the financial statements, these amortizing term notes would be categorized as Level 2 in the fair value hierarchy.

Investment Notes — The fair value of investment notes is estimated by discounting future cash flows using current rates at which similar investment notes would be offered to lenders for the same remaining maturities. If the Company’s investment notes were measured at fair value in the financial statements, these investment notes would be categorized as Level 2 in the fair value hierarchy.

The carrying amounts and estimated fair values of our financial instruments at September 30, 2013 and 2012 are as follows:

	As of September 30, 2013				As of September 30, 2012
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value

Financial assets:
Cash and cash equivalents - non-restricted	$	1,922,956	$	1,922,956	$	2,136,520	$	2,136,520
Cash and cash equivalents - restricted	623,333		623,333		727,857		727,857
Investments - restricted	—		—		1,024,134		1,024,134
Investments - non-restricted	1,718,741		1,718,741		3,360,773		3,360,773
Net finance receivables	314,671,912		313,215,121		331,910,518		331,950,198

Financial liabilities:
Amortizing term notes	$	187,581,690	$	190,267,660	$	186,230,677	$	186,232,408
Investment notes	63,907,784		66,986,636		67,428,441		67,604,603

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal year, which is the subject of this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the design and operation of our disclosure controls and procedures are effective.

There were no changes in our internal controls over financial reporting identified in connection with management’s evaluation that occurred during the fourth quarter of fiscal year ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

On December 18, 2013, the Board of PFS appointed Joseph B. Freeman as Chief Executive Officer of PFS commencing on January 2, 2014. Mr. Freeman, age 43, has served as the President and Chief Operating Officer of PFS since 2010. From 2007 to 2010 he served as the Chief Operating Officer of PFS. In connection with his appointment, Mr. Freeman entered into an amendment to his employment agreement dated November 29, 2010 to reflect his new position, duties and responsibilities and an increase of $25,000 in his annual base salary. The foregoing description of the amendment is not complete and is qualified in its entirety by reference to the full and complete terms of the amendment, which is filed as Exhibit 10.45 to this Form 10-K and incorporated herein by reference.

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an effective internal control over financial reporting as this term is defined under Rule 13a-15(f) of the Securities and Exchange Act (“Exchange Act”) and has made organizational arrangements providing appropriate divisions of responsibility and has established communication programs aimed at assuring that its policies, procedures and principles of business conduct are understood and practiced by the employees of the Consumer Banking Division of MidCountry Bank (“CBD”). All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework 1992. Based on these criteria and our assessment, we have determined that, as of September 30, 2013, our internal control over financial reporting was effective.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only an annual report from management with regard to the internal control over financial reporting in this annual report.

/s/ Thomas H. Holcom Jr.
Thomas H. Holcom, Jr.
Chief Executive Officer
(Principal Executive Officer)

/s/ Laura V. Stack
Laura V. Stack
Chief Financial Officer, Treasurer and Asst. Secretary
(Principal Financial Officer)

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth information regarding our directors and executive officers as of September 30, 2013:

Name	Age	Position

Thomas H. Holcom, Jr. (1)	67	Chief Executive Officer and Chairman
Laura V. Stack	50	Chief Financial Officer, Treasurer, Asst. Secretary and Director
Joseph B. Freeman (2)	43	President, Chief Operating Officer and Director
Robert F. Hatcher (3)	71	Director
Timothy L. Stanley	55	Vice Chairman and Director

(1) Mr. Holcom, Jr. has announced his resignation effective January 2, 2014.

(2) Effective January 2, 2014, Mr. Freeman will serve as our Chief Executive Officer.

(3) Effective January 2, 2014, Mr. Hatcher will serve as our Chairman.

For each member of our executive team and our Board, we set forth below information regarding such member’s business experience and the specific experience, qualifications, attributes and/or skills which, in the opinion of our Board, qualifies this person to serve as a director and are likely to enhance our Board’s ability to manage and direct our business and affairs. The information in this section should not be understood to mean that any of the directors is an “expert” within the meaning of the federal securities laws.

Since June 2007, Thomas H. Holcom, Jr. has served as our Chief Executive Officer, and as of December 2011, he became the chairman of our Board. Mr. Holcom joined us in 1985 when he became our Chief Financial Officer. He was named Chief Operating Officer in September 2000 and promoted to Chief Executive Officer in May 2007. Prior to joining us, Mr. Holcom spent 19 years with a regional bank with assets over $1 billion and rose to the level of Executive Vice President. His career has encompassed strategic planning, corporate finance, consulting, investments, risk management and marketing. He serves in leadership positions on the boards of numerous professional and civic organizations. As such, Mr. Holcom has a deep knowledge and understanding of the industry and market in which we operate, our goals and objectives and related strategies to achieve such goals and objectives, and the financial concerns and challenges we face and he has significant experience in the management and operations of finance companies.

Joseph B. Freeman is our President and Chief Operating Officer. He was named to that position in 2010, succeeding Mr. Holcom. He also became the Chief Operating Officer, succeeding Mr. Holcom, in July 2007 when Mr. Holcom became Chief Executive Officer in connection with the Transaction. Prior to that Mr. Freeman held the dual role of Chief Strategy Officer and Chief Lending Officer. Since 2010, Mr. Freeman has served on the Board and our audit committee. He joined us in 2002 after serving as President of a successful Internet Marketing Company that helped clients align their marketing efforts with operations, ROI initiatives and strategic objectives. Mr. Freeman has considerable business experience in accounting, operations, consulting, and marketing. His community and philanthropic activities span a wide breadth of Kansas City organizations and universities. As such, Mr. Freeman has management and operational oversight experience of finance companies. As a former manager for Deloitte & Touche LLP, our registered accounting firm, he has accounting experience for public companies and understands the regulatory environment in which we operate.

Since June 2007, Laura V. Stack has served as our Chief Financial Officer, Treasurer and Asst. Secretary. She has been a member of the Board since January 12, 2010 and a member of our audit committee and the audit committee financial expert since December 2010. Prior to December 2010, Ms. Stack was our Director of Corporate Finance and previously held the position of Controller. Ms. Stack joined us in 1999, after serving as Vice President for a financial services firm with responsibilities for accounting, cash management, financial/regulatory reporting, consolidating-corporation budget and auditing. Ms. Stack serves on the board of directors for the charitable organizations, Friends of Alvin Ailey and the Junior League. Ms. Stack has accounting experience and knowledge about public companies, the concerns and challenges faced in our industry, our regulatory environment and significant experience in financial reporting of finance companies to the SEC and our lenders.

Robert F. Hatcher has served as a member of our Board since January 2010. Mr. Hatcher has served as President and Chief Executive Officer of MCFC since its inception in 2002. Mr. Hatcher was the President of First Liberty Bank from 1988 until 1990 and President and Chief Executive Officer of that bank and its parent, First Liberty Financial Corp., from 1990 until its merger with BB&T in 1999. Prior to joining First Liberty, Mr. Hatcher served in various positions with Trust Company Bank (now SunTrust) for 27 years. He has been a director of MCFC since 2002. Mr. Hatcher has management and financial experience as a chief executive officer of a financial services company. He also has oversight and corporate governance experience as a current member and former chairman of the Board of Regents of the University System of Georgia and a current and former director of various corporate and nonprofit entities.

Timothy L. Stanley has served as a member of our Board since December 18, 2013. Mr. Stanley has served as President and Chief Executive Officer of Heights Finance Corporation (“Heights”) since April 2003 and as the Chief Operating Officer of MCFC since September 2010. Prior to joining Heights, Mr. Stanley spent 23 years with Wells Fargo Financial and held a variety of positions in branch operations, marketing, client services, and technology during his tenure, including Senior Vice President of the Information Services Group. Mr. Stanley has management and financial experience as a chief executive officer and a chief operating officer of a financial services company. He has oversight responsibility for the operations, legal, information technology and human resources functions of MCFC, as well as ongoing corporate-wide initiatives. He also has oversight and corporate governance experience as a current member and former chairman of the American Financial Services Association and a current and former director of various corporate and nonprofit entities.

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Director Compensation, Composition and Committees

We have no outside independent directors and do not pay separate compensation for serving as a director.

We are a wholly-owned subsidiary of MCFC. In view of this, the small size of our Board and that we do not have publicly traded equity securities that would be subject to exchange listing requirements, we do not have a separate standing nominating committee or compensation committee. The functions which are normally performed by those committees are performed by our Board as a whole. Our Board has formed an audit committee, consisting of two members of our Board, Laura V. Stack and Joseph B. Freeman. Ms. Stack has been appointed the chair of the audit committee and is an audit committee financial expert. The designation of a person as an “audit committee financial expert”, within the meaning of the rules under Section 407 of the Sarbanes-Oxley Act of 2002, shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on such person as a member of the audit committee, nor shall it decrease the duties and obligations of other audit committee members or the Board. The audit committee does not have a separate charter. In recognition of the expertise and experience of the audit committee of MCFC, our audit committee relies and expects to continue to rely heavily on MCFC’s audit committee in fulfilling the functions of an audit committee. Our executive officers and directors, including our principal executive, financial and principal accounting officers are subject to our Code of Ethics, a copy of which may be obtained at no charge from us upon written request directed to us at Pioneer Financial Services Inc., 4700 Belleview Ave., Suite 300, Kansas City, Missouri 64112.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes the material elements of compensation awarded to, earned by, or paid to each of our Principal Executive Officer (referred to in this CD&A as our “Chief Executive Officer”), Principal Financial Officer (referred to in this CD&A as our “Chief Financial Officer”) and other executive officers for all services rendered by these officers in all capacities to us. During the last completed fiscal year, Mr. Freeman and Ms. Stack have been employed by CBD and Mr. Holcom has been employed primarily by MCFC. The Chief Executive Officer provides less than 50% of his services to us. The Chief Financial Officer provides over 50% of her services to us. The other executive officers provide less than 50% of their services to us. Other than our Chief Executive Officer, Chief Financial Officer, and President and Chief Operating Officer, none of our executive officers earned or were paid or awarded compensation equal to or greater than $100,000 for services provided to us in any capacity. As disclosed under “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations,” we pay CBD various fees for services provided to us. All compensation for the named and other executive officers, except the Chief Financial Officer, is paid by CBD, or MCFC, and reviewed by the Compensation Committee of the Board of Directors of MCFC. For fiscal 2013, the compensation of the Chief Financial Officer was reviewed by the President of the Company.

The purpose of this analysis is to summarize the philosophical principles, specific program elements and other factors considered in making decisions about executive compensation. Our compensation discussion and analysis primarily focuses on the compensation information for the last completed fiscal year, as contained in the tables, related footnotes and other narrative descriptions which follow this discussion, but we also describe compensation actions taken before or after the last completed fiscal year to the extent it enhances the understanding of our executive compensation disclosure.

MCFC Compensation Committee’s Responsibilities

The Board of Directors of MCFC (the “MCFC Board”) established the MCFC Board Compensation Committee (the “Committee”) that is responsible for oversight of MCFC’s executive compensation program, including stock grants, to ensure that CBD and MCFC provide the appropriate motivation to retain key executives and employees and achieve superior corporate performance and stockholder value. The Committee is responsible for all matters dealing with executive officers’ and director’s compensation including: annual incentive plans, employment contracts for executive officers and restricted stock unit awards for eligible employees.

The Committee is composed of three MCFC Board Directors and meets approximately four times per year. Reports of the Committee’s actions and recommendations are presented to the full MCFC Board after each meeting. In May 2012, the Committee engaged Blanchard Consulting Group (“Blanchard”), an independent executive compensation consultant, to advise it on compensation practices for executive officers based on information provided to Blanchard by MCFC’s management and Blanchard’s independent research. Blanchard completed a formal executive compensation review (“Blanchard Report”) and presented this to the Committee in September 2012. A formal review of executive compensation is completed every two years by an independent executive compensation consultant.

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Compensation Philosophy

MCFC is a privately held company and its primary concerns are improving shareholder value for its shareholders and meeting our obligations to our investment note holders. Accordingly, the guiding compensation philosophy of the Committee is to establish a compensation program that will enable the attraction, development, and retention of key executives and employees who are motivated to achieve excellent corporate performance, strong results of operations and cash flows and sustained long-term shareholder value. Furthermore, the pay practices we have in place do not encourage employees to take inappropriate or excessive risks that would be potentially detrimental to our financial or operating results, our cash flow, our profits and the interests of our investment note holders.

Program Elements

Our executive compensation program is composed of base salary, annual incentive compensation and long-term incentive compensation. The following table outlines the total compensation earned by, and awarded to, our named executive officers for services provided to us in any capacity.

Total Compensation

Name and Principal Position	Year	Salary		Annual Incentive (1)		Restricted Stock Awards		All Other Compensation		Total Annual Compensation

Thomas H. Holcom Jr.
Chief Executive Officer	2013	$	108,000	$	—	$	2,003	$	8,754	$	118,757
Chief Executive Officer	2012	70,654		9,564		10,312		6,200		96,730
President and Chief Executive Officer	2011	65,923		48,834		11,682		6,457		132,896

Joseph B. Freeman
President and Chief Operating Officer	2013	$	72,577	$	—	$	2,003	$	5,064	$	79,644
President and Chief Operating Officer	2012	64,385		4,643		4,492		5,521		79,041
Chief Operating Officer	2011	58,950		38,401		3,704		5,524		106,579

Laura V. Stack
Chief Financial Officer	2013	$	92,001	$	36,757	$	4,007	$	6,605	$	139,370
Chief Financial Officer	2012	88,972		—		3,084		7,962		100,018
Chief Financial Officer	2011	85,217		49,009		—		8,020		142,246

(1) Annual incentives earned are paid primarily in the subsequent fiscal year.

Base Salary

Base salaries are determined after considering an individual’s responsibilities, experience and overall job performance. The Committee reviewed the competitiveness of base compensation as compared to market published survey data and a third party peer group in the Blanchard Report. Base salaries are targeted at the midpoint to seventy-fifth percentile of the market based on job experience and as compared to similar positions in markets where we compete for talent.

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The third party peer group of companies consists of:

			Total Assets	Market Cap	ROAA	ROAE	Net Interest Margin
			2011Y	2011Y	2011Y	2011Y	2011Y
	Company Name	Ticker	($000)	($M)	(%)	(%)	(%)
1	Home BancShares, Inc.	HOMB	3,604,117	733	1.50	11.53	4.69
2	Community Trust Bancorp, Inc.	CTBI	3,591,179	454	1.11	10.91	4.13
3	Republic Bancorp, Inc.	RBCAA	3,419,991	480	2.76	21.42	5.09
4	Southside Bancshares, Inc.	SBSI	3,303,817	357	1.29	16.69	3.60
5	First Financial Corporation	THFF	2,954,061	439	1.49	10.88	4.50
6	Lakeland Financial Corporation	LKFN	2,889,688	418	1.10	11.78	3.54
7	State Bank Financial Corporation	STBZ	2,776,334	479	1.56	11.38	7.00
8	CoBiz Financial Inc.	COBZ	2,423,504	214	1.39	16.23	4.23
9	S.Y. Bancorp, Inc.	SYBT	2,053,097	284	1.20	13.14	3.99
10	Hills Bancorporation	HBIA	2,018,297	300	1.36	14.96	3.78
11	German American Bancorp, Inc.	GABC	1,873,767	229	1.11	12.67	3.84
12	Bryn Mawr Bank Corporation	BMTC	1,774,907	257	1.14	11.08	3.96
13	Bank of Kentucky Financial Corporation	BKYF	1,744,724	149	1.00	10.10	3.73
14	Mercantile Bank Corporation	MBWM	1,433,229	84	2.45	28.30	3.60
15	West Bancorporation, Inc.	WTBA	1,269,524	167	1.18	11.27	3.58
16	First Citizens Bancshares, Inc.	FIZN	1,053,549	112	1.19	12.34	4.24
17	Ames National Corporation	ATLO	1,035,564	182	1.38	10.82	3.60
18	EZCORP, Inc.	EZPW	756,450	1,433	18.04	20.63	NM
19	World Acceptance Corporation	WRLD	666,397	1,024	13.82	22.95	63.79
20	CompuCredit Holdings Corporation	CCRT	647,907	81	17.21	169.77	15.47
21	First Cash Financial Services, Inc.	FCFS	357,096	1,056	21.58	24.86	NM
22	Regional Management Corporation	RM	304,150	NA	8.09	51.10	29.42
23	America’s Car-Mart, Inc.	CRMT	276,409	257	10.53	15.63	11.98
24	Nicholas Financial, Inc.	NICK	243,643	144	7.30	15.87	22.57

All executive officers are eligible for an annual merit increase to base salary, effective January 1st, based primarily on performance of job responsibilities and accomplishment of predetermined performance objectives. Job accomplishments are measured by a written performance appraisal which includes evaluating the key responsibilities of the position using five levels of defined performance ratings culminating in an overall job performance rating. The Chief Executive Officer of MCB evaluates Mr. Freeman’s performance and the President of the Company evaluates Ms. Stack. The Chief Executive Officer of MCFC evaluates our Chief Executive Officer’s performance.

Annual Incentive

CBD and MCFC provide our named executive officers with an annual opportunity to earn cash incentive awards through the Annual Incentive Plan (the “AIP”). Annual incentive compensation is paid in cash. Incentive opportunity levels for named executive officers are generally positioned at or above market competitive levels. Cash incentives are targeted to be between the midpoint and seventy-fifth percentile when targeted performance is met and above the seventy-fifth percentile when maximum performance is met. Additionally, the Company believes in deferring a portion of the AIP to ensure accurate performance measurement and to add a retention component to short-term awards.

Incentive and Retention Plan Awards

	Threshold		Target		Maximum
Thomas H. Holcom Jr.	$	43,200	$	70,200	$	102,600

Joseph B. Freeman	$	32,660	$	43,546	$	54,433

Laura V. Stack	$	27,600	$	41,400	$	55,200

For fiscal 2013, Mr. Holcom’s annual incentive was based 25% on our pre-tax income, 50% on the operating earnings of MCFC and 20% based on delinquency plus net charge-offs and 5% on customer count. To receive an incentive payment, the minimum performance objective must be achieved. Ten percent of Mr. Holcom’s annual earned cash incentive is deferred for a period of two years, with 50% of the deferred incentive paid after one year and the remaining 50% paid after two years.

For fiscal 2013, Mr. Freeman’s annual incentive was based 30% on CBD pre-tax income, 10% on consolidated MCB pre-tax income, 20% on the operating earnings of MCFC, 20% based on our delinquency plus net charge-offs combined with CBD, 10%

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based on loan portfolio level and 10% based on customer count. To receive an incentive payment, the minimum performance objective must be achieved. Ten percent of Mr. Freeman’s annual earned cash incentive is deferred for a period of two years, with 50% of the deferred incentive paid after one year and the remaining 50% paid after two years.

For fiscal 2013, Ms. Stack’s annual incentive was based 35% on our operating earnings combined with the operating earnings of CBD, 15% on the loan portfolio yield, 15% on our efficiency ratio combined with CBD, 25% on customer count and 10% on the operating earnings of MCFC. To receive an incentive payment, the minimum performance objective must be achieved.

Long Term Incentive

CBD and MCFC provide our executive officers with a Long Term Incentive Plan (“LTIP”) that annually grants restricted MCFC stock unit awards to officers based on the earned annual cash incentive, if one is earned. The restricted MCFC stock unit awards vest 40% on the third anniversary of the grant date, 30% on the fourth anniversary of the grant date and 30% on the fifth anniversary of the grant date.

The Committee reviewed the competitiveness of LTIP compensation as compared to market published survey data and a third party peer group in the Blanchard Report. The following table provides information concerning options exercised and restricted stock awards vested during the year ended September 30, 2013, for each of our named executive officers.

Option Exercises and Restricted Stock Vested

	Option Awards			Restricted Stock Units
Name	Shares Acquired on Exercise	Value Realized on Exercise ($)		Number of Shares Acquired	Value Realized on Vesting ($)
Thomas H. Holcom Jr.
December 1, 2012	—	$	—	252	$	2,003
December 1, 2011	—	—		963	10,312
December 1, 2010	—	—		1,733	11,682
Joseph B. Freeman
December 1, 2012	—	$	—	252	$	2,003
December 1, 2011	—	—		419	4,492
December 1, 2010	—	—		550	3,704
Laura V. Stack
December 1, 2012	—	$	—	504	$	4,007
December 1, 2011	—	—		288	3,084
December 1, 2010	—	—		—	—

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code provides guidance on the deductibility of compensation paid to our five highest paid officers. CBD has taken the necessary actions to ensure the deductibility of payments under our annual and long-term performance incentive compensation plans. CBD and MCFC also intend to take the actions necessary to maintain the future deductibility of payments and awards under these programs.

Conclusion

We are satisfied that the base salary, annual incentive plan and long-term incentive plan provided to our named executive officers by CBD and MCFC are structured to foster a performance-oriented culture. They create strong alignment with the long-term best interests of our shareholder and noteholders. Compensation levels are reasonable in light of services provided, executive performance, our performance and industry practices. Furthermore, the pay practices we have in place do not encourage employees to take inappropriate or excessive risks that would be potentially detrimental to our financial or operating results, our cash flow, our profits and the interests of our investment note holders.

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Potential payments upon termination

Assuming the employment of the following named executive officers were to be terminated by the Company without cause or by such executives with good reason as of September 30, 2013, each named executive officer would be entitled to payments as stipulated in the terms of his signed Employment Agreement, as follows.

Severance Benefits

	Average Base Salary (1)		Average Annual Incentive		Total
Thomas H. Holcom Jr.	$	81,526	$	19,466	$	100,992
Joseph B. Freeman	65,304		14,348		79,652

(1) Average amounts are based on the most current three years

No severance payment is provided for any of the executive officers in the event of death, disability or retirement. Assuming the employment of our named executive officers were to be terminated due to death, disability or retirement after attaining age 65, restricted stock unit awards would automatically vest. If employment of the named executive officer is terminated because of death or disability, stock options may be exercised to the extent exercisable on the termination date. In the case of retirement after attaining age 65, stock options and restricted stock unit awardswould become fully vested on the termination date. Upon all other terminations, the amounts in the AIP and LTIP would be forfeited.

REPORT OF THE COMPENSATION COMMITTEE

Our Board serves as our Compensation Committee and has, with the assistance of the MCFC Compensation Committee, reviewed and discussed the CD&A presented above with management. Based on that review and discussion, our Board has recommended that the Compensation Discussion and Analysis be included in this annual report on Form 10-K.

By our Board: Thomas H. Holcom, Laura V. Stack, Joseph B. Freeman and Robert F. Hatcher.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Board are set forth in the preceding section. During the past three fiscal years, none of our executive officers served on the MCFC Compensation Committee or any compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on the MCFC Compensation Committee. Our Board is our Compensation Committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

As of September 30, 2013, MCFC, a Georgia corporation, owns one share of our common stock, which constitutes our only outstanding and issued share of common stock. We have no other class of capital stock authorized. The address of MCFC is 201 Second Street, Suite 950 (31201), P.O. Box 4164, Macon, Georgia 31208. MCFC has sole voting and investment power with respect to the share of our common stock set forth above. Neither our directors nor any of our executive officers own any shares of our common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Our Chief Executive Officer, Thomas H. Holcom, Jr., and certain immediate family members own investment notes issued by us. Amounts held by these related parties totaled $549,713 and $843,292 at September 30, 2013 and 2012 respectively. These investment notes will mature in 2014, 2015 and 2021, and bear a weighted average interest rate of 5.82%. Carol Jackson, a member of the MCFC Board of Directors, owns investment notes issued by us. Amounts held by her totaled $585,906 and $541,250 at September 30, 2013 and 2012 respectively. These investment notes will mature in 2014 and bear a weighted average interest rate of 8.25% (see Note 7 to the consolidated financial statements).

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We entered into a LSMS Agreement with CBD in June 2013. Under the LSMS agreement, we buy certain military loans that CBD originates and receive management and record keeping services from CBD. The following table represents the related party transactions associated with this agreement and other related transactions for the periods presented.

	As of and for the Years Ended September 30,
	2013		2012		2011
Loan purchasing:
Loans purchased from CBD	$	235,076,964	$	239,616,353	$	251,013,073

Management and record keeping services:
Monthly servicing to CBD (1)	$	31,381,573	$	33,820,834	$	33,609,257
Monthly relationship fee to CBD (2)	4,759,230		5,084,245		5,173,367
Monthly management fee to MCFC (3)	674,200		750,000		750,000
Total management and record keeping services	$	36,815,003	$	39,655,079	$	39,532,624

Other transactions:
Fees paid to CBD in connection with loans purchased ($30.00 each loan purchased)	$	3,401,220	$	3,276,540	$	3,630,526
Tax payments to MCFC	7,431,763		9,844,816		13,727,467
Dividends paid to MCFC	24,618,033		6,773,313		8,845,387
Expenses reimbursed to MCFC (4)	979,300		745,932		472,776
Total other transactions	$	36,430,316	$	20,640,601	$	26,676,156

(1) Monthly servicing fee to CBD was 0.68% of outstanding principal for the six months ended September 30, 2013. Prior to April 1, 2013, the monthly servicing fee was 0.7% of outstanding principal.

(3) $750,000 annual maximum for fiscal years 2013, 2012 and 2011.

(4) $1,640,000 annual maximum for fiscal year 2013, plus 7% per annum thereafter.

Policies and Procedures

Our audit committee, with the assistance of the MCFC Board, reviews, approves or ratifies any related party transactions. The review includes the nature of the relationship, the materiality of the transaction, the related person’s interest in the transaction and position, the benefit to us and the related party, and the effect on the related person’s willingness or ability in making such determination to properly perform their duties here.

Director Independence

Our Board currently consists of the following five persons: Thomas H. Holcom, Laura V. Stack, Joseph B. Freeman, Robert F. Hatcher and Timothy L. Stanley. As each of these individuals is an executive officer of PFS or an executive officer of our parent, our Board has determined that none of these individuals are independent, as the term is defined under the listing standards of the NASDAQ Global Select Market. Our only outstanding share of common stock is held by MCFC and neither our common stock nor investment notes are listed on any national exchange stock. None of the members of our Board sit on the board of directors of any public company.

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PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Pursuant to the rules and regulations of the SEC, we have filed certain agreements as exhibits to this Annual Report on Form 10-K. These agreements may contain representations, warranties and covenants by the parties and other factual information about us, CBD or MCFC or their respective businesses or operations. These representations, warranties covenants and other factual statements (i) have been made solely for the benefit of the other party or parties to such agreements; (ii) were made only as of the date of such agreements or such other date(s) as expressly set forth in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may have been subject to qualifications with respect to materiality, knowledge and other matters, which qualifications modify, qualify and create exceptions to the representations, warranties and covenants in the agreements, (iv) may be qualified by disclosures made to such other party or parties in connection with signing such agreements, which disclosures contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants in the agreements, (v) have been made to reflect the allocation of risk among the parties to such agreements rather than establishing matters as facts, and (vi) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations, warranties, covenants and statements of act should not be relied upon by investors as they may not describe our actual state of affairs as of September 30, 2013 or as of the date of filing this Annual Report on Form 10-K.

The following documents are filed as exhibits to this annual report:

Exhibit No.		Description
3.1		Second Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K dated December 28, 2009).
3.2		Certificate of Amendment of the Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K dated December 28, 2009).
3.3		Second Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 to the Form 10-K filed with the SEC on November 30, 2010).
4.1		Second Amended and Restated Indenture dated as of December 29, 2009 (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 31, 2009 (the “2009 Registration Statement”)).
4.2		Form of investment note certificate (incorporated by reference to Exhibit 4.2 of the 2009 Registration Statement).
10.1		Secured Senior Lending Agreement dated as of June 12, 2009 among the Company, certain of the Company’s subsidiaries, the listed lenders and UMB Bank, N.A., as Agent (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K dated June 18, 2009).
10.2		Negative Pledge Agreement dated as of June 12, 2009, between MidCountry Financial Corp. and UMB Bank, N.A., as agent (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K dated June 18, 2009).
10.3		Amendment No. 1 to Senior Lending Agreement dated as of July 27, 2009 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and First Citizens Bank (incorporated by reference to Exhibit 4.5 to Form 10-Q filed with the SEC on August 13, 2010).
10.4		Amendment No. 2 to Secured Senior Lending Agreement dated as of March 29, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders and UMB Bank, N.A., as Agent. (incorporated by reference to Exhibit 4.6 to Form 10-Q filed with the SEC on August 13, 2010).
10.5		Amendment No. 3 to Senior Lending Agreement dated as of March 31, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent, Citizens Bank and Trust Company and Enterprise Bank & Trust (incorporated by reference to Exhibit 4.7 to Form 10-Q filed with the SEC on August 13, 2010).
10.6		Amendment No. 4 to Secured Senior Lending Agreement dated as of May 24, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders and UMB Bank, N.A., as Agent (incorporated by reference to Exhibit 4.8 to Form 10-Q filed with the SEC on August 13, 2010).
10.7		Amendment No. 5 to Secured Senior Lending Agreement dated as of June 25, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Stifel Bank and Trust (incorporated by reference to Exhibit 4.9 to Form 10-Q filed with the SEC on August 13, 2010).
10.8		Amendment No. 6 to Secured Senior Lending Agreement dated as of June 28, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Parkside Financial Bank and Trust (incorporated by reference to Exhibit 4.10 to Form 10-Q filed with the SEC on August 13, 2010).

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10.9		Amendment No. 7 to Secured Senior Lending Agreement dated as of June 30, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and CrossFirst Bank (incorporated by reference to Exhibit 4.11 to Form 10-Q filed with the SEC on August 13, 2010).
10.10		Amendment No. 8 to the Secured Senior Lending Agreement dated as of July 1, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Page County State Bank (incorporated by reference to Exhibit 4.12 to Form S-1 filed with the SEC on January 18, 2011).
10.11		Amendment No. 9 to the Secured Senior Lending Agreement dated as of July 8, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and CrossFirst Bank Leawood (incorporated by reference to Exhibit 4.13 to Form S-1 filed with the SEC on January 18, 2011).
10.12		Amendment No. 10 to the Secured Senior Lending Agreement dated as of July 12, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and People’s Community State Bank (incorporated by reference to Exhibit 4.14 to Form S-1 filed with the SEC on January 18, 2011).
10.13		Amendment No. 11 to the Secured Senior Lending Agreement dated as of July 22, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and First State Bank & Trust Co. of Larned (incorporated by reference to Exhibit 4.15to Form S-1 filed with the SEC on January 18, 2011).
10.14		Amendment No. 12 to the Secured Senior Lending Agreement dated as of September 10, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and United Bank of Kansas (incorporated by reference to Exhibit 4.16 to Form S-1 filed with the SEC on January 18, 2011).
10.15		Amendment No. 13 to the Secured Senior Lending Agreement dated as of September 13, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Macon Atlanta State Bank (incorporated by reference to Exhibit 4.17 to Form S-1 filed with the SEC on January 18, 2011).
10.16		Amendment No. 14 to the Secured Senior Lending Agreement dated as of September 15, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Peoples Community Bank (incorporated by reference to Exhibit 4.18 to Form S-1 filed with the SEC on January 18, 2011).
10.17		Amendment No. 15 to the Secured Senior Lending Agreement dated as of September 15, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Blue Ridge Bank and Trust Co. (incorporated by reference to Exhibit 4.19 to Form S-1 filed with the SEC on January 18, 2011).
10.18		Amendment No. 16 to the Secured Senior Lending Agreement dated as of October 6, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and First Community Bank (incorporated by reference to Exhibit 4.20 to Form S-1 filed with the SEC on January 18, 2011).
10.19		Amendment No. 17 to the Secured Senior Lending Agreement dated as of October 15, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Guaranty Bank (incorporated by reference to Exhibit 4.21 to Form S-1 filed with the SEC on January 18, 2011).
10.20		Amendment No. 18 to the Secured Senior Lending Agreement dated as of October 26, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and ONB Bank and Trust Company (incorporated by reference to Exhibit 4.22 to Form S-1 filed with the SEC on January 18, 2011).
10.21		Amendment No. 19 to the Secured Senior Lending Agreement dated as of November 19, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Alterra Bank (incorporated by reference to Exhibit 4.23 to Form S-1 filed with the SEC on January 18, 2011).
10.22		Amendment No. 20 to the Secured Senior Lending Agreement dated as of December 10, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and First Federal Savings Bank of Creston, F.S.B. (incorporated by reference to Exhibit 4.24 to Form S-1 filed with the SEC on January 18, 2011).
10.23		Amendment No. 21 to the Secured Senior Lending Agreement dated as of December 10, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Sunflower Bank, National Association (incorporated by reference to Exhibit 4.25 to Form S-1 filed with the SEC on January 18, 2011).
10.24		Amendment No. 22 to the Secured Senior Lending Agreement dated as of December 13, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Enterprise Bank and Trust (incorporated by reference to Exhibit 4.26 to Form S-1 filed with the SEC on January 18, 2011).
10.25		Amendment No. 23 to the Secured Senior Lending Agreement dated as of December 16, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Bank of Blue Valley (incorporated by reference to Exhibit 4.27 to Form S-1 filed with the SEC on January 18, 2011).

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10.26		Amendment No. 24 to the Secured Senior Lending Agreement dated as of December 29, 2010 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Hawthorn Bank (incorporated by reference to Exhibit 4.28 to Form S-1 filed with the SEC on January 18, 2011).
10.27		Amendment No. 25 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Lyon County State Bank (incorporated by reference to Exhibit 4.29 of the Form 10-Q filed with the SEC on May 13, 2011).
10.28		Amendment No. 26 to the Secured Senior Lending Agreement dated as of May 03, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A. (incorporated by reference to Exhibit 4.30 of the Form 10-Q filed with the SEC on August 12, 2011).
10.29		Amendment No. 27 to the Secured Senior Lending Agreement dated as of May 05, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and ONB Bank and Trust Company (incorporated by reference to Exhibit 4.31 of the Form 10-Q filed with the SEC on August 12, 2011).
10.30		Amendment No. 28 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Carrollton Bank (incorporated by reference to Exhibit 4.32 of the Form 10-Q filed with the SEC on August 12, 2011).
10.31		Amendment No. 29 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and other lenders for creation of Subsidiary company PSLF, Inc. (incorporated by reference to Exhibit 4.33 of the Form S-1 filed with the SEC on December 23, 2011).
10.32		Amendment No. 30 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and William Sullivan Family Investment Group LLC. (incorporated by reference to Exhibit 4.34 of the Form S-1 filed with the SEC on December 23, 2011).
10.33		Amendment No. 31 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and William Sullivan Family Investment Group LLC. (incorporated by reference to Exhibit 4.35 of the Form S-1 filed with the SEC on December 23, 2011).
10.34		Amendment No. 32 to the Secured Senior Lending Agreement dated as of January 14, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent. (incorporated by reference to Exhibit 4.36 of the Form S-1 filed with the SEC on December 23, 2011).
10.35		Amendment No. 33 to the Secured Senior Lending Agreement dated as of December 12, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent. (incorporated by reference to Exhibit 10.35 of the Form 10-Q filed with the SEC on February 13, 2012).
10.36		Amendment No. 34 to the Secured Senior Lending Agreement dated as of December 29, 2011 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and The PrivateBank and Trust Company. (incorporated by reference to Exhibit 10.36 of the Form 10-Q filed with the SEC on February 13, 2012).
10.37		Amendment No. 35 to the Secured Senior Lending Agreement dated as of March 31, 2012 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Bank Midwest, N.A, (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on form 10-K filed with the SEC on December 20, 2012).
10.38		Amendment No. 36 to the Secured Senior Lending Agreement dated as of June 21, 2013 among the Company, certain of the Company’s subsidiaries, the listed lenders, UMB Bank, N.A., as Agent and Bank Midwest, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current report on Form 8-K filed with the SEC on June 27, 3013).
10.39*		Employment Agreement dated November 29, 2010 between the Company and Thomas H. Holcom (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on December 3, 2010).
10.40*		Employment Agreement dated February 1, 2007 between the Company and Laura V. Stack. (incorporated by reference to Exhibit 10.4 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2008, filed with the SEC on December 29, 2008).
10.41*		Employment Agreement dated November 29, 2010 between the Company and Joseph B. Freeman (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed on December 3, 2010).
10.42		Amended and Restated Non-Recourse Loan Sale and Master Services Agreement dated as of June 12, 2009 among MidCountry Bank through its Pioneer Military Lending Division, Pioneer Funding, listed other affiliated entities of the Company and UMB Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated June 18, 2009).
10.43		Unlimited Continuing Guaranty, dated as of June 12, 2009, from MidCountry Financial Corp. in favor of UMB Bank, N.A., as Agent (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated June 18, 2009).
10.44		Oracle Services Agreement and Amendment No. 1, dated May 18, 2011, between the Company and Oracle Financial

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PIONEER FINANCIAL SERVICES, INC.

		/s/ Thomas H. Holcom, Jr.
		Thomas H. Holcom, Jr.
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.

Name	Title	Date

/s/ Thomas H. Holcom, Jr.	Chief Executive Officer, Chairman	December 23, 2013
Thomas H. Holcom, Jr.	and Director (Principal Executive Officer)

/s/ Laura V. Stack	Chief Financial Officer, Treasurer, Asst.	December 23, 2013
Laura V. Stack	Secretary and Director (Principal Financial Officer and Principal Accounting Officer)

/s/ Joseph B. Freeman	Chief Operating Officer,	December 23, 2013
Joseph B. Freeman	President and Director


/s/ Robert F. Hatcher	Director	December 23, 2013
Robert F. Hatcher


/s/ Timothy L. Stanley	Vice Chairman and Director	December 23, 2013
Timothy L. Stanley

Item No.		Page

PART I
ITEM 1.	BUSINESS	1

ITEM 1A.	RISK FACTORS	5

ITEM 2.	PROPERTIES	15

ITEM 3.	LEGAL PROCEEDINGS	15

ITEM 4.	MINE SAFETY DISCLOSURES	15

PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	16

ITEM 6.	SELECTED FINANCIAL DATA	16

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	30

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	55

ITEM 9A.	CONTROLS AND PROCEDURES	55

ITEM 9B.	OTHER INFORMATION	55

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	56

ITEM 11.	EXECUTIVE COMPENSATION	57

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	61

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	61

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	63

PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	64

SIGNATURES		68

	Page

Report of Independent Registered Public Accounting Firm	32

Consolidated Balance Sheets as of September 30, 2013 and 2012	33

Consolidated Statements of Operations for the years ended September 30, 2013, 2012 and 2011	34

Consolidated Statements of Comprehensive Income for the years ended September 30, 2013, 2012 and 2011	35

Consolidated Statements of Stockholder’s Equity for the years ended September 30, 2013, 2012 and 2011	36

Consolidated Statements of Cash Flows for the years ended September 30, 2013, 2012 and 2011	37

Notes to Consolidated Financial Statements	38

		Services Software, Inc. (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on form 10-K filed with the SEC on December 20, 2012).
10.45*		Amendment to Employment Agreement between the Company and Joseph B. Freeman dated December 18, 2013 (filed herewith).
21		Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Annual Report on form 10-K filed with the SEC on December 20, 2012).
31.1		Certifications of Chief Executive Officer pursuant to Rule 15d-15e.
31.2		Certifications of Chief Financial Officer pursuant to Rule 15d-15e.
32.1		18 U.S.C. Section 1350 Certification of Chief Executive Officer.
32.2		18 U.S.C. Section 1350 Certification of Chief Financial Officer.

101**		The following financial information from Pioneer Financial Services, Inc.’s Annual Report on Form 10-K for the year ended September 30, 2013, filed with the SEC on December 23, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statement of Operations for the years ended 2013, 2012 and 2011, (ii) the Condensed Consolidated Balance Sheets as of September 30, 2013 and September 30, 2012, (iii) the Condensed Consolidated Statement of Cash Flows for years ended 2013, 2012 and 2011 and (iv) Notes to Condensed Consolidated Financial Statements.