Use these links to rapidly review the documentTABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                           to


COMMISSION FILE NUMBER 001-32363

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

Delaware(State or other jurisdiction of
incorporation or organization)

58-2332639(I.R.S. Employer
Identification No.)135 North Church Street
Spartanburg, South Carolina(Address of principal executive offices)

29306(Zip Code)


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

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

Title of Each Class

Name of Each Exchange on which RegisteredCommon Stock, par value $.01 per share

New York Stock Exchange


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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark 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). Yes o    No o

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

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

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


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

As of June 30, 2010, the aggregate market value of voting stock (based upon the last reported sales price on the New York Stock Exchange) held by
nonaffiliates of the registrant was $222,837,687.

At
March 2, 2011, there were 62,292,117 shares of the registrant's Common Stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this report is incorporated herein by reference from the registrant's proxy statement for the registrant's
Annual Meeting of Stockholders to be held on May 17, 2011.



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ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.  Form 10-K  For the year ended December 31, 2010



PART IItem 1.

Business

4Item 1A.

Risk Factors

19Item 1B.

Unresolved Staff Comments

31Item 2.

Properties

31Item 3.

Legal Proceedings

32Item 4.

(Removed and Reserved)

37PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

38Item 6.

Selected Financial Data

40Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

44Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

76Item 8.

Financial Statements and Supplementary Data

77Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

120Item 9A.

Controls and Procedures

120Item 9B.

Other Information

121PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

122Item 11.

Executive Compensation

123Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

123Item 13.

Certain Relationships and Related Transactions, and Director Independence

123Item 14.

Principal Accountant Fees and Services

123PART IVItem 15.

Exhibits and Financial Statement Schedules

123SIGNATURES

128


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FORWARD-LOOKING STATEMENTS

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

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

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

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PART I

ITEM 1.    BUSINESS.

Overview

We are the largest non-bank provider of cash advance services in the United States, as measured by the number of centers
operated. As of December 31, 2010, we operated 2,313 centers in 30 states in the United States, 21 centers in the United Kingdom, and 18 centers in Canada, and had 62 limited licensees in the
United Kingdom. Cash advances are typically small-denomination, short-term, unsecured advances that are due on the customer's next payday. We do not franchise any of our centers in the
United States or Canada and do not provide pawn lending, title lending, or similar services.

We
offer various types of short-term credit products and services depending on applicable legislative and regulatory restrictions. For example, in Texas, we offer a fee-based credit
services package to assist customers in trying to improve their credit and in obtaining an extension of consumer credit through a third-party lender. We offer installment loans directly to customers
in Illinois and Colorado, and second mortgage loans in Ohio. We also offer certain complementary products and services. For example, we sell prepaid debit cards in most of our centers as an agent of a
bank regulated by the U.S. Office of Thrift Supervision ("OTS"). We also sell money orders and provide money transfer services as an agent of a registered money transmitter. In the future, we may
further expand our product and service offerings.

We
focus primarily on providing cash advance services to middle-income working individuals. The table below shows selected demographics of the customers we serve:

Customers(1)

U.S. Census 2000Average age (years)


47


36Median household income

$
48,964

$
41,994Percentage homeowners(2)


61
%

66
%Percentage with high school degrees


90
%

81
%


(1)Based
on 200,000 of our randomly selected customers across all states that performed a transaction between January 1, 2010 and November 30,
2010.(2)Percentage
homeowners include homeowners and probable homeowners.


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

Our
centers, which we design to have the appearance of mainstream financial institutions, are typically located in middle-income shopping areas with high retail activity. As of
December 31, 2010, we operated 2,231 centers under the "Advance America" brand and 121 centers under the "National Cash Advance" brand.

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The
following table presents key operating data for our business:

Year Ended December 31,2008

2009

2010Number of centers open at end of period


2,797


2,587


2,352Number of customers servedall credit products (thousands)


1,419


1,316


1,310Number of cash advances originated (thousands)(1)


11,762


10,860


10,027Aggregate principal amount of cash advances originated (thousands)(1)

$
4,296,493

$
3,922,195

$
3,710,133Average amount of each cash advance originated(1)

$
366

$
361

$
370Average charge to customers for providing and processing a cash advance(1)

$
55

$
53

$
55Average duration of a cash advance (days)(1)(2)


16.8


17.6


18.0Average number of lines of credit outstanding during the period (thousands)(3)


10


24


12Average amount of aggregate principal on lines of credit outstanding during the period (thousands)(3)

$
6,946

$
10,945

$
3,753Average principal amount on each line of credit outstanding during the period(3)

$
672

$
410

$
251Number of installment loans originated (thousands)(4)


32


35


61Aggregate principal amount of installment loans originated (thousands)(4)

$
14,841

$
15,992

$
27,375Average principal amount of each installment loan originated(4)

$
462

$
453

$
446


(1)Excludes
lines of credit and installment loans.(2)Excludes
the effect of extended payment plans.(3)In
Virginia, we began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing
advances on existing lines of credit in September 2010.(4)The
installment loan activity for 2008 and 2009 reflects loans we originated as the lender in Illinois only. For 2010 the installment loan activity reflects
loans we originated as the lender in Illinois and Colorado.


Our Industry

The cash advance services industry is part of the broader consumer finance industry. In contrast to more traditional consumer credit
options, cash advance services typically involve providing customers small-denomination, short-term, and unsecured cash advances. We believe our industry developed in the early 1990s in
response to changes in the availability of short-term consumer credit alternatives from traditional banking institutions. The high charges associated with having insufficient funds in
one's bank account, as well as overdraft fees and other late fees charged by financial institutions and merchants, helped create customer demand for cash advance services. We believe customers value
cash advance services as a simple, quick, and confidential way to meet short-term cash needs between paydays while avoiding the potentially higher costs and negative credit consequences of
other alternatives.

Because
of the relatively low cost of entry and the regulatory safe harbor that many state statutes provide for cash advance services, our industry experienced significant growth during
the late 1990s and early 2000s. However, due to market saturation and to federal and state legislative and regulatory challenges, the number of centers in the cash advance services industry has
largely stopped growing in

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the
United States. Additionally, traditional banking institutions, other consumer credit providers, and retailers have introduced products and services that are designed to compete more directly with
cash advance services.

Competitive Strengths

Market Leader with Economies of Scale.With 2,313 centers located in 30 states as of December 31, 2010, we are the largest
non-bank provider of cash advance services in the United States, as measured by the number of centers operated, with approximately twice as many centers as the next largest
non-bank provider of cash advance services. We believe our size provides us with a leadership position in the industry, allows us to leverage our brand name, and enables us to benefit from
economies of scale and to enter favorable relationships with landlords, strategic vendors, and other suppliers. We have centralized most center support functions, including marketing and advertising,
accounting and finance, treasury management, human resources, regulatory compliance, information technology support, and customer support systems.

Continued Focus on Government Affairs.We have experience with the legislative and regulatory environment in all of the states in which
we operate as
well as at the federal level. We are a founding member of the Community Financial Services Association of America ("CFSA"), an industry trade group composed of our company and more than 100 other
companies engaged in the cash advance services industry. Our internal government affairs team, together with the CFSA, seeks to encourage favorable legislation that permits us to operate profitably
within a balanced regulatory framework. Cash advance legislation we supported was adopted by two states in 2010 and 2009, and five states in 2008. Our approach is to continue to work with policymakers
and grassroots organizations to provide a predictable and favorable legislative environment for the cash advance services industry.

Center-Level Controls.We believe that our management information systems, our cash management systems, and our internal compliance
systems are
critical to our success. We use both proprietary and third-party point-of-sale systems to record transactions on a daily basis. We analyze this information at our centers and
at our headquarters. We also use a third-party cash reconciliation software system to balance and monitor cash receipts and disbursements.

Customer Satisfaction.We believe our customers value our safe and convenient locations and the courtesy with which they are treated by
our
employees. Our cash advance services are cost-competitive and easy to understand. We post our rates and fees on the walls of our stores and our customer documents fully outline the terms
of the transaction. The advance process is simple, reliable, and transparent for our customers. We believe our customer service distinguishes us from our competitors and that our customers are more
likely than those of other cash advance providers to repay advances in a timely manner and return to us the next time the need arises for a cash advance. Periodically, we survey our customers to
measure their satisfaction with Advance America. In our most recent survey in October 2010, over 91% of our surveyed customers rated our customer service as good or excellent and 93% say they will
consider Advance America in the future.

Geographical Diversification of Our Centers.With centers located in 30 states as of December 31, 2010, we believe we have
developed a
significant presence throughout the United States. We also operate centers in Canada and the United Kingdom. This geographic diversification helps mitigate the risk and possible financial impact of
unfavorable legislative changes or the economic environment of a particular region and allows us to take advantage of competitive opportunities in those markets. For the year ended December 31,
2010, Florida, California, and Texas, which accounted for approximately 12.6%, 12.4%, and 11.8%, respectively, of our total revenues, were the only states that accounted for more than 10% of our total
revenues.

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Business Strategy

Maintain Position as the Market Leader.A principal component of our strategy is being a leading provider of cash advance services in
each market
where we operate. We believe that by continuing to offer the convenience of multiple locations, as well as exceptional customer service, we will maintain a high level of customer satisfaction. In
general, we believe there are few opportunities for new markets in the United States and we have reduced new center openings accordingly. In the United States, we opened five centers in 2009 and 19
centers in 2010. We currently expect to open approximately 35 centers during 2011. We may also consider opportunities to acquire cash advance companies or businesses in select markets.

Improve Profitability of Existing Centers.As the competitive environment has shifted away from new center openings, we are now focusing
on
opportunities to improve the profitability of our existing centers, including by selectively consolidating centers. We believe we can combine certain centers that are near each other and maintain the
majority of the customers and revenues of both centers while reducing operating costs. From time to time, we may also acquire new customers from competitors who are exiting certain markets where we
operate so that we can increase the average number of customers per center. By selectively consolidating centers and increasing the average number of customers served per center, we hope to reduce
operating costs and increase center gross profit.

Continue to Drive Center Operating Performance.We strive to have all of our centers match the operating performance of the best centers
in their
market. To do this, our employees are evaluated and compensated, in part, based on their achievement of operational goals, which we adjust each year to account for the continued improvement in our
business. The three key metrics we reward are: (1) maintaining a high level of compliance with applicable laws and regulations; (2) meeting stated target volume objectives; and
(3) meeting loss targets. We believe that by focusing on these specific goals and tying them to employee compensation, we can improve operating performance in all our centers.

Support Improvement of the Legislative and Regulatory Environment.As of December 31, 2010, 34 states had specific laws that
permitted cash
advances or related services, 30 of which we believe offer a regulatory framework that balances consumer interests while allowing profitable cash advance operations. We remain committed to working
with policymakers and grassroots organizations to facilitate the implementation of a balanced, viable, and predictable regulatory framework that protects the interests of the customers we serve while
allowing us to operate profitably.

Further Expand Our Product and Service Offerings.While our primary focus will continue to be on cash advance services, we also
continue to explore
complementary product and service offerings to take advantage of our brand name and national footprint. Over the last several years, we began to offer
prepaid debit cards and money transfer services as an agent for third-party vendors. We believe these products increase customer satisfaction and revenue.

Expand Distribution Channels.During 2008, we began accepting online cash advance applications through Advance America websites, where
customers may
either (1) apply for cash advances from us and come to a center to complete their transactions; or (2) apply for cash advances from third-party lenders that will be deposited directly to
their bank account. We expect this distribution channel to attract new customers.

Our Services



Our primary business is offering cash advance services, which include cash advances and installment loans. However, we also offer
certain complementary products and services.

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In
most states where we operate, we originate cash advance services under the authority of state-specific enabling statutes that allow for services ranging from single cash advances to
installments with closed-end terms. The particular cash advance services may change in response to changes in state law and federal law. Additionally, where permitted by applicable law, we
may service customers for a third-party lender. For example, we operate as a credit services organization ("CSO") in Texas, where we offer a fee-based credit services package to assist
customers in trying to improve their credit and in obtaining an extension of consumer credit through a third-party lender. Under the terms of the agreement with this lender, we process customer
applications and are contractually obligated for all losses.

The
permitted size of a cash advance varies by jurisdiction and ranges from $50 to $5,000. However, our typical cash advance ranges from $50 to $1,000. The finance charges on cash
advance services we currently offer also vary by jurisdiction and range up to 22% of the amount of the cash advance.

We
may charge and collect annual participation fees, fees for returned checks, late fees, and other fees as permitted by applicable law. Currently, none of the cash advance services we
offer include annual participation fees. Fees for returned checks or electronic debits that are declined for non-sufficient funds ("NSF") vary by state and range up to $30, and late fees
vary by state and range up to $50. For the years ended December 31, 2010 and 2009, total NSF fees collected were approximately $2.9 million and $3.2 million, respectively, and
total late fees collected were approximately $0.9 million and $0.8 million, respectively. In Texas and online, the third-party lender charges NSF fees and late fees in accordance with
applicable law.

A
customer may obtain a cash advance in one of three ways: (1) by visiting one of our centers in person, completing an application, and receiving a cash advance from us;
(2) by visiting our website, beginning the application process online, and then visiting one of our centers in person to complete the application and receive a cash advance from us; or
(3) by visiting our website, completing an application online and receiving a cash advance from a third-party lender that is directly deposited into the customer's bank account.

Each
new customer must provide us with certain personal information such as his or her name, address, phone number, proof of identification, employment information or source of income,
bank account, and references. This information is entered into our information system and, where applicable, that of the third party lender. The customer's identification, proof of income and/or
employment, and proof of bank account are verified. We determine whether to approve a cash advance and the size of a cash advance, based primarily on a customer's income. In the future, we may
consider other criteria in evaluating cash advances. If a third-party lender provides the advance, such as in Texas and online, the applicable third-party lender decides whether to approve the cash
advance and establishes all of the underwriting criteria and terms, conditions, and features of the customer agreements.

After
the documents presented by the customer have been copied and reviewed for completeness and accuracy and the cash advance has been approved, the customer enters into an agreement
governing the terms of the cash advance. The customer then provides a personal check or an Automated Clearing House ("ACH") authorization, which enables electronic payment from the customer's account,
to cover the amount of the cash advance plus charges for applicable fees and/or interest and/or the balance due under the agreement and makes an appointment to return on a specified due date,
typically his or her next payday, to repay the cash advance plus the applicable charges. However, in some states, customers are not required to provide us with a personal check or ACH authorization
and payment cycles may vary depending upon state law and service type. At the specified due date, the customer is required to make the applicable payment, usually payment in full of the cash advance
plus applicable fees and interest. Payment is usually made in person, in cash at the

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center
where the cash advance was initiated or issued unless the cash advance was completed on the internet, in which case the customer makes payment by ACH authorization.

Upon
payment in full, the customer's check is returned and/or his or her ACH authorization is deemed to be revoked. If the customer does not repay the outstanding amount in full on or
before the due date, we will seek to collect from the customer the outstanding amount and any applicable fees, including late and NSF fees due, and may deposit the customer's personal check or
initiate the electronic payment from the customer's bank account.



We offer alternative products and services to our customers where permissible under applicable law. For instance, in Ohio we currently
offer check-cashing services at state authorized rates. We may also offer the products or services of a third party that we market, process, and/or service at our centers pursuant to an agreement with
the third party. For instance, we currently offer pre-paid debit cards and money orders, money transmission, and bill payment services. Our Advance America branded pre-paid
Visa debit card is issued by a bank regulated by the OTS. The card allows a cardholder to load cash onto the card and use the card wherever VISA debit cards are accepted. We are compensated under an
agreement with the bank based on a number of factors related to the bank's revenue from purchases and subsequent cardholder activity, such as charges for loads, ATM withdrawals, account
maintenance/plan charges, and point of sale purchases. In the third and fourth quarters of 2007, we began selling money orders and providing money transfer services and bill payment services as an
agent of a licensed third-party money transmitter. We are compensated by the money transmitter based upon the number and value of money transfers, money orders, and bill payments made by our centers.



Although there are numerous differences under the various state-level enabling regulations, the application and approval process,
underwriting criteria, delivery method, repayment and collection practices, customer and market characteristics and underlying economics of our principal products and services generally are
substantially similar in most states.

In
order for a new customer to be approved for a cash advance, he or she is required to have a bank account and a regular source of income. To obtain a cash advance, a customer
typically:



In
jurisdictions where we provide cash advances, we determine whether to approve the cash advance to our customers. We require proof of identification, bank account, and income source,
as described above, and we primarily consider the customer's income in determining the amount of the cash advance. We are currently testing a new customized predictive scoring model that considers
other criteria in evaluating first time customers' probability of repaying a cash advance. The model is

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designed
to decline customers who are statistically unlikely to repay a cash advance. The full implementation of this model is expected to result in a decrease in cash advances written, a decrease in
loan losses, and an overall increase in net revenue. When a third party lender provides the cash advance, such as in Texas and online, the applicable third-party lender decides whether to approve a
cash advance and establishes all of the underwriting criteria and terms, conditions, and features of the customer agreements.



In most states, a customer may qualify for an extended payment plan ("Payment Plan"). Generally, the terms of our Payment Plans conform
to the CFSA Best Practices for extended payment plans. Certain states have specified their own terms and eligibility requirements for Payment Plans. Typically, a customer may enter into a Payment Plan
for no additional fee once every twelve months and the Payment Plan will call for scheduled payments that coincide with the customer's next four paydays. In some states, a customer may enter into a
Payment Plan more frequently. We do not engage in collection efforts while a customer is enrolled in a Payment Plan. If a customer misses a scheduled payment under a Payment Plan, we may resume our
normal collection procedures. We do not offer a Payment Plan for installment loans or lines of credit. The third-party lender in Texas does not offer a Payment Plan for advances to its customers. The
third-party internet lenders offer Payment Plans as required by state law.

Certain
states also provide for credit counseling plans. If a customer informs us that he or she has entered into a credit counseling plan, we work with the credit counselor and the
customer to create a modified Payment Plan.



Repayment terms vary depending upon state law, the type of cash advance service offered, and whether the cash advance was completed
online or in one of our centers.
Generally, as part of the closing process, we explain the customer's repayment obligations and establish the expectation that the customer will pay us in cash on or before the due date in accordance
with their agreement with us. The day before the due date, we generally call the customer to confirm their payment.

If
a customer does not pay the amount due, our center management has the discretion to either commence past-due collection efforts, which typically may proceed for up to
14 days in most states, or deposit the customer's personal check or debit their bank account in accordance with their ACH authorization. If center management decides to commence
past-due collection efforts, employees typically contact the customer by telephone to obtain a payment or a promise to pay and, in cases where we hold a check, attempt to exchange the
customer's check for a cashier's check, if funds are available.

If,
at the end of this past-due collection period or Payment Plan, the center has been unable to collect the amount due, the customer's check is deposited or their ACH
authorization is processed. Additional collection efforts are not required if the customer's deposited check or ACH debit clears. If the customer's check or ACH debit does not clear and is returned
because of non-sufficient funds in the customer's account or because of a closed account or a stop-payment order, we begin additional collection efforts. These additional
collection efforts are carried out by center employees or third party collection agencies and typically include contacting the customer by telephone to obtain payment or a promise to pay and
attempting to exchange the customer's check for a cashier's check, if funds become available. We also send out a series of collection letters, which are automatically distributed from a central
location based on a set of pre-determined criteria.

In
the case of cash advances in the form of lines of credit, if a customer fails to make payment when due in accordance with the terms of their agreement with us, center management may
close the

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line
of credit, accelerate the maturity date, and take the steps outlined above or work with the customer to bring his or her payments current. If we close the line of credit and accelerate the
maturity date, we stop charging interest on the outstanding amount and begin collection efforts as described above.



Our business is seasonal due to the impact of fluctuating demand for cash advance services and fluctuating collection rates throughout
the year. Demand has historically been higher in the third and fourth quarters of each year, corresponding to the
back-to-school and holiday seasons, and lowest in the first quarter of each year, corresponding to our customers' receipt of income tax refunds.



We depend on borrowings under our revolving credit facility to fund our products and services and our other liquidity needs. Our
day-to-day balances under our revolving credit facility, as well as our cash balances, vary because of seasonal and day-to-day requirements resulting
from making and collecting cash advances. Our borrowings under our revolving credit facility will also increase as the demand for cash advances increases during our peak periods such as the
back-to-school and holiday seasons. Conversely, our borrowings typically decrease during the tax refund season when cash receipts from customers peak and customer demand for
new cash advances decreases.

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Center Operations



We operate the largest non-bank network of cash advance centers in the United States. The following table illustrates the
composition of our center network by geographic area as of the specified dates:

As of December 31,State

2008

2009

2010Alabama


144


142


139Arizona(1)


53


48


California


290


282


278Colorado(2)


68


62


31Delaware


16


16


14Florida


257


241


241Idaho


10


7


6Illinois


80


65


62Indiana


113


100


95Iowa


35


34


34Kansas


59


53


53Kentucky


44


44


44Louisiana


85


84


82Michigan


152


151


153Mississippi


61


61


61Missouri


91


86


83Montana(3)


5


2


Nebraska


24


22


20Nevada


14


13


11New Hampshire(4)


24





North Dakota


8


6


2Ohio(5)


244


181


174Oklahoma


68


67


67Rhode Island


21


21


20South Carolina


138


140


129South Dakota


12


11


11Tennessee


63


62


61Texas


252


244


244Utah


6


6


3Virginia(6)


151


139


82Washington(7)


102


91


46Wisconsin


67


62


56Wyoming


10


10


11Total United States


2,767


2,553


2,313Canada


10


13


18United Kingdom


20


21


21Total


2,797


2,587


2,352


(1)We
closed all of our centers in Arizona during 2010.(2)We
closed or consolidated 31 centers in Colorado during 2010.


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(3)We
closed all of our centers in Montana during the fourth quarter of 2010.(4)We
closed all of our centers in New Hampshire during 2009.(5)We
closed or consolidated 63 centers in 2009 and 7 centers in 2010 in Ohio.(6)We
closed or consolidated 57 centers in Virginia during 2010.(7)We
closed or consolidated 45 centers in Washington during 2010.




Our domestic and international revenues and long-lived assets for the three years ended December 31, 2008, 2009, and
2010 are as follows (in thousands):

Domestic

International2008

2009

2010

2008

2009

2010Revenues

$
673,567

$
644,496

$
593,379

$
2,869

$
3,180

$
6,855Long-lived assets

$
171,525

$
155,823

$
148,819

$
5,991

$
7,011

$
6,158




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

Competition

We believe our principal competitors for short-term credit customers in the United States are merchants who accept late
payments and banks and credit unions that provide overdraft services and bounced check protection for their account holders. We believe the credit provided and fees generated by the cash advance
service industry are small in comparison to the overall short-term credit market. The cash advance services industry provides services that are designed to be simple, affordable, and
convenient alternatives to merchant late fees, penalties, and overdraft service fees.

Within
the cash advance services industry, we believe that the principal competitive factors are customer service, location, convenience, speed, and confidentiality. Historically, cash
advance services have been highly competitive due to relatively low barriers to entry and the regulatory safe harbor that many state statutes provided. We believe the industry has begun to mature and
that the number of competitors is contracting. However, we believe that competition remains high even as our industry matures and consolidates.

The
cash advance services industry is highly fragmented. In April 2010, Stephens, Inc. estimated that there were approximately 20,600 outlets (including our own centers) in the
United States, down 7.6% from the prior year. Our network of 2,313 centers in the United States as of December 31, 2010 represents the largest network of such centers in the United States. We
believe that our two largest cash advance company competitors, Check 'n Go and Check into Cash, have approximately 1,000 and 1,100 cash advance centers, respectively. We also believe that QC
Holdings, Inc. has over 550 locations

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in
the United States. The remaining competitors are primarily smaller chains and single-unit operators. We also compete with businesses offering cash advances and short-term
loans over the internet as well as by phone, many of whom operate outside of the state regulatory framework.

In
addition to businesses that provide cash advance services as their core product line, there are other companies that offer cash advance services as an ancillary financial product to
their customers. This includes banks and credit unions, which provide cash advance services to their customers as an alternative or in addition to overdraft services, some of which have a much larger
branch and automated teller machine network than our center network. This also includes companies with the primary business of cashing checks, selling money orders, providing pawn lending, title
lending, money transfer services, or offering similar financial services. These competitors include Dollar Financial Corp., ACE Cash Express, Inc., and Cash America International, Inc.

Marketing and Advertising

The goal of our marketing strategy is to maximize revenues by attracting new customers and cross-selling all of our products and
services to existing customers. We use the results of data analysis from our customer database to target prospects who have characteristics similar to the customers we serve.

Our
mass media advertising (primarily through television, direct mail, radio, internet and the yellow pages) increases awareness, acceptance, and, ultimately, the use of our products and
services. We utilize marketing promotions at our centers with high-impact, consumer-relevant, point-of-purchase materials such as brochures, flyers, and posters.
Local marketing also includes attendance at, or sponsorship of, community events such as food drives, voter registration programs, and other events.

Our
advertising expenditures fluctuate from quarter to quarter based on our perception of market opportunities and customer needs.

Information Systems

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

The
point-of-sale systems are designed to facilitate customer service and speed the dissemination of information for cash reconciliation purposes. These systems
record and monitor the details of every transaction, reduce the risk of transaction errors, and provide automated, integrated transactions that are designed to ensure standardization and compliance
with applicable state and federal regulations.

Transaction
data gathered by our point-of-sale system is integrated into our management information system, general ledger, and cash reconciliation software.
Third party point-of-sale systems are not fully integrated at present. Our point-of-sale systems and cash reconciliation software allow us
to:



We
maintain and test a disaster recovery plan for our critical networked systems, the documentation for which is hosted on a third-party vendor website. Our back-up data
tapes are housed

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by
a third party at an off-site location. We also own back-up computer equipment and real-time data storage that is housed at an off-site facility to
provide us with access to needed systems in the event of an emergency that disables our headquarters' equipment.

Security

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

Because
our business requires us to maintain a significant supply of cash in each of our centers, we are subject to the risk of cash shortages resulting from employee and third-party
theft and errors. Cash shortages from employee and third-party theft and errors were approximately $1.3 million (0.22% of total revenues) in 2010, $1.7 million (0.27% of total revenues)
in 2009, and $2.1 million (0.31% of total revenues) in 2008.

Human Resources

Our North American operations are divided into zones, regions, and divisions, which we believe allows for a more effective management
process. A zone has approximately 500 to 1,000 centers and includes centers in more than one state. We currently have three North American zones, each with a zone director responsible for the
operations, administration, staffing, and general supervision of the centers in his or her zone. Regions include 18 to 153 centers organized into three to 11 divisions and are supervised by regional
directors who report to a zone director. Divisions include four to 20 centers and are supervised by divisional directors who report to a regional director. Determination of region and division
alignment is usually based upon geographic considerations and is periodically revised as centers are opened, closed, or consolidated. Our three zones in North America currently include
22 regions and 175 divisions. Within the United Kingdom we have a single zone and two regions.

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

Employees

We currently have approximately 5,839 employees, including approximately 5,398 center employees, 171 divisional directors,
19 regional directors, three state directors, four zone directors, and 244 corporate employees and support personnel.

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

Intellectual Property and Other Proprietary Rights

We use a number of trademarks, logos, and slogans in our business. Unauthorized use of our intellectual property by third parties may
damage our brand and our reputation and could result in a loss of customers. It may be possible for third parties to obtain and use our intellectual property without our authorization. Third parties
have in the past infringed or misappropriated our intellectual property or similar proprietary rights. For example, competitors of ours have used our name and other

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trademarks
of ours on their websites to advertise their financial services. We believe infringements and misappropriations will continue to occur in the future.

Other

Advance America, Cash Advance Centers, Inc. is a Delaware corporation that was incorporated on August 11, 1997. Our
principal executive offices are located at 135 North Church Street, Spartanburg, South Carolina 29306. Our telephone number at that location is (864) 342-5600. We maintain an
internet website athttp://www.advanceamerica.net. We make available free of charge on our website our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with,
or furnish it to, the U.S. Securities and Exchange Commission (the "SEC"). Information on our website is not incorporated by reference into this Annual Report. The SEC also maintains a website that
contains reports, proxy and information statements, and other information regarding us atwww.sec.gov. In addition, any materials we file with the SEC
may be read and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the
SEC at 1-800-SEC-0330.

Government Regulation

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

Federal Regulation

Various anti-cash advance legislation has been proposed or introduced in the U.S. Congress. Congressional members continue
to receive pressure from consumer advocates and other industry opposition groups to adopt such legislation. In 2008 and 2009, bills were introduced in Congress that would have placed a federal cap of
36% on the effective annual percentage rate ("APR") on all consumer loan transactions. Another bill would have placed a 15-cents-per-dollar borrowed ($.15/$1.00)
cap on fees for cash advances, banned rollovers (payment of a fee to extend the term of a cash advance or other short-term financing), and required us to offer an extended payment plan
that would severely restrict our cash advance product. In July 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"),
which authorizes the Bureau of Consumer Financial Protection ("BCFP") to regulate a variety of consumer finance transactions. Any federal legislative or regulatory action that severely restricts or
prohibits cash advance and similar services, if enacted, could have a material adverse impact on our business. Any federal law that would effectively limit our APR to 36% would likely eliminate our
ability to continue our current operations.

Our
products and services are subject to a variety of federal laws and regulations, such as the Dodd-Frank Act, Truth-in-Lending Act ("TILA"), the
Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act ("FDCPA"), the Gramm-Leach-Bliley Act ("GLBA"), the Bank Secrecy Act, the Money
Laundering Control Act of 1986, the Money Laundering Suppression Act of 1994, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
(the "PATRIOT Act"), and the regulations promulgated under each. Among other things, these laws require disclosure of the principal terms of each transaction to every customer, prohibit misleading
advertising, protect against

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discriminatory
lending practices, and proscribe unfair credit practices. TILA and Regulation Z, adopted under TILA, require disclosure of, among other things, the pertinent elements of consumer
credit transactions, including the dollar amount of the finance charge and the charge expressed in terms of an annual percentage rate.

Our
marketing efforts and the representations we make about our advances also are subject to federal and state unfair and deceptive practices statutes. The Federal Trade Commission
("FTC") enforces the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce the analogous state statutes.

State Regulation

Our business is regulated under a variety of enabling state statutes, including payday loan, deferred presentment, check-cashing, money
transmission, small loan, and credit services organization state laws, all of which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our
business. As of December 31, 2010, we operated in 30 states because we believe it is attractive to operate in those states due to specific legislation that enables us to offer economically
viable products. We currently do not conduct business in the remaining states or in the District of Columbia because we do not believe it is economically attractive to operate in those jurisdictions
due to specific legislative restrictions, such as interest rate ceilings, an unattractive population density, or unattractive location characteristics. However, we may open centers in any of these
states or the District of Columbia if we believe doing so may become economically attractive because of a change in any of these variables. Despite the lack of specific laws, other laws may permit us
to offer products and services in these states.

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

The
states with laws that specifically regulate our products and services typically limit the principal amount of a cash advance or loan and set maximum fees and interest rates that
customers may be charged. Some states also limit a customer's ability to renew a cash advance and require various disclosures to consumers. State statutes often specify minimum and maximum maturity
dates for cash advances and, in some cases, specify mandatory cooling-off periods between transactions. Our collection activities regarding past due amounts are subject to consumer
protection laws and state regulations relating to debt collection practices. In addition, some states restrict the advertising content of our marketing materials.

During
the last few years, legislation that prohibits or severely restricts our products and services has been introduced or adopted in a number of states and at the federal level, and
we expect that trend to continue for the foreseeable future. Legislation was adopted in New Hampshire in 2008 that effectively prohibits us from offering cash advances to consumers in that state. As a
result, in February 2009, we decided to close all of our centers in New Hampshire. In Virginia, a 2009 law prompted us to change our cash advance product and to offer an open-ended line of
credit product. However, a subsequent Virginia Corporation Commission ruling and additional legislation limited our ability to offer and service the open-ended line of credit product in
Virginia. As a result, we discontinued originations of new lines of credit and draws on existing lines of credit and we have consolidated a number of our centers in Virginia. We may determine that
further consolidation of centers in Virginia is appropriate if the cash advance product we now offer in Virginia is not sufficiently profitable. In the State of Washington, on January 1, 2010,
a new law placed a number of restrictions on our cash

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advance
product including limiting the number of cash advances a customer may take to eight in any one year. As a result, we expect our revenues and profits in Washington will be significantly
reduced. If we are unable to operate profitably in Washington, we may cease operating in that state. New laws in each of South Carolina, Kentucky, and Wisconsin implement a statewide database to
monitor the number and/or dollar amount of advances made to customers. New Colorado legislation permits a multiple installment loan that we expect will significantly lower our revenues and profits in
Colorado. Further, legislation permitting cash advances in Arizona expired on July 2, 2010, and as a result, we ceased operating in Arizona. The Mississippi legislature passed legislation
during the first quarter of 2011 which, if signed by the governor, would modify certain aspects of our cash advance product in that state and extend the statute's sunset provision through 2016. This
legislation would become effective on January 1, 2012. We are regularly refining our cash advance services and developing new products and services or operations to address recent or
anticipated legislative and regulatory changes. Some of these legislative and regulatory changes may require us to cease operations, while other changes may result in less significant
short-term or long-term changes, interruption in revenues, and lower operating margins. We generally cannot estimate what effect, if any, operational changes we make in
response to legislative and regulatory changes may have on our financial results until we are able to develop legal and financially viable alternative products and services.

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

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

Additionally,
state attorneys general and banking regulators are scrutinizing our products and services and taking actions that could require us to modify, suspend, or cease operations
in their respective states. For example, in March 2008, the Arkansas Attorney General demanded that our Arkansas subsidiary immediately cease offering deferred presentment transactions. As a result,
we closed all of our centers in Arkansas in October 2008. Similarly, as a result of an adverse ruling in July 2007 in a case brought by the Pennsylvania Department of Banking, we closed all of our
centers in Pennsylvania. See "Item 3. Legal Proceedings." Other actions could be taken against our industry in the future by other state attorneys general and banking regulators requiring us to
suspend or cease operations in such jurisdictions and have a negative effect on our business.

State-specific
legislative or regulatory action can reduce our revenues and/or margins in a state, cause us to temporarily operate at a loss in a state, or even cause us to cease or
suspend our operations in a state. From time to time, we may also choose to operate in a state even if legislation or regulations cause us to operate at a loss in that state.

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Local Regulation

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

Foreign Regulation

In the United Kingdom, consumer lending is governed by the Consumer Credit Act of 1974, which was amended by the Consumer Credit Act of
2006, and related rules and regulations. Our subsidiaries in the United Kingdom must maintain licenses from the Office of Fair Trading, which is responsible for regulating consumer credit and
competition, for policy and for consumer protection. The United Kingdom also has rules regarding the presentation, form, and content of loan agreements, including statutory warnings and the layout of
financial information. In Canada, the Canadian Parliament amended the federal usury law to transfer jurisdiction and the development of laws and regulation of our industry to the respective provinces.
To date, eight provinces have proposed substantive regulation of our industry. In general, the proposed regulations require lenders to be licensed, set maximum fees, and regulate collection practices.
However, the proposed regulations may undergo significant additional revisions.

Environmental, Health and Safety Matters

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

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

ITEM 1A.    RISK FACTORS.

Risks Related to Our Business and Industry



Although states have historically provided the primary regulatory framework under which we offer advances, certain federal laws also affect our business. See
"Item 1. BusinessFederal Regulation." We must comply with the Federal Truth-in-Lending Act and Regulation Z adopted under that Act. Additionally, we
are subject to the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair and Accurate Credit Transaction Act, the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act. We
are also subject to the Bank Secrecy Act, the Money Laundering Control Act of 1986, the Money Laundering Suppression Act of 1994, and the PATRIOT Act. Any failure to comply with any of these federal
laws and regulations could have a material adverse effect on our business, prospects, results of operations, and financial condition.

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In July 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This legislation authorizes the
creation of a Bureau of Consumer Financial Protection (the "BCFP") with broad regulatory powers over banks and non-depository companies that offer consumer financial services, including
cash advances and other consumer credit products. Under this new legislation, the BCFP has the authority to examine companies that offer consumer financial protection services, and the exclusive
authority to enforce federal consumer financial laws. The BCFP will also have rulemaking authority with respect to several federal consumer financial protection laws, including many of the statutes
listed above. Although we cannot currently predict how, when, or if the BCFP will impose additional regulations that could affect us, the BCFP may promulgate regulations that would impact the consumer
credit products that we offer and have a material adverse effect on our business, prospects, results of operations, and financial condition. Failure to comply with applicable regulations could subject
us to regulatory enforcement action that could result in civil, monetary, or other penalties and could have a material adverse effect on our business, prospects, results of operations, and financial
condition.

In
addition, our marketing efforts and the representations we make about our products and services are subject to federal and state unfair and deceptive practices statutes. The Federal
Trade Commission enforces the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce analogous state statutes. If we are found to have violated any of these
statutes, it could have a material adverse effect on our business, prospects, results of operations, and financial condition.



Various anti-cash advance legislation has been proposed or introduced in the U.S. Congress. Congressional members continue to receive pressure from
consumer advocates and other industry opposition groups to adopt such legislation. In 2008 and 2009, bills were introduced that would have placed a cap of 36% on the effective annual percentage rate
("APR") on all consumer loan transactions. Another bill would have placed a 15-cents-per-dollar borrowed ($0.15/$1.00) cap on fees for cash advances and would have
implemented other consumer protections. Other bills have been introduced that would have limited to six the number of cash advances a customer would be permitted to receive in any twelve-month period.
Any federal legislation or regulation that places restrictions on cash advances and similar services could have a material adverse effect on our business, prospects, results of operations and
financial condition. Any federal law that would impose a national 36% APR limit or prohibit or severely restrict cash advance services would likely eliminate our ability to continue our current
operations.



Our business is regulated under a variety of enabling state statutes, including cash advance, deferred presentment, check cashing, money transmission, small loan
and credit services organization laws, all of which are subject to change and which may impose significant costs, limitations or prohibitions on the way we conduct or expand our business. As of
December 31, 2010, we operated in 30 states. Currently, we do not conduct business in the remaining states or in the District of Columbia because we do not believe it is economically attractive
to operate in these jurisdictions due to specific legislative restrictions, such as interest rate ceilings, an unattractive population density or unattractive location characteristics. However, we may
open centers in any of these states or the District of Columbia if we believe doing so may become economically attractive because of a change in any of these variables.

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During
the last few years, legislation has been introduced or adopted in some states that prohibits or severely restricts our products and services. In 2009 and 2010, bills that would
severely restrict or effectively prohibit cash advances if adopted as law were introduced in eleven and eight states, respectively. Such new or modified legislation could have a material adverse
impact on our results of operations. For example, in the first quarter of 2010, bills that implemented a state-wide database went into effect in Kentucky, South Carolina and Washington. A
similar law in Wisconsin took effect on January 1, 2011. In response to legislation in Virginia, we developed an open-ended line of credit product and made changes to our cash
advance product.
However, a subsequent Virginia Corporation Commission ruling limits our ability to offer the open-ended line of credit product in Virginia effective March 1, 2010. As a result, we
have decided to consolidate a number of our centers in Virginia, and the cash advance product we now offer in Virginia may not be as profitable for us as the cash advance product we offered there
prior to this ruling. As a result of legislation in New Hampshire that became effective in January 2009, we concluded that operating in that state was no longer economically viable and closed all of
our New Hampshire centers in 2009. As a result of new legislation passed in Colorado in 2010, we closed 31 of our 62 centers in that state. In addition, some states, such as Arizona and Mississippi,
have sunset provisions in their cash advance laws that require renewal of the laws by state legislatures at periodic intervals. When Arizona's cash advance law was not renewed on June 30, 2010,
we closed all of our centers in that state. If no further action is taken, Mississippi's cash advance law will expire in 2012.

Laws
prohibiting cash advances and similar products and services or making them less profitable, or even unprofitable, could be passed in any other state at any time or existing enabling
laws could expire or be amended, any of which could have a material adverse effect on our business, prospects, results of operations, and financial condition. For instance, in November 2008, a new
Ohio law became effective that capped interest rates on cash advances and limited the number of advances a customer may take in any one year. In response to this legislation, we now offer a small loan
product that is not as profitable as our former cash advance product, which could have a material adverse effect on our business, prospects, results of operations, and financial condition.

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

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

Additionally,
state attorneys general and banking regulators are scrutinizing cash advances and other alternative financial products and services and taking actions that require us to
modify, suspend or cease operations in their respective states. For example, as a result of an adverse ruling in July 2007

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in
a case brought by the Pennsylvania Department of Banking, we suspended our operations and subsequently closed all of our centers in Pennsylvania. See "Item 8. Financial Statements and
Supplementary DataNote 12. Commitments and Contingencies." The closures in Pennsylvania have had an adverse effect on our results of operations and financial condition. Also, in
March 2008, the Attorney General of Arkansas distributed letters to 60 companies operating under the Check Cashers Act. The letter demanded that we cease and desist offering deferred presentment
transactions within the State of Arkansas. As a result, we agreed to close all of our centers in Arkansas in October 2008 and the Arkansas Attorney General agreed not to bring suit against us. Similar
or additional actions could have a material adverse effect on our business, prospects, results of operations, and financial condition.



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

From
time to time, we may also choose to operate in a location even if applicable legislation or regulations cause us to lose money on our operations in that location. For example, we
currently operate at a loss in Canada. Any similar actions or events could have a material adverse effect on our business, prospects, results of operations, and financial condition.



To conduct our business, we are required to manage, use, and store large amounts of personally identifiable information, consisting primarily of confidential
personal and financial data regarding our customers. We also depend on our IT networks and systems, and those of third parties, to process, store, and transmit this information. As a result, we are
subject to numerous U.S. and foreign laws and regulations designed to protect this information, such as the European Union Directive on Data Protection, Canadian federal and provincial laws, and
various U.S. federal and state laws governing the protection of financial or other individually identifiable information. Security breaches involving our
files and infrastructure could lead to unauthorized disclosure of confidential information, as well as shutdowns or disruptions of our systems.

If
any person, including our employees or those of third party vendors, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise
mismanages or misappropriates that data, we could be subject to costly litigation, monetary damages, fines, and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential customer
data by any person, whether through systems failure, unauthorized access to our IT systems, fraud, misappropriation, or negligence, could result in negative publicity, damage to our reputation, and a
loss of customers. Any unauthorized disclosure of personally identifiable information could subject us to liability under data privacy laws and adversely affect our business prospects, results of
operations, and financial condition.



In the United Kingdom, consumer lending is governed by the Consumer Credit Act of 1974, which was amended by the Consumer Credit Act of 2006, and related rules
and regulations. Our subsidiaries in the United Kingdom must maintain licenses from the Office of Fair Trading, which is responsible for regulating consumer credit and competition, for policy-making,
and for consumer protection. The

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United
Kingdom also has strict rules regarding the presentation, form, and content of loan agreements, including statutory warnings and the layout of financial information. Our
non-compliance with these rules could render a loan agreement unenforceable. Our inability to obtain and maintain the required licenses or to comply with the applicable rules or
regulations in the United Kingdom could limit our expansion opportunities and/or could result in a material adverse effect on our business, results of operations, and financial condition.

In
Canada, the Canadian Parliament amended the federal usury law in 2007 to transfer jurisdiction and the development of laws and regulation of our industry to the respective provinces.
To date, four provinces have proposed substantive regulation of our industry. In general, the proposed regulations require lenders to be licensed, set maximum fees and regulate collection practices.
However, the proposed regulations may undergo significant additional revisions. Our expansion in Canada may be limited due to this uncertain regulatory landscape. We are currently operating at a loss
in Canada in anticipation of expanding operations after regulations are adopted. Further, our inability to comply with new regulations may have a material adverse effect on our business, prospects,
results of operations, and financial condition.



Our business is subject to lawsuits, regulatory proceedings, and other legal proceedings, including government investigations, that generate adverse publicity,
cause us to incur substantial expenditures, and could significantly impair our business and/or force us to cease doing business in one or more states. See "Item 3. Legal Proceedings." Our
officers and directors are often also named in these lawsuits or subject to these matters. Our amended and restated certificate of incorporation, our bylaws, and indemnification agreements provide
that our officers and directors are entitled to have us indemnify them for damages and advance expenses incurred in defending against these lawsuits and proceedings, including in connection with their
responses to a pending investigation, and defending against any related enforcement proceedings, by the U.S. Securities and Exchange Commission into alleged tipping of material nonpublic information
and improper trading in our securities. Accordingly, we may also incur significant expenditures in connection with matters involving our current or former officers and directors. Any of these
lawsuits, regulatory proceedings, or other legal matters could have a material adverse effect on our business, prospects, results of operations, and financial condition.

We,
and our officers and directors, are likely to be subject to further litigation and proceedings in the future. The consequences of an adverse ruling in any current or future
litigation or proceeding could cause us to have to refund fees and/or interest collected, refund the principal amount of advances, pay treble or other multiple damages, pay monetary penalties and/or
modify or terminate our operations in particular states. We also may be subject to adverse publicity as a result of litigation and investigations. Defense of any lawsuits or proceedings, even if
successful and responding to investigations requires substantial time and attention on the part of our management personnel that otherwise would be spent on other aspects of our business, and requires
the expenditure of significant amounts for legal fees and other related costs. Settlement of lawsuits also may result in significant payments and modifications to our operations. Further, actions
against our officers and directors may impair our ability to obtain, renew, or maintain various licenses that are necessary for us to conduct business. Any of these events could have a material
adverse effect on our business, prospects, results of operations, and financial condition.

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In 2007, we began selling money orders and providing money transfer services. We also began offering prepaid debit cards in 2007 as an agent of a bank regulated
by the U.S. Office of Thrift Supervision. In 2008, we began offering open-ended lines of credit to customers in Virginia and small
loans to customers in Ohio. In 2009, we began offering cash advances pursuant to the Ohio Second Mortgage Act. We also intend to introduce additional products and services in the future. For example,
we modified our product in the State of Washington in response to new legislation effective in 2010.

We
regularly offer new or modified products and services. In order to offer new or modified products and services, we need to comply with additional regulatory and licensing
requirements. Each modification, new product or service, and alternative method of conducting business is subject to risk and uncertainty and requires significant investment in time and capital,
including additional marketing expenses, legal costs, and other incremental start-up costs. Due to our lack of experience in offering alternative products and services, we cannot assure
that we will be able to successfully introduce any new products or services or do so in a timely or profitable manner. We also may fail to modify or test adequately our
point-of-sale system, collection procedures, customer contracts, monitoring, and other operations prior to offering a new product, nor can we ensure compliance with applicable
regulations. Any such noncompliance could result in fines, suspensions, or legal actions against us and could have a material adverse effect on our business, prospects, results of operations, and
financial condition. Furthermore, we cannot predict the demand or loss experience for new products or services, nor do we know if we will be able to offer these new products or services in an
efficient manner or on a profitable basis. Our failure to do so, or low customer demand or high loss experience for any of these new services or products, could have a material adverse effect on our
business, prospects, results of operations, and financial condition.



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



We operated centers in 32 states during the year ended December 31, 2010, and our five largest states (measured by total revenues) accounted for
approximately 51% of our total revenues. While we believe we have a diverse geographic presence, for the near term we expect that a significant portion of our revenues will continue to be generated
from certain states, largely due to the currently prevailing economic, demographic, regulatory, competitive, and other conditions in those states. For example, during 2010, California, Florida, and
Texas each accounted for more than 10% of our total revenues. Changes to any of these conditions in the markets in which we operate could lead to a reduction in demand for our products and services, a
decline in our revenues, or an increase in our provision for doubtful accounts that could result in a deterioration of our financial condition. For example,

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regulatory
changes occurring in Arizona and Colorado caused us to close or consolidate our centers in these states in the latter half of 2010. In prior years, regulatory changes in Ohio and New
Hampshire, and actions by state regulators, such as those in Pennsylvania and Arkansas, have also caused us to close or consolidate centers. Regulatory changes in any one of our larger states may have
a material adverse affect on our business, prospects, results of operations, and financial condition.



The current global economic crisis may adversely affect our business in several ways. For example, the rise in unemployment levels will likely reduce the number
of customers who qualify for our products and services, which in turn may reduce our revenues. Similarly, reduced consumer confidence and spending may decrease the demand for our products. Also, we
are unable to predict how the widespread loss of jobs, housing foreclosures, and general economic uncertainty may affect our loss experience. Our methodology for establishing our provision for
doubtful accounts is based in large part on our historic loss experience. If customer behavior changes as a result of current economic conditions, our provision may be inadequate. Additionally,
because we rely on our credit facility to fund customer advances, conditions in the credit markets could cause our access to liquidity to be restrained or even eliminated as a result of a default by
our lenders, a failure by us to comply with covenants under our credit agreement or our inability to renew, extend or modify our existing credit facility. If we are unable to maintain access to
external sources of liquidity, our ability to finance our current operations or future dividends would be impaired. Lastly, given the unprecedented nature of the current economic crisis, our business
may be adversely affected in ways that we are unable to anticipate.



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



We have an existing revolving credit facility that allows us to borrow up to $270.0 million, assuming we are in compliance with a number of covenants and
conditions, including, but not limited to, a senior leverage limitation of two times trailing twelve month EBITDA, as defined in the credit agreement. As of December 31, 2010, the senior
leverage limitation was approximately $188.0 million. Because we typically use substantially all of our available cash generated from our operations to repay borrowings on our revolving credit
facility on a current basis, we have limited cash balances and we expect that a substantial portion of our liquidity needs, including any amounts to pay future quarterly cash dividends on our common
stock, will be funded primarily from borrowings under our revolving credit facility. While we had approximately $149.5 million of unused borrowings under this facility as of December 31,
2010, the senior leverage covenant restricted our additional availability to $62.4 million. Due to the seasonal nature of our business, our borrowings are historically the lowest during the
first calendar

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quarter
and increase during the remainder of the year. If our existing sources of liquidity are insufficient to satisfy our financial needs, we may need to raise additional debt or equity in the
future. If we are unable to do so, our ability to pay future dividends or finance our current operations or potential growth will likely be impaired.



Consumer advocacy groups, certain media reports, and many regulators and elected officials advocate for governmental and regulatory action to prohibit or severely
restrict our products and services. The consumer groups and media reports typically focus on the cost to a consumer and characterize our products and services as predatory or abusive toward consumers.
If this negative characterization of advances becomes widely accepted by consumers, demand for our products and services could significantly decrease, which could materially adversely affect our
business, results of operations, and financial condition. Negative perception of our products and services could also result in increased regulatory scrutiny and litigation, encourage restrictive
local zoning rules, make it more difficult to obtain government approvals necessary to open new centers and cause industry trade groups, such as the CFSA, to promote policies that cause our business
to be less profitable. In addition, media coverage and public statements that assert some form of corporate wrongdoing can lower morale, make
it more difficult for us to attract and retain qualified personnel and directors, divert management attention, and increase expenses. These trends could materially adversely affect our business,
prospects, results of operations, and financial condition.



We may not be able to collect customers' checks or Automated Clearing House ("ACH") authorizations because of non-sufficient funds in the customers'
bank accounts, closed accounts, stop-payment orders or a variety of other reasons, including laws that prevent us from doing so. For the years ended December 31, 2010 and 2009, we
deposited customer checks or presented an Automated Clearing House ("ACH") authorization for approximately 6.5% and 5.9%, respectively, of all the customer checks and ACHs we received and we were
unable to collect approximately 64% and 70%, respectively, of these deposited customer checks or presented ACHs. Total charge-offs, net of recoveries, for the years ended
December 31, 2010 and 2009 were approximately $108.0 million and $130.4 million, respectively. If the number of customer checks that we deposit or ACHs that we present increases
or the percentage of the customers' checks or ACHs that we charge-off increases, our provision for doubtful accounts will increase and our net income will decrease.



We maintain an allowance for doubtful accounts for estimated losses. We also maintain an accrual for third-party lender losses for loans and certain related fees
that are not paid by the customers for all loans that are processed by us for the third-party lender in Texas. To estimate the appropriate allowance for doubtful accounts and accrual for third-party
lender losses, we consider total amounts outstanding, historical charge-offs, our current collection patterns, and the current economic trends in the markets we serve.

At
December 31, 2010, the total of our allowance for doubtful accounts and accrual for third-party lender losses decreased to $53.8 million from $57.6 million at
December 31, 2009. This amount, however, is an estimate. If our actual losses are greater than our allowance for doubtful accounts and accrual for third-party lender losses, our provision for
doubtful accounts would increase. This could

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result
in a decline in our future earnings, which could have a material adverse effect on our business, prospects, results of operations, and financial condition.



A significant portion of our total assets at December 31, 2010 is comprised of goodwill. Under generally accepted accounting principles, goodwill is
subject to periodic review and testing to determine if it is impaired. These tests require projections of future cash flows. Unfavorable trends in our industry and unfavorable events or disruptions to
our operations can affect these projections and estimates. Significant impairment charges, although not affecting cash flow, could have a material adverse impact on our operating results and financial
position.



We allow customers who cannot timely repay their advances to qualify for extended payment plans. The ability of a customer to defer payment increases the average
duration of a cash advance, which may in turn affect our revenues, return on investment, loss experience, and provision for doubtful accounts. If more customers use extended payment plans, our results
of operations and financial condition may worsen.



We have devoted significant management time and financial resources to expanding our operations outside of the United States. Our international operations have
increased the complexity of our organization and the administrative, operating, and legal cost of operating our business. Penetrating new markets will likely require additional marketing expenses and
incremental start-up costs. We may decide to reduce fees, or even temporarily operate centers at a loss, in order to build brand recognition and establish a foothold in these new markets.
For example, in Canada, we have opened 18 centers that are currently not profitable in anticipation of more favorable provincial legislation. Ultimately, the expansion of our international operations
may prove to be unprofitable. Additionally, as a foreign business we are subject to local regulations, tariffs, and labor controls to which our domestic businesses are not subject. Our financial
results also may be negatively affected by tax rates in the United Kingdom and Canada or as a result of withholding requirements and tax treaties with those countries. Moreover, if political,
regulatory or economic conditions deteriorate in the United Kingdom and Canada, our ability to expand and maintain our international operations could be impaired or the costs of doing so could
increase, either of which could further erode our business, prospects, results of operations, and financial condition. Ultimately, it remains unclear if we will be able to operate on a profitable
basis outside the United States.



We may incur substantial additional debt in the future. As of December 31, 2010, our total debt was approximately $116.3 million, including
$8.5 million in outstanding letters of credit issued pursuant to our credit facility, and our stockholders' equity was approximately $235.0 million. The total availability under our
current credit facility is $270.0 million, which we may borrow at any time, subject to compliance with certain covenants and conditions. Due to the seasonal nature of our business, our total
debt is historically the lowest during the first calendar quarter and then increases during the

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remainder
of the year. If we incur substantial additional debt, it could have important consequences to our business. For example, it could:



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

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



We depend on borrowings under our revolving credit facility to fund our products and services, capital expenditures to build new centers, and other needs. If our
current or potential credit banks decide not to lend money to companies in our industry, we could face higher borrowing costs, limitations on our ability to maintain or expand our business as well as
possible cash shortages, any of which could have a material adverse effect on our business, prospects, results of operations, and financial condition. Certain banks have notified us and other
companies in the cash advance and check-cashing industries that they will no longer maintain bank accounts for these companies due to reputational risks and increased compliance costs of servicing
money services businesses and other cash intensive industries. If one of our larger depository banks request that we close our bank accounts or put other restrictions on how we use their services, we
could face higher costs of managing our cash and limitations on our ability to maintain or expand our business, both of which could have a material adverse effect on our business, prospects, results
of operations, and financial condition.

We
use an electronic check conversion process to electronically present most of our past due checks to the customers' bank accounts. This process uses either the Automated Clearing House
("ACH") or the VISA Point-of-Sale ("VISA POS") network. We depend on our banks to settle our ACH transactions and on VISA and certain participating financial institutions to
operate the VISA POS system. If our banks decide to no longer process our ACH transactions due to increased credit risk or other reasons, or if a financial institution were to exit the VISA POS
payment network or if VISA stopped supporting this network, our ability to collect on past due accounts could be adversely affected and our cost of collections could increase.

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In Texas, where we operate as a CSO, and with respect to our online business, we facilitate loans made to our customers by unrelated third-party lenders. There
are a limited number of lenders that make these types of cash advances and we compete with others in our industry for their services. If we lose the services of our current third-party lenders, or
these lenders lose their ability or become unwilling to make cash advances, and we are unable to find replacement third-party lenders, we may be forced to modify or discontinue our operations as a CSO
in Texas and our online business, which could have a material adverse effect on our results of operations and financial condition.



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

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



Because our business requires us to maintain a significant supply of cash in each of our centers, we are subject to the risk of cash shortages resulting from
employee and third-party theft and errors. Although we have implemented various programs to reduce these risks, maintain insurance coverage for theft and provide security for our employees and
facilities, we cannot assure you that employee and third-party theft and errors will not occur. Cash shortages from employee and third-party theft and errors were approximately $1.3 million
(0.22% of total revenues) in 2010, $1.7 million (0.27% of total revenues) in 2009, and $2.1 million (0.31% of total revenues) in 2008. The extent of these cash shortages could increase
as we expand the nature and scope of our products and services. Theft and errors could lead to cash shortages and could adversely affect our business, prospects, results of operations and financial
condition. It is also possible that crimes such as armed robberies may be committed at our centers. We could experience liability or adverse publicity arising from such crimes. For example, we may be
liable if an employee, customer, or bystander suffers bodily injury, emotional distress, or death. Any such event may have a material adverse effect on our business, prospects, results of operations,
and financial condition.

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



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



Our ability to maintain or expand our business depends on a number of factors, some of which are beyond our control, including:



We
cannot assure you that our systems, procedures, controls, and existing personnel will be adequate to support new or replacement products and services. Our new international operations
increase the complexity of our organization, our administrative costs, and the regulatory risks we face and, therefore, could destabilize our business, prospects, results of operations, and financial
condition. Our results of operations depend substantially on the ability of our officers and key employees to manage changing business conditions and unpredictable regulations and to implement and
improve our technical, administrative, financial control, and reporting systems. In addition, we cannot assure you that we will be able to implement our business strategy profitably in geographic
areas or product lines we do not currently serve.

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As of December 31, 2010, the annual turnover among our center managers was approximately 27.6% and among our other center employees was approximately
55.9%. Approximately 28.7% of combined turnover occurs in the first six months following the hire date of our center managers and employees. This turnover increases our cost of operations and makes it
more difficult to operate our centers. The average tenure of our center managers is 4.4 years and for our other center employees is 1.1 years. If we are unable to retain our employees in
the future, our business, prospects, results of operations, and financial condition could be adversely affected.

Risks Related to Our Common Stock



We are not required to pay any dividends. Any determination to pay dividends, and the amounts of any dividends, is at the sole discretion of our Board of
Directors and will depend on a number of factors, including: regulatory and other restrictions on the ability of our operating subsidiaries to distribute cash to us; our net income, results of
operations and cash flows and our other cash needs; our financial position and capital requirements; general business conditions and the outlook for our company; general stock market conditions,
including our stock price and our perception of the value of a regular dividend to our stockholders; and any legal, tax, regulatory and other factors our Board of Directors deems relevant. Also, our
revolving credit facility restricts our ability to pay dividends depending on the absence of any default or event of default, our net income, the ratio of our consolidated senior funded debt to our
consolidated EBITDA, our consolidated fixed charge coverage ratio and the maintenance of our net worth covenant (which terms and ratios are determined under our revolving credit facility). Our Board
of Directors may at any time modify or revoke our dividend policy.



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

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.    PROPERTIES.

Our average center size is approximately 1,500 square feet. We try to locate our centers in highly visible, accessible locations. Our
centers, which we design to have the appearance of a mainstream financial institution, are typically located in middle-income shopping areas with high retail activity.

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Other
tenants in these shopping areas typically include grocery stores, discount retailers, and national quick service restaurants. All of our centers are leased, with typical lease terms of three
years with an option to renew at the end of the lease term. Our leases usually require that we pay all maintenance costs, insurance costs, and property taxes.

See
"Item 1. BusinessCenter OperationsCenters" for a listing of the number of centers we operated in various jurisdictions as of December 31,
2010.

We
own our corporate headquarters in Spartanburg, South Carolina. Our headquarters building, which is approximately 75,000 square feet, and related land are subject to a mortgage payable
to a lender, the principal amount of which was approximately $4.1 million at December 31, 2010. The mortgage is payable in monthly installments of approximately $66,400, including
principal and interest, and bears interest at a fixed rate of 7.30% over its 15 year term. The mortgage matures on June 10, 2017. The carrying amount of our corporate headquarters (land,
land improvements, and building) was approximately $4.6 million and $4.4 million at December 31, 2009 and 2010, respectively.

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

ITEM 3.    LEGAL PROCEEDINGS.

We are involved in a number of active lawsuits, including lawsuits filed by private litigants and those matters arising out of actions
taken by state regulatory authorities. We are also involved in various other legal proceedings with state and federal regulators. In addition, we are obligated to advance expenses to, and, in certain
circumstances, indemnify for damages incurred by, certain of our current or former officers and directors in responding to inquiries or defending against claims or proceedings that have arisen by
reason of the fact that such person is or was an officer or director of the Company. Under certain circumstances, we may also be obligated to defend and indemnify other parties against whom claims
have been asserted. Unless otherwise stated below, we are vigorously defending against these actions and will, when management believes appropriate in consideration of ongoing litigation expenses and
other factors, evaluate reasonable settlement opportunities. The amount of losses and/or the probability of an unfavorable outcome, if any, cannot be reasonably estimated for these legal proceedings
unless otherwise stated below. Accordingly, except as otherwise specified below, no accrual has been recorded for any of these matters as of December 31, 2010.



On February 27, 2007, Brenda McGinnis filed a putative class action in the Circuit Court of Clark County, Arkansas alleging
violations of the Arkansas usury law, the Arkansas Deceptive Trade Practices Act, and a 2001 class action settlement agreement entered into by our prior subsidiary in Arkansas. The complaint alleged
that our subsidiary made usurious loans under the Arkansas Check Cashers Act and sought compensatory damages in an amount equal to twice the interest paid on the deferred presentment transactions made
from 2001 to present (which could total approximately $21.4 million for deferred presentment transactions made during that time, or approximately $87.0 million in damages for all
transactions originated, processed, and serviced during that time) as well as a declaration that the contracts are void, enforcement of the 2001 class action settlement agreement, attorneys' fees, and
costs.

On
September 23, 2009, we entered into a settlement agreement with the class representatives in connection with the litigation. Pursuant to the terms of the settlement agreement
which was approved by the court, the case has been dismissed and we have been released from any and all claims and liability in connection with deferred presentment transactions entered into in
Arkansas pursuant to the
Arkansas Check Casher's Act. The settlement agreement did not include an admission of wrongdoing or liability.

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We
took a charge against earnings during the year ended December 31, 2009 of approximately $5.7 million to cover the estimated costs of settlement. We do not expect to
incur any additional charges related to this case.



On July 16, 2008, Kerri Stone filed a putative class action complaint in the Superior Court of California in San Diego against
us and our California subsidiary. Defendants removed the case to the United States District Court for the Southern District of California. The amended complaint alleges violations of the California
Deferred Deposit Transaction Law and the California Unfair Competition Law and seeks an order requiring defendants to disgorge and/or make restitution of all revenue and loan principal, pay three
times the amount of damages the class members actually incurred, reasonable attorney's fees and costs of suit, and punitive damages. The complaint also seeks certain injunctive relief. We anticipate
that the case will proceed to trial during 2011.



We and our subsidiary, McKenzie Check Advance of Florida, LLC ("McKenzie"), are defendants in a putative class action lawsuit
commenced by former customers, Wendy Betts and Donna Reuter, on January 11, 2001, and a third named class representative, Tiffany Kelly, in the Circuit Court of Palm Beach County, Florida. This
putative class action alleges that McKenzie, by and through the actions of certain officers, directors, and employees, engaged in unfair and deceptive trade practices and violated Florida's criminal
usury statute, the Florida Consumer Finance Act, and the Florida Racketeer Influenced and Corrupt Organizations Act. The suit seeks unspecified damages, and the named defendants could be required to
refund fees and/or interest collected, refund the principal amount of cash advances, pay multiple damages, and pay other monetary penalties. Ms. Reuter's claim has been held to be subject to
binding arbitration, which we expect to proceed in parallel with this case. However, the trial court has denied the defendants' motion to compel arbitration of Ms. Kelly's claims. The Florida
Appellate Court affirmed the trial court's decision,
but certified a "Question of Great Public Importance" to the Florida Supreme Court regarding their decision and we intend to appeal this decision to the Florida Supreme Court.



A second Florida lawsuit was filed on August 24, 2004, in the Circuit Court of Palm Beach County by former customers Gerald
Betts and Ms. Reuter against us and our Florida subsidiary, Advance America, Cash Advance Centers of Florida, Inc., and certain officers and directors. The allegations, relief sought,
and our defenses in this lawsuit are nearly identical to those alleged in the firstBetts and Reuterlawsuit described above. The case is currently
stayed, pending a decision from the Florida Supreme Court inPendergast v. Sprint Nextel Corp., which is a separate case, to which we are not a party,
involving arbitration issues.



On March 10, 2008, Trishia Hooper and Josephine Vaughn filed a putative class action lawsuit in the United States District Court
for the Western District of Missouri against our subsidiary Advance America, Cash Advance Centers of Missouri, Inc. The action alleged that the arbitration clause and class action waiver in our
subsidiary's customer loan agreements were unconscionable, that our subsidiary's practices violated the Missouri statutes governing unfair and deceptive trade practices, interest rates, loan renewals,
debt reduction, and consideration of borrower's ability to repay. The lawsuit sought certification as a class action, unspecified monetary damages, and a declaratory judgment that the arbitration
clause and class action waiver was unconscionable and injunctive relief. On May 27, 2010, we and the class representatives entered into a settlement agreement. The settlement agreement

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did
not include an admission of wrongdoing or liability. Pursuant to the terms of the settlement agreement, which the court approved on November 4, 2010, the case was dismissed, we and all
other defendants were released from any and all claims and liability, we established a settlement pool of approximately $2.0 million for payments and/or credits to settle the claims of certain
customers of our Missouri subsidiary and payment of all attorneys' fees, class action administration fees, and other fees and expenses related to the litigation, and our subsidiary offered discounts
on the repayment of certain defaulted loans and on fees to certain lass members for future loans. We took a charge against earnings in the second quarter of 2010 of approximately $2.0 million
to cover the estimated costs of settlement. We do not expect to incur any additional charges related to this case.



On July 27, 2004, John Kucan, Welsie Torrence, and Terry Coates, each of whom was a customer of Republic Bank & Trust
Company ("Republic"), the lending bank for whom we previously marketed, processed, and serviced cash advances in North Carolina, filed a putative class action lawsuit in the General Court of Justice
for the Superior Court Division for New Hanover County, North Carolina against us and Mr. William M. Webster IV, Chairman of our Board of Directors and our former Chief Executive Officer,
alleging, among other things, that the relationship between our North Carolina subsidiary and Republic was a "rent a charter" relationship and therefore Republic was not the "true lender" of the cash
advances it offered. The lawsuit also claimed that the cash advances were made, administered and collected in violation of numerous North Carolina consumer protection laws. The lawsuit sought an
injunction barring the subsidiary from continuing to do business in North Carolina, the return of the principal amount of the cash advances made to the plaintiff class since August 2001, along with
three times the interest and/or fees associated with those advances, which could have, under certain circumstances, totaled approximately $220 million, plus attorneys' fees and other
unspecified costs.

On
September 17, 2010, we and the class representatives entered into a settlement agreement. The settlement agreement did not include any admission of wrongdoing or liability and
is subject to court approval and certain other conditions before it becomes final and the lawsuit is concluded. Pursuant to the terms of the settlement agreement, the case will be dismissed, we and
all other defendants will be released from any and all claims and liability, we will establish a settlement pool of approximately $18.75 million for payments and/or credits to settle the claims
of certain customers of our North Carolina subsidiary and payment of all attorneys' fees, class action administration fees, and any and all other fees and expenses related to the litigation. We took a
charge against earnings in the third quarter of 2010 of approximately $16.3 million to cover the estimated net costs of settlement less insurance proceeds. The Trial Court entered an order
granting final approval of this settlement on January 31, 2011. We do not expect to incur any additional charges related to this case.



On February 1, 2005, the Commissioner of Banks of North Carolina initiated a contested case against our North Carolina
subsidiary for alleged violations of the North Carolina Consumer Finance Act. In December 2005, the Commissioner of Banks ordered that our North Carolina subsidiary immediately cease and desist
operating. In accordance with the Commissioner of Banks' order, our North Carolina subsidiary ceased all business operations on December 22, 2005. We appealed the Commissioner's order to the
Superior Court of North Carolina, which denied the appeal. Our appeal of this decision to the North Carolina Court of Appeals was stayed pending resolution of the Kucancase. We will dismiss our appeal
if there are no appeals of the final order in theKucancase. We
do not expect to incur any additional charges related to this case.

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On September 27, 2006, the Pennsylvania Department of Banking filed a lawsuit in the Commonwealth Court of Pennsylvania alleging
that our Delaware subsidiary, NCAS of Delaware, LLC, was providing lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania's financial licensing law and
charging interest and fees in excess of the amounts permitted by Pennsylvania's usury law. In July 2007, the court determined that certain aspects of our Choice-Line of Credit required our subsidiary
to be licensed under Pennsylvania's Consumer Discount Company Act ("CDCA") and enjoined us from continuing our lending activities in Pennsylvania for so long as the CDCA violations continued and from
collecting monthly participation fees. We appealed to the Pennsylvania Supreme Court and, in May 2008, the Pennsylvania Supreme Court upheld the lower court's ruling. The Pennsylvania Department of
Banking subsequently amended its complaint to add the Pennsylvania Attorney General as a plaintiff, to name us as a defendant, and to seek damages, fines, and penalties under Pennsylvania's CDCA,
usury laws, and consumer protection laws. In April 2010, the Pennsylvania Commonwealth Court dismissed the alleged CDCA and usury allegations and partially dismissed the alleged consumer protection
law violations. The remaining alleged consumer protection law claims will proceed before the trial court. These remaining claims could, under certain circumstances, total approximately
$45 million in damages, plus civil penalties of $1,000 for each violation of the Pennsylvania Consumer Protection Law and an additional $2,000 for violations against customers over the age of
60, and attorneys' fees and costs. The parties are engaged in discovery and we will continue to defend vigorously against these claims.



On August 1, 2007, Sharlene Johnson, Helena Love, and Bonny Bleacher filed a putative class action lawsuit in the United States
District Court, Eastern District of Pennsylvania against us and two of our subsidiaries alleging that we provided lines of credit to borrowers in Pennsylvania without a license required under
Pennsylvania law and with interest and fees in excess of the amounts permitted by Pennsylvania law. The complaint seeks, among other things, a declaratory judgment that the monthly participation fee
charged to customers with a line of credit is illegal, an injunction prohibiting the collection of the monthly participation fee, and payment of damages equal to three times the monthly participation
fees paid by customers since June 2006, which could total approximately $135 million in damages, plus attorneys' fees and costs. In January 2008, the trial court entered an order compelling the
purported class representatives to arbitrate their claims on an
individual basis, unless determined otherwise by the arbiter. All parties appealed that order. On February 28, 2011, in a non-precedential opinion, the U.S. Third Circuit Court of
Appeals vacated the trial court's order and remanded the case to the trial court for further proceedings on the validity of the class action waivers. The parties to the litigation will await further
instruction from the trial court as to the reinstitution of proceedings before that court.



On January 18, 2007, Raymond King and Sandra Coates, who were customers of BankWest Inc., the lending bank for which we
previously marketed, processed, and serviced cash advances in Pennsylvania, filed a putative class action lawsuit in the United States District Court, Eastern District of Pennsylvania alleging various
causes of action, including that our Pennsylvania subsidiary made illegal cash advance loans in Pennsylvania in violation of Pennsylvania's usury law, the Pennsylvania Consumer Discount Company Act,
the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Pennsylvania Fair Credit Extension Uniformity Act, and the Pennsylvania Credit Services Act. The complaint alleges that
BankWest Inc. was not the "true lender" and that our Pennsylvania subsidiary was the "lender in fact." The complaint seeks compensatory damages, attorneys' fees, punitive

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damages,
and the trebling of any compensatory damages. In January 2008, the trial court entered an order compelling the purported class representatives to arbitrate their claims on an individual
basis, unless determined otherwise by the arbiter. In April 2010, the United States Supreme Court issued its opinion inStolt-Nielsen. On
February 28, 2011, in a non-precedential opinion, the U.S. Third Circuit Court of Appeals vacated the trial court's order and remanded the case to the trial court for further
proceedings on the validity of the class action waivers. The parties to the litigation will await further instruction from the trial court as to the reinstitution of proceedings before that court.



On April 21, 2009, Yulon Clerk filed a putative class action lawsuit in the Court of Common Pleas of Philadelphia County,
Pennsylvania, against our subsidiaries Advance America, Cash Advance Centers of Pennsylvania, Inc. and NCAS of Delaware, LLC, as well as BankWest, Inc., whose defense we are
handling pursuant to an indemnification agreement, and other unrelated lenders and banks. The complaint alleged that the practices of our subsidiaries and BankWest, Inc. violated the
Pennsylvania Consumer Discount Protection Act, the Pennsylvania Loan Interest Protection Law, and Pennsylvania Consumer Protection Laws. The complaint seeks certification
of a class of individuals for the alleged violations, a declaration that all loans made to class members are unenforceable, injunctive relief, and monetary damages. The complaint repeats allegations
asserted in other putative class actions filed in Pennsylvania that have been stayed in favor of mandatory individual arbitrations. We removed the case to the United States District Court for the
Eastern District of Pennsylvania and filed a motion to compel arbitration and stay the underlying action's proceedings. In August 2009, the District Court issued an order severing the claims against
the individual defendants. On September 21, 2009, plaintiffs filed three separate complaints seeking the same relief as the April 21, 2009 complaint against Advance America, Cash Advance
Centers of Pennsylvania, Inc., NCAS of Delaware, LLC, and BankWest, Inc. The case against our Pennsylvania subsidiary was subsequently dismissed by consent of the parties on
November 11, 2009. Motions to stay and to compel individual arbitration have been filed in the other cases. The cases against NCAS of Delaware and Bankwest, Inc. are now proceeding
before the trial court.



Eight separate putative class actions were filed in South Carolina against our subsidiary, Advance America, Cash Advance Centers of
South Carolina, Inc., and several other unaffiliated defendants. John and Rebecca Morgan filed a complaint on August 27, 2007 in the Horry County Court of Common Pleas; Margaret Horne
filed a complaint on September 6, 2007 in the Spartanburg County Court of Common Pleas; Tawan Smalls filed a complaint on September 10, 2007 in the Charleston County Court of Commons
Pleas; Chadric and Lisa Wiley filed a complaint on September 27, 2007 in the Richland County Court of Common Pleas; Mildred Weaver filed a complaint on September 27, 2007 in the
Darlington County Court of Common Pleas; Lisa Johnson and Gilbert Herbert filed a complaint on October 2, 2007 in the Georgetown County Court of Common Pleas; Kimberly Kinney filed a complaint
on October 12, 2007 in the Marion County Court of Common Pleas; and Carl G. Ferrell filed a complaint on October 30, 2008 in the Richland County Court of Common Pleas (collectively, the
"South Carolina Claimants"). The allegations and relief sought are similar in each case. Plaintiffs allege that our South Carolina subsidiary violated the South Carolina Deferred Presentment Services
Act and the Consumer Protection Code by failing to perform a credit check and evaluate a customer's ability to repay the advance. Each complaint seeks an injunction to prohibit us from continuing our
operations, the return of fees and interest, unspecified actual damages, punitive damages, and attorneys' fees and costs. Each of the lawsuits was joined to ongoing litigation in the South Carolina
state court system pursuant to an order of the South Carolina Supreme Court consolidating all cases brought against the industry. In December 2009, a group of industry defendants, including us,
reached an agreement in principle, subject to reaching a definitive agreement and

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obtaining
court approval, for the settlement and release of all claims brought by the South Carolina Claimants. On June 2, 2010, we entered into a settlement agreement, along with several other
unaffiliated defendants and the class representatives. The settlement agreement did not include an admission of wrongdoing or liability on our part or our South Carolina subsidiary. Pursuant to the
terms of the settlement agreement, we and our South Carolina subsidiary were released from any and all claims associated with this lawsuit. The court entered an order granting final approval of the
settlement on September 20, 2010, and the order became final on October 21, 2010. This litigation has concluded and we do not expect to incur any charges in connection with the
settlement beyond the
charge of $0.9 million we recorded for the fourth quarter of 2009. We do not expect to incur any additional charges related to this case.



We are also involved in other litigation, arbitrations and administrative proceedings that are incidental to our business, including,
without limitation, regulatory enforcement matters, individual consumer claims, contractual disputes, employee claims for workers' compensation, wrongful termination, harassment, discrimination,
payment of wages due, and customer claims relating to collection practices and violations of state and/or federal consumer protection laws.

SEC Investigation

On July 22, 2009, we were informed that Kenneth E. Compton, our former President and Chief Executive Officer, received a "Wells
Notice" from the United States Securities and Exchange Commission (the "SEC"). We understand that the staff intends to recommend that the SEC file a civil injunctive action against
Mr. Compton alleging that he violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder in connection with alleged insider trading involving less than a material amount of losses avoided by third parties selling our stock during 2007. We did not receive a Wells Notice and do
not believe that we are a subject of this investigation; however, we are obligated to advance expenses incurred by our current and former officers and directors in connection with this matter.

ITEM 4.    (Removed and Reserved)

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PART II

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

Our common stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "AEA." The following table sets forth the
quarterly high and low sales prices of our common stock as reported by NYSE as well as the quarterly cash dividend declared per share for 2009 and 2010:

Sales PricesCash
DividendHigh

Low2009:Quarter ended March 31, 2009

$
2.44

$
0.80

$
0.0625Quarter ended June 30, 2009


5.10


1.61


0.0625Quarter ended September 30, 2009


6.33


3.60


0.0625Quarter ended December 31, 2009


6.70


4.56


0.06252010:Quarter ended March 31, 2010

$
6.65

$
4.20

$
0.0625Quarter ended June 30, 2010


7.45


4.00


0.0625Quarter ended September 30, 2010


4.18


3.26


0.0625Quarter ended December 31, 2010


5.96


3.95


0.0625


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

On
February 16, 2011, our Board of Directors declared a quarterly cash dividend of $0.0625 per common share, payable on March 11, 2011, to stockholders of record as of
March 1, 2011.

As
of March 2, 2011, there were 121 stockholders of record. A substantially greater number of stockholders are "street name" or beneficial holders, whose shares are held of
record by banks, brokers and other financial institutions.

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Table of Contents

Performance Graph

The following graph compares the change in the cumulative value of $100 invested for the period beginning on December 31, 2005
and ending on December 31, 2010, in: (1) our Common Stock; (2) the Standard & Poor's 500 Index; (3) the NASDAQ Other Financial Index; and (4) the NYSE
Financial Sector Index. The values of each investment are based upon the share price appreciation and reinvestment of dividends, on an annual basis.

Comparison of Cumulative Return vs.        S&P 500, NASDAQ Other Financial, and NYSE Financial Sector Indices

GRAPHIC

Advance America,
Cash Advance
Centers,Inc. (AEA)

Standard & Poors 500
Index (SPX)

NYSE Financial Sector
Index (NYK)

NASDAQ Other
Financial Index (IXFN)12/31/05

$
100.00

$
100.00

$
100.00

$
100.0012/30/06

$
121.62

$
113.62

$
119.45

$
117.4312/29/07

$
87.69

$
117.63

$
103.79

$
118.0012/31/08

$
18.29

$
72.36

$
48.12

$
63.2012/31/09

$
57.85

$
89.33

$
59.04

$
82.6912/31/10

$
61.82

$
100.75

$
62.01

$
92.25


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Table of Contents

Issuer Purchases of Equity Securities

The following table sets forth information about our stock repurchases for each of the three months during the quarter ended
December 31, 2010:

Period(1)

Total Number
of Shares
Purchased(2)

Average
Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares That
May Yet Be
Purchased Under the
Plans or Programs(3)October 1 to October 31


10,454

$
4.95





November 1 to November 30











December 1 to December 31


1,116


5.25





Total


11,570

$
4.98








(1)Based
on trade date.(2)This
column includes 11,570 shares surrendered by employees to satisfy their tax obligations with respect to the vesting of shares of restricted stock
awarded pursuant to the Company's 2004 Omnibus Stock Plan.(3)We
completed our stock repurchase program in July 2008. Except as noted above, we did not repurchase any stock during the three months ended
December 31, 2010.


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

ITEM 6.    SELECTED FINANCIAL DATA.

The following tables set forth our summary consolidated financial information and other financial and statistical data for the periods
ended and as of the dates indicated. The financial information for the years ended December 31, 2010, 2009, and 2008, and as of December 31, 2010 and 2009, has been derived from our
audited financial statements included elsewhere in this report. The financial information for the years ended December 31, 2007 and 2006, and as of December 31, 2008, 2007 and 2006 has
been derived from our audited financial statements not included in this report. Certain amounts below in 2006 and 2007 include the consolidation of a variable interest entitysee
"Item 8. Financial Statements and Supplementary DataNote 17. Transactions with Variable Interest Entities." The historical selected financial information may not be
indicative of our future performance and should be read in conjunction with the information contained in "Item 7. Management's Discussion and

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Table of Contents

Analysis
of Financial Condition and Results of Operations" and the consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data."

Year ended December 31,Consolidated Financial Information

2006

2007

2008

2009

2010(Dollars in thousands, except per share data
and other financial data)Revenues:Fees and interest charged to customers

$
659,876

$
709,557

$
676,436

$
647,676

$
600,233Marketing, processing and servicing fees(1)


12,418











Total revenues


672,294


709,557


676,436


647,676


600,233Center expenses:Salaries and related payroll costs


185,938


199,416


196,951


185,599


179,617Provision for doubtful accounts


120,855


140,245


135,857


124,575


104,228Occupancy costs


87,276


96,847


100,315


94,370


87,457Center depreciation expense


16,233


17,200


16,698


13,174


9,806Advertising expense


20,375


26,770


20,304


22,232


20,898Other center expenses


54,986


59,340


48,652


45,606


43,124Total center expenses


485,663


539,818


518,777


485,556


445,130Center gross profit


186,631


169,739


157,659


162,120


155,103Corporate and other expenses (income):General and administrative expenses


53,363


59,410


68,568


56,526


62,527Legal settlements








1,950


6,427


18,608Corporate depreciation and amortization expense


3,661


3,162


3,033


2,714


2,306Interest expense


7,129


11,059


11,188


6,241


4,858Interest income


(538
)

(317
)

(128
)

(238
)

(74
)(Gain)/loss on disposal of property and equipment


960


3,189


551


(50
)

413Loss on impairment of assets





314


486


2,987


654Income before income taxes


122,056


92,922


72,011


87,513


65,811Income tax expense


48,858


37,831


33,540


33,310


30,048Income before income of consolidated variable interest entity


73,198


55,091


38,471


54,203


35,763Income of consolidated variable interest entity


(3,047
)

(706
)







Net income

$
70,151

$
54,385

$
38,471

$
54,203

$
35,763


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Table of Contents



Year ended December 31,Consolidated Financial Information

2006

2007

2008

2009

2010(Dollars in thousands, except per share data
and other financial data)Per Share Data:Net income per common share:Basic

$
0.87

$
0.70

$
0.60

$
0.89

$
0.59Diluted

$
0.87

$
0.70

$
0.60

$
0.88

$
0.58Cash dividends paid per common share

$
0.44

$
0.50

$
0.44

$
0.25

$
0.25Weighted average number of shares outstanding:Basic


80,889


77,923


64,233


60,868


61,054Effect of dilutive options and unvested restricted stock


28


12





799


386Diluted


80,917


77,935


64,233


61,667


61,440Balance Sheet Data (at end of period):Cash and cash equivalents

$
67,245

$
28,251

$
16,017

$
38,189

$
26,948Advances and fees receivable, net


237,725


221,480


220,115


204,234


205,207Goodwill


122,627


127,286


126,661


127,031


126,914Total assets


525,092


471,698


447,010


446,151


431,652Total debt


111,050


147,980


194,952


146,276


116,297Total stockholders' equity


299,897


250,291


171,259


212,613


235,041Cash Flow Data:Cash flows provided by operating activities

$
186,125

$
184,496

$
186,227

$
182,087

$
134,541Cash flows used in investing activities


(156,216
)

(113,216
)

(125,674
)

(93,001
)

(99,333
)Cash flows (used in) provided by financing activities


10,077


(110,310
)

(72,164
)

(66,884
)

(46,267
)


(1)We
previously marketed, processed and serviced installment loans made by lending banks under our agency business model, which we discontinued in 2006.


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Table of Contents

Year ended December 31,Consolidated Financial Information

2006

2007

2008

2009

2010Other Financial and Statistical Data:Number of centers open at end of period


2,853


2,832


2,797


2,587


2,352Number of customers servedall credit products (thousands)


1,494


1,524


1,419


1,316


1,310Number of cash advances originated (thousands)(1)


11,539


11,979


11,762


10,860


10,027Aggregate principal amount of cash advances originated (thousands)(1)

$
4,082,865

$
4,317,980

$
4,296,493

$
3,922,195

$
3,710,133Average amount of each cash advance originated(1)

$
353

$
361

$
366

$
361

$
370Average charge to customers for providing and processing a cash advance(1)

$
55

$
55

$
55

$
53

$
55Average duration of a cash advance (days)(1)(2)


16.2


16.5


16.8


17.6


18.0Average number of lines of credit outstanding during the period (thousands)(3)


20


24


10


24


12Average amount of aggregate principal on lines of credit outstanding during the period (thousands)(3)

$
8,963

$
10,377

$
6,946

$
10,945

$
3,753Average principal amount on each line of credit outstanding during the period(3)

$
448

$
429

$
672

$
410

$
251Number of installment loans originated (thousands)(4)


29


31


32


35


61Aggregate principal amount of installment loans originated (thousands)(4)

$
13,905

$
12,997

$
14,841

$
15,992

$
27,375Average principal amount of each installment loan originated(4)

$
486

$
417

$
462

$
453

$
446


(1)Excludes
lines of credit and installment loans.(2)Excludes
the impact of extended payment plans.(3)We
offered lines of credit in Pennsylvania from June 2006 through July 2007. In Virginia, we began offering lines of credit in November 2008, ceased
offering new lines of credit to customers in February 2010, and stopped providing advances on existing lines of credit on September 30, 2010.(4)For
the year ended December 31, 2006, the installment loan activity reflects loans we originated as agent for lending banks in Arkansas and
Pennsylvania and loans we originated directly as the lender in Illinois. The loans originated as an agent contained fixed payment terms and no discounts for early repayment. These originations ceased
during 2006. For 2007 through 2009 the installment loan activity reflects loans we originated as the lender in Illinois only. For 2010, the installment loan activity reflects loans we originated as
the lender in Illinois and Colorado.


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Table of Contents

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

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

Overview

Headquartered in Spartanburg, South Carolina, we are the largest non-bank provider of cash advance services in the United
States as measured by the number of centers operated. Our centers provide short-term, unsecured cash advances that are typically due on the customers' next payday. As of
December 31, 2010, we operated 2,313 centers in 30 states in the United States, 21 centers in the United Kingdom, and 18 centers in Canada and had 62 limited licensees in the United Kingdom.

Our
industry has been significantly affected by increasing regulatory challenges. Legislation that negatively impacts cash advance services, whether through preclusions, interest rate
ceilings, fee reductions, mandatory extensions of term length, limits on the amount or term of our products and services, or limits on consumers' use of our products and services could materially and
adversely affect our business. We are very active in monitoring and evaluating regulatory initiatives in all of the states and are closely involved with the efforts of the Community Financial Services
Association of America ("CFSA"), an industry trade group composed of our company and more than 100 other companies engaged in the cash advance services industry.



Our primary business is offering cash advance services, which include cash advances and installment loans. However, we also offer
certain complementary products and services.

In
most states where we operate, we originate cash advance services under the authority of state-specific enabling statutes that allow for services ranging from single cash advances to
installments with closed-end terms. The particular cash advance services we offer in any given location may change in response to changes in state law and federal law. Additionally, where
permitted by applicable law, we may service customers for a third-party lender. In Texas, where we operate as a Credit Services Organization ("CSO"), we offer a fee-based credit services
package to assist customers in trying to improve their credit and in obtaining an extension of consumer credit through a third-party lender. Under the terms of our agreement with this lender, we
process customer applications and are contractually obligated for all losses. The permitted size of a cash advance varies by jurisdiction and ranges from $50 to $5,000. However, our typical cash
advance ranges from $50 to $1,000. The finance charges on cash advance services we currently offer also vary by jurisdiction and range up to 22% of the amount of the cash advance.

A
customer may obtain a cash advance in one of three ways: (1) by visiting one of our centers in person, completing an application, and receiving a cash advance from us;
(2) by visiting our website,
beginning the application process online, and then visiting one of our centers in person to complete the application and receive a cash advance; or (3) by visiting our website, completing an
application online and receiving a cash advance from a third-party lender that is directly deposited in the customer's bank account.

Our
customers also may obtain online cash advances made by third-party lenders that are governed by the laws of the state where the customer resides. We receive revenue from online cash
advances

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Table of Contents

made
by third-party lenders based on a percentage of the net fees, defined as advance fees less a provision for doubtful accounts and a cost of capital charge, but otherwise are not contractually
obligated for losses.

We
may also charge and collect annual participation fees, fees for returned checks, late fees, and other fees as permitted by applicable law. Currently, none of the cash advance services
we offer include annual participation fees. Fees for returned checks or electronic debits that are declined for non-sufficient funds ("NSF") vary by state and range up to $30, and late
fees vary by state and range up to $50. For the years ended December 31, 2010 and 2009, total NSF fees collected were approximately $2.9 million and $3.2 million, respectively,
and total late fees collected were approximately $0.9 million and $0.8 million, respectively. In Texas and online, the third-party lenders charge NSF fees and late fees in accordance
with applicable law.

Each
new customer must provide us with certain personal information such as his or her name, address, phone number, proof of identification, employment information or source of income,
bank account, and references. This information is entered into our information system and, where applicable, that of the third-party lender. The customer's identification, proof of income and/or
employment and proof of bank account are verified. We determine whether to approve a cash advance and the size of a cash advance based primarily on a customer's income. We do not perform credit checks
through consumer reporting agencies. In the future, we may consider other criteria in evaluating cash advances. When a third-party lender provides the cash advance, such as in Texas and online, the
applicable third-party lender decides whether to approve a cash advance and establishes all of the underwriting criteria and terms, conditions and features of the customer agreements.

After
the documents presented by the customer have been reviewed for completeness and accuracy and copied for record-keeping purposes and the cash advance has been approved, the customer
enters into an agreement governing the terms of the cash advance. The customer then provides a personal check or an Automated Clearing House ("ACH") authorization, which enables electronic payment
from the customer's account, to cover the amount of the cash advance plus charges for applicable fees and/or interest and/or the balance due under the agreement, and makes an appointment to return on
a specified due date, typically his or her next payday, to repay the cash advance plus the applicable charges. However, in some states, customers are not required to provide us with a personal check
or ACH authorization and payment cycles may vary depending upon state law and type of service. At the specified due date, the customer is required to make the applicable payment, usually payment in
full of
the cash advance plus applicable fees and interest. Payment is usually made in person, in cash at the center where the cash advance was initiated or issued unless the cash advance was completed on the
internet, in which case the customer makes payment by ACH authorization.

Upon
payment in full, the customer's check is returned and/or his or her ACH authorization is deemed to be revoked. If the customer does not repay the outstanding cash advance in full on
or before the due date, we will seek to collect from the customer the amount of the cash advance and any applicable fees, including late and NSF fees due, and may deposit the customer's personal check
or initiate the electronic payment from the customer's bank account.



We may offer alternative products and services to our customers where permissible under applicable law. For instance, in Ohio we
currently offer check-cashing services at state authorized rates. We may also offer the products or services of a third party that we market, process and/or service at our centers pursuant to an
agreement with the third party. For example, we currently offer pre-paid debit cards and money orders, money transmission, and bill payment services. Our Advance America- branded
pre-paid Visa debit card is issued by a federally chartered bank and regulated by the Office of Thrift Supervision. The card allows a cardholder to load cash onto the card and use the card
wherever

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VISA
debit cards are accepted. We are compensated under an agreement with the bank based on a number of factors related to the bank's revenue from purchases and subsequent cardholder activity, such as
charges for loads, ATM withdrawals, account maintenance/plan charges and purchases. We also sell money orders, and provide money transfer services and bill payment services as an agent of a licensed
third-party money transmitter. We are compensated by the money transmitter based upon the number and value of money transfers, money orders, and bill payments made at our centers.



Although there are numerous differences under the various enabling regulations, the application and approval process, underwriting
criteria, delivery method, repayment and collection practices, customer and market characteristics and underlying economics of our principal products and services generally are substantially similar
in most jurisdictions.

In
order for a new customer to be approved for a cash advance, he or she is required to have a bank account and a regular source of income. To obtain a cash advance, a customer
typically:



In
jurisdictions where we provide cash advances, we determine whether to approve the cash advance to our customers. We require proof of identification, bank account and income source, as
described above, and we primarily consider the customer's income in determining the amount of the cash advance. We are currently testing a new customized predictive scoring model that considers other
criteria in evaluating first time customers' probability of repaying a cash advance. When a third-party lender provides the cash advance, such as in Texas and online, the applicable third-party lender
decides whether to approve a cash advance and establishes all of the underwriting criteria and terms, conditions, and features of the customer agreements.



In most states, a customer may qualify for an extended payment plan ("Payment Plan"). Generally, the terms of our Payment Plans conform
to the CFSA Best Practices for extended payment plans. Certain states have specified their own terms and eligibility requirements for Payment Plans. Typically, a customer may enter into a Payment Plan
for no additional fee once every twelve months and the Payment Plan will call for scheduled payments that coincide with the customer's next four paydays. In some states, a customer may enter into a
Payment Plan more frequently. We do not engage in collection efforts while a customer is enrolled in a Payment Plan. If a customer misses a scheduled payment under a Payment Plan, we may resume our
normal collection procedures. We do not offer a Payment Plan for installment loans or lines of credit. The third-party lender in Texas does not offer a Payment Plan for advances to its customers. The
third-party internet lenders offer Payment Plans as required by state law.

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Certain
states also provide for credit counseling plans. If a customer informs us that he or she has entered into a credit counseling plan, we work with the credit counselor and the
customer to create a modified payment plan.



Repayment terms vary depending upon state law, the type of cash advance service offered, and whether the cash advance was completed
online or in one of our centers. Generally, as part of the closing process, we explain the customer's repayment obligations and establish the expectation that the customer will pay us in cash on or
before the due date in accordance with their agreement with us. The day before the due date, we generally call the customer to confirm their payment.

If
a customer does not pay the amount due, our center management has the discretion to either commence past-due collection efforts, which typically may proceed for up to
14 days in most states, or deposit the customer's personal check or debit their bank account in accordance with their ACH authorization. If center management decides to commence
past-due collection efforts, employees typically contact the customer by telephone to obtain a payment or a
promise to pay and, in cases where we hold a check, attempt to exchange the customer's check for a cashier's check, if funds are available.

If,
at the end of this past-due collection period or Payment Plan, the center has been unable to collect the amount due, the customer's check is deposited or their ACH
authorization is processed. Additional collection efforts are not required if the customer's deposited check or ACH debit clears. If the customer's check or ACH debit does not clear and is returned
because of non-sufficient funds in the customer's account or because of a closed account or a stop-payment order, we begin additional collection efforts. These additional
collection efforts are carried out by center employees or third party collection agencies and typically include contacting the customer by telephone to obtain payment or a promise to pay and
attempting to exchange the customer's check for a cashier's check, if funds become available. We also send out a series of collection letters, which are automatically distributed from a central
location based on a set of pre-determined criteria.

In
the case of cash advances in the form of lines of credit, if a customer fails to make payment when due in accordance with the terms of their agreement with us, center management may
close the line of credit, accelerate the maturity date, and take the steps outlined above or work with the customer to bring his or her payments current. If we close the line of credit and accelerate
the maturity date, we stop charging interest on the outstanding amount and begin collection efforts as described above.

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The following table presents key operating data for our business:

Year Ended December 31,2008

2009

2010Number of centers open at end of period


2,797


2,587


2,352Number of customers servedall credit products (thousands)


1,419


1,316


1,310Number of cash advances originated (thousands)(1)


11,762


10,860


10,027Aggregate principal amount of cash advances originated (thousands)(1)

$
4,296,493

$
3,922,195

$
3,710,133Average amount of each cash advance originated(1)

$
366

$
361

$
370Average charge to customers for providing and processing a cash advance(1)

$
55

$
53

$
55Average duration of a cash advance (days)(1)(2)


16.8


17.6


18.0Average number of lines of credit outstanding during the period (thousands)(3)


10


24


12Average amount of aggregate principal on lines of credit outstanding during the period (thousands)(3)

$
6,946

$
10,945

$
3,753Average principal amount on each line of credit outstanding during the period(3)

$
672

$
410

$
251Number of installment loans originated (thousands)(4)


32


35


61Aggregate principal amount of installment loans originated (thousands)(4)

$
14,841

$
15,992

$
27,375Average principal amount of each installment loan originated(4)

$
462

$
453

$
446


(1)Excludes
lines of credit and installment loans.(2)Excludes
the impact of extended payment plans.(3)In
Virginia, we began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing
advances on existing lines of credit on September 30, 2010.(4)The
installment loan activity reflects loans we originated as the lender in Illinois and Colorado.




Our revenues consist primarily of fees and/or interest paid to us directly by our customers. Our expenses relate primarily to the
operation of our centers. These expenses include salaries and related payroll costs, occupancy expense related to our leased centers, center depreciation expense, advertising expense, and other center
expenses that consist principally of costs related to center closings, communications, delivery, supplies, travel, bank charges, various compliance and collection costs, and costs associated with
theft.



Our provision for doubtful accounts and accrual for third-party lender losses are primarily based upon models that analyze specific
portfolio statistics and also reflect, to a lesser extent, management's judgment regarding overall accuracy. The analytical models take into account several factors including the number of
transactions customers complete, and charge-off and recovery rates. Additional factors, such as changes in state laws, center closings, length of time centers have been open in a state,
and

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relative
mix of new centers within a state are also evaluated to determine whether the results from the analytical models should be revised.

The
provision for doubtful accounts as a percentage of total revenues for the year ended December 31, 2010 was 17.4%, compared to 19.2% for the same period in 2009. Loss reserves
were lower during the year ended December 31, 2010 compared to the same period in 2009 due primarily to a reduction in the write-off rate, partially offset by reduced sales of
previously written-off receivables. We sold approximately $0.7 million of previously written-off receivables during 2010 compared with $3.4 million during 2009.



The effective income tax rate as a percentage of income before income taxes was 38.1% and 45.7% for the year ended December 31,
2009 and 2010, respectively. The increase in the effective tax rate in the current year is primarily a result of a reduction in state tax expense recognized in the prior year and lower
pre-tax profits, primarily as a result of legal settlement charges, along with other discrete items recognized in the current year.



During the last few years, legislation that prohibits or severely restricts our products and services has been introduced or adopted in
a number of states and at the federal level, and we expect that trend to continue for the foreseeable future. For example, in July 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act was signed into law. Among other items, this act created the Bureau of Consumer Financial Protection, which will have authority to regulate companies that provide consumer financial
services. At the state level, legislation has been adopted that has caused us to modify operations and, in some cases, close all operations in a state. For example, legislation was adopted in New
Hampshire in 2008 that effectively prohibits us from offering cash advances to consumers in that state. As a result, in February 2009, we decided to close all of our centers in New Hampshire. In
Virginia, a 2009 law prompted us to change our cash advance product and to offer an open-ended line of credit product. However, a subsequent Virginia Corporation Commission ruling and
additional legislation limited our ability to offer and service the open-ended line of credit product in Virginia. As a result, we discontinued originations of new lines of credit and
draws on existing lines of credit and we have consolidated a number of our centers in Virginia. We may determine that further consolidation of centers in Virginia is appropriate if the cash advance
product we now offer in Virginia is not sufficiently profitable. In the State of Washington, on January 1, 2010, a new law placed a number of restrictions on our cash advance product including
limiting the number of cash advances a customer may take to eight in any one year. As a result, our revenues and profits in Washington have been significantly reduced. If we are unable to operate
profitably in Washington, we may cease operating in that state. New laws in each of South Carolina, Kentucky, and Wisconsin implement a statewide database to monitor the number and/or dollar amount of
advances made to customers. New Colorado legislation permits a multiple installment loan that we expect will significantly lower our revenues and profits in Colorado. Further, legislation permitting
cash advances in Arizona expired on July 2, 2010, and as a result, we ceased operating in Arizona. The Mississippi legislature passed legislation during the first quarter of 2011 which, if
signed into law, would modify certain aspects of our cash advance product in that state and extend the statute's sunset provision through 2016. This legislation would become effective on
January 1, 2012. We are regularly refining our cash advance services and developing new products and services or operations to address recent or anticipated legislative and regulatory changes.
Some of these legislative and regulatory changes may result in our discontinuation of operations, while other changes may result in less significant short-term or long-term
changes, interruptions in revenues, and lower operating margins. We generally cannot estimate what effect, if any, operational changes we make in response to legislative and regulatory changes may
have

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on
our financial results until we are able to develop legal and financially viable alternative products and services.



In November 2008, the State of Ohio capped interest rates on cash advance loans and limited the number of cash advances a customer may
take in any one year. As a result of this legislation, we began offering small loans pursuant to the Ohio Small Loan Act and check-cashing services. The small loan product and check-cashing services
generate less revenue than our former cash advance product and, as a result, we have consolidated some of our centers in Ohio. In the third quarter of 2009, we stopped offering small loans and began
to offer cash advances pursuant to the Ohio Second Mortgage Act as a registered second mortgage lender. A rule issued by the Ohio Division of Financial Institutions in the first quarter of 2010, and
temporarily stayed by the Ohio courts pending the outcome of certain litigation between that state and unrelated third parties, would, if enforced, restrict certain activities by licensed check
cashers and could have a further negative effect on our operations in Ohio.

During
the year ended December 31, 2010, we closed seven centers in Ohio. The cost to close these centers was approximately $0.2 million recognized in the year ended
December 31, 2010. For the year ended December 31, 2010, these amounts are included in the income statement as an increase in other center expenses of $0.2 million.

For
the years ended December 31, 2008, 2009, and 2010, 8.1%, 5.8%, and 7.3%, respectively, of our total revenues were generated from our operations in Ohio. The following is a
summary of financial information for our operations in Ohio for those years (in thousands):

2008

2009

2010Total revenues

$
54,881

$
37,878

$
44,104Total center expenses


45,335


36,252


34,734Center gross profit (loss)

$
9,546

$
1,626

$
9,370




A Virginia law that went into effect in January 2009 substantially changed the terms for cash advance services in Virginia and severely
restricted viable operations for short-term lenders. We continue to offer cash advances in Virginia in conformity with the new regulations, and between November 2008 and February 2010 also
offered an open-ended line of credit product. However, a subsequent Virginia Corporation Commission ruling limited our ability to offer the open-ended lines of credit effective
March 1, 2010. As a result, we ceased offering new open-ended lines of credit in February 2010 and continued to service existing lines of credit. Because of additional legislation
that was passed in 2010, we stopped providing new draws on existing lines of credit on September 30, 2010.

During
the year ended December 31, 2010, we closed 57 centers in Virginia. For the twelve months ended December 31, 2010, closing costs of approximately $1.1 million
are included in the income statement as an increase in other center expenses of $0.9 million and center salaries and related payroll costs of $0.2 million.

The
elimination of the open-ended line of credit product may cause us to close or consolidate some or all of our centers in Virginia. If we close all of our remaining centers
in Virginia, our estimated closing costs, including severance, center tear-down costs, lease termination costs, and the write-down of fixed assets would range from
$2.1 million to $5.8 million, and the collectability of advances and fees receivable in Virginia would most likely be impaired. As of December 31, 2010, the net advances and fees
receivable balance in Virginia was approximately $10.4 million. At this time, we are not able to determine the amount of goodwill impairment, if any, that could result from the cessation of
operations in Virginia.

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For the years ended December 31, 2008, 2009, and 2010, 7.5%, 7.8%, and 4.5%, respectively, of our total revenues were generated from our operations in
Virginia. The following is a summary of financial information for our operations in Virginia for those years (in thousands):

2008

2009

2010Total revenues

$
50,607

$
50,638

$
26,715Total center expenses


34,401


45,376


20,402Center gross profit (loss)

$
16,206

$
5,262

$
6,313




A law became effective in the State of Washington on January 1, 2010 that limits the number of cash advances a customer may take
in any one year, limits the cash advance amount that can be taken out at any one time, and implements a statewide database to monitor the number of cash advances. As a result, our revenue and
profitability in Washington has decreased.

During
the year ended December 31, 2010, we closed 45 centers in Washington. For the twelve months ended December 31, 2010, closing costs of approximately
$1.2 million are included in the income statement as an increase in other center expenses of $0.9 million, a loss on disposal of property and equipment of $0.1 million, and center
salaries and related payroll costs of $0.2 million.

If
we close all of our remaining centers in Washington, our estimated closing costs, including severance, center tear-down costs, lease termination costs, and the
write-down of fixed assets would range from $0.9 million to $3.7 million, and the collectability of advances and fees receivable in Washington would most likely be impaired.
As of December 31, 2010, the net advances
and fees receivable balance in Washington was approximately $4.3 million. At this time we are not able to determine the amount of goodwill impairment, if any, that could result from the
cessation of our operations in Washington.

For
the years ended December 31, 2008, 2009, and 2010, 4.0%, 4.1%, and 1.0%, respectively, of our total revenues were generated from our operations in Washington. The following is
a summary of financial information for our operations in Washington for those years (in thousands):

2008

2009

2010Total revenues

$
27,205

$
26,637

$
6,259Total center expenses


23,153


19,996


9,310Center gross profit (loss)

$
4,052

$
6,641

$
(3,051
)




A new law in South Carolina became effective January 1, 2010 that, among other things, prohibits consumers from having more than
one cash advance outstanding at any time and implements a statewide database to monitor the number and dollar amount of cash advances made to customers within that state. Although this law has
negatively affected our revenue and profitability in South Carolina, we currently believe operations will remain economically viable.

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For
the years ended December 31, 2008, 2009, and 2010, 5.1%, 5.3%, and 3.6%, respectively, of our total revenues were generated from our operations in South Carolina. The
following is a summary of financial information for our operations in South Carolina for those years (in thousands):

2008

2009

2010Total revenues

$
34,817

$
34,582

$
21,905Total center expenses


25,881


23,847


20,333Center gross profit (loss)

$
8,936

$
10,735

$
1,572




A new law in Kentucky became effective on April 30, 2010 that, among other things, prohibits any consumer from having more than
two cash advances outstanding at any time, establishes a maximum aggregate advance amount of $500, and implements a statewide database to monitor the number and dollar amount of cash advances made to
customers within that state. Although this law has negatively affected our revenue and profitability in Kentucky, we currently believe operations will remain economically viable.

For
the years ended December 31, 2008, 2009, and 2010, 1.2%, 1.2%, and 1.1%, respectively, of our total revenues were generated from our operations in Kentucky. The following is a
summary of financial information for our operations in Kentucky for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2008

2009

2010Total revenues

$
8,254

$
8,000

$
6,336Total center expenses


6,169


6,208


5,858Center gross profit (loss)

$
2,085

$
1,792

$
478




A new law in Colorado became effective on August 11, 2010, that expands the minimum term of cash advances to six months, allows
repayment in multiple installments, and revises permitted finance, interest, and other charges. This law has negatively affected our revenue and profitability in Colorado.

During
the year ended December 31, 2010, we closed 31 centers in Colorado. For the twelve months ended December 31, 2010, closing costs of approximately $0.9 million
are included in the income statement as an increase in other center expenses of approximately $0.6 million, center salaries and related payroll costs of approximately $0.1 million, and a
loss on impairment of assets of approximately $0.2 million.

If
we close all of our remaining centers in Colorado, our estimated closing costs, including severance, center tear-down costs, lease termination costs, and the
write-down of fixed assets would range from $0.7 million to $2.1 million, and the collectability of advances and fees
receivable in Colorado would most likely be impaired. As of December 31, 2010, advances and fees receivable, net of allowance for doubtful accounts, in Colorado was approximately
$4.8 million. At this time we are not able to determine the amount of goodwill impairment, if any, that could result from the cessation of our operations in Colorado.

For
the years ended December 31, 2008, 2009, and 2010, 1.7%, 1.9%, and 1.7%, respectively, of our total revenues were generated from our operations in Colorado. The following is a
summary of

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financial
information for our operations in Colorado for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2008

2009

2010Total revenues

$
11,685

$
12,531

$
10,122Total center expenses


12,097


11,534


10,665Center gross profit (loss)

$
(412
)
$
997

$
(543
)




We closed 86 centers during 2008 (including 30 in Arkansas and 10 in New Mexico), 220 centers during 2009 (including 24 in New
Hampshire and 63 in Ohio), and 259 centers during 2010 (including 48 in Arizona). The expenses related to closing centers typically include the undepreciated costs of fixtures and signage that cannot
be moved and reused at another center, moving costs, severance payments and any lease cancellation costs. We recorded expenses related to center closures and scheduled center closings of approximately
$4.3 million, $6.7 million, and $6.0 million in 2008, 2009, and 2010, respectively. The costs are included in the income statements for the years ended 2008, 2009, and 2010 as
shown below.

Year ended December 31,2008

2009

2010(amounts in thousands)Salaries and related payroll costs

$
562

$
374

$
860Provision for doubtful accounts


1,592





Occupancy costs


(77
)

(219
)

(258
)Other center expenses


1,290


3,183


4,343Loss on disposal of property and equipment


403


337


358Loss on impairment of assets


486


2,987


654$
4,256

$
6,662

$
5,957




In response to new or modified state regulations, we closed operations in Georgia in 2004, in Pennsylvania and Oregon in 2007, in
Arkansas and New Mexico in 2008, in New Hampshire in 2009, and in Arizona and Montana in 2010.

Closing of Operations in Arkansas.In March 2008, we received a letter from the Arkansas Attorney General demanding that we stop
offering deferred
presentment transactions under the Arkansas Check Cashers Act. In response, we complied with the Attorney General's demands and began offering consumer loans at interest rates below the applicable
Arkansas usury cap. In September 2008, we received a notice from the Arkansas State Board of Collections that the Board had determined that consumer lenders who accept account withdrawal
authorizations would be deemed by the Board to be engaged in the business of making deferred presentment transactions. During this same time, we were in discussions with the Arkansas Attorney General
to address certain items regarding our operations in Arkansas. The Attorney General agreed that if we discontinued our operations in Arkansas, he would not bring suit against us. Although we believe
we have always operated in compliance with Arkansas law, we concluded that avoiding potentially costly litigation in this circumstance was in the best interest of our stockholders. As a result, we
closed all 30 of our centers in Arkansas on or before October 31, 2008. The costs associated with closing our Arkansas operations were approximately $1.8 million, including
$1.1 million due to the write-down of receivables. These costs are included in the 2008 income statement as increases of $1.1 million in the provision for

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doubtful
accounts, $0.4 million in other center expenses, $0.2 million in center salaries and related payroll costs, and $0.1 million in loss on disposal of property and
equipment. The cessation of our Arkansas operations did not result in any impairment of goodwill.

The
following is a summary of financial information for our operations in Arkansas for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2008

2009

2010Total revenues

$
3,864

$


$
4Total center expenses


6,881


129


1Center gross profit (loss)

$
(3,017
)
$
(129
)
$
3


Closing of Operations in New Hampshire.Legislation in New Hampshire became effective in 2009 that effectively prohibits the offering
of cash
advances in New Hampshire. As a result of this legislation, we determined that it was not economically viable for us to continue operating in New Hampshire. As a result, we closed all of our 24
centers in New Hampshire in 2009. The cost associated with closing our New Hampshire operations was approximately $1.3 million, including $0.5 million due to the write-down
of receivables. Approximately $0.7 million of these expenses were recognized during 2008, including a $0.5 million increase in the provision for doubtful accounts and $0.2 million
loss on impairment of assets. The remaining $0.6 million was recognized during 2009 and are included in the income statement as an increase of $0.5 million in other center expenses and
$0.1 million in center salaries and related payroll costs. The cessation of our New Hampshire operations did not result in any impairment of goodwill.

The
following is a summary of financial information for our operations in New Hampshire for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2008

2009

2010Total revenues

$
8,124

$
130

$
Total center expenses


4,710


1,126


49Center gross profit (loss)

$
3,414

$
(996
)
$
(49
)


Closing of Operations in Arizona.An existing law permitting cash advances in Arizona expired June 30, 2010. We ceased operations
in our
remaining 47 centers in Arizona during the quarter ended September 30, 2010. For the twelve months ended December 31, 2010, closing costs of approximately $1.2 million are
included in the income statement as an increase in other center expenses of $0.7 million, center salaries and related payroll costs of $0.3 million, and a loss on the impairment of
assets of approximately $0.2 million. The cessation of our Arizona operations did not result in any impairment of goodwill.

For
the years ended December 31, 2008, 2009, and 2010, 2.4%, 2.4%, and 1.2%, respectively, of our total revenues were generated from our operations in Arizona. The following is a
summary of financial information for our operations in Arizona for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2008

2009

2010Total revenues

$
16,267

$
15,694

$
7,363Total center expenses


11,863


10,590


6,936Center gross profit (loss)

$
4,404

$
5,104

$
427


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Closing of Operations in Montana.Due to a recent law change in Montana that became effective January 1, 2011, the Company has
closed its two
centers. The cost of closing these centers is approximately $38,000. For the twelve months ended December 31, 2010, the operations in Montana generated approximately $66,000 of center gross
profit.



During the year ended December 31, 2008, we acquired two centers in the United Kingdom for an aggregate purchase price,
including transaction-related costs, of approximately $0.8 million in cash and an increase in goodwill of approximately $0.7 million.

During
the year ended December 31, 2007, we completed four acquisitions in the United Kingdom consisting of a total of 12 centers and 85 limited licensees for an aggregate
purchase price, including transaction-related costs, of approximately $5.5 million in cash and an increase in goodwill of approximately $4.7 million.



We opened 49, 10, and 24 centers in the years ended December 31, 2008, 2009 and 2010, respectively. The capital cost of opening
a new center varies depending on the size and type of center, but typically averages approximately $47,000. This capital cost includes leasehold improvements, signage, fixtures, furniture, computer
equipment, and a security system. In addition, the typical center that has been operating for at least 24 months requires average working capital of approximately $95,000 to fund the center's
advance portfolio.

Of
the 268 North American centers we opened in 2007, 2008, and 2009, 188 centers remain open as of December 31, 2010. Of these, 177 have reached the point where, for at least one
month, the center generated sufficient revenues to cover the center's expenses exclusive of corporate overhead (the "Breakeven Point"). The amount of time that it takes for a center to reach this
Breakeven Point is affected by a number of factors including, but not limited to, the time of the year the center opens, the seasonal nature of the business and the regulatory environment of the state
in which the center is opened. It is not uncommon for a center that has reached the Breakeven Point to temporarily drop below that point and then again exceed the Breakeven Point. Given the relatively
fixed nature of most center expenses, the main determinant of the Breakeven Point for a given center is the number of advances outstanding.

On
average, the 177 centers reached the Breakeven Point between their eleventh and fourteenth month of operations and had, on average, approximately 104 advances outstanding at that
time. Cumulative operating losses to break even for these centers averaged approximately $79,000 per center. We have experienced a general trend of an increase in the time it takes a center to
reach the Breakeven Point and, consequently, an increase in the cumulative operating losses to break even.

The
remaining 11 centers opened in 2007, 2008, and 2009 and still open have yet to reach the Breakeven Point. These 11 centers are, on average, approximately 36 months old at
December 31, 2010. At December 31, 2010, a seasonally high point in advances outstanding, these centers had, on average, approximately 85 advances outstanding. Cumulative operating
losses to date for these centers averaged approximately $208,000 per center.



Our consolidated financial statements include the accounts of Advance America, Cash Advance Centers, Inc. and all of our
wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

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Our business is seasonal due to the impact of fluctuating demand for advances and fluctuating collection rates throughout the year.
Demand has historically been highest in the third and fourth quarters of each year, corresponding to the back-to-school and holiday seasons, and lowest in the first quarter of
each year, corresponding to our customers' receipt of income tax refunds. Our provision for doubtful accounts and allowance for doubtful accounts are historically lowest as a percentage of revenues in
the first quarter of each year, corresponding to customers' receipt of income tax refunds, and increase as a percentage of revenues for the remainder of each year.

Critical Accounting Policies and Use of Estimates

The preparation of our financial statements, in conformity with generally accepted accounting principles ("GAAP") in the United States,
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In applying the accounting principles, we must often make
estimates and assumptions regarding expected outcomes or uncertainties. As might be expected, the actual results or outcomes are generally different than the estimated or assumed amounts. These
differences are usually minor and are included in our consolidated financial statements as soon as they are known. Estimates, judgments, and assumptions are continually evaluated based on available
information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

Actual
results related to the estimates and assumptions made in preparing our consolidated financial statements will emerge over periods of time, such as estimates, and assumptions
underlying the determination of the allowance for doubtful accounts, accrual for third-party lender losses, legal settlements, and regulatory loss contingencies. These estimates and assumptions are
monitored and periodically adjusted as circumstances warrant. These amounts may be adjusted based on higher or lower actual loss experience. Although there is greater risk with respect to the accuracy
of these estimates and assumptions because of the period over which actual results may emerge, such risk is mitigated by the ability to make changes to these estimates and assumptions over the same
period.

We
believe that the following critical accounting policies affect the more significant estimates and assumptions used in the preparation of our financial statements.



We believe the most significant estimates made in the preparation of our accompanying consolidated financial statements relate to the
determination of an allowance for doubtful accounts for estimated probable losses on advances we make directly to customers and an accrual for third-party lender losses for estimated probable losses
on loans and certain related fees for loans that we process for the third-party lender in Texas. See "Off-Balance Sheet Arrangement with Third-Party Lender" in this section. Our advances
and fees receivable, net, on our balance sheet, do not include the advances and interest receivable for loans processed by us for the third-party lender in Texas because these loans are owned by the
third-party lender.

The
provision for doubtful accounts as a percentage of total revenues for the year ended December 31, 2010 was 17.4%, compared to 19.2% for the same period in 2009. Loss reserves
were lower during the year ended December 31, 2010 compared to the same period in 2009 due primarily to a reduction in the write-off rate, partially offset by reduced sales of
previously written off receivables. We sold approximately $0.7 million of previously written-off receivables during 2010 compared with $3.4 million in 2009.

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The allowance for doubtful accounts and accrual for third-party lender losses are primarily based upon financial models that analyze specific portfolio statistics
and also reflect, to a lesser extent, management's judgment regarding overall accuracy. The analytical models take into account several factors including the number of transactions customers complete
and charge-off and recovery rates. Additional factors such as new products, changes in state laws, center closings, length of time centers have been open in a state, relative mix of new
centers within a state, and other relevant factors are also evaluated to determine whether the results from the analytical models should be revised.

We
record the allowance for doubtful accounts as a reduction of advances and fees receivable, net on our balance sheet. We record the accrual for third-party lender losses as a current
liability on our balance sheet. We charge the portion of advances and fees deemed to be uncollectible against the allowance for doubtful accounts and credit any subsequent recoveries (including sales
of debt without recourse) to the allowance for doubtful accounts.

Unpaid
advances and the related fees and/or interest are generally charged off 60 days after the date a customer's check was returned, the ACH was rejected by the customer's bank,
or the default date, unless the customer has paid at least 15% of the total of his or her loan plus all applicable fees, or 15% of the outstanding balance and related interest and fees for our line of
credit and installment loan products. Unpaid advances, installment loans, or lines of credit customers who file for bankruptcy are charged off upon receipt of the bankruptcy notice. Although
management uses the best information available to make evaluations, future adjustments to the allowance for doubtful accounts and accrual
for third-party lender losses may be necessary if conditions differ substantially from our assumptions used in assessing their adequacy.

Our
business experiences cyclicality in receivable balances from both the time of year and the day of the week. Fluctuations in receivable balances result in a corresponding impact on
the allowance for doubtful accounts, accrual for third-party lender losses, and provision for doubtful accounts.

Our
receivables are traditionally lowest at the end of the first quarter, corresponding to tax refund season, and reach their highest level during the last week of December.

In
addition to the seasonal fluctuations, the receivable balances can fluctuate throughout a week, generally being at their highest levels on a Wednesday or Thursday and at their lowest
levels on a Friday. In general, receivable balances decrease approximately 2% to 5% from a typical Thursday to a typical Friday. The year 2009 began and ended on a Thursday. The year 2010 began and
ended on a Friday.

To
the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, our loss experience could differ significantly,
resulting in either higher or lower future provisions for doubtful accounts. As of December 31, 2010, if the estimated rates used in calculating our allowance for doubtful accounts and
third-party lender losses were 5% higher or lower, it would have increased or decreased our provision for doubtful accounts by approximately $2.6 million.



As a result of our acquisition of the National Cash Advance group of affiliated companies in October 1999, we recorded approximately
$143.0 million of goodwill. During 2007 and 2008, we completed six acquisitions in the United Kingdom, resulting in additional goodwill of approximately $5.4 million. As of
December 31, 2010, the carrying value of goodwill was $126.9 million due to the amortization of goodwill prior to the adoption of ASC 350-20-35,
"GoodwillSubsequent Measurement", and the change in the exchange rate for our United Kingdom assets. Due to the significance of goodwill and the reduction of net income that would occur
if goodwill were impaired, we assess the impairment of our long-lived and intangible assets annually, during the fourth quarter of

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each
year, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant underperformance
relative to historical or projected future cash flows, significant changes in the manner of use of the acquired assets or the strategy of the overall business, and significant negative industry
trends. A reporting unit is an operating segment, or under certain circumstances, a component of an operating segment that constitutes a business. Our reporting units consist of multiple state-based
operations and therefore the cessation of operations in any particular state does not imply that goodwill for the relevant reporting unit will be impaired. When estimated future cash flows are less
than the carrying value of the net assets and related goodwill, an impairment test is performed to measure and recognize the amount of the impairment loss, if any. Impairment losses, which are limited
to the carrying value of goodwill, represent the excess of the carrying amount of a reporting unit's goodwill over the implied fair value of that goodwill. In determining the estimated future
discounted cash flows, we consider current and projected future levels of income, as well as business trends, prospects, and market and economic conditions. Impairment tests involve the use of
judgments and estimates related to the fair market value of the business operations with which goodwill is associated, taking into consideration both historical operating performance and anticipated
financial position and future earnings. We believe that the estimates of future cash flows and fair value are reasonable. Changes in estimates of those cash flows and fair value, however, could affect
the evaluation, and any impairment would lower our net income.

As
of December 31, 2010, the United Kingdom operations have cumulatively and for the last twelve months generated negative cash flow and have not reached break-even.
Our expansion efforts in the United Kingdom began in the third quarter of 2007. Our goodwill impairment model projects future positive cash flows sufficient to support the goodwill and
long-lived asset base in our United Kingdom operations. If the United Kingdom operations continue to generate negative cash flow and do not break-even an impairment charge
related to its goodwill is possible.

We
cannot predict the occurrence of certain events that might adversely affect the carrying value of our goodwill. Should the operations of the businesses with which goodwill is
associated incur significant
adverse changes in business, clients, adverse actions by regulators, unanticipated competition, loss of our revolving line of credit, and/or changes in technology or markets, some or all of our
recorded goodwill could be impaired.



During the quarter ended December 31, 2010, we and our third-party lender in Texas acquired a payday loan receivables portfolio
of approximately $11.3 million. At closing, we and our third-party lender paid the seller and the seller's third-party lender approximately $5.3 million and $1.9 million,
respectively for approximately $9.4 million and $1.9 million of the total portfolio, respectively. In addition, we agreed to a contingent payment to be satisfied during the first quarter
of 2011. At December 31, 2010, we recorded a liability related to the contingency of approximately $1.1 million. For the quarter and year ended December 31, 2010, we recorded
approximately $0.4 million in revenue related to the servicing and collection of these receivables.

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In view of the inherent difficulty of predicting the outcome of litigation and regulatory matters, particularly where the claimants
seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, we cannot state with confidence what the eventual outcome of pending
matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter may be or the extent to which such
amounts may be recoverable under our insurance policies.

In
accordance with applicable accounting guidance, we establish reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and
estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. In some of the matters described in "Item 3. Legal Proceedings" loss contingencies are not
both probable and estimable in the view of management, and accordingly, reserves have not been established for those matters. Based on current knowledge, management does not believe that loss
contingencies, if any, arising from pending litigation and regulatory matters, including the litigation and regulatory matters described in this Annual Report on Form 10-K, will
have a material adverse effect on our consolidated
financial position or liquidity, but may be material to our results of operations for any particular reporting period.



Accrued liabilities in our December 31, 2009 and 2010 financial statements include accruals of approximately $5.0 million
and $5.6 million, respectively, for workers' compensation. The costs of both reported claims and claims incurred but not reported, up to specified deductible limits, are estimated based on
historical data, projected payroll numbers and other information. We review estimates and periodically update our estimates and the resulting reserves and any necessary adjustments are reflected in
earnings currently. To the extent historical claims are not indicative of future claims, there are changes in payroll numbers, workers' compensation loss development factors change, or other
assumptions used by management do not prevail, our expense and related accrued liabilities could increase or decrease.



We use certain assumptions and estimates in determining income taxes payable or refundable for the current year, deferred income tax
liabilities and assets for events recognized differently in our financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions
and interpretation of tax laws and regulations. We exercise considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments
and estimates are re-evaluated on a continual basis as regulatory and business factors change.

No
assurance can be given that neither our tax returns nor the income tax reported on our Consolidated Financial Statements will be adjusted as a result of adverse rulings by the U.S.
Tax Court, changes in the tax code, or assessments made by the Internal Revenue Service ("IRS"). We are subject to potential adverse adjustments, including but not limited to, an increase in the
statutory federal or state income tax rates, the permanent nondeductibility of amounts currently considered deductible either now or in future periods, and the dependence on the generation of future
taxable income, including capital gains, in order to ultimately realize deferred income tax assets.

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In connection with our CSO operations in Texas, we entered into an agreement with an unaffiliated third-party lender in 2005. We
determined that the third-party lender was a variable interest entity ("VIE") under Accounting Standards Codification ("ASC") 815-10-65 "Variable Interest Entities" and that we
were the primary beneficiary of this VIE. As a result, we consolidated the lender for the year ended December 31, 2007. During the fourth quarter of 2007, we terminated our CSO agreement with
that lender and entered into an agreement with another unaffiliated third-party lender with substantially similar terms and conditions as the agreement with the former lender. The current lender is
also a VIE but we have determined that we are not the primary beneficiary of this VIE and have not consolidated the current lender as of and for the years ended December 31, 2008, 2009, and
2010. See "Item 8. Financial Statements and Supplementary DataNote 17. Transactions with Variable Interest Entities" for the effect of consolidating the former lender on our
results of operations and financial condition.



In 2004, we adopted ASC 718, "Stock Compensation". Accordingly, we measure the cost of our stock-based employee compensation at the
grant date based on fair value and recognize such cost in the financial statements over each award's requisite service period. As of December 31, 2010, the total compensation expense not yet
recognized related to nonvested stock awards under our stock-based employee compensation plans is approximately $5.1 million. The weighted average period over which this expense is expected to
be recognized is approximately 2.4 years. See "Item 8. Financial Statements and Supplementary DataNote 11. Stock-Based Compensation Plans" for a description of our
restricted stock and stock option awards and the assumptions used to calculate the fair value of such awards, including the expected volatility assumed in valuing our stock option grants.

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Results of Operations

Year Ended December 31, 2009 Compared to the Year Ended December 31, 2010

The following tables set forth our results of operations for the year ended December 31, 2009 compared to the year ended
December 31, 2010:

Year Ended December 31,2009

2010

Variance
Favorable/
(Unfavorable)% Total
Revenues



% Total
RevenuesDollars

Dollars

Dollars

%(Dollars in thousands, except center information)Total Revenues

$
647,676


100.0
%
$
600,233


100.0
%
$
(47,443
)
(7.3)%Center Expenses:Salaries and related payroll costs


185,599


28.7
%

179,617


29.9
%

5,982

3.2%Provision for doubtful accounts


124,575


19.2
%

104,228


17.4
%

20,347

16.3%Occupancy costs


94,370


14.6
%

87,457


14.6
%

6,913

7.3%Center depreciation expense


13,174


2.0
%

9,806


1.6
%

3,368

25.6%Advertising expense


22,232


3.4
%

20,898


3.5
%

1,334

6.0%Other center expenses


45,606


7.1
%

43,124


7.2
%

2,482

5.4%Total center expenses


485,556


75.0
%

445,130


74.2
%

40,426

8.3%Center gross profit


162,120


25.0
%

155,103


25.8
%

(7,017
)
(4.3)%Corporate and Other Expenses (Income):General and administrative expenses


56,526


8.7
%

62,527


10.4
%

(6,001
)
(10.6)%Legal settlements


6,427


1.0
%

18,608


3.1
%

(12,181
)
(189.5)%Corporate depreciation and amortization expense


2,714


0.4
%

2,306


0.4
%

408

15.0%Interest expense


6,241


1.0
%

4,858


0.8
%

1,383

22.2%Interest income


(238
)




(74
)




(164
)
(68.9)%(Gain)/loss on disposal of property and equipment


(50
)




413


0.1
%

(463
)
(926.0)%Loss on impairment of assets


2,987


0.4
%

654


0.1
%

2,333

78.1%Total corporate and other expenses


74,607


11.5
%

89,292


14.9
%

(14,685
)
(19.7)%Income before income taxes


87,513


13.5
%

65,811


10.9
%

(21,702
)
(24.8)%Income tax expense


33,310


5.1
%

30,048


5.0
%

3,262

9.8%Net income

$
54,203


8.4
%
$
35,763


5.9
%
$
(18,440
)
(34.0)%


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Year Ended
December 31,2009

2010Center Information:Number of centers open at beginning of period


2,797


2,587Opened


10


24Acquired





Closed


(220
)

(259
)Number of centers open at end of period


2,587


2,352Weighted average number of centers open during the period


2,698


2,474Number of customers servedall credit products (thousands)


1,316


1,310Number of cash advances originated (thousands)(1)


10,860


10,027Aggregate principal amount of cash advances originated (thousands)(1)

$
3,922,195

$
3,710,133Average amount of each cash advance originated(1)

$
361

$
370Average charge to customers for providing and processing a cash advance(1)

$
53

$
55Average duration of a cash advance (days)(1)(2)


17.6


18.0Average number of lines of credit outstanding during the period (thousands)(3)


24


12Average amount of aggregate principal on lines of credit outstanding during the period (thousands)(3)

$
10,945

$
3,753Average principal amount on each line of credit outstanding during the period(3)

$
410

$
251Number of installment loans originated (thousands)(4)


35


61Aggregate principal amount of installment loans originated (thousands)(4)

$
15,992

$
27,375Average principal amount of each installment loan originated(4)

$
453

$
446


(1)Excludes
lines of credit and installment loans.(2)Excludes
the impact of extended payment plans.(3)In
Virginia, we began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing
advances on existing lines of credit on September 30, 2010.(4)The
2009 installment loan activity reflects loans we originated as the lender in Illinois. The 2010 installment loan activity reflects loans we originated
as the lender in Illinois and Colorado.


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Year Ended December 31,2009

2010

Variance
Favorable/
(Unfavorable)% Total
Revenues



% Total
RevenuesDollars

Dollars

Dollars

%(Dollars in thousands)Per Center (based on weighted average number of centers open during the period):Center revenues

$
240.1


100.0
%
$
242.6


100.0
%
$
2.5

1.0%Center expenses:Salaries and related payroll costs


68.8


28.7
%

72.6


29.9
%

(3.8
)
(5.5)%Provision for doubtful accounts


46.2


19.2
%

42.1


17.4
%

4.1

8.9%Occupancy costs


35.0


14.6
%

35.4


14.6
%

(0.4
)
(1.1)%Center depreciation expense


4.9


2.0
%

4.0


1.6
%

0.9

18.4%Advertising expense


8.2


3.4
%

8.4


3.5
%

(0.2
)
(2.4)%Other center expenses


16.9


7.1
%

17.4


7.2
%

(0.5
)
(3.0)%Total center expenses


180.0


75.0
%

179.9


74.2
%

0.1

0.1%Center gross profit

$
60.1


25.0
%
$
62.7


25.8
%
$
2.6

4.3%




Total revenues decreased approximately $47.4 million in 2010. Total revenues for the 2,320 centers opened prior to
January 1, 2009 and still open as of December 31, 2010 decreased $4.0 million, from $584.3 million in 2009 to $580.3 million in 2010. Total revenues for the 32
centers opened after January 1, 2009 and still open as of December 31, 2010 increased $2.0 million, from $0.3 million in 2009 to $2.3 million in 2010. Total revenues
for the remaining 479 centers that closed represented a decrease of approximately $45.4 million for 2010 compared to 2009.



Salaries and related payroll costs.The decrease in salaries and related payroll costs in 2010 was due primarily to a reduction in the
number of
centers open during the year ended December 31, 2010 as compared to the same period in 2009. We averaged approximately 1.94 and 2.00 full-time equivalent field employees, including
district directors, per center during 2009 and 2010, respectively.

Provision for doubtful accounts.The provision for doubtful accounts as a percentage of total revenues for the year ended
December 31, 2010
was 17.4%, compared to 19.2% for the same period in 2009. Loss reserves were lower during the year ended December 31, 2010 compared to the same period in 2009 due primarily to a reduction in
the write-off rate, partially offset by reduced sales of previously written-off receivables. We sold approximately $0.7 million of previously written-off
receivables during 2010 compared with $3.4 million in 2009.

Occupancy costs and center depreciation expense.The decrease in occupancy costs and center depreciation expense in 2010 was due
primarily to a
decrease in the average number of centers operating throughout 2010 as compared to 2009. In addition, depreciation continues to decrease as centers age and property and equipment become fully
depreciated.

Advertising expense.Advertising expense decreased in 2010 compared to 2009 due primarily to a decrease in our geographic footprint and
the number of
centers as compared to 2009.

Other center expenses.The decrease in other center expenses in 2010 was due primarily to a decrease in the number of centers as
compared to 2009.

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General and administrative expenses.The increase in general and administrative expenses in 2010 was due primarily to:



Legal settlements.The amounts reflected as legal settlements relate to charges during the year ended December 31, 2010 of
approximately
$18.6 million, net of insurance reimbursements. The primary reason for the increase is due to the settlement ofKucan et al. v. Advance America, Cash Advance Centers of
North Carolina, Inc. et al.

Interest expense.The decrease in interest expense for the year ended December 31, 2010, as compared to 2009 was due primarily to
a decrease
in the average outstanding balance of variable interest debt.

(Gain)/loss on disposal of property and equipment.The unfavorable change in this item for the year ended December 31, 2010
compared to 2009
was primarily due to the closing and consolidation of centers in 2010.

Loss on impairment of assets.Loss on impairment of assets for the year ended December 31, 2010 and 2009 represents the write-down
of the undepreciated costs of certain fixed assets in our centers identified for closure.

Income tax expense.The decrease in income tax expense for the year ended December 31, 2010 as compared to 2009 was primarily due
to lower
pre-tax profits, primarily as a result of legal settlements, recognized in the current year. Additionally, permanent non-deductible items remained stable for the year, but when
applied to lower pre-tax income, resulted in an increase to the effective income tax rate.

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The following tables set forth our results of operations for the year ended December 31, 2008 compared to the year ended
December 31, 2009:

Year Ended December 31,2008

2009

Variance
Favorable/
(Unfavorable)% Total
Revenues



% Total
RevenuesDollars

Dollars

Dollars

%(Dollars in thousands, except center information)Total Revenues

$
676,436


100.0
%
$
647,676


100.0
%
$
(28,760
)
(4.3)%Center Expenses:Salaries and related payroll costs


196,951


29.1
%

185,599


28.7
%

11,352

5.8%Provision for doubtful accounts


135,857


20.1
%

124,575


19.2
%

11,282

8.3%Occupancy costs


100,315


14.8
%

94,370


14.6
%

5,945

5.9%Center depreciation expense


16,698


2.5
%

13,174


2.0
%

3,524

21.1%Advertising expense


20,304


3.0
%

22,232


3.4
%

(1,928
)
(9.5)%Other center expenses


48,652


7.2
%

45,606


7.1
%

3,046

6.3%Total center expenses


518,777


76.7
%

485,556


75.0
%

33,221

6.4%Center gross profit


157,659


23.3
%

162,120


25.0
%

4,461

2.8%Corporate and Other Expenses (Income):General and administrative expenses


68,568


10.1
%

56,526


8.7
%

12,042

17.6%Legal settlements


1,950


0.3
%

6,427


1.0
%

(4,477
)
(229.6)%Corporate depreciation expense


3,033


0.4
%

2,714


0.4
%

319

10.5%Interest expense


11,188


1.7
%

6,241


1.0
%

4,947

44.2%Interest income


(128
)




(238
)




110

85.9%Loss on disposal of property and equipment


551


0.1
%

(50
)




601

109.1%Loss on impairment of assets


486





2,987


0.4
%

(2,501
)
(514.6)%Total corporate and other expenses


85,648


12.6
%

74,607


11.5
%

11,041

12.9%Income before income taxes


72,011


10.7
%

87,513


13.5
%

15,502

21.5%Income tax expense


33,540


5.0
%

33,310


5.1
%

230

0.7%Net income

$
38,471


5.7
%
$
54,203


8.4
%
$
15,732

40.9%


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Table of Contents



Year Ended December 31,2008

2009Center Information:Number of centers open at beginning of period


2,832


2,797Opened


49


10Acquired


2


Closed


(86
)

(220
)Number of centers open at end of period


2,797


2,587Weighted average number of centers open during the period


2,848


2,698Number of customers servedall credit products (thousands)


1,419


1,316Number of cash advances originated (thousands)(1)


11,762


10,860Aggregate principal amount of cash advances originated (thousands)(1)

$
4,296,493

$
3,922,195Average amount of each cash advance originated(1)

$
366

$
361Average charge to customers for providing and processing a cash advance(1)

$
55

$
53Average duration of a cash advance (days)(1)(2)


16.8


17.6Average number of lines of credit outstanding during the period (thousands)(3)


10


24Average amount of aggregate principal on lines of credit outstanding during the period (thousands)(3)

$
6,946

$
10,945Average principal amount on each line of credit outstanding during the period(3)

$
672

$
410Number of installment loans originated (thousands)(4)


32


35Aggregate principal amount of installment loans originated (thousands)(4)

$
14,841

$
15,992Average principal amount of each installment loan originated(4)

$
462

$
453


(1)Excludes
lines of credit and installment loans.(2)Excludes
the impact of extended payment plans.(3)In
Virginia, we began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing
advances on existing lines of credit on September 30, 2010.(4)The
installment loan activity reflects loans we originated as the lender in Illinois.


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Year Ended December 31,2008

2009

Variance
Favorable/
(Unfavorable)% Total
Revenues



% Total
RevenuesDollars

Dollars

Dollars

%(Dollars in thousands)Per Center (based on weighted average number of centers open during the period):Center revenues

$
237.5


100.0
%
$
240.1


100.0
%
$
2.6

1.1%Center expenses:Salaries and related payroll costs


69.2


29.1
%

68.8


28.7
%

0.4

0.6%Provision for doubtful accounts


47.7


20.1
%

46.2


19.2
%

1.5

3.1%Occupancy costs


35.2


14.8
%

35.0


14.6
%

0.2

0.6%Center depreciation expense


5.9


2.5
%

4.9


2.0
%

1.0

16.9%Advertising expense


7.1


3.0
%

8.2


3.4
%

(1.1
)
(15.5)%Other center expenses


17.1


7.2
%

16.9


7.1
%

0.2

1.2%Total center expenses


182.2


76.7
%

180.0


75.0
%

2.2

1.2%Center gross profit

$
55.3


23.3
%
$
60.1


25.0
%
$
4.8

8.7%




Total revenues decreased approximately $28.8 million in 2009. Total revenues for the 2,527 centers opened prior to
January 1, 2008 and still open as of December 31, 2009 decreased $5.0 million, from $635.0 million in 2008 to $630.0 million in 2009. Total revenues for the 60
centers opened after January 1, 2008 and still open as of December 31, 2009 increased $5.3 million, from $2.3 million in 2008 to $7.6 million in 2009. Total revenues
for the remaining 306 centers that closed represented a decrease of approximately $29.1 million for 2009 compared to 2008. Of this decrease, approximately $0.2 million,
$3.9 million, and $8.0 million were due to the closure of our centers in New Mexico, Arkansas, and New Hampshire respectively.

Changes
in legislation have had a significant impact on our revenues in Ohio. In Ohio, our revenue decreased by $17.1 million, or 31.2%, for the year ended December 31,
2009, as compared to 2008.



Salaries and related payroll costs.The decrease in salaries and related payroll costs in 2009 was due primarily to a reduction in the
number of
centers open during the year ended December 31, 2009 as compared to the same period in 2008. We averaged approximately 2.00 and 1.94 full-time equivalent field employees, including
district directors, per center during 2008 and 2009, respectively.

Provision for doubtful accounts.As a percentage of total revenues, the provision for doubtful accounts decreased to 19.2% for the year
ended
December 31, 2009 from 20.1% in 2008. This decrease is due to an increase in non-lending revenues, improved ACH collections, and an increase in the sale of receivables during the
year ended December 31, 2009. During the years ended December 31, 2008 and 2009, we received proceeds from the sale of receivables in the amount of $0.6 million and
$3.4 million, respectively. During the year ended December 31, 2008, the provision included a charge related to the suspension of operations in Arkansas and New Hampshire of
approximately $1.1 million and $0.5 million, respectively.

Occupancy costs and center depreciation expense.The decrease in occupancy costs and center depreciation expense in 2009 was due
primarily to a
decrease in the average number of centers

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operating
throughout 2009 as compared to 2008. In addition, depreciation continues to decrease as centers age and property and equipment become fully depreciated.

Advertising expense.Advertising expense increased in 2009 compared to 2008 due primarily to an increase in direct marketing
advertising.

Other center expenses.The decrease in other center expenses in 2009 was due primarily to a decrease in the number of centers opened as
compared to
2008. This was partially offset by an increase in center closing cost related to the closing of 220 centers in 2009 as compared to 86 centers in 2008.



General and administrative expenses.The decrease in general and administrative expenses in 2009 was due primarily to:



The
decrease was partially offset by:



In
addition, we received approximately $1.4 million in insurance proceeds related to the reimbursement of legal expenses recognized in prior periods that reduced legal expenses
during the year ended December 31, 2009. This was offset by higher legal expenses during the period.

Legal settlements.The amounts reflected as legal settlements relate to the charges during the year ended
December 31, 2009 of approximately $5.7 million for the settlement of theMcGinnisclass-action litigation in Arkansas, approximately
$0.9 million for the proposed settlement in the consolidated class-action litigation in South Carolina, and approximately $0.4 million for the settlement of the King and Strongclass-action
litigation in Georgia. Offsetting these amounts are approximately $0.6 million in insurance reimbursements related
to theKing and Strongclass-action litigation in Georgia. For the year ended December 31, 2008, the amount relates to charges accrued of
approximately $1.95 million for the settlement of theKing and Strongclass-action litigation in Georgia.

Interest expense.The decrease in interest expense for the year ended December 31, 2009, as compared to 2008 was due to a decrease
in the
average interest rates and the average outstanding balance during the period.

(Gain)/Loss on disposal of property and equipment.The favorable change in this item for the year ended December 31, 2009 compared
to 2008 was
primarily due to insurance proceeds of approximately $0.5 million being recognized during the period.

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Loss on impairment of assets.Loss on impairment of assets in the year ended December 31, 2009 and 2008 represents the write-down
of the undepreciated costs of certain fixed assets in our centers identified for closure.

Income tax expense.The decrease in income tax expense for the year ended December 31, 2009 as compared to 2008 was primarily due
to a
reduction in state taxes as a result of claims filed for recovery of income taxes recognized in prior years, and to significantly reduce nondeductible lobbying expenditures and other discrete items.

Liquidity and Capital Resources

The following table presents a summary of cash flows for the years ended December 31, 2008, 2009, and 2010 (in thousands):

2009 vs. 2008
Variance

2010 vs. 2009
Variance2008

2009

2010

Dollars

%

Dollars

%Cash flows provided by (used in):Operating activities

$
186,227

$
182,087

$
134,541

$
(4,140
)
(2.2)%

$
(47,546
)
(26.1)%Investing activities


(125,674
)

(93,001
)

(99,333
)

32,673

26.0%


(6,332
)
(6.8)%Financing activities


(72,164
)

(66,884
)

(46,267
)

5,280

7.3%


20,617

30.8%Effect of exchange rate changes on cash and cash equivalents


(623
)

(30
)

(182
)

593

95.2%


(152
)
(506.7)%Net increase (decrease) in cash and cash equivalents


(12,234
)

22,172


(11,241
)

34,406

281.2%


(33,413
)
(150.7)%Cash and cash equivalents, beginning of period


28,251


16,017


38,189


(12,234
)
(43.3)%


22,172

138.4%Cash and cash equivalents, end of period

$
16,017

$
38,189

$
26,948

$
22,172

138.4%

$
(11,241
)
(29.4)%


Our
principal sources of cash are from operations and from borrowings under our revolving credit facility. See "Certain Contractual Cash
CommitmentsLong-Term Debt Obligations" in this section for a detailed description of our revolving credit facility. We anticipate that our primary uses of cash will be to
provide working capital, finance capital expenditures, meet debt service requirements, fund advances, finance center openings, fund acquisitions, and pay dividends on our common stock.

We
borrow under our $270.0 million revolving credit facility to fund our advances and to meet our other liquidity needs. Our day-to-day balances under our
revolving credit facility, as well as our cash balances, vary because of seasonal and day-to-day requirements resulting from making and collecting advances. For example, if a
month ends on a Friday (a typical payday), our borrowings and our cash balances will be high compared to a month that does not end on a Friday. This is because a substantial portion of the advances
will be repaid in cash on that day but sufficient time will not yet have passed for the cash to reduce the outstanding borrowings under our revolving credit facility. Our borrowings under our
revolving credit facility will also increase as the demand for advances increases during our peak periods such as the back-to-school and holiday seasons. Conversely, our
borrowings typically decrease during the tax refund season when cash receipts from customers peak or the customer demand for new advances decreases. Advances and fees receivable, net increased
approximately

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$1.0 million,
or 0.5%, to $205.2 million at December 31, 2010, compared to $204.2 million at December 31, 2009.

During
the years ended December 31, 2009 and 2010, we repurchased 16,960 and 64,594 shares, respectively, of our common stock at a cost of approximately $76,700 and $334,234,
respectively. During the years ended December 31, 2010 and 2009, these amounts include 64,594 and 16,960 shares of our common stock, respectively, that were surrendered by employees to satisfy
their tax obligations with respect to the vesting of restricted stock awarded pursuant to our 2004 Omnibus Stock Plan. Based on the average of the high and low stock price on the dates of surrender,
the shares surrendered in 2009 and 2010 had an aggregate value of approximately $76,700 and $334,234, respectively.

Although
our revolving credit facility places restrictions on our capital expenditures and acquisitions, we believe that these restrictions do not currently prohibit us from pursuing our
strategy or limit our current level of operations. Cash that is restricted due to certain states' regulatory liquidity requirements is not included in cash and cash equivalents. Instead, the
restricted cash is shown on our consolidated balance sheet as a non-current asset under the line item "Restricted cash." Historically, these restrictions have not had an impact on our
ability to meet our liquidity needs for operations. However, our ability to make dividends to our stockholders and repurchases of our common stock has been, and in the future may be, restricted under
our revolving credit facility.



Net cash provided by operating activities in 2010 as compared to 2009 decreased approximately 26.1% to $134.5 million. The
decrease in operating cash flows was attributable to a decrease of approximately $20.0 million in non-cash expense items, an increase over prior year of legal settlement charges of
approximately $12.2 million, and a greater net increase of
approximately $9.1 million in operating assets and liabilities. The decrease in non-cash expenses was primarily due to a decrease in the allowance for doubtful accounts of
approximately $20.3 million, which was partially offset by an increase in loss on disposal of property, plant, and equipment of approximately $0.4 million.

Net
cash provided by operating activities in 2009 as compared to 2008 decreased approximately 2.2% to $182.1 million. The decrease in operating cash flows was attributable to the
net change of $21.1 million in non-cash expense items. This was partially offset by an increase in net income of $15.7 million and an increase in operating assets and
liabilities of $1.2 million. The decrease in non-cash expenses was primarily due to a decrease in the allowance for doubtful accounts of $11.2 million, a change in deferred
income taxes of approximately $7.5 million, and a decrease in depreciation expense of $3.8 million, which was partially offset by an increase in loss on impairment of assets of
approximately $2.5 million. The increase in operating assets and liabilities is primarily due to a decrease in deferred revenue of approximately $6.9 million and a decrease in accrued
liabilities of approximately $4.9 million, partially offset by an increase in accounts payable of approximately $4.0 million.



Net cash used in investing activities in 2010 as compared to 2009 increased approximately 6.8% to $99.3 million. The increase
was primarily related to increases in advances receivable of approximately $2.6 million, the purchase of customer lists and relationships of approximately $2.4 million, and property and
equipment purchases of approximately $1.3 million.

Net
cash used in investing activities in 2009 as compared to 2008 decreased approximately 26.0% to $93.0 million. The decrease was primarily related to decreases in advances
receivable of $27.4 million and a decrease in purchases of property and equipment of approximately $4.9 million.

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Net cash used in financing activities in 2010 as compared to 2009 decreased 30.8% to $46.3 million. During the year ended
December 31, 2010, net payments on indebtedness, including the revolving credit facility, decreased by approximately $18.7 million to $30.0 million, and the change in book
overdrafts decreased by approximately $2.4 million. Dividend payments were approximately $15.4 million and $15.3 million in 2010 and 2009, respectively.

Net
cash used in financing activities in 2009 as compared to 2008 decreased 7.3% to $66.9 million. In 2009, we had net repayments on indebtedness, including the revolving credit
facility, of approximately $48.7 million compared to 2008 net borrowings on indebtedness of approximately $47.0 million. Dividend payments were approximately $15.3 million and
$28.3 million in 2009 and 2008, respectively, and purchases of treasury stock were approximately $0.1 million and $89.0 million in 2009 and 2008, respectively.

Capital Expenditures

For the years ended December 31, 2008, 2009, and 2010, we spent $9.7 million, $4.8 million, and
$6.1 million, respectively, on capital expenditures. Capital expenditures included expenditures for new centers opened, center remodels, and computer equipment replacements in our centers and
at our corporate headquarters.

Off-Balance Sheet Arrangement with Third-Party Lender

In Texas, where we operate as a CSO, we offer a fee-based credit services package to assist customers in trying to improve
their credit and in obtaining an extension of consumer credit through a third-party lender. Under the terms of our agreement with this lender, we process customer applications and are contractually
obligated to reimburse the lender for the full amount of the loans and certain related fees that are not collected from the customers. As of December 31, 2009 and 2010, the third-party lender's
outstanding advances and interest receivable (which were not recorded on our balance sheet) totaled approximately $19.7 million and $22.8 million, respectively, which is the amount we
would be obligated to pay the third-party lender if these amounts were to become uncollectible. Additionally, if these advances were to become uncollectible, we would also be required to pay the
third-party lender all related NSF fees and late fees on these advances.

Because
of our economic exposure for losses related to the third-party lender's advances and interest receivable, we have established an accrual for third-party lender losses to reflect
our estimated probable losses related to uncollectible third-party lender advances. The accrual for third-party lender losses that was reported on our balance sheet at December 31, 2009 and
2010 was approximately $4.5 million and $5.4 million, respectively, and was established on a basis similar to the allowance for doubtful accounts. If actual losses on the third-party
lender's advances are materially greater than our accrual for third-party lender losses, our business, results of operations, and financial condition could be adversely affected. See "Item 8.
Financial Statements and Supplementary DataNote 17. Transactions with Variable Interest Entities."

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Certain Contractual Cash Commitments

Our principal future contractual obligations and commitments as of December 31, 2010, including periodic interest payments,
included the following (in thousands):

Payment due by December 31,Contractual Cash Obligations

Total

2011

2012

2013

2014

2015

2016 and
thereafterLong-term debt obligations:Revolving credit facility

$
111,930

$


$


$
111,930

$


$


$
Mortgage payable


4,113


513


552


594


638


687


1,129Note payable


254


254














Interest payable on long-term debt obligations


1,068


286


245


203


158


110


66Operating lease obligations(1)


113,966


53,781


36,639


18,482


3,556


955


553Purchase obligations


9,805


8,800


996


9








Total

$
241,136

$
63,634

$
38,432

$
131,218

$
4,352

$
1,752

$
1,748


(1)Includes
leases for centers, aircraft hangar space, warehouse space, security equipment and fax/copier equipment.




In March 2008, we entered into an amendment and restatement of our prior credit facility with a syndicate of banks. As amended and
restated, our revolving credit facility now provides us with a $270.0 million revolving line of credit, including the ability to issue up to $25.0 million in letters of credit. Our
revolving credit facility matures on March 24, 2013. We have the option to increase the revolving credit facility by an additional $95.0 million upon receipt of sufficient commitments
from lenders in the lending syndicate and other eligible lenders as defined in the credit agreement. Any portion of our revolving credit facility that is repaid may be borrowed again subject to any
limitations based on financial covenants. In July 2008, we amended our credit facility to modify the consolidated net worth test to reduce the requirement by the cost of repurchases of common stock
made after January 1, 2008.

As
of December 31, 2010, we had approximately $112.0 million outstanding on the revolving portion of our credit facility and approximately $8.5 million of
commitments under outstanding letters of credit, leaving approximately $149.5 million available for future borrowings under this credit facility, subject to additional limitations based on
certain financial covenants. As of December 31, 2010, the senior leverage covenant restricted that additional availability to approximately $62.4 million.

In
general, our borrowings under our revolving credit facility bear interest, at our option, at a base rate plus an applicable margin or a LIBOR-based rate plus an applicable margin. The
base rate equals the greater of: (i) the prime rate set by Bank of America, the administrative agent under the revolving credit facility; and (ii) the sum of the federal funds rate plus
0.50%. The applicable margin is determined each quarter by a pricing grid based on our total leverage ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, and
amortization ("EBITDA") as defined in the credit agreement. The base rate applicable margin ranges from 1.50% to 2.25% based upon our total leverage ratio. The LIBOR-based applicable margin ranges
from 2.50% to 3.25% based upon our total leverage ratio. As of December 31, 2010, the applicable margin for the prime-based rate was 1.75% and the applicable margin for the LIBOR-based rate was
2.75%.

The
applicable rate is chosen when we request a draw down under the revolving credit facility and is based on the forecasted working capital requirements and the required notice period
for each type of

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borrowing.
LIBOR-based rates can be selected for one-, two-, three-, or six-month terms. In the case of a base rate loan, we must notify the bank on the requested
date of any required borrowing and in the case of a LIBOR-based loan, we must notify the bank three business days prior to the date of the requested borrowing. Base rate loans are variable, and the
rates on those loans are changed whenever the underlying rate changes. LIBOR-based loans bear interest for the term of the loan at the rate set at the time of borrowing for that loan.

Our
obligations under the revolving credit facility are guaranteed by each of our domestic subsidiaries. Our borrowings under the revolving credit facility are collateralized by
substantially all of our assets and the assets of our subsidiaries. In addition, our borrowings under the revolving credit facility are secured by a pledge of all of the capital stock, or similar
equity interests, of our domestic subsidiaries and 65% of the voting capital stock, or similar equity interests, of our foreign subsidiaries. Our revolving credit facility contains various financial
covenants that require, among other things, the maintenance of minimum net worth, maximum leverage and senior leverage, minimum fixed charge coverage and maximum charge-off ratios. The
maximum leverage allowed under the revolving credit facility is three and one half times trailing twelve month EBITDA, as defined in the credit agreement. The maximum senior leverage allowed under the
revolving credit facility is two times trailing twelve month EBITDA as defined in the credit agreement. Our trailing twelve month EBITDA, as defined in the credit agreement, and including pro forma
adjustments for acquisitions, as of December 31, 2010 was approximately $94.0 million. The charge-off ratio, as defined in the revolving credit facility, limits the average
of actual charge-offs incurred during each fiscal month to a maximum of 4.50% of the average amount of adjusted transaction receivables outstanding at the end of each fiscal month during
the prior twelve consecutive months. At December 31, 2010, our charge off ratio was 3.37% and was calculated based on average monthly charge-offs of $9.0 million and average
transaction receivables of $267.2 million, and we had charge-offs of $33.2 million during the three months ended December 31, 2010. We could have charged off an
additional $36.3 million for the three months ended December 31, 2010 within the limits of this covenant. The revolving credit facility contains customary covenants, including covenants
that restrict our ability to, among other things (i) incur liens, (ii) incur certain indebtedness (including guarantees or other contingent obligations), (iii) engage in mergers
and consolidations, (iv) engage in sales, transfers, and other dispositions of property and assets (including sale-leaseback transactions), (v) make loans, acquisitions,
joint ventures, and other investments, (vi) make dividends and other distributions to, and redemptions and repurchases from, equity holders, (vii) prepay, redeem, or repurchase certain
debt, (viii) make changes in the nature of our business, (ix) amend our organizational documents, or amend or otherwise modify certain of our debt documents, (x) change our fiscal
quarter and fiscal year ends, (xi) enter into transactions with our affiliates, and (xii) issue certain equity interests. The revolving credit facility contains customary events of
default, including events of default resulting from (i) our failure to pay principal when due or interest, fees, or other amounts after three or more business days, (ii) covenant
defaults, (iii) our material breach of any representation or warranty, (iv) cross defaults to any other indebtedness in excess of $1.0 million in the aggregate,
(v) bankruptcy, insolvency, or other similar proceedings, (vi) our inability to pay debts, (vii) monetary judgment defaults in excess of $1.0 million in the aggregate,
(viii) customary ERISA defaults, (ix) actual or asserted invalidity of any material provision of the loan documentation or impairment of a material portion of the collateral, and
(x) a change of control. A breach of a covenant
or an event of default could cause all amounts outstanding under the revolving credit facility to become immediately due and payable. We were in compliance with all financial covenants at
December 31, 2010. See "Liquidity and Capital Resources" in this section for a description of how we utilize the revolving credit facility to meet our liquidity needs.

We
borrow under our revolving credit facility to fund our advances and our other liquidity needs. Our day-to-day balances under our revolving credit facility, as
well as our cash balances, vary because of seasonal and day-to-day requirements resulting from making and collecting advances. For example, if a month ends on a Friday (a
typical payday), our borrowings and our cash balances will be high

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compared
to a month that does not end on a Friday. This is because a substantial portion of the advances will be repaid in cash on that day but sufficient time will not yet have passed for the cash to
reduce the outstanding borrowings under our revolving credit facility. Our borrowings under our revolving credit facility will also increase as the demand for advances increases during our peak
periods such as the back-to-school and holiday seasons. Conversely, our borrowings typically decrease during the tax refund season when cash receipts from customers peak or the
customer demand for new advances decreases.

United Kingdom Overdraft Facility.In October 2008, our United Kingdom operations entered into an overdraft facility. The maximum
available
borrowings under the facility were GBP 400,000, which was equivalent to approximately $637,000 at December 31, 2009. The interest rate on any borrowings under this facility was the Bank of
England base rate plus 1.75%. This facility expired and was not renewed during the fourth quarter of 2009.

Mortgage Payable.Our corporate headquarters building and related land are subject to a mortgage, the principal amount of which was
approximately
$4.6 million and $4.1 million at December 31, 2009 and 2010, respectively. The mortgage is payable to an insurance company and is collateralized by our corporate headquarters
building and related land. The mortgage is payable in monthly installments of approximately $66,400, including principal and interest, and bears interest at a fixed rate of 7.30% over its
15 year term. The mortgage matures on June 10, 2017. The carrying amount of our corporate headquarters (land, land improvements, and building) was approximately $4.6 million and
$4.4 million at December 31, 2009 and 2010, respectively.



We lease all of our centers from third-party lessors under operating leases. These leases typically have initial terms of three to five
years and may contain provisions for renewal options, additional rental charges based on revenue, and payment of real estate taxes and common area charges. In addition, we lease aircraft hangar space,
warehouse space, and certain security and office equipment. The lessor under the aircraft hangar space lease is a company controlled by or affiliated with Mr. George D. Johnson, Jr., our former
Chairman and a significant stockholder. In addition, on July 13, 2009, the Company entered into a one-year Aircraft Dry Lease Agreement with Carabo Capital, LLC, an entity of
which the Company's current Chairman is a member. Under the Aircraft Dry Lease, the Company may use Carabo's aircraft from time to time in exchange for one dollar, standard usage expenses, and the
Company's fulfillment of its obligations under the Aircraft Dry Lease. See "Item 8. Financial Statements and Supplementary DataNote 14. Related Party Transactions."



We enter into agreements with vendors to purchase furniture, fixtures, and other items used to open new centers and for marketing
agreements. These purchase commitments typically extend for a period of two to three months after the opening of a new center, up to one year for marketing agreements, and three to four years for
telephone and internet service agreements. As of December 31, 2010, our purchase obligations totaled approximately $9.8 million.

Impact of Inflation

We believe our results of operations are not dependent upon the levels of inflation.

Impact of New Accounting Pronouncements

See "Item 8. Financial Statements and Supplementary Data. Note 1. Description of Business and Significant Accounting
Policies." of the Consolidated Financial Statements for the impact of new accounting pronouncements.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements. All statements other than historical
information or statements of current condition contained in this Annual Report, including statements regarding our future financial performance, our business strategy, and expected developments in our
industry, are forward-looking statements. The words "expect," "intend," "plan," "believe," "project," "anticipate," "may," "will," "should," "would," "could," "estimate," "continue," and similar
expressions are intended to identify forward-looking statements.

We
have based these forward-looking statements on management's current views and expectations. Although we believe that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the related statements, are inherently subject to risks, uncertainties, and other factors, many of which are not under our
control and may not even be predictable. These risks, uncertainties, and other factors could cause the actual results, performance or achievements to differ materially from any future results,
performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties, and factors include, but are not limited to:



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We
expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or
expectations, or otherwise. We make no prediction or statement about the performance of our shares of common stock.

You
are cautioned not to rely unduly on any forward-looking statements. These risks and uncertainties are discussed in more detail elsewhere in this Annual Report, including under
"Item 1A. Risk Factors," "Item 1. Business," and this Item 7.

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

We have no market-risk-sensitive instruments entered into for trading purposes, as defined by GAAP.



We are exposed to interest rate risk on our revolving credit facility. Our variable interest expense is sensitive to changes in the
general level of interest rates. We may from time to time enter into interest rate swaps, collars, or similar instruments with the objective of reducing our volatility in borrowing costs. We do not
use derivative financial instruments for speculative or trading purposes. We had no derivative financial instruments outstanding as of December 31, 2009 and 2010. The weighted average interest
rate on our $141.1 million of variable interest debt as of December 31, 2009 was approximately 3.13%. The weighted average interest rate on our $112.0 million of variable interest
debt as of December 31, 2010 was approximately 3.36%.

We
had total interest expense of $11.2 million, $6.2 million, and $4.9 million for the years ended December 31, 2008, 2009, and 2010, respectively. The
estimated change in interest expense from a hypothetical 200 basis-point change in applicable variable interest rates would have been approximately $3.4 million in 2008, $3.0 million in
2009, and $2.0 million in 2010.



The expansion of our operations to the United Kingdom and Canada in 2007 has exposed us to shifts in currency valuations. We may, from
time to time, elect to purchase financial instruments as hedges against foreign exchange rate risks with the objective of protecting our results of operations in the United Kingdom and Canada against
foreign currency fluctuations. We had no such financial instruments outstanding as of December 31, 2009 and 2010.

As
currency exchange rates change, translation of the financial results of our United Kingdom and Canadian operations into United States dollars will be impacted. Changes in exchange
rates have resulted in cumulative translation adjustments decreasing our net assets at December 31, 2009 and 2010 by approximately $1.9 million and $2.2 million, respectively.
These cumulative translation adjustments are included in accumulated other comprehensive loss as a separate component of stockholders' equity. Due to the immateriality of our operations in the United
Kingdom and Canada, a change in foreign currency exchange rates is not expected to have a significant impact on our consolidated financial position, results of operations or cash flows.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm

78Consolidated Balance Sheets as of December 31, 2009 and 2010

79Consolidated Statements of Income for the Years Ended December 31, 2008, 2009 and 2010

80Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2009 and 2010

81Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2009 and 2010

82Notes to Consolidated Financial Statements

83


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Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Stockholders of
Advance America, Cash Advance Centers, Inc.

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Advance America, Cash Advance Centers, Inc. and its subsidiaries at December 31, 2010 and December 31, 2009, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Charlotte, North Carolina
March     , 2011

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Advance America, Cash Advance Centers, Inc.        Consolidated Balance Sheets        December 31, 2009 and December 31, 2010        (in
thousands, except per share data)

2009

2010AssetsCurrent assetsCash and cash equivalents

$
38,189

$
26,948Advances and fees receivable, net


204,234


205,207Deferred income taxes


19,145


18,615Other current assets


17,383


19,869Total current assets


278,951


270,639Restricted cash


4,366


3,752Property and equipment, net


31,839


25,054Goodwill


127,031


126,914Customer lists and relationships, net





2,282Other assets


3,964


3,011Total assets

$
446,151

$
431,652Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable

$
13,562

$
12,554Accrued liabilities


31,432


37,939Income taxes payable


11,400


42Accrual for third-party lender losses


4,528


5,420Current portion of long-term debt


851


767Total current liabilities


61,773


56,722Revolving credit facility


141,058


111,930Long-term debt


4,367


3,600Deferred income taxes


23,349


23,148Deferred revenue


2,717


890Other liabilities


274


321Total liabilities


233,538


196,611Commitments and contingencies (Note 12)Stockholders' equityPreferred stock, par value $.01 per share, 25,000 shares authorized; no shares issued and outstanding





Common stock, par value $.01 per share, 250,000 shares authorized; 96,821 shares issued and 61,614 and 62,148 outstanding as of December 31, 2009 and
2010, respectively


968


968Paid in capital


290,146


290,753Retained earnings


182,765


203,001Accumulated other comprehensive loss


(1,934
)

(1,885
)Common stock in treasury (35,207 and 34,673 shares at cost at December 31, 2009 and 2010, respectively)


(259,332
)

(257,796
)Total stockholders' equity


212,613


235,041Total liabilities and stockholders' equity

$
446,151

$
431,652


The accompanying notes are an integral part of these consolidated financial statements.

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Advance America, Cash Advance Centers, Inc.        Consolidated Statements of Income        Years Ended December 31, 2008, 2009, and 2010    
(in thousands, except per share data)

2008

2009

2010Total revenues

$
676,436

$
647,676

$
600,233Center Expenses:Salaries and related payroll costs


196,951


185,599


179,617Provision for doubtful accounts


135,857


124,575


104,228Occupancy costs


100,315


94,370


87,457Center depreciation expense


16,698


13,174


9,806Advertising expense


20,304


22,232


20,898Other center expenses


48,652


45,606


43,124Total center expenses


518,777


485,556


445,130Center gross profit


157,659


162,120


155,103Corporate and Other Expenses (Income):General and administrative expenses


68,291


55,363


61,892General and administrative expenses with related parties


277


1,163


635Legal settlements


1,950


6,427


18,608Corporate depreciation and amortization expense


3,033


2,714


2,306Interest expense


11,188


6,241


4,858Interest income


(128
)

(238
)

(74
)(Gain)/loss on disposal of property and equipment


551


(50
)

413Loss on impairment of assets


486


2,987


654Income before income taxes


72,011


87,513


65,811Income tax expense


33,540


33,310


30,048Net income

$
38,471

$
54,203

$
35,763Net income per common share:Basic

$
0.60

$
0.89

$
0.59Diluted

$
0.60

$
0.88

$
0.58Dividends declared per common share

$
0.44

$
0.25

$
0.25Weighted average number of shares outstanding:Basic


64,233


60,868


61,054Diluted


64,233


61,667


61,440


The
accompanying notes are an integral part of these consolidated financial statements.

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Advance America, Cash Advance Centers, Inc.        Consolidated Statements of Stockholders' Equity        Years Ended December 31, 2008, 2009, and 2010
    (in thousands, except per share data)

Common
StockCommon Stock
In TreasuryAccumulated
Other
Comprehensive
LossPar
Value

Paid In
Capital

Retained
EarningsShares

Shares

Amount

TotalBalances, December 31, 2007


96,821

$
968

$
286,999

$
133,789

$
(75
)

(23,874
)
$
(171,390
)
$
250,291Comprehensive income:Net income











38,471











38,471Foreign currency translation














(2,510
)







(2,510
)Total comprehensive income























35,961Dividends paid ($0.44 per share)











(28,251
)










(28,251
)Dividends payable











(48
)










(48
)Purchases of treasury stock

















(11,922
)

(88,962
)

(88,962
)Issuance of restricted stock

















42





Forfeitures of restricted stock























Vesting of restricted stock issued from treasury stock








(490
)










490


Amortization of restricted stock








862














862Stock option expense








1,309














1,309Issuance of common stock to director in lieu of cash








(45
)







20


142


97Balances, December 31, 2008


96,821


968


288,635


143,961


(2,585
)

(35,734
)

(259,720
)

171,259Comprehensive income:Net income











54,203











54,203Foreign currency translation














651








651Total comprehensive income























54,854Dividends paid ($0.25 per share)











(15,296
)










(15,296
)Dividends payable











(103
)










(103
)Purchases of treasury stock

















(17
)

(76
)

(76
)Issuance of restricted stock

















570





Vesting of restricted stock issued from treasury stock








(433
)










433


Forfeitures of restricted stock

















(30
)




Amortization of restricted stock








759














759Stock option expense








1,209














1,209Issuance of common stock to director in lieu of cash








(24
)







4


31


7Balances, December 31, 2009


96,821


968


290,146


182,765


(1,934
)

(35,207
)

(259,332
)

212,613Comprehensive income:Net income











35,763











35,763Foreign currency translation














(298
)







(298
)Other Comprehensive Income














347








347Total comprehensive income























35,812Dividends paid ($0.25 per share)











(15,392
)










(15,392
)Dividends payable











(135
)










(135
)Purchases of treasury stock

















(64
)

(465
)

(465
)Issuance of restricted stock

















595





Exercise of stock options








(238
)







45


238


Vesting of restricted stock issued from treasury stock








(1,763
)










1,763


Forfeitures of restricted stock

















(42
)




Amortization of restricted stock








1,633














1,633Stock option expense








975














975Issuance of common stock to director in lieu of cash























Balances, December 31, 2010


96,821

$
968

$
290,753

$
203,001

$
(1,885
)

(34,673
)
$
(257,796
)
$
235,041


The accompanying notes are an integral part of these consolidated financial statements.

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Advance America, Cash Advance Centers, Inc.        Consolidated Statements of Cash Flows        Years Ended December 31, 2008, 2009, and 2010    
   (in thousands)

2008

2009

2010Cash flows from operating activitiesNet income

$
38,471

$
54,203

$
35,763Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitionsDepreciation and amortization


19,781


15,925


12,112Non-cash interest expense


704


647


631Provisions for doubtful accounts


135,857


124,575


104,228Deferred income taxes


2,411


(5,099
)

329(Gain)/loss on disposal of property and equipment


551


(50
)

413Loss on impairment of assets


486


2,987


654Amortization of restricted stock


862


759


1,633Stock option expense


1,309


1,209


975Common stock issued to director in lieu of cash


97


7


Changes in operating assets and liabilitiesFees receivable, net


(19,060
)

(19,038
)

(12,816
)Other current assets


(2,453
)

(1,647
)

(2,507
)Other assets


162


168


304Accounts payable


(1,672
)

2,353


(577
)Accrued liabilities


2,305


(2,613
)

6,584Deferred revenue


4,791


(2,074
)

(1,827
)Income taxes payable


1,625


9,775


(11,358
)Net cash provided by operating activities


186,227


182,087


134,541Cash flows from investing activitiesChanges in advances receivable


(116,317
)

(88,868
)

(91,445
)Customer lists and relationships








(2,360
)Changes in restricted cash


1,068


267


614Acquisitions of business, net of cash acquired


(769
)




Proceeds from sale of property and equipment


74


446


4Purchases of property and equipment


(9,730
)

(4,846
)

(6,146
)Net cash used in investing activities


(125,674
)

(93,001
)

(99,333
)Cash flows from financing activities(Payments on)/Proceeds from revolving credit facility, net


47,515


(48,759
)

(29,128
)Payments on mortgage payable


(413
)

(444
)

(477
)Payments on long-term debt








Payments on note payable


(130
)

(224
)

(374
)Proceeds from note payable





751


Payments of financing costs


(1,622
)




Purchases of treasury stock


(88,962
)

(76
)

(465
)Payments of dividends


(28,251
)

(15,296
)

(15,392
)Changes in book overdrafts


(301
)

(2,836
)

(431
)Net cash used in financing activities


(72,164
)

(66,884
)

(46,267
)Effect of exchange rate changes on cash and cash equivalents


(623
)

(30
)

(182
)Net increase (decrease) in cash and cash equivalents


(12,234
)

22,172


(11,241
)Cash and cash equivalents, beginning of period


28,251


16,017


38,189Cash and cash equivalents, end of period

$
16,017

$
38,189

$
26,948Supplemental disclosures of cash flow information:Cash paid during the period for:Interest, net of amounts capitalized

$
10,530

$
5,849

$
4,846Income taxes


28,665


30,799


41,485Supplemental schedule of non-cash investing and financing activity:Property and equipment purchases included in accounts payable and accrued expenses


99


72


179Restricted stock dividends payable


48


103


135Net assets acquired through acquisitions of business


61








The accompanying notes are an integral part of these consolidated financial statements.

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Advance America, Cash Advance Centers, Inc.        Notes to Consolidated Financial Statements        December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies

Basis of Presentation, Principles of Consolidation, and Description of Business

The accompanying consolidated financial statements include the accounts of Advance America, Cash Advance Centers, Inc.
("AACACI") and its wholly owned subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated.

At
December 31, 2010, the Company operated 2,313 centers throughout the United States under the brand names Advance America ("Advance America") and National Cash Advance
("National Cash") and 21 centers in the United Kingdom and 18 centers in Canada under the brand name National Cash.
In each jurisdiction, separate wholly owned subsidiaries own the centers operating as Advance America and as National Cash. Historically, the Company has conducted business in most states under the
authority of a variety of enabling state statutes including cash advance, deferred presentment, check-cashing, small loan, credit service organization, and other state laws whereby advances are made
directly to customers. The Company's operations in the United Kingdom are conducted in accordance with applicable English law. The Company's operations in Canada are conducted in accordance with
applicable Canadian federal and provincial law.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term investments with original maturities of three months or less.
The carrying amount of cash and cash equivalents is the estimated fair value at December 31, 2009 and 2010. The Company invests excess funds in certificates of deposit and in overnight sweep
accounts with commercial banks, which in turn invest these funds in short-term, interest-bearing reverse repurchase agreements, or overnight Eurodollar deposits. Due to the
short-term nature of these investments, the Company does not take possession of the securities, which are instead held by the financial institution. The market value of the securities held
pursuant to these arrangements approximates the carrying amount. Deposits in excess of $250,000 are not insured by the FDIC.

Restricted Cash

Restricted cash includes cash in certain money market accounts and certificates of deposit. Restricted cash is restricted due to
certain states' liquidity requirements.

Revenue Recognition

Revenues can be characterized as fees and/or interest depending on the Company's business operations and product offerings under
enabling regulations. Revenue is recognized on a constant-yield basis ratably over the term of each advance.

Between
November 2008 and February 2010, the Company offered a line of credit product in Virginia with a 25-day billing cycle. In March 2010, the Company discontinued
offering new open-ended lines of credit but continued to service existing lines of credit in Virginia. The Company stopped providing new draws on existing lines of credit on
September 30, 2010. Customers are not charged interest on any outstanding borrowings during a billing cycle if they have a zero balance at the close of business on their billing cycle end date.
Revenue for this product is recorded when fees and

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

interest
are charged to the customer's account and therefore revenue is not recognized on a ratable basis.

The
Company has entered into a long-term services contract for which the Company receives advance payments. These advance payments are recorded as deferred revenue and
recognized as revenue over the life of the contract, subject to certain terms and conditions.

Advances and Fees Receivable, Net

The Company segregates its accounts receivable into advances receivable, fees and interest receivable, returned item receivables, and
other receivables. Advances receivable and fees and interest receivable include advances that have not been repaid. Returned item receivables include advances for which the customer's personal check
has been deposited and the check has been returned due to non-sufficient funds in the customers' accounts, closed accounts, or other reasons. Other receivables primarily include
miscellaneous receivables. Advances and fees receivable, net, do not include the advances and interest receivable for loans processed by the Company for the current third-party lender in Texas since
these loans are owned by the third-party lender. Advances and fees and interest receivable are carried at cost less unearned revenues and the allowance for doubtful accounts.

Allowance for Doubtful Accounts and Accrual for Third-Party Lender Losses

The allowance for doubtful accounts represents management's estimated probable losses for advances made directly to customers and is
recorded as a reduction of advances and fees receivable, net, on the Company's balance sheet. The accrual for third-party lender losses represents management's estimated probable losses for loans and
certain related fees for loans that are
processed by the Company for its current third-party lender in Texas (see Note 17) and is recorded as a current liability on the Company's balance sheet.

The
allowance for doubtful accounts and the accrual for third-party lender losses are primarily based upon models that analyze specific portfolio statistics and also reflect, to a lesser
extent, management's judgment regarding overall accuracy. The analytical models take into account several factors including the number of transactions customers complete and charge-off and
recovery rates. Additional factors such as changes in state laws, center closings, length of time centers have been open in a state, relative mix of new centers within a state, and other relevant
factors are also evaluated to determine whether the results from the analytical models should be revised.

The
Company has charged the portion of advances and fees deemed to be uncollectible against the allowance for doubtful accounts and credited any subsequent recoveries (including sales of
debt) to the allowance for doubtful accounts.

Unpaid
advances and the related fees and/or interest are generally charged off 60 days after the date a customer's check was returned, the Automated Clearing House ("ACH") was
rejected by the customer's bank, or the default date, unless the customer has paid at least 15% of the total of his or her loan plus all applicable fees, or 15% of the outstanding balance and related
interest and fees for our line of credit and installment loan products. Unpaid advances, installment loans, or lines of credit customers who file for bankruptcy are charged off upon receipt of the
bankruptcy notice.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

Management
believes that the allowance for doubtful accounts and accrual for third-party lender losses are adequate. Management's ongoing evaluation of the adequacy of the allowance for
doubtful accounts and accrual for third-party lender losses is based on its evaluation of the advances and loans outstanding, historical experience and such other factors that, in management's
judgment, deserve consideration in estimating probable losses.

Property and Equipment

Property and equipment, including improvements that significantly extend useful lives, are recorded at cost. Cost includes major
expenditures for improvements and replacements that extend useful lives and interest costs associated with significant capital expenditures. Maintenance
and repairs are expensed when incurred. Depreciation is calculated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets as follows:
building, 40 years; aircraft, 20 years; land improvements, seven years; leasehold improvements, office equipment and furniture, typically 3 to 5 years; and software, 3 to
5 years. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and the resulting gains or losses are
included in income.

The
carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable.
The Company assesses recoverability by determining whether the net book value of assets will be recovered through projected undiscounted future cash flows. If the Company determines that the carrying
value of assets may not be recoverable, it measures any impairment based on the projected discounted future cash flows or estimated sale proceeds to be provided from the assets as compared to the
carrying value. The Company recorded in 2008 an impairment of assets expense of approximately $0.5 million to write off the undepreciated costs of underperforming centers identified for future
closure. The Company recorded in 2009 an impairment of assets expense of approximately $3.0 million to write off the undepreciated costs of underperforming centers identified for future
closure. The Company recorded in 2010 an impairment of assets expense of approximately $0.7 million to write off the undepreciated costs of underperforming centers identified for future
closure.

The
Company accounts for internally developed software costs in accordance with Accounting Standards Codification ("ASC") 350-40, "Internal Use Software", which requires the
capitalization of certain costs incurred in connection with developing or obtaining software for internal use. The Company capitalizes internal use software if that software meets the following
criteria:



If
these two criteria are met, the Company will capitalize labor costs of full-time and temporary employees working directly on the development or modification of internal use software and
hardware and software purchased specifically for the internal use software. Capitalized costs are depreciated over the estimated useful lives of 3 to 5 years when the software is complete and
ready for its intended use.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

Cash Overdrafts

The Company has included in accounts payable book overdrafts of $2.4 million and $2.0 million at December 31, 2009
and 2010, respectively.

Operating Leases

The Company's center leases typically have a lease term of three years and contain lessee renewal options and cancellation clauses in
the event of regulatory changes. Because of the economic penalties associated with relocating its centers, combined with the loss of customers and additional capital requirements, the Company
typically renews its leases for one or more option periods. Accordingly, the Company amortizes its leasehold improvements over the shorter of their economic lives, which are generally five years, or
the lease term that considers renewal periods that are reasonably assured.

Concentration of Risk

During the year ended December 31, 2010, the Company operated in 32 states in the United States. For the years ended
December 31, 2008, 2009, and 2010, total revenues within the Company's five largest states (measured by total revenues) accounted for approximately 48%, 48%, and 51%, respectively, of the
Company's total revenues. The states that represent the Company's five largest states (measured by total revenues) change from time to time.

Advertising Costs

Advertising costs are expensed when incurred.

Pre-opening Costs

New center pre-opening costs are expensed when incurred.

Center Closing Costs

Center closing costs represent management's estimate of severance payments, costs to clean and vacate the premises, losses related to
the write-off of leasehold improvements and signage, and lease cancellation expense related to closing a center. A liability for severance payments is recognized when management:
(i) decides to close a center and this plan is unlikely to change; (ii) determines that an employee cannot be relocated to another center; and (iii) informs the employee of the
termination and the benefits that will be paid. The severance liability is recognized at the time the termination is communicated to the employee or, if the employee is required to continue service in
order to receive the benefit, ratably until the center closes. Costs to terminate the lease are recorded at the earlier of the date the lease is terminated or the lease's cease-use date.
All other expenses are recorded when incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

financial
statement carrying value of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Derivative and Hedging Activities

The Company has occasionally used derivative financial instruments for the purpose of managing exposure to adverse fluctuations in
interest rates. While these instruments are subject to fluctuations in value, such fluctuations are generally offset by the change in value of the underlying exposures being hedged. The Company does
not enter into any derivative financial instruments for speculative or trading purposes. The Company had no derivative financial instruments outstanding as of December 31, 2009 and 2010.

Earnings per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period
excluding unvested restricted stock. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period, after adjusting for the
dilutive effect of unvested restricted stock and stock options. At December 31, 2008, 2009, and 2010, 241,363, 172,268 and 130,152, respectively, unvested shares of restricted stock were not
included in the computation of diluted earnings per share because the effect of including them would be anti-dilutive. At December 31, 2008, 2009, and 2010, options to purchase
1,582,500, 1,555,000 and 1,537,500 shares of common stock, respectively, that were outstanding at those dates were not included in the computation of diluted earnings per share because the effect of
including them would be anti-dilutive.

The
following table presents the reconciliation of the denominator used in the calculation of basic and diluted earnings per share for the years ended December 31, 2008, 2009, and
2010 (in thousands):

2008

2009

2010Reconciliation of denominator:Weighted average number of common shares outstandingbasic


64,233


60,868


61,054Effect of dilutive unvested restricted stock





433


216Effect of dilutive outstanding stock options





366


170Weighted average number of common shares outstandingdiluted


64,233


61,667


61,440


Stock-Based Compensation Plans

The Company's stock-based compensation plans include the 2004 Omnibus Stock Plan which was approved by the Company's Board of Directors
in 2004 and a Nonqualified Stock Option Agreement and a Restricted Stock Agreement, both of which are between the Company and the Company's

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

President
and Chief Executive Officer and were approved by the Company's Board of Directors in 2005.

Under
the Company's stock-based compensation plans, the Company has granted shares of restricted stock and options to purchase the Company's common stock. In 2004, the Company adopted
ASC 718, "Stock Compensation". As required by ASC 718, the Company uses the fair value method of accounting for compensation cost for its restricted stock and stock options. Accordingly, compensation
cost was measured at the grant date based on the fair value of the awards and is being recognized over each award's respective service period. See Note 11 for the impact of these stock-based
compensation plans on the Company's results of operations and financial condition as well as other disclosures required by ASC 718.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and related notes to the financial statements. Actual results could differ from these estimates. Significant estimates include the determination of the
allowance for doubtful accounts, accrual for third-party lender losses, accounting for income taxes, self-insurance accruals for workers' compensation, fair value of goodwill under
required impairment analysis, and legal settlement loss contingencies.

Risks and Uncertainties

The Company's future operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating
results and cause actual results to differ materially from expectations include, but are not limited to: application of laws and regulations to the Company's business, as more fully disclosed in
Note 2; the Company's ability to manage credit risk; continued access to revolving credit facilities; and interest rate fluctuation on variable rate debt. The Company manages these risks
through political and legal efforts, continual evaluation of advance loss experience and, occasionally, entering into interest rate hedging instruments, respectively.

Fair Value of Financial Instruments

For certain of the Company's financial instruments, including cash and cash equivalents, advances, and fees receivable, the carrying
amounts approximate fair value due to their short maturities.

Treasury Stock

The Company's Board of Directors periodically authorizes the repurchase of common stock. The Company's repurchases of shares of common
stock are recorded as "Common stock in treasury" and result in a reduction of stockholders' equity. When treasury shares are reissued, the Company uses an average cost method. Gains on sales of
treasury stock not previously accounted for as constructively retired are credited to paid in capital. Losses on sales of treasury stock are charged to additional paid in capital to the extent that
previous net "gains" from sales or retirements are included therein, otherwise to retained earnings.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

Business Segment

ASC 280, "Segment Reporting" established standards for reporting information about operating segments. Operating segments are defined
as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate
resources and in assessing performance. For purposes of disclosure required by ASC 280, the Company operates in one segment, retail financial services.

Foreign Currency Translation and Transactions

The Company operates centers in the United Kingdom and Canada. The financial statements of these foreign businesses have been
translated into United States dollars. All balance sheet accounts were translated at the respective current exchange rate as of the balance sheet date and all income statement accounts were translated
at the respective average exchange rate for the period. The resulting translation adjustments, as well as exchange rate gains and losses on intercompany balances of a long-term investment
nature, are included in accumulated other comprehensive loss, a separate component of stockholders' equity. Gains or losses resulting from foreign currency transactions are included in general and
administrative expenses. Accumulated other comprehensive loss of $1.9 million at December 31, 2009 consisted of approximately $2.0 million of foreign currency translation
adjustments, net of related tax of approximately $0.1 million. Accumulated other comprehensive loss of $2.2 million at December 31, 2010 consisted of approximately
$2.3 million of foreign currency translation adjustments, net of related tax of approximately $0.1 million.

Litigation Accrual

In view of the inherent difficulty of predicting the outcome of litigation and regulatory matters, particularly where the claimants
seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company cannot state with confidence what the eventual outcome of
pending matters will be, what the timing of the ultimate resolution of these matters will be, what the eventual loss, fines or penalties related to each pending matter may be, or the extent to which
such amounts may be recoverable under the Company's insurance policies.

In
accordance with applicable accounting guidance, the Company establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both
probable and estimable.
When loss contingencies are not both probable and estimable, the Company does not establish reserves. In some of the matters described in Note 12, loss contingencies are not both probable and
estimable in the view of management, and accordingly, reserves have not been established for those matters. Based on current knowledge, management does not believe that loss contingencies, if any,
arising from pending litigation and regulatory matters, including the litigation and regulatory matters described in Note 12, will have a material adverse effect on the consolidated financial
position or liquidity of the Company, but may be material to the Company's results of operations for any particular reporting period.

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

1. Description of Business and Significant Accounting Policies (Continued)

Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board ("FASB") issued the Accounting Standards Codification ("ASC") Standard ASC
810-30, "Variable Interest Entities." ("ASC 810-30"). ASC 810-30 changes how a reporting entity determines whether an entity that is insufficiently capitalized or
is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things,
the other entity's purpose and design and the reporting entity's ability to direct the activities of the other entity that most significantly impact the other entity's performance. ASC
810-30 will be effective for a reporting entity's first fiscal year beginning after November 15, 2009. The adoption of ASC-810-30 during the quarter ended
March 31, 2010, did not have a material impact on the Company's financial position or results of operations.

In
July 2010, FASB issued Accounting Standard Update ("ASU") No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables
and the Allowance for Credit Losses ("ASU No. 2010-20"). The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an
entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate, by portfolio
segment or class of financing receivable, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. For public entities,
the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about the credit quality of the
Company's receivables required by the amendment are in Note 4. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods
beginning on or after December 15, 2010. As this ASU amends only the disclosure requirements for loans and the allowance for credit losses, the adoption of ASU No. 2010-20 is
not expected to have a significant impact on the Company's financial statements.

Reclassifications

Certain previously reported amounts have been reclassified to conform to the current presentation. Legal settlements have previously
been included in the accompanying consolidated statements of income in general and administrative expense but are now included in a separate line item for all periods presented.

2. Regulatory Requirements

The Company's business is regulated under numerous state laws and regulations, which are subject to change and which may impose significant costs or limitations on the way the Company
conducts or expands its business. As of December 31, 2010, the Company operated in 30 states because the Company believes it is attractive to operate in those states, due to specific
legislation that enables it to offer economically viable products.

The
Company does not currently conduct business in the remaining states or in the District of Columbia because the Company does not believe it is currently economically attractive to
offer its current products and services in these jurisdictions due to specific legislative restrictions such as interest

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

2. Regulatory Requirements (Continued)

rate
ceilings, an unattractive population density or unattractive location characteristics. However, the Company may open centers in any of these states or the District of Columbia if the Company
believes doing so may become economically attractive because of a change in those variables. Despite the lack of specific laws, other laws may permit the Company to offer products and services in
these states.

The
scope of state regulation, including the fees and terms of the Company's products and services, varies from state to state. Most states with laws that specifically regulate the
Company's products and services establish allowable fees and/or interest and other charges to consumers. In addition, many states regulate the maximum amount, maturity and renewal or extension of cash
advances or loans. State statutes often specify minimum and maximum maturity dates for cash advances and, in some cases, specify mandatory cooling-off periods between transactions.

State
statutes authorizing our products and services typically provide the state agencies that regulate banks and financial institutions with significant regulatory powers to administer
and enforce the law. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in
different ways, or issue new administrative rules. In addition, when the staff of state regulatory bodies change, it is possible that the interpretations of applicable laws and regulations may also
change.

The
Company's centers are individually licensed under these state laws. Certain states have minimum net worth or minimum asset level requirements for each company conducting business in
the state as a provider of cash advances or similar short-term consumer credit.

Although
states provide the primary regulatory framework under which the Company offers cash advance services, certain federal laws also impact the business. The Company's cash advance
services are subject to federal laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"),
Truth-in-Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act ("FDCPA"), the
Gramm-Leach-Bliley Act ("GLBA"), the Bank Secrecy Act, the Money Laundering Control Act of 1986, the Money Laundering Suppression Act of 1994, and the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the "PATRIOT Act") and the regulations promulgated under each. Among other things, these laws require disclosure of the principal
terms of each transaction to every customer, prohibit misleading advertising, protect against discriminatory lending practices, proscribe unfair credit practices and prohibit creditors from
discriminating against credit applicants on the basis of race, sex, age or marital status. The GLBA and its implementing regulations generally require the Company to protect the confidentiality of its
customers' nonpublic personal information and to disclose to the Company's customers its privacy policy and practices.

The
Company's marketing efforts and the representations it makes about advance services also are subject to federal and state unfair and deceptive practices statutes. The Federal Trade
Commission ("FTC") enforces the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce the analogous state statutes. These statutes generally prohibit unfair or
deceptive conduct. The FTC has not initiated any formal actions against the Company.

Additionally,
various anti-cash advance legislation has been proposed or introduced in the U.S. Congress. Congressional members continue to receive pressure from consumer
advocates and other

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

2. Regulatory Requirements (Continued)

industry
opposition groups to adopt such legislation. In 2002 and 2009, bills were introduced in Congress that would have placed a federal cap of 36% on the effective annual percentage rate ("APR") on
all consumer loan transactions. Another bill would have placed a 15-cents-per-dollar borrowed ($.15/$1.00) cap on fees for cash advances, banned rollovers (payment
of a fee to extend the term of a cash advance or other short-term financing), and required us to offer an extended payment plan that severely restricts our cash advance product. The
Dodd-Frank Act, which was enacted in July 2010, authorizes the newly created Bureau of Consumer Financial Protection to regulate a variety of consumer finance transactions.

The
Company's subsidiaries in the United Kingdom must maintain licenses from the Office of Fair Trading, which is responsible for regulating consumer credit and competition, for policy
and for consumer protection. The United Kingdom also has rules regarding the presentation, form and content of loan agreements, including statutory warnings and the layout of financial information. In
Canada, the Company's subsidiaries will need to operate in compliance with pending provincial legislation.

Violations
of the statutes and regulations described above may result in actions for damages, claims for refund of payments made, certain fines and penalties, injunctions against certain
practices, and the potential forfeiture of rights to repayment of loans.

3. Advances and Fees Receivable, Net

Advances and fees receivable, net, consisted of the following (in thousands):

2009

2010Advances receivable

$
200,110

$
201,352Fees and interest receivable


34,497


33,458Returned items receivable


36,255


34,599Other


6,112


3,768Allowance for doubtful accounts


(53,031
)

(48,382
)Unearned revenues


(19,709
)

(19,588
)Advances and fees receivable, net

$
204,234

$
205,207


4. Allowance for Doubtful Accounts and Accrual for Third-Party Lender Losses

The Company defines its portfolio segment as short-term consumer loans.

Changes
in the allowance for doubtful accounts were as follows (in thousands):

2008

2009

2010Beginning balance

$
61,306

$
59,441

$
53,031Provision for doubtful accounts


136,484


124,007


103,336Charge-offs


(162,932
)

(153,881
)

(126,957
)Recoveries


24,583


23,464


18,972Ending balance

$
59,441

$
53,031

$
48,382


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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

4. Allowance for Doubtful Accounts and Accrual for Third-Party Lender Losses (Continued)

Changes in the accrual for third-party lender losses were as follows (in thousands):

2008

2009

2010Beginning balance

$
4,587

$
3,960

$
4,528Provision for doubtful accounts


(627
)

568


892Ending balance

$
3,960

$
4,528

$
5,420


The
total changes in the allowance for doubtful accounts, and the accrual for third-party lender losses were as follows (in thousands):

2008

2009

2010Beginning balance

$
65,893

$
63,401

$
57,559Provision for doubtful accounts


135,857


124,575


104,228Charge-offs


(162,932
)

(153,881
)

(126,957
)Recoveries


24,583


23,464


18,972Ending balance

$
63,401

$
57,559

$
53,802


For
the year ended December 31, 2010, total loans collectively evaluated for impairment were $253.6 million.

The
Company considers returned items receivable as its primary credit quality indicator. The Company does not perform credit checks through consumer reporting agencies. In the future,
the Company may consider criteria in evaluating loans. If a third-party lender provides the advance, such as in Texas and online, the applicable third-party lender decides whether to approve the cash
advance and establishes all of the underwriting criteria and terms, conditions, and features of the customer agreements.

Gross
receivables relating to credit quality indicator (in thousands):

2009

2010Advances, fees and interest receivable

$
214,898

$
215,222Returned items receivable


36,255


34,599Other


6,112


3,768


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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

5. Other Current Assets

Other current assets consisted of the following (in thousands):

2009

2010Prepaid rent

$
6,287

$
5,762Prepaid income taxes


3,637


4,362Prepaid insurance


2,874


2,762Insurance receivable





2,426Prepaid taxes and licenses


1,558


1,524Prepaid workers compensation loss fund


346


346Other


2,681


2,687Total

$
17,383

$
19,869


6. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

2009

2010Land and land improvements

$
1,479

$
1,479Leasehold improvements


44,018


45,464Office furniture and equipment


78,010


74,315Software


11,858


11,987Building


5,293


5,293Aircraft


2,790


2,790Construction in progress


585


623Property and equipment


144,033


141,951Less accumulated depreciation


(112,194
)

(116,897
)Property and equipment, net

$
31,839

$
25,054


7. Goodwill and Other Intangible Assets

Goodwill represents the excess cost over the fair value of assets acquired. During the year ended December 31, 2009 the Company made no acquisitions. During the year ended
December 31, 2008, the Company completed two acquisitions in the United Kingdom consisting of a total of two centers for an aggregate purchase price, including transaction-related costs, of
approximately $0.8 million in cash and an increase in goodwill of approximately $0.7 million. During the year ended December 31, 2007, the Company completed four acquisitions in
the United Kingdom consisting of a total of 12 centers and 85 limited licensees for an aggregate purchase price, including transaction-related costs, of approximately $5.5 million in
cash and an increase in goodwill of approximately $4.7 million.

The
Company tests its goodwill for impairment annually as of September 30, or if there is a significant change in the business environment. Estimated cash flows and related
goodwill are grouped at the reporting unit level. A reporting unit is an operating segment, or under certain circumstances, a component of an operating segment that constitutes a business. When
estimated future cash flows are

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

7. Goodwill and Other Intangible Assets (Continued)

less
than the carrying value of the net assets and related goodwill, an impairment test is performed to measure and recognize the amount of the impairment loss, if any. Impairment losses, which are
limited to the carrying value of goodwill, represent the excess of the carrying amount of a reporting unit's goodwill over the implied fair value of that goodwill. In determining the estimated future
cash flows, the Company, considers current and projected future levels of income, as well as business trends, prospects, market and economic conditions. Impairment tests involve the use of judgments
and estimates related to the fair market value of the business operations with which goodwill is associated, taking into consideration both historical operating performance and anticipated financial
position and future earnings. The results of the 2008, 2009, and 2010 tests indicated there was no impairment.

As
of December 31, 2010, the United Kingdom operations have cumulatively and for the last twelve months generated negative cash flow and have not reached break-even.
The Company's expansion efforts in the United Kingdom began during the third quarter of 2007. The goodwill impairment model projects future positive cash flows sufficient to support the goodwill and
long-lived asset base. If the United Kingdom operations continue to generate negative cash flow and do not break-even an impairment charge related to its goodwill is possible.

During
the quarter ended December 31, 2010, the Company and its third-party lender in Texas acquired a payday loan receivables portfolio of approximately $11.3 million. At
closing, the Company and its third-party lender paid the seller and the seller's third-party lender approximately $5.3 million and $1.9 million, respectively for approximately
$9.4 million and $1.9 million of the total portfolio, respectively. In addition, the Company agreed to a contingent payment to be satisfied during the first quarter of 2011. At
December 31, 2010, the Company recorded a liability related to the contingency of approximately $1.1 million.

The
purchase price was allocated to the estimated fair value of the tangible and intangible assets and liabilities, including receivables of approximately $4.6 million, a
guarantee to its third-party lender of approximately $0.6 million, and a customer list of approximately $2.4 million. The customer list is being amortized on a straight-line
basis over 30 months, starting in December 2010. For the quarter and year ended December 31, 2010, the Company recorded approximately $0.4 million in revenue related to the
servicing and collection of these receivables.

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

8. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

2009

2010Legal fines and settlements

$
6,666

$
11,570Employee compensation


9,191


9,048Workers' compensation


4,996


5,612Center closing costs


817


1,678Deferred revenue


1,709


1,531Straight-line rent accrual


2,142


1,388Accounting and tax fees


528


1,137Legal fees


547


564Property, sales and franchise taxes


519


294Construction in progress


72


179Advertising


770


119Severance


41


95Other


3,434


4,724Total

$
31,432

$
37,939


9. Revolving Credit Facility and Long-Term Debt

Revolving Credit Facility

In March 2008, the Company amended and restated its prior revolving credit facility with a syndicate of banks. This credit facility now
provides the Company with a
$270.0 million revolving line of credit, which amount includes the ability to issue up to $25.0 million in letters of credit. This revolving credit facility matures on March 24,
2013. The Company has the option to increase the revolving credit facility by an additional $95.0 million, subject to compliance with the credit agreement's covenants and conditions and upon
receipt of sufficient commitments from lenders in the lending syndicate.

The
credit facility is collateralized by substantially all of the Company's assets and contains various financial covenants that require, among other things, the maintenance of a minimum
net worth and certain leverage and fixed charge coverage ratios and also restricts the encumbrance of assets and the creation of indebtedness. A breach of a covenant or an event of default could
prohibit the Company from accessing otherwise available borrowings, or could cause all amounts outstanding under the revolving credit facility to become due and payable. The Company was in compliance
with all financial covenants at December 31, 2010.

In
general, the Company's borrowings under the revolving credit facility bear interest, at the Company's option, at a base rate plus an applicable margin or a LIBOR-based rate plus an
applicable margin. The base rate equals the greater of: (i) the prime rate set by Bank of America; and (ii) the sum of the federal funds rate plus 0.50%. The applicable margin is
determined each quarter by a pricing grid based on the Company's total leverage ratio of consolidated debt to consolidated EBITDA. The base rate applicable margin ranges from 1.50% to 2.25% based upon
the Company's total leverage ratio. The LIBOR-based applicable margin ranges from 2.50% to 3.25% based upon the Company's

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

9. Revolving Credit Facility and Long-Term Debt (Continued)

total
leverage ratio. As of December 31, 2010, the applicable margin for the prime-based rate was 1.75% and the applicable margin for the LIBOR-based rate was 2.75%.

As
of December 31, 2010, the Company had $111.9 million outstanding on the revolving portion of the credit facility and $8.5 million of letters of credit
outstanding. Borrowings under the revolving credit facility are subject to compliance with certain covenants and conditions.

In
connection with this amended and restated credit facility, the Company incurred approximately $1.6 million in loan origination costs during the year ended December 31,
2008 that were capitalized in other assets and are being amortized over the remaining term of the credit facility.

The
weighted average interest rate was 3.13% and 3.36% at December 31, 2009 and 2010, respectively.

Total
commitment fees paid were $0.4 million, $0.3 million, and $0.5 million for the years ended December 31, 2008, 2009, and 2010, respectively.

The
carrying value of the credit facility approximated its fair value at December 31, 2009 and 2010.

Long-Term Debt

Long-term debt consisted of the following (in thousands):

2009

2010Mortgage payable

$
4,590

$
4,113Note payable


628


254Total long-term debt


5,218


4,367Less current portion


(851
)

(767
)Long-term debt

$
4,367

$
3,600


The
Company owns its headquarters building and related land subject to a mortgage. The mortgage is payable to an insurance company and is secured by the Company's corporate headquarters
building and related land. The mortgage is payable in monthly installments of approximately $66,400, including principal and interest, and bears interest at a fixed rate of 7.30% over its
15 year term. The mortgage matures on June 10, 2017. The carrying amount of the corporate headquarters (land, land improvements, and building) was $4.6 million and
$4.4 million at December 31, 2009 and 2010, respectively.

The
fair value of the long-term debt is estimated using a discounted cash flow analysis and was approximately $5.9 million and $4.9 million at
December 31, 2009 and 2010, respectively.

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

9. Revolving Credit Facility and Long-Term Debt (Continued)

Interest
expense consisted of the following (in thousands):

2008

2009

2010Interest expense:Mortgage payable

$
382

$
351

$
317Credit facility


10,076


5,190


3,792Amortization of deferred financing costs


704


647


631Other


26


53


118Total interest expense

$
11,188

$
6,241

$
4,858


Revolving
credit facility and long-term debt maturities for the next five years and thereafter are (in thousands):

2011

$
7672012


5522013


112,5242014


6392015


687Thereafter


1,128Total

$
116,297


10. Income Taxes

Income tax expense consisted of the following (in thousands):

2008

2009

2010CurrentFederal

$
27,606

$
36,536

$
23,307State


3,416


1,968


6,41231,022


38,504


29,719Deferred


2,518


(5,194
)

329Total

$
33,540

$
33,310

$
30,048


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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

10. Income Taxes (Continued)

A
reconciliation of the statutory federal income tax rate and the Company's effective income tax rate follows:

2008

2009

2010Statutory income tax rate


35.0
%

35.0
%

35.0
%State income taxes, net


4.6


2.2


6.4Nondeductible Lobbying Expense


5.1


1.8


3.4Other


1.9


(0.9
)

0.9Effective income tax rate


46.6
%

38.1
%

45.7
%


The
tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are (in thousands):

2009

2010Deferred tax assetsAccrued expenses

$
12,187

$
15,372Bad debts


8,094


6,498Net operating loss carryforwards


3,641


5,022State credit carryforwards


1,663


1,356Other


620


881Valuation allowance


(3,436
)

(4,689
)Total deferred tax assets


22,769


24,440Deferred tax liabilitiesGoodwill


(22,166
)

(25,400
)Depreciation


(2,655
)

(1,490
)Prepaid expenses


(1,494
)

(1,416
)Book versus tax basis difference for aircraft


(658
)

(667
)Total deferred tax liabilities


(26,973
)

(28,973
)Net deferred tax liability

$
(4,204
)
$
(4,533
)


As
of December 31, 2009 and 2010, the Company had net operating loss carryforwards for state income tax purposes totaling approximately $0.9 million and
$1.2 million, respectively, which will begin to expire in 2014. A valuation allowance of $0.8 million has been recorded at December 31, 2010 because management believes it is more
likely than not that the entire deferred tax asset related to state net operating loss carryforwards will not be realized. As of December 31, 2009 and 2010, the Company had credit carryforwards
for state income tax purposes totaling approximately $1.7 million and $1.4 million, respectively, which will begin to expire in 2011. Additionally, as of December 31, 2009 and
2010, the Company had foreign net operating losses in the United Kingdom and Canada totaling approximately $2.7 million and $3.8 million, respectively. A full valuation allowance has
been recorded at December 31, 2009 and 2010 because management believes it is more likely than not that the entire deferred tax asset related to the foreign net operating loss carryforwards
will not be realized.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

10. Income Taxes (Continued)

The
Company accounts for income taxes using the asset and liability method described in FASB ASC 740-10 "Income Taxes," the objective of which is to establish deferred tax
assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company's assets and liabilities at enacted tax rates expected to be in effect when such
amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The Company adopted FASB ASC 740-10 "Income Taxes" (Prior authoritative literature: FASB interpretation No. 48 "Accounting for Uncertainty in
Income Taxes," an interpretation of FASB Statement 109) on January 1, 2007. As a result of the implementation of FASB ASC 740-10, the Company recognized no
adjustments to the January 1, 2007 balance of retained earnings. At the adoption date, the Company did not have any unrecognized tax benefits and did not have any interest or penalties accrued.
As of December 31, 2009 and December 31, 2010, the Company had $0.7 million and $0.9 million of total gross unrecognized tax benefits including interest, respectively. Of
this total, approximately $0.7 million and $0.9 million, respectively, represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect
the annual effective tax rate.

A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Unrecognized tax benefits balance at January 1, 2010

$
605Gross increases for tax positions of prior years


147Unrecognized tax benefits balance at December 31, 2010

$
752


The
Company's continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2010, the Company had
approximately $142,000 accrued for gross interest. The Company has determined that it is possible that the total amount of unrecognized tax benefits related to various state examinations will
significantly increase or decrease within twelve months of the reporting date. However, at this time, a reasonable estimate of the range of possible change cannot be made until further correspondence
has been conducted with the state taxing authorities.

The
Company is subject to U.S. income taxes, as well as various taxes in other foreign, state, and local jurisdictions. With few exceptions, the Company is no longer subject to U.S.
federal, state and local, or non-U.S. income tax examinations by tax authorities for years before the tax year ended September 30, 2007, although carryforward attributes that were
generated prior to 2007 may still be adjusted upon examination by the taxing authorities if they either have been used or will be used in a future period. The income tax returns for the years 2005
through 2008 are under examination by a state tax authority which has completed its examinations and issued a proposed assessment for tax years 2005 through 2008. In consideration of the proposed
assessment, the total gross unrecognized tax benefit was increased by $0.2 million in 2010. At this time, it is too early to predict the final outcome on this tax issue and any future
recoverability of this charge. Until the tax issue is resolved, the Company expects to accrue approximately $52,000 per year for interest.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

11. Stock-Based Compensation Plans

In 2004, the Company adopted ASC 718 "Stock Compensation". Accordingly, the Company measures the cost of its stock-based employee compensation at fair value on the grant date and
recognizes such cost in the financial statements on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.

The
Company's 2004 Omnibus Stock Plan provides for the granting of restricted stock, stock options, and other stock awards to certain directors, officers, and other key employees of the
Company. Additionally, during 2005, the Company granted stock options and shares of restricted stock to its President and Chief Executive Officer under a Nonqualified Stock Option Agreement and a
Restricted Stock Agreement, respectively. Both of these agreements are separate from the Company's 2004 Omnibus Stock Plan.

Restricted
stock grants under the Company's stock-based compensation plans generally vest in equal annual installments over three, five, or eight years from the date of grant. Stock
option grants under the Company's stock-based compensation plans are generally exercisable in equal annual installments over three, five, or eight years from the date of grant and generally expire ten
years after the date of grant.

The
grant date fair value of all shares of restricted stock was based on the market value of the Company's common stock on the dates of grant. These amounts are being expensed ratably
over each award's respective vesting period.

All
stock options were granted with an exercise price equal to the market value of the Company's common stock on the dates of grant. The Company estimated the fair value of stock options
on the date of grant using the Black-Scholes option pricing model using the following assumptions:



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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

11. Stock-Based Compensation Plans (Continued)



To
estimate each stock option's weighted-average fair value on the grant dates, the following weighted-average assumptions were used in the Black-Scholes option pricing model for all
stock options granted during the years ended December 31, 2008 and 2009:

2008

2009Expected term (years)


5.42


2.00Expected volatility


48
%

66
%Expected dividends (yield)


4.1
%

21.9
%Risk-free rate


2.93
%

1.03
%


The
weighted-average grant-date fair values of options granted during the years ended December 31, 2008 and 2009 were $2.70 per option and $0.12 per option,
respectively, and are being expensed ratably over each award's respective vesting period. No stock options were issued in 2010.

The
following table provides certain information with respect to stock options outstanding and exercisable at December 31, 2010 under the Company's stock-based compensation plans:

Outstanding

ExercisableNumber of stock options


1,948,836


1,202,500Range of exercise prices


$1.14 - $14.70


$1.14 - $14.70Weighted-average exercise price

$
9.63

$
11.53Aggregate intrinsic value (in thousands)

$


$
Weighted-average remaining contractual term (years)


5.47


5.54


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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

11. Stock-Based Compensation Plans (Continued)

A
summary of the Company's outstanding and available shares, activity, and the weighted average stock option exercise prices under its stock based compensation plans follows:

OutstandingRestricted
Stock

Stock
Options

Available
For Grant

Weighted Average
Stock Option
Exercise PriceOutstanding at December 31, 2007


507,988


1,477,500


3,214,512

$
12.08Granted


42,000


152,500


(194,500
)

8.52Canceled





(47,500
)

47,500


9.88Outstanding at December 31, 2008


549,988


1,582,500


3,067,512


11.81Granted


570,476


539,500


(1,109,976
)

1.14Canceled


(73,791
)

(47,500
)

121,291


5.46Outstanding at December 31, 2009


1,046,673


2,074,500


2,078,827


9.18Exercised





(45,371
)




Granted


594,202





(594,202
)

Canceled


(106,594
)

(80,293
)

186,887


2.77Outstanding at December 31, 2010


1,534,281


1,948,836


1,671,512

$
9.63


Under
these plans, the Company has authorized for issuance, pursuant to grants, a total of 5,200,000 shares of common stock.

A
summary of the Company's restricted stock activity and the weighted average grant date fair values follows:

Shares

Weighted Average
Fair ValueNonvested at December 31, 2007


266,667

$
12.10Granted


42,000


8.65Vested


(67,304
)

12.28Forfeited





Nonvested at December 31, 2008


241,363


10.30Granted


570,476


1.18Vested


(59,095
)

11.74Forfeited


(30,001
)

4.95Nonvested at December 31, 2009


722,743


3.10Granted


594,202


5.29Vested


(171,200
)

3.20Forfeited


(106,594
)

3.65Nonvested at December 31, 2010


1,039,151

$
4.62


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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

11. Stock-Based Compensation Plans (Continued)

The total grant date fair value of restricted shares vested during the years ended December 31, 2008, 2009, and 2010 was approximately $0.8 million, $0.7 million,
and $0.5 million, respectively, and the total market value of these shares on the dates vested was approximately $0.2 million, $0.2 million, and $0.9 million, respectively.

A
summary of the stock-based compensation cost included in general and administrative expenses in the accompanying consolidated statements of income for the years ended
December 31, 2008, 2009, and 2010 follows (in thousands):

2008

2009

2010Restricted stock

$
862

$
759

$
1,633Stock options


1,309


1,209


975Total stock-based compensation expense

$
2,171

$
1,968

$
2,608


As
of December 31, 2010, the total compensation cost not yet recognized related to nonvested stock awards under the Company's plans is approximately $5.1 million. The
weighted average period over which this expense is expected to be recognized is approximately 2.4 years.

12. Commitments and Contingencies

The Company is involved in a number of active lawsuits, including lawsuits filed by private litigants and matters arising out of actions taken by state regulatory authorities. The
Company is also involved in various other legal proceedings with state and federal regulators. In addition, the Company is obligated to advance expenses to, and, in certain circumstances, indemnify
for damages incurred by, certain of its current or former officers and directors in responding to inquiries or defending against claims or proceedings that have arisen by reason of the fact that such
person is or was an officer or director of the Company. Under certain circumstances, the Company may also be obligated to defend and indemnify other parties against whom claims have been asserted.
Unless otherwise stated below, the Company is vigorously defending against these actions and will, when management believes appropriate in consideration of ongoing litigation expenses and other
factors, evaluate reasonable settlement opportunities. The amount of losses and/or the probability of an unfavorable outcome, if any, cannot be reasonably estimated for these legal proceedings unless
otherwise stated below. Accordingly, except as otherwise specified below, no accrual has been recorded for any of these matters as of December 31, 2010.



On July 16, 2008, Kerri Stone filed a putative class action complaint in the Superior Court of California in San Diego against
the Company and its California subsidiary. Defendants removed the case to the United States District Court for the Southern District of California. The amended complaint alleges violations of the
California Deferred Deposit Transaction Law and the California Unfair Competition Law and seeks an order requiring Defendants to disgorge and/or make restitution of all revenue and loan principal, pay
three times the amount of damages the class members actually incurred, reasonable attorneys' fees and costs of suit, and punitive damages. The complaint also seeks certain injunctive relief. The
Company anticipates that the case will proceed to trial during 2011.

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)



The Company and the Company's subsidiary, McKenzie Check Advance of Florida, LLC ("McKenzie"), are defendants in a putative
class action lawsuit commenced by former customers, Wendy Betts and Donna Reuter, on January 11, 2001, and a third named class representative, Tiffany Kelly, in the Circuit Court of Palm Beach
County, Florida. This putative class action alleges that McKenzie, by and through the actions of certain officers, directors, and employees, engaged in unfair and deceptive trade practices and
violated Florida's criminal usury statute, the Florida Consumer Finance Act, and the Florida Racketeer Influenced and Corrupt Organizations Act. The suit seeks unspecified damages, and the named
defendants could be required to refund fees and/or interest collected, refund the principal amount of cash advances, pay multiple damages, and pay other monetary penalties. Ms. Reuter's claim
has been held to be subject to binding arbitration, which the Company expects to proceed in parallel with this case. However, the trial court has denied the defendants' motion to compel arbitration of
Ms. Kelly's claims. The Florida Appellate Court affirmed the trial court's decision, but certified a "Question of Great Public Importance" to the Florida Supreme Court regarding their decision
and the Company intends to appeal this decision to the Florida Supreme Court.



A second Florida lawsuit was filed on August 24, 2004, in the Circuit Court of Palm Beach County by former customers Gerald
Betts and Ms. Reuter against the Company, the Company's Florida subsidiary, Advance America, Cash Advance Centers of Florida, Inc., and certain officers and directors. The allegations,
relief sought, and the Company's defenses in this lawsuit are nearly identical to those alleged in the firstBetts and Reuterlawsuit described above.
The case is currently stayed, pending a decision from the Florida Supreme Court inPendergast v. Sprint Nextel Corp., which is a separate case, to which
the Company is not a party, involving arbitration issues.



On September 27, 2006, the Pennsylvania Department of Banking filed a lawsuit in the Commonwealth Court of Pennsylvania alleging
that the Company's Delaware subsidiary, NCAS of Delaware, LLC, was providing lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania's financial licensing law
and charging interest and fees in excess of the amounts permitted by Pennsylvania's usury law. In July 2007, the court determined that certain aspects of the Company's Choice Line of Credit required
the Company to be licensed under Pennsylvania's Consumer Discount Company Act ("CDCA") and enjoined the Company from continuing its lending activities in Pennsylvania for so long as the CDCA
violations continued and from collecting monthly participation fees. The Company appealed to the Pennsylvania Supreme Court and, in May 2008, the Pennsylvania Supreme Court upheld the lower court's
ruling. The Pennsylvania Department of Banking subsequently amended its complaint to add the Pennsylvania Attorney General as a plaintiff, to name the Company as a defendant, and to seek damages,
fines, and penalties under Pennsylvania's CDCA, usury laws, and consumer protection laws. In April 2010, the Pennsylvania Commonwealth Court dismissed the alleged CDCA and usury allegations and
partially dismissed the alleged consumer protection law violations. The remaining alleged consumer protection law claims will proceed before the trial court. These

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)

remaining
claims could, under certain circumstances, total approximately $45 million in damages, plus civil penalties of $1,000 for each violation of the Pennsylvania Consumer Protection Law
and an additional $2,000 for violations against customers over the age of 60, and attorneys' fees and costs. The parties are engaged in discovery and the Company will continue to defend vigorously
against these claims.



On August 1, 2007, Sharlene Johnson, Helena Love, and Bonny Bleacher filed a putative class action lawsuit in the United States
District Court, Eastern District of Pennsylvania against the Company and two of its subsidiaries alleging that they provided lines of credit to borrowers in Pennsylvania without a license required
under Pennsylvania law and with interest and fees in excess of the amounts permitted by Pennsylvania law. The complaint seeks, among other things, a declaratory judgment that the monthly participation
fee charged to customers with a line of credit is illegal, an injunction prohibiting the collection of the monthly participation fee, and payment of damages equal to three times the monthly
participation fees paid by customers since June 2006, which could total approximately $135 million in damages, plus attorneys' fees and costs. In January 2008, the trial court entered an order
compelling the purported class representatives to arbitrate their claims on an individual basis, unless determined otherwise by the arbiter. All parties appealed that order. On February 28,
2011, in a non-precedential opinion, the U.S. Third Circuit Court of
Appeals vacated the trial court's order and remanded the case to the trial court for further proceedings on the validity of the class action waivers. The parties to the litigation will await further
instruction from the trial court as to the reinstitution of proceedings before that court.



On January 18, 2007, Raymond King and Sandra Coates, who were customers of BankWest Inc., the lending bank for which the
Company previously marketed, processed, and serviced cash advances in Pennsylvania, filed a putative class action lawsuit in the United States District Court, Eastern District of Pennsylvania alleging
various causes of action, including that the Company's Pennsylvania subsidiary made illegal cash advance loans in Pennsylvania in violation of Pennsylvania's usury law, the Pennsylvania Consumer
Discount Company Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Pennsylvania Fair Credit Extension Uniformity Act, and the Pennsylvania Credit Services Act. The
complaint alleges that BankWest Inc. was not the "true lender" and that the Company's Pennsylvania subsidiary was the "lender in fact." The complaint seeks compensatory damages, attorneys'
fees, punitive damages, and the trebling of any compensatory damages. In January 2008, the trial court entered an order compelling the purported class representatives to arbitrate their claims on an
individual basis, unless determined otherwise by the arbiter. In April 2010, the United States Supreme Court issued its opinion inStolt-Nielsen. On
February 28, 2011, in a non-precedential opinion, the U.S. Third Circuit Court of Appeals vacated the trial court's order and remanded the case to the trial court for further
proceedings on the validity of the class action waivers. The parties to the litigation will await further instruction from the trial court as to the reinstitution of proceedings before that court.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)



On April 21, 2009, Yulon Clerk filed a putative class action lawsuit in the Court of Common Pleas of Philadelphia County,
Pennsylvania, against the Company's subsidiaries, Advance America, Cash Advance Centers of Pennsylvania, Inc., and NCAS of Delaware, LLC, as well as BankWest, Inc., whose defense
the Company is handling pursuant to an indemnification agreement, and other unrelated lenders and banks. The complaint alleges that the practices of the Company's subsidiaries and
BankWest, Inc. violated the Pennsylvania Consumer Discount Protection Act, the Pennsylvania Loan Interest Protection Law, and Pennsylvania Consumer Protection Laws. The
complaint seeks certification of a class of individuals for the alleged violations, a declaration that all loans made to class members are unenforceable, injunctive relief, and monetary damages. The
complaint repeated allegations asserted in other putative class actions filed in Pennsylvania that have been stayed in favor of mandatory individual arbitrations. The Company removed the case to the
United States District Court for the Eastern District of Pennsylvania and filed a motion to compel arbitration and stay the underlying action's proceedings. In August 2009, the District Court issued
an order severing the claims against the individual defendants. On September 21, 2009, plaintiffs filed three separate complaints seeking the same relief as the April 21, 2009 complaint
against Advance America, Cash Advance Centers of Pennsylvania, Inc., NCAS of Delaware, LLC, and BankWest, Inc. The case against the Company's Pennsylvania subsidiaries was
subsequently dismissed by consent of the parties on November 11, 2009. Motions to stay and to compel individual arbitration have been filed in the other cases. The cases against NCAS of
Delaware and Bankwest, Inc. are now proceeding before the trial court.



The Company is also involved in other litigation and administrative proceedings that are incidental to its business, including, without
limitation, regulatory enforcement matters, individual consumer claims, contractual disputes, employee claims for workers' compensation, wrongful termination, harassment, discrimination, payment of
wages due, and customer claims relating to collection practices and violations of state and/or federal consumer protection laws.

SEC Investigation

On July 22, 2009, the Company was informed that Kenneth E. Compton, its former President and Chief Executive Officer, received a
"Wells Notice" from the staff of the United States Securities and Exchange Commission (the "SEC"). The Company understands that the staff intends to recommend that the SEC file a civil
injunctive action against Mr. Compton alleging that he violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder in connection with alleged insider trading involving less than a material amount of losses avoided by third parties selling Company stock during 2007. The
Company did not receive a Wells Notice and does not believe it is a subject of this investigation; however, the Company is obligated to advance expenses incurred by its current and former officers and
directors in connection with this matter.

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Table of Contents

Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)

Changes in Legislation



On November 24, 2008, the State of Ohio capped interest rates on cash advance loans and limited the number of cash advances a
customer may take in any one year. As a result of this legislation, the Company began offering small loans pursuant to the Ohio Small Loan Act and check-cashing services. The small loan product and
check-cashing services generate less revenue than the Company's former cash advance product and, as a result, the Company has closed some of its centers in Ohio. In the third quarter of 2009, the
Company stopped offering small loans and began offering cash advances pursuant to the Ohio Second Mortgage Act.

In
the first quarter of 2010, the Ohio Division of Financial Institutions issued a rule restricting certain activities by licensed check cashers which would have a negative impact on the
Company's operations in Ohio. This rule was scheduled to become effective May 1, 2010, but has been temporarily stayed by the Court of Common Pleas of Franklin County, Ohio pending the outcome
of certain litigation involving the state and unrelated third parties.



A Virginia law that went into effect in January 2009 substantially changed the terms for cash advance services in Virginia and severely
restricted viable operations for short-term lenders. The Company continues to offer cash advances in Virginia in conformance with the new regulations, and between November 2008 and
February 2010 also offered an open-ended line of credit product. However, a subsequent Virginia Corporation Commission ruling limited the Company' ability to offer the
open-ended lines of credit product effective March 1, 2010. As a result, the Company ceased offering new open-ended lines of credit in February 2010 and stopped
providing new draws on existing lines of credit in September 2010.

During
the year ended December 31, 2010, the Company closed 57 centers in Virginia. The cost to close these centers was approximately $1.1 million. For the year ended
December 31, 2010, these amounts are
included in the income statement as an increase in other center expenses of $0.9 million and center salaries and related payroll costs of $0.2 million.

The
elimination of the open-ended line of credit product may cause the Company to close or consolidate additional centers in Virginia. If the Company closes all of its
centers in Virginia, the estimated closing costs, including severance, center tear-down costs, lease termination costs, and the write-down of fixed assets would range from
$2.1 million to $5.8 million, and the collectability of advances and fees receivable in Virginia would most likely be impaired. As of December 31, 2010, the net advances and fees
receivable balance in Virginia was approximately $10.4 million. At this time the Company is not able to determine the amount of goodwill impairment, if any, that could result from the cessation
of operations in Virginia.



A law became effective on January 1, 2010, in the State of Washington that limits the number of cash advances a customer may
take in any one year, limits the advance amount that can be taken out

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)

at
any one time, and implements a statewide database to monitor the number of cash advances. As a result, the Company's revenue and profitability have decreased. The Company may close or consolidate
some or all of its centers in Washington if management determines that it is no longer economically viable to operate all of its Washington centers.

During
the year ended December 31, 2010, the Company closed 45 centers in Washington. The cost to close these centers was approximately $1.2 million. For the year ended
December 31, 2010, these amounts are included in the income statement as an increase in other center expenses of $0.9 million, a loss on disposal of property and equipment of
$0.1 million, and center salaries and related payroll costs of $0.2 million.

If
the Company closes all of its remaining centers in Washington, the estimated closing costs, including severance, center tear-down costs, lease termination costs, and the
write-down of fixed assets would range from $0.9 million to $3.7 million, and the collectability of advances and fees receivable in Washington would most likely be impaired.
As of December 31, 2010, the net advances and fees receivable balance in Washington was approximately $4.3 million. At this time the Company is not able to determine the amount of
goodwill impairment, if any, that could result from the cessation of operations in Washington.



An existing law permitting cash advances in Arizona expired on June 30, 2010, and the Company ceased operations in its 48
remaining centers in Arizona. Closing costs of approximately $1.2 million are included in the income statement as an increase in other center expenses of $0.7 million, center salaries
and related payroll costs of $0.3 million, and a loss on impairment of assets of approximately $0.2 million. The cessation of the Company's Arizona operations did not result in any
impairment of goodwill.



A new law in South Carolina became effective January 1, 2010 that, among other things, prohibits consumers from having more than
one cash advance outstanding at any time and implements a statewide database to monitor the number and dollar amount of cash advances made to customers within that state. Although this law has had a
negative effect on revenue and profitability in South Carolina, the Company currently believes operations will remain economically viable in this state.



A new law in Kentucky became effective on April 30, 2010 that, among other things, prohibits any consumer from having more than
two cash advances outstanding at any time, establishes a maximum aggregate advance amount of $500, and implements a statewide database to monitor the number and dollar amount of cash advances made to
customers within that state. Although this law has had a negative effect on revenue and profitability in Kentucky, the Company currently believes operations will remain economically viable in this
state.

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)



A new law became effective in Rhode Island on July 1, 2010 that reduced the maximum allowable fees to be charged on a cash
advance from $15 per $100 to $10 per $100. Although the Company expects this law to have a negative effect on its revenue and profitability in Rhode Island, management currently believes operations
will remain economically viable in this state.



A new law became effective in Colorado on August 11, 2010 that expands the minimum term of cash advances to six months, allows
repayment in multiple installments, and creates a new regime of permitted finance, interest, and other charges. This law has negatively impacted the Company's revenue and profitability in Colorado. If
management determines that it is no longer economically viable to operate these centers, the Company may close or consolidate some or all of its centers.

During
the year ended December 31, 2010, the Company closed 31 centers in Colorado. For the twelve months ended December 31, 2010, closing costs of approximately
$0.9 million are included in the income statement as an increase in other center expenses of $0.6 million, center salaries and related payroll costs of $0.1 million, and a loss on
impairment of assets of $0.2 million.

If
the Company closed all of its remaining centers in Colorado, its estimated closing costs, including severance, center tear-down costs, lease termination costs, and the
write-down of fixed assets would range from $0.7 million to $2.1 million, and the collectability of advances and fees receivable in Colorado would most likely be impaired. As
of December 31, 2010, advances and fees receivable, net of allowance for doubtful accounts, in Colorado was approximately $4.8 million. At this time, the Company is not able to determine
the amount of goodwill impairment, if any, that could result from the cessation of our operations in Colorado.



Due to a recent law change in Montana that became effective January 1, 2011, the Company closed its two centers in this state.
The cost of closing these centers was approximately $38,000.



A new law became effective in Wisconsin on January 1, 2011, that limits the total dollar amount of cash advances a customer may
have outstanding, allows an extended payment plan on each cash advance, and implements a statewide database to monitor the number of cash advances. Although the Company expects this law to have a
negative effect on its revenue and profitability in Wisconsin, management currently believes operations will remain economically viable in this state.



A new law becomes effective in Illinois on March 21, 2011, that will change the terms of the installment loan product currently
offered in Illinois and negatively affect the profitability of this product. However, the new law creates a longer term product with multiple installments and applicable fees. The Company intends to
offer products in conformance with the new legislation. Although the

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

12. Commitments and Contingencies (Continued)

Company
expects this law to have a negative effect on its revenue and profitability in Illinois, management currently believes operations will remain economically viable in this state.



In July 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This new
federal legislation creates the Bureau of Consumer Financial Protection (the "BCFP"), which will have authority to regulate consumer finance companies. It is unknown what effect this legislation will
have on the Company until such time as the BCFP promulgates regulations.



The Company is self-insured for certain elements of its employee benefits, including workers' compensation, but limits its
liability through stop-loss insurance. Self-insurance liabilities are based on claims filed and estimates of claims incurred but not reported.

Substantially
all center locations and certain office equipment are leased from third-party lessors under operating leases. Total rent expense in 2008, 2009, and 2010 was
$67.2 million, $63.2 million, and $57.7 million, respectively. As of December 31, 2010, minimum future lease commitments under the operating leases having
non-cancelable lease terms in excess of one year are (in thousands):

Operating
Lease2011

$
53,7812012


36,6392013


18,4822014


3,5562015


955Thereafter


553Operating lease obligations

$
113,966


The
Company enters into agreements with vendors to purchase furniture, fixtures, and other items used to open new centers and for marketing agreements. These purchase commitments
typically extend for a period of two to three months after the opening of a new center, up to one year for marketing agreements, and three to four years for telephone and internet service agreements.
As of December 31, 2010, the Company's purchase obligations totaled approximately $9.8 million.

Under
the terms of the Company's agreement with its current third-party lender in Texas, the Company is contractually obligated to reimburse the lender for the full amount of the loans
and certain related fees that are not collected from the customerssee Note 17.

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

13. Legal Settlements



On February 27, 2007, Brenda McGinnis filed a putative class action in the Circuit Court of Clark County, Arkansas alleging
violations of the Arkansas usury law, the Arkansas Deceptive Trade Practices Act, and a 2001 class action settlement agreement entered into by the Company's prior subsidiary in Arkansas. The complaint
alleged that the Company's current subsidiary made usurious loans under the Arkansas Check Cashers Act and sought compensatory damages in an amount equal to twice the interest paid on the deferred
presentment transactions made from 2001 to present (which could total approximately $21.4 million for deferred presentment transactions made during that time or approximately
$87.0 million in damages for all transactions originated, processed, and serviced during that time) as well as a declaration that the contracts are void, enforcement of the 2001 class action
settlement agreement, attorneys' fees, and costs.

On
September 23, 2009, the Company and the class representatives entered into a settlement agreement in connection with the litigation. Pursuant to the terms of the settlement
agreement, which was approved by the court, the case has been dismissed and the Company has been released from any and all claims and liability in connection with deferred presentment transactions
entered into in Arkansas pursuant to the Arkansas Check Casher's Act. The settlement agreement did not include an admission of wrongdoing or liability.

The
Company took a charge against earnings during the year ended December 31, 2009 of approximately $5.7 million to cover the estimated costs of settlement. The Company
does not expect to incur any additional charges related to this case.



On March 10, 2008, Trishia Hooper and Josephine Vaughn filed a putative class action lawsuit in the United States District Court
for the Western District of Missouri against the Company's Missouri subsidiary, Advance America, Cash Advance Centers of Missouri, Inc. The action alleges that the arbitration clause and class
action waiver in the Company's subsidiary's customer loan agreements are unconscionable, that the Company's subsidiary's practices violate the Missouri statutes governing unfair and deceptive trade
practices, interest rates, loan renewals, debt reduction, and consideration of borrower's ability to repay. The lawsuit sought certification as a class action, unspecified monetary damages, and a
declaratory judgment that the arbitration clause and class action waiver was unconscionable and injunctive relief. On May 27, 2010, the Company and the class representatives entered into a
settlement agreement. The settlement agreement did not include an
admission of wrongdoing or liability. Pursuant to the terms of the settlement agreement, the case was dismissed, the Company and all other defendants will be released from any and all claims and
liability, the Company will establish a settlement pool of approximately $2.0 million for payments and/or credits to settle the claims of certain customers of the Company's Missouri subsidiary
and payment of all attorneys' fees, class action administration fees, and other fees and expenses related to the litigation, and the Company's subsidiary offered discounts on the repayment of certain
defaulted loans and on fees to certain class members for future loans. The Company took a charge against earnings in the second quarter of 2010 of approximately $2.0 million to cover the
estimated costs of settlement. The Company does not expect to incur any additional charges related to this case.

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Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

13. Legal Settlements (Continued)



On July 27, 2004, John Kucan, Welsie Torrence, and Terry Coates, each of whom was a customer of Republic Bank & Trust
Company ("Republic"), the lending bank for whom the Company previously marketed, processed, and serviced cash advances in North Carolina, filed a putative class action lawsuit in the General Court of
Justice for the Superior Court Division for New Hanover County, North Carolina against the Company and Mr. William M. Webster IV, Chairman of the Company's Board of Directors and the Company's
former Chief Executive Officer, alleging, among other things, that the relationship between the Company's North Carolina subsidiary and Republic was a "rent a charter" relationship and therefore
Republic was not the "true lender" of the cash advances it offered. The lawsuit also claimed that the cash advances were made, administered, and collected in violation of numerous North Carolina
consumer protection laws. The lawsuit sought an injunction barring the subsidiary from continuing to do business in North Carolina, the return of the principal amount of the cash advances made to the
plaintiff class since August 2001, along with three times the interest and/or fees associated with those advances, which could have, under certain circumstances, totaled approximately
$220 million, plus attorneys' fees and other unspecified costs.

On
September 17, 2010, the Company and the class representatives entered into a settlement agreement. The settlement agreement did not include an admission of wrongdoing or
liability and is subject to court approval and certain other conditions before it becomes final and the lawsuit is concluded. Pursuant to the terms of the settlement agreement, the case will be
dismissed, and the Company and all other defendants will be released from any and all claims and liability, the Company will establish a settlement pool of approximately $18.75 million for
payments and/or credits to settle the claims of certain customers of its North Carolina subsidiary and payment of all attorneys' fees, class action administration fees, and any and all other fees and
expenses related to the litigation. The Company took a charge against earnings in the third quarter of 2010 of approximately $16.3 million to cover the estimated net costs of settlement less
insurance proceeds. The Trial Court entered an order
granting final approval of this settlement on January 31, 2011. The Company does not expect to incur any additional charges related to this case.



On February 1, 2005, the Commissioner of Banks of North Carolina initiated a contested case against the Company's North Carolina
subsidiary for alleged violations of the North Carolina Consumer Finance Act. In December 2005, the Commissioner of Banks ordered that the Company's North Carolina subsidiary immediately cease and
desist operating. In accordance with the Commissioner of Banks' order, the Company's North Carolina subsidiary ceased all business operations on December 22, 2005. The Company appealed the
Commissioner's order to the Superior Court of North Carolina, which denied the appeal. The Company's appeal of this decision to the North Carolina Court of Appeals was stayed pending final resolution
ofKucan et al. v. Advance America, Cash Advance Centers of North Carolina, Inc. et al., on January 31, 2011. The Company will dismiss its
appeal if there are no appeals of the final order in theKucancase. The Company does not expect to incur any additional charges related to this case.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

13. Legal Settlements (Continued)



Eight separate putative class actions were filed in South Carolina against the Company's subsidiary, Advance America, Cash Advance
Centers of South Carolina, Inc., and several other unaffiliated defendants. John and Rebecca Morgan filed a complaint on August 27, 2007 in the Horry County Court of Common Pleas;
Margaret Horne filed a complaint on September 6, 2007 in the Spartanburg County Court of Common Pleas; Tawan Smalls filed a complaint on September 10, 2007 in the Charleston County Court
of Commons Pleas; Chadric and Lisa Wiley filed a complaint on September 27, 2007 in the Richland County Court of Common Pleas; Mildred Weaver filed a complaint on September 27, 2007 in
the Darlington County Court of Common Pleas; Lisa Johnson and Gilbert Herbert filed a complaint on October 2, 2007 in the Georgetown County Court of Common Pleas; Kimberly Kinney filed a
complaint on October 12, 2007 in the Marion County Court of Common Pleas; and Carl G. Ferrell filed a complaint on October 30, 2008 in the Richland County Court of Common Pleas
(collectively the "South Carolina Claimants"). The allegations and relief sought are similar in each case. Plaintiffs allege that the Company's South Carolina subsidiary violated the South Carolina
Deferred Presentment Services Act and the Consumer Protection Code by failing to perform a credit check and evaluate a customer's ability to repay the advance. Each complaint seeks an injunction to
prohibit the Company from continuing its operations, the return of fees and interest, unspecified actual
damages, punitive damages, and attorneys' fees and costs. Each of the lawsuits was joined to ongoing litigation in the South Carolina state court system pursuant to an order of the South Carolina
Supreme Court consolidating all cases brought against the industry. In December 2009, a group of industry defendants, including the Company, reached an agreement in principle, subject to reaching a
definitive agreement and obtaining court approval, for the settlement and release of all claims brought by the South Carolina Claimants. On June 2, 2010, the Company, several other unaffiliated
defendants, and the class representatives entered into a settlement agreement. The settlement agreement did not include an admission of wrongdoing or liability on the part of the Company or its South
Carolina subsidiary. Pursuant to the terms of the settlement agreement, the Company and its South Carolina subsidiary were released from any and all claims associated with this lawsuit. The Court
entered an order granting final approval of the settlement on September 20, 2010, and the order became final on October 21, 2010. This litigation has concluded and the Company does not
expect to incur any charges in connection with the settlement beyond the charge of $0.9 million the Company recorded for the fourth quarter of 2009. The Company does not expect to incur any
additional charges related to this case.

14. Related Party Transactions

In January 2009, the Company entered into a one-year consulting arrangement with Mr. Tony S. Colletti, a member of the Board of Directors, for his support of
government relations initiatives on the Company's behalf in Illinois and Washington, D.C. Included in general and administrative expenses, for the year ended December 31, 2009, are payments of
approximately $274,000 related to this consulting arrangement. In addition, in connection with his appointment to the Board of Directors in February 2009, Mr. Colletti was granted 15,000 shares
of restricted stock with a fair market value of $16,650 and a three-year vesting period. During the years ended December 31, 2009 and 2010, approximately $5,000 and $5,550
respectively, was included in general and administrative expense related to the amortization of this restricted stock grant.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

14. Related Party Transactions (Continued)

Effective
July 2010, Mr. Colletti entered into an agreement with the Community Financial Services Association of America ("CFSA"), an industry trade group composed of the Company
and more than 100 other companies engaged in the cash advance services industry, to provide consulting and advisory services on regulatory initiatives. Under the consulting agreement, the CFSA paid
Mr. Colletti approximately $235,000 between July 31, 2010 and December 31, 2010. As of December 31, 2010, the Company has paid approximately $1.1 million of
membership dues and other funds to the CFSA, all of which are included in general and administrative expenses. In addition, Kenneth E. Compton, the Company's former President and Chief Executive
Officer, served as a member of the CFSA's Board of Directors.

On
July 13, 2009, the Company entered into a one-year Aircraft Dry Lease Agreement with Carabo Capital, LLC, an entity of which the Company's current Chairman
is a Member. Under the Aircraft Dry Lease, the Company may use Carabo's aircraft from time to time in exchange for one dollar, standard usage expenses, and the Company's fulfillment of its obligations
under the Aircraft Dry Lease. For the year ended December 31, 2009, the Company paid Carabo Capital, LLC approximately $20,000 in operating expenses in connection with the use of this
aircraft by the Company's Chairman for Company business.

In
addition, under a time-share arrangement, the Company's current Chairman and former Chairman have used the Company's aircraft for private purposes in exchange for the
Company's use of an identical aircraft owned by the Company's former Chairman and formerly owned, in part, by the Company's current Chairman. Included in accounts receivable at December 31,
2010 is approximately $4,000 net receivable related to this arrangement. Pursuant to this time-share arrangement, the Company entered into a Time Sharing Agreement on August 5,
2010, with Johnson Management, LLC, a limited liability company that is owned by the Company's former Chairman, who is also the beneficial owner of more than five percent of the Company's
common stock. This agreement provides the Company with the right to lease an aircraft form Johnson Management, LLC for a period of one year, subject to automatic renewal on a
month-to-month basis, at a lease rate equal to the cost of operating the aircraft, plus an additional charge equal to 100% of the cost of fuel, oil, and lubricants used on the
flights. The Company intends to use the aircraft for business purposes when the Company's aircraft is unavailable.

The
Company has entered into operating leases for aircraft hangar space and office space with companies controlled by or affiliated with the Company's former Chairman and members of his
family. Additionally, companies controlled by the Company's current Chairman and/or former Chairman or in which they had ownership interests, provided pilots, fuel and other operating services for the
Company's aircraft.

The
Company's former Chairman's brother is a partner of a law firm that provided the Company with certain routine legal services during 2008, 2009, and 2010.

The
Company pays rent of $350 per month for office space used by the Company's current Chairman at an office building owned by the Company's former Chairman.

The
Company incurred costs and expenses of approximately $640,000 and $421,000 for the year ended December 31, 2009 and 2010, respectively, for the advancement of the expenses
incurred by certain of the Company's officers and directors in connection with their responses to requests for

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

14. Related Party Transactions (Continued)

information
and subpoenas as part of an investigation by the United States Securities and Exchange Commission ("SEC") into alleged insider trading by third parties in the Company's securities. These
costs were incurred by the Company pursuant to indemnification agreements between the Company and certain officers and directors, which agreements require the Company to advance expenses, and may
require the Company to indemnify those persons for damages, incurred by them in responding to the pending SEC investigation or defending against any related enforcement proceedings, including the
"Wells Notice" issued by the SEC to the Company's former Chief Executive Officer on July 22, 2009.

Expenses
related to all transactions with related parties consisted of the following (in thousands):

2008

2009

2010Aircraft

$
194

$
168

$
165Consulting





274


Center leases


5





Office and warehouse space leases


51


1


4Legal


32


720


466Total

$
282

$
1,163

$
635


15. Capital Stock

The Company's Amended and Restated Certificate of Incorporation authorizes 250 million shares of par value $.01 per share of common stock and 25 million shares of par value
$.01 per share preferred stock. Each share of common stock is entitled to one vote.

In
July 2008, the Company completed the repurchase of its common stock under its stock repurchase program that the Company's Board of Directors approved on May 4, 2005, and twice
extended, once on August 16, 2006, and again on February 13, 2008, for a total of $225.0 million in authorized repurchases. The following table provides certain information with
respect to the stock purchased under the Company's approved stock repurchase program and stock surrendered by employees to satisfy their tax obligations with respect to the vesting of shares of
restricted stock awarded pursuant to the Company's 2004 Omnibus Stock Plan (in thousands).

Year Ended
December 31,
2008

Year Ended
December 31,
2009

Year Ended
December 31,
2010Shares

Dollars

Shares

Dollars

Shares

DollarsStock Repurchase Program


11,911

$
88,915




$





$
Omnibus Stock Plan


11


47


17


76


65


334Total


11,922

$
88,962


17

$
76


65

$
334


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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

16. Quarterly Financial Information (unaudited)

Quarterly financial information for the years ended December 31, 2010 and 2009 is presented below ($ in thousands, except per share data):

2010Three months ended,March 31

June 30

Sept 30

Dec 31

Total YearTotal revenues

$
144,398

$
141,357

$
154,228

$
160,250

$
600,233Total center expenses


101,633


110,233


118,023


115,241


445,130Center gross profit


42,765


31,124


36,205


45,009


155,103Total corporate and other expenses


18,701


21,572


32,273


16,746


89,292Income before income taxes


24,064


9,552


3,932


28,263


65,811Income tax expense


10,577


4,430


2,528


12,513


30,048Net income

$
13,487

$
5,122

$
1,404

$
15,750

$
35,763Net income per common sharebasic

$
0.22

$
0.08

$
0.02

$
0.26

$
0.59diluted

$
0.22

$
0.08

$
0.02

$
0.26

$
0.58




2009Three months ended,March 31

June 30

Sept 30

Dec 31

Total YearTotal revenues

$
156,393

$
150,124

$
167,920

$
173,239

$
647,676Total center expenses


111,994


125,464


124,642


123,456


485,556Center gross profit


44,399


24,660


43,278


49,783


162,120Total corporate and other expenses


18,683


15,975


22,562


17,387


74,607Income before income taxes


25,716


8,685


20,716


32,396


87,513Income tax expense


10,573


2,043


8,135


12,559


33,310Net income

$
15,143

$
6,642

$
12,581

$
19,837

$
54,203Net income per common sharebasic

$
0.25

$
0.11

$
0.21

$
0.33

$
0.89diluted

$
0.25

$
0.11

$
0.20

$
0.32

$
0.88


17. Transactions with Variable Interest Entities

The Company conducts business in Texas through a wholly owned subsidiary registered as a Credit Services Organization ("CSO") under Texas law. In connection with operating as a CSO, the
Company entered into a credit services organization agreement with an unaffiliated third-party lender in 2005. The agreement governed the terms by which the Company referred customers in Texas to that
lender, on a non-exclusive basis, for a possible extension of credit, processed loan applications and committed to reimburse the lender for any loans or related fees that were not
collected from such customers. During the fourth quarter of 2007, the Company terminated its agreement with that lender (the "former lender") and entered into a new agreement with another unaffiliated
third-party lender (the

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

17. Transactions with Variable Interest Entities (Continued)

"current
lender") with substantially similar terms and conditions as the CSO agreement with the former lender.

The
Company had determined that the former lender was a variable interest entity ("VIE") under ASC 815-10-65 Variable Interest Entities" and had also determined
that the Company was the primary beneficiary of this VIE. As a result, the Company consolidated the former lender into the Company's financial statements for the year ended December 31, 2007
(for the period in 2007 prior to the CSO agreement termination date).

The
Company has determined that the current lender is also a VIE but that the Company is not the primary beneficiary of this VIE. Therefore, the Company has not consolidated the current
lender in 2008, 2009 or 2010.

Under
the terms of the Company's agreement with its current third-party lender, the Company is contractually obligated to reimburse the lender for the full amount of the loans and
certain related fees that are not collected from the customers. As of December 31, 2009 and 2010, the third-party lender's
outstanding advances and interest receivable (which were not recorded on the Company's balance sheet) totaled approximately $19.7 million and $22.8 million, respectively, which is the
amount the Company would be obligated to pay the third-party lender if these amounts were to become uncollectible. Additionally, if these advances were to become uncollectible, the Company would also
be required to pay the third-party lender all related NSF fees and late fees on these advances.

Because
of the Company's economic exposure for losses related to the third-party lender's advances and interest receivable, the Company has established an accrual for third-party lender
losses to reflect the Company's estimated probable losses related to uncollectible third-party lender advances. The accrual for third-party lender losses that was reported in the Company's balance
sheet at December 31, 2009 and 2010 was approximately $4.5 million and $5.4 million, respectively and was established on a basis similar to the allowance for doubtful accounts.

18. Loss on Impairment of Assets

During the year ended December 31, 2010, the Company closed approximately 259 centers, including all of its 48 centers in Arizona. The impairment charge related to these centers
was approximately $0.7 million, which represents the write-down of the undepreciated costs of the fixed assets. The estimated cost to close these centers, including the impairment
charge, is approximately $6.0 million, was recognized during the year ended December 31, 2010. These approximate amounts are included in the income statement as a $4.3 million
increase in other center expenses, $0.3 million in loss on disposal of property and equipment, $0.7 million in loss on impairment of assets, $0.9 million increase in center
salaries and related payroll costs, and partially offset by a decrease in occupancy cost of $0.2 million.

19. Subsequent Events

On February 16, 2011, our Board of Directors declared a quarterly cash dividend of $0.0625 per common share, payable on March 11, 2011, to stockholders of record on
March 1, 2011.

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Advance America, Cash Advance Centers, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2008, 2009, and 2010

19. Subsequent Events (Continued)

As
previously disclosed in a Current Report on Form 8-K filed with the SEC on February 28, 2011, the Company's Board of Directors accepted the retirement of
Mr. Kenneth E. Compton as President and Chief Executive Officer of the Company, effective February 28, 2011. Mr. Compton will remain as a director of the Company.

Following
the retirement of Mr. Compton, on the recommendation of the Nominating and Corporate Governance Committee of the Board of Directors, the disinterested members of the
Board of Directors unanimously elected J. Patrick O'Shaughnessy to be the Company's President and Chief Executive Officer, effective February 28, 2011. Mr. O'Shaughnessy has served as
the Executive Vice President and Chief Financial Officer, and has been a director of the Company since August 2007. Mr. O'Shaughnessy also will continue to serve as the Company's Chief
Financial Officer while the Company considers candidates for a new Chief Financial Officer.

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of
December 31, 2010. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2010, our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal
control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with
generally accepted accounting principles in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors
of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on our financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
management assessed the effectiveness of our internal control over financial reporting based on the framework inInternal ControlIntegrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over
financial reporting was effective as of December 31, 2010.
There have been no changes in our internal control over financial reporting during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

The
effectiveness of the Company's internal control over financial reporting as of December 31, 2010 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears in "Item 8. Financial Statements and Supplementary Data."

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Additionally,
as required by Section 303A.12(a) of the New York Stock Exchange ("NYSE") Listed Company Manual, the Registrant's Chief Executive Officer filed a certificate with
the NYSE on June 10, 2010 reporting that he was not aware of any violation by us of the NYSE's Corporate Governance listing standards. The certifications of the President and Chief Executive
Officer and the Executive Vice President and Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of the Company's disclosure in this 2010 Annual
Report on Form 10-K, have been filed as exhibits 31(i)(A) and 31(i)(B) hereto.

ITEM 9B.    OTHER INFORMATION.

None.

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Table of Contents

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers

Our executive officers, their ages at March 7, 2011, and their positions with us are set forth below. Our executive officers are
elected by and serve at the discretion of our Board of Directors.

Name

Age

PositionKenneth E. Compton


58

Former President and Chief Executive OfficerJ. Patrick O'Shaughnessy


45

President and Chief Executive Officer and Chief Financial Officer


Kenneth E. Comptonserved as our President and Chief Executive Officer from August 2005 until February 28, 2011. From February 1992
to February 2005, Mr. Compton was President of the Global Automotive Group for Milliken & Company, an international textile and chemical manufacturer headquartered in Spartanburg, South
Carolina. In this capacity, Mr. Compton was responsible for the management and operations of multiple manufacturing facilities worldwide. Prior to his role as President of the Global Automotive
Group, Mr. Compton held various management positions within Milliken & Company.

J. Patrick O'Shaughnessyhas served as our Executive Vice President and Chief Financial Officer since August 2007 and was appointed as our
President and Chief Executive Officer on February 28, 2011. Prior to joining the Company, Mr. O'Shaughnessy worked as an investment banker focusing on financing and merger and
acquisition transactions, with a concentration in the consumer and industrial services industries, most recently as a partner at Thomas Weisel Partners LLC ("Thomas Weisel"). Prior to joining
Thomas Weisel, Mr. O'Shaughnessy spent much of his career at Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and with Credit Suisse First Boston, where he remained after its
acquisition of DLJ until 2002.

Other Information

The information set forth under the captions "Election of our Board of Directors," "Principal
StockholdersSection 16(a) Beneficial Ownership Reporting Compliance" and "Corporate GovernanceMeeting and Committees of the Board of DirectorsAudit
Committee" in the proxy statement for our 2011 annual meeting is incorporated herein by reference.

We
have a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, and
principal accounting officer. You can find our Code of Business Conduct and Ethics by going to the following website address: http://investors.advanceamerica.netand clicking "Code of Conduct." We will
post on our website
(http://www.advanceamerica.net) any amendments to the Code of Business Conduct and Ethics, as well as any waivers that are required to be disclosed by
the rules of either the U.S. Securities and Exchange Commission ("SEC") or the New York Stock Exchange. You can also obtain a printed copy of any of the materials referred to above without charge by
contacting us at the following address and requesting a copy:

Advance America, Cash Advance Centers, Inc.
Attention: Corporate Secretary
135 North Church Street
Spartanburg, South Carolina 29306
Telephone: 864-342-5600


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ITEM 11.    EXECUTIVE COMPENSATION.

Information contained under the captions "Executive and Director Compensation," "Compensation Committee Report" and "Corporate
GovernanceMeetings and Committees of the Board of DirectorsCompensation Committee Interlocks and Insider Participation" in the proxy statement for our 2011 annual meeting is
incorporated herein by reference.

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

The information set forth under the caption "Principal Stockholders" in the proxy statement for our 2011 annual meeting is incorporated
herein by reference.

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

The information set forth under the captions "Certain Transactions" and "Corporate GovernanceIndependent Directors" in the
proxy statement for our 2011 annual meeting is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information contained under the caption "Appointment of Our Independent Registered Public Accounting Firm" in the proxy statement for
our 2011 annual meeting is incorporated herein by reference.

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial Statements

The information required by this Item is included in "Item 8. Financial Statements and Supplementary Data."

(a)(2) Financial Statement Schedules

All schedules, for which provision is made in the applicable accounting regulations of the SEC have been omitted because they are not
required under the related instructions, are not applicable, or the information has been provided in the consolidated financial statements or the notes thereto, included in "Item 8. Financial
Statements and Supplementary Data."

(a)(3) Exhibits:

The exhibits to this report are listed in the Exhibit Index included elsewhere herein. Included in the exhibits listed are the
following exhibits that constitute management contracts or compensatory plans or arrangements of the Company:

10.2
(a)
2004 Omnibus Stock Plan.10.2
(b)
Form of Restricted Stock Agreement.10.2
(c)
Form of Nonqualified Stock Option Agreement.10.3

Form of Registration Rights Agreement.


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10.4

Nonqualified Stock Option Agreement between Advance America, Cash Advance Centers, Inc. and Kenneth E. Compton, dated as of October 27, 2005.10.5

Restricted Stock Agreement between Advance America, Cash Advance Centers, Inc. and Kenneth E. Compton, dated as of October 27, 2005.10.7

Advance America, Cash Advance Centers, Inc. Policy Regarding Receipt of Company Stock in Lieu of Cash Director's Fees.10.8

Description of Compensation Arrangement for Non-executive Directors.10.12

Summary of Terms of Arrangement for Personal Use of Aircraft by Kenneth E. Compton.10.13

Offer letter between Advance America, Cash Advance Centers, Inc. and Patrick O'Shaughnessy, dated as of August 20, 2007.10.14

Description of 2008 Cash Bonus Arrangement for Named Executive Officers.10.15

Description of 2009 Cash Bonus Arrangement for Named Executive Officers.10.16

Professional Services Agreement between Advance America, Cash Advance Centers, Inc. and Tony S. Colletti d/b/a Colletti & Associates dated February 19, 2009.10.18
(a)
Description of 2010 Cash Bonus Arrangements for Named Executive Officers.10.18
(b)
Description of 2010 Cash Bonus Arrangements for Named Executive Officers, as amended.10.20

Description of Compensation Arrangement and Stock Ownership Guidelines for Non-executive Directors, effective as of January 1, 2011 (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash
Advance Centers, Inc.'s Quarterly Report on Form 10-Q filed on November 8, 2010).10.21

Description of 2011 Cash Bonus Arrangement for Named Executive Officers (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K filed on
February 18, 2011).10.22

Retirement Agreement and General Release Agreement between the Company and Kenneth E. Compton, dated as of February 28, 2011.10.23

Change of Control Agreement between the Company and J. Patrick O'Shaughnessy, dated as of March 7, 2011.


(b)   Exhibits

Exhibit Number

Description3(i)

Amended and Restated Certificate of Incorporation of the registrant (incorporated herein by reference to Exhibit 3.1 to Advance America, Cash Advance Centers, Inc.'s Registration Statement, on Form S-1,
Registration No. 333-118227 (the "IPO Registration Statement")).3(ii)

Amended and Restated Bylaws of the registrant effective as of October 24, 2007 (incorporated herein by reference to Exhibit 3.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on
Form 8-K dated October 24, 2007).4.1

Specimen common stock certificate (incorporated herein by reference to Exhibit 4.1 to the IPO Registration Statement).


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Exhibit Number

Description10.1(a)

Amended and Restated Credit Agreement, dated as of March 24, 2008 (the "2008 Credit Facility") (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2008).10.1(b)

First Amendment, dated as of June 26, 2008, to the 2008 Credit Facility (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008).10.1(c)

Second Amendment, dated as of February 17, 2011, to the 2008 Credit Facility.10.2(a)

2004 Omnibus Stock Plan (incorporated herein by reference to Exhibit 10.5(a) to the IPO Registration Statement).10.2(b)

Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.5(b) to the IPO Registration Statement).10.2(c)

Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.3 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K filed on November 3, 2005
(the "November 2005 8-K")).10.3

Form of Registration Rights Agreement (incorporated herein by reference to Exhibit 10.6 to the IPO Registration Statement).10.4

Nonqualified Stock Option Agreement between Advance America, Cash Advance Centers, Inc. and Kenneth E. Compton, dated as of October 27, 2005 (incorporated herein by reference to Exhibit 10.1 to the
November 2005 8-K).10.5

Restricted Stock Agreement between Advance America, Cash Advance Centers, Inc. and Kenneth E. Compton, dated as of October 27, 2005 (incorporated herein by reference to Exhibit 10.2 to the November 2005
8-K).10.6

Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.11 to the IPO Registration Statement).10.7

Advance America, Cash Advance Centers, Inc. Policy Regarding Receipt of Company Stock in Lieu of Cash Director's Fees (incorporated herein by reference to Exhibit 99.1 to Advance America, Cash Advance
Centers, Inc.'s Current Report on Form 8-K filed on February 23, 2006).10.8

Description of Compensation Arrangement for Non-executive Directors, effective through December 31, 2010 (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers,
 Inc.'s Current Report on Form 8-K filed on October 29, 2009).10.9

Aircraft Dry Lease by and between Advance America, Cash Advance Centers, Inc. and Arizona, LLC, dated as of May 9, 2006 (incorporated herein by reference to Exhibit 10.2 to Advance America, Cash
Advance Centers, Inc.'s Current Report on Form 8-K filed on November 22, 2006 (the "November 2006 8-K")).10.10

Aircraft Dry Lease by and between Advance America, Cash Advance Centers, Inc. and Arizona, LLC, dated as of June 15, 2005 (incorporated herein by reference to Exhibit 10.3 to the November 2006
8-K).10.11

Summary of Terms of Reciprocal Use Agreement by and between Advance America, Cash Advance Centers, Inc. and Arizona, LLC (incorporated herein by reference to Exhibit 10.1 to the November 2006
8-K).


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Exhibit Number

Description10.12

Summary of Terms of Arrangement for Personal Use of Aircraft by Kenneth E. Compton (incorporated herein by reference to Exhibit 10.4 to the November 2006 8-K).10.13

Offer letter between Advance America, Cash Advance Centers, Inc. and Patrick O'Shaughnessy, dated as of August 20, 2007 (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance
Centers, Inc.'s Current Report on Form 8-K filed on August 24, 2007).10.14

Description of 2008 Cash Bonus Arrangement for Named Executive Officers (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K
filed on February 20, 2008).10.15

Description of 2009 Cash Bonus Arrangement for Named Executive Officers (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K
filed on February 25, 2009).10.16

Professional Services Agreement between Advance America, Cash Advance Centers, Inc. and Tony S. Colletti d/b/a Colletti & Associates dated February 19, 2009 (incorporated herein by reference to
Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Quarterly Report on Form 10-Q filed on May 11, 2009).10.17

Aircraft Dry Lease by and between Advance America, Cash Advance Centers, Inc. and Carabo Capital, LLC dated as of July 13, 2009 (incorporated herein by reference to Exhibit 10.1 to Advance America,
Cash Advance Centers, Inc.'s Quarterly Report on Form 10-Q filed on November 9, 2009).10.18(a)

Description of 2010 Cash Bonus Arrangement for Named Executive Officers (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K
filed on February 19, 2010).10.18(b)

Description of 2010 Cash Bonus Arrangement for Named Executive Officers, as amended.10.19

Time Sharing Agreement by and between Advance America, Cash Advance Centers, Inc. and Johnson Management, LLC, dated as of August 5, 2010 (incorporated herein by reference to Exhibit 10.1 to
Advance America, Cash Advance Centers, Inc.'s Quarterly Report on Form 10-Q filed on August 6, 2010).10.20

Description of Compensation Arrangement and Stock Ownership Guidelines for Non-executive Directors, effective as of January 1, 2011 (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash
Advance Centers, Inc.'s Quarterly Report on Form 10-Q filed on November 8, 2010).10.21

Description of 2011 Cash Bonus Arrangement for Named Executive Officers (incorporated herein by reference to Exhibit 10.1 to Advance America, Cash Advance Centers, Inc.'s Current Report on Form 8-K
filed on February 18, 2011).10.22

Retirement Agreement and General Release Agreement between the Company and Kenneth E. Compton, dated as of February 28, 2011.10.23

Change of Control Agreement between the Company and J. Patrick O'Shaughnessy, dated as of March 7, 2011.21.1

Subsidiaries of the registrant.23.1

Consent of PricewaterhouseCoopers LLP.


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Table of Contents

Exhibit Number

Description31(i)(A)

Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as amended.31(i)(B)

Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as amended.32.1

Certification of Chief Executive Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002).32.2

Certification of Chief Financial Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002).


(c)   Financial Statement Schedules

None.

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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, on the 10th day of March, 2011.

ADVANCE AMERICA,
CASH ADVANCE CENTERS, INC.By:

/s/ J. PATRICK O'SHAUGHNESSY J. Patrick O'Shaughnessy President, Chief Executive Officer, and Chief Financial Officer


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

Signature

Title

Date/s/ WILLIAM M. WEBSTER, IV William M. Webster, IV

Chairman of the Board and Director

March 10, 2011/s/ J. PATRICK O'SHAUGHNESSY J. Patrick O'Shaughnessy

President and Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), and Director

March 10, 2011/s/ ROBERT H. CHAPMAN, III Robert H. Chapman, III

Director

March 10, 2011/s/ TONY S. COLLETTI Tony S. Colletti

Director

March 10, 2011/s/ KENNETH E. COMPTON Kenneth E. Compton

Director

March 10, 2011/s/ GARDNER G. COURSON Gardner G. Courson

Director

March 10, 2011/s/ ANTHONY T. GRANT Anthony T. Grant

Director

March 10, 2011


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Signature

Title

Date/s/ THOMAS E. HANNAH Thomas E. Hannah

Director

March 10, 2011/s/ DONOVAN A. LANGFORD, III Donovan A. Langford, III

Director

March 10, 2011/s/ W. OLIN NISBET W. Olin Nisbet

Director

March 10, 2011


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