Letter from the President

Hello Team Loyalty,

August is here, unbelievable, the year will be two thirds over at the end of this month. We have continued strong loan growth, growing another $70,000.00 in July alone. Our sales have been also continuing to stay strong. We are positioning ourselves to be in a very good position by the end of the year with a goal of pre-COVID numbers. The goal would be to get our loan balance back to preCOVID numbers and continue with our strong sales. Which in case you are not aware or have not been with the company that long we have an approximate 50% increase in sales (only taking in to account instore sales) comparing pre-Covid instore sales numbers and during the pandemic instore sales numbers. That is a terrific number, keep it up!!

Another metric that we have been watching is the amount of goods that we produce organically or the merchandise that comes to our counters both in general merchandise and jewelry inventory. This is an important number to follow as our margins are greater in organically grown merchandise as opposed to the merchandise that we must go source. We need the inventory, so we will continue to keep our showcases and the showroom floors stocked as best we can throughout sourcing but as mentioned earlier margins are better when the product comes to our counter. The product is coming in both in loans which turn into defaults and our over-the-counter purchases, keep it up. This will also boost our company wide scrap sales which is one of the areas that COVID affected us the most, as long as we can continue organically growing this number will also grow. The other revenue area that suffered during COVID was our pawn service charges. This area is also improving and will continue to improve as our loan balance continues to grow and I see no slowing in this part of our business.

The last thing that I have spent much of my time and energy on lately is a federal issue. There have been several federal bills introduced that would put a cap on our interest rate that we are allowed to collect. California Pawnbrokers Association (CAPA) and the National Pawnbrokers Association (NPA) have been working on the best strategy to defeat this industry killing legislation. While California continues to be one of the cheaper states for pawn service charges, we feel that our model is fair for us as a company, but we also provide the only non-recourse collateral loan product at one of the cheapest rates in the nation. We feel extremely confident that we can be exempt from any of this legislation, but we must stay vigilant and work with all our industry partners in defeating this type of industry killing legislation. Any questions please feel free to reach out to me directly.

Thank You Loyalty Pawn Family together we will continue to be the leader in local lending.

Gratefully,

Stan Lukowicz, III