Despite the ever-present legislative and regulatory assault, payday loans and pawnshops continue to thrive as viable businesses. EZCORP (NASDAQ:EZPW) has been showing just what opportunities are still available in the industry as it focuses more of its energy on expanding the short-term loan side of the ledger.

It turned in a first-quarter performance that far exceeded analyst expectations, even though it was not able to open as many stores as it had intended. While the raw data on the report can be found in my Fool by Numbers article, the fact is that business is booming and continued expansion is planned. CEO Joe Rotunda had an arts-and-crafts day for his conference call, in which he invited listeners to draw up a table showing how the company's stand-alone payday loan store models were faring. After we put down our pencils, the chart looked like this:


Number of Stores

Average Portfolio per Store

Less Than 6 Months



6-12 Months



12-18 Months



18-24 Months



24+ Months



The takeaway here is that the longer the store is in business, the more money it makes for EZCORP, which is why it has a plan in place to continually open new stores. By the end of their second year of operation, the payday loan lender wants these stores to have a loan portfolio of $80,000, which it is in line to achieve. Also, the company has a line of EZMONEY stores next to its pawnshops, and these stores actually ramp up faster because the pawnshops transfer their loans over to the stores.

In a sign of how important the payday loans are becoming to EZCORP, it is undertaking a remodeling of its adjacent stores to create more lobby room -- on a Friday night in a store with an $80,000 or $90,000 loan portfolio, the lobby can be packed -- by actually stealing storeroom space from the pawnshops. The storefronts are only 300 to 400 square feet in size, so with the takeover of the storerooms, the teller windows can be pushed deeper into the stores, giving customers more room.

While this probably doesn't hold true for all of its customers, EZCORP did mention that the typical customer in Texas who was using its maximum $1,500 payday loan service had an individual income of around $60,000 to $70,000 annually. This puts the lie to the argument critics raise that the payday lenders are preying upon the poor. These are simply individuals with short-term loan needs that have been abandoned by traditional banking institutions.

Aside from payday loans, EZCORP also saw significant increases in its pawnshop business (up 12% to $35.7 million), where yields on loans improved 11% to 146% annualized, due to the company's shortening of the grace period it offers. While this marks an improvement for EZCORP, First Cash Financial (NASDAQ:FCFS) had a 158% yield at the end of 2005, while Cash America (NYSE:CSH) had a yield of 119% at the end of its third quarter.

EZCORP's scrap business from sales of forfeited merchandise scrapped 278,000 more grams of gold this year than last. That additional 600 pounds was in addition to the 12,000 carats of diamonds -- usually three points or less. For the remainder of the year, EZCORP expects gold prices to be in the range of $610 to $620 per ounce, which would be down from its current price of about $650 an ounce. While the company's proceeds per gram of gold were up 21%, EZCORP's volume has also increased, up 30% in the quarter. Moreover, it has also increased the amount that it will lend on gold jewelry, allowing it to reap additional gains.

Although it opened only seven new stores instead of the planned 10, EZCORP says it is still on target to open 30 new stores this quarter. That will continue to be the key to its expanding success.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.