"A large portion of the increase was due to financial products," CFO Cathy Donovan said during the company's recent earnings webcast. In the third quarter, revenue from financial products hit $1.7 million, an increase of 29.1 percent from $13.4 million in last year's corresponding period.
A major source of bank product income is Liberty's Refund Advance program. While the program's acronym is RAL—the same as the now vanished Refund Anticipation Loan—the programs are dramatically different.
"We are charging a fee to franchisee for offering this to customer," Donovan said. "There is no charge to the customer."
Like competitor H&R Block, Liberty was hit by a decrease in the number of returns prepared. The number of returns prepared through January 31 was 459,000, a decline of 4.2 percent from 479,000, in the corresponding period of the 2015 tax season. The percentage decline widened through February 28 this year, by which time 1,159,000 returns had been prepared by Liberty offices, a decline of 4.4 percent from 1,212,000 through February 28 last year.
The decline in the number returns filed was countered by a 4.7-percent rise in fees paid. The total number of Liberty offices reached 4,225 on January 31, an increase of 156 locations from 4,069 a year earlier. This include an increase of 196 permanent stories and a drop of 51 seasonal locations.
Liberty has expanded the number of company-owned stores to 250 at the end of the quarter, double the 125 a year ago. Its intent is to use these locations in major metropolitan region to develop a business that can be sold as a turnkey operation to franchisees.