.comment-link {margin-left:.6em;}

Sunday, June 19, 2011


Nickolas Financial (NICK) released their 10-K recently.
Year ending Mar 31, 2011.
11.8 million shares on June 9, 2011.

4 new branches were opened this year (two are in new states).  No branches closed.  No plans for closing in 2012.  The economic downturn really killed the direct loan part of the business, which is very small.  Direct loans will probably not grow going forward.

In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer from which the Company is purchasing the Contract, and the value of the automobile in relation to the purchase price and the term of the Contract.

Currently 14 states, 56 branches.  Florida, Ohio, NC, GA, KY, IN, AL, TN, Mich, Virginia, Maryland, SC, ILL, MO.  Non-exclusive agreements with 4,000 dealers, 1,700 active (meaning activity in the last 6 months).

Typical 5-20 percent down payment.  12 to 72 month financing.  Various insurance, including health, life.  $500 max deductible.

NICK buys loans at a discount (1% to 15%) based on the car and borrower.  Some markets are competitive and require less of a discount.  Also $75 processing fee paid by dealer.

This past year 1/3 of the loans were in Florida, about the same as last year.  Every state increased.  15,009 contracts this year vs 12,907 last year (12,134 the year before).  23.57% weighted APR! which is about the same as last year.  Ave discount is actually lower at 8.78% from 9.11% last year.  I had expected this to go up after the downturn due to failed competitors.  Weighted ave term is 49 months, up from 48.  Ave loan is $9,800 which is up from $9,422.

Direct loans are in Florida and NC.  The terms are better for the company and these loans consistently do better than the purchased contracts, but the total business is small, so I'll skip this part.
The Company’s typical customer has a credit history that fails to meet the lending standards of most banks and credit unions. Among the credit problems experienced by the Company’s customers that resulted in a poor credit history are: unpaid revolving credit card obligations; unpaid medical bills; unpaid student loans; prior bankruptcy; and evictions for nonpayment of rent. The Company believes that its customer profile is similar to that of its direct competitors.
NICK actually interviews borrowers by phone.  NICK audits dealers on a schedule based on various factors.  Audit function is separate from sales.

Lots of good info in the Monitoring and Enforcement of Contracts section.

288 employees in NICK Financial.  No unions.

NOTE: The LOC matures on Nov 30.  $118 million outstanding, $22 million more available.

Dodd-Frank Act establishes the CFPB which becomes operational on July 21, 2011.  Given the anti-business and arbitrary nature of the current Federal administration, and government in general from both parties, I worry about this.  This act can deem behaviors as "unfair" or "deceptive" or "abusive".

CEO owns 14% of the stock.

661K options.  Can authorize 291K more.  Small potatoes.

The long-term results in the table on page 19 shows the key things about this company. Kickass results consistently through the downturn.  Sure does look like a $20 stock to me, so long as everything continues to check out and Dodd-Frank doesn't do too much damage.

Results were helped by the Cash for Clunkers program (boy, was that a silly waste of money!)

In 2009, NICK tightened up the credit criteria.

Static pools are established per branch, per quarter.  100% of the discount paid for loans goes into the allowance for loss.  Traditionally, much of this feeds back into the earnings when the loans get paid off.

(Continue on page 22, Fiscal 2011 compared to Fiscal 2010)

Comments: Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?