Nicholas Financial direct originations skyrocket

Subprime lender Nicholas Financial has ramped up its direct loan originations 150.3% year over year, according to the company’s earnings report for fiscal year 2020. Direct originations jumped to $12.6 million from $7.7 million in the prior year to follow through on previous direct loan growth trajectory goals.
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The lender’s focus has recently been on marketing its direct loan product to current and former customer bases, according to Doug Marohn, president and chief executive of Nicholas. “The product is available to new customers too, but our efforts are focused on our core customer base,” he said.

Balance outstandings for direct loans increased 32.5% year over year to $11,844, while indirect outstandings fell 6.2% to $207,247.

Both direct and indirect delinquency rates increased year over year in 2020, with indirect contracts rising 11 basis points to 10.22% and direct loans jumping 71 basis points to 4.55%.

Provisions for credit losses as a percentage of average finance receivables also fell to 7.34% from 18.34%, a drop that was indicative of companywide losses, Marohn told Auto Finance News.

“We use a formula of taking the trailing six months of losses annualized and using that to base our required allowance, which drives our provision,” Marohn explained, noting that the lender then looks for any external or internal trends that may have a critical impact and slightly adjust the provision.

“As for the impact of the COVID-19 pandemic, we are monitoring it closely and will, of course, adjust our allowance for losses as needed and warranted, if necessary,” he added. 

In mid-May Nicholas was able to hire back its 40 employees who had been furloughed as a result of the coronavirus crisis, according to Marohn. “We were also able to lift the hiring freeze we implemented in March,” he said.

The Florida-based auto lender currently has direct loans in all but one of the 13 states where it has branch offices, keeping up with expansion plans from last November to generate direct loan products in all acquired states. 

Nicholas Financial [NASDAQ: NICK] was trading at $8.50 per share, unmoved since the market opened at press time. The lender has a market capitalization of $67.2 million.

Originally published on Auto Finance News