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Nicholas Financial Inc. Reports Operating Results (10-Q)

February 16, 2010 | About:
10qk

10qk

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Nicholas Financial Inc. (NICK) filed Quarterly Report for the period ended 2009-12-31.

Nicholas Financial Inc. has a market cap of $88.59 million; its shares were traded at around $7.67 with a P/E ratio of 9.12 and P/S ratio of 1.67. Nicholas Financial Inc. had an annual average earning growth of 11.3% over the past 10 years. GuruFocus rated Nicholas Financial Inc. the business predictability rank of 2-star.
This is the annual revenues and earnings per share of NICK over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of NICK.


Highlight of Business Operations:

Consolidated net income increased to approximately $2.9 million for the three-month period ended December 31, 2009 as compared to $235,000 for the corresponding period ended December 31, 2008. Net income for the three months ended December 31, 2009 and 2008 includes a pre-tax gain of approximately $265,000 and a pre-tax charge of $1.7 million respectively, related to the change in fair value of interest rate swaps. Consolidated net income increased to approximately $7.6 million for the nine-month period ended December 31, 2009 as compared to $2.6 million for the corresponding period ended December 31, 2008. Net income for the nine months ended December 31, 2009 and 2008 includes a pre-tax gain of approximately $797,000 and a pre-tax charge of $1.7 million respectively, related to the change in fair value of interest rate swaps. Other than pre-tax gains related to the change in fair value of interest rate swaps, earnings were favorably impacted primarily by an increase in the average net receivables, a decrease in operating expenses as a percentage of average finance receivables, net of unearned interest, a reduction in the provision for credit losses and a decrease in the average cost of borrowed funds. The Company’s software subsidiary, Nicholas Data Services (“NDS”), did not contribute significantly to consolidated operations in the three and nine months ended December 31, 2009 or 2008, respectively.

For the nine months ended December 31, 2009, net earnings, excluding changes in fair value of interest rate swaps, increased 97% to $7.1 million compared to $3.6 million for the nine months ended December 31, 2008. Per share diluted net earnings, excluding changes in fair value of interest rate swaps, increased 91% to $0.61 for the nine months ended December 31, 2009 as compared to $0.32 for the nine months ended December 31, 2008.

Interest and fee income on finance receivables, predominately finance charge income, increased 9% to approximately $14.4 million for the three-month period ended December 31, 2009 from $13.2 million for the corresponding period ended December 31, 2008. Average finance receivables, net of unearned interest equaled approximately $226.3 million for the three-month period ended December 31, 2009, an increase of 9% from $208.4 million for the corresponding period ended December 31, 2008. The primary reason average finance receivables, net of unearned interest, increased was the increase in the receivable base of several existing branches in younger markets and the opening of one additional branch location. The gross finance receivable balance increased 9% to approximately $316.3 million as of December 31, 2009, from $291.5 million as of December 31, 2008. The primary reason interest income increased was the increase in the outstanding loan portfolio. The gross portfolio yield decreased from 25.41% for the three-month period ended December 31, 2008 to 25.37% for the three-month period ended December 31, 2009. The net portfolio yield increased from 14.21% for the three-month period ended December 31, 2008 to 18.12% for the corresponding period ended December 31, 2009. The gross portfolio yield decreased primarily due to a lower weighted annual percentage rate (“APR”) earned on finance receivables. The net portfolio yield increased primarily due to a decrease in the average cost of borrowed funds and a reduction in the provision for credit losses.

Interest expense decreased to approximately $1.1 million for the three-month period ended December 31, 2009 from $1.3 million for the three-month period ended December 31, 2008. The average indebtedness for the three-month period ended December 31, 2009 increased to approximately $110.1 million as compared to $104.1 million for the corresponding period ended December 31, 2008. The Company’s average cost of borrowed funds decreased to 3.92% for the three-month period ended December 31, 2009 as compared to 4.87% for the corresponding period ended December 31, 2008. The weighted-average 30-day LIBOR rate decreased to 0.28% for the three months ended December 31, 2009 as compared to 2.89% for the corresponding period ended December 31, 2008. The decrease driven by the reduction in 30-day LIBOR rates was offset in part by the increase in average indebtedness and impacted by notional amounts of interest rate swap agreements, which convert a substantial portion of the Company’s floating rate debt to fixed rate debt. The weighted average notional amount of interest rate swaps was $57.4 million at a weighted average fixed rate of 3.91% for the three months ended December 31, 2009 as compared to $80.0 million at 4.01% for the corresponding period ended December 31, 2008. For further discussions regarding the Company’s cost of funds and the effect of interest rate swap agreements see note 6 – “Interest Rate Swap Agreements”. The average cost of borrowings in future periods will continue to be impacted by such factors as well as pricing options under the new credit agreement entered into on January 12, 2010. For further discussions regarding the new credit agreement and the increase of amounts available under the Line see note 9 – “Subsequent Events”.

Interest income and fee on finance receivables, predominately finance charge income, increased 6% to approximately $42.2 million for the nine-month period ended December 31, 2009 from $39.8 million for the corresponding period ended December 31, 2008. Average finance receivables, net of unearned interest equaled approximately $221.6 million for the nine-month period ended December 31, 2009, an increase of 7% from $206.8 million for the corresponding period ended December 31, 2008. The primary reason average finance receivables, net of unearned interest, increased was the increase in the receivable base of several existing branches in younger markets and the opening of two additional branch locations. The gross finance receivable balance increased 9% to approximately $316.3 million as of December 31, 2009, from $291.5 million as of December 31, 2008. The primary reason interest income increased was the increase in the outstanding loan portfolio. The gross portfolio yield decreased from 25.68% for the nine-month period ended December 31, 2008 to 25.37% for the nine-month period ended December 31, 2009. The net portfolio yield increased from 14.57% for the nine-month period ended December 31, 2008 to 17.41% for the corresponding period ended December 31, 2009. The gross portfolio yield decreased primarily due to a lower weighted annual percentage rate (“APR”) earned on finance receivables. The net portfolio yield increased primarily due to a decrease in the average cost of borrowed funds and a reduction in the provision for credit losses.

Interest expense decreased to approximately $3.6 million for the nine-month period ended December 31, 2009 from $4.1 million for the nine-month period ended December 31, 2008. The average indebtedness for the nine-month period ended December 31, 2009 increased to approximately $106.5 million as compared to $103.7 million for the corresponding period ended December 31, 2008. The Company’s average cost of borrowed funds decreased to 4.57% for the nine-month period ended December 31, 2009 as compared to 5.28% for the corresponding period ended December 31, 2008. The weighted-average 30-day LIBOR rate decreased to 0.35% for the nine months ended December 31, 2009 as compared to 2.67% for the corresponding period ended December 31, 2008. The decrease driven by the reduction in 30-day LIBOR rates was offset in part by the increase in average indebtedness and impacted by notional amounts of interest rate swap agreements, which convert a substantial portion of the Company’s floating rate debt to fixed rate debt. The weighted average notional amount of interest rate swaps was $72.5 million at a weighted average fixed rate of 3.98% for the nine months ended December 31, 2009 as compared to $74.8 million at 4.03% for the corresponding period ended December 31, 2008. For further discussions regarding the Company’s cost of funds and the effect of interest rate swap agreements see note 6 – “Interest Rate Swap Agreements”. The average cost of borrowings in future periods will continue to be impacted by such factors as well as pricing options under the new credit agreement entered into on January 12, 2010. For further discussions regarding the new credit agreement and the increase of amounts available under the Line see note 9 – “Subsequent Events”.

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