Nicholas Financial Earns 33 Cents Per Share

Earnings are out and they’re good!

Nicholas Financial, Inc. announced that for the three months ended September 30, 2010, net earnings, excluding change in fair value of interest rate swaps, increased 70% to $3,897,000 as compared to $2,286,000 for the three months ended September 30, 2009. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 65% to $0.33 as compared to $0.20 for the three months ended September 30, 2009. See reconciliations of the Non-GAAP measures below. Revenue increased 11% to $15,732,000 for the three months ended September 30, 2010 as compared to $14,158,000 for the three months ended September 30, 2009.

For the six months ended September 30, 2010, net earnings, excluding change in fair value of interest rate swaps, increased 68% to $7,323,000 as compared to $4,367,000 for the six months ended September 30, 2009. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 63% to $0.62 as compared to $0.38 for the six months ended September 30, 2009. See reconciliations of the Non-GAAP measures below. Revenue increased 10% to $30,684,000 for the six months ended September 30, 2010 as compared to $27,851,000 for the six months ended September 30, 2009.

According to Peter L. Vosotas, Chairman and CEO, “We are pleased to report record 2nd quarter revenue and earnings. Our results were primarily impacted by an increase in revenues, a reduction in the net charge-off rate and an increase in the cost of borrowed funds. The Company continues to evaluate additional markets for future branch locations, and subject to market conditions, could open additional branch locations during the year. The Company remains open to acquisitions should an opportunity present itself,” added Vosotas.

This is a very good report. Let’s see how close my estimates were. Here’s what I predicted:

Receivables: $245 million
Gross yield: 25%
Interest Expense: 2.5%
Provision for Credit Losses: 2.8%
Pre-Tax Yield: 10%
EPS: 30 cents or more

Here are the results:

Receivables: $249,065,668
Gross yield: 25.25%
Interest Expense: 2.33%
Provision for Credit Losses: 2.75%
Pre-Tax Yield: 10.24%
EPS: 33 cents

Here’s a chart that I think is a good way to see the improvement at NICK:

The blue area is the pre-tax yield which just broke 10% for the first time since 2007. The maroon area is the provision for credit losses which has dropped by over 7% in the last two years. As you can see, the credit losses were mainly responsible for the earnings decline. When you add the two together, NICK has been fairly consistent.

NICK has so far earned 80 cents per share this calendar year. Q4 is often on the slow side for NICK but I think the company can earn $1.25 for the whole year.

Here’s my spreadsheet detailing NICK’s numbers.

Posted by on October 28th, 2010 at 10:09 am


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