Nicholas Financial CEO Focuses Underwriting on Small-Dollar, Short-Term Loans

Nicholas Financial Inc. is returning to its core discipline as a subprime auto lender after the appointment of Doug Marohn as president and chief executive.

Marohn, who was previously with the company from 1998 to 2011, returned to Nicholas Financial in December 2017 and is working to shift the company’s focus back to being “one of the most disciplined underwriters in the subprime space,” Marohn told Auto Finance News.

“You’re going to see a smaller dollar deal with a higher yield, shorter term, smaller payments, lower advance, etc.,” Marohn said. “Hopefully, that will translate into increased contracts as we get our marquee message out.”

The company’s contract purchases declined to $27 million in the fourth quarter, compared with $46 million the same time the year prior. Nicholas chalked up the 41% drop in originations to a change in underwriting guidelines — including the use of alternative data — that were implemented to improve the quality of contracts being purchased, according to a press release.

For the three-month period ended in December, delinquencies declined 16%. Yet charge-offs grew to 10.63% of the lender’s portfolio, compared with 8.86% during the same period the year prior, according to earnings.

As the company returns to its “disciplined” subprime focus, Marohn anticipates that originations will increase in 2018. Nicholas Financial also plans to expand existing products, such as direct loans.

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