Nicholas Financial Inc. reported a 33% year-over-year drop in auto contracts acquired during the quarter ended June 30, due to “intense competition” and recent changes to the company’s underwriting guidelines, said President and Chief Executive Ralph Finkenbrink.
Nicholas acquired $27.2 million in contracts in its quarter, with a weighted APR of 23.3% and an average term of 55 months — down two months from the same time a year prior, according to filings with the Securities and Exchange Commission.
“Throughout this past quarter, we continued to experience intense competition from existing market participants,” Finkenbrink said in the filing. “During this same time period, automobile dealerships which [Nicholas] conducts business with have reported declining sales.”
Nicholas Financial will not expand the number of contracts purchased “by incurring risk that is not priced appropriately and not conducive to providing long-term sustainable value,” he added. “These ongoing market conditions require us to gain momentum regarding our ability to adapt to a competitive cycle that, for the foreseeable future, gives no indication of subsiding. For us, that involves further evaluation of our current business structure, as well as, our overall operating strategy.”
Despite volume declines, the company’s net-charge-off rate shot up to 9.5% in the quarter, from 7.5% during the same period last year.
Similarly, indirect loan delinquencies 30 days or more past due grew to 12.2% in the quarter, from 7.6% the same time a year prior. Direct loan delinquencies 30 days or more past due sat at 5.3% at quarter’s end, up from 2.5% the same period the year prior. The increase was driven by the company’s continued portfolio weakness, according to the filing.
Nicholas Financial is also decreasing its headcount. Marketing, salaries, employee benefits, depreciation, and administrative expenses decreased to approximately $8.7 million for the quarter, from $8.9 million at the same time a year prior, according to the filing. The decrease is attributable — in part — to a decrease in average headcount to 307 as of June 30, from 330 in the prior-year quarter.
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