Nicholas Financial, Inc. is a Canadian holding company incorporated under the
laws of British Columbia in 1986. The business activities of Nicholas Financial-Canada
are currently conducted exclusively through its wholly-owned indirect subsidiary,
Nicholas Financial, Inc., a Florida corporation (“Nicholas Financial”).
Nicholas Financial is a specialized consumer finance company engaged primarily
in acquiring and servicing automobile finance installment contracts (“Contracts”)
for purchases of new and used automobiles and light trucks. To a lesser extent,
Nicholas Financial also originates direct consumer loans (“Direct Loans”)
and sells consumer-finance related products.
A second Florida subsidiary, Nicholas Data Services, Inc. (“NDS”),
historically was engaged in supporting and updating industry-specific computer
application software for small businesses located primarily in the Southeastern
United States.
The Company’s principal goals are to increase its profitability and its
long-term shareholder value through greater penetration in its current markets
and controlled geographic expansion into new markets. The Company seeks to expand
its automobile financing program in the eighteen states — Alabama, Florida,
Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Michigan, Missouri,
North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia
and Wisconsin — in which it currently operates by increasing the business
generated at its existing branch locations and by targeting certain geographic
locations within some of these states where it believes there is a sufficient
market for its automobile financing program. The Company’s strategy is
to monitor these markets and ultimately decide if and where it will open additional
branch locations. The Company is planning to open a branch in Pittsburgh by
the end of the second quarter in fiscal 2017. Dealers in Wisconsin are serviced
in our Gurnee, Illinois branch.
The Company consolidated two branch locations (Clearwater, FL and Birmingham,
AL) into branches previously established within their market. The Company will
continue to evaluate any branch locations that do not meet its minimum profitability
targets and may elect to close one or more of these branches in the future.
The Company also continues to analyze other markets in states in which it does
not currently operate for expansion opportunities. The Company is also evaluating
the organization and its structure. The Company’s decisions on how it
plans to continue operating its business strategy will be influenced by the
sustainability of some of its competitors’ underwriting and risk-based
pricing. Although the Company has not made any bulk purchases of Contracts in
over two decades, if the opportunity arises, the Company may consider possible
acquisitions of portfolios of seasoned Contracts from dealers in bulk transactions
as a means of further penetrating its existing markets or expanding its presence
in targeted geographic locations. The Company cannot provide any assurances,
however, that it will be able to further expand in either its current markets
or any targeted new markets.
The Company’s typical customer has a credit history that fails to meet
the lending standards of most banks and credit unions. Among the credit problems
experienced by the Company’s customers that resulted in a poor credit
history are: unpaid revolving credit card obligations; unpaid medical bills;
unpaid student loans; prior bankruptcy; and evictions for nonpayment of rent.
The Company believes that its customer profile is similar to that of its direct
competitors.
Prior to its approval of the purchase of a Contract, the Company is provided
with a standardized credit application completed by the consumer which contains
information relating to the consumer’s background, employment, and credit
history. The Company also obtains credit reports from Equifax, Experian and/or
TransUnion, which are independent credit reporting services. The Company verifies
the consumer’s employment history, income and residence. In most cases,
consumers are interviewed via telephone by a Company application processor.
The Company also considers the customer’s prior payment history with the
Company, if any, as well as the collateral value of the vehicle being financed.
The Company has established internal buying guidelines to be used by its Branch
Managers and internal underwriters when purchasing Contracts. Any Contract that
does not meet these guidelines must be approved by the senior management of
the Company. The Company currently has District Managers charged with managing
the specific branches in a defined geographic area. In addition to a variety
of administrative duties, the District Managers are responsible for monitoring
their assigned branches’ compliance with the Company’s underwriting
standards.