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I’ve always been impressed with the amount of financial info that Nicholas Financial (NASDAQ:NICK) provides about its portfolio in its quarterly statements. I wish more companies were this forthcoming. I’ve assembled a portfolio summary on this spreadsheet of how they’ve done over the last several quarters.

By looking at this spreadsheet you can see why I’m such a big fan of the stock. The pre-tax bottom line is column N. However, the most important line to watch is column K, the provision for credit losses. That zoomed up during the credit crisis and it took out a huge chunk of NICK’s earnings.

The pre-tax yield before adjusting for credit losses has been remarkably consistent for the past 12 quarters, usually around 12.5%. The credit losses completely altered NICK’s profitability. But something big happened in the last two quarters. The eight-quarter run of year-over-year increases in the provision for credit losses finally stopped. It’s still high, but if it continues to drop, that will give a big boost to NICK’s bottom line.

Let’s make some assumptions for the next earnings report. If the pre-tax yield for the last quarter hit 7% on receivables of $230 million that comes to about $4 million pre-tax for the quarter. With the new shares post stock dividend, that’s 35 cents a share. After taxes, that’s about 22 cents a share.

For the first six months of the fiscal year (ends March 31), NICK made 40 cents a share. So we’re probably talking about stock on its way to making around 80 cents a share for the year during an awful recession. As I see it, this company is almost like an 11% or 12% bond and the credit quality is improving.

Source: Nicholas Financial: Looking at the Numbers