(By Kevin Donovan) If you're as lucky as us to drive a creampuff of an automobile previously owned by a little old lady from Pasadena, you could be beholden to Coastal Credit LLC. If you're also an investor, consider subsidizing your used-car loan by owning tiny White River Capital (RVR), Coastal's parent.
The company currently pays a quarterly dividend of $0.25, amounting to a handsome annual yield of 4.45% at today's share price of $22.45. The stock is up 13.44% year to date and has fluctuated between $16.32 and $27.17 in the last 52 weeks.
And White River, with a market capitalization of just $79.5 million, extends its shareholder-friendly hand further with an ongoing share repurchase program. White River is authorized to buy back up to 250,000 shares on the open market or in privately negotiated transactions. At the end of March, White River had repurchased 62,829 shares under the program at an average price per share of $19.40. What's more, White River's management is closely aligned with shareholder interests, with about 15% of the company owned by insiders.
The shares also trade at a substantial discount to the market with a price-to-earnings ratio of 8.5 for the trailing 12 months, compared with 1x/xx for the S&P 500. Share price volatility is low, with a beta of 0.34.
White River's sole subsidiary, Coastal Credit LLC, is a specialized auto finance company headquartered in Virginia Beach, Va. Coastal acquires sub-prime auto receivables from franchised and independent automobile dealers of mostly used, but some new, cars and light trucks. Coastal then services the receivables. The financing outfit began operating in 1987 and conducts business in 27 states through its 14 branch locations.
In the first quarter, White River Capital reported net income of $2.0 million, or $0.57 per diluted share, compared to first quarter 2011 net income of $2.1 million, or $0.57 per diluted share. The net income results for the first quarter of 2012 are due to the following. The result included $3.8 million of earnings from operations contributed by the Coastal Credit and $0.7 million of operating expenses at the holding company, and income tax expense of $1.1 million.
Meanwhile, credit statistics remained healthy. Coastal's 30-plus day delinquency declined to 1.8% at the end of the first quarter compared with 2.0% at the end of the fourth quarter in 20011. Coastal Credit's allowance for loan losses as a percentage of finance receivables, net of unearned finance charges, was 5.54% at March 31, 2012 compared with 5.68% at December 31, 2011.
The consolidated provision for loan losses was $1.3 million compared to $1.1 million for the quarters ended March 31, 2012 and 2011, respectively.
The obvious risk to owning White River is the creditworthiness of borrowers, an issue not to be dismissed lightly given the parlous condition of the job market and the ability to stay afloat in a weak economic environment.
Still, we think the Coastal unit's longevity and its proven record of managing risk warrants consideration for those seeking current income from a low-volatility stock.