Of great interest: Regional Acceptance Corp.'s deals put people behind the wheel - with rates as high as 29%.

• Author: Mildenberg, David
• Position: Includes related article - Cover Story

As long as banks relegate used-car financing to their greenest rookies, Bill Stallings figures the world is his oyster. "I always get a kick out of these boys from Carolina who've got their pants up to here and their tie about that wide, and they're sitting behind a big desk," he says with a smirk.

"They're intimidating. A lot of these blue-collar workers that got bad credit don't like to deal with the bank because there's a big old marble building and guys with pin-stripe suits who tend to look down on them."

But those folks have to get a car somewhere, even if it means paying up to 29% interest. ("How many people did you see hitchhiking on your way from Charlotte?" he asks.) In Eastern North Carolina, chances are they'll get the money from one of the 13 offices of Greenville-based Regional Acceptance Corp., which went public in a $20 million initial offering in June.

The IPO made Stallings, 53, a multimillionaire. He took about $5 million out and still owns a 39% stake, worth $35 million on Sept. 30. The cash injection also set Regional on a course that could make it a big-time player in auto finance. He predicts the loan portfolio will grow from the current $50 million to $1 billion by the time he's 65. "If I get 20% compounded growth for 12 years, won't that about get me up there?" he asks. During the past five years, Regional's growth rate has averaged 23%.

One who thinks Stallings can do it is Atlanta insurance executive J. Mack Robinson, the investor who owns 3.3% of Wachovia Corp.'s stock, worth about $170 million on Sept. 30. Several months before the IPO, Stallings met Robinson for lunch at Atlanta's Peachtree Country Club to discuss Regional's future.

"I quizzed him at length about his company," Robinson says, "and I was so impressed that I bought quite a bit of his stock |$1 million worth, according to Stallings~. He knows his business, else he would have failed a long time ago."

You'll get no argument on that from Stallings, who started Regional in April 1978 in partnership with Greenville orthodontist Ledyard Ross. They had gone in together the previous year to buy a Grady White boat franchise in Greenville, each putting up $25,000. Stallings raised the money by taking out a second mortgage on his house. "I had a wife and four kids, and I was making $24,000 a year at that time, so I didn't have much room for error," he says.

Though boat sales were strong, Stallings quickly realized that used-car financing was far more lucrative. "I'd been in |auto finance~ for 17 years, and I knew it like a monkey in a coconut tree," he says. So he started Regional with a loan from Chicago-based Walter Heller Corp. Feeling loyal to Ross for his help in buying the boat dealership, which they sold in 1979, Stallings offered him half ownership in Regional. Ross, who remains a director, owns a 23% stake now worth more than $18 million.

Stallings' years in the finance business had taught him an important lesson: Lending to people with bad credit can be better business than lending to those who've never missed a payment -- and can dicker for a better deal. He also knew that the computer programs banks use to make credit decisions don't take into account life's vagaries.

"You might be a good guy for 15 years, and then your wife leaves you and your damn dog dies and whatever happens. Once you get over that, you might go out and get married again and get you a better job. Then you're the same guy as before these things happened, but you don't get credit for that.

"That's the key to our business -- we get the people who've fallen through the cracks."

Success, of course, is predicated on being able to get those people to pay you back, notes Chief Financial Officer Robert Barry. "The secret here isn't the interest rate, but the collection efforts. And that's what's incredible." Regional's net charge-offs have ranged from 0.6% to 1.7% the past five years. By comparison, NationsBank's charge-off rate was 1.25%...