Febuary 2, 2017

Nicholas Financial Announces 3rd Quarter Results

Clearwater, Florida, - Februuary 2, 2017 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended December 31, 2016, diluted earnings per share decreased 40% to $0.21 as compared to $0.35 for the three months ended December 31, 2015. Net earnings were $1.6 million and $2.7 million for the three months ended December 31, 2016 and 2015, respectively. Revenue decreased 3% to $22.0 million for the three months ended December 31, 2016 as compared to $22.8 million for the three months ended December 31, 2015.

For the nine months ended December 31, 2016, per share diluted net earnings decreased 33% to $0.83 as compared to $1.24 for the nine months ended December 31, 2015. Net earnings were $6.5 million and $9.7 million for the nine months ended December 31, 2016 and 2015, respectively. Revenue remained relatively flat at $67.6 million for the nine months ended December 31, 2016 as compared to $67.5 million for the nine months ended December 31, 2015.

Our net earnings for the three months ended December 31, 2016 were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and past-due accounts along with a reduction in the gross portfolio yield. To a lesser extent, our results were favorably impacted by a decrease in operating expenses which was partially offset by a change in the interest rate swaps.

Our net earnings for the nine months ended December 31, 2016 were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and past-due accounts along with a reduction in the gross portfolio yield. Conversely, our results were favorably impacted by a decrease in operating expenses.

“During our third quarter, competition for new loan originations remained high with yields that continued to trend lower. We do not expect to see any material changes during our fourth quarter ending March 31, 2017,” stated Ralph T. Finkenbrink, the Company’s President and CEO.

As previously disclosed, on October 1, 2016; the Company moved all loan-servicing operations from branch locations to a centralized location within its Corporate Headquarters in Clearwater, FL. The Company’s continued portfolio weakness was exacerbated by greater than anticipated difficulties in implementing the centralized collection model. In early January 2017, the Company elected to move most of its servicing and collection activity back to 31 branch offices, or 48% of its branch network. Please refer to the Current Report on Form 8-K filed by the Company on January 11, 2017 for further details. We continue to evaluate the various markets in which we operate; however, we do not expect any significant changes to the number of branches or other perations during our fourth quarter ending March 31, 2017. The Company continues to evaluate various strategies in an effort to improve its portfolio performance and reduce its operating expenses, although no assurances can be given.

Nicholas Financial, Inc. is one of the largest publicly-traded specialty consumer finance companies in North America. The Company operates branch locations in both Southeastern and Midwestern U.S. states. The Company has approximately 7,779,000 shares of common stock outstanding. For an index of Nicholas Financial, Inc.’s news releases or to obtain a specific release, visit our web site at www.nicholasfinancial.com.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that involve risks and uncertainties including general economic conditions, access to bank financing, and other risks detailed from time to time in the Company’s filings and reports with the Securities and Exchange Commission including the Company’s Annual Report on Form 10-K for the year ended March 31, 2016. Such statements are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially. All forward-looking statements and cautionary statements included in this document are made as of the date hereby based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward looking statement or cautionary statement.

NICHOLAS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands, Except Per Share Amounts)
         
  Three months ended      
December 31,          		 Nine months ended      
December 31,          
  2016      2015      2016      2015     
Revenue
  Interest and fee income on finance receivables $22,044  $22,757  $67,606  $67,469 
         
Expenses
  Operating 8,098  8,367  25,624  25,273 
  Professional fees 386  306  1,004  1,131 
  Provision for credit losses 8,796  7,599  23,966  18,766 
  Interest Expense 2,258  2,311  6,745  6,750 
  Change in fair value of interest rate swaps (81) (251) (184) (128)
  19,457  18,332  57,155  51,792 
 
Operating income before income taxes 2,587  4,425  10,451  15,677 
  Income tax expense 981  1,698  3,972  6,024 
    Net income $1,606  $2,727  $6,479  $9,653 
 
Earnings Per share:
    Basic $  0.21  $  0.36  $  0.83  $  1.27 
    Diluted $  0.21  $  0.35  $  0.83  $  1.24 
 
Weighted average shares 7,590,000  7,623,000  7,672,000  7,620,000 
 
Weighted average shares and assumed dilution 7,650,000  7,771,000  7,732,000  7,778,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  December 31,
2016      		 March 31, 
2016     
Cash $   3,664  $   1,849 
Finance receivables, net 321,757  311,837 
Other assets 12,420  11,623 
     
  Total assets $337,841  $325,309 
     
Line of credit $214,340  $211,000 
Other Liabilities 13,707  11,460 
 
  Total Liabilities 228,047  222,460 
 
Shareholders' equity 109,794  102,849 
 
Total Liabilities and shareholders' equity $337,841   $325,309  
 

       
Portfolio Summary

Three months ended
December 31,
(In thousands)

Nine months ended
December 31,
(In thousands),
  2016      2015      2016      2015     
Average finance receivables, net of unearned interest (1) $349,916  $340,307  $345,950  $333,006 
Average indebtedness (2) $210,745  $212,685   $209,875  $207,072 
Interest and fee income on finance receivables $  22,044  $  22,757  $  67,606  $  67,469 
Interest Expense 2,258  2,311  6,745  6,750 
Net Interest and fee income on finance receivables $19,786  $20,446  $60,861  $60,719 
Gross portfolio yield (3) 25.20%  26.75%  26.06%  27.01% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest		 2.58 %  2.72 %  2.60%  2.70% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest		 10.05%  8.93%  9.24%  7.51% 
Net portfolio yield (3) 12.57%  15.10%  14.22%  16.80% 

Marketing, salaries, employee benefits, depreciation,
   administrative, professional fees as a percentage of
   average finance receivables, net of unearned interest 		9.70%  10.19%  10.26%  10.57% 
Pre-tax yield as a percentage of average finance
   receivables, net of unearned interest (4)		 2.87%  4.91%  3.96%  6.23% 
Write-off to liquidation (5) 12.35%  10.31%  11.02%  8.99% 
Net charge-off percentage (6) 8.86%  8.19%  8.57%  7.57% 
 
Note:  All three and nine month key performance indicators expressed as percentages have been annualized.
(1)     Average finance receivables, net of unearned interest, represents the average of gross finance receivables, less unearned
           interest throughout the period.
(2)     Average indebtedness represents the average outstanding borrowings under the Line.
(3)     Gross portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables,
            net of unearned interest. Net portfolio yield represents interest and fee income on finance receivables minus (a) interest expense
           and (b) the provision for credit losses as a percentage of average finance receivables, net of unearned interest.
(4)     Pre-tax yield represents net portfolio yield minus administrative expenses (marketing, salaries, employee benefits, depreciation,
            administrative, and professional fees) as a percentage of average finance receivables, net of unearned interest.
(5)     Write-off to liquidation percentage is defined as net charge-offs divided by liquidation. Liquidation is defined as beginning
           receivable balance plus current period purchases minus voids and refinances minus ending receivable balance.
(6)     Net charge-off percentage represents net charge-offs divided by average finance receivables, net of unearned interest,
            outstanding during the period.

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to automobile finance installment contracts ("Contracts") and direct consumer loans ("Direct Loans"), excluding any Chapter 13 bankruptcy accounts:
  (In thousands, except percentages)
  Delinquencies
Contracts  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2016 $ 499,549 $ 35,184 $ 17,263 $ 19,717 $ 72,164
    7.04% 3.46% 3.95% 14.45%
   
December 31, 2015 $ 478,397 $ 23,971 $ 7,030 $ 4,082 $ 35,083
    5.01% 1.47% 0.85% 7.33%
Direct Loans  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2016 $ 11,511 $ 282 $ 155 $ 125 $ 562
    2.45% 1.34% 1.09% 4.88%
   
December 31, 2015 $ 12,032 $ 212 $ 63 $ 37 $ 312
    1.76% 0.53% 0.31% 2.60%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest (1):
         
 
Three months ended
December 31,
(Purchases in thousands)
Nine months ended
December 31, 
(Purchases in thousands)
  2016      2015      2016     2015     
Purchases $45,941  $41,605  $128,312 $142,169 
Weighted APR 21.99%  22.55%  22.20%  22.66% 
Average Discount 6.87%  7.59%  7.00%  7.56% 
Weighted average term (months) 57  56  57  56 
Average Loan $  11,945  $   11,346  $   11,727  $   11,363 
Number of contracts 3,846  3,667  10,942  12,512 
 
The following table presents selected information on the Contract portfolio of the Company (1):
         
   
As of      
December 31,
  
Portfolio   2016      2015       
Weighted APR 22.43%  22.71%   
Weighted Average Discount 7.48%  7.70%   
Weighted average term (months) 57  56   
Number of active contracts 37,834  38,013   
 
(1) The following table does not include any selected information on Direct Loans; which only accounts for approximately 2% of the Company's total receivable portfolio.