May 17, 2015

Nicholas Financial Reports 4th Quarter Results

Clearwater, Florida, - May 7, 2017 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended March 31, 2017, diluted earnings per share decreased 140.0% to a net (loss) of $(0.14) as compared to a net gain of $0.35 for the three months ended March 31, 2016. Net (loss) earnings were $(1.1) million and $2.7 million for the three months ended March 31, 2017 and 2016, respectively. Revenue decreased 1.3% to $22.9 million for the three months ended March 31, 2017 as compared to $23.2 million for the three months ended March 31, 2016.

For the year ended March 31, 2017, per share diluted net earnings decreased 56.6% to $0.69 as compared to $1.59 for the year ended March 31, 2016. Net earnings were $5.4 million and $12.4 million for the years ended March 31, 2017 and 2016, respectively. Revenue remained relatively flat at $90.5 million for the year ended March 31, 2017 as compared to $90.7 million for the year ended March 31, 2016.

Our net earnings for the three and twelve months ended March 31, 2017 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. Additionally, several negative factors, including an extremely competitive market, greater than anticipated losses, and lower auction proceeds have undermined our loss estimates and led to actual losses incurred that were greater than anticipated. We remain cautious with respect to near term losses as delinquency percentages remain elevated.

We have recently taken steps that we believe will result in lower losses on new static pools, beginning with the March 31, 2017 pool of contracts acquired. During the three months ending March 31, 2017, we have created a centralized funding department whose primary function is to review approved applications prior to funding the contract to the dealer. Stipulations that are embedded in our approvals of applications are verified by the centralized department to eliminate funding acquired contracts to dealers that had inaccurate job information, income proofs or certain other items that would have led us to turn down the application. Effective March 1, 2017 we have also changed our underwriting guidelines to incorporate the results of a retroactive study of our actual contracts measured by a third-party provider of alternative data. The results of this analysis have assisted us in identifying areas where our underwriting guidelines did not price the risk appropriately. We continue to evaluate our operating structure and will attempt to make further improvements that can be implemented. The market for contract acquisition remains challenging and we do not expect any material improvements in the near-term.

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 7,810,000 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.

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      
March 31,          
Year ended         
March 31,            
  2017      2016      2017      2016     
 
  Interest and fee income on finance receivables $22,860  $23,238  $90,466  $90,707 
 
Expenses
  Operating 8,921  8,889  35,549  35,293 
  Provision for credit losses 13,211  7,512  37,177  26,278 
  Interest Expense 2,477  2,257  9,222  9,007 
  Change in fair value of interest rate swaps (38) 152  (222) 2
  24,571  18,810  81,726  70,602 
 
Operating income before income taxes (1,711) 4,428  8,740  20,105 
  Income tax (benefit) expense (641) 1,702  3,331  7,726 
    Net income $ (1,070) $2,726  $5,409  $12,379 
 
Earnings Per share:
    Basic $  (0.14) $  0.35   $  0.70  $  1.60 
    Diluted $  (0.14) $  0.35   $  0.69  $  1.59 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  March 31,
2017      
March 31, 
2016     
Cash $   2,855  $   1,849 
Finance receivables, net 317,205  311,837 
Other assets 13,552  11,623 
     
  Total assets $333,612  $325,309 
     
Line of credit $213,000  $211,000 
Other Liabilities 11,752  11,460 
 
  Total Liabilities 224,752  222,460 
 
Shareholders' equity 108,860  102,849 
 
Total Liabilities and shareholders' equity $333,612   $325,309  
 

Portfolio Summary Three months ended
March 31,
Year ended
March 31,
  2017      2016      2017      2016     
Average finance receivables, net of unearned interest (1) $352,486  $340,764  $347,367  $334,754 
Average indebtedness (2) $214,323  $211,681  $210,987  $208,214 
Interest and fee income on finance receivables $  22,861  $  23,238  $  90,466  $  90,707 
Interest Expense 2,477  2,257  9,222  9,007 
Net Interest and fee income on finance receivables $20,384  $20,981  $81,244  $81,700 
Gross portfolio yield (3) 25.94%  27.28%  26.04%  27.10% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest
2.81 %  2.65 %  2.65%  2.69% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest
14.99%  8.82%  10.70%  7.85% 
Net portfolio yield (3) 8.14%  15.81%  12.69%  16.56% 
Marketing, salaries, employee benefits, depreciation,
  administrative and professional fees as a percentage
  average finance receivables, net of unearned interest)
10.12%  10.44%  10.23%  10.54% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (4)
(1.98%) 5.37%  2.46%  6.02% 
Write-off to liquidation (5) 13.96%  9.39%  11.81%  9.10% 
Net charge-off percentage (6) 11.69%  8.05%  9.37%  7.56% 
 
Note:  All three month and twelve-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 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") on a gross basis which includes unearned interest, excluding any Chapter 13 bankrupt accounts:
 
  Delinquencies
Contracts  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 Total
March 31, 2017 $ 498,030 $ 25,450 $ 12,388 $ 12,197 $ 50,035
    5.11% 2.49% 2.45% 10.05%
   
March 31, 2016 $ 482,864 $ 17,466 $ 6,069 $ 3,366 $ 26,901
    3.61% 1.26% 0.70% 5.57%
Direct Loans  Gross Balance
Outstanding
30 - 50 days 60 - 89 days 90 +days Total
March 31, 2017 $ 10,628 $ 191 $ 67 $ 155 $ 413
    1.80% 0.63% 1.46% 3.89%
   
March 31, 2016 $ 10,978 $ 161 $ 41 $ 38 $ 240
    1.47% 0.37% 0.35% 2.19%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest (1):
         
 
Three months ended
March 31,
(Purchases in thousands)

Nine months ended
March 31, 

(Purchases in thousands)
  2017      2016      2017     2016     
Purchases $42,629  $45,106  $170,941 $187,275 
Weighted APR 22.28%  22.65%  22.22%  22.66% 
Average Discount 7.33%  7.36%  7.08%  7.51% 
Weighted average term (months) 56  57  57  56 
Average Loan $  11,593  $   11,302  $   11,693  $   11,348 
Number of contracts 3,677  3,991  14,619  16,503 
 
The following table presents selected information on the Contract portfolio of the Company (1):
         
   
As of      
March 31,
 
Portfolio   2017      2016       
Weighted APR 22.37%  22.67%   
Weighted Average Discount 7.41%  7.82%   
Weighted average term (months) 57  56   
Number of active contracts 37,453  37,855   
 
(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.