May 9, 2016

Nicholas Financial Reports 4th Quarter Results

Clearwater, Florida, - May 9, 2016 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended March 31, 2016, diluted earnings per share increased 6% to $0.35 as compared to $0.33 for the three months ended March 31, 2015. Net earnings were $2,725,000 and $3,848,000 for the three months ended March 31, 2016 and 2015, respectively. Revenue increased 6% to $23,238,000 for the three months ended March 31, 2016 as compared to $21,934,000 for the three months ended March 31, 2015.

For the year ended March 31, 2016, diluted earnings per share increased 15% to $1.59 as compared to $1.38 for the year ended March 31, 2015. Net earnings were $12,379,000 and $16,856,000 for the year ended March 31, 2016 and 2015, respectively. Revenue increased 5% to $90,707,000 for the year ended March 31, 2016 as compared to $86,790,000 for the year ended March 31, 2015.

Our net earnings for the three months ended March 31, 2016 were adversely affected primarily by an increase in the provision for credit losses and to a lesser extent an increase in interest expense and a reduction in the gross portfolio yield. During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

Our net earnings for the twelve months ended March 31, 2016 were adversely affected by a reduction in the gross portfolio yield, an increase in interest expense and an increase in the provision for credit losses. Gross portfolio yield and provision for credit losses changes were primarily the result of increased competition. Our per share diluted net earnings for the twelve months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

“During our fourth quarter we opened our second branch location in the state of Texas, specifically in Dallas, We have also commenced contract acquisition in Pittsburgh, Pennsylvania utilizing the underwriting staff of our Columbus, Ohio branch location. During the first quarter of Fiscal 2017 we will further evaluate the Pittsburgh portfolio and decide whether we will open a Pittsburgh branch. We continue to evaluate market conditions which include a continued high level of intense competition. We are currently evaluating our organization and its structure. Our decisions on how we plan to continue operating our business strategy will be influenced by the sustainability of some of our competitors underwriting and risk based pricing stated Ralph T. Finkenbrink, the Company’s President and CEO.

Nicholas Financial, Inc. is one of the largest publicly traded specialty consumer finance companies in North America. The Company operates branch locations in both the Southeastern and the Midwestern states. The Company has approximately 7,753,000 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, 2015. 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,            
  2016      2015      2016      2015     
 
  Interest and fee income on finance receivables $23,238  $21,934  $90,707  $86,790 
 
Expenses
  Operating 8,827  8,420  34,099  32,606 
  Professional fees 63  258  1,194  1,383 
  Provision for credit losses 7,512  5,188  26,278  20,371 
  Interest Expense 2,256  1,578  9,007  5,970 
  Change in fair value of interest rate swaps 152  258  24  364 
  18,810  15,702  70,602  60,694 
 
Operating income before income taxes 4,428  6,232  20,105  26,096 
  Income tax expense 1,703  2,384  7,726  9,240 
    Net income $2,725  $3,848  $12,379  $16,856 
 
Earnings Per share:
    Basic $  0.35  $  0.34   $  1.60  $  1.40 
    Diluted $  0.35  $  0.33   $  1.59  $  1.38 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  March 31,
2016      		 March 31, 
2015     
Cash $   1,849  $   3,388 
Finance receivables, net 311,837  288,904 
Other assets 11,623  10,237 
     
  Total assets $325,309  $302,529 
     
Line of credit $211,000  $199,000 
Other Liabilities 11,460  13,641 
 
  Total Liabilities 222,460  212,641 
 
Shareholders' equity 102,849  89,888 
 
Total Liabilities and shareholders' equity $325,309   $302,529  
 

Portfolio Summary Three months ended
March 31,		 Year ended
March 31,
  2016      2015      2016      2015     
Average finance receivables, net of unearned interest (1) $340,763,898  $314,730,362  $334,754,250  $309,994,611 
Average indebtedness (2) $211,680,748  $141,216,714  $208,214,246  $133,433,740 
Interest and fee income on finance receivables $  23,238,008  $  21,933,607  $  90,707,306  $  86,789,958 
Interest Expense 2,256,195  1,578,737  9,006,666  5,970,434 
Net Interest and fee income on finance receivables $20,981,813  $20,354,870  $81,700,639  $80,819,524 
Weighted average contractual rate (3) 22.73%  22.93%  22.73%  22.93% 
Average cost of borrowed funds (2) 4.26%  4.47%  4.33%  4.47% 
Gross portfolio yield (4) 27.28%  27.88%  27.10%  28.00% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest		 2.65 %  2.01 %  2.69%  1.93% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest		 8.82%  6.59%  7.85%  6.57% 
Net portfolio yield (4) 15.81%  19.28%  16.56%  19.50% 
Marketing, salaries, employee benefits, depreciation,
  administrative and professional fee expenses as a percentage
  average finance receivables, net of unearned interest (5)
 10.44%  11.03%  10.54%  10.96% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (6)		 5.37%  8.25%  6.02%  8.54% 
Write-off to liquidation (7) 9.39%  7.42%  9.10%  8.13% 
Net charge-off percentage (8) 8.05%  6.72%  7.56%  7.04% 
 
Note:  All three 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. Average cost of borrowed funds
           represents interest expense as a percentage of average indebtedness.
(3)     Weighted average contractual rate represents the weighted average annual percentage rate ("APR") of all Contracts and Direct
          Loans as of the period ending date.
(4)     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.

(5)     The numerator for the twelve-month period ended March 31, 2015 includes expenses associated with the potential sale of the
           Company. Absent these expenses, the percentages would have been 10.85%.
(6)     Pre-tax yield represents net portfolio yield minus operating expenses as a percentage of average finance receivables, net of
            unearned interest.
(7)     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.
(8)     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 under its direct consumer loans ("Direct Loans"), excluding any Chapter 13 bankrupt accounts:
 
  Delinquencies
Contracts  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days Over 90 Total
March 31, 2016 $ 482,863,893 $ 17,465,741 $ 6,069,074 $ 3,365,981 $ 26,900,796
    3.61% 1.26% 0.70% 5.57%
   
March 31, 2015 $ 443,083,009 $ 13,694,370 $ 3,435,332 $ 1,330,093 $ 18,459,795
    3.09% 0.78% 0.30% 4.17%
Direct Loans  Gross Balance
Outstanding		 30 - 50 days 60 - 89 days 90 +days Total
March 31, 2016 $ 10,978,105 $ 161,514 $ 40,501 $ 38,288 $ 240,303
    1.47% 0.37% 0.35% 2.19%
   
March 31, 2015 $ 10,911,845 $ 122,718 $ 41,894 $ 14,652 $ 179,354
    1.12% 0.39% 0.13% 1.64%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
March 31,           		 Year ended        
March 31,          
Contracts 2016      2015      2016      2015     
Purchases $45,106,395  $48,889,450  $187,275,490 $178,368,342
Weighted APR 22.65%  22.79%  22.66%  22.90% 
Average Discount 7.36%  7.96%  7.51%  8.08% 
Weighted average term (months) 57  55  56  55 
Average Loan $  11,302  $  10,867  $  11,348  $  10,967 
Number of contracts 3,991  4,499  16,503  16,264