November 2, 2016

Nicholas Financial Reports 2nd Quarter Results

Clearwater, Florida, - Nicholas Financial, Inc. (NASDAQ: NICK) announced that for the three months ended September 30, 2016, diluted earnings per share decreased 40% to $0.25 as compared to $0.42 for the three months ended September 30, 2015. Net earnings were $1,970,000 and $3,257,000 for the three months ended September 30, 2016 and 2015, respectively. Revenue remained relatively flat at $22,647,000 for the three months ended September 30, 2016 as compared to $22,687,000 for the three months ended September 30, 2015.

For the six months ended September 30, 2016, per share diluted net earnings decreased 30% to $0.62 as compared to $0.89 for the six months ended September 30, 2015. Net earnings were $4,873,000 and $6,927,000 for the six months ended September 30, 2016 and 2015, respectively. Revenue increased 2% to $45,562,000 for the six months ended September 30, 2016 as compared to $44,712,000 for the six months ended September 30, 2015.

Our net earnings for the three and six months ended September 30, 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 due to a change in the fair value of the interest rate swaps.

“During our second quarter, new loan origination continued to be below Company expectations due to numerous companies looking to acquire automobile retail installment contracts. Some of these companies are willing to acquire loans at riskier pricing, which we believe will ultimately leave those companies with unprofitable portfolios. During our second quarter, we closed three branch locations as a result of these respective markets not meeting the Company’s operating criteria to remain viable branch locations. Also, as previously disclosed, effective October 1, 2016, the Company has moved all loan-servicing operations from the branch locations to a centralized location within its Corporate Headquarters in Clearwater, FL. 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 operations during our third quarter which ends December 31, 2016.” 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 7,779,000 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.

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      
September 30,          		 Six months ended      
Septemember 30,          
  2016      2015      2016      2015     
Revenue:
  Interest and fee income on finance receivables $22,647  $22,687  $45,562  $44,712 
         
Expenses
  Operating 8,852  8,483  17,526  16,906 
  Professional fees 371  377  618  825 
  Provision for credit losses 8,144  6,178  15,170  11,167 
  Interest Expense 2,243  2,273  4,487  4,439 
  Change in fair value of interest rate swaps (121) 79  (103) 123 
  19,498  17,390  37,698  33,460 
 
Operating income before income taxes 3,158  5,297  7,864  11,252 
  Income tax expense 1,188  2,041  2,991  4,326 
    Net income $1,970  $3,256  $4,873  $6,926 
 
Earnings Per share:
    Basic $  0.25  $  0.43  $  0.63  $  0.91 
    Diluted $  0.25  $  0.42  $  0.62  $  0.89 
 
Weighted average shares 7,672,000  7,622,000  7,672,000  7,619,000 
 
Weighted average shares & assumed dilution 7,733,000  7,752,000  7,733,000  7,748,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  September 30,
2016      		 March 31, 
2016     
Cash $   3,799  $   1,849 
Finance receivables, net 312,727  311,837 
Other assets 12,255  11,623 
     
  Total assets $328,781  $325,309 
     
Line of credit $209,000  $211,000 
Other Liabilities 11,755  11,460 
 
  Total Liabilities 220,755  222,460 
 
Shareholders' equity 108,026  102,849 
 
Total Liabilities and shareholders' equity $328,781   $325,309  
 

Portfolio Summary Three months ended
September 30,		 Six months ended
September 30,
  2016      2015      2016      2015     
Average finance receivables, net of unearned interest (1) $343,542  $334,701  $343,327  $329,628 
Average indebtedness (2) $208,461  $207,446  $209,437  $204,275 
Interest and fee income on finance receivables $  22,647  $  26,687  $  45,562  $  44,712 
Interest Expense 2,243  2,273  4,487 4,439 
Net Interest and fee income on finance receivables $20,404  $20,414  $41,075  $40,273 
Gross portfolio yield (3) 26.37%  27.11%  26.54%  27.13% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest 		2.61 %  2.72 %  2.61%  2.69% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest 		9.48%  7.38%  8.84%  6.78% 
Net portfolio yield (3) 14.28%  17.01%  15.09%  17.66% 
Marketing, salaries, employee benefits, depreciation
  administrative, and professional fees as a percentage of
  average finance receivables, net of unearned interest		 10.74%  10.59%  10.57%  10.76% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (4)		 3.54%  6.42%  4.52%  6.90% 
Write-off to liquidation (5) 11.41%  9.64%  10.42%  8.34% 
Net charge-off percentage (6) 9.36%  8.03%  8.43%  6.95% 
 
Note:  All three and six 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)     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 Chapter 13 bankrupt accounts:
 
  Delinquencies
Contracts  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days 90 + days Total
September 30, 2016 $ 484,479 $ 29,327 $ 10,654 $ 7,310 $ 47,291
    6.05% 2.20% 1.51% 9.76%
   
September 30, 2015 $ 475,089 $ 19,746 $ 5,603 $ 2,575 $ 27,924
    4.16% 1.18% 0.54% 5.88%
Direct Loans  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days 90 + days Total
September 30, 2016 $ 11,088 $ 296 $ 87 $ 71 $ 454
    2.67% 0.78% 0.64% 4.09%
   
September 30, 2015 $ 11,673 $ 156 $ 28 $ 26 $ 210
    1.34% 0.24% 0.22% 1.80%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest (1):
         
  Three months ended      
September 30,          		 Six months ended       
September 30,           
  2016      2015      2016      2015     
Purchases $41,540  $48,189  $82,370  $100,564 
Weighted APR 22.26%  22.76%  22.32%  22.71% 
Average Discount 7.01%  7.57%  7.08%  7.55% 
Weighted average term (months) 57  56  57  56 
Average Loan $   11,565  $   11,357  $   11,608  $   11,370 
Number of contracts 3,592  4,243  7,096  8,845 
 
 
The following table presents selected information on the entire Contract porfolio of the Company (1):
 
  As of      
September 30,          		            
  2016      2015                 
Weighted APR 22.53%  22.77%     
Average Discount 7.39%  8.01%     
Weighted average term (months) 57  55     
Number of contracts 37,383  38,124     
 
(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.