January 28, 2016

Nicholas Financial Announces 3rd Quarter Results

Clearwater, Florida, - January 28, 2016 - Nicholas Financial, Inc. (NASDAQ: NICK), today announced that for the three months ended December 31, 2015, per share diluted net earnings increased 17% to $0.35 as compared to $0.30 for the three months ended December 31, 2014. Net earnings were $2,727,000 and $3,769,000 for the three months ended December 31, 2015 and 2014, respectively. Revenue increased 4% to $22,757,000 for the three months ended December 31, 2015 as compared to $21,800,000 for the three months ended December 31, 2014.

For the nine months ended December 31, 2015, per share diluted net earnings increased 18% to $1.24 as compared to $1.05 for the nine months ended December 31, 2014. Net earnings were $9,654,000 and $13,008,000 for the nine months ended December 31, 2015 and 2014, respectively. Revenue increased 4% to $67,469,000 for the nine months ended December 31, 2015 as compared to $64,856,000 for the nine months ended December 31, 2014.

Our net earnings for the three months ended December 31, 2015 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 net earnings were positively affected by a reduction in operating expenses as a percentage of net finance receivables and were also favorably impacted by a change in the fair value of our interest rate swap agreements. The interest rate swap agreements resulted in a pre-tax gain of $251,000 for the three-month period ended December 31, 2015 compared to a pre-tax loss of $145,000 for the comparable three-month period ended December 31, 2014. Our per share diluted net earnings for the three months ended December 31, 2015, 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 nine months ended December 31, 2015 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 net earnings were positively affected by a reduction in operating expenses as a percentage of net finance receivables and were also favorably impacted by a change in the fair value of our interest rate swap agreements. The interest rate swap agreements resulted in a pre-tax gain of $128,000 for the nine-month period ended December 31, 2015 compared to a pre-tax loss of $106,000 for the comparable nine-month period ended December 31, 2014. Our per share diluted net earnings for the nine months ended December 31, 2015, 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. Results for the nine months ended December 31, 2014 were also positively affected by a decrease in income tax expense of $804,000 or $0.07 per diluted share. This reduction related to professional fees associated with the previously announced potential sale of the Company that were not initially deductible for income tax purposes, but became deductible as a result of the termination of the Arrangement Agreement as announced on July 1, 2014.

“We continue to experience aggressive competition in our markets, which is putting pressure on margins and making it more difficult to acquire business that is consistent with our internal guidelines. We will continue to evaluate our current branch network and may consolidate or close certain branch locations in the future. We also continue our expansion in the state of Texas and plan to open our second location, specifically in Dallas, during our fourth quarter which ends March 31, 2016.” stated Ralph T. Finkenbrink, the Company’s President and CEO.

Nicholas Financial, Inc. is one of the largest publically 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 7,750,000 shares of common stock outstanding. For an index of Nicholas Financial, Inc. news releases and public filings please 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, competitive conditions in our industry, regulatory conditions and related costs, our ability to open new branch offices and expand into new markets, as well as 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      
December 31,          
Nine months ended      
December 31,          
  2015      2014      2015      2014     
Revenue
  Interest and fee income on finance receivables $22,757  $21,800  $67,469  $64,856 
         
Expenses
  Operating 8,367  7,948  25,272  24,186 
  Professional fees 306  314  1,131  1,125 
  Provision for credit losses 7,599  5,797  18,766  15,183 
  Interest Expense 2,311  1,458  6,751  4,392 
  Change in fair value of interest rate swaps (251)  145  (128)  106 
  18,332  15,662  51,792  44,992 
 
Operating income before income taxes 4,425  6,138  15,677  19,864 
  Income tax expense 1,698  2,369  6,023  6,856 
    Net income $2,727  $3,769  $9,654  $13,008 
 
Earnings Per share:
    Basic $  0.36  $  0.31  $  1.27  $  1.07 
    Diluted $  0.35  $  0.30  $  1.24  $  1.05 
 
Weighted average shares 7,623,000  12,197,000  7,620,000  12,189,000 
 
Weighted average shares and assumed dilution 7,771,000  12,375,000  7,778,000  12,372,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  December 31,
2015      
March 31, 
2015     
Cash $   3,006  $   3,388 
Finance receivables, net 310,314  288,904 
Other assets 11,166  10,237 
     
  Total assets $324,486  $302,529 
     
Line of credit $213,000  $199,000 
Other Liabilities 11,497  13,641 
 
  Total Liabilities 224,497  212,641 
 
Shareholders' equity 99,989  89,888 
 
Total Liabilities and shareholders' equity $324,486   $302,529  
 

       
Portfolio Summary
Three months ended
December 31,
Nine months ended
December 31,
  2015      2014      2015      2014     
Average finance receivables, net of unearned interest (1) $340,306,851  $310,882,006  $333,005,943  $308,351,789 
Average indebtedness (2) $212,684,576  $130,112,500   $207,071,567  $130,580,000 
Interest and fee income on finance receivables $  22,757,326  $  21,800,764  $  67,469,297  $  64,851,435 
Interest Expense 2,310,848  1,457,919  6,750,471  4,391,697 
Net Interest and fee income on finance receivables $20,446,478  $20,342,845  $60,718,826  $60,459,738 
Weighted average contractual rate (3) 22.78%  23.02%  22.78%  23.02% 
Average cost of borrowed funds (2) 4.35%  4.48%  4.35%  4.48% 
Gross portfolio yield (4) 26.75%  28.05%  27.01%  28.04% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest
2.72 %  1.88 %  2.70%  1.90% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest
8.93%  7.46%  7.51%  6.57% 
Net portfolio yield (4) 15.10%  18.71%  16.80%  19.57% 
Marketing, salaries, employee benefits, depreciation
   and administrative, professional fee expenses as a percentage of
   average finance receivables, net of unearned interest (5)
10.19%  10.63%  10.57%  10.94% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (6)
4.91%  8.08%  6.23%  8.63% 
Write-off to liquidation (7) 10.31%  9.60%  8.99%  8.38% 
Net charge-off percentage (8) 8.19%  8.16%  7.38%  7.15% 
 
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. 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.
(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 nine-month period ensded December 31, 2014 included expenses associated with the potential sale of the
           Company. Absent these expenses would have been 10.79%.
(6)     Pre-tax yield represents net portfolio yield minus administrative 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.
(9)     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"):
 
  Delinquencies
Contracts  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2015 $ 478,397,403 $ 23,970,608 $ 7,029,791 $ 4,082,125 $ 35,082,526
    5.01% 1.47% 0.85% 7.33%
   
December 31, 2014 $ 431,877,085 $ 21,749,891 $ 6,103,607 $ 3,180,951 $ 31,034,449
    5.04% 1.41% 0.74% 7.19%
Direct Loans  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2015 $ 12,032,334 $ 211,921 $ 63,543 $ 36,850 $ 312,314
    1.76% 0.53% 0.31% 2.60%
   
December 31, 2014 $ 11,680,909 $ 164,347 $ 59,043 $ 46,776 $ 270,166
    1.41% 0.51% 0.40% 2.31%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
December 31,          
Nine months ended       
December 31,           
  2015      2014      2015     2014     
Purchases $41,605,310  $41,832,549  $142,169,095 $129,478,894 
Weighted APR 22.55%  22.77%  22.66%  22.95% 
Average Discount 7.59%  8.04%  7.56%  8.13% 
Weighted average term (months) 56  55  56  55 
Average Loan $  11,346  $   11,041  $   11,363  $   11,005 
Number of contracts 3,667  3,789  12,512  11,765