Nicholas Financial Reports

1st Quarter Fiscal Year 2024 Results

•
We substantially completed our restructuring plan and returned to profitability, recognizing $1.7 million in pre-tax income for the three months ended June 30, 2023
•
Our pre-tax yield increased to 5.6% for the three months ended June 30,2023, and improvement of 9.2% year over year
•
Our operating expenses decreased 55.3% for the first fiscal quarter, compared to the same period year over year

August 16, 2023 - Clearwater, Florida - Nicholas Financial, Inc. (NASDAQ: NICK) (the "Company") announced a net income for the three months ended June 30, 2023 of $1.6 million compared to net loss of $1.8 million for the three months ended June 30, 2022. Basic and diluted net earnings per share was $0.21 for the three months ended June 30, 2023 as compared to basic and diluted net loss per share of $0.24 for the three months ended June 30, 2022. Interest and fee income on finance receivables decreased 41.3% to $7.1 million for the three months ended June 30, 2023 as compared to $12.1 million for the three months ended June 30, 2022. The Company reported income before income taxes for the three months ended June 30, 2023 of $1.7 million compared to a loss before income taxes of $2.4 million for the three months ended June 30, 2022. The Company recorded income tax expense of approximately $0.1 million during the three months ended June 30, 2023 as compared to an income tax benefit of $0.6 million during the three months ended June 30, 2022.

We adopted ASU 2016-13 on April 1, 2023 and recognized a decrease to our opening retained earnings balance of approximately $0.2 million, which reflects an increase to the allowance for credit losses of approximately $0.2 million.

ASU 2016-13 introduces a new accounting model to measure credit losses for financial assets. In contrast to the previous incurred loss model, ASU 2016-13 requires credit losses for financial assets measured at amortized cost to be based on the total current expected credit losses over the life of those financial assets. Following the adoption of ASU 2016-13, the provision for credit losses decreased 82.3% to $0.6 million for the three months ended June 30, 2023 as compared to $3.6 million for the three months ended June 30, 2022. The net charge-off percentage increased to 9.6% for the three months ended on June 30, 2023, from 6.5% for the three months ended on June 30, 2022, primarily due to increased delinquencies and loan defaults.

For the quarter ended June 30, 2023, the Company originated $2.7 million in finance receivables, collected $15.6 million in principal payments, decreased debt by $13.9 million and increased cash by $0.2 million.

"We are pleased to announce income of $1.6 million for the three months ended June 30, 2023. Over the past twelve months the Company has significantly changed its operating strategy. The focus has been to reduce operating expenses and free up capital permitting the Company to allocate excess capital to increase shareholder returns. The Company continued to originate $2.7 million of indirect finance receivables while building our relationship with our servicing agent, Westlake Portfolio Management, during the first quarter of fiscal year 2024," commented Mike Rost, CEO of Nicholas Financial.

"Turning the Company in the right direction is an ongoing process. I feel we have made progress in the first fiscal quarter. Our ultimate goals are still the same, free up capital and permit the Company to allocate that excess capital to increase shareholder equity, while continuing to reduce operating expenses throughout the Company," concluded Rost.

Key Performance Indicators on Contracts Purchased

(Purchases in thousands)

Number of

Average

Fiscal Year

Contracts

Principal Amount

Amount

Average

Average

Average

/Quarter

Purchased

Purchased#

Financed*^

APR*

Discount%*

Term*

2024

219

$

2,720

$

12,420

22.0

%

6.0

%

50

1

219

2,720

12,420

22.0

%

6.0

%

50

2023

4,040

$

47,526

$

11,932

22.5

%

6.5

%

48

4

127

1,579

12,433

22.2

%

6.2

%

49

3

383

4,511

11,778

22.4

%

6.8

%

48

2

1,595

19,082

11,964

22.7

%

6.4

%

48

1

1,935

22,354

11,552

22.9

%

6.6

%

48

2022

7,793

$

85,804

$

11,002

23.1

%

6.9

%

47

4

2,404

27,139

11,289

22.9

%

6.9

%

47

3

1,735

19,480

11,228

23.1

%

6.8

%

47

2

1,707

18,880

11,061

23.0

%

6.7

%

47

1

1,947

20,305

10,429

23.2

%

7.0

%

46

2021

7,307

$

74,025

$

10,135

23.4

%

7.5

%

46

Key Performance Indicators on Direct Loans Originated
(Originations in thousands)

Number of

Principal

Fiscal Year

Loans

Amount

Average Amount

Average

Average

/Quarter

Originated

Originated

Financed*^

APR*

Term*

2024

$

-

$

-

$

-

0.0

%

-

1

-

-

-

0.0

%

-

2023

3,662

$

15,822

$

4,277

30.4

%

26

4

-

-

-

0.0

%

-

3

245

1,080

4,128

29.6

%

27

2

1,427

6,527

4,574

30.3

%

25

1

1,990

8,215

4,128

31.2

%

25

2022

6,770

$

28,740

$

4,307

30.5

%

26

4

1,584

7,458

4,708

30

%

27

3

2,282

8,505

3,727

31.8

%

24

2

1,588

7,040

4,433

30

%

26

1

1,316

5,737

4,359

30.1

%

25

2021

3,497

$

14,148

$

4,131

29.6

%

25

*Each average included in the tables is calculated as a simple average.

^Average amount financed is calculated as a single loan amount.

#Bulk portfolio purchase excluded for period-over-period comparability

Nicholas Financial, Inc. (NASDAQ: NICK) is a specialized consumer finance company, operating branch locations in both Southeastern and Midwestern U.S. States. Nicholas Financial engages primarily in acquiring and servicing automobile finance installment contracts ("Contracts") for purchases of used and new automobiles and light trucks. Additionally, Nicholas Financial sells consumer-finance related products and originated direct consumer loans ("Direct Loans") prior to December 2022 . For an index of Nicholas Financial, Inc's new releases or to obtain a specific release, please visit our website at www.nicholasfinancial.com.

Cautionary Note regarding Forward-Looking Statements

This press release may contain various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, that represent the Company's current expectations or beliefs concerning future events. Statements other than those of historical fact, as well as those identified by words such as "anticipate," "estimate," intend," "plan," "expect," "project," "believe," "may," "will," "should," "would," "could," "probable" and any variation of the foregoing and similar expressions are forward-looking statements. Such forward-looking statements are inherently subject to risks and uncertainties. The Company's actual results and financial condition 28may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include the following: the ongoing impact of the COVID-19 pandemic and the mitigation efforts by governments and related effects on our financial condition, business operations and liquidity, our customers, our employees, and the overall economy; recently enacted, proposed or future legislation and the manner in which it is implemented; changes in the U.S. tax code; the nature and scope of regulatory authority, particularly discretionary authority, that may be exercised by regulators, including, but not limited to, the Securities and Exchange Commission (SEC), Department of Justice, U.S. Consumer Financial Protection Bureau, and individual state regulators having jurisdiction over the Company; the unpredictable nature of regulatory proceedings and litigation; employee misconduct or misconduct by third parties; uncertainties associated with management turnover and the effective succession of senior management; media and public characterization of consumer installment loans;

labor unrest; the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company's reported consolidated financial statements or necessitate material delays or changes in the issuance of the Company's audited consolidated financial statements; the Company's assessment of its internal control over financial reporting; changes in interest rates; risks relating to the acquisition or sale of assets or businesses or other strategic initiatives, including increased loan delinquencies or net charge-offs, the loss of key personnel, integration or migration issues, the failure to achieve anticipated synergies, increased costs of servicing, incomplete records, and retention of customers; risks inherent in making loans, including repayment risks and value of collateral; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; our dependence on debt and the potential impact of limitations in the Company's amended revolving line of credit or other impacts on the Company's ability to borrow money on favorable terms, or at all; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquency and charge-offs); the impact of extreme weather events and natural disasters; changes in the Company's markets and general changes in the economy (particularly in the markets served by the Company). All forward-looking statements and cautionary statements included in this document are made as of the date hereof 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.

## More ##

Nicholas Financial, Inc.

Condensed Consolidated Statements of Income

(Unaudited, Dollars in Thousands, Except Share and Per Share Amounts)

Three months ended

June 30,

2023

2022

Revenue:

Interest and fee income on finance receivables

$

7,083

$

12,064

Unrealized losses on equity investments

-

(787

)

Total revenue

7,083

11,277

Expenses:

Operating expenses

4,237

9,469

Provision for credit losses

645

3,644

Interest expense

500

568

Total expenses

5,382

13,681

Income (loss) before income taxes

1,701

(2,404

)

Income tax expense (benefit)

145

(627

)

Net income (loss)

$

1,556

$

(1,777

)

Earnings/(loss) per share:

Basic

$

0.21

$

(0.24

)

Diluted

$

0.21

$

(0.24

)

Condensed Consolidated Balance Sheets

(Unaudited, In Thousands, Except Per Share Amounts)

June 30,

March 31,

2023

2023*

Cash

$

678

$

454

Finance receivables, net

93,854

106,919

Repossessed assets

1,953

1,491

Other assets

1,620

1,484

Total assets

$

98,105

$

110,348

Line of credit, net of debt issuance costs

$

15,109

$

28,936

Other liabilities

1,815

1,603

Total liabilities

16,924

30,539

Shareholders' equity

81,181

79,809

Total liabilities and shareholders' equity

$

98,105

$

110,348

Book value per share

$

11.13

$

10.95

*- derived from audited financial statements

Three months ended

June 30,

(In thousands)

Portfolio Summary

2023

2022

Average finance receivables (1)

$

120,773

$

179,455

Average indebtedness (2)

$

22,078

$

60,829

Interest and fee income on finance receivables

$

7,083

$

12,064

Interest expense

500

568

Net interest and fee income on finance receivables

$

6,583

$

11,496

Portfolio yield (3)

23.46

%

26.89

%

Interest expense as a percentage of average finance receivables

1.66

%

1.27

%

Provision for credit losses as a percentage of average finance receivables

2.14

%

8.12

%

Net portfolio yield (3)

19.67

%

17.50

%

Operating expenses as a percentage of average finance receivables

14.03

%

21.11

%

Pre-tax yield (4)

5.64

%

(3.61

)

%

Net charge-off percentage (5)

9.58

%

6.48

%

Finance receivables

$

112,242

$

180,053

Allowance percentage (6)

13.68

%

2.05

%

Total reserves percentage (7)

16.84

%

5.95

%

Note: All three-month statement of income performance indicators expressed as percentages have been annualized.

(1) Average finance receivables represent the average of finance receivables throughout the period.

(2) Average indebtedness represents the average daily outstanding borrowings under the line of credit. Average indebtedness does not include the PPP loan.

(3) Portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables. Net portfolio yield represents (a) interest and fee income on finance receivables minus (b) interest expense minus (c) the provision for credit losses, as a percentage of average finance receivables.

(4) Pre-tax yield represents net portfolio yield minus operating expenses, as a percentage of average finance receivables.

(5) Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables, outstanding during the period.

(6) Allowance percentage represents the allowance for credit losses divided by finance receivables outstanding as of ending balance sheet dates.

(7) Total reserves percentage represents the allowance for credit losses, unearned purchase price discount, and unearned dealer discounts divided by finance receivables outstanding as of ending balance sheet date.

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)

Contracts

Balance

Outstanding

30 - 59 days

60 - 89 days

90 - 119 days

120+

Total

June 30, 2023

$

96,325

$

10,394

$

7,425

$

1,251

$

-

$

19,070

10.79

%

7.71

%

1.30

%

0.00

%

19.80

%

June 30, 2022

$

153,029

$

8,958

$

4,041

$

1,448

$

29

$

14,476

5.85

%

2.64

%

0.95

%

0.02

%

9.46

%

Direct Loans

Balance

Outstanding

30 - 59 days

60 - 89 days

90 - 119 days

120+

Total

June 30, 2023

$

15,254

$

1,646

$

1,640

$

222

$

-

$

3,508

10.79

%

10.75

%

1.46

%

0.00

%

23.00

%

June 30, 2022

$

26,779

$

889

$

300

$

187

$

-

$

1,376

3.32

%

1.12

%

0.70

%

0.00

%

5.14

%

The following table presents selected information on Contracts purchased and Direct Loans originated by the Company:

Contracts

Direct Loans

Three months ended

Three months ended

June 30,

June 30,

(Purchases in thousands)

(Originations in thousands)

2023

2022

2023

2022

Purchases/Originations

$

2,720

$

22,354

$

-

$

8,215

Average APR

22.0

%

22.9

%

0

%

31.2

%

Average discount

6.0

%

6.6

%

N/A

N/A

Average term (months)

50

48

-

25

Average amount financed

$

12,420

$

11,552

$

-

$

4,128

Number of contracts

219

1,935

-

1,990

The following table presents selected information on the entire Contract and Direct Loan portfolios of the Company:

Contracts

Direct Loans

As of

As of

June 30,

June 30,

Portfolio

2023

2022

2023

2022

Average APR

22.8

%

22.9

%

28.8

%

29.9

%

Average discount

6.5

%

7.3

%

N/A

N/A

Average term (months)

49

50

29

27

Number of active contracts

12,769

18,959

4,558

7,096

## End ##

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Nicholas Financial Inc. published this content on 16 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 August 2023 14:39:06 UTC.