Nicholas Financial Reports 3rd Quarter Results

  • Accounts 61+ days delinquent decreased to 5.38% year-over-year from 5.93%, excluding Chapter 13 bankruptcy accounts
  • Provision for credit losses saw a 12.4% improvement from prior year third quarter
  • Average APR on new contracts purchased during the quarter increased to 23.5% compared to 21.7% during the prior year third quarter
  • Interest and fee income on financed receivables decreased 18.4% due to an 18.9% decrease in average finance receivables, compared to prior year third quarter

CLEARWATER, Fla., Feb. 01, 2019 (GLOBE NEWSWIRE) -- Nicholas Financial, Inc. (NASDAQ: NICK) announced a net loss for the three months ended December 31, 2018 of $0.9 million compared to a net loss of $2.9 million for the three months ended December 31, 2017.  Diluted net loss per share decreased to $0.12 for the three months ended December 31, 2018 as compared to $0.37 for the three months ended December 31, 2017. Revenue decreased 18.4% to $16.7 million for the three months ended December 31, 2018 as compared to $20.5 million for the three months ended December 31, 2017. The Company reported an operating loss before income taxes for the three months ended December 31, 2018 of $1.3 million compared to operating income of $0.8 million for the three months ended December 31, 2017.   The Company recorded an income tax benefit of approximately $0.4 million during the current quarter compared to $3.7 million income tax provision during the three months ending December 31, 2017.  This change was attributed to the Tax Cuts and Jobs Act enacted in the prior year. 

“Whereas it is always disappointing to have a negative earnings quarter, we remain pleased with our continuing efforts to improve the overall health of the Company and with our subsequent positive results related to our last 12 months of purchases and operations,” commented Doug Marohn, President and CEO of Nicholas Financial.  “As we have reported over the last 4 quarters, the legacy portfolios from purchases in 2015, 2016 and 2017 have difficult pools in terms of underwriting quality and subsequent portfolio performance/losses.  Our focus over the last year has been to manage through these existing receivables as best we can, but more importantly to substantially improve our underwriting and operations in an effort to improve the strength and stability of the Company going forward.”

Net income for the nine months ended December 31, 2018 was $1.1 million compared to a net loss of $1.7 million for the nine months ended December 31, 2017.  Diluted net earnings per share increased to $0.14 for the nine months ended December 31, 2018 as compared to a $0.22 loss for the nine months ended December 31, 2017. Revenue decreased 14.3% to $54.9 million for the nine months ended December 31, 2018 as compared to $64.1 million for the nine months ended December 31, 2017. The Company’s operating income before income taxes decreased for the nine months ended December 31, 2018 to $1.4 million compared to $2.7 million for the nine months ended December 31, 2017.   The provision for income taxes decreased to $0.3 million compared to $4.4 million in the prior year.  This change was attributed to the Tax Cuts and Jobs Act enacted in the prior year. 

“Over the last year we have been able to improve all significant Key Performance Indicators (KPIs) on new purchases resulting significantly increased yields on the new purchases and a lower exposure for potential losses,” continued Marohn. 

Fiscal Year
/ Quarter
 Number of
Contracts
purchased
 Principal Amount
purchased
 Average Amount
Financed
 Average
APR*
 Average
Discount%*
 Average
Term*
2019 5,533 $56,265,636 $10,169 23.6% 8.3% 47
3 1,625 16,475,956 10,139 23.5% 8.1% 47 
2 1,761 17,844,587 10,133 23.5% 8.4% 47
1 2,147 21,945,093 10,221 23.7% 8.3% 48
2018 9,767 109,575,099 11,219 22.4% 7.4% 54
4 2,814 29,253,725 10,396 23.3% 7.9% 50
3 2,365 27,378,449 11,577 21.7% 6.9% 54
2 2,239 25,782,056 11,515 22.0% 7.3% 55
1 2,349 27,160,869 11,563 22.3% 7.6% 55
       
2017 14,619 170,941,206 11,693 22.2% 7.1% 57
4 3,677 42,629,274 11,593 22.3% 7.3% 56
3 3,846 45,941,459 11,945 22.0% 6.9% 57
2 3,592 41,540,401 11,565 22.3% 7.0% 57
1 3,504 40,830,072 11,609 22.4% 7.2% 57

 *The averages included in the table are calculated as a simple average.

“This focus on improving our loan metrics also came with a deliberate reduction in our new loan purchases to allow for retraining of our field employees, redevelopment of our dealer relationships and remarketing of our brand.  Now that we have been successful in correcting the type of contracts we purchase, we intend to focus more efforts on increasing the quantity of purchases, as well.”  The Company began modifying its underwriting guidelines half way through fiscal 2018 to improve the quality of Contracts being purchased. These changes led to a decrease in the dollar amount of Contracts purchased by approximately $24.1 million, or 29.9%, during the 9 months ended December 31, 2018, as compared to the nine months ended December 31, 2017. However, the number of Contracts purchased only decreased by 1,420, or 20.4%, over the same period of time, as illustrated in the table above.  The revenue decrease during the nine months ended December 31, 2018, as compared to the nine months ended December 31, 2017, was a result of this reduction in the dollar amount of Contracts purchased partially offset by an increase in the average APR.   With tighter underwriting guidelines and a decreasing portfolio, the Company’s provision for credit losses saw a 12.4% improvement for the three months ended December 31, 2018 compared to the three months ended December 31, 2017 and a 25.0% improvement for the nine months ended December 31, 2018 compared to the nine months ended December 31, 2017.  

Marohn continued, “We are also very excited about the progress we are making with our Direct Loan / Consumer Loan product.  What was once primarily a Florida-specific product is now an active product in Florida, North Carolina, Georgia and Ohio.  As a result, we have increased our Direct Loan portfolio by over 13% in this past quarter.  We are in the process of licensing Tennessee, Kentucky and Indiana and expect those markets to be operational by the end of our 4th quarter.  It is our strategy to eventually have the Direct Loan product in each of our markets where we have a branch office.”

Nicholas Financial, Inc. is a publicly-traded specialty consumer finance company, operating branch locations in both Southeastern and Midwestern U.S. states. The Company has approximately 7.9 million shares of voting 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.

Cautionary Note regarding 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 risk relating to competition and our ability to increase and maintain yield and profitability at desirable levels, as well as risks relating to  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, 2018.  When used in this document, the words “anticipate”, “estimate”, “expect”, “will”, “may”, “plan,” “believe”, “intend” and similar expressions are intended to identify forward-looking statements.  Such statements are based on the beliefs of Company management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially from those anticipated, estimated or expect. 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.

 Nicholas Financial, Inc.      
 Condensed Consolidated Statements of Income     
 (Unaudited, Dollars in Thousands, Except Share and Per Share Amounts)     
                   
                   
  Three months ended Nine months ended      
  December 31,December 31,     
  2018  2017  2018 2017       
 Revenue:                 
 Interest and fee income on finance receivables$16,740  $20,526  $54,903 $64,062       
 Expenses:                 
 Operating expenses 7,848   8,138   24,615  24,984       
 Provision for credit losses 7,870   8,989   21,670  28,887       
 Interest expense 2,303   2,585   7,228  7,500       
                   
 Total expenses 18,021   19,712   53,513  61,371       
           
 Operating (loss) income before income taxes (1,281)  814   1,390  2,691       
 Income tax expense (benefit) (376)  3,712   293  4,432       
                   
    Net (loss) income$(905) $(2,898) $1,097 $(1,741)      
                   
 Earnings (loss) per share:                 
    Basic$(0.12) $(0.37) $0.14 $(0.22)      
                   
    Diluted$(0.12) $(0.37) $0.14 $(0.22)      
                   
 Condensed Consolidated Balance Sheets     
 (Unaudited, In Thousands)     
                   
  December 31, March 31,            
  2018
 2018
            
 Cash$4,252  $2,626             
 Finance receivables, net 219,210   266,573             
 Other assets 11,084   11,660             
                   
 Total assets$234,546  $280,859             
                   
 Line of credit$120,000  $165,750             
 Other liabilities 4,955   6,672             
                   
 Total liabilities 124,955   172,422             
               
 Shareholders’ equity 109,591   108,437             
                   
 Total liabilities and shareholders’ equity$234,546  $280,859             
                   
 Book value per share$13.86  $13.73             
                      


  Three months ended Nine months ended  
  December 31, December 31,  
  (In thousands) (In thousands)  
 Portfolio Summary2018  2017  2018  2017  
 Average finance receivables (1)$261,036  $321,742  $279,023  $333,660  
               
 Average indebtedness (2)$127,332  $183,615  $143,693  $196,619  
               
 Interest and fee income on finance receivables$16,740  $20,526  $54,903  $64,062  
 Interest expense 2,303   2,585   7,228   7,500  
               
 Net interest and fee income on finance receivables$14,437  $17,941  $47,675  $56,562  
               
 Portfolio yield (3) 25.65 % 25.52 % 26.24 % 25.60% 
 Interest expense as a percentage of average finance receivables 3.53 % 3.21 % 3.45 % 3.00% 
 Provision for credit losses as a percentage of average finance receivables 12.06 % 11.18 % 10.36 % 11.54% 
               
 Net portfolio yield (3) 10.06 % 11.13 % 12.43 % 11.06% 
 Operating expenses as a percentage of average finance receivables 12.03 % 10.12 % 11.76 % 9.98% 
               
 Pre-tax yield as a percentage of average finance receivables (4) (1.96)% 1.01 % 0.66 % 1.08% 
               
 Write-off to liquidation (5) 12.59 % 13.66 % 12.35 % 13.00% 
 Net charge-off percentage (6) 10.84 % 10.63 % 10.49 % 10.13% 
 Allowance percentage (7) 7.65 % 6.59 % 7.16 % 6.35% 
 Note: All three-month and six-month statement of income performance indicators expressed as percentages have been annualized.  
(1) Average finance receivables represents the average of finance receivables throughout the period. 
(2) Average indebtedness represents the average outstanding borrowings under the Line. 
(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) 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 and originations minus ending receivable balance. 
(6) Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables, outstanding during the period. 
(7) Allowance percentage represents the allowance for credit losses divided by average finance receivables 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 any Chapter 13 bankruptcy accounts:        
 (In thousands, except percentages)                  
                    
  Balance                
 ContractsOutstanding  31 – 60 days
 61 – 90 days
 91 – 120 days
 Over 120
 Total
 
 December 31, 2018$238,183 $18,229 $6,897 $3,760 $2,416 $31,302 
      7.65% 2.90% 1.58% 1.01% 13.14%
        
 December 31, 2017$301,544 $22,583 $9,413 $5,320 $3,471 $40,787 
      7.49% 3.12% 1.76% 1.15% 13.53%
                  
  Balance                 
 Direct LoansOutstanding 31 – 60 days
 61 – 90 days
 91 – 120 days
 Over 120
 Total
 
 December 31, 2018$8,470 $188 $88 $30 $68 $374 
      2.22% 1.04% 0.35% 0.80% 4.42%
        
 December 31, 2017$8,204 $204 $81 $26 $67 $378 
      2.49% 0.99% 0.32% 0.82% 4.61%
     
 The following table presents selected information on Contracts purchased by the Company (1):    
                    
  Three months ended Nine months ended       
  December 31,December 31,      
  (Purchases in thousands)(Purchases in thousands)      
 Contracts2018 2017 2018 2017       
 Purchases$16,476 $27,378 $56,266 $80,321       
 Average APR 23.45% 21.68% 23.56% 21.99%      
 Average discount 8.13% 6.89% 8.29% 7.23%      
 Average term (months) 47  54  47  55       
 Average loan$10,139 $11,577 $10,169 $11,552       
 Number of contracts 1,625  2,365  5,533  6,953       
                    
 The following table presents selected information on the entire Contract portfolio of the Company (1):     
                    
  As of             
  December 31,            
 Portfolio2018 2017             
 Average APR 22.68% 22.21%            
 Average discount 7.46% 7.25%            
 Average term (months) 53  57             
 Number of active contracts 29,061  33,993             
                    
(1) The table does not include any selected information on Direct Loans; which only accounts for approximately 3% of the Company’s total receivable portfolio. 

Contact:
Kelly Malson
CFO
Web site: www.nicholasfinancial.com 
Ph #  (727)-726-0763

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