10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     .

Commission file number: 0-26680

NICHOLAS FINANCIAL, INC.

(Exact Name of Registrant as Specified in its Charter)

British Columbia, Canada	8736-3354
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2454 McMullen Booth Road, Building C Clearwater, Florida	33759
(Address of Principal Executive Offices)	(Zip Code)

(727) 726-0763

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x

As of August 1, 2016, 12,490,031 shares, no par value, of the Registrant were outstanding (of which 4,713,804 shares were held by the Registrant’s principal operating subsidiary and pursuant to applicable law, not entitled to vote and 7,776,227 shares were entitled to vote).

NICHOLAS FINANCIAL, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
Part I.	Financial Information		2
Item 1.	Financial Statements (Unaudited)		2
	Consolidated Balance Sheets as of June 30, 2016 and March 31, 2016		2
	Consolidated Statements of Income for the three months ended June 30, 2016 and 2015		3
	Consolidated Statements of Cash Flows for the three months ended June 30, 2016 and 2015		4
	Notes to the Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		20
Item 4.	Controls and Procedures		20
Part II.	Other Information
Item 1.	Legal Proceedings		21
Item 1A.	Risk Factors		21
Item 6.	Exhibits		21

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Nicholas Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)

	June 30, 2016 (Unaudited)			March 31, 2016
Assets
Cash	$	4,520		$	1,849
Finance receivables, net		312,655			311,837
Assets held for resale		2,483			2,148
Income taxes receivable		—			593
Prepaid expenses and other assets		975			977
Property and equipment, net		1,569			1,290
Deferred income taxes		6,715			6,615
Total assets	$	328,917		$	325,309
Liabilities and shareholders’ equity
Line of credit	$	209,000		$	211,000
Drafts payable		2,060			1,499
Interest rate swap agreements		223			205
Accounts payable and accrued expenses		6,551			5,839
Deferred revenues		3,910			3,917
Income taxes payable		1,309			—
Total liabilities		223,053			222,460
Shareholders’ equity
Preferred stock, no par: 5,000 shares authorized; none issued
Common stock, no par: 50,000 shares authorized; 12,467 and 12,466 shares issued, respectively; and 7,753 shares outstanding		33,399			33,287
Treasury stock: 4,714 common shares, at cost		(70,459	)		(70,459	)
Retained earnings		142,924			140,021
Total shareholders’ equity		105,864			102,849
Total liabilities and shareholders’ equity	$	328,917		$	325,309

See accompanying notes.

2

Nicholas Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

	Three months ended June 30,
	2016		2015
Interest and fee income on finance receivables	$	22,915	$	22,025
Expenses:
Marketing		386		392
Salaries and employee benefits		5,593		5,585
Professional Fees		247		448
Administrative		2,564		2,351
Provision for credit losses		7,026		4,989
Depreciation		131		95
Interest expense		2,244		2,166
Change in fair value of interest rate swap agreements		18		44
		18,209		16,070
Operating income before income taxes		4,706		5,955
Income tax expense		1,803		2,285
Net income	$	2,903	$	3,670
Earnings per share:
Basic	$	0.37	$	0.48
Diluted	$	0.37	$	0.47

See accompanying notes.

3

Nicholas Financial, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three months ended June 30,
	2016			2015
Cash flows from operating activities
Net income	$	2,903		$	3,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		131			95
Gain on sale of property and equipment		(10	)		(15	)
Provision for credit losses		7,026			4,989
Amortization of dealer discounts		(3,574	)		(3,286	)
Deferred income taxes		(109	)		(177	)
Share-based compensation		118			130
Change in fair value of interest rate swap agreements		18			44
Changes in operating assets and liabilities:
Prepaid expenses and other assets		2			176
Accounts payable and accrued expenses		712			259
Income taxes payable and receivable		1,902			2,450
Deferred revenues		(7	)		287
Net cash provided by operating activities		9,112			8,622
Cash flows from investing activities
Purchase and origination of finance receivables		(37,678	)		(48,332	)
Principal payments received		33,408			35,036
Increase in assets held for resale		(335	)		(366	)
Purchase of property and equipment		(418	)		(165	)
Proceeds from sale of property and equipment		18			16
Net cash used in investing activities		(5,005	)		(13,811	)
Cash flows from financing activities
(Decrease) increase on line of credit		(2,000	)		4,000
Change in drafts payable		561			(950	)
Payment of debt costs		—			(25	)
Expenses related to prior purchase of treasury shares		—			(50	)
Proceeds from exercise of stock options		2			54
Excess tax benefits from share-based compensation		1			3
Net cash (used) provided by financing activities		(1,436	)		3,032
Net increase (decrease) in cash		2,671			(2,157	)
Cash, beginning of period		1,849			3,388
Cash, end of period	$	4,520		$	1,231
Supplemental Disclosure of noncash investing and financing activities:
Tax deficiency from share awards	$	(9	)	$	—

See accompanying notes.

4

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying consolidated balance sheet as of March 31, 2016, which has been derived from audited financial statements, and the accompanying unaudited interim consolidated financial statements of Nicholas Financial, Inc. (including its subsidiaries, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q pursuant to the Securities and Exchange Act of 1934, as amended in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements, although the Company believes that the disclosures made are adequate to ensure the information is not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending March 31, 2017. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2016 as filed with the Securities and Exchange Commission on June 14, 2016. The March 31, 2016 consolidated balance sheet included herein has been derived from the March 31, 2016 audited consolidated balance sheet included in the aforementioned Form 10-K.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on finance receivables and the fair value of interest rate swap agreements.

2. Revenue Recognition

Finance receivables consist of automobile finance installment contracts (“Contracts”) and direct consumer loans (“Direct Loans”). Interest income on finance receivables is recognized using the interest method. Accrual of interest income on finance receivables is suspended when a loan enters bankruptcy status, is contractually delinquent for 60 days or more or the collateral is repossessed, whichever is earlier. Chapter 13 bankruptcy accounts are accounted for under the cost-recovery method. Interest income on Chapter 13 bankruptcy accounts does not resume until all principal amounts are recovered (see Note 4).

A dealer discount represents the difference between the finance receivable, net of unearned interest, of a Contract, and the amount of money the Company actually pays for the Contract. The discount negotiated by the Company is a function of the lender, the wholesale value of the vehicle and competition in any given market. In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer from which the Company is purchasing the Contract, and the value of the automobile in relation to the purchase price and the term of the Contract. The entire amount of discount is amortized as an adjustment to yield using the interest method over the life of the loan. The average dealer discount associated with new volume for the three months ended June 30, 2016 and 2015 was 7.15% and 7.54%, respectively.

The amount of future unearned income is computed as the product of the Contract rate, the Contract term and the Contract amount.

Deferred revenues consist primarily of commissions received from the sale of ancillary products. These products include automobile warranties, roadside assistance programs, accident and health insurance, credit life insurance and forced placed automobile insurance. These commissions are amortized over the life of the contract using the interest method.

The Company’s net costs for originating Direct Loans are deferred and recognized as an adjustment to the yield and are amortized over the life of the loan using the interest method.

5

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

3. Earnings Per Share

The Company has granted stock compensation awards with nonforfeitable dividend rights which are considered participating securities. As such, earnings per share is calculated using the two-class method. Basic earnings per share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per share includes the dilutive effect of additional potential common shares from stock compensation awards. Earnings per share have been computed based on the following weighted average number of common shares outstanding:

	Three months ended June 30, (In thousands, except per share amounts)
	2016			2015
Numerator:
Net income per consolidated statements of income	$	2,903		$	3,670
Less: Allocation of earnings to participating securities		(30	)		—
Net income allocated to common stock		2,873		$	3,670
Basic earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding, including shares considered participating securities		7,753			7,616
Less: Weighted average participating securities outstanding		(81	)		—
Weighted average shares of common stock		7,672			7,616
Basic earnings per share	$	0.37			0.48
Diluted earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Undistributed earnings re-allocated to participating securities		—			—
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding for basic earnings per share		7,672			7,616
Incremental shares from stock options		60			127
Weighted average shares and dilutive potential common shares		7,732			7,743
Diluted earnings per share	$	0.37		$	0.47

Diluted earnings per share do not include the effect of certain stock options as their impact would be anti-dilutive. For the three months ended June 30, 2016 and 2015, potential shares of common stock from stock options totaling 165,000 and 155,000, respectively, were not included in the diluted earnings per share calculation because their effect is anti-dilutive.

4. Finance Receivables

Finance receivables consist of automobile finance installment Contracts and Direct Loans and are detailed as follows:

	(In thousands)
	June 30,			March 31,
	2016			2016
Finance receivables, gross contract	$	499,480		$	498,130
Unearned interest		(155,860	)		(155,257	)
Finance receivables, net of unearned interest		343,620			342,873
Unearned dealer discounts		(17,365	)		(18,023	)
Finance receivables, net of unearned interest and unearned dealer discounts		326,255			324,850
Allowance for credit losses		(13,600	)		(13,013	)
Finance receivables, net	$	312,655		$	311,837

6

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

4. Finance Receivables (continued)

The terms of the Contracts range from 12 to 72 months and the Direct Loans range from 12 to 60 months. The Contracts and Direct Loans bear a weighted average effective interest rate of 22.60% and 25.72% as of June 30, 2016, respectively and 22.67% and 25.72% as of March 31, 2016, respectively.

Finance receivables consist of Contracts and Direct Loans, each of which comprises a portfolio segment. Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts:

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	12,265		$	11,325
Current period provision		6,955			4,886
Losses absorbed		(6,992	)		(5,522	)
Recoveries		608			835
Balance at end of period	$	12,836		$	11,524

The Company purchases Contracts from automobile dealers at a negotiated price that is less than the original principal amount being financed by the purchaser of the automobile. The Contracts are predominately for used vehicles. As of June 30, 2016, the average model year of vehicles collateralizing the portfolio was a 2008 vehicle. The Company utilizes a static pool approach to track portfolio performance. If the allowance for credit losses is determined to be inadequate for a static pool, then an additional charge to income through the provision is used to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, and current economic conditions. Such evaluation, considers among other matters, the estimated net realizable value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for an adequate allowance for credit losses.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Direct Loans:

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	748		$	703
Current period provision		71			103
Losses absorbed		(72	)		(59	)
Recoveries		17			8
Balance at end of period	$	764		$	755

Direct Loans are originated directly between the Company and the consumer. These loans are typically for amounts ranging from $1,000 to $9,000 and are generally secured by a lien on an automobile, watercraft or other permissible tangible personal property. The majority of Direct Loans are originated with current or former customers under the Company’s automobile financing program. The typical Direct Loan represents a significantly better credit risk than our typical Contract due to the customer’s historical payment history with the Company. In deciding whether or not to make a loan, the Company considers the individual’s credit history, job stability, income and impressions created during a personal interview with a Company loan officer. Additionally, because most of Direct Loans made by the Company to date have been made to borrowers under Contracts previously purchased by the Company, the payment history of the borrower under the Contract is a significant factor in making the loan decision. As of June 30, 2016, loans made by the Company pursuant to its Direct Loan program constituted approximately 2% of the aggregate principal amount of the Company’s loan portfolio. Changes in the allowance for credit losses for both Contracts and Direct Loans were driven by current economic conditions and trends over several reporting periods which are useful in estimating future losses and overall portfolio performance.

7

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

4. Finance Receivables (continued)

A performing account is defined as an account that is less than 61 days past due. A non-performing account is defined as an account that is contractually delinquent for 61 days or more and the accrual of interest income is suspended. When an account is 120 days contractually delinquent, the account is written off. Upon notification of a Chapter 13 bankruptcy, an account is monitored for collection with other Chapter 13 bankruptcy accounts. In the event the debtors balance has been reduced by the bankruptcy court, the Company will record a loss equal to the amount of principal balance reduction. The remaining balance will be reduced as payments are received by the bankruptcy court. In the event an account is dismissed from bankruptcy, the Company will decide, based on several factors, to begin repossession proceedings or to allow the customer to begin making regularly scheduled payments.

The following table is an assessment of the credit quality by creditworthiness:

	(In thousands)
	June 30, 2016				June 30, 2015
	Contracts		Direct Loans		Contracts		Direct Loans
Performing accounts	$	472,424	$	10,965	$	456,698	$	11,313
Non-performing accounts		11,603		97		6,698		59
Total	$	484,027	$	11,062	$	463,396	$	11,372
Chapter 13 bankruptcy accounts		4,350		40		3,958		41
Finance receivables, gross contract	$	488,377	$	11,102	$	467,354	$	11,413

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and under its Direct Loans, excluding Chapter 13 bankruptcy accounts:

	(In thousands)
Contracts	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	484,027	$	25,445		$	8,027		$	3,576		$	37,048
				5.26	%		1.66	%		0.74	%		7.66	%
June 30, 2015	$	463,396	$	18,879		$	4,799		$	1,899		$	25,577
				4.07	%		1.04	%		0.41	%		5.52	%
Direct Loans	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	11,062	$	178		$	55		$	42		$	275
				1.61	%		0.50	%		0.38	%		2.49	%
June 30, 2015	$	11,372	$	156		$	35		$	24		$	215
				1.37	%		0.31	%		0.21	%		1.89	%

5. Line of Credit

The Company has a line of credit facility (the “Line”) up to $225.0 million The pricing of the Line, which expires on January 30, 2018, is 300 basis points above 30-day LIBOR with a 1% floor on LIBOR (4.00% at June 30, 2016 and March 31, 2016). Pledged as collateral for this Line are all of the assets of the Company. The outstanding amount of the Line was $209.0 million and $211.0 million as of June 30, 2016 and March 31, 2016, respectively. The amount available under the Line was $16.0 million and $14.0 million as of June 30, 2016 and March 31, 2016, respectively.

The facility requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests, including maintenance of asset quality and performance tests. Dividends do not require consent in writing by the agent and majority lenders under the new facility as long as the Company is in compliance with a net income covenant. As of June 30, 2016, the Company was in full compliance with all debt covenants.

8

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

6. Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements to manage exposure to variability in expected cash flows attributable to interest rate risk. The interest rate swap agreements convert a portion of the floating rate debt to a fixed rate, more closely matching the interest rate characteristics of finance receivables.

As of the three months ended June 30, 2016 and 2015, no new contracts were initiated and no contracts matured.

The Company currently has two interest rate swap agreements. A June 4, 2012 interest rate swap agreement provides for a five-year interest rate swap in which the Company pays a fixed rate of 1% and receives payments from the counterparty on the 1-month LIBOR rate. This interest rate swap agreement had an effective date of June 13, 2012 and a notional amount of $25.0 million. A July 30, 2012 agreement provides for a five-year interest rate swap in which the Company pays a fixed rate of 0.87% and receives payments from the counterparty on the 1-month LIBOR rate. This interest rate swap agreement had an effective date of August 13, 2012 and a notional amount of $25.0 million.

The locations and amounts of losses in income are as follows:

	Three months ended June 30,
	(In thousands)
	2016			2015
Periodic change in fair value of interest rate swap agreements	$	(18	)	$	(44	)
Periodic settlement differentials included in interest expense		(63	)		(95	)
Loss recognized in income	$	(81	)	$	(139	)

Net realized losses from the interest rate swap agreements were recorded in the interest expense line item of the consolidated statements of income. The following table summarizes the average variable rates received and average fixed rates paid under the swap agreements.

	Three months ended June 30,
	2016			2015
Variable rate received		0.44	%		0.18	%
Fixed rate paid		0.94	%		0.94	%

7. Income Taxes

The provision for income taxes decreased to approximately $1.8 million for the three months ended June 30, 2016 from approximately $2.3 million for the three months ended June 30, 2015. The Company’s effective tax rate decreased to 38.31% for the three months ended June 30, 2016 from 38.36% for the three months ended June 30, 2015.

9

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

8. Fair Value Disclosures

The Company measures specific assets and liabilities at fair value, which is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When applicable, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability under a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The Company estimates the fair value of interest rate swap agreements based on the estimated net present value of the future cash flows using a forward interest rate yield curve in effect as of the measurement period, adjusted for nonperformance risk, if any, including a quantitative and qualitative evaluation of both the Company’s credit risk and the counterparty’s credit risk. Accordingly, the Company classifies interest rate swap agreements as Level 2.

	Fair Value Measurement Using (In thousands)
Description	Level 1		Level 2			Level 3		Fair Value
Interest rate swap agreements:
June 30, 2016 – liabilities:	$	—	$	(223	)	$	—	$	(223	)
March 31, 2016 – liabilities:	$	—	$	(205	)	$	—	$	(205	)

Financial Instruments Not Measured at Fair Value

The Company’s financial instruments consist of cash, finance receivables and the Line. For each of these financial instruments- the carrying value approximates fair value.

Finance receivables, net approximates fair value based on the price paid to acquire Contracts. The price paid reflects competitive market interest rates and purchase discounts for the Company’s chosen credit grade in the economic environment. This market is highly liquid as the Company acquires individual loans on a daily basis from dealers. The initial terms of the Contracts range from 12 to 72 months. The initial terms of the Direct Loans range from 12 to 60 months. In addition, there have been minimal changes in interest rates and purchase discounts related to these types of loans due to the competitive nature of the current market. If liquidated outside of the normal course of business, the amount received may not be the carrying value.

Based on current market conditions, any new or renewed credit facility would contain pricing that approximates the Company’s current Line. Based on these market conditions, the fair value of the Line as of June 30, 2016 was estimated to be equal to the book value. The interest rate for the Line is a variable rate based on LIBOR pricing options.

10

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

8. Fair Value Disclosures (continued)

	(In thousands)
	Fair Value Measurement Using						Fair		Carrying
Description	Level 1		Level 2		Level 3		Value		Value
Cash:
June 30, 2016	$	4,520	$	—	$	—	$	4,520	$	4,520
March 31, 2016	$	1,849	$	—	$	—	$	1,849	$	1,849
Finance receivables:
June 30, 2016	$	—	$	—	$	312,655	$	312,655	$	312,655
March 31, 2016	$	—	$	—	$	311,837	$	311,837	$	311,837
Line of credit:
June 30, 2016	$	—	$	209,000	$	—	$	209,000	$	209,000
March 31, 2016	$	—	$	211,000	$	—	$	211,000	$	211,000

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis. The Company does not have any assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2016 and March 31, 2016.

9. Contingencies

The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business, none of which, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

10. Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The ASU also requires additional disclosures related to estimates and judgments used to measure all expected credit losses. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In March 2016, the FASB issued the ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

11

Nicholas Financial, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

(Unaudited)

10. Recently Issued Accounting Standards (continued)

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. “The ASU will require organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The accounting by organizations that own the assets leased by the lessee—also known as lessor accounting— will remain largely unchanged from current U.S. GAAP. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Recognition and Measurement of Financial Assets and Liabilities,” which is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU permits early adoption of the instrument-specific credit risk provision. The Company is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU, and all subsequently issued clarifying ASUs, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU would permit public entities to adopt the ASU early, but not before the original effective date (i.e., annual periods beginning after December 15, 2016). The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

The Company does not believe there are any other recently issued accounting standards that have not yet been adopted that will have a material impact on the Company’s consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

This report on Form 10-Q contains various statements, other than those concerning historical information, that are based on management’s beliefs and assumptions, as well as information currently available to management, and should be considered forward-looking statements. This notice is intended to take advantage of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. When used in this document, the words “anticipate”, “estimate”, “expect”, “will”, “may”, “believe”, and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on the Company’s operating results are fluctuations in the economy, the ability to access bank financing, the degree and nature of competition, demand for consumer financing in the markets served by the Company, the Company’s products and services, increases in the default rates experienced on Contracts, adverse regulatory changes in the Company’s existing and future markets, the Company’s ability to expand its business, including its ability to complete acquisitions and integrate the operations of acquired businesses, to recruit and retain qualified employees, to expand into new markets and to maintain profit margins in the face of increased pricing competition. All forward looking statements included in this report are based on information available to the Company on the date hereof, and the Company assumes no obligations to update any such forward looking statement. You should also consult factors described from time to time in the Company’s filings made with the Securities and Exchange Commission, including its reports on Forms 10-K, 10-Q, 8-K and annual reports to shareholders.

Litigation and Legal Matters

See “Item 1. Legal Proceedings” in Part II of this quarterly report below.

Regulatory Developments

As previously reported, Title X of the Dodd-Frank Act established the Consumer Financial Protection Bureau (“CFPB”), which became operational on July 21, 2011. Under the Dodd-Frank Act, the CFPB has regulatory, supervisory and enforcement powers over providers of consumer financial products, such as Contracts and the Direct Loans that we offer, including explicit supervisory authority to examine and require registration of installment lenders such as ourselves. Included among the powers afforded to the CFPB is the authority to adopt rules describing specified acts and practices as being “unfair,” “deceptive” or “abusive,” and hence unlawful. Although the Dodd-Frank Act expressly provides that the CFPB has no authority to establish usury limits, some consumer advocacy groups have suggested that certain forms of alternative consumer finance products, such as installment loans, should be a regulatory priority and it is possible that at some time in the future the CFPB could propose and adopt rules making such lending or other products that we may offer materially less profitable or impractical. Further, the CFPB may target specific features of loans by rulemaking that could cause us to cease offering certain products. Any such rules could have a material adverse effect on our business, results of operation and financial condition. The CFPB could also adopt rules imposing new and potentially burdensome requirements and limitations with respect to any of our current or future lines of business, which could have a material adverse effect on our operations and financial performance.

In June 2015, the CFPB published a rule expanding their supervision and examination of non-depository “larger participants” in the automobile finance business, including us. Since we are deemed a larger participant, we are subject to supervision and examination by the CFPB. The CFPB’s stated objectives of such examinations are: to assess the quality of a larger participant’s compliance management systems for preventing violations of federal consumer financial laws; to identify acts or practices that materially increase the risk of violations of federal consumer finance laws and associated harm to consumers; and to gather facts that help determine whether the larger participant engages in acts or practices that are likely to violate federal consumer financial laws in connection with its automobile finance business. Thus, as a larger participant, we will be subject to examination by the CFPB for, among other things, ECOA compliance; unfair, deceptive or abusive acts or practices (“UDAAP”) compliance; and the adequacy of our compliance management systems.

Critical Accounting Policy

The Company’s critical accounting policy relates to the allowance for credit losses. It is based on management’s opinion of an amount that is adequate to absorb losses incurred in the existing portfolio. The allowance for credit losses is established through a provision for credit losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, specific impaired loans and current economic conditions. Such evaluation considers, among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for an adequate credit loss allowance.

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Because of the nature of the customers under the Company’s Contracts and its Direct Loan program, the Company considers the establishment of adequate reserves for credit losses to be imperative. The Company segregates its Contracts into static pools for purposes of establishing reserves for losses. All Contracts purchased by a branch during a fiscal quarter comprise a static pool. The Company pools Contracts according to branch location because the branches purchase Contracts in different geographic markets. This method of pooling by branch and quarter allows the Company to evaluate the different markets where the branches operate. The pools also allow the Company to evaluate the different levels of customer income, stability and credit history, and the types of vehicles purchased, in each market. Each such static pool consists of the Contracts purchased by a branch office during a fiscal quarter.

Contracts are purchased from many different dealers and are all purchased on an individual Contract-by-Contract basis. Individual Contract pricing is determined by the automobile dealerships and is generally the lesser of the applicable state maximum interest rate, if any, or the maximum interest rate which the customer will accept. In certain markets, competitive forces will drive down Contract rates from the maximum rate to a level where an individual competitor is willing to buy an individual Contract. The Company purchases Contracts on an individual basis, although the Company may consider portfolio acquisitions as part of its growth strategy.

The Company utilizes the branch model, which allows for Contract purchasing to be done on the branch level. The Company has detailed underwriting guidelines it utilizes to determine which Contracts to purchase. These guidelines are specific and are designed to cause all of the Contracts that the Company purchases to have common risk characteristics. The Company utilizes its District Managers to evaluate their respective branch locations for adherence to these underwriting guidelines. The Company also utilizes internal audit to assure adherence to its underwriting guidelines.

The allowance for credit losses is established through charges to earnings through the provision for credit losses. The allowance for credit losses is maintained at an amount that reduces the net carrying amount of finance receivables for incurred losses.

In analyzing a static pool, the Company considers competition in the market place at the time Contracts are purchased, performance of prior static pools originated by the same branch office, the performance of prior Contracts purchased from the dealers whose Contracts are included in the current static pool, the credit rating of the customers under the Contracts in the static pool, and current market and economic conditions. Each static pool is analyzed monthly to determine if the loss reserves are adequate, and adjustments are made if they are determined to be necessary.

Introduction

Diluted net earnings per share decreased 21.3% to $0.37 for the three-month period ended June 30, 2016 as compared to $0.47 for the corresponding period ended June 30, 2015. Net earnings decreased 21.6% to $2.9 million for the three months ended June 30, 2016 as compared to $3.7 million for the three months ended June 30, 2015. Revenue increased 4.1% to $22.9 million for the three months ended June 30, 2016 as compared to $22.0 million for the three months ended June 30, 2015.

Our net earnings for the three months ended June 30, 2016 were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and a reduction in the gross portfolio yield primarily due to a decrease in the weighted average APR of purchases associated with our receivables portfolio. Our net earnings were positively affected by a reduction in operating expenses as a percentage of average net receivables from 10.92% to 10.40%, for the three months ended June 30, 2015 and 2016, respectively.

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	Three months ended June 30, (In thousands)
Portfolio Summary	2016			2015
Average finance receivables, net of unearned interest (1)	$	343,185		$	324,951
Average indebtedness (2)	$	210,407		$	201,086
Interest and fee income on finance receivables	$	22,915		$	22,025
Interest expense		2,244			2,166
Net interest and fee income on finance receivables	$	20,671		$	19,859
Weighted average contractual rate (3)		22.67	%		22.88	%
Average cost of borrowed funds (2)		4.27	%		4.31	%
Gross portfolio yield (4)		26.71	%		27.11	%
Interest expense as a percentage of average finance receivables, net of unearned interest		2.62	%		2.67	%
Provision for credit losses as a percentage of average finance receivables, net of unearned interest		8.19	%		6.14	%
Net portfolio yield (4)		15.90	%		18.30	%
Marketing, salaries, employee benefits, depreciation, administrative and professional fee expenses as a percentage of average finance receivables, net of unearned interest		10.40	%		10.92	%
Pre-tax yield as a percentage of average finance receivables, net of unearned interest (5)		5.50	%		7.38	%
Write-off to liquidation (6)		9.41	%		6.99	%
Net charge-off percentage (7)		7.51	%		5.83	%

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 finance revenues as a percentage of average finance receivables, net of unearned interest. Net portfolio yield represents finance revenue minus (a) interest expense and (b) the provision for credit losses as a percentage of average finance receivables, net of unearned interest.

(5) 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.

(6) Write-off to liquidation percentage is defined as net charge-offs divided by liquidation. Liquidation is defined as beginning gross receivable balance plus current period purchases minus voids and refinances minus ending gross receivable balance.

(7) Net charge-off percentage represents net charge-offs divided by average finance receivables, net of unearned interest, outstanding during the period.

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Three months ended June 30, 2016 compared to three months ended June 30, 2015

Interest Income and Loan Portfolio

Interest and fee income on finance receivables, predominately finance charge income, increased 4.1% to approximately $22.9 million for the three-month period ended June 30, 2016 from $22.0 million for the corresponding period ended June 30, 2015. Average finance receivables, net of unearned interest equaled approximately $343.2 million for the three-month period ended June 30, 2016, an increase of 5.6% from $325.0 million for the corresponding period ended June 30, 2015. Finance receivables, net, as of June 30, 2016 increased 4.1% to approximately $312.7 million from approximately $300.5 million as of June 30, 2015. While our purchasing volume has slowed, our finance receivables continue to grow in our younger markets, including our two new states (see “Contract Procurement” and “Loan Origination” below). The increase in our average term and average loan amount has also contributed to increasing our finance receivables. The primary reason interest income increased was the increase in average finance receivables, which was partially offset by a lower weighted APR and lower discount earned on our portfolio for the three months ended June 30, 2016 compared to the three months ended June 30, 2015. The gross portfolio yield decreased to 26.71% for the three-month period ended June 30, 2016 compared to 27.11% for the three-month period ended June 30, 2015. The gross portfolio yield decreased primarily due to the decrease in the average dealer discount and a decrease in the average weighted APR, both of which are primarily the result of increased competition. The net portfolio yield decreased to 15.90% for the three-month period ended June 30, 2016 from 18.30% for the corresponding period ended June 30, 2015. The net portfolio yield decreased due to a decrease in the gross portfolio yield and an increase in the provision for credit losses (see “Analysis of Credit Losses”).

Marketing, Salaries, Employee Benefits, Depreciation, Administrative, and Professional Fee Expenses

Marketing, salaries, employee benefits, depreciation, administrative, and professional fee expenses remained flat at approximately $8.9 million for both the three-month period ended June 30, 2016 and June 30, 2015. Marketing, salaries, employee benefits, depreciation, administrative, and professional fee expenses as a percentage of finance receivables, net of unearned interest, decreased to 10.40% for the three-month period ended June 30, 2016 from 10.92% for the three-month period ended June 30, 2015 due to the increase in average finance receivables, net of unearned interest.

Interest Expense

Interest expense remained flat at approximately $2.2 million for both the three-month period ended June 30, 2016 and June 30, 2015. The following table summarizes the Company’s average cost of borrowed funds:

	Three months ended June 30,
	2016			2015
Variable interest under the line of credit facility		0.56	%		0.29	%
Settlements under interest rate swap agreements		0.12	%		0.19	%
Credit spread under the line of credit facility		3.59	%		3.83	%
Average cost of borrowed funds		4.27	%		4.31	%

The Company’s average cost of funds decreased mostly due to LIBOR rates increasing (.46% as of June 30, 2016 compared to .19% as of June 30, 2015), which has caused the credit spread to decrease and the variable interest to increase. The variable interest rate also includes a decrease in the unused line fees offset with an increase in amortized debt fees. Also, interest rate swap agreements have not increased proportionately to total average debt, $210.4 million as of June 30, 2016 as compared to $201.1 million June 30, 2015.

The notional amount of interest rate swap agreements was $50.0 million at a weighted average fixed rate of 0.94% for each of the three-month periods ended June 30, 2016 and 2015. For further discussions regarding the effect of interest rate swap agreements see Note 6 – “Interest Rate Swap Agreements”.

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Contract Procurement

The Company purchases Contracts in the eighteen states listed in the table below. The Contracts purchased by the Company are predominately for used vehicles; for the three-month periods ended June 30, 2016 and 2015, less than 1% were for new vehicles.

The following tables present selected information on Contracts purchased by the Company, net of unearned interest.

	As of June 30, 2016			Three months ended June 30,
				2016		2015
State	Number of branches			Net Purchases (In thousands)
FL		20		$	11,766	$	15,774
GA		6			3,303		5,173
NC		6			3,156		3,837
SC		2			911		1,709
OH		8			4,855		7,133
MI		3			1,818		1,861
VA		2			843		1,485
IN		3			2,261		2,045
KY		3			1,900		2,434
MD		1			484		849
AL		2			1,249		1,900
TN		2			1,319		1,778
IL		3			1,849		2,088
MO		3			1,821		2,262
KS		1			723		760
TX		2			1,921		1,287
PA		—	a		346		—
WI		—	b		305		—
Total		67		$	40,830	$	52,375

^a.  Purchases in the state of Pennsylvania were being acquired and serviced through an Ohio branch as of June 30, 2016.

The Company has subsequently opened a branch in the Pennsylvania market.

^b.  Purchases in the state of Wisconsin are currently being acquired and serviced through an Illinois branch.

	Three months ended June 30, (Purchases in thousands)
Contracts	2016			2015
Purchases	$	40,830		$	52,375
Weighted APR		22.39	%		22.67	%
Average discount		7.15	%		7.54	%
Weighted average term (months)		57			56
Average loan	$	11,609		$	11,381
Number of Contracts		3,517			4,602

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Loan Origination

The following table presents selected information on Direct Loans originated by the Company, net of unearned interest.

	Three months ended June 30, (Originations in thousands)
Direct Loans Originated	2016			2015
Originations	$	2,276		$	2,651
Weighted APR		26.05	%		25.62	%
Weighted average term (months)		30			30
Average loan	$	3,480		$	3,573
Number of loans		654			742

Analysis of Credit Losses

As of June 30, 2016, the Company had approximately 1,500 active static pools. The average pool upon inception consisted of 59 Contracts with aggregate finance receivables, net of unearned interest, of approximately $667,000.

The provision for credit losses increased to approximately $7.0 million for the three months ended June 30, 2016 from approximately $5.0 million for the three months ended June 30, 2015. This increase is primarily a result of an increase in the net charge-off rate to 7.51% for the three months ended June 30, 2016 from 5.83% for the three months ended June 30, 2015.

The Company’s losses as a percentage of liquidation (see note 6 in the Portfolio Summary on page 15 for the definition of write-off to liquidation) increased to 9.41% for the three months ended June 30, 2016 as compared to 6.99% for the three months ended June 30, 2015. This increase was primarily the result of increased competition in all markets in which the Company presently operates and to a lesser extent, lower resale value at auto auctions. Increased competition continues to drive a higher percentage of loans acquired that are categorized in the lower tiers of the Company’s guidelines. Decreased auction proceeds from repossessed vehicles increased the amount of write-offs which, in turn, increased the write-off to liquidation percentage. During the three months ended June 30, 2016 and 2015, auction proceeds from the sale of repossessed vehicles averaged approximately 40% and 46%, respectively, of the related principal balance.

Recoveries as a percentage of charge-offs were approximately 8.84% and 15.10% for the three months ended June 30, 2016 and 2015, respectively. The Company attributes a large portion of this decrease simply to the increase in charge-offs; however, there was also a decrease in the dollars received through our recovery department. Historically, recoveries fluctuate from period to period due to various factors. The increase in competition hinders our ability to collect deficiency balances. Many customers do not need to be concerned about blemished credit histories due to many competitors with less restrictive underwriting guidelines. From time to time, the Company will aggregate charge-off accounts it deems uncollectible, and sell them to a third-party to limit future down-side risk relating to these accounts.

The delinquency percentage for Contracts more than thirty days past due, excluding Chapter 13 bankruptcy accounts, as of June 30, 2016 increased to 7.66% from 5.52% as of June 30, 2015. The delinquency percentage for Direct Loans more than thirty days past due as of June 30, 2016 increased to 2.49% from 1.89% as of June 30, 2015. See Note 4- “Finance Receivables” for changes in allowance for credit losses, credit quality and delinquencies. The delinquency percentage increase for Contracts reflects portfolio weakness that generally manifests itself in increased future losses. The Company has continued to see significant increase in the number of competitors with aggressive underwriting in our operating market. The Company utilizes a static pool approach to analyzing portfolio performance and looks at specific static pool performance and recent trends as leading indicators of the future performance of its portfolio.

The Company also considers the following factors to assist in determining the appropriate loss reserve levels: unemployment rates; competition; the number of bankruptcy filings; the results of internal branch audits; consumer sentiment; consumer spending; economic growth (i.e., changes in GDP); the condition of the housing sector; and other leading economic indicators. The Company continues to evaluate reserve levels on a pool-by-pool basis during each reporting period. The longer-term outlook for portfolio performance will depend on overall economic conditions, the unemployment rate, the rational or irrational behavior of the Company’s competitors, and the Company’s ability to monitor, manage and implement its underwriting philosophy in additional geographic areas as it strives to continue its expansion.

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In accordance with our policies and procedures, certain borrowers qualify for, and the Company offers, one-month principal payment deferrals on Contracts and Direct Loans. For the three months ended June 30, 2016 and June 30, 2015 the Company granted deferrals to approximately 5.41% and 5.27%, respectively, of total Contracts and Direct Loans. The number of deferrals is influenced by portfolio performance, including but not limited to, the unemployment rate, inflation, credit quality of loans purchased, and general economic conditions.

Income Taxes

The provision for income taxes decreased to approximately $1.8 million for the three months ended June 30, 2016 from approximately $2.3 million for the three months ended June 30, 2015. The Company’s effective tax rate decreased to 38.31% for the three months ended June 30, 2016 from 38.36% for the three months ended June 30, 2015.

Liquidity and Capital Resources

The Company’s cash flows are summarized as follows:

	Three months ended June 30, (In thousands)
	2016			2015
Cash provided by (used in):
Operating activities	$	9,112		$	8,622
Investing activities (primarily purchase of Contracts)		(5,005	)		(13,811	)
Financing activities		(1,436	)		3,032
Net increase (decrease) in cash	$	2,671		$	(2,157	)

The Company’s primary use of working capital during the three months ended June 30, 2016, was the funding of the purchase of Contracts which are financed substantially through cash from principal payments received and cash from operations in addition to borrowings on the Line. The Line is secured by all of the assets of the Company and has a maturity date of January 31, 2018. The Company may borrow up to $225.0 million. Borrowings under the Line may be under various LIBOR pricing options plus 300 basis points with a 1% floor on LIBOR. As of June 30, 2016, the amount outstanding under the Line was $209.0 million, and the amount available under the Line was approximately $16.0 million.

The Company will continue to depend on the availability of the Line, together with cash from operations, to finance future operations. Amounts outstanding under the Line have decreased by $2 million during the three months ended June 30, 2016. The decrease of the Line is principally related to the fact that cash received from operations exceeded cash needed to fund new contracts. The amount of debt the Company incurs from time to time under these financing mechanisms depends on the Company’s need for cash and ability to borrow under the terms of the Line. The Company believes that borrowings available under the Line as well as cash flow from operations will be sufficient to meet its short-term funding needs. The Line requires compliance with certain debt covenants including financial ratios, asset quality and other performance tests. The Company is in compliance with all of its debt covenants as of June 30, 2016.

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Contractual Obligations

The following table summarizes the Company’s material obligations as of June 30, 2016.

	Payments Due by Period (In thousands)
	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Operating leases	$	5,891	$	2,233	$	3,106	$	552	$	—
Line of credit1		209,000		—		209,000		—		—
Interest on Line1		14,130		8,924		5,206		—		—
Total	$	229,021	$	11,157	$	217,312	$	552	$	—

^1.  The Company’s Line matures on January 30, 2018. Interest on outstanding borrowings under the Line as of June 30, 2016, is based on an effective interest rate of 4.27% which includes the estimated effect of the interest rate swap agreements settlements through the maturity date. The effective interest rate used in the above table does not contemplate the possibility of entering into interest rate swap agreements in the future.

Future Expansion

The Company currently (as of August 9, 2016) operates a total of 68 branch locations in eighteen states (see “Contract Procurement”). Each office is budgeted (size of branch, number of employees and location) to handle up to 1,000 accounts and up to $7.5 million in gross finance receivables. To date, thirty-three of our branches meet this capacity. The Company continues to evaluate potential new markets and is also evaluating its existing markets and may close or consolidate certain existing branches. As a result of continued intense competition; the Company has been evaluating the long-term sustainability of its current branch-based model. In the beginning of August 2016, the Company decided to restructure its collections to a centralized department operating at the Corporate Headquarters. New regulations and best practices regarding collections were important aspects that led us to the decision to centralize. To a lesser extent the Company will experience a decline in operating expenses as a result of a reduced headcount. The Company does not believe there will be any material change in delinquencies and losses as a result of this strategic decision. The branches will continue to underwrite all business; however, any additional material changes to Company operations will be evaluated by the Company over the next several quarters.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company’s operations result primarily from changes in interest rates. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes.

Interest rate risk

Management’s objective is to minimize the cost of borrowing through an appropriate mix of fixed and floating rate debt. Derivative financial instruments, such as interest rate swap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from ongoing business operations. The Company does not use interest rate swap agreements for speculative purposes. As of June 30, 2016, $159 million, or approximately 76.1% of our total debt, was subject to floating interest rates; however, due to a 1% floor on the debt these rates are effectively fixed until the variable rates exceed this threshold. As a result, a hypothetical increase in the variable interest rates of 1% or 100 basis points (1.46% as of June 30, 2016) applicable to this floating rate debt would have an annual after-tax increase of interest expense of approximately $284,000.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

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Changes in internal controls. There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business, none of which, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2016, which could materially affect our business, financial condition or future results. The risks described in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 6. EXHIBITS

See exhibit index following the signature page.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

NICHOLAS FINANCIAL, INC.

(Registrant)

Date: August 09, 2016	/s/ Ralph T. Finkenbrink
	Ralph T. Finkenbrink
	Chairman of the Board, President,
	Chief Executive Officer and Director
Date: August 09, 2016	/s/ Katie L. MacGillivary
	Katie L. MacGillivary
	Vice President and
	Chief Financial Officer

22

EXHIBIT INDEX

Exhibit No.	Description
10.8	Form of Dealer Agreement and Schedule thereto listing dealers that are parties to such agreements
31.1	Certification of the President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. § 1350
32.2*	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. § 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* This certification accompanies the Quarterly Report on Form 10-Q and is not filed as part of it.

EX-10.8

Exhibit 10.8

NICHOLAS FINANCIAL, INC. Automobile Dealer Retail Agreement

Non-Recourse Dealer Retail Agreement

The undersigned Dealer proposes to sell to the undersigned Nicholas Financial, Inc. (NFI), from time to time, Promissory Notes, Security Agreements, Retail Installment contracts, Conditional Sales Contracts, or other instruments hereinafter referred to as “Contracts”, evidencing installment payment obligations owing Dealer arising from the time sale of motor vehicle(s) and secured by such Contracts. It is understood that NFI shall have the sole discretion to determine which Contracts it will purchase from Dealer.

1. Dealer represents and warrants that Contracts submitted to NFI for purchase shall represent valid, bona fide sales for the respective amount therein set forth in such Contracts and that such Contracts represent sales of motor vehicles owned by the Dealer and are free and clear of all liens and encumbrances.

2. Upon purchase by NFI of any contracts hereunder from dealer, dealer shall endorse and assign to NFI the obligations and all pertinent security, security instruments, along with such provisional endorsements as may be stipulated for such contracts purchased by NFI.

3. This Agreement, and sums payable hereunder, may not be assigned by Dealer without written consent of NFI.

4. Dealer acknowledges that NFI charges an acquisition fee and a $75.00 loan processing charge on all contracts purchased and funded by NFI. The acquisition fee and loan processing charge are taken from Dealer Proceeds and are Non-Refundable. The amount is disclosed on each transaction and is set by Nicholas Financial, Inc.

5. Perfection of Security Interest: For each Contract purchased by NFI, Dealer shall, within 20 days of the date of the Contract or within a lesser time period if required by applicable law, file and record all documents necessary to properly perfect the valid and enforceable first priority security interest of NFI in the Vehicle and shall send NFI all security interest filing receipts. A Contract shall be subject to Repurchase for the life of the Contract if NFI suffers a loss due to the Dealership’s failure to (1) file and record, within 20 days of the date of the Contract or within a lesser time period if required by applicable law, all documents required to properly perfect the valid and enforceable first priority security interest of NFI in the Vehicle; (2) send NFI the filing receipts reflecting said perfection.

6. Indemnity: As a separate and cumulative obligation, Dealer shall defend and hold NFI harmless from any and all claims, defenses, offsets, damages, suits, administrative or other proceedings, cost (including reasonable attorney’s fees), expenses, losses, and liabilities. (Collectively Claims) arising out of connected with or relating to the Contract or the goods or services sold there under. Timing of indemnification is within 7 days of demand by NFI.

7. Add-on Products and Services:

a. Defined. “Add-on Products and Services,” or “APS,” shall mean service contracts, mechanical breakdown contracts, GAP contracts, credit life and credit accident and health insurance. In addition, the term shall include other products and services acceptable to and approved in writing by NFI from time to time.

b. Cancellation of APS. If APS has been sold by the Dealer and financed in a Contract purchased by NFI, Dealer agrees that such APS shall be cancelable upon demand by Buyer. Upon such cancellation, Dealer shall immediately notify NFI that the Buyer has canceled the APS. Upon cancellation, Buyer shall be entitled to a refund of the unearned portion of the cash price of the APS as provided in the APS Contract or as may otherwise be required by law, whichever is greater. As between NFI and Dealer, Dealer agrees to pay to NFI, as appropriate, any refund due to Buyer under the terms of an APS Contract. Dealer’s liability under this Section shall be limited to the amount Dealer collected and retained or otherwise received, directly or indirectly, in connection with the sale of the APS.

8. Privacy: Dealer shall not make any unauthorized disclosure of, or use any personal information of individual consumers which it receives from NFI or on NFI’s behalf other than to carry out the purposes for which such information is received. NFI and Dealer shall comply in all respects with all applicable requirements of Title V of the Gramm-Leach-Bliley Act of 1999 and its implementing regulations.

9. No Provisions hereof may be modified, changed or supplemented, unless both parties agree to the amendment in writing.

Nicholas Financial, Inc.	Dealer:
By:	By:
Date:	Date:

Exhibit 10.8

DEALER NAME	DEALER NAME
123 AUTO LLC	ALTERNATIVES
12K & UNDER MOTORS	AMAZING GRACE AUTOMOTIVE
1ST CHOICE CAROLINA CARS	AMERICAN AUTO SALES WHOLESALE
247 AUTO SALES	AMERIFIRST AUTO CENTER, INC.
27 AUTO SALES INC. OF LEON	AMOS AUTOMOTIVE LLC
360 MOTOR CORP	AMS CARS
4042 MOTORSPORTS LLC	AMTEX SERVICES INC
A & D MOTORS SALES CORP	ANDERSON MOTORS
A & D MOTORS, INC.	ANDY MOHR NISSAN, INC.
A LUXURY AUTO	APPROVAL AUTO CREDIT INC.
A PLUS CAR SALES & RENTALS INC	APPROVED AUTOS LLC
A.R.J.’S AUTO SALES, INC	ARC AUTO LLC
A.Z. AUTOMOTIVE INC	ARCADIA CREEK AUTO SALES LLC
A-1 AUTO PLEX LLC	ARCHER AUTOMOTIVE INC
AACC AUTO CAR SALES, INC	ARENA AUTO SALES
ABBY’S AUTOS, INC.	ARMSTRONG AUTO SALES
ACCURATE AUTO GROUP INC	A’S USED CARS INC
ACTION AUTO SALES	ATL AUTOS .COM
ACTIVE AUTO SALES	ATLANTA BEST USED CARS LLC
ADAMS AUTO SALES INC	ATLANTA LUXURY MOTORS INC
ADDISON AUTO GROUP	AUCTION DIRECT USA
ADELSA AUTO FINANCE INC	AUTO BRIGHT AUTO SALES
ADVANCED AUTO BROKERS, INC.	AUTO CENTER OF GREER LLC
ADVENTURE SUBARU LLC	AUTO CENTRAL SALES INC
AFFORDABLE AUTO MOTORS, INC	AUTO CHOICE BROKERS
AFFORDABLE USED CARS & TRUCKS	AUTO CLUB OF MIAMI
AJ’S AUTO	AUTO COLLECTION OF MURFREESBOR
AJ’S AUTO IMPORTS	AUTO CREDIT CONNECTION, LLC
AL PIEMONTE SUZUKI INC	AUTO DEALER SOLUTIONS INC
AL PIEMONTE’S ARLINGTON HEIGHT	AUTO DEALS INC
ALBANY MITSUBISHI	AUTO DIRECT COLUMBUS OH
ALFA AUTO MALL LLC	AUTO DIRECT PRE-OWNED
ALL ABOUT AUTO’S INC	AUTO ENTERPRISE CO
ALL AMERICAN AUTO MART	AUTO EXCHANGE OF CENTRAL
ALL AMERICAN AUTO SALES	AUTO EXCHANGE USA CORP
ALL MAKES AUTO SALES INC	AUTO EXCHANGE USA, LLC
ALL SEASON AUTO SALES LLC	AUTO EXPO HOUSTON
ALL STAR DODGE CHRYSLER JEEP	AUTO EXPRESS ENTERPRISE INC
ALLAN VIGIL FORD	AUTO HAUS
ALLIANCE AUTO SALES LTD	AUTO HOUSE
ALLSTAR MOTORS, INC.	AUTO JUNCTION LLC
ALM MALL OF GEORGIA	AUTO LINE, INC.

Exhibit 10.8

DEALER NAME	DEALER NAME
AUTO LOAN ASSOCIATES LLC	AUTOWORLD USA
AUTO MAC 2	AXELROD PONTIAC
AUTO MALL OF TAMPA INC	BAKER BUICK GMC CADILLAC
AUTO MARTT, LLC	BALLPARK AUTO LLC
AUTO NATIONS INC	BARBIES AUTOS CORPORATION
AUTO NETWORK OF THE TRIAD LLC	BAREFOOTS AUTO MART
AUTO NETWORK, INC.	BARGAIN SPOT CENTER
AUTO PLACE INC	BARTS CAR STORE INC
AUTO PLAZA USA	BASELINE AUTO SALES, INC.
AUTO PLUS SALES & SERVICE LLC	BAYSIDE AUTOMALL
AUTO PROFESSION CAR SALES 2	BELAIR ROAD DISCOUNT AUTO
AUTO PROFESSIONAL CAR SALES	BELLS AUTO SALES
AUTO RITE, INC	BELMONTE AUTO IMPORTS
AUTO SALES USA	BENING MOTOR CO-JACKSON
AUTO SELECT	BENSON CADILLAC NISSAN, INC.
AUTO SOLUTIONS MOTOR COMPANY	BENSON FORD MERCURY
AUTO SPORT, INC.	BENTLEY HYUNDAI
AUTO STORE OF GARNER	BEREA AUTO MALL
AUTO UNION OF MIAMI INC	BERGER CHEVROLET
AUTO VILLA	BERT SMITH INTERNATIONAL
AUTO VILLA OUTLET	BEST AUTO SELECTION INC
AUTO VILLA WEST	BEST BUY AUTO TRADE INC
AUTO WEEKLY SPECIALS	BEST CAR FOR LESS
AUTO WORLD	BEST CARS KC INC
AUTOCO	BEST DEALS ON WHEELS AUTO
AUTOLAND	BEST IMPORT AUTO SALES INC
AUTO-LAND INC	BEST PRICE DEALER INC
AUTOLINE INDY	BEST VALUE AUTO SALES INC
AUTOLINK	BESTWAY AUTO BROKERS LLC
AUTOMALL 59	BETTER AUTOMALL OF STUART
AUTOMAX	BEXLEY MOTORCAR COMPANY LLC
AUTOMAX KC LLC	BIC MOTORS LLC
AUTOMAXX OF SUMMERVILLE	BIG BLUE AUTOS, LLC
AUTOMOBILE COMMODITY LLC	BIG BOYS TOYS FLORIDA LLC
AUTO-ONE USA LLC	BIG CHOICES AUTO SALES INC
AUTOPLEX OF AFFTON	BIG M CHEVROLET
AUTORAMA PREOWNED CARS	BILL BUCK CHEVROLET, INC
AUTOSHOW SALES AND SERVICE	BILL KAY CHEVROLET GEO INC
AUTOTEAM INC	BILL PENNEY TOYOTA
AUTOTEAM OF VALDOSTA LLC	BILLY RAY TAYLOR AUTO SALES
AUTOVATION	BILTMORE MOTOR CORP.
AUTOWAY CAR SALES LLC	BIRMINGHAM WHOLESALE AUTO LLC

Exhibit 10.8

DEALER NAME

DEALER NAME

BLEECKER CHRYSLER DODGE JEEP BLOOMINGTON AUTO CENTER BLUE RIDGE MAZDA BLUE SPRINGD FORD SALES INC BLUESLADE MOTOR CARS LLC BOB MAXEY FORD BOB MAXEY LINCOLN-MERCURY BOBB SUZUKI BOBBY LAYMAN CHEVROLET, INC. BOBBY MURRAY TOYOTA BOOMERS TRUCKS & SUVS LLC BOSAK HONDA BOWMAN AUTOMOTIVE INC BRADY AUTO SALES BRAMLETT PONTIAC INC BRANNAN AUTO SALES BRECKENRIDGE MOTORS EAST LLC BRICKELL HONDA BUICK & GMC BROADMOOR MOTOR SALES INC BROADWAY AUTO MALL BROCKMAN AUTO LLC BROGS AUTO BROOKS AUTO SALES BUCKEYE FORD LINCOLN MERC OF O BUCKEYE NISSAN, INC. BUDGET CAR SALES & RENTALS BUDGET MOTORCARS BURDUE QUALITY USED CARS BURL’S USED CARS BURNS AUTO MART LLC BUY IT RIGHT AUTO SALES #1 INC BUY RIGHT AUTO SALES INC BYERLY FORD-NISSAN, INC C & S SALES C&H AUTO SALES CADILLAC OF NOVI INC CALHOUN AUTO OUTLET, INC CALVARY CARS & SERVICE, INC CAMARENA AUTO, INC CAPITAL AUTO SALES CAPITAL AUTO SPORTS CENTER LLC CAPITAL AUTOMOTIVE OF

CAPITAL MOTORS LLC CAPITOL AUTO CAPITOL AUTO SALES, INC. CAPITOL CITY FORD, INC. CAR BAZAAR INC OF FRANKLIN CAR BOSS LLC CAR CHOICE CAR CITY USA LLC CAR COLLECTINO INC CAR CONNECTION & FINANCE CAR DEALZ CAR DEPOT CAR DEPOT OF MIRAMAR CAR FACTORY OUTLET CAR LEGENDS CAR LINE AUTOS CAR LOAN DIRECT, LLC CAR MART FL.COM CAR MASTERS CAR SMILE CAR SOURCE, LLC. CAR STOP INC CAR TOWN KIA USA CAR XPRESS AUTO SALES CAR ZONE INC CARDINAL MOTORS INC CAREY PAUL HONDA CARISMA AUTO GROUP CARITE, INC CARLOCK KIA OF TUSCALOOSA CARLYLE MOTORS LLC CARMEL MOTORS CAROLINA AUTO SPORTS CARPLEX CARS & CREDIT OF FLORIDA CARS AND MORE EUROPEAN CAR CARS CARS CARS LLC CARS KONNECT INC CARS PLUS LLC CARS TO GO AUTO SALES AND CARS UNDER 5 CARTISTIC

Exhibit 10.8

DEALER NAME

DEALER NAME

CARX DEPOT LLC CARZ4LESS CARZONE USA CAS SALES & RENTALS CASCADE AUTO GROUP, LTD CASH & DASH AUTO SALES INC CAVALIER AUTO SALES INC CC MOTORS INCORPORATED CD S AUTOMOTIVE INC CEDARCREST AUTO BROKERS LLC CENTRAL FLORIDA EXPORTS, INC. CERTIFIED AUTO CENTER CHAMPION PREFERRED AUTOMOTIVE CHAMPS AUTO SALES INC CHATHAM PARKWAY TOYOTA CHECKERED FLAG HONDA CHEIFS WHOLESALE AUTOS CHEROKEE AUTO SALES, INC. CHERRY ROAD AUTO SALES CHICAGO AUTO DEPOT INC CHICAGO MOTORS INC CHILLICOTHE TRUCKS INC CHIPINQUE AUTO SALES INC CHRIS LEITH AUTOMOTIVE INC CHRIS SPEARS PRESTIGE AUTO CINCINNATI USED AUTO SALES CIRCLE CITY ENTERPRISES, INC. CITY AUTO SALES CITY STAR MOTORS LLC CITY TO CITY AUTO SALES, LLC CITY WIDE AUTO CREDIT CLARKSVILLE AUTO SALES CLASSIC AUTO GROUP INC CLASSIC AUTOHAUS CLASSIC KIA OF CARROLLTON CLAY COOLEY TOYOTA OF HAZELWOO CLEVELAND AUTO MALL INC CLIFF & SONS AUTO SALES CLUTCH AUTO BROKERS LLC COAL WHOLESALE COAST TO COAST AUTO SALES COASTAL CHEVROLET, INC.

COBB’S CAR COMPANY INC COBB’S CAR COMPANY INC COLE FORD LINCOLN LLC COLON AUTO SALES INC COLUMBUS AUTO RESALE, INC COMBS & CO COMMUNITY AUTO SALES COMPASS MOTORS OF ANDERSON COMPLETE AUTO CENTER INC CONCOURS AUTO SALES, INC. CONSUMERS SUZUKI CONWAY HEATON INC CONWAY IMPORTS AUTO SALES COOK & REEVES CARS INC COOPERATIVE AUTO BROKERS INC CORLEW CHEVROLET CADILLAC OLDM COUCH MOTORS LLC COUGHLIN AUTOMOTIVE- PATASKALA COUGHLIN FORD OF CIRCLEVILLE COUNTRY HILL MOTORS INC COUNTY MOTOR CO., INC. COURTESY CHRYSLER JEEP DODGE COURTESY FORD CRAIG & LANDRETH INC CREEKSIDE AUTO SALES LLC CRM MOTORS, INC. CRONIC CHEVROLET, OLDSMOBILE- CROSS AUTOMOTIVE CROSSROADS AUTO MART INC CROWN ACURA CROWN AUTOMOTIVE GROUP LLC CROWN KIA CROWN NISSAN DADE CITY AUTOMAX DAN CUMMINS CHV BUICK PONTIAC DAN HATFIELD AUTO GROUP DAN TUCKER AUTO SALES DANNY MOTORS INC DAN’S AUTO SALES, INC DAVES JACKSON NISSAN DAVID RICE AUTO SALES DAVID SMITH AUTOLAND, INC.

Exhibit 10.8

DEALER NAME

DEALER NAME

DEACON JONES AUTO PARK DEALZ AUTO TRADE DEALZ ON WHEELZ LLC DEAN SELLERS, INC. DELTA TRADE INC DEREK MOTORCAR CO INC DESTINYS AUTO SALES DFW AUTO FINANCE AND SALES DIAMOND K MOTORS LLC DICK BROOKS HONDA DIRECT AUTO SALES DIRECT MOTORSPORT LLC DISCOUNT CARS OF MARIANNA INC DIXIE IMPORT INC DIXIE WAY AUTO PLAZA, INC DM MOTORS, INC. DOCTOR WINDSHIELD DOGWOOD AUTO WORKS INC DON FRANKLIN FORD, INC DON HINDS FORD, INC. DON JACKSON CHRYSLER DODGE DONLEY FORD LINCOLN DORAL CARS OUTLET DORAL LINCOLN LLC DOUGLAS AUTO SALES INC DOWNTOWN BEDFORD AUTO DREAM CAR 4 U OF LAKELAND, LLC DRIVE 1 CAR AND TRUCK LLC DRIVE ATLANTA LLC DRIVE NATION AUTO SALES DRIVE NOW AUTO SALES DRIVEN AUTO SALES DRIVEN AUTO SALES LLC DRIVER SEAT AUTO SALES LLC DRIVERIGHT AUTO SALES, INC. DRIVERS WORLD DRIVEWAY MOTORS DRIVEWAYCARS.COM DURAN MOTOR SPORTS INC DUVAL CARS LLC DYNAMIC AUTO WHOLESALES INC DYNAMIC IMPORTS

DYNASTY AUTOMOTIVE LLC E & R AUTO SALES INC E CAR SUPERSTORE INC EAGLE CAR & TRUCK INC EASLEY MITSUBISHI’S THE EAST BEACH AUTO SALES EASTERN SHORE AUTO BROKERS INC EASY AUTO AND TRUCK EASY FINANCE AUTO ECARS GROUP ECONO AUTO SALES INC ECONOMIC AUTO SALES INC ECONOMY MOTORS LLC ED TILLMAN AUTO SALES ED VOYLES HYUNDAI EDDIE AUTO BROKERS EDDIE MERCER AUTOMOTIVE EDEN AUTO SALES EDGE MOTORS EJ’S AUTO WORLD, INC. ELITE AUTO SALES OF ORLANDO ELITE AUTO WHOLESALE ELITE AUTOMALL LLC ELITE LEVEL AUTO INC ELYRIA BUDGET AUTO SALES INC EMJ AUTOMOTIVE REMARKETING EMPIRE AUTO SALES & SERVICE EMPIRE AUTOMOTIVE GROUP EMPIRE EXOTIC MOTORS, INC EMPORIUM AUTO MART ENTERPRISE CAR SALES ENTERPRISE CAR SALES ENTERPRISE LEASING COMPANY ENTERPRISE LEASING COMPANY ERNEST MOTORS, INC. ESSEN MOTOR COMPANY PLUS EVOLUTION SPORT MOTORS EXCLUSIVE AUTO WHOLESALE LLC EXECUTIVE CARS LLC EXOTIC MOTORCARS EXPRESS AUTO SALES LLC EXPRESS MOTORS

Exhibit 10.8

DEALER NAME

DEALER NAME

EXPRESS MOTORS LLC EXTREME WINDOW TINTING SIGNS & EZ CAR CONNECTION LLC EZEL AUTO SALES, INC FAIRLANE FORD SALES, INC. FAITH MOTORS INC FAMILY AUTO CENTER AND SERVICE FANELLIS AUTO FANTASY AUTOMOTIVE FAT SACK MOTORS, LLC FERCO MOTORS CORP FERMAN CHRYSLER PLYMOUTH FERMAN FORD FERMAN NISSAN FIRST CHANCE MOTORSPORTS FIRST CHOICE AUTO SALES FIRST CHOICE AUTOMOTIVE INC FIRST CLASS AUTO CHOICE FIRST CLASS AUTO SALES LLC FIRST CLASS MOTORS INC FIRST STOP AUTO SALES FIRST UNION AUTOMOTIVE LLC FISHER AUTO GROUP FITZGERALD MOTORS, INC. FIVE STAR AUTO SALES OF FIVE STAR AUTOS INC FIVE STAR CAR & TRUCK FLEET SERVICES REMARKETING FLETCHER CHRYSLER PRODUCTS INC FLORENCE AUTO MART INC FLOW HONDA FOOTHILL FORD FORT MYERS AUTO MALL FORT WALTON BEACH FORTUNE MOTOR GROUP FRANK MYERS AUTO SALES, INC FRANKLIN STREET MOTORS LLC FRITZ ASSOCIATES FRONTIER MOTORS INC G & L MOTORS, INC G & R AUTO SALES CORP GAINESVILLE AUTO KI LLC

GAINESVILLE MITSUBISHI GANLEY CHEVROLET, INC GANLEY LINCOLN MERCURY GANLEY, INC GATEWAY AUTO PLAZA GATEWAY BUICK GMC GATOR CHRYSLER-PLYMOUTH, INC. GATOR CITY MOTORS INC GENERAL AUTO LLC GENTHE AUTOMOTIVE-EUREKA LLC GEN-X CORP GEOFF ROGERS AUTOPLEX GEORGIA CHRYSLER DODGE GERALDS AUTO SALES GERMAIN TOYOTA GERMAN AUTO SALES LLC GINN MOTOR COMPANY GISELLE MOTORS, CORP GIVE AWAY AUTO SALE LLC GLOBAL PRE-OWNED INC GMT AUTO SALES, INC GODZILLA MOTORS INC GOLDEN OLDIES GOOD RIDES INC GOOD TO GO AUTO SALES, INC. GR MOTOR COMPANY GRACE AUTOMOTIVE LLC GRAHAM MOTOR COMPANY GRANT MOTORS CORP. GRAVITY AUTOS ROSWELL GREEN LIGHT CAR SALES GRIFFIN FORD SALES, INC. GRIMALDI AUTO SALES INC G’S AUTOMOTIVE GULF ATLANTIC WHOLESALE INC GULF CHRYSLER DODGE JEEP INC GULF COAST AUTO BROKERS, INC. GWINNETT MITSUBISHI H & H AUTO SALES HAGGERTY BUICK GMC INC HAIMS MOTORS INC HAIMS MOTORS INC

Exhibit 10.8

DEALER NAME

DEALER NAME

HALE OF A DEAL AUTO GROUP INC HAMILTON CHEVROLET INC HAPPY HYUNDAI HARBOR CITY AUTO SALES, INC. HARBOR NISSAN HARDY CHEVROLET HARRIET SALLEY AUTO GROUP LLC HARRIGANS AUTO SALES HARRISON AUTO BROKER AND HATFIELD USED CAR CENTER HEADQUARTER TOYOTA HEARTLAND CHEVROLET HEB AUTO SALES INC HENNESSY FORD LINCOLN ATLANTA HENNESSY MAZDA PONTIAC HERB KINMAN CHEVROLET, INC. HERITAGE AUTOMOTIVE GROUP HERITAGE BUICK GMC HONDA HERRINGTON AUTOMOTIVE HI LINE IMPORTS INC HIGH POINT IMPORTS LLC HIGH Q AUTOMOTIVE CONSULTING HIGHESTCASHFORCARS LLC HIGHLINE AUTO SALES HIGHLINE AUTOMOTIVE SERVICES HIGHLINE IMPORTS, INC. HILLTOP MOTORS HILLWOOD AUTO SALES & SERVICE HOBSON CHEVROLET BUICK GMC LLC HOLLYWOOD MOTOR CO #1 HOLLYWOOD MOTOR CO #3 HOMESTEAD MOTORS INC HONDA OF CONYERS HONDA OF FRONTENAC HONDA OF MUFREESBORO HONDA OF OCALA HONEYCUTT’S AUTO SALES, INC. HOOVER AUTOMOTIVE LLC HOOVER CHRYSLER PLYMOUTH DODGE HOOVER THE MOVER CAR AND HOTWHEELZ CUSTOM AUTOS LLC HOUSTON DIRECT AUTO

HOUSTON DIRECT AUTO, INC. HT MOTORS INC HUBLER FINANCE CENTER HUBLER FORD LINCOLN MERCURY HUBLER MAZDA SOUTH HUDSON AUTO SALES HUFFINES CHRYSLER JEEP DODGE HY-TECH AUTO SALE AND EXPORT I GOT A DEAL USED CARS I-80 AUTO SALES INC IAUTO INC ICARS IDEAL USED CARS INC IDRIVE FINANCIAL IKONIC MOTORS IMPORT AUTO BROKERS INC INDY MOTORSPORTS INLINE AUTO SALE INC INTERNATIONAL AUTO OUTLET INTERNATIONAL AUTO SALES NC INTERNATIONAL AUTO WHOLESALERS INTERNATIONAL CARS CO. IT’S CAR TIME INC IVORY CHEVROLET, LLC J & B AUTO GROUP LLC J & J MOTORS INC J & M AFFORDABLE AUTO, INC. J AND J’S AUTO SALES J&M AUTOMOBILES CORP JACK DEMMER FORD, INC. JACK MILLER AUTO PLAZA LLC JACK MILLER KIA JACK STONES CREEKSIDE SALES JACKIE MURPHY’S USED CARS JAKMAX JAX AUTO WHOLESALE, INC. JAY WOLFE AUTO OUTLET JAY WOLFE HONDA JAZCARS, INC. JB AUTO SOURCE INC JEFF WYLER CHEVROLET OF JEFFREY P. HYDER

Exhibit 10.8

DEALER NAME

DEALER NAME

JENKINS NISSAN, INC. JENO AUTOPLEX JENROC AUTO SALES JERRY HAGGERTY CHEVROLET INC JERRY HUNT AUTO SALES JERRY WILSON’S MOTOR CARS JIM M LADY OLDSMOBILE INC JIM ORR AUTO SALES JIMMY KAVADAS YOUR CREDIT MAN JK AUTOMOTIVE GROUP LLC JK PONTIAC-GMC TRUCK INC JOBETA AUTOMOTIVE GROUP INC JOE RICCI AUTOMOTIVE JOE RICCI AUTOMOTIVE—TAYLOR JOHN BLEAKLEY FORD JOHN JONES AUTOMOTIVE JOHN KOOL LINCOLN MERCURY INC JOHN WEISS TOYOTA SCION OF JOHNSON AUTOMOTIVE GROUP INC JORDAN AUTO SALES JOSEPH CHEVROLET OLDSMOBILE CO JOSEPH MOTORS JOSEPH TOYOTA INC. JPL AUTO EMPIRE JT AUTO INC. JUSTICE AUTOMOTIVE K B AUTO EMPORIUM KALER LEASING SERVICES INC KATHY’S KARS KC AUTO FINANCE KC AUTOMOTIVE GROUP LLC KEITH HAWTHORNE HYUNDAI, LLC KELLEY BUICK GMC INC KEMET AUTO SALES KENDALL TOYOTA KENS KARS KERRY NISSAN, INC. KIA ATLANTA SOUTH KIA COUNTRY OF SAVANNAH KIMBLE’S AUTO SALES, INC. KING MOTORS KING SUZUKI OF HICKORY LLC

KINGS AUTO GROUP INC KINGS OF QUALITY AUTO SALES KNOX BUDGET CAR SALES & RENTAL KUNES COUNTRY CHEVROLET KUNES COUNTRY CHRYSLER DODGE KUNES COUNTRY FORD LINCOLN INC KUNES COUNTY FORD OF ANTIOCH LA AUTO STAR, INC. LA PORTE MITSUBISHI LAFONTAINE AUTO GROUP LAGRANGE MOTORS LAGUNA NIGUEL AUTO SALES INC LAKE PLACID MOTOR CAR, INC LAKELAND CHRYSLER DODGE LAKESIDE MOTORS INC LANCASTER AUTOMOTIVE LANDERS MCLARTY SUBARU LANDMARK AUTO INC LANDMARK CDJ OF MONROE, LLC LANDSTREET AUTO SOLUTIONS LLC LANIGAN’S AUTO SALES LANTERN MOTORS INC LASCO FORD INC LAW AUTO SALES, INC LAWRENCE MOTORSPORTS INC LEGACY AUTOS LEGEND AUTO, INC LEVEL UP AUTO SALES LGE CORP LIBERTY USED MOTORS INC LIGHTHOUSE AUTO SALES LMN AUTO INC LONDOFF JOHNNY CHEVROLET INC LONGSTREET AUTO LOU FUSZ BUICK GMC LOWEST PRICE TRANSPORTATION LOWPRICE AUTO MART LLC LUCKY MOTORS INC LUNA MOTOR GROUP CORP LUXURY AUTO SALES LLC LUXURY FLEET LEASING LLC LYNCH CHEVROLET OF KENOSHA

Exhibit 10.8

DEALER NAME

DEALER NAME

M & M AUTO SUPER STORE M & M AUTO WHOLESALERS, LLC M & M AUTO, INC. M & M MOTORS OF ROCK HILL INC M I D OVERSEAS INC MAC CHURCHILL AUTO MALL MACHADO AUTO SELL LLC MAINLAND AUTO SALES INC MAINSTREAM AUTO SALES LLC MALOY AUTOMOTIVE LLC MARCH MOTORS INC. MARIETTA AUTO MALL CENTER MARLOZ OF HIGH POINT MARONEY AUTO SALES MARTY FELDMAN CHEVY MASTER AUTO GROUP MATHEWS FORD INC. MATHEWS HAROLD NISSAN MATT CASTRUCCI MAUS MOTORS INC MAX MOTORS INC MAXIE PRICE CHEVROLETS OLDS, MAYSVILLE PREMIER AUTO LLC MAZDA SAAB OF BEDFORD MCADENVILLE MOTORS MCCLUSKY AUTOMOTIVE LLC MCCLUSKY’S CHEVROLET INC MCGHEE AUTO SALES INC. MCHENRY MOTORWERKS MCJ AUTO SALES OF CENTRAL MCKENNEY CHEVROLET MEACH AUTO SALES MEMORIAL HWY AUTO SALES AND MI AUTO CENTER LLC MIA ON WHEELS CORP MIA REPOS LLC MIAMI AUTO LIQUIDATORS INC MIAMI AUTO WHOLESALE MIAMI EMPIRE AUTO SALES CORP MIAMI USED AUTO SALES MICHAEL RABURN’S AUTO SALES MICHAEL’S MOTOR CO

MID AMERICA AUTO EXCHANGE INC MIDCITY AUTO & TRUCK EXCHANGE MIDWEST AUTO DIRECT MIDWEST AUTO MART LLC MIDWEST AUTO STORE LLC MIDWEST MOTORS MIDWEST MOTORSPORT SALES & MIGENTE MOTORS INC MIGHTY MOTORS MIKANO AUTO SALES, INC. MIKE BASS FORD MIKE CASTRUCCI FORD SALES MILLENIUM AUTO SALES MILTON MARTIN TOYOTA MINT AUTO SALES MINT AUTO SALES MINT AUTO SALES MINTON AUTO INC MINTON MOTOR CARS II LP MIRA AUTO SALES LLC MMC AUTO SALES LLC MO AUTO SALES MODERN CORP MONARCH CAR CORP MOORE NISSAN MORNING STAR MOTORS MOSS CURTAIN MOTORS LLC MOTOR CAR CONCEPTS II MOTOR CITY AUTO INC MOTORCARS TOYOTA MOTORHOUSE INC MOTORMAX OF GRAND RAPIDS MOTORS DRIVEN INC MOTORS TRUST INC MOUNTAIN TOP MOTOR COMPANY INC MR AUTO INC MR WHOLESALER INC MULDER AUTO SALES MULLER HONDA OF GURNEE MULLINAX FORD OF PALM BEACH MUSIC CITY AUTOPLEX LLC MWS WHOLESALE AUTO OUTLET

Exhibit 10.8

DEALER NAME

DEALER NAME

MY CAR LLC MY CAR STORE MYEZAUTOBROKER.COM LLC NALLEY HONDA NAPLETON SANFORD IMPORTS LLC NASHVILLE CHRYSLER DODGE JEEP NATIONAL AUTOMOTIVE, INC NATIONAL CAR MART, INC NATIONWIDE LUXURY CARS INC NC SELECT AUTO SALES LLC NEIL HUFFMAN VW NELSON AUTO GROUP NELSON MAZDA NEW RIDE MOTORS INC NEWPORT AUTO GROUP NEWTON’S AUTO SALES, INC. NEXT CAR INC NEXT RIDE AUTO SALES INC NICE AUTO GROUP LLC NICHOLAS DATA SERVICES, INC. NILE AUTOMOTIVE LLC NISSAN OF CANTON NORTH BROTHERS FORD, INC NORTH COAST CAR CREDIT LLC NORTH MAIN MOTORS INC NORTHERN KY AUTO SALES LLC NORTHTOWNE OF LIBERTY SUZI, NORTHWEST AUTO BROKERS LLC NORTHWEST MOTORS INC NU-WAVE AUTO CENTER OASIS MOTORS O’BRIENS AUTO EMPORIUM, LLC OFF LEASE FINANCIAL, INC. OLATHE FORD SALES, INC. OLDHAM MOTOR COMPANY LLC ONE SOURCE AUTOS INC ORANGE PARK AUTO MALL ORANGE PARK DODGE ORANGE PARK TRUCKS ORLANDO AUTOS OSCAR MOTORS CORP OSCAR MOTORS CORPORATION

OT AUTO SALES OURISMAN CHEVROLET CO INC. OV AUTO FARM OXMOOR FORD LINCOLN MERCURY OXMOOR MAZDA OXMOOR TOYOTA P S AUTO ENTERPRISES INC PALM BAY FORD PALM BAY MOTORS PALM BEACH AUTO DIRECT PALM CHEVROLET OF GAINESVILLE PALMETTO FORD PALMETTO WHOLESALE MOTORS PASQUALE’S AUTO SALES & BODY PAUL BLANCO’S GOOD CAR COMPANY PAUL CERAME KIA PAYLESS AUTO SALES LLC PAYLESS MOTORS LLC PC AUTO SALES LLC PCT ENTERPRISES OF FLORIDA LLC PELHAM’S AUTO SALES PENLAND AUTOMOTIVE LLC PENSACOLA AUTO BROKERS, INC PERFORMANCE CHRYSLER JEEP DODG PERFORMANCE MOTOR COMPANY LLC PETE MOORE CHEVROLET, INC PETERS AUTO SALES, INC. PGF AUTOMOTIVE LLC PHILLIPS BUICK PONTIAC GMC INC PIEMONTES DUNDEE CHEVROLET PIERSON AUTOMOTIVE PILES CHEV-OLDS-PONT-BUICK PINELLAS MOTORS INC PINELLAS PARK AUTO INC PITTSBURGH AUTO DEPOT INC PLATINA CARS AND TRUCKS INC PLATINUM AUTO EXCHANGE INC PLATINUM AUTO TRADE PLATTNER’S PORTAL AUTOMOTIVE INC POWER ON AUTO LLC POWERBUY MOTORS

Exhibit 10.8

DEALER NAME

DEALER NAME

PRADO AUTO SALES PRE-AUCTION AUTO SALES INC PREFERRED AUTO PREMIER AUTO BROKERS, INC. PREMIER AUTO GROUP PREMIER AUTO LOCATORS PREMIER AUTO SALES OF BAY PREMIER AUTOMOTIVE GROUP INC PREMIER AUTOMOTIVE SALES INC PREMIERE CHEVROLET, INC. PREMIUM CARS OF MIAMI LLC PRESTIGE AUTO BROKERS PRESTIGE AUTO MALL PRESTIGE AUTO SALES & RENTALS PRESTIGE ECONOMY CARS INC PRESTON AUTO OUTLET PRICED RIGHT CARS, INC PRICELESS AUTOMOTIVES PRIDE AUTO SALES LLC PRIME AUTO EXCHANGE PRIME MOTORS INC PRISTINE CARS & TRUCKS INC PRO SELECT AUTOS PROCAR PROVIDENCE AUTO GROUP LLC PURE AUTOMOTIVE LLC PURE PURSUIT, LLC QUALITY AUTO BROKERS QUALITY AUTO SALES OF FL LLC QUALITY IMPORTS & CONSIGNMENT RADER CAR CO INC RAFAELS CREDIT CAR INC RAMSEY MOTORS RANDY CURNOW AUTO PLAZA/RC RANDY SHIRKS NORTHPOINTE AUTO RANKL & RIES MOTORCARS, INC RAPTOR AUTOMOTIVE RATCHET MOTORSPORTS LLC RAY PEARMAN LINCOLN MERCURY RAY SKILLMAN EASTSIDE RAY SKILLMAN NORTHEAST MAZDA RAYMOND CHEVROLET KIA

RBF AUTO RE BARBER FORD INC REAL RELIABLE RIDES LLC REALITY AUTO SALES INC REGAL PONTIAC, INC. REGIONAL AUTO FINANCE LLC REGIONAL WHOLESALE REIDSVILLE NISSAN INC REINEKE FORD LINCOLN MERCURY REVOLUTION MOTORS LLC REYNOLDS AUTOMOTIVE LLC RHOADES AUTOMOTIVE INCORPORATE RICART FORD USED RICH AUTO SALES LTD RICHARD KAY AUTOMOTIVE RICK CASE CARS INC RIDE TIME, INC. RIGHT PRICE AUTO SALES OF RIGHT WAY AUTOMOTIVE RIGHTWAY AUTOMOTIVE CREDIT RIGHTWAY AUTOMOTIVE CREDIT RITE TRACK AUTO DETAILING INC RIVIERA AUTO SALES SOUTH INC ROB PARTELO’S WINNERS ROBERTS COMPANY MOTOR MART LLC ROCK AUTO KC INC ROCK BOTTOM AUTO SALES, INC. ROCK ROAD AUTO PLAZA ROGER WILSON MOTORS INC ROME MOTOR SALES RON’S RIDES INC ROSEDALE AUTO SALES INC ROSELLE MOTORS INC ROSEVILLE CHRYSLER JEEP ROSEWOOD AUTO SALES LLC ROTRO RIDEZ LLC ROUEN CHRYSLER DODGE JEEP INC ROUTE 4 BUDGET AUTO ROYAL OAK FORD SALES, INC. RUESCHHOFF AUTOMOBILES LLC RUSH AUTO SALES II S S AUTO INC

Exhibit 10.8

DEALER NAME

DEALER NAME

SAM GALLOWAY FORD INC. SANDOVAL BUICK GMC INC SAPAUGH MOTORS INC SAVAGE AUTOMOTIVE GROUP SAVANNAH AUTO SAVANNAH AUTOMOTIVE GROUP SAVANNAH VOLKSWAGEN SCALES AUTO SOLUTIONS LLC SCOTTI’S AUTO REPAIT AND SALES SCOTTROCK MOTORS LLC SELECT AUTO SELECT AUTO GROUP LLC SELECT CARS OF CLEVELAND LLC SELECT MOTORS OF TAMPA INC. SHAVER MOTORS OF ALLEN CO INC SHEEHY GLEN BURNIE INC. SHELBYVILLE CHRYSLER PRODUCTS SHOOK AUTO INC SHORELINE AUTO GROUP OF IONIA SHORELINE MOTORS SHOW ME MOTORS INC SHOWROOM AUTO SALES OF SIGN AND DRIVE AUTO GROUP WILK SIGN AND DRIVE AUTO SALES LLC SIGN IT DRIVE IT LLC SIMPLE AUTO IMPORTS SINCLAIR DAVE LINCOLN MERCURY SMART WAY AUTO FINANCE SMITH MOTORS SOBH AUTOMOTIVE SOMERSET MOTORS SOUTH MOTORS HONDA SOUTHEAST JEEP EAGLE SOUTHERN KENTUCKY AUTO & TRK SOUTHERN MOTOR COMPANY SOUTHERN MOTORSPORTS GA SOUTHERN PARK AUTO MALL INC SOUTHERN STAR AUTOMOTIVE SOUTHERN TRUST AUTO GROUP SOUTHFIELD JEEP-EAGLE, INC. SOUTHSIDE SALES SOUTHWEST AUTO SALES

SOUTHWEST AUTOMOTIVE (SWAG) SPACE CITY AUTO CENTER SPITZER AUTOWORLD SHEFFIELD SPITZER MOTOR CITY SPORTS CENTER IMPORTS INC SRQ AUTO LLC ST GEORGE AUTO BROKERS LLC ST. PETERS AUTO GROUP LLC STANFIELD AUTO SALES STAN’S CAR SALES STAR AUTO STARGATE AUTO SALES LLC STARRS CARS AND TRUCKS, INC STEARNS MOTORS OF NAPLES STEELY LEASE SALES STEPHEN A FINN AUTO BROKER STERLING AUTO SALES STERLING AUTOMOTIVE LLC STEVE RAYMAN CHEVROLET, LLC STEWART AUTO GROUP OF STOKES BROWN TOYOTA SCION STOKES BROWN TOYOTA SCION STOKES HONDA CARS OF BEAUFORT SUBARU OF PORT RICHEY INC SULLIVAN BUICK GMC INC SUMMERS MOTORS INC SUMMIT PLACE KIA SUMMIT PLACE KIA MT. CLEMENS SUN TOYOTA SUNCOAST QUALITY CARS LLC SUNRISE AUTOMOTIVE LLC #2 SUNSET MOTORS SUNSHINE AUTO SUNTRUP NISSAN VOLKSWAGEN SUPER ADVANTAGE AUTO SALES SUPER AUTO SALES SUPER AUTO SALES INC SUPER DEAL AUTO SALES LLC SUPERIOR AUTO GROUP SUPERIOR CHEVROLET SUPERIOR HYUNDAI SOUTH SUPERIOR MOTORS NORTH

Exhibit 10.8

DEALER NAME

DEALER NAME

SUSAN SCHEIN CHRYSLER PLYMOUTH SW PREMIER MOTOR GROUP INC SWANNS RENTAL AND SALES INC TAMIAMI FORD, INC. TAMPA BAY LUXURY LLC TARGET AUTOMOTIVE TAYLOR IMPORT SALES INC TAYLOR MORGAN INC TD CAR SALES TED CIANOS USED CAR CENTER TEDS AUTO SALES INC TERRE HAUTE AUTO AND EQUIPMENT TESTAROSSA MOTORS TEXANS AUTO GROUP TEXAS BAY AREA PRE-OWNED TEXAS CAPITAL AUTO SALES, INC TEXAS MOTOR CLUB LLC THE AUTO BROKER THE AUTO GROUP LLC THE AUTO STORE THE AUTO STORE THE AUTOBLOCK THE BOULEVARD CAR LOT THE CAR CENTER THE CAR COMPANY THE CAR CONNECTION, INC. THE CAR LOT THE CAR MAN LLC THE CAR SHOPPE LLC THE CAR STORE THE CHEVY EXCHANGE THE LUXURY AUTOHAUS INC. THE REPO STORE THE SUPER AUTO OUTLET THE USED CAR FACTORY INC THEE CAR LOT #2 THORNTON CHEVROLET, INC THORNTON ROAD HYUNDAI THOROUGHBRED FORD INC TILLMAN AUTO LLC TIM SHORT PREMIERE USED CARS TIMBERLAND FORD

TIME TO BUY LLC TINPUSHER LLC TK AUTO SALES LLC TKP AUTO SALES TKP AUTO SALES INC TNT AUTO SALES INC TOM GILL CHEVROLET TOM HOLZER FORD TOM TEPE AUTOCENTER INC TOM WOOD FORD TOMMY’S AUTO SALES TOMMY’S AUTO SALES LLC LOT #2 TONY ON WHEELS INC TONY’S AUTO SALES OF TONY’S AUTO WORLD TOTAL CYCLE CARE INC TOTALNATION AUTO PRO LLC TOVI MOTORS TOWN & COUNTRY FORD, INC. TOWN & COUNTRY FORD, INC. TOWNSEND FORD INC TOYOTA OF LAKEWOOD TOYOTA OF MUNCIE TOYOTA ON NICHOLASVILLE TOYOTA SOUTH/SCION SOUTH TRI STATE USED AUTO SALES TRIAD AUTOPLEX TRI-CITY AUTO MART TRIPLE C CAR CO., INC. TROPICAL AUTO OUTLET TROY FORD INC TRUCK AND AUTO OUTLET TRUSSVILLE WHOLESALE AUTOS TRUST CAPITAL AUTOMOTIVE GROUP TRUSTED MOTORS LLC TWO OS MOTOR SALES U.S. AUTO GROUP, INC. UNI AUTO SALES UNITED AUTO BROKERS UNITED AUTO SALES UNITED LUXURY MOTORS LLC UNITED VEHICLE SALES

Exhibit 10.8

DEALER NAME

DEALER NAME

UNIVERSAL AUTO PLAZA LLC UNIVERSITY HYUNDAI OF DECATUR UNIVERSITY MOTORS UNLIMITED AUTO SALE LLC US AUTO MART INC US AUTO SALES AND SERVICE INC US MOTOR SALES LLC US MOTORS USA CHOPPERS USA MOTORCARS USED CAR SUPERMARKET USED CARS FORSALE LLC VADEN CHEVROLET BUICK PONTIAC VANN YORK BARGAIN CARS LLC VANN YORK PONTIAC BUICK GMC VANN YORK TOYOTA, INC VANTAGE MOTORS LLC VC CARS MARIETTA LLC VEGTER AUTOMOTIVE VEHICLES 4 SALES, INC. VELOCITY MOTORS INC VERACITY MOTOR COMPANY LLC VERACITY MOTOR COMPANY LLC VESTAVIA HILLS AUTOMOTIVE VICTORIA MOTORS, LLC VICTORY CHEVROLET BUICK VILLAGE AUTO OUTLET INC VILLAGE AUTO SALES LLC VILLAGE AUTOMOTIVE VINCE WHIBBS PONTIAC-GMC VINSON MOTORS LLC VIP AUTO ENTERPRISES INC VISION AUTO LLC VIZION AUTO VMARK CARS VOGUE MOTOR CO INC VOLKSWAGEN OF LEES’ SUMMIT VOLKSWAGEN OF OCALA VOLVO OF OCALA VOLVO SALES & SERVICE CENTER I VSA MOTORCARS LLC W & S AUTO CENTER INC

WABASH AUTO CARE INC WADE FORD INC WALDORF FORD, INC. WALDROP MOTORS INC WALLY’S WHEELS WANTED WHEELS INC WASHINGTON AUTO GROUP WAYNESVILLE AUTO MART WEINLE AUTO SALES WEST END AUTO SALES & SERVICE WEST INTERNATIONAL CORP WEST SIDE TOYOTA WHEELS & DEALS AUTO SALES WHITEWATER MOTOR COMPANY INC WHITEWATER MOTORS INC WIDEWORLDOFCARS.NET LLC WILDCAT AUTO SALES WILDFIRE MOTORS INCORPORATED WILLETT HONDA SOUTH WIN—WIN AUTO CENTER CORP WISE MOTORS WOLFORD AUTOMOTIVE SALES LLC WOODBRIDGE MOTORS, INC. WORKMANS AUTO SALES WORLD AUTO NETWORK INC WORLD AUTO, INC. WORLD CAR CENTER & FINANCING WORLDWIDE MOTORS LLC XL1 MOTORSPORTS, INC XPRESS AUTO MALL XTREME MOTORS INC YADEN’S AUTO SALES, INC YARK AUTOMOTIVE GROUP, INC YES AUTO SALES INC YOU SELECT AUTO SALES LLC YOUR DEAL AUTOMOTIVE YPSILANTIS IMPORT AUTO SALES Z AUTO PLACE Z AUTO PLACE ZAPPIA MOTORS ZEIGLER CHEVROLET LLC ZEIGLER CHRYSLER DODGE JEEP ZOOM! AUTOS OF DALLAS

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ralph T. Finkenbrink, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Nicholas Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 09, 2016	/s/ Ralph T. Finkenbrink
	Ralph T. Finkenbrink
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Katie L. MacGillivary certify that:

1. I have reviewed this quarterly report on Form 10-Q of Nicholas Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 09, 2016	/s/ Katie L. MacGillivary
	Katie L. MacGillivary
	Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. § 1350

Solely for the purpose of complying with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned President and Chief Executive Officer of Nicholas Financial, Inc. (the “Company”), hereby certify that the Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ralph T. Finkenbrink

Ralph T. Finkenbrink

President and Chief Executive Officer

Dated: August 09, 2016

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350

Solely for the purpose of complying with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Vice President and Chief Financial Officer of Nicholas Financial, Inc. (the “Company”), hereby certify that the Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Katie L. MacGillivary

Katie L. MacGillivary

Vice President and Chief Financial Officer

Dated: August 09, 2016

XML

Document and Entity Information - shares	3 Months Ended
	Jun. 30, 2016	Aug. 01, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	NICHOLAS FINANCIAL INC
Entity Central Index Key	0001000045
Trading Symbol	nick
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		12,490,031
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016
Assets
Cash	$ 4,520	$ 1,849
Finance receivables, net	312,655	311,837
Assets held for resale	2,483	2,148
Income taxes receivable	0	593
Prepaid expenses and other assets	975	977
Property and equipment, net	1,569	1,290
Deferred income taxes	6,715	6,615
Total assets	328,917	325,309
Liabilities and shareholders' equity
Line of credit	209,000	211,000
Drafts payable	2,060	1,499
Interest rate swap agreements	223	205
Accounts payable and accrued expenses	6,551	5,839
Deferred revenues	3,910	3,917
Income taxes payable	1,309
Total liabilities	223,053	222,460
Shareholders' equity
Preferred stock, no par: 5,000 shares authorized; none issued
Common stock, no par: 50,000 shares authorized; 12,467 and 12,466 shares issued, respectively; and 7,753 shares outstanding	33,399	33,287
Treasury stock: 4,714 common shares, at cost	(70,459)	(70,459)
Retained earnings	142,924	140,021
Total shareholders' equity	105,864	102,849
Total liabilities and shareholders' equity	$ 328,917	$ 325,309

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares shares in Thousands	Jun. 30, 2016	Mar. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	12,467	12,466
Common stock, shares outstanding	7,753	7,753
Treasury stock, shares	4,714	4,714

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Interest and fee income on finance receivables	$ 22,915	$ 22,025
Expenses:
Marketing	386	392
Salaries and employee benefits	5,593	5,585
Professional Fees	247	448
Administrative	2,564	2,351
Provision for credit losses	7,026	4,989
Depreciation	131	95
Interest expense	2,244	2,166
Change in fair value of interest rate swap agreements	18	44
Total expenses	18,209	16,070
Operating income before income taxes	4,706	5,955
Income tax expense	1,803	2,285
Net income	$ 2,903	$ 3,670
Earnings per share:
Basic (in dollars per share)	$ 0.37	$ 0.48
Diluted (in dollars per share)	$ 0.37	$ 0.47

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities
Net income	$ 2,903	$ 3,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	131	95
Gain on sale of property and equipment	(10)	(15)
Provision for credit losses	7,026	4,989
Amortization of dealer discounts	(3,574)	(3,286)
Deferred income taxes	(109)	(177)
Share-based compensation	118	130
Change in fair value of interest rate swap agreements	18	44
Changes in operating assets and liabilities:
Prepaid expenses and other assets	2	176
Accounts payable and accrued expenses	712	259
Income taxes payable and receivable	1,902	2,450
Deferred revenues	(7)	287
Net cash provided by operating activities	9,112	8,622
Cash flows from investing activities
Purchase and origination of finance receivables	(37,678)	(48,332)
Principal payments received	33,408	35,036
Increase in assets held for resale	(335)	(366)
Purchase of property and equipment	(418)	(165)
Proceeds from sale of property and equipment	18	16
Net cash used in investing activities	(5,005)	(13,811)
Cash flows from financing activities
(Decrease) increase on line of credit	(2,000)	4,000
Change in drafts payable	561	(950)
Payment of debt costs	0	(25)
Expenses related to prior purchase of treasury shares	0	(50)
Proceeds from exercise of stock options	2	54
Excess tax benefits from share-based compensation	1	3
Net cash (used) provided by financing activities	(1,436)	3,032
Net increase (decrease) in cash	2,671	(2,157)
Cash, beginning of period	1,849	3,388
Cash, end of period	4,520	$ 1,231
Supplemental Disclosure of noncash investing and financing activities:
Tax deficiency from share awards	$ (9)

XML

Basis of Presentation

3 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying consolidated balance sheet as of March 31, 2016, which has been derived from audited financial statements, and the accompanying unaudited interim consolidated financial statements of Nicholas Financial, Inc. (including its subsidiaries, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q pursuant to the Securities and Exchange Act of 1934, as amended in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements, although the Company believes that the disclosures made are adequate to ensure the information is not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending March 31, 2017. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2016 as filed with the Securities and Exchange Commission on June 14, 2016. The March 31, 2016 consolidated balance sheet included herein has been derived from the March 31, 2016 audited consolidated balance sheet included in the aforementioned Form 10-K.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on finance receivables and the fair value of interest rate swap agreements.

XML

Revenue Recognition

3 Months Ended

Jun. 30, 2016

Deferred Revenue Disclosure [Abstract]

Revenue Recognition

2. Revenue Recognition

Finance receivables consist of automobile finance installment contracts (“Contracts”) and direct consumer loans (“Direct Loans”). Interest income on finance receivables is recognized using the interest method. Accrual of interest income on finance receivables is suspended when a loan enters bankruptcy status, is contractually delinquent for 60 days or more or the collateral is repossessed, whichever is earlier. Chapter 13 bankruptcy accounts are accounted for under the cost-recovery method. Interest income on Chapter 13 bankruptcy accounts does not resume until all principal amounts are recovered (see Note 4).

A dealer discount represents the difference between the finance receivable, net of unearned interest, of a Contract, and the amount of money the Company actually pays for the Contract. The discount negotiated by the Company is a function of the lender, the wholesale value of the vehicle and competition in any given market. In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer from which the Company is purchasing the Contract, and the value of the automobile in relation to the purchase price and the term of the Contract. The entire amount of discount is amortized as an adjustment to yield using the interest method over the life of the loan. The average dealer discount associated with new volume for the three months ended June 30, 2016 and 2015 was 7.15% and 7.54%, respectively.

The amount of future unearned income is computed as the product of the Contract rate, the Contract term and the Contract amount.

Deferred revenues consist primarily of commissions received from the sale of ancillary products. These products include automobile warranties, roadside assistance programs, accident and health insurance, credit life insurance and forced placed automobile insurance. These commissions are amortized over the life of the contract using the interest method.

The Company’s net costs for originating Direct Loans are deferred and recognized as an adjustment to the yield and are amortized over the life of the loan using the interest method.

XML

Earnings Per Share

3 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

3. Earnings Per Share

The Company has granted stock compensation awards with nonforfeitable dividend rights which are considered participating securities. As such, earnings per share is calculated using the two-class method. Basic earnings per share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per share includes the dilutive effect of additional potential common shares from stock compensation awards. Earnings per share have been computed based on the following weighted average number of common shares outstanding:

	Three months ended June 30, (In thousands, except per share amounts)
	2016			2015
Numerator:
Net income per consolidated statements of income	$	2,903		$	3,670
Less: Allocation of earnings to participating securities		(30	)		—
Net income allocated to common stock		2,873		$	3,670
Basic earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding, including shares considered participating securities		7,753			7,616
Less: Weighted average participating securities outstanding		(81	)		—
Weighted average shares of common stock		7,672			7,616
Basic earnings per share	$	0.37			0.48
Diluted earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Undistributed earnings re-allocated to participating securities		0			—
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding for basic earnings per share		7,672			7,616
Incremental shares from stock options		60			127
Weighted average shares and dilutive potential common shares		7,732			7,743
Diluted earnings per share	$	0.37		$	0.47

Diluted earnings per share do not include the effect of certain stock options as their impact would be anti-dilutive. For the three months ended June 30, 2016 and 2015, potential shares of common stock from stock options totaling 165,000 and 155,000, respectively, were not included in the diluted earnings per share calculation because their effect is anti-dilutive.

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Finance Receivables

3 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Finance Receivables

4. Finance Receivables

Finance receivables consist of automobile finance installment Contracts and Direct Loans and are detailed as follows:

	(In thousands)
	June 30,			March 31,
	2016			2016
Finance receivables, gross contract	$	499,480		$	498,130
Unearned interest		(155,860	)		(155,257	)
Finance receivables, net of unearned interest		343,620			342,873
Unearned dealer discounts		(17,365	)		(18,023	)
Finance receivables, net of unearned interest and unearned dealer discounts		326,255			324,850
Allowance for credit losses		(13,600	)		(13,013	)
Finance receivables, net	$	312,655		$	311,837

The terms of the Contracts range from 12 to 72 months and the Direct Loans range from 12 to 61 months. The Contracts and Direct Loans bear a weighted average effective interest rate of 22.60% and 25.72% as of June 30, 2016, respectively and 22.67% and 25.72% as of March 31, 2016, respectively.

Finance receivables consist of Contracts and Direct Loans, each of which comprises a portfolio segment. Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts:

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	12,265		$	11,325
Current period provision		6,955			4,886
Losses absorbed		(6,992	)		(5,522	)
Recoveries		608			835
Balance at end of period	$	12,836		$	11,524

The Company purchases Contracts from automobile dealers at a negotiated price that is less than the original principal amount being financed by the purchaser of the automobile. The Contracts are predominately for used vehicles. As of June 30, 2016, the average model year of vehicles collateralizing the portfolio was a 2008 vehicle. The Company utilizes a static pool approach to track portfolio performance. If the allowance for credit losses is determined to be inadequate for a static pool, then an additional charge to income through the provision is used to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, and current economic conditions. Such evaluation, considers among other matters, the estimated net realizable value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for an adequate allowance for credit losses.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Direct Loans:

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	748		$	703
Current period provision		71			103
Losses absorbed		(72	)		(59	)
Recoveries		17			8
Balance at end of period	$	764		$	755

Direct Loans are originated directly between the Company and the consumer. These loans are typically for amounts ranging from $1,000 to $9,000 and are generally secured by a lien on an automobile, watercraft or other permissible tangible personal property. The majority of Direct Loans are originated with current or former customers under the Company’s automobile financing program. The typical Direct Loan represents a significantly better credit risk than our typical Contract due to the customer’s historical payment history with the Company. In deciding whether or not to make a loan, the Company considers the individual’s credit history, job stability, income and impressions created during a personal interview with a Company loan officer. Additionally, because most of Direct Loans made by the Company to date have been made to borrowers under Contracts previously purchased by the Company, the payment history of the borrower under the Contract is a significant factor in making the loan decision. As of June 30, 2016, loans made by the Company pursuant to its Direct Loan program constituted approximately 2% of the aggregate principal amount of the Company’s loan portfolio. Changes in the allowance for credit losses for both Contracts and Direct Loans were driven by current economic conditions and trends over several reporting periods which are useful in estimating future losses and overall portfolio performance.

A performing account is defined as an account that is less than 61 days past due. A non-performing account is defined as an account that is contractually delinquent for 61 days or more and the accrual of interest income is suspended. When an account is 120 days contractually delinquent, the account is written off. Upon notification of a Chapter 13 bankruptcy, an account is monitored for collection with other Chapter 13 bankruptcy accounts. In the event the debtors balance has been reduced by the bankruptcy court, the Company will record a loss equal to the amount of principal balance reduction. The remaining balance will be reduced as payments are received by the bankruptcy court. In the event an account is dismissed from bankruptcy, the Company will decide, based on several factors, to begin repossession proceedings or to allow the customer to begin making regularly scheduled payments.

The following table is an assessment of the credit quality by creditworthiness:

	(In thousands)
	June 30, 2016				June 30, 2015
	Contracts		Direct Loans		Contracts		Direct Loans
Performing accounts	$	472,424	$	10,965	$	456,698	$	11,313
Non-performing accounts		11,603		97		6,698		59
Total	$	484,027	$	11,062	$	463,396	$	11,372
Chapter 13 bankruptcy accounts		4,350		40		3,958		41
Finance receivables, gross contract	$	488,377	$	11,102	$	467,354	$	11,413

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and under its Direct Loans, excluding Chapter 13 bankruptcy accounts:

(In thousands)
Contracts	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	484,027	$	25,445		$	8,027		$	3,576		$	37,048
		0		5.26	%		1.66	%		0.74	%		7.66	%
June 30, 2015	$	463,396	$	18,879		$	4,799		$	1,899		$	25,577
				4.07	%		1.04	%		0.41	%		5.52	%
Direct Loans	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	11,062	$	178		$	55		$	42		$	275
		0		1.61	%		0.50	%		0.38	%		2.49	%
June 30, 2015	$	11,372	$	156		$	35		$	24		$	215
				1.37	%		0.31	%		0.21	%		1.89	%

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Line of Credit

3 Months Ended

Jun. 30, 2016

Line Of Credit Facility [Abstract]

Line of Credit

5. Line of Credit

The Company has a line of credit facility (the “Line”) up to $225.0 million The pricing of the Line, which expires on January 30, 2018, is 300 basis points above 30-day LIBOR with a 1% floor on LIBOR (4.00% at June 30, 2016 and March 31, 2016). Pledged as collateral for this Line are all of the assets of the Company. The outstanding amount of the Line was $209.0 million and $211.0 million as of June 30, 2016 and March 31, 2016, respectively. The amount available under the Line was $16.0 million and $14.0 million as of June 30, 2016 and March 31, 2016, respectively.

The facility requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests, including maintenance of asset quality and performance tests. Dividends do not require consent in writing by the agent and majority lenders under the new facility as long as the Company is in compliance with a net income covenant. As of June 30, 2016, the Company was in full compliance with all debt covenants.

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Interest Rate Swap Agreements

3 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swap Agreements

6. Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements to manage exposure to variability in expected cash flows attributable to interest rate risk. The interest rate swap agreements convert a portion of the floating rate debt to a fixed rate, more closely matching the interest rate characteristics of finance receivables.

As of the three months ended June 30, 2016 and 2015, no new contracts were initiated and no contracts matured.

The Company currently has two interest rate swap agreements. A June 4, 2012 interest rate swap agreement provides for a five-year interest rate swap in which the Company pays a fixed rate of 1% and receives payments from the counterparty on the 1-month LIBOR rate. This interest rate swap agreement had an effective date of June 13, 2012 and a notional amount of $25.0 million. A July 30, 2012 agreement provides for a five-year interest rate swap in which the Company pays a fixed rate of 0.87% and receives payments from the counterparty on the 1-month LIBOR rate. This interest rate swap agreement had an effective date of August 13, 2012 and a notional amount of $25.0 million.

The locations and amounts of losses in income are as follows:

	Three months ended June 30,
	(In thousands)
	2016			2015
Periodic change in fair value of interest rate swap agreements	$	(18	)	$	(44	)
Periodic settlement differentials included in interest expense		(63	)		(95	)
Loss recognized in income	$	(81	)	$	(139	)

Net realized losses from the interest rate swap agreements were recorded in the interest expense line item of the consolidated statements of income. The following table summarizes the average variable rates received and average fixed rates paid under the swap agreements.

	Three months ended June 30,
	2016			2015
Variable rate received		0.44	%		0.18	%
Fixed rate paid		0.94	%		0.94	%

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Income Taxes

3 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

The provision for income taxes decreased to approximately $1.8 million for the three months ended June 30, 2016 from approximately $2.3 million for the three months ended June 30, 2015. The Company’s effective tax rate decreased to 38.31% for the three months ended June 30, 2016 from 38.36% for the three months ended June 30, 2015.

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Fair Value Disclosures

3 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures

8. Fair Value Disclosures

The Company measures specific assets and liabilities at fair value, which is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When applicable, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability under a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The Company estimates the fair value of interest rate swap agreements based on the estimated net present value of the future cash flows using a forward interest rate yield curve in effect as of the measurement period, adjusted for nonperformance risk, if any, including a quantitative and qualitative evaluation of both the Company’s credit risk and the counterparty’s credit risk. Accordingly, the Company classifies interest rate swap agreements as Level 2.

	Fair Value Measurement Using (In thousands)
Description	Level 1		Level 2			Level 3		Fair Value
Interest rate swap agreements:
June 30, 2016 – liabilities:	$	0	$	(223	)	$	0	$	(223	)
March 31, 2016 – liabilities:	$	—	$	(205	)	$	—	$	(205	)

Financial Instruments Not Measured at Fair Value

The Company’s financial instruments consist of cash, finance receivables and the Line. For each of these financial instruments- the carrying value approximates fair value.

Finance receivables, net approximates fair value based on the price paid to acquire Contracts. The price paid reflects competitive market interest rates and purchase discounts for the Company’s chosen credit grade in the economic environment. This market is highly liquid as the Company acquires individual loans on a daily basis from dealers. The initial terms of the Contracts range from 12 to 72 months. The initial terms of the Direct Loans range from 12 to 60 months. In addition, there have been minimal changes in interest rates and purchase discounts related to these types of loans due to the competitive nature of the current market. If liquidated outside of the normal course of business, the amount received may not be the carrying value.

Based on current market conditions, any new or renewed credit facility would contain pricing that approximates the Company’s current Line. Based on these market conditions, the fair value of the Line as of June 30, 2016 was estimated to be equal to the book value. The interest rate for the Line is a variable rate based on LIBOR pricing options. 

	Fair Value Measurement Using (In thousands)
							Fair		Carrying
Description	Level 1		Level 2		Level 3		Value		Value
Cash:
June 30, 2016	$	4,520	$	0	$	0	$	4,520	$	4,520
March 31, 2016	$	1,849	$	—	$	—	$	1,849	$	1,849
Finance receivables:
June 30, 2016	$	0	$	0	$	312,655	$	312,655	$	312,655
March 31, 2016	$	—	$	—	$	311,837	$	311,837	$	311,837
Line of credit:
June 30, 2016	$	0	$	209,000	$	0	$	209,000	$	209,000
March 31, 2016	$	—	$	211,000	$	—	$	211,000	$	211,000

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis. The Company does not have any assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2016 and March 31, 2016.

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Contingencies

3 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Contingencies

9. Contingencies

The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business, none of which, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

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Recently Issued Accounting Standards

3 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Standards

10. Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) 2016-13 Financial Instruments—Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The new guidance requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The ASU also requires additional disclosures related to estimates and judgments used to measure all expected credit losses. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In March 2016, the FASB issued the ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. “The ASU will require organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The accounting by organizations that own the assets leased by the lessee—also known as lessor accounting— will remain largely unchanged from current U.S. GAAP. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Recognition and Measurement of Financial Assets and Liabilities,” which is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU permits early adoption of the instrument-specific credit risk provision. The Company is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU, and all subsequently issued clarifying ASUs, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU would permit public entities to adopt the ASU early, but not before the original effective date (i.e., annual periods beginning after December 15, 2016). The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

The Company does not believe there are any other recently issued accounting standards that have not yet been adopted that will have a material impact on the Company’s consolidated financial statements.

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Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying consolidated balance sheet as of March 31, 2016, which has been derived from audited financial statements, and the accompanying unaudited interim consolidated financial statements of Nicholas Financial, Inc. (including its subsidiaries, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q pursuant to the Securities and Exchange Act of 1934, as amended in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements, although the Company believes that the disclosures made are adequate to ensure the information is not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending March 31, 2017. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2016 as filed with the Securities and Exchange Commission on June 14, 2016. The March 31, 2016 consolidated balance sheet included herein has been derived from the March 31, 2016 audited consolidated balance sheet included in the aforementioned Form 10-K.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on finance receivables and the fair value of interest rate swap agreements.

Revenue Recognition

2. Revenue Recognition

Finance receivables consist of automobile finance installment contracts (“Contracts”) and direct consumer loans (“Direct Loans”). Interest income on finance receivables is recognized using the interest method. Accrual of interest income on finance receivables is suspended when a loan enters bankruptcy status, is contractually delinquent for 60 days or more or the collateral is repossessed, whichever is earlier. Chapter 13 bankruptcy accounts are accounted for under the cost-recovery method. Interest income on Chapter 13 bankruptcy accounts does not resume until all principal amounts are recovered (see Note 4).

A dealer discount represents the difference between the finance receivable, net of unearned interest, of a Contract, and the amount of money the Company actually pays for the Contract. The discount negotiated by the Company is a function of the lender, the wholesale value of the vehicle and competition in any given market. In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer from which the Company is purchasing the Contract, and the value of the automobile in relation to the purchase price and the term of the Contract. The entire amount of discount is amortized as an adjustment to yield using the interest method over the life of the loan. The average dealer discount associated with new volume for the three months ended June 30, 2016 and 2015 was 7.15% and 7.54%, respectively.

The amount of future unearned income is computed as the product of the Contract rate, the Contract term and the Contract amount.

Deferred revenues consist primarily of commissions received from the sale of ancillary products. These products include automobile warranties, roadside assistance programs, accident and health insurance, credit life insurance and forced placed automobile insurance. These commissions are amortized over the life of the contract using the interest method.

The Company’s net costs for originating Direct Loans are deferred and recognized as an adjustment to the yield and are amortized over the life of the loan using the interest method.

Recently Issued Accounting Standards

10. Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) 2016-13 Financial Instruments—Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The new guidance requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The ASU also requires additional disclosures related to estimates and judgments used to measure all expected credit losses. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In March 2016, the FASB issued the ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. “The ASU will require organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The accounting by organizations that own the assets leased by the lessee—also known as lessor accounting— will remain largely unchanged from current U.S. GAAP. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Recognition and Measurement of Financial Assets and Liabilities,” which is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU permits early adoption of the instrument-specific credit risk provision. The Company is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU, and all subsequently issued clarifying ASUs, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU would permit public entities to adopt the ASU early, but not before the original effective date (i.e., annual periods beginning after December 15, 2016). The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on the Company’s consolidated financial statements.

The Company does not believe there are any other recently issued accounting standards that have not yet been adopted that will have a material impact on the Company’s consolidated financial statements.

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Earnings Per Share (Tables)

3 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted earnings per share

	Three months ended June 30, (In thousands, except per share amounts)
	2016			2015
Numerator:
Net income per consolidated statements of income	$	2,903		$	3,670
Less: Allocation of earnings to participating securities		(30	)		—
Net income allocated to common stock		2,873		$	3,670
Basic earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding, including shares considered participating securities		7,753			7,616
Less: Weighted average participating securities outstanding		(81	)		—
Weighted average shares of common stock		7,672			7,616
Basic earnings per share	$	0.37			0.48
Diluted earnings per share computation:
Net income allocated to common stock	$	2,873		$	3,670
Undistributed earnings re-allocated to participating securities		0			—
Net income allocated to common stock	$	2,873		$	3,670
Weighted average common shares outstanding for basic earnings per share		7,672			7,616
Incremental shares from stock options		60			127
Weighted average shares and dilutive potential common shares		7,732			7,743
Diluted earnings per share	$	0.37		$	0.47

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Finance Receivables (Tables)

3 Months Ended

Jun. 30, 2016

Accounts, Notes, Loans and Financing Receivable [Line Items]

Schedule of finance receivables consisting of automobile finance installment Contracts and Direct Loans

	(In thousands)
	June 30,			March 31,
	2016			2016
Finance receivables, gross contract	$	499,480		$	498,130
Unearned interest		(155,860	)		(155,257	)
Finance receivables, net of unearned interest		343,620			342,873
Unearned dealer discounts		(17,365	)		(18,023	)
Finance receivables, net of unearned interest and unearned dealer discounts		326,255			324,850
Allowance for credit losses		(13,600	)		(13,013	)
Finance receivables, net	$	312,655		$	311,837

Schedule of an assessment of the credit quality by creditworthiness

	(In thousands)
	June 30, 2016				June 30, 2015
	Contracts		Direct Loans		Contracts		Direct Loans
Performing accounts	$	472,424	$	10,965	$	456,698	$	11,313
Non-performing accounts		11,603		97		6,698		59
Total	$	484,027	$	11,062	$	463,396	$	11,372
Chapter 13 bankruptcy accounts		4,350		40		3,958		41
Finance receivables, gross contract	$	488,377	$	11,102	$	467,354	$	11,413

Schedule of information regarding delinquency rates

(In thousands)
Contracts	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	484,027	$	25,445		$	8,027		$	3,576		$	37,048
		0		5.26	%		1.66	%		0.74	%		7.66	%
June 30, 2015	$	463,396	$	18,879		$	4,799		$	1,899		$	25,577
				4.07	%		1.04	%		0.41	%		5.52	%
Direct Loans	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
June 30, 2016	$	11,062	$	178		$	55		$	42		$	275
		0		1.61	%		0.50	%		0.38	%		2.49	%
June 30, 2015	$	11,372	$	156		$	35		$	24		$	215
				1.37	%		0.31	%		0.21	%		1.89	%

Contracts

Accounts, Notes, Loans and Financing Receivable [Line Items]

Schedule of reconciliation of the changes in the allowance for credit losses

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	12,265		$	11,325
Current period provision		6,955			4,886
Losses absorbed		(6,992	)		(5,522	)
Recoveries		608			835
Balance at end of period	$	12,836		$	11,524

Direct Loans

Accounts, Notes, Loans and Financing Receivable [Line Items]

Schedule of reconciliation of the changes in the allowance for credit losses

	Three months ended June 30, (In thousands)
	2016			2015
Balance at beginning of period	$	748		$	703
Current period provision		71			103
Losses absorbed		(72	)		(59	)
Recoveries		17			8
Balance at end of period	$	764		$	755

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Interest Rate Swap Agreements (Tables)

3 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of locations and amounts of (gains) losses recognized in income

	Three months ended June 30,
	(In thousands)
	2016			2015
Periodic change in fair value of interest rate swap agreements	$	(18	)	$	(44	)
Periodic settlement differentials included in interest expense		(63	)		(95	)
Loss recognized in income	$	(81	)	$	(139	)

Schedule of variable rates received and average fixed rates paid under the swap agreements

	Three months ended June 30,
	2016			2015
Variable rate received		0.44	%		0.18	%
Fixed rate paid		0.94	%		0.94	%

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Fair Value Disclosures (Tables)

3 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities recorded at fair value on a recurring basis

	Fair Value Measurement Using (In thousands)
Description	Level 1		Level 2			Level 3		Fair Value
Interest rate swap agreements:
June 30, 2016 – liabilities:	$	0	$	(223	)	$	0	$	(223	)
March 31, 2016 – liabilities:	$	—	$	(205	)	$	—	$	(205	)

Schedule of financial instruments not measured at fair value

	Fair Value Measurement Using (In thousands)
							Fair		Carrying
Description	Level 1		Level 2		Level 3		Value		Value
Cash:
June 30, 2016	$	4,520	$	0	$	0	$	4,520	$	4,520
March 31, 2016	$	1,849	$	—	$	—	$	1,849	$	1,849
Finance receivables:
June 30, 2016	$	0	$	0	$	312,655	$	312,655	$	312,655
March 31, 2016	$	—	$	—	$	311,837	$	311,837	$	311,837
Line of credit:
June 30, 2016	$	0	$	209,000	$	0	$	209,000	$	209,000
March 31, 2016	$	—	$	211,000	$	—	$	211,000	$	211,000

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Revenue Recognition (Detail Textuals)	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Deferred Revenue Disclosure [Abstract]
Interest income accrual on finance receivables suspension condition	Accrual of interest income on finance receivables is suspended when a loan enters bankruptcy status, is contractually delinquent for 60 days or more or the collateral is repossessed, whichever is earlier. Chapter 13 bankruptcy accounts are accounted for under the cost-recovery method.
Average dealer discount associated with new volume	7.15%	7.54%

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Earnings Per Share - Basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Numerator:
Net income per consolidated statements of income	$ 2,903	$ 3,670
Less: Allocation of earnings to participating securities	(30)
Net income allocated to common stock	2,873	3,670
Basic earnings per share computation:
Net income allocated to common stock	$ 2,873	$ 3,670
Weighted average common shares outstanding, including shares considered participating securities	7,753	7,616
Less: Weighted average participating securities outstanding	(81)
Weighted average shares of common stock	7,672	7,616
Basic earnings per share (in dollars per share)	$ 0.37	$ 0.48
Diluted earnings per share computation:
Net income allocated to common stock	$ 2,873	$ 3,670
Undistributed earnings re-allocated to participating securities		0
Net income allocated to common stock	$ 2,873	$ 3,670
Weighted average common shares outstanding for basic earnings per share	7,672	7,616
Incremental shares from stock options	60	127
Weighted average shares and dilutive potential common shares	7,732	7,743
Diluted earnings per share (in dollars per share)	$ 0.37	$ 0.47

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Earnings Per Share (Detail Textuals) - shares	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common stock shares not included in diluted earnings per share calculation	165,000	155,000

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Finance Receivables - Finance receivables consist of automobile finance installment Contracts and Direct Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Finance receivables, net	$ 312,655	$ 311,837
Contracts and Direct Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Finance receivables, gross contract	499,480	498,130
Unearned interest	(155,860)	(155,257)
Finance receivables, net of unearned interest	343,620	342,873
Unearned dealer discounts	(17,365)	(18,023)
Finance receivables, net of unearned interest and unearned dealer discounts	326,255	324,850
Allowance for credit losses	(13,600)	(13,013)
Finance receivables, net	$ 312,655	$ 311,837

XML

Finance Receivables - Summary of reconciliation of changes in allowance for credit losses on contracts (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Current period provision	$ 7,026	$ 4,989
Contracts
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	12,265	11,325
Current period provision	6,955	4,886
Losses absorbed	(6,992)	(5,522)
Recoveries	608	835
Balance at end of period	$ 12,836	$ 11,524

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Finance Receivables - Reconciliation of changes in allowance for credit losses on direct loans (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Current period provision	$ 7,026	$ 4,989
Direct Loans
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	748	703
Current period provision	71	103
Losses absorbed	(72)	(59)
Recoveries	17	8
Balance at end of period	$ 764	$ 755

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Finance Receivables - Assessment of credit quality by creditworthiness (Details 3) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Contracts
Financing Receivable, Recorded Investment [Line Items]
Total	$ 484,027	$ 463,396
Chapter 13 bankruptcy accounts	4,350	3,958
Finance receivables, gross contract	488,377	467,354
Contracts | Performing accounts
Financing Receivable, Recorded Investment [Line Items]
Total	472,424	456,698
Contracts | Non-performing accounts
Financing Receivable, Recorded Investment [Line Items]
Total	11,603	6,698
Direct Loans
Financing Receivable, Recorded Investment [Line Items]
Total	11,062	11,372
Chapter 13 bankruptcy accounts	40	41
Finance receivables, gross contract	11,102	11,413
Direct Loans | Performing accounts
Financing Receivable, Recorded Investment [Line Items]
Total	10,965	11,313
Direct Loans | Non-performing accounts
Financing Receivable, Recorded Investment [Line Items]
Total	$ 97	$ 59

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Finance Receivables - Information regarding delinquency rates with respect to contracts and direct loans (Details 4) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Contracts
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 484,027	$ 463,396
Total	$ 37,048	$ 25,577
Total (in percentage)	7.66%	5.52%
Contracts | 31 - 60 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 25,445	$ 18,879
Total (in percentage)	5.26%	4.07%
Contracts | 61 - 90 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 8,027	$ 4,799
Total (in percentage)	1.66%	1.04%
Contracts | Over 90 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 3,576	$ 1,899
Total (in percentage)	0.74%	0.41%
Direct Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 11,062	$ 11,372
Total	$ 275	$ 215
Total (in percentage)	2.49%	1.89%
Direct Loans | 31 - 60 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 178	$ 156
Total (in percentage)	1.61%	1.37%
Direct Loans | 61 - 90 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 55	$ 35
Total (in percentage)	0.50%	0.31%
Direct Loans | Over 90 days
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gross Balance Outstanding	$ 42	$ 24
Total (in percentage)	0.38%	0.21%

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Finance Receivables (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Finance receivables, net	$ 312,655	$ 311,837
Contracts
Accounts, Notes, Loans and Financing Receivable [Line Items]
Weighted average effective interest rate	22.60%	22.67%
Contracts | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Initial term of finance receivables	12 months
Contracts | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Initial term of finance receivables	72 months
Direct Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Weighted average effective interest rate	25.72%	25.72%
Percentage of direct loan to aggregate principal amount of loan portfolio	2.00%
Direct Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Initial term of finance receivables	12 months
Finance receivables, net	$ 1,000
Direct Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Initial term of finance receivables	60 months
Finance receivables, net	$ 9,000

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Finance Receivables (Detail Textuals 1)	3 Months Ended
	Jun. 30, 2016
Receivables [Abstract]
Maximum criteria for receivable to be a performing account	61 days
Minimum criteria for receivable to be a non-performing account	61 days or more
Criteria for receivable to be delinquent account	120 days

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Line of Credit (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Mar. 31, 2016
Line of Credit Facility [Line Items]
Outstanding amount of line of credit facility	$ 209,000	$ 211,000
Line of credit facility
Line of Credit Facility [Line Items]
Maximum amount of line of credit facility	$ 225,000
Line of credit facility, basis spread on variable rate (in percent)	3.00%
Description of variable rate basis	30-day LIBOR
Line of credit facility, floor rate	1.00%
Interest rate	4.00%	4.00%
Outstanding amount of line of credit facility	$ 209,000	$ 211,000
Amount available under the line of credit	$ 16,000	$ 14,000

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Interest Rate Swap Agreements - Summary of locations and amounts of (gains) losses in income (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Periodic change in fair value of interest rate swap agreements	$ (18)	$ (44)
Periodic settlement differentials included in interest expense	(63)	(95)
Loss recognized in income	$ (81)	$ (139)

XML

Interest Rate Swap Agreements - Summary of variable rates received and fixed rates paid under swap (Details 1) - Interest Rate Swap	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Derivative [Line Items]
Variable rate received	0.44%	0.18%
Fixed rate paid	0.94%	0.94%

XML

Interest Rate Swap Agreements (Detail Textuals) - Interest Rate Swap $ in Millions		1 Months Ended
	Jun. 04, 2012 USD ($)	Jul. 30, 2012 USD ($)	Jun. 30, 2016
Derivatives, Fair Value [Line Items]
Number of interest rate swap agreements			2
Interest rate swap period	5 years	5 years
Fixed interest rate	1.00%	0.87%
Description of rate for the variable rate of the interest rate	1-month LIBOR	1-month LIBOR
Interest rate swap agreements, effective date	Jun. 13, 2012	Aug. 13, 2012
Derivative notional amount	$ 25.0	$ 25.0

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Income Taxes (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 1,803	$ 2,285
Effective tax rate	38.31%	38.36%

XML

Fair Value Disclosures - Assets and liabilities recorded at fair value on recurring basis (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements - liabilities	$ (223)	$ (205)
Recurring Basis | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements - liabilities	0
Recurring Basis | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements - liabilities	(223)	(205)
Recurring Basis | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements - liabilities	0
Recurring Basis | Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements - liabilities	$ (223)	$ (205)

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Fair Value Disclosures - Summary of financial instruments not measured at fair value (Details 1) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	$ 4,520	$ 1,849
Finance receivables	0
Line of credit	0
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	0
Finance receivables	0
Line of credit	209,000	211,000
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	0
Finance receivables	312,655	311,837
Line of credit	0
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	4,520	1,849
Finance receivables	312,655	311,837
Line of credit	209,000	211,000
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	4,520	1,849
Finance receivables	312,655	311,837
Line of credit	$ 209,000	$ 211,000

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Fair Value Disclosures (Detail Textuals)	3 Months Ended
	Jun. 30, 2016
Contracts | Minimum
Financial Instruments Not Measured At Fair Value [Line Items]
Initial term of finance receivables	12 months
Contracts | Maximum
Financial Instruments Not Measured At Fair Value [Line Items]
Initial term of finance receivables	72 months
Direct Loans | Minimum
Financial Instruments Not Measured At Fair Value [Line Items]
Initial term of finance receivables	12 months
Direct Loans | Maximum
Financial Instruments Not Measured At Fair Value [Line Items]
Initial term of finance receivables	60 months