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 ☒ 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 RegulationS-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act) Yes ☐ No ☒

As of ~~February 1, 2018, 12,599,201~~August 14, 2023, approximately 12.7 million common shares, no par value, of the Registrant were outstanding (of which ~~4,713,804~~5.4 million shares were held by the Registrant’s principal operating subsidiary and pursuant to applicable law, not entitled to vote and ~~7,885,397~~7.3 million shares were entitled to vote).

Note 2. Recently Adopted Accounting Standards

   Three months ended
December 31,
(In thousands, except per
share amounts)    Nine months ended
December 31,
(In thousands, except per
share amounts)
   2017    2016    2017    2016
Numerator:

Net income (loss)
   $ (2,898 )    $ 1,606    $ (1,741 )    $ 6,479
Less: Allocation of earnings (loss) to participating securities
   40    (22 )    23    (76 )








Net income (loss) allocated to common stock
   (2,858 )    1,584    (1,718 )    6,403








Basic earnings (loss) per share computation:

Net income (loss) allocated to common stock
   $ (2,858 )    $ 1,584    $ (1,718 )    $ 6,403








Weighted average common shares outstanding, including shares considered participating securities
   7,910    7,697    7,876    7,763
Less: Weighted average participating securities outstanding
   (110 )    (107 )    (102 )    (91 )








Weighted average shares of common stock
   7,800    7,590    7,774    7,672








Basic earnings (loss) per share
   $ (0.37 )    $ 0.21    $ (0.22 )    $ 0.83








Diluted earnings (loss) per share computation:

Net income (loss) allocated to common stock
   $ (2,858 )    $ 1,584    $ (1,718 )    $ 6,403
Undistributed earningsre-allocated to participating securities
   —      —      —      —








Numerator for diluted earnings (loss) per share
   $ (2,858 )    $ 1,584    $ (1,718 )    $ 6,403
Weighted average common shares outstanding for basic earnings (loss) per share
   7,800    7,590    7,774    7,672
Incremental shares from stock options
   —      60    —      60








Weighted average shares and dilutive potential common shares
   7,800    7,650    7,774    7,732








Diluted earnings (loss) per share
   $ (0.37 )    $ 0.21    $ (0.22 )    $ 0.83

Diluted earnings (loss) per share do not include the effect of certain stock options as their impact would be anti-dilutive. The potential shares of common stock from stock options totaling 189,690 were excluded from the diluted earnings (loss) per share calculation for December 31, 2017 because the Company experienced a net loss for the period. The potential shares of common stock from stock options totaling 160,000 were excluded from the diluted earnings (loss) per share calculation for December 31, 2016 because their effect is anti-dilutive.

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~4. Finance Receivables~~

~~Finance receivables consist of Contracts and Direct Loans and are detailed as follows:~~

   (In thousands)
   December 31,
2017    March 31,
2017
Finance receivables, gross contract
   $ 454,277    $ 512,720
Unearned interest
   (137,594 )    (160,853 )




Finance receivables, net of unearned interest
   316,683    351,867
Unearned dealer discounts
   (14,138 )    (17,004 )




Finance receivables, net of unearned interest and unearned dealer discounts
   302,545    334,863
Allowance for credit losses
   (21,187 )    (17,658 )




Finance receivables, net
   $ 281,358    $ 317,205

~~Contracts and Direct Loans each comprise a portfolio segment. The following tables present selected information on the entire portfolio of the Company:~~

   As of
December 31,
   2017 2016
Contract Portfolio

Weighted APR
   22.21 % 22.43 %
Weighted average discount
   7.25 % 7.48 %
Weighted average term (months)
   57 57
Number of active contracts
   33,993 37,834

   As of
December 31,
   2017 2016
Direct Loan Portfolio

Weighted APR
   25.18 % 25.69 %
Weighted average term (months)
   33 33
Number of active contracts
   2,718 3,023

~~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
December 31,
(In thousands)    Nine months ended
December 31,
(In thousands)
   2017    2016    2017 2016
Balance at beginning of period
   $ 19,967    $ 12,925    $ 16,885 $ 12,265
Current period provision
   8,818    8,701    28,498 23,723
Losses absorbed
   (8,745 )    (8,247 )    (26,372 ) (23,815 )
Recoveries
   360    570    1,389 1,776






Balance at end of period
   $ 20,400    $ 13,949    $ 20,400 $ 13,949

The allowance for credit losses is increased by charges against earnings and decreased by charge-offs (net of recoveries). The Company aggregates Contracts into static pools consisting of Contracts purchased during a three-month period for each branch location as management considers these pools to have similar risk characteristics and are considered smaller-balance homogenous loans. The Company analyzes each consolidated static pool at specific points in time to estimate losses that are probable of being incurred as of the reporting date. It has maintained historical~~write-off~~ ~~information for over 10 years with respect to every consolidated static pool and segregates each static pool by liquidation which creates~~

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~4. Finance Receivables (continued)~~

~~snapshots or buckets of each pool’s historicalwrite-off~~ to liquidation ratio at five different points in each vintage pool’s liquidation cycle. These snapshots are then used to assist in determining the allowance for credit losses. The five snapshots are tracked at liquidation levels of 20%, 40%, 60%, 80% and 100%. These snapshots help us in determining the appropriate allowance for credit losses.

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 December 31, 2017, the average model year of vehicles collateralizing the portfolio was a 2010 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
December 31,
(In thousands)    Nine months ended
December 31,
(In thousands)
   2017    2016    2017 2016
Balance at beginning of period
   $ 782    $ 774    $ 773 $ 748
Current period provision
   171    95    389 243
Losses absorbed
   (172 )    (73 )    (395 ) (217 )
Recoveries
   6    3    20 25






Balance at end of period
   $ 787    $ 799    $ 787 $ 799

Direct Loans are typically for amounts ranging from $1,000 to $11,000 and are generally secured by a lien on an automobile, watercraft or other permissible tangible personal property. Much of Direct Loans are originated with current or former customers under the Company’s automobile financing program. The typical Direct Loan represents a better credit risk than Contracts due to the customer’s historical payment history with the Company; however, the underlying collateral is less valuable. In deciding if 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 the 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 December 31, 2017, 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 credit loss trends over several reporting periods which are utilized in estimating future losses and overall portfolio performance.

A performing account is defined as an account that is less than 61 days past due. We define an automobile contract as delinquent when more than 25% of a payment contractually due by a certain date has not been paid by the immediately following due date, which date may have been extended within limits specified in the servicing agreements or as a result of a deferral. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable.

~~In certain circumstances, we will grant obligorsone-month~~ payment extensions. The only modification of terms in those circumstances is to advance the obligor’s next due date by one month and extend the maturity date of the receivable. There are no other concessions, such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled debt restructurings.

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~4. Finance Receivables (continued)~~

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

   (In thousands)
   December 31,
2017    December 31,
2016
   Contracts    Direct Loans    Contracts    Direct Loans
Performing accounts
   $ 412,775    $ 10,349    $ 462,569    $ 11,231
Non-performing accounts
   27,053    217    36,980    280








Total
   $ 439,828    $ 10,566    $ 499,549    $ 11,511
Chapter 13 bankruptcy accounts
   3,843    40    4,220    36








Finance receivables, gross contract
   $ 443,671    $ 10,606    $ 503,769    $ 11,547

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 180 days contractually delinquent, the account is written off. The delinquency table below represents both performing and~~non-performing~~ accounts; however, it does not include Chapter 13 bankruptcy accounts. Upon notification of a Chapter 13 bankruptcy, the account is not modified to reflect the new repayment plan administered by a court-appointed trustee. The cost recovery method of accounting is used, and the accrual of interest income is suspended. The balance will be reduced as payments are received by the bankruptcy court. 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. 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 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, except percentages)~~

Contracts
   Gross Balance
Outstanding    31 – 60days 61 – 90days 91 – 120 days Over 120 Total
December 31, 2017
   $ 439,828    $ 33,453 $ 14,039 $ 7,893 $ 5,121 $ 60,506
      7.61 % 3.19 % 1.79 % 1.16 % 13.76 %
December 31, 2016
   $ 499,549    $ 35,184 $ 17,263 $ 11,072 $ 8,645 $ 72,164
      7.04 % 3.46 % 2.22 % 1.73 % 14.45 %


Direct Loans
   Gross Balance
Outstanding    31 – 60days 61 – 90days 91 – 120 days Over 120 Total
December 31, 2017
   $ 10,566    $ 254 $ 102 $ 32 $ 83 $ 471
      2.41 % 0.97 % 0.30 % 0.78 % 4.46 %
December 31, 2016
   $ 11,511    $ 282 $ 155 $ 61 $ 64 $ 562
      2.45 % 1.34 % 0.53 % 0.56 % 4.88 %

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~5. Line of Credit~~

The Company has a line of credit facility (the “Line”) up to $225.0 million. On November 8, 2017, the Company executed amendment 7 to this existing Line which extended the maturity date to March 31, 2018 and increased the pricing of the Line to 400 basis points above 30 day LIBOR, while maintaining the 1% floor on LIBOR. The amendment also increased the beneficial ownership limit from 20% to 30% and revised the calculation of availability and the minimum interest coverage ratio. The threshold for the minimum interest coverage ratio was lowered for the period ending December 31, 2017.

On December 30, 2016, the Company executed an amendment which increased the pricing of the Line to 350 basis points above 30 day LIBOR while maintaining the 1% floor on LIBOR. Prior to December 30, 2016, the pricing on the Line was 300 basis points above 30 day LIBOR with a 1% floor on LIBOR.

The Company has a longstanding relationship with its lenders and believes it is probable that it will be able to obtain financing from either its existing lenders or from other sources; however, we can provide no assurances that the lenders will approve the further renewal or extension of the Line past March 31, 2018 or, assuming that they will approve it, that the facility will not be on terms less favorable than the current agreement. The Company may also determine to seek alternative financing, including but not limited to, the issuance of equity or debt; however, we may not be able to raise additional funds on acceptable terms, or at all.

~~6. Interest Rate Swap Agreements~~

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

During the nine months ended December 31, 2017, no new contracts were initiated and both interest rate swap contracts matured. During the nine months ended December 31, 2016, no new contracts were initiated and no contracts matured.

On June ~~13, 2017 an interest rate swap agreement with an effective date of June 13, 2012, a notional amount of $25.0 million, and a fixed rate of interest of 1.00% expired.~~

~~On July 30, 2017 an interest rate swap agreement with an effective date of July 30, 2012, a notional amount of $25.0 million, and a fixed rate of interest of 0.87% expired.~~

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~6. Interest Rate Swap Agreements (continued)~~

~~The locations and amounts of loss and gain in income are as follows:~~

Three months ended
December 31,

Nine months ended
December 31,

   (In thousands)    (In thousands)
   2017    2016    2017    2016
Periodic change in fair value of interest rate swap agreements
   $ —      $ (81 )    $ 17    $ (184 )
Periodic settlement differentials included in interest expense
   —      45    18    163








Loss (gain) recognized in income
   $ —      $ (36 )    $ 35    $ (21 )

Net realized losses and gains 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
December 31, Nine months ended
December 31,
   2017    2016 2017 2016
Variable rate received
   —      0.58 % 1.05 % 0.51 %
Fixed rate paid
   —      0.94 % 0.91 % 0.94 %

~~7. Income Taxes~~

On December 22, 2017, the Tax Cuts and Jobs Act was passed into law (“TCJA”). The TCJA includes a broad range of tax reform including changes to tax rates and deductions that are effective January 1, 2018. The decrease in the enacted corporate tax rate expected to apply when our temporary differences are realized or settled ultimately resulted in a~~one-time~~ revaluation of our net deferred tax asset of $3.4 million in December 2017 with a corresponding charge to income tax expense. The tax effects of the TCJA increased income tax expense to a level that reduced net income to a net loss for both the three and nine-month periods ending December 31, 2017.

The provision for income taxes increased to approximately $3.7 million for the three months ended December 31, 2017 from approximately $1.0 million for the three months ended December 31, 2016. The Company’s effective tax rate increased to 456.48% for the three months ended December 31, 2017 from 37.93% for the three months ended December 31, 2016. The provision for income taxes increased to approximately $4.4 million for the nine months ended December 31, 2017 from approximately $4.0 million for the nine months ended December 31, 2016. The Company’s effective tax rate increased to 164.70% for the nine months ended December 31, 2017 from 38.01% for the nine months ended December 31, 2016.

~~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.

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~8. Fair Value Disclosures (continued)~~

~~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:

December 31, 2017 – assets:
   $ —      $ —      $ —      $ —
March 31, 2017 – assets:
   $ —      $ 17    $ —      $ 17

~~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 generally range from 12 to 72 months. The initial terms of the Direct Loans generally range from 12 to 72 months. 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 December 31, 2017 was estimated to be equal to the book value. The interest rate for the Line is a variable rate based on LIBOR pricing options.

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~8. Fair Value Disclosures (continued)~~

(In thousands)

   Fair Value Measurement Using
Description
   Level 1    Level 2    Level 3    Fair
Value    Carrying
Value
Cash:

December 31, 2017
   $ 3,082    $ —      $ —      $ 3,082    $ 3,082
March 31, 2017
   $ 2,855    $ —      $ —      $ 2,855    $ 2,855
Finance receivables:

December 31, 2017
   $ —      $ —      $ 281,358    $ 281,358    $ 281,358
March 31, 2017
   $ —      $ —      $ 317,205    $ 317,205    $ 317,205
Line of credit:

December 31, 2017
   $ —      $ 178,000    $ —      $ 178,000    $ 178,000
March 31, 2017
   $ —      $ 213,000    $ —      $ 213,000    $ 213,000

~~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 December 31, 2017 and March 31, 2017.

~~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. Summary of Significant Accounting Policies~~

~~Reclassifications~~

The Company made certain reclassifications to the 2016 statements of cash flows. The amortization of deferred revenues decreased cash flows from operating activities by $1.342 million for 2016 and correspondingly increased cash flows from investing activities.

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~10. Summary of Significant Accounting Policies (continued)~~

~~Recent Accounting Pronouncements~~

~~In August~~ 2016, the Financial Accounting ~~Standards~~Standard Board ~~(“FASB”)~~(FASB) issued the Accounting ~~Standards~~Standard Update ~~(“ASU”)2016-15~~ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payment. The new guidance focuses on making the Statement of Cash Flows more uniform for companies. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements, and is in the process of analyzing its current presentation of the Consolidated Statements of Cash Flows. At this time, the Company does not believe ASU~~2016-15~~ ~~will have a material impact.~~

~~In June 2016, the FASB issued the ASU~~(ASU) 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other things, the amendments in this ASU require the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ~~Financial institutions and other organizations~~Companies will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. 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~~adopted this standard effective April 1, 2023. The initial impact of adoption was a $0.2 million decrease to retained earnings ($0.2 million increase to the ~~adoption~~allowance for credit losses (ACL)). As of ~~this ASU on~~April 1, 2023, there is a full valuation allowance recorded against the ~~consolidated financial statements,~~deferred tax assets (DTA). Therefore, a net increase of $0.1 million recorded to the DTA was offset by an increase of the same amount to the valuation allowance. The ACL reflects the difference between the amortized cost basis and ~~is collecting and analyzing data that will be needed to produce historical inputs into any models created as a result~~the present value of ~~adopting this ASU. At this time, we believe~~ the ~~adoption of this ASU will likely have a material adverse effect on our consolidated financial statements.~~expected cash flows.

In ~~February 2016,~~March 2022, the FASB issued ASU~~No. 2016-02,~~ ~~“Leases”~~ 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, ~~intended to improve financial reporting about leasing transactions. The ASU affects all companies~~which removes the accounting guidance for troubled debt restructurings 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. While the Company has not specifically evaluated each lease agreement, we anticipate upon adoption, the Company will add the impact of the full operating lease terms that meets the scope, using the present value of future minimum lease payments to the balance sheet. The Company will continuerequires entities to evaluate whether a modification provided to a customer results in a new loan or continuation of an existing loan. The amendments enhance existing disclosures and require new disclosures for receivables when there has been a modification in contractual cash flows due to a customer experiencing financial difficulties. Additionally, the ~~impact of the adoption of this ASU on the consolidated financial statements.~~

~~In January 2016, the FASB issued ASUNo. 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 foramendments require 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 portiongross charge-off information by year of ~~the total change~~origination in the ~~fair value of a liability resulting from a change~~vintage disclosures. This ASU became effective for us on April 1, 2023. We adopted this guidance in the ~~instrument-specific credit risk (also referred to as “own credit”) when~~first quarter of fiscal 2024 using 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. While the Company is currently evaluating the impact of the pending adoptionmodified retrospective method. Adoption of this ~~ASU on the Company’s consolidated financial statements, the Company does~~standard did not ~~believe it will~~ have a material impact on ~~the consolidated financial statements.~~

~~Nicholas Financial, Inc. and Subsidiaries~~

~~Notes to the~~our unaudited Condensed Consolidated Financial ~~Statements (Continued)~~Statements.

~~(Unaudited)~~

~~10. Summary of Significant Accounting Policies (continued)~~

~~In May 2014, the FASB issued ASUNo. 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, ASU2014-09~~ 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 impact of the standard is limited to a large extent due to Topic 606 including a scope exception for finance receivables. Since substantially all of the Company’s revenue streams are generated from activities that are outside the scope of the new standard, the Company does not believe that this standard will have a material impact on the Company’s financials. The Company has begun analyzing~~in-scope~~ ~~contracts using the five-step process outlined in Topic 606 and expects to finalize our conclusion during the quarter ending March 31, 2018.~~

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.

Note 4. Finance Receivables

Finance Receivables Portfolio, net

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


	(In thousands)
	June 30, 2023			March 31, 2023
Finance receivables	$	112,244		$	128,170
Accrued interest receivable		1,621			1,932
Unearned dealer discounts		(3,487	)		(4,286	)
Unearned insurance commissions and fees		(1,111	)		(1,419	)
Unearned purchase price discount		(54	)		(82	)
Finance receivables, net of unearned discounts and fees and accrued interest receivable		109,213			124,315
Allowance for credit losses		(15,359	)		(17,396	)
Finance receivables, net	$	93,854		$	106,919

Contracts and Direct Loans each comprise a portfolio segment which consists of groups of loans sharing common risk factors. The following tables present selected information on the entire portfolio of the Company:


	As of June 30,			As of March 31,
Contract Portfolio	2023			2023
Average APR		22.8	%		22.8	%
Average discount		6.5	%		6.8	%
Average term (months)		49			49
Number of active contracts		12,769			14,081


	As of June 30,			As of March 31,
Direct Loan Portfolio	2023			2023
Average APR		28.8	%		29.1	%
Average term (months)		29			28
Number of active contracts		4,558			5,322

Allowance for Credit Losses (ACL)

The ACL reflects the difference between the amortized cost basis and the present value of the expected cash flows of finance receivables. Provisions for credit losses are recorded in amounts sufficient to maintain an ACL at an adequate level to provide for estimated losses over the lives of the finance receivables. Portfolio segments are comprised of homogeneous loans sharing common risk factors. Accordingly, loans are not individually evaluated for collectability. Consistent with the application during prior reporting years, the Company continues charging credit losses against the allowance when the account reaches 120 days contractually delinquent and any recoveries on finance receivables previously charged to the ACL are credited to the ACL when collected.

The Company uses a Discounted Cash Flow (DCF) model to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company has utilized its own historical data as well as its peer group companies' data from FFIEC Call Report filings. This data has been used to produce regression analysesdesigned to quantify the impact of reasonable and supportable forecasts in projective models.

The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature. The Company considers changes in international, national, regional and local conditions, changes in the volume and severity of past due loans, portfolio bankruptcy trends, maturity terms extensions, changes in the value of underlying collateral for collateral dependent loans, the effect of other external factors, such as competition, legal and regulatory requirements on the level of estimated credit losses, the existence and effect of any concentrations of credit and changes in the levels of such concentrations, changes in the nature and volume of the portfolio and terms of loans, changes in the quality of the loan review system, changes in the experience, depth, and ability of lending management, and reasonable and supportable economic forecasts, which cover the lives of the finance receivables.

The Company discounts expected cash flows at the financial asset’s effective interest rate. The effective interest rate is defined in the ASC 326as the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial assets. For the Company, this is calculated using prepayment adjusted contractual cash flows relative to the amortized cost. The Company also considers prepayment and curtailment effects in calculation of its effective interest rate.

According to ASC 326-20-30-9, estimating expected credit losses is highly judgmental and requires to produce reasonable and supportable forecasts of expected credit losses. The Company has elected to forecast the first four quarters of the credit loss estimate and revert to a long-run average of each considered economic factor as permitted in ASC 326-20-30-9. Based on the final values in the forecast and the uncertainty of a post-pandemic recovery, management has elected to revert over four quarters. The Company also uses information provided by the FOMC to obtain various forecasts for unemployment rate and gross domestic product, as well as other economic factors that are considered as part of its ACL calculations.

The Company elected not to measure an allowance on accrued interest which included as a component of amortized cost and limited to performing accounts, defined as an account that is less than 61 days past due. Accrual of interest income on finance receivables is suspended when a loan is contractually delinquent for 61 days or more, or the collateral is repossessed, whichever is earlier. Consistent with the application in the prior reporting periods, the Company continue timely reversing the accrual of interest income when the loan is contractually delinquent 61 days or more. All of these such accounts are accounted for in the calculation for allowance for credit losses.

The Company defines a non-performing asset as one that is 61 or more days past due, a Chapter 7 bankruptcy account, or a Chapter 13 bankruptcy account that has not been confirmed by the courts, for which the accrual of interest income is suspended. Upon confirmation of a Chapter 13 bankruptcy account (BK13), the account is immediately charged-off. Upon notification of a Chapter 7 bankruptcy, an account is monitored for collectability. In the event the debtors’ balance is reduced by the bankruptcy court, the Company records a loss equal to the amount of principal balance reduction. The remaining balance is reduced as payments are received. In the event an account is dismissed from bankruptcy, the Company will decide whether to begin repossession proceedings or to allow the customer to make regularly scheduled payments.

Prior to adoption of ASU 2016-13 the Company was periodically evaluating composition of the portfolio, current economic conditions, the estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts when determining management’s estimate of probable credit losses and the adequacy of the allowance for credit losses. Management utilized significant judgment in determining probable incurred losses and in identifying and evaluating qualitative factors. This approach aligned with the Company’s lending policies and underwriting standards. If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision is recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio.

The Company used a trailing twelve-month net charge-off as a percentage of average finance receivables, and applied this percentage to ending finance receivables to estimate probable credit losses. This approach reflected the current trends of incurred losses within the portfolio and closely aligns the allowance for credit losses with the portfolio’s performance indicators. Estimating the allowance for credit losses using the trailing twelve-month charge-off analysis reflected portfolio performance adjusted for seasonality. Management evaluated qualitative factors to support its allowance for credit losses. The Company examined the impact of macro-economic factors, such as year-over-year inflation, as well as portfolio performance characteristics, such as changes in the value of underlying collateral, level of nonperforming accounts, delinquency trends, and accounts with extended terms.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts and Direct Loans for the three months ended June 30, 2023 and 2022 (in thousands):


	Three months ended June 30, 2023
	Contracts			Direct Loans			Total
Balance at beginning of period, prior to adoption of ASU 2016-13	$	16,265		$	1,131		$	17,396
Impact of adoption of ASU 2016-13		(562	)		772			210
Provision for credit losses		596			49			645
Charge-offs		(4,656	)		(691	)		(5,347	)
Recoveries		2,221			234			2,455
Balance at June 30, 2023	$	13,864		$	1,495		$	15,359

	Three months ended June 30, 2022
	Contracts			Direct Loans			Total
Balance at beginning of period	$	1,961		$	988		$	2,949
Provision for credit losses		3,102			542			3,644
Charge-offs		(4,045	)		(349	)		(4,394	)
Recoveries		1,442			45			1,487
Balance at June 30, 2022	$	2,460		$	1,226		$	3,686

The following table presents details of the allowance for credit losses segregated by portfolio segment as of June 30, 2023, calculated in accordance with the current expected credit losses methodology (in thousands):



	As of June 30, 2023
	Contracts		Direct Loans		Total
Modeled expected credit losses	$	11,437	$	1,145	$	12,582
Qualitative adjustments		2,427		350		2,777
Total	$	13,864	$	1,495	$	15,359

The following table presents gross charge-offs and recoveries by receivable origination year for total portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		2,847		685		2,162
2022		1,606		774		832
2021		447		218		229
2020		220		292		(72	)
Prior		227		486		(259	)
Total	$	5,347	$	2,455	$	2,892

The following table presents gross charge-offs and recoveries by receivable origination year for Contract segment of portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		2,323		580		1,743
2022		1,447		679		768
2021		441		202		239
2020		218		281		(63	)
Prior		227		479		(252	)
Total	$	4,656	$	2,221	$	2,435

The following table presents gross charge-offs and recoveries by receivable origination year for Direct segment of portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		524		105		419
2022		159		95		64
2021		6		16		(10	)
2020		2		11		(9	)
Prior		-		7		(7	)
Total	$	691	$	234	$	457

The following table shows portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	2,682	$	31,930	$	32,675	$	13,056	$	5,109	$	3,895	$	89,347
30-59		12		3,942		4,829		1,648		858		830		12,119
60-89		-		3,743		3,402		1,185		445		413		9,188
90-120		-		517		757		158		76		82		1,590
Total	$	2,694	$	40,132	$	41,663	$	16,047	$	6,488	$	5,220	$	112,244

The following table shows Contracts portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	2,682	$	25,588	$	27,722	$	12,627	$	5,065	$	3,889	$	77,573
30-59		12		3,030		4,112		1,620		857		830		10,461
60-89		-		2,764		2,717		1,164		443		413		7,501
90-120		-		378		660		158		76		82		1,354
Total	$	2,694	$	31,760	$	35,211	$	15,569	$	6,441	$	5,214	$	96,889

The following table shows Direct loans portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	—	$	6,342	$	4,953	$	429	$	44	$	6	$	11,774
30-59		-		912		717		28		1		-		1,658
60-89		-		979		685		21		2		-		1,687
90-120		-		139		97		-		-		-		236
Total	$	-	$	8,372	$	6,452	$	478	$	47	$	6	$	15,355

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


	(In thousands)
	June 30, 2023						March 31, 2023
	Contracts		Direct Loans		Total		Contracts		Direct Loans		Total
Performing accounts	$	87,649	$	13,392	$	101,041	$	101,856	$	16,926	$	118,782
Non-performing accounts		8,676		1,862		10,538		6,972		1,728		8,700
Total		96,325		15,254		111,579		108,828		18,654		127,482
Chapter 13 bankruptcy accounts		564		101		665		590		98		688
Finance receivables	$	96,889	$	15,355	$	112,244	$	109,418	$	18,752	$	128,170

A performing account is defined as an account that is less than 61 days past due. The Company defines an automobile contract as delinquent when more than 10% of a payment contractually due by a certain date has not been paid immediately by the following due date, which date may have been extended within limits specified in the servicing agreements or as a result of a deferral. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable.

In certain circumstances, the Company will grant obligors one-month payment extensions. The only modification of terms in those circumstances is to advance the obligor’s next due date by one month and extend the maturity date of the receivable. There are no other concessions, such as a reduction in interest rate, or forgiveness of principal or of accrued interest. Accordingly, the Company considers such extensions to be insignificant delays in payments.

A non-performing account is defined as an account that is contractually delinquent for 61 days or more or is a Chapter 13 bankruptcy account for which the accrual interest income has been suspended. The Company’s charge-off policy is to charge off an account in the month the contract becomes 121 days contractually delinquent.

In the event an account is dismissed from bankruptcy, the Company will decide whether to begin repossession proceedings or to allow the customer to make regularly scheduled payments.

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


	Contracts
	(In thousands, except percentages)
	Balance Outstanding		30 – 59 days			60 – 89 days			90 – 119 days			120+		Total
June 30, 2023	$	96,325	$	10,394		$	7,425		$	1,251		$	—	$	19,070
				10.79	%		7.71	%		1.30	%	0.00%			19.80	%

March 31, 2023	$	108,828	$	10,083		$	3,274		$	3,698		$	—	$	17,055
				9.27	%		3.01	%		3.40	%	0.00%			15.67	%


	Direct Loans
	(In thousands, except percentages)
	Balance Outstanding		30 – 59 days			60 – 89 days			90 – 119 days			120+		Total
June 30, 2023	$	15,254	$	1,646		$	1,640		$	222		$	—	$	3,508
				10.79	%		10.75	%		1.46	%	0.00%			23.00	%

March 31, 2023	$	18,654	$	1,448		$	654		$	1,074		$	—	$	3,176
				7.76	%		3.51	%		5.76	%	0.00%			17.03	%

Note 8. Fair Value Disclosures

The Company’s financial instruments consist of cash, finance receivables, and the Credit Facility. Each of these financial instruments are not carried at 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 generally range from 12 to 72 months. Beginning in December 2017, the maximum initial term of a Contract was reduced to 60 months. The initial terms of the Direct Loans generally range from 12 to 60 months. If liquidated outside of the normal course of business, the amount received may not be the carrying value.

Repossessed assets, which are not financial instruments, are valued at the lower of the finance receivable balance prior to repossession or the estimated net realizable value of the repossessed asset. The Company estimates the net realizable value using estimated auction wholesale proceeds less costs to sell plus insurance claims outstanding, if any.

Based on current market conditions, the fair value of the Credit Facility as of June 30, 2023 was estimated to be equal to the book value. The interest rate for the Credit Facility is a variable rate based on SOFR pricing options.


	(In thousands)
	Fair Value Measurement Using
Description	Level 1		Level 2		Level 3		Fair Value		Carrying Value
Cash:
June 30, 2023	$	678	$	-	$	-	$	678	$	678
March 31, 2023	$	454	$	-	$	-	$	454	$	454
Finance receivables:
June 30, 2023	$	-	$	-	$	93,854	$	93,854	$	93,854
March 31, 2023	$	-	$	-	$	105,971	$	105,971	$	106,919
Repossessed assets:
June 30, 2023	$	-	$	-	$	1,953	$	1,953	$	1,953
March 31, 2023	$	-	$	-	$	1,491	$	1,491	$	1,491
Credit Facility:
June 30, 2023	$	-	$	-	$	15,250	$	15,250	$	15,250
March 31, 2023	$	-	$	-	$	29,100	$	29,100	$	29,100

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis. There were none at June 30, 2023 and March 31, 2023.

Level 1 is for financial assets and liabilities that have a regular mark to market mechanism for setting a fair market value. These assets and liabilities are considered to have readily observable, transparent prices and therefor a reliable, fair market value. Management has determined that this level to be most appropriate for cash.

Level 2 is for financial assets and liabilities that do not have regular market pricing, but whose fair value can be determined based on other data values or market pricing.

At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. Management has determined that this level to be most appropriate for the finance receivables, repossessed assets, and Credit Facility.

Note 10. Stock Plans

In May 2019, the Company’s Board of Directors (“Board”) authorized a new stock repurchase program allowing for the repurchase of up to $8.0 million of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective immediately.

The timing and actual number of repurchases will depend on a variety of factors, including stock price, corporate and regulatory requirements and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.

In August 2019, the Company’s Board authorized additional repurchases of up to $1.0 million of the Company’s outstanding shares.

The following table summarizes treasury share transactions under the Company's stock repurchase program:


	Three months ended June 30, (In thousands)					Three months ended June 30, (In thousands)
	2023					2022
	Number of Shares		Amount			Number of Shares		Amount
Treasury shares at the beginning of period		5,368	$	(76,794	)		5,127	$	(74,405	)
Treasury shares purchased		-		-			205		(2,138	)
Treasury shares at the end of period		5,368	$	(76,794	)		5,332	$	(76,543	)

For the three months ended June 30, 2023, the Company did not repurchase any shares of its common stock.

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

This ~~report~~Quarterly Report on Form10-Q contains various forward-looking statements ~~other than those concerning historical information, that~~within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on management’s current 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.management. When used in this document, the words “anticipate”, “estimate”, “expect”, "forecast", “will”, "would", “may”, “plan,” “believe”, “intend” and similar expressions are intended to identify forward-looking statements. Although Nicholas Financial, Inc., including its subsidiaries ~~(the~~(collectively, the “Company,” ~~“we,” “us,”~~“we”, “us”, or “our”) believes that the expectations reflected or implied in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. ~~Such~~As a result, actual results could differ materially from those indicated in these forward-looking statements. Forward-looking statements in this Quarterly Report may include, without limitation statements about (1) the expected benefits, costs and timing of the Company’s restructuring and change in operating strategy, including its servicing arrangement with Westlake Portfolio Management, LLC (collectively with its affiliate Westlake Capital Finance, LLC, “Westlake”) (including without limitation the servicing fees, classified as administrative costs), its loan agreement with Westlake (including without limitation anticipated interest payments thereunder), and its restructuring activities; (2) the availability and use of excess capital (including by acquiring loan portfolios or businesses or by investing outside of the Company’s traditional business); (3) the continuing impact of COVID-19 on our customers and our business, (4) projections of revenue, income, and other items relating to our financial position and results of operations, (5) statements of our plans, objectives, strategies, goals and intentions, (6) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (7) statements of expected industry and general economic trends. These statements are subject to certain risks, uncertainties and assumptions that may cause results to differ materially from those expressed or implied in forward-looking statements, including ~~but~~without limitation:

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 the availability of capital (including the ability to access bank financing) on favorable terms, recently enacted, proposed or future legislation and the manner in which it is implemented, including the effect of changes in tax law, such as the effect of the Tax Cuts and Jobs Act (“TCJA”) that was enacted on December 22, 2017, fluctuations in the economy, the degree and nature of competition and its effects on the Company’s ability to maintain profit margins at acceptable levels or generate net income at all, fluctuations in interest rates, demand for consumer financing in the markets served by the Company, the Company’s products and services, increases in the default rates experienced on automobile finance installment contracts (“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 and to expand into new markets, and the Company’s ability to recruit and retain qualified employees. All ~~forward looking~~forward-looking statements included in this ~~report~~Quarterly Report are based on information available to the Company onas the date ~~hereof,~~of filing of this Quarterly Report, and the Company assumes no ~~obligations~~obligation to update any such ~~forward looking~~forward-looking statement. ~~You~~Prospective investors should also consult the risk factors described from time to time in the Company’s other filings made with the ~~Securities and Exchange Commission,~~SEC, including its reports on Forms~~10-K,10-Q,8-K~~ 10-K, 10-Q, 8-K and annual reports to shareholders.

~~Litigation~~Restructuring and ~~Legal Matters~~Change in Operating Strategy

~~See “Item 1. Legal Proceedings”~~The Company announced on Form 8-K filed on November 3, 2022 a change in ~~Part II~~its operating strategy and restructuring plan with the goal of reducing operating expenses and freeing up capital. As part of this ~~Form10-Q.~~plan, the Company has shifted from a decentralized to a regionalized business model in which each of its originators focuses on a specific region in the Company’s smaller target market footprint, and the Company has entered into a loan servicing agreement with Westlake Portfolio Management, LLC (“WPM”, and, collectively with its affiliate, Westlake Capital Finance, LLC, “Westlake”). An affiliate of Westlake, Westlake Services, LLC, is the beneficial owner of approximately 6.8% of the Company’s common stock.

The Company’s critical accounting ~~policy~~estimate (i.e., that involves a significant level of estimation uncertainty and has or is reasonably likely to have a material impact on the Company’s financial condition or results of operations) relates to the allowance for credit ~~losses. It~~losses, which reflects the difference between the amortized cost basis and the present value of the expected cash flows of finance receivables.

There has been one change in our critical accounting policies from those disclosed in our Annual Report on 2023 Form 10-K related the Company's adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and -11 in November 2019, ASU 2020-02 in February 2020 and ASU 2022-02 in March 2022.

The Company adopted ASU 2016-13 for measurement of current expected credit losses on April 1, 2023. An impairment model required by ASU 2016-13 is not prescriptive in the methodology used to determine the expected credit loss estimate. Therefore, management has flexibility in selecting the methodology. However, the expected credit losses must be estimated over a financial asset's remaining expected life, adjusted for prepayments, utilizing quantitative and qualitative factors. The estimate of current expected credit losses is based on ~~management’s opinion~~relevant information about past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Historical loss experience is the starting point for estimating expected credit losses. Adjustments are made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms, and differences in economic conditions - both current conditions and reasonable and supportable forecasts. When the Company is not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, it has estimated expected credit losses for the remaining life after the forecasted period using an ~~amount~~approach that reverts to historical credit loss information.

The Company selected a discounted cash flow (DCF) model to estimate its base allowance for credit losses. Management has elected to use this approach after analysis and consideration. Below are a few of the key decision points that contributed to the election:

DCF methodologies work properly with an amortizing approach. In order to ~~absorb~~estimate expected credit losses ~~incurred in~~using methods that project future principal and interest cash flows (that is, a discounted cash flow method), the ~~existing portfolio.~~

~~The~~Company discounts expected cash flows at the financial asset’s effective interest rate. When a discounted cash flow method is applied, the allowance for credit losses must reflect the difference between the amortized cost basis and the present value of the expected cash flows.

The Company applies historical loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the Company’s ACL model. The Company reviews macroeconomic forecasts to use in its ACL. The projected change in creditworthiness is ~~established through~~modeled using information provided by FOMC, such as unemployment rate and GDP. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations.

As loans receivable are originated, provisions for credit losses are recorded in amounts sufficient to maintain an ACL at an adequate level to provide for estimated losses over the remaining expected life of the finance receivables. The Company uses its historical loss experience and macroeconomic factors to forecast expected credit losses.

While the Company utilizes a systematic methodology in determining its allowance, the allowance is based on estimates, and ultimate losses may vary from current estimates. The estimates are reviewed periodically and, as adjustments become necessary, are reported in earnings in the periods in which they become known.

After adoption, all changes in the ACL, net of charge-offs and recoveries, are recorded as “Provision for credit losses” in the unaudited Condensed Consolidated Statements of Income (Loss).

The Company finances primary transportation to and from work for the subprime borrower. We do not finance luxury cars, second units or recreational vehicles, which are the first payments customers tend to skip in time of economic insecurity. We finance the main and often only vehicle in the household that is needed to get our customers to and from work. The amounts we finance are much lower than most of our competitors, and therefore the payments are significantly lower, too. The combination of financing a “need” over a “want” and making that loan on comparatively affordable terms incentivizes our customers to prioritize their account with us.

For the three months ended June 30, 2023, the dilutive earnings per share were $0.21 as compared to dilutive loss per share of $0.24 for the three months ended June 30, 2022. Net income was $1.6 million for the three months ended June 30, 2023 as compared to net loss of $1.8 million for the three months ended June 30, 2022. Interest and fee income on finance receivables decreased 41.3% to $7.1 million for the three months ended June 30, 2023 as compared to $12.1 million for the three months ended June 30, 2022. Provision for credit losses decreased 82.3% to $0.6 million for the three months ended June 30, 2023 as compared to $3.6 million for the three months ended June 30, 2022.

From time-to-time the Company uses certain financial measures derived on a basis other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. Such financial measures qualify as “non-GAAP financial measures” as defined in SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company may present these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components to understanding and assessing the Company’s financial performance. Such non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are, thus, susceptible to varying calculations, any non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies.

Note: All income performance indicators expressed as percentages have been annualized.

We adopted ASU 2016-13 on April 1, 2023, as further described in "Significant Accounting Policies" to the unaudited Condensed Consolidated Financial Statements. Upon implementation of ASU 2016-13, we recognized a decrease to our opening retained earnings balance of approximately $0.2 million, which reflects an increase to the allowance for credit losses (ACL) of approximately $0.2 million.

ASU 2016-13 introduces a new accounting model to measure credit losses for financial assets measured at amortized costs. In contrast to the previous incurred loss model, ASU 2016-13 requires credit losses for financial assets measured at amortized cost to be determined based on the total current expected credit losses over the life of those financial asset or group of assets.

Our process for determining the ACL considers a customer's willingness and ability to pay along with other risk characteristics, including loan size, effective interest rate, loan term, geographic location, expected loss patterns, loan modification programs and other macroeconomic factors. In addition to our quantitative ACL, we also incorporate qualitative adjustments that may relate to risks and changes in current economic conditions that may not be reflected in quantitatively derived results.

Prior to adoption of ASU 2016-13 the Company used a trailing twelve-month charge-off analysis to calculate the allowance for credit losses and took into consideration the composition of the portfolio, current economic conditions, estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts when determining management’s estimate of probable credit losses and adequacy of the allowance for credit losses. By including recent trends such as delinquency, non-performing assets, and bankruptcy in its determination, management believed that the allowance for credit losses reflected the current trends of incurred losses within the portfolio and was aligned with the portfolio’s performance indicators.

If the allowance for credit losses was determined to be inadequate, then an additional charge to the provision was recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan ~~portfolio which includes~~portfolio. Conversely, the ~~competitive environment that existed when the loan was acquired,~~Company could identify abnormalities in the composition of the portfolio, which would indicate the calculation is overstated and ~~current economic conditions. Such evaluation considers, among~~management judgment may be required to determine the allowance of credit losses for both Contracts and Direct Loans.

Non-performing assets are defined as accounts that are contractually delinquent for 61 or more days past due or Chapter 13 bankruptcy accounts. For these accounts, the accrual of interest income is suspended, and any previously accrued interest is reversed. Upon notification of a bankruptcy, an account is monitored for collection with other ~~matters,~~Chapter 13 accounts. In the event the debtors’ balance is 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, whether to begin repossession proceedings or allow the customer to begin making regularly scheduled payments.

Beginning March 31, 2018, the Company allocated a specific reserve for the Chapter 13 bankruptcy accounts using a look back method to calculate the estimated ~~net realizable value or the fair value~~losses. Based on this look back, management calculated a specific reserve of ~~the underlying collateral, economic conditions, historical loan loss experience, management’s estimate~~approximately $252 thousand for these accounts as of ~~probable credit losses and other factors that warrant recognition in providing for an adequate credit loss allowance.~~June 30, 2023.

~~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. In analyzing a static pool, the Company considers the performance of prior static pools originated by the same branch office, the competition at time of acquisition, 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. A consolidated static pool contains the static pools of all branches for a given quarter. The Company analyzes each consolidated static pool at specific points in time.

~~The Company has been maintaining historicalwrite-off~~ ~~information for over 20 years with respect to every consolidated static pool, segregating each consolidated static pool by liquidation and in effect creating snapshots of a pool’swrite-off-to~~ ~~liquidation ratio at five different points in such pool’s liquidation cycle. These snapshots help the Company in determining the appropriate~~ provision for credit losses ~~and subsequent allowance for credit losses. The five snapshots are taken when the liquidation levels are at 20%, 40%, 60%, 80% and 100%.~~

The Company’s allowance for credit losses incorporates recent trends that include the acquisition of longer term contracts and increased delinquencies which the Company believes more closely depicts the amount of the allowance for credit losses needed to maintain an adequate reserve. Management evaluates each static pool on an independent basis each quarter and accounts for such pool’s term, how far along the corresponding pool is in its liquidation cycle, late charges, the number of deferments, and delinquency. This information is based on the result each individual Contract. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators.

~~Contracts are purchased from many different dealers and are all purchased on an individualContract-by-Contract~~ basis. Individual Contract pricing is determined by the automobile dealerships and is generally based on the lesser of the applicable state maximum interest rate, if any, or the maximum interest rate which the customer will accept. In most 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 does not anticipate any portfolio acquisitions in the near-term.

The Company utilizes the branch model, which allows for Contract purchasing to be done at 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 provide reasonable assurance that the Contracts that the Company purchases have common risk characteristics. The Company utilizes its District Managers to evaluate their respective branch locations for adherence to these underwriting guidelines, as well as approve underwriting exceptions. The Company also utilizes internal audit (the “IA”) to assure adherence to its underwriting guidelines. Any Contract that does not meet our underwriting guidelines can be submitted by a branch manager for approval from the Company’s District Managers or senior management.

~~Pretax income for the three months ending December 31, 2017 was $.8 million. In the month of December 2017, the Company had aone-time~~ income tax expense adjustment of $3.4 million relating to the Tax Cuts and Jobs Act (“TCJA”) which reduced net income to a net loss. The net loss for the three months ended December 31, 2017 was $2.9 million.

~~For the three months ended December 31, 2016 the Company had pretax earnings of $2.6 million and net earnings of $1.6 million. Diluted net loss per share~~ decreased to ~~$0.37 for the three months ended December 31, 2017 as compared to diluted earnings per share of $0.21 for the three months ended December 31, 2016. Revenue decreased 7% to $20.5~~$0.6 million for the three months ended ~~December 31, 2017 as compared to $22.0~~on June 30, 2023, from $3.6 million for the three months ended ~~December 31, 2016.~~

~~The Company announced that its pretax income for the nine months ending December 31, 2017 was $2.7 million. In the month~~on June 30, 2022, largely due to adoption of ~~December 2017,~~ASU 2016-13. Prior to April 1, 2023, the Company ~~had aone-time~~ ~~income tax expense adjustment of $3.4 million relating~~recorded losses based on the trailing twelve-month charge-offs, and applied this calculated percentage to ~~the TCJA which reduced net income to a net loss. The net loss for the nine months ended December 31, 2017 was $1.7 million.~~

For the nine months ended December 31, 2016 the Company had pretax earnings of $10.5 million and net earnings of $6.5 million. Diluted net loss per share decreased to $0.22 for the nine months ended December 31, 2017 as compared to diluted earnings per share of $0.83 for the nine months ended December 31, 2016. Revenue decreased 5% to $64.1 million for the nine months ended December 31, 2017 as compared to $67.6 million for the nine months ended December 31, 2016.

~~Three months ended December 31, 2017 compared to three months ended December 31, 2016~~

~~Interest and fee income on~~ finance receivables ~~predominately finance charge income, decreased 7%~~ to ~~$20.5 million~~calculate estimated probable credit losses for purposes of determining the three-month period ended December 31, 2017 from $22.0 million for the three-month period ended December 31, 2016. The decrease was primarily due to a decrease in the average weighted APR of the portfolio, and a decrease in the volume of Contracts purchased.

Average finance receivables, net of unearned interest equaled approximately $321.7 million for the three-month period ended December 31, 2017, a decrease of 8% from $349.9 million for the corresponding period ended December 31, 2016. Our purchasing volume declined 39% quarter over quarter mainly as a result of the modification of our underwriting guidelines, including the use of alternative data provided by a third party service company beginning in March 2017, to improve pricing for proper risk. The decrease in average finance receivables, net of unearned interest was primarily due to this decrease in purchasing volume.

The gross portfolio yield increased to 25.52% for the three-month period ended December 31, 2017 compared to 25.20% for the three-month period ended December 31, 2016. The gross portfolio yield increased primarily due to the decrease in~~past-due~~ ~~accounts (see~~~~“Note~~4- ~~Finance Receivables”~~for further discussion). The net portfolio yield decreased to 11.13% for the three-month period ended December 31, 2017 from 12.57% for the corresponding period ended December 31, 2016. The net portfolio yield decreased due to an increase in interest expense, as described under “Interest Expense”, and an increase in the provisionallowance for credit losses. Upon adoption of ASC 326 on April 1, 2023, expected credit losses ~~as described under “Analysis of Credit Losses”.~~

~~Marketing, Salaries, Employee Benefits, Depreciation, and Administrative Expenses~~

~~Marketing, salaries, employee benefits, depreciation, and administrative expenses decreased to approximately $8.1 million for~~were determined by comparing the three-month period ended December 31, 2017 from approximately $8.5 million for the three-month period ended December 31, 2016. The decrease was primarily related to a decrease in bonuses related to the declining portfolio performance along with a decrease in administrative costs directly related to the volume of Contracts purchased. Marketing, salaries, employee benefits, depreciation, and administrative expenses as a percentageamortized cost of finance receivables with the present value of the estimated future principal and interest cash flows. The current period provision reflects the change in the difference between the amortized cost basis and the present value of the expected cash flows of finance receivables.

The net ~~of unearned interest,~~charge-off percentage increased to ~~10.12% for the three-month period ended December 31, 2017 from 9.70% for the three-month period ended December 31, 2016.~~

Interest expense increased to approximately $2.6 million for the three-month period ended December 31, 2017 as compared to $2.3 million for the three-month period ended December 31, 2016. This increase was primarily due to the increase in the pricing to 400 basis points above 30 day LIBOR and an increase in 30 day LIBOR rates. Pricing prior to November 7, 2017 was 350 basis points above 30 day LIBOR. Pricing for the three-month period ended December 31, 2016 was 300 basis points above 30 day LIBOR until December 30, 2016, when it changed to 350 basis points above 30 day LIBOR. This change continued until the November 7, 2017 amendment. See below for more details. The following table summarizes the Company’s average cost of borrowed funds:

LIBOR rates have increased (1.57% as of December 31, 2017 compared to .77% as of December 31, 2016) which caused an increase in variable interest for the amount that exceeded the 1% floor. Average cost of borrowed funds is greater than the highest 30 day LIBOR rate plus 400 basis points, or 5.57%, due to amortized loan costs. During the three months ended September 30, 2017, the Company’s remaining interest rate swap expired (see “~~Note~~6- ~~Interest Rate Swap Agreements”~~ ~~for further discussion) but these did not have a significant effect on borrowing costs. For further discussions regarding interest rates see~~~~“Note 5 – Line of Credit”.~~

~~Nine months ended December 31, 2017 compared to nine months ended December 31, 2016~~

Interest and fee income on finance receivables, predominately finance charge income, decreased 5% to $64.1 million for the nine-month period ended December 31, 2017 from $67.6 million for the nine-month period ended December 31, 2016. The decrease was primarily due to a decrease in the average weighted APR of the portfolio, and a decrease in the volume of Contracts purchased.

Average finance receivables, net of unearned interest equaled approximately $333.7 million for the nine-month period ended December 31, 2017, a decrease of 4% from $346.0 million for the corresponding period ended December 31, 2016. Our purchasing volume declined 36% period over period mainly as a result of the modification of our underwriting guidelines, including the use of alternative data provided by a third party service company beginning in March 2017, to improve pricing for proper risk. The decrease in average finance receivables, net of unearned interest was primarily due to this decrease in purchasing volume.

The gross portfolio yield decreased to 25.60% for the nine-month period ended December 31, 2017 compared to 26.06% for the nine-month period ended December 31, 2016. The gross portfolio yield decreased primarily due to the decrease in the average weighted APR of the portfolio described above. The net portfolio yield decreased to 11.07% for the nine-month period ended December 31, 2017 from 14.22% for the corresponding period ended December 31, 2016. The net portfolio yield decreased due to a decrease in the gross portfolio yield, but primarily to an increase in the provision for credit losses, as described under “Analysis of Credit Losses”.

~~Marketing, Salaries, Employee Benefits, Depreciation, and Administrative Expenses~~

Marketing, salaries, employee benefits, depreciation, and administrative expenses decreased to approximately $25.0 million for the nine-month period ended December 31, 2017 from approximately $26.6 million for the nine-month period ended December 31, 2016. The decrease was primarily related to a decrease in the amount of Contracts purchased and a decrease in average headcount for the nine months ended December 31, 2017. The Company decreased average headcount to 305 for the nine-month period ended December 31, 2017 from 317 for the nine-month period ended December 31, 2016, mainly due to branch closures. Marketing, salaries, employee benefits, depreciation, and administrative expenses as a percentage of finance receivables, net of unearned interest, decreased to 9.98% for the nine-month period ended December 31, 2017 from 10.26% for the nine-month period ended December 31, 2016.

Interest expense increased to approximately $7.5 million for the nine-month period ended December 31, 2017 as compared to $6.7 million for the nine-month period ended December 31, 2016. This increase was primarily due to the increase in the pricing to 400 basis points above 30 day LIBOR and an increase in 30 day LIBOR rates. Pricing prior to November 7, 2017 was 350 basis points above 30 day LIBOR. Pricing for the nine-month period ended December 31, 2016 was 300 basis points above 30 day LIBOR until December 30, 2016, when it changed to 350 basis points above 30 day LIBOR. This change continued until the November 7, 2017 amendment. See below for more details. The following table summarizes the Company’s average cost of borrowed funds:

LIBOR rates have increased (1.57% as of December 31, 2017 compared to .77% as of December 31, 2016) which caused an increase in variable interest for the amount that exceeded the 1% floor. The increase in LIBOR rates also caused a decrease in expense related to our interest rate swap agreements. During the nine months ended December 31, 2017, both of the Company’s interest rate swaps expired (see “~~Note~~6- ~~Interest Rate Swap Agreements”~~ ~~for further discussion) but these did not have a significant effect on borrowing costs. For further discussions regarding interest rates see~~~~“Note 5 – Line of Credit”.~~

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 and nine month periods ended December 31, 2017 and 2016, less than 1% were for new vehicles.

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

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

As of December 31, 2017, the Company had approximately 1,491 active static pools. The average pool upon inception consisted of 49 Contracts with aggregate finance receivables, net of unearned interest, of approximately $570,000.

~~The provision for credit losses increased to $9.0 million~~9.6% for the three months ended ~~December 31, 2017~~on June 30, 2023, from ~~$8.8 million~~6.5% for the three months ended ~~December 31, 2016, largely due to the netcharge-off~~ ~~percentage (see note 6 in the Portfolio Summary table in the~~~~“Introduction”~~ ~~above for the definition of netcharge-off~~ percentage) increasing to 10.63% for the three months ended December 31, 2017 from 8.86% for the three months ended December 31, 2016 for the reasons described below. The provision for credit losses increased to approximately $28.9 million for the nine months ended December 31, 2017 from approximately $24.0 million for the nine months ended December 31, 2016. This increase ison June 30, 2022, primarily ~~a result of an increase in the netcharge-off~~ ~~rate to 10.13% for the nine months ended December 31, 2017 from 8.57% for the nine months ended December 31, 2016 for the reasons described below.~~

~~The Company’s allowance for credit losses incorporates recent trends that include~~driven by increased delinquencies ~~by analyzing the allowance on a~~and loan by loan basis, which the Company believes more closely depicts the amount of the allowance for credit losses needed to maintain an adequate reserve within a static pool. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators. The allowance for credit losses as a percentage of average net receivables (see note 7 indefaults. (See the Portfolio Summary table in the “~~Introduction”~~“Introduction” above for the definition of ~~allowance~~net charge-off percentage). Management attributes these increased delinquencies and loan defaults primarily to ~~6.59%~~the fact that the beneficial impact of the government’s prior COVID-19-related assistance to the Company’s customers had subsided at a time when those customers began facing increased inflationary pressures affecting their cost of living, and expects that the net charge-off percentage will remain, for the three months ended December 31, 2017 from 4.21% for the three months ended December 31, 2016. The allowance for credit losses as a percentage of average net receivables increased to 6.35% for the nine months ended December 31, 2017 from 4.26% for the nine months ended December 31, 2016. The increase is primarily a result of an increase in~~write-off~~ to liquidation to 13.66% for the three months ended December 31, 2017 from 12.35% for the three months ended December 31, 2016 and to 13.00% for the nine months ended December 31, 2017 from 11.02% for the nine months ended December 31, 2016.

~~The Company considers multiple factors to assist in determining appropriate loss reserve levels. The Company continues to evaluate reserve~~foreseeable future, at levels ~~on apool-by-pool~~ basis during each reporting period. The longer-term outlook for portfolio performance will depend on overall economic conditions, the rational or irrational behavior of the Company’s competitors, and the Company’s ability to monitor, manage and implement its underwriting and collections philosophy in additional geographic areas as it strives to continue its expansion.

~~The Company’s loan losses as a percentage of liquidation (see note 5 in the Portfolio Summary table in the “~~~~Introduction~~~~” above for the definition ofwrite-off~~ to liquidation) increased to 13.66% for the three months ended December 31, 2017 as compared to 12.35% for the three months ended December 31, 2016. The Company’s losses as a percentage of liquidation increased to 13.00% for the nine months ended December 31, 2017 as compared to 11.02% for the nine months ended December 31, 2016.

~~The increases in the netcharge-off~~ ~~percentage,write-off~~ to liquidation percentage and allowance percentage for both the three-month and nine-month periods ended December 31, 2017 were primarily the result of the Company underestimating the competitiveness of the markethigher than those experienced in prior years and purchasing loans of lower credit quality in such years. As these loans move toward maturity, the actual losses do not occur evenly over their respective lives. Within both the three-month and nine-month periods ended December 31, 2017, the Company saw more charge-offs in these lower quality pools than it saw for the same pools during the three-month and nine-month periods ended December 31, 2016. At the beginning of 2016, the Company implemented measures to mitigate losses, identify fraud on the front end, and more accurately price

for risk. In January of 2016, the Company modified its underwriting policies, in March of 2017 the Company engaged a third party service company, to more accurately price risk, and in June of 2017, the Company created a centralized funding department to provide a final review of all Contracts prior to funding. The Company also continues to see decreased auction proceeds from repossessed vehicles, which increases the amount of write-offs which, in turn, increases the~~write-off~~ ~~to liquidation percentage, allowance percentage and netcharge-off~~ percentage. During the three months ended December 31, 2017 and 2016, auction proceeds from the sale of repossessed vehicles averaged approximately 36% and 37%, respectively, of the related principal balance. During the nine months ended December 31, 2017 and 2016, auction proceeds from the sale of repossessed vehicles averaged approximately 35% and 38%, respectively, of the related principal balance. Based on current market conditions, the Company does not expect auction proceeds to improve within the remaining quarters of the fiscal year.

Recoveries as a percentage of charge-offs were approximately 4.10% and 6.88% for the three months ended December 31, 2017 and 2016, respectively. Recoveries as a percentage of charge-offs were approximately 5.26% and 7.49% for the nine months ended December 31, 2017 and 2016, respectively. The Company attributes a large portion of this decrease simply to the increase in charge-offs for the 2017 periods, and to a lesser extent to the September 1, 2016, change in its accounting policy to write off accounts that are 180+ delinquent (from 120+ days delinquent). The Company periodically aggregates~~charge-off~~ accounts it deems uncollectible and sells them to a third-party. For the nine months ended December 31,2016 the Company received approximately $225k from a third party sale, this has not occurred in the nine-months ended December 31, 2017.

The delinquency percentage for Contracts more than ~~thirty~~twenty-nine days past due, excluding Chapter 13 bankruptcy accounts, as of ~~December 31, 2017~~June 30, 2023 was ~~13.76%~~19.8%, ~~a decrease~~an increase from ~~14.45%~~9.5% as of ~~December 31, 2016.~~June 30, 2022. The delinquency percentage for Direct Loans more than ~~thirty~~twenty-nine days past due, excluding Chapter 13 bankruptcy accounts, as of ~~December 31, 2017~~June 30, 2023 was ~~4.46%~~23.0%, ~~a decrease~~an increase from ~~4.88%~~5.1% as of ~~December 31, 2016.~~June 30, 2022. The ~~decrease~~changes in delinquency percentage for both Contracts and Direct Loans was driven primarily by portfolio improvement. The delinquency percentage for the period ended December 31, 2016 was exacerbated by greater than anticipated difficulties in implementing a centralized collection model in October 2016, after the Company moved all loan-servicing operations from branch locations to a centralized location withinmarket and economic pressure and its ~~corporate headquarters in Clearwater. The Company has since moved all of its collections back to the branches.~~adverse impact on consumers.

~~The Company has continued to see a significant number of competitors with aggressive underwriting in its operating market. See~~~~“Note 4—Finance Receivables”~~ ~~for changes in allowance for credit losses, credit quality and delinquencies.~~

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, 2023 compared to three months ended ~~December 31, 2017~~June 30, 2022

Interest and ~~December 31, 2016, the Company granted deferrals~~Fee Income on Finance Receivables

Interest and fee income on finance receivables, which consist predominantly of finance charge income, decreased 41.3% to approximately 7.47% and 11.84%, respectively, of total Contracts and Direct Loans. For the nine months ended December 31, 2017 and December 31, 2016, the Company granted deferrals to approximately 30.34% and 22.85%, respectively, of total Contracts and Direct Loans. The increase in the number of deferrals for the nine month period ended December 31, 2017 was mainly a result of the impact of Hurricane Irma and Hurricane Harvey, with 42% of our branch locations located in areas that were affected by these storms. The Company offered deferrals to those customers that were impacted to assist them during a time of crisis. Additionally, deferments are influenced by portfolio performance, including but not limited to, inflation, credit quality of loans purchased, competition at the time of Contract acquisition, and general economic conditions.

~~The provision for income taxes increased to approximately $3.7~~$7.1 million for the three months ended ~~December 31, 2017~~June 30, 2023, from ~~approximately $1.0~~$12.1 million for the three months ended ~~December 31, 2016.~~June 30, 2022. The decrease was primarily due to a reduction in originations of Contracts and discontinued originating Direct Loans pursuant to its restructuring plan.

The portfolio yield decreased to 23.5% for the three months ended June 30, 2023, compared to 26.9% for the three months ended June 30, 2022. The net portfolio yield increased to 19.7% for the three months ended June 30, 2023, compared to 17.5% for the three months ended June 30, 2022. The substantial improvement in net portfolio yield was primarily a result of reduced provision for credit losses following the adoption of ASC 326.

As part of the Company’s restructuring and change in operating strategy disclosed above, the Company realized significant savings in operating expenses for the three months ended June 30, 2023 as evident by a ratio of operating expenses as a percentage of average finance receivable of 14.1% as compared to 21.1% for the three months ended June 30, 2023, and 2022, respectively. Management expects that the operating expenses will continue declining as the Company transitioned its servicing and collections activities to Westlake under the Servicing Agreement.

Operating expenses decreased to $4.2 million for the three months ended June 30, 2023 compared to $9.5 million for the three months ended June 30, 2022. The decrease in operating expenses was primarily attributed to restructuring initiative associated with branch closures and transition of the servicing process to Westlake under our servicing agreement. These factors had a direct beneficial effect and lead to the decrease in salary and wages as a result of the Company’s headcount reduction. Similarly, operating expenses as a percentage of average finance receivables also decreased to 14.0% for the three months ended June 30, 2023 from 21.1% for the three months ended June 30, 2022 as a result of the factors above and a decrease in the average receivables balance.

The provision for credit losses decreased to $0.6 million for the three months ended June 30, 2023 from $3.6 million for the three months ended June 30, 2022, largely due to a change in the accounting policy related to the adoption of ASC 326, while the net charge-off percentage increased to 9.6% for the three months ended June 30, 2023 from 6.5% for the three months ended June 30, 2022.

Interest expense was $0.5 million for the three months ended June 30, 2023 and $0.6 million for the three months ended June 30, 2022. The following table summarizes the Company’s average cost of borrowed funds:

SOFR rates have increased to 5.1%, which represented the daily SOFR rate as required under the Westlake Credit Agreement, as of June 30, 2023 compared to 1.5% as of June 30, 2022 required by Wells Fargo Credit Facility.

The Company recorded an income tax expense of approximately $0.1 million for the three months ended June 30, 2023 compared to an income tax benefit of approximately $0.7 million for the three months ended June 30, 2022. The Company’s effective tax rate ~~increased~~decreased to ~~456.48%~~8.4% for the three months ended ~~December 31, 2017~~June 30, 2023 from ~~37.93%~~26.1% for the three months ended ~~December 31, 2016.~~June 30, 2022. The provision for income taxes increased to approximately $4.4 million for the nine months ended December 31, 2017 from approximately $4.0 million for the nine months ended December 31, 2016. The Company’slower effective tax rate ~~increased to 164.70%~~ for the ~~nine~~three months ended ~~December 31, 2017 from 38.01%~~June 30, 2023 is primarily attributable to the establishment of a valuation allowance subsequent to June 30, 2022.

As of June 30, 2023, the Company purchased Contracts in the states listed in the table below. The Contracts purchased by the Company are predominantly for used vehicles for the ~~nine months~~three-month periods ended ~~December 31, 2016.~~

The following tables present selected information on Contracts purchased by the Company.

The following table presents selected information on Direct Loans originated by the Company.

The Company’s primary use of working capital for the ~~nine months~~quarter ended ~~December 31, 2017~~June 30, 2023 was funding the purchase of Contracts, which are financed substantially through cash from principal and interest payments received, ~~cash from operations~~ and ~~our~~the Company’s line of credit.

Please refer to “Note 5 – in the Annual Report on Form 10-K” for disclosure on the Company’s prior credit ~~(the “Line”). The Company may borrow up to $225.0 million~~facility with Wells Fargo under the ~~Line. Effective November 8, 2017,~~WF Credit Agreement, which disclosure is incorporated herein by reference.

On January 18, 2023, the Company executed amendment 7 to the Line which extended the maturity date to March 31, 2018 and increased the pricing of the Line to 400 basis points above 30 day LIBOR, while maintaining the 1% floor on LIBOR. The amendment also increased the voting stock ownership limit from 20% to 30% and revised the calculation of availability and the minimum interest coverage ratio. The threshold for the minimum interest coverage ratio was lowered for the period ending December 31, 2017.

On December 30, 2016, the Company had executed an amendment which increased the pricing of the Line to 350 basis points above 30 day LIBOR while maintaining the 1% floor on LIBOR. This pricing was maintained under a subsequent amendment effective June 30, 2017. Prior to December 30, 2016, the pricing on the Line was 300 basis points above 30 day LIBOR with a 1% floor on LIBOR.

Pledged as collateral for this Line are all the assets of the Company. The Line requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests, including maintenance of asset quality and performance tests. As of December 31, 2017, the Company is in compliance with all debt covenants. Had the Company notthrough its subsidiaries, entered into amendment 6 and amendment 7 to the credit agreement, the Company would not have been in compliance with the minimum interest coverage ratio of 1.5:1 as of June 30, 2017, September 30, 2017 and December 31, 2017, respectively.

As of December 31, 2017, the amount outstanding under the Line was $178.0 million, while the average amount outstanding during the three and nine months ended December 31, 2017 was $183.6 million and $196.6 million, respectively. The exact amount that the Company may borrow under the Line at any given time is determined in accordance with the Second Amended and Restateda Loan and Security Agreement ~~as subsequently amended.~~(the “Loan Agreement”) with Westlake, pursuant to which Westlake is providing the Company a senior secured revolving credit facility in the principal amount of up to $50 million (the “Credit Facility”).

~~The Company will continue to depend on the availability of the Line, together with cash from operations, to finance future operations.~~

The availability of funds under the ~~Line~~Credit Facility is generally ~~depends on availability calculations as defined in~~limited to an advance rate of between 70% and 85% of the ~~corresponding credit agreement. In addition, our credit facility requires us to comply with certain financial ratios and covenants and to satisfy specified financial tests, including maintenance~~value of ~~asset quality and portfolio performance tests.~~

~~Since~~ the ~~borrowings available~~Company's eligible receivables. Outstanding advances under the ~~Line are calculated every month based on individual loan criteria~~Credit Facility will accrue interest at a rate equal to the secured overnight financing rate (SOFR) plus a specified margin, subject to a specified floor interest rate. Unused availability under the Credit Agreement will accrue interest at a low interest rate. The commitment period for advances under the Credit Facility is two years. We refer to the expiration of that time period as ~~defined in~~ the ~~credit agreement, no assurances can be given that~~“Maturity Date.”

The Loan Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, and sales of assets. The Loan Agreement also requires the Company ~~will~~to maintain ~~sufficient availability.~~

~~As disclosed in Note 4~~(i) a minimum tangible net worth equal to the ~~financial statements, the quality~~lower of $40 million and an amount equal to 60% of the ~~Company’s loan portfolio has generally been deteriorating, which has resulted in~~outstanding balance of the Credit Facility and (ii) an ~~increase innon-performing~~ ~~loans, an increase in delinquencies (with a decrease limited~~excess spread ratio of no less than 8.0%. Pursuant to the ~~quarter ended December 31, 2017) and other factors, which~~Loan Agreement, the Company granted a security interest in ~~turn has resulted in increased net charge-offs and an increase in the provision~~substantially all of their assets as collateral for ~~credit losses. These conditions have resulted in a reduction in net earnings and have affected our borrowing capacity~~their obligations under the ~~credit facility.~~

~~Failure to meet any financial ratios, covenants or financial tests could result in an event of default under our line of credit facility.~~Credit Facility. If an event of default occurs, ~~under the credit facility, our lenders~~Westlake could increase ~~our~~ borrowing costs, restrict ~~our~~the Company's ability to obtain additional ~~borrowings~~advances under the ~~facility,~~Credit Facility, accelerate all amounts outstanding under the ~~facility, or~~Credit Facility, enforce their interest against collateral pledged under the ~~facility.~~Loan Agreement or enforce such other rights and remedies as they have under the loan documents or applicable law as secured lenders. Subject to Company’s compliance with certain terms and conditions, the lender waived its rights and remedies under the Agreement applicable to the excess spread ratio covenant and collateral performance indicator through September 30, 2024.

If the Company prepays the loan and terminate the Credit Facility prior to the Maturity Date, then the Company would be obligated to pay Westlake a termination fee in an amount equal to a percentage of the average outstanding principal balance of the Credit Facility during the immediately preceding 90 days. If the Company were to sell its accounts receivable to a third party prior to the

Maturity Date, then the Company would be obligated to pay Westlake a fee in an amount equal to a specified percentage of the proceeds of such sale.

The Company has substantially completed its restructuring process to substantially decrease operating expenses and is developing a ~~longstanding relationship~~strategy with respect to its ~~lenders and believes it is probable that it will be able to obtain financing from either its existing lenders or from other sources. However, the Line currently matures on March 31,2018.~~long-term use of cash. The Company can provide no assurances that the lenders will approve the further renewal or extension of the Line past its current maturity or, assuming that they will approve it, that the facility will not be on terms less favorable than the current agreement. The Company may also determine to seek alternative financing, including but not limited to, the issuance of equity or debt; however, we may not be able to raise additional funds on acceptable terms, or at all.

~~See also “~~~~Our business depends on our continued access to bank financing on acceptable terms~~”related disclosure contained in “~~1A. Risk Factors~~”Restructuring and Change in ~~this report, which~~Operating Strategy” is incorporated herein by reference.

The ~~following table summarizes the Company’s material obligations as of December 31, 2017.~~Company does not engage in any off-balance sheet financing arrangements.

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.Not Applicable.

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 to managing fluctuating interest rate exposures that exist from ongoing business operations. The Company does not use interest rate swap agreements for speculative purposes and does not currently have any active agreements.

As of December 31, 2017, $178.0 million, or 100.00% of our total debt, was subject to floating interest rates. As a result, a hypothetical increase in LIBOR of 1% or 100 basis points (based on actual LIBOR rates of 1.57% as of December 31, 2017) would have resulted in an annual~~after-tax~~ ~~increase of interest expense of approximately $1.2 million.~~

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures~~. Procedures

In accordance with Rule13a-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 Form10-Q, the Company’s management evaluated, with the participation of the Company’s ~~President and~~ Chief Executive Officer and ~~Principal~~Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule13a-15(e) under the Exchange Act).

Based ~~upon their~~on that evaluation, ~~of these disclosure controls and procedures, the Principal~~our Chief Executive Officer and the ~~Principal~~Chief Financial Officer have concluded that ~~the~~our disclosure controls and procedures were not effective at a reasonable level of assurance as of June 30, 2023 because of a material weakness in our internal control over financial reporting relating to the ~~end~~design of the ~~period covered by~~controls over accounting for credit losses in accordance with FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (CECL), including the operation of these controls.

We will take certain measures to remediate the material weakness related to the design of the controls related to application of the CECL accounting standard, including designing and implementing formal procedures and controls related to secondary review of data input, model calculations, journal entries, and financial statement disclosures.

While we believe that our efforts for remediation will improve the effectiveness of our internal control over financial reporting, these remediation efforts will be ongoing and will require time to operate for management to be able to conclude that the design is effective to remediate the material weakness identified. We may conclude that additional measures are necessary to remediate the material weakness in our internal control over financial reporting, which may necessitate additional evaluation and implementation time.

Notwithstanding the material weakness, the Company has concluded that the condensed consolidated financial statements included in this report present fairly, in all material respects, the financial position and results of operations of the Company as of and for the three months ended June 30, 2023 in conformity with generally accepted accounting principles in the United States of America. The Company filed its Quarterly Report on Form~~10-Q.~~ 10-Q for the period ended June 30, 2023 on Wednesday, August 16, 2023, which was two business days following the filing deadline as extended pursuant to Rule 12b-25 of the Securities Exchange Act of 1934, as amended.

In connection with the adoption of CECL, management in the process of establishing and is refining its internal procedures and controls to ensure finance receivables are appropriately accounted for in the accordance with FASB ASC Topic 326 and that required disclosures are complete and accurate. This includes procedures and controls over inputs and assumptions used in the estimation process, the use of third parties, and other risk-based considerations.

Other than described above, during the most recent fiscal quarter, there has been no ~~changes~~change in ~~the Company’s~~our internal ~~control~~controls over financial reporting, ~~that occurred during~~as defined in Rules 13a-15(f) and 15d-15(f) under the ~~Company’s last fiscal quarter~~Exchange Act, that have materially affected or are reasonably likely to materially affect the Company’s internal ~~control~~controls over financial reporting.

The Company ~~currently~~ is ~~not a party to any pending~~involved in certain claims and legal proceedings ~~other than ordinary routine litigation incidental to its~~in the normal course of business ~~none~~ of which one, 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.

Specifically, the Company has been sued together with several other defendants, in a lawsuit styled: Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri. On March 9, 2021 the Company filed suit against Jeremiah Gross for a deficiency balance owed to the Company following the 2018 surrender and sale of his motor vehicle which secured a loan from the Company. On April 22, 2021 a default judgment for $7,984.18 was entered against Mr. Gross. On December 22, 2021 Mr. Gross filed a motion to set aside the default judgment. The Court granted his motion on March 23, 2022. In his answer he asserted a class-action counterclaim against the Company seeking to represent a nationwide class of the Company’s customers who received allegedly deficient notices regarding the sale of their vehicles and whose vehicles were recovered and sold by the Company, and on behalf of Missouri customers who received allegedly deficient notices from the Company regarding the sale of their recovered vehicles and the calculation of the deficiency owed the Company. The Company filed its answer to the counterclaim on May 13, 2022. On September 9, 2022 the Company filed a motion for summary judgment as to all counts of the counterclaim and the Company's claim against Mr. Gross. The motion was argued on February 16, 2023. On March 27, 2023 the Court entered an order granting the motion in part and denying the motion in part. The Court found in favor of the Company as to the counterclaim regarding presale notices and prejudgment interest, and in Mr. Gross’s favor for the counterclaim as to post-sale notices. The Court denied the Company’s motion for summary judgment as to its claim for a deficiency against Mr. Gross. The remaining claim relates to post-sale notices sent to Missouri customers. The Company’s insurer has accepted the defense of this litigation under a reservation of rights.

In addition to the ~~risk factors~~Risk Factor below and the other information set forth in this report, especially in the section “PART I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward Looking Statements,” you should carefully consider the factors discussed in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form10-K for the year ended March 31, ~~2017,~~2023, which could materially affect our business, financial condition or future results. The risks described ~~below, elsewhere in this report and~~ in the Form10-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.

~~Our business depends on our continued access to bank financing on acceptable terms.~~

~~Our business~~As part of its restructuring and change in operating strategy, the Company has outsourced its servicing, collection and recovery operations and is ~~particularly~~substantially dependent on ~~our ability~~Westlake for generation of revenue and debt financing.

As part of the Company’s restructuring and change in operating strategy, in December 2022, Westlake began servicing all receivables held by the Company under its Contracts and Direct Loans, except for charged-off and certain other receivables. The Company expects to ~~access bank financing at competitive rates. We currently use~~add additional Contract receivables to the receivables pool covered under the servicing agreement with Westlake from time to time in the future, but will no longer originate Direct Loans. As a ~~$225.0 million line~~result, the Company has significantly reduced its footprint, closing all of its branches and retaining only 16 employees as of June 2023.

In January 2023, two of the Company’s subsidiaries entered into a loan agreement with Westlake, pursuant to which Westlake is providing a senior secured revolving credit facility ~~(the “Line”)~~in the principal amount of up to $50 million. This facility replaced the Company’s prior facility with ~~a consortium~~Wells Fargo.

Additional details on the servicing agreement, restructuring activities and loan agreement are incorporated herein by reference to “Item 2. Management’s Discussion and Analysis of ~~lenders~~Financial Condition and Results of Operations – Restructuring and Change in Operating Strategy” in this quarterly report on Form 10-Q.

The Company may also determine to seek alternative financing, including but not limited through the issuance of equity or debt. We may not be able to raise additional funds on acceptable terms, or at all. If we are unable to secure sufficient capital to fund our operating activities, we may be required to curtail portions of our strategic plan. Any equity financings may cause substantial dilution to our stockholders and could involve the issuance of securities with rights senior to the common stock. Any allowed debt financings may require us to comply with onerous financial covenants and restrict our business operations. Our ability to complete additional financings is dependent on, among other things, the state of the capital markets at the timematerialization of any ~~proposed offering, market reception~~ of ~~the Company and the likelihood of the success of our business model, and the offering terms, among other things.~~

~~Changes in U.S. federal, state and local tax law or interpretations of existing tax law could increase our tax burden or otherwise~~these risks may adversely affect our ~~financial condition or~~ results of ~~operations.~~operations or financial position, potentially to a material extent.

~~We are subject~~ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2019, the Company’s Board of Directors (“Board”) authorized a new stock repurchase program allowing for the repurchase of up to taxation at the federal, state and local levels in the United States. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The changes included in the TCJA are broad and complex. The final transition impacts$8.0 million of the ~~TCJA~~Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective immediately.

The timing and actual number of sharers will depend on a variety of factors, including stock price, corporate and regulatory requirements and other market and economic conditions. The Company’s stock repurchase program may ~~differ from~~be suspended or discontinued at any time.

In August 2019, the ~~estimates provided elsewhere in this report, possibly materially, due~~Company’s Board authorized additional repurchase of up to ~~among other things, changes in interpretations~~$1.0 million of the TCJA, any legislative action to address questions that arise because of the TCJA, any changes in accounting standards for income taxes or related interpretations in response to the TCJA, or any updates or changes to estimates the Company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates. The estimated impact of the new law is based on management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based on our actual results in the fourth quarter of fiscal 2018 and our further analysis of the new law.

+ Portions of this exhibit have been redacted in accordance with Item 601(b)(10)(iv) of Regulations S-K.

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

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.


2454 McMullen Booth Road, Building C ~~Clearwater, Florida~~
Clearwater, Florida		33759
(Address of Principal Executive Offices)		(Zip Code)


			Page
~~Part I.~~	~~Financial Information~~

~~Item 1.~~Part I .	Financial ~~Statements~~Information
Item 1.	Financial Statements (Unaudited)		1
	Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~June 30, 2023 and March 31, ~~2017~~2023			2	1

	Condensed Consolidated Statements of Income (Loss) for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2023 and ~~2016~~2022			3	2
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended June 30, 2023 and 2022		3
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2023 and ~~2016~~2022			4

	Notes to the Condensed Consolidated Financial Statements			5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk			25
		26
Item 4.	Controls and Procedures			25
		26
~~Part II.~~	~~Other Information~~

~~Item 1.~~Part II .	~~Legal Proceedings~~Other Information			26

Item ~~1A.~~1.	~~Risk Factors~~Legal Proceedings			26
		27
Item 1A.	Risk Factors		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3.	Defaults Upon Senior Securities		28
Item 6.	Exhibits			28	29


	December 31,			March 31,
	2017			2017
	(Unaudited)						June 30, 2023 (Unaudited)			March 31, 2023
Assets
Cash	$	3,082		$	2,855		$	678		$	454
Finance receivables, net of unearned discounts and fees and accrued interest receivable								109,213			124,315
Less: Allowance for credit losses								(15,359	)		(17,396	)
Finance receivables, net		281,358			317,205			93,854			106,919
Assets held for resale		2,975			2,453
Repossessed assets								1,953			1,491
Prepaid expenses and other assets								613			316
Income taxes receivable		620			719			801			946
Prepaid expenses and other assets		729			674
Property and equipment, net		970			1,184			206			222
Interest rate swap agreements		—			17
Deferred income taxes		6,456			8,505

Total assets	$	296,190		$	333,612		$	98,105		$	110,348

Liabilities and shareholders’ equity
Line of credit	$	178,000		$	213,000
Drafts payable		2,186			1,851
Accounts payable and accrued expenses		4,994			5,932
Deferred revenues		3,313			3,969

Line of credit, net of debt issuance costs							$	15,109		$	28,936
Accounts payable, accrued expenses, and other liabilities								1,815			1,603
Total liabilities		188,493			224,752			16,924			30,539

Commitments and contingencies (see Note 9)
Shareholders’ equity
Preferred stock, no par: 5,000 shares authorized; none issued		—			—			—			—
Common stock, no par: 50,000 shares authorized; 12,599 and 12,524 shares issued, respectively; and 7,885 and 7,810 shares outstanding, respectively		34,467			33,889
Treasury stock: 4,714 common shares, at cost		(70,459	)		(70,459	)
Common stock, no par: 50,000 shares authorized; 12,658 shares issued, 7,289 shares outstanding								35,249			35,223
Treasury stock: 5,368 common shares, at cost								(76,794	)		(76,794	)
Retained earnings		143,689			145,430			122,726			121,380

Total shareholders’ equity		107,697			108,860			81,181			79,809

Total liabilities and shareholders’ equity	$	296,190		$	333,612		$	98,105		$	110,348


	Three months ended December 31,						Nine months ended December 31,						Three Months Ended June 30,
	2017			2016			2017			2016			2023		2022
Revenue:
Interest and fee income on finance receivables	$	20,526		$	22,044		$	64,062		$	67,606		$	7,083	$	12,064

Unrealized losses on equity investments														—		(787	)
Total revenue:														7,083		11,277
Expenses:
Marketing		351			369			1,095			1,100			30		584
Salaries and employee benefits		4,826			5,041			14,835			16,363
Administrative		2,845			2,932			8,698			8,752			4,185		8,760
Provision for credit losses		8,989			8,796			28,887			23,966			645		3,644
Depreciation		116			142			356			413
Depreciation and amortization of intangibles														22		125
Interest expense		2,585			2,258			7,483			6,745			500		568
Change in fair value of interest rate swap agreements		—			(81	)		17			(184	)

		19,712			19,457			61,371			57,155
Operating income before income taxes		814			2,587			2,691			10,451
Income tax expense		3,712			981			4,432			3,972

Total expenses														5,382		13,681
Income (loss) before income taxes														1,701		(2,404	)
Income tax expense (benefit)														145		(627	)
Net income (loss)	$	(2,898	)	$	1,606		$	(1,741	)	$	6,479		$	1,556	$	(1,777	)

Earnings (loss) per share:
Earnings (loss) earnings per share:
Basic	$	(0.37	)	$	0.21		$	(0.22	)	$	0.83		$	0.21	$	(0.24	)

Diluted	$	(0.37	)	$	0.21		$	( 0.22	)	$	0.83		$	0.21	$	(0.24	)

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

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


	Three Months Ended June 30, 2023
	Common Stock												Total
	Shares			Amount			Treasury Stock			Retained Earnings			Shareholders' Equity
Balance at March 31, 2023		7,289		$	35,223		$	(76,794	)	$	121,380		$	79,809
Cumulative effect of adoption of ASU 2016-13, net of tax		—			—			—			(210	)		(210	)
Share-based compensation		—			26			—			—			26
Treasury stock		—			—			—			—			—
Net Income		—			—			—			1,556			1,556
Balance at June 30, 2023		7,289		$	35,249		$	(76,794	)	$	122,726		$	81,181

	Three Months Ended June 30, 2022
	Common Stock												Total
	Shares			Amount			Treasury Stock			Retained Earnings			Shareholders' Equity
Balance at March 31, 2022		7,546		$	35,292		$	(74,405	)	$	155,499		$	116,386
Forfeitures		(28	)		(174	)		—			—			(174	)
Share-based compensation		—			25			—			—			25
Treasury stock		(205	)		—			(2,138	)		—			(2,138	)
Net loss		—			—			—			(1,777	)		(1,777	)
Balance at June 30, 2022		7,313		$	35,143		$	(76,543	)	$	153,722		$	112,322


	Nine months ended December 31,
	2017			2016
Cash flows from operating activities
Net income (loss)	$	(1,741	)	$	6,479
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		356			413
Gain on sale of property and equipment		(22	)		(13	)
Provision for credit losses		28,887			23,966
Amortization of dealer discounts		(8,670	)		(9,830	)
Amortization of commission for products		(1,226	)		(1,342	)
Deferred income taxes		2,049			(626	)
Share-based compensation		240			474
Change in fair value of interest rate swap agreements		17			(184	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		156			345
Accounts payable and accrued expenses		(938	)		1,552
Income taxes receivable		99			1,198
Deferred revenues		(656	)		86

Net cash provided by operating activities		18,551			22,518

Cash flows from investing activities
Purchase and origination of finance receivables		(74,760	)		(118,276	)
Principal payments received		91,616			95,562
Increase in assets held for resale		(522	)		(828	)
Purchase of property and equipment		(143	)		(728	)
Proceeds from sale of property and equipment		23			38

Net cash provided by (used in) investing activities		16,214			(24,232	)

Cash flows from financing activities
(Decrease) Increase on line of credit		(35,000	)		3,340
Change in drafts payable		335			188
Payment of loan origination fees		(211	)		—
Proceeds from exercise of stock options		338			1

Net cash (used in) provided by financing activities		(34,538	)		3,529

Net increase in cash		227			1,815
Cash, beginning of period		2,855			1,849

Cash, end of period	$	3,082		$	3,664

Supplemental Disclosure of noncash investing and financing activities:
Tax deficiency from share awards		—		$	(9	)


	Three months ended December 31, (In thousands, except per share amounts)						Nine months ended December 31, (In thousands, except per share amounts)
	2017			2016			2017			2016
Numerator:
Net income (loss)	$	(2,898	)	$	1,606		$	(1,741	)	$	6,479
Less: Allocation of earnings (loss) to participating securities		40			(22	)		23			(76	)

Net income (loss) allocated to common stock		(2,858	)		1,584			(1,718	)		6,403

Basic earnings (loss) per share computation:
Net income (loss) allocated to common stock	$	(2,858	)	$	1,584		$	(1,718	)	$	6,403

Weighted average common shares outstanding, including shares considered participating securities		7,910			7,697			7,876			7,763
Less: Weighted average participating securities outstanding		(110	)		(107	)		(102	)		(91	)

Weighted average shares of common stock		7,800			7,590			7,774			7,672

Basic earnings (loss) per share	$	(0.37	)	$	0.21		$	(0.22	)	$	0.83

Diluted earnings (loss) per share computation:
Net income (loss) allocated to common stock	$	(2,858	)	$	1,584		$	(1,718	)	$	6,403
Undistributed earningsre-allocated to participating securities		—			—			—			—

Numerator for diluted earnings (loss) per share	$	(2,858	)	$	1,584		$	(1,718	)	$	6,403
Weighted average common shares outstanding for basic earnings (loss) per share		7,800			7,590			7,774			7,672
Incremental shares from stock options		—			60			—			60

Weighted average shares and dilutive potential common shares		7,800			7,650			7,774			7,732

Diluted earnings (loss) per share	$	(0.37	)	$	0.21		$	(0.22	)	$	0.83


	(In thousands)
	December 31, 2017			March 31, 2017
Finance receivables, gross contract	$	454,277		$	512,720
Unearned interest		(137,594	)		(160,853	)

Finance receivables, net of unearned interest		316,683			351,867
Unearned dealer discounts		(14,138	)		(17,004	)

Finance receivables, net of unearned interest and unearned dealer discounts		302,545			334,863
Allowance for credit losses		(21,187	)		(17,658	)

Finance receivables, net	$	281,358		$	317,205


	As of December 31,
	2017			2016
Contract Portfolio
Weighted APR		22.21	%		22.43	%
Weighted average discount		7.25	%		7.48	%
Weighted average term (months)		57			57
Number of active contracts		33,993			37,834


	Three months ended December 31, (In thousands)						Nine months ended December 31, (In thousands)
	2017			2016			2017			2016
Balance at beginning of period	$	19,967		$	12,925		$	16,885		$	12,265
Current period provision		8,818			8,701			28,498			23,723
Losses absorbed		(8,745	)		(8,247	)		(26,372	)		(23,815	)
Recoveries		360			570			1,389			1,776

Balance at end of period	$	20,400		$	13,949		$	20,400		$	13,949


	(In thousands)
	December 31, 2017				December 31, 2016
	Contracts		Direct Loans		Contracts		Direct Loans
Performing accounts	$	412,775	$	10,349	$	462,569	$	11,231
Non-performing accounts		27,053		217		36,980		280

Total	$	439,828	$	10,566	$	499,549	$	11,511
Chapter 13 bankruptcy accounts		3,843		40		4,220		36

Finance receivables, gross contract	$	443,671	$	10,606	$	503,769	$	11,547


Contracts	Gross Balance Outstanding		31 – 60days			61 – 90days			91 – 120 days			Over 120			Total
December 31, 2017	$	439,828	$	33,453		$	14,039		$	7,893		$	5,121		$	60,506
				7.61	%		3.19	%		1.79	%		1.16	%		13.76	%
December 31, 2016	$	499,549	$	35,184		$	17,263		$	11,072		$	8,645		$	72,164
				7.04	%		3.46	%		2.22	%		1.73	%		14.45	%


Direct Loans	Gross Balance Outstanding		31 – 60days			61 – 90days			91 – 120 days			Over 120			Total
December 31, 2017	$	10,566	$	254		$	102		$	32		$	83		$	471
				2.41	%		0.97	%		0.30	%		0.78	%		4.46	%
December 31, 2016	$	11,511	$	282		$	155		$	61		$	64		$	562
				2.45	%		1.34	%		0.53	%		0.56	%		4.88	%


	Three months ended December 31,					Nine months ended December 31,
	(In thousands)					(In thousands)
	2017		2016			2017		2016
Periodic change in fair value of interest rate swap agreements	$	—	$	(81	)	$	17	$	(184	)
Periodic settlement differentials included in interest expense		—		45			18		163

Loss (gain) recognized in income	$	—	$	(36	)	$	35	$	(21	)


	Three months ended June 30, (In thousands, except per share amounts)
	2023			2022
Numerator
Net income (loss) per consolidated statements of income	$	1,556		$	(1,777	)
Percentage allocated to shareholders *		99.8	%		99.9	%
Numerator for basic and diluted earnings per share	$	1,553		$	(1,775	)

Denominator
Denominator for Basic earnings per share - weighted-average shares outstanding		7,279			7,464
Dilutive effect of stock options		—			—
Denominator for diluted earnings per share		7,279			7,464

Per share income (loss) from continuing operations
Basic	$	0.21		$	(0.24	)
Diluted		0.21			(0.24	)

* Basic weighted-average shares outstanding		7,279			7,464
Basic weighted-average shares outstanding and unvested restricted stock units expected to vest		7,291			7,473
Percentage allocated to shareholders		99.8	%		99.9	%


in thousands
FY2024 (remaining nine months)	$	49
FY2025		67
FY2026		60
Total future minimum lease payments		176
Present value adjustment		(8	)
Operating lease liability	$	168


Lease cost:
Operating lease cost	$	16
Variable lease cost		1
Total lease cost	$	17



Other Lease Information
Operating Lease - Operating Cash Flows (Fixed Payments)	$	8
Operating Lease - Operating Cash Flows (Liability Reduction)	$	8
Weighted Average Lease Term - Operating Leases		2.7 years
Weighted Average Discount Rate - Operating Leases		6.5%


	(In thousands)
	Total Cost Estimated		Incurred to Date		Remaining cost
Branch Closures	$	3,213	$	3,213	$	-
Severance		570		570		-
Cease-use of contractual services		779		779		-
Professional fees		323		299		24
Other		26		25		1
Total restructuring cost	$	4,911	$	4,886	$	25


	Three months ended December 31,
	2017			2016
Variable interest under the line of credit facility		0.63	%		0.21	%
Settlements under interest rate swap agreements		0.00	%		0.09	%
Credit spread under the line of credit facility		5.00	%		4.00	%

Average cost of borrowed funds		5.63	%		4.30	%


	Nine months ended December 31,
	2017			2016
Variable interest under the line of credit facility		0.08	%		0.18	%
Settlements under interest rate swap agreements		(0.01	)%		0.10	%
Credit spread under the line of credit facility		5.00	%		4.00	%

Average cost of borrowed funds		5.07	%		4.28	%


	As of December 31, 2017			Three months ended December 31,				Nine months ended December 31,
	As of December 31, 2017			2017		2016		2017		2016
State	Number of branches			Net Purchases (In thousands)				Net Purchases (In thousands)
FL		19		$	6,552	$	12,950	$	21,081	$	36,527
GA		6			3,000		4,195		8,270		11,515
NC		6			2,374		3,740		6,364		9,843
SC		2			1,088		1,213		3,040		3,062
OH		6			3,693		5,100		10,431		14,645
MI		2			1,286		1,725		3,685		5,121
VA		2			770		1,126		1,986		3,041
IN		3			1,776		2,318		4,975		6,865
KY		3			1,410		2,271		4,159		6,316
MD		1			244		898		886		2,056
AL		2			682		1,138		2,259		3,699
TN		2			982		1,426		2,304		3,858
IL		3			525		2,004		2,245		5,570
MO		3			1,153		2,383		3,615		5,997
KS		1			427		926		1,390		2,274
TX		2			739		1,578		1,859		5,239
PA		1			677		748		1,666		1,878
WI		–	^a		—		202		106		806

Total		64		$	27,378	$	45,941	$	80,321	$	128,312


	Three months ended December 31, (Purchases in thousands)						Nine months ended December 31, (Purchases in thousands)
Contracts	2017			2016			2017			2016
Purchases	$	27,378		$	45,941		$	80,321		$	128,312
Weighted APR		21.68	%		21.99	%		21.99	%		22.20	%
Average discount		6.89	%		6.87	%		7.23	%		7.00	%
Weighted average term (months)		54			57			55			57
Average loan	$	11,577		$	11,945		$	11,552		$	11,727
Number of Contracts		2,365			3,846			6,953			10,942


	Three months ended December 31, (Originations in thousands)						Nine months ended December 31, (Originations in thousands)
Direct Loans Originated	2017			2016			2017			2016

Originations	$	2,218		$	2,578		$	6,196		$	7,109
Weighted APR		25.20	%		25.87	%		25.25	%		26.03	%
Weighted average term (months)		28			29			29			29
Average loan	$	3,566		$	3,661		$	3,742		$	3,563
Number of loans		622			704			1,656			1,995


	Three months ended June 30,
	2023			2022
Variable interest under the Credit Facility		5.08	%		0.68	%
Credit spread under the Credit Facility		3.35	%		2.25	%
Average cost of borrowed funds		8.43	%		2.93	%


	Three months ended June 30, (Purchases in thousands)
Contracts	2023			2022
Purchases	$	2,720		$	22,354
Average APR		22.0	%		22.9	%
Average discount		6.0	%		6.6	%
Average term (months)		50			48
Average amount financed	$	12,420		$	11,552
Number of Contracts		219			1,935


Direct Loans	Three months ended June 30, (Originations in thousands)
Originated	2023	2022
Purchases/Originations	N/A	$	8,215
Average APR	N/A		31.2	%
Average term (months)	N/A		25
Average amount financed	N/A	$	4,128
Number of loans	N/A		1,990


	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	$	4,153	$	2,505	$	1,578	$	70	$	—
Line of credit¹		178,000		178,000		—		—		—
Interest on Line¹		2,479		2,479		—		—		—

Total	$	184,632	$	182,984	$	1,578	$	70	$	—


Exhibit No.		Description

~~10.1~~ 31.1		Employment Agreement, dated December 12, 2017, between Nicholas Financial, Inc. and Douglas Marohn, President and Chief Executive Officer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form~~8-K~~ filed on December 11, 2017)*

~~10.2~~		~~Form of Dealer Agreement and Schedule thereto listing dealers that are parties to such agreements~~

~~31.1~~		Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.11		Certification of the Principal Executive Officer Pursuant to 18 U.S.C. § 1350

32.21		Certification of the Principal Financial Officer Pursuant to 18 U.S.C. § 1350

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

		*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated

¹~~This certification accompanies~~
104		Cover Page Interactive Data File (embedded within the ~~Quarterly Report on Form10-Q~~ ~~and is not filed as part of it.~~Inline XBRL document)


Date: August 16, 2023		/s/ Mike Rost
		Mike Rost
		Chief Executive Officer
		(Principal Executive Officer)


Date: ~~February 09, 2018~~	August 16, 2023		/s/ ~~Doug Marohn~~Irina Nashtatik
		~~Doug Marohn~~
		~~President and Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~Date: February 09, 2018~~		~~/s/ Katie L. MacGillivary~~	Irina Nashtatik
		~~Katie L. MacGillivary~~
		~~Vice President and~~
		Chief Financial Officer
		(Principal Financial Officer)

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