CLEARWATER, Fla. -

Nicholas Financial top management explained intense competition for subprime paper triggered not only modifications of its infrastructure and human capital, but also how many contracts the finance company booked during the second quarter of its current fiscal year.

The company reported during the three-month span that finished Sept. 30 that it secured 3,592 contracts, down from the year-ago figure of 4,243. Halfway through its fiscal year, Nicholas Financial added 7,096 contracts, again down from the 8,845 contracts from dealerships the company collected at the midpoint of its previous fiscal year.

“During our second quarter, new-loan origination continued to be below company expectations due to numerous companies looking to acquire automobile retail installment contracts,” Nicholas Financial president and chief executive officer Ralph Finkenbrink said in a news release about its performance.

“Some of these companies are willing to acquire loans at riskier pricing, which we believe will ultimately leave those companies with unprofitable portfolios,” Finkenbrink continued.

Nicholas Financial also reported that its average contract amount and term ticked higher while its average APR dipped a bit. In Q2 of its fiscal year, average contracts stood at $11,565 for 57 months with an APR of 22.26 percent.

All told, the company indicated it held 37,383 active accounts as of Sept. 30, pushing its portfolio to $485.5 million.

As a result of its origination activity plus other market facts, Nicholas Financial mentioned in its disclosures to the Securities and Exchange Commission that it closed three branch locations as a result of these respective markets not meeting the company’s operating criteria to remain viable branch locations. The sites included Sarasota, Fla., Troy, Mich., and Toledo, Ohio, with the company moving activities to other locations already in operation within those markets.

While the company cut those locations, Nicholas Financial also noted in its SEC documents that it opened a full-service branch in Pittsburgh during Q2.

“The company continues to evaluate potential new markets while maintaining its existing markets,” Nicholas Financial said in its Form 10-Q with the SEC. “The company may choose to close or consolidate certain existing branches if they are unable to acquire contracts that meet company expectations. As a result of continued intense competition, the company has been evaluating the long-term sustainability of its current branch-based model.”

Back in the news release, Finkenbrink noted the company also moved all loan-servicing operations from the branch locations to a centralized location within its corporate headquarters in Clearwater, Fla.

“We continue to evaluate the various markets in which we operate,” Finkenbrink said. “However, we do not expect any significant changes to the number of branches or other operations during our third quarter which ends Dec. 31.”

Nicholas Financial elaborated about its personnel and infrastructure moves in the SEC document.

“New regulations and best practices regarding collections were important aspects that led us to the decision to centralize our loan servicing operations,” the company said. “To a lesser extent, the company expects to experience a decline in operating expenses as a result of a reduced headcount.

“The company does not believe there will be any material change in delinquencies and losses as a result of this strategic decision. However no assurances can be given at this time,” the company continued. “The branches will continue to underwrite and acquire contracts. However, any additional material changes to company operations will be evaluated by the company over the next several quarters.”

And speaking of delinquencies, Nicholas Financial reported that its total rate of past due accounts — ranging from just over 30 days to more than 90 days — constituted 9.79 percent of its outstanding portfolio, or about $47.3 million. After Q2 of its previous fiscal year, the company indicated those readings stood at 5.88 percent or $27.9 million.

Looking at its top-line metrics, Nicholas Financial said its Q2 diluted earnings per share decreased 40 percent to $0.25 as compared to $0.42 a year earlier. Net earnings softened to $1.97 million, down from $3.28 million.

The company noted its Q2 revenue remained relatively flat at $22.65 million.

For the six-month span that ended Sept. 30, Nicholas Financial reported that its per-share diluted net earnings decreased 30 percent to $0.62 as compared to $0.89 for six months of its 2015 fiscal year. Net earnings totaled $4.87 million, down from $6.93 million.

Through six months, revenue increased 2 percent year-over-year from $44.71 million to $45.56 million.

“Our net earnings for the three and six months ended Sept. 30 were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and past-due accounts along with a reduction in the gross portfolio yield,” Nicholas Financial said. “Conversely, our results were favorably impacted due to a change in the fair value of the interest rate swaps.”