Nicholas Financial found a way to cheer the close of its 2020 fiscal year since it broke a string of two consecutive years of negative earnings.

And the subprime auto-finance company also highlighted how funds from the Paycheck Protection Program generated a positive impact, too.

Nicholas Financial reported that its net income for the fiscal year that ended March 31 totaled $3.5 million as compared to net loss of $3.6 million for the fiscal year that closed on the same date in 2019.

Nicholas Financial said it generated that figure even though annual revenue decreased 12.9% to $62.1 million from the previous fiscal year’s total of $71.3 million.

The finance company ended the fiscal year on the upbeat not since its fourth quarter included net income of $2.3 million as compared to net loss of $4.7 million a year earlier.

“We are very pleased to return to profitability in Fiscal Year 2020, after posting negative earnings in each of the previous two years,” Nicholas Financial president and chief executive officer Doug Marohn said in a news release.

“Although the uncertainty related to the COVID-19 pandemic and its impact on the economy is a very real factor, we believe the pieces are now in place to build upon those modest profits through market scale, new product offerings and other strategic initiatives,” Marohn continued.

In response to the global impacts of COVID-19 on U.S. companies and citizens, the government enacted the CARES Act on March 27. Nicholas Financial said the CARES Act included several tax relief options for companies, which resulted in the following available provisions:

— The company has elected to carryback its 2018 net operating losses of $9.7 million to 2013, thus generating an anticipated refund of $3.4 million and an income tax benefit of $1.3 million. The tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2013.

— The company plans to carryback its 2019 net operating losses of $2.9 million to 2014, thus generating an anticipated refund of $1.0 million and an income tax benefit of $0.4 million. The tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2014.

— During the quarter ended March 31, the company had significant cash movements of approximately $19.9 million for the bulk portfolio purchases and approximately $7.4 million from the credit facility, which increased outstanding debt. The company did not have any significant capital expenditures.

Beyond those moves, Marohn explained other ways Nicholas Financial is looking to make it through the coronavirus pandemic.

“As we navigate through the market conditions facing us today and impacting both our borrowing customers and our retail dealer partners, we are also focused on maintaining the underwriting and servicing discipline that allowed us to be profitable once again,” Marohn said. “Our four-prong approach to growing our company is more important now than ever. 

“We are dedicated to growing market share in our existing markets, we are expanding our direct loan program wherever we have a branch location, we are committed to expanding our branch network in Idaho, Iowa, Nevada, Utah, Wisconsin and other locations, and we remain open to portfolio acquisitions as they present themselves,” he went on to say.

In other matters, Nicholas Financial said that on May 27 the company obtained a loan in the amount of $3,243,900 from Fifth Third Bank in connection with the U.S. Small Business Administration’s Paycheck Protection Program Pursuant to the Paycheck Protection Program, all or a portion of the PPP Loan may be forgiven if the company uses the proceeds of the PPP Loan for its payroll costs and other expenses in accordance with the requirements of the Paycheck Protection Program.

The company said intends to use the proceeds of the PPP loan for payroll costs and other covered expenses and intends to seek full forgiveness of the PPP loan as soon as permitted under the Paycheck Protection Program.

“The company is very fortunate to have the benefit of the Paycheck Protection Program at this critical time,” Marohn added. “With these additional funds, we are able to bring back 100% of our employees who were furloughed in April, release the hiring freeze implemented in March and ensure all of our existing branch offices will remain open and operational for the foreseeable future.”

If the PPP Loan is not fully forgiven, Nicholas Financial acknowledged that it will remain liable for the full and punctual payment of the outstanding principal balance plus accrued and unpaid interest. The PPP Loan accrues interest at a rate per annum equal to 1.00% and an initial payment of accrued and unpaid interest is due on Dec. 27.

The outstanding principal balance plus accrued, and unpaid interest is due on May 27, 2022, according to Nicholas Financial.

“The PPP Loan is unsecured. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type,” the company said.