February 4, 2014

Nicholas Financial Reports 3rd Quarter Results

Clearwater, Florida, - February 4, 2013 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended December 31, 2013 net earnings decreased 17% to $3,827,000 as compared to $4,596,000 for the three months ended December 31, 2012. Per share diluted net earnings decreased 18% to $0.31 as compared to $0.38 for the three months ended December 31, 2012. Revenue increased 1% to $20,761,000 for the three months ended December 31, 2013 as compared to $20,605,000 for the three months ended December 31, 2012.

For the nine months ended December 31, 2013 net earnings decreased 9% to $13,844,000 as compared to $15,154,000 for the nine months ended December 31, 2012. Per share diluted net earnings decreased 9% to $1.13 as compared to $1.24 for the nine months ended December 31, 2012. Revenue increased 1% to $62,186,000 for the nine months ended December 31, 2013 as compared to $61,738,000 for the nine months ended December 31, 2012.

“Our results for the three months ended December 31, 2013 were adversely affected by a reduction in the gross portfolio yield and professional fees of $821,000 associated with the previously announced sale of the Company. Also, after-tax earnings were increasingly impacted as a significant portion of the professional fees were not deductible for income tax purposes resulting in a higher effective tax rate and after-tax impact of $0.07 per share. Our results for the three months ended December 31, 2012 were affected by an after-tax charge of $747,000 or $0.06 per share related to a 5% withholding tax associated with the one-time special cash dividend of $2.00 per share paid in December 2012” stated Peter L. Vosotas, Chairman and CEO. "We continue to develop additional markets and expect to open one additional location during the fourth quarter, which ends March 31, 2014.”

Nicholas Financial, Inc. is one of the largest publically traded specialty consumer finance companies in North America. The Company operates branch locations in both the Southeastern and the Midwestern states. The Company has approximately 12,200,000 shares of common stock outstanding. For an index of Nicholas Financial, Inc. news releases and public filings please visit our web site at www.nicholasfinancial.com.

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that involve risks and uncertainties including general economic conditions, access to bank financing, and other risks detailed from time to time in the Company’s filings and reports with the Securities and Exchange Commission including the Company’s Annual Report on Form 10-K for the year ended March 31, 2013. Such statements are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially. All forward looking statements and cautionary statements included in this document are made as of the date hereby based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward looking statement or cautionary statement.

NICHOLAS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands, Except Per Share Amounts)
         
  Three months ended      
December 31,          
Nine months ended      
December 31,          
  2013      2012      2013      2012     
Revenue
  Interest and fee income on finance receivables $20,756  $20,595  $62,169  $61,709 
  Sales 10  17  29 
  20,761  20,605  62,186  61,738 
Expenses
  Operating 7,515  6,933  22,498  20,814 
  Dividend Tax 1,287  143  1,419 
  Professional fees 1,061  187 2,012  639 
  Provision for credit losses 4,183  3,485 10,798  9,850
  Interest Expense 1,441  1,275  4,289  3,717 
  Change in fair value of interest rate swaps   agreements (99) (37) (682)  646
  14,101  13,130  39,058  37,085 
 
Operating income before income taxes 6,660  7,475  23,128  24,653 
  Income tax expense 2,833  2,879  9,284  9,499 
    Net income $3,827  $4,596  $13,844  $15,154 
 
Earnings Per share:
    Basic $  0.32  $  0.38  $  1.15  $  1.27 
    Diluted $  0.31  $  0.38  $  1.13  $  1.24 
Dividends Declared Per share: $  2.12  $  0.24  $  2.34 
 
Weighted average shares 12,109,000  11,982,000  12,089,000  11,962,000 
 
Weighted average shares 12,334,000  12,193,000  12,286,000  12,192,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  December 31,
2013      
March 31, 
2013     
Cash $   4,089  $   2,798 
Finance receivables, net 261,343  249,826 
Other assets 10,743  11,211 
     
  Total assets $276,086  $263,835 
     
Line of credit $127,000  $125,500 
Other Liabilities 10,271  11,370 
 
  Total Liabilities 137,271  136,870 
 
Shareholders' equity 138,815  126,965 
 
Total Liabilities and shareholders' equity $276,086   $263,835  
 

Portfolio Summary Three months ended
December 31,
Nine months ended
December 31,
  2013      2012      2013      2012     
Average finance receivables, net of unearned interest (1) $291,620,270  $281,553,866  $289,110,042  $281,242,951 
Average indebtedness (2) $128,500,000  $114,131,239   $127,545,256  $111,293,746 
Interest and fee income on finance receivables (3)* $  20,756,034  $  20,594,614  $  62,168,566  $  61,708,812 
Interest Expense 1,441,175  1,275,015  4,288,979  3,717,386 
Net Interest and fee income on finance receivables* $19,314,859  $19,319,599  $57,879,587  $57,991,426 
Weighted average contractual rate (4) 23.33%  23.34%  23.20%  23.55% 
Average cost of borrowed funds (2) 4.49%  4.47%  4.48%  4.45% 
Gross portfolio yield (5)* 28.47%  29.26%  28.67%  29.26% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest
1.98 %  1.81 %  1.98 1.76% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest*
5.74%  4.95%  4.98%  4.67% 
Net portfolio yield (5)* 20.75%  22.50%  21.71%  22.83% 
Marketing, salaries, employee benefits, depreciation
  and administrative expenses as a percentage of
  average finance receivables, net of unearned interest (6)
11.68%  11.86%  11.29%  10.76% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (7)*
9.07%  10.64%  10.42%  12.07% 
Write-off to liquidation (8) 7.62%  7.94%  7.24%  6.82% 
Net charge-off percentage (9) 6.34%  6.75%  6.20%  5.74% 
 
Note:  All three and nine month key performance indicators expressed as percentages have been annualized.
(1)     Average finance receivables, net of unearned interest, represents the average of gross finance receivables, less unearned
           interest throughout the period.
(2)     Average indebtedness represents the average outstanding borrowings under the Line. Average cost of borrowed funds
           represents interest expense as a percentage of average indebtedness.
(3)     Interest & fee income on finance receivables does not include revenue generated by Nicholas Data Services, Inc. ("NDS") the
            wholly-owned software subsidiary of Nicholas Financial, Inc.
(4)     Weighted average contractual rate represents the weighted average annual percentage rate ("APR") of all automobile finance installment
           contracts purchased and direct consumer loans originated during the period.
(5)     Gross portfolio yield represents interest and fee income on finance receivables as a percentage of average finance receivables,
            
net of unearned interest. Net portfolio yield represents interest and fee income on finance receivables minus (a) interest expense
           and (b) the provision for credit losses as a percentage of average finance receivables, net of unearned interest.
(6)     Administrative expenses included in the calculation above are net of administrative expenses associated with NDS which
           approximated $58,000 and $54,000 during the three-month periods ended December 31, 2013 and 2012, respectively, and $161,000
           and $172,000 during the nine-month periods ended December 31, 2013 and 2012, respectively. For the three and nine months ended
           December 31, 2013, the numerators include expenses associated with the potential sale of the Company. Absent these expenses, the
           percentage would have been 10.55% and 10.75% respectively. For the three and nine months ended December 31, 2012, the
           numerators include a tax associated with cash dividends. Absent the dividend tax, the percentage would have been 10.03% and 10.08%
           respectively.
(7)     Pre-tax yield represents net portfolio yield minus operating expenses as a percentage of average finance receivables, net of
            unearned interest.
(8)     Write-off to liquidation percentage is defined as net charge-offs divided by liquidation. Liquidation is defined as beginning
           receivable balance plus current period purchases minus voids and refinances minus ending receivable balance.
(9)     Net charge-off percentage represents net charge-offs divided by average finance receivables, net of unearned interest,
            outstanding during the period.
* The amounts for the three and nine months periods ended December 31, 2012 have been revised as discussed in Note 2 to the consolidated financial statements.

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to automobile finance installment contracts ("Contracts") and direct consumer loans ("Direct Loans"):
 
  Delinquencies
Contracts  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2013 $ 399,785,114 $ 18,740,543 $ 5,200,159 $ 5,194,114 $ 29,134,816
    4.69% 1.30% 1.30% 7.29%
   
December 31, 2012 $ 380,519,395 $ 17,287,813 $ 4,529,766 $ 2,254,123 $ 24,071,702
    4.54% 1.19% 0.59% 6.32%
Direct Loans  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 days Total
December 31, 2013 $ 11,319,887 $ 176,446 $ 40,887 $ 42,592 $ 259,925
    1.56% 0.36% 0.38% 2.30%
   
December 31, 2012 $ 8,861,098 $ 116,251 $ 29,295 $ 22,501 $ 168,047
    1.31% 0.33% 0.25% 1.89%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
December 31,          
Nine months ended       
December 31,           
  2013      2012      2013     2012     
Purchases $36,241,261  $31,417,597  $120,082,490 $107,893,529 
Weighted APR 23.05%  23.10%  22.96%  23.37% 
Average Discount 8.58%  8.64%  8.47%  8.59% 
Weighted average term (months) 52  50  52  49 
Average Loan $  10,578  $   10,549  $   10,638  $   10,228 
Number of contracts 3,426  3,004  11,288  10,549