May 22, 2014

Nicholas Financial Reports 4th Quarter Results

Clearwater, Florida, - May 22, 2014 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended March 31, 2014, net earnings decreased 40% to $2,860,000 as compared to $4,787,000 for the three months ended March 31, 2013. Diluted earnings per share decreased 41% to $0.23 as compared to $0.39 for the three months ended March 31, 2013. Revenue increased less than 1% to $20,443,000 for the three months ended March 31, 2014 as compared to $20,372,000 for the three months ended March 31, 2013.

For the year ended March 31, 2014, net earnings decreased 16% to $16,703,000 as compared to $19,941,000 for the year ended March 31, 2013. Diluted earnings per share decreased 17% to $1.36 as compared to $1.63 for the year ended March 31, 2013. Revenue increased 1% to $82,629,000 for the year ended March 31, 2014 as compared to $82,110,000 for the year ended March 31, 2013.

“Our results for the three and twelve months ended March 31, 2014 were adversely affected by a reduction in the gross portfolio yield, an increase in the provision for losses and an increase in operating expenses compared to corresponding periods ended March 31, 2013. Each period was also significantly affected by professional fees associated with the previously announced potential sale of the Company. Such fees were principally related to fiscal 2014 and resulted in a higher effective tax rate as the majority were not deductible for income tax purposes. The after-tax impact on diluted earnings per share by such professional fees totaling $1,131,000 and $2,312,000 was approximately $0.09 and $0.18 for the three and twelve months ended March 31, 2014, respectively” stated Peter L. Vosotas, Chairman and CEO.

“Our results for the twelve months ended March 31, 2014 in comparison to March 31, 2013 were impacted favorably by a reduction in dividend taxes which were $143,000 for the twelve-month period ended March 31, 2014, as compared to $1,492,000 for the twelve-month period ended March 31, 2013 when, among other quarterly dividends, the Company paid a special $2.00 dividend. Results were further impacted favorably by a change in the fair value of the interest rate swap agreements which resulted in a gain of $688,000 for the twelve months ended March 31, 2014, compared to a loss of $505,000 for the comparable twelve-month period ended March 31, 2013” stated Peter L. Vosotas, Chairman and CEO.

Nicholas Financial, Inc. is one of the largest publicly traded specialty consumer finance companies based in the Southeastern states. The Company presently operates 65 branch locations in both the Southeastern and the Midwestern states. The Company has approximately 12,221,000 shares of common stock outstanding. For an index of Nicholas Financial, Inc.’s news releases or to obtain a specific release, 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      
March 31,          
Year ended         
March 31,            
  2014      2013      2014      2013     
Revenue
  Interest and fee income on finance receivables $20,441  $20,363  $82,610  $82,072 
  Sales 19  38 
  20,443  20,372  82,629  82,110
Expenses
  Operating 7,843  7,408  30,342  28,221 
  Dividend tax 73  143  1,492 
  Professional fees 1,647  254  3,659  893 
  Provision for credit losses 4,181  3,542  14,979  13,392 
  Interest Expense 1,389  1,403  5,678  5,121 
  Change in fair value of interest rate swaps (6) (141)  (688)  505 
  15,054  12,539  54,113  49,624 
 
Operating income before income taxes 5,389  7,833  28,516  32,486 
  Income tax expense 2,529  3,046  11,813  12,545 
    Net income $2,860  $4,787  $16,703  $19,941 
 
Earnings Per share:
    Basic $  0.24  $  0.40   $  1.38  $  1.66 
    Diluted $  0.23  $  0.39   $  1.36  $  1.63 
 
Weighted average shares 12,125,000  12,024,000  12,096,000  11,977,000 
 
Weighted average shares and assumed dilution 12,348,000  12,267,000  12,325,000  12,218,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  March 31,
2014      
March 31, 
2013     
Cash $   2,635  $   2,798 
Finance receivables, net 269,344  249,826 
Other assets 11,451  11,211 
     
  Total assets $283,430  $263,835 
     
Line of credit $127,900  $125,500 
Other Liabilities 11,592  11,370 
 
  Total Liabilities 141,492  136,870 
 
Shareholders' equity 141,938  126,965 
 
Total Liabilities and shareholders' equity $283,430   $263,835  
 

Portfolio Summary Three months ended
March 31,
Year ended
March 31,
  2014      2013      2014      2013     
Average finance receivables, net of unearned interest (1) $294,412,632  $279,938,071  $290,435,690  $280,916,731 
Average indebtedness (2) $125,737,114  $126,750,000  $127,093,220  $115,157,810 
Interest and fee income on finance receivables (3) $  20,441,293  $  20,363,825  $  82,609,859  $  82,072,643 
Interest Expense 1,389,209  1,403,441  5,678,188  5,120,827 
Net Interest and fee income on finance receivables $19,052,084  $18,960,384  $76,931,671  $76,951,816 
Weighted average contractual rate (4) 23.10%  23.16%  23.00%  23.43% 
Average cost of borrowed funds (2) 4.42%  4.43%  4.47%  4.45% 
Gross portfolio yield (5) 27.77%  29.10%  28.44%  29.22% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest
1.89 %  2.01 %  1.95%  1.82% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest
5.68%  5.16%  5.16%  4.77% 
Net portfolio yield (5) 20.20%  22.03%  21.33%  22.63% 
Marketing, salaries, employee benefits, depreciation
  and administrative expenses as a percentage of
  average finance receivables, net of unearned interest (6)
12.82%  10.98%  11.68%  10.81% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (7)
7.38%  11.05%  9.65%  11.82% 
Write-off to liquidation (8) 6.98%  6.78%  7.17%  6.81% 
Net charge-off percentage (9) 6.29%  6.30%  6.22%  5.88% 
 
Note:  All three month key performance indicators expressed as percentages have been annualized.
(1)     Average finance receivables, net of unearned interest, represents the average of gross finance receivables, less unearned
           interest throughout the period.
(2)     Average indebtedness represents the average outstanding borrowings under the Line. Average cost of borrowed funds
           represents interest expense as a percentage of average indebtedness.
(3)     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 Contracts purchased
           and direct 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 $54,000 and $48,000 for the three-month periods ended March 31, 2014 and 2013, and $196,000 and $220,000 for
           the years ended March 31, 2014 and 2013 respectively. The numerators include expenses associated with the potential sale of the
           Company and include taxes associated with the payments of cash dividends. Absent these expenses, the percentages would have
           been 11.29% and 10.84% for the three and twelve months ended March 31, 2014, respectively. Absent these expenses, the

           percentages would have been 10.81% and 10.26% for the three and twelve months ended March 31, 2013 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 following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and under its direct loan program:
 
  Delinquencies
Contracts  Gross Balance
Outstanding
31 - 60 days 61 - 90 days Over 90 Total
March 31, 2014 $ 413,613,292 $ 11,713,021 $ 2,944,228 $ 1,896,591 $ 16,553,840
    2.83% 0.71% 0.46% 4.00%
   
March 31, 2013 $ 386,940,093 $ 10,421.500 $ 2,631,617 $ 1,188,160 $ 14,241,277
    2.69% 0.68% 0.31% 3.68%
Direct Loans  Gross Balance
Outstanding
30 - 50 days 60 - 89 days 90 +days Total
March 31, 2014 $ 10,730,901 $ 143,624 $ 25,345 $ 22,515 $ 191,484
    1.34% 0.23% 0.21% 1.78%
   
March 31, 2013 $ 8,781,637 $ 72,364 $ 21,509 $ 13,790 $ 107,663
    0.82% 0.25% 0.16% 1.23%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
March 31,           
Year ended        
March 31,          
  2014      2013      2014      2013     
Purchases $49,161,645  $42,289,228  $169,244,136 $151,740,809 
Weighted APR 23.10%  23.06%  23.00%  23.28% 
Average Discount 8.36%  8.45% 8.44%  8.54%
Weighted average term (months) 53  51  52  50 
Average Loan $  10,547  $   10,341  $  10,612  $   10,260 
Number of contracts 4,661  4,240  15,949  14,789