October 31, 2013

Nicholas Financial Reports 2nd Quarter Results

Clearwater, Florida, - October 31, 2013 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended September 30, 2013 net earnings decreased 16% to $4,317,000 as compared to $5,150,000 for the three months ended September 30, 2012. Per share diluted net earnings decreased 17% to $0.35 as compared to $0.42 for the three months ended September 30, 2012. Revenue increased 1% to $20,949,000 for the three months ended September 30, 2012 as compared to $20,705,000 for the three months ended September 30, 2012.

For the six months ended September 30, 2013 net earnings decreased 5% to $10,017,000 as compared to $10,558,000 for the six months ended September 30, 2012. Per share diluted net earnings decreased 6% to $0.82 as compared to $0.87 for the six months ended September 30, 2012. Revenue increased 1% to $41,425,000 for the six months ended September 30, 2013 as compared to $41,133,000 for the six months ended September 30, 2012.

“Our results for the three months ended September 30, 2013 were adversely affected by a non-cash charge related to the change in fair value of interest rate swap agreements, an increase in operating expenses as a percentage of finance receivables, net, and an increase in the net charge-off rate” stated Peter L. Vosotas, Chairman and CEO. "We continue to develop additional markets and expect to open between 1-3 new branch locations during the remainder of our current fiscal year, 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      
September 30,          
Six months ended      
Septemember 30,          
  2013      2012      2013      2012     
Revenue
  Interest and fee income on finance receivables $20,943  $20,696  $41,413  $41,114 
  Sales 12  19 
  20,949  20,705  41,425  41,133
Expenses
  Operating 8,080  7,330  16,077  14,465 
  Provision for credit losses 3,973  3,262  6,615  6,365 
  Interest Expense 1,443  1,250  2,848  2,442 
  Change in fair value of interest rate swaps 250  474  (583)  683 
  13,746  12,316  24,957  23,955 
 
Operating income before income taxes 7,203  8,389  16,468  17,178 
  Income tax expense 2,886  3,238  6,451  6,620 
    Net income $4,317  $5,150  $10,017  $10,558 
 
Earnings Per share:
    Basic $  0.36  $  0.43   $  0.83  $  0.88 
    Diluted $  0.35  $  0.42   $  0.82  $  0.87 
 
Weighted average shares 12,092,000  11,964,000  12,079,000  11,956,000 
 
Weighted average shares 12,315,000  12,182,000  12,274,000  12,189,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  September 30,
2013      
March 31, 
2013     
Cash $   4,474  $   2,798 
Finance receivables, net 260,494  249,826 
Other assets 11,634  11,211 
     
  Total assets $276,602  $263,835 
     
Line of credit $131,000  $125,000 
Other Liabilities 10,855  11,370 
 
  Total Liabilities 141,855  136,870 
 
Shareholders' equity 134,747  129,965 
 
Total Liabilities and shareholders' equity $276,602   $263,835  
 

Portfolio Summary Three months ended
September 30,
Six months ended
September 30,
  2013      2012      2013      2012     
Average finance receivables, net of unearned interest (1) $290,071,860  $282,424,703  $287,854,928  $281,087,493 
Average indebtedness (2) $125,880,390  $109,000,000  $127,067,884  $109,875,000 
Interest and fee income on finance receivables (3) * $  20,943,161  $  20,696,241  $  41,412,533  $  41,114,198 
Interest Expense 1,442,898  1,250,231  2,847,804  2,442,371 
Net Interest and fee income on finance receivables * $19,500,263  $19,446,010  $38,564,729  $38,671,827 
Weighted average contractual rate (4) 23.30%  23.48%  23.14%  23.64% 
Average cost of borrowed funds (2) 4.58%  4.59%  4.48%  4.45% 
Gross portfolio yield (5) * 28.88%  29.31%  28.77%  29.25% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest
1.99 %  1.77 %  1.98%  1.74% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest *
5.48%  4.62%  4.60%  4.53% 
Net portfolio yield (5) * 21.41%  22.92%  22.19%  22.98% 
Marketing, salaries, employee benefits, depreciation
  and administrative expenses as a percentage of
  average finance receivables, net of unearned interest (6)
11.07%  10.31%  11.10%  10.20% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (7) *
10.34%  12.61%  11.09%  12.78% 
Write-off to liquidation (8) 8.19%  7.54%  7.05%  6.25% 
Net charge-off percentage (9) 7.10%  6.39%  6.13%  5.23% 
 
Note:  All three and six 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 $48,000 and $50,000 during the three-month periods ended September 30, 2013 and 2012 and $103,000 and $117,000
           during the six-month periods ended September 30, 2013 and 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 amounts for the three and six months periods ended September 30, 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 90 + days Total
September 30, 2013 $ 400,057,098 $ 15,756,362 $ 3,239,528 $ 3,767,037 $ 22,762,927
    3.94% 0.81% 0.94% 5.69%
   
September 30, 2012 $ 388,783,924 $ 15,310,139 $ 3,879,087 $ 1,739,015 $ 20,928,241
    3.94% 1.00% 0.44% 5.38%
Direct Loans  Gross Balance
Outstanding
31 - 60 days 61 - 90 days 90 + days Total
September 30, 2013 $ 10,623,932 $ 104,983 $ 37,604 $ 30,877 $ 173,464
    0.99% 0.35% 0.39% 1.63%
   
September 30, 2012 $ 8,075,902 $ 94,770 $ 6,822 $ 11,024 $ 112,616
    1.17% 0.08% 0.14% 1.39%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
September 30,          
Six months ended       
September 30,           
  2013      2012      2013      2012     
Purchases $41,958,516  $39,244,000  $83,841,229 $76,475,932
Weighted APR 23.05%  23.31%  22.93%  23.48% 
Average Discount 8.51%  8.14%  8.43%  8.57% 
Weighted average term (months) 52  49  52  49 
Average Loan $   10,685  $   10,352  $   10,664  $   10,136 
Number of contracts 3,927  3,791  7,862  7,545