August 6, 2014

Nicholas Financial Reports 1st Quarter Results

Clearwater, Florida, - August 6, 2014 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended June 30, 2014 net earnings decreased 14% to $4,909,000 as compared to $5,700,000 for the three months ended June 30, 2013. Per share diluted net earnings decreased 13% to $0.40 as compared to $0.46 for the three months ended June 30, 2013. Revenue increased 4% to $21,333,000 for the three months ended June 30, 2014 as compared to $20,476,000 for the three months ended June 30, 2013.

“Our results for the three months ended June 30, 2014 were negatively affected by a reduction in the gross portfolio yield, an increase in the provision for credit losses and an increase in operating expenses compared to the corresponding period ended June 30, 2013. Results were further impacted negatively by a change in the fair value of interest rate swap agreements which resulted in a loss of $212,000 for the three months ended June 30, 2014 compared to a gain of $833,000 for the period ended June 30, 2013. Finally, for the period ended June 30, 2014, professional fees associated with the previously announced potential sale of the Company, that were not deductible for income tax purposes, will now be deductible as a result of the termination of the Arrangement Agreement as announced on July 1, 2014, resulting in a decrease in income tax expense of $804,000. We will continue to develop additional markets and we may open additional branch locations during the remainder of our current fiscal year, which ends March 31, 2015", stated Ralph T. Finkenbrink, President 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 66 branch locations in both the Southeastern and the Midwestern states. The Company has approximately 12,274,000 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, 2014. 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
June 30,
  2014      2013     
Revenue
  Interest and fee income on finance receivables $21,333  $20,476 
     
Expenses
  Operating 8,091  7,529 
  Professional fees 618  468 
  Provision for credit losses 4,232  2,642 
  Interest Expense 1,449  1,405 
  Change in fair value of interest rate swaps 212  (833) 
  14,602  11,211 
 
Operating income before income taxes 6,731  9,265 
  Income tax expense 1,822  3,565 
    Net income $4,909  $5,700 
 
Earnings Per share:
    Basic $  0.40  $  0.47 
    Diluted $  0.40  $  0.46 
 
Dividends declared per share $ 0.00  $ 0.12 
 
Weighted average shares 12,178,000  12,065,000 
 
Weighted average shares & assumed dilution 12,363,000  12,287,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
  June 30, March 31,
  2014 2014
Cash $   2,291  $   2,635 
Finance receivables, net 278,173  269,344 
Other assets 10,821  11,451 
     
  Total assets $291,285  $283,430 
     
Line of credit $131,400  $127,900 
Other Liabilities 12,814  13,592 
 
  Total Liabilities 144,214  141,492 
 
Shareholders' equity 147,071  141,938 
 
Total Liabilities and hareholders' equity $291,285   $283,430  
 

Portfolio Summary Three months ended
June 30,
  2014  2013 
Average finance receivables, net of unearned interest (1) $304,915,588  $285,637,997 
Average indebtedness (2) $129,837,500  $125,880,390 
Interest and fee income on finance receivables $  21,332,514  $  20,475,735 
Interest Expense 1,448,586  1,404,906 
Net Interest and fee income on finance receivables $19,879,012  $19,064,466 
Weighted average contractual rate (3) 23.12%  23.28% 
Average cost of borrowed funds (2) 4.46%  4.46% 
Gross portfolio yield (4) 27.98% 28.66% 
Interest expense as a percentage of average finance
  receivables, net of unearned interest		 1.90%  1.97% 

Provision for credit losses as a percentage of average
  finance receivables, net of unearned interest*		 5.55%  3.70% 
Net portfolio yield (4) 20.53%  22.99%
Marketing, salaries, employee benefits, depreciation and administrative, dividend tax expense
  & professional fees as a percentage of average finance receivables, net of unearned interest (5)		 11.42%  11.12% 
Pre-tax yield as a percentage of average finance  receivables, net of unearned interest (6) 9.11%  11.87% 
Write-off to liquidation (7) 6.44%  5.90% 
Net charge-off percentage (8) 5.34%  5.15% 
 
Note:  All three 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)     Weighted average contractual rate represents the weighted average annual percentage rate (APR) of all Contracts and Direct
           Loans.

(4)     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.

(5)     The numerators include expenses associacted with the potential sale of the Company and include taxes associated with the
           payments of cashdividends. Absent these expenses, the percentages would have been 11.00% & 10.69% for the three months
           ended June 30, 2014 and 2013, respectively.
(6)     Pre-tax yield represents net portfolio yield minus operating expenses as a percentage of average finance receivables, net of
            unearned interest.
(7)     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.
(8)     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
June 30, 2014 $425,896,471 $16,433,351 $4,346,201 $ 1,543,475 $22,323,027
    3.86% 1.02% 0.36% 5.24%
   
June 30, 2013 $391,977,580 $12,506,882 $3,138,575 $1,331,851 $16,977,308
    3.19% 0.80% 0.34% 4.33%
Direct Loans  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days Over 90 Total
June 30, 2014 $11,175,661 $ 183,159 $ 41,491 $ 15,840 $ 240,385
    1.64% 0.37% 0.14% 2.15%
   
June 30, 2012 $9,654,947 $79,552 $27,046 $14,037 $120,635
    0.82% 0.28% 0.15% 1.25%
           

The following table presents selected information on Contracts purchased by the Company,
net of unearned interest:
     
  Three months ended
June 30,
Contracts 2014      2013     
Purchases $46,769,602  $41,882,714 
Weighted APR 23.01%  22.81% 
Average Discount 8.19%  8.35% 
Weighted average term (months) 54  51 
Average Loan $   11,020  $   10,576 
Number of contracts 4,244  3,960