October 31, 2012

Nicholas Financial Reports Record 2nd Quarter Results

Clearwater, Florida, - October 31, 2012 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended September 30, 2012 net earnings decreased 7% to $5,161,000 as compared to $5,520,000 for the three months ended September 30, 2011. Per share diluted net earnings decreased 9% to $0.42 as compared to $0.46 for the three months ended September 30, 2011. Revenue increased 3% to $17,771,000 for the three months ended September 30, 2012 as compared to $17,211,000 for the three months ended September 30, 2011.

For the six months ended September 30, 2012 net earnings decreased 3% to $10,535,000 as compared to $10,823,000 for the six months ended September 30, 2011. Per share diluted net earnings decreased 4% to $0.86 as compared to $0.90 for the six months ended September 30, 2011. Revenue increased 4% to $35,051,000 for the six months ended September 30, 2012 as compared to $33,845,000 for the six months ended September 30, 2011.

“Our results for the three months ended September 30, 2012 were adversely affected by a non-cash charge related to interest rate swaps (mark-to-market) and an increase in operating expenses as a percentage of net finance receivables,” stated Peter L. Vosotas, Chairman and CEO. "We continue to develop additional markets and expect to open between 2-4 new branch locations during the remainder of our current fiscal year, which ends March 31, 2013."

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 12,100,000 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, 2012. 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,          
  2012      2011      2012      2011     
Revenue
  Interest and fee income on finance receivables $17,762  $17,199  $35,032  $33,823 
  Sales 9  12  19  22 
  17,771  17,211  35,051  30,845
Expenses
  Operating 7,331  6,779  14,465  13,474 
  Provision for credit losses 309  178  319  257 
  Interest Expense 1,250  1,237  2,442  2,466 
  Change in fair value of interest rate swaps 474  -  683  - 
  9,364  8,194  17,909  16,197 
 
Operating income before income taxes 8,407  9,017  17,142  17,648 
  Income tax expense 3,246  3,497  6,607  6,825 
    Net income $5,161  $5,520  $10,535  $10,823 
 
Earnings Per share:
    Basic $  0.43  $  0.47   $  0.88  $  0.92 
    Diluted $  0.42  $  0.46   $  0.86  $  0.90 
 
Weighted average shares 11,964,000  11,773,000  11,956,000  11,710,000 
 
Weighted average shares 12,182,000  12,027,000  12,189,000  12,002,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  September 30,
2012      		 March 31, 
2012     
Cash $   3,723  $   2,803 
Finance receivables, net 249,072  242,349 
Other assets 12,327  12,084 
     
  Total assets $265,122  $257,236 
     
Line of credit $110,000  $112,000 
Other Liabilities 10,398  9,297 
 
  Total Liabilities 120,398  121,297 
 
Shareholders' equity 144,724  135,939 
 
Total Liabilities and shareholders' equity $265,122   $257,236  
 

Portfolio Summary Three months ended
September 30,		 Six months ended
September 30,
  2012      2011      2012      2011     
Average finance receivables, net of unearned interest (1) $282,424,703  $272,906,536  $281,087,493  $271,022,679 
Average indebtedness (2) $109,000,000  $116,505,921  $109,875,000  $117,002,960 
Interest and fee income on finance receivables (3) $  17,761,998  $  17,199,730  $  35,032,086  $  33,823,318 
Interest Expense 1,250,231  1,236,893  2,442,371  2,465,871 
Net Interest and fee income on finance receivables $16,511,767  $15,962,837  $32,589,715  $31,357,447 
Weighted average contractual rate (4) 23.48%  23.94%  23.64%  23.91% 
Average cost of borrowed funds (2) 4.59%  4.25%  4.45%  4.22% 
Gross portfolio yield (5) 25.16%  25.21%  24.93%  24.96% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest		 1.77 %  1.81 %  1.74%  1.82% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest		 0.44%  0.26%  0.23%  0.19% 
Net portfolio yield (5) 22.95%  23.14%  22.96%  22.95% 
Marketing, salaries, employee benefits, depreciation
  and administrative expenses as a percentage of
  average finance receivables, net of unearned interest (6)		 10.31%  9.85%  10.20%  9.85% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (7)		 12.64%  13.29%  12.76%  13.10% 
Write-off to liquidation (8) 7.54%  5.93%  6.25%  5.34% 
Net charge-off percentage (9) 6.39%  4.74%  5.23%  4.18% 
 
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 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 $50,000 and $53,000 during the three-month periods ended September 30, 2012 and 2011 and $117,000 and $113,000
           during the six-month periods ended September 30, 2012 and 2011 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 automobile finance installment contracts ("Contracts") and direct consumer loans ("Direct Loans"):
 
  Delinquencies
Contracts  Gross Balance
Outstanding		 30 - 59 days 60 - 89 days 90 +days Total
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%
   
September 30, 2011 $ 377,297,796 $ 10,934,539 $ 3,188,022 $ 1,041,238 $ 15,163,799
    2.90% 0.84% 0.28% 4.02%
Direct Loans  Gross Balance
Outstanding		 30 - 50 days 60 - 89 days 90 +days Total
September 30, 2012 $ 8,075,902 $ 94,770 $ 6,822 $ 11,024 $ 112,616
    1.17% 0.08% 0.14% 1.39%
   
September 30, 2011 $ 5,721,768 $ 22,229 $ 20,229 $ 15,558 $ 58,016
    0.39% 0.35% 0.27% 1.01%
           

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,           
  2012      2011      2012      2011     
Purchases $39,243,999  $35,093,489  $76,475,932 $71,555,929
Weighted APR 23.31%  23.83%  23.48%  23.80% 
Average Discount 7.41%  8.45%  7.83%  8.48% 
Weighted average term (months) 49  49  49  49 
Average Loan $   10,352  $    9,922  $   10,136  $    9,900 
Number of contracts 3,791  3,537  7,545  7,228