UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 FOR THE PERIOD ENDED DECEMBER 31, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to _________.
Commission file number: 0-26680
NICHOLAS FINANCIAL, INC.
(Exact name of registrant as specified in its Charter)
British Columbia, Canada 8736-3354
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2454 McMullen Booth Road, Building C
Clearwater, Florida 33759
(Address of Principal Executive Offices) (Zip Code)
(727) 726-0763
(Registrant's telephone number, Including area code)
Not applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 and 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____.
As of January 31st, 2003 there were 5,002,021 shares of common
stock outstanding.
2
Nicholas Financial, Inc.
Form 10-QSB
Index
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet
as of December 31, 2002...............................3
Condensed Consolidated Statements of Income
for the three and nine months ended
December 31, 2002 and 2001............................4
Condensed Consolidated Statements of Cash
Flows for the nine months ended
December 31, 2002 and 2001............................5
Notes to the Condensed Consolidated
Financial Statements..................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................12
Item 3. Disclosures and Controls..............................22
Part II. Other Information
Item 1. Legal Proceedings.............................23
Item 2. Changes in Securities.........................23
Item 3. Defaults upon Senior Securities...............23
Item 4. Submission of Matters to a Vote of
Security Holders.............................23
Item 5. Other Information.....................................23
Item 6. Exhibits and Reports on Form 8-K......................23
Signatures............................................24
Exhibit Index.........................................27
3
Part I. Item 1
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
December 31, 2002
-------------------
Assets
Cash $ 738,841
Finance receivables, net 81,747,124
Accounts receivable 19,542
Prepaid expenses and other assets 867,332
Property and equipment, net 406,818
Deferred income taxes 1,321,300
--------------
Total assets $85,100,957
==============
Liabilities
Line of credit $57,333,426
Drafts payable 309,724
Notes payable - related party 654,376
Accounts payable 2,614,682
Derivatives 2,040,258
Income tax payable 991,754
Deferred revenues 949,958
--------------
Total liabilities 64,894,178
Shareholders' equity
Preferred stock, no par: 5,000,000 shares
authorized; none issued and outstanding -
Common stock, no par: 50,000,000 shares
authorized; 5,002,021 shares issued
and outstanding 4,443,133
Other comprehensive loss (2,073,541)
Retained earnings 17,837,187
--------------
20,206,779
--------------
Total liabilities and shareholders' equity $85,100,957
==============
See accompanying notes.
4
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
--------------------------------------------------
Revenue:
Interest income on
finance receivables $5,350,248 $4,923,210 $16,075,736 $14,312,868
Sales 78,850 85,852 254,165 274,894
--------------------------------------------------
5,429,098 5,009,062 16,329,901 14,587,762
Expenses:
Cost of sales 19,865 15,932 62,685 59,494
Marketing 172,388 134,724 481,729 383,196
Administrative 2,012,342 1,846,227 6,108,890 5,328,805
Provision for credit losses 548,554 500,679 1,677,758 1,281,104
Depreciation and amortization 51,000 60,365 130,000 165,365
Interest expense 1,023,976 949,068 2,955,671 2,955,481
--------------------------------------------------
3,828,125 3,506,995 11,416,733 10,173,445
--------------------------------------------------
Operating income before
income taxes 1,600,973 1,502,067 4,913,168 4,414,317
Income tax expense:
Current 1,585,769 392,265 2,667,527 1,403,411
Deferred (993,962) 161,269 (832,845) 250,852
--------------------------------------------------
591,807 553,534 1,834,682 1,654,263
--------------------------------------------------
Net Income $1,009,166 $948,533 $3,078,486 $2,760,054
==================================================
Earnings per share - basic $0.20 $0.19 $0.62 $0.57
==================================================
Earnings per share - diluted $0.19 $0.18 $0.58 $0.53
==================================================
See accompanying notes.
5
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended December 31,
2002 2001
---------------------------------------
Operating activities
Net income $ 3,078,486 $ 2,760,054
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 130,000 165,365
Provision for credit losses 1,677,758 1,281,104
Deferred income taxes (832,845) 250,852
Changes in operating assets and
liabilities:
Accounts receivable (5,098) 1,321
Prepaid expenses and other assets (350,677) (102,686)
Accounts payable (805,737) (275,795)
Drafts payable (109,392) -
Principal payments received 35,754,549 31,196,298
Income taxes payable 921,902 (93,819)
Deferred revenues 294,402 74,076
------------------------------
Net cash provided by operating
activities 39,753,348 35,256,770
Investing activities
Purchase of finance contracts (43,112,044) (38,216,607)
Purchase of property and equipment,
net of disposals (165,969) (116,262)
------------------------------
Net cash used in investing activities (43,278,013) (38,332,869)
Financing activities
Issuance of notes payable - related party 112,094 223,274
Net Proceeds from line of credit 4,060,000 2,850,000
Sale of common stock 40,173 72,733
------------------------------
Net cash provided by financing activities 4,212,267 3,146,007
------------------------------
Net increase in cash 687,602 69,908
Cash, beginning of period 51,239 233,167
------------------------------
Cash, end of period $ 738,841 $ 303,075
==============================
See accompanying notes.
6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
December 31, 2002
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Nicholas Financial, Inc. (the "Company") have been
prepared in accordance with accounting principles generally
accepted in the United States for interim financial information
and with the instructions to Form 10-QSB pursuant to the
Securities and Exchange Act of 1934, as amended in Article 10 of
Regulation SB. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for
the nine months ended December 31, 2002 are not necessarily
indicative of the results that may be expected for the year
ending March 31, 2003. For further information, refer to the
condensed consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year
ended March 31, 2002.
Revenue Recognition
Interest income on finance receivables is recognized using the
interest method. Accrual of interest income on finance
receivables is suspended when a loan is contractually delinquent
for 60 days or more or the collateral is repossessed, whichever
is earlier. The Company receives a commission for selling add-on
services to consumer borrowers and amortizes the commission, net
of the related costs, over the term of the loan using the
interest method.
7
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
3. Earnings Per Share
Basic earnings per share excludes any dilutive effects of common
stock equivalents such as options, warrants, and convertible
securities. Diluted earnings per share includes the effects of
dilutive options, warrants, and convertible securities. Basic and
diluted earnings per share have been computed as follows:
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
-----------------------------------------------
Numerator:
Numerator for basic earnings per
share - Net income available to
common stockholders $1,009,166 $ 948,533 $3,078,486 $2,760,054
Effect of dilutive securities:
Convertible debt - - - 17,491
---------------------------------------------
Numerator for dilutive earnings
per share - income available to
common stockholders after
assumed conversions $1,009,166 $948,533 $3,078,486 $2,777,545
=============================================
Denominator:
Denominator for basic earnings
per share - weighted average
shares 5,003,592 4,980,860 5,004,470 4,831,586
Effect of dilutive securities:
Employee stock options 274,025 294,768 307,607 290,794
Convertible debt - - - 135,910
--------------------------------------------
Denominator for diluted earnings
per share - adjusted weighted-
average shares and
assumed conversions 5,277,617 5,275,628 5,312,077 5,258,290
============================================
Earnings per share - basic $0.20 $0.19 $0.62 $0.57
============================================
Earnings per share - diluted $0.19 $0.18 $0.58 $0.53
============================================
8
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
4. Finance Receivables
Finance receivables consist of automobile finance installment
contracts and direct consumer loans and are detailed as follows:
Finance receivables, gross contract $128,992,200
Less:
Unearned interest (30,455,591)
--------------
98,536,609
Dealer discount (12,110,424)
Allowance for credit losses (4,679,061)
--------------
Finance receivables, net $ 81,747,124
==============
The terms of the receivables range from 12 to 60 months and bear
a weighted average effective interest rate of 24%.
5. Line of Credit
The Company has a $75 million Line of Credit facility (the Line)
which expires on November 30, 2004. Borrowings under the Line
bear interest at the prime rate plus .25%. The Company also has
several LIBOR pricing options available. If the outstanding
balance falls below $10 million, the Line bears interest at the
prime rate plus 2.00%. Pledged as collateral for this credit
facility are all of the assets of Nicholas Financial, Inc. and
its subsidiaries.
6. Notes Payable - Related Party
The Company's notes payable consist of unsecured notes bearing
interest at 9.5% with principal and interest due within 30-days
upon demand. The notes totaled $654,376 at December 31, 2002 and
are held by a related party.
9
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
7. Derivatives and Hedging
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). This statement establishes requirements
for accounting and reporting of derivative instruments and
hedging activities. SFAS 133 was updated by the issuance of SFAS
No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and
SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - amendment of FASB Statement No.
133." As amended, SFAS 133 established accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities.
The Company adopted the provisions of SFAS 133, as amended by
SFAS 137 and SFAS 138, on April 1, 2001, which requires that all
derivative instruments be recorded on the balance sheet at fair
value. The estimated fair value of derivative financial
instruments represents the amount required to enter into similar
offsetting contracts with similar remaining maturities based on
quoted market prices.
The Company utilizes interest rate swaps to manage its interest
rate exposure. The swaps effectively convert a portion of the
Company's floating rate debt to a fixed rate, more closely
matching the interest rate characteristics of the Company's
finance receivables. When entering into contracts intended by the
Company to receive hedge accounting treatment, the Company
formally designates and documents the financial instrument as a
hedge of a specific underlying exposure, as well as the risk
management objectives and strategies for undertaking the hedge
transaction.
The Company has entered into the following cash-flow hedges:
Fixed
Date Notional Rate Of
Entered Amount Interest Maturity Date
----------------------------------------------------
August 19, 1999 $10,000,000 5.80% August 1, 2003
May 17, 2000 10,000,000 6.87% May 17, 2004
March 30, 2001 10,000,000 4.89% April 2, 2003
October 5, 2001 10,000,000 3.85% October 5, 2004
June 28, 2002 10,000,000 3.83% July 2, 2005
10
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
7. Derivatives and Hedging (cont.)
The Company has also entered into various interest rate option
agreements with maturities through May 17, 2004.
For cash-flow hedge transactions, changes in the fair value of
the derivative instrument are recorded as a component of other
comprehensive income, and reclassified into earnings in the same
period or periods during which earnings are affected by the
variability of the cash flows of the hedged item. Any ineffective
portion of a derivative instrument's change in fair value is
immediately recognized in earnings.
8. Stock Options
In December 2003, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
(SFAS) No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure" which amends FASB
Statement No. 123. SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based-employee compensation. SFAS 148
also amends the disclosure requirements of SFAS 123 to require
more prominent and more frequent disclosures in financial
statements concerning the effects of stock-based compensation.
The effective date of SFAS 148 is for fiscal years ending after
December 15, 2002.
The Company has an employee stock incentive plan (the SIP) for
officers, directors and key employees under which 604,810 shares
of common stock were reserved for issuance as of December 31,
2002. Options currently granted by the Company generally vest
over a five-year period.
Previous to FAS 148 the Company had elected to follow APB 25, and
related Interpretations in accounting for its employee stock
options because the alternative, fair value method, provided for
under FAS 123 requires use of option valuation models that were
not developed for use in valuing employee stock options. Under
APB 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
11
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
8. Compensation Based Stock Options (cont.)
The following table contains pro forma net income and basic and
fully diluted earnings per share under the fair value method. The
fair value method uses the Black-Scholes option-pricing model
to determine compensation expense associated with the Company's
options.
Three Months Ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
----------------------------------------------
Net income $1,009,166 $948,533 $3,078,486 $2,760,054
Basic earnings per share $0.20 $0.19 $0.62 $0.57
Fully diluted earnings
per share $0.19 $0.18 $0.58 $0.53
Stock based employee
compensation cost under
the Intrinsic Value Method - - - -
Stock based employee
compensation cost under
the Fair Value Method 15,282 23,729 59,594 77,801
Pro forma net income 993,884 924,804 3,018,892 2,682,253
Pro forma basic earnings
per share $0.20 $0.19 $0.60 $0.56
Pro forma fully diluted
earnings per share $0.19 $0.18 $0.57 $0.51
12
Part I. Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Consolidated net income increased for the three month period
ended December 31, 2002 to $1,009,166 from $948,533 for the three
month period ended December 31, 2001. Earnings were favorably
impacted by an increase in the outstanding loan portfolio. The
Company's Nicholas Data Services subsidiary did not contribute
significantly to consolidated operations in the three or nine
month periods ended December 31, 2002 or 2001.
Portfolio Summary
--------------------
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
---------------------------------------------------
Average Net Finance
Receivables (1) $98,504,403 $84,882,208 $96,554,714 $82,919,199
Average Indebtedness(2) 57,952,802 50,611,434 56,899,973 50,271,434
Total Finance Revenue(3) 5,350,248 4,923,210 16,075,736 14,312,868
Interest Expense 1,023,976 949,068 2,955,671 2,955,481
---------------------------------------------------
Net Finance Revenue 4,326,272 3,974,142 13,120,065 11,357,387
Weighted average
contractual rate(5) 23.73% 23.96% 23.85% 24.04%
Gross Portfolio Yield(4) 21.73% 23.20% 22.20% 23.01%
Average Cost of
Borrowed Funds(2) 7.07% 7.50% 6.93% 7.84%
Provision for Credit
Losses as a Percentage
of Average Net Finance
Receivables 2.23% 2.36% 2.32% 2.06%
Net Portfolio Yield(4) 15.34% 16.37% 15.80% 16.20%
Operating Expenses as
a Percentage of
Average Net Finance
Receivables(6) 8.69% 9.15% 8.88% 8.96%
Pre-tax Yield as a
Percentage of
Average Net Finance
Receivables(7) 6.65% 7.22% 6.92% 7.24%
Write-off to
Liquidation(8) 11.97% 10.06% 9.88% 8.97%
Net Charge-Off
Percentage(9) 10.50% 9.10% 8.62% 7.92%
See accompanying notes.
13
(1) Average net finance receivables represents the average of
net finance receivables throughout the period. Net
finance receivables represents gross finance receivables
less any unearned finance charges related to those
receivables.
(2) Average indebtedness represents the average outstanding
borrowings under the Line of Credit and notes payable-
related party. Average cost of borrowed funds represents
interest expense as a percentage of average indebtedness.
(3) Does not include revenue generated by the Company's software
subsidiary "NDS". See page 14 for detail on NDS revenue for
the three months ended December 31, 2002 and 2001,
respectively. See page 15 for detail on NDS revenue for the
nine months ended December 31, 2002 and 2001, respectively.
(4) Gross portfolio yield represents total finance revenues as a
percentage of average net finance receivables. Net
portfolio yield represents net finance revenue income minus
the provision for credit losses as a percentage of average
net finance receivables.
(5) Weighted average contractual rate represents the weighted
average Annual percentage rate (APR) of all contracts in the
portfolio during the period.
(6) Does not include operating expenses associated with the
Company's software subsidiary "NDS". See page 13 for detail
on NDS cost of sales and operating expenses for the three
months ended December 31, 2002 and 2001, respectively. See
page 15 for detail on NDS cost of sales and operating
expenses for the nine months ended December 31, 2002 and
2001, respectively.
(7) Pre-tax yield represents net portfolio yield minus operating
expenses as a percentage of interest earning assets
(8) 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 net finance receivables outstanding during the
period.
14
Three months ended December 31, 2002 compared to three months ended
December 31, 2001
Interest Income and Loan Portfolio
Interest revenue increased 9% to $5.4 million for the
period ended December 31, 2002, from $4.9 million for the period
ended December 31, 2001. The net finance receivable balance
totaled $81.7 million at December 31, 2002, an increase of 15%
from the $70.8 million at December 31, 2001. The primary reason
net finance receivables increased was the increase in the
receivable base of several existing branches and the opening of
six additional branch locations. The gross finance receivable
balance increased 15% to $129 million at December 31, 2002 from
$112 million at December 31, 2001. The primary reason interest
revenue increased was the increase in the outstanding loan
portfolio. The gross portfolio yield decreased from 23.20% for
the period ended December 31, 2001 to 21.73% for the period ended
December 31, 2002. The net portfolio yield decreased from 16.37%
for the period ended December 31, 2001 to 15.34% for the period
ended December 31, 2002. The primary reason for the decrease in
the net portfolio yield was an increase in charge-offs for the
period ended December 31, 2002. The net charge off percentage for
the period ended December 31, 2002 was 10.50% compared to 9.10%
for the period ended December 31, 2001.
Computer Software Business
Sales for the period ended December 31, 2002 were $78,850
compared to $85,852 for the period ended December 31, 2001, a
decrease of 8%. Cost of sales and operating expenses decreased
from $115,473 for the period ended December 31, 2001 to $115,073
for the period ended December 31, 2002.
Operating Expenses
Operating expenses, excluding provision for credit losses
and interest expense, increased to $2.3 million for the period
ended December 31, 2002 from $2.1 million for the period ended
December 31, 2001. This increase of 10% was primarily
attributable to the additional staffing of several existing
branches, increased general operating expenses and the opening of
six additional branch offices. Operating expenses as a percentage
of interest earning assets decreased from 9.15% for the period
ended December 31, 2001 to 8.69% for the period ended December
31, 2002.
Interest Expense
Interest expense increased to $1,023,976 for the period
ended December 31, 2002 as compared to $949,068 for the period
ended December 31, 2001. The average indebtedness for the period
ended December 31, 2002 increased to $58.0 million compared to
$50.6 million for the period ended December 31, 2001. This
increase was offset by a decrease in the average cost of
outstanding borrowings from 7.50% during the three months ended
December 31, 2001 to 7.07% during the three months ended December
31, 2002.
15
Nine months ended December 31, 2002 compared to nine months ended
December 31, 2001
Interest Income and Loan Portfolio
Interest revenue increased 12% to $16.1 million for the
period ended December 31, 2002, from $14.3 million for the period
ended December 31, 2001. The net finance receivable balance
totaled $81.7 million at December 31, 2002, an increase of 15%
from the $70.8 million at December 31, 2001. The primary reason
net finance receivables increased was the increase in the
receivable base of several existing branches and the opening of
six additional branch locations. The gross finance receivable
balance increased 15% to $129 million at December 31, 2002 from
$112 million at December 31, 2001. The primary reason interest
revenue increased was the increase in the outstanding loan
portfolio. The gross portfolio yield decreased from 23.01% for
the period ended December 31, 2001 to 22.20% for the period ended
December 31, 2002. The net portfolio yield decreased from 16.20%
for the period ended December 31, 2001 to 15.80% for the period
ended December 31, 2002. The primary reason for the decrease in
the net portfolio yield was an increase in charge-offs for the
period ended December 31, 2002. The net charge off percentage for
the period ended December 31, 2002 was 8.62% compared to 7.92%
for the period ended December 31, 2001.
Computer Software Business
Sales for the period ended December 31, 2002 were $254,165
compared to $274,894 for the period ended December 31, 2001, a
decrease of 7.5%. This decrease was primarily due to lower
revenue from the existing customer base during the first quarter
of the fiscal year. Cost of sales and operating expenses
decreased from $363,083 for the period ended December 31, 2001 to
$351,059 for the period ended December 31, 2002.
Operating Expenses
Operating expenses, excluding provision for credit losses
and interest expense, increased to $6.8 million for the period
ended December 31, 2002 from $5.9 million for the period ended
December 31, 2001. This increase of 14% was primarily
attributable to the additional staffing of several existing
branches, increased general operating expenses and the opening of
six additional branch offices. Operating expenses as a percentage
of interest earning assets increased from 8.96% for the period
ended December 31, 2001 to 8.88% for the period ended December
31, 2002.
Interest Expense
Interest expense was $3.0 million for the period ended
December 31, 2002 as compared to $3.0 million for the period
ended December 31, 2001. The average indebtedness for the period
ended December 31, 2002 increased to $56.9 million compared to
$50.3 million for the period ended December 31, 2001. This
increase was offset by a decrease in the average cost of
outstanding borrowings from 7.84% during the nine months ended
December 31, 2001 to 6.93% during the nine months ended December
31, 2002.
16
Contract Procurement
The Company purchases contracts in the states listed below. The
amounts shown in the table below represent the total face value
of contracts acquired. The decrease in purchases for the State of
Florida is primarily due to increased competition and the lack of
expansion in that state during the current year. The Company has
sixteen branch locations in Florida and does not have any
immediate plans for additional expansion in Florida. The Company
has been expanding its contract procurement in North Carolina,
South Carolina and Ohio. Please see Future Expansion.
The Contracts purchased by the Company are predominately for used
vehicles, less than 3% were new. The average model year
collateralizing the portfolio is a 1998 vehicle. Contracts
purchased and originated are shown at face value.
Maximum
allowable
Interest 3 Months Ended 9 Months Ended
State rate (1) 12/31/02 12/31/01 12/31/02 12/31/01
-----------------------------------------------------------------------
FL 30% $7,667,048 $8,920,202 $26,790,694 $27,935,330
GA 29% 1,844,048 1,426,241 5,679,668 5,391,992
NC 29% 1,755,160 1,666,170 5,694,837 4,715,598
SC 29% 568,994 411,725 1,667,627 454,779
OH 25% 1,714,623 315,452 5,373,214 315,452
VA 29% 10,432 194,880 65,475 210,943
--------------------------------------------------
Total $13,560,305 $12,934,670 $45,271,515 $39,024,094
==================================================
(1) The allowable maximum interest rates by State is subject to
change and are governed by the individual states the
Company conducts business in.
Indirect Contracts Purchased
------------------------------
3 Months Ended 9 Months Ended
12/31/02 12/31/01 12/31/02 12/31/01
------------------------------------------------------
Purchases $13,560,305 $12,934,670 $45,271,515 $39,024,094
Weighted APR 23.66% 24.38% 24.11% 24.45%
Average Discount 9.00% 8.79% 8.87% 8.48%
Average
Term(mnths) 40 41 41 42
Average Loan $8,091 $8,161 $8,157 $8,284
Number of
Contracts 1,676 1,585 5,550 4,711
Direct Loans Originated
----------------------------
3 Months Ended 9 Months Ended
12/31/02 12/31/01 12/31/02 12/31/01
--------------------------------------------------------
Originations $935,909 $1,356,272 $2,982,344 $3,118,883
Weighted APR 26.60% 25.62% 26.07% 25.97%
Average
Term(mnths) 20 22 21 23
Average Loan $2,713 $3,229 $2,988 $3,125
Number of
Loans 345 420 998 998
17
Analysis of Credit Losses
Because of the nature of the borrowers under the Contracts and
its direct consumer loan program, the Company considers the
establishment of adequate reserves for credit losses to be
imperative. The Company segregates its Contracts into pools for
purposes of establishing reserves for losses. Each such pool
consists of the loans purchased by a Company branch office during
a three month period. The average pool consists of 70 Contracts
with an aggregate initial principal amount of approximately
$567,000. As of December 31, 2002, the Company had 409 active
pools.
The Company pools Contracts according to branch location
because the branches purchase contracts in different markets
located in Florida, Georgia, North Carolina, South Carolina and
Ohio. All Contracts purchased by a branch during a fiscal quarter
comprise a pool. This method of pooling by branch and quarter
allows the Company to evaluate the different markets where the
branches operate. The pools also allow the Company to evaluate
the different levels of customer income, stability, credit
history, and the types of vehicles purchased in each market.
Dealer discount represents the difference between the face
value of an installment contract and the amount of money the
Company actually pays for the contract. The discount negotiated
by the Company is a function of the credit quality of the
customer and the wholesale value of the vehicle. The automotive
dealer accepts these terms by executing a dealer agreement with
the Company. The entire amount of discount relates to credit
quality, and is therefore considered to be part of the credit
loss reserve. The Company utilizes a static pool approach to
track portfolio performance. A static pool retains an amount
equal to 100% of the discount into a reserve for credit losses.
In situations where, at the date of purchase, the discount is
determined to be insufficient to absorb all potential losses
associated with the pool, a portion of future unearned income
associated with that specific pool will be added to the reserves
for credit losses until total reserves have reached the
appropriate level. Subsequent to the purchase, if the reserve for
credit losses is determined to be inadequate for a pool which is
not fully liquidated, then a charge to income through the
provision is used to reestablish adequate reserves. If a pool is
fully liquidated and has any remaining reserves, the excess
reserves are immediately recognized into income. For pools not
fully liquidated, that are determined to have excess reserves,
such excess amounts are accreted into income. Reserves accreted
into income for the period ended December 31, 2002 were $301,326
compared to $604,321 in the period ended December 31, 2001.
Reserves accreted into income for the nine months ended December
31, 2002 was $1,415,651 compared to $1,702,938 for the period
ended December 31, 2001.
In analyzing a pool, the Company considers the performance of
prior pools originated by the branch office, the performance of
prior Contracts purchased from the dealers whose Contracts are
included in the current pool, the credit rating of the borrowers
under the Contracts in the pool, and current market and economic
conditions. Each pool is analyzed monthly to determine if the
loss reserves are adequate, and adjustments are made if they are
determined to be necessary.
18
The following table sets forth a reconciliation of the changes in
dealer discount.
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
------------------------------------------------------
Balance at beginning
of period $11,952,122 $10,755,104 $11,259,898 $10,306,699
Discounts acquired on
new volume 2,160,225 2,120,253 7,378,298 6,466,272
Losses absorbed (1,980,599) (1,908,906) (5,917,291) (5,113,954)
Recoveries 280,002 211,891 805,170 617,942
Reserves accreted (301,326) (604,321) (1,415,651) (1,702,938)
------------------------------------------------------
Balance at end
of period $12,110,424 $10,574,021 $12,110,424 $10,574,021
======================================================
Reserve as a percent
of gross finance
receivables 9.39% 9.45% 9.39% 9.45%
======================================================
The following table sets forth a reconciliation of the changes in
the allowance for credit losses.
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
------------------------------------------------------
Balance at beginning
of period $5,081,682 $3,941,970 $4,305,786 $3,465,015
Current period provision 548,554 500,679 1,677,758 1,281,104
Losses absorbed (923,333) (264,870) (1,258,177) (541,778)
Recoveries 8,921 3,782 24,052 10,133
Reserves accreted (36,763) (29,726) (70,358) (62,639)
-----------------------------------------------------
Balance at end
of period $4,679,061 $4,151,835 $4,679,061 $4,151,835
=====================================================
Reserve as a percent
of gross finance
receivables 3.63% 3.71% 3.63% 3.71%
=====================================================
Total reserves at
end of period $16,789,485 $14,725,856 $16,789,485 $14,725,856
======================================================
Reserves as a percent
of gross finance
receivables 13.02% 13.16% 13.02% 13.16%
======================================================
The average dealer discount associated with new volume increased
for the three and nine months ended December 31, 2002 to 9.00%
and 8.87% respectively, from 8.81% and 8.48% for the three and
nine months ended December 31, 2001, respectively. The Company
does not consider these changes to be material and such changes
are not the result of any change in buying philosophy or
competition.
The provision for credit losses increased for the three and nine-
month periods ended December 31, 2002 to $548,354 and 1,677,758
respectively, as compared to $500,679 and $1,281,104 for the
three and nine-month periods ended December 31, 2001. This
increase is primarily attributed to an increase in the Net
Finance Receivable balance from $70.8 million at December 31,
2001 to $81.7 million at December 31, 2002. To a lesser extent,
the provision for credit losses increased as a result of certain
static pools reaching reserve levels below Company estimates to
absorb future credit losses. In these instances, the Company
increased reserves related to specific static pools through a
direct charge to income through the provision.
19
The Company's losses as a percentage of liquidation increased
from 10.06% and 8.97% for the three and nine-month periods ended
December 31, 2001 to 11.97% and 9.88% for the three and nine-
month periods ended December 31, 2002. The Company anticipates
portfolio performance will stabilize in the near term but will
continue to be higher in relation to past years when the overall
economic conditions and unemployment rate was better. In response
to current conditions the Company has raised its initial target
reserve percentage on new static pools to 12.2% from 11.8%. The
Company does not believe there have been any significant changes
in loan concentrations, terms or quality of contracts purchased
during the current fiscal year that would have contributed to the
rise in losses. The delinquency percentage for contracts more
than thirty days past due for the period ended December 31, 2002
decreased to 3.07% from 3.55% for the period ended December 31,
2001. The delinquency percentage for direct loans more than
thirty days past due for the period ended December 31, 2002
increased to 2.52% from 2.03% for the period ended December 31,
2001. The Company does not give significant consideration to
short-term trends in delinquency when evaluating reserve levels.
Delinquency percentages tend to be very volatile and often are
not necessarily an indication of future losses. The Company
utilizes a static pool approach to analyzing portfolio
performance and looks at specific pool performance and recent
trends as leading indicators to future performance of the
portfolio.
Recoveries as a percentage of current period losses were 10.00%
and 11.56% for the three and nine-month periods ended December
31, 2002 as compared to 9.92% and 11.11% for the three and nine-
month periods ended December 31, 2001. Recoveries are seasonally
lower in the December quarter and the current year results are
consistent with prior reporting periods.
Reserves accreted into income for the three and nine-month
periods ended December 31, 2002 were $338,089 and $1,486,009
respectively as compared to $634,047 and $1,765,577 for the three
and nine-month periods ended December 31, 2001. The amount and
timing of reserves accreted into income is a function of
individual static pool performance. The Company has seen
deterioration in the performance of the portfolio, more
specifically; static pools more than fifty percent liquidated
have seen an increase in the default rate when compared to prior
year pool performance during their same liquidation cycle. The
Company attributes this increase to overall general economic
conditions and more specifically to the increased unemployment
rate in the Company's markets.
20
The following tables present certain information regarding the
delinquency rates experienced by the Company with respect to
Contracts and under its direct consumer loan program:
Period Ended Period Ended
December 31, 2002 December 31, 2001
-------------------- --------------------
Contracts
Gross Balance
Outstanding $124,238,870 $107,053,507
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
-------------------- ---------------------
30 to 59 days $ 2,595,883 2.09% $ 2,486,640 2.32%
60 to 89 days 852,351 0.69% 940,610 0.88%
90 + days 363,195 0.29% 370,151 0.35%
------------------- ---------------------
Total Delinquencies $ 3,811,429 $ 3,797,401
*Total Delinquencies
as percent of
outstanding balance 3.07% 3.55%
Direct Loans
Gross Balance
Outstanding $ 4,753,330 $ 4,831,355
Delinquencies
30 to 59 days $ 52,074 1.10% $ 49,542 1.03%
60 to 89 days 46,896 0.99% 28,770 0.60%
90 + days 20,869 0.43% 19,521 0.40%
------------------- -------------------
Total Delinquencies $ 119,839 $ 97,833
*Total Delinquencies
as a percent of
outstanding balance 2.52% 2.03%
The delinquency percentage for contracts more than thirty days
past due for the period ended December 31, 2002 decreased to
3.07% from 3.55% for the period ended December 31, 2001. The
delinquency percentage for direct loans more than thirty days
past due for the period ended December 31, 2002 increased to
2.52% from 2.03% for the period ended December 31, 2001.
The Company does not give much consideration to short-term trends
in delinquency percentages when evaluating reserve levels.
Delinquency percentages tend to be very volatile and often are
not necessarily an indication of future losses. The Company
utilizes a static pool approach to analyzing portfolio
performance and looks at specific pool performance and recent
trends as leading indicators to future performance of the
portfolio.
Income Taxes
The Company's effective tax rate remained relatively consistent
at 36.97% and 37.34% for the three and nine month periods ended
December 31, 2002 compared to 36.85% and 37.34% for the three and
nine months ended December 31, 2001.
21
Liquidity and Capital Resources
The Company's cash flows for the nine months ended December 31,
2002 and December 31, 2001 are summarized as follows:
Nine months ended Nine months ended
December 31, 2002 December 31, 2001
------------------- -------------------
Cash provided by(used in):
Operating Activities- $39,753,348 $35,256,770
Investing Activities -
(purchase of Contracts) (43,278,013) (38,332,869)
Financing Activities 4,212,267 3,146,007
Net increase in cash 687,602 69,908
The Company's primary use of working capital during the
three months ended December 31, 2002 was the funding of the
purchase of Contracts. The Contracts were financed substantially
through borrowings on the Company's Line of Credit. The Line of
Credit is secured primarily by Contracts, and available
borrowings are based on a percentage of qualifying Contracts. As
of December 31, 2002 the Company had approximately $17.7 million
available under the Line of Credit. Since inception, the Company
has also funded a portion of its working capital needs through
cash flows from operating activities.
The self-liquidating nature of installment Contracts and
other loans enables the Company to assume a higher debt-to-equity
ratio than in most businesses. The amount of debt the Company
incurs from time to time under these financing mechanisms depends
on the Company's need for cash and it's ability to borrow under
the terms of its Line of Credit. The Company believes that
borrowings available under the Line of Credit as well as cash
flow from operations and, if necessary, the issuance of
additional subordinated debt and, or the sale of additional
securities in the capital markets, will be sufficient to meet its
short term funding needs.
The Company renewed its credit facility on June 28, 2002. The
new loan agreement expires November 30, 2004 and bears interest
at the prime rate plus .25% and offers several LIBOR pricing
options. The new loan agreement released Bank One as a
participating bank and added First Tennessee Bank. The Company is
pleased with its new banking relationship and believes it will be
beneficial for future expansion.
22
Future Expansion
The Company currently operates twenty-eight branch
locations, sixteen in the State of Florida, three in the State of
Georgia, three in the State of North Carolina, one in the state
of South Carolina and five in the state of Ohio. Each office is
budgeted (size of branch, number of employees and location) to
handle up to 1,000 accounts and up to $7,500,000 in outstanding
receivables. To date two of our branches have reached this
capacity.
The Company currently intends to continue its expansion through
the purchase of additional Contracts and the expansion of its
direct consumer loan program. In order to increase the size of
the Company's portfolio of Contracts, it will be necessary for
the Company to open additional branch offices and increase the
size of its revolving Line of Credit arrangement, either with
its current lender or another lender. The Company, from time to
time, has and will meet with private investors and financial
institutions that specialize in investing in subordinated debt.
The Company also intends to continue its policy of not paying
dividends and using earnings from operations to purchase
Contracts or make direct consumer loans. The Company believes
opportunity for growth continues to exist in Georgia, North
Carolina, South Carolina and Ohio and intends to continue its
expansion activities in those states. The Company has expanded
its automobile financing program in the State of Ohio to include
5 branch locations and will continue to pursue seeking markets
in Ohio for further expansion. The Company is currently pursuing
purchasing Contracts in the State of Michigan and South Carolina
utilizing employees who reside in those States, respectively.
These employees are developing their respective markets and the
Company has created a Central Buying Office in its Corporate
Headquarters in Clearwater Florida to purchase, process and
service these Contracts. The Company's strategy is to monitor
these new markets and ultimately decide where and when to open
actual branch locations. No assurances can be given, however,
that any further such expansion will occur.
Forward-Looking Information
This 10-QSB contains various forward-looking statements and
information that are based on management's beliefs and
assumptions, as well as information currently available to
management. When used in this document, the words "anticipate",
"estimate", "expect", and similar expressions are intended to
identify forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those anticipated, estimated or expected.
Among the key factors that may have a direct bearing on the
Company's operating results are fluctuations in the economy, the
degree and nature of competition, demand for consumer financing
in the markets served by the Company, the Company's products and
services, increases in the default rates experienced on
Contracts, adverse regulatory changes in the Company's existing
and future markets, the Company's ability to expand its business,
including its ability to complete acquisitions and integrate the
operations of acquired businesses, to recruit and retain
qualified employees, to expand into new markets and to maintain
profit margins in the face of increased pricing competition.
Part I. Item 3
DISCLOSURES AND CONTROLS
(a) Evaluation of disclosure controls and procedures. The
Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities
and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing
date of this report, the chief executive officer and the chief
financial officer of the Company concluded that the Company's
disclosure controls and procedures were adequate.
(b) Changes in internal controls. The Company made no
significant changes in its internal controls or in other factors
that could significantly affect these controls subsequent to the
date of the evaluation of those controls by the chief executive
officer and chief financial officer.
23
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - See exhibit index following
the signature page.
(b) Reports on Form 8-K - None
24
SIGNATURES
In accordance with the requirements of the Securities Act of
1934, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
10-QSB and authorized this Report to be signed on its behalf by
the undersigned, in the City of Clearwater, State of Florida, on
February 14, 2003.
NICHOLAS FINANCIAL, INC.
(Registrant)
Date: February 14, 2003 /s/Peter L. Vosotas
------------------------------
Peter L. Vosotas
Chairman, President,
Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 2003 /s/Ralph T. Finkenbrink
------------------------------
Ralph T. Finkenbrink
(Principal Accounting Officer)
25
CERTIFICATION
I, Peter L. Vosotas, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Nicholas
Financial, Inc.;
2.Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3.Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4.The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a)designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b)evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c)presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5.The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a)all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b)any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls;
6.The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date or our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/Peter L. Vosotas
--------------------------
Peter L. Vosotas
Principal Executive Officer
26
CERTIFICATION
I, Ralph T. Finkenbrink, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Nicholas
Financial, Inc.;
2.Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3.Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4.The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5.The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls;
6.The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date or our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/Ralph T. Finkenbrink
------------------------------
Ralph T. Finkenbrink
Principal Accounting Officer
26
EXHIBIT INDEX
Item 6. Exhibits and Reports on Form 8-K
3.1 Articles of Incorporation and By-Laws of Nicholas
Financial, Inc. Incorporated by reference to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
4.1 Stock Certificate
Incorporated by reference to Exhibit 4.1 to the Company's
Form 10-SB (File No. 0-26680) filed on March 13, 1996
10.1.1 Loan and Security Agreement dated March 31, 1993 between
BA Business Credit, Inc. and Nicholas Financial, Inc.
Incorporated by reference to Exhibit 10.1.1 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.2 Amendment No. 1 to Loan Agreement dated January 14, 1994
Incorporated by reference to Exhibit 10.1.2 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.3 Temporary Line Increase Agreement dated Mach 28, 1994
Incorporated by reference to Exhibit 10.1.3 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.4 Amendment No. 2 to Loan Agreement dated June 3, 1994
Incorporated by reference to Exhibit 10.1.4 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.5 Amendment No. 3 to Loan Agreement dated July 5, 1994
Incorporated by reference to Exhibit 10.1.5 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.6 Amendment No. 4 to Loan Agreement dated March 31, 1995
Incorporated by reference to Exhibit 10.1.6 to the
Company's Form 10-SB (File No. 0-26680) filed on
March 13, 1996
10.1.7 Amendment No. 5 to Loan Agreement dated July 13, 1995
Incorporated by reference to Exhibit 10.1.7 to the
Company's Form 10-KSB for the fiscal year ended
March 31, 1996
10.1.8 Amendment No. 6 to Loan Agreement dated May 13, 1996
Incorporated by reference to Exhibit 10.1.8 to the
Company's Form 10-QSB for the three months ended
June 30, 1996
10.1.9 Amendment No. 7 to Loan Agreement dated July 5, 1997
Incorporated by reference to Exhibit 10.1.9 to the
Company's Form 10-QSB for the three months ended
September 30, 1997
10.1.10 Amendment No. 8 to Loan Agreement dated September 18, 1998
Incorporated by reference to Exhibit 10.2.0 to the
Company's Form 10-QSB for the three months ended
September 30, 1998
28
10.1.11 Amendment No. 9 to Loan Agreement dated November 25, 1998
Incorporated by reference to Exhibit 10.2.1 to the
Company's Form 10-QSB for the three months ended
December 31, 1998
10.1.12 Amendment No. 10 to Loan Agreement dated November 24, 1999
Incorporated by reference to Exhibit 10.2.2 to the
Company's Form 10-QSB for the three months ended
December 31, 1999
10.1.13 Amendment No. 11 to Loan Agreement dated August 1, 2000
Incorporated by reference to Exhibit 10.1.13 to the
Company's Form 10-KSB for the year ended March 31, 2001
10.1.14 Amendment No. 12 to Loan Agreement dated March 16, 2001
Incorporated by reference to Exhibit 10.1.14 to the
Company's Form 10-KSB for the year ended March 31, 2001
10.3.1 Employee Stock Option Plan
Incorporated by reference to the Company's 1999
Annual proxy statement dated June 29, 1999
10.3.2 Non-Employee Stock Option Plan
Incorporated by reference to the Company's 1999
Annual proxy statement dated June 29, 1999
10.4.1 Employment Contract, dated November 22, 1999, between
Nicholas Financial, Inc. and Ralph Finkenbrink,
Senior Vice President of Finance.
Incorporated by reference to Exhibit 10.2.1 to the
Company's Form 10-QSB for the three months ended
December 31, 1999
10.4.2 Employment Contract, dated March 16, 2001, between
Nicholas Financial, Inc. and Peter L. Vosotas
President & Chief Executive Officer.
Incorporated by reference to the Company's 2001
Annual proxy statement dated July 2, 2001
21 Subsidiaries of Nicholas Financial, Inc.
Incorporated by reference to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
24 Powers of Attorney (included on signature page hereto)
99.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. 1350
99.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. 1350
29
Exhibit 99.1
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. 1350
Solely for the purposes of complying with 18 U.S.C. 1350, I ,
the undersigned Chief Executive Officer of Nicholas Financial,
Inc. (the "Company"), hereby certify, based on my knowledge, that
the Quarterly Report on Form 10-QSB of the Company for the
quarter ended December 31, 2002 (the "Report") fully complies
with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
/s/Peter L. Vosotas
------------------------------
Peter L. Vosotas
Chief Executive Officer
February 14, 2003
30
Exhibit 99.2
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. 1350
Solely for the purposes of complying with 19 U.S.C. 1350, I ,
the undersigned Chief Financial Officer of Nicholas Financial,
Inc. (the "Company"), hereby certify, based on my knowledge, that
the Quarterly Report on Form 10-QSB of the Company for the
quarter ended December 31, 2002 (the "Report") fully complies
with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
/s/Ralph T. Finkenbrink
------------------------------
Ralph Finkenbrink
Chief Financial Officer
February 14, 2003