July 29, 2010

Nicholas Financial Reports Record 1st Quarter Revenue & Earnings

Clearwater, Florida, - July 29, 2010 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for the three months ended June 30, 2010, net earnings, excluding change in fair value of interest rate swaps, increased 65% to $3,426,000 as compared to $2,081,000 for the three months ended June 30, 2009. Per share diluted net earnings, excluding change in fair value of interest rate swaps, increased 61% to $0.29 as compared to $0.18 for the three months ended June 30, 2009. See reconciliations of the Non-GAAP measures on page 2. Revenue increased 9% to $14,952,000 for the three months ended June 30, 2010 as compared to $13,694,000 for the three months ended June 30, 2009.

According to Peter L. Vosotas, Chairman and CEO, “We are pleased to report record 1st quarter revenue and earnings. Our results were primarily impacted by an increase in revenues, a reduction in the net charge-off rate and an increase in the cost of borrowed funds. During the first quarter we have added four branch offices to our 12 state branch network, bringing the total to 54 locations. The Company continues to evaluate additional markets for future branch locations and subject to market conditions, could open additional branch locations during the year. The Company remains open to acquisitions should an opportunity present itself”.

The Company will hold its Annual Shareholders Meeting at the Innisbrook Golf Resort in Palm Harbor, Florida on August 11th at 10:00am.

Nicholas Financial, Inc. is one of the largest publicly traded specialty consumer finance companies based in the Southeastern states. The Company presently operates 54 branch locations in both the Southeastern and the Midwestern states. The Company has approximately 11,800,000 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, 2010. 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.

This press release contains disclosures of non-GAAP financial measures including: net earnings, excluding change in fair value of interest rate swaps and per share diluted net earnings, excluding change in fair value of interest rate swaps. These measures utilize the GAAP terms “net income” and “diluted earnings per share” and adjust the GAAP terms to exclude the effect of mark to market adjustments and reclassifications of previously recorded accumulated comprehensive losses associated with interest rate swaps. Management believes this presentation provides additional and meaningful measures for the assessment of the Company's ongoing results and performance. Prior to the three months ended December 31, 2008, the Company reported changes in the fair value of interest rate swaps through other comprehensive income under hedge accounting. Management believes that the inclusion of this non-GAAP measure provides consistency in its financial reporting and facilitates investors' understanding of the Company's historic operating trends by providing an additional basis for comparisons to prior periods. Management recognizes that the use of non-GAAP measures has limitations, including the fact that they may not be directly comparable with similar non-GAAP financial measures used by other companies. All non-GAAP financial measures are intended to supplement the applicable GAAP disclosures and should not be considered in isolation from, or as substitute for, financial information prepared in accordance with GAAP. For a reconciliation of non-GAAP measures from GAAP reported amounts, please see the supplemental information included with this press release.

NICHOLAS FINANCIAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
     
The following tables include reconciliations of GAAP reported net income to the non-GAAP measure, net earnings, excluding change in fair value of interest rate swaps as well as GAAP reported diluted earnings per share to the non-GAAP measure, per share diluted net earnings, excluding change in fair value of interest rate swaps. The non-GAAP measures exclude the effect of mark-to-market adjustments and reclassifications of previously recorded accumulated comprehensive losses associated with interest rate swaps.
     
  Three months ended
June 30,
  2010      2009     

Net income, GAAP		 $3,575,838  $2,263,899
Mark-to-market gain on interest rate swaps, net of tax expense $94,037 and $114,441  respectively (150,328) (182,863)

Net earnings, excluding changes in fair value of
  interest rate swaps  (a)		 $3,425,510  $2,081,036
     
  Three months ended
June 30,
  2010      2009     

Diluted earnings per share, GAAP		 $0.30  $0.20

Per diluted share mark-to-market gain on
  interest rate swaps 		($0.01) ($0.02)

Per share diluted net earnings, excluding change in fair value of interest rate swaps  (a)		 $0.26  $0.18
 

(a) Represents a non-GAAP financial measure.  See information on non-GAAP financial measures above.

NICHOLAS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands, Except Per Share Amounts)
     
  Three months ended
June 30,
  2010      2009     
Revenue
  Interest and fee income on finance receivables $14,943  $13,673 
  Sales 9  21 
  14,952  13,694 
Expenses
  Operating 6,249  5,714 
  Provision for credit losses 1,596  3,323 
  Interest Expense 1,539  1,273 
  Change in fair value of interest rate swaps (244) (297) 
  9,140  10,013 
 
Operating income before income taxes 5,812  3,681 
  Income tax expense 2,236  1,417 
    Net income $3,576  $2,264 
 
Earnings Per share:
    Basic $  0.31  $  0.20 
    Diluted $  0.30  $  0.20 
 
Weighted average shares 11,555,000  11,400,000 
 
Weighted average shares 11,807,000  11,556,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
  June 30, March 31,
  2010 2010
Cash $   2,321  $   1,534 
Finance receivables, net 211,111  202,440 
Other assets 10,462  10,162 
     
  Total assets $223,894  $214,136 
     
Line of credit $110,022  $107,725 
Other Liabilities 12,511  9,424 
 
  Total Liabilities 122,533  116,699 
 
Shareholders' equity 101,361  97,437 
 
Total Liabilities and hareholders' equity $223,894   $214,136  
 

Portfolio Summary Three months ended
June 30,
  2010  2009 
Average finance receivables, net of unearned interest (1) $238,314,417  $215,721,582 
Average indebtedness (2) $108,246,360  $102,991,423 
Interest and fee income on finance receivables (3) $  14,942,905  $  13,673,272 
Interest Expense 1,539,373  1,272,677 
Net Interest and fee income on finance receivables $13,403,532  $12,400,595 
Weighted average contractual rate (4) 23.54%  23.93% 
Average cost of borrowed funds (2) 5.69%  4.94% 
Gross portfolio yield (5) 25.08 25.35% 
Interest expense as a percentage of average finance
  receivables, net of unearned interest		 2.58%  2.36% 

Provision for credit losses as a percentage of average
  finance receivables, net of unearned interest		 2.68%  6.16% 
Net portfolio yield (5) 19.82%  16.83% 
Marketing, salaries, employee benefits, depreciation and administrative expenses
  as a percentage of average   finance receivables, net of unearned interest (6)		 10.39%  10.49% 
Pre-tax yield as a percentage of average finance  receivables, net of unearned interest (7) 9.43%  6.34% 
Write-off to liquidation (8) 6.49%  10.80% 
Net charge-off percentage (9) 4.59%  7.72% 
 
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)     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 $58,000 and $52,000 during the three months ended June 30, 2010 and 2009, 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		 30 - 59 days 60 - 89 days 90 +days Total
June 30, 2010 $335,892,581 9,381,762 2,728,739 754,662 12,865,163
    2.79% 0.81% 0.23% 3.83%
   
June 30, 2009 $301,549,799 9,603.430 3,739.568 1,080,091 14,423,899
    3.18% 1.24% 0.36% 4.78%
Direct Loans  Gross Balance
Outstanding		 30 - 50 days 60 - 89 days 90 +days Total
June 30, 2010 $4,845,178 68,939 27,950 16,014 112,903
    1.42% 0.58% 0.33% 2.33%
   
June 30, 2009 $6,311,182 137,623 103,786 37,232 278,641
    2.18% 1.64% 0.59% 4.41%
           

The following table presents selected information on Contracts purchased by the Company,
net of unearned interest:
     
  Three months ended
June 30,
Contracts 2010      2009     
Purchases $35,574,106  $30,089,267 
Weighted APR 23.44%  23.83% 
Average Discount 8.91%  9.29% 
Weighted average term (months) 49  49 
Average Loan $    9,860  $    9,444 
Number of contracts 3,608  3,186