January 27, 2011

Nicholas Financial Reports Record 3rd Quarter Revenue and Earnings

Clearwater, Florida, - Januuary 27, 2011 - Nicholas Financial, Inc. (NASDAQ: NICK), announced that for for the three months ended December 31, 2010 net earnings increased 54% to $4,475,000 as compared to $2,909,000 for the three months ended December 31, 2009. Per share diluted net earnings increased 52% to $0.38 as compared to $0.25 for the three months ended December 31, 2009. Revenue increased 11% to $15,995,000 for the three months ended December 31, 2010 as compared to $14,365,000 for the three months ended December 31, 2009.

For the nine months ended December 31, 2010, net earnings increased 58% to $12,033,000 as compared to $7,605,000 for the nine months ended December 31, 2009. Per share diluted net earnings increased 55% to $1.01 as compared to $0.65 for the nine months ended December 31, 2009. Revenue increased 11% to $46,679,000 for the nine months ended December 31, 2010 as compared to $42,216,000 for the nine months ended December 31, 2009.

According to Peter L. Vosotas, Chairman and CEO, “We are pleased to report record 3rd quarter revenue and earnings. Our results were favorably impacted by an increase in revenues and a reduction in the net charge-off rate. In the third quarter the Company entered the Illinois and Missouri markets, where we have signed leases for new branch locations in Chicago and St. Louis. We expect these new locations to be fully operational by the end of the fourth quarter. The Company will then operate in fourteen states with a total of 56 branch locations.

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.

NICHOLAS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands, Except Per Share Amounts)
         
  Three months ended      
December 31,          		 Nine months ended      
December 31,          
  2010      2009      2010      2009     
Revenue
  Interest and fee income on finance receivables $15,985  $14,354  $46,650  $42,166 
  Sales 10  11  29  50 
  15,995  14,365  46,679  42,216
Expenses
  Operating 6,244  5,788  18,735  17,424 
  Provision for credit losses 1,201  3,020  4,509  9,597 
  Interest Expense 1,383  1,079  4,372  3,645 
  Change in fair value of interest rate swaps (96) (265) (478) (797)
  8,732  9,622  27,138  29,869 
 
Operating income before income taxes 7,263  4,743  19,541  12,347 
  Income tax expense 2,788  1,834  7,508  4,742 
    Net income $4,475  $2,909  $12,033  $7,605 
 
Earnings Per share:
    Basic $  0.39  $  0.25   $  1.04  $  0.67 
    Diluted $  0.38  $  0.25   $  1.01  $  0.65 
 
Weighted average shares 11,604,000  11,510,000  11,606,000  11,400,000 
 
Weighted average shares 11,900,000  11,725,000  11,867,000  11,617,000 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  December 31,
2010      		 March 31, 
2010     
Cash $   3,352  $   1,534 
Finance receivables, net 222,309  202,440 
Other assets 11,066  10,162 
     
  Total assets $236,727  $214,136 
     
Line of credit $118,017  $107,275 
Other Liabilities 8,511  9,424 
 
  Total Liabilities 126,528  116,699 
 
Shareholders' equity 110,199  97,437 
 
Total Liabilities and shareholders' equity $236,727   $214,136  
 

Portfolio Summary Three months ended
December 31,		 Nine months ended
December 31,
  2010      2009      2010      2009     
Average finance receivables, net of unearned interest (1) $255,571,347  $226,321,020  $247,650,478  $221,581,423 
Average indebtedness (2) $117,009,444  $110,060,915  $112,860,116  $106,465,014 
Interest and fee income on finance receivables (3) $  15,984,880  $  14,354,022  $  46,649,661  $  42,166,002 
Interest Expense 1,382,950  1,079,044  4,372,080  3,645,282 
Net Interest and fee income on finance receivables $14,601,930  $13,274,978  $42,277,581  $38,520,720 
Weighted average contractual rate (4) 23.48%  23.41%  23.45%  23.60% 
Average cost of borrowed funds (2) 4.73%  3.92%  5.17%  4.57% 
Gross portfolio yield (5) 25.02%  25.37%  25.12%  25.37% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest		 2.16 %  1.91%  2.35%  2.19% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest		 1.88%  5.34%  2.43%  5.77% 
Net portfolio yield (5) 20.98%  18.12%  20.34%  17.41% 
Marketing, salaries, employee benefits, depreciation
  and administrative expenses as a percentage of
  average finance receivables, net of unearned interest (6)		 9.69%  10.12%  9.99%  10.38% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (7)		 11.29%  8.00%  10.35%  7.03% 
Write-off to liquidation (8) 7.20%  11.27%  6.97%  11.07% 
Net charge-off percentage (9) 5.39%  8.39%  5.11%  8.12% 
 
Note:  All three and nine 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 $55,000 for both the three-month periods ended December 31, 2010 and 2009 and $173,000 and $164,000
           during the nine-month periods ended December 31, 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
December 31, 2010 $ 353,963,564 $ 10,065,353

$ 2,807,904

 $ 935,688 $ 13,808,945
    2.84% 0.79% 0.26% 3.89%
   
December 31, 2009 $ 310,682,358 $ 11,437.840 $ 3,810,954 $ 1,819,393 $ 17,068,187
    3.68% 1.23% 0.59% 5.50%
Direct Loans  Gross Balance
Outstanding		 30 - 50 days 60 - 89 days 90 +days Total
December 31, 2010 $ 5,252,546 $ 63,680 $ 18,491 $ 14,378 $ 96,549
    1.21% 0.35% 0.27% 1.83%
   
December 31, 2009 $ 5,599,857 $ 141,300 $ 83,097 $ 44,320 $ 268,717
    2.52% 1.48% 0.79% 4.79%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest:
         
  Three months ended      
December 31,          		 Nine months ended       
December 31,           
  2010      2009      2010      2009     
Purchases $31,865,984  $26,227,449  $105,346,702 $87,579,696 
Weighted APR 23.48%  23.27%  23.45%  23.50% 
Average Discount 8.74%  9.08%  8.76%  9.07% 
Weighted average term (months) 49  48  49  48 
Average Loan $    9,841  $    9,486  $    9,869  $    9,465 
Number of contracts 3,238  2,765  10,675  9,253