T his past year, our 23rd, has been very difficult for those of us in the Financial Services industry. It seems that none of the institutions operating in this sector have escaped unharmed. Many have been badly bruised. Some have totally collapsed, while others have been severely wounded. In spite of these difficulties, we are very pleased to report our 18th consecutive year of record revenues, which rose 7% to $50,083,000 as compared to $46,709,000 in the previous year.

      Peter L. Vosotas              
Chairman, CEO & President       

Our profits dipped by 16% from $11,580,000 in 2007 to $9,672,000 in 2008, while Shareholder Equity grew 13% from $69.8 million to $78.6 million. Although 2008 wasn’t a banner year, it was still a pretty good year and we will try hard to make 2009 even better.

Last year I wrote that, “We believe that the coming years will be tough going for our fellow American consumers.” Little did I realize that it would be this tough. I believe that the primary factors are the dramatic increase in the cost of gasoline and the credit mess that many consumers have put themselves in. For several years credit has been too easy to obtain. This seemed to reach a tipping point with the sub prime housing disaster, which caused widespread difficulties not only within USA financial institutions but has spread to financial sectors throughout the world. As a result of this credit crisis, virtually all lenders have tightened up their lending guidelines, causing those in debt to pay up or face the consequences. In many instances the lender has suffered as much or even more than the debtor. Our customers, those with sub prime credit who need their vehicles to get to work, are struggling not only with their debt obligations, but also with the higher costs of everything, starting with the cost of gas for their vehicles. Fortunately less than 10% of our 30,000 plus customers are home owners and therefore are not affected by the mortgage crisis. During this challenging period we have examined everything that we do and how we do it. My suspicion is that this introspection is normal and should make us stronger and possibly smarter.

One very positive development, which we are now capitalizing on, has occurred as a result of the credit crunch. We are now attracting a much higher number of quality workers than we have been able to in the past. Some of these talented people are coming from our competition and who up to now have been unwilling to change companies. In many instances their company has either gone out of business or made considerable cut backs leaving them out of work or fearful of future layoffs. This recent change in the recruiting environment is allowing us to staff our company with several terrific people, making us stronger than ever. We believe this opportunity will help us to expand our company (very carefully), while our competitors pull back or in some cases abandon our markets.

We started the year with 47 branch offices and ended with 47. We closed two branch offices and added two. We built our second branch office in Indianapolis, Indiana and a second branch in Birmingham, Alabama. We also elected to close two (2) poorly performing branches during the year, one of our two locations in Baltimore and our lone office in Columbia, SC.

Closing branches is a very difficult process for us and usually includes a lot of agonizing. Opening branches on the other hand is a very uplifting process that invigorates the entire company. The Company currently has branches operating in 11 states. In addition, we are presently constructing our first branch in the state of Tennessee, which should be fully operational in June.

Last year we reported that we opened a Centralized Purchasing Center (CPC). The purpose of which was to augment and possibly reinforce the purely organic growth model of our branch office network. Thus far we have not been able to find another company that will sell us their branches. Therefore we continue to focus on the organic method of growth. The primary focus of the CPC department is to establish a presence for the Company in new markets via an alternative marketing method. To date we are reasonably pleased with the results produced by the CPC, as it has assisted troubled branches and is currently developing a market for our newest branch in Nashville, Tennessee. The CPC team is also working in underserved markets near several of our established branches, with very good results. As always, we will stay alert to possible acquisition opportunities that may come to our attention.

During the past year we maintained our close relationship with our current lenders, as we continued to address our long-term financing needs. Last November we announced an increase in our revolving credit line from $110 million to $115 million, along with a slight decrease in our borrowing rate. Our lenders led by Bank of America include First Tennessee Bank, Hibernia National Bank, the Bank of Scotland along with our newest lender, BMO Capital. In addition the maturity date of the credit line was extended to November 2010.

We are very proud of our employees, whose dedication, talent and loyalty have made Nicholas an important force in automobile financing. We are grateful for their ongoing efforts and for the support of our customers, bankers, vendors and shareholders. We remain determined to increase the value of our publicly traded stock. We are convinced that our shareholders will be rewarded if we continue to build the net worth of our Company each year.

To all of you who have invested in Nicholas, we wish to thank you for having continued faith in our Company. On behalf of our Board of Directors and our employees, we thank you for the confidence that you have entrusted in us.

Peter L. Vosotas
Chairman, CEO & President
June 2008