2006 Annual Report

  From The President

Peter L. Vosotas, Chairman, CEO & President & Ralph Finkenbrink, CFO & Senior Vice President
I am pleased to report that our Company once again achieved outstanding financial results by recording its 16th consecutive year of record revenues and profits, during fiscal 2006. Last year marked our 21st year of business and our 19thyear as a publicly traded company. Several notable financial milestones were achieved by our Company during the past year.       

Several notable financial milestones were achieved by our Company during the past year. Net income for the year ended March 31, 2006 increased 31% to $10,559,000 as compared to $8,080,000 for the year ended March 31, 2005. Diluted Earnings per share increased by 26% to $ 1.01 as compared to $0.80 last year. Revenue for the year increased 30% to $42,677,000 as compared to $32,832,000 last year. Shareholder’s Equity grew 25% from $46,758,000 to $58,249,000. In addition, the Company announced record income and revenues in each quarter during the past fiscal year.

In keeping with the Company’s expansion strategy, Nicholas added seven new locations to our branch office network during the past fiscal year, bringing the total to 42. We built our fourth branch office in Atlanta, Georgia, our second office in Raleigh, North Carolina, our first office in Indianapolis, Indiana and our first office in Baltimore, Maryland. We also added a branch in Lexington, Kentucky a branch in Louisville, Kentucky and a branch in Miami, Florida. The company added two more branch offices in the first quarter of fiscal 2007, including a second branch in Baltimore, Maryland and a branch in New Port Richey, Florida. With the addition
of these new branches that opened in
May 2006, the Company now has 44 branches operating in 10 states.

On May 12th, 2005 the Company announced a three for two stock split to shareholders of record as of June 7, 2005. The stock split was payable on June 17, 2005, in the form of a 50% stock dividend.

For many years I have made the same statement regarding our accomplishments, “Our consistent financial performance hasn’t happened by accident. It is the result of many people working very hard over a long period of time. The automobiles of our employees are usually the first to arrive in the parking lot each morning and invariably the last to drive away at night.” To the credit of our employees this statement rings as true today as when it was first written. We, like all companies, have a challenge to find good, hardworking, and qualified people. When we do, we try our best to keep those who work hard and produce results. We reward our employees with excellent benefits, including performance based bonuses and strong career opportunities. As a result, we have very low employee turnover. Our ability to mold and retain a veteran team is one of the primary reasons for our success. The majority of our senior managers, accounting staff and data processing staff have been with the Company since its inception in the late 1980’s.
During the past year we

maintained our close

elationship with our current lenders, as we continued to address our long-term financing needs. In February of this year we announced an increase in our revolving credit line from $85 million to $100 million. Our creditors, led by Bank of America, include First Tennessee Bank, Hibernia National Bank and the Bank of Scotland.

We look forward with optimism toward the coming year. Any company that can say, “Our potential customer base is over $300 billion dollars a year”, should be excited about its business prospects. Our intention is to continue our strategy of steady controlled growth by increasing our existing branch loan portfolios and building new branch offices. We intend to continue growing our company organically. However we will stay alert to possible acquisition opportunities that may come to our attention.

Overall, we are very pleased with what Nicholas Financial has accomplished during the past year in spite of the distress caused by hurricanes here in Florida. Fortunately, none of our branch locations suffered the extreme catastrophic devastation experienced in the Alabama, Mississippi and Louisana gulf region. These climatic events however, have prompted our Company to reexamine and retool its disaster preparedness facilities. We have expended considerable monies this past year rebuilding our
network telecommunications

architecture as well as

a redundant computer disaster avoidance facility employing Verizon Communications to provide a private managed network allowing more security and flexibility. With the threat of hurricanes in this part of the country we would be foolish not to have made these important investments.

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 2006