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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 000-50840



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QC
HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Kansas                                                         |  | 48-1209939                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                            |  |           
|----------------------------------------------------------- |  | ----------
|9401 Indian Creek Parkway, Suite 1500 Overland Park, Kansas |  | 66210     
|(Address of principal executive offices)                    |  | (Zip Code)

(913) 234-5000

(Registrants telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.     Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act).     Yes ̈No  x

The number of shares outstanding of the registrants common stock, as of July 31, 2007:

Common Stock $0.01 per share par value  19,266,699 Shares



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##### Table of Contents

QC HOLDINGS, INC.

Form 10-Q

June 30, 2007

Index



|                                                                                                                             |  |      |  | 
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | 
|                                                                                                                             |  | Page
|PART I  FINANCIAL INFORMATION                                                                                               |  |     
|                                                                                                                             | 
|Item 1.     Financial Statements                                                                                             |  |     
|                                                                                                                             | 
|Introductory Comments                                                                                                        |  | 1   
|                                                                                                                             | 
|Consolidated Balance Sheets - December 31, 2006 and June 30, 2007                                                            |  | 2   
|                                                                                                                             | 
|Consolidated Statements of Income - Three and Six Months Ended June 30, 2006 and 2007                                        |  | 3   
|                                                                                                                             | 
|Consolidated Statements of Cash Flows - Six Months Ended June 30, 2006 and 2007                                              |  | 4   
|                                                                                                                             | 
|Consolidated Statements of Changes in Stockholders Equity - Year Ended December 31, 2006 and Six Months Ended June 30, 2007 |  | 5   
|                                                                                                                             | 
|Notes to Consolidated Financial Statements                                                                                   |  | 6   
|                                                                                                                             | 
|Computation of Basic and Diluted Earnings per Share                                                                          |  | 7   
|                                                                                                                             | 
|Item 2.     Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 16  
|                                                                                                                             | 
|Item 3.     Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 28  
|                                                                                                                             | 
|Item 4.     Controls and Procedures                                                                                          |  | 28  
|                                                                                                                             | 
|PART II  OTHER INFORMATION                                                                                                  |  |     
|                                                                                                                             | 
|Item 1.     Legal Proceedings                                                                                                |  | 29  
|                                                                                                                             | 
|Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds                                                      |  | 29  
|                                                                                                                             | 
|Item 4.     Submission of Matters to a Vote of Security Holders                                                              |  | 29  
|                                                                                                                             | 
|Item 6.     Exhibits                                                                                                         |  | 30  
|                                                                                                                             | 
|SIGNATURES                                                                                                                   |  | 31  



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##### Table of Contents

QC HOLDINGS, INC.

FORM 10-Q

JUNE 30, 2007

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

INTRODUCTORY COMMENTS

The consolidated financial statements included in this report have been prepared by QC
Holdings, Inc. (the Company or QC), without audit, under the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted under those rules and regulations, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. These
consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, as well as Managements Discussion and Analysis of Financial Condition and Results of Operations, included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006. Results for the three and six months ended June 30, 2007 are not necessarily indicative of the results expected for the full year 2007.



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##### Table of Contents

QC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated
Balance Sheets

(in thousands, except share and per share amounts)



|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                                                            |  | December 31, 2006 |         |   | June 30, 2007 |  
|                                                                                                                                                                                                            |  |                  
|                                                                                                                                                                                                            |  |                   |         |   | Unaudited     |  
|ASSETS                                                                                                                                                                                                      |  |                   |         |   |               |   |         |  
|                                                                                                                                                                                                            |  |                  
|Current assets:                                                                                                                                                                                             |  |                   |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                                                                   |  | $                 | 23,446  |   |               | $ | 19,261  |  
|Loans receivable, less allowance for losses of $2,982 at December 31, 2006 and $3,721 at June 30, 2007                                                                                                      |  |                   | 66,018  |   |               |   | 63,363  |  
|Prepaid expenses and other current assets                                                                                                                                                                   |  |                   | 3,028   |   |               |   | 4,013   |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total current assets                                                                                                                                                                                        |  |                   | 92,492  |   |               |   | 86,637  |  
|Property and equipment, net                                                                                                                                                                                 |  |                   | 31,311  |   |               |   | 28,432  |  
|Goodwill                                                                                                                                                                                                    |  |                   | 14,492  |   |               |   | 15,756  |  
|Other assets, net                                                                                                                                                                                           |  |                   | 4,652   |   |               |   | 4,730   |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total assets                                                                                                                                                                                                |  | $                 | 142,947 |   |               | $ | 135,555 |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|                                                                                                                                                                                                            |  |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                        |  |                   |         |   |               |   |         |  
|                                                                                                                                                                                                            |  |                  
|Current liabilities:                                                                                                                                                                                        |  |                   |         |   |               |   |         |  
|Accounts payable                                                                                                                                                                                            |  | $                 | 909     |   |               | $ | 634     |  
|Accrued expenses and other liabilities                                                                                                                                                                      |  |                   | 3,233   |   |               |   | 4,876   |  
|Accrued compensation and benefits                                                                                                                                                                           |  |                   | 5,668   |   |               |   | 5,780   |  
|Deferred revenue                                                                                                                                                                                            |  |                   | 4,558   |   |               |   | 5,260   |  
|Income taxes payable                                                                                                                                                                                        |  |                   | 531     |   |               |   |         |  
|Dividends payable                                                                                                                                                                                           |  |                   | 1,975   |   |               |   |         |  
|Debt due within one year                                                                                                                                                                                    |  |                   | 16,300  |   |               |   | 10,500  |  
|Deferred income taxes                                                                                                                                                                                       |  |                   | 1,742   |   |               |   | 1,086   |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total current liabilities                                                                                                                                                                                   |  |                   | 34,916  |   |               |   | 28,136  |  
|                                                                                                                                                                                                            |  |                  
|Deferred income taxes                                                                                                                                                                                       |  |                   | 2,645   |   |               |   | 1,762   |  
|Other non-current liabilities                                                                                                                                                                               |  |                   | 598     |   |               |   | 690     |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total liabilities                                                                                                                                                                                           |  |                   | 38,159  |   |               |   | 30,588  |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|                                                                                                                                                                                                            |  |                  
|Commitments and contingencies                                                                                                                                                                               |  |                   |         |   |               |   |         |  
|                                                                                                                                                                                                            |  |                  
|Stockholders' equity:                                                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Common stock, $0.01 par value: 75,000,000 shares authorized; 20,700,250 shares issued and 19,501,300 outstanding at December 31, 2006;
20,700,250 shares issued and 19,263,649 outstanding at June 30, 2007 |  |                   | 207     |   |               |   | 207     |  
|Additional paid-in capital                                                                                                                                                                                  |  |                   | 70,227  |   |               |   | 69,731  |  
|Retained earnings                                                                                                                                                                                           |  |                   | 49,284  |   |               |   | 53,957  |  
|Treasury stock, at cost                                                                                                                                                                                     |  |                   | (14,930 | ) |               |   | (18,928 | )
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total stockholders' equity                                                                                                                                                                                  |  |                   | 104,788 |   |               |   | 104,967 |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  
|Total liabilities and stockholders' equity                                                                                                                                                                  |  | $                 | 142,947 |   |               | $ | 135,555 |  
|                                                                                                                                                                                                            |  |                   |         |   |               |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

QC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated
Statements of Income

(in thousands, except per share amounts)

(Unaudited)



|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|----------------------------------------------------- |  | --------------------------- | ------ | ------------------------- | ---- | - | ------ |  | - | ------ | - |  | - | ------
|                                                      |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                      |  | 2006                        |        |                           | 2007 |   | 2006   |  |   | 2007  
|Revenues                                              |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Payday loan fees                                      |  | $                           | 35,713 |                           |      | $ | 44,308 |  | $ | 69,400 |   |  | $ | 85,888
|Other                                                 |  |                             | 4,054  |                           |      |   | 6,936  |  |   | 8,799  |   |  |   | 13,875
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Total revenues                                        |  |                             | 39,767 |                           |      |   | 51,244 |  |   | 78,199 |   |  |   | 99,763
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|                                                      |  |                             |        |                          
|Branch expenses                                       |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Salaries and benefits                                 |  |                             | 10,856 |                           |      |   | 11,433 |  |   | 21,568 |   |  |   | 23,310
|Provision for losses                                  |  |                             | 9,380  |                           |      |   | 14,205 |  |   | 14,623 |   |  |   | 20,680
|Occupancy                                             |  |                             | 5,463  |                           |      |   | 6,139  |  |   | 11,001 |   |  |   | 14,055
|Depreciation and amortization                         |  |                             | 1,230  |                           |      |   | 1,209  |  |   | 2,491  |   |  |   | 2,436 
|Other                                                 |  |                             | 3,675  |                           |      |   | 3,484  |  |   | 7,019  |   |  |   | 7,306 
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Total branch expenses                                 |  |                             | 30,604 |                           |      |   | 36,470 |  |   | 56,702 |   |  |   | 67,787
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Branch gross profit                                   |  |                             | 9,163  |                           |      |   | 14,774 |  |   | 21,497 |   |  |   | 31,976
|                                                      |  |                             |        |                          
|Regional expenses                                     |  |                             | 3,043  |                           |      |   | 3,230  |  |   | 6,116  |   |  |   | 6,236 
|Corporate expenses                                    |  |                             | 5,272  |                           |      |   | 4,977  |  |   | 10,147 |   |  |   | 11,392
|Depreciation and amortization                         |  |                             | 332    |                           |      |   | 553    |  |   | 638    |   |  |   | 1,049 
|Interest expense (income), net                        |  |                             | (182   | )                         |      |   | 55     |  |   | (277   | ) |  |   | 170   
|Other expense, net                                    |  |                             | 145    |                           |      |   | 531    |  |   | 193    |   |  |   | 2,073 
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Income before taxes                                   |  |                             | 553    |                           |      |   | 5,428  |  |   | 4,680  |   |  |   | 11,056
|Provision for income taxes                            |  |                             | 257    |                           |      |   | 2,159  |  |   | 1,891  |   |  |   | 4,405 
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Net income                                            |  | $                           | 296    |                           |      | $ | 3,269  |  | $ | 2,789  |   |  | $ | 6,651 
|                                                      |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|                                                      |  |                             |        |                          
|Weighted average number of common shares outstanding: |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Basic                                                 |  |                             | 20,278 |                           |      |   | 19,461 |  |   | 20,378 |   |  |   | 19,500
|Diluted                                               |  |                             | 21,046 |                           |      |   | 19,997 |  |   | 21,135 |   |  |   | 20,026
|                                                      |  |                             |        |                          
|Earnings per share:                                   |  |                             |        |                           |      |   |        |  |   |        |   |  |   |       
|Basic                                                 |  | $                           | 0.01   |                           |      | $ | 0.17   |  | $ | 0.14   |   |  | $ | 0.34  
|Diluted                                               |  | $                           | 0.01   |                           |      | $ | 0.16   |  | $ | 0.13   |   |  | $ | 0.33  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

QC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated
Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                                                            |  |                          |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                            |  | Six Months EndedJune 30, |        
|                                                                                            |  | 2006                     |         |   | 2007 |  
|Cash flows from operating activities                                                        |  |                          |         |   |      |   |         |  
|Net income                                                                                  |  | $                        | 2,789   |   |      | $ | 6,651   |  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                          |         |   |      |   |         |  
|Depreciation and amortization                                                               |  |                          | 3,129   |   |      |   | 3,485   |  
|Provision for losses                                                                        |  |                          | 14,623  |   |      |   | 20,680  |  
|Deferred income taxes                                                                       |  |                          | (292    | ) |      |   | (1,471  | )
|Loss on disposal of property and equipment                                                  |  |                          | 193     |   |      |   | 2,073   |  
|Other, net                                                                                  |  |                          | 49      |   |      |   |         |  
|Stock-based compensation                                                                    |  |                          | 718     |   |      |   | 1,176   |  
|Stock option income tax benefits                                                            |  |                          | (416    | ) |      |   | (999    | )
|Changes in operating assets and liabilities:                                                |  |                          |         |   |      |   |         |  
|Loans receivable, net                                                                       |  |                          | (11,534 | ) |      |   | (16,672 | )
|Prepaid expenses and other assets                                                           |  |                          | (93     | ) |      |   | (336    | )
|Other assets                                                                                |  |                          | (645    | ) |      |   | 121     |  
|Accounts payable                                                                            |  |                          | (294    | ) |      |   | (275    | )
|Accrued expenses, other liabilities, accrued compensation and benefits and deferred revenue |  |                          | 1,031   |   |      |   | 1,890   |  
|Income taxes                                                                                |  |                          | (2,408  | ) |      |   | (144    | )
|Other non-current liabilities                                                               |  |                          | (70     | ) |      |   | (2      | )
|                                                                                            |  |                          |         |   |      |   |         |  
|Net operating                                                                               |  |                          | 6,780   |   |      |   | 16,177  |  
|                                                                                            |  |                          |         |   |      |   |         |  
|                                                                                            |  |                         
|Cash flows from investing activities                                                        |  |                          |         |   |      |   |         |  
|Purchase of property and equipment                                                          |  |                          | (3,784  | ) |      |   | (1,699  | )
|Proceeds from sale of property and equipment                                                |  |                          | 55      |   |      |   | 25      |  
|Acquisition costs, net                                                                      |  |                          |         |   |      |   | (3,266  | )
|                                                                                            |  |                          |         |   |      |   |         |  
|Net investing                                                                               |  |                          | (3,729  | ) |      |   | (4,940  | )
|                                                                                            |  |                          |         |   |      |   |         |  
|                                                                                            |  |                         
|Cash flows from financing activities                                                        |  |                          |         |   |      |   |         |  
|Borrowings under credit facility                                                            |  |                          |         |   |      |   | 10,500  |  
|Repayments under credit facility                                                            |  |                          |         |   |      |   | (16,300 | )
|Dividends to stockholders                                                                   |  |                          |         |   |      |   | (3,953  | )
|Repurchase of common stock                                                                  |  |                          | (5,846  | ) |      |   | (7,357  | )
|Exercise of stock options                                                                   |  |                          | 469     |   |      |   | 689     |  
|Excess tax benefits from stock-based payment arrangements                                   |  |                          | 416     |   |      |   | 999     |  
|Credit facility fees                                                                        |  |                          | 338     |   |      |   |         |  
|                                                                                            |  |                          |         |   |      |   |         |  
|Net financing                                                                               |  |                          | (4,623  | ) |      |   | (15,422 | )
|                                                                                            |  |                          |         |   |      |   |         |  
|                                                                                            |  |                         
|Cash and cash equivalents                                                                   |  |                          |         |   |      |   |         |  
|Net decrease                                                                                |  |                          | (1,572  | ) |      |   | (4,185  | )
|At beginning of year                                                                        |  |                          | 31,640  |   |      |   | 23,446  |  
|                                                                                            |  |                          |         |   |      |   |         |  
|At end of period                                                                            |  | $                        | 30,068  |   |      | $ | 19,261  |  
|                                                                                            |  |                          |         |   |      |   |         |  
|                                                                                            |  |                         
|Supplementary schedule of cash flow information                                             |  |                          |         |   |      |   |         |  
|Cash paid during the period for                                                             |  |                          |         |   |      |   |         |  
|Interest                                                                                    |  | $                        | 255     |   |      | $ | 376     |  
|Income taxes                                                                                |  |                          | 3,599   |   |      |   | 6,084   |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

QC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated
Statements of Changes in Stockholders Equity

(in thousands, except share amounts)



|                                       |  |                   |   |  |             |     |                          |   |        |                  |  |   |               |   |  |                          |         |   |  |   |         |  
|-------------------------------------- |  | ----------------- | - |  | ----------- | --- | ------------------------ | - | ------ | ---------------- |  | - | ------------- | - |  | ------------------------ | ------- | - |  | - | ------- | -
|                                       |  | Outstandingshares |   |  | Commonstock |     | Additionalpaid-incapital |   |        | Retainedearnings |  |   | Treasurystock |   |  | Totalstockholders'equity |        
|Balance, December 31, 2005             |  | 20,432,850        |   |  | $           | 207 |                          | $ | 71,687 |                  |  | $ | 42,050        |   |  | $                        | (3,128  | ) |  | $ | 110,816 |  
|Net income                             |  |                   |   |  |             |     |                          |   |        |                  |  |   | 9,209         |   |  |                          |         |   |  |   | 9,209   |  
|Common stock repurchases               |  | (1,316,800        | ) |  |             |     |                          |   |        |                  |  |   |               |   |  |                          | (16,544 | ) |  |   | (16,544 | )
|Dividends to stockholders              |  |                   |   |  |             |     |                          |   |        |                  |  |   | (1,975        | ) |  |                          |         |   |  |   | (1,975  | )
|Stock-based compensation expense       |  |                   |   |  |             |     |                          |   | 1,234  |                  |  |   |               |   |  |                          |         |   |  |   | 1,234   |  
|Stock option exercises                 |  | 385,250           |   |  |             |     |                          |   | (3,916 | )                |  |   |               |   |  |                          | 4,742   |   |  |   | 826     |  
|Tax impact of stock-based compensation |  |                   |   |  |             |     |                          |   | 1,156  |                  |  |   |               |   |  |                          |         |   |  |   | 1,156   |  
|Other, net                             |  |                   |   |  |             |     |                          |   | 66     |                  |  |   |               |   |  |                          |         |   |  |   | 66      |  
|                                       |  |                   |   |  |             |     |                          |   |        |                  |  |   |               |   |  |                          |         |   |  |   |         |  
|Balance, December 31, 2006             |  | 19,501,300        |   |  |             | 207 |                          |   | 70,227 |                  |  |   | 49,284        |   |  |                          | (14,930 | ) |  |   | 104,788 |  
|Net income                             |  |                   |   |  |             |     |                          |   |        |                  |  |   | 6,651         |   |  |                          |         |   |  |   | 6,651   |  
|Common stock repurchases               |  | (503,956          | ) |  |             |     |                          |   |        |                  |  |   |               |   |  |                          | (7,358  | ) |  |   | (7,358  | )
|Dividends to stockholders              |  |                   |   |  |             |     |                          |   |        |                  |  |   | (1,978        | ) |  |                          |         |   |  |   | (1,978  | )
|Issuance of restricted stock awards    |  | 26,305            |   |  |             |     |                          |   | (328   | )                |  |   |               |   |  |                          | 328     |   |  |   |        |  
|Stock-based compensation expense       |  |                   |   |  |             |     |                          |   | 1,176  |                  |  |   |               |   |  |                          |         |   |  |   | 1,176   |  
|Stock option exercises                 |  | 240,000           |   |  |             |     |                          |   | (2,343 | )                |  |   |               |   |  |                          | 3,032   |   |  |   | 689     |  
|Tax impact of stock-based compensation |  |                   |   |  |             |     |                          |   | 999    |                  |  |   |               |   |  |                          |         |   |  |   | 999     |  
|                                       |  |                   |   |  |             |     |                          |   |        |                  |  |   |               |   |  |                          |         |   |  |   |         |  
|Balance, June 30, 2007 (Unaudited)     |  | 19,263,649        |   |  | $           | 207 |                          | $ | 69,731 |                  |  | $ | 53,957        |   |  | $                        | (18,928 | ) |  | $ | 104,967 |  
|                                       |  |                   |   |  |             |     |                          |   |        |                  |  |   |               |   |  |                          |         |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

QC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1  The Company and Basis of Presentation

Business.The accompanying unaudited interim consolidated financial statements include the accounts of QC Holdings, Inc. and its wholly-owned
subsidiaries, QC Financial Services, Inc. and QC E-Services, Inc. (collectively, the Company). QC Financial Services, Inc. is the 100% owner of QC Financial Services of California, Inc., Financial Services of North Carolina, Inc., QC Financial
Services of Texas, Inc., Express Check Advance of South Carolina, LLC, QC Advance, Inc., Cash Title Loans, Inc. and QC Properties, LLC.

QC
Holdings, Inc. has provided various retail consumer financial products and services throughout its 23-year history. Since 1998, the Company has been primarily engaged in the business of providing short-term consumer loans, known as payday loans,
with principal values that typically range from $100 to $500. Payday loans provide customers with cash in exchange for a promissory note with a maturity of generally two to three weeks and supported by that customers personal check for the
aggregate amount of the cash advanced plus a fee. The fee varies from state to state, based on applicable regulations, and generally ranges from $15 to $20 per $100 borrowed. To repay the cash advance, customers may redeem their check by paying cash
or they may allow the check to be presented to the bank for collection.

The Company also provides other consumer financial products and
services, such as check cashing services, title loans, credit services, installment loans, money transfers and money orders. All of the Companys loans and other services are subject to state regulation, which vary from state to state, as well
as to federal and local regulation, where applicable. As of June 30, 2007, the Company operated 599 branches with locations in Alabama, Arizona, California, Colorado, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, Texas, Utah, Virginia, Washington and Wisconsin.

On
July 1, 2007, a new law went into effect in Oregon that caps the interest rate that may be charged on a payday loan to 36% per annum. As a result of the new regulation, the Company determined during the second quarter 2007 that it would
close its eight branches in Oregon during third quarter 2007. In addition, the Company closed 39 of its lower performing branches during first quarter 2007 largely due to regulatory changes that affected the prospects for the long-term profitability
of each branch. In accordance with accounting principles generally accepted in the United States (GAAP), the Company recorded approximately $3.5 million in pre-tax charges during the six months ended June 30, 2007, as a result of these
closings. The charges included $1.8 million in losses for disposal of assets, $1.6 million in occupancy costs for lease terminations and other related occupancy costs and $82,000 in other costs. See additional information in Note 4.

Basis of Presentation. The consolidated financial statements of QC Holdings, Inc. included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. The Consolidated Balance Sheet as of December 31, 2006 was
derived from the audited financial statements of the Company, but does not include all disclosures required by GAAP. These consolidated financial statements should be read in conjunction with the Companys audited financial statements and the
notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.



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In the opinion of the Companys management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal closing procedures) necessary to present fairly the financial position of the Company and its subsidiary companies as of December 31, 2006 and June 30, 2007, and the results of
operations and cash flows for the three months and six months ended June 30, 2006 and 2007, in conformity with GAAP.

Certain amounts
in the prior years consolidated financial statements have been reclassified to conform to the current year presentation. The results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of the
results to be expected for the full year 2007.

Note 2  Accounting Developments

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 is an interpretation of FASB
Statement No. 109, Accounting for Income Taxes and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The Company adopted FIN 48 on January 1, 2007. See additional information in Note 9.

In February
2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities using different measurement
techniques. SFAS 159 requires additional disclosures related to fair value measurements included in the entitys financial statements. This statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

In
September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurement (SFAS 157). SFAS 157 establishes a common definition for fair value to be applied to generally accepted accounting
principles guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company
is currently assessing the impact of SFAS 157 on its consolidated financial statements.

Note 3  Earnings Per Share

Basic and diluted earnings per share are computed by dividing income
available to common stockholders by the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share gives effect to all dilutive potential common shares that were outstanding during the year.
The effect of stock options and unvested restricted stock represent the only differences between the weighted average shares used for the basic earnings per share computation compared to the diluted earnings per share computation for each period
presented.



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The following table presents the computations of basic and diluted earnings per share for each of the
periods indicated (in thousands, except per share data).



|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|-------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                                               |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                                               |  | 2006                       |        | 2007                     |   | 2006   |  | 2007
|Net income                                                     |  | $                          | 296    |                          | $ | 3,269  |  | $    | 2,789  |  | $ | 6,651 
|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|Weighted average shares outstanding:                           |  |                            |        |                          |   |        |  |      |        |  |   |       
|Weighted average basic common shares outstanding               |  |                            | 20,278 |                          |   | 19,461 |  |      | 20,378 |  |   | 19,500
|Dilutive effect of stock options and unvested restricted stock |  |                            | 768    |                          |   | 536    |  |      | 757    |  |   | 526   
|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|Weighted average diluted common shares outstanding             |  |                            | 21,046 |                          |   | 19,997 |  |      | 21,135 |  |   | 20,026
|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                                               |  |                            |        |                         
|Basic earnings per share:                                      |  | $                          | 0.01   |                          | $ | 0.17   |  | $    | 0.14   |  | $ | 0.34  
|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|Diluted earnings per share:                                    |  | $                          | 0.01   |                          | $ | 0.16   |  | $    | 0.13   |  | $ | 0.33  
|                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       

Note 4  Significant Business Transactions

Closure of branches.During second quarter 2007, the Company decided to close all its branches in Oregon due to a new law that went into effect on
July 1, 2007 that effectively precludes payday loans. The Company expects to close its eight branches in Oregon by the end of third quarter 2007. In accordance with GAAP, the Company recorded approximately $517,000 in pre-tax charges during
second quarter 2007 associated with these expected closings. The charges included a $373,000 loss for the disposition of fixed assets, $102,000 for lease terminations and other related occupancy costs, $31,000 in severance and benefit costs and
$11,000 for other costs. In the Consolidated Statements of Income, the loss associated with the disposition of fixed assets is reported as an other expense, the costs associated with the lease terminations are included in occupancy costs and the
other costs of $11,000 are included in other branch expenses.

During first quarter 2007, the Company closed 39 of its lower performing
branches largely due to regulatory changes that affected the prospects for the long-term profitability of each branch. In accordance with GAAP, the Company recorded approximately $3.0 million in pre-tax charges during first quarter 2007 as a result
of these closings. The charges recorded included $1.5 million loss for the disposition of fixed assets, $1.5 million for lease terminations and other related occupancy costs and $40,000 for other costs. In the Consolidated Statements of Income, the
loss associated with the disposition of fixed assets is reported as an other expense, the costs associated with the lease terminations are occupancy costs and the other costs of $40,000 are included in other branch expenses.

The following table summarizes the accrued costs associated with the closure of branches and the activity related to those charges as of June 30,
2007(in thousands).



|                                  |  |                            |   |           |   |            |  |   |                         |   |  |   |    
|--------------------------------- |  | -------------------------- | - | --------- | - | ---------- |  | - | ----------------------- | - |  | - | ---
|                                  |  | Balance atDecember 31,2006 |   | Additions |   | Reductions |  |   | Balance atJune 30, 2007
|Lease and related occupancy costs |  | $                          |  |           | $ | 1,558      |  | $ | (901                    | ) |  | $ | 657
|Severance                         |  |                            |   |           |   | 31         |  |   |                         |   |  |   | 31 
|Other                             |  |                            |   |           |   | 51         |  |   | (51                     | ) |  |   |    
|                                  |  |                            |   |           |   |            |  |   |                         |   |  |   |    
|Total                             |  | $                          |  |           | $ | 1,640      |  | $ | (952                    | ) |  | $ | 688
|                                  |  |                            |   |           |   |            |  |   |                         |   |  |   |    

As of June 30, 2007, the balance of $688,000 for accrued costs associated with the closure of
branches is included as a current liability on the Consolidated Balance Sheet as the Company expects that the liabilities for these costs will be settled by December 31, 2007.



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Acquisitions.During the first six months of 2007, the Company acquired 13 branches and certain
assets, in four separate acquisitions, for a total of $3.3 million, which included net book value of depreciable assets of approximately $204,000 and loans receivable of approximately $1.4 million. In connection with an acquisition of eight branches
in Missouri, the Company closed six of the branches acquired and transferred the receivable balances to existing locations. The Company used the purchase method of accounting. The excess of the total acquisition cost over the fair value of the net
assets acquired totaled $1.9 million. Of this amount, the Company allocated $1.3 million to goodwill, $388,000 to customer relationships and $206,000 to non-compete agreements. The purchase price allocations with respect to these acquisitions have
been completed. See additional information in Note 8. The pro forma results of operations have not been presented because the results of operations for the Company would not have been materially different from those reported for the first six months
ended June 30, 2007.

On December 1, 2006, the Company acquired all of the issued and outstanding membership interests in Express
Check Advance of South Carolina, LLC (ECA). The results of ECAs operations have been included in the consolidated financial statements since that date. ECA currently operates 50 payday loan branches in South Carolina. As a result of the
acquisition, the Company has established a significant presence in South Carolina. The aggregate purchase price was $16.3 million, net of cash acquired. The acquisition was funded with a draw on the Companys revolving credit facility, which
was repaid during first quarter 2007.

Note 5  Allowance for Doubtful Accounts and Provision for Losses

When the Company enters into a payday loan with a customer, the Company records a loan receivable for the amount loaned to the customer plus the fee
charged by the Company, which varies from state to state based on applicable regulations.

The following table summarizes certain data with
respect to the Companys payday loans:



|                                              |  |                            |        |                          |   |        |  |      |        |  |   |       
|--------------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                              |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                              |  | 2006                       |        | 2007                     |   | 2006   |  | 2007
|Average loan to customer (principal plus fee) |  | $                          | 360.41 |                          | $ | 361.22 |  | $    | 360.25 |  | $ | 361.99
|Average fee received by the Company           |  | $                          | 53.21  |                          | $ | 51.94  |  | $    | 53.03  |  | $ | 52.11 
|Average term of the loan (days)               |  |                            | 16     |                          |   | 15     |  |      | 16     |  |   | 16    

When checks are presented to the bank for payment and returned as uncollected, all accrued fees,
interest and outstanding principal are charged-off as uncollectible, generally within 16 days after their due date. Accordingly, payday loans included in the receivable balance at any given point in time are typically not older than 30 days. These
charge-offs are recorded as expense through the provision for losses. Any recoveries on losses previously charged to expense are recorded as a reduction to the provision for losses in the period recovered. During the six months ended June 30,
2007, the Company received approximately $1.8 million from the sale of certain payday loan receivables that the Company had previously charged-off. The sale was recorded as a credit to the overall loss provision, which is consistent with the
Companys policy for recording recoveries.

With respect to the loans receivable at the end of each reporting period, the Company
maintains an aggregate allowance for loan losses (including fees and interest) for payday loans, title loans and installment loans at levels estimated to be adequate to absorb estimated incurred losses in the respective outstanding loan portfolios.
The Company does not specifically reserve for any individual loan. The Company aggregates payday loans, title loans and installment loans for purposes of computing the loss allowance based on very similar historical averages of uncollectible amounts
as a percentage of volume for each type of loan (generally ranging from 2% to 4% of the total volume). For purposes of the allowance calculation, installment loans are included with payday loans and title loans based on the expectation that the loss
experience for installment loans will be similar to payday loans and title loans.



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##### Table of Contents

The following tables summarize the activity in the allowance for loan losses and the provision for losses
during the three and six months ended June 30, 2006 and 2007 (in thousands):



|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                   |  | Three Months EndedJune 30,  |        |   | Six Months EndedJune 30,  |  
|Allowance for loan losses                                                                                                          |  | 2006                        |        |   | 2007                      |   |         | 2006 |  |   | 2007    |  
|Balance, beginning of period                                                                                                       |  | $                           | 1,049  |   |                           | $ | 1,770   |      |  | $ | 1,705   |   |  | $ | 2,982   |  
|Adjustment to provision for losses based on evaluation of outstanding receivables                                                  |  |                             | 731    |   |                           |   | 1,951   |      |  |   | 75      |   |  |   | 739     |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Balance, end of period                                                                                                             |  | $                           | 1,780  |   |                           | $ | 3,721   |      |  | $ | 1,780   |   |  | $ | 3,721   |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|                                                                                                                                   |  |                            
|                                                                                                                                   |  | Three Months EndedJune 30,  |        |   | Six Months EndedJune 30,  |  
|Provision for losses                                                                                                               |  | 2006                        |        |   | 2007                      |   |         | 2006 |  |   | 2007    |  
|Charged-off to expense                                                                                                             |  | $                           | 17,335 |   |                           | $ | 23,358  |      |  | $ | 34,115  |   |  | $ | 44,404  |  
|Recoveries                                                                                                                         |  |                             | (8,696 | ) |                           |   | (11,114 | )    |  |   | (19,518 | ) |  |   | (24,483 | )
|Adjustment to provision for losses based on evaluation of outstanding receivables and credit service obligation at period end      |  |                             | 741    |   |                           |   | 1,961   |      |  |   | 26      |   |  |   | 759     |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Balance, end of period                                                                                                             |  | $                           | 9,380  |   |                           | $ | 14,205  |      |  | $ | 14,623  |   |  | $ | 20,680  |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Note 6  Other Revenues  The components of Other revenues as reported in the statements of
income are as follows (in thousands): | 
|                                                                                                                                   |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                                                                                                                                   |  | 2006                        |        |   | 2007                      |   |         | 2006 |  |   | 2007    |  
|Check cashing fees                                                                                                                 |  | $                           | 1,455  |   |                           | $ | 1,461   |      |  | $ | 3,813   |   |  | $ | 3,633   |  
|Title loan fees                                                                                                                    |  |                             | 1,158  |   |                           |   | 1,088   |      |  |   | 2,250   |   |  |   | 2,201   |  
|Credit service fees                                                                                                                |  |                             | 781    |   |                           |   | 1,681   |      |  |   | 1,484   |   |  |   | 3,121   |  
|Installment loan fees                                                                                                              |  |                             | 131    |   |                           |   | 2,068   |      |  |   | 131     |   |  |   | 3,593   |  
|Other fees                                                                                                                         |  |                             | 529    |   |                           |   | 638     |      |  |   | 1,121   |   |  |   | 1,327   |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total                                                                                                                              |  | $                           | 4,054  |   |                           | $ | 6,936   |      |  | $ | 8,799   |   |  | $ | 13,875  |  
|                                                                                                                                   |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  

Note 7  Property and Equipment

Property and equipment consisted of the following (in thousands):



|                                                |  |                   |         |   |               |   |         |  
|----------------------------------------------- |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                |  | December 31, 2006 |         |   | June 30, 2007 |  
|                                                |  |                  
|Buildings                                       |  | $                 | 2,540   |   |               | $ | 2,540   |  
|Leasehold improvements                          |  |                   | 21,767  |   |               |   | 20,926  |  
|Furniture and equipment                         |  |                   | 22,124  |   |               |   | 22,323  |  
|Vehicles                                        |  |                   | 772     |   |               |   | 847     |  
|                                                |  |                   |         |   |               |   |         |  
|                                                |  |                   | 47,203  |   |               |   | 46,636  |  
|Less: Accumulated depreciation and amortization |  |                   | (15,892 | ) |               |   | (18,204 | )
|                                                |  |                   |         |   |               |   |         |  
|Total                                           |  | $                 | 31,311  |   |               | $ | 28,432  |  
|                                                |  |                   |         |   |               |   |         |  



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In February 2005, the Company entered into a seven-year lease to relocate its corporate headquarters to
office space in Overland Park, Kansas. As part of the lease agreement, the Company received a tenant allowance from the landlord for leasehold improvements totaling $976,000. The tenant allowance was recorded by the Company as a deferred rent
liability and is being amortized as a reduction of rent expense over the life of the lease. As of December 31, 2006, the balance of the deferred rent liability was approximately $737,000, of which $598,000 is classified as a non-current
liability. As of June 30, 2007, the balance of the deferred rent liability was approximately $667,000 of which $528,000 is classified as a non-current liability.

Note 8  Goodwill and Intangible Assets

Goodwill.The following table summarizes the
changes in the carrying amount of goodwill (in thousands):



|                               |  |                  |        |              |   |       
|------------------------------ |  | ---------------- | ------ | ------------ | - | ------
|                               |  | December 31,2006 |        | June 30,2007
|Balance at beginning of period |  | $                | 7,265  |              | $ | 14,492
|Acquisitions                   |  |                  | 7,227  |              |   | 1,264 
|                               |  |                  |        |              |   |       
|Balance at end of period       |  | $                | 14,492 |              | $ | 15,756
|                               |  |                  |        |              |   |       

Intangible Assets.The following table summarizes intangible assets (in
thousands):



|                               |  |                  |       |   |              |   |       |  
|------------------------------ |  | ---------------- | ----- | - | ------------ | - | ----- | -
|                               |  | December 31,2006 |       |   | June 30,2007 |  
|Intangible assets:             |  |                  |       |   |              |   |       |  
|Customer relationships         |  | $                | 1,915 |   |              | $ | 2,303 |  
|Non-compete agreements         |  |                  | 705   |   |              |   | 911   |  
|Trade names                    |  |                  | 600   |   |              |   | 600   |  
|Debt issue costs               |  |                  | 416   |   |              |   | 416   |  
|Other                          |  |                  | 15    |   |              |   | 15    |  
|                               |  |                  |       |   |              |   |       |  
|Gross carrying amount          |  |                  | 3,651 |   |              |   | 4,245 |  
|Less: Accumulated amortization |  |                  | (208  | ) |              |   | (614  | )
|                               |  |                  |       |   |              |   |       |  
|Net intangible assets          |  | $                | 3,443 |   |              | $ | 3,631 |  
|                               |  |                  |       |   |              |   |       |  

Intangible assets at December 31, 2006 and June 30, 2007 include customer relationships,
non-compete agreements, trade names and debt financing costs. Customer relationships are amortized using the straight-line method over the weighted average useful lives ranging from 4 to 15 years. Non-compete agreements are currently amortized using
the straight-line method over the term of the agreements, ranging from three to five years. The amount recorded for trade names is considered an indefinite life intangible and is not subject to amortization. Costs paid to obtain debt financing are
amortized over the term of each related debt agreement using the straight-line method, which approximates the effective interest method.

Note 9 
Income taxes

On January 1, 2007, the Company adopted FIN 48. Prior to the adoption of FIN 48, the Company had accrued sufficient
liabilities for unrecognized tax benefits under the provisions of Statement of Financial Accounting Standard No. 5, Accounting for Contingencies and therefore no adjustments to retained earnings were necessary as a result of
the implementation of FIN 48. As of December 31, 2006 and June 30, 2007, the accrued liability for unrecognized tax benefits was approximately $150,000. The amount of unrecognized tax benefits that, if recognized, would affect the
effective tax rate is approximately $150,000.

The Company records accruals for interest and penalties related to unrecognized tax benefits
in interest expense and operating expense, respectively. As of June 30, 2007, the amount of accrued interest and penalties was approximately $40,000 and $25,000, respectively.



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In the ordinary course of business, many transactions occur for which the ultimate tax outcome is
uncertain. In addition, respective tax authorities periodically audit our income tax returns. These audits examine our significant tax filing positions, including the timing and amounts of deductions and the allocation of income among tax
jurisdictions. During 2006, the Company settled two open tax years, 2003 and 2004, which were undergoing audit by the United States Internal Revenue Service. The 2005 and 2006 federal income tax returns are the only open tax years that remain
subject to potential future audit. State income tax returns for all years after 1999 are subject to potential future audit by tax authorities in the Companys state tax jurisdictions.

The Company is currently being audited in one state jurisdiction. It is reasonably possible that the Company will settle the audit in this particular
state jurisdiction within 12 months after the reporting date.

Note 10  Credit Services Organization

Payday loans are originated by the Company at all of its branches, except branches in Texas. For its locations in Texas, the Company began operating as a
credit service organization (CSO), through one of its subsidiaries, in September 2005. As a CSO, the Company acts as a credit services organization on behalf of consumers in accordance with Texas laws. The Company charges the consumer a fee for
arranging for an unrelated third-party to make a loan to the consumer and for providing related services to the consumer, including a guarantee of the consumers obligation to the third-party lender. The Company also services the loan for the
lender. The CSO fee is recognized ratably over the term of the loan. The Company is not involved in the loan approval process or in determining the loan approval procedures or criteria. As a result, loans made by the lender are not included in the
Companys loans receivable balance and are not reflected in the Consolidated Balance Sheets. As noted above, however, the Company absorbs all risk of loss through its guarantee of the consumers loan from the lender. As of
December 31, 2006 and June 30, 2007, the consumers had total loans outstanding with the lender of approximately $2.2 million and $2.6 million, respectively. Because of the economic exposure for potential losses related to the guarantee of
these loans, the Company records a payable to reflect the anticipated losses related to uncollected loans. The payable is recognized at its fair value pursuant to FASB Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.Changes in the liability are recognized through the provision for loan losses on the Consolidated Statements of Income. The balance of the liability for
estimated losses reported in accrued liabilities was approximately $100,000 as of December 31, 2006 and $120,000 at June 30, 2007.

Note 11
 Credit Facility

On January 19, 2006, the Company entered into a credit agreement with a syndicate of banks, which provides
for a revolving line of credit (including provisions permitting the issuance of letters of credit) in the aggregate principal amount of up to $45.0 million (the credit facility). The credit facility is guaranteed by each subsidiary and is secured by
all the capital stock of each subsidiary of the Company and all personal property (including, without limitation, all present and future accounts receivable, instruments, deposit accounts, investment property and the proceeds thereof, and general
intangibles including intellectual property). Borrowings under the facility are available based on two types of loans, Base Rate loans or LIBOR Rate loans. Base Rate loans bear interest at the higher of the Prime Rate or the Federal Funds Rate.
LIBOR Rate loans bear interest at rates based on the LIBOR rate for the applicable loan period. The loan period for a LIBOR Rate loan may be one month, two months, three months or six months and the loan may be renewed upon notice to the agent
provided that no default has occurred. The credit facility has a grid that adjusts borrowing costs up or down based upon the Companys leverage ratio. Leverage ratio is defined as the ratio of total debt to EBITDA (earnings before interest,
provision for income taxes, depreciation and amortization and non-cash expenses related to equity-based compensation). An annual facility fee of 0.25% is required on the credit facility. Among other provisions, the Company has agreed in the credit
facility to maintain a fixed charge coverage ratio as of the end of each fiscal quarter of not less than 1.25 to 1, a leverage ratio (defined as the ratio of funded debt to EBITDA, as defined in credit agreement) not greater than 2.00 to 1, and a
minimum consolidated net worth of not less than $81.6 million, plus 75% of the Companys consolidated net income since January 2006. The credit facility expires on January 19, 2009.



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On October 30, 2006, the Company entered into an amendment to its credit agreement to amend certain
financial covenants that affect the Companys ability to repurchase shares of its common stock and pay dividends on its stock. The amendment also waived any defaults under the credit agreement (prior to the amendment) as a result of the
Companys repurchase of approximately $10.7 million of its common stock during third quarter 2006. The amendment provides for greater flexibility in repurchasing the Companys common stock within the parameters of the existing
authorization and removes the restriction on the Companys ability to pay dividends to its stockholders. As of June 30, 2007, the Company was in compliance with all debt covenants.

On December 1, 2006, the Company borrowed $16.3 million under the credit facility with a LIBOR Rate loan to fund the acquisition of ECA. The LIBOR
Rate loan had a loan term of three months. The weighted average interest rate on borrowings under the LIBOR Rate loan was 6.87% during first quarter 2007. As of December 31, 2006, the Company had $16.3 million outstanding under the credit
facility, which was classified as a current liability on the Consolidated Balance Sheet due to the short-term nature of the loan term. During first quarter 2007, the Company repaid the $16.3 million that was outstanding as of December 31, 2006.

During second quarter 2006, the Company borrowed $10.5 million under the credit facility to fund its operations. The weighted average
interest rate on borrowings under the LIBOR Rate loan was 7.40% during second quarter 2007. As of June 30, 2007, the Company had $10.5 million outstanding under the credit facility, which was classified as a current liability on the
Consolidated Balance Sheet due to the short-term nature of the borrowings.

Note 12  Stockholders Equity

Stock Repurchases. On July 31, 2007, the Companys board of directors increased the authorization limit of the Companys common
stock repurchase program to $40 million, subject to amendment of the Companys credit facility. In June 2007, the Companys board of directors extended the program through June 30, 2008. As of June 30, 2007, the Company has
repurchased 2.1 million shares at a total cost of approximately $27.5 million.

Dividends. On May 1, 2007, the
Companys board of directors declared a cash dividend of $0.10 per common share. The dividend amount of approximately $2.0 million was paid on May 31, 2007 to stockholders of record as of May 15, 2007. On July 31, 2007, the
Companys board of directors declared a cash dividend of $0.10 per common share. The dividend is payable on August 31, 2007, to stockholders of record as of August 15, 2007. The Company estimates that the total amount of the dividend
will be approximately $2.0 million.

Note 13  Stock-Based Compensation

Restricted stock grants. During January 2007, the Company granted 84,474 shares of restricted stock to various employees and non-employee directors
pursuant to restricted stock agreements. The grants consisted of 71,974 shares granted to employees that vest equally over four years and 12,500 shares granted to non-employee directors that vested immediately upon grant. The Company estimated that
the fair market value of these restricted stock grants was approximately $1.2 million. For the three and six months ended June 30, 2007, the Company recognized $63,000 and $308,000, respectively, in stock-based compensation expense related to
these restricted stock grants. As of June 30, 2007, there was $904,000 of total unrecognized compensation costs related to the restricted stock grants. The Company expects that these costs will be amortized over a weighted average period of 3.5
years.



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##### Table of Contents

A summary of all restricted stock activity under the equity compensation plans for the six months ended
June 30, 2007 is as follows:



|                                    |  |                 |   |  |                                      |      
|----------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                    |  | RestrictedStock |   |  | WeightedAverage GrantDate Fair Value
|Non-vested balance, January 1, 2007 |  | 98,765          |   |  | $                                    | 13.24
|Granted                             |  | 84,474          |   |  |                                      | 15.69
|Vested                              |  | (26,305         | ) |  |                                      | 11.90
|Forfeited                           |  | (2,438          | ) |  |                                      | 13.97
|                                    |  |                 |   |  |                                      |      
|Non-vested balance, June 30, 2007   |  | 154,496         |   |  | $                                    | 14.47
|                                    |  |                 |   |  |                                      |      

Note 14  Commitments and Contingencies

Litigation. The Company is subject to various legal proceedings arising from normal business operations. Although there can be no assurances,
based on the information currently available, management believes that it is probable that the ultimate outcome of each of the actions will not have a material adverse effect on the consolidated financial statements. However, an adverse outcome in
any of the actions could have a material adverse effect on the financial results of the Company in the period, which it is recorded.

Arizona. In 2005, one of the Companys Arizona customers filed a lawsuit against the Company in Superior Court of Pima County, Arizona, seeking class certification and challenging the validity of the Companys lending
practices in Arizona on a variety of theories, alleging that the loan violated the Arizona Deferred Presentment Companies Statute and asserting various other claims based in tort, contract and violations of state law. The Company removed the case to
federal court and filed a motion to compel arbitration. The Company and the customer have reached an oral agreement to settle the case for an immaterial amount. The Company expects this case to be dismissed with prejudice in the third quarter.

Missouri.On October 13, 2006, one of the Companys Missouri customers sued the Company in the Circuit Court of St. Louis
County, Missouri in a purported class action. The lawsuit alleges violations of the Missouri statute pertaining to unsecured loans under $500 and the Missouri Merchandising Practices Act. The lawsuit seeks monetary damages and a declaratory judgment
that the arbitration agreement with the plaintiff is not enforceable on a variety of theories. The Company has not filed an answer, but has moved to compel arbitration of this matter. Plaintiff secured the right to have discovery regarding the
Companys arbitration provision, however, prior to the courts ruling on the Companys motion. The court heard oral arguments on the Companys motion in June 2007. The Company is awaiting the courts ruling on the
Companys motion to compel arbitration.

New Mexico. In September 2005, the New Mexico Attorney General issued proposed
regulations that have the practical effect of limiting the fees and interest on payday loans to 54% per annum, thus effectively prohibiting payday loans in New Mexico. In January 2006, the Attorney General purported to adopt the regulations in
final form. The Company filed a Civil Complaint for Injunctive Relief and Declaratory Judgment against the New Mexico Attorney General in District Court in Bernalillo County, New Mexico.

The Attorney General and the parties to the lawsuits against the Attorney General (including the Company) agreed to stay those proceedings while the New
Mexico Financial Institutions Division (FID) had an opportunity to promulgate new regulations for the payday loan industry.

In June 2006,
the FID promulgated new regulations, which were scheduled to go into effect on August 31, 2006. On August 30, 2006, the Company, joined by other parties, received a permanent injunction of the FID regulations in state court in New Mexico.
As a result of this ruling, the FID is restrained from enforcing its regulations. The FID never perfected its appeal of the permanent injunction (after expressing its intent to do so), and in April 2007, the court entered an order dismissing the
FIDs appeal and making the injunction permanent.



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In March 2007, New Mexico adopted legislation (effective November 2007) that will, among other matters,
reduce the maximum fee that may be charged to a customer from $20.00 per $100.00 borrowed to $15.50 per $100.00 borrowed. The Company anticipates that this new legislation will effectively end all pending matters with the New Mexico Attorney General
and the FID, and the Company intends to dismiss all pending litigation it has filed against the New Mexico Attorney General.

North
Carolina. On February 8, 2005, the Company, two of its subsidiaries, including its subsidiary doing business in North Carolina, and Mr. Don Early, the Companys Chairman of the Board and Chief Executive Officer, were sued in
Superior Court of New Hanover County, North Carolina in a putative class action lawsuit filed by James B. Torrence, Sr. and Ben Hubert Cline, who were customers of a Delaware state-chartered bank for whom the Company provided certain services in
connection with the banks origination of payday loans in North Carolina, prior to the closing of the Companys North Carolina branches in fourth quarter 2005. The lawsuit alleges that the Company violated various North Carolina laws,
including the North Carolina Consumer Finance Act, the North Carolina Check Cashers Act, the North Carolina Loan Brokers Act, the state unfair trade practices statute and the state usury statute, in connection with payday loans made by the bank to
the two plaintiffs through the Companys retail locations in North Carolina. The lawsuit alleges that the Company made the payday loans to the plaintiffs in violation of various state statutes, and that if the Company is not viewed as the
actual lenders or makers of the payday loans, its services to the bank that made the loans violated various North Carolina statutes. Plaintiffs are seeking certification as a class, unspecified monetary damages, and treble damages and
attorneys fees under specified North Carolina statutes. Plaintiffs have not sued the bank in this matter and have specifically stated in the complaint that plaintiffs do not challenge the right of out-of-state banks to enter into loans with North
Carolina residents at such rates as the banks home state may permit, all as authorized by North Carolina and federal law. This case is in the preliminary stages.

There are three similar purported class action lawsuits filed in North Carolina against three other companies unrelated to the Company. In December 2005, the judge in those three cases (1) granted the
defendants motions to stay the purported class action lawsuits and to compel arbitration in accordance with the terms of the arbitration provisions contained in the consumer loan contracts, (2) ruled that the class action waivers in those
consumer loan contracts are valid, and (3) denied plaintiffs motions for class certifications. The plaintiffs in those three cases, who are represented by the same law firms as the plaintiffs in the case filed against the Company, have
appealed that ruling. The judge handling the lawsuit against the Company in North Carolina is the same judge who issued these three orders in December 2005. The Company has not had a ruling on the similar pending motions by the plaintiffs and the
Company in its North Carolina case. There is a stay in the North Carolina lawsuit, pending the outcome of the appeal in the other three North Carolina cases concerning the enforceability of the arbitration provision in the consumer contracts.
Accordingly, there will be no ruling on the Companys motion to enforce arbitration in North Carolina during the pendency of that appeal. In January 2007, the North Carolina Supreme Court heard the appeal in the three companion cases, although
it is unknown when the court will issue its ruling.

Note 15  Certain Concentrations of Risk

The Company is subject to regulation by federal and state governments, that affects the products and services provided by the Company, particularly payday
loans. As of June 30, 2007, the Company offered payday loans in 25 states throughout the United States. The level and type of regulation of payday loans varies greatly from state to state, ranging from states with no specific payday lending
legislation to other states with very strict guidelines and requirements.

Company branches located in the states of Missouri, California,
Arizona, South Carolina, Kansas and New Mexico represented approximately 24%, 13%, 8%, 7%, 5% and 5%, respectively, of total revenues for the six months ended June 30, 2007. To the extent that laws and regulations are passed that affect the
Companys ability to offer payday loans or the manner by which the Company offers its payday loans in any one of these states, the Companys financial position, results of operations and cash flows could be affected.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

The discussion below includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, our plans, strategies and prospects, both business and financial. All statements other than statements of current or historical fact contained in this
discussion are forward-looking statements. The words believe, expect, anticipate, should, would, could, plan, will, may, intend,
estimate, potential, continue or similar expressions or the negative of these terms are intended to identify forward-looking statements.

These forward-looking statements are based on our current expectations and are subject to a number of risks and uncertainties, which could cause actual
results to differ materially from those forward-looking statements. These risks include (1) changes in laws or regulations or governmental interpretations of existing laws and regulations governing consumer protection or payday lending
practices, (2) litigation or regulatory action directed towards us or the payday loan industry, (3) volatility in our earnings, primarily as a result of fluctuations in loan loss experience and the rate of growth in unit branches,
(4) negative media reports and public perception of the payday loan industry and the impact on federal and state legislatures and federal and state regulators, (5) changes in our key management personnel, (6) integration risks and
costs associated with contemplated and completed acquisitions, and (7) the other risks detailed under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities
and Exchange Commission.In light of these risks, uncertainties and assumptions, the forward-looking statements in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking
statements. When investors consider these forward-looking statements, they should keep in mind the risk factors and other cautionary statements in this discussion.

Our forward-looking statements speak only as of the date they are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.

The discussion in this item is intended to clarify and focus on our results of operations, certain changes in financial
position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included under Item 1 of this Form 10-Q. This discussion should be read in conjunction with these consolidated
financial statements, the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006, and the related notes thereto and is qualified by reference thereto.

EXECUTIVE SUMMARY

We operate primarily through our
wholly-owned subsidiaries, QC Financial Services, Inc and QC E-Services, Inc. QC Financial Services, Inc. is the 100% owner of QC Financial Services of California, Inc., Financial Services of North Carolina, Inc., QC Financial Services of Texas,
Inc., Express Check Advance of South Carolina, LLC, QC Advance, Inc., Cash Title Loans, Inc. and QC Properties, LLC.

We derive our
revenues primarily by providing short-term consumer loans, known as payday loans, which represents approximately 86% of our total revenues for the six months ended June 30, 2007. We also earn fees for various other financial services, such as
check cashing services, title loans, credit services, installment loans, money transfers and money orders. We operated 599 branches in 25 states at June 30, 2007. In all but one of these states, Texas, we fund our payday loans directly to the
customer and receive a fee. Fees charged to customers vary from state to state, generally ranging from $15 to $20 per $100 borrowed, and in most cases, are limited by state law. In Texas, through one of our subsidiaries, we operate as a CSO on
behalf of consumers in accordance with Texas laws. We charge the consumer a CSO fee for arranging for an unrelated third-party to make a loan to the consumer and for providing related services to the consumer, including a guarantee of the
consumers obligation to the third-party lender.



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##### Table of Contents

Our expenses primarily relate to the operations of our branch network. The most significant expenses
include salaries and benefits for our branch employees, provisions for losses and occupancy expense for our leased real estate. Regional and corporate expenses, including compensation of employees, professional fees and equity award expenses, are
our other primary costs.

We evaluate our branches based on revenue growth, gross profit contributions and loss ratio (which is losses as a
percentage of revenues), with consideration given to the length of time the branch has been open and its geographic location. We evaluate changes in comparable branch metrics on a routine basis to assess operating efficiency. We define comparable
branches as those branches that are open during the full periods for which a comparison is being made. For example, comparable branches for the quarterly analysis as of June 30, 2007 have been open at least 15 months on that date. We monitor
newer branches for their progress to profitability and rate of loan growth.

With respect to our cost structure, salaries and benefits are
one of our largest costs and are driven primarily by the addition of branches throughout the year and growth in loan volumes. Our provision for losses is also a significant expense. If a customers check is returned by the bank as uncollected,
we make an immediate charge-off to the provision for losses for the amount of the customers loan, which includes accrued fees and interest. Any recoveries on amounts previously charged off are recorded as a reduction to the provision for
losses in the period recovered. We have experienced seasonality in our operations, with the first and fourth quarters typically being our strongest periods as a result of broader economic factors, such as holiday spending habits at the end of each
year and income tax refunds during the first quarter.

According to the Community Financial Services Association of America (CFSA),
industry analysts estimate that the industry has grown to approximately 24,000 payday loan branches in the United States and these branches extend approximately $40 billion in short-term credit to millions of middle-class households that experience
cash-flow shortfalls between paydays. We believe our industry is highly fragmented as 10 companies operate approximately 8,500 branches in the United States.

With this fragmentation and industry growth, we believe there are opportunities to expand through acquisitions and new branch openings. We are actively identifying possible branch locations in numerous states in which
we currently operate and evaluating the regulatory environment and market potential in the various states in which we currently do not have branches. As we consider acquisitions and open new branches, there are various execution risks associated
with any such transactions. The following table sets forth our growth through de novo branch openings and branch acquisitions since January 1, 2002.



|                                      |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  |              |  
|------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ------------ | -
|                                      |  | 2002 |   |  | 2003 |   |  | 2004 |   |  | 2005 |   |  | 2006 |   |  | June 30,2007 |  
|Beginning branch locations            |  | 204  |   |  | 258  |   |  | 294  |   |  | 371  |   |  | 532  |   |  | 613          |  
|De novo branches opened during period |  | 55   |   |  | 45   |   |  | 54   |   |  | 174  |   |  | 46   |   |  | 22           |  
|Acquired branches during period       |  | 6    |   |  |      |   |  | 29   |   |  | 10   |   |  | 51   |   |  | 13           |  
|Branches closed during period         |  | (7   | ) |  | (9   | ) |  | (6   | ) |  | (23  | ) |  | (16  | ) |  | (49          | )
|                                      |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  |              |  
|Ending branch locations               |  | 258  |   |  | 294  |   |  | 371  |   |  | 532  |   |  | 613  |   |  | 599          |  
|                                      |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  |              |  

The growth of the payday loan industry has followed, and continues to be significantly affected
by, increasing acceptance of payday lending by state legislatures. We actively monitor and evaluate regulatory initiatives in each of the states and nationally, and are closely involved with the efforts of the CFSA. To the extent that states enact
legislation that negatively impacts payday lending, whether through preclusion, fee reduction or loan caps, our business could be adversely affected. For example, on July 1, 2007, a new law went into effect in Oregon that caps the interest rate
that may be charged on a payday loan to 36% per annum. As a result of the new regulation, we determined in the second quarter 2007 that we would close our eight branches in Oregon during the third quarter 2007. In addition, the Company closed
39 of our lower performing branches during first quarter 2007 largely due to regulatory changes that affected the prospects for the long-term profitability of each branch. As a result of these closings, we recorded approximately $3.5 million in
pre-tax charges for the six months ended June 30, 2007.



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Recent Accounting Developments

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose
to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets
and liabilities using different measurement techniques. SFAS 159 requires additional disclosures related to fair value measurements included in the entitys financial statements. This statement is effective for financial statements issued for
fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 is an interpretation of FASB Statement No. 109,
Accounting for Income Taxes and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 prescribes a recognition threshold and measurement attribute
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and
transition.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurement, (SFAS 157). SFAS 157 establishes a common definition for fair value to be applied to generally accepted accounting principles guidance requiring use of fair value, establishes a framework for measuring fair value, and expands
disclosure about such fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS 157 on our consolidated financial statements.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2007
Compared with the Three Months Ended June 30, 2006

The following table sets forth our results of operations for the three
months ended June 30, 2007 compared to the three months ended June 30, 2006:



|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|------------------------------ |  | -------------------------- | ------ | -------------------------- | ---- | - | ------ |  | ----- | ---- |  | ----- | -
|                               |  | Three Months EndedJune 30, |        | Three Months EndedJune 30, |     
|                               |  | 2006                       |        |                            | 2007 |   | 2006   |  |       | 2007 | 
|                               |  | (in thousands)             |        | (percentage of revenues)   |     
|Revenues                       |  |                            |        |                            |      |  
|Payday loan fees               |  | $                          | 35,713 |                            |      | $ | 44,308 |  | 89.8  | %    |  | 86.5  | %
|Other                          |  |                            | 4,054  |                            |      |   | 6,936  |  | 10.2  | %    |  | 13.5  | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Total revenues                 |  |                            | 39,767 |                            |      |   | 51,244 |  | 100.0 | %    |  | 100.0 | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Branch expenses                |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Salaries and benefits          |  |                            | 10,856 |                            |      |   | 11,433 |  | 27.3  | %    |  | 22.3  | %
|Provision for losses           |  |                            | 9,380  |                            |      |   | 14,205 |  | 23.6  | %    |  | 27.7  | %
|Occupancy                      |  |                            | 5,463  |                            |      |   | 6,139  |  | 13.7  | %    |  | 12.0  | %
|Depreciation and amortization  |  |                            | 1,230  |                            |      |   | 1,209  |  | 3.1   | %    |  | 2.4   | %
|Other                          |  |                            | 3,675  |                            |      |   | 3,484  |  | 9.3   | %    |  | 6.8   | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Total branch expenses          |  |                            | 30,604 |                            |      |   | 36,470 |  | 77.0  | %    |  | 71.2  | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Branch gross profit            |  |                            | 9,163  |                            |      |   | 14,774 |  | 23.0  | %    |  | 28.8  | %
|                               |  |                            |        |                           
|Regional expenses              |  |                            | 3,043  |                            |      |   | 3,230  |  | 7.7   | %    |  | 6.3   | %
|Corporate expenses             |  |                            | 5,272  |                            |      |   | 4,977  |  | 13.3  | %    |  | 9.7   | %
|Depreciation and amortization  |  |                            | 332    |                            |      |   | 553    |  | 0.8   | %    |  | 1.1   | %
|Interest expense (income), net |  |                            | (182   | )                          |      |   | 55     |  | (0.5  | )%   |  | 0.1   | %
|Other expense, net             |  |                            | 145    |                            |      |   | 531    |  | 0.4   | %    |  | 1.0   | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Income before taxes            |  |                            | 553    |                            |      |   | 5,428  |  | 1.3   | %    |  | 10.6  | %
|Provision for income taxes     |  |                            | 257    |                            |      |   | 2,159  |  | 0.6   | %    |  | 4.2   | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  
|Net income                     |  | $                          | 296    |                            |      | $ | 3,269  |  | 0.7   | %    |  | 6.4   | %
|                               |  |                            |        |                            |      |   |        |  |       |      |  |       |  



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##### Table of Contents

The following table sets forth selected financial and statistical information for the three months ended
June 30, 2006 and 2007:



|                                                                   |  |                            |         |   |      |   |         |  
|------------------------------------------------------------------ |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                   |  | Three Months EndedJune 30, |        
|                                                                   |  | 2006                       |         |   | 2007 |  
|Other Information:                                                 |  |                            |         |   |      |   |         |  
|Payday loan volume (in thousands)                                  |  | $                          | 251,003 |   |      | $ | 298,042 |  
|Average revenue per branch                                         |  |                            | 72,304  |   |      |   | 86,269  |  
|                                                                   |  |                           
|Average loan size (principal plus fee)                             |  | $                          | 360.41  |   |      | $ | 361.22  |  
|Average fees per loan                                              |  |                            | 53.21   |   |      |   | 51.94   |  
|                                                                   |  |                           
|Branch Information:                                                |  |                            |         |   |      |   |         |  
|Number of branches, beginning of period                            |  |                            | 549     |   |      |   | 588     |  
|De novo branches opened                                            |  |                            | 9       |   |      |   | 10      |  
|Acquired branches                                                  |  |                            |         |   |      |   | 5       |  
|Branches closed                                                    |  |                            | (7      | ) |      |   | (4      | )
|                                                                   |  |                            |         |   |      |   |         |  
|Number of branches, end of period                                  |  |                            | 551     |   |      |   | 599     |  
|                                                                   |  |                            |         |   |      |   |         |  
|Average number of branches open during period                      |  |                            | 550     |   |      |   | 594     |  
|                                                                   |  |                            |         |   |      |   |         |  
|                                                                   | 
|                                                                   |  | Three Months EndedJune 30, |        
|                                                                   |  | 2006                       |         |   | 2007 |  
|Comparable Branch Information (a):                                 |  |                            |         |   |      |   |         |  
|Total revenues generated by all comparable branches (in thousands) |  | $                          | 38,506  |   |      | $ | 46,154  |  
|Total number of comparable branches                                |  |                            | 500     |   |      |   | 500     |  
|Average revenue per comparable branch                              |  | $                          | 77,012  |   |      | $ | 92,308  |  

---

|(a) | Comparable branches are those branches that were open for all of the two periods being compared, which means the 15 months since March 31, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

Net income.For the three months ended June 30, 2007, net income was $3.3 million compared to $296,000 for the same period in 2006. As noted
above, we are closing our Oregon branches during the third quarter 2007 due to new legislation that was effective July 1, 2007. As a result of these closings, we recorded approximately $517,000 in pre-tax charges during second quarter 2007. The
charges recorded included $373,000 in losses on the disposition of fixed assets, $102,000 in occupancy costs for lease terminations and other related occupancy costs, $31,000 in severance and benefit costs and $11,000 in other costs. The low level
of net income for the second quarter 2006 reflected a high number of branches at the early stages of their lifecycle. Historically, newer branches generally have higher costs as a percentage of revenues because the new branch is establishing itself
in the community and collecting information about the customer base. A discussion of the various components of net income follows.

Revenues.For the three months ended June 30, 2007, revenues were $51.2 million, a 28.6% increase from $39.8 million during the three months ended June 30, 2006. The growth in revenues was primarily a result of higher
payday loan volumes, which reflects increases in the number of branches, the number of customer transactions and average loan size. We originated approximately $298.0 million through payday loans during second quarter 2007, which was an increase of
18.7% over the $251.0 million during second quarter 2006. The average loan (including fee) totaled $361.22 in second quarter 2007 versus $360.41 during second quarter 2006. Average fees received from customers per loan declined from $53.21 in second
quarter 2006 to $51.94 in second quarter 2007 due to legislative and regulatory changes affecting rates and to a decline in the fee rate as loan volumes increase in newer branches located in states that have lower fee structures, partially offset by
a higher average loan principal. Our average fee rate per $100.00 for second quarter 2007 was $16.79 compared to $17.32 in second quarter 2006.



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We anticipate that our average fee rate may continue to decline in 2007 as rates are modified based on
changing legislation or regulation and as we enter into or expand in states that have lower fee structures. In March 2007, New Mexico adopted legislation (effective November 2007) that will reduce the maximum fee that may be charged to a customer
from $20.00 per $100.00 borrowed to $15.50 per $100.00 borrowed. In addition, the new legislation restricts the total number of loans a customer may have and prohibits immediate loan renewals.

One manner by which we evaluate our branches is revenue growth, with consideration given to the length of time the branch has been open. We define
comparable branches as those branches that are open during the full periods for which a comparison is being made. For example, comparable branches for the quarterly analysis as of June 30, 2007 have been open at least 15 months. The following
table provides a summary of our revenues by comparable branches and new branches:



|                        |  |                            |        |      |   |       
|----------------------- |  | -------------------------- | ------ | ---- | - | ------
|                        |  | Three Months EndedJune 30,
|                        |  | 2006                       |        | 2007
|                        |  | (in thousands)            
|Comparable branches     |  | $                          | 38,506 |      | $ | 46,154
|Branches opened in 2006 |  |                            | 72     |      |   | 4,273 
|Branches opened in 2007 |  |                            |        |      |   | 763   
|Other (a)               |  |                            | 1,189  |      |   | 54    
|                        |  |                            |        |      |   |       
|Total                   |  | $                          | 39,767 |      | $ | 51,244
|                        |  |                            |        |      |   |       

---

|(a) | For the three months ended June 30, 2006, amount represents primarily closed branches
|--- | -------------------------------------------------------------------------------------

Our revenues from comparable branches increased by $7.7 million, from $38.5 million during second quarter 2006 to $46.2 million in second quarter 2007.
This increase is primarily attributable to the acceleration of revenues from our branches opened during 2005 and to growth in the installment loan product in our Illinois branches. Revenues from our 2005 group of branches improved 58.5% to $10.3
million for the second quarter 2007 versus $6.5 million in second quarter 2006.

During 2007, we believe the growth rate in comparable
branch revenue will be particularly affected by: (i) the benefits resulting from the aging of our 2005 and 2004 groups of branches; (ii) the negative effects resulting from the federal guidelines that effectively ban payday lending to
members of the military, which could reduce our revenues by approximately $2 million to $3 million; and (iii) the new legislation adopted in New Mexico (effective November 2007) that will reduce the fee rate from $20.00 per $100.00 to $15.50
per $100.00 borrowed and place restrictions on the number of loans a customer may have in New Mexico.

Revenues in second quarter 2007 also
include approximately $4.3 million from branches added during 2006, including the 50 South Carolina branches acquired in December 2006.

Revenues from check cashing, title loans, CSO fees, installment loans and other sources totaled $6.9 million during second quarter 2007, up approximately $2.8 million from the $4.1 million in the comparable prior year quarter. The following
table summarizes other revenues:



|                      |  |                            |       |                             |   |       |  |      |      |  |      |  
|--------------------- |  | -------------------------- | ----- | --------------------------- | - | ----- |  | ---- | ---- |  | ---- | -
|                      |  | Three Months EndedJune 30, |       | Three Months Ended June 30, |  
|                      |  | 2006                       |       | 2007                        |   | 2006  |  |      | 2007 | 
|                      |  | (in thousands)             |       | (percentage of revenues)    |  
|Check cashing fees    |  | $                          | 1,455 |                             | $ | 1,461 |  | 3.7  | %    |  | 2.9  | %
|Title loan fees       |  |                            | 1,158 |                             |   | 1,088 |  | 2.9  | %    |  | 2.1  | %
|Credit service fees   |  |                            | 781   |                             |   | 1,681 |  | 2.0  | %    |  | 3.3  | %
|Installment loan fees |  |                            | 131   |                             |   | 2,068 |  | 0.3  | %    |  | 4.0  | %
|Other fees            |  |                            | 529   |                             |   | 638   |  | 1.3  | %    |  | 1.2  | %
|                      |  |                            |       |                             |   |       |  |      |      |  |      |  
|Total                 |  | $                          | 4,054 |                             | $ | 6,936 |  | 10.2 | %    |  | 13.5 | %
|                      |  |                            |       |                             |   |       |  |      |      |  |      |  



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The decline in check cashing fees as a percentage of revenues reflects a higher rate of growth in payday
and installment loan revenues. The revenue increases in credit services fees and installment loans reflects the addition of new product offerings as credit services were offered in our Texas branches beginning in September 2005 and installment loans
were offered in our Illinois branches beginning in second quarter 2006.

Branch Expenses.Total branch expenses increased $5.9
million or 19.3%, from $30.6 million during second quarter 2006 to $36.5 million in second quarter 2007. Branch-level salaries and benefits increased by $500,000 for the three months ended June 30, 2007 compared to the same period in the prior
year primarily as a result of a 6.8% increase in field personnel associated with our new branches.

The provision for losses increased from
$9.4 million in second quarter 2006 to $14.2 million during second quarter 2007. Our loss ratio was 27.7% in second quarter 2007 versus 23.6% in second quarter 2006. The less favorable loss ratio quarter to quarter reflects higher charge-offs as a
percentage of revenues and a more challenging collection environment. Our charge-offs as a percentage of revenue were 45.6% during second quarter 2007 compared to 43.6% during second quarter 2006. Our collections as a percentage of charge-offs were
47.6% during second quarter 2007 compared to 50.2% during second quarter 2006. The increase in the charge-off ratio and the decline in the collections ratio reflect our focus on increasing revenues and the recent surge in gasoline prices. We
received approximately $850,000 from the sale of certain payday loan receivables during second quarter 2007 that had previously been written off.

Comparable branches totaled $13.3 million in loan losses during second quarter 2007, while branches opened during the last nine months of 2006 and the first half of 2007 had approximately $2.1 million in loan losses. In our comparable
branches, the loss ratio was 28.8% during second quarter 2007 compared to 24.0% for the same period in 2006.

Occupancy costs increased
from $5.5 million in second quarter 2006 to $6.1 million in second quarter 2007. Occupancy costs as a percentage of revenues declined from 13.7% in second quarter 2006 to 12.0% in second quarter 2007 due to the revenue increases quarter to quarter.
As noted above, we recorded a charge of $102,000 to occupancy expense during second quarter 2007 to reflect an estimate of the lease termination costs and other related occupancy costs associated with our decision to close our branches located in
Oregon.

Branch Gross Profit.Branch gross profit increased from $9.2 million in second quarter 2006 to $14.8 million in second
quarter 2007. Branch gross margin, which is branch gross profit as a percentage of revenues, increased from 23.0% during second quarter 2006 to 28.8% during second quarter 2007. The following table summarizes our branch gross profit by comparable
branches and new branches.



|                        |  |                            |        |   |      |   |        |  
|----------------------- |  | -------------------------- | ------ | - | ---- | - | ------ | -
|                        |  | Three Months EndedJune 30, |       
|                        |  | 2006                       |        |   | 2007 |  
|                        |  | (in thousands)             |       
|Comparable branches     |  | $                          | 10,118 |   |      | $ | 13,699 |  
|Branches opened in 2006 |  |                            | (300   | ) |      |   | 613    |  
|Branches opened in 2007 |  |                            |        |   |      |   | (257   | )
|Other (a)               |  |                            | (655   | ) |      |   | 719    |  
|                        |  |                            |        |   |      |   |        |  
|Total                   |  | $                          | 9,163  |   |      | $ | 14,774 |  
|                        |  |                            |        |   |      |   |        |  

---

|(a) | represents primarily closed branches
|--- | ------------------------------------

Comparable branches
during second quarter 2007 reported a gross margin of 29.7% versus 26.3% in second quarter 2006, with the improvements resulting from stronger results in the majority of states. The 78 branches added during the last nine months of 2006 reported a
gross profit of $613,000, the majority of which is from the 50 South Carolina branches acquired in December 2006.



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Regional and Corporate Expenses.Regional and corporate expenses decreased slightly from $8.3
million in the second quarter 2006 to $8.2 million during second quarter 2007. The lower level of expenses in second quarter 2007 reflects lower professional fees in the current quarter due to approximately $600,000 in costs during second quarter
2006 associated with evaluating a potential significant acquisition that did not materialize. The reduction in professional fees was partially offset by higher equity award compensation in second quarter 2007 for grants made in December 2006 and
January 2007 and salaries associated with a 6.1% increase in the average number of home office and regional personnel quarter-to-quarter.

Income Tax Provision. The effective income tax rate during second quarter 2007, decreased to 39.8% from 46.5% in prior years second quarter, primarily due to the effect of the permanent tax differences in second quarter 2006 on
a lower level of pre-tax income.

Six Months Ended June 30, 2007 Compared with the Six Months Ended June 30, 2006

The following table sets forth our results of operations for the six months ended June 30, 2007 compared to the six months ended June 30, 2006:



|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|------------------------------ |  | ------------------------ | ------ | ------------------------ | ---- | - | ------ |  | ----- | ---- |  | ----- | -
|                               |  | Six Months EndedJune 30, |        | Six Months EndedJune 30, |     
|                               |  | 2006                     |        |                          | 2007 |   | 2006   |  |       | 2007 | 
|                               |  | (in thousands)           |        | (percentage of revenues) |     
|Revenues                       |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Payday loan fees               |  | $                        | 69,400 |                          |      | $ | 85,888 |  | 88.7  | %    |  | 86.1  | %
|Other                          |  |                          | 8,799  |                          |      |   | 13,875 |  | 11.3  | %    |  | 13.9  | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Total revenues                 |  |                          | 78,199 |                          |      |   | 99,763 |  | 100.0 | %    |  | 100.0 | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Branch expenses                |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Salaries and benefits          |  |                          | 21,568 |                          |      |   | 23,310 |  | 27.6  | %    |  | 23.4  | %
|Provision for losses           |  |                          | 14,623 |                          |      |   | 20,680 |  | 18.7  | %    |  | 20.7  | %
|Occupancy                      |  |                          | 11,001 |                          |      |   | 14,055 |  | 14.1  | %    |  | 14.1  | %
|Depreciation and amortization  |  |                          | 2,491  |                          |      |   | 2,436  |  | 3.2   | %    |  | 2.4   | %
|Other                          |  |                          | 7,019  |                          |      |   | 7,306  |  | 9.0   | %    |  | 7.4   | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Total branch expenses          |  |                          | 56,702 |                          |      |   | 67,787 |  | 72.6  | %    |  | 68.0  | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Branch gross profit            |  |                          | 21,497 |                          |      |   | 31,976 |  | 27.4  | %    |  | 32.0  | %
|                               |  |                          |        |                         
|Regional expenses              |  |                          | 6,116  |                          |      |   | 6,236  |  | 7.8   | %    |  | 6.3   | %
|Corporate expenses             |  |                          | 10,147 |                          |      |   | 11,392 |  | 13.0  | %    |  | 11.4  | %
|Depreciation and amortization  |  |                          | 638    |                          |      |   | 1,049  |  | 0.8   | %    |  | 1.0   | %
|Interest expense (income), net |  |                          | (277   | )                        |      |   | 170    |  | (0.4  | )%   |  | 0.2   | %
|Other expense, net             |  |                          | 193    |                          |      |   | 2,073  |  | 0.2   | %    |  | 2.0   | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Income before taxes            |  |                          | 4,680  |                          |      |   | 11,056 |  | 6.0   | %    |  | 11.1  | %
|Provision for income taxes     |  |                          | 1,891  |                          |      |   | 4,405  |  | 2.4   | %    |  | 4.4   | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  
|Net income                     |  | $                        | 2,789  |                          |      | $ | 6,651  |  | 3.6   | %    |  | 6.7   | %
|                               |  |                          |        |                          |      |   |        |  |       |      |  |       |  



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The following table sets forth selected financial and statistical information for the six months ended
June 30, 2006 and 2007:



|                                              |  |                          |         |   |      |   |         |  
|--------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                              |  | Six Months EndedJune 30, |        
|                                              |  | 2006                     |         |   | 2007 |  
|Other Information:                            |  |                          |         |   |      |   |         |  
|Payday loan volume (in thousands)             |  | $                        | 482,701 |   |      | $ | 577,094 |  
|Average revenue per branch                    |  |                          | 144,279 |   |      |   | 164,625 |  
|                                              |  |                         
|Average loan size (principal plus fee)        |  | $                        | 360.25  |   |      | $ | 361.99  |  
|Average fees per loan                         |  |                          | 53.03   |   |      |   | 52.11   |  
|                                              |  |                         
|Branch Information:                           |  |                          |         |   |      |   |         |  
|Number of branches, beginning of period       |  |                          | 532     |   |      |   | 613     |  
|De novo branches opened                       |  |                          | 27      |   |      |   | 22      |  
|Acquired branches                             |  |                          |         |   |      |   | 13      |  
|Branches closed                               |  |                          | (8      | ) |      |   | (49     | )
|                                              |  |                          |         |   |      |   |         |  
|Number of branches, end of period             |  |                          | 551     |   |      |   | 599     |  
|                                              |  |                          |         |   |      |   |         |  
|                                              |  |                         
|Average number of branches open during period |  |                          | 542     |   |      |   | 606     |  
|                                              |  |                          |         |   |      |   |         |  



|                                                                   |  |                          |         |      |   |        
|------------------------------------------------------------------ |  | ------------------------ | ------- | ---- | - | -------
|                                                                   |  | Six Months EndedJune 30,
|                                                                   |  | 2006                     |         | 2007
|Comparable Branch Information (a):                                 |  |                          |         |      |   |        
|Total revenues generated by all comparable branches (in thousands) |  | $                        | 75,197  |      | $ | 88,269 
|Total number of comparable branches                                |  |                          | 483     |      |   | 483    
|Average revenue per comparable branch                              |  | $                        | 155,687 |      | $ | 182,752

---

|(a) | Comparable branches are those branches that were open for all of the two periods being compared, which means the 18 months since December 31, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

Income from continuing operations.For the six months ended June 30, 2007, net income was $6.7 million compared to $2.8 million for the same
period in 2006. A discussion of the various components of net income follows.

Revenues.For the six months ended June 30,
2007, revenues were $99.8 million, a 27.6% increase from $78.2 million during the six months ended June 30, 2006. The increase in revenues was primarily a result of higher payday loan volumes, which reflects increases in the number of branches,
the number of customer transactions and average loan size. We originated approximately $577.1 million through payday loans during the six months ended June 30, 2007, which was an increase of 19.6% over the $482.7 million during the same period
in the prior year. The average loan (including fee) totaled $361.99 during the first six months of 2007 versus $360.25 in comparable 2006. Average fees received from customers per loan declined from $53.03 in first six months of 2006 to $52.11 in
comparable 2007 due to legislative and regulatory changes affecting rates and to a decline in the fee rate as loan volumes increase in newer branches located in states that have lower fee structures, partially offset by a higher average loan
principal. Our average fee rate per $100.00 for the first six months 2007 was $16.82 compared to $17.26 for the same period in 2006.

As
noted in the quarterly discussion, we anticipate that our average fee rate may continue to decline in 2007 as rates are modified based on changing legislation or regulation and as we enter into or expand in states that have lower fee structures. In
March 2007, New Mexico adopted legislation (effective November 2007) that will reduce the maximum fee that may be charged to a customer from $20.00 per $100.00 borrowed to $15.50 per $100.00 borrowed. In addition, the new legislation restricts the
total number of loans a customer may have and prohibits immediate loan renewals.



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##### Table of Contents

One manner by which we evaluate our branches is revenue growth, with consideration given to the length of
time the branch has been open. We define comparable branches as those branches that are open during the full periods for which a comparison is being made. For example, comparable branches for the year-to-date analysis as of June 30, 2007 have
been open at least 18 months. The following table provides a summary of our revenues by comparable branches and new branches:



|                        |  |                          |        |      |   |       
|----------------------- |  | ------------------------ | ------ | ---- | - | ------
|                        |  | Six Months EndedJune 30,
|                        |  | 2006                     |        | 2007
|                        |  | (in thousands)          
|Comparable branches     |  | $                        | 75,197 |      | $ | 88,269
|Branches opened in 2006 |  |                          | 490    |      |   | 9,995 
|Branches opened in 2007 |  |                          |        |      |   | 824   
|Other (a)               |  |                          | 2,512  |      |   | 675   
|                        |  |                          |        |      |   |       
|Total                   |  | $                        | 78,199 |      | $ | 99,763
|                        |  |                          |        |      |   |       

---

|(a) | represents primarily closed branches
|--- | ------------------------------------

Revenues for
comparable branches increased 17.4%, or $13.1 million, to $88.3 million for the six months ended June 30, 2007. This increase is primarily attributable to the benefits resulting from the continuing development of our branches opened in 2005 and
to growth in the installment loan product in our Illinois branches. Revenues from our branches opened during 2005 improved 62.8% to $19.7 million for the six months ended June 30, 2007 compared to $12.1 million for the six months ended
June 30, 2006. Revenues from branches added during 2006, including the 50 branches acquired in South Carolina, totaled $10.0 million for the six months ended June 30, 2007.

Revenues from check cashing, title loans, CSO fees, installment loans and other sources totaled $8.8 million and $13.9 for the six months ended
June 30, 2006 and 2007, respectively. The following table summarizes other revenues:



|                      |  |                          |       |                           |   |        |  |      |      |  |      |  
|--------------------- |  | ------------------------ | ----- | ------------------------- | - | ------ |  | ---- | ---- |  | ---- | -
|                      |  | Six Months EndedJune 30, |       | Six Months Ended June 30, |  
|                      |  | 2006                     |       | 2007                      |   | 2006   |  |      | 2007 | 
|                      |  | (in thousands)           |       | (percentage of revenues)  |  
|Check cashing fees    |  | $                        | 3,813 |                           | $ | 3,633  |  | 4.9  | %    |  | 3.7  | %
|Title loan fees       |  |                          | 2,250 |                           |   | 2,201  |  | 2.9  | %    |  | 2.2  | %
|Credit service fees   |  |                          | 1,484 |                           |   | 3,121  |  | 1.9  | %    |  | 3.1  | %
|Installment loan fees |  |                          | 131   |                           |   | 3,593  |  | 0.2  | %    |  | 3.6  | %
|Other fees            |  |                          | 1,121 |                           |   | 1,327  |  | 1.4  | %    |  | 1.3  | %
|                      |  |                          |       |                           |   |        |  |      |      |  |      |  
|Total                 |  | $                        | 8,799 |                           | $ | 13,875 |  | 11.3 | %    |  | 13.9 | %
|                      |  |                          |       |                           |   |        |  |      |      |  |      |  

As noted in the quarterly discussion, the decline in check cashing fees as a percentage of
revenues reflects a higher rate of growth in payday loan revenues. The revenue increases in credit services fees and installment loans reflects the addition of new product offerings as credit services were offered in our Texas branches beginning in
September 2005 and installment loans were offered in our Illinois branches beginning in second quarter 2006.

Branch Expenses.Total
branch expenses increased $11.1 million, or 19.6%, from $56.7 million during first six months of 2006 to $67.8 million in first six months of 2007. Branch-level salaries and benefits increased by $1.7 million for the six months ended June 30,
2007 compared to the same period in the prior year primarily due to an increase in field personnel associated with our new branches. The total number of field personnel averaged 1,696 for the six months ended June 30, 2006 compared to 1,830 for
the six months ended June 30, 2007, an increase of 7.9%.



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##### Table of Contents

The provision for losses increased from $14.6 million for the six months ended June 30, 2006 to
$20.7 million during six months ended June 30, 2007. Our loss ratio was 20.7% for the six months ended June 30, 2007 versus 18.7% for the six months ended June 30, 2006. The less favorable loss experience in 2007 reflects a higher
level of charge-offs and lower collection rate during 2007. Our charge-offs as a percentage of revenue were 44.5% during the six months ended June 30, 2007 compared to 43.6% in the same period of the prior year. Our collections as a percentage
of charge-offs were 55.1% during the first half of 2007 compared to 57.2% during first half of 2006. In addition, we received approximately $1.8 million from the sale of certain payday loan receivables during the six months ended June 30, 2007.

Comparable branches totaled $19.4 million in loan losses for the first six months of 2007 compared to $14.1 million in loan losses for the
first six months of 2006. In our comparable branches, the loss ratio was 22.0% for the six months ended June 30, 2007 compared to 18.7% for the same period in 2006.

Occupancy costs increased from $11.0 million for the six months ended June 30, 2006 to $14.1 million in the current year period. Occupancy costs as a percentage of revenues were 14.1% for the six months ended
June 30, 2007 and 14.1% for the same period in the prior year. In connection with the closure of 39 branches during the first quarter 2007 and the decision to close our Oregon branches, we recorded approximately $1.6 million in occupancy costs
during the six months ended June 30, 2007 to reflect lease termination costs and other occupancy related costs.

Branch Gross
Profit.Branch gross profit increased by $10.5 million, or 48.8%, from $21.5 million for the six months ended June 30, 2006 to $32.0 million for the six months ended June 30, 2007. Branch gross margin, which is branch gross profit as a
percentage of revenues, increased from 27.4% to 32.0%. The following table summarizes our branch gross profit by comparable branches and new branches.



|                        |  |                           |        |   |      |   |        |  
|----------------------- |  | ------------------------- | ------ | - | ---- | - | ------ | -
|                        |  | Six Months Ended June 30, |       
|                        |  | 2006                      |        |   | 2007 |  
|                        |  | (in thousands)            |       
|Comparable branches     |  | $                         | 23,760 |   |      | $ | 31,698 |  
|Branches opened in 2006 |  |                           | (1,239 | ) |      |   | 1,414  |  
|Branches opened in 2007 |  |                           |        |   |      |   | (383   | )
|Other (a)               |  |                           | (1,024 | ) |      |   | (753   | )
|                        |  |                           |        |   |      |   |        |  
|Total                   |  | $                         | 21,497 |   |      | $ | 31,976 |  
|                        |  |                           |        |   |      |   |        |  

---

|(a) | represents primarily closed branches
|--- | ------------------------------------

Comparable branches
for the six months ended June 30, 2007 reported a gross margin of 35.9% versus 31.6% in the comparable prior year period, with the improvements resulting from stronger results in the majority of states. The 95 branches added during the 2006
reported a gross profit of $1.4 million.

Regional and Corporate Expenses.Regional and corporate expenses increased $1.3 million
from $16.3 million during the six months ended June 30, 2006 to $17.6 million in the current year period. The higher level of expenses in 2007 is attributable to equity award compensation, salaries associated with an 8.2% increase in the
average number of home office and regional personnel from June 30, 2006 and approximately $750,000 in advertising for public awareness expenditures during first quarter 2007.

Interest and Other Expenses.Interest expense totaled $170,000 during the six months ended June 30, 2007 compared to interest income of
$277,000 during the six months ended June 30, 2006. This decline was due to lower balances in cash and cash equivalents and short-term investments during 2007 compared to 2006 and interest expense associated with the borrowing of $10.5 million
to fund operations during 2007. Other expenses during the six months ended June 30, 2007 was higher than the same period in 2006 as a result of losses on the disposal of assets during 2007 related to the closure of branches.



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##### Table of Contents

Income Tax Provision. The effective income tax rate for the six months ended June 30, 2007
was 39.8% compared to 40.4% for the six months ended June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):



|                                             |  |                           |        |   |      |   |         |  
|-------------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ------- | -
|                                             |  | Six Months Ended June 30, |       
|                                             |  | 2006                      |        |   | 2007 |  
|Cash flows provided by (used for):           |  |                           |        |   |      |   |         |  
|Operating activities                         |  | $                         | 6,780  |   |      | $ | 16,177  |  
|Investing activities                         |  |                           | (3,729 | ) |      |   | (4,940  | )
|Financing activities                         |  |                           | (4,623 | ) |      |   | (15,422 | )
|                                             |  |                           |        |   |      |   |         |  
|Net decrease in cash and cash equivalents    |  |                           | (1,572 | ) |      |   | (4,185  | )
|Cash and cash equivalents, beginning of year |  |                           | 31,640 |   |      |   | 23,446  |  
|                                             |  |                           |        |   |      |   |         |  
|Cash and cash equivalents, end of period     |  | $                         | 30,068 |   |      | $ | 19,261  |  
|                                             |  |                           |        |   |      |   |         |  

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. In
addition, we entered into a credit agreement on January 19, 2006, which provides a three-year revolving line of credit for borrowings up to $45.0 million (the credit facility). As of June 30, 2007, there was $10.5 million outstanding under
the credit facility.

Net cash provided by operating activities for the six months ended June 30, 2007 was $16.2 million,
approximately $9.4 million higher than the $6.8 million in comparable 2006. This increase is primarily attributable to higher net income during first six months 2007, plus certain non-cash charges associated with the branch closings during 2007.

Net cash used by investing activities for the six months ended June 30, 2007 was $4.9 million, which primarily consisted of
approximately $1.7 million for capital expenditures and approximately $3.3 million in acquisition costs. The capital expenditures included $326,000 to open 22 de novo branches in 2007, $711,000 for renovations to existing and acquired branches,
$577,000 for technology and other furnishings at the corporate office, and $90,000 for other expenditures. Net cash used by investing activities for the six months ended June 30, 2006 was $3.7 million, which primarily consisted of capital
expenditures. The capital expenditures included $1.2 million to open 27 de novo branches in 2006, $1.2 million for renovations to existing and acquired branches, $467,000 for tenant improvements, furnishings and technology for the new corporate
office space and $402,000 for branches not yet open as of June 30, 2006, $400,000 for the purchase of a building in St. Louis, Missouri that is used as a branch location and other expenditures.

Cash used for financing activities for the six months ended June 30, 2007 was $15.4 million, which primarily consisted of $16.3 million in
repayments of indebtedness under the credit facility, dividend payments to stockholders totaling $4.0 million and share repurchases of approximately 504,000 shares of our common stock for $7.4 million. These items were partially offset by proceeds
received from borrowings under our credit facility totaling $10.5 million to fund operations and proceeds from the exercise of stock options by employees. During the six months ended June 30, 2006, cash outflows consisted of the repurchase
436,300 shares of our common stock for approximately $5.8 million partially offset by proceeds from the exercise of stock options by employees.

Future Capital Requirements.We believe that our available cash, expected cash flows from operations and borrowings available under our credit facility will be sufficient to fund our liquidity and capital expenditure requirements for
the foreseeable future. Expected future uses of cash include funding of anticipated increases in payday loans, dividend payments, common stock repurchases, financing of new branch expansion and acquisitions and, if amounts are borrowed under the
credit facility, debt repayments and interest payments on the outstanding debt.



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On July 31, 2007, our board of directors declared a cash dividend of $0.10 per common share. The
dividend is payable on August 31, 2007 to stockholders of record as of August 15, 2007. We estimate that the total amount of the dividend will be approximately $2.0 million.

The level of cash required to operate a particular branch varies based on the products and services provided by that branch. For each branch location,
cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline,
a typical payday only branch requires an average of approximately $10,000 to $15,000, while a branch that also includes check cashing requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005 and 2006, we were
able to achieve de novo unit branch growth of 46.9% and 8.6%, respectively. In addition, we acquired 10 branches and 51 branches in 2005 and 2006, respectively. During the first six months of 2007, we opened 22 branches and acquired 13 branches. In
connection with one of our acquisitions, we elected to close six of the branches acquired and transfer the receivable balances to our existing branch locations. During the second half of 2007, we expect to open between 10 and 15 additional branches.
We believe our current cash position and our expected cash flow from operations should provide the capital needed to fund this level of growth, assuming no material acquisitions.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary
depending on the branch size, location and the services being offered. In fiscal 2006, we opened 46 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

Common Stock Repurchase Program.In July 2007, our board of directors increased the authorization limit of the Companys common stock
repurchase program to $40 million, subject to amendment of our credit facility. In June 2007, our board of directors extended the program through June 30, 2008. As of June 30, 2007, we have repurchased 2.1 million shares at a total
cost of approximately $27.5 million.

Concentration of Risk. Our branches located in the states of Missouri, California,
Arizona, South Carolina, Kansas and New Mexico represented approximately 24%, 13%, 8%, 7%, 5% and 5%, respectively, of total revenues for the six months ended June 30, 2007. To the extent that laws and regulations are passed that affect our
ability to offer payday loans or the manner by which we offer our payday loans in any one of those states, our financial position, results of operations and cash flows could be affected.

As discussed above, there is new legislation in New Mexico that will become effective in November 2007, which will adversely affect our revenues and
gross profit in our New Mexico branches.

Seasonality

Our business is seasonal due to fluctuating demand for payday loans during the year. Historically, we have experienced our highest demand for payday loans in January and in the fourth calendar quarter. As a result of
the receipt by customers of their income tax refunds, demand for payday loans has historically declined in the balance of the first quarter of each calendar year and the first month of the second quarter. Our loss ratio historically fluctuates with
these changes in payday loan demand, with a higher loss ratio in the second and third quarters of each calendar year and a lower loss ratio in the first and fourth quarters of each calendar year. Due to the seasonality of our business, results of
operations for any quarter are not necessarily indicative of the results of operations that may be achieved for the full year.



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Off-Balance Sheet Arrangements

In September 2005, we began operating through a subsidiary as a CSO in our Texas branches. As a CSO, we act as a credit services organization on behalf of consumers in accordance with Texas laws. We charge the
consumer a fee for arranging for an unrelated third-party lender to make a loan to the consumer and for providing related services to the consumer, including a guarantee of the consumers obligation to the third-party lender. We also service
the loan for the lender. We are not involved in the loan approval process or in determining the loan approval procedures or criteria, and we will not acquire or own any participation interest in the loans. Consequently, loans made by the lender will
not be included in our loans receivable balance and will not be reflected in the Consolidated Balance Sheet. Under the agreement with the current lender, however, we absorb all risk of loss through our guarantee of the consumers loan from the
lender. As of December 31, 2006, and June 30, 2007, consumers had total loans outstanding with the lender of approximately $2.2 million and $2.6 million, respectively. Because of the economic exposure for potential losses related to the
guarantee of these loans, we record a payable to reflect the anticipated losses related to uncollected loans. The payable is recognized at its fair value pursuant to FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.Changes in the liability are recognized through the provision for loan losses in our Consolidated Statements of Income. The balance of the liability for estimated losses reported in
accrued liabilities was approximately $100,000 as of December 31, 2006 and $120,000 as of June 30, 2007.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We have had no significant changes in our Quantitative and Qualitative Disclosures About Market Risk from that previously reported in our Annual Report on Form 10-K for the year ended December 31, 2006.



|Item 4. | Controls and Procedures
|------- | -----------------------

We maintain a system of
disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act)) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures
are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms.

Our internal control over financial reporting (as defined in
Exchange Act Rule 13a-15(f)) is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.



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PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

The Company and a former
customer in New Mexico, who has sued the Company in a purported class action lawsuit, have reached an oral agreement to settle the case for an immaterial amount. The Company expects this case to be dismissed with prejudice in the third quarter.
Except for the favorable resolution of the New Mexico case described in our Annual Report on Form 10-K for the year ended December 31, 2006, under Item 3, Legal Proceedings, there have been no material developments in the second
quarter 2007 in any cases material to the Company as reported in our 2006 Annual Report.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Issuer Purchases of Equity Securities.The following table sets forth certain information about the shares of common stock we repurchased during the second quarter 2007.



|                   |  |                               |  |                            |       |                                                                   |         |                                                                                  |   |          
|------------------ |  | ----------------------------- |  | -------------------------- | ----- | ----------------------------------------------------------------- | ------- | -------------------------------------------------------------------------------- | - | ---------
|Period             |  | TotalNumber ofSharesPurchased |  | AveragePrice PaidPer Share |       | Total Numberof SharesPurchased asPart of PubliclyAnnouncedProgram |         | MaximumApproximateDollar Value ofShares that MayYet BePurchased Underthe
Program
|April 1  April 30 |  |                              |  | $                          |      |                                                                   |        |                                                                                  | $ | 8,274,492
|May 1  May 31     |  | 71,750                        |  |                            | 14.88 |                                                                   | 71,750  |                                                                                  |   | 7,206,559
|June 1  June 30   |  | 316,262                       |  |                            | 14.90 |                                                                   | 316,262 |                                                                                  |   | 2,493,807
|                   |  |                               |  |                            |       |                                                                   |         |                                                                                  |   |          
|Total              |  | 388,012                       |  | $                          | 14.90 |                                                                   | 388,012 |                                                                                  | $ | 2,493,807
|                   |  |                               |  |                            |       |                                                                   |         |                                                                                  |   |          

On July 31, 2007, our board of directors increased our $30 million common stock
repurchase program by $10 million, subject to amendment of our credit facility. The repurchase program authorizes us to purchase $40 million. As of June 30, 2007, we have repurchased 2.1 million shares at a total cost of approximately
$27.5 million.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Our annual meeting of stockholders was held in Overland Park, Kansas, on June 7, 2007. At that meeting, the stockholders elected the following individuals to serve as directors for a term of one year and until their respective
successors are duly elected and qualified:



|                   |  |            |  |                  
|------------------ |  | ---------- |  | -----------------
|Director           |  | For        |  | WithheldAuthority
|Don Early          |  | 18,801,524 |  | 735,388          
|Mary Lou Andersen  |  | 18,800,603 |  | 736,309          
|Richard B. Chalker |  | 18,336,096 |  | 1,200,816        
|Murray A. Indick   |  | 19,082,650 |  | 454,262          
|Gerald F. Lamberti |  | 18,336,860 |  | 1,200,052        
|Francis P. Lemery  |  | 18,336,096 |  | 1,200,816        
|Mary V. Powell     |  | 18,333,175 |  | 1,203,737        

No other matters were submitted to a vote of the stockholders at the annual meeting.



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|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                                         
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer under Rule 13-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                      
|     | 
|31.2 |  | Certification of Chief Financial Officer under Rule 13-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                      
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to Section 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to Section 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in the capacities indicated on August 8, 2007.



QC Holdings, Inc./s/ Darrin J. AndersenDarrin J. AndersenPresident and Chief Operating Officer/s/ Douglas E. NickersonDouglas E. NickersonChief Financial Officer(Principal Financial and Accounting Officer)




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