##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 Commission File No. 1-14771
 MICROFINANCIAL INCORPORATED
  Massachusetts
    
    04-2962824(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ o
  o o þ
 o þ




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##### Table of Contents



MICROFINANCIAL INCORPORATED
TABLE OF CONTENTS
 PagePart I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):Condensed Consolidated Balance Sheets  December 31, 2005 and September 30, 2006
    
    
    3Condensed Consolidated Statements of Operations  Three and nine months ended September 30, 2005 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2005 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    23Part II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    24Item 1A.
    
    Risk Factors
    
    
    24Item 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFO




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
  December 31,
    
    
    September 30,2005
    
    
    2006ASSETSCash and cash equivalents
    
    $
    32,926
    
    
    $
    32,580Net investment in leases:Receivables due in installments
    
    
    29,139
    
    
    
    31,668Estimated residual value
    
    
    3,865
    
    
    
    2,875Initial direct costs
    
    
    98
    
    
    
    204Less:Advance lease payments and deposits
    
    
    (35
    )
    
    
    (44
    )Unearned income
    
    
    (3,658
    )
    
    
    (9,230
    )Allowance for credit losses
    
    
    (8,714
    )
    
    
    (5,587
    )Net investment in leases
    
    
    20,695
    
    
    
    19,886Investment in service contracts, net
    
    
    1,626
    
    
    
    771Investment in rental contracts, net
    
    
    3,025
    
    
    
    708Property and equipment, net
    
    
    719
    
    
    
    751Other assets
    
    
    1,315
    
    
    
    731Deferred income taxes, net
    
    
    4,882
    
    
    
    3,458Total assets
    
    $
    65,188
    
    
    $
    58,885LIABILITIES AND STOCKHOLDERS EQUITYNotes payable
    
    $
    161
    
    
    $
    38Subordinated notes payable
    
    
    2,602
    
    
    
    300Accounts payable
    
    
    1,099
    
    
    
    821Dividends payable
    
    
    4,114
    
    
    
    690Other liabilities
    
    
    2,094
    
    
    
    1,825Income taxes payable
    
    
    431
    
    
    
    Total liabilities
    
    
    10,501
    
    
    
    3,674Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at December 31, 2005 and September 30, 2006
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
13,713,899 and 13,808,942 shares issued at December 31, 2005
and September 30, 2006, respectively
    
    
    137
    
    
    
    138Additional paid-in capital
    
    
    43,839
    
    
    
    44,281Retained earnings
    
    
    10,711
    
    
    
    10,792Total stockholders equity
    
    
    54,687
    
    
    
    55,211Total liabilities and stockholders equity
    
    $
    65,188
    
    
    $
    58,885
  3




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except share and per share data)
  For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2006
    
    2005
    
    2006Revenues:Income on financing leases
    
    $
    832
    
    
    $
    1,007
    
    
    $
    3,442
    
    
    $
    2,403Rental income
    
    
    6,469
    
    
    
    5,121
    
    
    
    19,330
    
    
    
    16,436Income on service contracts
    
    
    792
    
    
    
    435
    
    
    
    2,818
    
    
    
    1,478Loss and damage waiver fees
    
    
    681
    
    
    
    431
    
    
    
    2,251
    
    
    
    1,475Service fees and other
    
    
    595
    
    
    
    848
    
    
    
    2,559
    
    
    
    3,124Total revenues
    
    
    9,369
    
    
    
    7,842
    
    
    
    30,400
    
    
    
    24,916Expenses:Selling, general and administrative
    
    
    4,461
    
    
    
    3,312
    
    
    
    16,699
    
    
    
    11,445Provision for credit losses
    
    
    1,576
    
    
    
    1,887
    
    
    
    8,870
    
    
    
    5,124Depreciation and amortization
    
    
    2,465
    
    
    
    1,195
    
    
    
    7,414
    
    
    
    4,634Interest
    
    
    203
    
    
    
    23
    
    
    
    986
    
    
    
    135Total expenses
    
    
    8,705
    
    
    
    6,417
    
    
    
    33,969
    
    
    
    21,338Income (loss) before provision (benefit) for income taxes
    
    
    664
    
    
    
    1,425
    
    
    
    (3,569
    )
    
    
    3,578Provision (benefit) for income taxes
    
    
    310
    
    
    
    573
    
    
    
    (1,032
    )
    
    
    1,424Net income (loss)
    
    $
    354
    
    
    $
    852
    
    
    ($
    2,537
    )
    
    $
    2,154Net income (loss) per common share  basic
    
    $
    0.03
    
    
    $
    0.06
    
    
    ($
    0.19
    )
    
    $
    0.16Net income (loss) per common share  diluted
    
    $
    0.03
    
    
    $
    0.06
    
    
    ($
    0.19
    )
    
    $
    0.15Weighted-average shares:Basic
    
    
    13,710,683
    
    
    
    13,803,996
    
    
    
    13,518,351
    
    
    
    13,784,650Diluted
    
    
    13,910,948
    
    
    
    13,942,572
    
    
    
    13,518,351
    
    
    
    13,928,399
  4




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
  For the Nine Months EndedSeptember 30,2005
    
    2006Cash flows from operating activities:Cash received from customers
    
    $
    43,772
    
    
    $
    30,840Cash paid to suppliers and employees
    
    
    (16,541
    )
    
    
    (10,905
    )Cash received (paid) for income taxes
    
    
    (48
    )
    
    
    (456
    )Interest paid
    
    
    (413
    )
    
    
    (105
    )Interest received
    
    
    276
    
    
    
    1,049Net cash provided by operating activities
    
    
    27,046
    
    
    
    20,423Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (4,119
    )
    
    
    (12,426
    )Investment in inventory
    
    
    (13
    )
    
    
    Investment in direct costs
    
    
    (33
    )
    
    
    (206
    )Investment in property and equipment
    
    
    (271
    )
    
    
    (216
    )Net cash used in investing activities
    
    
    (4,436
    )
    
    
    (12,848
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    214
    
    
    
    83Repayment of secured debt
    
    
    (135
    )
    
    
    (205
    )Repayment of subordinated debt
    
    
    (1,500
    )
    
    
    (2,302
    )Repayment of capital leases
    
    
    (41
    )
    
    
    Payment of dividends
    
    
    (2,015
    )
    
    
    (5,497
    )Net cash used in financing activities
    
    
    (3,477
    )
    
    
    (7,921
    )Net increase (decrease) in cash and cash equivalents
    
    
    19,133
    
    
    
    (346
    )Cash and cash equivalents, beginning of period
    
    
    9,709
    
    
    
    32,926Cash and cash equivalents, end of period
    
    $
    28,842
    
    
    $
    32,580
   5




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)
 For the Nine Months EndedSeptember 30,2005
    
    2006Reconciliation of net income (loss) to net cash provided
by operating activities:Net income (loss)
    
    
    ($2,537
    )
    
    $
    2,154Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (3,442
    )
    
    
    (2,403
    )Depreciation and amortization
    
    
    7,414
    
    
    
    4,634Provision for credit losses
    
    
    8,870
    
    
    
    5,124Recovery of equipment cost and residual value
    
    
    16,611
    
    
    
    9,497Stock-based compensation expense
    
    
    942
    
    
    
    207Non-cash interest expense (amortization of debt discount)
    
    
    572
    
    
    
    34Changes in assets and liabilities:Current taxes payable
    
    
    (48
    )
    
    
    (431
    )Deferred income taxes
    
    
    (1,032
    )
    
    
    1,424Other assets
    
    
    802
    
    
    
    551Accounts payable
    
    
    (1,326
    )
    
    
    (277
    )Other liabilities
    
    
    220
    
    
    
    (91
    )Net cash provided by operating activities
    
    $
    27,046
    
    
    $
    20,423Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    63
    
    
    $
    251Warrants exercised by cancellation of debt
    
    
    779
    
    
    
    
  6




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MICROFINANCIAL INCORPORATED
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
 A. Nature of Business
  B. Summary of Significant Accounting Policies
 Basis of Presentation
   Allowance for Credit Losses
   7




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands, except share and per share data)
   Allowance for credit losses at December 31, 2005
    
    

    
    
    

    $
    8,714Provision for credit losses
    
    

    
    

    
    
    5,124Charge-offs
    
    
    (12,683
    )Recoveries
    
    
    4,432Charge-offs, net of recoveries
    
    
    
    

    
    
    (8,251
    )Allowance for credit losses at September 30, 2006
    
    
    
    

    
    $
    5,587
 Net Income (Loss) Per Share
  For Three Months Ended
    
    For Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2006
    
    2005
    
    2006Net income (loss)
    
    $
    354
    
    
    $
    852
    
    
    
    ($2,537
    )
    
    $
    2,154Shares used in computation:Weighted average common shares
outstanding used in computation
of net income (loss) per common share
    
    
    13,710,683
    
    
    
    13,803,996
    
    
    
    13,518,351
    
    
    
    13,784,650Dilutive effect of common stock
options, warrants and restricted stock
    
    
    200,265
    
    
    
    138,576
    
    
    
    
    
    
    
    143,749Shares used in computation of net
income (loss) per common share -
assuming dilution
    
    
    13,910,948
    
    
    
    13,942,572
    
    
    
    13,518,351
    
    
    
    13,928,399Net income (loss) per common share  basic
    
    $
    0.03
    
    
    $
    0.06
    
    
    
    ($0.19
    )
    
    $
    0.16Net income (loss) per common share  diluted
    
    $
    0.03
    
    
    $
    0.06
    
    
    
    ($0.19
    )
    
    $
    0.15
 8




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands, except share and per share data)
 Stock-Based Employee Compensation
 Share-Based Payment
   Outstanding
    
    ExercisableWeighted-
    
    
    
    
    
    Weighted-Average
    
    Intrinsic
    
    Average
    
    
    
    
    
    IntrinsicExercise Price
    
    Shares
    
    Life (Years)
    
    Value
    
    Exercise Price
    
    Shares
    
    Value$12.31
    
    
    359,391
    
    
    
    2.41
    
    
    
    $  
    
    
    $
    12.31
    
    
    
    359,391
    
    
    $
    $13.54
    
    
    40,609
    
    
    
    2.41
    
    
    
    
    
    
    $
    13.54
    
    
    
    40,609
    
    
    
    $  9.78
    
    
    350,000
    
    
    
    3.41
    
    
    
    
    
    
    $
    9.78
    
    
    
    350,000
    
    
    
    $13.10
    
    
    90,000
    
    
    
    4.40
    
    
    
    
    
    
    $
    13.10
    
    
    
    90,000
    
    
    
    $  6.70
    
    
    235,000
    
    
    
    5.42
    
    
    
    
    
    
    $
    6.70
    
    
    
    188,000
    
    
    
    $  1.59
    
    
    167,500
    
    
    
    6.16
    
    
    
    281
    
    
    $
    1.59
    
    
    
    157,500
    
    
    
    2641,242,500
    
    
    
    3.91
    
    
    
    $ 281
    
    
    $
    9.35
    
    
    
    1,185,500
    
    
    $
    264
   9




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands, except share and per share data)
    C. Notes Payable and Subordinated Debt
  Interest
    
    December 31,
    
    September 30,Rate
    
    2005
    
    2006Revolving credit facility
    
    prime + 1.5%
    
    $
    161
    
    
    $
    38Subordinated notes
    
    
    8.0%-12.0
    %
    
    
    2,602
    
    
    
    300$
    2,763
    
    
    $
    338
  D. Commitments and Contingencies
 Legal Matters
   10




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands, except share and per share data)
  Internal Revenue Service Tax Audit
  Lease Commitments
  E. Recent Accounting Pronouncements
 Accounting for Servicing of Financial Assets  An Amendment of FASB Statement No. 140
 Accounting for Uncertainty
in Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for
Income Taxes.
 11




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Forward-Looking Information
  Overview
   12




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Critical Accounting Policies
   Results of Operations  Three months ended September 30, 2006 as compared to the three months ended
September 30, 2005
 Revenue
 For the Three Months EndedSeptember 30,2005
    
    
    Change
    
    
    2006(Dollars in thousands)Income on financing leases
    
    $
    832
    
    
    
    21.0
    %
    
    $
    1,007Rental income
    
    
    6,469
    
    
    
    (20.8
    )%
    
    
    5,121Income on service contracts
    
    
    792
    
    
    
    (45.1
    )%
    
    
    435Service fees and other
    
    
    1,276
    
    
    
    0.2
    %
    
    
    1,279Total revenues
    
    $
    9,369
    
    
    
    (16.3
    )%
    
    $
    7,842
   13




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Selling, General and Administrative
 For the Three Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Selling, general and administrative
    
    $
    4,461
    
    
    
    (25.8
    )%
    
    $
    3,312As a percent of revenue
    
    
    47.6
    %
    
    
    
    
    
    
    42.2
    %
  Provision for Credit Losses
 For the Three Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Provision for credit losses
    
    $
    1,576
    
    
    
    19.7
    %
    
    $
    1,887As a percent of revenue
    
    
    16.8
    %
    
    
    
    
    
    
    24.1
    %
  Depreciation and Amortization
 For the Three Months EndedSeptember 30,2005
    
    
    Change
    
    
    2006(Dollars in thousands)Depreciation  fixed assets
    
    $
    59
    
    
    
    (18.6
    )%
    
    $
    48Depreciation and amortization  rentals
    
    
    1,559
    
    
    
    (40.0
    )%
    
    
    936Depreciation and amortization  contracts
    
    
    847
    
    
    
    (75.1
    )%
    
    
    211Total depreciation and amortization
    
    
    2,465
    
    
    
    (51.5
    )%
    
    
    1,195As a percent of revenue
    
    
    26.3
    %
    
    
    
    
    
    
    15.2
    %
  14




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Interest Expense
 For the Three Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Interest
    
    $
    203
    
    
    
    (88.7
    )%
    
    $
    23As a percent of revenue
    
    
    2.0
    %
    
    
    
    
    
    
    0.3
    %
  Provision for Income Taxes
 For the Three Months EndedSeptember 30,2005
    
    2006(Dollars in thousands)Provision for income taxes
    
    $
    310
    
    
    $
    573As a percent of revenue
    
    
    3.3
    %
    
    
    7.3
    %As a percent of income (loss) before taxes
    
    
    46.7
    %
    
    
    40.2
    %
  15




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Other Operating Data
  Results of Operations  Nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005
 Revenue
 For the Nine Months EndedSeptember 30,2005
    
    
    Change
    
    
    2006(Dollars in thousands)Income on financing leases
    
    $
    3,442
    
    
    
    (30.2
    )%
    
    $
    2,403Rental income
    
    
    19,330
    
    
    
    (15.0
    )%
    
    
    16,436Income on service contracts
    
    
    2,818
    
    
    
    (47.6
    )%
    
    
    1,478Service fees and other
    
    
    4,810
    
    
    
    (4.4
    )%
    
    
    4,599Total revenues
    
    $
    30,400
    
    
    
    (18.0
    )%
    
    $
    24,916
   16




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Selling, General and Administrative
 For the Nine Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Selling, general and administrative
    
    $
    16,699
    
    
    
    (31.3
    )%
    
    $
    11,445As a percent of revenue
    
    
    54.9
    %
    
    
    
    
    
    
    45.9
    %
  Provision for Credit Losses
 For the Nine Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Provision for credit losses
    
    $
    8,870
    
    
    
    (42.2
    )%
    
    $
    5,124As a percent of revenue
    
    
    29.2
    %
    
    
    
    
    
    
    20.6
    %
  Depreciation and Amortization
 For the Nine Months EndedSeptember 30,2005
    
    
    Change
    
    
    2006(Dollars in thousands)Depreciation  fixed assets
    
    $
    273
    
    
    
    (44.0
    )%
    
    $
    153Depreciation and amortization  rentals
    
    
    4,521
    
    
    
    (19.9
    )%
    
    
    3,623Depreciation and amortization  contracts
    
    
    2,620
    
    
    
    (67.3
    )%
    
    
    858Total depreciation and amortization
    
    
    7,414
    
    
    
    (37.5
    )%
    
    
    4,634As a percent of revenue
    
    
    24.4
    %
    
    
    
    
    
    
    18.6
    %
  17




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Interest Expense
 For the Nine Months EndedSeptember 30,2005
    
    Change
    
    2006(Dollars in thousands)Interest
    
    $
    986
    
    
    
    (86.3
    )%
    
    $
    135As a percent of revenue
    
    
    3.2
    %
    
    
    
    
    
    
    0.5
    %
  Provision (Benefit) for Income Taxes
 For the Nine Months EndedSeptember 30,2005
    
    
    
    
    
    2006(Dollars in thousands)Provision (benefit) for income taxes
    
    
    ($1,032
    )
    
    
    
    
    
    $
    1,424As a percent of revenue
    
    
    (3.4
    )%
    
    
    
    
    
    
    5.7
    %As a percent of income (loss) before taxes
    
    
    (28.9
    )%
    
    
    
    
    
    
    39.8
    %
  18




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Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    December 31, 2005
    
    
    September 30, 2006Cumulative amounts billed
    
    $220,796
    
    
    $169,98431-60 days past due
    
    $
    991
    
    
    
    0.4
    %
    
    $
    655
    
    
    
    0.4
    %61-90 days past due
    
    
    997
    
    
    
    0.5
    %
    
    
    525
    
    
    
    0.3
    %Over 90 days past due
    
    
    16,101
    
    
    
    7.3
    %
    
    
    8,279
    
    
    
    4.9
    %Total past due
    
    $
    18,089
    
    
    
    8.2
    %
    
    $
    9,459
    
    
    
    5.6
    %
  19




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##### Table of Contents



(dollars in thousands)
    
    December 31, 2005
    
    
    September 30, 2006Current
    
    $
    8,486
    
    
    
    29.1
    %
    
    $
    19,422
    
    
    
    61.3
    %31-60 days past due
    
    
    637
    
    
    
    2.2
    %
    
    
    1,042
    
    
    
    3.3
    %61-90 days past due
    
    
    601
    
    
    
    2.1
    %
    
    
    494
    
    
    
    1.6
    %Over 90 days past due
    
    
    19,415
    
    
    
    66.6
    %
    
    
    10,710
    
    
    
    33.8
    %Gross receivables due in installments
    
    $
    29,139
    
    
    
    100.0
    %
    
    $
    31,668
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
      Borrowings
  20




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##### Table of Contents



December 31, 2005
    
    
    September 30, 2006MaximumAmounts
    
    
    Interest
    
    
    Amounts
    
    
    Interest
    
    
    Unused
    
    
    Facility(dollars in thousands)
    
    Outstanding
    
    
    Rate
    
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    AmountRevolving credit
facility
(1)
    
    $
    161
    
    
    
    8.75
    %
    
    $
    38
    
    
    
    9.75
    %
    
    $
    29,962
    
    
    $
    30,000Subordinated notes
payable
    
    
    2,602
    
    
    
    8.0%-12.5
    %
    
    
    300
    
    
    
    12.0
    %
    
    
    
    
    
    
    $
    2,763
    
    
    
    
    
    
    $
    338
    
    
    
    
    
    
    $
    29,962
    
    
    $
    30,000
 
 (1)
    
    The unused capacity is subject to lease eligibility and the borrowing
base formula.   Dividends
    Contractual Obligations, Commercial Commitments and Contingencies
 Contractual Obligations
  21




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##### Table of Contents



RevolvingCredit
    
    Long-Term
    
    OperatingYear Ending December 31,
    
    Facility(1)
    
    Debt
    
    Leases
    
    Total2006
    
    $
    38
    
    
    $
    300
    
    
    $
    59
    
    
    $
    3972007
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    2372008
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    2372009
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    2372010
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    237Thereafter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38
    
    
    $
    300
    
    
    $
    1,007
    
    
    $
    1,345
 
 (1)
    
    The Companys obligation to repay the revolving credit facility in the
current year is subject to lease collateral availability and the borrowing base formula.
The credit facility expires on September 29, 2007. Commitments
  Contingencies
  Recent Accounting Pronouncements
  22




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
     
 ITEM 4. Controls and Procedures
   23




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##### Table of Contents



Part II  Other Information
 
 ITEM 1. Legal Proceedings
   
 ITEM 1A. Risk Factors
  
 ITEM 6. Exhibits
  31.1*
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith 24




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##### Table of Contents



SIGNATURES
  MicroFinancial IncorporatedBy:
    /s/ Richard F. LatourPresident and Chief Executive OfficerBy:
    /s/ James R. Jackson Jr.Vice President and Chief Financial Officer  25