##### 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, 2009
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
 
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



MICROFINANCIAL INCORPORATED  TABLE OF CONTENTS
 PagePart I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):Condensed Consolidated Balance Sheets 
September 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Income 
Three and nine months ended September 30, 2009 and 2008

    
    
    4Condensed Consolidated Statements of Stockholders Equity
for the nine months ended September 30, 2009 and the twelve
months ended December 31, 2008

    
    
    5Condensed Consolidated Statements of Cash Flows 
Nine months ended September 30, 2009 and 2008

    
    
    6Notes to Condensed Consolidated Financial Statements

    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 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 Chief Executive OfficerEX-31.2 Section 302 Certification of Chief Financial OfficerEX-32.1 Section 906 Certification of Chief Executive OfficerEX-32.2 Section 906 Certification of Chief Financial Officer




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MICROFINANCIAL INCORPORATED  CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands, except share and per share data)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    540
    
    
    $
    5,047Restricted cash
    
    
    722
    
    
    
    528Net investment in leases:Receivables due in installments
    
    
    169,934
    
    
    
    142,881Estimated residual value
    
    
    18,216
    
    
    
    15,257Initial direct costs
    
    
    1,472
    
    
    
    1,211Less:Advance lease payments and deposits
    
    
    (2,028
    )
    
    
    (982
    )Unearned income
    
    
    (55,071
    )
    
    
    (49,384
    )Allowance for credit losses
    
    
    (13,876
    )
    
    
    (11,722
    )Net investment in leases
    
    
    118,647
    
    
    
    97,261Investment in service contracts, net
    
    
    
    
    
    
    32Investment in rental contracts, net
    
    
    448
    
    
    
    240Property and equipment, net
    
    
    695
    
    
    
    759Other assets
    
    
    1,009
    
    
    
    983Total assets
    
    $
    122,061
    
    
    $
    104,850LIABILITIES AND STOCKHOLDERS EQUITYRevolving line of credit
    
    $
    47,207
    
    
    $
    33,325Accounts payable
    
    
    2,067
    
    
    
    1,648Capital lease obligation
    
    
    109
    
    
    
    125Dividends payable
    
    
    
    
    
    
    702Other liabilities
    
    
    1,797
    
    
    
    1,308Income taxes payable
    
    
    753
    
    
    
    8Deferred income taxes
    
    
    3,995
    
    
    
    3,396Total liabilities
    
    
    55,928
    
    
    
    40,512Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at September 30, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
14,173,076 and 14,038,257 shares issued at September 30, 2009 and December 31,
2008, respectively
    
    
    142
    
    
    
    140Additional paid-in capital
    
    
    46,170
    
    
    
    45,774Retained earnings
    
    
    19,821
    
    
    
    18,424Total stockholders equity
    
    
    66,133
    
    
    
    64,338Total liabilities and stockholders equity
    
    $
    122,061
    
    
    $
    104,850
  3




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (In thousands, except share and per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Income on financing leases
    
    $
    7,635
    
    
    $
    6,030
    
    
    $
    21,522
    
    
    $
    16,566Rental income
    
    
    2,124
    
    
    
    2,330
    
    
    
    6,471
    
    
    
    7,566Income on service contracts
    
    
    162
    
    
    
    221
    
    
    
    526
    
    
    
    720Loss and damage waiver fees
    
    
    1,048
    
    
    
    849
    
    
    
    3,052
    
    
    
    2,305Service fees and other
    
    
    1,001
    
    
    
    632
    
    
    
    2,371
    
    
    
    1,712Interest income
    
    
    
    
    
    
    23
    
    
    
    14
    
    
    
    110Total revenues
    
    
    11,970
    
    
    
    10,085
    
    
    
    33,956
    
    
    
    28,979Expenses:Selling, general and administrative
    
    
    3,349
    
    
    
    3,260
    
    
    
    10,413
    
    
    
    9,697Provision for credit losses
    
    
    5,437
    
    
    
    3,782
    
    
    
    15,883
    
    
    
    10,199Depreciation and amortization
    
    
    440
    
    
    
    245
    
    
    
    1,158
    
    
    
    705Interest
    
    
    751
    
    
    
    310
    
    
    
    1,928
    
    
    
    696Total expenses
    
    
    9,977
    
    
    
    7,597
    
    
    
    29,382
    
    
    
    21,297Income before provision for income taxes
    
    
    1,993
    
    
    
    2,488
    
    
    
    4,574
    
    
    
    7,682Provision for income taxes
    
    
    767
    
    
    
    905
    
    
    
    1,761
    
    
    
    2,670Net income
    
    $
    1,226
    
    
    $
    1,583
    
    
    $
    2,813
    
    
    $
    5,012Net income per common share  basic
    
    $
    0.09
    
    
    $
    0.11
    
    
    $
    0.20
    
    
    $
    0.36Net income per common share  diluted
    
    $
    0.09
    
    
    $
    0.11
    
    
    $
    0.20
    
    
    $
    0.35Weighted-average shares:Basic
    
    
    14,170,079
    
    
    
    14,016,167
    
    
    
    14,138,374
    
    
    
    13,992,951Diluted
    
    
    14,328,613
    
    
    
    14,179,080
    
    
    
    14,242,420
    
    
    
    14,174,576
  4




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  (In thousands, except share and per share data)
 Additional
    
    
    
    
    
    TotalCommon Stock
    
    Paid-in
    
    Retained
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Earnings
    
    EquityBalance at December 31, 2007
    
    
    13,960,778
    
    
    $
    140
    
    
    $
    45,412
    
    
    $
    15,276
    
    
    $
    60,828Stock options exercises
    
    
    17,500
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Stock issued for deferred compensation
    
    
    53,729
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    241Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    74Amortization of unearned compensation
    
    
    6,250
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Common stock dividends ($0.20 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,802
    )
    
    
    (2,802
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,950
    
    
    
    5,950Balance at December 31, 2008
    
    
    14,038,257
    
    
    $
    140
    
    
    $
    45,774
    
    
    $
    18,424
    
    
    $
    64,338Stock issued for deferred compensation
    
    
    131,069
    
    
    
    2
    
    
    
    336
    
    
    
    
    
    
    
    338Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    49Amortization of unearned compensation
    
    
    3,750
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Common stock dividends ($0.10 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,416
    )
    
    
    (1,416
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,813
    
    
    
    2,813Balance at September 30, 2009
    
    
    14,173,076
    
    
    $
    142
    
    
    $
    46,170
    
    
    $
    19,821
    
    
    $
    66,133
  5




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  (In thousands)
 Nine Months EndedSeptember 30,2009
    
    2008Cash flows from operating activities:Cash received from customers
    
    $
    55,433
    
    
    $
    43,185Cash paid to suppliers and employees
    
    
    (11,530
    )
    
    
    (10,928
    )Income taxes paid
    
    
    (416
    )
    
    
    (249
    )Interest paid
    
    
    (1,577
    )
    
    
    (696
    )Interest received
    
    
    14
    
    
    
    110Net cash provided by operating activities
    
    
    41,924
    
    
    
    31,422Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (56,749
    )
    
    
    (50,569
    )Investment in direct costs
    
    
    (980
    )
    
    
    (836
    )Investment in property and equipment
    
    
    (256
    )
    
    
    (318
    )Net cash used in investing activities
    
    
    (57,985
    )
    
    
    (51,723
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    66,487
    
    
    
    71,176Repayment of secured debt
    
    
    (52,605
    )
    
    
    (36,642
    )(Increase) decrease in restricted cash
    
    
    (194
    )
    
    
    339Proceeds from capital lease obligation
    
    
    31
    
    
    
    163Repayment of capital lease obligations
    
    
    (47
    )
    
    
    (26
    )Payment of dividends
    
    
    (2,118
    )
    
    
    (2,098
    )Net cash provided by financing activities
    
    
    11,554
    
    
    
    32,912Net change in cash and cash equivalents
    
    
    (4,507
    )
    
    
    12,611Cash and cash equivalents, beginning of period
    
    
    5,047
    
    
    
    7,080Cash and cash equivalents, end of period
    
    $
    540
    
    
    $
    19,691Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    2,813
    
    
    $
    5,012Adjustments to reconcile net income to net
cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (21,522
    )
    
    
    (16,566
    )Depreciation and amortization
    
    
    1,158
    
    
    
    705Provision for credit losses
    
    
    15,883
    
    
    
    10,199Recovery of equipment cost and residual value
    
    
    40,968
    
    
    
    29,297Stock-based compensation expense
    
    
    60
    
    
    
    70Changes in assets and liabilities:Current taxes payable
    
    
    745
    
    
    
    (39
    )Deferred income taxes
    
    
    599
    
    
    
    2,461Other assets
    
    
    (26
    )
    
    
    (430
    )Accounts payable
    
    
    757
    
    
    
    173Other liabilities
    
    
    489
    
    
    
    540Net cash provided by operating activities
    
    $
    41,924
    
    
    $
    31,422Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    338
    
    
    $
    241
  6




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (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  (In thousands, except share and per share data)
   Nine Months EndedSeptember 30,2009
    
    
    2008Allowance for credit losses, beginning
    
    $
    11,722
    
    
    $
    5,722Provision for credit losses
    
    
    15,883
    
    
    
    10,199Charge-offs
    
    
    (16,871
    )
    
    
    (8,869
    )Recoveries
    
    
    3,142
    
    
    
    3,350Allowance for credit losses, ending
    
    $
    13,876
    
    
    $
    10,402
 Net Income Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    1,226
    
    
    $
    1,583
    
    
    $
    2,813
    
    
    $
    5,012Weighted average common shares outstanding
    
    
    14,170,079
    
    
    
    14,016,167
    
    
    
    14,138,374
    
    
    
    13,992,951Dilutive effect of common stock
options, warrants and restricted stock
    
    
    158,534
    
    
    
    162,913
    
    
    
    104,046
    
    
    
    181,625Shares used in computation of net income
per common share  diluted
    
    
    14,328,613
    
    
    
    14,179,080
    
    
    
    14,242,420
    
    
    
    14,174,576Net income per common share  basic
    
    $
    0.09
    
    
    $
    0.11
    
    
    $
    0.20
    
    
    $
    0.36Net income per common share  diluted
    
    $
    0.09
    
    
    $
    0.11
    
    
    $
    0.20
    
    
    $
    0.35
 Stock-Based Employee Compensation
  8




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
    Outstanding
    
    ExercisableWeighted-
    
    
    
    
    
    Weighted-Exercise
    
    
    
    
    
    Average
    
    Intrinsic
    
    Average
    
    
    
    
    
    IntrinsicPrice
    
    Shares
    
    Life (Years)
    
    Value
    
    Exercise Price
    
    Shares
    
    Value$
    9.78
    
    
    
    350,000
    
    
    
    0.40
    
    
    
    
    
    
    $
    9.78
    
    
    
    350,000
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    1.39
    
    
    
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    2.41
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    3.16
    
    
    
    282,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    282,0005.77
    
    
    
    31,923
    
    
    
    7.42
    
    
    
    
    
    
    
    5.77
    
    
    
    
    
    
    
    5.85
    
    
    
    142,382
    
    
    
    8.33
    
    
    
    
    
    
    
    5.85
    
    
    
    
    
    
    
    2.30
    
    
    
    258,723
    
    
    
    9.42
    
    
    
    303,000
    
    
    
    2.30
    
    
    
    
    
    
    
    1,258,028
    
    
    
    4.11
    
    
    $
    585,000
    
    
    
    7.78
    
    
    
    825,000
    
    
    $
    282,000
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  9




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Concentration of Credit Risk
  C. Revolving line of credit
  D. Commitments and Contingencies
 Legal Matters
  Lease Commitments
  Dividends
  E. Recent Accounting Pronouncements
  10




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   , ,
    11




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   12




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Forward-Looking Information
  Overview
     13




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Critical Accounting Policies
   Results of Operations  Three months ended September 30, 2009 compared to the three months ended
September 30, 2008
 Revenue
 Three Months EndedSeptember 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Income on financing
leases
    
    $
    7,635
    
    
    
    26.6
    %
    
    $
    6,030Rental income
    
    
    2,124
    
    
    
    (8.8
    )
    
    
    2,330Income on service
contracts
    
    
    162
    
    
    
    (26.7
    )
    
    
    221Loss and damage waiver
fees
    
    
    1,048
    
    
    
    23.4
    
    
    
    849Service fees and other
income
    
    
    1,001
    
    
    
    58.4
    
    
    
    632Interest income
    
    
    
    
    
    
    (100.0
    )
    
    
    23Total revenues
    
    $
    11,970
    
    
    
    18.7
    %
    
    $
    10,085
 14




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Selling, General and Administrative
 Three Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Selling, general and administrative
    
    $
    3,349
    
    
    
    2.7
    %
    
    $
    3,260As a percent of revenue
    
    
    28.0
    %
    
    
    
    
    
    
    32.3
    %
  Provision for Credit Losses
 Three Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for credit losses
    
    $
    5,437
    
    
    
    43.8
    %
    
    $
    3,782As a percent of revenue
    
    
    45.4
    %
    
    
    
    
    
    
    37.5
    %
  Depreciation and Amortization
 Three Months EndedSeptember 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Depreciation  fixed assets
    
    $
    110
    
    
    
    10.0
    %
    
    $
    100Depreciation  rental equipment
    
    
    327
    
    
    
    205.6
    
    
    
    107Amortization  service contracts
    
    
    3
    
    
    
    (92.1
    )
    
    
    38Total depreciation and amortization
    
    $
    440
    
    
    
    79.6
    %
    
    $
    245As a percent of revenue
    
    
    3.7
    %
    
    
    
    
    
    
    2.4
    %
 15




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Interest Expense
 Three Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Interest
    
    $
    751
    
    
    
    142.3
    %
    
    $
    310As a percent of revenue
    
    
    6.3
    %
    
    
    
    
    
    
    3.1
    %
  Provision for Income Taxes
 Three Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for income taxes
    
    $
    767
    
    
    
    (15.2
    )%
    
    $
    905As a percent of revenue
    
    
    6.4
    %
    
    
    
    
    
    
    9.0
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    36.4
    %
  16




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Other Operating Data
  Results of Operations  Nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008
 Revenue
 Nine Months EndedSeptember 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Income on financing leases
    
    $
    21,522
    
    
    
    29.9
    %
    
    $
    16,566Rental income
    
    
    6,471
    
    
    
    (14.5
    )
    
    
    7,566Income on service contracts
    
    
    526
    
    
    
    (26.9
    )
    
    
    720Loss and damage waiver fees
    
    
    3,052
    
    
    
    32.4
    
    
    
    2,305Service fees and other income
    
    
    2,371
    
    
    
    38.5
    
    
    
    1,712Interest income
    
    
    14
    
    
    
    (87.3
    )
    
    
    110Total revenues
    
    $
    33,956
    
    
    
    17.2
    %
    
    $
    28,979
   17




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Selling, General and Administrative
 Nine Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Selling, general and administrative
    
    $
    10,413
    
    
    
    7.4
    %
    
    $
    9,697As a percent of revenue
    
    
    30.7
    %
    
    
    
    
    
    
    33.5
    %
  Provision for Credit Losses
 Nine Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for credit losses
    
    $
    15,883
    
    
    
    55.7
    %
    
    $
    10,199As a percent of revenue
    
    
    46.8
    %
    
    
    
    
    
    
    35.2
    %
  Depreciation and Amortization
 Nine Months EndedSeptember 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Depreciation  fixed assets
    
    $
    319
    
    
    
    12.3
    %
    
    $
    284Depreciation  rental equipment
    
    
    810
    
    
    
    200.0
    
    
    
    270Amortization  service contracts
    
    
    29
    
    
    
    (80.8
    )
    
    
    151Total depreciation and amortization
    
    $
    1,158
    
    
    
    64.3
    %
    
    $
    705As a percent of revenue
    
    
    3.4
    %
    
    
    
    
    
    
    2.4
    %
   18




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##### Table of Contents



Interest Expense
 Nine Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Interest
    
    $
    1,928
    
    
    
    177.0
    %
    
    $
    696As a percent of revenue
    
    
    5.7
    %
    
    
    
    
    
    
    2.4
    %
  Provision for Income Taxes
 Nine Months EndedSeptember 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for income taxes
    
    $
    1,761
    
    
    
    (34.0
    )%
    
    $
    2,670As a percent of revenue
    
    
    5.2
    %
    
    
    
    
    
    
    9.2
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    34.8
    %
    19




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##### Table of Contents



Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    September 30, 2009
    
    December 31, 2008Current
    
    $
    134,469
    
    
    
    79.1
    %
    
    $
    110,423
    
    
    
    77.3
    %31-60 days past due
    
    
    5,815
    
    
    
    3.4
    
    
    
    6,941
    
    
    
    4.861-90 days past due
    
    
    5,194
    
    
    
    3.1
    
    
    
    5,079
    
    
    
    3.6Over 90 days past due
    
    
    24,456
    
    
    
    14.4
    
    
    
    20,438
    
    
    
    14.3Gross receivables due in installments
    
    $
    169,934
    
    
    
    100.0
    %
    
    $
    142,881
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
    20




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##### Table of Contents



Borrowings
  September 30, 2009
    
    December 31, 2008Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaximumAmounts
    
    Interest
    
    Unused
    
    Facility
    
    Amounts
    
    Interest
    
    Unused
    
    Facility(dollars in 000)
    
    Outstanding
    
    Rate
    
    Capacity
    
    Amount
    
    Outstanding
    
    Rate
    
    Capacity
    
    AmountRevolving credit
facility(1)
    
    $
    47,207
    
    
    
    5.0
    %
    
    $
    37,793
    
    
    $
    85,000
    
    
    $
    33,325
    
    
    
    3.25
    %
    
    $
    26,675
    
    
    $
    60,000
 
 (1)
    
    The unused capacity is subject to the borrowing base formula.   Dividends
    21




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##### Table of Contents



Contractual Obligations and Lease Commitments
 Contractual Obligations
  Lease Commitments
  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
 (a)
    
    Exhibits index
 3.1
    
    Restated Articles of Organization, as amended (incorporated by reference to Exhibit 3.1
in the Registrants Registration Statement on Form S-1, No. 333-56639, filed with the
Securities and Exchange Commission on June 9, 1998).3.2
    
    Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 in the
Registrants Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 28, 2007).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 2002.32.2*
    
    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