##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended June 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
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




---



##### 



MICROFINANCIAL INCORPORATED
TABLE OF CONTENTS
 PagePart I - FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Condensed Consolidated Balance Sheets -
June 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Income -
Three and six months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Stockholders Equity
for the Six months ended June 30, 2009 and the twelve
months ended December 31, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows -
Six months ended June 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 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24Signatures
    
    
    26EX-10.1 Separation Agreement and General Release dated May 28, 2009 between Mr. Thomas Herlihy and TimePayment Corp.EX-31.1 Certification of Chief Executive Officer pursuant to Section 302EX-31.2 Certification of Chief Financial Officer pursuant to Section 302EX-32.1 Certification of Chief Executive Officer pursuant to Section 906EX-32.2 Certification of Chief Financial Officer pursuant to Section 906




---



##### Table of Contents



MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands, except share and per share data)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    1,003
    
    
    $
    5,047Restricted cash
    
    
    772
    
    
    
    528Net investment in leases:Receivables due in installments
    
    
    159,740
    
    
    
    142,881Estimated residual value
    
    
    17,146
    
    
    
    15,257Initial direct costs
    
    
    1,380
    
    
    
    1,211Less:Advance lease payments and deposits
    
    
    (1,545
    )
    
    
    (982
    )Unearned income
    
    
    (52,793
    )
    
    
    (49,384
    )Allowance for credit losses
    
    
    (13,509
    )
    
    
    (11,722
    )Net investment in leases
    
    
    110,419
    
    
    
    97,261Investment in service contracts, net
    
    
    3
    
    
    
    32Investment in rental contracts, net
    
    
    392
    
    
    
    240Property and equipment, net
    
    
    682
    
    
    
    759Other assets
    
    
    1,163
    
    
    
    983Total assets
    
    $
    114,434
    
    
    $
    104,850LIABILITIES AND STOCKHOLDERS EQUITYRevolving line of credit
    
    $
    40,956
    
    
    $
    33,325Accounts payable
    
    
    1,694
    
    
    
    1,648Capital lease obligation
    
    
    125
    
    
    
    125Dividends payable
    
    
    
    
    
    
    702Other liabilities
    
    
    1,943
    
    
    
    1,308Income taxes payable
    
    
    499
    
    
    
    8Deferred income taxes
    
    
    3,734
    
    
    
    3,396Total liabilities
    
    
    48,951
    
    
    
    40,512Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at June 30, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
14,141,192 and 14,038,257 shares issued at June 30, 2009 and December 31,
2008, respectively
    
    
    141
    
    
    
    140Additional paid-in capital
    
    
    46,038
    
    
    
    45,774Retained earnings
    
    
    19,304
    
    
    
    18,424Total stockholders equity
    
    
    65,483
    
    
    
    64,338Total liabilities and stockholders equity
    
    $
    114,434
    
    
    $
    104,850
  3




---



##### Table of Contents



MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (In thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Income on financing leases
    
    $
    7,098
    
    
    $
    5,596
    
    
    $
    13,887
    
    
    $
    10,536Rental income
    
    
    2,138
    
    
    
    2,484
    
    
    
    4,347
    
    
    
    5,236Income on service contracts
    
    
    175
    
    
    
    240
    
    
    
    364
    
    
    
    499Loss and damage waiver fees
    
    
    1,018
    
    
    
    768
    
    
    
    2,004
    
    
    
    1,456Service fees and other
    
    
    699
    
    
    
    532
    
    
    
    1,370
    
    
    
    1,080Interest income
    
    
    1
    
    
    
    27
    
    
    
    14
    
    
    
    87Total revenues
    
    
    11,129
    
    
    
    9,647
    
    
    
    21,986
    
    
    
    18,894Expenses:Selling, general and administrative
    
    
    3,492
    
    
    
    3,198
    
    
    
    7,064
    
    
    
    6,437Provision for credit losses
    
    
    4,993
    
    
    
    3,060
    
    
    
    10,446
    
    
    
    6,417Depreciation and amortization
    
    
    383
    
    
    
    230
    
    
    
    718
    
    
    
    460Interest
    
    
    661
    
    
    
    234
    
    
    
    1,177
    
    
    
    386Total expenses
    
    
    9,529
    
    
    
    6,722
    
    
    
    19,405
    
    
    
    13,700Income before provision for income taxes
    
    
    1,600
    
    
    
    2,925
    
    
    
    2,581
    
    
    
    5,194Provision for income taxes
    
    
    616
    
    
    
    1,053
    
    
    
    994
    
    
    
    1,765Net income
    
    $
    984
    
    
    $
    1,872
    
    
    $
    1,587
    
    
    $
    3,429Net income per common share  basic
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11
    
    
    $
    0.25Net income per common share  diluted
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11
    
    
    $
    0.24Weighted-average shares:Basic
    
    
    14,141,192
    
    
    
    13,987,528
    
    
    
    14,122,259
    
    
    
    13,981,216Diluted
    
    
    14,239,391
    
    
    
    14,137,300
    
    
    
    14,214,308
    
    
    
    14,151,034
  4




---



##### Table of Contents



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
    
    
    100,435
    
    
    
    1
    
    
    
    230
    
    
    
    
    
    
    
    231Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    27Amortization of unearned compensation
    
    
    2,500
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Common stock dividends ($0.05 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )
    
    
    (707
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,587
    
    
    
    1,587Balance at June 30, 2009
    
    
    14,141,192
    
    
    $
    141
    
    
    $
    46,038
    
    
    $
    19,304
    
    
    $
    65,483
  5




---



##### Table of Contents



MICROFINANCIAL
INCORPORATED
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
 (In thousands)
 Six
Months EndedJune 30,2009
    
    
    2008Cash flows from operating activities:Cash received from customers
    
    $
    35,966
    
    
    $
    27,866Cash paid to suppliers and employees
    
    
    (7,768
    )
    
    
    (7,215
    )Income taxes paid
    
    
    (164
    )
    
    
    (182
    )Interest paid
    
    
    (952
    )
    
    
    (386
    )Interest received
    
    
    13
    
    
    
    87Net cash provided by operating activities
    
    
    27,095
    
    
    
    20,170Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (36,353
    )
    
    
    (34,644
    )Investment in direct costs
    
    
    (631
    )
    
    
    (557
    )Investment in property and equipment
    
    
    (133
    )
    
    
    (252
    )Net cash used in investing activities
    
    
    (37,117
    )
    
    
    (35,453
    )Cash flows from financing activities:Proceeds
from secured debt
    
    
    41,384
    
    
    
    37,860Repayment of secured debt
    
    
    (33,753
    )
    
    
    (23,014
    )Increase in restricted cash
    
    
    (244
    )
    
    
    (9
    )Proceeds from capital lease obligation
    
    
    31
    
    
    
    163Repayment of capital lease obligations
    
    
    (31
    )
    
    
    (13
    )Payment of dividends
    
    
    (1,409
    )
    
    
    (1,397
    )Net cash provided by financing activities
    
    
    5,978
    
    
    
    13,590Net change in cash and cash equivalents
    
    
    (4,044
    )
    
    
    (1,693
    )Cash and cash equivalents, beginning of period
    
    
    5,047
    
    
    
    7,080Cash and cash equivalents, end of period
    
    $
    1,003
    
    
    $
    5,387Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    1,587
    
    
    $
    3,429Adjustments to reconcile net income to netcash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (13,887
    )
    
    
    (10,536
    )Depreciation and amortization
    
    
    718
    
    
    
    460Provision for credit losses
    
    
    10,446
    
    
    
    6,417Recovery of equipment cost and residual value
    
    
    26,636
    
    
    
    18,265Stock-based compensation expense
    
    
    34
    
    
    
    47Changes in assets and liabilities:Current taxes payable
    
    
    491
    
    
    
    150Deferred income taxes
    
    
    338
    
    
    
    1,434Other assets
    
    
    (180
    )
    
    
    (139
    )Accounts payable
    
    
    277
    
    
    
    25Other liabilities
    
    
    635
    
    
    
    618Net cash provided by operating activities
    
    $
    27,095
    
    
    $
    20,170Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    231
    
    
    $
    127
  6




---



##### Table of Contents



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




---



##### Table of Contents



MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   Six Months EndedJune 30,2009
    
    
    2008Allowance for credit losses, beginning
    
    $
    11,722
    
    
    $
    5,722Provision for credit losses
    
    
    10,446
    
    
    
    6,417Charge-offs
    
    
    (10,675
    )
    
    
    (4,801
    )Recoveries
    
    
    2,016
    
    
    
    2,161Allowance for credit losses, ending
    
    $
    13,509
    
    
    $
    9,499
 Net Income Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    984
    
    
    $
    1,872
    
    
    $
    1,587
    
    
    $
    3,429Weighted average common shares
outstanding
    
    
    14,141,192
    
    
    
    13,987,528
    
    
    
    14,122,259
    
    
    
    13,981,216Dilutive effect of common stock options, warrants and
restricted stock
    
    
    98,199
    
    
    
    149,772
    
    
    
    92,049
    
    
    
    169,818Shares used in computation of net
income per common share - diluted
    
    
    14,239,391
    
    
    
    14,137,300
    
    
    
    14,214,308
    
    
    
    14,151,034Net income per common share - basic
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11
    
    
    $
    0.25Net income per common share -
diluted
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11
    
    
    $
    0.24
 Stock-Based Employee Compensation
  8




---



##### Table of Contents



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
    
    
    
    .65
    
    
    $
    
    
    
    $
    9.78
    
    
    
    350,000
    
    
    $
    13.10
    
    
    
    90,000
    
    
    
    1.64
    
    
    
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    2.66
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    3.41
    
    
    
    309,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    309,0005.77
    
    
    
    31,923
    
    
    
    7.67
    
    
    
    
    
    
    
    5.77
    
    
    
    
    
    
    
    5.85
    
    
    
    142,382
    
    
    
    8.58
    
    
    
    
    
    
    
    5.85
    
    
    
    
    
    
    
    2.30
    
    
    
    258,723
    
    
    
    9.67
    
    
    
    349,000
    
    
    
    2.30
    
    
    
    
    
    
    
    1,258,028
    
    
    
    4.36
    
    
    $
    658,000
    
    
    
    7.78
    
    
    
    825,000
    
    
    $
    309,000
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  Concentration of Credit Risk
 9




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  Interim
Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of
Financial Instruments, Interim Financial Reporting,
     12




---



##### Table of Contents



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




---



##### Table of Contents



Critical Accounting Policies
   Results
of Operations - Three months ended June 30, 2009 compared to the three months ended June
30, 2008
 Revenue
 Three Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Income on financing leases
    
    $
    7,098
    
    
    
    26.8
    %
    
    $
    5,596Rental income
    
    
    2,138
    
    
    
    (13.9
    )
    
    
    2,484Income on service contracts
    
    
    175
    
    
    
    (27.1
    )
    
    
    240Loss and damage waiver fees
    
    
    1,018
    
    
    
    32.6
    
    
    
    768Service fees and other income
    
    
    699
    
    
    
    31.4
    
    
    
    532Interest income
    
    
    1
    
    
    
    (96.3
    )
    
    
    27Total revenues
    
    $
    11,129
    
    
    
    15.4
    %
    
    $
    9,647
  14




---



##### Table of Contents



Selling, General and Administrative Expenses
 Three Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Selling, general and administrative
    
    $
    3,492
    
    
    
    9.2
    %
    
    $
    3,198As a percent of revenue
    
    
    31.4
    %
    
    
    
    
    
    
    33.2
    %
  Provision for Credit Losses
 Three Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for credit losses
    
    $
    4,993
    
    
    
    63.2
    %
    
    $
    3,060As a percent of revenue
    
    
    44.9
    %
    
    
    
    
    
    
    31.7
    %
  Depreciation and Amortization
 Three Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Depreciation
 fixed assets
    
    $
    105
    
    
    
    9.4
    %
    
    $
    96Depreciation
 rental equipment
    
    
    269
    
    
    
    228.0
    
    
    
    82Amortization
 service contracts
    
    
    9
    
    
    
    (82.7
    )
    
    
    52Total depreciation and amortization
    
    $
    383
    
    
    
    66.5
    %
    
    $
    230As a percent of revenue
    
    
    3.4
    %
    
    
    
    
    
    
    2.4
    %
  15




---



##### Table of Contents



Interest Expense
 Three Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Interest
    
    $
    661
    
    
    
    182.5
    %
    
    $
    234As a percent of revenue
    
    
    5.9
    %
    
    
    
    
    
    
    2.4
    %
  Provision for Income Taxes
 Three Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Provision for income taxes
    
    $
    616
    
    
    
    (41.5
    )%
    
    $
    1,053As a percent of revenue
    
    
    5.5
    %
    
    
    
    
    
    
    10.9
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    36.0
    %
   16




---



##### Table of Contents



Other Operating Data
  Results
of Operations - Six months ended June 30, 2009 compared to the six months ended June 30,
2008
 Revenue
 Six Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Income on financing leases
    
    $
    13,887
    
    
    
    31.8
    %
    
    $
    10,536Rental income
    
    
    4,347
    
    
    
    (17.0
    )
    
    
    5,236Income on service contracts
    
    
    364
    
    
    
    (27.1
    )
    
    
    499Loss and damage waiver fees
    
    
    2,004
    
    
    
    37.6
    
    
    
    1,456Service fees and other income
    
    
    1,370
    
    
    
    26.9
    
    
    
    1,080Interest income
    
    
    14
    
    
    
    (83.9
    )
    
    
    87Total revenues
    
    $
    21,986
    
    
    
    16.4
    %
    
    $
    18,894
   Selling, General and Administrative Expenses
 Six Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Selling, general and administrative
    
    $
    7,064
    
    
    
    9.7
    %
    
    $
    6,437As a percent of revenue
    
    
    32.1
    %
    
    
    
    
    
    
    34.1
    %
  17




---



##### Table of Contents



Provision for Credit Losses
 Six Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Provision for credit losses
    
    $
    10,446
    
    
    
    62.8
    %
    
    $
    6,417As a percent of revenue
    
    
    47.5
    %
    
    
    
    
    
    
    34.0
    %
  Depreciation and Amortization
 Six Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Depreciation
 fixed assets
    
    $
    210
    
    
    
    14.1
    %
    
    $
    184Depreciation
 rental equipment
    
    
    483
    
    
    
    198.1
    
    
    
    162Amortization
 service contracts
    
    
    25
    
    
    
    (78.1
    )
    
    
    114Total depreciation and amortization
    
    $
    718
    
    
    
    56.1
    %
    
    $
    460As a percent of revenue
    
    
    3.3
    %
    
    
    
    
    
    
    2.4
    %
    18




---



##### Table of Contents



Interest Expense
 Six Months Ended June 30,2009
    
    Change
    
    2008(Dollars in thousands)Interest
    
    $
    1,177
    
    
    
    204.9
    %
    
    $
    386As a percent of revenue
    
    
    5.4
    %
    
    
    
    
    
    
    2.0
    %
  Provision for Income Taxes
 Six Months Ended June 30,2009
    
    
    Change
    
    
    2008(Dollars in thousands)Provision for income taxes
    
    $
    994
    
    
    
    (43.7
    )%
    
    $
    1,765As a percent of revenue
    
    
    4.5
    %
    
    
    
    
    
    
    9.3
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    34.0
    %
    Other Operating Data
  19




---



##### Table of Contents



Exposure to Credit Losses
  (dollars in thousands)
    
    June 30, 2009
    
    
    December 31, 2008Current
    
    $
    126,138
    
    
    
    79.0
    %
    
    $
    110,423
    
    
    
    77.3
    %31-60 days past due
    
    
    5,232
    
    
    
    3.3
    
    
    
    6,941
    
    
    
    4.861-90 days past due
    
    
    4,550
    
    
    
    2.8
    
    
    
    5,079
    
    
    
    3.6Over 90 days past due
    
    
    23,820
    
    
    
    14.9
    
    
    
    20,438
    
    
    
    14.3Gross receivables due in installments
    
    $
    159,740
    
    
    
    100.0
    %
    
    $
    142,881
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
      Borrowings
  20




---



##### Table of Contents



June 30, 2009
    
    December 31, 2008Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaximumAmounts
    
    Interest
    
    Unused
    
    Facility
    
    Amounts
    
    Interest
    
    Unused
    
    Facility(dollars in 000)
    
    Outstanding
    
    Rate
    
    Capacity
    
    Amount
    
    Outstanding
    
    Rate
    
    Capacity
    
    AmountRevolving line of
credit
facility(1)
    
    $
    40,956
    
    
    
    5.0
    %
    
    $
    44,044
    
    
    $
    85,000
    
    
    $
    33,325
    
    
    
    3.25
    %
    
    $
    26,675
    
    
    $
    60,000
 
 (1)
    
    The unused capacity is subject to the borrowing base formula.   Dividends
    Contractual Obligations and Lease Commitments
 Contractual Obligations
  Lease Commitments
  21




---



##### Table of Contents



Recent Accounting Pronouncements
  22




---



##### Table of Contents



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




---



##### Table of Contents



Part II - Other Information
 
 ITEM 1.
    
    Legal Proceedings
  
 ITEM 1A.
    
    Risk Factors
  
 ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
   Name
of Director
    
    For
    
    Authority WithheldBrian E. Boyle
    
    9,221,078
    
    2,607,559Alan J. Zakon
    
    10,668,098
    
    1,160,539
  For

    Against
    
    
    Abstain11,795,564
    

    33,073
    
    
    
    
    0
 
 ITEM 5.
    
    Other Information
  
 ITEM 6.
    
    Exhibits
  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).10.1*
    
    Separation Agreement and General Release dated May 28, 2009 between Mr. Thomas Herlihy
and TimePayment Corp., a wholly owned subsidiary of the Registrant.
 24




---



##### Table of Contents



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 25




---



##### Table of Contents



SIGNATURES
  MicroFinancial IncorporatedBy:
    /s/ Richard F. LatourPresident and Chief Executive OfficerBy:
    /s/ James R. Jackson Jr.Vice President and Chief Financial OfficerDate: August 14, 2009 26