##### 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, 2008
 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
  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, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Income -
Three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Stockholders Equity
for the nine months ended September 30, 2008 and the twelve
months ended December 31, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 2008 and 2007
    
    
    6Notes 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
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24EX-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)
  September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCash and cash equivalents
    
    $
    19,691
    
    
    $
    7,080Restricted cash
    
    
    222
    
    
    
    561Net investment in leases:Receivables due in installments
    
    
    132,673
    
    
    
    92,314Estimated residual value
    
    
    14,049
    
    
    
    9,814Initial direct costs
    
    
    1,092
    
    
    
    729Less:Advance lease payments and deposits
    
    
    (707
    )
    
    
    (219
    )Unearned income
    
    
    (46,909
    )
    
    
    (35,369
    )Allowance for credit losses
    
    
    (10,402
    )
    
    
    (5,722
    )Net investment in leases
    
    
    89,796
    
    
    
    61,547Investment in service contracts, net
    
    
    52
    
    
    
    203Investment in rental contracts, net
    
    
    175
    
    
    
    106Property and equipment, net
    
    
    816
    
    
    
    782Other assets
    
    
    1,133
    
    
    
    703Total assets
    
    $
    111,885
    
    
    $
    70,982LIABILITIES AND STOCKHOLDERS EQUITYNotes payable
    
    $
    41,065
    
    
    $
    6,531Accounts payable
    
    
    1,395
    
    
    
    1,350Capital lease obligation
    
    
    137
    
    
    
    Dividends payable
    
    
    
    
    
    
    698Other liabilities
    
    
    1,341
    
    
    
    801Income taxes payable
    
    
    189
    
    
    
    228Deferred income taxes
    
    
    3,007
    
    
    
    546Total liabilities
    
    
    47,134
    
    
    
    10,154Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at September 30, 2008 and December 31, 2007
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
14,019,507 and 13,960,778 shares issued at September 30, 2008 and December
31, 2007, respectively
    
    
    140
    
    
    
    140Additional paid-in capital
    
    
    45,723
    
    
    
    45,412Retained earnings
    
    
    18,888
    
    
    
    15,276Total stockholders equity
    
    
    64,751
    
    
    
    60,828Total liabilities and stockholders equity
    
    $
    111,885
    
    
    $
    70,982
  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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Income on financing leases
    
    $
    6,030
    
    
    $
    3,406
    
    
    $
    16,566
    
    
    $
    8,092Rental income
    
    
    2,330
    
    
    
    3,268
    
    
    
    7,566
    
    
    
    10,706Income on service contracts
    
    
    221
    
    
    
    303
    
    
    
    720
    
    
    
    993Loss and damage waiver fees
    
    
    849
    
    
    
    524
    
    
    
    2,305
    
    
    
    1,442Service fees and other
    
    
    632
    
    
    
    415
    
    
    
    1,712
    
    
    
    1,131Interest income
    
    
    23
    
    
    
    182
    
    
    
    110
    
    
    
    752Total revenues
    
    
    10,085
    
    
    
    8,098
    
    
    
    28,979
    
    
    
    23,116Expenses:Selling, general and administrative
    
    
    3,260
    
    
    
    3,134
    
    
    
    9,697
    
    
    
    9,861Provision for credit losses
    
    
    3,782
    
    
    
    1,919
    
    
    
    10,199
    
    
    
    5,119Depreciation and amortization
    
    
    245
    
    
    
    288
    
    
    
    705
    
    
    
    1,098Interest
    
    
    310
    
    
    
    13
    
    
    
    696
    
    
    
    39Total expenses
    
    
    7,597
    
    
    
    5,354
    
    
    
    21,297
    
    
    
    16,117Income before provision for income taxes
    
    
    2,488
    
    
    
    2,744
    
    
    
    7,682
    
    
    
    6,999Provision for income taxes
    
    
    905
    
    
    
    941
    
    
    
    2,670
    
    
    
    2,530Net income
    
    $
    1,583
    
    
    $
    1,803
    
    
    $
    5,012
    
    
    $
    4,469Net income per common share  basic
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.36
    
    
    $
    0.32Net income per common share  diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.35
    
    
    $
    0.32Weighted-average shares:Basic
    
    
    14,016,167
    
    
    
    13,956,881
    
    
    
    13,992,951
    
    
    
    13,910,234Diluted
    
    
    14,179,080
    
    
    
    14,180,213
    
    
    
    14,174,576
    
    
    
    14,146,696
  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, 2006
    
    
    13,811,442
    
    
    $
    138
    
    
    $
    44,136
    
    
    $
    11,862
    
    
    $
    56,136Warrant exercises
    
    
    125,000
    
    
    
    1
    
    
    
    319
    
    
    
    
    
    
    
    320Purchase and retirement of shares
    
    
    (75,000
    )
    
    
    (1
    )
    
    
    (398
    )
    
    
    
    
    
    
    (399
    )Stock issued for deferred compensation
    
    
    77,654
    
    
    
    2
    
    
    
    307
    
    
    
    
    
    
    
    309Restricted stock granted
    
    
    11,682
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Conversion of share-based liability
awards
to equity awards
    
    
    
    
    
    
    
    
    
    
    932
    
    
    
    
    
    
    
    932Amortization of unearned compensation
    
    
    10,000
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    32Common stock dividends ($0.20 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,788
    )
    
    
    (2,788
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,202
    
    
    
    6,202Balance at December 31, 2007
    
    
    13,960,778
    
    
    $
    140
    
    
    $
    45,412
    
    
    $
    15,276
    
    
    $
    60,828Stock issued for deferred compensation
    
    
    53,729
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    241Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Amortization of unearned compensation
    
    
    5,000
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Common stock dividends ($0.10 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,400
    )
    
    
    (1,400
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,012
    
    
    
    5,012Balance at September 30, 2008
    
    
    14,019,507
    
    
    $
    140
    
    
    $
    45,723
    
    
    $
    18,888
    
    
    $
    64,751
  5




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 (In thousands)
  Nine Months EndedSeptember 30,2008
    
    2007Cash flows from operating activities:Cash received from customers
    
    $
    43,185
    
    
    $
    30,143Cash paid to suppliers and employees
    
    
    (10,928
    )
    
    
    (9,892
    )Income taxes paid
    
    
    (249
    )
    
    
    (212
    )Interest paid
    
    
    (696
    )
    
    
    (3
    )Interest received
    
    
    110
    
    
    
    752Net cash provided by operating activities
    
    
    31,422
    
    
    
    20,788Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (50,569
    )
    
    
    (37,219
    )Investment in direct costs
    
    
    (836
    )
    
    
    (527
    )Investment in property and equipment
    
    
    (318
    )
    
    
    (297
    )Net cash used in investing activities
    
    
    (51,723
    )
    
    
    (38,043
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    71,176
    
    
    
    46Repayment of notes payable
    
    
    (36,642
    )
    
    
    (50
    )Decrease in restricted cash
    
    
    339
    
    
    
    Proceeds from capital lease obligation
    
    
    163
    
    
    
    Repayment of capital lease obligations
    
    
    (26
    )
    
    
    Proceeds from exercise of common stock warrants
    
    
    
    
    
    
    41Payment of dividends
    
    
    (2,098
    )
    
    
    (2,083
    )Net cash provided by (used in) financing activities
    
    
    32,912
    
    
    
    (2,046
    )Net change in cash and cash equivalents
    
    
    12,611
    
    
    
    (19,301
    )Cash and cash equivalents, beginning of period
    
    
    7,080
    
    
    
    28,738Cash and cash equivalents, end of period
    
    $
    19,691
    
    
    $
    9,437Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    5,012
    
    
    $
    4,469Adjustments
to reconcile net income to net cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (16,566
    )
    
    
    (8,092
    )Depreciation and amortization
    
    
    705
    
    
    
    1,098Provision for credit losses
    
    
    10,199
    
    
    
    5,119Recovery of equipment cost and residual value
    
    
    29,297
    
    
    
    15,187Stock-based compensation expense
    
    
    70
    
    
    
    537Non-cash interest expense (amortization of debt discount)
    
    
    
    
    
    
    37Changes in assets and liabilities:Current taxes payable
    
    
    (39
    )
    
    
    (123
    )Deferred income taxes
    
    
    2,461
    
    
    
    2,440Other assets
    
    
    (430
    )
    
    
    (223
    )Accounts payable
    
    
    173
    
    
    
    287Other liabilities
    
    
    540
    
    
    
    52Net cash provided by operating activities
    
    $
    31,422
    
    
    $
    20,788Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    241
    
    
    $
    381Conversion of share-based liability awards to equity awards
    
    
    
    
    
    
    932
  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 30,2008
    
    
    2007Allowance for credit losses, beginning
    
    $
    5,722
    
    
    $
    5,223Provision for credit losses
    
    
    10,199
    
    
    
    5,119Charge-offs
    
    
    (8,869
    )
    
    
    (8,733
    )Recoveries
    
    
    3,350
    
    
    
    3,697Allowance for credit losses, ending
    
    $
    10,402
    
    
    $
    5,306
 Net Income Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    1,583
    
    
    $
    1,803
    
    
    $
    5,012
    
    
    $
    4,469Weighted average common shares outstanding
    
    
    14,016,167
    
    
    
    13,956,881
    
    
    
    13,992,951
    
    
    
    13,910,234Dilutive effect of common stock
options, warrants and restricted stock
    
    
    162,913
    
    
    
    223,332
    
    
    
    181,625
    
    
    
    236,462Shares used in computation of net income
per common share  diluted
    
    
    14,179,080
    
    
    
    14,180,213
    
    
    
    14,174,576
    
    
    
    14,146,696Net income per common share  basic
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.36
    
    
    $
    0.32Net income per common share  diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.35
    
    
    $
    0.32
 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$12.31
    
    
    359,391
    
    
    
    .41
    
    
    $
    
    
    
    $
    12.31
    
    
    
    359,391
    
    
    $
    13.54
    
    
    40,609
    
    
    
    .41
    
    
    
    
    
    
    
    13.54
    
    
    
    40,609
    
    
    
    9.78
    
    
    350,000
    
    
    
    1.40
    
    
    
    
    
    
    
    9.78
    
    
    
    350,000
    
    
    
    13.10
    
    
    90,000
    
    
    
    2.39
    
    
    
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    6.70
    
    
    235,000
    
    
    
    3.41
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    167,500
    
    
    
    4.16
    
    
    
    404,000
    
    
    
    1.59
    
    
    
    167,500
    
    
    
    404,0005.77
    
    
    40,188
    
    
    
    8.42
    
    
    
    
    
    
    
    5.77
    
    
    
    
    
    
    
    5.85
    
    
    176,879
    
    
    
    9.33
    
    
    
    
    
    
    
    5.85
    
    
    
    
    
    
    
    1,459,567
    
    
    
    2.98
    
    
    $
    404,000
    
    
    
    9.19
    
    
    
    1,242,500
    
    
    $
    404,000
     9




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##### Table of Contents



MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  Cash and Cash Equivalents
  Concentration of Credit Risk
  C. Notes Payable
   D. Commitments and Contingencies
 Legal Matters
  Lease Commitments
  10




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  Dividends
  E. Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities
   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, 2008 compared to the three months ended
September 30, 2007
 Revenue
 Three Months EndedSeptember 30,2008
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    6,030
    
    
    
    77.0
    %
    
    $
    3,406Rental income
    
    
    2,330
    
    
    
    (28.7
    )
    
    
    3,268Income on service contracts
    
    
    221
    
    
    
    (27.1
    )
    
    
    303Loss and damage waiver fees
    
    
    849
    
    
    
    62.0
    
    
    
    524Service fees and other income
    
    
    632
    
    
    
    52.3
    
    
    
    415Interest income
    
    
    23
    
    
    
    (87.4
    )
    
    
    182Total revenues
    
    $
    10,085
    
    
    
    24.5
    %
    
    $
    8,098
   13




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Selling, General and Administrative
 Three Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    3,260
    
    
    
    4.0
    %
    
    $
    3,134As a percent of revenue
    
    
    32.3
    %
    
    
    
    
    
    
    38.7
    %
  Provision for Credit Losses
 Three Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    3,782
    
    
    
    97.1
    %
    
    $
    1,919As a percent of revenue
    
    
    37.5
    %
    
    
    
    
    
    
    23.7
    %
  Depreciation and Amortization
 Three Months EndedSeptember 30,2008
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    100
    
    
    
    31.6
    %
    
    $
    76Depreciation  rental equipment
    
    
    107
    
    
    
    (10.8
    )
    
    
    120Amortization  service contracts
    
    
    38
    
    
    
    (58.7
    )
    
    
    92Total depreciation and amortization
    
    $
    245
    
    
    
    (14.9
    )%
    
    $
    288As a percent of revenue
    
    
    2.4
    %
    
    
    
    
    
    
    3.6
    %
 14




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Interest Expense
 Three Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    310
    
    
    
    2,284.6
    %
    
    $
    13As a percent of revenue
    
    
    3.1
    %
    
    
    
    
    
    
    0.2
    %
  Provision for Income Taxes
 Three Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    905
    
    
    
    (3.8
    )%
    
    $
    941As a percent of revenue
    
    
    9.0
    %
    
    
    
    
    
    
    11.6
    %As a percent of income before taxes
    
    
    36.4
    %
    
    
    
    
    
    
    34.3
    %
  15




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Other Operating Data
  Results of Operations  Nine months ended September 30, 2008 compared to the nine months ended
September 30, 2007
 Revenue
 Nine Months EndedSeptember 30,2008
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    16,566
    
    
    
    104.7
    %
    
    $
    8,092Rental income
    
    
    7,566
    
    
    
    (29.3
    )
    
    
    10,706Income on service contracts
    
    
    720
    
    
    
    (27.5
    )
    
    
    993Loss and damage waiver fees
    
    
    2,305
    
    
    
    59.8
    
    
    
    1,442Service fees and other income
    
    
    1,712
    
    
    
    51.4
    
    
    
    1,131Interest income
    
    
    110
    
    
    
    (85.4
    )
    
    
    752Total revenues
    
    $
    28,979
    
    
    
    25.4
    %
    
    $
    23,116
 16




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##### Table of Contents



Selling, General and Administrative
 Nine Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    9,697
    
    
    
    (1.7
    )%
    
    $
    9,861As a percent of revenue
    
    
    33.5
    %
    
    
    
    
    
    
    42.7
    %
  Provision for Credit Losses
 Nine Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    10,199
    
    
    
    99.2
    %
    
    $
    5,119As a percent of revenue
    
    
    35.2
    %
    
    
    
    
    
    
    22.1
    %
  17




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##### Table of Contents



Depreciation and Amortization
 Nine Months EndedSeptember 30,2008
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    284
    
    
    
    39.9
    %
    
    $
    203Depreciation  rental equipment
    
    
    270
    
    
    
    (52.0
    )
    
    
    563Amortization  service contracts
    
    
    151
    
    
    
    (54.5
    )
    
    
    332Total depreciation and amortization
    
    $
    705
    
    
    
    (35.8
    )%
    
    $
    1,098As a percent of revenue
    
    
    2.4
    %
    
    
    
    
    
    
    4.8
    %
     Interest Expense
 Nine Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    696
    
    
    
    1,684.6
    %
    
    $
    39As a percent of revenue
    
    
    2.4
    %
    
    
    
    
    
    
    0.2
    %
  18




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##### Table of Contents



Provision for Income Taxes
 Nine Months EndedSeptember 30,2008
    
    Change
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    2,670
    
    
    
    5.5
    %
    
    $
    2,530As a percent of revenue
    
    
    9.2
    %
    
    
    
    
    
    
    10.9
    %As a percent of income before taxes
    
    
    34.8
    %
    
    
    
    
    
    
    36.1
    %
  Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    September 30, 2008
    
    December 31, 2007Current
    
    $
    104,183
    
    
    
    78.5
    %
    
    $
    75,528
    
    
    
    81.8
    %31-60 days past due
    
    
    6,235
    
    
    
    4.7
    
    
    
    4,565
    
    
    
    5.061-90 days past due
    
    
    4,335
    
    
    
    3.3
    
    
    
    3,016
    
    
    
    3.2Over 90 days past due
    
    
    17,920
    
    
    
    13.5
    
    
    
    9,205
    
    
    
    10.0Gross receivables due in installments
    
    $
    132,673
    
    
    
    100.0
    %
    
    $
    92,314
    
    
    
    100.0
    %
 19




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##### Table of Contents



Liquidity and Capital Resources
 General
      Borrowings
  September 30, 2008
    
    
    December 31, 2007Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaximumAmounts
    
    
    Interest
    
    
    Unused
    
    
    Facility
    
    
    Amounts
    
    
    Interest
    
    
    Unused
    
    
    Facility(dollars in 000)
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    Amount
    
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    AmountRevolving credit
facility(1)
    
    $
    41,065
    
    
    
    5.0
    %
    
    $
    18,935
    
    
    $
    60,000
    
    
    $
    6,531
    
    
    
    7.25
    %
    
    $
    23,469
    
    
    $
    30,000$
    41,065
    
    
    
    
    
    
    $
    18,935
    
    
    $
    60,000
    
    
    $
    6,531
    
    
    
    
    
    
    $
    23,469
    
    
    $
    30,000
 
 (1)
    
    The unused capacity is subject to the borrowing base formula.  20




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##### Table of Contents



Dividends
    Contractual Obligations and Lease Commitments
 Contractual Obligations
  Lease Commitments
  Recent Accounting Pronouncements
  21




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
      
 ITEM 4. Controls and Procedures
   22




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##### Table of Contents



Part II  Other Information
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 6. Exhibits
  10.1
    
    
    Amended and Restated Credit Agreement dated July 9, 2008 (incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K filed on July 15, 2008).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 23




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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
  24