##### 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 THESECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES AND EXCHANGE ACT OF 1934
 Commission File No. 1-14771
 MICROFINANCIAL INCORPORATED
  Massachusetts
(State or other jurisdiction of 
incorporation or organization)
    
    04-2962824
(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, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Income  Three and nine months ended September 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Stockholders Equity for the nine months ended September 30, 2010 and the twelve
months ended December 31, 2009
    
    
    5Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2010 and 2009
    
    
    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-10.2EX-31.1EX-31.2EX-32.1EX-32.2




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands, except share and per share data)
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    515
    
    
    $
    391Restricted cash
    
    
    973
    
    
    
    834Net investment in leases:Receivables due in installments
    
    
    187,786
    
    
    
    175,615Estimated residual value
    
    
    21,090
    
    
    
    19,014Initial direct costs
    
    
    1,510
    
    
    
    1,509Less:Advance lease payments and deposits
    
    
    (3,284
    )
    
    
    (2,411
    )Unearned income
    
    
    (58,458
    )
    
    
    (55,821
    )Allowance for credit losses
    
    
    (12,993
    )
    
    
    (13,856
    )Net investment in leases
    
    
    135,651
    
    
    
    124,050Investment in rental contracts, net
    
    
    469
    
    
    
    379Property and equipment, net
    
    
    277
    
    
    
    699Other assets
    
    
    1,343
    
    
    
    744Total assets
    
    $
    139,228
    
    
    $
    127,097LIABILITIES AND STOCKHOLDERS EQUITYRevolving line of credit
    
    $
    59,955
    
    
    $
    51,906Accounts payable
    
    
    2,135
    
    
    
    2,011Capital lease obligation
    
    
    43
    
    
    
    93Dividends payable
    
    
    3
    
    
    
    Other liabilities
    
    
    1,828
    
    
    
    1,250Income taxes payable
    
    
    663
    
    
    
    209Deferred income taxes
    
    
    5,812
    
    
    
    4,863Total liabilities
    
    
    70,439
    
    
    
    60,332Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at September 30, 2010 and December 31, 2009
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
14,266,345 and 14,174,326 shares issued at September 30, 2010 and December
31, 2009, respectively
    
    
    143
    
    
    
    142Additional paid-in capital
    
    
    46,585
    
    
    
    46,197Retained earnings
    
    
    22,061
    
    
    
    20,426Total stockholders equity
    
    
    68,789
    
    
    
    66,765Total liabilities and stockholders equity
    
    $
    139,228
    
    
    $
    127,097
  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 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Income on financing leases
    
    $
    8,790
    
    
    $
    7,635
    
    
    $
    25,421
    
    
    $
    21,522Rental income
    
    
    1,917
    
    
    
    2,124
    
    
    
    5,795
    
    
    
    6,471Income on service contracts
    
    
    124
    
    
    
    162
    
    
    
    397
    
    
    
    526Loss and damage waiver fees
    
    
    1,154
    
    
    
    1,048
    
    
    
    3,377
    
    
    
    3,052Service fees and other
    
    
    912
    
    
    
    1,001
    
    
    
    2,845
    
    
    
    2,371Interest income
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    14Total revenues
    
    
    12,897
    
    
    
    11,970
    
    
    
    37,836
    
    
    
    33,956Expenses:Selling, general and administrative
    
    
    3,356
    
    
    
    3,349
    
    
    
    10,167
    
    
    
    10,413Provision for credit losses
    
    
    4,969
    
    
    
    5,437
    
    
    
    17,462
    
    
    
    15,883Depreciation and amortization
    
    
    731
    
    
    
    440
    
    
    
    1,633
    
    
    
    1,158Interest
    
    
    743
    
    
    
    751
    
    
    
    2,439
    
    
    
    1,928Total expenses
    
    
    9,799
    
    
    
    9,977
    
    
    
    31,701
    
    
    
    29,382Income before provision for income taxes
    
    
    3,098
    
    
    
    1,993
    
    
    
    6,135
    
    
    
    4,574Provision for income taxes
    
    
    1,192
    
    
    
    767
    
    
    
    2,363
    
    
    
    1,761Net income
    
    $
    1,906
    
    
    $
    1,226
    
    
    $
    3,772
    
    
    $
    2,813Net income per common share  basic
    
    $
    0.13
    
    
    $
    0.09
    
    
    $
    0.26
    
    
    $
    0.20Net income per common share  diluted
    
    $
    0.13
    
    
    $
    0.09
    
    
    $
    0.26
    
    
    $
    0.20Weighted-average shares:Basic
    
    
    14,263,726
    
    
    
    14,170,079
    
    
    
    14,235,086
    
    
    
    14,138,374Diluted
    
    
    14,492,842
    
    
    
    14,328,613
    
    
    
    14,454,201
    
    
    
    14,242,420
  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, 2008
    
    
    14,038,257
    
    
    $
    140
    
    
    $
    45,774
    
    
    $
    18,424
    
    
    $
    64,338Stock issued for deferred compensation
    
    
    131,069
    
    
    
    2
    
    
    
    336
    
    
    
    
    
    
    
    338Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Amortization of unearned compensation
    
    
    5,000
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Common stock dividends ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,125
    )
    
    
    (2,125
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,127
    
    
    
    4,127Balance at December 31, 2009
    
    
    14,174,326
    
    
    $
    142
    
    
    $
    46,197
    
    
    $
    20,426
    
    
    $
    66,765Stock issued for deferred compensation
    
    
    88,269
    
    
    
    1
    
    
    
    295
    
    
    
    
    
    
    
    296Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    83Amortization of unearned compensation
    
    
    3,750
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Common stock dividends ($0.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,137
    )
    
    
    (2,137
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,772
    
    
    
    3,772Balance at September 30, 2010
    
    
    14,266,345
    
    
    $
    143
    
    
    $
    46,585
    
    
    $
    22,061
    
    
    $
    68,789
  5




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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  (In thousands)
 Nine Months EndedSeptember 30,2010
    
    2009Cash flows from operating activities:Cash received from customers
    
    $
    69,054
    
    
    $
    55,433Cash paid to suppliers and employees
    
    
    (11,980
    )
    
    
    (11,530
    )Income taxes paid
    
    
    (960
    )
    
    
    (416
    )Interest paid
    
    
    (1,919
    )
    
    
    (1,577
    )Interest received
    
    
    1
    
    
    
    14Net cash provided by operating activities
    
    
    54,196
    
    
    
    41,924Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (58,120
    )
    
    
    (56,749
    )Investment in direct costs
    
    
    (853
    )
    
    
    (980
    )Investment in property and equipment
    
    
    (114
    )
    
    
    (256
    )Net cash used in investing activities
    
    
    (59,087
    )
    
    
    (57,985
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    75,678
    
    
    
    66,487Repayment of secured debt
    
    
    (67,629
    )
    
    
    (52,605
    )Payments of debt closing costs
    
    
    (711
    )
    
    
    Increase in restricted cash
    
    
    (139
    )
    
    
    (194
    )Proceeds from capital lease obligation
    
    
    
    
    
    
    31Repayment of capital lease obligations
    
    
    (50
    )
    
    
    (47
    )Payment of dividends
    
    
    (2,134
    )
    
    
    (2,118
    )Net cash provided by financing activities
    
    
    5,015
    
    
    
    11,554Net change in cash and cash equivalents
    
    
    124
    
    
    
    (4,507
    )Cash and cash equivalents, beginning of period
    
    
    391
    
    
    
    5,047Cash and cash equivalents, end of period
    
    $
    515
    
    
    $
    540Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    3,772
    
    
    $
    2,813Adjustments to reconcile net income to net
cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (25,421
    )
    
    
    (21,522
    )Depreciation and amortization
    
    
    1,633
    
    
    
    1,158Provision for credit losses
    
    
    17,462
    
    
    
    15,883Recovery of equipment cost and residual value
    
    
    54,144
    
    
    
    40,968Stock-based compensation expense
    
    
    93
    
    
    
    60Changes in assets and liabilities:Current taxes payable
    
    
    454
    
    
    
    745Deferred income taxes
    
    
    949
    
    
    
    599Other assets
    
    
    112
    
    
    
    (26
    )Accounts payable
    
    
    420
    
    
    
    757Other liabilities
    
    
    578
    
    
    
    489Net cash provided by operating activities
    
    $
    54,196
    
    
    $
    41,924Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    296
    
    
    $
    338
  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 30,2010
    
    
    2009Allowance for credit losses, beginning
    
    $
    13,856
    
    
    $
    11,722Provision for credit losses
    
    
    17,462
    
    
    
    15,883Charge-offs
    
    
    (21,598
    )
    
    
    (16,871
    )Recoveries
    
    
    3,273
    
    
    
    3,142Allowance for credit losses, ending
    
    $
    12,993
    
    
    $
    13,876
 Fair Value of Financial Instruments
  Net Income Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    1,906
    
    
    $
    1,226
    
    
    $
    3,772
    
    
    $
    2,813Weighted average common shares outstanding
    
    
    14,263,726
    
    
    
    14,170,079
    
    
    
    14,235,086
    
    
    
    14,138,374Dilutive effect of common stock
options, warrants and restricted stock
    
    
    229,116
    
    
    
    158,534
    
    
    
    219,115
    
    
    
    104,046Shares used in computation of net income
per common share  diluted
    
    
    14,492,842
    
    
    
    14,328,613
    
    
    
    14,454,201
    
    
    
    14,242,420Net income per common share  basic
    
    $
    0.13
    
    
    $
    0.09
    
    
    $
    0.26
    
    
    $
    0.20Net income per common share  diluted
    
    $
    0.13
    
    
    $
    0.09
    
    
    $
    0.26
    
    
    $
    0.20
 8




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Stock-Based Employee Compensation
     Weighted-AverageShares
    
    
    Price Per Share
    
    
    Exercise PriceOutstanding at December 31, 2009
    
    
    1,258,028
    
    
    $
    1.585 to $13.10
    
    
    $
    6.38Granted
    
    
    Expired
    
    
    (350,000
    )
    
    $
    9.78
    
    
    $
    9.78Forfeited
    
    
    Outstanding at September 30, 2010
    
    
    908,028
    
    
    $
    1.585 to $13.10
    
    
    $
    6.27
     9




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  Restricted Stock
    
    Restricted Stock UnitsNumber
    
    Recognized
    
    Number
    
    Recognizedof
    
    Compensation
    
    of
    
    CompensationShares
    
    Expense
    
    Shares
    
    ExpenseNon-vested at
December 31, 2009
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    88,269
    
    
    
    
    
    
    
    33,518
    
    
    
    Vested
    
    
    (92,019
    )
    
    $
    10,000
    
    
    
    
    
    
    $
    14,000Non-vested at
September 30, 2010
    
    
    
    
    
    
    
    
    
    
    33,518
  Information relating to our outstanding stock options at September 30, 2010 is as follows:
 Outstanding
    
    
    
    
    
    ExercisableWeighted-
    
    
    
    
    
    Weighted-Average
    
    Intrinsic
    
    Average
    
    
    
    
    
    IntrinsicExercise Price
    
    Shares
    
    Life (Years)
    
    Value
    
    Exercise Price
    
    Shares
    
    Value$13.10
    
    
    90,000
    
    
    
    0.39
    
    
    $
    
    
    
    $
    13.10
    
    
    
    90,000
    
    
    $
    6.70
    
    
    235,000
    
    
    
    1.41
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    150,000
    
    
    
    2.16
    
    
    
    347,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    347,0005.77
    
    
    31,923
    
    
    
    6.42
    
    
    
    
    
    
    
    5.77
    
    
    
    
    
    
    
    5.85
    
    
    142,382
    
    
    
    7.33
    
    
    
    
    
    
    
    5.85
    
    
    
    35,596
    
    
    
    2.30
    
    
    258,723
    
    
    
    8.42
    
    
    
    414,000
    
    
    
    2.30
    
    
    
    
    
    
    
    908,028
    
    
    
    4.53
    
    
    $
    761,000
    
    
    
    6.27
    
    
    
    510,596
    
    
    $
    347,000
  Cash and Cash Equivalents
  Concentration of Credit Risk
  C. Revolving line of credit
  10




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   D. Commitments and Contingencies
 Legal Matters
  Contractual Obligations
  rd  th
 Lease Commitments
  Dividends
  11




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MICROFINANCIAL INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Stock Repurchase
  E. Subsequent Events
   F. Recent Accounting Pronouncements
    1.
    
    Transfers in and out of Levels 1 and 2. A reporting entry should disclose
separately the amounts of significant transfers in and out of Level 1 and Level 2 fair
value measurements and describe the reasons for the transfers.2.
    
    Activity in level 3 fair value measurements3.
    
    A reporting entity should provide fair value measurement disclosures for each
class of assets and liabilities.
   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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Unregistered Purchase of Equity Securities and Use of Proceeds
  Critical Accounting Policies
   Results of Operations  Three months ended September 30, 2010 compared to the three months ended September 30, 2009
 Revenue
 Three Months EndedSeptember 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Income on financing leases
    
    $
    8,790
    
    
    
    15.1
    %
    
    $
    7,635Rental income
    
    
    1,917
    
    
    
    (9.7
    )
    
    
    2,124Income on service contracts
    
    
    124
    
    
    
    (23.5
    )
    
    
    162Loss and damage waiver fees
    
    
    1,154
    
    
    
    10.1
    
    
    
    1,048Service fees and other income
    
    
    912
    
    
    
    (8.9
    )
    
    
    1,001Interest income
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    12,897
    
    
    
    7.7
    %
    
    $
    11,970
 14




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Selling, General and Administrative
 Three Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Selling, general and administrative
    
    $
    3,356
    
    
    
    0.2
    %
    
    $
    3,349As a percent of revenue
    
    
    26.0
    %
    
    
    
    
    
    
    28.0
    %
  Provision for Credit Losses
 Three Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for credit losses
    
    $
    4,969
    
    
    
    (8.6
    )%
    
    $
    5,437As a percent of revenue
    
    
    38.5
    %
    
    
    
    
    
    
    45.4
    %
  Depreciation and Amortization
 Three Months EndedSeptember 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Depreciation  fixed assets
    
    $
    309
    
    
    
    180.9
    %
    
    $
    110Depreciation  rental equipment
    
    
    422
    
    
    
    29.1
    
    
    
    327Amortization  service contracts
    
    
    
    
    
    
    (100.0
    )
    
    
    3Total depreciation and amortization
    
    $
    731
    
    
    
    66.1
    %
    
    $
    440As a percent of revenue
    
    
    5.7
    %
    
    
    
    
    
    
    3.7
    %
 15




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Interest Expense
 Three Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Interest
    
    $
    743
    
    
    
    (1.1
    )%
    
    $
    751As a percent of revenue
    
    
    5.8
    %
    
    
    
    
    
    
    6.3
    %
  Provision for Income Taxes
 Three Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for income taxes
    
    $
    1,192
    
    
    
    55.4
    %
    
    $
    767As a percent of revenue
    
    
    9.2
    %
    
    
    
    
    
    
    6.4
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    38.5
    %
   16




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##### Table of Contents



Other Operating Data
  17




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##### Table of Contents



Results of Operations  Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009
 Revenue
 Nine Months EndedSeptember 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Income on financing leases
    
    $
    25,421
    
    
    
    18.1
    %
    
    $
    21,522Rental income
    
    
    5,795
    
    
    
    (10.4
    )
    
    
    6,471Income on service contracts
    
    
    397
    
    
    
    (24.5
    )
    
    
    526Loss and damage waiver fees
    
    
    3,377
    
    
    
    10.6
    
    
    
    3,052Service fees and other income
    
    
    2,845
    
    
    
    20.0
    
    
    
    2,371Interest income
    
    
    1
    
    
    
    (92.9
    )
    
    
    14Total revenues
    
    $
    37,836
    
    
    
    11.4
    %
    
    $
    33,956
  Selling, General and Administrative
 Nine Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Selling, general and administrative
    
    $
    10,167
    
    
    
    (2.4
    )%
    
    $
    10,413As a percent of revenue
    
    
    26.9
    %
    
    
    
    
    
    
    30.7
    %
  Provision for Credit Losses
 Nine Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for credit losses
    
    $
    17,462
    
    
    
    9.9
    %
    
    $
    15,883As a percent of revenue
    
    
    46.2
    %
    
    
    
    
    
    
    46.8
    %
  18




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##### Table of Contents



Depreciation and Amortization
 Nine Months EndedSeptember 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Depreciation  fixed assets
    
    $
    536
    
    
    
    68.0
    %
    
    $
    319Depreciation  rental equipment
    
    
    1,097
    
    
    
    35.4
    
    
    
    810Amortization  service contracts
    
    
    
    
    
    
    (100.0
    )
    
    
    29Total depreciation and amortization
    
    $
    1,633
    
    
    
    41.0
    %
    
    $
    1,158As a percent of revenue
    
    
    4.3
    %
    
    
    
    
    
    
    3.4
    %
    Interest Expense
 Nine Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Interest
    
    $
    2,439
    
    
    
    26.5
    %
    
    $
    1,928As a percent of revenue
    
    
    6.4
    %
    
    
    
    
    
    
    5.7
    %
  Provision for Income Taxes
 Nine Months EndedSeptember 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for income taxes
    
    $
    2,363
    
    
    
    34.2
    %
    
    $
    1,761As a percent of revenue
    
    
    6.2
    %
    
    
    
    
    
    
    5.2
    %As a percent of income before taxes
    
    
    38.5
    %
    
    
    
    
    
    
    38.5
    %
  19




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##### Table of Contents



Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    September 30, 2010
    
    December 31, 2009Current
    
    $
    157,445
    
    
    
    83.8
    %
    
    $
    140,000
    
    
    
    79.7
    %31-60 days past due
    
    
    5,759
    
    
    
    3.1
    
    
    
    6,233
    
    
    
    3.661-90 days past due
    
    
    4,638
    
    
    
    2.5
    
    
    
    5,336
    
    
    
    3.0Over 90 days past due
    
    
    19,944
    
    
    
    10.6
    
    
    
    24,046
    
    
    
    13.7Gross receivables due in installments
    
    $
    187,786
    
    
    
    100.0
    %
    
    $
    175,615
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
  20




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##### Table of Contents



Borrowings
  September 30, 2010
    

    December 31, 2009Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaximumAmounts
    
    Interest
    
    Unused
    
    Facility
    
    Amounts
    
    Interest
    
    Unused
    
    Facility(dollars in 000)
    
    Outstanding
    
    Rate
    
    Capacity
    
    Amount
    
    Outstanding
    
    Rate
    
    Capacity
    
    AmountRevolving credit
facility(1)
    
    $
    59,995
    
    
    3.5%-4.5%
    
    $
    40,005
    
    
    $
    100,000
    
    
    $
    51,906
    
    
    
    5.00
    %
    
    $
    33,094
    
    
    $
    85,000
 
 (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
  rd th
 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
  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
    
    Agreement and Amendment No. 2, dated July 28, 2010, to Amended and Restated Credit
Agreement dated July 9, 2008 (incorporated by reference to Exhibit 10.1 in the Registrants
Current Report on Form 8-K filed August 2, 2010).10.2*
    
    Office Lease Agreement dated September 20, 2010.31.1*
    
    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