##### 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 June 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 Commission File No. 1-14771
 MICROFINANCIAL INCORPORATED
  Massachusetts
    
    04-2962824(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ o
 o o
  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




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##### 



MICROFINANCIAL INCORPORATED
TABLE OF CONTENTS
 PagePart I- FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Condensed Consolidated Balance Sheets -
June 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Income -
Three and six months ended June 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Stockholders Equity
for the six months ended June 30, 2010 and the twelve
months ended December 31, 2009
    
    
    5Condensed Consolidated Statements of Cash Flows -
Six months ended June 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-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
  June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    1,510
    
    
    $
    391Restricted cash
    
    
    858
    
    
    
    834Net investment in leases:Receivables due in installments
    
    
    184,584
    
    
    
    175,615Estimated residual value
    
    
    20,464
    
    
    
    19,014Initial direct costs
    
    
    1,521
    
    
    
    1,509Less:Advance lease payments and deposits
    
    
    (3,075
    )
    
    
    (2,411
    )Unearned income
    
    
    (58,008
    )
    
    
    (55,821
    )Allowance for credit losses
    
    
    (13,431
    )
    
    
    (13,856
    )Net investment in leases
    
    
    132,055
    
    
    
    124,050Investment in rental contracts, net
    
    
    408
    
    
    
    379Property and equipment, net
    
    
    534
    
    
    
    699Other assets
    
    
    633
    
    
    
    744Total assets
    
    $
    135,998
    
    
    $
    127,097LIABILITIES AND STOCKHOLDERS EQUITYRevolving line of credit
    
    $
    59,016
    
    
    $
    51,906Accounts payable
    
    
    2,169
    
    
    
    2,011Capital lease obligation
    
    
    60
    
    
    
    93Dividends payable
    
    
    2
    
    
    
    Other liabilities
    
    
    2,019
    
    
    
    1,250Income taxes payable
    
    
    135
    
    
    
    209Deferred income taxes
    
    
    5,156
    
    
    
    4,863Total liabilities
    
    
    68,557
    
    
    
    60,332Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at June 30, 2010 and December 31, 2009
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
14,230,670 and 14,174,326 shares issued at June 30, 2010 and December 31,
2009, respectively
    
    
    142
    
    
    
    142Additional paid-in capital
    
    
    46,428
    
    
    
    46,197Retained earnings
    
    
    20,871
    
    
    
    20,426Total stockholders equity
    
    
    67,441
    
    
    
    66,765Total liabilities and stockholders equity
    
    $
    135,998
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Income on financing leases
    
    $
    8,509
    
    
    $
    7,098
    
    
    $
    16,631
    
    
    $
    13,887Rental income
    
    
    1,920
    
    
    
    2,138
    
    
    
    3,878
    
    
    
    4,347Income on service contracts
    
    
    132
    
    
    
    175
    
    
    
    273
    
    
    
    364Loss and damage waiver fees
    
    
    1,119
    
    
    
    1,018
    
    
    
    2,223
    
    
    
    2,004Service fees and other
    
    
    940
    
    
    
    699
    
    
    
    1,933
    
    
    
    1,370Interest income
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    14Total revenues
    
    
    12,621
    
    
    
    11,129
    
    
    
    24,939
    
    
    
    21,986Expenses:Selling, general and administrative
    
    
    3,581
    
    
    
    3,492
    
    
    
    6,811
    
    
    
    7,064Provision for credit losses
    
    
    5,562
    
    
    
    4,993
    
    
    
    12,493
    
    
    
    10,446Depreciation and amortization
    
    
    474
    
    
    
    383
    
    
    
    902
    
    
    
    718Interest
    
    
    885
    
    
    
    661
    
    
    
    1,696
    
    
    
    1,177Total expenses
    
    
    10,502
    
    
    
    9,529
    
    
    
    21,902
    
    
    
    19,405Income before provision for income taxes
    
    
    2,119
    
    
    
    1,600
    
    
    
    3,037
    
    
    
    2,581Provision for income taxes
    
    
    818
    
    
    
    616
    
    
    
    1,171
    
    
    
    994Net income
    
    $
    1,301
    
    
    $
    984
    
    
    $
    1,866
    
    
    $
    1,587Net income per common share  basic
    
    $
    0.09
    
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11Net income per common share  diluted
    
    $
    0.09
    
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11Weighted-average shares:Basic
    
    
    14,230,670
    
    
    
    14,141,192
    
    
    
    14,220,529
    
    
    
    14,122,259Diluted
    
    
    14,452,575
    
    
    
    14,239,391
    
    
    
    14,432,535
    
    
    
    14,214,308
  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
    
    
    53,844
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    169Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Amortization of unearned compensation
    
    
    2,500
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Common stock dividends ($0.10 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,421
    )
    
    
    (1,421
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,866
    
    
    
    1,866Balance at June 30, 2010
    
    
    14,230,670
    
    
    $
    142
    
    
    $
    46,428
    
    
    $
    20,871
    
    
    $
    67,441
  5




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##### Table of Contents



MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  (In thousands)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Cash received from customers
    
    $
    44,928
    
    
    $
    35,966Cash paid to suppliers and employees
    
    
    (7,824
    )
    
    
    (7,768
    )Income taxes paid
    
    
    (951
    )
    
    
    (164
    )Interest paid
    
    
    (1,173
    )
    
    
    (952
    )Interest received
    
    
    1
    
    
    
    13Net cash provided by operating activities
    
    
    34,981
    
    
    
    27,095Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (38,857
    )
    
    
    (36,353
    )Investment in direct costs
    
    
    (575
    )
    
    
    (631
    )Investment in property and equipment
    
    
    (62
    )
    
    
    (102
    )Net cash used in investing activities
    
    
    (39,494
    )
    
    
    (37,086
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    50,933
    
    
    
    41,384Repayment of secured debt
    
    
    (43,823
    )
    
    
    (33,753
    )Increase in restricted cash
    
    
    (24
    )
    
    
    (244
    )Repayment of capital lease obligations
    
    
    (33
    )
    
    
    (31
    )Payment of dividends
    
    
    (1,421
    )
    
    
    (1,409
    )Net cash provided by financing activities
    
    
    5,632
    
    
    
    5,947Net change in cash and cash equivalents
    
    
    1,119
    
    
    
    (4,044
    )Cash and cash equivalents, beginning of period
    
    
    391
    
    
    
    5,047Cash and cash equivalents, end of period
    
    $
    1,510
    
    
    $
    1,003Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    1,866
    
    
    $
    1,587Adjustments to reconcile net income to net cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (16,631
    )
    
    
    (13,887
    )Depreciation and amortization
    
    
    902
    
    
    
    718Provision for credit losses
    
    
    12,493
    
    
    
    10,446Recovery of equipment cost and residual value
    
    
    34,862
    
    
    
    26,636Stock-based compensation expense
    
    
    62
    
    
    
    34Changes in assets and liabilities:Current taxes payable
    
    
    (74
    )
    
    
    491Deferred income taxes
    
    
    293
    
    
    
    338Other assets
    
    
    111
    
    
    
    (180
    )Accounts payable
    
    
    328
    
    
    
    277Other liabilities
    
    
    769
    
    
    
    635Net cash provided by operating activities
    
    $
    34,981
    
    
    $
    27,095Supplemental disclosure of non-cash activities:Fair market value of stock issued for compensation
    
    $
    169
    
    
    $
    231
  6




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A. Nature of Business
  B. Summary of Significant Accounting Policies
 Basis of Presentation
   Allowance for Credit Losses
   7




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Six Months EndedJune 30,2010
    
    
    2009Allowance for credit losses, beginning
    
    $
    13,856
    
    
    $
    11,722Provision for credit losses
    
    
    12,493
    
    
    
    10,446Charge-offs
    
    
    (14,946
    )
    
    
    (10,675
    )Recoveries
    
    
    2,028
    
    
    
    2,016Allowance for credit losses, ending
    
    $
    13,431
    
    
    $
    13,509
 Fair Value of Financial Instruments
  Net Income Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    1,301
    
    
    $
    984
    
    
    $
    1,866
    
    
    $
    1,587Weighted average common shares outstanding
    
    
    14,230,670
    
    
    
    14,141,192
    
    
    
    14,220,529
    
    
    
    14,122,259Dilutive effect of common stock
options, warrants and restricted stock
    
    
    221,905
    
    
    
    98,199
    
    
    
    212,006
    
    
    
    92,049Shares used in computation of net income
per common share  diluted
    
    
    14,452,575
    
    
    
    14,239,391
    
    
    
    14,432,535
    
    
    
    14,214,308Net income per common share  basic
    
    $
    0.09
    
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11Net income per common share  diluted
    
    $
    0.09
    
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.11
 8




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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 June 30, 2010
    
    
    908,028
    
    
    $
    1.585 to $13.10
    
    
    $
    6.27
    Restricted Stock
    
    Restricted Stock UnitsNumber
    
    Amortized
    
    Number
    
    Amortizedof
    
    Compensation
    
    of
    
    CompensationShares
    
    Expense
    
    Shares
    
    ExpenseNon-vested at December 31,
2009
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    53,844
    
    
    
    
    
    
    
    33,518
    
    
    
    Vested
    
    
    (56,344
    )
    
    $
    6,800
    
    
    
    
    
    
    $
    9,000Non-vested at June 30, 2010
    
    
    1,250
    
    
    
    
    
    
    
    33,518
 9




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##### Table of Contents



Outstanding
    
    
    
    
    
    
    
    
    
    
    ExercisableWeighted-
    
    
    
    
    
    
    Weighted-Exercise
    
    
    
    
    
    Average
    
    
    Intrinsic
    
    
    Average
    
    
    
    
    
    
    IntrinsicPrice
    
    Shares
    
    
    Life (Years)
    
    
    Value
    
    
    Exercise Price
    
    
    Shares
    
    
    Value$13.10
    
    
    90,000
    
    
    
    0.64
    
    
    $
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    $
    6.70
    
    
    235,000
    
    
    
    1.66
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    150,000
    
    
    
    2.41
    
    
    
    285,000
    
    
    
    1.59
    
    
    
    150,000
    
    
    
    285,0005.77
    
    
    31,923
    
    
    
    6.67
    
    
    
    
    
    
    
    5.77
    
    
    
    
    
    
    
    5.85
    
    
    142,382
    
    
    
    7.58
    
    
    
    
    
    
    
    5.85
    
    
    
    35,596
    
    
    
    2.30
    
    
    258,723
    
    
    
    8.67
    
    
    
    308,000
    
    
    
    2.30
    
    
    
    
    
    
    
    908,028
    
    
    
    4.78
    
    
    $
    593,000
    
    
    
    6.27
    
    
    
    510,596
    
    
    $
    285,000
  Cash and Cash Equivalents
  Concentration of Credit Risk
  C. Revolving line of credit
   10




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##### Table of Contents



D. Commitments and Contingencies
 Legal Matters
  Lease Commitments
  Dividends
  E. Subsequent Events
   F. Recent Accounting Pronouncements
   11




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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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Critical Accounting Policies
   Results of Operations  Three months ended June 30, 2010 compared to the three months ended June
30, 2009
 Revenue
 Three Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Income on financing leases
    
    $
    8,509
    
    
    
    19.9
    %
    
    $
    7,098Rental income
    
    
    1,920
    
    
    
    (10.2
    )
    
    
    2,138Income on service contracts
    
    
    132
    
    
    
    (24.6
    )
    
    
    175Loss and damage waiver fees
    
    
    1,119
    
    
    
    9.9
    
    
    
    1,018Service fees and other income
    
    
    940
    
    
    
    34.5
    
    
    
    699Interest income
    
    
    1
    
    
    
    0.0
    
    
    
    1Total revenues
    
    $
    12,621
    
    
    
    13.4
    %
    
    $
    11,129
   14




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Selling, General and Administrative Expenses
 Three Months Ended June 30,2010
    
    Change
    
    2009(Dollars in thousands)Selling, general and administrative
    
    $
    3,581
    
    
    
    2.5
    %
    
    $
    3,492As a percent of revenue
    
    
    28.3
    %
    
    
    
    
    
    
    31.4
    %
  Provision for Credit Losses
 Three Months Ended June 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for credit losses
    
    $
    5,562
    
    
    
    11.4
    %
    
    $
    4,993As a percent of revenue
    
    
    44.1
    %
    
    
    
    
    
    
    44.9
    %
  Depreciation and Amortization
 Three Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Depreciation  fixed assets
    
    $
    111
    
    
    
    5.7
    %
    
    $
    105Depreciation  rental equipment
    
    
    363
    
    
    
    34.9
    
    
    
    269Amortization  service contracts
    
    
    0
    
    
    
    (100.0
    )
    
    
    9Total depreciation and amortization
    
    $
    474
    
    
    
    23.8
    %
    
    $
    383As a percent of revenue
    
    
    3.8
    %
    
    
    
    
    
    
    3.4
    %
  15




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##### Table of Contents



Interest Expense
 Three Months Ended June 30,2010
    
    Change
    
    2009(Dollars in thousands)Interest
    
    $
    885
    
    
    
    33.9
    %
    
    $
    661As a percent of revenue
    
    
    7.0
    %
    
    
    
    
    
    
    5.9
    %
  Provision for Income Taxes
 Three Months Ended June 30,2010
    
    Change
    
    2009(Dollars in thousands)Provision for income taxes
    
    $
    818
    
    
    
    32.8
    %
    
    $
    616As a percent of revenue
    
    
    6.5
    %
    
    
    
    
    
    
    5.5
    %As a percent of income before taxes
    
    
    38.6
    %
    
    
    
    
    
    
    38.5
    %
    Other Operating Data
  16




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17




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##### Table of Contents



Results of Operations  Six months ended June 30, 2010 compared to the six months ended June
30, 2009
 Revenue
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Income on financing leases
    
    $
    16,631
    
    
    
    19.8
    %
    
    $
    13,887Rental income
    
    
    3,878
    
    
    
    (10.8
    )
    
    
    4,347Income on service contracts
    
    
    273
    
    
    
    (25.0
    )
    
    
    364Loss and damage waiver fees
    
    
    2,223
    
    
    
    10.9
    
    
    
    2,004Service fees and other income
    
    
    1,933
    
    
    
    41.1
    
    
    
    1,370Interest income
    
    
    1
    
    
    
    (92.9
    )
    
    
    14Total revenues
    
    $
    24,939
    
    
    
    13.4
    %
    
    $
    21,986
   Selling, General and Administrative Expenses
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Selling, general and administrative
    
    $
    6,811
    
    
    
    (3.6
    )%
    
    $
    7,064As a percent of revenue
    
    
    27.3
    %
    
    
    
    
    
    
    32.1
    %
  Provision for Credit Losses
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Provision for credit losses
    
    $
    12,493
    
    
    
    19.6
    %
    
    $
    10,446As a percent of revenue
    
    
    50.1
    %
    
    
    
    
    
    
    47.5
    %
  18




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##### Table of Contents



Depreciation and Amortization
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Depreciation  fixed assets
    
    $
    227
    
    
    
    8.1
    %
    
    $
    210Depreciation  rental equipment
    
    
    675
    
    
    
    39.8
    
    
    
    483Amortization  service contracts
    
    
    0
    
    
    
    (100.0
    )
    
    
    25Total depreciation and amortization
    
    $
    902
    
    
    
    25.6
    %
    
    $
    718As a percent of revenue
    
    
    3.6
    %
    
    
    
    
    
    
    3.3
    %
    Interest Expense
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Interest
    
    $
    1,696
    
    
    
    44.1
    %
    
    $
    1,177As a percent of revenue
    
    
    6.8
    %
    
    
    
    
    
    
    5.4
    %
  Provision for Income Taxes
 Six Months Ended June 30,2010
    
    
    Change
    
    
    2009(Dollars in thousands)Provision for income taxes
    
    $
    1,171
    
    
    
    17.8
    %
    
    $
    994As a percent of revenue
    
    
    4.7
    %
    
    
    
    
    
    
    4.5
    %As a percent of income before taxes
    
    
    38.6
    %
    
    
    
    
    
    
    38.5
    %
  19




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##### Table of Contents



Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    June 30, 2010
    
    
    December 31, 2009Current
    
    $
    154,206
    
    
    
    83.5
    %
    
    $
    140,000
    
    
    
    79.7
    %31-60 days past due
    
    
    4,967
    
    
    
    2.7
    
    
    
    6,233
    
    
    
    3.661-90 days past due
    
    
    4,226
    
    
    
    2.3
    
    
    
    5,336
    
    
    
    3.0Over 90 days past due
    
    
    21,185
    
    
    
    11.5
    
    
    
    24,046
    
    
    
    13.7Gross receivables due in installments
    
    $
    184,584
    
    
    
    100.0
    %
    
    $
    175,615
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
  20




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##### Table of Contents



Borrowings
  June 30, 2010
    
    
    December 31, 2009Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaximumAmounts
    
    
    Interest
    
    
    Unused
    
    
    Facility
    
    
    Amounts
    
    
    Interest
    
    
    Unused
    
    
    Facility(dollars in 000)
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    Amount
    
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    AmountRevolving line of
credit
facility(1)
    
    $
    59,016
    
    
    
    5.0
    %
    
    $
    25,984
    
    
    $
    85,000
    
    
    $
    51,906
    
    
    
    5.00
    %
    
    $
    33,094
    
    
    $
    85,000
 
 (1)
    
    The unused capacity is subject to the borrowing base formula and does not
give effect to the increased capacity under the July 28, 2010 amendment described
below.  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