8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 22, 2008

MICROFINANCIAL INCORPORATED

(Exact name of registrant as specified in its charter)

MASSACHUSETTS

(State or other jurisdiction of incorporation)

1-14771	04-2962824
(Commission file number)	(IRS Employer Identification Number)

10-M Commerce Way, Woburn, MA 01801

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 781-994-4800

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99 Press Release dated October 22, 2008

Item 2.02. Results of Operations and Financial Condition.

     On October 22, 2008, the Registrant announced its results of operations for the fiscal quarter and nine month period ended September 30, 2008. Pursuant to Form 8-K, General Instruction F, the Registrant hereby incorporates by reference the press release attached hereto as Exhibit 99.

Item 9.01. Financial Statements and Exhibits.

Exhibit	Exhibit Title
Exhibit 99	Press Release dated October 22, 2008

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MICROFINANCIAL INCORPORATED Registrant
By:	/s/ James R. Jackson, Jr.
	James R. Jackson, Jr.
	Vice President and Chief Financial Officer

Dated: October 24, 2008

EX-99

Exhibit 99

For Release October 22, 2008	Contact:
4:01 pm	Richard F. Latour
	President and CEO
	Tel: 781-994-4800

MICROFINANCIAL INCORPORATED ANNOUNCES
THIRD QUARTER 2008 RESULTS

Woburn, MA – October 22, 2008 — MicroFinancial Incorporated (NASDAQ: MFI), a financial intermediary specializing in vendor-based leasing and finance programs for microticket transactions, today announced financial results for the third quarter and the nine months ended September 30, 2008.

Net income for the third quarter of 2008 was $1.6 million or $0.11 per diluted share based upon 14,179,080 shares, compared to net income of $1.8 million, or $0.13 per diluted share based upon 14,180,213 shares for the same period last year.

Revenue in the third quarter of 2008 was $10.1 million compared to $8.1 million in the third quarter of 2007 as expected declines in rental income during the quarter were more than offset by growth in the leasing income and other revenue associated with our new lease originations. Revenue from leases was $6.0 million, up $2.6 million from the same period last year and rental income was $2.3 million, down $0.9 million from September 30, 2007. Other revenue components contributed $1.8 million for the current quarter, up $0.3 million from the same period last year.

Total operating expenses for the current quarter increased 41.9% to $7.6 million from $5.4 million in the third quarter of 2007. Third quarter net charge-offs increased to $2.9 million from $1.5 million in the comparable period of 2007. The third quarter 2008 provision for credit losses increased by $1.9 million to $3.8 million compared to the third quarter of 2007. The allowance for credit losses increased to $10.4 million or 11.6% of net investment in leases as compared to $9.5 million or 11.5% of net investment in leases as of June 30, 2008. Sequentially, amounts billed greater than 31 days delinquent as of September 30, 2008 increased to $6.0 million from $4.9 million as of June 30, 2008. Selling, general and administrative expenses increased 4.0% to $3.3 million from $3.1 million in the third quarter of last year primarily due to increases in collection expenses and compensation costs relating to increased headcount. Depreciation and amortization expense declined 14.8% to $0.2 million for the quarter, due to a decline in the number of rental and service contracts as well as the fact that a greater percentage of these assets are fully depreciated. Interest expense increased $297 thousand as a result of an increase in borrowings under our line of credit.

Cash balances at September 30, 2008 were $19.9 million. During the third quarter, the Company drew down additional cash against its line of credit as a precautionary measure. Cash received

from customers in the third quarter increased 45.6% to $15.3 million compared to $10.5 million during the same period in 2007. New originations in the quarter increased by 7.6% to $16.0 million for the third quarter 2008, compared to the third quarter 2007.

Richard Latour, President and Chief Executive Officer said, “As we navigate through these difficult economic times we continually review our application approval and lease pricing structure to try to maintain a balance in the overall economics of the business. Throughout the year, the Company has adopted more restrictive credit standards which, on a dollar basis, have resulted in a decrease in our application approval ratios from 55.7% for the third quarter of 2007 to 47.6%, for the same period in 2008. Our priorities have remained consistent – growing our vendor base, expanding product offerings, and maintaining efficiencies. During the third quarter of 2008, we approved an additional 308 new vendors bringing the total vendor count to approximately 3,100. We also processed over 14,000 applications, an increase of over 4,000 applications as compared to the same period last year.”

For the nine months ended September 30, 2008, net income was $5.0 million versus net income of $4.5 million for the same period last year. Net income per diluted share year to date was $0.35 based on 14,174,576 shares versus $0.32 based on 14,146,696 shares for the same period in 2007.

Year to date revenues for the nine months ended September 30, 2008 increased 25.4% to $29.0 million compared to $23.1 million during the same period in 2007. Revenue from leases was $16.6 million, up $8.5 million from the same period last year and rental income was $7.6 million, down $3.1 million from September 30, 2007. Other revenue components contributed $4.8 million, up $0.5 million from the same period last year. New contract originations year to date September 30, 2008 were $51.4 million versus $37.4 million through the same period last year.

Total operating expenses for the nine months ended September 30, 2008 increased 32.1% to $21.3 million versus $16.1 million for the same period last year. Selling, general and administrative expenses declined $0.2 million to $9.7 million and depreciation and amortization expenses declined 35.7% to $0.7 million. Significant factors decreasing the S.G.& A. expenses include declines in debt closing costs and legal expenses. The provision for credit losses increased by $5.1 million year to date to $10.2 million, as compared to the same period last year. Year to date net charge-offs increased to $5.5 million as compared to $5.0 million for the same period last year. Headcount at September 30, 2008 was 94, up from 72 at the end of the same period last year. Year to date cash from customers was $43.2 million as compared to $30.1 million for the same period last year.

MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

	September 30,			December 31,
	2008			2007
ASSETS
Cash and cash equivalents	$	19,691		$	7,080
Restricted cash		222			561
Net investment in leases:
Receivables due in installments		132,673			92,314
Estimated residual value		14,049			9,814
Initial direct costs		1,092			729
Less:
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			61,547
Investment in service contracts, net		52			203
Investment in rental contracts, net		175			106
Property and equipment, net		816			782
Other assets		1,133			703
Total assets	$	111,885		$	70,982
LIABILITIES AND STOCKHOLDERS’ EQUITY

	September 30,		December 31,
	2008		2007
Notes payable	$	41,065	$	6,531
Capital lease obligation		137		—
Accounts payable		1,395		1,350
Dividends payable		—		698
Other liabilities		1,341		801
Income taxes payable		189		228
Deferred income taxes		3,007		546
Total liabilities		47,134		10,154
Stockholders’ 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		140
Additional paid-in capital		45,723		45,412
Retained earnings		18,888		15,276
Total stockholders’ equity		64,751		60,828
Total liabilities and stockholders’ equity	$	111,885	$	70,982

MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Revenues:
Income on financing leases	$	6,030	$	3,406	$	16,566	$	8,092
Rental income		2,330		3,268		7,566		10,706
Income on service contracts		221		303		720		993
Loss and damage waiver fees		849		524		2,305		1,442
Service fees and other		632		415		1,712		1,131
Interest income		23		182		110		752
Total revenues		10,085		8,098		28,979		23,116
Expenses:
Selling, general and administrative		3,260		3,134		9,697		9,861
Provision for credit losses		3,782		1,919		10,199		5,119
Depreciation and amortization		245		288		705		1,098
Interest		310		13		696		39
Total expenses		7,597		5,354		21,297		16,117
Income before provision for income taxes		2,488		2,744		7,682		6,999
Provision for income taxes		905		941		2,670		2,530
Net income	$	1,583	$	1,803	$	5,012	$	4,469
Net income per common share:
Basic	$	0.11	$	0.13	$	0.36	$	0.32
Diluted	$	0.11	$	0.13	$	0.35	$	0.32
Weighted-average shares:
Basic		14,016,167		13,956,881		13,992,951		13,910,234
Diluted		14,179,080		14,180,213		14,174,576		14,146,696

About The Company

MicroFinancial Inc. (NASDAQ: MFI), is a financial intermediary specializing in microticket leasing and financing. MicroFinancial has been operating since 1986, and is headquartered in Woburn, Massachusetts.

Statements in this release that are not historical facts, including statements about future dividends or growth plans, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “expects,” “views,” “will” and similar expressions are intended to identify forward-looking statements. We caution that a number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Readers should not place undue reliance on forward-looking statements, which reflect our views only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. We cannot assure that we will be able to anticipate or respond timely to changes which could adversely affect our operating results. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results or other factors may result in fluctuations in the price of our common stock. For a more complete description of the prominent risks and uncertainties inherent in our business, see the risk factors described in documents that we file from time to time with the Securities and Exchange Commission.