MicroFinancial/Leasecomm $2.7 Million Loss 2nd Q

WOBURN, Mass.----MicroFinancial Incorporated (NYSE-MFI), a leader in Microticket leasing and finance, announced today its financial results for the second quarter and the six months ended June 30, 2003.

Second quarter revenue for the period ended June 30, 2003, was $24.0 million compared to $33.0 million for the same period last year. The reduction in revenues is directly related to the Company's decision in October 2002 to cease funding new originations as a result of its Lenders' decision not to renew the revolving credit facility on September 30, 2002.

The net loss for the quarter was $3.7 million, or ($0.29) per diluted share as compared with net income of $2.0 million or $0.15 per diluted share in the prior year's second quarter. The decline in net income for the quarter is primarily the result of a 39.2% decline in lease and loan revenues to $8.4 million, a 46.3% decline in service fee and other revenues to $3.2 million, and a 40.9% increase in the provision for credit losses to $15.2 million as compared with the second quarter ended June 30, 2002. The additional provision for credit losses was required to maintain the Company's reserve policy requirement, which the Company continues to believe is appropriate.

Total operating expenses for the quarter, before the provision for credit losses, declined approximately 21% to $14.9 million as compared to the same period in 2002. Interest expense declined 18.1% to $2.1 million as a result of lower debt balances of approximately $71.5 million offset by an increase in the Company's average interest rates of 139 basis points. Selling, general and administrative expenses decreased 23.7% to $8.7 million for the second quarter ended June 30, 2003, versus $11.4 million for the same period last year. The decrease was attributable to reductions in personnel related expenses of approximately $1.2 million, a $1 million reduction in cost of goods sold, and a $0.4 million reduction in collection related expenses. The provision for credit losses increased to $15.2 million for the quarter ended June 30, 2003 from $10.8 million for the same period last year, while net charge offs increased to $22.4 million. Past due balances greater than 31 days delinquent at June 30, 2003 decreased to 23.0% from 24.3% last quarter. Exclusive of a federal tax refund in excess of $11 million, net cash provided by operating activities for the quarter decreased 20.1% to $20.5 million compared to $25.7 million for the previous quarter. The Company repaid debt of $35.0 million on its senior credit facility and securitizations during the quarter.

Richard Latour, President and Chief Executive Officer stated, "I am pleased that the collections from our existing portfolio remained strong in the second quarter. The Company's ongoing strategy of driving down expenses while maximizing collections continued."

The Company remains in full compliance with the terms and conditions of its securitizations and senior credit facility. The Company operates within all delinquency and charge-off covenants and has made or exceeded all scheduled payments on these debt instruments in a timely manner. During the quarter, MicroFinancial's successful collections efforts allowed the Company to reduce its bank debt by $26.1 million to $88.9 million.

Year to date revenues for the period ended June 30, 2003 decreased 27.4% to $49.5 million compared to $68.2 million during the same period in 2002. The reduction in revenues is directly related to the Company's decision to cease funding new originations since October 2002 as a result of its Lenders' decision not to renew the revolving credit facility on September 30, 2002.

The net loss year to date ending June 30, 2003 was $4.5 million versus net income of $5.2 million for the same period last year. Earnings per share year to date were ($0.35) on 12,917,752 shares.

Total operating expenses for the six months ended June 30, 2003 were $57.0 million compared to $59.6 million in 2002. Interest expense declined 11.0% to $4.8 million as a result of lower average debt balances of approximately $58.2 million. Selling, general and administrative expenses decreased 25.6% to $17.8 million for the six months ended June 30, 2003 versus $24.0 million for the same period last year. The decrease was driven by a reduction in personnel related expenses of approximately $2.9 million, a $1.6 million reduction in cost of goods sold, and a reduction in collection related expenses of $1.3 million. The Company's headcount at June 30, 2003 was 159, down from 356 from the same period last year while depreciation and amortization decreased 1.6% to $8.4 million compared to $8.5 million in 2002. The provision for credit losses increased 19.6% to $26.0 million for the six months ended June 30, 2003 from $21.8 million for the same period last year. Year to date net charge-offs increased to $36.2 million and the Company repaid debt balances on its senior credit facility and securitizations of $58.7 million for the six months ended June 30, 2003.

MicroFinancial Incorporated continues to operate without the use of gain on sale accounting treatment and a balance sheet with total liabilities less subordinated debt to total equity plus subordinated debt of 1.7 to 1.

Mr. Latour concluded, "MicroFinancial's capital structure and cash flow remain strong. We continue to seek various financing, restructuring and strategic alternatives that will enable the Company to reenter the financing market."

MicroFinancial Incorporated

Richard F. Latour, 781-994-4800