FORWARD-LOOKING STATEMENTS

The discussion below includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, our plans, strategies and prospects, both business and financial. All statements other than statements of current or historical fact contained in this discussion are forward-looking statements. The words "believe," "expect," "anticipate," "should," "would," "could," "plan," "will," "may," "intend," "estimate," "potential," "continue" or similar expressions or the negative of these terms are intended to identify forward-looking statements.

These forward-looking statements are based on our current expectations and are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those forward-looking statements. These risks include
(1) changes in laws or regulations or governmental interpretations of existing laws and regulations governing consumer protection or payday lending practices,
(2) litigation or regulatory action directed towards us or the payday loan industry, (3) volatility in our earnings, primarily as a result of fluctuations in loan loss experience and the rate of growth in or closure of branches,
(4) risks associated with the leverage of the Company, (5) negative media reports and public perception of the payday loan industry and the impact on federal and state legislatures and federal and state regulators, (6) changes in our key management personnel, (7) integration risks and costs associated with future acquisitions, and (8) the other risks detailed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking statements in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements. When investors consider these forward-looking statements, they should keep in mind the risk factors and other cautionary statements in this discussion.

Our forward-looking statements speak only as of the date they are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The discussion in this item is intended to clarify and focus on our results of operations, certain changes in financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included under Item 1 of this Form 10-Q. This discussion should be read in conjunction with these consolidated financial statements, the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008, and the related notes thereto and is qualified by reference thereto.

EXECUTIVE SUMMARY

We operate primarily through our wholly-owned subsidiaries, QC Financial Services, Inc., QC Auto Services, Inc., QC Loan Services, Inc. and QC E-Services, Inc. QC Financial Services, Inc. is the 100% owner of QC Financial Services of California, Inc., Financial Services of North Carolina, Inc., QC Financial Services of Texas, Inc., Express Check Advance of South Carolina, LLC, QC Advance, Inc., Cash Title Loans, Inc. and QC Properties, LLC.

We derive our revenues primarily by providing short-term consumer loans, known as payday loans, which represented approximately 73.8% of our total revenues for the nine months ended September 30, 2009. We earn fees for various other financial services, such as installment loans, credit services, check cashing services, title loans, open-end credit, money transfers and money orders. We operated 558 short-term lending branches in 24 states at September 30, 2009. In all but one of these states, Texas, we fund our payday loans directly to the customer and receive a fee. Fees charged to customers vary from state to state, generally ranging from $15 to $20 per $100 borrowed, and in most cases, are limited by state law. Through five locations in the Kansas City area, we also sell used automobiles and finance most of those sales, earning income on the automotive sales and interest on the automotive loans.

In Texas, through one of our subsidiaries, we operate as a credit service organization (CSO) on behalf of consumers in accordance with Texas laws. We charge the consumer a CSO fee for arranging for an unrelated third-party to make a loan to the consumer and for providing related services to the consumer, including a guarantee of the consumer's obligation to the third-party lender. In Illinois, New Mexico, Arizona and Montana, we offer an installment loan product, which is an amortizing loan generally over four to twelve months with principal amounts ranging between $300 and $1,000.

Our expenses primarily relate to the operations of our branch network. The most significant expenses include salaries and benefits for our branch employees, provisions for losses and occupancy expense for our leased real estate. Regional and corporate expenses, which include compensation of employees, professional fees and equity award charges, are our other primary costs.

We evaluate our branches based on revenue growth, gross profit contributions and loss ratio (which is losses as a percentage of revenues), with consideration given to the length of time the branch has been open and its geographic location. We evaluate changes in comparable branch metrics on a routine basis to assess operating efficiency. We define comparable branches as those branches that are open during the full periods for which a comparison is being made. For example, comparable branches for the quarterly analysis as of September 30, 2009 have been open at least 15 months on that date. We monitor newer branches for their progress to profitability and rate of loan growth.

With respect to our cost structure, salaries and benefits are one of our largest costs and have historically been driven by the addition of branches throughout the year and growth in loan volumes. Our provision for losses is also a significant expense. If a customer's check is returned by the bank as uncollected, we make an immediate charge-off for the amount of the customer's loan, which includes accrued fees and interest. If any amount is collected on loans previously charged off, we record it as a recovery. We have experienced seasonality in our operations, with the first and fourth quarters typically being our strongest periods as a result of broader economic factors, such as holiday spending habits at the end of each year and income tax refunds during the first quarter.

Over the last five years, we have grown from 294 branches to 558 branches through a combination of acquisitions and new branch openings. During this period, we opened 309 de novo branches, acquired 104 branches and closed 149 branches. In response to changes in the overall market, over the past three years we have generally ceased our de novo branch expansion efforts, and have reduced our overall number of branches from 613 at December 31, 2006 to 558 at September 30, 2009. During the first nine months of 2009, we closed 30 of our lower performing branches in various states (which included five branches that were consolidated into nearby branches). We recorded approximately $1.5 million in pre-tax charges during the nine months ended September 30, 2009 associated with these closings.

The following table summarizes our changes in the number of short-term lending branches locations since January 1, 2004.

                                                                                                September 30,
                                              2004      2005      2006      2007      2008          2009
Beginning branch locations                     294       371       532       613       596                585
De novo branches opened during period           54       174        46        20        12                  3
Acquired branches during period                 29        10        51        13         1
Branches closed during period                   (6 )     (23 )     (16 )     (50 )     (24 )              (30 )

Ending branch locations                        371       532       613       596       585                558

We intend to evaluate opportunities for new branch development to complement existing branches within a given state or market. Additionally, we utilize a disciplined acquisition strategy for both the payday and the buy here, pay here businesses. During the remainder of 2009, we expect to open up to 3 payday-focused branches. In January 2009, we acquired the assets related to two automotive sale and finance locations in Missouri.

According to the Community Financial Services Association of America (CFSA), industry analysts estimate that the industry has approximately 22,000 payday loan branches in the United States and these branches extend approximately $40 billion in short-term credit to millions of middle-class households that experience cash-flow shortfalls between paydays. We believe our industry is highly fragmented as 10 companies operate approximately 10,100 branches in the United States. After a number of years of growth, the industry has contracted slightly in the last two years, primarily due to changes in laws that govern the payday product. Absent changes in regulations and laws, we do not expect significant fluctuations in the industry's number of branches in the foreseeable future.

The payday loan industry has followed, and continues to be significantly affected by, payday lending legislation and regulation in the various states and nationally. We actively monitor and evaluate legislative and regulatory initiatives in each of the states and nationally, and are closely involved with the efforts of the CFSA. To the extent that states enact legislation or regulations that negatively impacts payday lending, whether through preclusion, fee reduction or loan caps, our business has been adversely affected in the past and could be further adversely affected in the future. Over the last two years a few states have enacted interest rate caps from 28% to 36% per annum on payday lending. A 36% per annum interest rate translates to approximately $1.38 per $100 loaned, which effectively precludes us from offering payday loans in those states.

During 2009, payday loan-related legislation was passed in various states, including South Carolina and Washington, that may affect our profitability beginning in 2010. We will continue to monitor and evaluate the laws as they are finalized in each of these states. During 2008, the industry undertook ballot initiatives in Arizona and Ohio in an effort to stabilize the regulatory environment with respect to providing short-term loans to customers in those states. While the outcome of those initiatives was not favorable, there is little immediate impact on us. In Arizona, we will continue to operate under the existing legislation, while working to eliminate the June 30, 2010 sunset provision that would remove short-term loans as an alternative for Arizona customers. In Ohio, we closed 13 branches in the third quarter of 2008 in response to legislation that effectively precludes payday lending in that state, but are offering customers a new product at our remaining Ohio branches under a different statute.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2009 Compared with the Three Months Ended
September 30, 2008

The following table sets forth our results of operations for the three months
ended September 30, 2009 compared to the three months ended September 30, 2008:



                                                Three Months Ended              Three Months Ended
                                                  September 30,                    September 30,
                                               2008            2009            2008               2009
                                                  (in thousands)             (percentage of revenues)
Revenues
Payday loan fees                             $  46,628       $ 43,158             80.2 %           76.0 %
Other                                           11,478         13,638             19.8 %           24.0 %

Total revenues                                  58,106         56,796            100.0 %          100.0 %


Branch expenses
Salaries and benefits                           12,354         11,371             21.3 %           20.0 %
Provision for losses                            16,519         14,697             28.4 %           25.9 %
Occupancy                                        6,508          5,974             11.2 %           10.5 %
Depreciation and amortization                    1,067            999              1.8 %            1.8 %
Other                                            4,577          4,924              7.9 %            8.6 %

Total branch expenses                           41,025         37,965             70.6 %           66.8 %

Branch gross profit                             17,081         18,831             29.4 %           33.2 %

Regional expenses                                3,247          3,411              5.6 %            6.0 %
Corporate expenses                               6,349          6,238             10.9 %           11.0 %
Depreciation and amortization                      678            710              1.2 %            1.3 %
Interest expense, net                            1,070            790              1.8 %            1.3 %
Other expense, net                                  88             30              0.2 %            0.1 %

Income from continuing operations before
income taxes                                     5,649          7,652              9.7 %           13.5 %
Provision for income taxes                       2,687          2,912              4.6 %            5.1 %

Income from continuing operations                2,962          4,740              5.1 %            8.4 %
Loss from discontinued operations, net of
income tax                                        (216 )         (108 )           (0.4 )%          (0.2 )%

Net income                                   $   2,746       $  4,632              4.7 %            8.2 %

The following table sets forth selected information of our comparable branches for the three months ended September 30, 2008 and 2009:

                                                                       Three Months Ended
                                                                         September 30,
                                                                        2008         2009
Comparable Branch Information (a):
Total revenues generated by all comparable branches (in thousands)   $    55,681   $ 52,640
Total number of comparable branches                                          550        550
Average revenue per comparable branch                                $   101,238   $ 95,709

(a) Comparable branches are those branches that were open for all of the two periods being compared, which means the 15 months since June 30, 2008.

The following table sets forth selected financial and statistical information for the three months ended September 30, 2008 and 2009:

                                                                  Three Months Ended
                                                                    September 30,
                                                                 2008           2009
Branch Information:
Number of branches, beginning of period                              597            557
De novo branches opened                                                3              2
Acquired branches
Branches closed                                                      (15 )           (1 )

Number of branches, end of period                                    585            558


Average number of branches open during period (excluding
branches reported as discontinued operations)                        561            557


Other Information:
Payday Loans:
Payday loan volume (in thousands)                              $ 330,511      $ 300,468
Average loan (principal plus fee)                                 370.74         367.01
Average fees per loan                                              53.73          54.12

Installment Loans:
Installment loan volume (in thousands)                         $   9,648      $   7,877
Average loan (principal)                                          509.27         501.63
Average term (days)                                                  186            185

Automotive Loans:
Automotive loan volume (in thousands)                          $   1,682      $   3,074
Average loan (principal)                                           8,452          8,910
Average term (months)                                                 37             31
Locations, end of period                                               2              5

Income from continuing operations. For the three months ended September 30, 2009, income from continuing operations was $4.7 million compared to $3.0 million for the same period in 2008. A discussion of the various components of net income follows.

Revenues. For the three months ended September 30, 2009, revenues were $56.8 million, a decrease of 2.2% from $58.1 million during the three months ended September 30, 2008. The decrease in revenues was primarily due to reduced payday loan volumes, largely offset by higher automotive loan volumes (due to an increase in locations).

Revenues from our payday loan product represent our largest source of revenues and were approximately 76.0% of total revenues for the three months ended September 30, 2009. With respect to payday loan volume, we originated approximately $300.5 million in loans during third quarter 2009, which was a decline of 9.1% from the $330.5 million during third quarter 2008. This decline is attributable to reduced payday loan demand in most states, including Virginia, where we began offering an open-end credit product in late 2008. During second quarter 2009, we re-introduced the payday loan product in Virginia and discontinued the open-end product. The average payday loan (including fee) totaled $367.01 in third quarter 2009 versus $370.74 during third quarter 2008. Average fees received from customers per loan increased from $53.73 in third quarter 2008 to $54.12 in third quarter 2009. Our average fee rate per $100 for third quarter 2009 was $17.30 compared to $16.95 in third quarter 2008.

The following table summarizes other revenues (in thousands):

                                              Three Months Ended            Three Months Ended
                                                September 30,                  September 30,
                                              2008           2009         2008               2009
                                                (in thousands)           (percentage of revenues)
Installment loan interest                  $     5,072     $  4,571           8.7 %             8.0 %
Buy here, pay here sales and interest            1,926        3,810           3.3 %             6.7 %
Credit service fees                              1,633        1,802           2.8 %             3.2 %
Check cashing fees                               1,197        1,174           2.1 %             2.1 %
Title loan fees                                    940          807           1.6 %             1.4 %
Open-end credit interest and fees                               583                             1.0 %
Other fees                                         710          891           1.3 %             1.6 %

Total                                      $    11,478     $ 13,638          19.8 %            24.0 %

Revenues from installment loans, CSO fees, check cashing, title loans, buy here, pay here and other sources totaled $13.6 million during third quarter 2009, up approximately $2.1 million or 18.3% from $11.5 million in the comparable prior year quarter.

The increase in revenues from our buy here, pay here operations was a result of operating five branches during third quarter 2009 compared to two branches during third quarter 2008. The revenues from the open-end credit reflect the introduction of the product in Virginia in late 2008. As noted above, we are no longer offering this product in Virginia and have re-introduced the payday product. The decline in installment loans, check cashing fees and title loan fees reflects a decrease in customer demand for these products.

We evaluate our branches based on revenue growth, with consideration given to the length of time a branch has been open. The following table summarizes our revenues and average revenue per branch per month for the three months ended September 30, 2008 and 2009 based on the year that a branch was opened or acquired.

                                                                                               Average
               Year                  Number of              Revenues                    Revenue/Branch/Month
         Opened/Acquired             Branches      2008       2009     % Change          2008           2009
                                                   (in thousands)                          (in thousands)
Pre - 1999                                  33   $  6,378   $  5,937       (6.9 )%    $       64     $       60
1999                                        38      5,153      4,902       (4.9 )%            45             43
2000                                        45      5,394      5,044       (6.5 )%            40             37
2001                                        31      3,784      3,552       (6.1 )%            41             38
2002                                        51      5,654      5,072      (10.3 )%            37             33
2003                                        41      4,335      3,840      (11.4 )%            35             31
2004                                        66      5,622      5,429       (3.4 )%            28             27
2005                                       136     11,175     10,857       (2.8 )%            27             27
2006                                        83      6,239      5,936       (4.9 )%            25             24
2007                                        19      1,502      1,506        0.2 %             26             26
2008                                        12        476        820         (b )             13             23
2009                                         3                    49         (b )                             5

Sub-total                                  558     55,712     52,944       (5.0 )%    $       33     $       32

Consolidated branches (a)                             430
Buy here, pay here                                  1,926      3,810
Other                                                  38         42

Total                                            $ 58,106   $ 56,796       (2.3 )%

(a) Amounts represent branches that were consolidated into nearby branches and therefore were not reported as discontinued operations.

(b) Not meaningful.

We define comparable branches as those branches that are open during the full periods for which a comparison is being made. For example, comparable branches for the quarterly analysis as of September 30, 2009 have been open at least 15 months. Our revenues from comparable branches decreased by $3.1 million, from $55.7 million during third quarter 2008 to $52.6 million in third quarter 2009. This decrease is primarily attributable to reduced customer demand across most states.

We expect that the remainder of 2009 will present various challenges and opportunities for our customers and our branch operations given the dynamic state of the economy and markets. We believe that our customers used 2008 stimulus checks to reduce their borrowings, including borrowings with us. Likewise, we believe our customers used stimulus checks and refundable tax credits during 2009 to reduce their borrowings, including borrowings with us. With increasing unemployment rates, low consumer spending and negative consumer confidence, we anticipate that customer demand will continue to be lower than the prior year and therefore, revenue improvements will be unlikely during the balance of 2009 (compared to fourth quarter 2008) for our core short-term lending branches. Prior to second quarter 2009, we had expected 2009 revenues from our buy here, pay here operations to improve by $12 million to $15 million over 2008, due to the two locations we acquired in January 2009 and the continued growth in our three existing locations. Based on macroeconomic factors, we now expect that 2009 revenues from our buy here, pay here operations will improve by $8 million to $12 million over 2008.

Branch Expenses. Total branch expenses decreased $3.0 million, or 7.3%, from $41.0 million during third quarter 2008 to $38.0 million in third quarter 2009. Branch operating costs, exclusive of loan losses, decreased to $23.3 million during third quarter 2009 compared to $24.5 million in third quarter 2008. The decrease was attributable to a reduction in overtime compensation and occupancy costs, partially offset by higher cost of sales associated with our automotive sales locations.

The provision for losses decreased from $16.5 million in third quarter 2008 to $14.7 million during third quarter 2009. Our loss ratio was 25.9% in third quarter 2009 and 28.4% in third quarter 2008. This improvement reflects lower returned items quarter-to-quarter, partially offset by a higher allowance associated with our open-end credit product in Virginia. Our charge-offs as a percentage of revenue were 42.0% during third quarter 2009 and 46.5% during third quarter 2008. Our collections as a percentage of charge-offs were 42.6% during third quarter 2009 and 42.6% during third quarter 2008. We received approximately $239,000 from the sale of certain payday loan receivables during third quarter 2009 that had previously been written off compared to $205,000 during third quarter 2008.

With respect to the remainder of 2009, we believe that our collections experience will be consistent with historical levels, as customers continue to adapt to the current state of the economy. We also anticipate that our loss ratio will continue to be negatively affected by the transition in Virginia from the open-end product back to the payday loan product. Our past experience has indicated that the introduction of new products has increased our loss ratio as our customers transition to the new product (e.g., from payday loans to installment loans in Illinois and New Mexico).

Comparable branches totaled $13.6 million in loan losses during third quarter . . .