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) the increased leverage of the Company as a result of the payment of a $48.5 million special cash dividend in December 2007, (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) 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 71.3% of our total revenues for the three months ended March 31, 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 563 short-term lending branches in 24 states at March 31, 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 March 31, 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 to the provision for losses for the amount of the customer's loan, which includes accrued fees and interest. Any recoveries on amounts previously charged off are recorded as a reduction to the provision for losses in the period recovered. 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 563 branches through a combination of acquisitions and new branch openings. During this period, we opened 307 de novo branches, acquired 104 branches and closed 142 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 563 at March 31, 2009. During first quarter 2009, we closed 23 of our lower performing branches in various states (which included four branches that were consolidated into nearby branches). In accordance with GAAP, we recorded approximately $1.1 million in pre-tax charges during first quarter 2009 associated with these closings.

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

                                                                                      March 31,
                                         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             1
 Acquired branches during period           29       10       51       13        1
 Branches closed during period             (6 )    (23 )    (16 )    (50 )    (24 )         (23 )

 Ending branch locations                  371      532      613      596      585           563

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 2009, we expect to open approximately 5 to 10 de novo 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, which effectively precludes us from offering payday loans in those 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 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.

Recent Accounting Developments

In April 2009, the Financial Accounting Standards Board ("FASB") issued three Staff Positions ("FSPs") that are intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities. FSP FAS 157-4 clarifies the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. FSP FAS 115-2 and FAS 124-2 establish a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings versus other comprehensive income. FSP FAS 107-1 and APB 28-1 expand the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to interim periods. All of these FSPs are effective beginning April 1, 2009. We are assessing the potential impact that the adoption of FSP FAS 157-4 may have on its consolidated financial statements. We do not expect the adoption of FSP FAS 115-2 and FAS 124-2 to have a material effect on its consolidated financial statements. FSP FAS 107-1 and APB 28-1 will result in increased disclosures in our interim periods.

In June 2008, the Financial Accounting Standard Board (FASB) issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are considered to be participating securities and must be included in the computation of earnings per share pursuant to the two-class method. As required upon adoption, we retrospectively adjusted prior period earnings per share data to conform to provisions of this standard. We adopted EITF 03-6-1 on January 1, 2009. The impact of adopting the FSP decreased previously reported diluted earnings per share by $0.01 and previously reported basic earnings per share by $0.01 for the three months ended March 31, 2008.

In March 2008, the FASB issued Statement of Financial Accounting Standard No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161), which requires enhanced disclosures about an entity's derivative and hedging activities. We adopted SFAS 161 on January 1, 2009, with no material impact on our consolidated financial statements.

In February 2008, the FASB issued Staff Position 157-2, Effective Date of FASB 157, (FSP 157-2) which deferred the provisions of SFAS 157 to annual periods beginning after November 15, 2008 for non-financial assets and liabilities. Non-financial assets include fair value measurements associated with business acquisitions and impairment testing of tangible and intangible assets. In accordance with FSP 157-2, we adopted the provisions of FAS No. 157 to non-financial assets and non-financial liabilities in the first quarter of 2009. The adoption did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS 141R expands on required disclosures to improve the statement users' abilities to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008. We adopted SFAS 141R on January 1, 2009, with no material impact on our consolidated financial statements.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2009 Compared with the Three Months Ended March 31,
2008

The following table sets forth our results of operations for the three months
ended March 31, 2009 compared to the three months ended March 31, 2008:



                                                Three Months Ended              Three Months Ended
                                                    March 31,                       March 31,
                                                2008           2009          2008               2009
                                                  (in thousands)             (percentage of revenues)
Revenues
Payday loan fees                             $   42,643      $ 39,377           80.6 %             71.3 %
Other                                            10,259        15,827           19.4 %             28.7 %

Total revenues                                   52,902        55,204          100.0 %            100.0 %


Branch expenses
Salaries and benefits                            11,559        11,715           21.8 %             21.2 %
Provision for losses                              8,399         8,662           15.9 %             15.7 %
Occupancy                                         6,333         6,302           12.0 %             11.4 %
Depreciation and amortization                     1,094         1,042            2.1 %              1.9 %
Other                                             4,096         5,549            7.7 %             10.1 %

Total branch expenses                            31,481        33,270           59.5 %             60.3 %

Branch gross profit                              21,421        21,934           40.5 %             39.7 %

Regional expenses                                 3,443         3,463            6.5 %              6.3 %
Corporate expenses                                6,905         5,951           13.1 %             10.8 %
Depreciation and amortization                       675           733            1.3 %              1.3 %
Interest expense, net                             1,200         1,048            2.3 %              1.9 %
Other expense, net                                   78           136            0.1 %              0.2 %

Income from continuing operations before
income taxes                                      9,120        10,603           17.2 %             19.2 %
Provision for income taxes                        3,585         4,140            6.7 %              7.5 %

Income from continuing operations                 5,535         6,463           10.5 %             11.7 %
Loss from discontinued operations, net of
income tax                                         (141 )        (706 )         (0.3 )%            (1.3 )%

Net income                                   $    5,394      $  5,757           10.2 %             10.4 %

The following table sets forth selected information of our comparable branches for the three months ended March 31, 2008 and 2009:

                                                                      Three Months Ended
                                                                          March 31,
Comparable Branch Information (a):                                     2008         2009
Total revenues generated by all comparable branches (in
thousands)                                                          $    51,539   $ 50,061
Total number of comparable branches                                         549        549
Average revenue per comparable branch                               $    93,878   $ 91,186

(a)  Comparable branches are those branches that were open for
all of the two periods being compared, which means the 15 months
since December 31, 2007.

The following table sets forth selected financial and statistical information for the three months ended March 31, 2008 and 2009:

                                                                   Three Months Ended
                                                                        March 31,
                                                                   2008          2009
Other Information:
Payday loan volume (in thousands)                                $ 297,456     $ 273,889
Average revenue per branch                                          93,798        97,706

Average loan size (principal plus fee)                           $  370.61     $  369.53
Average fees per loan                                                53.66         53.30

Branch Information:
Number of branches, beginning of period                                596           585
De novo branches opened                                                  2             1
Acquired branches                                                        1
Branches closed                                                         (2 )         (23 )

Number of branches, end of period                                      597           563


Average number of branches open during period                          596           576


Average number of branches open during period (exlcuding
branches reported as discontinued operations)                          564           565

Income from continuing operations. For the three months ended March 31, 2009, income from continuing operations was $6.5 million compared to $5.5 million for the same period in 2008. A discussion of the various components of net income follows.

Revenues. For the three months ended March 31, 2009, revenues were $55.2 million, a 4.3% increase from $52.9 million during the three months ended March 31, 2008. The increase in revenues was primarily a result of the growth from our buy here, pay here operations, partially offset by declines in payday loan volumes. Revenues from our buy here, pay here operations totaled $4.4 million for the first quarter 2009 compared to $601,000 in the first quarter of 2008. This increase is attributable to operating five locations in 2009 versus one in first quarter 2008.

Revenues from our payday loan product represent our largest source of revenues and were approximately 71.3% of total revenues for the three months ended March 31, 2009. With respect to payday loan volume, we originated approximately $273.9 million in loans during first quarter 2009, which was a decline of 7.9% from the $297.5 million during first quarter 2008. This decline is primarily attributable to reduced payday loan volume in Virginia, where the Company began offering an open-end credit product in late 2008. The average loan (including fee) totaled $369.53 in first quarter 2009 versus $370.61 during first quarter 2008. Average fees received from customers per loan declined from $53.66 in first quarter 2008 to $53.30 in first quarter 2009. Our average fee rate per $100 for first quarter 2009 was $16.85 compared to $16.93 in first quarter 2008.

Revenues from installment loans, CSO fees, check cashing, title loans, buy here, pay here and other sources totaled $15.8 million during first quarter 2009, up approximately $5.5 million from the $10.3 million in the comparable prior year quarter. The following table summarizes other revenues (in thousands):

                                                Three Months Ended            Three Months Ended
                                                    March 31,                      March 31,
                                                2008           2009          2008              2009
                                                  (in thousands)           (percentage of revenues)
Installment loan interest                    $     4,605     $  4,477            8.7 %            8.1 %
Credit service fees                                1,402        1,593            2.7 %            2.9 %
Check cashing fees                                 1,980        1,944            3.7 %            3.5 %
Title loan fees                                      918          800            1.7 %            1.4 %
Buy here, pay here sales and interest                601        4,379            1.1 %            7.9 %
Open-end credit interest and fees                               1,732                             3.2 %
Other fees                                           753          902            1.5 %            1.7 %

Total                                        $    10,259     $ 15,827           19.4 %           28.7 %

The increase in revenues from our buy here, pay here operations was a result of operating five branches during first quarter 2009 compared to one branch during first quarter 2008. 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 March 31, 2008 and 2009 based on the year that a branch was opened or acquired.

                                                                                Average
                       Number of              Revenues                   Revenue/Branch/Month
Year Opened/Acquired   Branches      2008       2009     % Change         2008           2009
                                     (in thousands)                         (in thousands)
Pre - 1999                    33   $  6,206   $  5,658       (8.8 )%   $       63     $       57
1999                          38      4,801      4,572       (4.8 )%           42             40
2000                          45      5,304      4,819       (9.1 )%           39             36
2001                          31      3,488      3,396       (2.6 )%           38             37
2002                          51      5,328      5,139       (3.5 )%           35             34
2003                          42      4,074      3,989       (2.1 )%           32             32
2004                          69      5,378      5,163       (4.0 )%           26             25
2005                         137     10,047     10,157        1.1 %            24             25
2006                          84      5,654      5,753        1.8 %            22             23
2007                          19      1,259      1,413       12.2 %            22             25
2008                          13         31        669                                        17
2009                           1                     1

Sub-total                    563     51,570     50,729       (1.6 )%   $       31     $       30

Closed branches (a)                     706         68
Buy here, pay here                      601      4,379
Other                                    25         28

Total                              $ 52,902   $ 55,204        4.4 %

(a) Amounts for closed branches do not include revenue from branches that are reported as discontinued operations.

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 March 31, 2009 have been open at least 15 months. Our revenues from comparable branches decreased by $1.4 million, from $51.5 million during first quarter 2008 to $50.1 million in first quarter 2009. This decrease is primarily attributable to reduced customer demand across most states.

We are expecting that 2009 will be a very challenging year for our customers and our branch operations given the current state of the economy and markets. We believe that our customers used 2008 stimulus checks to reduce their borrowings, including borrowings with us, and we anticipate that stimulus checks and refundable tax credits will likewise be used by our customers in 2009 to reduce their borrowings, including borrowings with us. With consumer spending and . . .