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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

or

For the transition period from              to             

Commission file number: 000-51423

BROOKE CREDIT CORPORATION

(Exact name of registrant as specified in its charter)

10950 Grandview Drive, Suite 600, Overland Park, Kansas 66210

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number: (913) 661-0123

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (Check One):    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 5, 2007, there were 25,722,898 shares of the registrant’s sole class of common stock outstanding.

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Brooke Credit Corporation

Consolidated Financial Statements

September 30, 2007

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Brooke Credit Corporation

Form 10-Q

September 30, 2007

PART I – FINANCIAL INFORMATION

Introductory Comments

The Consolidated Financial Statements included herein have been prepared by Brooke Credit Corporation, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). For the purposes of this report, unless the context otherwise requires, all references herein to “BCC” and the “Company” shall mean Brooke Credit Corporation and its subsidiaries. These Consolidated Financial Statements and footnote disclosures have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated in consolidation of the financial statements. The Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. These Consolidated Financial Statements should be read in conjunction with the Proxy Statement for the Special Meeting of Stockholders dated July 11, 2007 and the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q. The results for the three and nine months ended September 30, 2007, are not necessarily indicative of the results expected for the full year ending December 31, 2007.

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Brooke Credit Corporation

Consolidated Balance Sheets

UNAUDITED

(in thousands, except share amounts)

See accompanying notes to consolidated financial statements.

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Brooke Credit Corporation

Consolidated Statements of Operations

UNAUDITED

(in thousands, except per share amounts)

See accompanying notes to consolidated financial statements.

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Brooke Credit Corporation

Consolidated Statements of Changes in Stockholders’ Equity

UNAUDITED

(in thousands, except share amounts)

See accompanying notes to consolidated financial statements.

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Brooke Credit Corporation

Consolidated Statements of Cash Flows

UNAUDITED

(in thousands)

See accompanying notes to consolidated financial statements.

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Brooke Credit Corporation

Notes to Consolidated Financial Statements

Data in tables is in thousands, except per share data.

1. Accounting Policies and Interim Financial Statements

The consolidated financial statements include the accounts of the Company and its subsidiaries, except for the following qualifying special purpose entities formed for the purpose of acquiring loans: Brooke Acceptance Company LLC, Brooke Captive Credit Company 2003, LLC, Brooke Capital Company, LLC, Brooke Securitization Company 2004A, LLC, Brooke Securitization Company V, LLC, and Brooke Securitization 2006-1, LLC. All of the foregoing entities have issued asset-backed securities in which the Company is not obligated to repay. Brooke Acceptance Company 2007-1, LLC, a wholly owned subsidiary of Brooke Warehouse Funding, LLC, has secured senior debt in which the Company is not obligated to repay. Each of these entities is a separate and distinct entity. Qualifying special purpose entities are specifically excluded from consideration under FIN46(R), “Consolidation of Variable Interest Entities.”

In the opinion of the management of Brooke Credit Corporation, the accompanying unaudited consolidated financial statements contain all adjustments necessary, which are of a normal and recurring nature, to present fairly the financial position of the Company as of September 30, 2007, and December 31, 2006, the results of operations for the three and nine months ended September 30, 2007 and 2006, the changes in stockholders’ equity for the nine months ended September 30, 2007, and cash flows for the nine months ended September 30, 2007 and 2006. The results for the three and nine months ended September 30, 2007, are not necessarily indicative of the results expected for the full year ending December 31, 2007. BCC operates in a single business segment, that of lending to locally-owned businesses that sell insurance. Certain prior year amounts have been reclassified to conform to the current year presentation.

(a) Organization

Brooke Credit Corporation was incorporated under the laws of the State of Kansas on January 22, 1988, under the name Hess Monuments, Inc. Its name was changed to Brooke Management, Inc. in August 1990 and then to Brooke Credit Corporation in July 1994. In July 2007 the Company merged with Oakmont Acquisition Corp. (“Oakmont”), a specialty purpose acquisition company (also known as a “blank check” company) that was originally incorporated in Delaware in July 2005. Subsequent to the merger, the Company is traded over the counter under the symbol “OTCBB: BRCR.OB” and is organized under the laws of the state of Delaware. BCC’s warrants are quoted under the symbol “OTCBB: BRCRW.OB” and its units are quoted under the symbol “OTCBB: BRCRU.OB”. Brooke Corporation, a Kansas corporation, whose stock is listed on the NASDAQ Stock Market under the symbol “BXXX” was previously the sole owner of the Company and, subsequent to the merger, remains the largest shareholder owning approximately 62% of the Company.

The Company is a specialty finance company that lends primarily to locally-owned businesses that sell insurance. The Company’s core target market consists of independent insurance agencies, captive insurance agencies and managing general agencies, where the sale of insurance is their primary business. In addition, the Company loans money to funeral home owners, where the sale of insurance is often an important, although not primary, part of their business. The Company’s lending programs feature the use of collateral preservation providers, which include industry consultants and franchisors, such as the Company’s affiliated companies, Brooke Franchise Corporation and Brooke Capital Advisors, Inc., in the preservation of collateral and assistance with loss mitigation during the life of the originated loan. The Company funds its loans through a combination of the following four mechanisms: off-balance sheet loan participations, involving the true sale of loan participation interests in individual loans; off-balance sheet loan securitizations, involving the issuance of rated and unrated asset-backed securities; off-balance sheet loan financing, involving the revolving funding of loan amounts from off-balance sheet warehouse facilities; and on-balance sheet funding, involving the funding of loan amounts from the Company’s cash, short-term and/or recourse participations, and warehouse lines of credit.

Titan Lending Group, Inc., a wholly owned subsidiary of the Company, was formed in March 2007 to originate loans to independent insurance agencies that are not franchisees of Brooke Franchise Corporation. Titan Lending Group, Inc. has separate financial statements which are consolidated with the Company’s financial information.

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Brooke Master Trust LLC, a Delaware bankruptcy remote special purpose limited liability company organized on September 18, 2007, is a wholly owned subsidiary of Brooke Warehouse Funding, LLC. It is anticipated that Brooke Master Trust LLC will replace Brooke Acceptance Company 2007-1 as borrower upon closing of a master trust credit facility with Fountain Square Commercial Funding Corporation (which will replace the current facility). The financial information of this subsidiary will not be consolidated with the Company’s financial information

(b) Merger with Oakmont Acquisition Corp.

Effective July 18, 2007, pursuant to the Amended and Restated Agreement and Plan of Merger dated as of April 30, 2007 (the “Merger Agreement”) by and among Oakmont Acquisition Corp. (“Oakmont”), Brooke Credit Corporation (“Brooke Kansas”) and Brooke Corporation, Brooke Kansas was merged with and into Oakmont. In connection with the merger, Oakmont changed its name to Brooke Credit Corporation (the “Surviving Corporation”). Pursuant to the Merger Agreement, each share of the issued and outstanding common stock of Oakmont was converted into one share of the validly issued, fully paid and non-assessable authorized share of common stock of the Surviving Corporation. Brooke Corporation, along with seven other former Brooke Kansas equity holders, received aggregate merger consideration of 16,304,000 shares of the Surviving Corporation’s common stock, and the common stock of Brooke Kansas was cancelled. Shares of the Surviving Corporation’s common stock received by Brooke Corporation along with shares of the Surviving Corporation purchased by the Brooke Corporation in the open market bring Brooke Corporation’s ownership position to approximately 62% of the Surviving Corporation’s issued and outstanding stock. An additional aggregate of 4,000,000 shares of the Surviving Corporation’s common stock will be issued to Brooke Corporation and the other former Brooke Kansas stockholders, or reserved for issuance pursuant to assumed warrants, in the event the Surviving Corporation achieves adjusted earnings of $15,000,000 in 2007. An additional aggregate of 1,000,000 shares of the Surviving Corporation’s common stock will be issued to Brooke Corporation and the other former Brooke Kansas stockholders, or reserved for issuance pursuant to assumed warrants, in the event the Surviving Corporation achieves adjusted earnings of $19,000,000 in 2008. Adjusted earnings for each applicable period equals the actual audited net after tax income of the combined company adjusted to add back all actual after tax amortization expense for intangibles resulting from the merger; plus the actual after tax amount of any negative impact to earnings associated with certain warrants, including deal related costs arising out of the accounting treatment for warrants, put/call rights, certain options or other employee equity incentive plans; and minus an amount intended to approximate interest earned on the cash in the trust account during each applicable period.

The Surviving Corporation has two categories of warrants outstanding. First, warrants outstanding totaling 17,150,332 were issued in the initial public offering of Oakmont, but did not become exercisable until the merger between Oakmont and Brooke Kansas. Each warrant can be converted into a share of the Company’s common stock at any time prior to their expiration in July 2009 at a conversion price of $5.00 per warrant. The Company can redeem the outstanding warrants, in whole but not in part, at a price of $.01 per warrant under certain conditions. Also outstanding is an option to Morgan Joseph & Co. to purchase up to a total of 720,000 units. Each unit consists of one share of common stock and two redeemable common stock purchase warrants. Each of these warrants has a conversion price of $5.70 per warrant. This option is exercisable at $7.50 per unit and expires in July 2010.

The second category includes 1,278,229 warrants which were issued by Brooke Kansas in conjunction with its private placement of debt issued in the fourth quarter of 2006. In addition, 500,000 shares of the Surviving Corporation are reserved for issuance in connection with stock or options that may be granted from time to time under the Surviving Corporation’s 2007 Equity Incentive Plan.

The merger was accounted for as a reverse acquisition. Under this method of accounting, Brooke Credit Corporation was the acquiring company for financial reporting purposes. In accordance with applicable guidance, the merger was considered to be a recapitalization. Accordingly, the merger was treated as the equivalent of Brooke Credit Corporation issuing stock for the net monetary assets of Oakmont accompanied by a recapitalization. The net monetary assets of Oakmont, primarily cash, were stated at their fair value, which was equivalent to its carrying value, and accordingly no goodwill or other intangible assets were recorded. As the merger was considered a reverse acquisition, the weighted average shares outstanding for all prior periods were retroactively restated to reflect the shares that were issued in the merger, 24,536,361 shares.

Prior to the merger, $43,016,000 in cash was held in trust by Oakmont for the purpose of completing a business combination. After payments totaling $4,705,000 for professional fees and other costs related to the merger, the net proceeds were $38,311,000. The proceeds were mainly used to pay down debt. The historical results prior to July 18, 2007, were that of Brooke Kansas prior to the merger.

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(c) Use of Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities and disclosures.

Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the year in which such adjustments are determined.

The following are significant estimates made by management:

It is at least reasonably possible these estimates will change in the near term.

(d) Cash Equivalents

For purposes of the statements of cash flows, the Company considers all cash on hand, cash in banks and short-term investments purchased with a maturity of three months or less to be cash and cash equivalents.

(e) Restricted Cash

The Company holds amounts in escrow in a cash account for certain borrowers for the purpose of paying debt service, property taxes and/or property insurance typically paid during the first year of the loan. The balance held in escrow for these purposes was $290,000 at September 30, 2007, and $564,000 at December 31, 2006.

(f) Notes and Interest Receivable, net

The net notes receivable included as part of the “Notes and interest receivable, net” asset category are available for sale. Based on management’s experience, the carrying value approximates the fair value. Accordingly, any changes in the net notes receivable balances are classified as an operating activity. Notes receivable are shown net of the reserve for credit losses of $830,000 at September 30, 2007, and $0 at December 31, 2006.

(g) Other Receivables

Other receivables include amounts due from Brooke Agency Services Company LLC, a wholly owned subsidiary of Brooke Corporation, as a result of the timing of certain securitized loan payments at the end of the period and sub-servicing income due to the Company for special servicing performed by the Company in connection with the Company’s securitizations and warehouses. Most of these amounts are collected within 30 days and all amounts are collected within 12 months after the date of recording.

(h) Securities

The carrying values of securities were $89,480,000 at September 30, 2007, and $50,320,000 at December 31, 2006, and consisted primarily of three types of securities (or retained residual assets): interest-only strip receivables in loans sold, retained over-collateralization interest in loans sold and cash reserves. These securities are classified as available for sale under SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” The aggregate carrying values above approximate the fair value as calculated by the Company using reasonable assumptions. The value of the Company’s retained residual assets is subject to credit and prepayment risk on the transferred financial assets.

When the Company sells loans to qualifying special purpose entities that qualify as true-sales under SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” a gain on sale is recognized when the note

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receivables are sold. When the Company sells notes receivable to qualifying special purpose entities, it typically retains the interest rights. The component of the gain on sale of notes receivable to qualifying special purpose entities is the gain on sale the Company records associated with the interest-only strip receivable and retained interest benefit as described below, net of direct expenses. Unlike participation sales, in loans sold to qualifying special purpose entities an unaffiliated third party is the servicer and the Company is the secondary or sub-servicer. As such, no servicing asset or liability is recorded.

When the Company sells notes receivables to qualifying special purpose entities, it retains an interest-only strip receivable or retained interest. The carrying values of the interest-only strip receivables in loans sold to qualifying special purpose entities were $26,480,000 and $12,094,000 at September 30, 2007, and December 31, 2006, respectively. The amount of gain or loss recorded on the sale of notes receivable to qualifying special purpose entities depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. To initially obtain the fair value of the retained interest-only strip receivables resulting from the sale of note receivables to qualifying special purpose entities, quoted market prices are used if available. However, quotes are generally not available for such retained residual assets. Therefore, the Company typically estimates fair value of the interest-only strip receivables retained based on the present value of future expected cash flows estimated using management’s best estimates of key assumptions, credit losses (0.50% annually), prepayment speed (10.00% annually) and discount rates (11.00%) commensurate with the risks involved. The amount of unrealized gain on the interest-only strip receivable was $2,158,000 and $89,000, at September 30, 2007, and December 31, 2006, respectively. The interest-only strip receivables have varying dates of maturities ranging from the fourth quarter of 2014 to the second quarter of 2021.

When the Company sells notes receivable to qualifying special purpose entities, it retains an over-collateralization interest in loans sold and cash reserves. The carrying values of retained over-collateralization interests were $62,150,000 and $37,003,000 at September 30, 2007, and December 31, 2006, respectively. The carrying values of cash reserves were $850,000 and $1,223,000 at September 30, 2007, and December 31, 2006, respectively. The fair value of the over-collateralization interest in the loans sold to qualifying special purpose entities that have issued asset-backed securities has been estimated at the par value (carrying value) of the underlying loans less the asset-backed securities sold. The fair value of the over-collateralization interest in the loans sold to qualifying special purpose entities that have secured bank debt is based on the present value of future expected cash flows using management’s best estimates of key assumptions, credit losses (0.50% annually), prepayment speed (10.00% annually) and discount rates (11.00%) commensurate with the risks involved. The cash reserves do not represent credit enhancement reserves for benefit of the asset-backed security holders and creditors of qualifying special purpose entities. These reserves are for the benefit of the third party trustee and servicer and, if not used for excessive trustee and servicer expenses, the funds will be returned to the Company once the last note receivable held by the qualifying special purpose entity has matured. If excessive expenses are incurred by the trustee and servicer the Company will expense the reduction of the cash reserve. No excessive expenses have been incurred by trustees and servicers to date. Therefore, the fair value of the cash reserves has been estimated at the cash value of the reserve account.

The notes receivable sold in April 2003, November 2003, June 2004, March 2005, December 2005 and July 2006 involved the issuance of asset-backed securities by the following qualifying special purpose entities: Brooke Acceptance Company, LLC; Brooke Captive Credit Company 2003, LLC; Brooke Securitization Company 2004A, LLC; Brooke Capital Company, LLC; Brooke Securitization Company V, LLC; and Brooke Securitization Company 2006-1, LLC, respectively. In September 2006, Brooke Warehouse Funding LLC entered into a receivables financing agreement with Fifth Third Bank which was classified as secured borrowings. However, in March 2007 Brooke Warehouse’s Fifth Third facility was paid off and replaced with a new off-balance sheet facility through Brooke Warehouse Funding LLC’s wholly owned qualifying special purpose entity, Brooke Acceptance Company 2007-1 LLC. Therefore, the loans sold in March 2007 to Brooke Warehouse Funding, LLC, the Company’s special purpose entity, involved the incurrence of debt owed to Fifth Third Bank by Brooke Acceptance Company 2007-1, LLC. Loans sold to Brooke Warehouse Funding, LLC are participated to Brooke Acceptance Company 2007-1, LLC which are then pledged to Fifth Third Bank for the off-balance sheet debt. The purchase of loans by Brooke Warehouse Funding, LLC, the participation of those loans to Brooke Acceptance Company 2007-1, LLC and the pledge to Fifth Third Bank occur simultaneously.

Upon the sale of financial assets to qualifying special purpose entities, the unaffiliated trustees over the qualifying special purpose entities and the investors and lenders to the qualifying special purpose entities obtain full control over the assets and the right to freely pledge or transfer the notes receivable. Servicing associated with the transferred assets is primarily the responsibility of unaffiliated servicing companies, which are compensated directly from cash flows generated from the transferred assets. The Company is retained as a secondary or sub-servicer. No servicing asset or servicing liability is recorded because servicing income is offset by servicing expense and represents the adequate compensation as determined by the market.

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Although the Company does not provide recourse on the transferred notes and is not obligated to repay amounts due to investors and creditors of the qualifying special purpose entities, its retained assets are subject to loss, in part or in full, in the event credit losses exceed initial and ongoing management assumptions used in the fair market value calculation. Additionally, a partial loss of retained assets could occur in the event actual prepayments exceed management’s initial and ongoing assumptions used in the fair market calculation.

Cash flows associated with the Company’s retained assets in the transferred assets are subordinate to cash flow distributions to the trustee over the transferred assets, servicer of the transferred loans, collateral preservation providers of the transferred loans, investors and creditors of the qualifying special purpose entities. Actual prepayments and credit losses will impact the amount and frequency of cash flow distributions to the Company from its retained assets. Although the Company expects to receive a certain level of cash flows over the life of the sold financial assets and the term of the asset-backed securities and senior debt secured by the qualifying special purpose entities, the Company will not receive full return of its retained assets until all obligations of the qualifying special purpose entities with respect to underlying loans are met.

Subsequent to the initial calculation of the fair value of retained interest, the Company utilizes a fair market calculation methodology (utilizing the same methodology used to establish the initial fair value) to determine the ongoing fair market value of the retained interest. Ongoing fair value is calculated using the then current outstanding principal of the transferred notes receivable and the outstanding balances due unaffiliated purchasers, which are reflective of credit losses and prepayments prior to the fair value recalculation. Additionally, the Company completes an ongoing analysis of key assumptions used in the fair market value calculation to ensure that such assumptions used in the calculation are viable, based on current and historical prepayments and credit loss trends within similar asset types. Management may make necessary adjustments to key assumptions based on current and historical trends, which may result in an immediate reduction or impairment loss in the fair market value of retained interest. During 2006, the securitized pools of loans experienced an increase in the prepayment rate, and as a result, management determined that an “other than temporary” impairment occurred. The Company recorded an impairment loss of $329,000 for the year ended December 31, 2006, which was included in other income on the consolidated statement of operations. The Company believes that over the life of the securitizations, the prepayment rate assumption used continues to be appropriate. Summarized in footnote 3 is a sensitivity analysis or stress test on retained interests to determine the impact of 10% and 20% variances in key assumptions currently used by management to calculate the fair value of retained interests.

Footnote 3 also contains a table summarizing the principal balances of loans managed by the Company. Included within the table are delinquency and net credit loss trends of managed receivables.

(i) Interest-Only Strip Receivable

The aggregate carrying values of interest-only strip receivables were $7,949,000 and $4,511,000 at September 30, 2007, and December 31, 2006, respectively. Interest-only strip receivables represent the fair value of an asset resulting from the sale of notes receivable to a participating bank. The amount of unrealized gain on the interest-only strip receivable was $271,000 and $98,000 at September 30, 2007, and December 31, 2006, respectively. The interest-only strip receivables have varying maturities ranging from the third quarter of 2011 to the first quarter of 2027.

When the Company sells notes receivable to a participating bank, it retains an interest-only strip receivable. The amount of gain or loss recorded on the sale of notes receivable to a participating bank depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the interest-only strip receivable based on its relative fair value at the date of transfer. To obtain fair values, the Company estimates fair value based on the present value of future expected cash flows using management’s best estimates of the key assumptions (credit losses, prepayment speeds, and discount rates) commensurate with the risks involved.

(j) Deferred Charges

Deferred charges include loan fees paid in 2004, 2005, and 2007 to establish and increase a line of credit with DZ BANK AG Deutsche Zentral-Genossenschaftsbank. Associated costs totaled $1,663,000, of which $696,000 was paid in 2004 to establish the line of credit, $300,000 was paid in 2005 to increase the line of credit, and $667,000 was paid in September 2007 to further increase the line of credit. Also included in deferred charges are costs associated with fees paid to establish lines of credit with Fifth Third Bank

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and Home Federal Savings and Loan. These costs totaled $423,000 and $168,000, respectively, and were paid in 2006. These costs are amortized over the period ending at the maturity date of the respective line of credit. Additional deferred charges include $4,646,000 in costs associated with the debt offering that occurred in November 2006 which will be amortized over the period ending at the maturity date of the debt. Net of amortization, the balance of deferred charges was $5,511,000 and $5,691,000 at September 30, 2007, and December 31, 2006, respectively.

(k) Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the contract database, capitalized software expense and prepaid insurance expenses.

The contract database asset consists of legal and professional fees associated with development of standardized documents relating to the creation of a new asset class for securitization and rating of insurance agency loan pools. The initial one-time development cost of standardized documents for creating a new security asset class is non-recurring and securitization of subsequent insurance agency loan pools results in lower and routine transaction expenses. This asset is being amortized over a five-year period because the benefits are expected to last at least five years and because significant changes to the associated standardized documents will probably not be required for five years. Net of amortization, the balance of the contract database was $87,000 and $196,000 at September 30, 2007, and December 31, 2006, respectively. The balance of the capitalized software was $134,000 and $0 at September 30, 2007, and December 31, 2006, respectively.

The prepaid insurance expenses consist of prepaid premium amounts on financial guaranty policies purchased through CJD & Associates, LLC, a subsidiary of Brooke Brokerage Corporation, which are issued by DB Indemnity, Ltd., (“DB Indemnity”), a captive subsidiary of Brooke Bancshares, a wholly owned subsidiary of Brooke Corporation, and prepaid directors and officers liability insurance. The financial guaranty policies are in force on the loan until such time the loan reaches 50% of its original principal amount that was insured. The prepaid premium amounts are refundable to the Company if the policy is cancelled. The policy would be cancelled when the loan insured by the policy is sold as part of an asset-backed securitization. The balance of this prepaid premium on financial guaranty policies was $2,833,000 and $841,000 at September 30, 2007, and December 31, 2006, respectively. The balance of the prepaid directors and officers liability insurance was $89,000 and $0 at September 30, 2007 and December 31, 2006, respectively.

(l) Warrant Obligation

The warrant obligation consisted of the detachable warrants issued in connection with the debt offering during the fourth quarter of 2006. The detachable noteholder warrants are within the scope of SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. SFAS 150 requires issuers to classify as liabilities (or assets under certain circumstances) free-standing financial instruments which, at inception, require or may require an issuer to settle an obligation by transferring assets.

SFAS 150 required the detachable warrants issued to the noteholders to be classified as a liability since the warrants incorporated a put option. The holders of these warrants could exercise their rights to force the Company to repurchase the warrants and/or warrant shares at the appraised value of the common stock, less the warrant exercise price of $0.01 per share.

The warrant obligation was initially recorded at its fair market value at the close of the offering, on November 1, 2006, of $2,737,000, using a valuation model obtained from CBIZ Valuation Group, LLC, a third-party valuation expert. As of December 31, 2006, the fair market value of these warrants was $2,821,000.

During July 2007, the warrants were amended to remove the put option. Therefore, the warrants are no longer properly shown as a liability, and their fair market value as of the date of the amendment is recorded as additional paid in capital in equity. The decrease in the market value of the liability from December 31, 2006 until July 2007, $467,000, was recorded as a reduction of other interest expense for the nine months ended September 30, 2007.

(m) Stockholders’ Equity

Prior to the Oakmont merger on July 18, 2007, the Company’s authorized capital stock consisted of 50,000,000 shares of common stock of which 5,650,000 shares were issued and outstanding at December 31, 2006. In February 2007, the Board of Directors directed 111,523 of authorized but unissued shares of stock being held in the Company’s name to be issued to Brooke Corporation. All stock has a par value of $.01 per share. All of the Company’s prior common stock were exchanged for shares of Oakmont, and subsequently converted into shares of Brooke Credit Corporation upon consummation of the merger described above.

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Warrants issued in association with a $45,000,000 private placement debt offering in November 2006 were exchanged as well and remain outstanding at September 30, 2007. These warrants, 1,278,229 in total, have a nominal exercise price ($0.01), are exercisable immediately and expire on October 31, 2014. In July 2007 these warrants were amended to remove a put option in exchange for the issuance of an additional 127,120 warrants. Therefore, the fair market value as of July 16, 2007, is recorded as additional paid in capital. These warrants, and the associated financing, are discussed further in footnote 4.

The effects of the merger on the Company’s outstanding common stock and warrants are shown below.

As a result of the merger and shares issued under the restricted stock award, there were 99,000,000 shares of common stock authorized with 25,722,898 shares issued and outstanding at September 30, 2007, with a par value of $.01 a share. There were also 1,000,000 shares of preferred stock authorized but none of these shares was issued and outstanding at September 30. 2007. Additionally, there were 17,150,332 warrants issued in the initial public offering of Oakmont outstanding. These warrants did not become exercisable until the merger between Oakmont and Brooke Credit Corporation. Each warrant can be converted into a share of the Company’s common stock at any time prior to their expiration in July 2009 at a conversion price of $5.00 per warrant. The Company can redeem the outstanding warrants, in whole but not in part, at a price of $.01 per warrant at any time upon a minimum of 30 days’ written notice of redemption if the last sales price of the common stock equals or exceeds $8.50 per share for any 20 trading days within a 30 trading day period ending three business days before the notice of redemption is sent. Also outstanding is an option to Morgan Joseph & Co. to purchase up to a total of 720,000 units. Each unit consists of one share of common stock and two redeemable common stock purchase warrants. These warrants are identical to those noted above except that each of these warrants has a conversion price of $5.70 per warrant. This option is exercisable at $7.50 per unit and expires in July 2010. In lieu of exercise, the option may be converted into units (i.e., a “cashless exercise”) to the extent that the market value of the units at the time of conversion exceeds the exercise price of the option. The option may only be exercised or converted by the option holder.

(n) Revenue Recognition

Interest income, net. The Company recognizes interest income when earned. A portion of the interest income that the Company receives on its loans is paid out to purchasers of its loans, such as participating lenders and qualifying special purpose entities that issue asset-backed securities and secure off-balance sheet bank debt. Payments to these holders are accounted for as participating interest expense, which is netted against gross interest income. Participating interest expense was $23,963,000 and $16,582,000, respectively, for the nine months ended September 30, 2007 and 2006. Cash received from the off-balance sheet facility is recorded as interest income by pool using the interest yield from each pool. Any excess cash received over the yield is applied to the securities balance or other comprehensive income. Any related fees or costs associated with the issuance of the loan that are not directly offset against loan origination fees (see below) are deferred over the life of the loan. Amortization of these costs is calculated over the life of the loans as an adjustment of the interest yield.

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Gain on sale of notes receivable. When the sale of a loan meets the criteria to be accounted for as a true sale, established by SFAS 140, a gain on sale is recognized when the note receivable is sold. When the Company sells notes receivable, it typically retains servicing rights and interest income. Gains or losses on sales of notes receivable depend, in part, on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold, the retained interest and the servicing assets based on their relative fair value at the date of transfer, and the proceeds received.

Loan origination fees. Loan origination fees charged to borrowers are offset against loan origination expenses incurred during the underwriting and placement of loans and are, therefore, not recorded as revenues. However, in the future if loan origination fees exceed these loan originations expense, the excess will be reported as interest income over the life of the loan as an adjustment of the interest yield. Loan origination fees reimburse the Company for cash outflows associated with the up-front issuance costs such as financial guaranty policy premiums, collateral preservation services, travel expenses for location inspections or meetings with the borrowers, and placement of the loans to outside investors.

(o) Provision for Credit Losses

The Company’s credit loss exposure is limited to on-balance sheet loans (other than loans sold to warehouse special purpose entities which are classified as on-balance sheet) and the Company’s retained interest in loans that are sold to qualifying special purpose entities that have issued asset-backed securities or off-balance sheet bank debt. A credit loss assumption is inherent in the calculations of retained interest-only strip receivables resulting from loans that are sold. Historically, no reserve for credit losses has been made for on-balance sheet loans held in inventory for eventual sale for two reasons. First, these loans were typically held for six to nine months before being sold to investors and, therefore, had a short-term exposure to loss. Second, commissions received by the Company’s affiliated company, Brooke Franchise Corporation, are typically distributed to the Company for loan payments prior to distribution of commissions to the franchisee borrower and most other creditors.

However, given the rapid growth that BCC has experienced over the past eighteen months, the seasoning of the loan portfolio, an increase in delinquencies of on-balance sheet loans and management’s expectation that loans will be held longer than previously (for nine to twelve months) before being sold; the Company established a reserve for potential loan losses on the on-balance sheet loans in the third quarter of 2007. The reserve for credit losses includes two key components: (1) loans that are impaired under SFAS 114, “Accounting by Creditors for Impairment of a Loan—an amendment of FASB Statements No. 5 and 15” and (2) reserves for estimated losses inherent in the rest of the portfolio based upon historical and projected credit risk. A reserve of $830,000 was established with an offsetting charge to loan loss expense. Management will evaluate the adequacy of the reserve on an ongoing basis in the future utilizing the credit metrics underlying the reserve.

(p) Other Operating Interest Expense

Operating interest expense includes interest paid by the Company to DZ BANK AG Deutsche Zentral-Genossenschaftsbank on a line of credit loan for the purpose of originating insurance agency loans and funeral home loans in the United States, to Fifth Third Bank on a line of credit loan for the purpose of originating funeral home loans in Canada, to Fifth Third Bank on a line of credit loan for the purpose of originating insurance agency and funeral home loans in the United States and, for the period ended September 30, 2007, to Home Federal Savings and Loan Association of Nebraska on a line of credit loan for the purpose of financing the over-collateralization portion of loans funded with the aforementioned lines of credit; therefore, this interest is accounted for as an operating expense. Interest expense for these lines of credit for the nine months ended September 30, 2007 and 2006 was $2,417,000 and $1,881,000, respectively.

(q) Collateral Preservation (CP)

Collateral preservation expense is comprised of up-front, ongoing and special fees paid to CP providers. The Company hires collateral preservation providers which are industry consultants and specialists for all of the Company’s loans (See footnote 10 for a discussion or related party CP providers). An initial fee is paid to the CP providers for assistance in sourcing and underwriting new loans. The majority of this expense is offset by loan origination fees charged to borrowers. An ongoing fee is also paid to the CP providers to assist the Company in preserving the loan collateral or the value of the borrower’s business. These CP providers provide monitoring, assistance and business liquidation services if required. An additional fee is generally paid to CP providers for liquidation services.

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(r) Income Taxes

The Company filed its federal income tax return on a consolidated basis with Brooke Corporation until the Oakmont merger. Following the merger BCC will be filing separate tax returns. The Company recorded provisions for income tax expense of $6,577,000 and $3,330,000 for the nine months ended September 30, 2007 and 2006, respectively. This tax expense was calculated for 2007 and 2006 based on the Company’s effective tax rate plus the change in deferred income taxes during the year. Deferred tax liabilities were recorded in 2007 and 2006 to recognize the future tax consequences of temporary differences between financial reporting amounts and the tax basis of existing assets and liabilities based on currently enacted tax laws and estimated tax rates. Footnote 5 provides further detail on the Company’s taxes.

2. Earnings Per Share Data

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of shares of the common shares outstanding for the period. The weighted average shares outstanding for all prior periods were retroactively restated to 24,536,361 shares, the number of shares issued in the Oakmont merger. Diluted earnings per share reflect the potential dilution that could occur if certain warrants were exercised. The following reconciles the weighted average shares used for the basic earnings per share computation to the shares used for the diluted earnings per share computation.

Potentially dilutive shares excluded from the calculation:

The following reconciles net income as shown on the statement of operations to net income available to common stockholders.

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3. Notes and Interest Receivable, net

Notes and interest receivable, net consisted of the following:

The Company has loaned money to related parties. These notes receivable are discussed further in footnote 10.

Loan participations and the sale of loans to qualifying special purpose entities that issue off-balance sheet asset-backed securities and bank debt represent the transfer of notes receivable, by sale, to “participating” lenders or qualifying special purpose entities. The Company receives consideration from the transfer of note receivables through retained interest and servicing assets. These transfers are accounted for by the criteria established by SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”

The transfers that do not meet the criteria established by SFAS 140 are classified as secured borrowings and the balances recorded as both a note receivable asset and participation payable liability. At September 30, 2007, and December 31, 2006, secured borrowings totaled $22,548,000 and $35,726,000, respectively. Of such amounts at September 30, 2007, and December 31, 2006, secured borrowings on related party loans totaled $774,000 and $2,681,000, respectively.

Of the notes receivable sold at September 30, 2007, and December 31, 2006, $562,582,000 and $321,452,000, respectively, were accounted for as sales because the transfers met the criteria established by SFAS 140. The notes sold at September 30, 2007, consisted of $313,089,000 sales in securitizations, $234,363,000 sales in participations, and $15,130,000 sales in participations for related parties’ balances. The notes sold at December 31, 2006 consisted of $167,870,000 sales in securitizations, $150,405,000 sales in participations, and $3,177,000 sales in participations for related parties’ balances. Purchasers of these note receivables obtained full control over the transferred assets (i.e. notes receivables) and obtained the right, free of conditions that constrain them from taking advantage of that right, to pledge or exchange the notes receivables. Furthermore, the agreements to transfer assets do not entitle, nor obligate, the Company to repurchase or redeem the notes receivable before their maturity, except in the event of an uncured breach of warranty.

When the Company sells notes receivable, it generally retains interest income and servicing income. Gains or losses on sales of the notes receivable depend, in part, on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold, the retained interest and the servicing assets based on their relative fair value at the date of transfer.

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The Company is typically paid annual servicing fees ranging from 0.25% to 1.375% of the outstanding loan balance on loan participations. In those instances when annual service fees paid to the Company are less than the minimum cost of servicing, which is estimated at 0.25% of the outstanding balance, a servicing liability is recorded. Additionally, the Company often retains interest income. The Company’s right to interest income is not subordinate to the purchasers’ interests and the Company shares interest income with purchasers on a pro-rata basis. Although not subordinate to purchasers’ interests, the Company’s retained interest is subject to credit and prepayment risks on the transferred assets.

The Company is typically paid annual servicing fees ranging from 0.10% to 0.25% of the outstanding transferred loan balances on loans to qualifying special purpose entities that qualify for true sale. Additionally, the Company often retains interest income. The Company’s right to interest income is subordinate to the investor and lender’s interests. As such, the Company’s retained interest is subject to credit and prepayment risks on the transferred assets.

When the Company sells loans to a qualifying special purpose entity an interest receivable is retained. The fair value of the difference between the loans sold and the securities issued to accredited investors, and the fair value of interest receivable are recorded as securities. A history of loans securitized follows:

In March 2007, the Company initiated a $150,000,000 facility to sell, on a revolving basis, a pool of its loans, while retaining residual assets such as interest-only strip receivables and a subordinated over-collateralization interest in the receivables. The eligible receivables are sold to Brooke Warehouse Funding, LLC, a wholly owned bankruptcy-remote special purpose entity, without legal recourse to the Company. Brooke Warehouse Funding, LLC then entered into a participation agreement with Brooke Acceptance Company 2007-1, LLC to sell an undivided senior participation interest in all of the assets of Brooke Warehouse Funding, LLC. Brooke Acceptance Company 2007-1, LLC entered into an amended and restated receivables financing agreement with Fifth Third Bank which extended a credit facility to Brooke Acceptance Company 2007-1 LLC to provide funds to acquire such participation interests with a facility line of credit of $150,000,000. The facility qualifies for true sale treatment under SFAS 140. As of September 30, 2007, the outstanding balance of sold accounts receivable held by Brooke Warehouse Funding, LLC and participated to Brooke Acceptance Company 2007-1, LLC totaled $180,270,000 which were removed from the consolidated balance sheet at that date. The fair value of the difference between loans sold and advanced portion on the facility, or fair value of retained residual assets, was recorded on the Company’s books as a security with a balance of $48,590,000 on September 30, 2007. This retained security was comprised of retained interest-only strip receivable totaling $16,216,000 and retained over-collateralization interests in the special purpose entity totaling $32,374,000. The Company received servicing income as sub-servicer of the facility of $103,000 for the nine months ended September 30, 2007. The facility contains the following financial covenants: minimum stockholders’ equity of $80 million, positive consolidated net income for the four fiscal quarter period then ending, maximum prepayment rate on the Company’s loan portfolio of 20%; maximum loan loss rate of 1.5%; minimum fixed charge coverage ratio as scheduled; maximum cash leverage ratio as scheduled; and maximum total leverage ratio as scheduled. The facility also contains other restrictions, including but not limited to: the incurrence of indebtedness and liens; the reorganization, transfer and merger of the Company; the disposal of its properties other than in the ordinary course of business; entering into transactions with affiliates or into material agreements other than in the ordinary course of business; entering into pledge and negative pledge agreements; and the declaration of dividends, except in limited circumstances.

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The table below summarizes certain cash flows received from and paid to qualifying special purpose entities (“SPEs”) in connection with the Company’s off-balance sheet securitizations and credit facilities:

At September 30, 2007, and December 31, 2006, the Company had transferred assets with balances, including related party loans, totaling $562,582,000 and $321,452,000, respectively. Asset transfers resulted in pretax gains for the nine months ended September 30, 2007 and 2006, of $15,376,000 and $6,068,000 respectively. The pretax gains include related party gain on sale of $35,000 and a loss on sale of $11,000 for the nine months ended September 30, 2007 and 2006, respectively.

The fair value of retained interest-only strip receivables is calculated by estimating the net present value of interest income on loans sold using the discount rate and prepayment speeds noted in the following key economic assumptions table. The fair value of the retained interest-only strip receivables is also reduced by the amount of estimated credit losses on loans sold in qualifying special purpose entities that qualify as true sales, which are calculated using the estimated credit loss percentage noted in the following table. At September 30, 2007, and December 31, 2006, the fair value of retained interest-only strip receivables recorded by the Company was $34,429,000 and $16,605,000, respectively. Of the total at September 30, 2007, $7,949,000 was included in Interest-only strip receivable and $26,480,000 was included in Securities on the balance sheet.

Of the business and real estate loans at September 30, 2007, and December 31, 2006, $144,000 and $2,247,000, respectively, in loans were sold to various participating lenders with recourse to the Company. Such recourse is limited to the amount of actual principal and interest loss incurred and any such loss is not due for payment to the participating lender until such time as all collateral is liquidated, all actions against the borrower are completed and all liquidation proceeds applied. However, participating lenders may be entitled to periodic advances from the Company against liquidation proceeds in the amount of regular loan payments. At September 30, 2007, all such recourse loans: a) had no balances more than 60 days past due and b) had adequate collateral. No recourse loan participations were in default at September 30, 2007.

To obtain fair values of retained interests, quoted market prices are used, if available. However, quotes are generally not available for retained interests, so the Company typically estimates fair value based on the present value of future expected cash flows estimated using management’s best estimates of key assumptions, credit losses, prepayment speed and discount rates commensurate with the risks involved.

The value of the servicing asset or liability is calculated by estimating the net present value of net servicing income (or expense) on loans sold using the discount rate and prepayment speeds noted in the following key economic assumptions table. Subsequent to the initial recording at fair value, the servicing asset is amortized in proportion to and over the period of estimated net servicing income.

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The following table provides the changes in the Company’s servicing asset and liability subsequently measured using the amortization method. The fair values exclude the servicing asset and liability on related party loans sold.

The dominant risk characteristics of the underlying loans of the Company’s retained interest-only strip receivables and servicing assets have been analyzed by management to identify how to stratify these assets for the purpose of evaluating and measuring impairment. The underlying loans are very similar in virtually all respects; however, management has concluded that those underlying loans with adjustable interest rates should be evaluated separately from loans with fixed interest rates. Accordingly, different key economic assumptions have been used when determining the fair value of retained interest and servicing assets from fixed-rate loans than have been used for adjustable-rate loans. However, for presentation purposes and due to the immateriality of the fixed-rate stratum, they have been combined in the tables hereafter. The fixed-rate stratum represents less than 1.00% of the retained interest and servicing assets. In addition, the Company does not typically any longer originate fixed-rate loans and, therefore, there are typically not any new assets resulting from fixed-rate loans. No valuation allowance has been established because the fair value for the adjustable-rate loan stratum is not less than the carrying amount of the servicing assets.

Although substantially all of the Company’s loans are adjustable, a discount rate has been applied to reflect the net present value of future revenue streams. As such, changes in the net present value rate, or discount rate, resulting from interest rate variations, could adversely affect the asset’s fair value. Impairment of retained interests and servicing assets are evaluated and measured annually. The impairment testing is performed by taking the current interest and servicing revenue stream and valuing the new revenue stream with the appropriate assumptions. The new revenue stream is based on the loan balances at the date the impairment test is completed, which will include all prepayments on loans and any credit losses for those loans. The new discounted revenue stream is then compared to the carrying value on the Company’s books and, if the new value is greater than the value on the books, no impairment has occurred. If the new discounted revenue stream is less than the value on the books, further analysis is performed to determine if an “other than temporary” impairment has occurred. If an “other than temporary” impairment has occurred, the Company writes the asset to the new discounted revenue stream. During 2006, the securitized pools of loans experienced increases in the prepayment rate and, as a result, management determined that an “other than temporary” impairment occurred. The Company recorded an impairment loss of $329,000 for the year ended December 31, 2006, which was included in other income on the Consolidated Statements of Operations. The Company believes that over the life of the securitizations the prepayment rate assumption used continues to be appropriate. No impairment was recognized for the nine months ended September 30, 2007.

For the twelve months ended September 30, 2007, the Company’s loan portfolio experienced an annualized prepayment rate of approximately 14.1%, which was higher than management’s assumption ranging from 8% on fixed rate loans, and 10% on variable rate loans. Management believes that this increase during 2007 is directly attributable to market conditions which are cyclical such as the softening insurance marketplace and the increasing interest rate environment. The prepayment assumption of 8% to 10%

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determined by management is an average annual rate over the life of the Company’s portfolio. Management believes that during the remaining term of this portfolio, several cycles are likely to occur which could increase or decrease actual prepayment rates; however, management continues to believe the average annual rate assumption used by management is appropriate. Shorter term swings in prepayment rates typically occur because of cycles within a marketplace, such a softening and hardening of the insurance marketplace, changes in the death care rate for funeral homes and changes in the variable interest rate loans from key index rate changes. Longer term increases in prepayment rates typically result from long-term deterioration of the marketplace or increased lending competition.

At September 30, 2007, key economic assumptions used in measuring the retained interests and servicing assets when loans were sold or securitized during the year follow (rates per annum):

At September 30, 2007, key economic assumptions and the sensitivity of the current fair value of residual cash flows to immediate 10 percent and 20 percent adverse changes in those assumptions follow:

These sensitivities are hypothetical and should be used with caution. The effect of a variation in a particular assumption on the value of the retained interest-only strip receivables and servicing assets is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

The above adverse changes for prepayment speed and discount rate are calculated on the Company’s retained interest-only strip receivables and servicing assets on loans sold totaling $547,452,000 which excludes related party loans of $15,130,000. The above adverse changes for expected credit losses are calculated on the Company’s retained interest-only strip receivables in loans sold to qualifying special purpose entities.

The calculations exclude the retained interest-only strip receivables and servicing assets on related party loans sold. The interest-only strip receivables on related party loans sold were $24,000 at September 30, 2007, and $14,000 at December 31, 2006. The servicing assets on related party loans sold were $64,000 at September 30, 2007, and $52,000 at December 31, 2006.

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The following illustrate how the changes in fair values were calculated for 10% and 20% adverse changes in key economic assumptions.

Effect of Increases in Assumed Prepayment Speed on Servicing Asset

Effect of Increases in Assumed Prepayment Speed on Retained Interest (Interest-Only Strip Receivable, including retained interest carried in Securities balance)

Effect of Increases in Assumed Credit Loss Rate on Retained Interest (Interest-Only Strip Receivable, including retained interest carried in Securities balance)

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Effect of Increases in Assumed Discount Rate on Servicing Asset

Effect of Increases in Assumed Discount Rate on Retained Interest (Interest Only Strip Receivable, including retained interest carried in Securities balance)