MOUNT LAUREL, N.J., May 3, 2007 (PRIME NEWSWIRE) -- Marlin Business Services Corp. (Nasdaq:MRLN) today reported net income of $5.0 million for the first quarter ended March 31, 2007, compared with net income of $4.7 million for the same period in 2006. Diluted earnings per share was $0.41 for the first quarter of 2007, an increase of 5% compared with $0.39 for the same period in 2006. Annualized returns on average assets and equity for the first quarter of 2007 were 2.52% and 14.61% respectively.
"Asset growth continues to be strong," said Daniel P. Dyer, Chairman and CEO of Marlin Business Services Corp. "Our immediate focus is addressing the impact of higher interest rates on our margins."
Highlights for the quarter ended March 31, 2007 include:
Asset Origination
* Based on initial equipment cost, lease production increased
25.2% to $102.7 million for the quarter ended March 31, 2007
compared to $82.0 million for the first quarter of 2006.
* Growth from direct sales was 33% year over year and growth from
the indirect channel was 12%.
* Average net investment in leases was $687.4 million at March 31,
2007 compared to $568.2 million for the first quarter of 2006.
Average net investment in leases was up 4.5% or $29.3 million
from the prior quarter.
* Our end user customer base grew to more than 89,000 at March 31,
2007 compared with 83,000 for the first quarter of 2006 and
87,000 in the previous quarter. The number of active leases in
our portfolio was approximately 111,000 at March 31, 2007.
* As of March 31, 2007 the Company had $386,000 of outstanding
purchased receivables balances for its factoring business "Marlin
Trade Receivables."
* As of March 31, 2007 the Company had $4.8 million of loan
balances outstanding for its new Business Capital Loan product.
Net Interest and Fee Margin and Cost of Funds
* The portfolio yield was 12.40% as a percentage of average total
finance receivables for the quarter ended March 31, 2007, a
decrease of 14 basis points from the first quarter of 2006 and a
decrease of 71 basis points from the quarter ended December 31,
2006. Higher interest income on free cash flow favorably impacted
the prior quarter by 61 basis points. As a result of the debt
proceeds raised in our third quarter 2006 term securitization,
cash balances were higher entering the fourth quarter. These
proceeds were used throughout the fourth quarter to fund
originations and subsequently cash balances have returned to more
normalized levels.
* Fee income as a percentage of average total finance receivables
was 3.25% for the quarter ended March 31, 2007 compared to 3.45%
for the first quarter of 2006 and 3.07% for the quarter ended
December 31, 2006. The increase from the previous quarter is due
primarily to higher administrative and late fee realization.
* The average cost of funds as a percentage of average total
finance receivables was 4.46% for the quarter ended March 31,
2007. This was a 59 basis point increase from the first quarter
of 2006 and a 49 basis point decrease from the 4.95% reported in
the quarter ended December 31, 2006. The average cost of funds in
the previous quarter was negatively impacted 61 basis points by
the assumption of higher debt balances, as a result of the
prefunding feature of the term securitization completed late in
the third quarter. As a result of the prefunding, average
borrowings outstanding were a higher percentage of average total
finance receivables at the end of the fourth quarter. The
prefunding proceeds were used to finance fourth quarter
originations. In the first quarter of 2007 outstanding average
borrowings have returned to more normalized levels.
* Due to the factors discussed above, the net interest and fee
margin was 11.19% as a percentage of average total finance
receivables for the quarter ended March 31, 2007; a decrease of 4
basis points compared to 11.23% for the quarter ended December
31, 2006.
* The average implicit yield on new leases was 12.80% for the
quarter ended March 31, 2007 compared to 12.84% in the first
quarter of 2006 and 12.67% for the quarter ended December 31,
2006.
* Included in income for the quarter ended March 31, 2007 is
$146,000 of interest income related to the Company's factoring
product and $79,000 of interest income related to its Business
Capital Loan product.
Credit Quality
* Net charge-offs totaled $3.0 million for the quarter ended March
31, 2007 compared with $2.4 million for the previous quarter. On
an annualized basis, net charge-offs were 1.75% of average total
finance receivables for the quarter ended March 31, 2007 compared
to 1.64% for the first quarter of 2006 and 1.46% for the quarter
ended December 31, 2006. Included in net charge-offs is $103,000
related to the factoring product. Net charge-offs in our core
leasing product are 1.69% of average net investment in leases as
of March 31, 2007 compared to 1.64% in the first quarter of 2006
and 1.46% in the previous quarter. Included in charge-offs for
the core leasing product is $230,000 or 13 basis points related
to a vendor fraud. Current net charge-offs reflect expected
seasonality and credit levels.
* As of March 31, 2007, 0.76% of our total lease portfolio was 60
or more days delinquent, up from a record low 0.49% as of March
31, 2006 and a slight deterioration compared to 0.71% as of
December 31, 2006. Delinquencies in the first quarter were impacted
by interest-rate sensitive industries, including financial
services, real estate and construction.
* As of March 31, 2007, 0.31% of our Business Capital Loan
portfolio and 6.57% of our factoring receivables portfolio was 60
or more day's delinquent.
* The allowance for credit losses was $8.6 million as of March 31,
2007, compared to $7.9 million in the first quarter of 2006 and
$8.2 million in the previous quarter. Allowance for credit losses
as a percentage of total finance receivables was 1.21% at both
March 31, 2007 and December 31, 2006.
* At March 31, 2007, the allowance for credit losses was 135.4% of
total finance receivables 60 or more days delinquent compared to
238.1% as of March 31, 2006 and 143.5% at December 31, 2006. The
prior year allowance included additional allowances booked for
potential Hurricane Katrina exposure.
* In addition, during the first quarter of 2007 the Company
refinanced a real estate related factoring receivable of $469,000
into a 42-month fully amortizing term loan at a market interest
rate of 14.00%.
* In conjunction with this release, static pool loss statistics
have been updated as supplemental information on the investor
relations section of our website at http://www.marlincorp.com.
Operating Expenses
* Salaries and benefits expense was $5.7 million in the first
quarter of 2007, up from $5.1 million in the first quarter of
2006, but down from $6.9 million in the previous quarter. In the
previous quarter, salaries and benefits expense included a one
time pretax charge of $1.45 million related to the departure of
the President of Marlin Business Services. Salaries and benefits
were 3.31% as an annualized percentage of average total finance
receivables for the first quarter of 2007 versus 3.62% in the
first quarter of 2006 and 3.30% in the previous quarter,
excluding the severance adjustment.
* Other general and administrative expenses were $3.4 million in
the first quarter of 2007 compared to $2.7 million in the first
quarter of 2006 and $3.3 million in the prior quarter. Other
general and administrative expenses as an annualized percentage
of average total finance receivables were 1.94% for the first
quarter of 2007 compared to 1.93% in the first quarter of last
year and 1.98% for the prior quarter.
Funding and Liquidity
* Our debt to equity ratio was 4.49:1 at March 31, 2007 compared
to 4.59:1 at December 31, 2006.
* Capital increased an additional $2.1 million through the
exercise of employee stock options and the related tax benefits
during the first quarter of 2007.
* The Company had $7.4 million in unrestricted cash balances as of
March 31, 2007.
Conference Call and Webcast
We will host a conference call on Friday, May 4, 2007 at 9:00 a.m. EST to discuss our first quarter 2007. If you wish to participate, please call (877) 704-5380 approximately 10 minutes in advance of the call time. The conference ID will be: "Marlin." The call will also be Webcast on the Investor Relations page of the Marlin Business Services Corp. website, http://www.marlincorp.com. An audio replay will also be available on the Investor Relations section of Marlin's website for approximately 90 days.
About Marlin Business Services Corp.
Marlin Business Services Corp. is a nationwide provider of equipment leasing solutions primarily to small businesses. The Company's principal operating subsidiary, Marlin Leasing Corporation, finances over 70 equipment categories in a segment of the market generally referred to as "small-ticket" leasing (i.e. leasing transactions less than $250,000). The Company was founded in 1997 and completed its initial public offering of common stock on November 12, 2003. In addition to its executive offices in Mount Laurel, NJ, Marlin has regional offices in or near Atlanta, Chicago, Denver, Philadelphia and Salt Lake City. For more information, visit http://www.marlincorp.com or call toll free at (888) 479-9111.
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements (including statements regarding future financial and operating results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," "may," "intend," and similar expressions are generally intended to identify forward- looking statements. Economic, business, funding, market, competitive, legal and/or regulatory factors, among others, affecting our business are examples of factors that could cause actual results to differ materially from those described in the forward-looking statements. More detailed information about these factors is contained in our filings with the SEC, including the sections captioned "Risk Factors" and "Business" in the Company's Form 10-K filed with the Securities and Exchange Commission. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per-share data)
March 31, December 31,
2007 2006
--------- ---------
(Unaudited)
Assets
Cash and cash equivalents $ 7,429 $ 26,663
Restricted cash 63,640 57,705
Net investment in leases and loans 723,057 693,911
Property and equipment, net 3,331 3,430
Property tax receivables 7,000 257
Fair value of cash flow hedge derivatives 264 456
Other assets 12,682 13,030
--------- ---------
Total assets $ 817,403 $ 795,452
========= =========
Liabilities and Stockholders' Equity
Revolving and term secured borrowings $ 632,197 $ 616,322
Other liabilities:
Fair value of cash flow hedge derivatives 2,328 1,607
Sales and property taxes payable 11,021 8,034
Accounts payable and accrued expenses 9,847 12,269
Deferred income tax liability 21,107 22,931
--------- ---------
Total liabilities 676,500 661,163
--------- ---------
Commitments and Contingencies
Stockholders' equity:
Common Stock, $0.01 par value;
75,000,000 shares authorized;
12,255,674 and 12,030,259 shares
issued and outstanding, respectively 123 120
Preferred Stock, $0.01 par value;
5,000,000 shares authorized; none issued -- --
Additional paid-in capital 84,396 81,850
Stock subscription receivable (15) (18)
Cumulative other comprehensive income 927 1,892
Retained earnings 55,472 50,445
--------- ---------
Total stockholders' equity 140,903 134,289
--------- ---------
Total liabilities and
stockholders' equity $ 817,403 $ 795,452
========= =========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per-share data)
(Unaudited)
Three Months Ended March 31,
2007 2006
----------- -----------
Income:
Interest income $ 21,437 $ 17,819
Fee income 5,615 4,907
----------- -----------
Interest and fee income 27,052 22,726
Interest expense 7,711 5,495
----------- -----------
Net interest and fee income 19,341 17,231
Provision for credit losses 3,392 2,415
----------- -----------
Net interest and fee income after
provision for credit losses 15,949 14,816
Insurance and other income 1,675 1,355
----------- -----------
Operating income 17,624 16,171
----------- -----------
Non-interest expense:
Salaries and benefits 5,716 5,145
General and administrative 3,352 2,746
Financing related costs 247 455
----------- -----------
Non-interest expense 9,315 8,346
----------- -----------
Income before income taxes 8,309 7,825
Income taxes 3,282 3,091
----------- -----------
Net income $ 5,027 $ 4,734
=========== ===========
Basic earnings per share $ 0.42 $ 0.40
Diluted earnings per share $ 0.41 $ 0.39
Shares used in computing basic
earnings per share 11,957,024 11,702,161
Shares used in computing diluted
earnings per share 12,257,484 12,042,436
SUPPLEMENTAL QUARTERLY DATA
(dollars in thousands, except share amounts)
(unaudited)
Quarter Ended: 3/31/2006 6/30/2006 9/30/2006
-------------- ---------- ---------- ----------
New Asset Production:
No. of Sales Reps 101 103 100
No. of Leases 7,734 8,553 8,824
Leased Equipment Volume $ 82,049 $ 97,871 $ 100,950
Average monthly sources 1,219 1,333 1,321
Implicit Yield on New Leases 12.84% 12.68% 12.73%
Net interest and fee margin
Interest Income Yield 12.54% 12.54% 12.57%
Fee Income Yield 3.45% 3.44% 3.35%
Interest and Fee Income Yield 15.99% 15.98% 15.92%
Cost of Funds 3.87% 4.06% 4.41%
Net interest and Fee Margin 12.12% 11.92% 11.51%
Average Total Finance
Receivables $ 568,248 $ 591,905 $ 624,711
Average Net Investment
in Leases $ 568,248 $ 591,905 $ 623,999
End of period Net Investment
in Leases $ 588,644 $ 622,815 $ 655,871
End of period Loans $ 0 $ 0 $ 971
End of period Factoring
Receivables $ 0 $ 0 $ 296
Portfolio Asset Quality:
Total Finance Receivables
60+ Days Past Due Delinquencies 0.49% 0.54% 0.58%
60+ Days Past Due Delinquencies $ 3,320 $ 3,867 $ 4,411
Leasing
60+ Days Past Due Delinquencies 0.49% 0.54% 0.58%
60+ Days Past Due Delinquencies $ 3,320 $ 3,867 $ 4,411
Loans
60+ Days Past Due Delinquencies 0.00% 0.00% 0.00%
60+ Days Past Due Delinquencies $ 0 $ 0 $ 0
Factoring Receivables
60+ Days Past Due Delinquencies 0.00% 0.00% 0.00%
60+ Days Past Due Delinquencies $ 0 $ 0 $ 0
Net Charge-offs - Leasing $ 2,324 $ 2,132 $ 2,685
% on Average Net Investment in
Leases Annualized 1.64% 1.44% 1.72%
Net Charge-offs - Other Finance
Receivables $ 0 $ 0 $ 0
% on Average Other Finance
Receivables Annualized 0.00% 0.00% 0.00%
Allowance for Credit Losses $ 7,904 $ 7,370 $ 7,767
% of 60+ Delinquencies 238.10% 190.59% 176.08%
90+ Day Delinquencies
(Non-earning) $ 1,544 $ 1,648 $ 1,876
Balance Sheet:
Assets
Investment in Leases and Loans $ 577,219 $ 609,359 $ 642,113
Initial Direct Costs and Fees 19,329 20,826 22,496
Reserve for Credit Losses (7,904) (7,370) (7,767)
Net Investment in Leases
and Loans $ 588,644 $ 622,815 $ 656,842
Cash and Cash Equivalents 4,929 3,168 34,159
Restricted Cash 52,987 54,457 179,964
Other Assets 23,735 17,667 15,954
Total Assets $ 670,295 $ 698,107 $ 886,919
Liabilities
Total Debt $ 504,459 $ 526,286 $ 712,355
Other Liabilities 46,645 45,580 44,963
Total Liabilities $ 551,104 $ 571,866 $ 757,318
Stockholders' Equity
Common Stock $ 118 $ 120 $ 120
Paid-in Capital, net 78,308 79,583 80,548
Other Comprehensive Income 4,220 4,705 2,370
Retained Earnings 36,545 41,833 46,563
Total Stockholders' Equity $ 119,191 $ 126,241 $ 129,601
Total Liabilities and
Stockholders' Equity $ 670,295 $ 698,107 $ 886,919
Capital and Leverage:
Tangible Equity $ 119,191 $ 126,241 $ 129,601
Debt to Tangible Equity 4.23 4.17 5.50
Expense Ratios:
Salaries and Benefits Expense $ 5,145 $ 5,254 $ 5,171
Salaries and Benefits Expense
annualized % of Avg. Fin. Recbl 3.62% 3.55% 3.31%
Total personnel end of quarter 301 319 310
General and Administrative
Expense $ 2,746 $ 3,078 $ 2,868
General and Administrative
Expense annualized % of
Avg. Fin. Recbl 1.93% 2.08% 1.84%
Efficiency Ratio 42.46% 44.16% 41.55%
Net Income:
Net Income $ 4,734 $ 5,288 $ 4,730
Annualized Performance Measures:
Return on Average Assets 2.82% 3.09% 2.55%
Return on Average
Stockholders' Equity 16.34% 17.24% 14.79%
Per Share Data:
Number of Shares - Basic 11,702,161 11,780,018 11,838,677
EPS- Basic $ 0.40 $ 0.45 $ 0.40
Number of Shares - Diluted 12,042,436 12,092,752 12,154,889
EPS- Diluted $ 0.39 $ 0.44 $ 0.39
Quarter Ended: 12/31/2006 3/31/2007
-------------- ----------- -----------
New Asset Production:
No. of Sales Reps 100 96
No. of Leases 8,985 8,639
Leased Equipment Volume $ 105,639 $ 102,652
Average monthly sources 1,309 1,337
Implicit Yield on New Leases 12.67% 12.80%
Net interest and fee margin
Interest Income Yield 13.11% 12.40%
Fee Income Yield 3.07% 3.25%
Interest and Fee Income Yield 16.18% 15.65%
Cost of Funds 4.95% 4.46%
Net interest and Fee Margin 11.23% 11.19%
Average Total Finance Receivables $ 660,529 $ 691,253
Average Net Investment in Leases $ 658,120 $ 687,442
End of period Net Investment in Leases $ 691,932 $ 717,882
End of period Loans $ 1,979 $ 5,175
End of period Factoring Receivables $ 1,760 $ 386
Portfolio Asset Quality:
Total Finance Receivables
60+ Days Past Due Delinquencies 0.71% 0.76%
60+ Days Past Due Delinquencies $ 5,715 $ 6,303
Leasing
60+ Days Past Due Delinquencies 0.71% 0.76%
60+ Days Past Due Delinquencies $ 5,676 $ 6,288
Loans
60+ Days Past Due Delinquencies 0.00% 0.28%
60+ Days Past Due Delinquencies $ 0 $ 15
Factoring Receivables
60+ Days Past Due Delinquencies 2.20% 6.57%
60+ Days Past Due Delinquencies $ 39 $ 26
Net Charge-offs - Leasing $ 2,405 $ 2,907
% on Average Net Investment in
Leases Annualized 1.46% 1.69%
Net Charge-offs - Other Finance
Receivables $ 0 $ 118
% on Average Other Finance
Receivables Annualized 0.00% 12.38%
Allowance for Credit Losses $ 8,201 $ 8,568
% of 60+ Delinquencies 143.50% 135.38%
90+ Day Delinquencies (Non-earning) $ 2,250 $ 2,976
Balance Sheet:
Assets
Investment in Leases and Loans $ 677,848 $ 705,739
Initial Direct Costs and Fees 24,264 25,886
Reserve for Credit Losses (8,201) (8,568)
Net Investment in Leases and Loans $ 693,911 $ 723,057
Cash and Cash Equivalents 26,663 7,429
Restricted Cash 57,705 63,640
Other Assets 17,173 23,277
Total Assets $ 795,452 $ 817,403
Liabilities
Total Debt $ 616,322 $ 632,197
Other Liabilities 44,841 44,303
Total Liabilities $ 661,163 $ 676,500
Stockholders' Equity
Common Stock $ 120 $ 123
Paid-in Capital, net 81,832 84,381
Other Comprehensive Income 1,892 927
Retained Earnings 50,445 55,472
Total Stockholders' Equity $ 134,289 $ 140,903
Total Liabilities and
Stockholders' Equity $ 795,452 $ 817,403
Capital and Leverage:
Tangible Equity $ 134,289 $ 140,903
Debt to Tangible Equity 4.59 4.49
Expense Ratios:
Salaries and Benefits Expense $ 6,898 $ 5,716
Salaries and Benefits Expense
annualized % of Avg. Fin. Recbl 4.18% 3.31%
Total personnel end of quarter 314 311
General and Administrative Expense $ 3,264 $ 3,352
General and Administrative Expense
annualized % of Avg. Fin. Recbl 1.98% 1.94%
Efficiency Ratio 50.58% 43.15%
Net Income:
Net Income $ 3,882 $ 5,027
Annualized Performance Measures:
Return on Average Assets 1.86% 2.52%
Return on Average
Stockholders' Equity 11.77% 14.61%
Per Share Data:
Number of Shares - Basic 11,889,262 11,957,024
EPS- Basic $ 0.33 $ 0.42
Number of Shares - Diluted 12,231,808 12,257,484
EPS- Diluted $ 0.32 $ 0.41
Net investment in total finance receivables includes net investment
in direct financing leases, loans, and factoring receivables.