Lease and Loan Portfolio Grows 10% Over Past Year
Strong Liquidity Position, Conservatively Leveraged
MOUNT LAUREL, N.J., Feb. 14, 2008 (PRIME NEWSWIRE) -- Marlin Business Services Corp. (Nasdaq:MRLN) today reported net income of $3.1 million for the fourth quarter ended December 31, 2007 compared to $3.9 million for the same period in 2006. Diluted earnings per share for the current period were $0.25 compared with $0.32 for the same period in 2006.
For the year ended December 31, 2007, net income was $18.3 million and diluted earnings per share were $1.49, down slightly from $18.6 million and $1.53, respectively, reported for fiscal 2006.
Daniel P. Dyer, Chairman and CEO of Marlin Business Services Corp., said, "Results this quarter reflect a slowing economy and its adverse impact on portfolio growth and credit quality. Entering 2008, our focus will remain on profitable growth while maintaining a disciplined approach to credit underwriting."
Average net investment in leases at December 31, 2007 grew 11.4% compared to the fourth quarter of 2006. Fourth quarter 2007 lease production was $87.7 million based on initial equipment cost, up sequentially from the third quarter, but lower compared to the same period in 2006. Lease production is consistent with the Company's disciplined pricing strategy, adjustments in underwriting standards implemented to maintain credit quality, as well as some weakness in certain geographic and industry segments.
Growth in average total finance receivables also reflects a $10 million increase in the Company's Business Capital Loan product compared to December 31, 2006.
For the quarter, the average implicit yield on new lease production was 12.98%, up 31 basis points from the fourth quarter of 2006 and down slightly (8 basis points) from the third quarter of 2007.
The portfolio interest income yield increased 55 basis points from the third quarter of 2007, primarily due to interest earned on the pre-funding cash proceeds raised in the third quarter term securitization. Excluding the positive impact of the prefunding, the portfolio yield has remained stable compared to the prior quarter.
For the fourth quarter, the average cost of funds as a percentage of average total finance receivables was 5.68%, up 90 basis points from the third quarter of 2007. The prefunding feature of the term securitization completed late in the third quarter increased both the amount of outstanding debt and the average cost of funds in the quarter. A portion of the third quarter term securitization, the prefunding proceeds, were used to finance fourth quarter originations and accounted for 55 basis points of the cost of funds increase.
For the fourth quarter, the net interest and fee margin declined sequentially from the third quarter of 2007 by 49 basis points to 10.17% of total average finance receivables. Margins fell as the increase in the portfolio interest income yield was more than offset by the higher cost of funds and a slight sequential decrease in fee income.
Leases over 60 days delinquent in the fourth quarter rose 4 basis points on a sequential basis, primarily due to weakness in segments of the portfolio tied to real estate. Charge-offs in the fourth quarter were $4.8 million, or 2.58% of average total finance receivables on an annualized basis, primarily due to the deterioration in the performance of leases in geographies and industries adversely impacted by weakness in residential real estate. The Company increased its allowance for credit losses to $11.0 million as of December 31, 2007, raising the provision as a percentage of total finance receivables to 1.47% from 1.27% in the third quarter of 2007.
In the fourth quarter of 2007, we established a $400,000 reserve for a loan that was originated in the first quarter of 2007 when the Company refinanced a real-estate related factoring receivable. As announced in the third quarter, the factoring business has been discontinued.
For the quarter, the Company's efficiency ratio was 42.4%. Total operating expenses for the quarter increased to $9.2 million, sequentially from $8.9 million in the third quarter, primarily as a result of costs associated with investments in sales hires and marketing programs, and an increase in bank commitment fees.
During the fourth quarter the Company repurchased 122,000 shares under the stock repurchase program announced in November.
The Company has received verbal notification from the Federal Deposit Insurance Corporation (FDIC) approving the modified bank application made by Marlin's proposed Utah Industrial Bank (Marlin Business Bank). The Company anticipates opening the Bank within the next 60 days.
In conjunction with this release, static pool loss statistics have been updated as supplemental information on the investor relations section of our website at www.marlincorp.com.
Conference Call and Webcast
We will host a conference call on Friday, February 15, 2008 at 9:00 a.m. EST to discuss our fourth quarter 2007 results. If you wish to participate, please call 1-877-627-6562 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, 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 and working capital 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 www.marlincorp.com or call toll free at (888) 479-9111.
The Marlin Business Services Corp. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4087
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
December 31, December 31,
------------ ------------
2007 2006
------------ ------------
(Dollars in thousands,
except per-share data)
(Unaudited)
ASSETS
Cash and cash equivalents $ 34,347 $ 26,663
Restricted cash 141,070 57,705
Net investment in leases and loans 765,938 693,911
Property and equipment, net 3,266 3,430
Property tax receivables 539 257
Fair value of cash flow hedge derivatives 4 456
Other assets 14,490 13,030
--------- ---------
Total assets $ 959,654 $ 795,452
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving and term secured borrowings $ 773,085 $ 616,322
Other liabilities:
Fair value of cash flow hedge derivatives 4,760 1,607
Sales and property taxes payable 5,756 8,034
Accounts payable and accrued expenses 10,226 12,269
Deferred income tax liability 15,682 22,931
--------- ---------
Total liabilities 809,509 661,163
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.01 par value; 75,000,000
shares authorized; 12,201,304 and 12,030,259
shares issued and outstanding, respectively 122 120
Preferred Stock, $0.01 par value; 5,000,000
shares authorized; none issued -- --
Additional paid-in capital 84,429 81,850
Stock subscription receivable (7) (18)
Cumulative other comprehensive (loss) income (3,130) 1,892
Retained earnings 68,731 50,445
--------- ---------
Total stockholders' equity 150,145 134,289
--------- ---------
Total liabilities and stockholders' equity $ 959,654 $ 795,452
========= =========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---- ---- ---- ----
(Dollars in thousands, except per-share data)
(Unaudited)
Income:
Interest income $ 24,021 $ 21,648 $ 90,231 $ 77,644
Fee income 5,510 5,066 21,996 20,311
---------- ---------- ---------- ----------
Interest and fee
income 29,531 26,714 112,227 97,955
Interest expense 10,587 8,173 35,322 26,562
---------- ---------- ---------- ----------
Net interest and fee
income 18,944 18,541 76,905 71,393
Provision for credit
losses 6,395 2,838 17,221 9,934
---------- ---------- ---------- ----------
Net interest and fee
income after
provision for credit
losses 12,549 15,703 59,684 61,459
Insurance and other
income 1,797 1,551 6,684 5,501
---------- ---------- ---------- ----------
Net interest and
other revenue after
provision for
credit losses 14,346 17,254 66,368 66,960
---------- ---------- ---------- ----------
Non-interest expense
Salaries and
benefits 5,243 6,898 21,329 22,468
General and
administrative 3,553 3,264 13,633 11,957
Financing related
costs 383 264 1,045 1,324
---------- ---------- ---------- ----------
Non-interest expense 9,179 10,426 36,007 35,749
---------- ---------- ---------- ----------
Income before
income taxes 5,167 6,828 30,361 31,211
Income taxes 2,114 2,946 12,075 12,577
---------- ---------- ---------- ----------
Net income $ 3,053 $ 3,882 $ 18,286 $ 18,634
========== ========== ========== ==========
Basic earnings per
share $ 0.25 $ 0.33 $ 1.51 $ 1.58
Diluted earnings per
share $ 0.25 $ 0.32 $ 1.49 $ 1.53
Weighted average
shares used in
computing basic
earnings per share 12,138,824 11,889,262 12,079,172 11,803,973
Weighted average
shares used in
computing diluted
earnings per share 12,283,142 12,231,808 12,299,051 12,161,479
SUPPLEMENTAL QUARTERLY DATA
(dollars in thousands, except share amounts)
(unaudited)
Quarter Ended: 12/31/2006 3/31/2007 6/30/2007 9/30/2007 12/31/2007
-------------- ---------- --------- --------- --------- ----------
New Asset
Production:
# of Sales
Reps 100 96 97 105 118
# of Leases 8,985 8,639 8,423 7,609 7,615
Leased
Equipment
Volume $105,639 $102,652 $97,260 $86,167 $87,670
Average monthly
sources 1,309 1,337 1,279 1,180 1,186
Implicit Yield
on New Leases 12.67% 12.80% 13.04% 13.06% 12.98%
Net interest
and fee
margin:
Interest Income
Yield 13.11% 12.40% 12.34% 12.34% 12.89%
Fee Income
Yield 3.07% 3.25% 2.89% 3.10% 2.96%
Interest and
Fee Income
Yield 16.18% 15.65% 15.23% 15.44% 15.85%
Cost of Funds 4.95% 4.46% 4.60% 4.78% 5.68%
Net interest
and Fee Margin 11.23% 11.19% 10.63% 10.66% 10.17%
Average Total
Finance
Receivables $660,529 $691,253 $717,893 $733,304 $745,150
Average Net
Investment in
Leases $658,120 $687,442 $710,587 $724,933 $733,461
End of period
Net Investment
in Leases $691,932 $717,882 $740,021 $746,889 $752,562
End of period
Loans $1,979 $5,175 $8,118 $9,038 $13,376
End of period
Factoring
Receivables $1,760 $386 $182 $95 $26
Total loan and
lease sales
personnel 103 100 101 114 124
Portfolio Asset
Quality:
Total Finance
Receivables
60+ Days Past
Due
Delinquencies 0.71% 0.76% 0.68% 0.91% 0.95%
60+ Days Past
Due
Delinquencies $5,715 $6,329 $5,824 $7,951 $8,377
Leasing
60+ Days Past
Due
Delinquencies 0.71% 0.76% 0.68% 0.91% 0.95%
60+ Days Past
Due
Delinquencies $5,676 $6,288 $5,798 $7,795 $8,195
Loans
60+ Days Past
Due
Delinquencies 0.00% 0.28% 0.32% 1.69% 1.23%
60+ Days Past
Due
Delinquencies $0 $15 $26 $156 $173
Factoring
Receivables
60+ Days Past
Due
Delinquencies 2.20% 6.57% 0.00% 0.00% 30.00%
60+ Days Past
Due
Delinquencies $39 $26 $0 $0 $9
Net Charge-offs
- Leasing $2,405 $2,907 $3,176 $3,351 $4,680
% on Average
Net Investment
in Leases
Annualized 1.46% 1.69% 1.79% 1.85% 2.55%
Net Charge-offs
- Other
Finance
Receivables $0 $118 $31 $49 $122
% on Average
Other Finance
Receivables
Annualized 0.00% 12.38% 1.70% 2.34% 4.17%
Allowance for
Credit Losses $8,201 $8,568 $8,829 $9,395 $10,988
% of 60+
Delinquencies 143.50% 135.38% 151.60% 118.16% 131.17%
90+ Day
Delinquencies
(Non-earning) $2,250 $2,976 $2,449 $3,438 $3,695
SUPPLEMENTAL QUARTERLY DATA
(dollars in thousands, except share amounts)
(unaudited)
Quarter Ended: 12/31/2006 3/31/2007 6/30/2007 9/30/2007 12/31/2007
-------------- ---------- --------- --------- --------- ----------
Balance Sheet:
Assets
Investment in
Leases and
Loans $677,848 $705,739 $730,316 $738,275 $749,543
Initial Direct
Costs and Fees 24,264 25,886 26,652 27,048 27,383
Reserve for
Credit Losses (8,201) (8,568) (8,829) (9,395) (10,988)
Net Investment
in Leases and
Loans $693,911 $723,057 $748,139 $755,928 $765,938
Cash and Cash
Equivalents 26,663 7,429 8,060 10,964 34,347
Restricted Cash 57,705 63,640 64,660 68,634 141,070
Other Assets 17,173 23,277 21,343 16,031 18,299
Total Assets $795,452 $817,403 $842,202 $851,557 $959,654
Liabilities
Total Debt $616,322 $632,197 $651,771 $659,561 $773,085
Other
Liabilities 44,841 44,303 42,780 41,563 36,424
Total
Liabilities $661,163 $676,500 $694,551 $701,124 $809,509
Stockholders'
Equity
Common Stock $120 $123 $123 $123 $122
Paid-in
Capital, net 81,832 84,381 84,923 85,638 84,422
Other
Comprehensive
Income 1,892 927 1,955 (1,006) (3,130)
Retained
Earnings 50,445 55,472 60,650 65,678 68,731
Total
Stockholders'
Equity $134,289 $140,903 $147,651 $150,433 $150,145
Total
Liabilities
and
Stockholders'
Equity $795,452 $817,403 $842,202 $851,557 $959,654
Capital and
Leverage:
Tangible Equity $134,289 $140,903 $147,651 $150,433 $150,145
Debt to
Tangible
Equity 4.59 4.49 4.41 4.38 5.15
Expense Ratios:
Salaries and
Benefits
Expense $6,898 $5,716 $5,113 $5,257 $5,243
Salaries and
Benefits
Expense
annualized %
of Avg. Fin
Recbl 4.18% 3.31% 2.85% 2.87% 2.81%
Total personnel
end of quarter 314 311 324 331 357
General and
Administrative
Expense $3,264 $3,352 $3,281 $3,447 $3,553
General and
Administrative
Expense
annualized %
of Avg. Fin
Recbl 1.98% 1.94% 1.83% 1.88% 1.91%
Efficiency
Ratio 50.58% 43.15% 40.68% 41.06% 42.41%
Net Income:
Net Income $3,882 $5,027 $5,178 $5,028 $3,053
Annualized
Performance
Measures:
Return on
Average Assets 1.86% 2.52% 2.49% 2.38% 1.25%
Return on
Average
Stockholders'
Equity 11.77% 14.61% 14.36% 13.49% 8.10%
Per Share Data:
Number of
Shares -
Basic 11,889,262 11,957,024 12,106,482 12,155,152 12,138,824
EPS- Basic $0.33 $0.42 $0.43 $0.41 $0.25
Number of
Shares -
Diluted 12,231,808 12,257,484 12,341,182 12,355,484 12,283,142
EPS- Diluted $0.32 $0.41 $0.42 $0.41 $0.25
Net investment in total finance receivables includes net investment
in direct financing leases, loans, and factoring receivables