* Strong capital position; equity to assets ratio of 18.5% * Pricing on new originations up 73 basis points year over year * Issuance of $63.4 million of insured deposits through Marlin Business Bank * Marlin Business Bank conversion to a state-chartered, Fed member commercial bank * Stable asset quality; delinquencies and charge-offs in line with expectations * Strengthening of loss reserves to $15.3 million
MOUNT LAUREL, N.J., March 9, 2009 (GLOBE NEWSWIRE) -- Marlin Business Services Corp. (Nasdaq:MRLN) today reported a fourth quarter 2008 net loss of $7.3 million or $0.62 per diluted share and net income on an adjusted basis of $371,000, or $0.03 per diluted share (excluding the losses on interest rate hedges of $7.7 million). For the twelve months ended December 31, 2008, the net loss was $5.2 million or $0.44 per diluted share and net income on an adjusted basis was $4.5 million, or $0.37 per diluted share (excluding the losses on interest rate hedges of $9.7 million).
Net Income on an Adjusted Basis is defined as net income excluding the loss on derivatives and hedging activities net of tax. The Company believes that Net Income on an Adjusted Basis is a useful performance metric for management, investors and lenders, because it facilitates evaluation of the Company without the effects of certain adjustments in accordance with GAAP that may not necessarily be indicative of current operating performance.
"2008 was a challenging year for the economy and I am pleased to report that despite these challenges the company delivered profitable net income on an adjusted basis," says Daniel P. Dyer, Marlin's Chairman and CEO. "We believe our strong operating model is a key factor behind this success. During this challenging period, we continue to focus and execute on the basic fundamentals of disciplined credit underwriting, productivity and maximizing profits while continuing to provide customers with exceptional service," says Dyer.
For the fourth quarter of 2008, the average net investment in leases was $667.2 million, compared to $691.0 million for the third quarter of 2008 and $733.5 million for the fourth quarter of 2007.
Fourth quarter 2008 lease production was $58.1 million, based on initial equipment cost, compared to $59.0 million for the third quarter of 2008 and $87.7 million for the fourth quarter of 2007. Approval rates on lease originations were 47% for the fourth quarter of 2008, versus 49% for the third quarter of 2008 and 56% for fourth quarter a year ago. Direct sales volume in the fourth quarter decreased 17% year over year, while indirect sales volume decreased by 64%. The lower lease production and approval rates in the fourth quarter reflect our decision to adopt more restrictive credit standards during a weakened credit environment and deliberate actions to reduce exposure in our indirect channel.
The average implicit yield on new lease production was 13.76% in the quarter, down slightly from the third quarter of 2008 and up 78 basis points from the fourth quarter of 2007. Yields on new originations in 2008 are the highest yields since 2004.
The net interest and fee margin for the quarter ended December 31, 2008 was 10.21%, down 5 basis points from the third quarter of 2008 and up 4 basis points from 10.17% for the quarter ended December 31, 2007.
Fee income at 3.32% for the quarter ended December 31, 2008 was flat from third quarter 2008 and an improvement of 36 basis points from 2.96% for the quarter ended December 31, 2007.
Interest expense as a percentage of average total finance receivables was flat at 4.99% in the fourth quarter of 2008 versus 4.98% in the third quarter of 2008.
Leases over 30 days delinquent were 3.72% as of December 31, 2008, an increase compared to 3.52% as of September 30, 2008. On a dollar basis, leases in the 30+ delinquency category totaled $28.1 million at December 31, 2008, up from $27.7 million at September 30, 2008 and an improvement from $29.1 million at December 31, 2007. Leases over 60 days delinquent were 1.53% as of December 31, 2008, an increase from 1.36% as of September 30, 2008 and 0.95% at December 31, 2007. On a dollar basis, leases over 60 days delinquent totaled $11.6 million at December 31, 2008, an increase compared to $10.7 million at September 30, 2008 and an increase compared to $8.2 million at December 31, 2007.
Net lease charge-offs in the fourth quarter were $7.9 million, or 4.71% of average net investment in leases on an annualized basis, compared to $6.7 million or 3.85% of average net investment in leases on an annualized basis during third quarter 2008.
The provision for credit losses was $9.4 million for the quarter ended December 31, 2008, up from $8.6 million for the third quarter 2008. The provision increase is primarily due to higher net charge-offs driven by a weakening credit environment.
The Company strengthened its allowance for credit losses to $15.3 million as of December 31, 2008, raising the allowance as a percentage of total finance receivables to 2.30% from 2.07% at September 30, 2008 and 1.47% as of December 31, 2007.
Salaries and benefits were $5.1 million for the fourth quarter ended December 31, 2008, down from $5.6 million for the third quarter 2008. The decrease is primarily due to a reduction in management incentive compensation for 2008.
General and administrative expenses were $3.6 million for the fourth quarter ended December 31, 2008, compared to $3.3 million for the third quarter 2008. The increase over the third quarter is primarily related to costs associated with increased investment spending in collections.
Effective July 1, 2008, the Company discontinued the use of hedge accounting for its derivative financial instruments used to hedge against interest rate risk under its securitization program. By discontinuing the use of hedge accounting, subsequent changes to the fair value of derivative instruments are recognized immediately in earnings rather than comprehensive income.
A $12.8 million loss was incurred on derivatives for the quarter due to losses caused by the precipitous decline in interest rates and the mark-to-market decrease in the value of forward "pay fixed" swaps. $10.6 million of the total loss recognized in the quarter was unrealized.
During the fourth quarter the Company repurchased 102,900 shares under the stock repurchase program announced in November 2007.
The Company opened its Utah Industrial Bank, Marlin Business Bank ("MBB"), on March 12, 2008 and the Bank has funded $79.3 million of leases and loans through its initial capitalization of $12 million and its issuance of $63.4 million in FDIC insured deposits at an average borrowing rate of 4.00%. Quarterly average deposit outstandings were $52.9 million at a weighted average interest rate of 4.14%.
On December 31, 2008, Marlin Business Bank received approval from the Federal Reserve Bank of San Francisco to convert from an industrial bank to a state-chartered commercial bank. The approval allows MBB to grow in size subject to the condition of additional invested capital. On January 13, 2009, MBB converted from an industrial bank to a commercial bank and became a member of the Federal Reserve System and Marlin Business Services Corp. became a bank holding company. On January 20, 2009, Marlin Business Bank submitted a modification request to the FDIC related to an outstanding Order that restricts the growth of the bank during its first three years of operations. At this time, we are awaiting a response from the FDIC on the modification request. Until we receive approval for this modification, we do not expect to have clear visibility on our overall funding options.
Our decision to adopt tighter underwriting standards, along with the general decline in the economy and related business activities, has led to lower overall anticipated lease originations. The lower expected originations, coupled with lack of clear visibility on our overall funding options, has resulted in our decision to proactively lower expenses in the first quarter of 2009, including reducing our workforce by 17% and closing our two smallest satellite offices (Chicago and Utah). A total of approximately 49 employees company-wide were affected as a result of the staff reductions. We expect to incur pretax severance costs in the three months ended March 31, 2009 of approximately $500,000 related to the staff reductions. The total annualized pretax salary cost savings that are expected to result from these reductions are estimated to be approximately $2.3 million. Although we believe that these estimates are appropriate and reasonable based on available information, actual results could differ from these estimates.
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 Tuesday, March 10, 2009 at 9:00 a.m. ET to discuss our fourth quarter and fiscal year 2008 results. If you wish to participate, please call (877)879-6174 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 80 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. 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.globenewswire.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,
------------------------
2008 2007
----------- -----------
(Dollars in thousands,
except per-share data)
(Unaudited)
ASSETS
Cash and cash equivalents $ 32,776 $ 34,347
Restricted cash 66,212 141,070
Net investment in leases and loans 670,494 765,938
Property and equipment, net 2,961 3,266
Property tax receivables 3,120 539
Fair value of cash flow hedge derivatives -- 4
Other assets 20,253 14,490
----------- -----------
Total assets $ 795,816 $ 959,654
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving and term secured borrowings $ 543,308 $ 773,085
Deposits 63,385 --
Other liabilities:
Fair value of cash flow hedge derivatives 11,528 4,760
Sales and property taxes payable 6,540 5,756
Accounts payable and accrued expenses 7,926 10,226
Net deferred income tax liability 15,673 15,682
----------- -----------
Total liabilities 648,360 809,509
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.01 par value; 75,000,000
shares authorized; 12,246,405 and
12,201,304 shares issued and outstanding,
respectively 122 122
Preferred Stock, $0.01 par value; 5,000,000
shares authorized; none issued -- --
Additional paid-in capital 83,671 84,429
Stock subscription receivable (5) (7)
Accumulated other comprehensive income
(loss) 167 (3,130)
Retained earnings 63,501 68,731
----------- -----------
Total stockholders' equity 147,456 150,145
----------- -----------
Total liabilities and stockholders'
equity $ 795,816 $ 959,654
=========== ===========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2008 2007 2008 2007
---- ---- ---- ----
(Dollars in thousands, except per-share data)
(Unaudited)
Income:
Interest income $ 20,214 $ 24,021 $ 86,099 $ 90,231
Fee income 5,643 5,510 22,657 21,996
---------- ---------- ---------- ----------
Interest and fee
income 25,857 29,531 108,756 112,227
Interest expense 8,484 10,587 36,880 35,322
---------- ---------- ---------- ----------
Net interest and fee
income 17,373 18,944 71,876 76,905
Provision for credit
losses 9,356 6,395 31,494 17,221
---------- ---------- ---------- ----------
Net interest and fee
income after
provision for credit
losses 8,017 12,549 40,382 59,684
Insurance and other
income 1,660 1,797 6,841 6,684
---------- ---------- ---------- ----------
Net interest and
other income after
provision for
credit losses 9,677 14,346 47,223 66,368
---------- ---------- ---------- ----------
Loss on derivatives
and hedging
activities (12,759) -- (16,039) --
---------- ---------- ---------- ----------
Non-interest expense
Salaries and benefits 5,082 5,243 22,916 21,329
General and
administrative 3,611 3,553 15,241 13,633
Financing related
costs 451 383 1,418 1,045
---------- ---------- ---------- ----------
Non-interest expense 9,144 9,179 39,575 36,007
---------- ---------- ---------- ----------
Income (loss)
before income
taxes (12,226) 5,167 (8,391) 30,361
Income tax (benefit)
expense (4,878) 2,114 (3,161) 12,075
---------- ---------- ---------- ----------
Net income (loss) $ (7,348) $ 3,053 $ (5,230) $ 18,286
========== ========== ========== ==========
Basic earnings (loss)
per share $ (0.62) $ 0.25 $ (0.44) $ 1.51
Diluted earnings (loss)
per share $ (0.62) $ 0.25 $ (0.44) $ 1.49
Weighted average shares
used in computing
basic earnings (loss)
per share 11,799,939 12,138,824 11,874,647 12,079,172
Weighted average shares
used in computing
diluted earnings
(loss) per share 11,799,939 12,283,142 11,874,647 12,299,051
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Net Income on an Adjusted Basis Reconciliation to GAAP Results
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
---- ---- ---- ----
(Dollars in thousands)
(Unaudited)
Net income (loss) as reported $ (7,348) $ 3,053 $ (5,230) $ 18,286
-------- -------- -------- --------
Deduct:
Loss on derivatives and
hedging activities (12,759) -- (16,039) --
Tax effect 5,040 -- 6,335 --
-------- -------- -------- --------
Loss on derivatives and
hedging activities, net of
tax (7,719) -- (9,704) --
-------- -------- -------- --------
Net Income on an Adjusted
Basis $ 371 $ 3,053 $ 4,474 $ 18,286
======== ======== ======== ========
Net Income on an Adjusted Basis is defined as net income excluding the
loss on derivatives and hedging activities, net of tax. The Company
believes that Net Income on an Adjusted Basis is a useful performance
metric for management, investors and lenders, because it facilitates
evaluation of the Company without the effects of certain adjustments in
accordance with GAAP that may not necessarily be indicative of current
operating performance.
SUPPLEMENTAL QUARTERLY DATA
(Dollars in thousands, except share amounts)
(unaudited)
Quarter Ended: 12/31/2007 3/31/2008 6/30/2008 9/30/2008 12/31/2008
-------------- ---------- --------- --------- --------- ----------
New Asset
Production:
# of Sales Reps 118 108 92 91 86
# of Leases 7,615 6,836 6,276 5,837 5,558
Leased
Equipment
Volume $87,670 $70,550 $62,467 $59,005 $58,098
Approval
Percentage 56% 50% 49% 49% 47%
Average Monthly
Sources 1,186 1,091 1,047 981 936
Implicit Yield
on New Leases 12.98% 13.29% 13.90% 13.87% 13.76%
Net Interest
and Fee Margin:
Interest Income
Yield 12.89% 12.32% 11.98% 11.92% 11.88%
Fee Income
Yield 2.96% 3.00% 3.05% 3.32% 3.32%
Interest and
Fee Income
Yield 15.85% 15.32% 15.03% 15.24% 15.20%
Cost of Funds 5.68% 5.50% 5.13% 4.98% 4.99%
Net Interest
and Fee Margin 10.17% 9.82% 9.90% 10.26% 10.21%
Average Total
Finance
Receivables $745,150 $745,175 $730,267 $706,508 $680,645
Average Net
Investment in
Leases $733,461 $729,951 $713,171 $690,973 $667,232
End of Period
Net Investment
in Leases $752,562 $737,301 $715,677 $688,488 $659,042
End of Period
Loans $13,376 $16,234 $15,750 $13,607 $11,452
End of Period
Factoring
Receivables $26 $0 $0 $0 $0
Total Loan and
Lease Sales
Personnel 124 117 95 94 88
Portfolio Asset
Quality:
Total Finance
Receivables
30+ Days Past
Due
Delinquencies 3.36% 3.07% 3.13% 3.58% 3.81%
30+ Days Past
Due
Delinquencies $29,548 $26,535 $26,195 $28,734 $29,216
60+ Days Past
Due
Delinquencies 0.95% 1.10% 1.16% 1.41% 1.59%
60+ Days Past
Due
Delinquencies $8,377 $9,527 $9,687 $11,320 $12,203
Leasing
30+ Days Past
Due
Delinquencies 3.37% 3.05% 3.04% 3.52% 3.72%
30+ Days Past
Due
Delinquencies $29,101 $25,831 $24,930 $27,739 $28,113
60+ Days Past
Due
Delinquencies 0.95% 1.09% 1.12% 1.36% 1.53%
60+ Days Past
Due
Delinquencies $8,195 $9,230 $9,156 $10,735 $11,559
Loans
30+ Days Past
Due
Delinquencies 3.03% 4.24% 7.62% 6.87% 8.91%
30+ Days Past
Due
Delinquencies $426 $704 $1,265 $995 $1,103
60+ Days Past
Due
Delinquencies 1.23% 1.79% 3.20% 4.04% 5.20%
60+ Days Past
Due
Delinquencies $173 $297 $531 $585 $644
Factoring
Receivables
30+ Days Past
Due
Delinquencies 70.00% 0.00% 0.00% 0.00% 0.00%
30+ Days Past
Due
Delinquencies $21 $0 $0 $0 $0
60+ Days Past
Due
Delinquencies 30.00% 0.00% 0.00% 0.00% 0.00%
60+ Days Past
Due
Delinquencies $9 $0 $0 $0 $0
Net Charge-offs
- Leasing $4,680 $5,289 $5,448 $6,653 $7,862
% on Average Net
Investment in
Leases
Annualized 2.55% 2.90% 3.06% 3.85% 4.71%
Net Charge-offs
- Other Finance
Receivables $122 $631 $283 $483 $550
% on Average
Other Finance
Receivables
Annualized 4.17% 16.58% 6.62% 12.44% 16.40%
Allowance for
Credit Losses $10,988 $12,074 $12,873 $14,339 $15,283
% of 60+
Delinquencies 131.17% 126.73% 132.89% 126.67% 125.24%
90+ Day
Delinquencies
(Non-earning
total finance
receivables) $3,695 $3,940 $4,704 $5,370 $6,380
Balance Sheet:
Assets
Investment in
Leases and
Loans $749,543 $739,393 $719,873 $693,626 $664,761
Initial Direct
Costs and Fees 27,383 26,216 24,517 22,808 21,016
Reserve for
Credit Losses (10,988) (12,074) (12,873) (14,339) (15,283)
Net Investment
in Leases and
Loans $765,938 $753,535 $731,427 $702,095 $670,494
Cash and Cash
Equivalents 34,347 24,089 36,798 17,151 32,776
Restricted Cash 141,070 64,894 65,136 64,294 66,212
Other Assets 18,299 30,315 22,216 20,378 26,334
Total Assets $959,654 $872,833 $855,577 $803,918 $795,816
Liabilities
Total Debt $773,085 $680,256 $618,330 $565,914 $543,308
Deposits $0 $0 $43,618 $47,172 $63,385
Other
Liabilities 36,424 44,975 41,234 38,383 41,667
Total
Liabilities $809,509 $725,231 $703,182 $651,469 $648,360
Stockholders'
Equity
Common Stock $122 $122 $122 $122 $122
Paid-in Capital,
net 84,422 83,792 83,319 83,661 83,666
Other
Comprehensive
Income (3,130) (6,402) (2,836) (2,182) 167
Retained
Earnings 68,731 70,090 71,790 70,848 63,501
Total
Stockholders'
Equity $150,145 $147,602 $152,395 $152,449 $147,456
Total
Liabilities and
Stockholders'
Equity $959,654 $872,833 $855,577 $803,918 $795,816
Capital and
Leverage:
Tangible Equity $150,145 $147,602 $152,395 $152,449 $147,456
Debt to Tangible
Equity 5.15 4.61 4.34 4.02 4.11
Equity to Assets 15.65% 16.91% 17.81% 18.96% 18.53%
Expense Ratios:
Salaries and
Benefits
Expense $5,243 $5,870 $6,344 $5,620 $5,082
Salaries and
Benefits
Expense
Annualized %
of Avg. Fin
Recbl. 2.81% 3.15% 3.47% 3.18% 2.99%
Total personnel
end of quarter 357 354 291 286 284
General and
Administrative
Expense $3,553 $4,303 $3,994 $3,333 $3,611
General and
Administrative
Expense
Annualized % of
Avg. Fin
Recbl 1.91% 2.31% 2.19% 1.89% 2.12%
Efficiency
Ratio 42.41% 50.71% 52.25% 45.13% 45.67%
Net Income:
Net Income
(Loss) $3,053 $1,359 $1,700 ($941) ($7,348)
Annualized
Performance
Measures:
Return on
Average Assets 1.25% 0.60% 0.79% -0.46% -3.71%
Return on
Average
Stockholders'
Equity 8.10% 3.66% 4.50% -2.47% -19.64%
Per Share Data:
Number of
Shares -
Basic 12,138,824 12,033,523 11,987,220 11,843,300 11,799,939
Basic Earnings
(Loss) per
Share $0.25 $0.11 $0.14 ($0.08) ($0.62)
Number of
Shares -
Diluted 12,283,142 12,133,159 12,061,843 11,843,300 11,799,939
Diluted
Earnings
(Loss) per
Share $0.25 $0.11 $0.14 ($0.08) ($0.62)
Net investment in total finance receivables includes net investment
in direct financing leases, loans, and factoring receivables.