* Strong liquidity position, $160 million of undrawn capacity
in credit facilities
* Strong capital position, leverage of 4.0:1; Equity to assets
ratio of 19%
* Pricing on new originations improved 81 basis points year
over year
* Marlin Business Bank operational; issued $47 million in
insured deposits at a fixed rate of 4.15%
* Marlin Business Bank filed an application to convert to a state
chartered Commercial Bank
MOUNT LAUREL, N.J., Nov. 3, 2008 (GLOBE NEWSWIRE) -- Marlin Business Services Corp. (Nasdaq:MRLN) today reported a third quarter 2008 net loss of $941,000 or $0.08 per diluted share. Excluding the losses on hedging related activities of $2.0 million, net income from operations was $1.1 million or $0.09 per share.
For the nine months ended September 30, 2008, net income was $2.1 million or $0.18 per diluted share. Net income and diluted earnings per share for the nine-month period ended September 30, 2008 were impacted by the same loss related to derivative and hedging activities. Adjusted to exclude this loss, net income for the nine-month period ended September 30, 2008 was $4.1 million, or $0.34 per diluted share.
"Against the backdrop of a weak economy and the ongoing turmoil in the capital markets, our business continues to demonstrate resiliency and profitable results," says Daniel P. Dyer, Marlin's Chairman and CEO. "The Company's proven business model combined with being well-capitalized and conservatively leveraged are essential ingredients for success during these challenging times. Our strategic focus remains on maintaining a well diversified portfolio of lease assets, adhering to stringent underwriting standards and generating attractive risk-adjusted margins. Marlin's recent filing to become a commercial bank will further diversify our sources of funding and reduce borrowing rates," says Dyer.
For the third quarter of 2008, the average net investment in leases was $691.0 million, compared to $713.2 million for the second quarter of 2008 and $724.9 million for the third quarter of 2007. Third quarter 2008 lease production was $59.0 million, based on initial equipment cost, compared to $62.5 million for the second quarter of 2008 and $86.2 million for the third quarter of 2007. Approval rates on lease originations were 49% for both the second and third quarter of 2008 versus 60% for the third quarter of 2007. Direct sales volume decreased 12.7% year over year, while indirect sales volume decreased by 67.1%.
The combination of conservative underwriting, price discipline and caution by businesses to invest in capital equipment are drivers of the quarter-over-quarter decline in both average net investment and lease production.
Demonstrating our pricing discipline, the average implicit yield on new lease production was 13.87% in the quarter, flat from the second quarter of 2008 and up 81 basis points from the third quarter of 2007. The yields achieved in this quarter and the prior quarter are the Company's highest yields on new originations since second quarter 2004.
The net interest and fee margin for the quarter ended September 30, 2008 was 10.26%, up 36 basis points from 9.90% in the second quarter of 2008. The increase is primarily due to an improvement in fee income and a decrease in interest expense as a percentage of average total finance receivables.
Fee income improved to 3.32% for the quarter ended September 30, 2008 from 3.05% in the second quarter of 2008 due to a higher number of late fee billings.
Interest expense as a percentage of average total finance receivables declined 15 basis points to 4.98% in the third quarter of 2008 versus 5.13% in the second quarter of 2008. The decrease is primarily due to the change in the funding mix between term funding, warehouse borrowings and Marlin Business Bank, combined with the lower cost of borrowings associated with our warehouse lines and insured deposits.
Effective July 1, 2008, the Company discontinued the use of hedge accounting for its derivative financial instruments. By discontinuing hedge accounting, subsequent changes to the fair value of derivative instruments are recognized immediately in earnings. These changes to fair value are reflected for the first time in third quarter net income. Included in net income for the quarter ended September 30, 2008, is a pretax mark-to-market loss of $2.2 million relating to the Company's derivative instruments.
In addition, the Company has concluded that certain forecasted borrowings will not occur within the timeframe allowed under hedge accounting. We therefore reclassified $1.1 million of pretax loss from accumulated other comprehensive income to loss on derivatives.
Credit performance continues to reflect the pressure from a weakened economy. Leases over 30 days delinquent were 3.52% as of September 30, 2008, an increase compared to 3.04% as of June 30, 2008. On a dollar basis, leases in the 30+ delinquency category were $27.7 million at September 30, 2008, up from $24.9 million at June 30, 2008 and down from $29.1 million at December 31, 2007. Leases over 60 days delinquent were 1.36% as of September 30, 2008, an increase from 1.12% as of June 30, 2008. On a dollar basis, leases over 60 days delinquent were $10.7 million at September 30, 2008, an increase compared to $9.2 million at June 30, 2008 and an increase compared to $8.2 million at December 31, 2007.
Net lease charge-offs in the third quarter were $6.7 million, or 3.85% of average net investment in leases on an annualized basis, compared to $5.4 million or 3.06% of average net investment in leases on an annualized basis during second quarter 2008.
The provision for credit losses was $8.6 million for the quarter ended September 30, 2008, up from $6.5 million for the second quarter 2008. The provision increase is due primarily to estimated higher net charge-offs in future periods, and the impact of increasing delinquencies on provision estimates.
The Company strengthened its allowance for credit losses to $14.3 million as of September 30, 2008, raising the allowance as a percentage of total finance receivables to 2.07% from 1.79% at June 30, 2008.
Salaries and benefits were $5.6 million for the third quarter ended September 30, 2008, down from $6.3 million for the second quarter 2008. Included in second quarter salaries and benefits are one-time costs of $501,000 associated with a previously announced workforce reduction.
General and administrative expenses were $3.3 million for the third quarter ended September 30, 2008, compared to $4.0 million for the second quarter 2008. The improvement over the second quarter is primarily related to a reduction in marketing investment and professional fees and continued focus on discretionary spending.
The Company opened its Utah Industrial Bank, Marlin Business Bank, on March 12, 2008. The Bank has funded $59.3 million of leases and loans through its initial capitalization of $12 million and its issuance of $47.2 million in FDIC insured deposits at an average borrowing rate of 4.15%. Quarterly average deposit outstandings were $43.9 million at a weighted average interest rate of 4.13%.
On Oct. 21, 2008, Marlin Business Bank filed an application with the Utah Department of Financial Institutions to convert its charter from an Industrial Bank to a state chartered Commercial Bank. It is our intent to file an application for membership in the Federal Reserve System, and the Company intends to file an application with the Federal Reserve to become a Bank Holding Company.
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, November 4, 2008 at 10:00 a.m. ET to discuss our third quarter 2008 results. If you wish to participate, please call (877)545-1490 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.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
September 30, December 31,
------------ -----------
2008 2007
-------- --------
(Dollars in thousands,
except per-share data)
(Unaudited)
ASSETS
Cash and cash equivalents $ 17,151 $ 34,347
Restricted cash 64,294 141,070
Net investment in leases and loans 702,095 765,938
Property and equipment, net 2,953 3,266
Property tax receivables 562 539
Fair value of cash flow hedge
derivatives 0 4
Other assets 16,863 14,490
-------- --------
Total assets $803,918 $959,654
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving and term secured borrowings $565,914 $773,085
Deposits 47,172 --
Other liabilities:
Fair value of cash flow hedge
derivatives 4,727 4,760
Sales and property taxes payable 8,716 5,756
Accounts payable and accrued expenses 10,079 10,226
Deferred income tax liability 14,861 15,682
-------- --------
Total liabilities 651,469 809,509
-------- --------
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.01 par value;
75,000,000 shares authorized;
12,227,391 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 83,666 84,429
Stock subscription receivable (5) (7)
Accumulated other comprehensive loss (2,182) (3,130)
Retained earnings 70,848 68,731
-------- --------
Total stockholders' equity 152,449 150,145
-------- --------
Total liabilities and stockholders'
equity $803,918 $959,654
======== ========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
------------------ ------------------
September 30, September 30,
------------- -------------
2008 2007 2008 2007
------- ------- ------- -------
(Dollars in thousands, except per-share data)
(Unaudited)
Income:
Interest income $21,062 $22,622 $65,884 $66,210
Fee income 5,855 5,685 17,013 16,486
------- ------- ------- -------
Interest and fee
income 26,917 28,307 82,897 82,696
Interest expense 8,790 8,768 28,396 24,735
------- ------- ------- -------
Net interest and
fee income 18,127 19,539 54,501 57,961
Provision for
credit losses 8,602 3,966 22,137 10,826
------- ------- ------- -------
Net interest and
fee income after
provision for
credit losses 9,525 15,573 32,364 47,135
Insurance and
other income 1,712 1,659 5,182 4,888
------- ------- ------- -------
Net interest
and other
revenue after
provision for
credit losses 11,237 17,232 37,546 52,023
------- ------- ------- -------
Gain (loss) on
derivatives and
hedging activities (3,280) -- (3,280) --
------- ------- ------- -------
Non-interest expense
Salaries and
benefits 5,620 5,257 17,835 16,087
General and
administrative 3,333 3,447 11,629 10,080
Financing related
costs 370 202 967 662
------- ------- ------- -------
Non-interest expense 9,323 8,906 30,431 26,829
------- ------- ------- -------
Income (loss)
before income
taxes (1,366) 8,326 3,835 25,194
Income taxes (425) 3,298 1,718 9,961
------- ------- ------- -------
Net income (loss) $ (941) $ 5,028 $ 2,117 $15,233
======= ======= ======= =======
Basic earnings
(loss) per share $ (0.08) $ 0.41 $ 0.18 $ 1.26
Diluted earnings
(loss) per share $ (0.08) $ 0.41 $ 0.18 $ 1.24
Weighted average
shares used in
computing basic
earnings (loss)
per share 11,843,300 12,155,152 11,899,731 12,066,077
Weighted average
shares used in
computing diluted
earnings (loss)
per share 11,843,300 12,355,484 12,013,961 12,310,198
SUPPLEMENTAL QUARTERLY DATA
(dollars in thousands, except share amounts)
(unaudited)
9/30/ 12/31/ 3/31/ 6/30/ 9/30/
Quarter Ended: 2007 2007 2008 2008 2008
-------------- -------- -------- -------- -------- --------
New Asset
Production:
# of Sales Reps 105 118 108 92 91
# of Leases 7,609 7,615 6,836 6,276 5,837
Leased
Equipment
Volume $ 86,167 $ 87,670 $ 70,550 $ 62,467 $ 59,005
Approval
Percentage 60% 56% 50% 49% 49%
Average Monthly
Sources 1,180 1,186 1,091 1,047 981
Implicit Yield
on New Leases 13.06% 12.98% 13.29% 13.90% 13.87%
Net Interest
and Fee Margin:
Interest
Income Yield 12.34% 12.89% 12.32% 11.98% 11.92%
Fee Income Yield 3.10% 2.96% 3.00% 3.05% 3.32%
Interest and
Fee Income
Yield 15.44% 15.85% 15.32% 15.03% 15.24%
Cost of Funds 4.78% 5.68% 5.50% 5.13% 4.98%
Net Interest
and Fee Margin 10.66% 10.17% 9.82% 9.90% 10.26%
Average Total
Finance
Receivables $733,304 $745,150 $745,175 $730,267 $706,508
Average Net
Investment
in Leases $724,933 $733,461 $729,951 $713,171 $690,973
End of Period
Net Investment
in Leases $746,889 $752,562 $737,301 $715,677 $688,488
End of Period
Loans $ 9,038 $ 13,376 $ 16,234 $ 15,750 $ 13,607
End of Period
Factoring
Receivables $ 95 $ 26 $ 0 $ 0 $ 0
Total Loan
and Lease
Sales Personnel 114 124 117 95 94
Portfolio Asset
Quality:
Total Finance
Receivables
30+ Days
Past Due
Delinquencies 3.08% 3.36% 3.07% 3.13% 3.58%
30+ Days
Past Due
Delinquencies $ 26,770 $ 29,548 $ 26,535 $ 26,195 $ 28,734
60+ Days
Past Due
Delinquencies 0.91% 0.95% 1.10% 1.16% 1.41%
60+ Days
Past Due
Delinquencies $ 7,951 $ 8,377 $ 9,527 $ 9,687 $ 11,320
Leasing
30+ Days
Past Due
Delinquencies 3.03% 3.37% 3.05% 3.04% 3.52%
30+ Days
Past Due
Delinquencies $ 26,054 $ 29,101 $ 25,831 $ 24,930 $ 27,739
60+ Days
Past Due
Delinquencies 0.91% 0.95% 1.09% 1.12% 1.36%
60+ Days
Past Due
Delinquencies $ 7,795 $ 8,195 $ 9,230 $ 9,156 $ 10,735
Loans
30+ Days
Past Due
Delinquencies 7.74% 3.03% 4.24% 7.62% 6.87%
30+ Days
Past Due
Delinquencies $ 715 $ 426 $ 704 $ 1,265 $ 995
60+ Days
Past Due
Delinquencies 1.69% 1.23% 1.79% 3.20% 4.04%
60+ Days
Past Due
Delinquencies $ 156 $ 173 $ 297 $ 531 $ 585
Factoring
Receivables
30+ Days
Past Due
Delinquencies 1.01% 70.00% 0.00% 0.00% 0.00%
30+ Days
Past Due
Delinquencies $ 1 $ 21 $ 0 $ 0 $ 0
60+ Days
Past Due
Delinquencies 0.00% 30.00% 0.00% 0.00% 0.00%
60+ Days
Past Due
Delinquencies $ 0 $ 9 $ 0 $ 0 $ 0
Net Charge-
offs - Leasing $ 3,351 $ 4,680 $ 5,289 $ 5,448 $ 6,653
% on Average
Net Investment
in Leases
Annualized 1.85% 2.55% 2.90% 3.06% 3.85%
Net Charge-offs -
Other Finance
Receivables $ 49 $ 122 $ 631 $ 283 $ 483
% on Average
Other Finance
Receivables
Annualized 2.34% 4.17% 16.58% 6.62% 12.44%
Allowance for
Credit Losses $ 9,395 $ 10,988 $ 12,074 $ 12,873 $ 14,339
% of 60+
Delinquencies 118.16% 131.17% 126.73% 132.89% 126.67%
90+ Day
Delinquencies
(Non-earning
total finance
receivables) $ 3,438 $ 3,695 $ 3,940 $ 4,704 $ 5,370
Balance Sheet:
Assets
Investment in
Leases and
Loans $738,275 $749,543 $739,393 $719,873 $693,626
Initial Direct
Costs and Fees 27,048 27,383 26,216 24,517 22,808
Reserve for
Credit Losses (9,395) (10,988) (12,074) (12,873) (14,339)
Net Investment
in Leases
and Loans $755,928 $765,938 $753,535 $731,427 $702,095
Cash and Cash
Equivalents 10,964 34,347 24,089 36,798 17,151
Restricted Cash 68,634 141,070 64,894 65,136 64,294
Other Assets 16,031 18,299 30,315 22,216 20,378
Total Assets $851,557 $959,654 $872,833 $855,577 $803,918
Liabilities
Total Debt $659,561 $773,085 $680,256 $618,330 $565,914
Deposits $ 0 $ 0 $ 0 $ 43,618 $ 47,172
Other
Liabilities 41,563 36,424 44,975 41,234 38,383
Total
Liabilities $701,124 $809,509 $725,231 $703,182 $651,469
Stockholders'
Equity
Common Stock $ 123 $ 122 $ 122 $ 122 $ 122
Paid-in
Capital, net 85,638 84,422 83,792 83,319 83,661
Other
Comprehensive
Income (1,006) (3,130) (6,402) (2,836) (2,182)
Retained
Earnings 65,678 68,731 70,090 71,790 70,848
Total
Stockholders'
Equity $150,433 $150,145 $147,602 $152,395 $152,449
Total
Liabilities
and
Stockholders'
Equity $851,557 $959,654 $872,833 $855,577 $803,918
Capital and
Leverage:
Tangible Equity $150,433 $150,145 $147,602 $152,395 $152,449
Debt to
Tangible Equity 4.38 5.15 4.61 4.34 4.02
Equity to Assets 17.67% 15.65% 16.91% 17.81% 18.96%
Expense Ratios:
Salaries and
Benefits
Expense $ 5,257 $ 5,243 $ 5,870 $ 6,344 $ 5,620
Salaries and
Benefits
Expense
Annualized %
of Avg.
Fin. Recbl. 2.87% 2.81% 3.15% 3.47% 3.18%
Total personnel
end of quarter 331 357 354 291 286
General and
Administrative
Expense $ 3,447 $ 3,553 $ 4,303 $ 3,994 $ 3,333
General and
Administrative
Expense
Annualized %
of Avg.
Fin. Recbl. 1.88% 1.91% 2.31% 2.19% 1.89%
Efficiency
Ratio 41.06% 42.41% 50.71% 52.25% 45.13%
Net Income:
Net Income
(Loss) $ 5,028 $ 3,053 $ 1,359 $ 1,700 $ (941)
Annualized
Performance
Measures:
Return on
Average Assets 2.38% 1.25% 0.60% 0.79% (0.46)%
Return on
Average
Stockholders'
Equity 13.49% 8.10% 3.66% 4.50% (2.47)%
Per Share Data:
Number of
Shares -
Basic 12,155,152 12,138,824 12,033,523 11,987,220 11,843,300
Basic
Earnings
(Loss) per
Share $ 0.41 $ 0.25 $ 0.11 $ 0.14 $ (0.08)
Number of
Shares -
Diluted 12,355,484 12,283,142 12,133,159 12,061,843 11,843,300
Diluted
Earnings
(Loss) per
Share $ 0.41 $ 0.25 $ 0.11 $ 0.14 $ (0.08)
Net investment in total finance receivables includes net investment
in direct financing leases, loans, and factoring receivables.