* Strong capital position, equity to assets leverage ratio of 19.1% * Total risk-based capital of 22.86% * Pricing on new originations improved 111 basis points year-over-year * Completed modification of warehouse facilities * Converted to a Bank Holding Company
MOUNT LAUREL, N.J., May 7, 2009 (GLOBE NEWSWIRE) -- Marlin Business Services Corp. (Nasdaq:MRLN) today reported a first quarter 2009 GAAP net loss of $879,000 or $0.08 per diluted share and net loss on an adjusted basis of $88,000 or $0.01 per share. Included in net income is an after-tax severance charge of $300,000 related to a previously announced workforce reduction. Excluding this charge, net loss for the first quarter ended March 31, 2009 is $579,000 and net income on an adjusted basis is $212,000.
"This past quarter was extremely difficult for the economy and the capital markets and I am quite pleased with the steps we have taken to manage through this challenging period and position ourselves for the future," said Daniel P. Dyer, Marlin's CEO. "These results demonstrate clearly the resiliency and strength of our business model during even the most difficult of times. Our capital position remains very strong and is a significant source of financial strength to Marlin Business Bank and our lenders. On the funding side we continue our efforts working with the FDIC toward a final decision on our order modification request to grow Marlin Business Bank," said Dyer.
For the first quarter of 2009, the average net investment in leases was $634.3 million, compared to $667.2 million for the fourth quarter of 2008 and $730.0 million for the first quarter of 2008.
Reflecting management's deliberate actions to maintain conservative underwriting standards, first quarter 2009 lease production was $36.3 million, based on initial equipment cost, compared to $58.1 million for the fourth quarter of 2008 and $70.6 million for the first quarter of 2008. Approval rates on lease originations were 41% for the first quarter of 2009, versus 47% for the fourth quarter of 2008 and 50% for the first quarter a year ago. Direct sales volume decreased 37% year-over-year, while indirect sales volume decreased by 87%. The lower lease production and approval rates in the first quarter reflect our decision to adopt more restrictive credit standards during a weakened economic environment in order to closely manage growth.
The average implicit yield on new lease production continues to improve and was 14.40% in the quarter, up 64 basis points from the fourth quarter of 2008 and up 111 basis points from the first quarter of 2008.
The net interest and fee margin for the quarter ended March 31, 2009 was 10.08%, up 6 basis points from the fourth quarter of 2008 and up 45 basis points from 9.63% for the quarter ended March 31, 2008.
Fee income at 3.12% for the quarter ended March 31, 2009 was flat from fourth quarter 2008 and up 31 basis points from 2.81% as of the quarter ended March 31, 2008. Certain fee income categories have been reclassed to "Other Income" to conform to the Securities and Exchange Commission's Regulation S-X, Article 9, applicable to bank holding companies. The impact of this reclassification on fee income was a reduction of 20 basis points for the quarter ended March 31, 2009, 19 basis points for the fourth quarter 2008 and 19 basis points for the first quarter of 2008.
Interest expense as a percentage of average total finance receivables was 4.86% in the first quarter of 2009 versus 4.99% in the fourth quarter of 2008. The decrease was primarily due a shift in mix from long-term borrowings to less expensive short-term borrowings and deposits.
Leases over 30 days delinquent were 4.87% as of March 31, 2009, an increase compared to 3.72% at December 31, 2008. On a dollar basis, leases in the 30+ delinquency category totaled $33.9 million at March 31, 2009, up from $28.1 million at December 31, 2008 and $25.8 million at March 31, 2008. Leases over 60 days delinquent were 2.34% as of March 31, 2009, an increase from 1.53% as of December 31, 2008 and 1.09% at March 31, 2008. On a dollar basis, leases over 60 days delinquent totaled $16.3 million at March 31, 2009, an increase compared to $11.6 million at December 31, 2008 and $9.2 million at March 31, 2008.
Net lease charge-offs in the first quarter were $8.0 million, or 5.03% of average net investment in leases on an annualized basis, compared to $7.9 million or 4.71% of average net investment in leases on an annualized basis during fourth quarter 2008.
The provision for credit losses was $8.7 million for the quarter ended March 31, 2009, down from $9.4 million for the fourth quarter of 2008. The provision reflects management's estimate of future charge-offs inherent in the portfolio. The allowance as a percentage of total finance receivables increased to 2.47% at March 31, 2009 versus 2.30% at December 31, 2008 and 1.63% at March 31, 2008.
A $1.3 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. $188,000 of the total loss recognized in the quarter was unrealized.
Salaries and benefits were $5.9 million for the first quarter ended March 31, 2009, up from $5.1 million for the fourth quarter of 2008. The increase is primarily due to seasonal withholding taxes and $500,000 of severance costs related to a previously announced reduction in work force occurring in the first quarter of 2009. The total annualized pretax savings that are expected to result from the reductions are estimated to be approximately $2.3 million.
The current limitation on asset growth at Marlin Business Bank has led to lower lease originations and an overall decline in our portfolio size, which has required us to further proactively lower expenses in the second quarter of 2009, including reducing our workforce and closing our satellite office in Denver. A total of approximately 53 employees company-wide were affected as a result of this recent staff reduction. We expect to incur pretax severance costs in the quarter ended June 30, 2009 of approximately $700,000 related to this staff reduction. The total annualized pretax salary cost savings that are expected to result from this reduction are estimated to be approximately $2.8 million. Although we believe that these estimates are appropriate and reasonable based on available information, actual results could differ from these estimates.
General and administrative expenses were $3.4 million for the first quarter ended March 31, 2009, compared to $3.6 million for the fourth quarter 2008. The decrease from the fourth quarter is primarily related to reductions in discretionary spending.
During the first quarter the Company repurchased 88,894 shares under the stock repurchase program announced in November 2007.
On January 13, 2009, the Company officially converted its Utah Industrial Bank to a state-chartered commercial bank and became a member of the Federal Reserve System. At that time Marlin Business Services Corp. became a bank holding company. Through March 31, 2009, the Bank has funded $93.7 million of leases and loans through its initial capitalization of $12 million and its issuance of $78.1 million in FDIC insured deposits at an average borrowing rate of 4.06%. First quarter 2009 average deposit outstandings were $67.2 million at a weighted average interest rate of 3.86%.
Marlin Business Bank is currently seeking a modification to its existing FDIC order issued when it became an industrial bank. If the FDIC approves the modification request, then Marlin Business Services Corp. intends to inject additional capital into Marlin Business Bank and begin executing against the business plan approved by the FRB.
In conjunction with this release, static pool loss statistics and vintage delinquency analysis 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, May 8, 2009 at 9:00 a.m. ET to discuss our first quarter 2009 results. If you wish to participate, please call 877-856-1969 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 90 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
(Unaudited)
March 31, December 31,
--------- ------------
2009 2008
------------ ------------
(Dollars in thousands,
except per-share data)
ASSETS
Cash and due from banks $ 1,704 $ 1,604
Interest-earning deposits with banks 48,762 38,666
------------ ------------
Total cash and cash equivalents 50,466 40,270
Restricted interest-earning deposits with
banks 71,382 66,212
Net investment in leases and loans 622,319 670,494
Property and equipment, net 2,927 2,961
Property tax receivables 7,493 3,120
Other assets 10,437 12,759
------------ ------------
Total assets $ 765,024 $ 795,816
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 116,314 $ 101,923
Long-term borrowings 383,538 441,385
Deposits 74,853 63,385
Other liabilities:
Fair value of cash flow hedge derivatives 11,716 11,528
Sales and property taxes payable 10,430 6,540
Accounts payable and accrued expenses 7,750 7,926
Net deferred income tax liability 13,936 15,673
------------ ------------
Total liabilities 618,537 648,360
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.01 par value; 75,000,000
shares authorized; 12,615,840 and
12,246,405 shares issued and outstanding,
respectively 126 122
Preferred Stock, $0.01 par value; 5,000,000
shares authorized; none issued -- --
Additional paid-in capital 83,566 83,671
Stock subscription receivable (5) (5)
Accumulated other comprehensive income 178 167
Retained earnings 62,622 63,501
------------ ------------
Total stockholders' equity 146,487 147,456
------------ ------------
Total liabilities and stockholders'
equity $ 765,024 $ 795,816
============ ============
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
----------------------
2009 2008
---- ----
(Dollars in thousands,
except per-share data)
Interest income $ 19,072 $ 22,953
Fee income 5,034 5,235
---------- ----------
Interest and fee income 24,106 28,188
Interest expense 7,832 10,247
---------- ----------
Net interest and fee income 16,274 17,941
Provision for credit losses 8,748 7,006
---------- ----------
Net interest and fee income after
provision for credit losses 7,526 10,935
---------- ----------
Other income:
Insurance income 1,543 1,562
Loss on derivatives and hedging activities (1,307) --
Other income 407 558
---------- ----------
Other income 643 2,120
---------- ----------
Other expense:
Salaries and benefits 5,885 5,870
General and administrative 3,399 4,303
Financing related costs 255 366
---------- ----------
Other expense 9,539 10,539
---------- ----------
Income (loss) before income taxes (1,370) 2,516
Income tax (benefit) expense (491) 1,157
---------- ----------
Net income (loss) $ (879) $ 1,359
========== ==========
Basic earnings (loss) per share $ (0.08) $ 0.11
Diluted earnings (loss) per share $ (0.08) $ 0.11
Weighted average shares used in computing
basic earnings (loss) per share 11,677,264 12,191,991
Weighted average shares used in computing
diluted earnings (loss) per share 11,677,264 12,267,071
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Net Income on an Adjusted Basis Reconciliation to GAAP Results
Three Months Ended
March 31,
----------------------
2009 2008
---- ----
(Dollars in thousands)
(Unaudited)
Net income (loss) as reported $ (879) $ 1,359
---------- ----------
Deduct:
Loss on derivatives and hedging activities (1,307) --
Tax effect 516 --
---------- ----------
Loss on derivatives and hedging activities,
net of tax (791) --
---------- ----------
Net Income (Loss) on an Adjusted Basis $ (88) $ 1,359
========== ==========
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
excludes the volatility resulting from derivatives activities
subsequent to discontinuing hedge accounting in mid-2008.
SUPPLEMENTAL QUARTERLY DATA
(Dollars in thousands, except share amounts)
(Unaudited)
Quarter Ended: 3/31/2008 6/30/2008 9/30/2008 12/31/2008 3/31/2009
-------------- --------- --------- --------- ---------- ---------
New Asset
Production:
# of Sales Reps 108 92 91 86 58
# of Leases 6,836 6,276 5,837 5,558 3,811
Leased
Equipment
Volume $70,550 $62,467 $59,005 $58,098 $36,280
Approval
Percentage 50% 49% 49% 47% 41%
Average Monthly
Sources 1,091 1,047 981 936 692
Implicit Yield
on New Leases 13.29% 13.90% 13.87% 13.76% 14.40%
Net Interest
and Fee
Margin:
Interest Income
Yield 12.32% 11.98% 11.92% 11.88% 11.82%
Fee Income
Yield 2.81% 2.88% 3.14% 3.13% 3.12%
Interest and
Fee Income
Yield 15.13% 14.86% 15.06% 15.01% 14.94%
Cost of Funds 5.50% 5.13% 4.98% 4.99% 4.86%
Net Interest
and Fee Margin 9.63% 9.73% 10.08% 10.02% 10.08%
Average Total
Finance
Receivables $745,175 $730,267 $706,508 $680,645 $645,570
Average Net
Investment in
Leases $729,951 $713,171 $690,973 $667,232 $634,314
End of Period
Net Investment
in Leases $737,301 $715,677 $688,488 $659,042 $613,159
End of Period
Loans $16,234 $15,750 $13,607 $11,452 $9,160
Total Loan and
Lease Sales
Personnel 117 95 94 88 58
Portfolio Asset
Quality:
Total Finance
Receivables
30+ Days Past
Due
Delinquencies 3.07% 3.13% 3.58% 3.81% 4.94%
30+ Days Past
Due
Delinquencies $26,535 $26,195 $28,734 $29,216 $34,910
60+ Days Past
Due
Delinquencies 1.10% 1.16% 1.41% 1.59% 2.38%
60+ Days Past
Due
Delinquencies $9,527 $9,687 $11,320 $12,203 $16,824
Leasing
30+ Days Past
Due
Delinquencies 3.05% 3.04% 3.52% 3.72% 4.87%
30+ Days Past
Due
Delinquencies $25,831 $24,930 $27,739 $28,113 $33,895
60+ Days Past
Due
Delinquencies 1.09% 1.12% 1.36% 1.53% 2.34%
60+ Days Past
Due
Delinquencies $9,230 $9,156 $10,735 $11,559 $16,281
Loans
30+ Days Past
Due
Delinquencies 4.24% 7.62% 6.87% 8.91% 10.04%
30+ Days Past
Due
Delinquencies $704 $1,265 $995 $1,103 $1,015
60+ Days Past
Due
Delinquencies 1.79% 3.20% 4.04% 5.20% 5.37%
60+ Days Past
Due
Delinquencies $297 $531 $585 $644 $543
Net Charge-offs
- Leasing $5,289 $5,448 $6,653 $7,862 $7,973
% on Average
Net Investment
in Leases
Annualized 2.90% 3.06% 3.85% 4.71% 5.03%
Net Charge-offs
- Other Finance
Receivables $631 $283 $483 $550 $749
% on Average
Other Finance
Receivables
Annualized 16.58% 6.62% 12.44% 16.40% 26.62%
Allowance for
Credit Losses $12,074 $12,873 $14,339 $15,283 $15,309
% of 60+
Delinquencies 126.73% 132.89% 126.67% 125.24% 91.00%
90+ Day
Delinquencies
(Non-earning
total finance
receivables) $3,940 $4,704 $5,370 $6,380 $8,263
Balance Sheet:
Assets
Investment in
Leases and
Loans $739,393 $719,873 $693,626 $664,761 $618,988
Initial Direct
Costs and Fees 26,216 24,517 22,808 21,016 18,640
Reserve for
Credit Losses (12,074) (12,873) (14,339) (15,283) (15,309)
Net Investment
in Leases and
Loans $753,535 $731,427 $702,095 $670,494 $622,319
Cash and Cash
Equivalents 32,237 44,981 25,367 40,270 50,466
Restricted Cash 64,894 65,136 64,294 66,212 71,382
Other Assets 22,167 14,033 12,162 18,840 20,857
Total Assets $872,833 $855,577 $803,918 $795,816 $765,024
Liabilities
Total Debt $680,256 $618,330 $565,914 $543,308 $499,852
Deposits $0 $43,618 $47,172 $63,385 $74,853
Other
Liabilities 44,975 41,234 38,383 41,667 43,832
Total
Liabilities $725,231 $703,182 $651,469 $648,360 $618,537
Stockholders'
Equity
Common Stock $122 $122 $122 $122 $126
Paid-in
Capital, net 83,792 83,319 83,661 83,666 83,561
Other
Comprehensive
Income (6,402) (2,836) (2,182) 167 178
Retained
Earnings 70,090 71,790 70,848 63,501 62,622
Total
Stockholders'
Equity $147,602 $152,395 $152,449 $147,456 $146,487
Total
Liabilities and
Stockholders'
Equity $872,833 $855,577 $803,918 $795,816 $765,024
Capital and
Leverage:
Tangible Equity $147,602 $152,395 $152,449 $147,456 $146,487
Debt to
Tangible Equity 4.61 4.34 4.02 4.11 3.92
Equity to
Assets 16.91% 17.81% 18.96% 18.53% 19.15%
Regulatory
Capital
Ratios:
Tier 1 Leverage
Capital n/a n/a n/a n/a 19.30%
Tier 1 Risk-
based Capital n/a n/a n/a n/a 21.60%
Total Risk-
based Capital n/a n/a n/a n/a 22.86%
Expense Ratios:
Salaries and
Benefits
Expense $5,870 $6,344 $5,620 $5,082 $5,885
Salaries and
Benefits
Expense
Annualized %
of Avg. Fin
Recbl. 3.15% 3.47% 3.18% 2.99% 3.65%
Total personnel
end of quarter 354 291 286 284 230
General and
Administrative
Expense $4,303 $3,994 $3,333 $3,611 $3,399
General and
Administrative
Expense
Annualized %
of Avg. Fin
Recbl. 2.31% 2.19% 1.89% 2.12% 2.11%
Efficiency Ratio 50.71% 52.25% 45.13% 45.67% 50.94%
Net Income:
Net Income
(Loss) $1,359 $1,700 ($941) ($7,348) ($879)
Annualized
Performance
Measures:
Return on
Average Assets 0.60% 0.79% -0.46% -3.71% -0.45%
Return on
Average
Stockholders'
Equity 3.66% 4.50% -2.47% -19.64% -2.39%
Per Share Data:
Number of
Shares -
Basic 12,191,991 12,185,532 11,843,300 11,799,939 11,677,264
Basic Earnings
(Loss) per
Share $0.11 $0.14 ($0.08) ($0.62) ($0.08)
Number of
Shares -
Diluted 12,267,071 12,239,736 11,843,300 11,799,939 11,677,264
Diluted
Earnings
(Loss) per
Share $0.11 $0.14 ($0.08) ($0.62) ($0.08)
Net investment in total finance receivables includes net investment
in direct financing leases and loans.