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.