Exhibit 99.1
Marlin Business Services Corp. Reports Fourth Quarter
And Full Year 2003 Operating Results
MOUNT LAUREL, N.J.--(BUSINESS WIRE)--Feb. 4, 2004--Marlin Business
Services Corp. (NASDAQ:MRLN) today reported net income attributable to
common shareholders of $1.0 million, or $0.14 per diluted share, for
the quarter ended December 31, 2003 and $1.2 million or $0.35 per
diluted share for the year then ended pursuant to U.S. Generally
Accepted Accounting Principles (GAAP).
Marlin completed its initial public offering of common stock (IPO)
on November 12, 2003. Certain non-recurring expenses and preferred
dividends were recorded in 2003 and in prior periods which reduced net
income attributable to common shareholders. A reconciliation between
net income attributable to common shareholders on a GAAP basis and pro
forma net income is provided in a table immediately following the
Consolidated Statements of Operations. These charges ended in
conjunction with the November IPO and associated corporate
reorganization and therefore will not affect future reporting periods.
As a result, we believe the pro forma numbers present a clearer and
more comparable basis to review the company's fundamental financial
performance. Highlights for the quarter and year ended December 31,
2003 include:
-- For the quarter ended December 31, 2003, pro forma net income
was $2.6 million, a 73% increase over the pro forma net income
of $1.5 million for the quarter ended December 31, 2002.
-- Pro forma diluted earnings per share were $0.26 per diluted
share in the fourth quarter of 2003, compared to $0.20 per
diluted share in the quarter ended December 31, 2002.
-- For the year ended December 31, 2003, pro forma net income was
$9.2 million, a 70% increase over the pro forma net income of
$5.4 million for the year ended December 31, 2002.
-- Pro forma diluted earnings per share was $1.09 per diluted
share for the year ended December 31, 2003, an increase of 53%
compared to $0.71 per diluted share for the year ended
December 31, 2002.
-- Net investment in leases grew to $421.7 million at year-end
2003, a $84.3 million or 25% increase over year-end 2002.
Based on initial equipment cost, lease production grew 19% to
$242 million in 2003 from $203 million in 2002.
"2003 was a milestone year at Marlin," said Dan Dyer, Chairman and
CEO of the company. "The completion of our IPO capped another very
successful year of operations. We delivered strong asset growth while
maintaining solid asset quality results. Portfolio growth, controlled
spending, combined with a wider net interest margin led to strong
growth in our core earnings this past year. Our market presence as a
leading national provider of small-ticket lease financing solutions to
businesses continues to grow."
Asset Origination
-- Based on initial equipment cost, lease production was $66.6
million in the fourth quarter of 2003 compared to $65.4
million in the third quarter of 2003 and $53.0 million in the
fourth quarter of 2002.
-- Our end user customer base grew to more than 66,000 as of
year-end 2003 compared to 53,500 at year-end 2002.
Credit Quality
-- Net charge-offs totaled $1.8 million for the quarters ended
December 31, 2003 and September 30, 2003. The provision for
credit losses was $2.1 million for the quarters ended December
31, 2003 and September 30, 2003.
-- On an annualized basis, net charge-offs were 1.82% of net
investment in leases during the fourth quarter of 2003
compared to 1.93% for the third quarter of 2003. The provision
represented an annualized 2.14% of average net investment in
leases in the fourth quarter compared to 2.20% for the third
quarter of 2003.
-- As of December 31, 2003, 0.74% of our total lease portfolio
was 60 or more days delinquent and 0.64% as of September 30,
2003, an improvement from the 0.86% reported as of December
31, 2002.
-- Allowance for credit losses was $5.0 million as of December
31, 2003, a $300,000 increase from $4.7 million as of
September 30, 2003. Allowance for credit losses as a
percentage of net investment in leases was 1.22% at December
31, 2003 and September 30, 2003.
-- In conjunction with this release, static pool loss statistics
have been added as supplemental information on the investor
relations section of our website at www.marlincorp.com.
Net Interest and Fee Margin and Cost of Funds
-- The net interest and fee margin was 10.71% for the quarter
ended December 31, 2003, an improvement of 25 basis points
compared to 10.46% for the quarter ended September 30, 2003.
-- The implicit yield on new business was 13.68% for the quarter
ended December 31, 2003 compared to 13.80% for the quarter
ended September 30, 2003.
-- The weighted cost of funds was 4.81% for the quarter ended
December 31, 2003, a 31 basis point improvement from the 5.12%
for the quarter ended September 30, 2003. During the fourth
quarter, the company began to borrow again under its lower
cost warehouse lines of credit, following its 2003
asset-backed securitization completed in the third quarter.
Usage of the warehouse lines and the payoff in November of the
11.0% subordinated debt resulted in lower blended borrowing
costs.
Operating Expenses
-- Salaries and benefits expense was $2.8 million in the fourth
quarter of 2003 compared to $2.6 million in the third quarter
of 2003. Employee headcount increased by 10, from 227 at
September 30, 2003 to 237 at December 31, 2003. Salaries and
benefits expense was 2.8% as an annualized percentage of
average net investment in leases for both the third and fourth
quarters of 2003.
-- Other general and administrative expenses were $2.5 million
for the fourth quarter 2003, an increase of $676,000 from $1.8
million for the third quarter of 2003. The increase was
primarily the result of higher legal fees incurred and certain
costs associated with becoming a public company. Other general
and administrative expenses as an annualized percentage of
average net investment in leases were 2.46% for the fourth
quarter of 2003, an increase of 56 basis points from 1.90% for
the third quarter of 2003.
Insurance and other Income
-- Insurance and other income was $934,000 for the fourth quarter
2003, an increase of 23% from $757,000 for the same period in
2002.
Funding and Liquidity
-- In November, we closed on the sale of 5,060,000 shares of our
common stock in our IPO. Of these shares, a total of 3,581,255
shares were sold by the company and 1,478,745 shares were sold
by selling shareholders. The initial public offering price was
$14.00 per share resulting in net proceeds to us, after
payment of underwriting discounts and commissions but before
other offering costs, of approximately $46.6 million. We did
not receive any proceeds from the shares sold by the selling
shareholders. We used the net proceeds from the IPO as
follows: (i) approximately $10.1 million was used to repay all
of our outstanding 11% subordinated debt and all accrued
interest thereon; (ii) approximately $6.0 million was used to
pay accrued dividends on preferred stock which converted to
common stock at the time of the IPO; (iii) approximately $2.2
million was used to pay expenses incurred in connection with
the IPO. The remaining $28.3 million will be used for general
corporate and liquidity purposes.
Conference Call and Webcast
We will host a conference call on Thursday, February 5, 2004 at
2:00 p.m. EST to discuss our fourth quarter and full year 2003
results. If you wish to participate, please call (877) 407-8031
(International participants please use (201)-689-8031) approximately
10 minutes in advance of the call time. The meeting number is
741982404. 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 solutions primarily to small businesses. The
company's principal operating subsidiary, Marlin Leasing Corporation,
finances over 60 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. Headquartered in Mount Laurel, NJ, Marlin has regional offices
in or near Atlanta, Chicago, Denver and Philadelphia. For more
information, visit 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 424(b)(1) prospectus filed
with the Securities and Exchange Commission on November 12, 2003. We
are under no obligation to (and expressly disclaims 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
(in thousands, except per share amounts)
December December
31, 31,
2003 2002
-------- --------
Assets
Cash and cash equivalents $29,435 $6,354
Restricted cash 15,672 12,582
Net investment in direct financing leases 421,698 337,434
Property and equipment, net 2,413 2,049
Other assets 5,643 5,749
-------- --------
Total assets $474,861 $364,168
======== ========
Liabilities and Shareholders' Equity
Debt and secured borrowings $378,900 $315,361
Subordinated debt -- 9,520
Other liabilities:
Lease obligation payable 630 628
Accounts payable and accrued expenses 9,100 6,630
Warrants to purchase Class A Common Stock -- 1,422
Deferred income tax liability 10,799 5,232
-------- --------
Total liabilities 399,429 338,793
Redeemable convertible preferred stock -- 21,171
Shareholders' equity:
Common Stock, $0.01 par value; 75,000 shares
authorized; 11,214 and 1,623 shares issued
and outstanding 112 16
Preferred Stock, $0.01 par value; 5,000
shares authorized; none issued and
outstanding. -- --
Additional paid-in capital 71,918 1,842
Stock subscription receivable (213) (147)
Deferred compensation (50) --
Retained earnings 3,665 2,493
-------- --------
Total shareholders' equity 75,432 4,204
-------- --------
Total liabilities and shareholders' equity $474,861 $364,168
======== ========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
--------------------- ---------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Income:
Interest and fee income $ 15,511 $ 12,627 $ 56,950 $ 46,664
Interest expense 4,810 4,761 18,069 17,899
---------- ---------- ---------- ----------
Net interest and fee
income 10,701 7,866 38,881 28,765
Provision for credit
losses 2,136 1,683 7,965 6,850
---------- ---------- ---------- ----------
Net interest and fee
income after
provision for credit
losses 8,565 6,183 30,916 21,915
Insurance and other
income 934 757 3,423 2,725
---------- ---------- ---------- ----------
Operating income 9,499 6,940 34,339 24,640
Salaries and benefits 2,790 2,398 10,273 8,109
General and
administrative 2,458 1,669 7,745 5,744
Financing related costs 452 385 1,604 1,618
Change in fair value of
warrants 692 144 5,723 908
---------- ---------- ---------- ----------
Income before income
taxes 3,107 2,344 8,994 8,261
Income taxes 1,503 1,012 5,816 3,731
---------- ---------- ---------- ----------
Net Income 1,604 1,332 3,178 4,530
Preferred stock dividends 566 435 2,006 1,781
---------- ---------- ---------- ----------
Net income attributable to
common shareholders $ 1,038 $ 897 $ 1,172 $ 2,749
========== ========== ========== ==========
Basic earnings per
share: $ 0.15 $ 0.56 $ 0.39 $ 1.61
========== ========== ========== ==========
Diluted earnings per
share: $ 0.14 $ 0.19 $ 0.35 $ 0.63
========== ========== ========== ==========
Shares used in computing
basic earnings per share: 6,886,694 1,595,797 3,001,754 1,703,820
========== ========== ========== ==========
Shares used in computing
diluted earnings per
share: 7,355,133 7,045,769 3,340,968 7,138,232
========== ========== ========== ==========
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Pro Forma Financial Information
(dollars in thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
---------------------- ------------------
2003 2002 2003 2002
--------- --------- -------- --------
Net income attributable
to common shareholders
per GAAP $ 1,038 $ 897 $ 1,172 $ 2,749
Change in fair value
of warrants 692 144 5,723 908
Preferred stock
dividends 566 435 2,006 1,781
Unamortized discount
expensed on payoff
of subordinated
debt, net of tax 270 -- 270 --
Pro forma Net Income $ 2,566 $ 1,476 $ 9,171 $ 5,438
Pro forma average diluted
shares outstanding 10,022,957 7,553,769 8,400,073 7,646,309
Pro forma diluted
earnings per share $ 0.26 $ 0.20 $ 1.09 $ 0.71
In conjunction with its November IPO, Marlin's capital structure
was simplified into one class of outstanding common stock. All
previously outstanding warrants and convertible preferred stock were
exercised and converted to common stock. Following the completion of
the IPO, the company has 11,213,610 shares of common stock
outstanding. Prior to the IPO, warrants outstanding were recorded as a
liability and periodically marked to their fair market value with
increases in value causing current period expense. This non-cash
expense was $692,000 for the quarter ended December 31, 2003 and $5.7
million for the year ended 2003. Upon the exercise of the warrants to
common stock, the warrant liability was reclassified to shareholders
equity. Similarly, all outstanding convertible preferred stock
converted to common stock at the time of the IPO. The pro forma
adjustments reflect the exercise of the warrants and conversion of the
preferred stock and the add back of the expenses and dividends
associated with each in the pre-IPO periods. Pursuant to GAAP, these
adjustments are anti-dilutive and, therefore, not reported in diluted
earnings per share calculations. In addition, the company paid off $10
million of subordinated debt outstanding in accordance with it
reorganization resulting in the recapture of $270,000 of unamortized
discount and transaction costs net of tax. This one time expense has
been added back to pro forma earnings for 2003.
SUPPLEMENTAL QUARTERLY DATA - 2003
(dollars in thousands,
except per share amounts) Quarter Ended:
3/31/03 6/30/03 9/30/03 12/31/03
-------------------------------------
New Asset Production:
# of Sales Reps 71 69 81 84
# of Leases 6,695 7,694 7,925 7,944
Equipment Volume $ 51,008 $ 59,262 $ 65,414 $ 66,594
Average monthly sources 1,040 1,101 1,133 1,188
Implicit Yield on New Business 14.44% 14.23% 13.80% 13.68%
Interest income yield 12.66% 12.68% 12.53% 12.43%
Fee income yield 2.87% 2.99% 3.05% 3.09%
Interest and fee income yield 15.53% 15.67% 15.58% 15.52%
Cost of funds 5.14% 4.71% 5.12% 4.81%
Net interest and fee margin 10.40% 10.96% 10.46% 10.71%
Portfolio Asset Quality:
60+ Days Past Due
Delinquencies % 0.64% 0.64% 0.64% 0.74%
60+ Days Past Due
Delinquencies $ $ 2,590 $ 2,781 $ 2,961 $ 3,629
Net Charge-offs $ 1,770 $ 1,514 $ 1,808 $ 1,822
% on Average Net Investment in
Leases annualized 2.11% 1.72% 1.93% 1.82%
Allowance for Credit Losses $ 4,047 $ 4,451 $ 4,703 $ 5,016
% of 60+ delinquencies 156.25% 160.05% 158.83% 138.22%
Balance Sheet
Assets
Investment in Direct Financing
Leases $342,988 $364,235 $387,696 $411,989
Initial direct costs and fees 12,585 13,131 13,846 14,725
Reserve for Credit Losses (4,047) (4,451) (4,703) (5,016)
Net Investment in Leases $351,526 $372,915 $396,839 $421,698
Cash and Cash Equivalents 5,704 6,294 15,837 29,435
Restricted Cash 11,598 65,446 15,081 15,672
Other Assets 7,491 8,286 8,493 8,056
Total Assets $376,319 $452,941 $436,250 $474,861
Liabilities
Total Debt $333,352 $402,535 $380,839 $378,900
Other Liabilities 17,170 24,147 28,219 20,528
Total Liabilities $350,522 $426,682 $409,058 $399,429
Preferred stock $ 21,641 $ 22,123 $ 22,611 $ -
SUPPLEMENTAL QUARTERLY DATA - 2003 - continued
(dollars in thousands,
except per share
amounts) Quarter Ended:
3/31/03 6/30/03 9/30/03 12/31/03
--------------------------------------------
Shareholders' Equity
Common Stock $ 17 $ 17 $ 17 $ 112
Paid-in Capital 1,846 1,862 1,935 71,656
Retained Earnings 2,294 2,258 2,629 3,665
Total Shareholders'
equity $ 4,157 $ 4,137 $ 4,581 $ 75,432
Total Liabilities and
Shareholders' Equity $ 376,319 $ 452,942 $ 436,250 $ 474,861
Capital and Leverage:
Tangible Equity
(includes sub debt &
preferred stock) $ 35,798 $ 36,260 $ 37,192 $ 75,432
Debt to Tangible
Equity 9.03 10.83 9.97 5.02
Expense Ratios:
Salaries and benefits
expense $ 2,336 $ 2,515 $ 2,631 $ 2,790
Salaries and benefits
expense annualized %
of avg. net
investment 2.79% 2.86% 2.80% 2.79%
General and
administrative
expense $ 1,578 $ 1,926 $ 1,782 $ 2,458
General and
administrative
expense annualized
% of avg. net
investment 1.88% 2.19% 1.90% 2.46%
Per Share Data:
Number of Shares -
Diluted 7,297,591 7,394,277 7,449,501 7,355,133
EPS- Diluted $ 0.04 $ 0.06 $ 0.12 $ 0.14
Pro forma number of
Shares - Diluted (1) 7,868,591 7,965,277 8,020,501 10,022,957
Pro forma Diluted
Earnings per Share $ 0.26 $ 0.29 $ 0.28 $ 0.26
(1) Pro forma shares outstanding assume conversion of convertible
preferred stock and the exercise of warrants outstanding. The
preferred stock and warrants were exercised into common shares in
conjunction with the company's IPO in November 2003.
SUPPLEMENTAL QUARTERLY DATA - 2002
(dollars in thousands,
except per share amounts) Quarter Ended:
3/31/02 6/30/02 9/30/02 12/31/02
-------------------------------------
New Asset Production:
# of Sales Reps 58 56 67 67
# of Leases 5,876 6,511 6,417 6,560
Equipment Volume $ 44,363 $ 54,206 $ 51,828 $ 53,007
Average monthly sources 861 906 931 929
Implicit Yield on New Business 14.32% 14.16% 14.09% 14.17%
Interest income yield 13.42% 13.16% 13.07% 12.79%
Fee income yield 3.04% 3.28% 3.07% 2.99%
Interest and fee income yield 16.46% 16.44% 16.14% 15.78%
Cost of funds 6.43% 5.88% 6.59% 5.95%
Net interest and fee margin 10.03% 10.56% 9.55% 9.83%
Portfolio Asset Quality:
60+ Days Past Due
Delinquencies % 1.05% 0.66% 0.82% 0.86%
60+ Days Past Due
Delinquencies $ $ 3,354 $ 2,285 $ 3,034 $ 3,364
Net Charge-offs $ 1,638 $ 1,337 $ 1,475 $ 1,495
% on Average Net Investment in
Leases annualized 2.56% 1.93% 1.97% 1.87%
Allowance for Credit Losses $ 3,301 $ 3,608 $ 3,776 $ 3,965
% of 60+ delinquencies 98.42% 157.90% 124.46% 117.87%
Balance Sheet
Assets
Investment in Direct Financing
Leases $265,767 $290,454 $310,430 $328,971
Initial direct costs and fees 11,046 11,463 11,905 12,428
Reserve for Credit Losses (3,301) (3,608) (3,776) (3,965)
Net Investment in Leases $273,512 $298,309 $318,559 $337,434
Cash and Cash Equivalents 1,517 10,490 6,063 6,354
Restricted Cash 7,654 49,814 10,942 12,582
Other Assets 7,677 8,514 8,102 7,798
Total Assets $290,360 $367,127 $343,666 $364,168
Liabilities
Total Debt $261,122 $330,297 $307,071 $324,881
Other Liabilities 7,039 13,466 12,676 13,912
Total Liabilities $268,160 $343,764 $319,748 $338,793
Preferred stock $ 19,828 $ 20,276 $ 20,733 $ 21,171
SUPPLEMENTAL QUARTERLY DATA - 2002 - continued
(dollars in thousands,
except per share
amounts) Quarter Ended:
3/31/02 6/30/02 9/30/02 12/31/02
-------------------------------------------
Shareholders' Equity
Common Stock $ 19 $ 19 $ 16 $ 16
Paid-in Capital 2,099 2,104 1,574 1,695
Retained Earnings 254 965 1,596 2,493
Total Shareholders'
equity $ 2,371 $ 3,087 $ 3,186 $ 4,204
Total Liabilities and
Shareholders' Equity $ 290,360 $ 367,127 $ 343,666 $ 364,168
Capital and Leverage:
Tangible Equity
(includes sub debt &
preferred stock) $ 32,199 $ 33,364 $ 33,918 $ 35,375
Debt to Tangible
Equity 7.80 9.60 8.76 8.90
Expense Ratios:
Salaries and benefits
expense $ 1,766 $ 1,905 $ 2,040 $ 2,398
Salaries and benefits
expense annualized %
of avg. net
investment 2.76% 2.75% 2.72% 3.00%
General and
administrative
expense $ 1,244 $ 1,394 $ 1,437 $ 1,669
General and
administrative
expense annualized %
of avg. net
investment 1.94% 2.01% 1.92% 2.09%
Per Share Data:
Number of Shares -
Diluted 7,208,136 7,184,977 7,131,433 7,045,769
EPS- Diluted $ 0.13 $ 0.15 $ 0.15 $ 0.19
Pro forma number of
Shares - Diluted (1) 7,716,136 7,692,977 7,639,433 7,553,769
Pro forma Diluted
Earnings per Share $ 0.13 $ 0.20 $ 0.18 $ 0.20
(1) Pro forma shares outstanding assume conversion of convertible
preferred stock and the exercise of warrants outstanding. The
preferred stock and warrants were exercised into common shares in
conjunction with the company's IPO in November 2003.
CONTACT: Marlin Business Services Corp., Mount Laurel
Bruce Sickel, 888-479-9111 ext. 4108