Exhibit 99.1
MARLIN BUSINESS SERVICES CORP. REPORTS THIRD QUARTER 2006 EARNINGS
MOUNT LAUREL, N.J., Nov. 2 /PRNewswire-FirstCall/ -- Marlin Business
Services Corp. (Nasdaq: MRLN) today reported net income of $4.7 million for
the third quarter ended September 30, 2006, a 38% increase over $3.4 million
for the same period in 2005. Diluted net earnings per share was $0.39
compared with $0.29 for the same period in 2005. Net income in the third
quarter of 2005 was impacted by an after-tax charge of $756,000, or $0.06
diluted earnings per share, for expected losses related to Hurricane Katrina.
For the nine months ended September 30, 2006 net income was $14.8 million
compared to $11.9 million for the same period in 2005. Diluted net earnings per
share for the nine-month period ended September 30, 2006 was $1.22 compared to
$0.99 per diluted share reported for the same period in 2005. Excluding the
impact of adjustments related to Hurricane Katrina for both periods, net income
for the nine-month period ended September 30, 2006 would have been $14.2 million
compared to $12.6 million of net income for the nine- month period ended
September 30, 2005. Diluted earnings per share, excluding the impact of
Katrina-related adjustments, would have been $1.17 for the nine- month period
ended September 30, 2006 compared to $1.06 per diluted share for the third
quarter ended September 30, 2005.
"Along with reporting another solid quarter of results, we are excited to
announce two new financial products targeting the small business market," said
Daniel P. Dyer, Chairman and CEO of Marlin Business Services Corp. "The recent
launch of Factoring and our Business Capital Loan Product are natural extensions
to our core leasing business and Marlin's strategy of serving the financing
needs of small business."
Highlights for the quarter ended September 30, 2006 include:
Asset Origination
- Based on initial equipment cost, lease production was $102.0 million in
the third quarter of 2006 compared to $97.9 million in the second quarter
of 2006 and $79.6 million in the third quarter of 2005. Net investment in
leases was $656.8 million at September 30, 2006.
- Our end user customer base grew to more than 86,000 at September 30, 2006
compared with 85,000 at June 30, 2006 and 82,000 at September 30, 2005.
The number of active leases in our portfolio was approximately 109,000 at
September 30, 2006.
Net Interest and Fee Margin and Cost of Funds
- The interest income yield was 12.57% as a percentage of average net
investment in leases for the quarter ended September 30, 2006, an
increase of 3 basis points from the quarter ended June 30, 2006 and a
decrease of 46 basis points from the third quarter of 2005.
- Fee income as a percentage of average net investment in leases was 3.35%
for the quarter ended September 30, 2006 compared to 3.44% for the
quarter ended June 30, 2006. Fee income was $5.2 million for the quarter
ended September, 30, 2006 compared to $5.1 million for the quarter ended
June 30, 2006. The increase in fee income is primarily attributed to
higher late fee realization partially offset by lower net residual income
on disposed equipment in the current quarter compared to the second
quarter of 2006. Residual income from disposed equipment was a net gain
of $68,000 in the third quarter ended September 30, 2006 compared to a
net gain of $246,000 in the second quarter ended June 30, 2006.
- The average cost of funds as a percentage of net investment in leases was
4.41% for the quarter ended September 30, 2006. This was a 35 basis point
increase from the 4.06% for the quarter ended June 30, 2006. The increase
in the average cost of funds was attributed to the assumption of higher
debt balances to fund originations as a result of completing a new term
securitization transaction, and an increase in the variable rate for
warehouse borrowings for the quarter ended September 30, 2006. In
addition, the Company increased its available financing through a
pre-funding feature in the recent term securitization transaction. The
pre-funding proceeds of $122 million will be used to finance new lease
production into the fourth quarter of 2006. The pre-funding amount
increased cost of funds as a percentage of net investment in leases by
approximately 10 basis points in the current quarter.
- Due to the factors discussed above, the net interest and fee margin was
11.51% as a percentage of average net investment in leases for the
quarter ended September 30, 2006, a decrease of 41 basis points compared
to 11.92% for the quarter ended June 30, 2006.
- The average implicit yield on new business was 12.73% for the quarter
ended September 30, 2006 compared to 12.68% for the quarter ended June
30, 2006 and 12.61% in the third quarter of 2005.
Credit Quality
- Net charge-offs totaled $2.7 million for the quarter ended September 30,
2006, compared with $2.1 million for the second quarter of 2006.
- On an annualized basis, net charge-offs were 1.72% of average net
investment in leases during the third quarter of 2006 compared to 1.44%
for the second quarter of 2006 and 1.74% for the full year ended December
31, 2005.
- As of September 30, 2006, 0.58% of our total lease portfolio was 60 or
more days delinquent, compared to 0.54% as of June 30, 2006 and 0.61% as
of December 31, 2005. Allowance for credit losses was $7.8 million as of
September 30, 2006, compared to $7.4 million as of June 30, 2006.
- Allowance for credit losses as a percentage of net investment in leases
was 1.21% at both September 30, 2006 and June 30, 2006.
- At September 30, 2006, the allowance for credit losses was 176.1% of
leases 60 or more days delinquent compared to 190.6% at June 30, 2006 and
192.30% at December 31, 2005.
- 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 $5.2 million in the third quarter of
2006 compared to $5.3 million in the second quarter. Salaries and
benefits expense was 3.31% as an annualized percentage of average net
investment in leases for the third quarter of 2006 compared to 3.55% in
the quarter ended June 30, 2006 and 3.40% in the third quarter of 2005.
In the third quarter of 2006, the Company incurred approximately $144,000
of salaries and benefits expense associated with Marlin Business Bank (in
organization) compared to approximately $60,000 for the third quarter
ended September 30, 2005. In addition, option-related compensation
expense totaled $240,000 in the third quarter due to the adoption of SFAS
123(R).
- Other general and administrative expenses were $2.9 million for the third
quarter of 2006, a decrease of $211,000 from $3.1 million for the second
quarter of 2006. Other general and administrative expenses as an
annualized percentage of average net investment in leases was 1.84% for
the third quarter of 2006 compared to 2.08% for the second quarter of
2006 and 2.27% in the third quarter of 2005.
Funding and Liquidity
- On September 21, 2006 we completed our eighth term asset-backed
securitization transaction at a weighted average fixed borrowing cost of
5.51% over the term of the transaction. The securitization amounted to
$380.2 million, and the note classes were rated P-1/A-1+, Aaa/AAA, A2/A,
Baa2/BBB by Moody's Investors Service, Inc. and Standard & Poor's Ratings
Service. Proceeds from the transaction were used to repay the Company's
revolving warehouse credit facilities and provide additional liquidity
for future lease production. As a result of hedging activity and other
transaction costs, we expect total interest expense on the 2006 term
transaction to approximate an average of 5.21% over the term of the
borrowing.
- On September 15, 2006, the Company paid off its 2003-1 term
securitization when the remaining note balances outstanding were
approximately $31.5 million at a coupon rate of approximately 3.19%.
- On September 28, 2006, the Company extended its $125 million warehouse
facility to September 27, 2007.
- During the third quarter ended September 30, 2006 the Company entered
into a series of forward starting interest rate swap agreements with
total underlying notional amounts of (i) $200.0 million at a blended
strike rate of approximately 5.25% to commence in October 2007, related
to its forecasted 2007 term note securitization and (ii) $100 million at
a blended strike rate of approximately 5.34% to commence in October 2008,
related to its forecasted 2008 term note securitization.
- Capital increased an additional $310,000 through the exercise of employee
stock options and the related tax benefits during the third quarter of
2006.
- The Company's debt to equity ratio was 5.50:1 at September 30, 2006
compared to 4.17:1 at June 30, 2006. The increase in this ratio is
primarily attributed to the additional borrowings associated with the
$122 million pre-funding feature of our 2006 term securitization. Our
debt to equity ratio was a similar 5.42:1 at September 30, 2005 following
our 2005 securitization.
Conference Call and Webcast
We will host a conference call on Friday, November 3, 2006 at 9:00 a.m. EST
to discuss our third quarter 2006 results. If you wish to participate, please
call (800) 903-0258 approximately 10 minutes in advance of the call time. The
conference ID will be: "7Marlin." 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 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. 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/A 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)
September 30, December 31,
2006 2005
------------- -------------
(Unaudited)
Assets
Cash and cash equivalents $ 34,159 $ 34,472
Restricted cash 179,964 47,786
Net investment in direct financing leases 656,842 572,581
Property and equipment, net 3,573 3,776
Property tax receivables 721 191
Fair value of cash flow hedge derivatives 690 3,383
Other assets 10,970 8,800
------------- -------------
Total assets $ 886,919 $ 670,989
============= =============
Liabilities and Stockholders' Equity
Revolving and term secured borrowings $ 712,355 $ 516,849
Other liabilities:
Fair value of cash flow hedge derivatives 1,801 -
Sales and property taxes payable 10,069 7,702
Accounts payable and accrued expenses 9,364 8,467
Deferred income tax liability 23,729 25,362
------------- -------------
Total liabilities 757,318 558,380
------------- -------------
Commitments and Contingencies
Stockholders' equity:
Common Stock, $0.01 par value; 75,000,000
shares authorized; 12,009,489 and 11,755,225
shares issued and outstanding, respectively 120 117
Preferred Stock, $0.01 par value; 5,000,000
shares authorized; none issued - -
Additional paid-in capital 80,567 77,186
Stock subscription receivable (19) (25)
Cumulative other comprehensive income 2,370 3,520
Retained earnings 46,563 31,811
------------- -------------
Total stockholders' equity 129,601 112,609
------------- -------------
Total liabilities and stockholders'
equity $ 886,919 $ 670,989
============= =============
MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per-share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Income:
Interest income $ 19,629 $ 17,490 $ 55,996 $ 49,593
Fee income 5,241 4,225 15,245 13,258
------------- ------------- ------------- -------------
Interest and fee income 24,870 21,715 71,241 62,851
Interest expense 6,888 5,618 18,389 14,902
------------- ------------- ------------- -------------
Net interest and fee income 17,982 16,097 52,852 47,949
Provision for credit losses 3,082 3,510 7,096 8,460
------------- ------------- ------------- -------------
Net interest and fee income
after provision for credit
losses 14,900 12,587 45,756 39,489
Insurance and other income 1,365 1,162 3,949 3,551
------------- ------------- ------------- -------------
Operating income 16,265 13,749 49,705 43,040
Non-interest expense:
Salaries and benefits 5,171 4,567 15,570 13,391
General and administrative 2,868 3,049 8,692 8,846
Financing related costs 408 390 1,060 1,173
------------- ------------- ------------- -------------
Non-interest expense 8,447 8,006 25,322 23,410
------------- ------------- ------------- -------------
Income before income
taxes 7,818 5,743 24,383 19,630
Income taxes 3,088 2,299 9,631 7,753
------------- ------------- ------------- -------------
Net income $ 4,730 $ 3,444 $ 14,752 $ 11,877
============= ============= ============= =============
Basic earnings per share $ 0.40 $ 0.30 $ 1.25 $ 1.03
Diluted earnings per share $ 0.39 $ 0.29 $ 1.22 $ 0.99
Shares used in computing
basic earnings per share 11,838,677 11,608,450 11,775,028 11,524,164
Shares used in computing
diluted earnings per share 12,154,889 12,048,274 12,114,655 11,953,274
SUPPLEMENTAL QUARTERLY DATA
(dollars in thousands, except share amounts)
(unaudited)
Quarter Ended: 9/30/2005 12/31/2005 3/31/2006
- ---------------------------------------- -------------- -------------- --------------
New Asset Production:
# of Sales Reps 113 103 101
# of Leases 8,142 7,566 7,734
Equipment Volume $ 79,632 $ 76,472 $ 82,049
Average monthly sources 1,306 1,202 1,219
Implicit Yield on New Business 12.61% 12.87% 12.84%
Net interest and fee margin
Interest Income Yield 13.03% 12.96% 12.54%
Fee Income Yield 3.15% 3.39% 3.45%
Interest and Fee Income Yield 16.18% 16.35% 15.99%
Cost of Funds 4.19% 4.28% 3.87%
Net interest and Fee Margin 11.99% 12.07% 12.12%
Average Net Investment in Leases $ 536,874 $ 554,705 $ 568,248
Portfolio Asset Quality:
60+ Days Past Due Delinquencies 0.72% 0.61% 0.49%
60+ Days Past Due Delinquencies $ 4,656 $ 4,063 $ 3,320
Net Charge-offs $ 1,965 $ 2,513 $ 2,324
% on Average Net Investment in
Leases Annualized 1.46% 1.81% 1.64%
Allowance for Credit Losses $ 7,900 $ 7,813 $ 7,904
% of 60+ Delinquencies 169.70% 192.30% 238.10%
90+ Day Delinquencies (Non-
earning) $ 2,039 $ 2,017 $ 1,544
Balance Sheet:
Assets
Investment in Direct Financing
Leases $ 547,868 $ 562,039 $ 577,219
Initial Direct Costs and Fees 17,902 18,355 19,329
Reserve for Credit Losses (7,900) (7,813) (7,904)
Net Investment in Leases $ 557,870 $ 572,581 $ 588,644
Cash and Cash Equivalents 51,656 34,472 4,929
Restricted Cash 108,295 47,786 52,987
Other Assets 15,112 16,150 23,735
Total Assets $ 732,933 $ 670,989 $ 670,295
Liabilities
Total Debt $ 582,611 $ 516,849 $ 504,459
Other Liabilities 42,851 41,531 46,645
Total Liabilities $ 625,462 $ 558,380 $ 551,104
Stockholders' Equity
Common Stock $ 117 $ 117 $ 118
Paid-in Capital, net 76,528 77,161 78,308
Other Comprehensive Income 3,386 3,520 4,220
Retained Earnings 27,440 31,811 36,545
Total Stockholders' Equity $ 107,471 $ 112,609 $ 119,191
Total Liabilities and
Stockholders' Equity $ 732,933 $ 670,989 $ 670,295
Capital and Leverage:
Tangible Equity $ 107,471 $ 112,609 $ 119,191
Debt to Tangible Equity 5.42 4.59 4.23
Expense Ratios:
Salaries and Benefits Expense $ 4,567 $ 4,781 $ 5,145
Salaries and Benefits Expense
annualized % of Avg. Net Invest. 3.40% 3.45% 3.62%
Total personnel end of quarter 308 296 301
General and Administrative Expense $ 3,049 $ 3,062 $ 2,746
General and Administrative Expense
annualized % of Avg. Net Invest. 2.27% 2.21% 1.93%
Efficiency Ratio 44.13% 43.87% 42.46%
Net Income:
Net Income $ 3,444 $ 4,370 $ 4,734
Annualized Performance Measures:
Return on Average Assets 2.06% 2.49% 2.82%
Return on Average Stockholders'
Equity 13.20% 15.89% 16.34%
Per Share Data:
Number of Shares - Basic 11,608,450 11,646,864 11,702,161
EPS- Basic $ 0.30 $ 0.38 $ 0.40
Number of Shares - Diluted 12,048,274 12,075,882 12,042,436
EPS- Diluted $ 0.29 $ 0.36 $ 0.39
Quarter Ended: 6/30/2006 9/30/2006
- ---------------------------------------- -------------- --------------
New Asset Production:
# of Sales Reps 103 100
# of Leases 8,553 8,882
Equipment Volume $ 97,871 $ 101,962
Average monthly sources 1,333 1,321
Implicit Yield on New Business 12.68% 12.73%
Net interest and fee margin
Interest Income Yield 12.54% 12.57%
Fee Income Yield 3.44% 3.35%
Interest and Fee Income Yield 15.98% 15.92%
Cost of Funds 4.06% 4.41%
Net interest and Fee Margin 11.92% 11.51%
Average Net Investment in Leases $ 591,905 $ 624,711
Portfolio Asset Quality:
60+ Days Past Due Delinquencies 0.54% 0.58%
60+ Days Past Due Delinquencies $ 3,867 $ 4,411
Net Charge-offs $ 2,132 $ 2,685
% on Average Net Investment in
Leases Annualized 1.44% 1.72%
Allowance for Credit Losses $ 7,370 $ 7,767
% of 60+ Delinquencies 190.59% 176.08%
90+ Day Delinquencies (Non-
earning) $ 1,648 $ 1,876
Balance Sheet:
Assets
Investment in Direct Financing
Leases $ 609,359 $ 642,113
Initial Direct Costs and Fees 20,826 22,496
Reserve for Credit Losses (7,370) (7,767)
Net Investment in Leases $ 622,815 $ 656,842
Cash and Cash Equivalents 3,168 34,159
Restricted Cash 54,457 179,964
Other Assets 17,667 15,954
Total Assets $ 698,107 $ 886,919
Liabilities
Total Debt $ 526,286 $ 712,355
Other Liabilities 45,580 44,963
Total Liabilities $ 571,866 $ 757,318
Stockholders' Equity
Common Stock $ 120 $ 120
Paid-in Capital, net 79,583 80,548
Other Comprehensive Income 4,705 2,370
Retained Earnings 41,833 46,563
Total Stockholders' Equity $ 126,241 $ 129,601
Total Liabilities and
Stockholders' Equity $ 698,107 $ 886,919
Capital and Leverage:
Tangible Equity $ 126,241 $ 129,601
Debt to Tangible Equity 4.17 5.50
Expense Ratios:
Salaries and Benefits Expense $ 5,254 $ 5,171
Salaries and Benefits Expense
annualized % of Avg. Net Invest. 3.55% 3.31%
Total personnel end of quarter 319 310
General and Administrative Expense $ 3,078 $ 2,868
General and Administrative Expense
annualized % of Avg. Net Invest. 2.08% 1.84%
Efficiency Ratio 44.16% 41.55%
Net Income:
Net Income $ 5,288 $ 4,730
Annualized Performance Measures:
Return on Average Assets 3.09% 2.55%
Return on Average Stockholders'
Equity 17.24% 14.79%
Per Share Data:
Number of Shares - Basic 11,780,018 11,838,677
EPS- Basic $ 0.45 $ 0.40
Number of Shares - Diluted 12,092,752 12,154,889
EPS- Diluted $ 0.44 $ 0.39
SOURCE Marlin Business Services Corp.
-0- 11/02/2006
/CONTACT: Lynne Wilson of Marlin Business Services Corp., +1-856-359-9111
x4108/
/Web site: http://www.marlincorp.com /