Marlin Leasing: What, Me Worry?

| About: Marlin Business (MRLN)

Prior to income tax Marlin Business Services, Mount Laurel, New Jersey (NASDAQ: MRLN) shows a $179,000 profit for the first three months of December 31, 2009 compared to a $4.8 million loss the year before, with a year-end profit of $347,000 compared to a loss of $3.1 million the prior year. Management has cut overhead and proven the old adage: “It is not sales that make a profit, but management.”

After taxes, the profit is $461,000 for three months ending December 31, 2009 compared to a loss of $7.3 million the previous period with a year-end profit of $1 million compared to a loss of $5.2 million the previous year.

(Dollars in Thousand) Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
Income (loss) before income taxes 640 (12,226) 1,383 (8,391)
Income tax expense (benefit) 179 ( 4,878) 347 (3,161)
Net income (loss) 461 ( 7,348) 1,036 (5,230)

$84.7 million of additional capital has brought the equity to $84.6 million, where last year-end $83.6 additional capital brought the equity to $146.6 million.

Leases have dropped from 5,558 12/31/2008 to 2,205 with sales reps going down from 86 to 38 resulting in volume going down from $58 million to $20 million. The decline is evident in the chart, as the company shut down the broker program January, 2009, decided to go direct sales only, but is down today to 38, according to their SEC filings.

Quarter Ended: 12/31/2008 3/31/2009 6/30/2009 9/30/2009 12/31/2009
New Asset Production:
# of Sales Reps 86 58 33 34 38
# of Leases 5,558 3,811 1,831 1.1916 2.205
Leased Equip. Volume $58,098 $36,280 $15,811 $16,813 $20,031
Approval Percentage 47% 41% 36% 38% 44%

(Marlin Board Meeting)

Evergreen and other statistics were not in the SEC 8K filing or press release, which resulted in major profit in previous filings, primarily from copier business that made up over 20% of their equipment leases.

It is interesting to see the profit from insurance was $5.3 million:

3 mos. end,2009 3 mos. end,2009 Y/E 2009 Y/2008
Insurance income 1,279 1,537 5,330 6,252
(in thousands)

On October 9, 2009, the Company closed on a $75,000,000 three-year committed funding facility with the Lender Finance division of Wells Fargo Foothill. The facility reportedly will be used to fund new lease originations.

While the following three items were noted in the Marlin press release, it appears Marlin was looking for money and last Friday completed a $80 7 million TALF eligible term securitization (see press release in this issue). The bank deposits and ratio’s were at the point the company was eligible for a government loan, which certainly will be used to benefit small businesses.

At December 31, 2009, the Company had outstanding $95 4 million of leases and loans funded through its banking subsidiary, Marlin Business Bank, and has $80 3 million in FDIC- insured deposits outstanding at an average borrowing rate of 3.16% with a weighted average term to maturity of 2.7 years. Fourth quarter 2009 average deposit outstandings were $82 million at a weighted average interest rate of 3.35%.

"Looking back on the economic turmoil and capital market crisis that unfolded in 2009, I am pleased with the management team's success navigating the challenges that confronted the business," says Daniel P. Dyer, Marlin's CEO.

"In 2009, we successfully executed on our risk strategy to strengthen the credit fundamentals of the business leading to improving charge-off and delinquency trends through 2009. On the funding side, we added new capacity to complement the funding provided through our bank depository, Marlin Business Bank," added Dyer. "Entering 2010, we're very excited about the future and the attractive opportunities to grow the business and serve the borrowing needs of customers."

The company has changed direction from its original Advanta model away from the independent broker market with the employees to serve these applications---and perhaps was the first to note the coming economic changes, planning perhaps two years ahead, making some serious, bold decisions.

SEC Filing:

Full Marlin Press Release with Financial Statements:

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Author's Disclosure: no positions