Christopher Menkin's  Instablog

Marlin Business Services (NASDAQ - MRLN) , Mount Laurel, New Jersey salary and administrative costs are down, nine months from $17.8 million to $14.9 and $11.6 to $9.7 million and certainly the Marlin Industrial Bank rate is better than the Wells Fargo Foothill borrowing rate. To say the least, management is running quite a trim ship and remaining productive as the small ticket finance and leasing company reported third quarter 2009 net income of $508,000; on an adjusted basis of $1.2 million. share.

"We are strongly encouraged by the asset quality results this quarter" says Daniel P. Dyer, Marlin's CEO. "Our focused, proactive approach to credit early into the recession has resulted in improving credit quality during a period when the overall market indicators are negative."

"Looking to the future, the company is well positioned to capitalize on growth bolstered by our strong, well capitalized balance sheet, access to the credit markets and strengthening fundamentals on the credit side," added Dyer.

Third quarter lease production was $16.8 million, based on initial equipment cost, compared to $15.8 million for the second quarter of 2009. The average implicit yield on new lease production continues to remain strong and was 15.62% for the third quarter of 2009.

"During the three months ended September 30, 2009, we generated 1,916 new leases with a cost of $16.8 million compared to 5,837 new leases with a cost of $59.0 million generated for the three months ended September 30, 2008. The reduction in volume was primarily due to our decision to proactively lower approval rates in response to economic conditions. Overall, our average net investment in total finance receivables for the three-month period ended September 30, 2009 decreased 25.4% to $526.8 million compared to $706.5 million for the three-month period ended September 30, 2008.

"At September 30, 2009, the Company has outstanding $97.3 million of leases and loans funded through its banking subsidiary, Marlin Business Bank, and have $80 million in FDIC insured deposits outstanding at an average borrowing rate of 3.45% with a weighted average term to maturity of 2.6 years. Third quarter 2009 average deposit outstandings were $79.4 million at a weighted average interest rate of 3.42%."
SEC filing

"Personnel costs represent our most significant overhead expense and we actively manage our staffing levels to the requirements of our lease portfolio. As a financial services company, we continue to be impacted by the challenging economic environment. As a result, we proactively lowered expenses in the first quarter of 2009, including reducing our workforce by 17% and closing our two smallest satellite sales offices (Chicago and Utah). A total of 49 employees company-wide were affected as a result of the staff reductions in the first quarter of 2009. We incurred pretax severance costs in the three months ended March 31, 2009 of approximately $500,000 related to the staff reductions. The total annualized pretax salary cost savings that are expected to result from the reductions are estimated to be approximately $2.3 million. During the second quarter of 2009, we announced a further workforce reduction of 24%, or 55 employees company-wide, including the closure of our Denver satellite office. We incurred pretax severance costs in the three months ended June 30, 2009 of approximately $700,000 related to these staff reductions. The total annualized pretax salary cost savings that are expected to result from these reductions are estimated to be approximately $2.9 million. Although we believe that our estimates are appropriate and reasonable based on available information, actual results could differ from these estimates. In comparison, during the first quarter of 2008 we reduced our workforce by approximately 51 employees and incurred related pretax severance costs of approximately $501,000. The total annualized pretax cost savings resulting from this reduction were estimated to be approximately $2.6 million."
SEC filing

"Interest expense decreased $2.4 million to $6.4 million for the three-month period ended September 30, 2009 from $8.8 million for the three-month period ended September 30, 2008. The decrease was primarily due to lower average total finance receivables combined with a shift in mix from borrowings to less expensive deposits. Interest expense, as an annualized percentage of average total finance receivables, decreased 9 basis points to 4.89% for the three-month period ended September 30, 2009, from 4.9 8% for the same period in 2008."
SEC Filing

"The opening of our wholly-owned subsidiary, Marlin Business Bank, on March 12, 2008 provides an additional funding source. Initially, FDIC-insured deposits are being raised via the brokered certificates of deposit market and from other financial institutions on a direct basis. Interest expense on deposits was $690,000, or 3.47% as a percentage of weighted average deposits, for the three-month period ended September 30, 2009. The average balance of deposits was $79.4 million for the three-month period ended September 30, 2009. Interest expense on deposits was $462,000, or 4.2 1% as a percentage of weighted average deposits, for the three-month period ended September 30, 2008. The average balance of deposits was $43.9 million for the three- month period ended September 30, 2008. Insurance income. Insurance income decreased $423,000 to $1.2 million for the three-month period ended September 30, 2009 from $1.6 million for the three-month period ended September 30, 2008, primarily due to lower billings from lower total finance receivables. Other income. Other income decreased $15,000 to $409,000 for the three-month period ended September 30, 2009 from $424,000 for the three-month period ended September 30, 2008, primarily due to the impact of lower transaction volumes."
SEC filing

"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, part of Wells Fargo & Company."
SEC filing

"WHEREAS, the Board of Directors of the Company desires to amend the Plan to increase the maximum aggregate number of shares of the Corporation's stock that shall be subject to grants made under the Plan to any individual during any calendar year from 100,000 shares to 200,000 shares."
SEC Filing

Marlin Press Release with financial statement:
http://leasingnews.org/PDF/Marlin_3rd_Quarter_09.pdf

SEC Filing: Marlin 10-Q 9/30/2009:
http://leasingnews.org/PDF/Marlin%20SEC%203rd%20Quarter.pdf


disclosure: no positions

Equipment Acquisition Resources -Busted!
by Christopher Menkin

"Last year, I was given the opportunity to finance $6MM of equipment to Equipment Acquisition Resources. I do not know how anyone who did a site visit and met with the Players and looked at the financials would lend them money. The financials were suspect and just the whole business model was suspect. I met Mr. Player and he gave me business card that showed him to be a consultant to the company. Long story short, I declined the transaction.

"Your site is testimony to the importance of using your site to keep on top of what is happening in the industry."

Craig H. Raddatz
Vice President
SL Financial Services Corporation
770 Lake Cook Road
Suite 270
Deerfield, IL 60015
mail : craigraddatz@slfinancial.com
http : slfinancial.com

Equipment Acquisitions Resources filed Chapter 11 Bankruptcy in the Northern District of Illinois U.S. Bankruptcy Court on October 23, 2009 with a hearing scheduled for November 2, 2009 at 09:30 AM at 219 South Dearborn, Courtroom 680, Chicago, Illinois 60604.

William Brandt, of the turnaround firm Development Specialists Inc., who was selected by shareholders (not named) of EAR (after Chief Executive Officer Donna L. Malone and her husband, Sheldon Player, resigned on October 8th, 2009), told Bloomberg reporter Erik Larson, "This is a giant fraud, a Ponzi scheme which we discovered two days after we were put into it."

In making his presentation for a retainer and stating his hourly fee, Brandt told the court in his filing:

"8.The Debtor owns and/or leases more than 2000 pieces of semiconductor manufacturing equipment. The Debtor is indebted to multiple lenders that hold liens on various pieces of equipment…The Debtor's secured debt totals, in the aggregate, approximately $135 million. The appraised value of the Debtor's equipment is not known.

"9. Beginning in the fourth quarter of 2008, the Debtor experienced a significant downturn in equipment sales. The downturn continued into 2009 precipitating a severe liquidity crisis and ultimately leading to this filing."

What follows is the list of the top 20 creditors. Not named on the list, but on the list of creditors to be notified, meaning they are not in the top 20, are pages and pages of leasing companies including, ABCO, Balboa Capital, Bank of the West, LEAF, Leasing One, OFC Credit, PenTech Financial via US Bank Manifest, US Bank, Varilease, just to name a few. There are many banks as well as the IRS. (see copy of filing at end of article. editor)

(Click for larger version)

- Note: this is from EAR accounting books and does not match law suit filings by several of the creditors with larger dollar amounts, such as Leasing One Corporation $2 million (not named as one of the top 20 creditors ) and ICON Capital at $21,599,653 (on the creditor's list for $18,733.10.)

William Brandt, representing EAR, filed the form requiring a $100,000 retainer noting his fee was $595 an hour with:
Senior Consultants: $425 to $595 an hour
Consultants: $250 to $420 an hour
Junior Consultants: $120 to $245 an hour

Attorneys representing the various leasing companies are registering such as Thomas V. Askounis of Askounis & Darcy, PC on behalf of Lyon Financial Services & First Premier Capital along with Alex Darcy (IFC Credit/NorVergence fame, suing the IFC BK for $150,000 fees not paid). If the list is followed, there will be at least 30 attorneys or more representing creditors.

Whether the collateral really exists is a question, as reports to Leasing News show EAR was a caught double dipping. At what locations and condition, including whether sold or subleased, is not known at this time either.

The amazing thing to me, and also to Bernie Boettigheimer, CLP, Lease Police, is how Sheldon Player got away with it so long after the first alert was in Leasing News in May, 2007, followed by the phony tax returns Don Blody caught when he was at Butler Capital (now at Madison Capital), covered by Leasing News as well as other stories the last two years. Lease Police has a vendor file and knows beyond the credit of the lessee what the track record is with the vendor.

Yes, Blody caught it, as did Craig Raddatz, but how all these major credit grantors were fooled, especially Icon Capital for $25 million, is certainly worth a revaluation of "due diligence." Shame on ICON. How much does the leasing industry have to lose before it looks at the vendor as much as it does the lessee?

"There is something fundamentally wrong with the way that we make credit decisions in our industry, "Lease Police Boettigheimer said. "The same mistakes are being repeated time and time again. It seems as if there is an imbalance between marketing, accounting, legal and credit management in many of the companies which have gotten in trouble lately.

"Too much emphasis has been placed on growth and market share and the reservations of quality credit personnel have often been ignored. On the other hand, those same credit people have been guilty of not being assertive of their opinions and concerns. The two 'Alerts' that I wrote about last week are classic examples of missed warning signals."

The companies named in the bankruptcy and lawsuits have officers and others in their employee who read Leasing News. Both Leasing News and Lease Police have been aware of the situation since 2007.

This one story tells it all:
http://www.leasingnews.org/archives/May%202007/05-04-07.htm#deja

EAR files Chapter 11
http://leasingnews.org/PDF/EAR_Files_BK_11.pdf

List of top 20 Creditors in BK by EAR
http://leasingnews.org/PDF/EAR_BK_list_of_top_creditors.pdf

Motion by Brandt and list of all creditors to be notified
http://leasingnews.org/PDF/EAR_List_of_Creditors.pdf

Brandt filing to be listed to represent EAR
http://leasingnews.org/PDF/Brandt_elected_by_shareholders.pdf

Leasing News articles since May, 2007
http://www.leasingnews.org/Conscious-Top%20Stories/Sheldon_Player.htm

Disclosure: no position

Two quotes from GE-Q3 2009 General Electric Earnings Conference Call, Event Date/Time: Oct. 16, 2009 12:30pm GMT

Keith Sherin-General Electric-Vice Chairman

The resignation of the CIT Group's chief executive Jeffrey M. Peek is very bad news for the finance and leasing industry. It will make credit tougher to obtain, and definitely more expensive, lengthening the recovery for small business in the United States, culling out the market place in a faster pace than Leasing News writers have been predicting. This is terrible news.

July 13, 2009 Leasing News printed an editorial regarding support for the CIT Group: "It is imperative that the finance and leasing industry show support for a company that has supported so many small businesses; enabled them to grow, to support their families, to provide jobs, to keep the economy growing."
http://www.leasingnews.org/archives/July%202009/07-13-09.htm#supportCIT

A recent press release stated Relational Technology Solutions, Rolling Meadows, Illinois "now manages nearly $1 billion in assets in Fortune 1000 and mid-market companies across all industries." The company is advertising in a leasing news media for "a Senior Credit Manager at our corporate office in Rolling Meadows, IL. " The company was noted as "founded in 1990 with 360 employees, revenues of $325,000,000."

From readers (the responses are from people known to Leasing News or their reputation, and if named, there would be a lot more creditability in what they state):

"Facts are somewhat correct. Relational has entered into a portfolio management arrangement whereby Macquarie will run out the Relational leasing portfolio on behalf of Relational. Macquarie will obtain the benefit of follow-on transactions with customers. Most of the employees will likely be let go although Macquarie has stated they wanted to keep some. Macquarie will be purchasing the Technology Solutions side of the business (VAR, engineering, etc) mainly located in Florida and Ohio."
(name with held)