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Marlin: “The Axeman Cometh”

|Includes: Marlin Business Services Corp. (MRLN)

Marlin: “The Axeman Cometh”

by Christopher Menkin


Marlin Business Services, Mount Laurel, New Jersey (NASDQ: MRLN) reports a first quarter revenue loss of $879,000 compared to a profit of $1,359,000 the first quarter of 2008. The company also announced it has closed its Denver office, plus has let additional 53 employees go,
many of them have been with the company ten to eleven years.

First Quarter Financial Statements shows Marlin is down to 58 salesmen. They completed 3,811 lease totaling $36,280,000 in the first quarter of 2009. Compared to the same time period of 2008, here were 108 salesmen who completed 6,836 leases for $70,500,000. It seems almost half. It also reflects the number of employees and performance of the company.

Compared to year-ending numbers:

2007 year-end employees: 357
2008 year-end employees: 284
It was announced before the year-end that 68 workers were no longer employed. The announcement was in 2009 and does not match the SEC numbers, so the company is down to 163 employees. With the broker division off, and direct sales personnel let go, the number could be 163. The second quarter SEC filing should be able to give the correct numbers as the announcement of those let go occurred in the second quarter, May 7, 2009.

To understand the changes, perhaps the year-end SEC filing gives a more accurate picture by indicating the type of equipment that was being leased.

Note, the two employees responsible for the copier leases were let go last year;
both now working for Cannon Financial.
The categories security systems, commercial and industrial are growth industry products tied to real estate expansion.

The states tie into this as the two hardest hit states are California and Florida with the most real estate foreclosures (Las Vegas as a city is high, but not the numbers of the two larger states.) In fact, Resource America financial indicate the same problems in commercial real estate, which they specialize in. The regional banks that have closed in these area were hit hardest by commercial developments rather than residential homes.

Hit hard was the credit department, where Vice-President Vince Drobniak from credit was given the axe. Approval ratings went from 50% to 41%.
2008 year-end describes the operation: “The vast majority of our credit analysts are centralized in our New Jersey headquarters. At December 31, 2008, we had 20 credit analysts managed by 5 credit managers having an average of more than 9 years of experience.”

In the latest layoff, there were veterans with ten to eleven years let go.

Daniel P. Dyer, Marlin’s CEO, said basically it was the economy, took no blame or remorse in cut backs, which did not include the raises, bonuses, and officer pay as well as director's pay.

His comments in the press release began, "“This past quarter was extremely difficult for the economy and the capital markets and I am quite pleased with the steps we have taken to manage through this challenging period and position ourselves for the future.

“These results demonstrate clearly the resiliency and strength of our business model during even the most difficult of times. Our capital position remains very strong and is a significant source of financial strength to Marlin Business Bank and our lenders. On the funding side we continue our efforts working with the FDIC toward a final decision on our order modification request to grow Marlin Business Bank.”

It appears the difficulties with the Utah Industrial Bank have not been cleared up. (Leasing News is told Dan Dyer’s brother Joe is responsible for the 12.8MM charge for the swap loss. He is the head of their treasury group.)

The press release stated, "The current limitation on asset growth at Marlin Business Bank has led to lower lease originations and an overall decline in our portfolio size, which has required us to further proactively lower expenses in the second quarter of 2009, including reducing our workforce and closing our satellite office in Denver. A total of approximately 53 employees company-wide were affected as a result of this recent staff reduction. We expect to incur pretax severance costs in the quarter ended June 30, 2009 of approximately $700,000 related to this staff reduction. The total annualized pretax salary cost savings that are expected to result from this reduction are estimated to be approximately $2.8 million. Although we believe that these estimates are appropriate and reasonable based on available information, actual results could differ from these estimates."

Net lease charge-offs in the first quarter were $8.0 million, or 5.03% of average net investment in leases on an annualized basis, compared to $7.9 million or 4.7 1% of average net investment in leases on an annualized basis during fourth quarter 2008.

Leases over 30 days delinquent were 4.87% as of March 31, 2009, an increase compared to 3.72% at December 31, 2008. On a dollar basis, leases in the 30+ delinquency category totaled $33.9 million at March 31, 2009, up from $28.1 million at December 31, 2008 and $25.8 million at March 31, 2008. Leases over 60 days delinquent were 2.34% as of March 31, 2009, an increase from 1.53% as of December 31, 2008 and 1.09% at March 31, 2008. On a dollar basis, leases over 60 days delinquent totaled $16.3 million at March 31, 2009, an increase compared to $11.6 million at December 31, 2008 and $9.2 million at March 31, 2008.

First Quarter Press Release with Financial Statements:

Marlin’s Dan Dyer/George Pelose get Raises + stock

Officers/Directors get Raises/Bonuses