Marlin Business Services Corp. Reports Third Quarter 2005 Earnings

Thursday, November 03, 2005

Marlin Business Services Corp. (Nasdaq: MRLN) today reported net income of $3.4 million for the third quarter ended September 30, 2005, consistent with net income of $3.4 million for the same period in 2004.

Diluted net income per share was $0.29 for both the third quarters of 2005 and 2004. Net income in the third quarter of 2005 was impacted by a $753,000 after tax charge, or $0.06 net income per diluted share, for expected losses related to Hurricane Katrina.

Excluding the impact of Hurricane Katrina, net income for the quarter ended September 30, 2005 would have been $4.2 million, or a 23.6% increase over the $3.4 million of net income reported for the quarter ended September 30, 2004.

For the nine months ended September 30, 2005 net income was $11.9 million compared to $9.9 million for the same period in 2004. Diluted net income per share for the nine-month period ended September 30, 2005 was $0.99 compared to $0.84 per diluted share reported for the same period in 2004. Net income in the nine-month period ended September 30, 2005 was impacted by the same $753,000 after tax charge, or $0.06 net income per diluted share, for expected losses related to Hurricane Katrina. Excluding the impact of Hurricane Katrina, net income for the nine-month period ended September 30, 2005 would have been $12.6 million, or a 28.0% increase over the $9.9 million of net income reported for the nine-month period ended September 30, 2004. 'Overall, I'm pleased to report another solid quarter of earnings performance led by strong asset originations and exceptional asset quality,' said Daniel P. Dyer, Chairman and CEO of Marlin Business Services Corp."

Highlights for the quarter ended September 30, 2005 include:
-- Net charge-offs were 1.46% of average net investment in leases during
the third quarter of 2005 compared to 1.74% for the second quarter of
2005 and 1.99% for the full year ended December 31, 2004.

-- Marlin successfully completed its seventh term asset backed
securitization in August totaling $340.6 million, including
approximately $109 million in pre-funding which will provide
attractive fixed rate funding into the fourth quarter of 2005.

-- The Company filed an application for an Industrial Bank Charter with
the FDIC and the State of Utah Department of Financial Institutions
on October 6, 2005.


Asset Origination
-- Based on initial equipment cost, lease production was $79.6 million
in the third quarter of 2005 compared to $85.0 million in the second
quarter of 2005 and $68.9 million in the third quarter of 2004. Net
investment in leases was $557.9 million at September 30, 2005.

-- Our end user customer base grew to more than 81,000 at September 30,
2005 compared with 80,000 at June 30, 2005 and 75,000 at
September 30, 2004. The number of active leases in our portfolio was
approximately 102,000 at September 30, 2005.


Credit Quality
-- The provision and allowance for credit losses was increased in the
third quarter of 2005 by an incremental $1.25 million related to
Hurricane Katrina.

-- Net charge-offs totaled $2.0 million for the quarter ended
September 30, 2005 compared with $2.2 million for second quarter of
2005.

-- On an annualized basis, net charge-offs were 1.46% of average net
investment in leases during the third quarter of 2005 compared to
1.74% for the second quarter of 2005 and 1.99% for the full year
ended December 31, 2004.

-- As of September 30, 2005, 0.72% of our total lease portfolio was
60 or more days delinquent, compared to 0.57% as of June 30, 2005 and
0.78% as of December 31, 2004.

-- Allowance for credit losses was $7.9 million as of September 30,
2005, compared to $6.3 million as of June 30, 2005. Allowance for
credit losses as a percentage of net investment in leases was 1.44%
at September 30, 2005 compared to 1.21% at June 30, 2005. The
allowance for credit losses was increased in the third quarter by an
additional $1.25 million, or 0.22% as a percentage of net investment
in leases, related to Hurricane Katrina.

-- At September 30, 2005, the allowance for credit losses was 169.7% of
leases 60 or more days delinquent compared to 179.8% at June 30,
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.


Net Interest and Fee Margin and Cost of Funds
-- The net interest and fee margin was 11.99% as a percentage of average
net investment in leases for the quarter ended September 30, 2005, a
decrease of 61 basis points compared to 12.60% for the quarter ended
June 30, 2005. The decrease in margin is principally attributed to a
decline in fee income and to additional interest expense attributed
to the 2005 term securitization transaction, which included a
$109 million pre-funding amount.

-- The average implicit yield on new business was 12.61% for the quarter
ended September 30, 2005 compared to 12.70% for the quarter ended
June 30, 2005.

-- Fee income as a percentage of average net investment in leases was
3.15% for the quarter ended September 30, 2005 compared to 3.57% for
the quarter ended June 30, 2005. The decrease in fee income is
primarily attributed to lower net residual income on disposed
equipment in the current quarter compared to the second quarter of
2005. Net residual income from disposed equipment was a net loss of
$111,000 in the third quarter ended September 30, 2005 compared to a
net gain of $165,000 in the second quarter ended June 30, 2005.

-- The average cost of funds as a percentage of net investment in leases
was 4.19% for the quarter ended September 30, 2005. This was a 46
basis point increase from the 3.73% for the quarter ended June 30,
2005. The Company normally sees an increase in its cost of funds in
the quarter it completes a term securitization transaction as it
generally refinances lower cost variable rate warehouse borrowings
with higher cost fixed rate term borrowings. In addition, the
Company increased its available financing through a pre-funding
feature in the recent term securitization transaction. The
pre-funding proceeds of $109 million will be used to finance new
lease production into the fourth quarter of 2005. 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.


Operating Expenses
-- Salaries and benefits expense was $4.6 million in the third quarter
of 2005 compared to $4.4 million in the second quarter. Salaries and
benefits expense was 3.4% as an annualized percentage of average net
investment in leases for both the second and third quarters of 2005
compared to 3.1% in the third quarter of 2004. In the third quarter
of 2005, the Company incurred approximately $60,000 of salaries and
benefits expense associated with the hiring of management related to
its planned Marlin Business Bank.

-- Other general and administrative expenses were $3.1 million for the
third quarter of 2005, an increase of $100,000 from $3.0 million for
the second quarter of 2005. Other general and administrative
expenses as an annualized percentage of average net investment in
leases was 2.3% for both the second and third quarters of 2005
compared to 2.2% in the third quarter of 2004. The Company incurred
approximately $89,000 of legal, accounting and filing fees in the
third quarter of 2005 associated with shelf registration statements
filed with the SEC.


Funding and Liquidity
-- On August 18, 2005, we completed our seventh term asset-backed
securitization transaction at a weighted average fixed borrowing cost
of 4.5% over the term of the transaction. The securitization
amounted to $340.6 million, and the note classes were rated P-1/A-1+,
Aaa/AAA, A2/A, and Baa2/BBB by Moody's Investors Service, Inc. and
Standard & Poor's Ratings Services. Proceeds from the transaction
were used to repay the Company's revolving warehouse credit
facilities and provide additional liquidity for future lease
production.

-- On August 15, 2005, the Company elected to exercise its call option
and pay off its 2002-1 term securitization when the remaining note
balances outstanding were approximately $26.5 million at a coupon
rate of approximately 4.4%.

-- On August 26, 2005, the Company extended its $40 million revolving
bank facility. The facility now expires on August 31, 2007.

-- Capital increased an additional $384,000 through the exercise of
employee stock options and the related tax benefits during the third
quarter of 2005.

-- Our debt to equity ratio was 5.42:1 at September 30, 2005 compared to
4.55:1 at June 30, 2005. The increase in this ratio is primarily
attributed to the additional borrowings associated with
$109.0 million pre-funding feature of our 2005 term securitization.
Our debt to equity ratio was a similar 5.59:1 at September 30, 2004
following our 2004 securitization.