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Marlin Year-End Growth/ Utah Industrial Bank (in organization.)

Marlin Business Services Corporation, Mount Laurel, New Jersey filed their 2005 year-end financial statement with the Security Exchange Commission.

In it, they announce the opening of a new office in Salt Lake City, Utah, along with an Industrial bank:

“We also believe that we can increase originations in certain regions of the country by establishing offices in identified strategic locations. Other regional offices are located in or near Atlanta, Georgia, Chicago, Illinois and Denver, Colorado. We expect to open our fourth regional office in Salt Lake City, Utah during 2006. Our Salt Lake City office would also house Marlin Business Bank (in organization) subject to regulatory approval and becoming operational.

Leases per state:

State Percentage
California 13 %
Florida 10 %
Texas 8 %
New York 7 %
New Jersey 6 %
Pennsylvania 4 %
Georgia 4 %
North Carolina 3 %
Massachusetts 3 %
Illinois 3 %
Ohio 3 %
All others (none more than 2.5%)

“Of our 296 total employees as of December 31, 2005, we employed 103 sales account executives, each of whom receives a base salary and earns commissions based on their lease originations. We also employed six employees dedicated to marketing as of December 31, 2005.

As of or For the Year Ended December 31,
2005 2004 2003 2002 2001
Number of sales account executives 103 100 84 67 50
Number of originating sources (1) 1,295 1,244 1,147 929 815
(1) Monthly average of origination sources generating lease volume.

“We finance over 60 categories of commercial equipment important to our end user customers, including copiers, telecommunications equipment, water filtration systems, computers, and certain commercial and industrial equipment. Our average lease transaction was approximately $9,000 at December 31, 2005, and we typically do not exceed $200,000 for any single lease transaction. This segment of the equipment leasing market is commonly known in the industry as the small-ticket segment.

Equipment Category Percentage
Copiers 22 %
Commercial & Industrial 7 %
Telecommunications equipment 7 %
Computers 6 %
Closed Circuit TV security systems 6 %
Restaurant equipment 6 %
Water filtration systems 5 %
Security systems 5 %
Automotive (no titled vehicles) 4 %
Computer software 4 %
Cash registers 3 %
Medical 3 %
All others (none more than 2.0%) 22 %

Portfolio Overview

At December 31, 2005, we had 103,278 active leases in our portfolio, representing an aggregate minimum lease payments receivable of $660.9 million. With respect to our portfolio at December 31, 2005:

• the average original lease transaction was $9,032, with an average remaining balance of $6,401;
• the average original lease term was 46 months;
• our active leases were spread among 82,479 different end user customers, with the largest single end user customer accounting for only 0.05% of the aggregate minimum lease payments receivable;
• over 74.5% of the aggregate minimum lease payments receivable were with end user customers who had been in business more than five years;
• the portfolio was spread among 10,927 origination sources, with the largest source accounting for only 1.5% of the aggregate minimum lease payments receivable, and our nine largest origination sources accounting for only 7.3% of the aggregate minimum lease payments receivable;
• there were 70 different equipment categories financed, with the largest categories set forth below, as a percentage of the December 31, 2005 aggregate minimum lease payments receivable:

Year Ended December 31,
2005 2004 2003 2002 2001
(Dollars in thousands)
Operating Data:
Total new leases originated 32,754 31,818 30,258 25,368 23,207
Total equipment cost originated $ 318,457 $ 272,271 $ 242,278 $ 203,458 $ 171,378
Average net investment in direct financing leases (1) 523,948 446,965 363,853 286,589 208,149
Weighted average interest rate (implicit) on new leases originated (2) 12.75 % 13.82 % 14.01 % 14.17 % 15.82 %
Interest income as a percent of average net investment in direct financing leases (1) 12.90 12.91 13.09 13.65 14.56
Interest expense as percent of average interest bearing liabilities, excluding subordinated debt (3) 4.24 3.86 4.54 5.76 7.41
Portfolio Asset Quality Data:
Minimum lease payments receivable $ 660,946 $ 571,150 $ 489,430 $ 392,392 $ 303,560
Delinquencies past due, greater than 60 days 0.61 % 0.78 % 0.74 % 0.86 % 1.94 %
Allowance for credit losses $ 7,813 $ 6,062 $ 5,016 $ 3,965 $ 3,059
Allowance for credit losses to net investment in direct financing leases (2) 1.39 % 1.26 % 1.23 % 1.21 % 1.24 %
Charge-offs, net $ 9,135 $ 8,907 $ 6,914 $ 5,944 $ 4,579
Ratio of net charge-offs to average net investment in direct financing leases 1.74 % 1.99 % 1.90 % 2.07 % 2.20 %
Operating Ratios:
Efficiency ratio (4) 43.36 % 41.63 % 43.15 % 44.47 % 46.79 %
Return on average total assets 2.57 % 2.54 % 0.66 % 1.31 % 1.04 %
Return on average stockholders' equity (5) 15.96 % 16.47 % 9.18 % 19.63 % 15.67 %
Balance Sheet Data:
Cash and cash equivalents $ 34,472 $ 16,092 $ 29,435 $ 6,354 $ 2,504
Restricted cash 47,786 37,331 29,604 24,372 16,325
Net investment in direct financing leases 572,581 489,678 419,160 335,442 255,169
Total assets 670,989 554,693 487,709 374,671 281,741
Revolving and term secured borrowings 516,849 434,670 393,997 327,842 245,551
Subordinated debt, net of discount — — — 9,520 9,408
Total liabilities 558,380 464,343 413,838 350,526 261,534
Redeemable convertible preferred stock, including accrued dividends — — — 21,171 19,391
Total stockholders' equity 112,609 90,350 73,871 2,974 816

“We access our end user customers through origination sources comprised of our existing network of over 9,200 independent commercial equipment dealers and, to a lesser extent, through relationships with lease brokers and direct solicitation of our end user customers. We use a highly efficient telephonic direct sales model to market to our origination sources. Through these origination sources, we are able to deliver convenient and flexible equipment financing to our end user customers.

“Our typical financing transaction involves a non-cancelable, full-payout lease with payments sufficient to recover the purchase price of the underlying equipment plus an expected profit. As of December 31, 2005, we serviced approximately 103,000 active equipment leases having a total original equipment cost of $932.8 million for approximately 82,000 end user customers.

Year Ended December 31,
2005 2004 2003
(Dollars in thousands)
Average net investment in direct financing leases $ 523,948 $ 446,965 $ 363,853
Salaries and benefits expense 18,173 14,447 10,273
General and administrative expense 11,908 10,063 7,745
Efficiency ratio 43.36 % 41.63 % 43.15 %
Percent of average net investment in leases:
Salaries and benefits 3.47 % 3.23 % 2.82 %
General and administrative 2.27 % 2.25 % 2.13 %

“The small-ticket equipment leasing market is highly fragmented. We estimate that there are up to 75,000 independent equipment dealers who sell the types of equipment we finance. We focus primarily on the segment of the market comprised of the small and mid-size independent equipment dealers. We believe this segment is underserved because: 1) the large commercial finance companies and large commercial banks typically concentrate their efforts on marketing their products and services directly to equipment manufacturers and larger distributors, rather than the independent equipment dealers; and 2) many smaller commercial finance companies and regional banking institutions have not developed the systems and infrastructure required to adequately service these equipment dealers on high volume, low-balance transactions. We focus on establishing our relationships with independent equipment dealers to meet their need for high quality, convenient point-of-sale lease financing.”

Net income was $16.2 million for the year ended December 31, 2005. This represented a $2.7 million, or 20.0%, increase from $13.5 million net income reported for the year ended December 31, 2004. Our increased earnings are primarily the result of growth and improved net interest and fee margins in our core leasing business. During the third quarter of 2005, the Company increased its reserves for expected credit losses based on its initial assessments of exposure to areas significantly impacted by Hurricane Katrina (such as New Orleans). The impact of this increase in reserves was a reduction of approximately $753,000 in net income for the year 2005.

Diluted net income per share was $1.36 for the year ended December 31, 2005 and $1.15 for the year ended December 31, 2004.

Year Ended December 31,
2005 2004
(Dollars in thousands)
Interest income $ 67,572 $ 57,707
Fee income 17,957 13,461
Interest and fee income 85,529 71,168
Interest expense 20,835 16,675
Net interest and fee income $ 64,694 $ 54,493
Average net investment in direct financing leases (1) $ 523,948 $ 446,965
Percent of average net investment in direct financing leases:
Interest income 12.90 % 12.91 %
Fee income 3.43 3.01
Interest and fee income 16.32 15.92
Interest expense 3.98 3.73
Net interest and fee margin 12.35 % 12.19 %
(1) Excludes allowance for credit losses and initial direct costs and fees deferred.

 

For the year ended December 31, 2005, we generated 32,754 new leases at a cost of $318.5 million compared to 31,818 new leases at a cost of $272.2 million for the year ended December 31, 2004. The weighted average implicit interest rate on new leases originated was 12.75% for the year ended December 31, 2005 compared to 13.82% for year ended December 31, 2004. Overall, the net investment in direct financing leases grew 16.9%, to $572.6 million at December 31, 2005 from $489.7 million at December 31, 2004. Returns on average assets were 2.57% for the year ended December 31, 2005 and 2.54% for the year ended December 31, 2004. Returns on average equity were 15.96% for the year ended December 31, 2005 and 16.47% for the year ended December 31, 2004. Our debt to equity ratio was 4.59:1 at December 31, 2005 compared to 4.81:1 at December 31, 2004.

http://www.leasingnews.org/Pages/Marlin_YE_net_inv.htm

full financial filing available here:

http://www.snl.com/Interactive/html.asp?F=2135934.HTML&T=MRLN&Y=10%2DK&D=
12%2F31%2F2005&S=1&V=DMZ6