Marlin Business Services Corp is a nationwide provider of equipment leasing solutions primarily to small businesses. Marlin finances over 60 categories of commercial equipment including copiers telephone systems computers and certain commercial and industrial equipment. Marlin Business Services Corp. has a market cap of $88.2 million; its shares were traded at around $7 with a P/E ratio of 43.8 and P/S ratio of 0.8. Marlin Business Services Corp. had an annual average earning growth of 21.3% over the past 5 years.
Highlight of Business Operations:
Since our founding in 1997, we have grown to $628.1 million in total assets at September 30, 2009. Our assets are substantially comprised of our net investment in leases and loans which totaled $499.6 million at September 30, 2009.
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 have 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.
Net income. Net income of $508,000 was reported for the three-month period ended September 30, 2009, resulting in diluted earnings per share of $0.04. This net income includes an after-tax charge of approximately $704,000 due to the net loss on derivatives. The net loss of $941,000 for the three-month period ended September 30, 2008 reflects an after-tax charge of approximately $2.0 million due to the loss on derivatives. Excluding the impact of these after-tax charges on both periods, net income would have been $1.2 million for the three-month period ended September 30, 2009, compared to net income of $1.1 million for the three-month period ended September 30, 2008. Diluted earnings per share excluding these after-tax charges would have been $0.10 for the three-month period ended September 30, 2009, compared to $0.09 for the three-month period ended September 30, 2008. The exclusion of the losses on derivatives removes the volatility resulting from derivatives activities subsequent to discontinuing hedge accounting in July 2008.
The provision for credit losses decreased $2.6 million, or 30.2%, to $6.0 million for the three-month period ended September 30, 2009 from $8.6 million for the same period in 2008, primarily due to a reduced portfolio size and improved delinquencies. During the three months ended September 30, 2009, net interest and fee income decreased $4.4 million, or 24.7%, primarily due to a 25.4% decrease in average total finance receivables. The decrease in income was partially mitigated by reductions in other expenses, which decreased $2.1 million, or 23.0%, for the three-month period ended September 30, 2009, compared to the same period in 2008.
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.
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