##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2007
 Commission
file number 000-50448
 MARLIN BUSINESS SERVICES CORP.
  Pennsylvania
(State of incorporation)
    
    38-3686388
(I.R.S. Employer Identification Number)
 
 
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##### Table of Contents



MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
 Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 2007
 TABLE OF CONTENTS
 Page No.Part I  Financial Information
    
    
    3Item 1  Financial Statements
    
    
    3Consolidated Balance Sheets at March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    4Consolidated Statements of Stockholders Equity at March 31, 2007 (unaudited) and December 31, 2006
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-14Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15-27Item 3  Quantitative and Qualitative Disclosure about Market Risk
    
    
    27Item 4  Controls and Procedures
    
    
    28Part II  Other Information
    
    
    28-29Item 1  Legal Proceedings
    
    
    28Item 1A   Risk Factors
    
    
    28Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3  Defaults upon Senior Securities
    
    
    28Item 4  Submission of Matters to a Vote of Security Holders
    
    
    28Item 5  Other Information
    
    
    28Item 6  Exhibits
    
    
    29Signatures
    
    
    30CertificationsRULE
13a-14(a) CERTIFICATION OF CEORULE
13a-14(a) CERTIFICATION OF CFORULE
13a-14(b) CERTIFICATION OF CEO AND CFO
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##### Table of Contents



PART I. Financial Information
 
 Item 1. Financial Statements
 MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 March 31,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands, except per-share data)(Unaudited)ASSETSCash and cash equivalents
    
    $
    7,429
    
    
    $
    26,663Restricted cash
    
    
    63,640
    
    
    
    57,705Net investment in leases and loans
    
    
    723,057
    
    
    
    693,911Property and equipment, net
    
    
    3,331
    
    
    
    3,430Property tax receivables
    
    
    7,000
    
    
    
    257Fair value of cash flow hedge derivatives
    
    
    264
    
    
    
    456Other assets
    
    
    12,682
    
    
    
    13,030Total assets
    
    $
    817,403
    
    
    $
    795,452LIABILITIES AND STOCKHOLDERS EQUITYRevolving and term secured borrowings
    
    $
    632,197
    
    
    $
    616,322Other liabilities:Fair value of cash flow hedge derivatives
    
    
    2,328
    
    
    
    1,607Sales and property taxes payable
    
    
    11,021
    
    
    
    8,034Accounts payable and accrued expenses
    
    
    9,847
    
    
    
    12,269Deferred income tax liability
    
    
    21,107
    
    
    
    22,931Total liabilities
    
    
    676,500
    
    
    
    661,163Commitments and contingenciesStockholders equity:Common Stock, $0.01 par value; 75,000,000 shares
authorized; 12,255,674 and 12,030,259 shares
issued and outstanding, respectively
    
    
    123
    
    
    
    120Preferred Stock, $0.01 par value; 5,000,000
shares authorized; none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    84,396
    
    
    
    81,850Stock subscription receivable
    
    
    (15
    )
    
    
    (18
    )Cumulative other comprehensive income
    
    
    927
    
    
    
    1,892Retained earnings
    
    
    55,472
    
    
    
    50,445Total stockholders equity
    
    
    140,903
    
    
    
    134,289Total liabilities and stockholders equity
    
    $
    817,403
    
    
    $
    795,452
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MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 Three Months Ended March 31,2007
    
    
    2006(Dollars in thousands, except per-share data)(Unaudited)Income:Interest income
    
    $
    21,437
    
    
    $
    17,819Fee income
    
    
    5,615
    
    
    
    4,907Interest and fee income
    
    
    27,052
    
    
    
    22,726Interest expense
    
    
    7,711
    
    
    
    5,495Net interest and fee income
    
    
    19,341
    
    
    
    17,231Provision for credit losses
    
    
    3,392
    
    
    
    2,415Net interest and fee income after provision for
credit losses
    
    
    15,949
    
    
    
    14,816Insurance and other income
    
    
    1,675
    
    
    
    1,355Operating income
    
    
    17,624
    
    
    
    16,171Non-interest expenseSalaries and benefits
    
    
    5,716
    
    
    
    5,145General and administrative
    
    
    3,352
    
    
    
    2,746Financing related costs
    
    
    247
    
    
    
    455Non-interest expense
    
    
    9,315
    
    
    
    8,346Income before income taxes
    
    
    8,309
    
    
    
    7,825Income taxes
    
    
    3,282
    
    
    
    3,091Net income
    
    $
    5,027
    
    
    $
    4,734Basic earnings per share
    
    $
    0.42
    
    
    $
    0.40Diluted earnings per share
    
    $
    0.41
    
    
    $
    0.39Weighted average shares used in computing basic
earnings per share
    
    
    11,957,024
    
    
    
    11,702,161Weighted average shares used in computing
diluted earnings per share
    
    
    12,257,484
    
    
    
    12,042,436
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MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity
 Additional
    
    
    Stock
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Stock
    
    
    Paid-In
    
    
    Subscription
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Receivable
    
    
    Income
    
    
    Earnings
    
    
    Equity(Dollars in thousands, except per-share data)(Unaudited)Balance, December 31, 2005
    
    
    11,755,225
    
    
    $
    117
    
    
    $
    77,186
    
    
    $
    (25
    )
    
    $
    3,520
    
    
    $
    31,811
    
    
    $
    112,609Issuance of common stock
    
    
    15,739
    
    
    
    
    
    
    
    343
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    343Exercise of stock options
    
    
    156,494
    
    
    
    2
    
    
    
    688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    690Tax benefit on stock options
exercised
    
    
    
    
    
    
    
    
    
    
    1,048
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,048Stock option compensation recognized
    
    
    
    
    
    
    
    
    
    
    1,090
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,090Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Restricted stock grant
    
    
    102,801
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    1,495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,495Unrealized gains (losses) on cash
flow
hedge derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,628
    )
    
    
    
    
    
    
    (1,628
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,634
    
    
    
    18,634Balance, December 31, 2006
    
    
    12,030,259
    
    
    $
    120
    
    
    $
    81,850
    
    
    $
    (18
    )
    
    $
    1,892
    
    
    $
    50,445
    
    
    $
    134,289Issuance of common stock
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    166,705
    
    
    
    2
    
    
    
    1,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054Tax benefit on stock options
exercised
    
    
    
    
    
    
    
    
    
    
    1,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054Stock option compensation recognized
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Restricted stock grant
    
    
    58,708
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Unrealized gains (losses) on cash
flow
hedge derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (965
    )
    
    
    
    
    
    
    (965
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,027
    
    
    
    5,027Balance, March 31, 2007
    
    
    12,255,674
    
    
    $
    123
    
    
    $
    84,396
    
    
    $
    (15
    )
    
    $
    927
    
    
    $
    55,472
    
    
    $
    140,903
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MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 Three Months Ended March 31,2007
    
    
    2006(In thousands)(Unaudited)Cash flows from operating activities:Net income
    
    $
    5,027
    
    
    $
    4,734Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,188
    
    
    
    1,126Excess tax benefits from stock-based payment
arrangements
    
    
    (1,054
    )
    
    
    (533
    )Amortization of deferred (gain) on cash flow hedge
derivatives
    
    
    (683
    )
    
    
    (402
    )Provision for credit losses
    
    
    3,392
    
    
    
    2,415Deferred taxes
    
    
    (1,192
    )
    
    
    (518
    )Amortization of deferred initial direct costs and fees
    
    
    3,779
    
    
    
    3,115Deferred initial direct costs and fees
    
    
    (5,402
    )
    
    
    (4,089
    )Effect of changes in other operating items:Other assets
    
    
    (5,799
    )
    
    
    (5,964
    )Other liabilities
    
    
    583
    
    
    
    5,189Net cash provided by (used by) operating
activities
    
    
    (161
    )
    
    
    5,073Cash flows from investing activities:Purchases of equipment for direct financing lease contracts
and funds used to originate loans
    
    
    (106,142
    )
    
    
    (82,049
    )Principal collections on leases and loans
    
    
    75,782
    
    
    
    64,799Security deposits collected, net of returns
    
    
    (556
    )
    
    
    (251
    )Acquisitions of property and equipment
    
    
    (208
    )
    
    
    (141
    )Change in restricted cash
    
    
    (5,935
    )
    
    
    (5,201
    )Net cash used in investing activities
    
    
    (37,059
    )
    
    
    (22,843
    )Cash flows from financing activities:Issuances of common stock, net of terminations
    
    
    3
    
    
    
    1Exercise of stock options
    
    
    1,054
    
    
    
    183Excess tax benefits from stock-based payment arrangements
    
    
    1,054
    
    
    
    533Debt issuance costs
    
    
    
    
    
    
    (100
    )Term securitization repayments
    
    
    (73,394
    )
    
    
    (65,958
    )Secured bank facility advances
    
    
    57,770
    
    
    
    26,190Secured bank facility repayments
    
    
    (50,021
    )
    
    
    (26,190
    )Warehouse advances
    
    
    82,372
    
    
    
    55,560Warehouse repayments
    
    
    (852
    )
    
    
    (1,992
    )Net cash provided by (used by) financing
activities
    
    
    17,986
    
    
    
    (11,773
    )Net increase (decrease) in cash and cash equivalents
    
    
    (19,234
    )
    
    
    (29,543
    )Cash and cash equivalents, beginning of period
    
    
    26,663
    
    
    
    34,472Cash and cash equivalents, end of period
    
    $
    7,429
    
    
    $
    4,929Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    7,886
    
    
    $
    5,477Cash paid for income taxes
    
    
    5,521
    
    
    
    2,246
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MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  Organization
 Description
    NOTE 2  Basis of Financial Statement Presentation and Critical Accounting Policies
  Use of Estimates.
 Income recognition.
 Fee income.
  Insurance and other income
 Initial direct costs and fees. Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases.
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Lease residual values.
 Allowance for credit losses.
  Securitizations. Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities
 Derivatives. Accounting for Derivative Instruments and Hedging Activities
 Stock-Based Compensation. Share-Based Payments
 Income taxes. Accounting for Income Taxes.
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Accounting for
Uncertainty in Income Taxes,
  NOTE 3  Net Investment in Leases and Loans
  March 31,
    
    
    December 31,2007
    
    
    2006(dollars in thousands)Minimum lease payments receivable
    
    $
    827,599
    
    
    $
    797,697Estimated residual value of equipment
    
    
    49,350
    
    
    
    48,188Unearned lease income, net of initial direct
costs and fees deferred
    
    
    (133,590
    )
    
    
    (128,252
    )Security deposits
    
    
    (16,968
    )
    
    
    (17,524
    )Loans, net of unamortized deferred fees and costs
    
    
    5,234
    
    
    
    2,003Allowance for credit losses
    
    
    (8,568
    )
    
    
    (8,201
    )$
    723,057
    
    
    $
    693,911
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Minimum LeasePayments
    
    
    IncomeReceivable
    
    
    AmortizationMarch 31, 2007
    
    
    March 31, 2007(dollars in thousands)Period Ending December 31:2007
    
    $
    251,385
    
    
    $
    53,5012008
    
    
    262,332
    
    
    
    45,1322009
    
    
    173,701
    
    
    
    23,0952010
    
    
    95,164
    
    
    
    9,5322011
    
    
    42,102
    
    
    
    2,271Thereafter
    
    
    2,915
    
    
    
    59$
    827,599
    
    
    $
    133,590
 NOTE 4  Other Assets
  March 31,
    
    
    December 31,2007
    
    
    2006(dollars in thousands)Derivative collateral
    
    $
    3,125
    
    
    $
    3,099Accrued fees receivable
    
    
    2,994
    
    
    
    2,687Deferred transaction costs
    
    
    1,969
    
    
    
    2,427Factoring receivables
    
    
    386
    
    
    
    1,760Prepaid expenses
    
    
    1,346
    
    
    
    871Other
    
    
    2,862
    
    
    
    2,186$
    12,682
    
    
    $
    13,030
  NOTE 5  Derivative Financial Instruments
 Accounting for
Derivative Instruments and Hedging Activities
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NOTE 6    Comprehensive Income
  Three Months Ended March 31,2007
    
    
    2006(dollars in thousands)Net income, as reported
    
    $
    5,027
    
    
    $
    4,734Other comprehensive income:Changes in fair values of cash flow hedge derivatives
    
    
    (913
    )
    
    
    1,565Amortization of deferred loss (gain) on cash flow
hedge derivatives
    
    
    (683
    )
    
    
    (402
    )Tax effect
    
    
    631
    
    
    
    (463
    )Total other comprehensive income
    
    
    (965
    )
    
    
    700Comprehensive income
    
    $
    4,062
    
    
    $
    5,434
 NOTE 7  Earnings Per Common Share
  Three Months Ended March 31,2007
    
    
    2006(dollars in thousands, except per-share data)Net income
    
    $
    5,027
    
    
    $
    4,734Weighted average common shares
outstanding used in computing basic
EPS
    
    
    11,957,024
    
    
    
    11,702,161Effect of dilutive securities:Stock options and restricted stock
    
    
    300,460
    
    
    
    340,275Adjusted weighted average common
shares used in computing diluted EPS
    
    
    12,257,484
    
    
    
    12,042,436Net earnings per common share:Basic
    
    $
    0.42
    
    
    $
    0.40Diluted
    
    $
    0.41
    
    
    $
    0.39
  NOTE 8  Stock-Based Compensation
  Stock Options
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Three Months EndedMarch 31,2007
    
    2006Risk-free interest rate
    
    
    4.48
    %
    
    
    4.79
    %Expected life (years)
    
    
    5
    
    
    
    5Expected volatility
    
    
    35
    %
    
    
    35
    %Expected dividends
    
    
    
    
    
    
    
   WeightedAverageOptions
    
    Shares
    
    Exercise PriceOutstanding at January 1, 2007
    
    
    918,977
    
    
    $
    11.61Granted
    
    
    95,967
    
    
    
    20.77Exercised
    
    
    (166,705
    )
    
    
    6.32Forfeited
    
    
    (1,125
    )
    
    
    22.07Expired
    
    
    
    
    
    
    Outstanding at March 31, 2007
    
    
    847,114
    
    
    $
    13.67
   Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    Aggregate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AggregateAverage
    
    
    Weighted
    
    
    Intrinsic
    
    
    
    
    
    
    Weighted
    
    
    Weighted
    
    
    IntrinsicRange of
    
    Number
    
    
    Remaining
    
    
    Average
    
    
    Value
    
    
    Number
    
    
    Average Remaining
    
    
    Average
    
    
    ValueExercise Prices
    
    Outstanding
    
    
    Life (Years)
    
    
    Exercise Price
    
    

(in thousands)
    
    
    Exercisable
    
    
    Life (Years)
    
    
    Exercise Price
    
    

(in thousands)$2.81 - 3.39
    
    
    166,686
    
    
    
    4.5
    
    
    $
    3.32
    
    
    $
    3,094
    
    
    
    166,686
    
    
    
    4.5
    
    
    $
    3.32
    
    
    $
    3,094$4.23 - 5.01
    
    
    58,641
    
    
    
    3.0
    
    
    
    4.34
    
    
    
    1,028
    
    
    
    58,641
    
    
    
    3.0
    
    
    
    4.34
    
    
    
    1,028$10.18
    
    
    106,645
    
    
    
    4.7
    
    
    
    10.18
    
    
    
    1,248
    
    
    
    106,645
    
    
    
    4.7
    
    
    
    10.18
    
    
    
    1,248$14.00-16.02
    
    
    99,000
    
    
    
    6.9
    
    
    
    14.73
    
    
    
    708
    
    
    
    67,363
    
    
    
    6.8
    
    
    
    14.61
    
    
    
    490$17.52-22.25
    
    
    416,142
    
    
    
    6.2
    
    
    
    19.78
    
    
    
    874
    
    
    
    144,758
    
    
    
    6.0
    
    
    
    18.90
    
    
    
    431847,114
    
    
    
    5.5
    
    
    $
    13.67
    
    
    $
    6,952
    
    
    
    544,093
    
    
    
    5.1
    
    
    $
    10.32
    
    
    $
    6,291
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Restricted Stock Awards
      WeightedAverageGrant-DateShares
    
    Fair ValueNon-vested restricted stock at January 1, 2007
    
    
    207,731
    
    
    $
    19.57Granted
    
    
    60,708
    
    
    
    20.77Vested
    
    
    (38,667
    )
    
    
    16.60Forfeited
    
    
    (2,000
    )
    
    
    21.53Non-vested restricted stock at March 31,2007
    
    
    227,772
    
    
    $
    20.38
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Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
 The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the related notes thereto in
our Form 10-K filed with the Securities and Exchange Commission This discussion contains certain
statements of a forward-looking nature that involve risks and uncertainties.
 FORWARD-LOOKING STATEMENTS
  
    
    availability, terms and deployment of capital;
    
    general volatility of the securitization and capital markets;
    
    changes in our industry, interest rates or the general economy;
    
    changes in our business strategy;
    
    the degree and nature of our competition;
    
    availability of qualified personnel; and
    
    the factors set forth in the section captioned Risk Factors in our
Form 10-K filed with the Securities and Exchange Commission.
  Overview
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##### Table of Contents



Three MonthsEndedMarch 31,
    
    As of or For the Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002Number of sales account executives
    
    
    96
    
    
    
    100
    
    
    
    103
    
    
    
    100
    
    
    
    84
    
    
    
    67Number of originating
sources(1)
    
    
    1,337
    
    
    
    1,295
    
    
    
    1,295
    
    
    
    1,244
    
    
    
    1,147
    
    
    
    929
 
 (1)
    
    Monthly average of origination sources generating lease volume.    Accounting for Derivative Instruments and
Hedging Activities
 Critical Accounting Policies
  - 16 -




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##### Table of Contents



Income recognition.
    Initial direct costs and fees. Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases.
 Lease residual values.
 Allowance for credit losses.
  Securitizations.
 - 17 -




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##### Table of Contents



Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
 Derivatives. Accounting for Derivative Instruments and Hedging Activities
 Stock-Based Compensation. Share-Based Payments
 Income taxes.
 Accounting for
Uncertainty in Income Taxes,
  RESULTS OF OPERATIONS
 Comparison of the Three Months Ended March 31, 2007 and 2006
 Net income.
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##### Table of Contents



Three Months Ended March 31,2007
    
    
    2006(Dollars in thousands)Interest income
    
    $
    21,437
    
    
    $
    17,819Fee income
    
    
    5,615
    
    
    
    4,907Interest and fee income
    
    
    27,052
    
    
    
    22,726Interest expense
    
    
    7,711
    
    
    
    5,495Net interest and fee income
    
    $
    19,341
    
    
    $
    17,231Average total finance receivables (1)
    
    $
    691,253
    
    
    $
    568,248Percent of average total finance receivables:Interest income
    
    
    12.40
    %
    
    
    12.54
    %Fee income
    
    
    3.25
    
    
    
    3.45Interest and fee income
    
    
    15.65
    
    
    
    15.99Interest expense
    
    
    4.46
    
    
    
    3.87Net interest and fee margin
    
    
    11.19
    %
    
    
    12.12
    %
 
 (1)
    
    Total finance receivables includes net investment in direct financing leases, loans
and factoring receivables. For the calculations above, the effects of (1) the allowance for
credit losses, and (2) initial direct costs and fees deferred, are excluded. Net interest and fee margin.
     - 19 -




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##### Table of Contents



Insurance and other income.
 Salaries and benefits expense.
 General and administrative expense.
 Financing related costs.
 Provision for credit losses.
 Provision for income taxes.
 FINANCE RECEIVABLES AND ASSET QUALITY
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##### Table of Contents



Year EndedThree Months Ended March 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2006(Dollars in thousands)Allowance for credit losses, beginning of period
    
    $
    8,201
    
    
    $
    7,813
    
    
    $
    7,813Provision for credit losses
    
    
    3,392
    
    
    
    2,415
    
    
    
    9,934Charge-offs, net
    
    
    (3,025
    )
    
    
    (2,324
    )
    
    
    (9,546
    )Allowance for credit losses, end of period
    
    $
    8,568
    
    
    $
    7,904
    
    
    $
    8,201Annualized net charge-offs to average total finance receivables (1)
    
    
    1.75
    %
    
    
    1.64
    %
    
    
    1.56
    %Allowance for credit losses to total finance receivables, end of period (1)
    
    
    1.21
    %
    
    
    1.37
    %
    
    
    1.21
    %Average net investment in total finance receivables (1)
    
    $
    691,253
    
    
    $
    568,248
    
    
    $
    611,348Net investment in total finance receivables, end of period (1)
    
    $
    706,135
    
    
    $
    577,219
    
    
    $
    679,621Delinquencies 60 days or more past due
    
    $
    6,329
    
    
    $
    3,320
    
    
    $
    5,715Delinquencies 60 days or more past due (2)
    
    
    0.76
    %
    
    
    0.49
    %
    
    
    0.71
    %Allowance for credit losses to delinquent accounts 60 days or
more past due
    
    
    135.38
    %
    
    
    238.07
    %
    
    
    143.50
    %Non-accrual leases and loans
    
    $
    2,976
    
    
    $
    1,544
    
    
    $
    2,250Renegotiated leases and loans
    
    $
    3,999
    
    
    $
    4,510
    
    
    $
    3,819
 
 (1)
    
    Net investment in total finance receivables includes net investment in direct
financing leases, loans and factoring receivables. For purposes of asset quality and
allowance calculations the effects of (1) the allowance for credit losses, and (2) initial
direct costs and fees deferred, are excluded.(2)
    
    Calculated as a percent of minimum lease payments receivable for leases and as a
percent of principal outstanding for loans and factoring receivables.   Residual Performance
   LIQUIDITY AND CAPITAL RESOURCES
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
    
    borrowings under a revolving bank facility;
    
    financing of leases in CP conduit warehouse facilities;
    
    financing of leases through term note securitizations; and
    
    equity and debt securities with third party investors.
     Cash and Cash Equivalents.
  Borrowings.
 For the Three Months Ended March 31, 2007
    
    
    As of March 31, 2007MaximumMaximum
    
    
    Month End
    
    
    Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedFacility
    
    
    Amount
    
    
    Amount
    
    
    Average
    
    
    Amounts
    
    
    Average
    
    
    UnusedAmount
    
    
    Outstanding
    
    
    Outstanding
    
    
    Coupon
    
    
    Outstanding
    
    
    Coupon
    
    
    Capacity(Dollars in thousands)Revolving bank facility(1)
    
    $
    40,000
    
    
    $
    7,749
    
    
    $
    2,170
    
    
    
    8.33
    %
    
    $
    7,749
    
    
    
    8.50
    %
    
    $
    32,251CP conduit warehouse
facilities(1)
    
    $
    225,000
    
    
    
    81,520
    
    
    
    29,216
    
    
    
    5.80
    %
    
    
    81,520
    
    
    
    5.61
    %
    
    
    143,480Term note securitizations(2)
    
    
    
    
    
    
    591,501
    
    
    
    579,425
    
    
    
    4.68
    %
    
    
    542,928
    
    
    
    4.72
    %
    
    
    $
    265,000
    
    
    
    
    
    
    $
    610,811
    
    
    
    4.75
    %
    
    $
    632,197
    
    
    
    4.88
    %
    
    $
    175,731
 
 (1)
    
    Subject to lease eligibility and borrowing base formula.(2)
    
    Our term note securitizations are one-time fundings that pay down over time without
any ability for us to draw down additional amounts. Revolving Bank Facility
  - 22 -




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CP Conduit Warehouse Facilities
    Term Note Securitizations
     - 23 -




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##### Table of Contents



Other
  Contractual Obligations
  Contractual Obligations as of March 31, 2007Operating
    
    
    Leased
    
    
    CapitalBorrowings
    
    
    Interest(1)
    
    
    Leases
    
    
    Facilities
    
    
    Leases
    
    
    Total(Dollars in thousands)2007
    
    $
    274,186
    
    
    $
    17,907
    
    
    $
    14
    
    
    $
    1,249
    
    
    $
    54
    
    
    $
    293,4102008
    
    
    182,679
    
    
    
    14,034
    
    
    
    14
    
    
    
    1,548
    
    
    
    34
    
    
    
    198,3092009
    
    
    106,619
    
    
    
    6,434
    
    
    
    10
    
    
    
    1,394
    
    
    
    
    
    
    
    114,4572010
    
    
    51,588
    
    
    
    2,274
    
    
    
    
    
    
    
    1,323
    
    
    
    
    
    
    
    55,1852011
    
    
    16,971
    
    
    
    361
    
    
    
    
    
    
    
    1,223
    
    
    
    
    
    
    
    18,555Thereafter
    
    
    154
    
    
    
    2
    
    
    
    
    
    
    
    2,193
    
    
    
    
    
    
    
    2,349Total
    
    $
    632,197
    
    
    $
    41,012
    
    
    $
    38
    
    
    $
    8,930
    
    
    $
    88
    
    
    $
    682,265
 
 (1)
    
    Includes interest on term note securitizations only. Excludes interest on $89.3
million of revolving bank facilities and CP conduit warehouse facilities. - 24 -




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MARKET INTEREST RATE RISK AND SENSITIVITY
        - 25 -




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Scheduled Maturities by Calendar YearTotal2011 &
    
    Carrying2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    Amount(Dollars in thousands)Debt:Fixed-rate debt
    
    $
    184,918
    
    
    $
    182,679
    
    
    $
    106,619
    
    
    $
    51,588
    
    
    $
    17,124
    
    
    $
    542,928Average fixed rate
    
    
    4.66
    %
    
    
    4.68
    %
    
    
    4.84
    %
    
    
    5.08
    %
    
    
    5.51
    %
    
    
    4.77
    %Variable-rate debt
    
    $
    89,269
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    89,269Average variable rate
    
    
    5.86
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.86
    %
   - 26 -




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RECENTLY ISSUED ACCOUNTING STANDARDS
 Accounting for Certain Hybrid Financial Instruments
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 Fair Value Measurements
 , Financial
Statements  Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in
Current Year Financial Statements
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
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##### Table of Contents



Item 4. Controls and Procedures
      
 PART II. Other Information
 
 Item 1.
    
    Legal ProceedingsWe are party to various legal proceedings, which include claims and litigation arising in
the ordinary course of business. In the opinion of management, these actions will not have
a material adverse effect on our business, financial condition or results of operations.
 
 Item 1A.
    
    Risk FactorsThere have been no material changes in the risk factors from those disclosed in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsNone
 
 Item 3.
    
    Defaults Upon Senior SecuritiesNone
 
 Item 4.
    
    Submission of Matters To A Vote Of Security HoldersNone
 
 Item 5.
    
    Other InformationNone
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Item 6. Exhibits
 ExhibitNumber
    
    Description31.1
    
    Certification of the Chief Executive Officer of Marlin Business Services Corp. required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. (Filed herewith)31.2
    
    Certification of the Chief Financial Officer of Marlin Business Services Corp. required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. (Filed herewith)32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer of Marlin Business
Services Corp. required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as
amended. (This exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that
section. Further, this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended.) (Furnished herewith)
 - 29 -




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SIGNATURES
  MARLIN BUSINESS SERVICES CORP.(Registrant)By:
    
    /s/ Daniel P. Dyer

   Daniel P. Dyer
    
    
    
    Chief Executive Officer(Chief
Executive Officer)By:
    
    /s/ Lynne C. WilsonLynne C. Wilson
    
    
    
    Chief
Financial Officer & Senior Vice President(Principal Financial Officer)
  - 30 -