##### 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, 2008
 Commission file number 000-50448
 MARLIN BUSINESS SERVICES CORP.
  Pennsylvania
    
    38-3686388(State of incorporation)
    
    (I.R.S. Employer Identification Number)
 
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
 Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 2008
 TABLE OF CONTENTS
 Page No.Part I  Financial Information
    
    
    2-32Item 1 Financial Statements
    
    
    2-16Consolidated Balance Sheets at March 31, 2008 (unaudited) and December 31, 2007
    
    
    2Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited)
    
    
    3Consolidated Statements of Stockholders Equity at March 31, 2008 (unaudited) and December 31, 2007
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6-16Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17-32Item 3 Quantitative and Qualitative Disclosure about Market Risk
    
    
    32Item 4 Controls and Procedures
    
    
    32Part II  Other Information
    
    
    33Item 1 Legal Proceedings
    
    
    33Item 1A Risk Factors
    
    
    33Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3 Defaults upon Senior Securities
    
    
    33Item 4 Submission of Matters to a Vote of Security Holders
    
    
    33Item 5 Other Information
    
    
    33Item 6 Exhibits
    
    
    33Signatures
    
    
    34CertificationsRULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICERRULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICERRULE 13a-14(b) CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
  1




---



##### Table of Contents



PART I. Financial Information
 
 Item 1. Financial Statements
 MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands, except per-share data)(Unaudited)ASSETSCash and cash equivalents
    
    $
    24,089
    
    
    $
    34,347Restricted cash
    
    
    64,894
    
    
    
    141,070Net investment in leases and loans
    
    
    753,535
    
    
    
    765,938Property and equipment, net
    
    
    3,359
    
    
    
    3,266Property tax receivables
    
    
    8,453
    
    
    
    539Fair value of cash flow hedge derivatives
    
    
    
    
    
    
    4Other assets
    
    
    18,503
    
    
    
    14,490Total assets
    
    $
    872,833
    
    
    $
    959,654LIABILITIES AND STOCKHOLDERS EQUITYRevolving and term secured borrowings
    
    $
    680,256
    
    
    $
    773,085Other liabilities:Fair value of cash flow hedge derivatives
    
    
    10,107
    
    
    
    4,760Sales and property taxes payable
    
    
    12,262
    
    
    
    5,756Accounts payable and accrued expenses
    
    
    8,304
    
    
    
    10,226Deferred income tax liability
    
    
    14,302
    
    
    
    15,682Total liabilities
    
    
    725,231
    
    
    
    809,509Commitments and contingenciesStockholders equity:Common Stock, $0.01 par value; 75,000,000 shares
authorized; 12,166,250 and 12,201,304 shares
issued and outstanding, respectively
    
    
    122
    
    
    
    122Preferred Stock, $0.01 par value;
5,000,000 shares authorized; none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    83,797
    
    
    
    84,429Stock subscription receivable
    
    
    (5
    )
    
    
    (7
    )Accumulated other comprehensive loss
    
    
    (6,402
    )
    
    
    (3,130
    )Retained earnings
    
    
    70,090
    
    
    
    68,731Total stockholders equity
    
    
    147,602
    
    
    
    150,145Total liabilities and stockholders equity
    
    $
    872,833
    
    
    $
    959,654
  2




---



##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 Three Months Ended March 31,2008
    
    
    2007(Dollars in thousands, except per-share data)(Unaudited)Income:Interest income
    
    $
    22,953
    
    
    $
    21,437Fee income
    
    
    5,594
    
    
    
    5,615Interest and fee income
    
    
    28,547
    
    
    
    27,052Interest expense
    
    
    10,247
    
    
    
    7,711Net interest and fee income
    
    
    18,300
    
    
    
    19,341Provision for credit losses
    
    
    7,006
    
    
    
    3,392Net interest and fee income after
provision for
credit losses
    
    
    11,294
    
    
    
    15,949Insurance and other income
    
    
    1,761
    
    
    
    1,675Net interest and other revenue
after provision for credit losses
    
    
    13,055
    
    
    
    17,624Non-interest expenseSalaries and benefits
    
    
    5,870
    
    
    
    5,716General and administrative
    
    
    4,303
    
    
    
    3,352Financing related costs
    
    
    366
    
    
    
    247Non-interest expense
    
    
    10,539
    
    
    
    9,315Income before income taxes
    
    
    2,516
    
    
    
    8,309Income taxes
    
    
    1,157
    
    
    
    3,282Net income
    
    $
    1,359
    
    
    $
    5,027Basic earnings per share
    
    $
    0.11
    
    
    $
    0.42Diluted earnings per share
    
    $
    0.11
    
    
    $
    0.41Weighted average shares used in computing
basic earnings per share
    
    
    12,033,523
    
    
    
    11,957,024Weighted average shares used in computing
diluted earnings per share
    
    
    12,133,159
    
    
    
    12,257,484
  3




---



##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity
 AccumulatedAdditional
    
    
    Stock
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Stock
    
    
    Paid-In
    
    
    Subscription
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Receivable
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity(Dollars in thousands)(Unaudited)Balance, December 31, 2006
    
    
    12,030,259
    
    
    $
    120
    
    
    $
    81,850
    
    
    $
    (18
    )
    
    $
    1,892
    
    
    $
    50,445
    
    
    $
    134,289Issuance of common stock
    
    
    17,994
    
    
    
    
    
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290Repurchase of common stock
    
    
    (122,000
    )
    
    
    (1
    )
    
    
    (1,613
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,614
    )Exercise of stock options
    
    
    217,417
    
    
    
    2
    
    
    
    1,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,744Tax benefit on stock options
exercised
    
    
    
    
    
    
    
    
    
    
    1,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,220Stock option compensation
recognized, net of tax
    
    
    
    
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Restricted stock grant
    
    
    57,634
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527Net unrealized losses on cash
flow
hedge derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,022
    )
    
    
    
    
    
    
    (5,022
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,286
    
    
    
    18,286Balance, December 31, 2007
    
    
    12,201,304
    
    
    $
    122
    
    
    $
    84,429
    
    
    $
    (7
    )
    
    $
    (3,130
    )
    
    $
    68,731
    
    
    $
    150,145Issuance of common stock
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (98,400
    )
    
    
    (1
    )
    
    
    (983
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (984
    )Exercise of stock options
    
    
    27,391
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Tax benefit on stock options
exercised
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Stock option compensation
recognized, net of tax
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Restricted stock grant
    
    
    35,953
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177Net unrealized losses on cash
flow
hedge derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,272
    )
    
    
    
    
    
    
    (3,272
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,359
    
    
    
    1,359Balance, March 31, 2008
    
    
    12,166,250
    
    
    $
    122
    
    
    $
    83,797
    
    
    $
    (5
    )
    
    $
    (6,402
    )
    
    $
    70,090
    
    
    $
    147,602
  4




---



##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 Three Months Ended March 31,2008
    
    
    2007(In thousands)(Unaudited)Cash flows from operating activities:Net income
    
    $
    1,359
    
    
    $
    5,027Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    760
    
    
    
    747Stock-based compensation
    
    
    281
    
    
    
    441Excess tax benefits from stock-based payment arrangements
    
    
    (75
    )
    
    
    (1,054
    )Amortization of deferred net gain on cash flow hedge
derivatives
    
    
    (70
    )
    
    
    (683
    )Provision for credit losses
    
    
    7,006
    
    
    
    3,392Deferred taxes
    
    
    685
    
    
    
    (1,192
    )Amortization of deferred initial direct costs and fees
    
    
    4,337
    
    
    
    3,779Deferred initial direct costs and fees
    
    
    (3,170
    )
    
    
    (5,402
    )Loss on equipment disposed
    
    
    173
    
    
    
    85Effect of changes in other operating items:Other assets
    
    
    (12,261
    )
    
    
    (5,799
    )Other liabilities
    
    
    4,602
    
    
    
    583Net cash provided by (used by) operating activities
    
    
    3,627
    
    
    
    (76
    )Cash flows from investing activities:Purchases of equipment for direct financing lease contracts
and funds used to originate loans
    
    
    (75,120
    )
    
    
    (106,142
    )Principal collections on leases and loans
    
    
    78,497
    
    
    
    74,508Security deposits collected, net of returns
    
    
    (706
    )
    
    
    (556
    )Proceeds from the sale of equipment
    
    
    1,387
    
    
    
    1,189Acquisitions of property and equipment
    
    
    (426
    )
    
    
    (208
    )Change in restricted cash
    
    
    76,177
    
    
    
    (5,935
    )Net cash provided by (used by) investing activities
    
    
    79,809
    
    
    
    (37,144
    )Cash flows from financing activities:Issuances of common stock
    
    
    2
    
    
    
    3Repurchases of common stock
    
    
    (984
    )
    
    
    Exercise of stock options
    
    
    80
    
    
    
    1,054Excess tax benefits from stock-based payment arrangements
    
    
    75
    
    
    
    1,054Debt issuance costs
    
    
    (38
    )
    
    
    Term securitization repayments
    
    
    (110,690
    )
    
    
    (73,394
    )Secured bank facility advances
    
    
    18,601
    
    
    
    57,770Secured bank facility repayments
    
    
    (740
    )
    
    
    (50,021
    )Warehouse advances
    
    
    
    
    
    
    82,372Warehouse repayments
    
    
    
    
    
    
    (852
    )Net cash provided by (used by) financing activities
    
    
    (93,694
    )
    
    
    17,986Net decrease in cash and cash equivalents
    
    
    (10,258
    )
    
    
    (19,234
    )Cash and cash equivalents, beginning of period
    
    
    34,347
    
    
    
    26,663Cash and cash equivalents, end of period
    
    $
    24,089
    
    
    $
    7,429Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    10,098
    
    
    $
    7,886Cash paid for income taxes
    
    
    1,805
    
    
    
    5,521
  5




---



##### Table of Contents



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.
   6




---



##### Table of Contents



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.
 Lease residual values.
 Allowance for credit losses.
  Securitizations. Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities a replacement of Financial Accounting Standards Board (FASB) Statement 125
 Derivatives. Accounting for Derivative Instruments and Hedging
Activities
 7




---



##### Table of Contents



Fair Value Measurements
 Common Stock and Equity.
 Stock-Based Compensation. Share-Based Payments,
 Income taxes. Accounting for Income Taxes.
  Accounting for
Uncertainty in Income Taxes,
  8




---



##### Table of Contents



NOTE 3  Net Investment in Leases and Loans
  March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Minimum lease payments receivable
    
    $
    846,688
    
    
    $
    865,156Estimated residual value of equipment
    
    
    51,043
    
    
    
    50,798Unearned lease income, net of initial direct
costs and fees deferred
    
    
    (134,231
    )
    
    
    (137,909
    )Security deposits
    
    
    (14,437
    )
    
    
    (15,144
    )Loans, net of unamortized deferred fees and costs
    
    
    16,546
    
    
    
    14,025Allowance for credit losses
    
    
    (12,074
    )
    
    
    (10,988
    )$
    753,535
    
    
    $
    765,938
   Minimum LeasePayments
    
    
    IncomeReceivable
    
    
    Amortization(Dollars in thousands)Period Ending December 31:2008
    
    $
    264,807
    
    
    $
    54,7772009
    
    
    271,927
    
    
    
    45,5652010
    
    
    177,370
    
    
    
    22,9212011
    
    
    95,711
    
    
    
    8,9812012
    
    
    34,902
    
    
    
    1,937Thereafter
    
    
    1,971
    
    
    
    50$
    846,688
    
    
    $
    134,231
 NOTE 4  Allowance for Credit Losses
   Three Months Ended March 31,2008
    
    
    2007(Dollars in thousands)Balance, beginning of period
    
    $
    10,988
    
    
    $
    8,201Current provisions
    
    
    7,006
    
    
    
    3,392Charge-offs, net
    
    
    (5,920
    )
    
    
    (3,025
    )Balance, end of period
    
    $
    12,074
    
    
    $
    8,568
 9




---



##### Table of Contents



NOTE 5  Other Assets
  March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Derivative collateral
    
    $
    8,148
    
    
    $
    4,361Accrued fees receivable
    
    
    3,129
    
    
    
    3,361Deferred transaction costs
    
    
    2,334
    
    
    
    2,739Prepaid expenses
    
    
    1,434
    
    
    
    1,268Other
    
    
    3,458
    
    
    
    2,761$
    18,503
    
    
    $
    14,490
 NOTE 6
 Revolving and Term Secured Borrowings
  Principal
    
    
    Interest(1)(Dollars in thousands)2008
    
    $
    243,516
    
    
    $
    23,4732009
    
    
    210,947
    
    
    
    18,7922010
    
    
    133,153
    
    
    
    8,8962011
    
    
    68,432
    
    
    
    3,2582012
    
    
    23,360
    
    
    
    592Thereafter
    
    
    848
    
    
    
    10Total
    
    $
    680,256
    
    
    $
    55,021
 
 (1)
    
    Includes interest on term note securitizations only. Excludes interest on $17.9
million of revolving bank facility and commercial paper (CP) conduit warehouse facility. NOTE 7  Derivative Financial Instruments
 Accounting for Derivative Instruments and Hedging Activities
   10




---



##### Table of Contents



For Active Agreements:
 Inception Date
    
    
    
    January,
    
    December,
    
    August,
    
    August,March, 2008

    
    2008
    
    2007
    
    2007
    
    2006
    
    July, 2004Commencement Date
    
    October,
    
    October,
    
    October,
    
    October,
    
    October,2009
    
    2009
    
    2009
    
    2008
    
    2008
    
    July, 2004(Dollars in thousands)Notional amount:March 31, 2008
    
    $
    25,000
    
    
    $
    25,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    3,066For active agreements:Fair value recorded in other assets (liabilities)March 31, 2008
    
    $
    (4
    )
    
    $
    (263
    )
    
    $
    (1,341
    )
    
    $
    (3,898
    )
    
    $
    (4,601
    )
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    (46
    )
    
    $
    (2,010
    )
    
    $
    (2,704
    )
    
    $
    4Unrealized gain (loss), net of tax, recorded in
equityMarch 31, 2008
    
    $
    (3
    )
    
    $
    (158
    )
    
    $
    (808
    )
    
    $
    (2,349
    )
    
    $
    (2,779
    )
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    (28
    )
    
    $
    (1,213
    )
    
    $
    (1,632
    )
    
    $
    2
 For Terminated Agreements:
 Inception Date
    
    August 2006/August
    
    June/September,
    
    October/December,2007
    
    2005
    
    2004Commencement Date
    
    October, 2007
    
    September, 2006
    
    August, 2005Termination Date
    
    October, 2007
    
    September, 2006
    
    August, 2005(Dollars in thousands)Notional amount
    
    $
    300,000
    
    
    $
    225,000
    
    
    $
    250,000Realized gain (loss) at termination
    
    $
    (2,683
    )
    
    $
    3,732
    
    
    $
    3,151Deferred gain (loss), net of tax,
recorded in equityMarch 31, 2008
    
    $
    (1,264
    )
    
    $
    801
    
    
    $
    158December 31, 2007
    
    $
    (1,462
    )
    
    $
    974
    
    
    $
    229Amortization recognized as increase
(decrease) in interest expenseThree months ended March 31, 2008
    
    $
    330
    
    
    $
    (282
    )
    
    $
    (118
    )Year ended December 31, 2007
    
    $
    255
    
    
    $
    (1,543
    )
    
    $
    (749
    )Expected amortization during next 12
months as increase/(decrease) in
interest expense
    
    $
    1,016
    
    
    $
    (832
    )
    
    $
    (263
    )
  11




---



##### Table of Contents



NOTE 8
 Fair Value Measurements
 Fair Value Measurements
   
    
    Level 1  Inputs to the valuation are unadjusted quoted prices in active markets for
identical assets or liabilities.
    
    Level 2  Inputs to the valuation may include quoted prices for similar assets and
liabilities in active or inactive markets, and inputs other than quoted prices, such as
interest rates and yield curves, that are observable for the asset or liability for
substantially the full term of the financial instrument.
    
    Level 3  Inputs to the valuation are unobservable and significant to the fair value
measurement. Level 3 inputs shall be used to measure fair value only to the extent that
observable inputs are not available.
   Fair Value Measurements Using
    
    Assets/LiabilitiesLevel 1
    
    Level 2
    
    Level 3
    
    at Fair Value(Dollars in thousands)AssetsInterest-rate caps purchased
    
    $
    
    
    
    $
    125
    
    
    $
    
    
    
    $
    125Interest-rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LiabilitiesInterest-rate caps sold
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    125Interest-rate swaps
    
    
    
    
    
    
    10,107
    
    
    
    
    
    
    
    10,107
 12




---



##### Table of Contents



NOTE 9  Comprehensive Income
  Three Months Ended March 31,2008
    
    
    2007(Dollars in thousands)Net income, as reported
    
    $
    1,359
    
    
    $
    5,027Other comprehensive income:Changes in fair values of cash flow hedge derivatives
    
    
    (5,352
    )
    
    
    (913
    )Amortization of net deferred gain on cash flow hedge
derivatives
    
    
    (70
    )
    
    
    (683
    )Tax effect
    
    
    2,150
    
    
    
    631Total other comprehensive loss
    
    
    (3,272
    )
    
    
    (965
    )Comprehensive income (loss)
    
    $
    (1,913
    )
    
    $
    4,062
 NOTE 10  Stockholders Equity and Earnings Per Share
 Stockholders Equity
   Regulatory Capital Requirements
    Prompt Corrective Action.
 13




---



##### Table of Contents



Dividends.
 Earnings Per Share
  Three Months Ended March 31,2008
    
    
    2007(Dollars in thousands, except per-share data)Net income
    
    $
    1,359
    
    
    $
    5,027Weighted average common shares outstanding used in
computing basic EPS
    
    
    12,033,523
    
    
    
    11,957,024Effect of dilutive securities:Stock options and restricted stock
    
    
    99,636
    
    
    
    300,460Adjusted weighted average common shares used in computing
diluted EPS
    
    
    12,133,159
    
    
    
    12,257,484Net earnings per common share:Basic
    
    $
    0.11
    
    
    $
    0.42Diluted
    
    $
    0.11
    
    
    $
    0.41
  NOTE 11  Stock-Based Compensation
  Stock Options
   14




---



##### Table of Contents



Three Months EndedMarch 31,2008
    
    2007Risk-free interest rate
    
    
    2.36
    %
    
    
    4.48
    %Expected life (years)
    
    5.2 years
    
    5.2 yearsExpected volatility
    
    
    35
    %
    
    
    35
    %Expected dividends
    
    
    
    
    
    
    
   WeightedAverageOptions
    
    Shares
    
    Exercise PriceOutstanding at January 1, 2008
    
    
    727,184
    
    
    $
    13.20Granted
    
    
    229,398
    
    
    
    9.51Exercised
    
    
    (27,391
    )
    
    
    2.94Forfeited
    
    
    (5,754
    )
    
    
    20.85Expired
    
    
    
    
    
    
    Outstanding at March 31, 2008
    
    
    923,437
    
    
    
    12.54
    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)$3.39
    
    
    121,520
    
    
    
    4.0
    
    
    $
    3.39
    
    
    $
    506
    
    
    
    121,520
    
    
    
    4.0
    
    
    $
    3.39
    
    
    $
    506$4.23 - 5.01
    
    
    58,641
    
    
    
    2.0
    
    
    
    4.34
    
    
    
    188
    
    
    
    58,641
    
    
    
    2.0
    
    
    
    4.34
    
    
    
    188$8.65 - 10.18
    
    
    336,043
    
    
    
    5.9
    
    
    
    9.73
    
    
    
    
    
    
    
    106,645
    
    
    
    3.7
    
    
    
    10.18
    
    
    
    $14.00-16.02
    
    
    93,484
    
    
    
    5.9
    
    
    
    14.75
    
    
    
    
    
    
    
    75,775
    
    
    
    5.8
    
    
    
    14.55
    
    
    
    $17.52-22.25
    
    
    313,749
    
    
    
    5.2
    
    
    
    19.97
    
    
    
    
    
    
    
    138,533
    
    
    
    4.9
    
    
    
    19.32
    
    
    
    923,437
    
    
    
    5.2
    
    
    
    12.54
    
    
    $
    694
    
    
    
    501,114
    
    
    
    4.2
    
    
    
    11.04
    
    
    $
    694
  15




---



##### Table of Contents



Restricted Stock Awards
      WeightedAverageGrant-DateShares
    
    Fair ValueNon-vested restricted stock at January 1, 2008
    
    
    218,248
    
    
    $
    20.17Granted
    
    
    40,451
    
    
    
    9.51Vested
    
    
    (6,515
    )
    
    
    17.95Forfeited
    
    
    (4,592
    )
    
    
    21.31Non-vested restricted stock at March 31, 2008
    
    
    247,592
    
    
    
    18.47
    16




---



##### Table of Contents



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 capital markets, in particular, the market for securitized assets;-
    
    changes in our industry, interest rates or the general economy resulting in changes to our business strategy;-
    
    the 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
     17




---



##### Table of Contents



Three MonthsEndedMarch 31,
    
    As of or For the Year Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Number of sales account executives
    
    
    108
    
    
    
    118
    
    
    
    100
    
    
    
    103
    
    
    
    100
    
    
    
    84Number of originating
sources(1)
    
    
    1,091
    
    
    
    1,246
    
    
    
    1,295
    
    
    
    1,295
    
    
    
    1,244
    
    
    
    1,147
 
 (1)
    
    Monthly average of origination sources generating lease volume    Accounting for Derivative
Instruments and Hedging Activities
 Critical Accounting Policies
  18




---



##### 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.
 19




---



##### Table of Contents



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
Uncertainty in Income Taxes,
 20




---



##### Table of Contents



RESULTS OF OPERATIONS
 Comparison of the Three Months Ended March 31, 2008 and 2007
 Net income.
   Three Months Ended March 31,2008
    
    
    2007(Dollars in thousands)Interest income
    
    $
    22,953
    
    
    $
    21,437Fee income
    
    
    5,594
    
    
    
    5,615Interest and fee income
    
    
    28,547
    
    
    
    27,052Interest expense
    
    
    10,247
    
    
    
    7,711Net interest and fee income
    
    $
    18,300
    
    
    $
    19,341Average total finance receivables (1)
    
    $
    745,175
    
    
    $
    691,253Percent of average total finance receivables:Interest income
    
    
    12.32
    %
    
    
    12.40
    %Fee income
    
    
    3.00
    
    
    
    3.25Interest and fee income
    
    
    15.32
    
    
    
    15.65Interest expense
    
    
    5.50
    
    
    
    4.46Net interest and fee margin
    
    
    9.82
    %
    
    
    11.19
    %
 
 (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.
  21




---



##### Table of Contents



Insurance and other income.
 Salaries and benefits expense.
 General and administrative expense.
 Financing related costs.
 Provision for credit losses.
 22




---



##### Table of Contents



Provision for income taxes.
 FINANCE RECEIVABLES AND ASSET QUALITY
   Three Months Ended
    
    
    Year EndedMarch 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007(Dollars
in thousands)Allowance for credit losses, beginning of period
    
    $
    10,988
    
    
    $
    8,201
    
    
    $
    8,201Provision for credit losses
    
    
    7,006
    
    
    
    3,392
    
    
    
    17,221Charge-offs, net
    
    
    (5,920
    )
    
    
    (3,025
    )
    
    
    (14,434
    )Allowance for credit losses, end of period
    
    $
    12,074
    
    
    $
    8,568
    
    
    $
    10,988Annualized net charge-offs to average total finance
receivables (1)
    
    
    3.18
    %
    
    
    1.75
    %
    
    
    2.00
    %Allowance for credit losses to total finance receivables,
end of period (1)
    
    
    1.63
    %
    
    
    1.21
    %
    
    
    1.47
    %Average total finance receivables (1)
    
    $
    745,175
    
    
    $
    691,253
    
    
    $
    721,900Total finance receivables, end of period (1)
    
    $
    739,393
    
    
    $
    706,135
    
    
    $
    749,571Delinquencies greater than 60 days past due
    
    $
    9,527
    
    
    $
    6,329
    
    
    $
    8,377Delinquencies greater than 60 days past due (2)
    
    
    1.10
    %
    
    
    0.76
    %
    
    
    0.95
    %Allowance for credit losses to delinquent
accounts greater than 60 days past due(2)
    
    
    126.73
    %
    
    
    135.38
    %
    
    
    131.17
    %Non-accrual leases and loans
    
    $
    3,940
    
    
    $
    2,976
    
    
    $
    3,695Renegotiated leases and loans
    
    $
    7,607
    
    
    $
    3,999
    
    
    $
    6,987
 
 (1)
    
    Total finance receivables include 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.   23




---



##### Table of Contents



RESIDUAL PERFORMANCE
   LIQUIDITY AND CAPITAL RESOURCES
   
    
    borrowings under a revolving bank facility;
    
    financing of leases and loans in CP conduit warehouse facilities;
    
    financing of leases through term note securitizations; and
    
    equity and debt securities with third-party investors.
  24




---



##### Table of Contents



Cash and Cash Equivalents.
  Borrowings.
 For the Three Months Ended March 31, 2008
    
    
    As of March 31, 2008MaximumMaximum
    
    
    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
    
    
    $
    17,861
    
    
    $
    5,445
    
    
    
    5.08
    %
    
    $
    17,861
    
    
    
    4.75
    %
    
    $
    22,139CP conduit warehouse
facilities(1)
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Term note securitizations(2)
    
    
    
    
    
    
    744,167
    
    
    
    716,705
    
    
    
    5.43
    %
    
    
    662,395
    
    
    
    5.67
    %
    
    
    $
    215,000
    
    
    
    
    
    
    $
    722,150
    
    
    
    5.43
    %
    
    $
    680,256
    
    
    
    5.65
    %
    
    $
    197,139
 
 (1)
    
    Subject to lease or loan 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
  CP Conduit Warehouse Facilities
  25




---



##### Table of Contents



Term Note Securitizations
    26




---



##### Table of Contents



Financial Covenants
  Actual(1)
    
    
    RequirementTangible net worth minimum
    
    
    $157.1 million
    
    
    $89.0 millionDebt-to-equity ratio maximum
    
    
    
    4.52 to 1

    
    
    
    10 to 1Four-quarter rolling average
interest coverage ratio minimum
    
    
    
    2.73 to 1

    
    
    
    1.50 to 1Three-month rolling average lease
portfolio charge-off ratio maximum
    
    
    
    2.46%

    
    
    
    3.00%
 
 (1)
    
    Calculations are based on specific contractual definitions per the applicable debt
agreements.    Marlin Business Bank (Bank)
      27




---



##### Table of Contents



Bank Capital and Regulatory Oversight
  Capital Requirements.
 Prompt Corrective Action.
  Dividends.
 Transfers of Funds and Transactions with Affiliates.
 Restrictions on Ownership
 28




---



##### Table of Contents



Information on Stock Repurchases
   Maximum ApproximateTotal Number of Shares
    
    Dollar Value of SharesNumber of
    
    
    
    
    
    Purchased as Part of a
    
    that May Yet beShares
    
    Average Price
    
    Publicly Announced Plan
    
    Purchased Under theTime Period
    
    Purchased
    
    Paid Per Share(1)
    

or Program
    
    Plans or ProgramsJanuary 1, 2008 to
January 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,386,188February 1, 2008 to
February 29, 2008
    
    
    98,400
    
    
    
    $ 10.00
    
    
    
    98,400
    
    
    $
    12,402,596March 1, 2008 to
March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,402,596Total for the quarter
ended March 31, 2008
    
    
    98,400
    
    
    
    $ 10.00
    
    
    
    98,400
    
    
    $
    12,402,596
 
 (1)
    
    Average price paid per share includes commissions and is rounded to the nearest two
decimal places. Contractual Obligations
  Contractual Obligations as of March 31, 2008Operating
    
    
    Leased
    
    
    CapitalBorrowings
    
    
    Interest(1)
    
    
    Leases
    
    
    Facilities
    
    
    Leases
    
    
    Total(Dollars in thousands)2008
    
    $
    243,516
    
    
    $
    23,473
    
    
    $
    10
    
    
    $
    1,365
    
    
    $
    34
    
    
    $
    268,3982009
    
    
    210,947
    
    
    
    18,792
    
    
    
    10
    
    
    
    1,816
    
    
    
    11
    
    
    $
    231,5762010
    
    
    133,153
    
    
    
    8,896
    
    
    
    5
    
    
    
    1,662
    
    
    
    3
    
    
    $
    143,7192011
    
    
    68,432
    
    
    
    3,258
    
    
    
    1
    
    
    
    1,521
    
    
    
    
    
    
    $
    73,2122012
    
    
    23,360
    
    
    
    592
    
    
    
    
    
    
    
    1,551
    
    
    
    
    
    
    $
    25,503Thereafter
    
    
    848
    
    
    
    10
    
    
    
    
    
    
    
    667
    
    
    
    
    
    
    $
    1,525Total
    
    $
    680,256
    
    
    $
    55,021
    
    
    $
    26
    
    
    $
    8,582
    
    
    $
    48
    
    
    $
    743,933
 
 (1)

    
    Includes interest on term note securitizations only. Excludes interest on $17.9
million of revolving bank facility and CP conduit warehouse facility. MARKET INTEREST RATE RISK AND SENSITIVITY
   29




---



##### Table of Contents



For Active Agreements:
 Inception Date
    
    March,
    
    January,
    
    December,
    
    August,
    
    August,2008
    
    2008
    
    2007
    
    2007
    
    2006
    
    July, 2004Commencement Date
    
    October,
    
    October,
    
    October,
    
    October,
    
    October,2009
    
    2009
    
    2009
    
    2008
    
    2008
    
    July, 2004(Dollars in thousands)Notional amount:March 31, 2008
    
    $
    25,000
    
    
    $
    25,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    100,000
    
    
    $
    3,066For active agreements:Fair value recorded in other assets (liabilities)March 31, 2008
    
    $
    (4
    )
    
    $
    (263
    )
    
    $
    (1,341
    )
    
    $
    (3,898
    )
    
    $
    (4,601
    )
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    (46
    )
    
    $
    (2,010
    )
    
    $
    (2,704
    )
    
    $
    4Unrealized gain (loss), net of tax, recorded in
equityMarch 31, 2008
    
    $
    (3
    )
    
    $
    (158
    )
    
    $
    (808
    )
    
    $
    (2,349
    )
    
    $
    (2,779
    )
    
    $
    December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    (28
    )
    
    $
    (1,213
    )
    
    $
    (1,632
    )
    
    $
    2
 30




---



##### Table of Contents



For Terminated Agreements:
 Inception Date
    
    August
    
    June/September,
    
    October/December,2006/August 2007
    
    2005
    
    2004Commencement Date
    
    October, 2007
    
    September, 2006
    
    August, 2005Termination Date
    
    October, 2007
    
    September, 2006
    
    August, 2005(Dollars in thousands)Notional amount
    
    $
    300,000
    
    
    $
    225,000
    
    
    $
    250,000Realized gain (loss) at termination
    
    $
    (2,683
    )
    
    $
    3,732
    
    
    $
    3,151Deferred gain (loss), net of tax,
recorded in equityMarch 31, 2008
    
    $
    (1,264
    )
    
    $
    801
    
    
    $
    158December 31, 2007
    
    $
    (1,462
    )
    
    $
    974
    
    
    $
    229Amortization recognized as increase
(decrease) in interest expenseThree months ended March 31, 2008
    
    $
    330
    
    
    $
    (282
    )
    
    $
    (118
    )Year ended December 31, 2007
    
    $
    255
    
    
    $
    (1,543
    )
    
    $
    (749
    )Expected amortization during next 12
months as increase/(decrease) in
interest expense
    
    $
    1,016
    
    
    $
    (832
    )
    
    $
    (263
    )
    Scheduled Maturities by Calendar YearTotal2012 &
    
    Carrying2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Amount(Dollars in thousands)Debt:Fixed-rate debt
    
    $
    225,655
    
    
    $
    210,947
    
    
    $
    133,153
    
    
    $
    68,432
    
    
    $
    24,208
    
    
    $
    662,395Average fixed rate
    
    
    5.54
    %
    
    
    5.82
    %
    
    
    6.07
    %
    
    
    6.49
    %
    
    
    7.51
    %
    
    
    5.91
    %Variable-rate debt
    
    $
    17,861
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,861Average variable rate
    
    
    4.75
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.75
    %
   31




---



##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 Fair Value Measurements
 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
  
 Item 4. Controls and Procedures
      32




---



##### Table of Contents



PART II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters To A Vote Of Security Holders
  
 Item 5. Other Information
  
 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)
 33




---



##### Table of Contents



SIGNATURES
  MARLIN BUSINESS SERVICES CORP.(Registrant)By:
    
    /s/ Daniel P. Dyer
    
    Chief Executive OfficerDaniel P. Dyer
    
    (Chief Executive Officer)By:
    
    /s/ Lynne C. WilsonLynne C. Wilson
    
    Chief Financial Officer & Senior Vice President
(Principal Financial Officer)
  34