##### 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 June 30, 2009
 Commission file number 000-50448
 MARLIN BUSINESS SERVICES CORP.
  Pennsylvania
    
    38-3686388(State of incorporation)
    
    (I.R.S. Employer Identification Number)
 
 
 þ o
 o 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




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##### 



MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
 Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 2009
 TABLE OF CONTENTS
 Page No.Part I  Financial Information
    
    
    2-51Item 1 Condensed Financial Statements (Unaudited)
    
    
    2-24Condensed Consolidated Balance Sheets at June 30, 2009 and December 31, 2008 (as restated)
    
    
    2Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Stockholders Equity for the six-month
period ended June 30, 2009 and the year ended December 31, 2008 (as
restated)
    
    
    4Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6-24Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25-51Item 3 Quantitative and Qualitative Disclosure about Market Risk
    
    
    51Item 4 Controls and Procedures
    
    
    51Part II  Other Information
    
    
    52-53Item 1 Legal Proceedings
    
    
    52Item 1A Risk Factors
    
    
    52Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 3 Defaults upon Senior Securities
    
    
    52Item 4 Submission of Matters to a Vote of Security Holders
    
    
    52Item 5 Other Information
    
    
    52Item 6 Exhibits
    
    
    53Signatures
    
    
    54CertificationsRULE 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
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##### Table of Contents



PART I. Financial Information
 
 Item 1. Condensed Financial Statements
 MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 (Unaudited)
 December 31,June 30,
    
    
    2008 (as restated,2009
    
    
    see Note 15)(Dollars in thousands, except per-share data)ASSETSCash and due from banks
    
    $
    3,242
    
    
    $
    1,604Interest-earning deposits with banks
    
    
    50,287
    
    
    
    38,666Total cash and cash equivalents
    
    
    53,529
    
    
    
    40,270Restricted interest-earning deposits with banks
    
    
    67,751
    
    
    
    66,212Net investment in leases and loans
    
    
    555,082
    
    
    
    669,109Property and equipment, net
    
    
    2,816
    
    
    
    2,961Property tax receivables
    
    
    1,855
    
    
    
    3,120Other assets
    
    
    9,613
    
    
    
    12,759Total assets
    
    $
    690,646
    
    
    $
    794,431LIABILITIES AND STOCKHOLDERS EQUITYShort-term borrowings
    
    $
    98,132
    
    
    $
    101,923Long-term borrowings
    
    
    328,071
    
    
    
    441,385Deposits
    
    
    77,305
    
    
    
    63,385Other liabilities:Fair value of derivatives
    
    
    9,693
    
    
    
    11,528Sales and property taxes payable
    
    
    9,413
    
    
    
    6,540Accounts payable and accrued expenses
    
    
    8,392
    
    
    
    7,926Net deferred income tax liability
    
    
    12,979
    
    
    
    15,119Total liabilities
    
    
    543,985
    
    
    
    647,806Commitments and contingencies (Note 6)Stockholders equity:Common Stock, $0.01 par value; 75,000,000 shares
authorized; 12,595,437 and 12,246,405 shares issued and outstanding, respectively
    
    
    126
    
    
    
    122Preferred Stock, $0.01 par value; 5,000,000 shares authorized; none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    83,841
    
    
    
    83,671Stock subscription receivable
    
    
    (3
    )
    
    
    (5
    )Accumulated other comprehensive income (loss)
    
    
    (40
    )
    
    
    167Retained earnings
    
    
    62,737
    
    
    
    62,670Total stockholders equity
    
    
    146,661
    
    
    
    146,625Total liabilities and stockholders equity
    
    $
    690,646
    
    
    $
    794,431
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##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per-share data)Interest income
    
    $
    17,281
    
    
    $
    21,870
    
    
    $
    36,353
    
    
    $
    44,823Fee income
    
    
    4,380
    
    
    
    5,252
    
    
    
    9,414
    
    
    
    10,487Interest and fee income
    
    
    21,661
    
    
    
    27,122
    
    
    
    45,767
    
    
    
    55,310Interest expense
    
    
    7,444
    
    
    
    9,359
    
    
    
    15,276
    
    
    
    19,606Net interest and fee income
    
    
    14,217
    
    
    
    17,763
    
    
    
    30,491
    
    
    
    35,704Provision for credit losses
    
    
    6,793
    
    
    
    6,530
    
    
    
    15,542
    
    
    
    13,536Net interest and fee income after provision for
credit losses
    
    
    7,424
    
    
    
    11,233
    
    
    
    14,949
    
    
    
    22,168Other income:Insurance income
    
    
    1,322
    
    
    
    1,544
    
    
    
    2,865
    
    
    
    3,106Gain (loss) on derivatives
    
    
    646
    
    
    
    
    
    
    
    (661
    )
    
    
    Other income
    
    
    387
    
    
    
    477
    
    
    
    795
    
    
    
    1,035Other income
    
    
    2,355
    
    
    
    2,021
    
    
    
    2,999
    
    
    
    4,141Other expense:Salaries and benefits
    
    
    5,057
    
    
    
    6,344
    
    
    
    10,942
    
    
    
    12,215General and administrative
    
    
    3,287
    
    
    
    3,994
    
    
    
    6,686
    
    
    
    8,296Financing related costs
    
    
    55
    
    
    
    231
    
    
    
    310
    
    
    
    597Other expense
    
    
    8,399
    
    
    
    10,569
    
    
    
    17,938
    
    
    
    21,108Income before
income taxes
    
    
    1,380
    
    
    
    2,685
    
    
    
    10
    
    
    
    5,201Income tax (benefit) expense
    
    
    434
    
    
    
    985
    
    
    
    (57
    )
    
    
    2,142Net income
    
    $
    946
    
    
    $
    1,700
    
    
    $
    67
    
    
    $
    3,059Basic earnings per share
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.01
    
    
    $
    0.25Diluted earnings per share
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.01
    
    
    $
    0.25Weighted average shares used in computing basic
earnings per share
    
    
    12,593,514
    
    
    
    12,185,532
    
    
    
    12,456,874
    
    
    
    12,192,844Weighted average shares used in computing
diluted earnings per share
    
    
    12,603,305
    
    
    
    12,239,736
    
    
    
    12,465,312
    
    
    
    12,258,264
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##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Condensed Consolidated
Statements of Stockholders Equity
 (Unaudited)
 AccumulatedAdditional
    
    
    Stock
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Stock
    
    
    Paid-In
    
    
    Subscription
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Receivable
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity(Dollars in thousands)Balance, December 31, 2007 (as restated, see Note 15)
    
    
    12,201,304
    
    
    $
    122
    
    
    $
    84,429
    
    
    $
    (7
    )
    
    $
    (3,130
    )
    
    $
    67,900
    
    
    $
    149,314Issuance of common stock
    
    
    36,360
    
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Repurchase of common stock
    
    
    (333,759
    )
    
    
    (3
    )
    
    
    (2,380
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,383
    )Exercise of stock options
    
    
    46,616
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Tax benefit on stock options exercised
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Stock option compensation recognized
    
    
    
    
    
    
    
    
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Restricted stock grant
    
    
    295,884
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    926Net change related to derivatives, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,297
    
    
    
    
    
    
    
    3,297Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,230
    )
    
    
    (5,230
    )Balance, December 31, 2008 (as restated, see Note 15)
    
    
    12,246,405
    
    
    $
    122
    
    
    $
    83,671
    
    
    $
    (5
    )
    
    $
    167
    
    
    $
    62,670
    
    
    $
    146,625Issuance of common stock
    
    
    17,750
    
    
    
    1
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Repurchase of common stock
    
    
    (102,614
    )
    
    
    (1
    )
    
    
    (399
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400
    )Exercise of stock options
    
    
    7,636
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Tax benefit on stock options exercised
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Stock option compensation recognized
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146Payment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Restricted stock grant
    
    
    426,260
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock compensation
recognized
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344Net change related to derivatives, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207
    )
    
    
    
    
    
    
    (207
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    67Balance, June 30, 2009
    
    
    12,595,437
    
    
    $
    126
    
    
    $
    83,841
    
    
    $
    (3
    )
    
    $
    (40
    )
    
    $
    62,737
    
    
    $
    146,661
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##### Table of Contents



MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months Ended June 30,2009
    
    
    2008(In thousands)Cash flows from operating activities:Net income
    
    $
    67
    
    
    $
    3,059Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,230
    
    
    
    1,492Stock-based compensation
    
    
    624
    
    
    
    449Excess tax benefits from stock-based payment arrangements
    
    
    (4
    )
    
    
    (75
    )Amortization of deferred net (gain) loss on cash flow hedge
derivatives
    
    
    66
    
    
    
    (121
    )Change in fair value of derivatives
    
    
    (1,195
    )
    
    
    Cash flow hedge gains reclassified from accumulated other
comprehensive income
    
    
    (409
    )
    
    
    Provision for credit losses
    
    
    15,542
    
    
    
    13,536Net deferred income taxes
    
    
    (2,137
    )
    
    
    (1,655
    )Amortization of deferred initial direct costs and fees
    
    
    6,739
    
    
    
    8,568Deferred initial direct costs and fees
    
    
    (1,598
    )
    
    
    (5,702
    )Loss on equipment disposed
    
    
    764
    
    
    
    394Effect of changes in other operating items:Other assets
    
    
    4,254
    
    
    
    (62
    )Other liabilities
    
    
    2,501
    
    
    
    5,729Net cash provided by operating activities
    
    
    26,444
    
    
    
    25,612Cash flows from investing activities:Purchases of equipment for direct financing lease contracts and
funds used to originate loans
    
    
    (52,091
    )
    
    
    (139,416
    )Principal collections on leases and loans
    
    
    143,629
    
    
    
    155,567Security deposits collected, net of refunds
    
    
    (1,571
    )
    
    
    (1,177
    )Proceeds from the sale of equipment
    
    
    2,613
    
    
    
    2,741Acquisitions of property and equipment
    
    
    (330
    )
    
    
    (561
    )Change in restricted interest-earning deposits with banks
    
    
    (1,539
    )
    
    
    75,935Net cash provided by investing activities
    
    
    90,711
    
    
    
    93,089Cash flows from financing activities:Issuances of common stock
    
    
    56
    
    
    
    96Repurchases of common stock
    
    
    (400
    )
    
    
    (1,496
    )Exercise of stock options
    
    
    26
    
    
    
    80Excess tax benefits from stock-based payment arrangements
    
    
    4
    
    
    
    75Debt issuance costs
    
    
    (397
    )
    
    
    (46
    )Term securitization repayments
    
    
    (113,314
    )
    
    
    (190,455
    )Secured bank facility advances
    
    
    4,192
    
    
    
    39,265Secured bank facility repayments
    
    
    (24,240
    )
    
    
    (3,565
    )Warehouse advances
    
    
    37,938
    
    
    
    Warehouse repayments
    
    
    (21,681
    )
    
    
    Increase in deposits
    
    
    13,920
    
    
    
    43,618Net cash used in financing activities
    
    
    (103,896
    )
    
    
    (112,428
    )Net increase in total cash and cash equivalents
    
    
    13,259
    
    
    
    6,273Total cash and cash equivalents, beginning of period
    
    
    40,270
    
    
    
    38,708Total cash and cash equivalents, end of period
    
    $
    53,529
    
    
    $
    44,981Supplemental disclosures of cash flow information:Cash paid for interest on deposits and borrowings
    
    $
    14,621
    
    
    $
    19,046Cash paid for income taxes
    
    $
    273
    
    
    $
    2,445
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MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
 
 NOTES TO CONDENSED 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 -




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##### Table of Contents



Insurance income
 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. Accounting for Contingencies,
  Securitizations. Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities a replacement of Financial Accounting Standards Board (FASB) Statement No. 125
 - 7 -




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Derivatives. Accounting for Derivative Instruments and Hedging
Activities
    Fair Value Measurements
 Common stock and equity.
 Stock-based compensation. Share-Based Payments,
 Income taxes. Accounting for Income Taxes.
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Earnings per share. Earnings Per Share Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities
   NOTE 3  Net Investment in Leases and Loans
  December 31,2008June 30,
    
    
    (As restated,2009
    
    
    see Note 15)(Dollars in thousands)Minimum lease payments receivable
    
    $
    619,008
    
    
    $
    752,802Estimated residual value of equipment
    
    
    48,296
    
    
    
    51,197Unearned lease income, net of initial
direct costs and fees deferred
    
    
    (95,704
    )
    
    
    (119,775
    )Security deposits
    
    
    (10,594
    )
    
    
    (12,165
    )Loans, including unamortized deferred
fees and costs
    
    
    8,054
    
    
    
    12,333Allowance for credit losses
    
    
    (13,978
    )
    
    
    (15,283
    )$
    555,082
    
    
    $
    669,109
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##### Table of Contents



Minimum LeasePayments
    
    
    IncomeReceivable
    
    
    Amortization(Dollars in thousands)Period Ending December 31:2009
    
    $
    148,818
    
    
    $
    29,8432010
    
    
    232,657
    
    
    
    38,1592011
    
    
    143,970
    
    
    
    18,7422012
    
    
    68,474
    
    
    
    7,1432013
    
    
    23,194
    
    
    
    1,724Thereafter
    
    
    1,895
    
    
    
    93$
    619,008
    
    
    $
    95,704
  NOTE 4  Allowance for Credit Losses
   Three Months Ended June 30,
    
    
    Six  Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Allowance for credit losses, beginning of period
    
    $
    15,309
    
    
    $
    12,074
    
    
    $
    15,283
    
    
    $
    10,988Charge-offs
    
    
    (8,944
    )
    
    
    (6,565
    )
    
    
    (18,342
    )
    
    
    (13,248
    )Recoveries
    
    
    820
    
    
    
    834
    
    
    
    1,495
    
    
    
    1,597Net charge-offs
    
    
    (8,124
    )
    
    
    (5,731
    )
    
    
    (16,847
    )
    
    
    (11,651
    )Provision for credit losses
    
    
    6,793
    
    
    
    6,530
    
    
    
    15,542
    
    
    
    13,536Allowance for credit losses, end of period
    
    $
    13,978
    
    
    $
    12,873
    
    
    $
    13,978
    
    
    $
    12,873
 NOTE 5  Other Assets
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Income taxes receivable
    
    $
    2,333
    
    
    $
    4,136Accrued fees receivable
    
    
    3,521
    
    
    
    3,559Deferred transaction costs
    
    
    1,180
    
    
    
    1,375Prepaid expenses
    
    
    801
    
    
    
    1,990Other
    
    
    1,778
    
    
    
    1,699$
    9,613
    
    
    $
    12,759
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NOTE 6  Commitments and Contingencies
  NOTE 7  Deposits
  ScheduledMaturities(Dollars in thousands)Period Ending December 31,2009
    
    $
    20,4552010
    
    
    19,1962011
    
    
    16,9882012
    
    
    10,8232013
    
    
    8,329Thereafter
    
    
    1,514$
    77,305
  NOTE 8  Short-term and Long-term Borrowings
    Principal
    
    

Interest (1)(Dollars in thousands)Period Ending December 31,2009
    
    $
    122,320
    
    
    $
    8,5232010
    
    
    207,801
    
    
    
    9,8802011
    
    
    69,793
    
    
    
    3,7522012
    
    
    24,280
    
    
    
    8162013
    
    
    1,802
    
    
    
    56Thereafter
    
    
    207
    
    
    
    15$
    426,203
    
    
    $
    23,042
 
 (1)
    
    Includes interest on term note securitizations only. Excludes interest on $98.1
million of CP conduit warehouse facility. NOTE 9  Derivative Financial Instruments
  - 11 -




---



##### Table of Contents



.
       - 12 -




---



##### Table of Contents



For Active Agreements:
 March,
    
    January,
    
    December,
    
    August,
    
    August,Inception Date
    
    2008
    
    2008
    
    2007
    
    2007
    
    2006October,
    
    October,
    
    October,
    
    October,
    
    October,Commencement Date
    
    2009
    
    2009
    
    2009
    
    2008
    
    2008(Dollars in thousands)Notional amount:June 30, 2009
    
    $
    
    
    
    $
    25,000
    
    
    $
    100,000
    
    
    $
    50,000
    
    
    $
    50,000December 31, 2008
    
    $
    25,000
    
    
    $
    25,000
    
    
    $
    100,000
    
    
    $
    50,000
    
    
    $
    50,000For active agreements:Fair value recorded in other assets (liabilities)June 30, 2009
    
    $
    
    
    
    $
    (999
    )
    
    $
    (4,277
    )
    
    $
    (2,091
    )
    
    $
    (2,326
    )December 31, 2008
    
    $
    (653
    )
    
    $
    (922
    )
    
    $
    (3,955
    )
    
    $
    (2,823
    )
    
    $
    (3,175
    )Unrealized gain, net of tax, recorded in equityJune 30, 2009
    
    $
    
    
    
    $
    93
    
    
    $
    190
    
    
    $
    
    
    
    $
    December 31, 2008
    
    $
    246
    
    
    $
    93
    
    
    $
    190
    
    
    $
    
    
    
    $
    
 For Terminated Agreements:
 August,
    
    
    
    October/August,
    
    2006/August,
    
    June/September,
    
    December,Inception Date
    
    March, 2008
    
    2006/2007
    
    2007
    
    2005
    
    2004October,
    
    October,
    
    October,Commencement Date
    
    2009
    
    2008
    
    2007
    
    September, 2006
    
    August, 2005September/October,
    
    October,Termination Date
    
    May, 2009
    
    2008
    
    2007
    
    September, 2006
    
    August, 2005(Dollars in thousands)Notional amount
    
    $
    25,000
    
    
    $
    100,000
    
    
    $
    300,000
    
    
    $
    225,000
    
    
    $
    250,000Realized gain (loss) at termination
    
    $
    (775
    )
    
    $
    (3,312
    )
    
    $
    (2,683
    )
    
    $
    3,732
    
    
    $
    3,151Deferred gain (loss), net of tax,
recorded in equity:June 30, 2009
    
    $
    
    
    
    $
    
    
    
    $
    (540
    )
    
    $
    217
    
    
    $
    December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    (777
    )
    
    $
    399
    
    
    $
    16Amortization recognized as
increase (decrease) in interest
expense:Six months ended June 30, 2009
    
    $
    
    
    
    $
    
    
    
    $
    394
    
    
    $
    (302
    )
    
    $
    (26
    )Year ended December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    1,136
    
    
    $
    (953
    )
    
    $
    (354
    )Expected amortization during next
12 months as increase (decrease)
in interest expense
    
    $
    
    
    
    $
    
    
    
    $
    527
    
    
    $
    (352
    )
    
    $
    
 - 13 -




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six  Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Change in fair value of derivative contracts
    
    $
    237
    
    
    $
    
    
    
    $
    (1,070
    )
    
    $
    Cash flow hedging gains on forecasted
transactions no longer probable of
occurring(1)
    
    
    409
    
    
    
    
    
    
    
    409
    
    
    
    Gain (loss) on derivatives
    
    $
    646
    
    
    $
    
    
    
    $
    (661
    )
    
    $
    
 
 (1)
    
    Reclassified from accumulated other comprehensive income    Disclosures about Derivative Instruments and Hedging
Activities-an amendment of FASB Statement No. 133.
 NOTE 10  Fair Value Measurements
 Fair Value Measurements Accounting for Leases
  - 14 -




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##### Table of Contents




    
    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
    
    $ 
    
    $
    221
    
    
    $ 
    
    $
    221LiabilitiesInterest-rate swaps
    
    
    
    
    9,693
    
    
    
    
    
    9,693
 Disclosures about the Fair Value of Financial Instruments
 Disclosures About Fair Value of Financial Instruments,
  - 15 -




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##### Table of Contents



June 30, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value(Dollars in thousands)Assets:Cash and cash equivalents
    
    $
    53,529
    
    
    $
    53,529
    
    
    $
    40,270
    
    
    $
    40,270Restricted cash
    
    
    67,751
    
    
    
    67,751
    
    
    
    66,212
    
    
    
    66,212Loans
    
    
    7,190
    
    
    
    6,847
    
    
    
    11,452
    
    
    
    11,201Interest-rate caps purchased
    
    
    221
    
    
    
    221
    
    
    
    53
    
    
    
    53Liabilities:Revolving and term secured
borrowings
    
    
    426,203
    
    
    
    422,440
    
    
    
    543,308
    
    
    
    535,042Deposits
    
    
    77,305
    
    
    
    78,423
    
    
    
    63,385
    
    
    
    64,635Accounts payable and accrued
expenses (1)
    
    
    17,805
    
    
    
    17,805
    
    
    
    14,426
    
    
    
    14,426Interest-rate caps sold
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    40Interest-rate swaps
    
    
    9,693
    
    
    
    9,693
    
    
    
    11,528
    
    
    
    11,528
 
 (1)
    
    Includes sales and property taxes payable.  (a) Cash and Cash Equivalents
  (b) Restricted Cash
  (c) Loans
  (d) Revolving and Term Secured Borrowings
  (e) Deposits
  (f) Accounts Payable and Accrued Expenses
  - 16 -




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##### Table of Contents



(g) Interest-Rate Swaps and Interest-Rate Caps
 Fair Value Measurements
 NOTE
11 Earnings Per Common Share (EPS)
    Three Months Ended June 30,
    
    
    Six  Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per-share data)Net income
    
    $
    946
    
    
    $
    1,700
    
    
    $
    67
    
    
    $
    3,059Weighted average common shares outstanding
    
    
    11,672,352
    
    
    
    11,987,220
    
    
    
    11,674,795
    
    
    
    12,008,544Add: Unvested restricted stock awards
considered participating securities
    
    
    921,162
    
    
    
    198,312
    
    
    
    782,079
    
    
    
    184,300Adjusted weighted average common shares
used in computing basic EPS
    
    
    12,593,514
    
    
    
    12,185,532
    
    
    
    12,456,874
    
    
    
    12,192,844Add: Effect of dilutive stock options
    
    
    9,791
    
    
    
    54,204
    
    
    
    8,438
    
    
    
    65,420Adjusted weighted average common shares
used in computing diluted EPS
    
    
    12,603,305
    
    
    
    12,239,736
    
    
    
    12,465,312
    
    
    
    12,258,264Net earnings per common share:Basic
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.01
    
    
    $
    0.25Diluted
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.01
    
    
    $
    0.25
   - 17 -




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##### Table of Contents



NOTE 12  Comprehensive Income (Loss)
  Three Months Ended June 30,
    
    
    Six  Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Net income, as reported
    
    $
    946
    
    
    $
    1,700
    
    
    $
    67
    
    
    $
    3,059Other comprehensive income (loss):Change in fair value of derivatives
    
    
    
    
    
    
    5,946
    
    
    
    
    
    
    
    595Reclassification of cash flow
hedging gains on forecasted
transactions no longer probable of
occurring
    
    
    (409
    )
    
    
    
    
    
    
    (409
    )
    
    
    Amortization of net deferred gain
(loss) on cash flow hedge
derivatives
    
    
    47
    
    
    
    (51
    )
    
    
    66
    
    
    
    (121
    )Tax effect
    
    
    144
    
    
    
    (2,329
    )
    
    
    136
    
    
    
    (180
    )Total other comprehensive income (loss)
    
    
    (218
    )
    
    
    3,566
    
    
    
    (207
    )
    
    
    294Comprehensive income (loss)
    
    $
    728
    
    
    $
    5,266
    
    
    $
    (140
    )
    
    $
    3,353
 NOTE 13  Stockholders Equity
 Stockholders Equity
   Regulatory Capital Requirements
     - 18 -




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##### Table of Contents



Actual
    
    Minimum Capital 
Requirement
    
    Well-Capitalized CapitalRequirementRatio
    
    Amount
    
    Ratio(1)
    
    Amount
    
    Ratio
    
    Amount(Dollars in thousands)Tier 1 Leverage CapitalMarlin Business
Services Corp.
    
    
    20.12
    %
    
    $
    146,702
    
    
    
    4
    %
    
    $
    29,170
    
    
    
    5
    %
    
    $
    36,463Marlin Business Bank
    
    
    15.54
    %
    
    $
    14,436
    
    
    
    5
    %
    
    $
    4,644
    
    
    
    5
    %
    
    $
    4,644Tier 1 Risk-based CapitalMarlin Business
Services Corp.
    
    
    24.36
    %
    
    $
    146,702
    
    
    
    4
    %
    
    $
    24,085
    
    
    
    6
    %
    
    $
    36,128Marlin Business Bank
    
    
    15.68
    %
    
    $
    14,436
    
    
    
    6
    %
    
    $
    5,524
    
    
    
    6
    %
    
    $
    5,524Total Risk-based CapitalMarlin Business
Services Corp.
    
    
    25.63
    %
    
    $
    154,308
    
    
    
    8
    %
    
    $
    48,170
    
    
    
    10
    %
    
    $
    60,213Marlin Business Bank
    
    
    16.65
    %
    
    $
    15,330
    
    
    
    15
    %
    
    $
    13,810
    
    
    
    10
    %(1)
    
    $
    9,207
 
 (1)
    
    MBB is required to maintain well-capitalized status. In addition, MBB must
maintain a total risk-based capital ratio greater than 15%. Prompt Corrective Action
  - 19 -




---



##### Table of Contents




    
    prohibiting the payment of principal and interest on subordinated debt;
    
    prohibiting the holding company from making distributions without prior regulatory
approval;
    
    placing limits on asset growth and restrictions on activities;
    
    placing additional restrictions on transactions with affiliates;
    
    restricting the interest rate the institution may pay on deposits;
    
    prohibiting the institution from accepting deposits from correspondent banks; and
    
    in the most severe cases, appointing a conservator or receiver for the institution.
   NOTE 14  Stock-Based Compensation
   Stock Options
   - 20 -




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Risk-free interest rate
    
    
    n/a
    
    
    
    2.94
    %
    
    
    n/a
    
    
    
    2.43
    %Expected life (years)
    
    
    n/a
    
    
    
    4
    
    
    
    n/a
    
    
    
    5Expected volatility
    
    
    n/a
    
    
    
    35
    %
    
    
    n/a
    
    
    
    35
    %Expected dividends
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
   WeightedAverageOptions
    
    Shares
    
    Exercise PriceOutstanding at January 1, 2009
    
    
    885,459
    
    
    $
    12.32Granted
    
    
    
    
    
    
    Exercised
    
    
    (7,636
    )
    
    
    3.39Forfeited
    
    
    (62,352
    )
    
    
    16.58Expired
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    815,471
    
    
    
    12.08
   - 21 -




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##### Table of Contents



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
    
    
    94,134
    
    
    
    2.8
    
    
    $
    3.39
    
    
    $
    208
    
    
    
    94,134
    
    
    
    2.8
    
    
    $
    3.39
    
    
    $
    208$4.23 - 5.01
    
    
    58,641
    
    
    
    0.8
    
    
    
    4.34
    
    
    
    74
    
    
    
    58,641
    
    
    
    0.8
    
    
    
    4.34
    
    
    
    74$7.61 - 10.18
    
    
    342,634
    
    
    
    4.7
    
    
    
    9.53
    
    
    
    
    
    
    
    158,910
    
    
    
    3.5
    
    
    
    9.61
    
    
    
    $14.00 - 16.02
    
    
    73,234
    
    
    
    4.7
    
    
    
    14.81
    
    
    
    
    
    
    
    64,242
    
    
    
    4.6
    
    
    
    14.74
    
    
    
    $17.52 - 22.23
    
    
    246,828
    
    
    
    4.0
    
    
    
    19.95
    
    
    
    
    
    
    
    145,281
    
    
    
    3.7
    
    
    
    19.30
    
    
    
    815,471
    
    
    
    4.0
    
    
    
    12.08
    
    
    $
    282
    
    
    
    521,208
    
    
    
    3.3
    
    
    
    11.23
    
    
    $
    282
   Restricted Stock Awards
      WeightedAverageGrant-DateShares
    
    Fair ValueNon-vested restricted stock at January 1, 2009
    
    
    503,914
    
    
    $
    11.29Granted
    
    
    502,433
    
    
    
    4.37Vested
    
    
    (40,177
    )
    
    
    18.23Forfeited
    
    
    (76,273
    )
    
    
    13.13Non-vested restricted stock at June 30, 2009
    
    
    889,897
    
    
    
    6.91
 - 22 -




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##### Table of Contents



NOTE 15  Restatement of Prior Financial Statements
      As PreviouslyConsolidated Balance Sheet
    
    Reported
    
    Adjustment
    
    As Restated(Dollars in thousands)Net investment in leases and loans
    
    $
    670,494
    
    
    $
    (1,385
    )
    
    $
    669,109Total assets
    
    
    795,816
    
    
    
    (1,385
    )
    
    
    794,431Net deferred income tax liability
    
    
    15,673
    
    
    
    (554
    )
    
    
    15,119Total liabilities
    
    
    648,360
    
    
    
    (554
    )
    
    
    647,806Retained earnings
    
    
    63,501
    
    
    
    (831
    )
    
    
    62,670Total stockholders equity
    
    
    147,456
    
    
    
    (831
    )
    
    
    146,625Total liabilities and stockholders equity
    
    
    795,816
    
    
    
    (1,385
    )
    
    
    794,431
 - 23 -




---



##### Table of Contents



As of or For the Year Ended December 31,2007
    
    2006
    
    2005As
    
    
    
    
    
    As
    
    
    
    
    
    AsPreviously
    
    
    
    
    
    Previously
    
    As
    
    Previously
    
    AsConsolidated Balance Sheet
    
    Reported
    
    As Restated
    
    Reported
    
    Restated
    
    Reported
    
    Restated(Dollars in thousands, except per-share data)Net investment in leases and loans
    
    $
    765,938
    
    
    $
    764,553
    
    
    $
    693,911
    
    
    $
    693,003
    
    
    $
    572,581
    
    
    $
    572,199Net deferred income tax liability
    
    
    15,682
    
    
    
    15,128
    
    
    
    22,931
    
    
    
    22,568
    
    
    
    25,362
    
    
    
    25,209Retained earnings
    
    
    68,731
    
    
    
    67,900
    
    
    
    50,445
    
    
    
    49,900
    
    
    
    31,811
    
    
    
    31,582Statements of OperationsInterest income
    
    $
    90,231
    
    
    $
    89,754
    
    
    $
    77,644
    
    
    $
    77,118
    
    
    $
    67,572
    
    
    $
    67,190Income before income taxes
    
    
    30,361
    
    
    
    29,884
    
    
    
    31,211
    
    
    
    30,685
    
    
    
    26,855
    
    
    
    26,473Income tax expense
    
    
    12,075
    
    
    
    11,884
    
    
    
    12,577
    
    
    
    12,367
    
    
    
    10,607
    
    
    
    10,454Net income
    
    
    18,286
    
    
    
    18,000
    
    
    
    18,634
    
    
    
    18,318
    
    
    
    16,248
    
    
    
    16,019Basic earnings per share(1)
    
    $
    1.49
    
    
    $
    1.47
    
    
    $
    1.56
    
    
    $
    1.53
    
    
    $
    1.39
    
    
    $
    1.37Diluted earnings per share(1)
    
    $
    1.47
    
    
    $
    1.45
    
    
    $
    1.53
    
    
    $
    1.50
    
    
    $
    1.35
    
    
    $
    1.33
 
 (1)
    
    The amounts for basic and diluted earnings per share as previously reported
reflect the impact of the retrospective adjustment to conform with the provisions of FSP EITF
03-6-1, as previously discussed in Note 2 herein. Therefore, the difference between the amounts as
previously reported and as restated represents the effect of the error correction discussed
above. NOTE 16  Subsequent Events
  - 24 -




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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 for the year ended December 31, 2008 filed with the Securities and Exchange
Commission (SEC). This discussion contains certain statements of a forward-looking nature that
involve risks and uncertainties.
 FORWARD-LOOKING STATEMENTS
  -
    
    availability, terms and deployment of funding and 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 and retention of qualified personnel; and-
    
    the factors set forth in the section captioned Risk Factors in our
Form 10-K for the year ended December 31, 2008 filed with the SEC.
  Overview
     - 25 -




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##### Table of Contents



Six MonthsEndedJune 30,
    
    As of or For the Year Ended December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Number of sales account executives
    
    
    33
    
    
    
    86
    
    
    
    118
    
    
    
    100
    
    
    
    103
    
    
    
    100Number of originating
sources(1)
    
    
    533
    
    
    
    1,014
    
    
    
    1,246
    
    
    
    1,295
    
    
    
    1,295
    
    
    
    1,244
 
 (1)
    
    Monthly average of origination sources generating lease volume    - 26 -




---



##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities
 Critical Accounting Policies
  Income recognition.
     - 27 -




---



##### Table of Contents



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. Accounting for Contingencies
  Securitizations. Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities a
replacement of Financial Accounting Standards Board Statement No. 125
 Derivatives. Accounting for Derivative Instruments and Hedging
Activities
 - 28 -




---



##### Table of Contents



Fair Value Measurements
 Stock-based compensation. Share-Based Payment,
    Income taxes. Accounting for Income Taxes.
 - 29 -




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RESULTS OF OPERATIONS
 Comparison of the Three-Month Periods Ended June 30, 2009 and 2008
 Net income.
     Average balances and net interest margin.
 - 30 -




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##### Table of Contents



Three Months Ended June 30,2009
    
    
    2008(Dollars in thousands)Average(1)
    
    
    
    
    
    
    Average
    
    
    Average(1)
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yields/Rates(2)
    
    
    Balance
    
    
    
    Interest
    
    
    Yields/Rates(2)Interest-earning assets:Interest-earning deposits with banks
    
    $
    50,528
    
    
    $
    38
    
    
    
    0.30
    %
    
    $
    27,943
    
    
    $
    166
    
    
    
    2.38
    %Restricted interest-earning deposits with
banks
    
    
    68,364
    
    
    
    79
    
    
    
    0.46
    
    
    
    65,695
    
    
    
    386
    
    
    
    2.35Net investment in leases(3)
    
    
    577,493
    
    
    
    16,897
    
    
    
    11.70
    
    
    
    713,171
    
    
    
    20,783
    
    
    
    11.66Loans receivable(3)
    
    
    9,115
    
    
    
    267
    
    
    
    11.72
    
    
    
    17,095
    
    
    
    535
    
    
    
    12.52Total interest-earning assets
    
    
    705,500
    
    
    
    17,281
    
    
    
    9.80
    
    
    
    823,904
    
    
    
    21,870
    
    
    
    10.62Non-interest-earning assets:Cash and due from banks
    
    
    2,279
    
    
    
    
    
    
    
    
    
    
    
    502Property and equipment, net
    
    
    2,899
    
    
    
    
    
    
    
    
    
    
    
    3,224Property tax receivables
    
    
    5,122
    
    
    
    
    
    
    
    
    
    
    
    6,637Other assets(4)
    
    
    10,223
    
    
    
    
    
    
    
    
    
    
    
    21,885Total non-interest-earning assets
    
    
    20,523
    
    
    
    
    
    
    
    
    
    
    
    32,248Total assets
    
    $
    726,023
    
    
    
    
    
    
    
    
    
    
    $
    856,152Interest-bearing liabilities:Short-term borrowings(5)
    
    $
    107,639
    
    
    $
    1,482
    
    
    
    5.51
    %
    
    $
    25,380
    
    
    $
    298
    
    
    
    4.70
    %Long-term borrowings(5)
    
    
    357,165
    
    
    
    5,264
    
    
    
    5.90
    
    
    
    621,925
    
    
    
    8,901
    
    
    
    5.72Deposits
    
    
    74,391
    
    
    
    698
    
    
    
    3.75
    
    
    
    16,297
    
    
    
    160
    
    
    
    3.93Total interest-bearing liabilities
    
    
    539,195
    
    
    
    7,444
    
    
    
    5.52
    
    
    
    663,602
    
    
    
    9,359
    
    
    
    5.64Non-interest-bearing liabilities:Fair value of derivatives
    
    
    10,793
    
    
    
    
    
    
    
    
    
    
    
    6,280Sales and property taxes payable
    
    
    9,738
    
    
    
    
    
    
    
    
    
    
    
    12,108Accounts payable and accrued expenses
    
    
    5,202
    
    
    
    
    
    
    
    
    
    
    
    7,115Net deferred income tax liability
    
    
    14,313
    
    
    
    
    
    
    
    
    
    
    
    16,056Total non-interest-bearing liabilities
    
    
    40,046
    
    
    
    
    
    
    
    
    
    
    
    41,559Total liabilities
    
    
    579,241
    
    
    
    
    
    
    
    
    
    
    
    705,161Stockholders equity
    
    
    146,782
    
    
    
    
    
    
    
    
    
    
    
    150,991Total liabilities and
stockholders equity
    
    $
    726,023
    
    
    
    
    
    
    
    
    
    
    $
    856,152Net interest income
    
    
    
    
    
    $
    9,837
    
    
    
    
    
    
    
    
    
    
    $
    12,511Interest rate spread(6)
    
    
    
    
    
    
    
    
    
    
    4.28
    %
    
    
    
    
    
    
    
    
    
    
    4.98
    %Net interest margin(7)
    
    
    
    
    
    
    
    
    
    
    5.58
    %
    
    
    
    
    
    
    
    
    
    
    6.07
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    130.84
    %
    
    
    
    
    
    
    
    
    
    
    124.16
    %
 
 (1)
    
    Average balances are calculated using month-end balances, to the extent such averages are representative of operations.(2)
    
    Annualized.(3)
    
    Average balances of leases and loans include non-accrual leases and loans, and are presented net of unearned income.(4)
    
    Includes operating leases.(5)
    
    Includes effect of transaction costs.(6)
    
    Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.(7)
    
    Net interest margin represents net interest income as a percentage of average interest-earning assets. - 31 -




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##### Table of Contents



Three Months Ended June 30, 2009 Compared To Three MonthsEnded June 30, 2008Increase (Decrease) Due To:(Dollars in thousands)Volume(1)
    
    Rate(1)
    
    TotalInterest income:Interest-earning deposits with banks
    
    $
    78
    
    
    $
    (206
    )
    
    $
    (128
    )Restricted interest-earning deposits with banks
    
    
    15
    
    
    
    (322
    )
    
    
    (307
    )Net investment in leases
    
    
    (3,970
    )
    
    
    84
    
    
    
    (3,886
    )Loans receivable
    
    
    (237
    )
    
    
    (31
    )
    
    
    (268
    )Total interest income
    
    
    (2,986
    )
    
    
    (1,603
    )
    
    
    (4,589
    )Interest expense:Short-term borrowings
    
    
    1,124
    
    
    
    60
    
    
    
    1,184Long-term borrowings
    
    
    (3,895
    )
    
    
    258
    
    
    
    (3,637
    )Deposits
    
    
    546
    
    
    
    (8
    )
    
    
    538Total interest expense
    
    
    (1,721
    )
    
    
    (194
    )
    
    
    (1,915
    )Net interest income
    
    
    (1,705
    )
    
    
    (969
    )
    
    
    (2,674
    )
 
 (1)
    
    Changes due to volume and rate are calculated independently for each line item
presented. Changes attributable to changes in volume represent changes in average
balances multiplied by the prior periods average rates. Changes attributable to changes in
rate represent changes in average rates multiplied by the prior years average balances.
Changes attributable to the combined impact of volume and rate have been allocated
proportionately to the change due to volume and the change due to rate. Net interest and fee margin.
 Three Months Ended June 30,2009
    
    
    2008(Dollars in thousands)Interest income
    
    $
    17,281
    
    
    $
    21,870Fee income
    
    
    4,380
    
    
    
    5,252Interest and fee income
    
    
    21,661
    
    
    
    27,122Interest expense
    
    
    7,444
    
    
    
    9,359Net interest and fee income
    
    
    14,217
    
    
    
    17,763Average total finance receivables (1)
    
    $
    586,608
    
    
    $
    730,267Percent of average total finance receivables:Interest income
    
    
    11.78
    %
    
    
    11.98
    %Fee income
    
    
    2.99
    %
    
    
    2.88
    %Interest and fee income
    
    
    14.77
    %
    
    
    14.86
    %Interest expense
    
    
    5.08
    %
    
    
    5.13
    %Net interest and fee margin
    
    
    9.69
    %
    
    
    9.73
    %
 
 (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.  - 32 -




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##### Table of Contents



Insurance income.
 Other income.
 - 33 -




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##### Table of Contents



Gain (loss) on derivatives.
    Salaries and benefits expense.
    General and administrative expense.
 - 34 -




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##### Table of Contents



Financing related costs.
 Provision for credit losses.
  Provision for income taxes.
 Comparison of the Six-Month Periods Ended June 30, 2009 and 2008
 Net income.
     Average balances and net interest margin.
 - 35 -




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##### Table of Contents



Six Months Ended June 30,2009
    
    
    2008(Dollars in thousands)Average(1)
    
    
    
    
    
    
    Average
    
    
    Average(1)
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yields/Rates(2)
    
    
    Balance
    
    
    Interest
    
    
    Yields/Rates(2)Interest-earning assets:Interest-earning deposits with banks
    
    $
    43,543
    
    
    $
    96
    
    
    
    0.44
    %
    
    $
    34,307
    
    
    $
    445
    
    
    
    2.59
    %Restricted interest-earning deposits with
banks
    
    
    67,919
    
    
    
    220
    
    
    
    0.65
    
    
    
    81,144
    
    
    
    1,316
    
    
    
    3.24Net investment in leases(3)
    
    
    605,903
    
    
    
    35,436
    
    
    
    11.70
    
    
    
    721,561
    
    
    
    42,061
    
    
    
    11.66Loans receivable(3)
    
    
    10,185
    
    
    
    601
    
    
    
    11.80
    
    
    
    16,153
    
    
    
    1,001
    
    
    
    12.39Total interest-earning assets
    
    
    727,550
    
    
    
    36,353
    
    
    
    9.99
    
    
    
    853,165
    
    
    
    44,823
    
    
    
    10.51Non-interest-earning assets:Cash and due from banks
    
    
    1,965
    
    
    
    
    
    
    
    
    
    
    
    426Property and equipment, net
    
    
    2,927
    
    
    
    
    
    
    
    
    
    
    
    3,282Property tax receivables
    
    
    3,837
    
    
    
    
    
    
    
    
    
    
    
    4,209Other assets(4)
    
    
    11,371
    
    
    
    
    
    
    
    
    
    
    
    23,000Total non-interest-earning assets
    
    
    20,100
    
    
    
    
    
    
    
    
    
    
    
    30,917Total assets
    
    $
    747,650
    
    
    
    
    
    
    
    
    
    
    $
    884,082Interest-bearing liabilities:Short-term borrowings(5)
    
    $
    107,804
    
    
    $
    2,647
    
    
    
    4.91
    %
    
    $
    15,413
    
    
    $
    399
    
    
    
    5.18
    %Long-term borrowings(5)
    
    
    384,104
    
    
    
    11,283
    
    
    
    5.87
    
    
    
    670,997
    
    
    
    19,046
    
    
    
    5.68Deposits
    
    
    70,815
    
    
    
    1,346
    
    
    
    3.80
    
    
    
    8,148
    
    
    
    161
    
    
    
    3.95Total interest-bearing liabilities
    
    
    562,723
    
    
    
    15,276
    
    
    
    5.43
    
    
    
    694,558
    
    
    
    19,606
    
    
    
    5.65Non-interest-bearing liabilities:Fair value of derivatives
    
    
    10,889
    
    
    
    
    
    
    
    
    
    
    
    7,348Sales and property taxes payable
    
    
    7,618
    
    
    
    
    
    
    
    
    
    
    
    9,108Accounts payable and accrued expenses
    
    
    4,429
    
    
    
    
    
    
    
    
    
    
    
    8,033Net deferred income tax liability
    
    
    15,004
    
    
    
    
    
    
    
    
    
    
    
    15,364Total non-interest-bearing liabilities
    
    
    37,940
    
    
    
    
    
    
    
    
    
    
    
    39,853Total liabilities
    
    
    600,663
    
    
    
    
    
    
    
    
    
    
    
    734,411Stockholders equity
    
    
    146,987
    
    
    
    
    
    
    
    
    
    
    
    149,671Total liabilities and
stockholders equity
    
    $
    747,650
    
    
    
    
    
    
    
    
    
    
    $
    884,082Net interest income
    
    
    
    
    
    $
    21,077
    
    
    
    
    
    
    
    
    
    
    $
    25,217Interest rate spread(6)
    
    
    
    
    
    
    
    
    
    
    4.56
    %
    
    
    
    
    
    
    
    
    
    
    4.86
    %Net interest margin(7)
    
    
    
    
    
    
    
    
    
    
    5.79
    %
    
    
    
    
    
    
    
    
    
    
    5.91
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    129.29
    %
    
    
    
    
    
    
    
    
    
    
    122.84
    %
 
 (1)
    
    Average balances are calculated using month-end balances, to the extent such averages are representative of operations.(2)
    
    Annualized.(3)
    
    Average balances of leases and loans include non-accrual leases and loans, and are presented net of unearned income.(4)
    
    Includes operating leases.(5)
    
    Includes effect of transaction costs.(6)
    
    Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.(7)
    
    Net interest margin represents net interest income as a percentage of average interest-earning assets. - 36 -




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##### Table of Contents



Six Months Ended June 30, 2009 Compared To Six Months EndedJune 30, 2008Increase (Decrease) Due To:(Dollars in thousands)Volume(1)
    
    Rate(1)
    
    TotalInterest income:Interest-earning deposits with banks
    
    $
    95
    
    
    $
    (444
    )
    
    $
    (349
    )Restricted interest-earning deposits with banks
    
    
    (186
    )
    
    
    (910
    )
    
    
    (1,096
    )Net investment in leases
    
    
    (6,764
    )
    
    
    139
    
    
    
    (6,625
    )Loans receivable
    
    
    (354
    )
    
    
    (46
    )
    
    
    (400
    )Total interest income
    
    
    (6,358
    )
    
    
    (2,112
    )
    
    
    (8,470
    )Interest expense:Short-term borrowings
    
    
    2,270
    
    
    
    (22
    )
    
    
    2,248Long-term borrowings
    
    
    (8,406
    )
    
    
    643
    
    
    
    (7,763
    )Deposits
    
    
    1,191
    
    
    
    (6
    )
    
    
    1,185Total interest expense
    
    
    (3,603
    )
    
    
    (727
    )
    
    
    (4,330
    )Net interest income
    
    
    (3,648
    )
    
    
    (492
    )
    
    
    (4,140
    )
 
 (1)
    
    Changes due to volume and rate are calculated independently for each line item
presented. Changes attributable to changes in volume represent changes in average
balances multiplied by the prior periods average rates. Changes attributable to changes in
rate represent changes in average rates multiplied by the prior years average balances.
Changes attributable to the combined impact of volume and rate have been allocated
proportionately to the change due to volume and the change due to rate. Net interest and fee margin.
 Six Months Ended June 30,2009
    
    
    2008(Dollars in thousands)Interest income
    
    $
    36,353
    
    
    $
    44,823Fee income
    
    
    9,414
    
    
    
    10,487Interest and fee income
    
    
    45,767
    
    
    
    55,310Interest expense
    
    
    15,276
    
    
    
    19,606Net interest and fee income
    
    $
    30,491
    
    
    $
    35,704Average total finance receivables (1)
    
    $
    616,089
    
    
    $
    737,721Percent of average total finance receivables:Interest income
    
    
    11.80
    %
    
    
    12.15
    %Fee income
    
    
    3.06
    %
    
    
    2.85
    %Interest and fee income
    
    
    14.86
    %
    
    
    15.00
    %Interest expense
    
    
    4.96
    %
    
    
    5.32
    %Net interest and fee margin
    
    
    9.90
    %
    
    
    9.68
    %
 
 (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.  - 37 -




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##### Table of Contents



Insurance income.
 Other income.
 - 38 -




---



##### Table of Contents



Gain (loss) on derivatives.
    Salaries and benefits expense.
    General and administrative expense.
 Financing related costs.
 - 39 -




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##### Table of Contents



Provision for credit losses.
  Provision for income taxes.
 - 40 -




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##### Table of Contents



FINANCE RECEIVABLES AND ASSET QUALITY
   Year EndedThree Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2008(Dollars in thousands)Allowance for credit losses, beginning of period
    
    $
    15,309
    
    
    $
    12,074
    
    
    $
    15,283
    
    
    $
    10,988
    
    
    $
    10,988Charge-offs
    
    
    (8,944
    )
    
    
    (6,565
    )
    
    
    (18,342
    )
    
    
    (13,248
    )
    
    
    (30,231
    )Recoveries
    
    
    820
    
    
    
    834
    
    
    
    1,495
    
    
    
    1,597
    
    
    
    3,032Net charge-offs
    
    
    (8,124
    )
    
    
    (5,731
    )
    
    
    (16,847
    )
    
    
    (11,651
    )
    
    
    (27,199
    )Provision for credit losses
    
    
    6,793
    
    
    
    6,530
    
    
    
    15,542
    
    
    
    13,536
    
    
    
    31,494Allowance for credit losses, end of period(1)
    
    $
    13,978
    
    
    $
    12,873
    
    
    $
    13,978
    
    
    $
    12,873
    
    
    $
    15,283Annualized net charge-offs to average total finance receivables (2)
    
    
    5.54
    %
    
    
    3.14
    %
    
    
    5.47
    %
    
    
    3.16
    %
    
    
    3.80
    %Allowance for credit losses to total finance receivables, end of period
(2)
    
    
    2.52
    %
    
    
    1.79
    %
    
    
    2.52
    %
    
    
    1.79
    %
    
    
    2.30
    %Average total finance receivables (2)
    
    $
    586,608
    
    
    $
    730,267
    
    
    $
    616,089
    
    
    $
    737,721
    
    
    $
    715,649Total finance receivables, end of period (2)
    
    $
    554,712
    
    
    $
    719,924
    
    
    $
    554,712
    
    
    $
    719,924
    
    
    $
    664,902Delinquencies greater than 60 days past due
    
    $
    14,579
    
    
    $
    9,687
    
    
    $
    14,579
    
    
    $
    9,687
    
    
    $
    12,203Delinquencies greater than 60 days past due (3)
    
    
    2.32
    %
    
    
    1.16
    %
    
    
    2.32
    %
    
    
    1.16
    %
    
    
    1.59
    %Allowance for credit losses to delinquent accounts greater than 60 days past
due (3)
    
    
    95.88
    %
    
    
    132.89
    %
    
    
    95.88
    %
    
    
    132.89
    %
    
    
    125.24
    %Non-accrual leases and loans, end of period
    
    $
    7,650
    
    
    $
    4,704
    
    
    $
    7,650
    
    
    $
    4,704
    
    
    $
    6,380Renegotiated leases and loans, end of period
    
    $
    6,567
    
    
    $
    8,143
    
    
    $
    6,567
    
    
    $
    8,143
    
    
    $
    8,256Accruing leases and loans past due 90 days or more
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest income included on non-accrual leases and loans(4)
    
    $
    105
    
    
    $
    74
    
    
    $
    316
    
    
    $
    209
    
    
    $
    711Interest income excluded on non-accrual leases and loans(5)
    
    $
    168
    
    
    $
    121
    
    
    $
    367
    
    
    $
    229
    
    
    $
    525
 
 (1)
    
    The allowance for credit losses allocated to loans at June 30, 2009, June 30, 2008
and December 31, 2008, was $864,000, $771,000 and $881,000, respectively.(2)
    
    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. Total finance receivables at December 31, 2008 have been restated as described
in Note 15 to the Consolidated Financial Statements.(3)
    
    Calculated as a percent of minimum lease payments receivable for leases and as a
percent of principal outstanding for loans and factoring receivables.(4)
    
    Represents interest which was recognized during the period on non-accrual loans and
leases, prior to non-accrual status.(5)
    
    Represents interest which would have been recorded on non-accrual loans and leases
had they performed in accordance with their contractual terms during the period.  - 41 -




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www.marlincorp.com
 Accounting for Contingencies
 RESIDUAL PERFORMANCE
   - 42 -




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   
    
    borrowings under a revolving or short-term bank facility;
    
    financing of leases and loans in CP conduit warehouse facilities;
    
    financing of leases through term note securitizations; and
    
    FDIC-insured brokered certificates of deposit issued by our wholly-owned subsidiary, Marlin
Business Bank (MBB).
       - 43 -




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Total Cash and Cash Equivalents.
  Borrowings.
 For the Six Months Ended June 30, 2009
    
    
    As of June 30, 2009MaximumMaximum
    
    
    Month End
    
    
    Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedFacility
    
    
    Amount
    
    
    Amount
    
    
    Average
    
    
    Amount
    
    
    Average
    
    
    UnusedAmount
    
    
    Outstanding
    
    
    Outstanding
    
    
    Coupon
    
    
    Outstanding
    
    
    Coupon
    
    
    Capacity(Dollars in thousands)Revolving or short-term bank facility(1)
    
    $
    
    
    
    $
    16,839
    
    
    $
    8,841
    
    
    
    2.92
    %
    
    $
    
    
    
    
    5.81
    %
    
    $
    CP conduit warehouse
facility(2)
    
    
    
    
    
    
    111,380
    
    
    
    98,963
    
    
    
    4.84
    %
    
    
    98,132
    
    
    
    5.03
    %
    
    
    Term note securitizations(3)
    
    
    
    
    
    
    419,167
    
    
    
    384,200
    
    
    
    5.63
    %
    
    
    328,071
    
    
    
    5.66
    %
    
    
    $
    
    
    
    
    
    
    
    $
    492,004
    
    
    
    5.42
    %
    
    $
    426,203
    
    
    
    5.51
    %
    
    $
    
 
 (1)
    
    Paid off and not renewed at June 29, 2009. Therefore, there was no unused capacity
at June 30, 2009.(2)
    
    Converted from a revolving facility to an amortizing facility in March, 2009.(3)
    
    Our term note securitizations are one-time fundings that pay down over time without
any ability for us to draw down additional amounts. - 44 -




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##### Table of Contents



Revolving Bank Facility/Short-term Bank Facility
  CP Conduit Warehouse Facility
    Term Note Securitizations
  - 45 -




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##### Table of Contents



Financial Covenants
  Actual(1)
    
    RequirementTangible net worth minimum
    
    $132.4 million
    
    $89.6 millionDebt-to-equity ratio maximum
    
    
    3.62 to 1
    
    
    
    10.0 to 1Four-quarter rolling average interest coverage ratio minimum
    
    
    1.78 to 1
    
    
    
    1.50 to 1
 
 (1)
    
    Calculations are based on specific contractual definitions and subsidiaries per the
applicable debt agreements, which may differ from ratios or amounts presented elsewhere in
this document.    Bank Capital and Regulatory Oversight
    Capital Adequacy
 - 46 -




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##### Table of Contents



i.e.
    Information on Stock Repurchases
  Contractual Obligations (excluding Deposits)
  Contractual Obligations as of June 30, 2009Operating
    
    
    Leased
    
    
    CapitalPeriod Ending December 31,
    
    Borrowings
    
    
    Interest(1)
    
    
    Leases
    
    
    Facilities
    
    
    Leases
    
    
    Total(Dollars in thousands)2009
    
    $
    122,320
    
    
    $
    8,523
    
    
    $
    6
    
    
    $
    863
    
    
    $
    18
    
    
    $
    131,7302010
    
    
    207,801
    
    
    
    9,880
    
    
    
    11
    
    
    
    1,575
    
    
    
    35
    
    
    
    219,3022011
    
    
    69,793
    
    
    
    3,752
    
    
    
    8
    
    
    
    1,431
    
    
    
    35
    
    
    
    75,0192012
    
    
    24,280
    
    
    
    816
    
    
    
    4
    
    
    
    1,461
    
    
    
    18
    
    
    
    26,5792013
    
    
    1,802
    
    
    
    56
    
    
    
    4
    
    
    
    623
    
    
    
    
    
    
    
    2,485Thereafter
    
    
    207
    
    
    
    15
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    226Total
    
    $
    426,203
    
    
    $
    23,042
    
    
    $
    37
    
    
    $
    5,953
    
    
    $
    106
    
    
    $
    455,341
 
 (1)
    
    Includes interest on term note securitizations only. Excludes interest on $98.1
million of CP conduit warehouse facility. - 47 -




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##### Table of Contents



MARKET INTEREST RATE RISK AND SENSITIVITY
    Accounting for Derivatives Instruments and Hedging Activities.
       - 48 -




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Change in fair value of derivatives contracts
    
    $
    237
    
    
    $
    
    
    
    
    (1,070
    )
    
    $
    Cash flow hedging gains on forecasted transactions no longer probable
of occurring(1)
    
    
    409
    
    
    
    
    
    
    
    409
    
    
    
    Gain (loss) on derivatives
    
    $
    646
    
    
    $
    
    
    
    $
    (661
    )
    
    $
    
 
 (1)
    
    Reclassified from accumulated other comprehensive income     Scheduled Maturities by Calendar YearTotal2013 &
    
    Carrying2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    Amount(Dollars in thousands)Debt:Fixed-rate debt
    
    $
    95,776
    
    
    $
    136,213
    
    
    $
    69,793
    
    
    $
    24,280
    
    
    $
    2,009
    
    
    $
    328,071Average fixed rate
    
    
    5.61
    %
    
    
    5.80
    %
    
    
    6.05
    %
    
    
    6.44
    %
    
    
    6.95
    %
    
    
    5.85
    %Variable-rate debt
    
    $
    26,544
    
    
    $
    71,588
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    98,132Average variable rate
    
    
    5.03
    %
    
    
    5.03
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.03
    %
  - 49 -




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##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities ,
  Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly .
 Interim Disclosures
about Fair Value of Financial Instruments .
 Subsequent Events.
  Accounting for Transfers of Financial Assets Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities,
 - 50 -




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##### Table of Contents



Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities,
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
      - 51 -




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##### Table of Contents



PART II. Other Information
 
 Item 1. Legal Proceedings
 We 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, results of operations or
cash flows.
 
 Item 1A. Risk Factors
 There 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, 2008.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Information on Stock Repurchases
    
 Item 3. Defaults Upon Senior Securities
 None
 
 Item 4. Submission of Matters to a Vote of Security Holders
 None
 
 Item 5. Other Information
 None
 - 52 -




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Articles of Incorporation (1)3.2
    
    Bylaws (2)10.1
    
    Marlin Business Services Corp. Compensation Policy for Non-Employee Independent Directors (3)10.2
    
    Third Amendment to the Amended and Restated Series 2002-A Supplement to the Master Lease
Receivables Asset-Backed Finance Facility Agreement, dated as of March 31, 2009, among Marlin
Leasing Corporation, Marlin Leasing Receivables Corp. II, Marlin Leasing Receivables II, LLC,
JPMorgan Chase Bank, N.A., as the agent and Wells Fargo Bank, N.A., as the trustee
(3)10.3
    
    Sixth Amendment to the Second Amended and Restated Warehouse Revolving Credit Facility
Agreement, dated as of March 31, 2009, among Marlin Leasing Corporation, the financial
institutions that are party thereto as lenders, and National City Bank, as agent for the
lenders (3)10.4
    
    Consent and Amendment to the Amended and Restated Series 2002-A Supplement, dated as of June
29, 2009, among Marlin Leasing Corporation, Marlin Leasing Receivables Corp. II, Marlin
Leasing Receivables II, LLC, JPMorgan Chase Bank, N.A., as the agent, and Wells Fargo Bank
Minnesota, N.A., as the trustee (4)31.1
    
    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)
 
 (1)
    
    Previously filed with the SEC as an exhibit to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2007 filed on March 5, 2008, and incorporated by
reference herein.(2)
    
    Previously filed with the SEC as an exhibit to the Companys Amendment No. 1 to
Registration Statement on Form S-1 (File No. 333-108530), filed on October 14, 2003 and
incorporated by reference herein.(3)
    
    Previously filed with the SEC as an exhibit to the Companys Form 8-K dated April 2,
2009, and incorporated by reference herein.(4)
    
    Previously filed with the SEC as an exhibit to the Companys Form 8-K dated July 2,
2009, and incorporated by reference herein. - 53 -




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##### 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)Date: August 10, 2009
 - 54 -