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Marlin Posts Fourth Quarter/Year-End Loss

Marlin Business Services Corp. (Nasdaq:MRLN) today reported a fourth quarter 2008 net loss of $7.3 million  and net income on an adjusted basis of $371,000. For the twelve months ended December 31, 2008, the net loss was $5.2 million and net income on an adjusted basis was $4.5 million.

Fourth quarter 2008 lease production was $58.1 million, based on initial equipment cost, compared to $59.0 million for the third quarter of 2008 and $87.7 million for the fourth quarter of 2007.

Approval rates on lease originations were 47% for the fourth quarter of 2008, versus 49% for the third quarter of 2008 and 56% for fourth quarter a year ago. Direct sales volume in the fourth quarter decreased 17% year over year, while indirect sales volume decreased by 64%. The lower lease production and approval rates in the fourth quarter reflect our decision to adopt more restrictive credit standards during a weakened credit environment and deliberate actions to reduce exposure in our indirect channel.

Net lease charge-offs in the fourth quarter were $7.9 million, or 4.71% of average net investment in leases on an annualized basis, compared to $6.7 million or 3.85% of average net investment in leases on an annualized basis during third quarter 2008.

A $12.8 million loss was incurred on derivatives for the quarter due to losses caused by the precipitous decline in interest rates and the mark-to-market decrease in the value of forward "pay fixed" swaps. $10.6 million of the total loss recognized in the quarter was unrealized.

During the fourth quarter the Company repurchased 102,900 shares under the stock repurchase program announced in November 2007.

The Company opened its Utah Industrial Bank, Marlin Business Bank ("MBB"), on March 12, 2008 and the Bank has funded $79.3 million of leases and loans through its initial capitalization of $12 million and its issuance of $63.4 million in FDIC insured deposits at an average borrowing rate of 4.00%. Quarterly average deposit outstandings were $52.9 million at a weighted average interest rate of 4.14%.

On December 31, 2008, Marlin Business Bank received approval from the Federal Reserve Bank of San Francisco to convert from an industrial bank to a state-chartered commercial bank. The approval allows MBB to grow in size subject to the condition of additional invested capital. On January 13, 2009, MBB converted from an industrial bank to a commercial bank and became a member of the Federal Reserve System and Marlin Business Services Corp. became a bank holding company. On January 20, 2009, Marlin Business Bank submitted a modification request to the FDIC related to an outstanding Order that restricts the growth of the bank during its first three years of operations. At this time, we are awaiting a response from the FDIC on the modification request. Until we receive approval for this modification, we do not expect to have clear visibility on our overall funding options.

Our decision to adopt tighter underwriting standards, along with the general decline in the economy and related business activities, has led to lower overall anticipated lease originations. The lower expected originations, coupled with lack of clear visibility on our overall funding options, has resulted in our decision to proactively lower expenses in the first quarter of 2009, including reducing our workforce by 17% and closing our two smallest satellite offices (Chicago and Utah). A total of approximately 49 employees company-wide were affected as a result of the staff reductions.

We expect to incur pretax severance costs in the three months ended March 31, 2009 of approximately $500,000 related to the staff reductions. The total annualized pretax salary cost savings that are expected to result from these reductions are estimated to be approximately $2.3 million. Although we believe that these estimates are appropriate and reasonable based