MARLIN BUSINESS SERVICES CORP (Form: 10-Q, Received: 11/03/2015 16:38:07)

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 September 30, 2015

Commission file number 000-50448

MARLIN BUSINESS SERVICES CORP.

(Exact name of registrant as specified in its charter)


		Pennsylvania		38-3686388
		(State of incorporation)		(I.R.S. Employer Identification Number)

300 Fellowship Road, Mount Laurel, NJ 08054

(Address of principal executive offices)

(Zip code)

(888) 479-9111

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨

(Do not check if a smaller

reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No þ

At October 27, 2015, 12,441,098 shares of Registrant’s common stock, $.01 par value, were outstanding.

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

for the Quarter Ended September 30, 2015

TABLE OF CONTENTS


		Page No.

Part I – Financial Information			3
Item 1	Condensed Consolidated Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014		3
	Condensed Consolidated Statements of Operations for the three-and nine- month periods ended September 30, 2015 and 2014		4
	Condensed Consolidated Statements of Comprehensive Income for the three-and nine- month periods ended September 30, 2015 and 2014		5
	Condensed Consolidated Statements of Stockholders’ Equity for the nine-month period ended September 30, 2015 and the year ended December 31, 2014		6
	Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2015 and 2014		7
	Notes to Unaudited Condensed Consolidated Financial Statements		8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3	Quantitative and Qualitative Disclosures about Market Risk		51
Item 4	Controls and Procedures		51
Part II – Other Information			51
Item 1	Legal Proceedings		51
Item 1A	Risk Factors		51
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		52
Item 3	Defaults upon Senior Securities		52
Item 4	Mine Safety Disclosures		53
Item 5	Other Information		53
Item 6	Exhibits		54
Signatures			55
Certifications
RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
RULE 13a-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
RULE 13a-14(b) CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PART I. Financial Information

Item 1. Condensed Consolidated Financial Statements

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30,		December 31,
	2015		2014
	(Dollars in thousands, except per-share data)

ASSETS
Cash and due from banks	$	4,366	$	2,437
Interest-earning deposits with banks		100,852		108,219

Total cash and cash equivalents		105,218		110,656
Time deposits with banks		7,368		—
Restricted interest-earning deposits with banks		389		711
Securities available for sale (amortized cost of $6.1 million and $5.8 million at September 30, 2015 and December 31, 2014, respectively)		6,048		5,722
Net investment in leases and loans		659,253		629,507
Property and equipment, net		4,003		2,846
Property tax receivables		885		690
Other assets		7,290		8,317

Total assets	$	790,454	$	758,449


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	579,625	$	550,119
Other liabilities:
Dividends payable		25,508		—
Sales and property taxes payable		5,409		2,739
Accounts payable and accrued expenses		13,279		14,406
Net deferred income tax liability		15,319		17,221

Total liabilities		639,140		584,485


Commitments and contingencies (Note 6)

Stockholders’ equity:
Common Stock, $0.01 par value; 75,000,000 shares authorized; 12,617,269 and 12,838,449 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		126		128
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; none issued		—		—
Additional paid-in capital		84,004		89,130
Stock subscription receivable		(2)		(2)
Accumulated other comprehensive loss		(27)		(17)
Retained earnings		67,213		84,725

Total stockholders’ equity		151,314		173,964

Total liabilities and stockholders’ equity	$	790,454	$	758,449

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(Dollars in thousands, except per-share data)

Interest income	$	16,690	$	16,705	$	49,665	$	50,182
Fee income		3,915		3,881		11,762		11,016

Interest and fee income		20,605		20,586		61,427		61,198
Interest expense		1,433		1,250		4,087		3,647

Net interest and fee income		19,172		19,336		57,340		57,551
Provision for credit losses		1,986		2,706		7,542		6,562

Net interest and fee income after provision for credit losses		17,186		16,630		49,798		50,989


Other income:
Insurance income		1,470		1,341		4,294		3,996
Other income		572		400		1,336		1,176

Other income		2,042		1,741		5,630		5,172

Other expense:
Salaries and benefits		7,058		6,313		21,290		19,962
General and administrative		4,357		3,818		12,780		11,975
Financing related costs		34		297		184		881

Other expense		11,449		10,428		34,254		32,818

Income before income taxes		7,779		7,943		21,174		23,343
Income tax expense		2,982		3,039		8,173		8,860

Net income	$	4,797	$	4,904	$	13,001	$	14,483


Basic earnings per share	$	0.38	$	0.38	$	1.01	$	1.12
Diluted earnings per share	$	0.38	$	0.38	$	1.01	$	1.12

Cash dividends declared per share	$	2.14	$	0.125	$	2.39	$	0.345

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(Dollars in thousands)

Net income	$	4,797	$	4,904	$	13,001	$	14,483


Other comprehensive income (loss):

Increase (decrease) in fair value of securities available for sale		78		33		(15)		278

Tax effect		(30)		(11)		5		(105)


Total other comprehensive income (loss)		48		22		(10)		173


Comprehensive income	$	4,845	$	4,926	$	12,991	$	14,656

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Shares		Common Stock Amount		Additional Paid-In Capital		Stock Subscription Receivable		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity

	(Dollars in thousands)

Balance, December 31, 2013		12,994,758	$	130	$	91,730	$	(2)	$	(257)	$	71,437	$	163,038
Issuance of common stock		14,428		—		253		—		—		—		253

Repurchase of common stock		(283,064)		(3)		(5,724)		—		—		—		(5,727)
Exercise of stock options		14,469		—		154		—		—		—		154
Excess tax benefits from stock-based payment arrangements		—		—		754		—		—		—		754

Stock option compensation recognized		—		—		7		—		—		—		7
Restricted stock grant		97,858		1		(1)		—		—		—		—
Restricted stock compensation recognized		—		—		1,957		—		—		—		1,957
Net change in unrealized gain/loss on securities available for sale, net of tax		—		—		—		—		240		—		240
Net income		—		—		—		—		—		19,350		19,350
Cash dividends declared		—		—		—		—		—		(6,062)		(6,062)

Balance, December 31, 2014		12,838,449	$	128	$	89,130	$	(2)	$	(17)	$	84,725	$	173,964
Issuance of common stock		7,582		—		121		—		—		—		121
Repurchase of common stock		(445,227)		(4)		(7,702)		—		—		—		(7,706)
Exercise of stock options		61,937		1		585		—		—		—		586
Excess tax benefits from stock-based payment arrangements		—		—		323		—		—		—		323
Restricted stock grant		154,528		1		(1)		—		—		—		—
Restricted stock compensation recognized		—		—		1,548		—		—		—		1,548
Net change in unrealized gain/loss on securities available for sale, net of tax		—		—		—		—		(10)		—		(10)
Net income		—		—		—		—		—		13,001		13,001
Cash dividends declared		—		—		—		—		—		(30,513)		(30,513)

Balance, September 30, 2015		12,617,269	$	126	$	84,004	$	(2)	$	(27)	$	67,213	$	151,314

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2015		2014
	(Dollars in thousands)

Cash flows from operating activities:
Net income	$	13,001	$	14,483
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,214		1,176
Stock-based compensation		1,548		1,641
Excess tax benefits from stock-based payment arrangements		(323)		(662)
Provision for credit losses		7,542		6,562
Net deferred income taxes		(1,975)		(1,662)
Amortization of deferred initial direct costs and fees		5,575		5,425
Deferred initial direct costs and fees		(6,150)		(5,282)
Loss on equipment disposed		300		1,197
Effect of changes in other operating items:
Other assets		521		1,917
Other liabilities		2,011		1,732

Net cash provided by operating activities		23,264		26,527

Cash flows from investing activities:
Net change in time deposits with banks		(7,368)		—
Purchases of equipment for direct financing lease contracts and funds used to originate loans		(276,915)		(245,816)
Principal collections on leases and loans		237,671		213,605
Security deposits collected, net of refunds		(281)		20
Proceeds from the sale of equipment		2,512		2,674
Acquisitions of property and equipment		(2,127)		(1,081)
Change in restricted interest-earning deposits with banks		322		328
Purchases of securities available for sale, net		(341)		72

Net cash (used in) investing activities		(46,527)		(30,198)

Cash flows from financing activities:
Net change in deposits		29,506		31,518
Issuances of common stock		121		135
Repurchases of common stock		(7,706)		(5,700)
Dividends paid		(5,005)		(4,461)
Exercise of stock options		586		75
Excess tax benefits from stock-based payment arrangements		323		662

Net cash provided by financing activities		17,825		22,229

Net (decrease) increase in total cash and cash equivalents		(5,438)		18,558
Total cash and cash equivalents, beginning of period		110,656		85,653

Total cash and cash equivalents, end of period	$	105,218	$	104,211


Supplemental disclosures of cash flow information:
Cash paid for interest on deposits and borrowings	$	3,647	$	3,127
Net cash paid for income taxes	$	9,340	$	6,833

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

-7-

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – The Company

Description

Marlin Business Services Corp. (the “Company”) is a bank holding company and a financial holding company regulated by the Federal Reserve Board under the Bank Holding Company Act. The Company was incorporated in the Commonwealth of Pennsylvania on August 5, 2003. Through its principal operating subsidiary, Marlin Leasing Corporation (“MLC”), the Company provides equipment financing solutions nationwide, primarily to small and mid-sized businesses in a segment of the equipment leasing market commonly referred to in the industry as the “small-ticket” segment. The Company finances over 100 categories of commercial equipment important to its end user customers, including copiers, security systems, computers, telecommunications equipment and certain commercial and industrial equipment. In May 2000, we established AssuranceOne, Ltd., a Bermuda-based, wholly-owned captive insurance subsidiary, which enables us to reinsure the property insurance coverage for the equipment financed by MLC and Marlin Business Bank (“MBB”) for our end user customers. Effective March 12, 2008, the Company opened MBB, a commercial bank chartered by the State of Utah and a member of the Federal Reserve System. MBB serves as the Company’s primary funding source through its issuance of Federal Deposit Insurance Corporation (“FDIC”)-insured deposits.

References to the “Company,” “Marlin,” “Registrant,” “we,” “us” and “our” herein refer to Marlin Business Services Corp. and its wholly-owned subsidiaries, unless the context otherwise requires.

NOTE 2 – Summary of Critical Accounting Policies

Basis of financial statement presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. MLC and MBB are managed together as a single business segment and are aggregated for financial reporting purposes as they exhibit similar economic characteristics, share the same leasing portfolio and have one product offering. All intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring items) necessary to present fairly the Company’s financial position at September 30, 2015 and the results of operations for the three-and nine-month periods ended September 30, 2015 and 2014, and cash flows for the nine-month periods ended September 30, 2015 and 2014. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and note disclosures included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 6, 2015 and Form 10-K/A filed with the SEC on April 13, 2015. The consolidated results of operations for the three-and nine-month periods ended September 30, 2015 and 2014 and the consolidated statements of cash flows for the nine-month periods ended September 30, 2015 and 2014 are not necessarily indicative of the results of operations or cash flows for the respective full years or any other period.

Time Deposits with Banks. Time deposits with banks are primarily composed of FDIC insured certificates of deposits that have original maturity dates of greater than 90 days. These deposits are held on the balance sheet at amortized cost. Generally, the certificates of deposits have the ability to redeem early, however, early redemption penalties may be incurred.

Dividends Payable. Shareholders of the Company’s stock are entitled to receive a cash dividend when declared by the Board of Directors out of funds legally available for this purpose. The Company’s Board of Directors declared a special cash dividend of $2.00 per share on September 14, 2015. The special dividend was paid on October 5, 2015 to shareholders of record on the close of business on September 24, 2015, which resulted in a dividend payment of approximately $25.5 million.

There have been no other significant changes to the Company’s accounting policies as disclosed in the Company’s 2014 Annual Report on Forms 10-K and 10-K/A.

-8-

Recent Accounting Pronouncements .

In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date for ASU 2014-09, Revenue from Contracts with Customers . The amendments in this Update defer the effective date of Update 2014-09 by one year. The guidance is to be applied retrospectively to all prior periods presented or through a cumulative adjustment in the year of adoption, for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. The adoption of this new requirement is not expected to have a material impact on the consolidated earnings, financial position or cash flows of the Company.

-9-

NOTE 3 – Net Investment in Leases and Loans

Net investment in leases and loans consists of the following:


	September 30, 2015		December 31, 2014
	(Dollars in thousands)

Minimum lease payments receivable	$	738,520	$	710,801
Estimated residual value of equipment		27,500		27,458
Unearned lease income, net of initial direct costs and fees deferred		(99,724)		(98,738)
Security deposits		(2,319)		(2,600)
Loans, including unamortized deferred fees and costs		3,864		1,123
Allowance for credit losses		(8,588)		(8,537)

	$	659,253	$	629,507

At September 30, 2015, a total of $0.6 million of minimum lease payments receivable is assigned as collateral for the borrowing facility. At September 30, 2015, there is no amount outstanding under this borrowing facility and the unused borrowing capacity is $50.0 million. In addition, $32.5 million in net investment in leases are pledged as collateral for the secured borrowing capacity at the Federal Reserve Discount Window.

Initial direct costs net of fees deferred were $10.7 million and $10.1 million as of September 30, 2015 and December 31, 2014, respectively. Initial direct costs are netted in unearned income and are amortized to income using the effective interest method. At September 30, 2015 and December 31, 2014, $22.9 million and $22.0 million, respectively, of the estimated residual value of equipment retained on our Condensed Consolidated Balance Sheets was related to copiers.

Minimum lease payments receivable under lease contracts and the amortization of unearned lease income, including initial direct costs and fees deferred, are as follows as of September 30, 2015:


	Minimum Lease Payments Receivable		Income Amortization
	(Dollars in thousands)

Period Ending December 31,
2015	$	83,471	$	15,989
2016		289,724		45,162
2017		190,190		23,805
2018		107,029		10,538
2019		52,337		3,652
Thereafter		15,769		578

	$	738,520	$	99,724

As of September 30, 2015 and December 31, 2014, the Company maintained total finance receivables which were on a non-accrual basis of $1.7 million. As of September 30, 2015 and December 31, 2014, the Company had total finance receivables in which the terms of the original agreements had been renegotiated in the amount of $0.5 million and $1.0 million, respectively. (See Note 4 for income recognition on leases and loans and additional asset quality information.)

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NOTE 4 – Allowance for Credit Losses

In accordance with the Contingencies Topic of the FASB ASC, we maintain an allowance for credit losses at an amount sufficient to absorb losses inherent in our existing lease and loan portfolios as of the reporting dates based on our estimate of probable net credit losses.

The table which follows provides activity in the allowance for credit losses and asset quality statistics.


		Three Months Ended September 30,				Nine Months Ended September 30,				Year Ended December 31,
		2015		2014		2015		2014		2014
		(Dollars in thousands)
Allowance for credit losses, beginning of period		$	8,567	$	7,725	$	8,537	$	8,467	$	8,467

Charge-offs			(2,595)		(2,707)		(9,196)		(8,446)		(11,463)
Recoveries			630		647		1,705		1,788		2,417

Net charge-offs			(1,965)		(2,060)		(7,491)		(6,658)		(9,046)

Provision for credit losses			1,986		2,706		7,542		6,562		9,116

Allowance for credit losses, end of period	(1)	$	8,588	$	8,371	$	8,588	$	8,371	$	8,537


Annualized net charge-offs to average total finance receivables	(2)		1.23%		1.36%		1.59%		1.48%		1.50%

Allowance for credit losses to total finance receivables, end of period	(2)		1.31%		1.36%		1.31%		1.36%		1.36%

Average total finance receivables	(2)	$	641,020	$	608,290	$	630,073	$	599,208	$	602,923
Total finance receivables, end of period	(2)	$	657,143	$	616,916	$	657,143	$	616,916	$	627,922

Delinquencies greater than 60 days past due		$	3,186	$	3,290	$	3,186	$	3,290	$	3,602
Delinquencies greater than 60 days past due	(3)		0.43%		0.47%		0.43%		0.47%		0.51%
Allowance for credit losses to delinquent accounts greater than 60 days past due	(3)		269.55%		254.44%		269.55%		254.44%		237.01%

Non-accrual leases and loans, end of period		$	1,684	$	1,903	$	1,684	$	1,903	$	1,742
Renegotiated leases and loans, end of period		$	468	$	1,130	$	468	$	1,130	$	1,014

⁽¹⁾	At September 30, 2015 the allowance for credit losses allocated to loans was $0.1 million. At December 31, 2014 and September 30, 2014, there was no allowance for credit losses allocated to loans.

⁽²⁾	Total finance receivables include net investment in direct financing leases and loans. For purposes of asset quality and allowance calculations, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred are excluded.

⁽³⁾	Calculated as a percent of total minimum lease payments receivable for leases and as a percent of principal outstanding for loans.

Net investments in finance receivables are generally charged-off when they are contractually past due for 120 days or more. Income recognition is discontinued on leases or loans when a default on monthly payment exists for a period of 90 days or more. Income

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recognition resumes when a lease or loan becomes less than 90 days delinquent. At September 30, 2015, December 31, 2014 and September 30, 2014, there were no finance receivables past due 90 days or more and still accruing.

Net charge-offs for the three-month period ended September 30, 2015 were $2.0 million (1.23% of average total finance receivables on an annualized basis), compared to $2.9 million (1.84% of average total finance receivables on an annualized basis) for the three-month period ended June 30, 2015 and $2.1 million (1.36% of average total finance receivables on an annualized basis) for the three-month period ended September 30, 2014.

NOTE 5 – Other Assets

Other assets are comprised of the following:


	September 30, 2015		December 31, 2014
	(Dollars in thousands)

Accrued fees receivable	$	2,532	$	2,465
Prepaid expenses		1,257		1,748
Income taxes receivable		—		854
Other		3,501		3,250

	$	7,290	$	8,317

NOTE 6 – Commitments and Contingencies

MBB is a member bank in a non-profit, multi-financial institution consortium serving as a catalyst for community development by offering flexible financing for affordable, quality housing to low- and moderate-income residents. Currently, MBB receives approximately 1.2% participation in each funded loan under the program. MBB records loans in its financial statements when they have been funded or become payable. Such loans help MBB satisfy its obligations under the Community Reinvestment Act of 1977. At September 30, 2015, MBB had an unfunded commitment of $0.8 million for this activity. Unless renewed prior to termination, MBB’s one-year commitment to the consortium will expire in September 2016.

The Company is involved in legal proceedings, which include claims, litigation and suits arising in the ordinary course of business. In the opinion of management, these actions will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

As of September 30, 2015, the Company leases all four of its office locations including its executive offices in Mt. Laurel, New Jersey, and its offices in or near Atlanta, Georgia; Philadelphia, Pennsylvania; and Salt Lake City, Utah. These lease commitments are accounted for as operating leases. The Company has entered into several capital leases to finance corporate property and equipment.

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The following is a schedule of future minimum lease payments for capital and operating leases as of September 30, 2015:


	Future Minimum Lease Payment Obligations
Period Ending December 31,		Capital Leases		Operating Leases		Total
		(Dollars in thousands)
2015		$	25	$	385	$	410
2016			102		1,543		1,645
2017			77		1,533		1,610
2018			—		1,478		1,478
2019			—		1,441		1,441
Thereafter			—		689		689

Total minimum lease payments		$	204	$	7,069	$	7,273

Less: amount representing interest			(11)

Present value of minimum lease payments		$	193

Rent expense was $0.8 million for each of the nine-months ended September 30, 2015 and September 30, 2014.

The Company has an employment agreement with a certain senior officer that currently extends through November 2015, with certain renewal options.

NOTE 7 – Deposits

MBB serves as the Company’s primary funding source. MBB issues fixed-rate FDIC-insured certificates of deposit raised nationally through various brokered deposit relationships and fixed-rate FDIC-insured deposits received from direct sources. On February 23, 2014, MBB began offering FDIC-insured money market deposit accounts (the “MMDA Product”) through participation in a partner bank’s insured savings account product. This brokered deposit product has a variable rate, no maturity date and is offered to the clients of the partner bank and recorded as a single deposit account at MBB. As of September 30, 2015, money market deposit accounts totaled $48.8 million.

As of September 30, 2015, the remaining scheduled maturities of certificates of deposits are as follows:


	Scheduled Maturities
	(Dollars in thousands)

Period Ending December 31,
2015	$	53,096
2016		214,478
2017		153,729
2018		67,421
2019		31,647
Thereafter		10,494

Total	$	530,865

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Certificates of deposits issued by MBB are time deposits and are generally issued in denominations of $250,000 or less. The MMDA Product is also issued to customers in amounts less than $250,000. The FDIC insures deposits up to $250,000 per depositor. The weighted average all-in interest rate of deposits at September 30, 2015 was 1.05%.

NOTE 8 – Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments

Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB ASC establishes a framework for measuring fair value and requires certain disclosures about fair value measurements. Its provisions do not apply to fair value measurements for purposes of lease classification and measurement, which is addressed in the Leases Topic of the FASB ASC.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (exit price). A three-level valuation hierarchy is required for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

The three levels are defined as follows:

●

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, which 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.

The Company characterizes active markets as those where transaction volumes are sufficient to provide objective pricing information, such as an exchange traded price. Inactive markets are typically characterized by low transaction volumes, and price quotations that vary substantially among market participants or are not based on current information.

The Company’s balances measured at fair value on a recurring basis include the following as of September 30, 2015 and December 31, 2014:


	September 30, 2015 Fair Value Measurements Using				December 31, 2014 Fair Value Measurements Using
	Level 1		Level 2		Level 1		Level 2
	(Dollars in thousands)

Assets
Securities available for sale	$	3,352	$	2,696	$	3,281	$	2,441

At this time, the Company has not elected to report any assets and liabilities using the fair value option available under the Financial Instruments Topic of the FASB ASC. There have been no transfers between Level 1 and Level 2 of the fair value hierarchy.

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Disclosures about the Fair Value of Financial Instruments

The Financial Instruments Topic of the FASB ASC requires the disclosure of the estimated fair value of financial instruments including those financial instruments not measured at fair value on a recurring basis. This requirement excludes certain instruments, such as the net investment in leases and all nonfinancial instruments.

The fair values shown below have been derived, in part, by management’s assumptions, the estimated amount and timing of future cash flows and estimated discount rates. Valuation techniques involve uncertainties and require assumptions and judgments regarding prepayments, credit risk and discount rates. Changes in these assumptions will result in different valuation estimates. The fair values presented would not necessarily be realized in an immediate sale. Derived fair value estimates cannot necessarily be substantiated by comparison to independent markets or to other companies’ fair value information.

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The following summarizes the carrying amount and estimated fair value of the Company’s financial instruments:


	September 30, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)

Financial Assets
Cash and cash equivalents	$	105,218	$	105,218	$	110,656	$	110,656
Time deposits with banks		7,368		7,355		—		—
Restricted interest-earning deposits with banks		389		389		711		711
Loans, net of allowance		3,795		3,745		1,123		1,123

Financial Liabilities
Deposits	$	579,625	$	579,332	$	550,119	$	549,578

The paragraphs which follow describe the methods and assumptions used in estimating the fair values of financial instruments.

Cash and Cash Equivalents

The carrying amounts of the Company’s cash and cash equivalents approximate fair value as of September 30, 2015 and December 31, 2014, because they bear interest at market rates and had maturities of less than 90 days at the time of purchase. This fair value measurement is classified as Level 1.

Time Deposits with Banks

Fair value of time deposits is estimated by discounting cash flows of current rates paid by market participants for similar time deposits of the same or similar remaining maturities. This fair value measurement is classified as Level 2.

Restricted Interest-Earning Deposits with Banks

The Company maintains interest-earning trust accounts related to our secured debt facility. The book value of such accounts is included in restricted interest-earning deposits with banks on the accompanying Consolidated Balance Sheet. These accounts earn a floating market rate of interest which results in a fair value approximating the carrying amount at September 30, 2015 and December 31, 2014. This fair value measurement is classified as Level 1.

Securities Available for Sale

Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon various sources of market pricing. Securities are classified within the fair value hierarchy after giving consideration to the activity level in the market for the security type and the observability of the inputs used to determine the fair value. When available, the Company uses quoted prices in active markets and classifies such instruments within Level 1 of the fair value hierarchy. Level 1 securities include mutual funds. When instruments are traded in secondary markets and quoted market prices do not exist for such securities, the Company relies on prices obtained from third-party pricing vendors and classifies these instruments within Level 2 of the fair value hierarchy. The third-party vendors use a variety of methods when pricing securities that incorporate relevant market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. Level 2 securities include municipal bonds.

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Loans

Loans are primarily comprised of participating interests acquired through membership in a non-profit, multi-financial institution consortium serving as a catalyst for community development by offering financing for affordable, quality housing to low- and moderate-income. Such loans help MBB satisfy its obligations under the Community Reinvestment Act of 1977. The fair value of these loans approximates the carrying amount at September 30, 2015 and December 31, 2014. This estimate was based on recent comparable sales transactions with consideration of current market rates. This fair value measurement is classified as Level 2. The Company also invests in a small business loan product tailored to the small business market. Fair value for these loans are estimated by discounting cash flows at an imputed market rate for similar loan products with similar characteristics. This fair value measurement is classified as Level 2.

Deposits

Deposit liabilities with no defined maturity such as MMDA deposits have a fair value equal to the amount payable on demand at the reporting date (i.e., their carrying amount). Fair value for certificates of deposits is estimated by discounting cash flows at current rates paid by the Company for similar certificates of deposit of the same or similar remaining maturities. This fair value measurement is classified as Level 2.

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NOTE 9 – Earnings Per Share

The Company’s restricted stock awards are paid non-forfeitable common stock dividends and thus meet the criteria of participating securities. Accordingly, EPS has been calculated using the two-class method, under which earnings are allocated to both common stock and participating securities.

Basic EPS has been computed by dividing net income allocated to common stock by the weighted average common shares used in computing basic EPS. For the computation of basic EPS, all shares of restricted stock have been deducted from the weighted average shares outstanding.

Diluted EPS has been computed by dividing net income allocated to common stock by the weighted average number of common shares used in computing basic EPS, further adjusted by including the dilutive impact of the exercise or conversion of common stock equivalents, such as stock options, into shares of common stock as if those securities were exercised or converted.

The following table provides net income and shares used in computing basic and diluted EPS:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014

	(Dollars in thousands, except per-share data)

Basic EPS

Net income	$	4,797	$	4,904	$	13,001	$	14,483

Less: net income allocated to participating securities		(136)		(142)		(377)		(416)


Net income allocated to common stock	$	4,661	$	4,762	$	12,624	$	14,067


Weighted average common shares outstanding		12,773,653		12,865,421		12,815,679		12,908,168

Less: Unvested restricted stock awards considered participating securities		(366,886)		(377,453)		(367,876)		(369,396)


Adjusted weighted average common shares used in computing basic EPS		12,406,767		12,487,968		12,447,803		12,538,772


Basic EPS	$	0.38	$	0.38	$	1.01	$	1.12


Diluted EPS

Net income allocated to common stock	$	4,661	$	4,762	$	12,624	$	14,067


Adjusted weighted average common shares used in computing basic EPS		12,406,767		12,487,968		12,447,803		12,538,772

Add: Effect of dilutive stock options		6,730		51,749		18,342		57,368


Adjusted weighted average common shares used in computing diluted EPS		12,413,497		12,539,717		12,466,145		12,596,140


Diluted EPS	$	0.38	$	0.38	$	1.01	$	1.12

For the three-month periods ended September 30, 2015 and September 30, 2014, options to purchase 12,502 and 15,698 shares of

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common stock were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of the Company’s common stock for the respective periods.

For the nine-month periods ended September 30, 2015 and September 30, 2014, options to purchase 14,258 and 15,698 shares of common stock were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of the Company’s common stock for the respective periods.

NOTE 10 – Stockholders’ Equity

Stockholders’ Equity

On November 2, 2007, the Company’s Board of Directors approved a stock repurchase plan, under which, the Company was authorized to repurchase up to $15 million in value of its outstanding shares of common stock (the “2007 Repurchase Plan”). On July 29, 2014, the Company’s Board of Directors approved a new stock repurchase plan to replace the 2007 Repurchase Plan (the “2014 Repurchase Plan” and, together with the 2007 Repurchase Plan, the “Repurchase Plans”). Under the 2014 Repurchase Plan, the Company is authorized to repurchase up to $15 million in value of its outstanding shares of common stock. This authority may be exercised from time to time and in such amounts as market conditions warrant. Any shares purchased under this plan are returned to the status of authorized but unissued shares of common stock. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time. The repurchases are funded using the Company’s working capital.

During the three- and nine-month periods ended September 30, 2015, the Company purchased 196,196 and 406,719 shares of its common stock under the 2014 Repurchase Plan at an average cost of $15.65 and $17.22, respectively. During the three- and nine-month periods ended September 30, 2014, the Company purchased 97,507 shares and 211,391 shares of its common stock under the Repurchase Plans at an average cost of $19.08 and $19.39, respectively. At September 30, 2015, the Company had $6.4 million remaining in the 2014 Repurchase Plan.

In addition to the repurchases described above, participants in the Company’s 2003 Equity Compensation Plan, as amended (the “2003 Plan”) and the Company’s 2014 Equity Compensation Plan (approved by the Company’s shareholders on June 3, 2014) (the “2014 Plan” and, together with the 2003 Plan, the “Equity Plans”) may have shares withheld to cover income taxes. There were 781 and 38,508 shares repurchased to cover income tax withholding in connection with shares granted under the Equity Plans during each of the three- and nine-month periods ended September 30, 2015, at average per-share costs of $16.05 and $18.17, respectively. There were 3,933 and 70,210 shares repurchased to cover income tax withholding in connection with shares granted under the Equity Plans during the three- and nine-month periods ended September 30, 2014, at average per-share costs of $19.11 and $22.72, respectively.

Regulatory Capital Requirements

Through its issuance of FDIC-insured deposits, MBB serves as the Company’s primary funding source. Over time, MBB may offer other products and services to the Company’s customer base. MBB operates as a Utah state-chartered, Federal Reserve member commercial bank, insured by the FDIC. As a state-chartered Federal Reserve member bank, MBB is supervised by both the Federal Reserve Bank of San Francisco and the Utah Department of Financial Institutions.

The Company and MBB are subject to capital adequacy regulations issued jointly by the federal bank regulatory agencies. These risk-based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations and consider off-balance sheet exposures in determining capital adequacy. The federal bank regulatory agencies and/or the U.S. Congress may determine to increase capital requirements in the future due to the current economic environment. Under the capital adequacy regulation, at least half of a banking organization’s total capital is required to be “Tier 1 Capital” as defined in the regulations, comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual preferred stock. The remaining capital, “Tier 2 Capital,” as defined in the regulations, may consist of other preferred stock, a limited amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The regulations establish minimum leverage ratios for banking organizations, which are calculated by dividing Tier 1 Capital by total quarterly average assets. Recognizing that the risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banking organizations are expected to maintain capital in excess of the minimum standards.

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On January 1, 2015, the Company and MBB became subject to new capital adequacy standards under the Basel III rules. The new standards require a minimum for Tier 1 leverage ratio of 4%; previously certain banking organizations were allowed to maintain a 3% minimum Tier 1 leverage ratio subject to certain requirements. The new standards raised the required minimum Tier 1 risk-based ratio from 4% to 6%. The Total risk-based capital ratio of 8% did not change. The new capital adequacy standards establish a new common equity Tier 1 risk-based capital ratio with a required 4.5% minimum (6.5% to be considered well-capitalized). There is also a new capital conservation buffer which is phased in from 2015 to 2019. When added to the minimum capital ratios and fully phased in, the capital conservation buffer will require banking organizations to hold an additional 2.5% of capital above the minimum requirements. If a banking organization does not maintain capital above the minimum plus the capital conservation buffer it may be subject to restrictions on dividends, share buybacks, and certain discretionary payments such as bonus payments.

The Company plans to provide the necessary capital to maintain MBB at “well-capitalized” status as defined by banking regulations and as required by an agreement entered into by and among MBB, MLC, Marlin Business Services Corp. and the FDIC in conjunction with the opening of MBB (the “FDIC Agreement”). MBB’s Tier 1 Capital balance at September 30, 2015 was $118.8 million, which met all capital requirements to which MBB is subject and qualified MBB for “well-capitalized” status. At September 30, 2015, the Company also exceeded its regulatory capital requirements and was considered “well-capitalized” as defined by federal banking regulations and as required by the FDIC Agreement.

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The following table sets forth the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio for Marlin Business Services Corp. and MBB at September 30, 2015.


	Actual				Minimum Capital Requirement				Well-Capitalized Capital Requirement
	Ratio		Amount		Ratio ⁽¹⁾		Amount		Ratio			Amount

	(Dollars in thousands)

Tier 1 Leverage Capital

Marlin Business Services Corp.		19.72%	$	151,319		4%	$	30,691		5%		$	38,364

Marlin Business Bank		16.81%	$	118,773		5%	$	35,320		5%		$	35,320

Common Equity Tier 1 Risk-Based Capital

Marlin Business Services Corp.		21.54%	$	151,319		4.5%	$	31,617		6.5%		$	45,670

Marlin Business Bank		17.47%	$	118,773		6.5%	$	44,183		6.5%		$	44,183

Tier 1 Risk-based Capital

Marlin Business Services Corp.		21.54%	$	151,319		6%	$	42,157		8%		$	56,209

Marlin Business Bank		17.47%	$	118,773		8%	$	54,379		8%		$	54,379

Total Risk-based Capital

Marlin Business Services Corp.		22.76%	$	159,907		8%	$	56,209		10%		$	70,261

Marlin Business Bank		18.71%	$	127,209		15%	$	101,961		10%	⁽¹⁾	$	67,974

⁽¹⁾

MBB is required to maintain “well-capitalized” status and must also maintain a total risk-based capital ratio greater than 15% pursuant to the FDIC Agreement.

Prompt Corrective Action . The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal regulators to take prompt corrective action against any undercapitalized institution. Five capital categories have been established under federal banking regulations: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Well-capitalized institutions significantly exceed the required minimum level for each relevant capital measure. Adequately capitalized institutions include depository institutions that meet but do not significantly exceed the required minimum level for each relevant capital measure. Undercapitalized institutions consist of those that fail to meet the required minimum level for one or more relevant capital measures. Significantly undercapitalized characterizes depository institutions with capital levels significantly below the minimum requirements for any relevant capital measure. Critically undercapitalized refers to depository institutions with minimal capital and at serious risk for government seizure.

Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A depository institution is generally prohibited from making capital distributions, including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. Institutions that are adequately capitalized but not well-capitalized cannot accept, renew or roll over brokered deposits except with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized institutions may not accept, renew or roll over brokered deposits.

The federal bank regulatory agencies are permitted or, in certain cases, required to take certain actions with respect to institutions falling within one of the three undercapitalized categories. Depending on the level of an institution’s capital, the agency’s corrective powers include, among other things:

•

prohibiting the payment of principal and interest on subordinated debt;

•

prohibiting the holding company from making distributions without prior regulatory approval;

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•

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.

A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted unless, among other things, the banking institution’s holding company guarantees the plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.

Pursuant to the FDIC Agreement entered into in conjunction with the opening of MBB, MBB must keep its total risk-based capital ratio above 15%. MBB’s total risk-based capital ratio of 18.71% at September 30, 2015 exceeded the threshold for “well capitalized” status under the applicable laws and regulations, and also exceeded the 15% minimum total risk-based capital ratio required in the FDIC Agreement.

Dividends . The Federal Reserve Board has issued policy statements requiring insured banks and bank holding companies to have an established assessment process for maintaining capital commensurate with their overall risk profile. Such assessment process may affect the ability of the organizations to pay dividends. Although generally organizations may pay dividends only out of current operating earnings, dividends may be paid if the distribution is prudent relative to the organization’s financial position and risk profile, after consideration of current and prospective economic conditions.

As previously disclosed in the Company’s Form 8-K filed on September 14, 2015, in addition to the Company’s regular quarterly dividend, the Company’s Board of Directors declared a special cash dividend of $2.00 per share on September 14, 2015. The special dividend was paid on October 5, 2015 to shareholders of record on the close of business on September 24, 2015, which resulted in a dividend payment of approximately $25.5 million.

NOTE 11 – Stock-Based Compensation

Under the terms of the 2014 Plan, employees, certain consultants and advisors and non-employee members of the Company’s Board of Directors have the opportunity to receive incentive and nonqualified grants of stock options, stock appreciation rights, restricted stock and other equity-based awards as approved by the Company’s Board of Directors. These award programs are used to attract, retain and motivate employees and to encourage individuals in key management roles to retain stock. The Company has a policy of issuing new shares to satisfy awards under the 2014 Plan. The aggregate number of shares under the 2014 Plan that may be issued pursuant to stock options or restricted stock grants is 1,200,000 with not more than 1,000,000 of such shares available for issuance as restricted stock grants. There were 923,661 shares available for future grants under the 2014 Plan as of September 30, 2015, of which 723,661 shares were available to be issued as restricted stock grants.

Total stock-based compensation expense was $0.4 million for the three-month period ended September 30, 2015 and $0.3 million for the three-month period ended September 30, 2014. Total stock-based compensation expense was $1.6 million for both the nine-month periods ended September 30, 2015 and September 30, 2014. Excess tax benefits from stock-based payment arrangements increased cash provided by financing activities and decreased cash provided by operating activities by $0.3 million and $0.7 million for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of the grant and have 7- to 10-year contractual terms. All options issued contain service conditions based on the participant’s continued service with the Company and may provide for accelerated vesting if there is a change in control as defined in the Equity Compensation Plans. Employee stock options generally vest over four years.

The Company also issues stock options to non-employee independent directors. These options generally vest in one year.

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There were no stock options granted during the three-month and nine-month periods ended September 30, 2015 and September 30, 2014.

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A summary of option activity for the nine-month period ended September 30, 2015 follows:


Options	Number of Shares		Weighted Average Exercise Price Per Share

Outstanding, December 31, 2014		193,351	$	10.23

Granted		—		—

Exercised		(61,937)		9.48

Forfeited		(80,728)		9.64

Expired		—		—


Outstanding, September 30, 2015		50,686		12.09

During each of the three-month periods ended September 30, 2015 and September 30, 2014 the Company did not recognize compensation expense related to options. During the nine-month period ended September 30, 2015 the Company did not recognize compensation expense related to options. During the nine-month period ended September 30, 2014 the Company recognized total compensation expense related to options of less than $0.1 million.

There were 4,082 and 1,039 stock options exercised during the three-month periods ended September 30, 2015 and September 30, 2014, respectively. The total pretax intrinsic values of stock options exercised were less than $0.1 million for the three-month periods ended September 30, 2015 and September 30, 2014, respectively.

The total pretax intrinsic values of stock options exercised were $0.6 million and less than $0.1 million for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.

The following table summarizes information about the stock options outstanding and exercisable as of September 30, 2015:


	*Options Outstanding*								*Options Exercisable*

				Weighted	Weighted		Aggregate				Weighted	Weighted		Aggregate

				Average	Average		Intrinsic				Average	Average		Intrinsic

Range of		Number		Remaining	Exercise		Value		Number		Remaining	Exercise		Value

Exercise Prices		Outstanding		Life (Years)	Price		(In thousands)		Exercisable		Life (Years)	Price		(In thousands)

$	7.17 - 7.79		2,878	1.0	$	7.35	$	23		2,878	1.0	$	7.35	$	23

$	12.08 - 12.41		47,808	1.6		12.38		144		35,306	1.6		12.36		107


			50,686	1.6		12.09	$	167		38,184	1.6		11.98	$	130

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $15.39 as of September 30, 2015, which would have been received by the option holders had all option holders exercised their options as of that date.

As of September 30, 2015, there was no future compensation cost related to non-vested stock options not yet recognized in the Consolidated Statements of Operations based on the most probable performance assumptions. As of September 30, 2015, $0.2 million of additional potential compensation cost related to non-vested stock options has not been recognized due to performance targets not being achieved. However, in certain circumstances, these options may be subject to vesting prior to their expiration dates. The weighted average remaining term of these options is approximately 1.6 years.

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Restricted Stock Awards

Restricted stock awards provide that, during the applicable vesting periods, the shares awarded may not be sold or transferred by the participant. The vesting period for restricted stock awards generally ranges from three to 10 years. All awards issued contain service conditions based on the participant’s continued service with the Company and may provide for accelerated vesting if there is a change in control as defined in the Equity Compensation Plans.

The vesting of certain restricted shares may be accelerated to a minimum of three years based on achievement of various individual performance measures. Acceleration of expense for awards based on individual performance factors occurs when the achievement of the performance criteria is determined.

In addition, the Company has issued certain shares under a Management Stock Ownership Program. Under this program, restrictions on the shares lapse at the end of 10 years but may lapse (vest) in a minimum of three years if the employee continues in service at the Company and owns a matching number of other common shares in addition to the restricted shares.

Of the total restricted stock awards granted during the nine-month period ended September 30, 2015, 77,342 shares may be subject to accelerated vesting based on individual performance factors; no shares have vesting contingent upon performance factors. Vesting was accelerated in 2014 and 2015 on certain awards based on the achievement of certain performance criteria determined annually, as described below.

The Company also issues restricted stock to non-employee independent directors. These shares generally vest in seven years from the grant date or six months following the director’s termination from Board of Directors service.

The following table summarizes the activity of the non-vested restricted stock during the nine months ended September 30, 2015:


Non-vested restricted stock	Shares		Weighted Average Grant-Date Fair Value

Outstanding at December 31, 2014		346,036	$	15.99

Granted		174,912		16.87

Vested		(122,740)		14.71

Forfeited		(20,384)		18.46

Outstanding at September 30, 2015		377,824		16.68

During the three-month periods ended September 30, 2015 and September 30, 2014, the Company granted restricted stock awards with grant date fair values totaling $0.4 million and $0.1 million, respectively. During the nine-month periods ended September 30, 2015 and September 30, 2014, the Company granted restricted stock awards with grant date fair values totaling $3.0 million and $2.1 million, respectively.

As vesting occurs, or is deemed likely to occur, compensation expense is recognized over the requisite service period and additional paid-in capital is increased. The Company recognized $0.4 million and $0.3 million of compensation expense related to restricted stock for the three-month period ended September 30, 2015 and September 30, 2014, respectively. The Company recognized $1.6 million of compensation expense related to restricted stock for both nine-month periods ended September 30, 2015 and September 30, 2014.

Of the $1.6 million total compensation expense related to restricted stock for the nine-month period ended September 30, 2015, approximately $0.5 million related to accelerated vesting during the first quarter of 2015, based on achievement of certain performance criteria determined annually. Of the $1.6 million total compensation expense related to restricted stock for the nine-month period ended September 30, 2014, approximately $0.6 million related to accelerated vesting during the first quarter of 2014, which was also based on the achievement of certain performance criteria determined annually.

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As of September 30, 2015, there was $4.6 million of unrecognized compensation cost related to non-vested restricted stock compensation scheduled to be recognized over a weighted average period of 4.2 years. In the event individual performance targets are achieved, $1.8 million of the unrecognized compensation cost would accelerate to be recognized over a weighted average period of 1.1 years. In addition, certain of the awards granted may result in the issuance of 59,959 additional shares of stock if achievement of certain targets is greater than 100%. The expense related to the additional shares awarded will be dependent on the Company’s stock price when the achievement level is determined.

The fair value of shares that vested during the three-month periods ended September 30, 2015 and September 30, 2014 was $0.1 million and $0.2 million, respectively. The fair value of shares that vested during the nine-month periods ended September 30, 2015 and September 30, 2014 was $2.2 million and $5.0 million, respectively.

NOTE 12 – Subsequent Events

The Company declared a dividend of $0.14 per share on November 2, 2015. The quarterly dividend, which is expected to result in a dividend payment of approximately $1.8 million, is scheduled to be paid on November 23, 2015 to shareholders of record on the close of business on November 12, 2015. It represents the Company’s seventeenth consecutive quarterly cash dividend. The payment of future dividends will be subject to approval by the Company’s Board of Directors.

On October 6, 2015, the Company’s affiliate, Marlin Receivables Corp. (“MRC”), amended its $50.0 million borrowing facility. The amendment changed the commitment termination date of the facility from October 7, 2015 to February 4, 2016.

As previously disclosed in the Company’s Form 8-K filed on October 20, 2015, the Company announced that Daniel P. Dyer retired from his position as Chief Executive Officer and director of Marlin Business Services Corp. on October 20, 2015. Edward J. Siciliano, Executive Vice President and Chief Sales Officer, has been named interim Chief Executive Officer, effective October 20, 2015, and will serve in that role while the Board of Directors conducts a search for a permanent Chief Executive Officer. In connection with his retirement, the Company and Mr. Dyer entered into a separation agreement dated October 20, 2015. The Company anticipates a fourth quarter 2015 after-tax charge of approximately $1.7 million due to a cash severance payment and vesting of outstanding restricted equity awards as defined by the separation agreement.

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 Forms 10-K and 10-K/A for the year ended December 31, 2014 filed with the SEC. This discussion contains certain statements of a forward-looking nature that involve risks and uncertainties.

FORWARD-LOOKING STATEMENTS

Certain statements in this document may include the words or phrases “can be,” “expects,” “plans,” “may,” “may affect,” “may depend,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “if” and similar words and phrases that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Forward-looking statements are subject to various known and unknown risks and uncertainties and the Company cautions that any forward-looking information provided by or on its behalf is not a guarantee of future performance. Statements regarding the following subjects are forward-looking by their nature: (a) our business strategy; (b) our projected operating results; (c) our ability to obtain external deposits or financing; (d) our understanding of our competition; and (e) industry and market trends. The Company’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond the Company’s control, including, without limitation:

availability, terms and deployment of funding and capital;

changes in our industry, interest rates, the regulatory environment or the general economy resulting in changes to our business strategy;

the degree and nature of our competition;

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availability and retention of qualified personnel;

general volatility of the capital markets; and

the factors set forth in the section captioned “Risk Factors” in Item 1 of our Form 10-K for the year ended December 31, 2014 filed with the SEC.

Forward-looking statements apply only as of the date made and the Company is not required to update forward-looking statements for subsequent or unanticipated events or circumstances.

Overview

Founded in 1997, we are a nationwide provider of equipment financing solutions, primarily to small and mid-sized businesses. We finance over 100 categories of commercial equipment important to the typical small and mid-sized business customer, including copiers, computers and software, security systems, telecommunications equipment and certain commercial and industrial equipment. We access our end user customers through origination sources comprised of our existing network of independent equipment dealers and national account programs, as well as through direct solicitation of our end user customers and through relationships with select lease brokers.

Our leases are fixed-rate transactions with terms generally ranging from 36 to 60 months. At September 30, 2015, our lease portfolio consisted of 81,121 accounts with an average original term of 47 months and average original transaction size of approximately $14,000.

During the first quarter of 2015, the Company launched Funding Stream, a new, flexible loan program of MBB. Funding Stream is tailored to the small business market to provide customers a convenient, hassle free alternative to traditional lenders and access to capital to help grow their businesses.

At September 30, 2015, we had $790.5 million in total assets. Our assets are substantially comprised of our net investment in leases and loans which totaled $659.3 million at September 30, 2015.

We generally reach our lessees through a network of independent equipment dealers and, to a much lesser extent, lease brokers. The number of dealers and brokers with whom we conduct business depends on, among other things, the number of sales account executives we have. Sales account executive staffing levels and the activity of our origination sources are shown below.


	As of or For the Nine Months Ended September 30, 2015		As of or For the Year Ended December 31,
			2014		2013		2012		2011		2010
Number of sales account executives		131		115		124		114		93		87
Number of originating sources ⁽¹⁾		1,088		1,117		1,173		1,117		827		604

⁽¹⁾ Monthly average of origination sources generating lease volume

Our revenue consists of interest and fees from our leases and loans and, to a lesser extent, income from our property insurance program and other fee income. Our expenses consist of interest expense and operating expenses, which include salaries and benefits and other general and administrative expenses. As a credit lender, our earnings are also impacted by credit losses. For the quarter ended September 30, 2015, our annualized net credit losses were 1.23% of our average total finance receivables. We establish reserves for credit losses which require us to estimate inherent losses in our portfolio as of the reporting date.

Our leases are classified under U.S. GAAP as direct financing leases, and we recognize interest income over the term of the lease. Direct financing leases transfer substantially all of the benefits and risks of ownership to the equipment lessee. Our net investment in direct finance leases is included in our consolidated financial statements in “net investment in leases and loans.” Net investment in direct financing leases consists of the sum of total minimum lease payments receivable and the estimated residual value of leased equipment, less unearned lease income. Unearned lease income consists of the excess of the total future minimum lease payments receivable plus

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the estimated residual value expected to be realized at the end of the lease term plus deferred net initial direct costs and fees less the cost of the related equipment. Approximately 67% of our lease portfolio at September 30, 2015 amortizes over the lease term to a $1 residual value. For the remainder of the portfolio, we must estimate end of term residual values for the leased assets. Failure to correctly estimate residual values could result in losses being realized on the disposition of the equipment at the end of the lease term.

We fund our business primarily through the issuance of fixed and variable-rate FDIC-insured deposits, and money market demand accounts raised nationally by MBB. The Company also maintains a variable-rate long-term loan facility. As of September 30, 2015 the variable-rate long term loan facility did not have a balance. Historically, leases were funded through variable-rate facilities until they were refinanced through term note securitizations at fixed rates. All of our term note securitizations were accounted for as on-balance sheet transactions and, therefore, we did not recognize gains or losses from these transactions.

Since its opening in 2008, MBB has served as a funding source for a portion of the Company’s new originations primarily through the issuance of FDIC-insured deposits. We anticipate that FDIC-insured deposits issued by MBB will continue to represent our primary source of funds for the foreseeable future. As of September 30, 2015, total MBB deposits were $579.6 million, compared to $550.1 million at December 31, 2014. We had no outstanding secured borrowings as of both September 30, 2015 and December 31, 2014.

Fixed rate leases may be financed with variable-rate funding sources, therefore, our earnings may be exposed to interest rate risk should interest rates rise. We generally benefit in times of falling and low interest rates. In contrast to previous facilities, our current long-term loan facility does not require annual refinancing.

Historically, from time to time we use derivative financial instruments to manage exposure to the effects of changes in market interest rates and to fulfill certain covenants in our borrowing arrangements. All derivatives are recorded on the Consolidated Balance Sheets at their fair value as either assets or liabilities. The Company was not a party to any derivative agreements at September 30, 2015.

Through the issuance of FDIC-insured deposits, the Company’s wholly owned subsidiary, MBB, serves as the Company’s primary funding source. In the future MBB may elect to offer other products and services to the Company’s customer base. As a Utah state-chartered Federal Reserve member bank, MBB is supervised by both the Federal Reserve Bank of San Francisco and the Utah Department of Financial Institutions.

On January 13, 2009, Marlin Business Services Corp. became a bank holding company and is subject to the Bank Holding Company Act and supervised by the Federal Reserve Bank of Philadelphia. On September 15, 2010, the Federal Reserve Bank of Philadelphia confirmed the effectiveness of Marlin Business Services Corp.’s election to become a financial holding company (while remaining a bank holding company) pursuant to Sections 4(k) and (l) of the Bank Holding Company Act and Section 225.82 of the Federal Reserve Board’s Regulation Y. Such election permits Marlin Business Services Corp. to engage in activities that are financial in nature or incidental to a financial activity, including the maintenance and expansion of the reinsurance activities conducted through its wholly-owned subsidiary, AssuranceOne, Ltd. (“AssuranceOne”).

Critical Accounting Policies

Dividends Payable. Shareholders of the Company’s stock are entitled to receive a special cash dividend when declared by the Board of Directors out of funds legally available for this purpose. The Company’s Board of Directors declared a special cash dividend of $2.00 per share on September 14, 2015. The special dividend was paid on October 5, 2015 to shareholders of record on the close of business on September 24, 2015, which resulted in a dividend payment of approximately $25.5 million.

There have been no other significant changes to our Critical Accounting Policies as described in our 2014 Annual Report on Forms 10-K and 10-K/A.

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RESULTS OF OPERATIONS

Comparison of the Three-Month Periods Ended September 30, 2015 and September 30, 2014

Net income. Net income of $4.8 million was reported for the three-month period ended September 30, 2015, resulting in diluted EPS of $0.38, compared to net income of $4.9 million and diluted EPS of $0.38 for the three-month period ended September 30, 2014.

Return on average assets was 2.51% for the three-month period ended September 30, 2015, compared to a return of 2.67% for the three-month period ended September 30, 2014. Return on average equity was 10.95% for the three-month period ended September 30, 2015, compared to a return of 11.50% for the three-month period ended September 30, 2014.

Overall, our average net investment in total finance receivables for the three-month period ended September 30, 2015 increased 5.4% to $641.0 million, compared to $608.3 million for the three-month period ended September 30, 2014. This change was primarily due to origination volume continuing to exceed lease repayments. The end-of-period net investment in total finance receivables at September 30, 2015 was $659.3 million, an increase of $29.8 million, or 4.7%, from $629.5 million at December 31, 2014.

During the three months ended September 30, 2015, we generated 6,476 new leases with equipment cost of $99.7 million, compared to 6,130 new leases with equipment cost of $82.5 million generated for the three months ended September 30, 2014. Sales staffing levels increased from 116 sales account executives at September 30, 2014 to 131 sales account executives at September 30, 2015. Approval rates increased 1% to 66% for the quarter ended September 30, 2015, compared to 65% for the quarter ended September 30, 2014.

For the three-month period ended September 30, 2015 compared to the three-month period ended September 30, 2014, net interest and fee income decreased $0.1 million, or 0.5%, primarily due to a $0.1 million increase in interest expense. The provision for credit losses decreased $0.7 million, or 25.9%, to $2.0 million for the three-month period ended September 30, 2015 from $2.7 million for the same period in 2014, primarily due to lower 30 plus day delinquencies and lower net charge-offs quarter over quarter.

Average balances and net interest margin. The following table summarizes the Company’s average balances, interest income, interest expense and average yields and rates on major categories of interest-earning assets and interest-bearing liabilities for the three-month periods ended September 30, 2015 and September 30, 2014.

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	Three Months Ended September 30,
	2015							2014

	(Dollars in thousands)
					Average							Average
	Average				Yields/			Average				Yields/
	Balance ⁽¹⁾		Interest		Rates ⁽²⁾			Balance ⁽¹⁾		Interest		Rates ⁽²⁾
Interest-earning assets:
Interest-earning deposits with banks	$	88,263	$	24		0.11	%	$	103,480	$	31		0.12	%
Time Deposits		7,368		21		1.15			—		—		—
Restricted interest-earning deposits with banks		502		-		0.01			977		—		0.01
Securities available for sale		6,080		33		2.17			5,580		30		2.18
Net investment in leases ⁽³⁾		638,358		16,473		10.32			607,055		16,633		10.96
Loans receivable ⁽³⁾⁽⁴⁾		2,662		139		20.81			1,235		11		3.68

Total interest-earning assets		743,233		16,690		8.98			718,327		16,705		9.30


Non-interest-earning assets:
Cash and due from banks		2,295							354
Property and equipment, net		4,042							2,544
Property tax receivables		3,074							1,107
Other assets ^-5		10,357							11,494

Total non-interest-earning assets		19,768							15,499


Total assets	$	763,001						$	733,826


Interest-bearing liabilities:
Certificate of Deposits ^-6	$	510,160	$	1,399		1.10	%		489,360	$	1,203		0.98	%
Money Market Deposits ^-6		46,755		34		0.29			45,042		29		0.26
Long-term borrowings ^-6		—		—		—			—		18		—

Total interest-bearing liabilities		556,915		1,433		1.03			534,402		1,250		0.94


Non-interest-bearing liabilities:
Sales and property taxes payable		5,959							2,243
Accounts payable and accrued expenses		7,908							7,909
Net deferred income tax liability		16,944							18,674

Total non-interest-bearing liabilities		30,811							28,826


Total liabilities		587,726							563,228

Stockholders’ equity		175,275							170,598

Total liabilities and stockholders’ equity	$	763,001						$	733,826


Net interest income			$	15,257						$	15,455
Interest rate spread ^-7						7.95	%						8.36	%
Net interest margin ^-8						8.21	%						8.61	%
Ratio of average interest-earning assets to average interest-bearing liabilities						133.46	%						134.42	%

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⁽¹⁾	Average balances were calculated using average daily balances.

⁽²⁾	Annualized.

⁽³⁾	Average balances of leases and loans include non-accrual leases and loans, and are presented net of unearned income. The average balances of leases and loans do not include the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred.

⁽⁴⁾	In 2015, the Company started funding business loans associated with Funding Stream. These loans were originated with higher average yields than the loans that were on the balance sheet as of December 2014, which resulted in higher average yields in 2015 compared to 2014.

⁽⁵⁾	Includes operating leases.

⁽⁶⁾	Includes effect of transaction costs. Amortization of transaction costs is on a straight-line basis, resulting in an increased average rate whenever average portfolio balances are at reduced levels.

⁽⁷⁾	Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.

⁽⁸⁾	Net interest margin represents net interest income as an annualized percentage of average interest-earning assets.

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The following table presents the components of the changes in net interest income by volume and rate.


	Three Months Ended September 30, 2015 Compared To
	Three Months Ended September 30, 2014
	Increase (Decrease) Due To:
	Volume ⁽¹⁾		Rate ⁽¹⁾		Total
	(Dollars in thousands)
Interest income:
Interest-earning deposits with banks	$	(4)	$	(3)	$	(7)
Time Deposits		21		—		21
Restricted interest-earning deposits with banks		—		—		—
Securities available for sale		3		—		3
Net investment in leases		834		(994)		(160)
Loans receivable		25		103		128
Total interest income		569		(584)		(15)

Interest expense:
Certificate of Deposits		53		143		196
Money Market Deposits		1		4		5
Long-term borrowings		(18)		—		(18)
Total interest expense		54		129		183

Net interest income		525		(723)		(198)

⁽¹⁾

Changes due to volume and rate are calculated independently for each line item presented rather than presenting vertical subtotals for the individual volume and rate columns. 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.

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Net interest and fee margin. The following table summarizes the Company’s net interest and fee income as an annualized percentage of average total finance receivables for the three-month periods ended September 30, 2015 and September 30, 2014.


	Three Months Ended September 30,
	2015		2014
	(Dollars in thousands)

Interest income	$	16,690	$	16,705

Fee income		3,915		3,881


Interest and fee income		20,605		20,586

Interest expense		1,433		1,250


Net interest and fee income	$	19,172	$	19,336


Average total finance receivables ⁽¹⁾	$	641,020	$	608,290

Annualized percent of average total finance receivables:

Interest income		10.41 %		10.98 %

Fee income		2.44		2.55


Interest and fee income		12.85		13.53

Interest expense		0.89		0.82


Net interest and fee margin		11.96 %		12.71 %

⁽¹⁾	Total finance receivables include net investment in direct financing leases and loans. For the calculations above, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred are excluded.

Net interest and fee income decreased $0.1 million, or 0.5%, to $19.2 million for the three months ended September 30, 2015 from $19.3 million for the three months ended September 30, 2014. The annualized net interest and fee margin decreased 75 basis points to 11.96% in the three-month period ended September 30, 2015 from 12.71% for the same period in 2014.

Interest income, net of amortized initial direct costs and fees, was $16.7 million for both three-month periods ended September 30, 2015 and September 30, 2014. Average total finance receivables increased $32.7 million, or 5.4%, to $641.0 million at September 30, 2015 from $608.3 million at September 30, 2014. The increase in average total finance receivables was primarily due to origination volume continuing to exceed lease repayments. The average yield on the portfolio decreased, due to lower yields on the new leases compared to the yields on the leases repaying. The weighted average implicit interest rate on new finance receivables originated was 11.06% for both three-month periods ended September 30, 2015, and September 30, 2014.

Fee income was $3.9 million for both three-month periods ended September 30, 2015 and September 30, 2014. Fee income included approximately $1.0 million and $0.9 million of net residual income for the three-month periods ended September 30, 2015 and September 30, 2014, respectively.

Fee income also included approximately $2.2 million and $2.4 million in late fee income for the three-month periods ended September 30, 2015 and September 30, 2014, respectively.

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Fee income, as an annualized percentage of average total finance receivables, decreased 11 basis points to 2.44% for the three-month period ended September 30, 2015 from 2.55% for the same period in 2014. Late fees remained the largest component of fee income at 1.38% as an annualized percentage of average total finance receivables for the three-month period ended September 30, 2015, compared to 1.55% for the three-month period ended September 30, 2014. As an annualized percentage of average total finance receivables, net residual income was 0.65% for the three-month period ended September 30, 2015, compared to 0.58% for the three-month period ended September 30, 2014.

Interest expense increased $0.1 million to $1.4 million, or 1.03% as an annualized percentage of average deposits for, the three-month period ended September 30, 2015, from $1.3 million, or 0.94% as an annualized percentage of average deposits, for the three-month period ended September 30, 2014. The increase was primarily due to an increase of deposits and higher rates quarter over quarter. The average balance of deposits was $556.9 million and $534.4 million for the three-month periods ended September 30, 2015 and September 30, 2014, respectively. Interest expense, as an annualized percentage of average total finance receivables, increased 7 basis points to 0.89% for the three-month period ended September 30, 2015, from 0.82% for the same period in 2014.

There were no borrowings outstanding for each of the three months ended September 30, 2015, and September 30, 2014.

Our wholly-owned subsidiary, MBB, serves as our primary funding source. MBB raises fixed-rate FDIC-insured deposits via the brokered certificates of deposit market, on a direct basis, and through the brokered MMDA Product. At September 30, 2015, brokered certificates of deposit represented approximately 55% of total deposits, while approximately 37% of total deposits were obtained from direct channels, and 8% were in the brokered MMDA Product.

Insurance income. Insurance income increased $0.2 million to $1.5 million for the three-month period ended September 30, 2015 from $1.3 million for the three-month period ended September 30, 2014, primarily due to an increase in the number of contracts enrolled in the insurance program as well as higher average ticket size.

Other income. Other income was $0.6 million and $0.4 million for the three-month periods ended September 30, 2015 and September 30, 2014, respectively. Other income includes various administrative transaction fees and fees received from lease syndications.

Salaries and benefits expense. Salaries and benefits expense increased $0.8 million, or 12.7%, to $7.1 million for the three-month period ended September 30, 2015 from $6.3 million for the same period in 2014. The increase was primarily due to an increase in total personnel. Salaries and benefits expense, as an annualized percentage of average total finance receivables, was 4.40% for the three-month period ended September 30, 2015 compared with 4.15% for the same period in 2014. Total personnel increased to 307 at September 30, 2015 from 279 at September 30, 2014.

General and administrative expense. General and administrative expense increased $0.6 million, or 15.8%, to $4.4 million for the three months ended September 30, 2015 from $3.8 million for the same period in 2014. General and administrative expense as an annualized percentage of average total finance receivables was 2.72% for the three-month period ended September 30, 2015, compared to 2.51% for the three-month period ended September 30, 2014. Selected major components of general and administrative expense for the three-month period ended September 30, 2015 included $0.8 million of premises and occupancy expense, $0.3 million of audit and tax compliance expense, $0.5 million of data processing expense, $0.3 million of marketing expense, $0.2 million of bank fees, and $0.3 million of recruiting expense. In comparison, selected major components of general and administrative expense for the three-month period ended September 30, 2014 included $0.7 million of premises and occupancy expense, $0.4 million of audit and tax compliance expense, $0.4 million of data processing expense, $0.3 million of marketing expense, $0.1 million of bank fees, and less than $0.1 million of recruiting expense.

Financing related costs. Financing related costs primarily represent bank commitment fees paid to our financing sources on the unused portion of loan facilities. Financing related costs were less than $0.1 million for the three-month period ended September 30, 2015, compared to $0.3 million for the three-month period ended September 30, 2014.

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Provision for credit losses. The provision for credit losses decreased $0.7 million, or 25.9%, to $2.0 million for the three months ended September 30, 2015 from $2.7 million for the same period in 2014, primarily due to lower 30 plus day delinquencies and lower net charge-offs. Lease portfolio losses tend to follow patterns based on the mix of origination vintages comprising the portfolio. The anticipated credit losses from the inception of a particular lease origination vintage to charge-off generally follow a pattern of lower losses for the first few months, followed by increased losses in subsequent months, then lower losses during the later periods of the lease term. Therefore, the seasoning, or mix of origination vintages, of the portfolio affects the timing and amount of anticipated probable and estimable credit losses.

Net charge-offs were $2.0 million for the three-month periods ended September 30, 2015, compared to $2.1 million for the same period in 2014. Net charge-offs as an annualized percentage of average total finance receivables decreased to 1.23% during the three-month period ended September 30, 2015, from 1.36% for the same period in 2014. The allowance for credit losses increased to approximately $8.6 million at September 30, 2015, an increase of $0.1 million from $8.5 million at December 31, 2014.

Additional information regarding asset quality is included herein in the subsequent section, “Finance Receivables and Asset Quality.”

Provision for income taxes. Income tax expense of $3.0 million was recorded for each of the three-month periods ended September 30, 2015 and September 30, 2014. Our effective tax rate, which is a combination of federal and state income tax rates, was approximately 38.3% for each of the three-month periods ended September 30, 2015 and September 30, 2014.

Comparison of the Nine-Month Periods Ended September 30, 2015 and September 30, 2014

Net income. Net income of $13.0 million was reported for the nine-month period ended September 30, 2015, resulting in diluted EPS of $1.01, compared to net income of $14.5 million and diluted EPS of $1.12 for the nine-month period ended September 30, 2014.

Return on average assets was 2.29% for the nine-month period ended September 30, 2015, compared to a return of 2.65% for the nine-month period ended September 30, 2014. Return on average equity was 9.92% for the nine-month period ended September 30, 2015, compared to a return of 11.56% for the nine-month period ended September 30, 2014.

Overall, our average net investment in total finance receivables for the nine-month period ended September 30, 2015 increased 5.2% to $630.1 million, compared to $599.2 million for the nine-month period ended September 30, 2014. This change was primarily due to origination volume continuing to exceed lease repayments. The end-of-period net investment in total finance receivables at September 30, 2015 was $659.3 million, an increase of $29.8 million, or 4.7%, from $629.5 million at December 31, 2014.

During the nine months ended September 30, 2015, we generated 18,533 new leases with equipment cost of $273.7 million, compared to 17,938 new leases with equipment cost of $245.4 million generated for the nine months ended September 30, 2014. Sales staffing levels increased from 116 sales account executives at September 30, 2014 to 131 sales account executives at September 30, 2015. Approval rates declined 2% to 64% for the nine-month period ended September 30, 2015, compared to 66% for the nine-month period ended September 30, 2014.

For the nine-month period ended September 30, 2015 compared to the nine-month period ended September 30, 2014, net interest and fee income decreased $0.3 million, or 0.5%, primarily due to a $0.5 million increase in interest expense. The provision for credit losses increased $0.9 million, or 13.6%, to $7.5 million for the nine-month period ended September 30, 2015 from $6.6 million for the same period in 2014, primarily due to increased net charge-offs and by the impact of portfolio growth.

Average balances and net interest margin. The following table summarizes the Company’s average balances, interest income, interest expense and average yields and rates on major categories of interest-earning assets and interest-bearing liabilities for the nine-month periods ended September 30, 2015 and September 30, 2014.

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	Nine Months Ended September 30,
	2015							2014
	(Dollars in thousands)
	Average Balance ⁽¹⁾		Interest		Average Yields/ Rates ⁽²⁾			Average Balance ⁽¹⁾		Interest		Average Yields/ Rates ⁽²⁾
Interest-earning assets:
Interest-earning deposits with banks	$	97,023	$	90		0.13	%	$	108,829	$	103		0.13	%
Time Deposits		4,563		38		1.10			—		—		—
Restricted interest-earning deposits with banks		785		—		0.01			1,126		—		0.01
Securities available for sale		5,764		93		2.14			5,528		121		2.91
Net investment in leases ⁽³⁾		628,214		49,226		10.45			597,976		49,920		11.13
Loans receivable ⁽³⁾⁽⁴⁾		1,859		218		15.60			1,233		38		4.13

Total interest-earning assets		738,208		49,665		8.97			714,692		50,182		9.36


Non-interest-earning assets:
Cash and due from banks		1,960							370
Property and equipment, net		3,635							2,406
Property tax receivables		3,222							433
Other assets ^-5		9,899							11,672

Total non-interest-earning assets		18,716							14,881


Total assets	$	756,924						$	729,573


Interest-bearing liabilities:
Certificate of Deposits ^-6	$	505,937	$	3,990		1.05	%		501,348	$	3,533		0.94	%
Money Market Deposits ^-6		47,069		98		0.28			32,212		61		0.25
Long-term borrowings ^-6		—		—		—			—		53		-

Total interest-bearing liabilities		553,006		4,088		0.98			533,560		3,647		0.91


Non-interest-bearing liabilities:
Sales and property taxes payable		4,893							2,565
Accounts payable and accrued expenses		6,811							8,063
Net deferred income tax liability		17,524							18,347

Total non-interest-bearing liabilities		29,228							28,975


Total liabilities		582,234							562,535

Stockholders’ equity		174,690							167,038

Total liabilities and stockholders’ equity	$	756,924						$	729,573


Net interest income			$	45,577						$	46,535
Interest rate spread ^-7						7.99	%						8.45	%
Net interest margin ^-8						8.23	%						8.68	%
Ratio of average interest-earning assets to average interest-bearing liabilities						133.49	%						133.95	%

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⁽¹⁾	Average balances were calculated using average daily balances.

⁽²⁾	Annualized.

⁽³⁾	Average balances of leases and loans include non-accrual leases and loans, and are presented net of unearned income. The average balances of leases and loans do not include the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred.

⁽⁴⁾	In 2015, the Company started funding business loans associated with Funding Stream. These loans were originated with higher average yields than the loans that were on the balance sheet as of December 2014, which resulted in higher average yields in 2015 compared to 2014.

⁽⁵⁾	Includes operating leases.

⁽⁶⁾	Includes effect of transaction costs. Amortization of transaction costs is on a straight-line basis, resulting in an increased average rate whenever average portfolio balances are at reduced levels.

⁽⁷⁾	Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.

⁽⁸⁾	Net interest margin represents net interest income as an annualized percentage of average interest-earning assets.

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The following table presents the components of the changes in net interest income by volume and rate.


	Nine Months Ended September 30, 2015 Compared To
	Nine Months Ended September 30, 2014
	Increase (Decrease) Due To:
	Volume ⁽¹⁾		Rate ⁽¹⁾		Total
	(Dollars in thousands)
Interest income:
Interest-earning deposits with banks	$	(13)	$	-	$	(13)
Time Deposits		38		-		38
Securities available for sale		5		(33)		(28)
Net investment in leases		2,454		(3,148)		(694)
Loans receivable		28		152		180
Total interest income		1,621		(2,138)		(517)

Interest expense:
Certificate of Deposits		33		424		457
Money Market Deposits		30		7		37
Long-term borrowings		(53)		-		(53)
Total interest expense		136		305		441

Net interest income		1,500		(2,458)		(958)

⁽¹⁾

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Net interest and fee margin. The following table summarizes the Company’s net interest and fee income as an annualized percentage of average total finance receivables for the nine-month periods ended September 30, 2015 and 2014.


	Nine Months Ended September 30,
	2015		2014
	(Dollars in thousands)

Interest income	$	49,665	$	50,182

Fee income		11,762		11,016


Interest and fee income		61,427		61,198

Interest expense		4,087		3,647


Net interest and fee income	$	57,340	$	57,551


Average total finance receivables ⁽¹⁾	$	630,073	$	599,208

Percent of average total finance receivables:

Interest income		10.51 %		11.17 %

Fee income		2.49		2.45


Interest and fee income		13.00		13.62

Interest expense		0.86		0.81

Net interest and fee margin		12.14 %		12.81 %

⁽¹⁾	Total finance receivables include net investment in direct financing leases and loans. For the calculations above, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred are excluded.

Net interest and fee income decreased $0.3 million, or 0.5%, to $57.3 million for the nine month periods ended September 30, 2015 from $57.6 million for the nine month periods ended September 30, 2014. The annualized net interest and fee margin decreased 67 basis points to 12.14% in the nine-month period ended September 30, 2015 from 12.81% for the same period in 2014.

Interest income, net of amortized initial direct costs and fees, decreased $0.5 million, or 1.0%, to $49.7 million for the nine-month period ended September 30, 2015 from $50.2 million for the nine-month period ended September 30, 2014. The decrease in interest income was principally due to a decrease in average yield of 66 basis points partially offset by a 5.2% increase in average total finance receivables, which increased $30.9 million to $630.1 million at September 30, 2015 from $599.2 million at September 30, 2014. The increase in average total finance receivables was primarily due to origination volume continuing to exceed lease repayments. The average yield on the portfolio decreased due to lower yields on the new leases compared to the yields on the leases repaying. The weighted average implicit interest rate on new finance receivables originated decreased 20 basis points to 11.03% for the nine-month period ended September 30, 2015, compared to 11.23% for the nine-month period ended September 30, 2014.

Fee income increased $0.8 million to $11.8 million for the nine-month period ended September 30, 2015, compared to $11.0 million for the nine-month period ended September 30, 2014. Fee income included approximately $2.9 million of net residual income for the nine-month period ended September 30, 2015 and $2.2 million for the nine-month period ended September 30, 2014.

Fee income also included approximately $7.1 million in late fee income for the nine-month period ended September 30, 2015, which decreased 1.4% from $7.2 million for the nine-month period ended September 30, 2014.

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Fee income, as an annualized percentage of average total finance receivables, increased 4 basis points to 2.49% for the nine-month period ended September 30, 2015 from 2.45% for the nine-month period ended September 30, 2014. Late fees remained the largest component of fee income at 1.50% as an annualized percentage of average total finance receivables for the nine-month period ended September 30, 2015, compared to 1.59% for the nine-month period ended September 30, 2014. As an annualized percentage of average total finance receivables, net residual income was 0.62% for the nine-month period ended September 30, 2015, compared to 0.49% for the nine-month period ended September 30, 2014.

Interest expense increased $0.5 million to $4.1 million, or 0.98% as an annualized percentage of average deposits for, the nine-month period ended September 30, 2015, from $3.6 million, or 0.91% as an annualized percentage of average deposits, for the nine-month period ended September 30, 2014. The increase was primarily due to an increase in deposits and higher rates year over year. The average balance of deposits was $553.0 million and $533.6 million for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively. Interest expense, as an annualized percentage of average total finance receivables, increased 5 basis points to 0.86% for the nine-month period ended September 30, 2015, from 0.81% for the same period in 2014.

There were no borrowings outstanding for each of the nine months ended September 30, 2015, and September 30, 2014.

Insurance income. Insurance income increased $0.3 million to $4.3 million for the nine-month period ended September 30, 2015 from $4.0 million for the nine-month period ended September 30, 2014, primarily due to an increase in the number of contracts enrolled in the insurance program as well as higher average ticket size.

Other income. Other income was $1.3 million and $1.2 million for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively. Other income includes various administrative transaction fees and fees received from lease syndications.

Salaries and benefits expense. Salaries and benefits expense increased $1.3 million, or 6.5%, to $21.3 million for the nine months ended September 30, 2015 from $20.0 million for the same period in 2014. The increase was primarily due to $0.3 million of salary and benefit expense associated with the separation agreement related to the departure of the Company’s Chief Financial Officer and an increase in total personnel. Salaries and benefits expense, as an annualized percentage of average total finance receivables, was 4.51% for the nine-month period ended September 30, 2015 compared with 4.44% for the same period in 2014.

Total personnel increased to 307 at September 30, 2015 from 279 at September 30, 2014.

General and administrative expense. General and administrative expense increased $0.8 million, or 6.7%, to $12.8 million for the nine months ended September 30, 2015 from $12.0 million for the same period in 2014. General and administrative expense as an annualized percentage of average total finance receivables was 2.70% for the nine-month period ended September 30, 2015, compared to 2.66% for the nine-month period ended September 30, 2014. Selected major components of general and administrative expense for the nine-month period ended September 30, 2015 included $2.5 million of premises and occupancy expense, $1.0 million of audit and tax compliance expense, $1.4 million of data processing expense, $0.9 million of marketing expense, and $0.4 million of recruiting expense. In comparison, selected major components of general and administrative expense for the nine-month period ended September 30, 2014 included $2.1 million of premises and occupancy expense, $1.1 million of audit and tax compliance expense, $1.2 million of data processing expense, $0.8 million of marketing expense, and $0.2 million of recruiting expense.

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Financing related costs. Financing related costs primarily represent bank commitment fees paid to our financing sources on the unused portion of loan facilities. Financing related costs were $0.2 million for the nine months ended September 30, 2015, compared to $0.9 million for the same period in 2014.

Provision for credit losses. The provision for credit losses increased $0.9 million, or 13.6%, to $7.5 million for the nine-month period ended September 30, 2015 from $6.6 million for the same period in 2014, primarily due to growth in the portfolio and increased net charge-offs partially offset by lower period end delinquency ratios. Additional factors that have an impact on the provision for credit losses include the ongoing seasoning of the portfolio as reflected in the mix of origination vintages and the mix of credit profiles because they impact both the charge-offs and the allowance for credit losses. Lease portfolio losses tend to follow patterns based on the mix of origination vintages comprising the portfolio. The anticipated credit losses from the inception of a particular lease origination vintage to charge-off generally follow a pattern of lower losses for the first few months, followed by increased losses in subsequent months, then lower losses during the later periods of the lease term. Therefore, the seasoning, or mix of origination vintages, of the portfolio affects the timing and amount of anticipated probable and estimable credit losses.

Net charge-offs were $7.5 million for the nine-month period ended September 30, 2015, compared to $6.7 million for the same period in 2014. The increase in net charge-offs was primarily due to portfolio growth, the ongoing seasoning of the portfolio as reflected in the mix of origination vintages and the mix of credit profiles. Net charge-offs as an annualized percentage of average total finance receivables increased to 1.59% during the nine-month period ended September 30, 2015, from 1.48% for the same period in 2014. The allowance for credit losses increased to approximately $8.6 million at September 30, 2015, an increase of $0.1 million from $8.5 million at December 31, 2014.

Additional information regarding asset quality is included herein in the subsequent section, “Finance Receivables and Asset Quality.”

Provision for income taxes. Income tax expense of $8.2 million was recorded for the nine-month period ended September 30, 2015, compared to an expense of $8.9 million for the same period in 2014. The change is primarily attributable to the change in pretax income recorded for the nine-month period ended September 30, 2015 compared to the nine-month period ended September 30, 2014. Our effective tax rate, which is a combination of federal and state income tax rates, was approximately 38.6% for the nine-month period ended September 30, 2015, compared to 38.0% for the nine-month period ended September 30, 2014.

FINANCE RECEIVABLES AND ASSET QUALITY

Our net investment in leases and loans increased $29.8 million, or 4.7%, to $659.3 million at September 30, 2015 from $629.5 million at December 31, 2014. We continue to adjust our credit underwriting guidelines in response to current economic conditions, and we continue to develop our sales organization to increase originations. A portion of the Company’s lease portfolio is generally assigned as collateral for the borrowing facility as described below in “Liquidity and Capital Resources.”

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The chart which follows provides our asset quality statistics for each of the three-and nine-month periods ended September 30, 2015 and September 30, 2014, and the year ended December 31, 2014:


		Three Months Ended				Nine Months Ended				Year Ended
		September 30,				September 30,				December 31,
		2015		2014		2015		2014		2014
		(Dollars in thousands)
Allowance for credit losses, beginning of period		$	8,567	$	7,725	$	8,537	$	8,467	$	8,467

Charge-offs			(2,595)		(2,707)		(9,196)		(8,446)		(11,463)
Recoveries			630		647		1,705		1,788		2,417

Net charge-offs			(1,965)		(2,060)		(7,491)		(6,658)		(9,046)

Provision for credit losses			1,986		2,706		7,542		6,562		9,116

Allowance for credit losses, end of period	(1)	$	8,588	$	8,371	$	8,588	$	8,371	$	8,537


Annualized net charge-offs to average total finance receivables	(2)		1.23%		1.36%		1.59%		1.48%		1.50%

Allowance for credit losses to total finance receivables, end of period	(2)		1.31%		1.36%		1.31%		1.36%		1.36%

Average total finance receivables	(2)	$	641,020	$	608,290	$	630,073	$	599,208	$	602,923
Total finance receivables, end of period	(2)	$	657,143	$	616,916	$	657,143	$	616,916	$	627,922

Delinquencies greater than 60 days past due		$	3,186	$	3,290	$	3,186	$	3,290	$	3,602
Delinquencies greater than 60 days past due	(3)		0.43%		0.47%		0.43%		0.47%		0.51%
Allowance for credit losses to delinquent accounts greater than 60 days past due	(3)		269.55%		254.44%		269.55%		254.44%		237.01%

Non-accrual leases and loans, end of period		$	1,684	$	1,903	$	1,684	$	1,903	$	1,742
Renegotiated leases and loans, end of period		$	468	$	1,130	$	468	$	1,130	$	1,014
Accruing leases and loans past due 90 days or more		$	—	$	—	$	—	$	—	$	—

Interest income included on non-accrual leases and loans	(4)	$	23	$	24	$	110	$	137	$	173
Interest income excluded on non-accrual leases and loans	(5)	$	22	$	28	$	33	$	32	$	34

⁽¹⁾	At September 30, 2015 the allowance for credit losses allocated to loans was $0.1 million. At December 31, 2014 and September 30, 2014, there was no allowance for credit losses allocated to loans.

⁽²⁾	Total finance receivables include net investment in direct financing leases and loans. For purposes of asset quality and allowance calculations, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred are excluded.

⁽³⁾	Calculated as a percent of total minimum lease payments receivable for leases and as a percent of principal outstanding for loans.

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⁽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.

Net charge-offs for the three months ended September 30, 2015 were $2.0 million (1.23% of average total finance receivables on an annualized basis), compared to $2.9 million (1.84% of average total finance receivables on an annualized basis) for the three months ended June 30, 2015 and $2.1 million (1.36% of average total finance receivables on an annualized basis) for the three months ended September 30, 2014. Lease portfolio losses tend to follow patterns based on the mix of origination vintages comprising the portfolio. The timing of credit losses from the inception of a particular lease origination vintage to charge-off generally follows a pattern of lower losses for the first few months, followed by increased losses in subsequent months, then lower losses during the later periods of the lease term. Therefore, the seasoning, or mix of origination vintages, of the portfolio affects the timing and amount of charge-offs.

Net charge-offs for the nine-month period ended September 30, 2015 were $7.5 million (1.59% of average total finance receivables on an annualized basis), compared to $6.7 million (1.48% of average total finance receivables on an annualized basis) for the nine-month period ended September 30, 2014. The increase in charge-off rate is partially due to the ongoing seasoning of the portfolio as reflected in the mix of origination vintages and the mix of credit profiles, as discussed above.

Delinquent accounts 60 days or more past due (as a percentage of minimum lease payments receivable for leases and as a percentage of principal outstanding for loans) were 0.43% at September 30, 2015 and 0.51% at December 31, 2014, compared to 0.47% at September 30, 2014. Supplemental information regarding loss statistics and delinquencies is available on the investor relations section of Marlin’s website at www.marlincorp.com .

In accordance with the Contingencies and Receivables Topics of the FASB ASC, we maintain an allowance for credit losses at an amount sufficient to absorb losses inherent in our existing lease and loan portfolios as of the reporting dates based on our projection of probable net credit losses. The factors and trends discussed above were included in the Company’s analysis to determine its allowance for credit losses. (See “Critical Accounting Policies.”)

RESIDUAL PERFORMANCE

Our leases offer our end user customers the option to own the equipment at lease expiration. As of September 30, 2015, approximately 67% of our leases were one dollar purchase option leases, 32% were fair market value leases and 1% were fixed purchase option leases, the latter of which typically contain an end-of-term purchase option equal to 10% of the original equipment cost. As of September 30, 2015, there were $27.5 million of residual assets retained on our Consolidated Balance Sheet, of which $22.9 million, or 83.1%, were related to copiers. As of December 31, 2014, there were $27.4 million of residual assets retained on our Consolidated Balance Sheet, of which $22.0 million, or 80.2%, were related to copiers. No other group of equipment represented more than 10% of equipment residuals as of September 30, 2015 and December 31, 2014. Improvements in technology and other market changes, particularly in copiers, could adversely impact our ability to realize the recorded residual values of this equipment.

Fee income included approximately $1.0 million and $0.9 million of net residual income for the three-month periods ended September 30, 2015 and September 30, 2014, respectively. Fee income included approximately $2.9 million and $2.2 million of net residual income for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively. Net residual income includes income from lease renewals and gains and losses on the realization of residual values of leased equipment disposed at the end of term as further described below.

Our leases generally include renewal provisions and many leases continue beyond their initial contractual term. Based on the Company’s experience, the amount of ultimate realization of the residual value tends to relate more to the customer’s election at the end of the lease term to enter into a renewal period, purchase the leased equipment or return the leased equipment than it does to the equipment type.

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We consider renewal income a component of residual performance. Renewal income net of depreciation totaled approximately $1.1 million for each of the three-month periods ended September 30, 2015 and September 30, 2014. Renewal income net of depreciation totaled approximately $3.2 million and $3.4 million for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.

For the three months ended September 30, 2015, the net loss on residual values disposed at end of term totaled $0.1 million, compared to a net loss of $0.2 million for the three months ended September 30, 2014. For the nine months ended September 30, 2015, the net loss on residual values disposed at end of term totaled $0.3 million, compared to a net loss of $1.2 million for the nine months ended September 30, 2014. The primary driver of the changes was a shift in the mix of the amounts, types and age of equipment disposed at the end of the applicable lease term. Historically, our net residual income has exceeded 100% of the residual recorded on such leases. Management performs periodic reviews of the estimated residual values and historical realization statistics no less frequently than quarterly. There was no impairment recognized on estimated residual values during the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our business requires a substantial amount of cash to operate and grow. Our primary liquidity need is to fund new originations. In addition, we need liquidity to pay interest and principal on our deposits and borrowings, to pay fees and expenses incurred in connection with our financing transactions, to fund infrastructure and technology investment, to pay dividends and to pay administrative and other operating expenses.

We are dependent upon the availability of financing from a variety of funding sources to satisfy these liquidity needs. Historically, we have relied upon four principal types of external funding sources for our operations:

• FDIC-insured deposits issued by our wholly-owned subsidiary, MBB;

• borrowings under various bank facilities;

• financing of leases and loans in various warehouse facilities (all of which have since been repaid in full); and

• financing of leases through term note securitizations (all of which have been repaid in full).

With the opening of MBB in 2008, we began to fund increasing amounts of new originations through the issuance of FDIC-insured deposits. Deposits issued by MBB represent our primary funding source for new originations. We also maintain the ability to fund new originations with cash from operations or through borrowings under our loan facility.

On February 23, 2014, MBB added the FDIC-insured MMDA Product as another source of deposit funding. This product is offered through participation in a partner bank’s insured savings account product to clients of that bank. It is a brokered account with a variable interest rate, recorded as a single deposit account at MBB. Over time, MBB may offer other products and services to the Company’s customer base. MBB is a Utah state-chartered, Federal Reserve member commercial bank. As such, MBB is supervised by both the Federal Reserve Bank of San Francisco and the Utah Department of Financial Institutions.

On January 13, 2009, Marlin Business Services Corp. became a bank holding company and is subject to the Bank Holding Company Act and supervised by the Federal Reserve Bank of Philadelphia. On September 15, 2010, the Federal Reserve Bank of Philadelphia confirmed the effectiveness of Marlin Business Services Corp.’s election to become a financial holding company (while remaining a bank holding company) pursuant to Sections 4(k) and (l) of the Bank Holding Company Act and Section 225.82 of the Federal Reserve Board’s Regulation Y. Such election permits Marlin Business Services Corp. to engage in activities that are financial in nature or incidental to a financial activity, including the maintenance and expansion of our reinsurance activities conducted through our wholly-owned subsidiary, AssuranceOne.

On October 9, 2009, Marlin Business Services Corp.’s affiliate, Marlin’s Receivables Corp. (“MRC”), closed on a $75.0 million, three-year committed loan facility with the Lender Finance division of Wells Fargo Capital Finance. The facility is secured by a lien on MRC’s assets and is supported by guaranties from Marlin Business Services Corp. and MLC. Advances under the facility are made pursuant to a borrowing base formula, and the proceeds are used to fund lease originations. On April 8, 2015, the facility was amended to change the amount under the loan facility from $75.0 million to $50.0 million. On July 6, 2015 the facility was amended to change the commitment termination date of the facility from July 7, 2015 to October 7, 2015. On October 6, 2015, the facility was further amended to change the commitment termination date of the facility from October 7, 2015 to February 4, 2016.

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As previously disclosed, the Company declared a dividend of $0.14 per share on July 30, 2015. The quarterly dividend was paid on August 24, 2015 to shareholders of record on the close of business on August 14, 2015, which resulted in a dividend payment of approximately $1.8 million. It represented the Company’s sixteenth consecutive quarterly cash dividend.

As previously disclosed, in addition to the Company’s regular quarterly dividend, the Company’s Board of Directors declared a special cash dividend of $2.00 per share on September 14, 2015. The special dividend was paid on October 5, 2015 to shareholders of record on the close of business on September 24, 2015, which resulted in a dividend payment of approximately $25.5 million. The Company’s Board of Directors does not expect the special dividend to affect the payment of the regular quarterly dividends, which remain subject to Board approval.

At September 30, 2015, we had approximately $73.0 million of available borrowing capacity from our borrowing facility and a federal funds line of credit with a correspondent bank in addition to available cash and cash equivalents of $105.2 million. This amount excludes additional liquidity that may be provided by the issuance of insured deposits through MBB. Our debt to equity ratio was 3.83 to 1 at September 30, 2015 and 3.16 to 1 at December 31, 2014.

Net cash used in investing activities was $46.5 million for the nine-month period ended September 30, 2015, compared to net cash used in investing activities of $30.2 million for the nine-month period ended September 30, 2014. Investing activities primarily relate to leasing activities.

Net cash provided by financing activities was $17.8 million for the nine-month period ended September 30, 2015, compared to net cash provided by financing activities of $22.2 million for the nine-month period ended September 30, 2014. Financing activities include net advances and repayments on our various deposit and borrowing sources and transactions related to the Company’s common stock, such as repurchasing common stock and paying dividends.

Additional liquidity is provided by or used by our cash flow from operations. Net cash provided by operating activities was $23.3 million for the nine-month period ended September 30, 2015, compared to net cash provided by operating activities of $26.5 million for the nine-month period ended September 30, 2014.

We expect cash from operations, additional borrowings on existing and future credit facilities and funds from deposits issued through brokers, direct deposit sources, and the MMDA Product to be adequate to support our operations and projected growth for the next 12 months and the foreseeable future.

Total Cash and Cash Equivalents. Our objective is to maintain an adequate level of cash, investing any free cash in leases. We primarily fund our originations and growth using FDIC- insured deposits issued through MBB and, to a much lesser extent, advances under our long-term bank facility. Total cash and cash equivalents available as of September 30, 2015 totaled $105.2 million, compared to $110.7 million at December 31, 2014.

Time Deposits with Banks. Time deposits with banks are primarily composed of FDIC insured certificates of deposits that have original maturity dates of greater than 90 days. Generally, the certificates of deposits have the ability to redeem early, however, early redemption penalties may be incurred. Total time deposits as of September 30, 2015 totaled $7.4 million. The Company did not have any time deposits as of December 31, 2014.

Restricted Interest-earning Deposits with Banks . As of September 30, 2015, we also had $0.4 million of cash that was classified as restricted interest-earning deposits with banks, compared to $0.7 million at December 31, 2014. Restricted interest-earning deposits with banks consist primarily of trust accounts related to our secured debt facility.

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Borrowings. Our primary borrowing relationship requires the pledging of eligible lease and loan receivables to secure amounts advanced. We had no outstanding secured borrowings at September 30, 2015 and December 31, 2014. Information pertaining to our borrowing facilities is as follows:


	For the Nine Months Ended September 30, 2015								As of September 30, 2015
	Maximum Facility Amount		Maximum Month End Amount Outstanding		Average Amount Outstanding		Weighted Average Rate ⁽²⁾		Amount Outstanding		Weighted Average Rate ⁽²⁾		Unused Capacity ⁽¹⁾
	(Dollars in thousands)
Federal funds purchased	$	23,000	$	—	$	—		— %	$	—		— %	$	23,000
Long-term loan facilities		50,000		—		—		— %		—		— %		50,000

	$	73,000			$	—		— %	$	—		— %	$	73,000

⁽¹⁾

Does not include MBB’s access to the Federal Reserve Discount Window, which is based on the amount of assets MBB chooses to pledge. Based on assets pledged at September 30, 2015, MBB had $29.8 million in unused, secured borrowing capacity at the Federal Reserve Discount Window. Additional liquidity that may be provided by the issuance of insured deposits is also excluded from this table.

⁽²⁾	Does not include transaction costs.

Federal Funds Line of Credit with Correspondent Bank

MBB has established a federal funds line of credit with a correspondent bank. This line allows for both selling and purchasing of federal funds. The amount that can be drawn against the line is limited to $23.0 million.

Federal Reserve Discount Window

In addition, MBB has received approval to borrow from the Federal Reserve Discount Window based on the amount of assets MBB chooses to pledge. MBB had $29.8 million in unused, secured borrowing capacity at the Federal Reserve Discount Window, based on $32.5 million of net investment in leases pledged at September 30, 2015.

Long-term Loan Facilities

On October 9, 2009, Marlin Business Services Corp.’s affiliate, MRC, closed on a $75.0 million, three-year committed loan facility with the Lender Finance division of Wells Fargo Capital Finance. The facility is secured by a lien on MRC’s assets and is supported by guaranties from Marlin Business Services Corp. and MLC. Advances under the facility are made pursuant to a borrowing base formula, and the proceeds are used to fund lease originations. In contrast to previous facilities, this long-term loan facility does not require annual refinancing. As previously disclosed, on April 8, 2015, the facility was amended to change the amount under the loan facility from $75.0 million to $50.0 million. On July 6, 2015 the facility was amended to change the commitment termination date of the facility from July 7, 2015 to October 7, 2015. On October 6, 2015, the facility was further amended to change the commitment termination date of the facility from October 7, 2015 to February 4, 2016. An event of default, such as non-payment of amounts when due under the loan agreement or a breach of covenants, may accelerate the commitment termination date of the facility. There was no amount outstanding under the facility at September 30, 2015.

Financial Covenants

Our secured borrowing arrangements contain numerous covenants, restrictions and default provisions that we must comply with in order to obtain funding through the facility and to avoid an event of default. A change in certain executive officers as described in the

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loan documents is an event of default under our long-term loan facility with Wells Fargo Capital Finance, unless we hire a replacement with skills and experience appropriate for performing the duties of the applicable positions within 120 days.

A merger or consolidation with another company in which the Company is not the surviving entity is also an event of default under the financing facility. The Company’s long-term loan facility contains acceleration clauses allowing the creditor to accelerate the scheduled maturities of the obligation under certain conditions that may not be objectively determinable (for example, if a “material adverse change” occurs). An event of default under our facility could result in an acceleration of amounts outstanding under the facility, foreclosure on all or a portion of the leases financed by the facility and/or the removal of the Company as servicer of the leases financed by the facility.

Some of the critical financial and credit quality covenants under our borrowing arrangement as of September 30, 2015 include:


	Actual ⁽¹⁾		Requirement

Debt-to-equity ratio maximum		3.83 to 1		5.5 to 1

Maximum servicer senior leverage ratio		0 to 1		5.0 to 1

Maximum portfolio delinquency ratio		0.43%		3.50%

Maximum gross charge-off ratio		1.93%		7.00%

⁽¹⁾ Calculations are based on specific contractual definitions and subsidiaries per the debt agreement, which may differ from ratios or amounts presented elsewhere in this document.

As of September 30, 2015, the Company was in compliance with the provisions of its secured borrowing arrangement.

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Bank Capital and Regulatory Oversight

On January 13, 2009, we became a bank holding company by order of the Federal Reserve Board and are subject to regulation under the Bank Holding Company Act. All of our subsidiaries may be subject to examination by the Federal Reserve Board even if not otherwise regulated by the Federal Reserve Board. On September 15, 2010, the Federal Reserve Bank of Philadelphia confirmed the effectiveness of our election to become a financial holding company (while remaining a bank holding company) pursuant to Sections 4(k) and (l) of the Bank Holding Company Act and Section 225.82 of the Federal Reserve Board’s Regulation Y. Such election permits us to engage in activities that are financial in nature or incidental to a financial activity, including the maintenance and expansion of our reinsurance activities conducted through our wholly-owned subsidiary, AssuranceOne.

MBB is also subject to comprehensive federal and state regulations dealing with a wide variety of subjects, including minimum capital standards, reserve requirements, terms on which a bank may engage in transactions with its affiliates, restrictions as to dividend payments and numerous other aspects of its operations. These regulations generally have been adopted to protect depositors and creditors rather than shareholders.

There are a number of restrictions on bank holding companies that are designed to minimize potential loss to depositors and the FDIC insurance funds. If an FDIC-insured depository subsidiary is “undercapitalized,” the bank holding company is required to ensure (subject to certain limits) the subsidiary’s compliance with the terms of any capital restoration plan filed with its appropriate banking agency. Also, a bank holding company is required to serve as a source of financial strength to its depository institution subsidiaries and to commit resources to support such institutions in circumstances where it might not do so absent such policy. Under the Bank Holding Company Act, the Federal Reserve Board has the authority to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the Federal Reserve Board’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of a depository institution subsidiary of the bank holding company.

Capital Adequacy . New capital adequacy standards adopted by the federal bank regulatory agencies establish new minimum capital requirements for the Company and MBB effective on January 1, 2015. Under the risk-based capital requirements applicable to them, bank holding companies must maintain a ratio of total capital to risk-weighted assets (including the asset equivalent of certain off-balance sheet activities such as acceptances and letters of credit) of not less than 8% (10% in order to be considered “well-capitalized”). The new requirements include a 6% minimum Tier 1 risk-based ratio (8% to be considered well-capitalized). Tier 1 Capital consists of common stock, related surplus, retained earnings, qualifying perpetual preferred stock and minority interests in the equity accounts of certain consolidated subsidiaries, after deducting goodwill and certain other intangibles. The remainder of total capital (“Tier 2 Capital”) may consist of certain perpetual debt securities, mandatory convertible debt securities, hybrid capital instruments and limited amounts of subordinated debt, qualifying preferred stock, allowance for credit losses on loans and leases, allowance for credit losses on off-balance-sheet credit exposures and unrealized gains on equity securities.

The new capital standards require a minimum Tier 1 leverage ratio of 4%. Previously certain banking organizations were allowed to maintain a Tier 1 leverage ratio of 3% if they met certain requirements. The capital requirements also now require a new common equity Tier 1 risk-based capital ratio with a required minimum of 4.5% (6.5% to be considered well-capitalized). The Federal Reserve Board’s guidelines also provide that bank holding companies experiencing internal growth or making acquisitions are expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the guidelines indicate that the Federal Reserve Board will continue to consider a “tangible tier 1 leverage ratio” ( i.e. , after deducting all intangibles) in evaluating proposals for expansion or new activities. MBB is subject to similar capital standards.

There is also a new required capital conservation buffer which is phased in from 2015 to 2019. When added to the minimum capital ratios and fully phased in, the capital conservation buffer will require banking organizations to hold an additional 2.5% of capital above the minimum requirements. If a banking organization does not maintain capital above the minimum plus the capital conservation buffer it may be subject to restrictions on dividends, share buybacks, and certain discretionary payments such as bonus payments.

At September 30, 2015, MBB’s Tier 1 leverage ratio, common equity Tier 1 risk-based ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 16.81%, 17.47%, 17.47% and 18.71%, respectively, which exceeds requirements for well-capitalized status of 5%, 6.5%, 8% and 10%, respectively. At September 30, 2015, Marlin Business Services Corp.’s Tier 1 leverage ratio, common equity Tier 1 risk based ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 19.72%, 21.54%, 21.54% and 22.76%, respectively, which exceeds requirements for well-capitalized status of 5%, 6.5%, 8% and 10%, respectively.

Pursuant to the FDIC Agreement entered into in conjunction with the opening of MBB, MBB is required to keep its total risk-based capital ratio above 15%. MBB’s Tier 1 Capital balance at September 30, 2015 was $118.8 million, which exceeds the regulatory

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threshold for “well capitalized” status. Until March 12, 2011, MBB operated in accordance with its original de novo three-year business plan as required by the original order issued by the FDIC when the Company opened MBB. Following the expiration of MBB’s three-year de novo period, the Company provided MBB with additional capital to support growth of $25 million in 2011, $10 million in 2012, and $10 million in 2013. Additional capital was not required from the Company in 2014 and 2015 as MBB is able to support future growth.

Information on Stock Repurchases

Information on Stock Repurchases is provided in “Part II. Other Information, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds” herein.

Items Subsequent to September 30, 2015

Contractual Obligations

In addition to scheduled maturities on our deposits and credit facilities, we have future cash obligations under various types of contracts. We lease office space and office equipment under long-term operating leases. The contractual obligations under our certificates of deposits, credit facilities, operating leases, agreements and commitments under non-cancelable contracts as of September 30, 2015 were as follows:

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	Contractual Obligations as of September 30, 2015
Period Ending December 31,	Certificates of Deposits ⁽¹⁾		Contractual Interest Payments ⁽²⁾		Operating Leases		Leased Facilities		Capital Leases		Total
	(Dollars in thousands)
2015	$	53,096	$	1,334	$	1	$	384	$	25	$	54,840
2016		214,478		4,350		4		1,539		102		220,473
2017		153,729		2,595		4		1,529		77		157,934
2018		67,421		1,272		4		1,474		—		70,171
2019		31,647		395		4		1,437		—		33,483
Thereafter		10,494		54		1		688		—		11,237

Total	$	530,865	$	10,000	$	18	$	7,051	$	204	$	548,138

⁽¹⁾	Money market deposit accounts are not included. As of September 30, 2015, money market deposit accounts totaled $48.8 million.

⁽²⁾	Includes interest on certificates of deposits and borrowings. Interest on the variable-rate long-term loan facility is assumed at the September 30, 2015 rate for the remaining term.

There were no off-balance sheet arrangements requiring disclosure at September 30, 2015.

MARKET INTEREST RATE RISK AND SENSITIVITY

Market risk is the risk of losses arising from changes in values of financial instruments. We engage in transactions in the normal course of business that expose us to market risks. We attempt to mitigate such risks through prudent management practices and strategies such as attempting to match the expected cash flows of our assets and liabilities.

We are exposed to market risks associated with changes in interest rates and our earnings may fluctuate with changes in interest rates. The lease assets we originate are almost entirely fixed-rate. Accordingly, we generally seek to finance these assets primarily with fixed interest certificates of deposit issued by MBB, and to a lesser extent through the variable rate MMDA Product at MBB.

RECENTLY ISSUED ACCOUNTING STANDARDS

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information appearing in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Interest Rate Risk and Sensitivity” under Item 2 of Part I of this Form 10-Q is incorporated herein by reference.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Interim Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.

Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report are designed and operating effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the 1934 Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with management’s evaluation that occurred during the Company’s third fiscal quarter of 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 impact 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 disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Information on Stock Repurchases

On November 2, 2007, the Company’s Board of Directors approved the 2007 Repurchase Plan, under which, the Company was authorized to repurchase up to $15 million in value of its outstanding shares of common stock. On July 29, 2014, the Company’s Board of Directors approved the 2014 Repurchase Plan to replace the 2007 Repurchase Plan. Under the 2014 Repurchase Plan, the Company is authorized to repurchase up to $15 million in value of its outstanding shares of common stock. This authority may be exercised from time to time and in such amounts as market conditions warrant. Any shares purchased under this plan are returned to the status of authorized but unissued shares of common stock. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time. The repurchases are funded using the Company’s working capital. The following table sets forth information regarding the Company’s repurchases of its common stock during the three months ended September 30, 2015.


	Number of Shares Purchased ⁽²⁾		Average Price Paid Per Share ⁽¹⁾		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program		Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
Time Period
July 1, 2015 to
July 31, 2015		13,658	$	16.75		13,658	$	9,201,236
August 1, 2015 to
August 31, 2015		-	$	-		-	$	9,201,236
September 1, 2015 to
September 30, 2015		182,538	$	15.57		182,538	$	6,359,323

Total for the quarter ended
September 30, 2015		196,196	$	15.65		196,196	$	6,359,323

⁽¹⁾	Average price paid per share includes commissions and is rounded to the nearest two decimal places.

⁽²⁾

On November 2, 2007, the Company’s Board of Directors approved a stock repurchase plan. Under this program, the Company was authorized to repurchase up to $15 million in value of its outstanding shares of common stock. On July 29, 2014, the Company’s Board of Directors approved a new stock repurchase plan to repurchase up to $15 million in value of its outstanding shares of common stock.

In addition to the repurchases described above, pursuant to the 2014 Equity Plan, participants may have shares withheld to cover income taxes. There were 781 shares repurchased to cover income tax withholding in connection with the shares granted under the 2014 Equity Plan during the three-month period ended September 30, 2015, at an average cost of $ 16.05 per share. At September 30, 2015, the Company had $6.4 million remaining in the 2014 Repurchase Plan.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None

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Item 6. Exhibits


Exhibit Number		Description

3.1		Amended and Restated Articles of Incorporation ⁽¹⁾
3.2		Bylaws ⁽²⁾
10.1		Fifth Amendment, dated as of July 6, 2015, to the Loan and Security Agreement, dated as of October 9, 2009, by and among Marlin Receivables Corp., Marlin Leasing Corporation, Marlin Business Services Corp. and Wells Fargo Foothill, LLC (now known as Wells Fargo Capital Finance, LLC). ⁽³⁾
10.2		Employment Offer Letter between W. Taylor Kamp and Marlin Business Services Corp. dated as of August 3, 2015
31.1		Certification of the Interim 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 Interim 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)
101		Financial statements from the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2015, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements. (Submitted electronically with this report)

^†	Management contract or compensatory plan or arrangement.

⁽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 Current Report on Form 8-K, filed on July 6, 2015 and incorporated by reference herein.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MARLIN BUSINESS SERVICES CORP.

	(Registrant)

	By:	/s/ Edward J. Siciliano		Interim Chief Executive Officer
		Edward J. Siciliano		(Interim Chief Executive Officer)

	By:	/s/ W. Taylor Kamp
		W. Taylor Kamp	Chief Financial Officer & Senior Vice
			President
			(Principal Financial Officer)

Date: November 3, 2015

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Exhibit 10.2

LOGO

Sent via email and overnight mail

August 3, 2015

Mr. W. Taylor Kamp

14 Patriots Way

Mendham, New Jersey 07945

Dear Taylor:

This letter, coupled with the terms of your employment application already on file, is to memorialize our recent verbal offer. In addition, this letter will also document the other items that we have discussed and agreed:

The details of the offer are:

Position: Senior Vice President, Chief Financial Officer reporting to Daniel Dyer, CEO.

Our expectation is that you would start work on or about August 10, 2015.

Your Bi-weekly salary will be $11,538 based upon an annual salary of $300,000 payable on a direct deposit basis.

Beginning in 2016, you will be eligible to participate in the Management Cash Incentive Program with an annual bonus opportunity targeted at up to 80% of your base salary in effect at the start of the calendar year, and based on the achievement of individual, departmental and corporate goals established annually. Payment of the annual bonus, if any, will normally occur in the first quarter annually provided you are on the active payroll at the time payment is made. Incentive plans are reviewed and approved each year. Your metrics for 2016 will be provided to you in detail at a later date. For fiscal year 2015, you will be paid a minimum cash bonus equal to 25% of your bonus opportunity target, and you will be eligible to earn the full pro-rata bonus for fiscal year 2015 based on (a) the achievement of individual and corporate goals and (b) the portion of the 2015 fiscal year in which you are employed by Marlin.

We are pleased to advise you that you will begin employment with an opportunity to receive equity in Marlin, which equity is intended to align the interests of our entire employee base with the interests of our shareholders. Under the Management Equity Incentive Plan, you are eligible to earn a targeted annual restricted stock award valued at 70% of your base salary in effect at the beginning of each calendar year (subject to approval by the Compensation Committee of the Board of Directors that administers the Plan). Attached is a copy of the Program’s guidelines. For calendar year 2015, your equity opportunity is a pro-rata percentage equal to 30% of base salary which will be granted to you by the Compensation Committee of the Board of Directors on or soon after your start date.

You will also be granted by the Compensation Committee of the Board of Directors a one-time grant of 12,500 restricted shares with a cliff vesting period three years from your start date.

You will also be provided an opportunity to purchase additional shares, at a discount, through our Employee Stock Purchase Program (ESPP).

Our current practice is to review performance and base salary on June 1st of each year. That review is normally based on individual performance during the 12 month period immediately preceding June 1st. In your case, any increase in base pay will be pro-rated for your period of participation.

Marlin will provide you with the following reimbursement for relocation and temporary living expenses as follows:

a) Marlin will provide you with a temporary living allowance covering up to six (6) months commencing within 12 months of employment. Instead of a detailed accounting of those expenses, we will provide a flat allowance of $3,000 per month (less applicable tax withholdings), payable in monthly installments commencing on your start date.

b) Marlin will pay the reasonable expenses associated with moving of your household goods from Mendham, New Jersey to a location of your choosing convenient to you within 12 months of employment. Together, we will select two responsible movers to provide you with estimates. Marlin will then select the actual mover on the basis of price and acceptability. Marlin will pay full replacement value insurance up to $50,000 for household goods.

c) Marlin will also pay for reasonable costs for storage of the above-mentioned household goods not to exceed three (3) months commencing within 12 months of employment, if necessary, and will pay reasonable expenses to have said household goods moved from storage to the new residence.

d) You are responsible for reimbursing us the amount paid in relocation and temporary housing costs in the event that you resign your employment as follows:

•

Less than one year (100%)

•

One to Two Years (66%)

•

Two to Three Years (33%)

•

Greater than three years (0%)

e) Marlin will reimburse you the reasonable costs associated with the travel, lodging and meals for you to search and secure living accommodations in the New Jersey area. We will cover up to one (1) additional trip with your spouse for a total of up to six (6) days.

Your employment is conditioned on the results of a favorable criminal background screen which we have received.

A post job offer, pre-employment drug screen is required within 72 hours of the offer. Your employment is conditioned on the favorable results of this screen. If the results are not favorable, this offer will be rescinded. You will receive instructions on how to satisfy this requirement via e-mail under separate cover.

10.

Marlin offers a comprehensive benefits plan including medical and prescription coverage, effective on your date of hire. Dental, vision and life insurance are effective the first of the month following your start date. Long Term Disability benefits go into effect after 3 months of service. A summary of the Marlin Benefits Program is forwarded with this offer letter. These benefits will be described in detail during your New Hire Orientation.

11.

You are eligible for 23 days of Paid-time-off (PTO), accrued throughout the calendar year and pro-rated for your period of participation during 2015. An additional day is added for each year of service up to 25 days. Marlin celebrates 6 paid holidays per calendar year and, an additional 3 variable holidays (that go into effect after 90 days of service) for a total of 9 holidays.

12.

You are eligible to participate in Marlin’s 401(k) Retirement Savings Plan effective on the first day of the calendar quarter following your date of hire (Jan. 1, April 1, July 1, and Oct. 1). The plan currently provides for a company match of 1.5% on the first 6% of personal contribution. Full vesting occurs after 3 years of service, as determined under the plan.

13.

The Compensation Committee of the Board of Directors is currently discussing the adoption of the Severance Pay Plan for Senior Management, which would provide certain severance benefits to executives who are covered by the plan if such executives experience a termination of employment that is covered by the plan. The details of such plan are still being developed, but if the plan is adopted, you will be eligible to participate in such as a Tier II Participant, provided that you commence employment with Marlin as provided in this offer letter and agree to the terms and conditions set forth in the corresponding participation agreement for such plan, which will be sent to you on the later of (i) your commencement of employment with Marlin or (ii) the adoption of the plan. A draft of the plan and corresponding participation agreement is forwarded with this offer letter.

14.

The Immigration Reform and Control Act, and our own standards, require us to examine personal identification and work authorization documents of new employees. Therefore, to meet these requirements of IRCA and our own policies, please provide Marlin with proof of your eligibility to work in the United States (i.e. passport, driver’s license, social security card, birth certificate as noted in I-9 documentation).

15.

The Human Resources Department will conduct an orientation, presentation, and review of your employee handbook and benefits, normally on your first day of work. This will be coordinated with your schedule.

16.

We are forwarding, along with this letter, the following documents for you to review, execute and bring with you on your first day of work:

•

I-9 Form

•

Insider Trading Policy Statement

•

Code of Ethics and Business Conduct

•

W-4 Form

•

Direct Deposit Enrollment Form

•

Emergency Contact Form

•

Password Security Form

•

First Day Checklist

17.

Marlin may withhold from any salary, bonuses, or other compensation or benefits payable or provided to you under this offer letter or otherwise, any and all federal, state, local, and other taxes and any and all other amounts as permitted or required by law, rule, or regulation.

18.

Marlin abides by the “employment-at-will” doctrine, which permits Marlin or the employee to terminate the employment relationship at any time, for any reason, with or without notice. Neither the policies contained in this letter, nor any other written or verbal communication, are intended to create a contract of employment or warranty or guarantee of benefits. The policies contained in this offer letter may be added to, deleted, or changed at any time by Marlin in its sole discretion, except that we will not modify our policy of “employment-at-will” in any case.

19.

Any disputes relating to this offer shall be governed and construed in accordance with the laws of the State of New Jersey.

20.

Please note that Marlin can rescind the offer of employment at any time up until acceptance is received by Marlin.

21.

This offer letter contains the entire understanding between Marlin and you with respect to your employment, and shall supersede all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written.

Taylor, I believe that this covers everything we discussed. The Marlin Team is excited at the prospect of you joining us. Should you have any questions, please do not hesitate to contact me and we will assist in any way we can.

Sincerely,

Daniel Dyer,

Chief Executive Officer

The offer of employment will become null and void within five (5) days of the date of this letter unless formal acknowledgement and acceptance is received. Please return a copy of this letter with your signature via to fax 856.813.2718 or email to DDyer@marlinleasing.com or EDietz@marlincorp.com .


W. Taylor Kamp		Date:

Enc:

Exhibit 31.1

CERTIFICATION REQUIRED BY RULE 13a-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION OF INTERIM CHIEF EXECUTIVE OFFICER

I, Edward J. Siciliano, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Marlin Business Services Corp.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the periods in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the periods covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2015

/s/ Edward J. Siciliano

Edward J. Siciliano

Interim Chief Executive Officer

Exhibit 31.2

CERTIFICATION REQUIRED BY RULE 13a-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, W. Taylor Kamp, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Marlin Business Services Corp.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2015

/s/ W. Taylor Kamp

W. Taylor Kamp

Chief Financial Officer & Senior Vice President

Principal Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q of Marlin Business Services Corp. for the quarter ended September 30, 2015 (the “Quarterly Report”), Edward J. Siciliano, as Interim Chief Executive Officer, and W. Taylor Kamp, Chief Financial Officer of the Company, each hereby certifies, that pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)	The Quarterly Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Marlin Business Services Corp.

Date: November 3, 2015


		/s/ Edward J. Siciliano
		Edward J. Siciliano
		Interim Chief Executive Officer
		/s/ W. Taylor Kamp
		W. Taylor Kamp
		Chief Financial Officer & Senior Vice President
		(Principal Financial Officer)