Marlin Reports Third Quarter 2020 Results and Declares a Cash Dividend of $0.14 Per Share

10/29, 9:05 PM (Source: GlobeNewswire)

Third Quarter Summary:

  • Net income of $2.7 million, or $0.23 per diluted share, compared with net income of $7.4 million, or $0.60 per diluted share a year ago and net loss of $5.9 million, or $0.50 per diluted share last quarter. Net income on an adjusted basis* of $3.2 million, or $0.27 per diluted share, compared with net income on an adjusted basis of $7.4 million, or $0.60 per diluted share a year ago
  • Ended the quarter with total stockholders’ equity of $182.4 million, book value per share of $15.23 and a consolidated equity-to-assets ratio of 16.49%
  • Total 30+ day delinquencies were 2.15%, up from 1.27% prior year, but down from 3.83% in the second quarter
  • Expense reduction efforts resulted in a $3.8 million (22%) reduction in Salaries and General and Administrative expenses during the third quarter versus prior year
  • Total sourced origination volume of $68.5 million, down 66.0% year-over-year. Average total finance receivables were $924.6 million, down 11.8% year-over-year
  • Total allowance for credit losses of $61.3 million; allowance as a percentage of receivables was 6.57% for equipment finance and 13.06% for working capital; annualized net charge-offs of 4.54%, compared with 3.47% in the prior quarter and 1.99% in the third quarter last year

MOUNT LAUREL, N.J., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Marlin Business Services Corp. (NASDAQ: MRLN), a nationwide provider of capital solutions to small businesses (“Marlin” or the “Company”), today reported third quarter 2020 net income of $2.7 million, or $0.23 per diluted share, compared with net loss of $5.9 million, or $0.50 per diluted share in the prior quarter, and net income of $7.4 million, or $0.60 per diluted share a year ago.

Commenting on the Company’s results, Jeffrey A. Hilzinger, Marlin’s President and CEO, said, “Given the significant challenges we faced in the first half of 2020 arising from the COVID-19 pandemic, I am very pleased with the resiliency of our business and our return to profitability in the third quarter. Due to significantly improving portfolio performance and outlook, coupled with the benefits from the cost reductions we implemented earlier in the year, we generated net income of $2.7 million, or $0.23 per diluted share and adjusted net income of $3.2 million, or $0.27 per diluted share. Portfolio performance improved throughout the third quarter and has continued into the fourth quarter. Given these trends, the assumptions underlying our loss reserves have been more informed by our actual experience and our capital position remains strong as we ended the quarter with increased reserve coverage, a total risk-based capital ratio of 22.49%% and book value of $15.23 per share.”

Mr. Hilzinger concluded, “Third quarter total sourced origination volume of $68.5 million was impacted by a number of factors including the disruption caused by the restructuring of our front-office operations, reduced customer demand and lower approval rates from tightened underwriting standards. As we look ahead, we believe that our strong balance sheet and the investments we are making in our digital origination platform put us in a great position to best serve our partners and customers and to take full advantage of the increased demand for small business financing as the economy recovers.”

Results of Operations
Total sourced origination volume for the third quarter of $68.5 million was down 66.0% from a year ago. Direct origination volume of $8.4 million in the third quarter was down 79.8% from $41.6 million in the third quarter of 2019. Indirect origination volume in the third quarter of 2020 was $58.8 million, down 57.9% from $139.5 million in the third quarter last year. Assets originated for sale in the third quarter were not significant, compared with $18.2 million in the third quarter last year. Referral volume totaled $1.3 million, down from $2.4 million in the third quarter last year. Net Investment in Leases and Loans was $847 million, down 18.2% from third quarter last year, while our total managed assets stood at approximately $1.2 billion, down 14.7% from the third quarter last year.

Net interest and fee margin as a percentage of average finance receivables was 8.87% for the third quarter, up 19 basis points from the second quarter of 2020 and down 68 basis points from a year ago. The sequential quarter increase was driven primarily by an increase in new origination loan and lease yields, higher fee income, and a decrease in interest expense resulting from lower deposit rates. The year-over-year decrease in margin percentage was primarily related to the decrease in new origination loan and lease yields, the change in the presentation of residual income driven by the adoption of CECL, and portfolio mix, partially offset by a decrease in interest expense resulting from lower deposit rates. During 2019 and prior periods, residual income was presented in fee income; however, effective in the first quarter 2020, residual income is included in the future cash flows used to assess credit losses and therefore this activity is reflected in the allowance for credit losses. The Company’s interest expense as a percent of average total finance receivables was 203 basis points in the third quarter of 2020 compared with 222 basis points for the prior quarter and 250 basis points for the third quarter of 2019, resulting from lower rates and a shift in mix, as higher rate long-term debt pays down.

On an absolute basis, net interest and fee income was $20.5 million for the third quarter of 2020 compared with $25.0 million in the third quarter last year.

The provision for credit losses was $7.2 million in the third quarter of 2020, compared to $18.8 million in the second quarter of 2020, and $7.7 million in the third quarter of 2019.   In the third quarter of 2020, our net change in expected impacts from COVID-19 on our portfolio and estimated credit losses was not significant compared to the prior quarters of this year.

Non-interest income was $4.2 million for the third quarter of 2020, compared with $3.8 million in the prior quarter and $10.4 million in the prior year period. The sequential increase in non-interest income is primarily due to the increase in reserves for property tax receivables in the prior quarter. The year-over-year decrease in non-interest income is primarily due to a $6.4 million decrease in gains from the sale of assets. Non-interest expense was $14.2 million for the third quarter of 2020, compared with $13.5 million in the prior quarter and $17.0 million in the third quarter of 2019. The sequential quarter increase was primarily due to an intangible assets impairment charge of $1.0 million in the third quarter associated with the Company’s past acquisition of Fleet Financing Resources (FFR), as well as higher Salaries and Benefits expense primarily driven by an adjustment in the second quarter to reduce Incentive compensation probable payout, partially offset by a decrease in general and administrative expenses due to a $1.4 million reduction in the estimated liability for contingent consideration related to the FFR acquisition. The year-over-year decrease was primarily due to a $2.4 million reduction in Salaries and Benefits expense due to lower commission on lower origination volumes and lower incentive compensation driven by company performance, along with the aforementioned offsetting amounts related to FFR that only impacted 2020.

The Company’s efficiency ratio for the third quarter was 57.6% compared with 48.0% in the third quarter last year. Excluding the impact of certain non-GAAP adjustments, the Company’s efficiency ratio on an adjusted basis* for the third quarter was 53.4% compared with 46.1% in the third quarter of 2019.

Marlin recorded a $0.5 million tax expense in the third quarter, representing an effective tax rate of 16.1%. The lower effective tax rate during the quarter was due to the partial recapture of previously capped income tax benefit. In the second quarter of 2020, the Company recorded a $1.4 million tax benefit representing an effective tax rate of 18.9% due to a $0.6 million discrete reduction in the income tax benefit resulting from interim tax financial reporting requirements, and in the third quarter of 2019, the Company recorded $3.3 million of tax expense, representing an effective tax rate of 30.6%. The higher effective tax rate in the third quarter of 2019 reflects changes in state statutory rates and related revaluation of deferred tax as well as the establishment of a valuation allowance against certain net operating loss carryforwards that are not expected to be utilized.

Portfolio Performance
Allowance for credit losses as a percentage of total finance receivables was 6.75% at September 30, 2020 compared with 6.53% at June 30, 2020. In addition, under the incurred loss allowance model in 2019, the percentage was 1.86% at September 30, 2019.

For the three months ended September 30, 2020, the Company recorded a $7.2 million provision for credit losses, which was $0.5 million lower than the $7.7 million provision recognized for the three months ended September 30, 2019 and $11.6 million lower than the $18.8 million recognized in the second quarter of 2020. In the third quarter of 2020, our net change in expected impacts from COVID-19 on our portfolio and estimated credit losses was not significant compared to the prior quarters of this year.

As a result of the ongoing impact from COVID-19, through the end of the third quarter the Company has completed over 5,200 loan and lease restructure requests from customers who have been impacted by the pandemic. As of September 30, 2020, the Company had $129.9 million total receivables that were part of this program, or 14.3% of total net investment, or $117.6 million (13.4%) Equipment Finance and $12.2 million (46.1%) of Working Capital. In the third quarter, we processed new modifications for 406 contracts, or $9.4 million net investment, and we extended the modification period for 319 contracts with $16.4 million net investment.

Through the end of the third quarter, $109.1 million (84%) of modified contracts are out of the deferral period, and the current deferral period will expire for substantially all the remaining modified contracts before December 31, 2020. As of the end of the third quarter we have stopped taking new applications for modifications, although we may consider offering extensions in select cases as part of our loss mitigation strategies.

We are closely monitoring the performance of the modified contracts as their deferral period expires. The following table outlines the delinquency status of the Company’s portfolio as of September 30, 2020, including information on restructured contracts in deferral, and restructured contracts that have resumed scheduled payment. Modified contracts are reported in our delinquency and non-accrual data based on their status with respect to their modified terms.

 Net Investment (in thousands) Delinquency Rate by population
  30 6090+CurrentTotal 30 60 90+CurrentTotal
Equipment Finance           
            
Out of deferral period(1)$1,402$1,646$1,672$94,905$99,625 1.41%1.65%1.68%95.26%100%
In deferral period 371 733  16,943 18,047 2.06%4.06% 93.88%100%
Restructured Portfolio 1,773 2,379 1,672 111,848 117,672 1.51%2.02%1.42%95.05%100%
            
Non-Restructured 4,430 3,348 5,148 749,869 762,795 0.58%0.44%0.67%98.31%100%
            
Total Equipment Finance$6,203$5,727$6,820$861,717$880,467 0.70%0.65%0.77%97.87%100%
            


 Net Investment (in thousands) Delinquency Rate by population
  15 3060+CurrentTotal 15 30 60+CurrentTotal
Working Capital            
Out of deferral period(1)$185$207$276$8,820$9,488 1.95%2.18%2.91%92.96%100%
In deferral period(1) 38 65 34 2,585 2,722 1.40%2.39%1.25%94.96%100%
Restructured Portfolio 223 272 310 11,405 12,210 1.83%2.23%2.54%93.40%100%
            
Non-Restructured 41 127 68 14,026 14,262 0.29%0.89%0.48%98.34%100%
            
Total Working Capital$264$399$378$25,431$26,472 1.00%1.51%1.43%96.06%100%
            

________________
(1)   Contracts out of modification period reflect those that are no longer in the full or partial deferral period on or prior to September 30, 2020. For the in-deferral population of Equipment Finance, approximately 50% have full payment deferral, and the remainder have a partial payment during the deferral period. For Working Capital, substantially all contracts have a partial payment during deferral.


Equipment Finance receivables over 30 days delinquent were 213 basis points as of September 30, 2020, down 177 basis points from June 30, 2020, and up 86 basis points from September 30, 2019. Working Capital receivables over 15 days delinquent were 393 basis points as of September 30, 2020, down 45 basis points from June 30, 2020, and up 204 basis points from September 30, 2019. Annualized third quarter total net charge-offs were 4.54% of average total finance receivables versus 3.47% in the second quarter of 2020 and 1.99% a year ago.

Portfolio Concentration
We have a well-diversified portfolio across industries and geographical areas for both Equipment Finance and Working Capital. As more municipalities across the U.S. have reduced lockdowns and we have begun to remove our underwriting restrictions on industries and geographical areas, we have included the total industry concentration of our portfolio, as opposed to the highly impacted concentration. The following table reflects our portfolio concentrations by industry where net investment is in excess of 5% of the total portfolio as of September 30, 2020:

 Equipment
Finance
 Working
Capital
Medical13.5% 8.6%
Miscellaneous Services(1)12.0% 8.2%
Retail10.2% 13.6%
Construction8.7% 11.2%
Restaurants7.1% 7.8%
Professional Services6.6% 6.3%
Manufacturing5.9% 9.9%
Transportation5.4% 3.2%
Auto Repair3.3% 6.1%

________
(1)   Miscellaneous Services is an amalgamation of service related SIC codes, the largest of which are Business Services, Repair Services, and Equipment Rental and Leasing.

Capital and Liquidity
As of September 30, 2020, the Company had $195.1 million of Cash and cash equivalents, an increase of $72.0 million from December 31, 2019. As of September 30, 2020, the Company had additional available liquidity of $84.3 million from lines of credit with financial institutions and the Federal Reserve discount window. There were no borrowings made on these additional sources of liquidity as of September 30, 2020 or subsequently.

As of September 30, 2020, the Company’s consolidated equity to assets ratio was 16.49 %. This compares to 15.13 % and 16.74 %, in the prior quarter and year ago quarter, respectively. The Company’s Total Risk-based capital ratio was 22.49% as of September 30, 2020, which was 14.49% above our minimum regulatory requirement.

Corporate Developments
On October 29, 2020, Marlin’s Board of Directors declared a $0.14 per share quarterly dividend. The dividend is payable on November 19, 2020, to shareholders of record on November 9, 2020. Based on the closing stock price on October 28, 2020, the annualized dividend yield on the Company’s common stock is 8.24%.

* Non-GAAP Financial Measures: Net income (loss) on an adjusted basis and adjusted efficiency ratio are financial measures that are not in accordance with U.S. generally accepted accounting principles (GAAP). See “Regulation G – Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for a detailed description and reconciliation of such Non-GAAP financial measures to their most directly comparable GAAP financial measures, in accordance with Regulation G.

Conference Call and Webcast
Marlin will host a conference call on Friday, October 30, 2020 at 9:00 a.m. ET to discuss the Company’s third quarter 2020 results. The conference call details are as follows:
Third Quarter 2020 Financial Results Conference Call

Date:Friday, October 30, 2020
Time:9:00 a.m. Eastern Time / 6:00 a.m. Pacific Time
Dial-in:1-877-407-0792 (Domestic)
 1-201-689-8263 (International)
Conference ID:13710845
Webcast:http://public.viavid.com/index.php?id=141614

For those unable to participate during the live broadcast, a replay of the call will also be available from 12:00 p.m. Eastern Time on October 30, 2020 through 11:59 p.m. Eastern Time on November 13, 2020 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13710845.

About Marlin 
Marlin is a nationwide provider of capital solutions to small businesses with a mission of helping small businesses fulfill their American dream. Our products and services are offered directly to small businesses and through financing programs with independent equipment dealers and other intermediaries. For more information about Marlin, visit marlincapitalsolutions.com or call toll free at (888) 479-9111.

Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements represent only the company’s current beliefs regarding future events and are not guarantees of performance or results. All forward-looking statements (including statements regarding expectations of future financial and operating results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” “may,” “could”, “intend” and similar expressions are generally intended to identify forward-looking statements. Economic, business, funding, market, competitive, legal and/or regulatory factors, among others (including but not limited to the impact of the COVID-19 pandemic), affecting our business are examples of factors that could cause actual results to differ materially from those described in the forward-looking statements. More detailed information about these factors is contained under the headings “Forward-Looking Statements” and “Risk Factors” in our periodic reports filed with the United States Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are also available in the “Investors” section of our website. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise. Investors are cautioned not to place undue reliance on such forward-looking statements.

Regulation G – Non-GAAP Financial Measures
The Company uses certain financial measures which are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company defines net income on an adjusted basis as net income excluding after-tax income and expenses that are deemed to be unusual in nature or infrequent in occurrence and are not indicative of the underlying performance of the business for the period presented. The Company defines diluted earnings per share on an adjusted basis, return on average assets on an adjusted basis and return on average equity on an adjusted basis as the calculation used for the “as reported” number substituting net income as reported with net income on an adjusted basis while using the same denominator in the “as reported” number, where appropriate. The Company defines efficiency ratio on an adjusted basis as the calculation used for the “as reported” ratio adjusting the numerator for any discrete pre-tax adjustments used to present net income on an adjusted basis as well as the impact of pass-through lease expenses that are required to be presented on a gross basis in the income statement, acquisition related expense, and Rep and Warranty liability adjustments, as applicable. The Company adjusts the denominator in the “as reported” ratio for pass-through lease revenue that is required to be presented on a gross basis in the income statement, as applicable. The Company defines General and administrative annualized percent of average finance receivables, on an adjusted basis, as the calculation used for the “as reported” ratio, adjusting the numerator for any General and administrative discrete pre-tax adjustments used to present net income on an adjusted basis, acquisition related general and administrative expenses, Rep and Warranty liability adjustments, and pass-through lease expenses that are required to be presented on a gross basis in the income statement, as applicable. The adjusted ratio uses the same denominator as the “as reported” ratio. The Company defines Non-interest expense divided by average total managed assets, on an adjusted basis, as the calculation used for the “as reported” ratio adjusting the number for any non-interest expense discrete pre-tax adjustments used to present net income on an adjusted basis as well as the impact of pass-through lease expenses that are required to be presented on a gross basis in the income statement, acquisition related expenses, and Rep and Warranty liability adjustments, as applicable. The adjusted ratio uses the same denominator as the “as reported” ratio. The Company believes that these non-GAAP measures are useful performance metrics for management, investors and lenders, because it provides a means to evaluate period-to-period comparisons of the Company's financial performance without the effects of certain adjustments in accordance with GAAP that may not necessarily be indicative of current operating performance.

Non-GAAP financial measures should not be considered as an alternative to GAAP financial measures. They may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Investor Contacts:
Mike Bogansky, Senior Vice President & Chief Financial Officer
856-505-4108

Lasse Glassen, Addo Investor Relations
lglassen@addoir.com
424-238-6249

-Tables to Follow--

Marlin Business Services Corp. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share amounts)

 
  September 30, December 31,
  2020  2019 
ASSETS      
Cash and due from banks $5,436  $4,701 
Interest-earning deposits with banks  189,696   118,395 
Total cash and cash equivalents  195,132   123,096 
Time deposits with banks  8,456   12,927 
Restricted interest-earning deposits  5,771   6,931 
Investment securities  10,761   11,076 
Net investment in leases and loans:      
Leases  357,500   426,608 
Loans  550,553   601,607 
Net investment in leases and loans, excluding allowance for credit losses  908,053   1,028,215 
Allowance for credit losses  (61,325)  (21,695)
Total net investment in leases and loans  846,728   1,006,520 
Intangible assets  5,846   7,461 
Goodwill     6,735 
Operating lease right-of-use assets  7,729   8,863 
Property and equipment, net  8,422   7,888 
Property tax receivables, net of allowance  8,580   5,493 
Other assets  8,526   10,453 
Total assets $1,105,951  $1,207,443 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Deposits $823,707  $839,132 
Long-term borrowings  39,833   76,091 
Operating lease liabilities  8,790   9,730 
Other liabilities:      
Sales and property taxes payable  5,706   2,678 
Accounts payable and accrued expenses  25,533   34,028 
Net deferred income tax liability  20,032   30,828 
Total liabilities  923,601   992,487 
       
Stockholders’ equity:      
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; none issued      
Common Stock, $0.01 par value; 75,000,000 shares authorized; 11,974,651 and      
12,113,585 shares issued and outstanding at September 30, 2020 and December 31, 2019,  120   121 
respectively      
Additional paid-in capital  75,893   79,665 
Accumulated other comprehensive income (loss)  93   58 
Retained earnings  106,244   135,112 
Total stockholders’ equity  182,350   214,956 
Total liabilities and stockholders’ equity $1,105,951  $1,207,443 
         


Marlin Business Services Corp. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share amounts)
 
    Three Months Ended September 30, Nine Months Ended September 30,
    2020 2019 2020  2019
               
Interest income$22,398 $27,708 $73,111  $80,673
Fee income 2,803  3,869  8,019   11,418
 Interest and fee income 25,201  31,577  81,130   92,091
Interest expense 4,694  6,561  15,802   18,931
 Net interest and fee income 20,507  25,016  65,328   73,160
Provision for credit losses 7,204  7,662  51,160   17,781
 Net interest and fee income after provision for credit losses 13,303  17,354  14,168   55,379
            
Non-interest income:           
 Gain on leases and loans sold 87  6,456  2,426   13,400
 Insurance premiums written and earned 2,082  2,230  6,612   6,538
 Other income 2,044  1,676  11,172   10,573
 Non-interest income 4,213  10,362  20,210   30,511
Non-interest expense:           
 Salaries and benefits 8,515  10,897  25,702   34,817
 General and administrative 4,717  6,092  24,169   25,514
 Goodwill impairment     6,735   
 Intangible assets impairment 1,016    1,016   
  Non-interest expense 14,248  16,989  57,622   60,331
   Income (loss) before income taxes 3,268  10,727  (23,244)  25,559
Income tax expense (benefit) 525  3,281  (8,284)  6,857
   Net income (loss)$2,743  7,446  (14,960)  18,702
            
Basic (loss) earnings per share$0.23 $0.61 $(1.27) $1.52
Diluted (loss) earnings per share$0.23 $0.60 $(1.27) $1.51
             


Marlin Business Services Corp. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands, except share amounts)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2020  2019  2020  2019 
        
Net income (loss) as reported$ 2,743  $ 7,446  $ (14,960)  $ 18,702 
Deduct:       
Goodwill impairment       (6,735)    
Intangible assets impairment (1,016)      (1,016)    
Charge in connection with workforce reorganization (836)      (1,713)   (311) 
Charge in connection with office lease termination (190)      (414)    
Acquisition earn out valuation adjustment 1,435      1,435    
Reversal of charges in connection with executive separation          218 
Tax effect 152      2,108   24 
Total adjustments, net of tax (455)      (6,335)   (69) 
        
Net tax benefit resulting from the CARES Act of 2020       3,256    
Net income (loss) on an adjusted basis$ 3,198  $ 7,446  $ (11,881)  $ 18,771 
        
Diluted earnings (loss) per share       
As reported$0.23  $0.60  ($1.27) $1.51 
As adjusted$0.27  $0.60  ($1.01) $1.52 
Return on Average Assets       
As reported 0.98%   2.34%   -1.68%   2.00% 
As adjusted 1.14%   2.34%   -1.33%   2.01% 
Return on Average Equity       
As reported 6.00%   14.58%   -10.31%   12.38% 
As adjusted 6.99%   14.58%   -8.19%   12.43% 
        
Efficiency Ratio numerator as reported$ 14,248  $ 16,989  $ 57,622  $ 60,331 
Adjustments to Numerator:       
Expense adjustments as seen in Net Income reconciliation (607)      (8,443)   (93) 
Acquisition related expenses (286)   (670)   (957)   (2,142) 
Rep & Warranty liability adjustment (175)      (982)    
Pass-through expenses (49)   (9)   (6,063)   (6,251) 
Efficiency ratio numerator on an adjusted basis$ 13,131  $ 16,310  $ 41,177  $ 51,845 
        
Efficiency Ratio denominator as reported$ 24,720  $ 35,378  $ 85,538  $ 103,671 
Adjustments to Denominator:       
Pass-through revenue (122)   42   (5,247)   (5,680) 
Efficiency Ratio denominator on an adjusted basis$ 24,598  $ 35,420  $ 80,291  $ 97,991 
        
Efficiency Ratio       
As reported 57.64%   48.02%   67.36%   58.19% 
As adjusted 53.38%   46.05%   51.28%   52.91% 
                
                


Marlin Business Services Corp. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands, except share amounts)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2020  2019  2020  2019 
            
Non-interest Expense / Average total managed assets numerator, as reported$14,248  $16,989  $57,622  $60,331 
Adjustments to Numerator:           
Expense adjustments as seen in Net Income reconciliation (607)      (8,443)   (93) 
Acquisition related expenses (286)   (670)   (957)   (2,142) 
Rep & Warranty liability adjustment (175)      (982)    
Pass-through expenses (49)   (9)   (6,063)   (6,251) 
Non-interest Expense / Average total managed assets numerator, on an adjusted basis$13,131  $16,310  $41,177  $51,845 
            
Non-interest Expense / Average total managed assets           
As reported 4.74%   5.32%   6.22%   6.55% 
As adjusted 4.36%   5.10%   4.44%   5.63% 
            
General and administrative expense Annualized % of           
Avg. Fin. Receivables numerator, as reported$4,717  $6,092  $24,169  $25,514 
Adjustments to Numerator:           
Expense adjustments as seen in Net Income reconciliation 1,245      1,021    
Acquisition related expenses (200)   (230)   (599)   (700) 
Rep & Warranty liability adjustment (175)      (982)    
Pass-through expenses (49)   (9)   (6,063)   (6,251) 
General and administrative expense Annualized % of           
Avg. Fin. Receivables numerator, as adjusted$5,538  $5,853  $17,546  $18,563 
            
General and administrative expense Annualized % of           
Average Finance Receivables           
As reported 2.04%   2.32%   3.32%   3.31% 
As adjusted 2.40%   2.23%   2.41%   2.41% 


Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
Net Income (Loss) $7,446   $8,414   ($11,821)   ($5,882)   $2,743 
               
Annualized Performance Measures:              
Return on Average Assets  2.34%    2.74%    -3.98%    -1.88%    0.98% 
Return on Average Stockholders' Equity  14.58%    16.04%    -22.75%    -12.41%    6.00% 
               
EPS Data:              
Net Income Allocated to Common Stock $7,357   $8,313   ($11,821)   ($5,882)   $2,707 
Basic Earnings (loss) per Share $0.61   $0.69   ($1.00)   ($0.50)   $0.23 
Diluted Earnings (loss) per Share $0.60   $0.69   ($1.00)   ($0.50)   $0.23 
Number of Shares - Basic12,054,944  11,996,446  11,876,147  11,760,479  11,791,141 
Number of Shares - Diluted12,167,962  12,118,193  11,876,147  11,760,479  11,832,413 
               
Cash Dividends Declared per share $0.14   $0.14   $0.14   $0.14   $0.14 
               
New Asset Production:              
Direct Originations $41,556   $50,421   $37,821   $6,617   $8,381 
Indirect Originations $139,472   $167,740   $113,760   $58,802   $58,736 
Total Originations (1) $181,028   $218,161   $151,581   $65,419   $67,117 
               
Equipment Finance Originations $154,781   $186,852   $127,681   $64,572   $65,764 
Working Capital Loans Originations $26,247   $31,309   $23,900   $847   $1,353 
Total Originations (1) $181,028   $218,161   $151,581   $65,419   $67,117 
               
Assets originated for sale in the period $18,174   $16,344   $3,301   $1,135   $62 
Assets referred in the period $2,408   $1,961   $2,509   $664   $1,297 
Total Sourced Originations (1) $201,610   $236,466   $157,391   $67,218   $68,476 
               
Implicit Yield on Loans Originated:              
Total (1)  13.38%    12.43%    12.45%    9.16%    9.34% 
Direct  24.38%    23.20%    21.69%    13.80%    15.76% 
Indirect  10.10%    9.19%    9.39%    8.64%    8.42% 
Equipment Finance  9.57%    8.91%    8.95%    8.80%    8.77% 
Working Capital  35.81%    33.51%    31.16%    36.75%    36.62% 
               
Paycheck Protection Program Loans Originated             $4,178   $202 
Implicit Yield on PPP Loans Originated              4.56%    2.76% 
               
Assets sold in the period $85,425   $114,483   $22,929   $1,127   $4,286 
               
# of Leases / Loans Equipment Finance  6,836    7,279    5,863    3,178    3,410 
Equipment Finance Approval Percentage  53%    54%    46%    37%    40% 
Average Monthly Equipment Finance Sources  1,067    1,033    932    518    547 

_________________
      (1)    Excludes Paycheck Protection Program (PPP) Loans Originated.

Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
Net Interest and Fee Margin Percentage              
of Average Total Finance Receivables:              
Interest Income 10.57%   10.34%    10.49%   9.90%   9.69% 
Fee Income (4) 1.48%   1.46%    1.10%   1.00%   1.21% 
Interest and Fee Income 12.05%   11.80%    11.59%   10.90%   10.90% 
Interest Expense 2.50%   2.36%    2.25%   2.22%   2.03% 
Net Interest and Fee Margin (NIM) 9.55%   9.44%    9.34%   8.68%   8.87% 
               
Cost of Funds (2) 2.63%   2.57%    2.50%   2.17%   2.13% 
               
Interest Income Equipment Finance$22,355  $21,620  $21,076  $19,985  $19,719 
Interest Income Working Capital 4,389   4,545    4,932   4,095   2,526 
               
Average Total Finance Receivables$1,048,798  $1,034,464  $1,008,823  $979,313  $924,635 
Average Net Investment Equipment Finance 995,346   977,225    947,696   928,210   886,990 
Average Working Capital Loans 53,452   57,239    61,127   51,103   33,696 
               
End of Period Net Investment in leases and loans,              
net of allowance:              
Equipment Finance$980,799  $947,477  $918,264  $876,919  $823,712 
Working Capital 53,699   59,043    51,812   34,116   23,016 
Total Owned Leases and Loans (3) 1,034,498   1,006,520    970,076   911,035   846,728 
               
Assets Serviced for Others 264,226   341,064    328,252   296,401   261,144 
Total Managed Assets$1,298,724  $1,347,584  $1,298,328  $1,207,436  $1,107,872 
               
Average Total Managed Assets$1,278,394  $1,314,728  $1,343,862  $1,292,052  $1,203,502 
               
Restructured Receivables:              
Payment Deferral Modification Program:              
Equipment Finance      $12,530  $115,941  $117,672 
Working Capital        6,987   17,876   12,210 
Total - $      $19,517  $133,817  $129,882 
               
Total - as a % of Ending Finance Receivables        2.0%   13.7%   14.3% 
Total - # of Active Modified Contracts        520   5,017   5,237 
               
Other Restructured Contracts$2,323  $2,668  $$3,096  $1,751  $1,035 

_________________
(2) COF is defined as interest expense for the period divided by average interest-bearing liabilities, annualized

(3) Net investment in total finance receivables includes net investment in Equipment finance leases and loans and Working Capital loans.

(4) Effective January 1, 2020, in connection with the adoption of ASU 2016-13 “CECL”, residual income is no longer recorded as a component of fee income and instead is presented within the allowance for loan loss.

Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
Portfolio Asset Quality              
               
Allowance              
Total $19,211   $21,695   $52,060   $63,644   $61,325 
% of Total Finance Receivables  1.86%    2.15%    5.09%    6.53%    6.75% 
               
Equipment Finance $17,115   $19,796   $44,860   $55,682   $57,869 
% of Net Investment Equipment Finance  1.75%    2.09%    4.66%    5.97%    6.57% 
               
Working Capital $2,096   $1,899   $7,200   $7,962   $3,456 
% of Total Working Capital Loans  3.80%    3.14%    12.20%    18.92%    13.06% 
               
Net Charge-Offs              
Total $5,228   $7,771   $7,846   $8,494   $10,488 
% on Avg. Finance Receivables, Annualized  1.99%    3.00%    3.11%    3.47%    4.54% 
               
Equipment Finance $5,038   $6,634   $6,603   $7,872   $9,956 
% on Avg. Finance Receivables, Annualized  2.02%    2.72%    2.79%    3.39%    4.49% 
               
Working Capital $190   $1,137   $1,243   $622   $532 
% on Avg. Finance Receivables, Annualized  1.42%    7.95%    8.13%    4.87%    6.32% 
               
Delinquency              
Total Finance Receivables:              
30+ Days Past Due  1.27%    1.40%    1.79%    3.83%    2.15% 
60+ Days Past Due  0.83%    0.83%    1.00%    2.46%    1.42% 
               
Equipment Finance:              
30+ Days Past Due  1.27%    1.40%    1.82%    3.90%    2.13% 
60+ Days Past Due  0.87%    0.86%    1.05%    2.52%    1.42% 
               
Working Capital:              
15+ Days Past Due  1.89%    1.75%    2.55%    4.38%    3.93% 
30+ Days Past Due  1.34%    1.42%    1.14%    2.68%    2.94% 
               


Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
               
Delinquency (continued)              
Total Finance Receivables:              
30+ Days Past Due $13,130   $14,081   $18,249   $37,347   $19,527 
60+ Days Past Due $8,542   $8,383   $10,220   $24,015   $12,925 
               
Equipment Finance:              
30+ Days Past Due $12,390   $13,226   $17,576   $36,217   $18,750 
60+ Days Past Due $8,515   $8,112   $10,156   $23,353   $12,546 
               
Working Capital:              
15+ Days Past Due $1,043   $1,058   $1,504   $1,843   $1,041 
30+ Days Past Due $740   $855   $673   $1,130   $777 
               
               
Non-Accrual              
Total  0.68%    0.55%    0.66%    1.13%    0.92% 
Equipment Finance  0.65%    0.49%    0.62%    1.06%    0.82% 
Working Capital  1.34%    1.57%    1.28%    2.83%    4.32% 
               
               
Total (5) $7,047   $5,592   $6,705   $11,031   $8,375 
Equipment Finance $6,307   $4,646   $5,950   $9,842   $7,231 
Working Capital $740   $946   $755   $1,189   $1,144 
               

_________________
(5)   Non-Accrual as of September 30, 2020 includes $1.8 million of Equipment Finance restructured contracts and $0.8 million of Working Capital restructured contacts.

Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
               
Expense Ratios              
Salaries and Benefits Expense $10,897   $9,351   $9,519   $7,668   $8,515 
As a % of Avg. Fin. Receivables (annualized)  4.16%    3.62%    3.77%    3.13%    3.68% 
               
Total personnel end of quarter  348    348    339    240    247 
               
General and Administrative Expense $6,092   $7,052   $13,605   $5,847   $4,717 
As a % of Avg. Fin. Receivables (annualized)  2.32%    2.73%    5.39%    2.39%    2.04% 
               
Adjusted General and Administrative Expense              
As a % of Avg. Fin. Receivables (annualized) (6)  2.23%    2.40%    2.62%    2.21%    2.40% 
               
Non-Interest Expense /              
Average Total Managed Assets  5.32%    4.99%    8.89%    4.18%    4.74% 
               
Adjusted Non-Interest Expense /              
Average Total Managed Assets (7)  5.10%    4.56%    4.74%    3.75%    4.36% 
               
Efficiency Ratio  48.02%    43.22%    83.51%    53.92%    57.64% 
               
Adjusted Efficiency Ratio (7)  46.05%    40.23%    52.68%    47.58%    53.38% 
               

_________________
(6)   Adjusted general and administrative expense adjusts certain items, as defined in the reconciliation of GAAP to Non-GAAP financial measures. See schedule for details.

(7)   Adjusted non-interest expense adjusts certain items, as defined in the reconciliation of GAAP to Non-GAAP financial measures. See schedule for details.


Marlin Business Services Corp. and Subsidiaries
Supplemental Quarterly Data
(Dollars in thousands, except share amounts)
 
 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
               
Balance Sheet:              
Assets              
Investment in Leases and Loans $1,032,868   $1,007,707   $1,002,611   $956,981   $891,940 
Initial Direct Costs and Fees  20,841    20,508    19,525    17,698    16,113 
Reserve for Credit Losses  (19,211)    (21,695)    (52,060)    (63,644)    (61,325) 
Net Investment in Leases and Loans $1,034,498   $1,006,520   $970,076   $911,035   $846,728 
Cash and Cash Equivalents  132,461    123,096    211,070    211,706    195,132 
Restricted Cash  7,576    6,931    6,474    6,072    5,771 
Other Assets  72,881    70,896    75,917    67,402    58,320 
Total Assets $1,247,416   $1,207,443   $1,263,537   $1,196,215   $1,105,951 
               
Liabilities              
Deposits  869,257    839,132    941,996    902,191    823,707 
Total Debt  91,739    76,091    62,193    50,890    39,833 
Other Liabilities  77,633    77,264    70,858    62,130    60,061 
Total Liabilities $1,038,629   $992,487   $1,075,047   $1,015,211   $923,601 
               
Stockholders' Equity              
Common Stock $122   $121   $119   $119   $120 
Paid-in Capital, net  80,226    79,665    75,647    75,606    75,893 
Other Comprehensive Income (Loss)  89    58    20    86    93 
Retained Earnings  128,350    135,112    112,704    105,193    106,244 
Total Stockholders' Equity $208,787   $214,956   $188,490   $181,004   $182,350 
               
Total Liabilities and              
Stockholders' Equity $1,247,416   $1,207,443   $1,263,537   $1,196,215   $1,105,951 
               
Capital and Leverage:              
Equity $208,787   $214,956   $188,490   $181,004   $182,350 
Debt to Equity  4.60    4.26    5.33    5.27    4.74 
Equity to Assets  16.74%    17.80%    14.92%    15.13%    16.49% 
               
Regulatory Capital Ratios:              
Tier 1 Leverage Capital  15.28%    16.31%    16.18%    15.05%    16.92% 
Common Equity Tier 1 Risk-based Capital  17.72%    18.73%    18.64%    19.33%    21.17% 
Tier 1 Risk-based Capital  17.72%    18.73%    18.64%    19.33%    21.17% 
Total Risk-based Capital  18.98%    19.99%    19.94%    20.65%    22.49% 

 

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