Marlin Business Services reported first quarter 2017 net income of $1.5 million. Before charges related to a reserve for restitution in connection with certain payment processing practices in effect prior to February 2016, first quarter 2017 net income on an adjusted basis was $4.3 million compared to $3.7 million for the first quarter last year.

“Our first quarter represented a great start to 2017 highlighted by strong origination volume, solid portfolio growth and good asset quality, along with excellent progress on our ‘Marlin 2.0’ initiative that we expect will help take the Company to the next level of growth and profitability,” said Jeffrey A. Hilzinger, Marlin’s President and CEO. “Total first quarter origination volume of $168.8 million increased 49% from a year ago and was 11% higher than the previous record established in the fourth quarter last year. During the quarter, we benefitted from continued strong customer demand for our Equipment Finance business, including meaningful contributions from the previously announced acquisition of Horizon Keystone Financial that we completed early in the first quarter. Funding Stream, our working capital loan business, continues to gain traction with $13.8 million, or 8.2%, of total first quarter originations. We also enjoyed solid growth from our Franchise and Transportation Finance businesses. In total, our Investment in Leases and Loans grew to a record $824.9 million, up 4% compared to the previous quarter and up almost 18% from a year ago.  Importantly, our focus on maintaining disciplined underwriting standards continues to be a top priority and credit quality remained consistent with expectations.”

Hilzinger concluded, “As previously disclosed, one of Marlin Business Bank’s regulatory agencies communicated preliminary findings in connection with the timing of certain aspects of the payment application processes in effect prior to February 2016 related to the assessment of late fees.  We believe that the resolution of this matter will require Marlin to pay restitution to customers. Our current estimate of such restitution is $4.2 million, which has been charged against first quarter earnings along with related professional service fees and costs.  Consistent with our Marlin 2.0 initiative and strategy, we have a deep commitment to our customers and the Company’s new management team continues to diligently strive to enhance the governance and business processes we have in place.  Further, because we revised our practices in February 2016, we do not believe this matter will have a negative impact on our operations going forward.”

First Quarter Highlights:

• Total first quarter origination volume (inclusive of referral volume) of $168.8 million, a record for a single quarter, up 11.3% compared to the prior quarter and an increase of 49.4% year-over-year
• Investment in Leases and Loans (before deferred costs and loss allowance) of $824.9 million, an all-time record, up 4.0% from the prior quarter and 17.9% from a year ago
• Total new origination loan and lease yield of 11.86%, up 36 basis points from the prior quarter and up 17 basis points year-over-year
• Credit quality remained consistent with expectations, with 30+ and 60+ day delinquencies at 88 basis points and 51 basis points, respectively, and annualized net charge-offs during the first quarter of 1.57%
• Strong capital position with equity to assets ratio of 17.22%
• Net income of $1.5 million included a one-time charge of $2.7 million (net of tax) related to a reserve for restitution in connection with certain payment processing practices in effect prior to February 2016
• Net income on an adjusted basis of $4.3 million, or $0.34 per diluted share, up from $3.7 million, or $0.29 per share in the prior year period
• During the quarter, the Company completed the acquisition of Horizon Keystone Financial
• Announced realignment of sales force and strategy to focus on both indirect and end-user channels

To read the full Q1 2017 release, click here.

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