Marlin Business Services reported third quarter 2017 net income of $3.3 million, or $0.26 per diluted share, compared to net income of $4.3 million, or $0.35 per diluted share, for the third quarter last year. Third quarter 2017 earnings included an impact of $0.05 per diluted share due to establishing additional insurance and credit loss reserves related to Hurricanes Harvey and Irma.
Third Quarter Summary:
- Total third quarter sourced origination volume of $160.4 million, down 4.4% from the previous quarter due to the intentional strategic pull-back in certain channels, but up 21.1% year-over-year
- Investment in Leases and Loans (before deferred costs and loss allowance) of $883.8 million, up 2.9% from the prior quarter and up 16.9% from a year ago
- Total new origination loan and lease yield of 12.18%, down 3 basis points from the prior quarter and up 49 basis points year-over-year
- Net interest and fee income of $23.1 million for the quarter, compared to $22.7 million for the prior quarter and $20.7 million for the third quarter last year
- 30+ and 60+ day delinquencies and net charge-offs increased in the quarter, but remain within the Company’s targeted range
- Provision for Credit Losses increased due, in part, to the higher delinquencies and charge-offs
- Strong capital position with equity to assets ratio of 16.42%
- Net income of $3.3 million, or $0.26 per diluted share, reduced by approximately $0.05 per diluted share due to establishing additional insurance and credit loss provisions related to Hurricanes Harvey and Irma
- ROE of 8.01%; ROE of 9.42% adjusted for the hurricane impact, down from 11.10% in the third quarter last year
Commenting on the Company’s results, Jeffrey A. Hilzinger, Marlin’s President and CEO, said, “Overall, Marlin’s third quarter results were mixed. We continue to benefit from strong growth in origination volume in our core channels, continued strong yields and growth in net interest income from the record size of our portfolio. However, earnings were impacted due to hurricane provisions and weaker portfolio performance, particularly within our transportation channel. While there was a modest increase in net charge-offs, our allowance for credit losses increased significantly as it is very sensitive to recent delinquency trends.”
Hilzinger continued, “Total third quarter sourced origination volume of $160.4 million was up 21% from the same period last year but down 4% from the previous quarter, driven by the intentional pull-back in our transportation channel as we pivot to a new strategy to improve the channel’s ROE. The year-over-year growth was due to strong customer demand in our Equipment Finance business. In addition, our working capital loan product, Funding Stream, continued to make a meaningful contribution with third quarter origination volume of $13.8 million, or nearly 9% of total sourced originations. This is up from $10.3 million, or 8%, of total sourced originations a year ago. Our Direct origination initiative also continued to gain traction, with origination volume increasing to $16.5 million during the quarter, an increase of 7% over last quarter and 61% over the third quarter last year. We expect growth in Direct originations to continue to accelerate in the future. Also in the quarter, we referred or sold $22.7 million of volume as part of our ongoing capital markets activities. At quarter end, total Investment in Leases and Loans expanded to a record $883.8 million, up 3% compared to the previous quarter and up 17% from a year ago.”
Hilzinger concluded, “While credit quality remains acceptable, we are proactively addressing recent trends to ensure that near-term portfolio performance improves. Overall, the fundamentals of our business remain very strong and we made good progress during the quarter on our strategic objectives to drive long term growth in profitability.”
To read the full earning release, click here.