Fourth Quarter Summary:
  • Total fourth quarter sourced origination volume of $186.5 million, up 16.3% from the previous quarter and up 23.1% year-over-year
  • 30+ and 60+ day delinquencies on total finance receivables improved from prior quarter to 102 basis points and 55 basis points, respectively, with annualized net charge-offs of 1.87%
  • Provision for Credit Losses of $4.5 million, improved from $5.7 million in the prior quarter, primarily due to the stabilizing portfolio performance in the fourth quarter along with the establishment of a hurricane reserve in the third quarter
  • Net income of $15.9 million, or $1.27 per diluted share, includes a fourth quarter tax benefit of $10.2 million, or $0.82 per diluted share, related to the Tax Cuts and Jobs Act of 2017
  • Net income on an adjusted basis of $5.9 million, or $0.47 per diluted share, compared to $4.8 million, or $0.38 per diluted share in the fourth quarter last year
  • ROE of 38.1%; ROE of 14.2% adjusted for the impact of the net tax benefit along with other items, up from 12.1% in the fourth quarter last year
  • Total new origination loan and lease yield of 11.59%, down 59 basis points from the prior quarter and up 9 basis points year-over-year
  • Net interest and fee income of $23.6 million for the quarter, compared to $23.1 million for the prior quarter and $21.8 million for the fourth quarter last year
  • Strong capital position with equity to assets ratio of 17.27%

Full Year 2017 Summary
  • Full year total sourced origination volume of $683.6 million, up 30.9% from a year ago
  • Investment in Leases and Loans (before deferred costs and loss allowance) of $911.2 million, up 3.1% from the prior quarter and up 14.9% from a year ago
  • Full year net income of $25.3 million, or $2.01 per diluted share, up from $17.3 million, or $1.38 per diluted share, in the prior year
  • Full year net income on an adjusted basis of $18.9 million, or $1.50 per share, up from $17.3 million, or $1.38 per diluted share in the prior year

MOUNT LAUREL, N.J., Feb. 01, 2018 (GLOBE NEWSWIRE) -- Marlin Business Services Corp. (NASDAQ:MRLN) ("Marlin" or the "Company") today reported fourth quarter 2017 net income of $15.9 million, or $1.27 per diluted share, compared to net income of $4.8 million, or $0.38 per diluted share, for the fourth quarter last year. Fourth quarter 2017 earnings included an impact of a net tax benefit resulting from the Tax Cuts and Jobs Act of 2017. Excluding the impact of this and other non-recurring items, fourth quarter net income on an adjusted basis was $5.9 million, or $0.47 per diluted share, compared with $4.8 million, or $0.38 per diluted share a year ago.

For the year ended December 31, 2017, net income was $25.3 million, or $2.01 per diluted share, up from $17.3 million, or $1.38 per diluted share, in 2016. For the year ended December 31, 2017, adjusted net income was $18.9 million, or $1.50 per diluted share.

Commenting on the Company's results, Jeffrey A. Hilzinger, Marlin's President and CEO, said, "Marlin wrapped-up 2017 with a strong fourth quarter highlighted by record origination volume, improved portfolio performance and excellent earnings growth. Total fourth quarter sourced origination volume of $186.5 million was an all-time record for a single quarter and increased 16% from the prior quarter and 23% from the fourth quarter last year. The growth was primarily driven by strong customer demand in our Equipment Finance business. In addition, our working capital loan product, Funding Stream, continued to make a meaningful contribution with fourth quarter origination volume of $16.5 million, or nearly 9% of total sourced originations. This is up from $11.3 million, or 7%, of total sourced originations a year ago. We have now originated over $100 million of Funding Stream loans since the product was introduced in 2015, and we are very pleased with both the growing demand for this product and Funding Stream's portfolio performance, which continues to exceed our expectations. I am also pleased with the early success of our Direct origination initiative, which identifies additional financing opportunities within our existing customer base.  During the quarter, direct origination volume increased to $26.9 million, an increase of 63% over last quarter and 42% over the fourth quarter last year. Also in the quarter, we referred or sold a combined $42.5 million of leases and loans as part of Marlin's ongoing capital markets activities. As a combined result of these origination and capital markets activities, our Investment in Leases and Loans grew to a record $911.2 million, up more than 3% compared to the previous quarter and up 15% from a year ago."

Mr. Hilzinger continued, "During the quarter, we took swift action to proactively address trends that were beginning to impact the performance of our portfolio.  These efforts included a strategic pivot within our Transportation channel to focus on financing transportation equipment used by small businesses rather than equipment used by transportation companies. Fourth quarter 30+ and 60+ day delinquencies improved sequentially for the first time in six quarters due primarily to an increase in our collection resources. Excluding charge-offs from the Transportation channel, the portfolio in 2017 continued to perform in a range that was consistent with what we have seen over the past four years and, in the near term, we expect our portfolio performance to continue to be stable and remain within our targeted range."

Mr. Hilzinger concluded, "The tax reform legislation recently passed by Congress has resulted in greater economic optimism among our small business customers, which we expect will result in an increasing demand for equipment and working capital in the future. At the same time, the lower tax rate will significantly improve our earnings power and create a more rapid accumulation of capital which will broaden our strategic options, potentially including enhanced organic growth, M&A opportunities and the return of additional capital to shareholders. Moving forward, our momentum continues to build, and I am very confident in our ability to continue driving profitable growth as we look ahead to 2018 and beyond."

Results of OperationsCombined Equipment Finance, Funding Stream and referral origination volume for the fourth quarter of $186.5 million was up 23.1% from a year ago. Equipment Finance origination volume of $163.6 million in the fourth quarter was up 21.3% from $134.9 million in the fourth quarter of 2016. Funding Stream origination volume in the fourth quarter of 2017 was $16.5 million, up from $11.3 million in the same period a year ago. Referral volume totaled $6.5 million, up from $5.4 million in the fourth quarter last year.

Net interest and fee margin as a percentage of average finance receivables was 10.57% for the fourth quarter, down 16 basis points from the third quarter of 2017 and down 87 basis points from a year ago. The decrease in margin percentage was primarily a result of a decline in late fees and end-of-lease revenue based on certain updated servicing practices, growth in lower yielding Equipment Finance channels and an increase in the Company's cost of funds, partially offset by an increase of 9 basis points in new origination loan and lease yield over last year. The Company's cost of funds increased to 145 basis points compared to 139 basis points for the previous quarter and 114 basis points for the fourth quarter of 2016, primarily as a result of the rising interest rate environment.

On an absolute basis, net interest and fee income was $23.6 million for the quarter ended December 31, 2017, compared to $23.1 million for the prior quarter and $21.8 million for the fourth quarter last year. The increase continues to reflect the strong growth in the portfolio and the underlying earnings power of the business.

Other income was $5.3 million for the fourth quarter of 2017, compared to $3.6 million in the prior quarter.  The increase is mostly due to a $1.7 million increase in gains-on-sale from the Company's capital market activity and a $0.1 million increase in Insurance related income.  Other income for the fourth quarter last year was $3.0 million.  The year-over-year increase in other income is primarily due to a $1.7 million increase in gains-on-sale, $0.3 million increase in Insurance related income, $0.2 million increase in referral fee income, and a $0.1 million increase in servicing fee income.

Other expenses were $15.4 million for the fourth quarter of 2017, compared to $15.7 million in the prior quarter and $13.5 million in the fourth quarter last year. The decrease from the prior quarter was primarily due to the reversal of $0.4 million of hurricane insurance claims reserves recorded in the prior quarter. The increase from the fourth quarter last year was primarily due to an increase in expenses related to the Horizon Keystone acquisition, including intangibles amortization expense, higher salaries and benefits and higher sales commissions.  Expenses also increased due to investments in the Direct origination initiative and expenses associated with building-out Marlin's senior leadership team.

The Company's efficiency ratio for the fourth quarter was 53.3%. The fourth quarter adjusted efficiency ratio was 51.8%, compared to 57.1% on an adjusted basis for the prior quarter and 54.6% in the fourth quarter last year. Marlin expects its efficiency ratio to continue to improve as the Company leverages its fixed costs through continued portfolio growth and from continued operational efficiencies generated by its various process renewal initiatives.

Due to the Tax Cuts and Jobs Act of 2017 enacted on December 22, 2017 that reduced the federal tax rate from 35% to 21%, the Company was required to revalue its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates on these deferred amounts. During the fourth quarter, Marlin recorded a one-time net tax benefit of $10.2 million primarily related to the revaluation of these deferred tax items. As a result, Marlin recorded an income tax benefit of $6.9 million for the fourth quarter of 2017. Excluding the one-time tax benefit, Marlin recorded an income tax provision of $3.3 million, representing an effective tax rate of 37.0%, compared with $2.0 million or 38.3% for the preceding quarter and $2.9 million or 37.7% for the fourth quarter of 2016.

Portfolio PerformanceAllowance for credit losses as a percentage of total finance receivables was 1.63% at December 31, 2017 compared to 1.64% at September 30, 2017 and 1.38% at December 31, 2016, with the year-over-year increase driven by generally higher portfolio delinquency and net charge-offs. Coverage of total 60+ day delinquencies was 263.0% at December 31, 2017 versus 264.4% at December 31, 2016.

Finance receivables over 30 days delinquent were 1.02% of the Company's total finance receivables portfolio as of December 31, 2017, an improvement of 11 basis points from the prior quarter but up 22 basis points from December 31, 2016. Finance receivables over 60 days delinquent were 0.55% of the Company's total finance receivables portfolio as of December 31, 2017, an improvement of 6 basis points from the prior quarter but up 9 basis point from December 31, 2016. Annualized fourth quarter net charge-offs were 1.87% of average total finance receivables versus 1.73% in the third quarter and 1.40% a year ago. Net charge-offs for the quarter were $4.2 million, an increase of $0.4 million from the previous quarter and $1.5 million from the fourth quarter of 2016, and were largely driven by a return to a more normalized credit environment and higher than expected charge-offs in the Transportation channel.

As of December 31, 2017 and 2016, the Company's consolidated equity to assets ratio was 17.27% and 18.19%, respectively.

Corporate DevelopmentsThe Board of Directors of Marlin Business Services Corp. today declared a $0.14 per share quarterly dividend. The dividend is payable February 22, 2018, to shareholders of record on February 12, 2017. Based on the closing stock price on January 31, 2018, the annualized dividend yield on the Company's common stock is 2.36%.

Business OutlookThe Company is initiating guidance for the full year ending December 31, 2018 as follows:
  • Total sourced origination volume is expected to finish approximately 20% above 2017 levels
  • Portfolio performance is expected to level off and remain within the targeted range
  • Net interest margin, as a percentage, is expected to between 10.0% and 10.25%
  • ROE is expected to improve in 2018 as the Company continues to improve operating scale
  • EPS is expected to be between $1.95 and $2.10 per share
  • Effective tax rate is expected to be in the range of 25 to 27%

Conference Call and WebcastMarlin will host a conference call on Friday, February 2, 2018 at 9:00 a.m. ET to discuss the Company's fourth quarter and full year 2017 results. If you wish to participate, please call 877-407-0792 approximately 10 minutes in advance of the call time. The conference ID will be: "Marlin." The call will also be webcast on the Investor Relations page of the Company's website, www.marlincorp.com. An audio replay will also be available on the Investor Relations section of Marlin's website for 45 days.

About Marlin Business Services Corp.Marlin Business Services Corp. is a nationwide provider of credit products and services to small businesses with a mission of helping small businesses achieve their American dream. Our products and services are offered directly to small businesses and through financing programs with equipment manufacturers, distributors, dealers and other intermediaries. Marlin and its wholly-owned operating subsidiary, Marlin Business Bank, are publicly traded (NASDAQ:MRLN). For more information about Marlin, visit www.marlinfinance.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. All forward-looking statements (including statements regarding 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," "intend" and similar expressions are generally intended to identify forward-looking statements. Economic, business, funding, market, competitive, legal and/or regulatory factors, among others, 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 in our filings with the Securities and Exchange Commission, including the sections captioned "Risk Factors" and "Business" in the Company's Form 10-K filed with the Securities and Exchange Commission. 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.

Regulation G - Non-GAAP Financial Measures In this release 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 an after-tax charge related to a reserve for restitution in connection with certain payment processing practices in effect prior to February 2016 and charges for associated legal and consulting fees, the after-tax hurricane credit and insurance loss reserves, the after-tax executive severance (Chief Operating Officer), and the net tax benefit from the tax cut and jobs act. 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 the 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 the reserve for restitution in connection with certain payment processing practices in effect prior to February 2016, Hurricane insurance loss reserves, and executive severance. The Company believes that these non-GAAP measures are useful performance metrics for management, investors and lenders, because it 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:Taylor KampSenior Vice President & Chief Financial Officer856-505-4108

Lasse Glassen, Addo Investor Relations lglassen@addoir.com 424-238-6249
 
MARLIN BUSINESS SERVICES CORP. 
AND SUBSIDIARIES 
Condensed Consolidated Balance Sheets 
(Unaudited) 
 
          December 31,     December 31,
          2017       2016  
                 
        (Dollars in thousands, except per-share data)
                 
ASSETS          
Cash and due from banks $ 3,544     $ 4,055  
Interest-earning deposits with banks   63,602       57,702  
Total cash and cash equivalents   67,146       61,757  
Time deposits with banks   8,110       9,605  
Securities available for sale (amortized cost of $11.7 million and $6.1 million at December 31, 2017 and December 31, 2016, respectively)   11,533       5,880  
Net investment in leases and loans:          
Net investment in leases and loans, excluding allowance for credit losses   929,271       807,654  
Allowance for credit losses   (14,851 )     (10,937 )
Total net investment in leases and loans   914,420       796,717  
Intangible assets   1,128        
Goodwill   1,160        
Property and equipment, net   4,204       3,495  
Property tax receivables   6,292       5,296  
Other assets   26,167       9,408  
Total assets $ 1,040,160     $ 892,158  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Deposits $ 809,315     $ 697,357  
Other liabilities:          
Sales and property taxes payable   2,963       2,586  
Accounts payable and accrued expenses   31,492       14,809  
Net deferred income tax liability   16,741       15,117  
Total liabilities   860,511       729,869  
           
           
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; 12,449,458 and 12,572,114 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively   124       126  
Additional paid-in capital   82,588       83,505  
Stock subscription receivable   (2 )     (2 )
Accumulated other comprehensive loss   (96 )     (138 )
Retained earnings   97,035       78,798  
Total stockholders' equity   179,649       162,289  
Total liabilities and stockholders' equity $ 1,040,160     $ 892,158  
 

MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations
(Unaudited)
 
        Three Months Ended December 31,   Twelve Months Ended December 31,
        2017   2016   2017   2016
                             
        (Dollars in thousands, except per-share data)
                             
Interest income $ 22,994     $ 20,188   $ 87,455     $ 74,709
Fee income   3,809       3,796     14,864       15,543
Interest and fee income   26,803       23,984     102,319       90,252
Interest expense   3,228       2,174     11,180       7,778
Net interest and fee income   23,575       21,810     91,139       82,474
Provision for credit losses   4,516       3,534     18,394       12,414
Net interest and fee income after provision for credit losses   19,059       18,276     72,745       70,060
                       
Other income:                      
Insurance premiums written and earned   1,881       1,639     7,155       6,398
Other income   3,417       1,347     9,577       3,360
Other income   5,298       2,986     16,732       9,758
Other expense:                      
Salaries and benefits   9,806       8,083     37,569       31,912
General and administrative   5,583       5,450     28,272       19,523
Financing related costs                   85
Other expenses   15,389       13,533     65,841       51,520
Income before income taxes   8,968       7,729     23,636       28,298
Income tax (benefit) expense   (6,926 )     2,914     (1,656 )     11,019
Net income $ 15,894     $ 4,815   $ 25,292     $ 17,279
                       
Basic earnings per share $ 1.27     $ 0.38   $ 2.02     $ 1.38
Diluted earnings per share $ 1.27     $ 0.38   $ 2.01     $ 1.38
                             
Cash dividends declared per share $ 0.14     $ 0.14   $ 0.56     $ 0.56
                           

MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Net Income on an Adjusted Basis Reconciliation to GAAP Results
(Unaudited)
   
  Three Months Ended December 31,   Twelve Months Ended December 31,
    2017     2016     2017     2016
  (Dollars in thousands, except per-share data)
                       
Net income as reported $ 15,894   $ 4,815   $ 25,292   $ 17,279
                       
Deduct:                      
Charge in connection with regulatory matters           (4,816)    
Hurricane credit loss reserve             (500)      
Hurricane insurance loss reserve   110           (327)      
Executive severance   (551)           (551)      
Tax effect   168         2,369    
Charges in connection with regulatory matters & hurricane reserves, net of tax   (273)         (3,825)    
                       
Net tax benefit resulting from the Tax Cuts and Jobs Act of 2017   10,246         10,246    
                       
Net Income on an Adjusted Basis $ $5,921   $ $4,815   $ $18,871   $ $17,279
                       
                       
Diluted earnings per share as reported   $1.27     $0.38     $2.01     $1.38
                       
Diluted earnings per share on an adjusted basis   $0.47     $0.38     $1.50     $1.38
                   
                   
Return on Average Assets as reported   6.21%     2.20%     2.59%     2.08%
                       
Return on Average Assets on an adjusted basis   2.31%     2.20%     1.94%     2.08%
                   
                   
Return on Average Equity as reported   38.08%     12.06%     15.38%     11.15%
                       
Return on Average Equity on an adjusted basis   14.18%     12.06%     11.48%     11.15%
                   
                   
Efficiency Ratio as reported   53.30%     54.58%     61.04%     55.77%
                       
Efficiency Ratio on an adjusted basis   51.77%     54.58%     55.76%     55.77%
                       
   
Net Income on an Adjusted Basis is defined as net income excluding the following:  Fourth quarter charge of $0.6 million related to the departure of the Company's Chief Operating Officer. Fourth quarter partial reversal of hurricane insurance reserve in the amount of $0.1 million.  Fourth quarter net tax benefit in the amount $10.2 million resulting from the Tax Cuts and Jobs Act of 2017. A third quarter 2017 $0.9 million charge related to credit and insurance hurricane loss reserves.  A first quarter 2017 $4.2 million charge associated with recent regulatory matters and charges for associated legal and consulting fees in the amounts of $0.3 million and $0.4 million for the first quarter and second quarter 2017, respectively.  The appropriate tax effect, where appropriate, on the aforementioned items.  The efficiency ratio as reported and the efficiency ratio on an adjusted basis are not impacted by the $0.5 million hurricane credit loss reserve charge or the $10.2 million net tax benefit as the provision for credit losses and income tax expense is not included as part of the ratio numerator.
 

SUPPLEMENTAL QUARTERLY DATA  
(Dollars in thousands, except share amounts)
(Unaudited)
           
Quarter Ended: 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
           
Net Income:          
Net Income $4,815 $1,540 $4,553 $3,305 $15,894
           
Annualized Performance Measures:          
Return on Average Assets 2.20% 0.67% 1.90% 1.31% 6.21%
Return on Average Stockholders' Equity 12.06% 3.78% 11.19% 8.01% 38.08%
           
           
EPS Data:          
Net Income Allocated to Common Stock $4,663 $1,495 $4,444 $3,225 $15,532
Number of Shares - Basic 12,161,782 12,213,464 12,242,805 12,220,381 12,187,666
Basic Earnings per Share $0.38 $0.12 $0.36 $0.26 $1.27
           
Number of Shares - Diluted 12,173,010 12,223,333 12,249,530 12,257,922 12,230,858
Diluted Earnings per Share $0.38 $0.12 $0.36 $0.26 $1.27
           
Cash Dividends Declared per share $0.14 $0.14 $0.14 $0.14 $0.14
           
New Asset Production:          
Equipment Finance $134,853 $132,691 $140,656 $133,646 $163,562
Funding Stream Loans $ 11,287 $ 13,795 $ 14,804 $ 13,775 $ 16,516
Total New Originations Funded $146,140 $146,486 $155,460 $147,421 $180,078
           
Referral Volume $ 5,449 $ 22,296 $ 12,324 $ 13,024 $ 6,466
           
Total Sourced Originations $ 151,589 $ 168,782 $ 167,784 $ 160,445 $ 186,544
           
Assets sold in the period $11,554 $8,694 $12,364 $9,649 $36,037
           
Implicit Yield on Equipment Finance Originations 9.68% 9.67% 9.96% 9.99% 9.46%
Implicit Yield on Funding Stream Loan Originations 33.28% 32.95% 33.62% 33.51% 32.73%
Total Implicit Yield on New Originations Funded 11.50% 11.86% 12.21% 12.18% 11.59%
           
# of Leases / Loans Equipment Finance 7,029 7,185 7,704 7,447 8,346
Equipment Finance Approval Percentage 57% 56% 55% 56% 56%
Average Monthly Equipment Finance Sources 1,134 1,114 1,247 1,185 1,244
           
Net Interest and Fee Margin:          
Interest Income Equipment Finance $18,575 $18,611 $19,338 $19,840 $20,382
Interest Income Funding Stream Loans $1,499 $1,781 $2,039 $2,213 $2,322
           
Interest Income Yield 10.59% 10.31% 10.33% 10.37% 10.31%
Fee Income Yield 1.99 % 1.77 % 1.79 % 1.75 % 1.71 %
Interest and Fee Income Yield 12.58% 12.08% 12.12% 12.12% 12.02%
Cost of Funds 1.14 % 1.17 % 1.25 % 1.39 % 1.45 %
Net Interest and Fee Margin 11.44% 10.91% 10.87% 10.73% 10.57%
           
Average Total Finance Receivables $762,604 $796,920 $835,516 $862,718 $891,819
Average Net Investment Equipment Finance $745,075 $775,551 $810,961 $836,713 $864,665
Average Funding Stream Loans $17,529 $21,369 $24,555 $26,005 $27,154
           
End of Period Net Investment Equipment Finance $777,607 $806,330 $837,520 $861,102 $887,328
End of Period Funding Stream Loans $ 19,110 $ 22,510 $ 25,183 $ 25,328 $ 27,092
Total Owned Net Investment in Leases and Loans $796,717 $828,840 $862,703 $886,430 $914,420
           
Total Assets Serviced for Others $ 19,203 $ 26,422 $ 36,482 $ 42,657 $ 74,359
           
Total Managed Assets $ 815,920 $ 855,262 $ 899,185 $ 929,087 $ 988,779
           
SUPPLEMENTAL QUARTERLY DATA  
(Dollars in thousands, except share amounts)
(Unaudited)
           
Quarter Ended: 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
           
Portfolio Asset Quality:          
           
Total Finance Receivables          
30+ Days Past Due Delinquencies 0.80% 0.88% 0.92% 1.13% 1.02%
30+ Days Past Due Delinquencies $7,226 $8,208 $8,978 $11,370 $10,565
           
60+ Days Past Due Delinquencies 0.46% 0.51% 0.52% 0.61% 0.55%
60+ Days Past Due Delinquencies $4,137 $4,729 $5,108 $6,157 $5,647
           
Equipment Finance          
30+ Days Past Due Delinquencies 0.82% 0.90% 0.94% 1.15% 1.04%
30+ Days Past Due Delinquencies $7,226 $8,206 $8,887 $11,260 $10,446
           
60+ Days Past Due Delinquencies 0.47% 0.52% 0.54% 0.63% 0.56%
60+ Days Past Due Delinquencies $4,137 $4,729 $5,108 $6,157 $5,647
           
Funding Stream Loans          
15+ Days Past Due Delinquencies 0.50% 0.43% 0.89% 0.77% 0.95%
15+ Days Past Due Delinquencies $98 $99 $230 $200 $264
           
30+ Days Past Due Delinquencies 0.00% 0.01% 0.35% 0.42% 0.43%
30+ Days Past Due Delinquencies $0 $2 $91 $110 $119
           
           
Net Charge-offs - Total Finance Receivables $2,670 $3,134 $3,442 $3,735 $4,169
% on Average Total Finance Receivables          
Annualized 1.40% 1.57% 1.65% 1.73% 1.87%
           
Net Charge-offs - Equipment Finance $2,521 $2,840 $3,062 $3,537 $3,944
% on Average Net Investment in Equipment Finance Annualized 1.35% 1.46% 1.51% 1.69% 1.82%
           
Net Charge-offs - Funding Stream Loans $149 $294 $380 $198 $225
% of Average Funding Stream Loans Annualized 3.40% 5.51% 6.19% 3.05% 3.31%
           
           
Total Allowance for Credit Losses $10,937 $11,687 $12,559 $14,504 $14,851
% of Total Finance Receivables 1.38% 1.42% 1.46% 1.64% 1.63%
% of 60+ Delinquencies 264.37% 247.13% 245.87% 235.57% 262.99%
           
Allowance for Credit Losses - Equipment Finance $10,177 $10,769 $11,514 $13,422 $13,815
% of Net Investment Equipment Finance 1.32% 1.34% 1.38% 1.56% 1.56%
% of 60+ Delinquencies 245.98% 227.72% 225.40% 218.00% 244.64%
           
Allowance for Credit Losses - Funding Stream Loans $760 $918 $1,045 $1,082 $1,036
% of Total Funding Stream Loans 3.86% 3.96% 4.04% 4.14% 3.73%
% of 60+ Delinquencies n/a n/a n/a n/a n/a
           
           
Non-accrual - Equipment Finance $2,176 $2,282 $2,560 $2,933 $3,065
Non-accrual - Equipment Finance 0.25% 0.25% 0.27% 0.30% 0.30%
           
Non-accrual - Funding Stream Loans $66 $53 $61 $17 $118
Non-accrual - Funding Stream Loans 0.34% 0.23% 0.24% 0.07% 0.42%
           
Non-accrual - Total Finance Receivables $2,242 $2,335 $2,621 $2,950 $3,183
Non-accrual - Total Finance Receivables 0.25% 0.25% 0.27% 0.29% 0.31%
           
Restructured - Total Finance Receivables $769 $798 $878 $2,543 $4,489
           
Net Interest and Fee Margin after Net Charge-offs 10.04% 9.34% 9.22% 9.00% 8.70%
           
SUPPLEMENTAL QUARTERLY DATA
(Dollars in thousands, except share amounts)
(Unaudited)
           
Quarter Ended: 12/31/2016   3/31/2017   6/30/2017   9/30/2017   12/31/2017
           
Expense Ratios:          
Salaries and Benefits Expense $8,083 $9,391 $9,070 $9,302 $9,806
Salaries and Benefits Expense          
Annualized % of Avg. Fin. Recbl. 4.24% 4.71% 4.34% 4.31% 4.40%
           
Total personnel end of quarter 318 330 329 331 330
           
General and Administrative Expense $5,450 $10,170 $6,110 $6,409 $5,583
General and Administrative Expense          
Annualized % of Avg. Fin. Recbl. 2.86% 5.10% 2.93% 2.97% 2.50%
           
Efficiency Ratio 54.58% 76.79% 56.69% 58.74% 53.30%
           
Balance Sheet:          
           
Assets          
Investment in Leases and Loans $793,285 $824,942 $858,671 $883,778 $911,242
Initial Direct Costs and Fees 14,369 15,585 16,591 17,156 18,029
Reserve for Credit Losses (10,937 ) (11,687 ) (12,559 ) (14,504 ) (14,851 )
Net Investment in Leases and Loans $796,717 $828,840 $862,703 $886,430 $914,420
Cash and Cash Equivalents 61,757 75,728 77,316 82,937 67,146
Restricted Cash - - - - -
Other Assets 33,684 39,924 45,063 43,650 58,594
Total Assets $892,158 $944,492 $985,082 $1,013,017 $1,040,160
           
Liabilities          
Deposits 697,357 739,793 780,838 806,954 809,315
Other Liabilities 32,512 42,054 40,061 39,768 51,196
Total Liabilities $729,869 $781,847 $820,899 $846,722 $860,511
           
Stockholders' Equity          
Common Stock $126 $126 $125 $125 $124
Paid-in Capital, net 83,503 84,066 82,825 83,391 82,586
Other Comprehensive Income (Loss) (138) (109) (106) (82) (96)
Retained Earnings 78,798 78,562 81,339 82,861 97,035
Total Stockholders' Equity $162,289 $162,645 $164,183 $166,295 $179,649
           
Total Liabilities and          
Stockholders' Equity $892,158 $944,492 $985,082 $1,013,017 $1,040,160
           
Capital and Leverage:          
Equity $162,289 $162,645 $164,183 $166,295 $179,649
Debt to Equity 4.30 4.55 4.76 4.85 4.50
Equity to Assets 18.19% 17.22% 16.67% 16.42% 17.27%
           
Regulatory Capital Ratios:          
Tier 1 Leverage Capital 18.36% 17.41% 16.81% 16.24% 17.25%
Common Equity Tier 1 Risk-based Capital 19.37% 18.37% 17.80% 17.64% 18.22%
Tier 1 Risk-based Capital 19.37% 18.37% 17.80% 17.64% 18.22%
Total Risk-based Capital 20.62% 19.63% 19.05% 18.90% 19.47%
           
Notes:          
Net investment in total finance receivables includes net investment in direct financing leases and loans.    
Equipment Finance consists of equipment leases and loans.        
Funding Stream Loans consist of small business loans.        
           

SUPPLEMENTAL QUARTERLY DATA  
(Dollars in thousands, except share amounts)
(Unaudited)
       
Year Ended: 2015 2016 2017
       
Net Income:      
Net Income $15,966 $17,279 $25,292
       
Annualized Performance Measures:      
Return on Average Assets 2.11% 2.08% 2.59%
Return on Average Stockholders' Equity 9.49% 11.15% 15.38%
       
       
EPS Data:      
Net Income Allocated to Common Stock $15,501 $16,761 $24,664
Number of Shares - Basic 12,364,873 12,141,595 12,216,020
Basic Earnings per Share $1.25 $1.38 $2.02
       
Number of Shares - Diluted 12,381,552 12,150,697 12,249,623
Diluted Earnings per Share $1.25 $1.38 $2.01
       
Cash Dividends Declared per share $2.53 $0.56 $0.56
       
New Asset Production:      
Equipment Finance $377,981 $468,505 $570,555
Funding Stream Loans $ 6,679 $ 35,777 $ 58,890
  Total New Originations Funded $384,660 $504,282 $629,445
       
Referral Volume $ 14,171 $ 17,724 $ 54,110
       
  Total Sourced Originations $ 398,831 $ 522,006 $ 683,555
       
Assets sold in the period $3,589 $18,132 $66,744
       
Implicit Yield on Equipment Finance Originations 10.69% 9.97% 9.76%
Implicit Yield on Funding Stream Loan Originations 33.65% 33.82% 33.19%
Total Implicit Yield on New Originations Funded 11.09% 11.66% 11.95%
       
# of Leases / Loans Equipment Finance 25,158 26,632 30,682
Equipment Finance Approval Percentage  63% 58% 56%
Average Monthly Equipment Finance Sources 1,093 1,116 1,198
       
Net Interest and Fee Margin:      
Interest Income Equipment Finance $65,866 $69,903 $78,171
Interest Income Funding Stream Loans $492 $4,302 $8,355
       
Interest Income Yield 10.47% 10.38% 10.33%
Fee Income Yield 2.40 % 2.16 % 1.76 %
Interest and Fee Income Yield 12.87% 12.54% 12.09%
Cost of Funds 0.89 % 1.08 % 1.32 %
Net Interest and Fee Margin 11.98% 11.46% 10.77%
       
Average Total Finance Receivables  $636,790 $720,060 $846,743
Average Net Investment Equipment Finance $635,476 $707,889 $821,972
Average Funding Stream Loans $1,314 $12,171 $24,771
       
End of Period Net Investment Equipment Finance $677,491 $777,607 $887,328
End of Period Funding Stream Loans $ 4,941 $ 19,110 $ 27,092
  Total Owned Net Investment in Leases and Loans $682,432 $796,717 $914,420
       
Total Assets Serviced for Others $ 3,195 $ 19,203 $ 74,359
       
  Total Managed Assets $ 685,627 $ 815,920 $ 988,779
       
SUPPLEMENTAL QUARTERLY DATA
(Dollars in thousands, except share amounts)
(Unaudited)
       
Year Ended: 2015 2016 2017
Portfolio Asset Quality:      
       
Total Finance Receivables      
30+ Days Past Due Delinquencies 0.73% 0.80% 1.02%
30+ Days Past Due Delinquencies $5,618 $7,226 $10,565
       
60+ Days Past Due Delinquencies 0.41% 0.46% 0.55%
60+ Days Past Due Delinquencies $3,163 $4,137 $5,647
       
Equipment Finance      
30+ Days Past Due Delinquencies 0.74% 0.82% 1.04%
30+ Days Past Due Delinquencies $5,618 $7,226 $10,446
       
60+ Days Past Due Delinquencies 0.41% 0.47% 0.56%
60+ Days Past Due Delinquencies $3,163 $4,137 $5,647
       
Funding Stream Loans      
15+ Days Past Due Delinquencies 0.00% 0.50% 0.95%
15+ Days Past Due Delinquencies $0 $98 $264
       
30+ Days Past Due Delinquencies 0.00% 0.00% 0.43%
30+ Days Past Due Delinquencies $0 $0 $119
       
       
Net Charge-offs - Total Finance Receivables $10,119 $9,890 $14,480
% on Average Total Finance Receivables      
  Annualized 1.59% 1.37% 1.71%
       
Net Charge-offs - Equipment Finance $10,119 $9,528 $13,383
% on Average Net Investment in Equipment Finance    
  Annualized 1.59% 1.35% 1.63%
       
Net Charge-offs - Funding Stream Loans $0 $362 $1,097
% of Average Funding Stream Loans       
  Annualized n/a 2.97% 4.43%
       
       
Total Allowance for Credit Losses $8,413 $10,937 $14,851
% of Total Finance Receivables 1.24% 1.38% 1.63%
% of 60+ Delinquencies 265.98% 264.37% 262.99%
       
Allowance for Credit Losses - Equipment Finance $8,239 $10,177 $13,815
% of Net Investment Equipment Finance  1.22% 1.32% 1.56%
% of 60+ Delinquencies 260.49% 245.98% 244.64%
       
Allowance for Credit Losses - Funding Stream Loans $174 $760 $1,036
% of Total Funding Stream Loans 3.49% 3.86% 3.73%
% of 60+ Delinquencies n/a n/a n/a
       
       
Non-accrual - Equipment Finance $1,677 $2,176 $3,065
Non-accrual - Equipment Finance 0.22% 0.25% 0.30%
       
Non-accrual - Funding Stream Loans $0 $66 $118
Non-accrual - Funding Stream Loans n/a 0.34% 0.42%
       
Non-accrual - Total Finance Receivables $1,677 $2,242 $3,183
Non-accrual - Total Finance Receivables 0.22% 0.25% 0.31%
       
Restructured - Total Finance Receivables $535 $769 $4,489
       
Net Interest and Fee Margin after Net Charge-offs 10.39% 10.09% 9.06%
       
SUPPLEMENTAL QUARTERLY DATA 
(Dollars in thousands, except share amounts) 
(Unaudited) 
       
Year Ended: 2015 2016 2017
Expense Ratios:      
Salaries and Benefits Expense $31,174 $31,912 $37,569
Salaries and Benefits Expense      
  Annualized % of Avg. Fin. Recbl. 4.90% 4.43% 4.44%
       
Total personnel end of quarter 314 318 330
       
General and Administrative Expense $17,451 $19,523 $28,272
General and Administrative Expense       
  Annualized % of Avg. Fin. Recbl. 2.74% 2.71% 3.34%
       
Efficiency Ratio 57.84% 55.77% 61.04%
       
Balance Sheet:      
       
Assets      
Investment in Leases and Loans $679,737 $793,285 $911,242
Initial Direct Costs and Fees 11,108 14,369 18,029
Reserve for Credit Losses (8,413 ) (10,937 ) (14,851 )
Net Investment in Leases and Loans $682,432 $796,717 $914,420
Cash and Cash Equivalents 60,129 61,757 67,146
Restricted Cash   216.00   -    - 
Other Assets 30,206 33,684 58,594
Total Assets $772,983 $892,158 $1,040,160
       
Liabilities      
Deposits   587,940   697,357   809,315
Other Liabilities 34,906 32,512 51,196
Total Liabilities $622,846 $729,869 $860,511
       
Stockholders' Equity      
Common Stock $124 $126 $124
Paid-in Capital, net 81,701 83,503 82,586
Other Comprehensive Income (Loss) (129) (138) (96)
Retained Earnings 68,441 78,798 97,035
Total Stockholders' Equity $150,137 $162,289 $179,649
       
Total Liabilities and       
Stockholders' Equity $772,983 $892,158 $1,040,160
       
Capital and Leverage:      
Equity $150,137 $162,289 $179,649
Debt to Equity 3.92 4.30 4.50
Equity to Assets 19.42% 18.19% 17.27%
       
Regulatory Capital Ratios:      
Tier 1 Leverage Capital 19.63% 18.36% 17.25%
Common Equity Tier 1 Risk-based Capital 20.86% 19.37% 18.22%
Tier 1 Risk-based Capital 20.86% 19.37% 18.22%
Total Risk-based Capital 22.02% 20.62% 19.47%
       
Notes:      
Net investment in total finance receivables includes net investment in direct financing leases and loans.
Equipment Finance consists of equipment leases and loans.    
Funding Stream Loans consist of small business loans.     
       

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