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Marlin Reports Q1 2018 Originations Volume Rises 9%, Managed Assets Exceed $1B

May 04, 2018, 07:15 AM
Filed Under: Corporate Earnings

Marlin Business Services Corp. reported first quarter 2018 net income of $6.2 million, compared with net income of $1.5 million a year ago. First quarter net income on an adjusted basis was $6.2 million compared with $4.3 million a year ago.

“Marlin is off to a good start in 2018 as strong execution continued to drive solid origination volume, stable credit performance and excellent earnings growth,” said Jeffrey A. Hilzinger, Marlin’s President and CEO. “Excluding referral volume, total origination volume was $159.7 million for the quarter compared with $146.5 million last year, resulting in a year-over-year increase of 9 percent. Growth in the quarter was driven by solid demand for both our Equipment Finance product and Funding Stream, our working capital loan product.

“During the quarter, yield on our origination volume was 12.44 percent compared to 11.86 percent a year ago with Equipment Finance increasing to 9.99 percent from 9.67 percent and Funding Stream decreasing from 33.0 percent to 31.7 percent.”

“We also continued to gain traction in our Direct origination initiative that identifies additional financing opportunities with existing customers. During the quarter, Direct origination volume was $30.9 million compared with $16.6 million last year, resulting in a year-over-year increase of 86 percent,” he said. “As part of Marlin’s developing capital markets activities, we referred or sold $27.2 million of leases and loans. As a result of these origination and capital markets activities, our Net Investment in Leases and Loans grew to $930.6 million, up 12.3 percent from a year ago. Also, for the first time our Managed Assets exceeded $1 billion growing to $1.02 billion compared with $855.3 million a year ago, resulting in a year-over-year increase of 19.4 percent. Importantly, our focus on maintaining disciplined underwriting standards continues to be a top priority and credit quality remained stable and within expectations during the quarter.”

Hilzinger concluded, “Our momentum continues to build and puts us on track to achieve our strategic, operational and financial objectives for the year. I look forward to continued strong execution of our strategy, further enhancing our financial performance and driving shareholder value as we move forward.”

Results of Operations
Total origination volume (excluding referral volume) for the first quarter of $159.7 million was up 9.0 percent from a year ago. Direct origination volume of $30.9 million in the first quarter was up 86.3 percent from $16.6 million in the first quarter 2017. Indirect origination volume in the first quarter of 2018 was $128.8 million, down slightly from $129.9 million in the same period a year ago. Referral volume totaled $4.2 million, down from $22.3 million in the first quarter last year, largely due to the transition of leases originated by Horizon Keystone Financial to Marlin’s balance sheet over the past year.

Net interest and fee margin as a percentage of average finance receivables was 10.43 percent for the first quarter, down 14 basis points from the fourth quarter 2017 and down 48 basis points from a year ago. The decrease in margin percentage was primarily a result of a decline in interest income and an increase in interest expense. The company’s interest expense as a percent of average finance receivables increased to 149 basis points compared with 145 basis points for the previous quarter and 117 basis points for the first quarter of 2017, primarily as a result of the rising interest rate environment.

On an absolute basis, net interest and fee income was $23.8 million for the first quarter 2018 compared with $21.7 million for the first quarter last year. The increase continues to reflect the strong growth in the portfolio and the underlying earnings power of the business.

Business Outlook
The Company is maintaining guidance for the full year ending December 31, 2018, as follows:

  • Total origination volume (including referral volume) is expected to finish approximately 20 percent above 2017 levels
  • Portfolio performance is expected to remain within the targeted range
  • Net interest margin, as a percentage, is expected to between 10.0 percent and 10.25 percent
  • 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.

To read the full release, click here.


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