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Marlin Reports Fourth Quarter 2018 Earnings and Declares a Cash Dividend of $0.14 Per Share

January 31, 2019 4:15 PM

Fourth Quarter Summary:

Full Year 2018 Summary:

MOUNT LAUREL, N.J., Jan. 31, 2019 (GLOBE NEWSWIRE) -- Marlin (NASDAQ: MRLN), a nationwide provider of capital solutions to small businesses (“Marlin” or the “Company”), today reported fourth quarter 2018 net income of $6.4 million, or $0.51 per diluted share, compared with net income of $15.9 million, or $1.27 per share a year ago. Fourth quarter net income on an adjusted basis was $6.4 million, or $0.51 per diluted share, compared with $5.9 million or $0.47 per diluted share a year ago.

For the year ended December 31, 2018, net income was $25.0 million, or $2.00 per diluted share, down from $25.3 million, or $2.01 per diluted share, in 2017. For the year ended December 31, 2018, adjusted net income increased 34.9% to $25.4 million, or $2.04 per diluted share, compared with $18.9 million, or $1.50 per diluted share, in the prior year.

Commenting on the Company’s results, Jeffrey A. Hilzinger, Marlin’s President and CEO, said, “We completed the year with a strong fourth quarter driven by solid origination volume that led to Net Investment in Leases and Loans reaching a record level and excellent year-over-year growth in adjusted net income. Fourth quarter Total Sourced Origination volume was $216.3 million compared with $186.5 million last year, resulting in a year-over-year improvement of 15.9%. This increase included strong growth from both our Equipment Finance and Working Capital Loan products as well as from our Direct origination channel. In addition, as part of Marlin’s capital markets initiatives, we referred or sold $62.6 million of leases and loans. Due to these origination and capital markets activities, our Net Investment in Leases and Loans increased 9.4% from a year ago and surpassed the $1 billion milestone for the first time in Company history, and total managed assets grew to nearly $1.2 billion, an increase of 17.8% from a year ago. At the bottom line, adjusted earnings expanded sharply on a year-over-year basis for both the fourth quarter and full-year.”

Mr. Hilzinger concluded, “While overall asset quality of our portfolio remains strong, charge-offs during the fourth quarter were elevated due primarily to fraudulent activity perpetrated by a single vendor. Charge-offs in the fourth quarter associated with fraud by this vendor totaled $1.2 million. Excluding the fraud, net charge-offs in the fourth quarter would have been 1.69% on an annualized basis which is better than the average for the prior four quarters of 1.74% and adjusted earnings per share would have been $2.11. Significant actions have been taken throughout 2018 to combat fraud risk including the implementation of new anti-fraud tools, increased vendor surveillance staff and enhancements to procedures. Overall, we expect our portfolio performance to continue to be stable and remain within our targeted range.”

Results of OperationsTotal Sourced Origination volume for the fourth quarter of $216.3 million was up 15.9% from a year ago. Direct origination volume of $40.4 million in the fourth quarter was up 27.7% from $31.6 million in the fourth quarter of 2017. Indirect origination volume in the fourth quarter of 2018 was $159.5 million, up from $148.5 million in the same period a year ago. Referral volume totaled $4.5 million, down from $6.5 million in the fourth quarter last year, largely due to the transition of leases originated by Marlin’s Horizon Keystone division to Marlin’s balance sheet over the past year.

Net interest and fee margin as a percentage of average finance receivables was 9.76% for the fourth quarter, down 18 basis points from the third quarter of 2018 and down 81 basis points from a year ago. The decrease in margin percentage was primarily a result of an increase in interest expense, partially offset by an increase of 77 basis points in new origination loan and lease yield over last year. The Company’s interest expense as a percent of average finance receivables increased to 220 basis points compared with 207 basis points for the previous quarter due exclusively to the securitization completed in the third quarter. Interest expense as a percent of average finance receivables increased from 145 basis points for the fourth quarter of 2017 due primarily to the impact on funding costs from the recent securitization and to a lesser extent an increase in deposit rates.

On an absolute basis, net interest and fee income was $23.7 million for the fourth quarter of 2018 compared with $23.6 million for the fourth quarter last year.

Non-interest income was $7.1 million for the fourth quarter of 2018, compared with $4.4 million in the prior quarter and $5.3 million in the prior year period. The year-over-year increase in non-interest income is primarily due to an increase in gains-on-sale and to a lesser extent an increase in insurance-related income. Non-interest expense was $16.4 million for the fourth quarter of 2018, compared with $15.7 million in the prior quarter and $15.4 million in the fourth quarter last year.

The Company’s efficiency ratio for the fourth quarter was 53.1% compared with 53.3% in the fourth quarter last year. The Company’s non-GAAP efficiency ratio for the fourth quarter was 53.1% compared with 51.8% in the fourth quarter last year and, excluding acquisition related sales commissions and intangible amortization, the non-GAAP efficiency ratio in 2018 was 53.2% as compared to 55.0% in 2017. 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 improvement activities.

Marlin recorded an income tax expense of $2.3 million, representing an effective tax rate of 26.0% for the fourth quarter of 2018, compared with an income tax benefit of $6.9 million, for the fourth quarter of 2017 due to the Tax Cuts and Jobs Act of 2017 enacted on December 22, 2017 which resulted in a one-time net tax benefit of $10.2 million. Excluding the one-time tax benefit, Marlin recorded an income tax provision of $3.3 million for the fourth quarter of 2017, representing an effective tax rate of 37.0%.

Portfolio PerformanceAllowance for credit losses as a percentage of total finance receivables was 1.62% at December 31, 2018 relatively consistent with 1.65% at September 30, 2018 and 1.63% at December 31, 2017.

Finance receivables over 30 days delinquent were 1.09% of the Company’s total finance receivables portfolio as of December 31, 2018, up 7 basis points from September 30, 2018 and up 7 basis points from December 31, 2017. Finance receivables over 60 days delinquent were 0.65% of the Company’s total finance receivables portfolio as of December 31, 2018, up 8 basis points from September 30, 2018 and up 10 basis points from December 31, 2017. Annualized fourth quarter net charge-offs were 2.30% of average total finance receivables versus 1.90% in the third quarter of 2018 and 1.87% a year ago.

As of December 31, 2018, the Company’s consolidated equity to assets ratio was 17.01%. This compares to 17.18% and 17.27%, in the prior quarter and year ago quarter, respectively.

Corporate DevelopmentsOn January 2, 2019 the Company announced the appointment of Michael R. Bogansky as Senior Vice President and Chief Financial Officer, effective February 1, 2019. Prior to joining Marlin, Mr. Bogansky was a Senior Vice President and Chief Financial Officer at PHH Corporation (formerly NYSE:PHH), as PHH was recently acquired by Ocwen Financial Corporation. Prior to that, he was Senior Vice President, Corporate Controller & Principal Accounting Officer of PHH.

Marlin’s Board of Directors today declared a $0.14 per share quarterly dividend. The dividend is payable February 21, 2019, to shareholders of record on February 11, 2019. Based on the closing stock price on January 31, 2019, the annualized dividend yield on the Company’s common stock is 2.53%.

Business Outlook The Company’s guidance for the full year ending December 31, 2019 is as follows:

Conference Call and Webcast Marlin will host a conference call on Friday, February 1, 2019 at 9:00 a.m. ET to discuss the Company’s fourth quarter 2018 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.marlinfinance.com. An audio replay will also be available on the Investor Relations section of Marlin’s website for 45 days.

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. Marlin Business Services Corp. is 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, and the net tax benefit from the tax cut and jobs act, as applicable. 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 the reserve for restitution in connection with certain payment processing practices in effect prior to February 2016, hurricane insurance loss reserves, and executive severance, as applicable. 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:Ed DietzSenior Vice President & General Counsel856-505-4458

Lasse GlassenAddo Investor Relations[email protected] 424-238-6249

---Tables to Follow---

MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2018 2017
(Dollars in thousands, except per-share data)
ASSETS
Cash and due from banks$5,088 $3,544
Interest-earning deposits with banks 92,068 63,602
Total cash and cash equivalents 97,156 67,146
Time deposits with banks 9,659 8,110
Restricted interest-earning deposits (includes $10.0 and $0 million at December 31, 2018, and 14,045 —
December 31, 2017, respectively, related to consolidated VIEs)
Investment securities (amortized cost of $11.2 million and $11.7 million at 10,956 11,533
December 31, 2018 and December 31, 2017, respectively)
Net investment in leases and loans:
Net investment in leases and loans, excluding allowance for credit losses 1,016,840 929,271
(includes $150.2 million and $0 million at December 31, 2018 and December 31, 2017,
respectively, related to consolidatedVIEs)
Allowance for credit losses (16,100) (14,851)
Total net investment in leases and loans 1,000,740 914,420
Intangible assets 7,912 1,128
Goodwill 7,360 1,160
Property and equipment, net 4,317 4,204
Property tax receivables 5,245 6,292
Other assets 9,656 26,167
Total assets$1,167,046 $1,040,160
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits$755,776 $809,315
Long-term borrowings related to consolidated VIEs 150,055 —
Other liabilities:
Sales and property taxes payable 3,775 2,963
Accounts payable and accrued expenses 36,369 31,492
Net deferred income tax liability 22,560 16,741
Total liabilities 968,535 860,511
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;
12,367,724 and 12,449,458 shares issued and outstanding at December 31, 2018 and
December 31, 2017, respectively 124 124
Additional paid-in capital 83,498 82,588
Stock subscription receivable (2) (2)
Accumulated other comprehensive loss (44) (96)
Retained earnings 114,935 97,035
Total stockholders’ equity 198,511 179,649
Total liabilities and stockholders’ equity$1,167,046 $1,040,160

MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2018 2017 2018 2017
(Dollars in thousands, except per-share data)
Interest income$24,946 $22,994 $97,025 $87,455
Fee income 4,078 3,809 15,843 14,864
Interest and fee income 29,024 26,803 112,868 102,319
Interest expense 5,349 3,228 17,414 11,180
Net interest and fee income 23,675 23,575 95,454 91,139
Provision for credit losses 5,761 4,516 19,522 18,394
Net interest and fee income after provision for credit losses 17,914 19,059 75,932 72,745
Non-interest income:
Insurance premiums written and earned 2,108 1,881 8,087 7,155
Other income 5,017 3,417 13,347 9,577
Non-interest income 7,125 5,298 21,434 16,732
Non-interest expense:
Salaries and benefits 9,908 9,806 39,750 37,569
General and administrative 6,450 5,583 24,915 28,272
Non-interest expense 16,358 15,389 64,665 65,841
Income before income taxes 8,681 8,968 32,701 23,636
Income tax expense 2,259 (6,926) 7,721 (1,656)
Net income$6,422 $15,894 $24,980 $25,292
Basic earnings per share$0.52 $1.27 $2.01 $2.02
Diluted earnings per share$0.51 $1.27 $2.00 $2.01
Cash dividends declared per share$0.14 $0.14 $0.56 $0.56

MARLIN BUSINESS SERVICES CORP.
AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Three Months Ended December 31, Twelve Months Ended December 31,
2018 2017 2018 2017
(Dollars in thousands, except per-share data) (Dollars in thousands, except per-share data)
(Unaudited) (Unaudited)
Net income as reported$6,422 $15,894 $24,980 $25,292
Deduct:
Executive separation - (551) (631) (551)
Charge in connection with regulatory matters - - - (4,816)
Hurricane credit loss reserve - - - (500)
Hurricane insurance loss reserve - 110 - (327)
Tax effect - 168 162 2,369
Charges in connection with executive separation, regulatory matters, & hurricane reserves, net of tax - (273) (469) (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$6,422 $5,921 $25,449 $18,871
Diluted earnings per share as reported$0.51 $1.27 $2.00 $2.01
Diluted earnings per share on an adjusted basis$0.51 $0.47 $2.04 $1.50
Return on Average Assets as reported 2.28% 6.21% 2.29% 2.59%
Return on Average Assets on an adjusted basis 2.28% 2.31% 2.33% 1.94%
Return on Average Equity as reported 13.16% 38.08% 13.27% 15.38%
Return on Average Equity on an adjusted basis 13.16% 14.18% 13.52% 11.48%
Efficiency Ratio as reported 53.11% 53.30% 55.32% 61.04%
Efficiency Ratio on an adjusted basis 53.11% 51.77% 54.78% 55.76%

Net Income on an Adjusted Basis is defined as net income excluding the following: Third quarter 2018 charge of $0.6 million related to the departure of the Company's Chief Financial Officer. A Fourth quarter 2017 charge of $0.6 million related to the departure of the Company's Chief Operating Officer. A fourth quarter 2017 partial reversal of hurricane insurance reserve in the amount of $0.1 million. Fourth quarter 2017 net tax benefit in the amount of $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 as the provision for credit losses is not included as part of the ratio numerator.

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY DATA
(Dollars in thousands, except share amounts)
(Unaudited)
Quarter Ended:12/31/173/31/186/30/189/30/1812/31/18
Net Income:
Net Income$15,894 $6,185 $6,467 $5,906 $6,422
Annualized Performance Measures:
Return on Average Assets 6.21% 2.37% 2.41% 2.04% 2.28%
Return on Average Stockholders' Equity 38.08% 13.69% 13.93% 12.36% 13.16%
EPS Data:
Net Income Allocated to Common Stock$15,532 $6,065 $6,352 $5,808 $6,322
Number of Shares - Basic 12,187,666 12,188,906 12,199,089 12,214,913 12,202,652
Basic Earnings per Share$1.27 $0.50 $0.52 $0.48 $0.52
Number of Shares - Diluted 12,230,858 12,245,019 12,269,989 12,296,726 12,286,748
Diluted Earnings per Share$1.27 $0.50 $0.52 $0.47 $0.51
Cash Dividends Declared per share$0.14 $0.14 $0.14 $0.14 $0.14
New Asset Production:
Direct Originations$31,610 $30,869 $36,338 $35,469 $40,381
Indirect Originations$148,468 $128,833 $135,865 $137,605 $159,534
Total Originations$180,078 $159,702 $172,203 $173,074 $199,915
Equipment Finance Originations$163,562 $141,646 $155,385 $153,503 $180,116
Working Capital Loans Originations$16,516 $18,056 $16,818 $19,571 $19,799
Total Originations$180,078 $159,702 $172,203 $173,074 $199,915
Assets originated for sale in the period$0 $0 $1,801 $3,890 $11,905
Assets referred in the period$6,466 $4,201 $5,638 $2,540 $4,451
Total Sourced Originations$186,544 $163,903 $179,642 $179,504 $216,271
Assets sold in the period$36,037 $22,981 $16,890 $40,986 $58,138
Implicit Yield on Direct Originations 19.22% 19.47% 18.59% 22.39% 21.79%
Implicit Yield on Indirect Originations 9.93% 10.75% 10.54% 10.29% 9.97%
Total Implicit Yield on Total Originations 11.59% 12.44% 12.24% 12.77% 12.36%
Implicit Yield on Equipment Finance Originations 9.46% 9.99% 9.94% 9.96% 9.68%
Implicit Yield on Working Capital Loans Originations 32.73% 31.68% 33.52% 34.85% 36.67%
# of Leases / Loans Equipment Finance 8,346 7,764 8,238 7,603 7,873
Equipment Finance Approval Percentage 56% 56% 56% 57% 59%
Average Monthly Equipment Finance Sources 1,244 1,190 1,240 1,174 1,140
Net Interest and Fee Margin (NIM)
Percent of Average Total Finance Receivables:
Interest Income 10.31% 10.19% 10.24% 10.37% 10.28%
Fee Income 1.71% 1.73% 1.66% 1.64% 1.68%
Interest and Fee Income 12.02% 11.92% 11.90% 12.01% 11.96%
Interest Expense 1.45% 1.49% 1.59% 2.07% 2.20%
Net Interest and Fee Margin (NIM) 10.57% 10.43% 10.31% 9.94% 9.76%
Cost of Funds (1) 1.58% 1.63% 1.76% 2.15% 2.43%
Interest Income Equipment Finance$20,382 $20,639 $21,082 $21,489 $21,590
Interest Income Working Capital Loans$2,322 $2,321 $2,463 $2,626 $2,824
Average Total Finance Receivables$891,819 $913,804 $936,007 $957,755 $970,785
Average Net Investment Equipment Finance$864,665 $884,946 $905,583 $925,900 $937,004
Average Working Capital Loans$27,154 $28,858 $30,424 $31,855 $33,781
End of Period Net Investment Equipment Finance$887,328 $900,763 $933,261 $937,897 $965,351
End of Period Working Capital Loans$27,092 $29,864 $29,848 $32,528 $35,389
Total Owned Net Investment in Leases and Loans (2)$914,420 $930,627 $963,109 $970,425 $1,000,740
Total Assets Serviced for Others$74,359 $90,701 $98,442 $128,539 $164,029
Total Managed Assets$988,779 $1,021,328 $1,061,551 $1,098,964 $1,164,769
Average Total Managed Assets$950,327 $996,334 $1,030,579 $1,071,246 $1,117,069
Portfolio Asset Quality:
Total Finance Receivables
30+ Days Past Due Delinquencies 1.02% 1.05% 0.96% 1.02% 1.09%
30+ Days Past Due Delinquencies$10,565 $10,994 $10,438 $11,270 $12,295
60+ Days Past Due Delinquencies 0.55% 0.64% 0.55% 0.57% 0.65%
60+ Days Past Due Delinquencies$5,647 $6,735 $6,007 $6,244 $7,292
Equipment Finance
30+ Days Past Due Delinquencies 1.04% 1.07% 0.97% 1.02% 1.08%
30+ Days Past Due Delinquencies$10,446 $10,942 $10,286 $10,913 $11,803
60+ Days Past Due Delinquencies 0.56% 0.66% 0.56% 0.57% 0.65%
60+ Days Past Due Delinquencies$5,647 $6,735 $5,952 $6,137 $7,100
Working Capital Loans
15+ Days Past Due Delinquencies 0.95% 0.53% 0.59% 1.17% 1.44%
15+ Days Past Due Delinquencies$264 $162 $183 $394 $526
30+ Days Past Due Delinquencies 0.43% 0.17% 0.49% 1.06% 1.35%
30+ Days Past Due Delinquencies$119 $52 $152 $357 $492
Net Charge-offs - Total Finance Receivables$4,169 $3,843 $4,306 $4,546 $5,578
% on Average Total Finance Receivables
Annualized 1.87% 1.68% 1.84% 1.90% 2.30%
Net Charge-offs - Equipment Finance$3,944 $3,618 $3,851 $4,194 $5,132
% on Average Net Investment in Equipment Finance
Annualized 1.82% 1.64% 1.70% 1.81% 2.19%
Net Charge-offs - Working Capital Loans$225 $224 $456 $352 $446
% of Average Working Capital Loans
Annualized 3.31% 3.10% 6.00% 4.42% 5.28%
Total Allowance for Credit Losses$14,851 $15,620 $15,570 $15,917 $16,100
% of Total Finance Receivables 1.63% 1.68% 1.62% 1.65% 1.62%
% of 60+ Delinquencies 262.99% 231.92% 259.19% 254.92% 220.79%
Allowance for Credit Losses - Equipment Finance$13,815 $14,310 $14,236 $14,498 $14,633
% of Net Investment Equipment Finance 1.56% 1.60% 1.53% 1.55% 1.52%
% of 60+ Delinquencies 244.64% 212.48% 239.18% 236.24% 206.10%
Allowance for Credit Losses - Working Capital Loans$1,036 $1,310 $1,334 $1,419 $1,467
% of Total Working Capital Loans 3.73% 4.25% 4.32% 4.22% 4.02%
Non-accrual - Equipment Finance$3,065 $3,626 $3,211 $3,392 $3,720
Non-accrual - Equipment Finance 0.30% 0.36% 0.30% 0.32% 0.34%
Non-accrual - Working Capital Loans$118 $27 $147 $217 $492
Non-accrual - Working Capital Loans 0.42% 0.09% 0.48% 0.65% 1.35%
Non-accrual - Total Finance Receivables$3,183 $3,653 $3,358 $3,609 $4,212
Non-accrual - Total Finance Receivables 0.31% 0.35% 0.31% 0.33% 0.37%
Restructured - Total Finance Receivables$4,489 $4,366 $3,747 $3,456 $3,636
Expense Ratios:
Salaries and Benefits Expense$9,806 $10,023 $9,527 $10,292 $9,908
Salaries and Benefits Expense
Annualized % of Avg. Fin. Recbl. 4.40% 4.39% 4.07% 4.30% 4.08%
Total personnel end of quarter 330 326 320 339 341
General and Administrative Expense$5,583 $6,571 $6,449 $5,445 $6,450
General and Administrative Expense
Annualized % of Avg. Fin. Recbl. 2.50% 2.88% 2.76% 2.27% 2.66%
Non-Interest Expense/Average Total Managed Assets 6.48% 6.66% 6.20% 5.88% 5.86%
Adjusted Non-Interest Expense/Average Total Managed Assets (3) 6.16% 6.52% 6.06% 5.46% 5.61%
Efficiency Ratio 53.30% 57.08% 55.56% 55.69% 53.11%
Balance Sheet:
Assets
Investment in Leases and Loans$911,242 $927,752 $959,452 $966,659 $996,384
Initial Direct Costs and Fees 18,029 18,495 19,227 19,683 20,456
Reserve for Credit Losses (14,851) (15,620) (15,570) (15,917) (16,100)
Net Investment in Leases and Loans$914,420 $930,627 $963,109 $970,425 $1,000,740
Cash and Cash Equivalents 67,146 84,891 99,227 88,448 97,156
Restricted Cash - - - 10,049 14,045
Other Assets 58,594 55,707 50,975 57,811 55,105
Total Assets$1,040,160 $1,071,225 $1,113,311 $1,126,733 $1,167,046
Liabilities
Deposits 809,315 833,145 863,568 700,107 755,776
Total Debt - - - 174,519 150,055
Other Liabilities 51,196 54,153 60,101 58,564 62,704
Total Liabilities$860,511 $887,298 $923,669 $933,190 $968,535
Stockholders' Equity
Common Stock$124 $124 $124 $124 $124
Paid-in Capital, net 82,586 82,507 83,472 83,315 83,496
Other Comprehensive Income (Loss) (96) (98) (73) (149) (44)
Retained Earnings 97,035 101,394 106,119 110,253 114,935
Total Stockholders' Equity$179,649 $183,927 $189,642 $193,543 $198,511
Total Liabilities and
Stockholders' Equity$1,040,160 $1,071,225 $1,113,311 $1,126,733 $1,167,046
Capital and Leverage:
Equity$179,649 $183,927 $189,642 $193,543 $198,511
Debt to Equity 4.50 4.53 4.55 4.52 4.56
Equity to Assets 17.27% 17.17% 17.03% 17.18% 17.01%
Regulatory Capital Ratios:
Tier 1 Leverage Capital 17.25% 17.35% 17.04% 15.57% 16.38%
Common Equity Tier 1 Risk-based Capital 18.22% 18.33% 18.07% 17.46% 17.50%
Tier 1 Risk-based Capital 18.22% 18.33% 18.07% 17.46% 17.50%
Total Risk-based Capital 19.47% 19.58% 19.33% 18.72% 18.76%
Notes and Footnotes:
(1) COF is defined as interest expense for the period divided by average interest bearing liabilities, annualized
(2) Net investment in total finance receivables includes net investment in Equipment Finance leases and loans and Working Capital Loans.
(3) Adjusted non-interest expense excludes NON-GAAP non-interest expense items as defined in the reconciliation of GAAP to NON-GAAP financial measures and acquisition related sales commissions and intangible amortization.
**Equipment Finance consists of equipment leases and loans; Working Capital Loans consist of small business loans.

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES
SUPPLEMENTAL ANNUAL DATA
(Dollars in thousands, except share amounts)
(Unaudited)
Year Ended: 2016 2017 2018
Net Income:
Net Income$17,279 $25,292 $24,980
Annualized Performance Measures:
Return on Average Assets 2.08% 2.59% 2.29%
Return on Average Stockholders' Equity 11.15% 15.38% 13.27%
EPS Data:
Net Income Allocated to Common Stock$16,761 $24,664 $24,548
Number of Shares - Basic 12,141,595 12,216,020 12,201,465
Basic Earnings per Share$1.38 $2.02 $2.01
Number of Shares - Diluted 12,150,697 12,249,623 12,273,406
Diluted Earnings per Share$1.38 $2.01 $2.00
Cash Dividends Declared per share$0.56 $0.56 $0.56
New Asset Production:
Direct Originations$50,313 $91,182 $143,057
Indirect Originations$453,969 $538,263 $561,837
Total Originations$504,282 $629,445 $704,894
Equipment Finance Originations$468,505 $570,555 $630,650
Working Capital Loans Originations$35,777 $58,890 $74,244
Total Originations$504,282 $629,445 $704,894
Assets originated for sale in the period$0 $0 $17,596
Assets referred in the period$17,724 $54,110 $16,830
Total Sourced Originations$522,006 $683,555 $739,320
Assets sold in the period$18,132 $66,744 $138,995
Implicit Yield on Direct Originations 23.49% 21.58% 20.63%
Implicit Yield on Indirect Originations 10.35% 10.32% 10.37%
Total Implicit Yield on Total Originations 11.66% 11.95% 12.45%
Implicit Yield on Equipment Finance Originations 9.97% 9.76% 9.88%
Implicit Yield on Working Capital Loans Originations 33.82% 33.19% 34.26%
# of Leases / Loans Equipment Finance 26,632 30,682 31,478
Equipment Finance Approval Percentage 58% 56% 57%
Average Monthly Equipment Finance Sources 1,116 1,198 1,186
Net Interest and Fee Margin (NIM)
Percent of Average Total Finance Receivables:
Interest Income 10.38% 10.33% 10.27%
Fee Income 2.16% 1.76% 1.68%
Interest and Fee Income 12.54% 12.09% 11.95%
Interest Expense 1.08% 1.32% 1.84%
Net Interest and Fee Margin (NIM) 11.46% 10.77% 10.11%
Cost of Funds (1) 1.20% 1.43% 2.02%
Interest Income Equipment Finance$69,903 $78,171 84,800
Interest Income Working Capital Loans$4,302 $8,355 10,234
Average Total Finance Receivables$720,060 $846,743 $944,588
Average Net Investment Equipment Finance$707,889 $821,972 $913,358
Average Working Capital Loans$12,171 $24,771 $31,230
End of Period Net Investment Equipment Finance$777,607 $887,328 $965,351
End of Period Working Capital Loans$19,110 $27,092 $35,389
Total Owned Net Investment in Leases and Loans (2)$796,717 $914,420 $1,000,740
Total Assets Serviced for Others$19,203 $74,359 $164,029
Total Managed Assets$815,920 $988,779 $1,164,769
Average Total Managed Assets$731,259 $884,851 $1,053,829
Portfolio Asset Quality:
Total Finance Receivables
30+ Days Past Due Delinquencies 0.80% 1.02% 1.09%
30+ Days Past Due Delinquencies$7,226 $10,565 $12,295
60+ Days Past Due Delinquencies 0.46% 0.55% 0.65%
60+ Days Past Due Delinquencies$4,137 $5,647 $7,292
Equipment Finance
30+ Days Past Due Delinquencies 0.82% 1.04% 1.08%
30+ Days Past Due Delinquencies$7,226 $10,446 $11,803
60+ Days Past Due Delinquencies 0.47% 0.56% 0.65%
60+ Days Past Due Delinquencies$4,137 $5,647 $7,100
Working Capital Loans
15+ Days Past Due Delinquencies 0.50% 0.95% 1.44%
15+ Days Past Due Delinquencies$98 $264 $526
30+ Days Past Due Delinquencies 0.00% 0.43% 1.35%
30+ Days Past Due Delinquencies$0 $119 $492
Net Charge-offs - Total Finance Receivables$9,890 $14,480 $18,273
% on Average Total Finance Receivables
Annualized 1.37% 1.71% 1.93%
Net Charge-offs - Equipment Finance$9,528 $13,383 $16,795
% on Average Net Investment in Equipment Finance
Annualized 1.35% 1.63% 1.84%
Net Charge-offs - Working Capital Loans$362 $1,097 $1,478
% of Average Working Capital Loans
Annualized 2.97% 4.43% 4.73%
Total Allowance for Credit Losses$10,937 $14,851 $16,100
% of Total Finance Receivables 1.38% 1.63% 1.62%
% of 60+ Delinquencies 264.37% 262.99% 220.79%
Allowance for Credit Losses - Equipment Finance$10,177 $13,815 $14,633
% of Net Investment Equipment Finance 1.32% 1.56% 1.52%
% of 60+ Delinquencies 245.98% 244.64% 206.10%
Allowance for Credit Losses - Working Capital Loans$760 $1,036 $1,467
% of Total Working Capital Loans 3.86% 3.73% 4.02%
Non-accrual - Equipment Finance$2,176 $3,065 $3,720
Non-accrual - Equipment Finance 0.25% 0.30% 0.34%
Non-accrual - Working Capital Loans$66 $118 $492
Non-accrual - Working Capital Loans 0.34% 0.42% 1.35%
Non-accrual - Total Finance Receivables$2,242 $3,183 $4,212
Non-accrual - Total Finance Receivables 0.25% 0.31% 0.37%
Restructured - Total Finance Receivables$769 $4,489 $3,636
Expense Ratios:
Salaries and Benefits Expense$31,912 $37,569 $39,750
Salaries and Benefits Expense
Annualized % of Avg. Fin. Recbl. 4.43% 4.44% 4.21%
Total personnel end of quarter 318 330 341
General and Administrative Expense$19,523 $28,272 $24,915
General and Administrative Expense
Annualized % of Avg. Fin. Recbl. 2.71% 3.34% 2.64%
Non-Interest Expense/Average Total Managed Assets 7.05% 7.44% 6.14%
Adjusted Non-Interest Expense/Average Total Managed Assets (3) 7.05% 6.71% 5.90%
Efficiency Ratio 55.77% 61.04% 55.32%
Balance Sheet:
Assets
Investment in Leases and Loans$793,285 $911,242 $996,384
Initial Direct Costs and Fees 14,369 18,029 20,456
Reserve for Credit Losses (10,937) (14,851) (16,100)
Net Investment in Leases and Loans$796,717 $914,420 $1,000,740
Cash and Cash Equivalents 61,757 67,146 97,156
Restricted Cash - - 14,045
Other Assets 33,684 58,594 55,105
Total Assets$892,158 $1,040,160 $1,167,046
Liabilities
Deposits 697,357 809,315 755,776
Total Debt - - 150,055
Other Liabilities 32,512 51,196 62,704
Total Liabilities$729,869 $860,511 $968,535
Stockholders' Equity
Common Stock$126 $124 $124
Paid-in Capital, net 83,503 82,586 83,496
Other Comprehensive Income (Loss) (138) (96) (44)
Retained Earnings 78,798 97,035 114,935
Total Stockholders' Equity$162,289 $179,649 $198,511
Total Liabilities and
Stockholders' Equity$892,158 $1,040,160 $1,167,046
Capital and Leverage:
Equity$162,289 $179,649 $198,511
Debt to Equity 4.30 4.50 4.56
Equity to Assets 18.19% 17.27% 17.01%
Regulatory Capital Ratios:
Tier 1 Leverage Capital 18.36% 17.25% 16.38%
Common Equity Tier 1 Risk-based Capital 19.37% 18.22% 17.50%
Tier 1 Risk-based Capital 19.37% 18.22% 17.50%
Total Risk-based Capital 20.62% 19.47% 18.76%
Notes and Footnotes:
(1) COF is defined as interest expense for the period divided by average interest bearing liabilities, annualized
(2) Net investment in total finance receivables includes net investment in Equipment Finance leases and loans and Working Capital Loans.
(3) Adjusted non-interest expense excludes NON-GAAP non-interest expense items as defined in the reconciliation of GAAP to NON-GAAP financial measures and acquisition related sales commissions and intangible amortization.
**Equipment Finance consists of equipment leases and loans; Working Capital Loans consist of small business loans.

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Source: Marlin Business Services Corp.

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