Marlin Business Services (NASDAQ: MRLN) reported Q4 EPS of $0.69, $0.06 better than the analyst estimate of $0.63.

Fourth Quarter Summary:

• Net income of $8.4 million, or $0.69 per diluted share, up 31.0% from $6.4 million, or $0.51 per diluted share a year ago and up from $7.4 million, or $0.60 per diluted share last quarter
• Total sourced origination volume of $236.5 million, up 9.3% year-over-year; Direct origination volume of $50.4 million, up 24.9% year-over-year
• Net Investment in Leases and Loans totaled $1.0 billion, relatively flat from a year ago, and total managed assets ended the fourth quarter at $1.3 billion, up 15.7% from a year ago
• Total origination yield of 12.43%, down 95 basis points from the prior quarter and up 7 basis points year-over-year

Commenting on the Company’s results, Jeffrey A. Hilzinger, Marlin’s President and CEO, said, “Marlin concluded 2019 with strong performance in the fourth quarter highlighted by record origination volume, disciplined expense management and excellent earnings growth. Total origination volume of $236.5 million increased 9.3% year-over-year, driven by increasing customer demand for both our equipment finance and working capital loan products, as well as solid growth in our direct origination channel. For the full year, total origination volume of $877.9 million grew 18.7% year-over-year, more than double the prior year’s growth rate. We also delivered solid earnings growth despite an increase in provisions for credit losses driven by higher delinquencies and charge-offs. We continue to closely monitor the portfolio and are making appropriate adjustments to ensure optimal risk-adjusted portfolio performance.”

Mr. Hilzinger continued, “While the origination growth we experienced demonstrates the significant demand that exists for our financing products, market conditions during the quarter created both an increasingly competitive pricing environment and a favorable capital markets environment. These market conditions allowed us to offset continued yield compression with exceptionally strong capital markets execution. I also remain extremely pleased with our ability to carefully manage expenses as evidenced by decreases in our adjusted efficiency ratio, which improved on both a sequential quarter and year-over-year basis. As a result, fourth quarter net income expanded to $8.4 million, or $0.69 per diluted share, up 31% from a year ago. For the full year net income of $27.1 million, or $2.20 per diluted share, was up 9% from a year ago. Overall, I believe that the fundamentals of our business remain strong as we enter 2020 and that Marlin is well-positioned for another year of profitable growth.”

GUIDANCE:

Marlin Business Services sees FY2020 EPS of $2.17-$2.27, versus the consensus of $2.60.

The Company expects earnings per share on an adjusted basis* for the year ending December 31, 2020 to be between $2.17 and $2.27 per share.

The Company’s earnings guidance for the full year ending December 31, 2020 reflects the adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses. ASU 2016 – 13 replaces the currently used incurred loss methodology for estimating credit losses with a forward-looking current expected credit losses (“CECL”) methodology effective on January 1, 2020. We estimate that the adoption of the CECL methodology could unfavorably impact earnings in 2020 by up to $0.25 per share.

The Company’s earnings guidance is based on the following assumptions:

• Total sourced origination volume growth in 2020 of approximately 20% from 2019 levels, with continued disproportionate growth in the working capital loan product.
• Portfolio performance does not deteriorate from year-end 2019 experience and delinquencies and net charge-offs remain at the higher end of our expected range.
• Net interest and fee margin in 2020, as a percentage of average finance receivables, of between 9.25% and 9.75%.

For earnings history and earnings-related data on Marlin Business Services (MRLN) click here.