|
2021
(888)
|
|
| ||
| March 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands, except per-share data) | ||||||||
ASSETS | ||||||||
Cash and due from banks | $ | 5,261 | $ | 4,701 | ||||
Interest-earning deposits with banks | 205,809 | 118,395 | ||||||
|
|
|
| |||||
Total cash and cash equivalents | 211,070 | 123,096 | ||||||
Time deposits with banks | 13,664 | 12,927 | ||||||
Restricted interest-earning deposits (includes $6.5 million and $6.9 million at March 31, 2020 and December 31, 2019, respectively related to consolidated VIEs) | 6,474 | 6,931 | ||||||
Investment securities (amortized cost of $10.6 million and $11.1 million at March 31, 2020 and December 31, 2019, respectively) | 10,480 | 11,076 | ||||||
Net investment in leases and loans: | ||||||||
Leases | 407,148 | 426,608 | ||||||
Loans | 614,988 | 601,607 | ||||||
|
|
|
| |||||
Net investment in leases and loans, excluding allowance for credit losses (includes $62.0 million and $76.1 million at March 31, 2020 and December 31, 2019, respectively, related to consolidated VIEs) | 1,022,136 | 1,028,215 | ||||||
Allowance for credit losses | (52,060 | ) | (21,695 | ) | ||||
|
|
|
| |||||
Total net investment in leases and loans | 970,076 | 1,006,520 | ||||||
Intangible assets | 7,261 | 7,461 | ||||||
Goodwill | — | 6,735 | ||||||
Operating leaseright-of-use assets | 8,618 | 8,863 | ||||||
Property and equipment, net | 8,138 | 7,888 | ||||||
Property tax receivables, net of allowance | 10,291 | 5,493 | ||||||
Other assets | 17,465 | 10,453 | ||||||
|
|
|
| |||||
Total assets | $ | 1,263,537 | $ | 1,207,443 | ||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Deposits | $ | 941,996 | $ | 839,132 | ||||
Long-term borrowings related to consolidated VIEs | 62,193 | 76,091 | ||||||
Operating lease liabilities | 9,487 | 9,730 | ||||||
Other liabilities: | ||||||||
Sales and property taxes payable | 7,267 | 2,678 | ||||||
Accounts payable and accrued expenses | 28,427 | 34,028 | ||||||
Net deferred income tax liability | 25,677 | 30,828 | ||||||
|
|
|
| |||||
Total liabilities | 1,075,047 | 992,487 | ||||||
|
|
|
| |||||
Commitments and contingencies | ||||||||
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; 11,884,473 and 12,113,585 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively | 119 | 121 | ||||||
Additionalpaid-in capital | 75,647 | 79,665 | ||||||
Accumulated other comprehensive income (loss) | 20 | 58 | ||||||
Retained earnings | 112,704 | 135,112 | ||||||
|
|
|
| |||||
Total stockholders’ equity | 188,490 | 214,956 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 1,263,537 | $ | 1,207,443 | ||||
|
|
|
| |||||
-3-
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands, except per-share data) | ||||||||
Interest income | $ | 26,465 | $ | 25,883 | ||||
Fee income | 2,766 | 4,042 | ||||||
|
|
|
| |||||
Interest and fee income | 29,231 | 29,925 | ||||||
Interest expense | 5,680 | 5,962 | ||||||
|
|
|
| |||||
Net interest and fee income | 23,551 | 23,963 | ||||||
Provision for credit losses | 25,150 | 5,363 | ||||||
|
|
|
| |||||
Net interest and fee income after provision for credit losses | (1,599 | ) | 18,600 | |||||
|
|
|
| |||||
Non-interest income: | ||||||||
Gain on leases and loans sold | 2,282 | 3,612 | ||||||
Insurance premiums written and earned | 2,282 | 2,132 | ||||||
Other income | 7,639 | 7,204 | ||||||
|
|
|
| |||||
Non-interest income | 12,203 | 12,948 | ||||||
|
|
|
| |||||
Non-interest expense: | ||||||||
Salaries and benefits | 9,519 | 11,451 | ||||||
General and administrative | 13,605 | 13,354 | ||||||
Goodwill impairment | 6,735 | — | ||||||
|
|
|
| |||||
Non-interest expense | 29,859 | 24,805 | ||||||
|
|
|
| |||||
(Loss) income before income taxes | (19,255 | ) | 6,743 | |||||
Income tax (benefit) expense | (7,434 | ) | 1,602 | |||||
|
|
|
| |||||
Net (loss) income | $ | (11,821 | ) | $ | 5,141 | |||
|
|
|
| |||||
Basic (loss) earnings per share | $ | (1.00 | ) | $ | 0.42 | |||
Diluted (loss) earnings per share | $ | (1.00 | ) | $ | 0.41 | |||
-4-
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands) | ||||||||
Net (loss) income | $ | (11,821 | ) | $ | 5,141 | |||
|
|
|
| |||||
Other comprehensive income (loss): | ||||||||
(Decrease) increase in fair value of debt securities available for sale | (51 | ) | 54 | |||||
Tax effect | 13 | (14 | ) | |||||
|
|
|
| |||||
Total other comprehensive (loss) income | (38 | ) | 40 | |||||
|
|
|
| |||||
Comprehensive (loss) income | $ | (11,859 | ) | $ | 5,181 | |||
|
|
|
| |||||
-5-
| Common Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
Balance, December 31, 2018 | 12,367,724 | 124 | 83,496 | (44 | ) | 114,935 | $ | 198,511 | ||||||||||||||||
Repurchase of common stock | (48,857 | ) | (1 | ) | (1,144 | ) | — | — | (1,145 | ) | ||||||||||||||
Stock issued in connection with restricted stock and RSUs, net of forfeitures | 30,209 | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation recognized | — | — | 861 | — | — | 861 | ||||||||||||||||||
Net change in unrealized gain/loss on securities available for sale, net of tax | — | — | — | 40 | — | 40 | ||||||||||||||||||
Net income | — | — | — | — | 5,141 | 5,141 | ||||||||||||||||||
Cash dividends paid ($0.14 per share) | — | — | — | — | (1,758 | ) | (1,758 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, March 31, 2019 | 12,349,076 | $ | 123 | $ | 83,213 | $ | (4 | ) | $ | 118,318 | $ | 201,650 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2019 | 12,113,585 | 121 | 79,665 | 58 | 135,112 | 214,956 | ||||||||||||||||||
Repurchase of common stock | (285,593 | ) | (3 | ) | (4,535 | ) | — | — | (4,538 | ) | ||||||||||||||
Stock issued in connection with restricted stock and RSUs, net of forfeitures | 56,481 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Stock-based compensation recognized | — | — | 518 | — | — | 518 | ||||||||||||||||||
Net change in unrealized gain/loss on securities available for sale, net of tax | — | — | — | (38 | ) | — | (38 | ) | ||||||||||||||||
Net (loss) | — | — | — | — | (11,821 | ) | (11,821 | ) | ||||||||||||||||
Impact of adoption of new accounting standards(1) | — | — | — | — | (8,877 | ) | (8,877 | ) | ||||||||||||||||
Cash dividends paid ($0.14 per share) | — | — | — | — | (1,710 | ) | (1,710 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, March 31, 2020 | 11,884,473 | $ | 119 | $ | 75,647 | $ | 20 | $ | 112,704 | $ | 188,490 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
-6-
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (11,821 | ) | $ | 5,141 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,057 | 1,209 | ||||||
Stock-based compensation | 518 | 861 | ||||||
Goodwill impairment | 6,735 | — | ||||||
Change in fair value of equity securities | (58 | ) | (43 | ) | ||||
Provision for credit losses | 25,150 | 5,363 | ||||||
Change in net deferred income tax liability | (2,107 | ) | 1,364 | |||||
Amortization of deferred initial direct costs and fees | 3,413 | 3,563 | ||||||
Loss on equipment disposed | — | 389 | ||||||
Gain on leases sold | (2,282 | ) | (3,612 | ) | ||||
Leases originated for sale | (3,693 | ) | (10,675 | ) | ||||
Proceeds from sale of leases originated for sale | 3,874 | 11,052 | ||||||
Noncash lease expense | 324 | 275 | ||||||
Effect of changes in other operating items: | ||||||||
Other assets | (12,002 | ) | (4,982 | ) | ||||
Other liabilities | 1,083 | 2,559 | ||||||
|
|
|
| |||||
Net cash provided by operating activities | 10,191 | 12,464 | ||||||
|
|
|
| |||||
Cash flows from investing activities: | ||||||||
Net change in time deposits with banks | (737 | ) | (1,580 | ) | ||||
Purchases of equipment for lease contracts and funds used to originate loans | (156,145 | ) | (197,168 | ) | ||||
Principal collections on leases and loans | 129,810 | 122,871 | ||||||
Proceeds from sale of leases originated for investment | 21,337 | 45,428 | ||||||
Security deposits collected, net of refunds | (78 | ) | (76 | ) | ||||
Proceeds from the sale of equipment | 840 | 696 | ||||||
Acquisitions of property and equipment | (796 | ) | (376 | ) | ||||
Principal payments received on securities available for sale | 594 | 372 | ||||||
|
|
|
| |||||
Net cash (used in) investing activities | (5,175 | ) | (29,833 | ) | ||||
|
|
|
| |||||
Cash flows from financing activities: | ||||||||
Net change in deposits | 102,864 | 84,391 | ||||||
Term securitization repayments | (14,008 | ) | (21,104 | ) | ||||
Business combinations earn-out consideration payments | (132 | ) | (121 | ) | ||||
Repurchases of common stock | (4,538 | ) | (1,145 | ) | ||||
Dividends paid | (1,685 | ) | (1,727 | ) | ||||
|
|
|
| |||||
Net cash provided by financing activities | 82,501 | 60,294 | ||||||
|
|
|
| |||||
Net increase in total cash, cash equivalents and restricted cash | 87,517 | 42,925 | ||||||
Total cash, cash equivalents and restricted cash, beginning of period | 130,027 | 111,201 | ||||||
|
|
|
| |||||
Total cash, cash equivalents and restricted cash, end of period | $ | 217,544 | $ | 154,126 | ||||
|
|
|
| |||||
-7-
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands) | ||||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest on deposits and borrowings | $ | 5,420 | $ | 5,204 | ||||
Net cash paid (refunds received) for income taxes | 1,797 | 1,371 | ||||||
Leases transferred into held for sale from investment | 19,235 | 42,193 | ||||||
Supplemental disclosures of non cash investing activities: | ||||||||
Business combinations assets acquired | $ | — | $ | 146 | ||||
Purchase of equipment for lease contracts and loans originated | 3,773 | 6,979 | ||||||
Reconciliation of Cash, cash equivalents and restricted cash tothe Consolidated Balance Sheets: | ||||||||
Cash and cash equivalents | $ | 211,070 | $ | 140,952 | ||||
Restricted interest-earning deposits | 6,474 | 13,174 | ||||||
|
|
|
| |||||
Cash, cash equivalents and restricted cash at end of period | $ | 217,544 | $ | 154,126 | ||||
|
|
|
| |||||
The accompanying notes are an integral part
-8-
Cash and cash equivalents
Marlin Business Services Corp. (the “Company”) is
.
Provision for income
limitations. The Company files state income tax returns in variousstates which may have different statutes of limitations.
-9-
Standards
CECL replaces the probable, incurred loss model with a measurement of expected credit losses for the contractual term of the Company’s current portfolio of loans and leases. After the adoption of CECL, an allowance, or estimate of credit losses, will be recognized immediately upon the origination of a loan or lease, and will be adjusted in each subsequent reporting period. This estimate of credit losses takes into consideration all cashflows the Company expects to receive or derive from the pools of contracts, including recoveries aftercharge-off, amounts related to initial direct cost and origination costs net of fees deferred, accrued interest receivable and certain future cashflows from residual assets. The Company had previously recognized residual income within Fee Income in its Consolidated Statements of Operations; the adoption of CECL results in such residual income being captured as a component of the activity of the allowance. The Company’s policy for charging off contracts against the allowance, andnon-accrual policy are not impacted by the adoption of CECL.
The provision for credit losses recognized in the Consolidated Statements of Operations under CECL will be primarily driven by originations, offset by the reversal of the allowance for any contracts sold, plus any amounts of realized cashflows, such as charge-offs, above or below our modeled estimates, plus adjustments for changes in estimate each subsequent reporting period.
Estimating an allowance under CECL requires the Company to develop and maintain a consistent systematic methodology to measure the estimated credit losses inherent in its current portfolio, over the entire life of the contracts. The Company assesses the appropriate collective, or pool, basis to use to aggregate its portfolio based on the existence of similar risk characteristics and determined that its measurement begins by separately considering segments of financing receivables, which is similar to how it has historically analyzed its allowance for credit losses: (i) equipment finance lease and loan; (ii) working capital loans; (iii) commercial vehicles “CVG”; and (iv) Community Reinvestment Act. However, these classes of receivables are further disaggregated into pools of loans based on risk characteristics that may include: lease or loan type, origination channel, and internal credit score (which is a measurement that combines many risk characteristics, including loan size, external credit scores, existence of a guarantee, and various characteristics of the borrower’s business).
As part of our analysis of expected credit losses, we may analyze contracts on an individual basis, or create additional pools of contracts, in situations where such loans exhibit unique risk characteristics and are no longer expected to experience similar losses to the rest of their pool.
As part of its estimate of expected credit losses, specific to each measurement date, management considers relevant qualitative and quantitative factors to assess whether the historical loss experience being referenced should be adjusted to better reflect the risk characteristics of the current portfolio and the expected future loss experience for the life of these contracts. This assessment incorporates all available information relevant to considering the collectability of its current portfolio, including considering economic and business conditions, default trends, changes in its portfolio composition, changes in its lending policies and practices, among other internal and external factors.
-10-
TheDecember 31, 2020 for a detailed discussion of our adoption of
| Balance as of December 31, 2019 | Adoption Impact | Balance as of January 1, 2020 | ||||||||||
| (Dollars in thousands) | ||||||||||||
Assets: | ||||||||||||
Net investment in leases and loans | $ | 1,028,215 | $ | — | $ | 1,028,215 | ||||||
Allowance for credit losses | (21,695 | ) | (11,908 | ) | (33,603 | ) | ||||||
|
|
|
| |||||||||
Total net investment in leases and loans | 1,006,520 | 994,612 | ||||||||||
Liabilities: | ||||||||||||
Net deferred income tax liability | 30,828 | (3,031 | ) | 27,797 | ||||||||
Stockholders’ Equity: | ||||||||||||
Retained Earnings | 135,112 | (8,877 | ) | 126,235 | ||||||||
See Note 6 –Allowancegeneral principles of ASC 740 in orderto reduce the cost and complexity of its
See Note 13 –Stockholders’ Equity, for discussion of the Company’s election to delay fortwo-years the effect of CECL on regulatory capital, followed by a three-yearphase-in for a five-year total transition.
In addition, as a result of adoption this standard, future measurements of the impairment of our investment securities will incorporate the guidance in these ASUs, including analyzing any decline in fair value between credit quality-driven factors versus other factors. There was no impact as of2021, and the adoption date todid not have a material impact on our investment securities.
| Three Months Ended March 31, | ||||||||
| (dollars in thousands) | ||||||||
| 2020 | 2019 | |||||||
Insurance premiums written and earned | $ | 2,282 | $ | 2,132 | ||||
Gain on sale of leases and loans | 2,282 | 3,612 | ||||||
Other income: | ||||||||
Property tax income | 5,504 | 5,643 | ||||||
Servicing income | 566 | 287 | ||||||
Net gain (loss) recognized on equity securities | 58 | 43 | ||||||
|
|
|
| |||||
Non-interest income within the scope of other GAAP topics | 10,692 | 11,717 | ||||||
|
|
|
| |||||
Other income: | ||||||||
Insurance policy fees | 918 | 668 | ||||||
Property tax administrative fees on leases | 234 | 268 | ||||||
ACH payment fees | 72 | 86 | ||||||
Referral fees | 94 | 155 | ||||||
Other | 193 | 54 | ||||||
|
|
|
| |||||
Non-interest income from contracts with customers | 1,511 | 1,231 | ||||||
|
|
|
| |||||
Totalnon-interest income | $ | 12,203 | $ | 12,948 | ||||
|
|
|
| |||||
| March 31, 2020 | December 31, 2019 | |||||||
| (Dollars in thousands) | ||||||||
Equity Securities | ||||||||
Mutual fund | $ | 3,692 | $ | 3,615 | ||||
Debt Securities, Available for Sale: | ||||||||
Asset-backed securities (“ABS”) | 4,135 | 4,332 | ||||||
Municipal securities | 2,653 | 3,129 | ||||||
|
|
|
| |||||
Total investment securities | $ | 10,480 | $ | 11,076 | ||||
|
|
|
| |||||
| Three months ended | ||||||||
| (Dollars in thousands) | March 31, 2020 | March 31, 2019 | ||||||
Net gains and (losses) recognized during the period on equity securities | $ | 58 | $ | 43 | ||||
Less: Net gains and (losses) recognized during the period on equity securities sold during the period | — | — | ||||||
|
|
|
| |||||
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date | $ | 58 | $ | 43 | ||||
|
|
|
| |||||
-13-
| March 31, 2020 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
ABS | $ | 4,074 | $ | 61 | $ | — | $ | 4,135 | ||||||||
Municipal securities | 2,664 | 14 | (25 | ) | 2,653 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Debt Securities, Available for Sale | $ | 6,738 | $ | 75 | $ | (25 | ) | $ | 6,788 | |||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2019 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
ABS | $ | 4,302 | $ | 33 | $ | (3 | ) | $ | 4,332 | |||||||
Municipal securities | 3,058 | 71 | — | 3,129 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Debt Securities, Available for Sale | $ | 7,360 | $ | 104 | $ | (3 | ) | $ | 7,461 | |||||||
|
|
|
|
|
|
|
| |||||||||
-14-
$
2020.
| March 31, 2020 | ||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
| Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
Municipal securities | $ | (25 | ) | $ | 1,834 | $ | — | $ | — | $ | (25 | ) | $ | 1,834 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total available for sale investment securities | $ | (25 | ) | $ | 1,834 | $ | — | $ | — | $ | (25 | ) | $ | 1,834 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| December 31, 2019 | ||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
| Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
ABS | $ | — | $ | — | $ | (3 | ) | $ | 430 | $ | (3 | ) | $ | 430 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total available for sale investment securities | $ | — | $ | — | $ | (3 | ) | $ | 430 | $ | (3 | ) | $ | 430 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
-15-
| Distribution of Maturities | ||||||||||||||||||||
| 1 Year or Less | Over 1 to 5 Years | Over 5 to 10 Years | Over 10 Years | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Amortized Cost: | ||||||||||||||||||||
ABS | $ | — | $ | 2,427 | $ | 1,647 | $ | — | $ | 4,074 | ||||||||||
Municipal securities | 15 | 34 | 756 | 1,859 | 2,664 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total available for sale investments | $ | 15 | $ | 2,461 | $ | 2,403 | $ | 1,859 | $ | 6,738 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Estimated fair value | $ | 15 | $ | 2,501 | $ | 2,413 | $ | 1,859 | $ | 6,788 | ||||||||||
Weighted-average yield, GAAP basis | 4.75 | % | 2.02 | % | 1.81 | % | 2.58 | % | 2.42 | % | ||||||||||
-16-
| March 31, 2020 | December 31, 2019 | |||||||
| (Dollars in thousands) | ||||||||
Minimum lease payments receivable | $ | 434,841 | $ | 457,602 | ||||
Estimated residual value of equipment | 29,464 | 29,342 | ||||||
Unearned lease income, net of initial direct costs and fees deferred | (56,645 | ) | (59,746 | ) | ||||
Security deposits | (512 | ) | (590 | ) | ||||
|
|
|
| |||||
Total leases | 407,148 | 426,608 | ||||||
Commercial loans, net of origination costs and fees deferred | ||||||||
Working Capital Loans | 59,012 | 60,942 | ||||||
CRA(1) | 1,410 | 1,398 | ||||||
Equipment loans(2) | 481,000 | 464,655 | ||||||
CVG | 73,566 | 74,612 | ||||||
|
|
|
| |||||
Total commercial loans | 614,988 | 601,607 | ||||||
Net investment in leases and loans, excluding allowance | 1,022,136 | 1,028,215 | ||||||
Allowance for credit losses | (52,060 | ) | (21,695 | ) | ||||
|
|
|
| |||||
| $ | 970,076 | $ | 1,006,520 | |||||
|
|
|
| |||||
|
|
-17-
| Minimum Lease Payments Receivable(1) | Net Income Amortization (2) | |||||||
| (Dollars in thousands) | ||||||||
Period Ending December 31, | ||||||||
Remainder of 2020 | $ | 132,867 | $ | 22,664 | ||||
2021 | 137,907 | 18,737 | ||||||
2022 | 90,158 | 9,728 | ||||||
2023 | 49,519 | 4,107 | ||||||
2024 | 20,660 | 1,140 | ||||||
Thereafter | 3,730 | 269 | ||||||
|
|
|
| |||||
| $ | 434,841 | $ | 56,645 | |||||
|
|
|
| |||||
|
|
2021:
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands) | ||||||||
Sales of leases and loans | $ | 22,929 | $ | 52,867 | ||||
Gain on sale of leases and loans | 2,282 | 3,612 | ||||||
-18-
For 2019 and prior, we maintained an allowance for credit losses at an amount sufficient to absorb losses inherent in our existing lease and loan portfolios as of the reporting dates based on our estimate of probable incurred net credit losses in accordance with the Contingencies Topic of the FASB ASC.
| Three Months Ended March 31, 2020 | ||||||||||||||||||||
| Commercial Leases and Loans | ||||||||||||||||||||
(Dollars in thousands) | Equipment Finance | Working Capital Loans | CVG | CRA | Total | |||||||||||||||
Allowance for credit losses, December 31, 2019 | $ | 18,334 | $ | 1,899 | $ | 1,462 | $ | — | $ | 21,695 | ||||||||||
Adoption of ASU2016-13 (CECL)(1) | 9,264 | (3 | ) | 2,647 | — | 11,908 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for credit losses, January 1, 2020 | $ | 27,598 | $ | 1,896 | $ | 4,109 | $ | — | $ | 33,603 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Charge-offs | (6,490 | ) | (1,279 | ) | (729 | ) | — | (8,498 | ) | |||||||||||
Recoveries | 525 | 38 | 89 | — | 652 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net chargeoffs | (5,965 | ) | (1,241 | ) | (640 | ) | — | (7,846 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Realized cashflows from Residual Income | 1,153 | — | — | — | 1,153 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Provision for credit losses | 14,988 | 6,545 | 3,617 | — | 25,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for credit losses, end of period | $ | 37,774 | $ | 7,200 | $ | 7,086 | $ | — | $ | 52,060 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment in leases and loans, before allowance | $ | 877,199 | $ | 59,012 | $ | 84,515 | $ | 1,410 | $ | 1,022,136 | ||||||||||
-19-
| Three Months Ended March 31, 2019 | ||||||||||||||||||||
| Commercial Leases and Loans | ||||||||||||||||||||
(Dollars in thousands) | Equipment Finance | Working Capital Loans | CVG | CRA | Total | |||||||||||||||
Allowance for credit losses, beginning of period | $ | 13,531 | $ | 1,467 | $ | 1,102 | $ | — | $ | 16,100 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Charge-offs | (4,333 | ) | (673 | ) | (328 | ) | — | (5,334 | ) | |||||||||||
Recoveries | 734 | 19 | — | — | 753 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net charge-offs | (3,599 | ) | (654 | ) | (328 | ) | — | (4,581 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Provision for credit losses | 4,043 | 871 | 449 | — | 5,363 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for credit losses, end of period | $ | 13,975 | $ | 1,684 | $ | 1,223 | $ | — | $ | 16,882 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment in leases and loans, before allowance | $ | 915,556 | $ | 43,210 | $ | 79,830 | $ | 1,476 | $ | 1,040,072 | ||||||||||
|
:
Starting with the January 1, 2020 adoption of CECL, the Company recognizes an allowance, or estimate of credit losses, immediately upon the origination of a loan or lease, and that estimate will be reassessed in each subsequent reporting period. This estimate of credit losses takes into consideration all cashflows the Company expects to receive or derive from the pools of contracts, including recoveries aftercharge-off, amounts related to initial direct cost and origination costs net of fees deferred, accrued interest receivable and certain future cashflows from residual assets.
As part of its estimate of expected credit losses, specific to each measurement date, management considers relevant qualitative and quantitative factors to assess whether the historical loss experience being referenced should be adjusted to better reflect the risk characteristics of the current portfolio and the expected future loss experience for the life of these contracts. This assessment incorporates all available information relevant to considering the collectability of its current portfolio, including considering economic and business conditions, default trends, changes in its portfolio composition, changes in its lending policies and practices, among other internal and external factors.
Current Measurement
-20-
Equipment Finance:
The Company qualitatively assessed the output of the Equipment Finance calculated allowance after adjusting the forecast period, and determined the resulting credit loss estimate to properly reflect its estimate of expected net cashflows of this portfolio segment over the remaining contract term.
$
-21-
March 31, 2021.
related risks.
Loans:
Subsequent toquarter-end, through April 24, 2020, the Company has approved the payment deferral modification application for contracts representing an additional $134.5 million net investment2021.
Troubled debt restructuringsMarch
As parthad $
-22-
as TDRs.
-23-
| Portfolio by Origination Year as of March 31, 2020 | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total Receivables | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
Equipment Finance | ||||||||||||||||||||||||||||
30-59 | $ | 179 | $ | 2,952 | $ | 1,803 | $ | 1,368 | $ | 512 | $ | 167 | $ | 6,981 | ||||||||||||||
60-89 | — | 1,428 | 1,304 | 767 | 319 | 73 | 3,891 | |||||||||||||||||||||
90+ | — | 2,157 | 1,629 | 1,046 | 387 | 138 | 5,357 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | 179 | 6,537 | 4,736 | 3,181 | 1,218 | 378 | 16,229 | |||||||||||||||||||||
Current(1) | 110,762 | 372,522 | 207,521 | 114,189 | 44,511 | 11,465 | 860,970 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 110,941 | 379,059 | 212,257 | 117,370 | 45,729 | 11,843 | 877,199 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Working Capital | ||||||||||||||||||||||||||||
30-59 | — | 609 | — | — | — | — | 609 | |||||||||||||||||||||
60-89 | — | 16 | — | — | — | — | 16 | |||||||||||||||||||||
90+ | — | 23 | 26 | — | — | — | 49 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | — | 648 | 26 | — | — | — | 674 | |||||||||||||||||||||
Current(1) | 21,388 | 35,947 | 965 | 38 | — | — | 58,338 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 21,388 | 36,595 | 991 | 38 | — | — | 59,012 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
CVG | ||||||||||||||||||||||||||||
30-59 | — | 126 | 178 | 106 | 30 | — | 440 | |||||||||||||||||||||
60-89 | — | 182 | 84 | 49 | — | — | 315 | |||||||||||||||||||||
90+ | — | 276 | 75 | 211 | 31 | — | 593 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | — | 584 | 337 | 366 | 61 | — | 1,348 | |||||||||||||||||||||
Current(1) | 8,755 | 39,679 | 19,750 | 11,054 | 3,833 | 96 | 83,167 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 8,755 | 40,263 | 20,087 | 11,420 | 3,894 | 96 | 84,515 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
CRA | ||||||||||||||||||||||||||||
Total Past Due | — | — | — | — | — | — | — | |||||||||||||||||||||
Current | 1,410 | — | — | — | — | — | 1,410 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 1,410 | — | — | — | — | — | 1,410 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment in leases and loans, before allowance | $ | 142,494 | $ | 455,917 | $ | 233,335 | $ | 128,828 | $ | 49,623 | $ | 11,939 | $ | 1,022,136 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
-24-
| Portfolio by Origination Year as of December 31, 2019 | ||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | Prior | Total Receivables | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
Equipment Finance | ||||||||||||||||||||||||||||
30-59 | $ | 1,420 | $ | 1,755 | $ | 935 | $ | 454 | $ | 169 | $ | 17 | $ | 4,750 | ||||||||||||||
60-89 | 1,023 | 1,055 | 685 | 366 | 80 | 4 | 3,213 | |||||||||||||||||||||
90+ | 947 | 1,522 | 1,090 | 527 | 163 | 7 | 4,256 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | 3,390 | 4,332 | 2,710 | 1,347 | 412 | 28 | 12,219 | |||||||||||||||||||||
Current | 424,559 | 236,068 | 135,419 | 55,119 | 16,461 | 1,407 | 869,033 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 427,949 | 240,400 | 138,129 | 56,466 | 16,873 | 1,435 | 881,252 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Working Capital | ||||||||||||||||||||||||||||
30-59 | 566 | 18 | — | — | — | — | 584 | |||||||||||||||||||||
60-89 | 16 | 52 | — | — | — | — | 68 | |||||||||||||||||||||
90+ | 203 | — | — | — | — | — | 203 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | 785 | 70 | — | — | — | — | 855 | |||||||||||||||||||||
Current | 57,706 | 2,343 | 38 | — | — | — | 60,087 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 58,491 | 2,413 | 38 | — | — | — | 60,942 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
CVG | ||||||||||||||||||||||||||||
30-59 | 50 | 126 | 90 | 99 | — | — | 365 | |||||||||||||||||||||
60-89 | 5 | 15 | 188 | 46 | — | — | 254 | |||||||||||||||||||||
90+ | — | 178 | 158 | 53 | — | — | 389 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Past Due | 55 | 319 | 436 | 198 | — | — | 1,008 | |||||||||||||||||||||
Current | 42,536 | 22,531 | 13,442 | 4,976 | 130 | — | 83,615 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 42,591 | 22,850 | 13,878 | 5,174 | 130 | — | 84,623 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
CRA | ||||||||||||||||||||||||||||
Total Past Due | — | — | — | — | — | — | — | |||||||||||||||||||||
Current | 1,398 | — | — | — | — | — | 1,398 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 1,398 | — | — | — | — | — | 1,398 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment in leases and loans, before allowance | $ | 530,429 | $ | 265,663 | $ | 152,045 | $ | 61,640 | $ | 17,003 | $ | 1,435 | $ | 1,028,215 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
-25-
below delinquency table and the non-accrual information for March
31, 2021 based on their status with respect to the modifiedterms.(Dollars in thousands) | March 31, 2020 | December 31, 2019 | ||||||
Equipment Finance | $ | 5,357 | $ | 4,256 | ||||
Working Capital Loans | 755 | 946 | ||||||
CVG | 593 | 389 | ||||||
|
|
|
| |||||
TotalNon-Accrual | $ | 6,705 | $ | 5,591 | ||||
|
|
|
| |||||
-26-
The Company’s goodwill balance of $6.7 million at December 31, 2019 included $1.2 million from the Company’s acquisition of Horizon Keystone Financial, an equipment company (‘HKF”), in January 2017, and $5.5 million from the September 2018 acquisition of FFR. The goodwill balance represents the excess purchase price over the Company’s fair value of the assets acquired and is not amortizable but is deductible for tax purposes. Impairment testing will be performed in the fourth quarter of each year and more frequently as warranted in accordance with the applicable accounting guidance.
The Company assigns its goodwill to a single, consolidated reporting unit, Marlin Business Services Corp.
The changes in the carrying amount of goodwill for the three- month period ended March 31, 2020 are as follows:
| (Dollars in thousands) | Total Company | |||
Balance at December 31, 2019 | $ | 6,735 | ||
Impairment of Goodwill | (6,735 | ) | ||
|
| |||
Balance at March 31, 2020 | $ | — | ||
|
| |||
The Company’s intangible assets consist of $1.3 million of definite-lived assets with a weighted-average amortization period of 8.7 years that were recognized in connection with the January 2017 acquisition of HKF, and $7.6 million of definite-lived intangible assets with a weighted-average amortization period of 10.8 years that were recognized in connection with the September 2018 acquisition of FFR. The Company has no indefinite-lived intangible assets.
(Dollars in thousands) Description | Useful Life | Gross Carrying Amount | Accumulated Amortization | Net Value | ||||||||||||
Lender relationships | 3 to 10 years | $ | 1,630 | $ | 551 | $ | 1,079 | |||||||||
Vendor relationships | 11 years | 7,290 | 1,140 | 6,150 | ||||||||||||
Corporate trade name | 7 years | 60 | 28 | 32 | ||||||||||||
|
|
|
|
|
| |||||||||||
| $ | 8,980 | $ | 1,719 | $ | 7,261 | |||||||||||
|
|
|
|
|
| |||||||||||
2021:
-27-
| (Dollars in thousands) | ||||
Remainder of 2020 | $ | 599 | ||
2021 | 798 | |||
2022 | 798 | |||
2023 | 798 | |||
2024 | 790 | |||
| March 31, 2020 | December 31, 2019 | |||||||
| (Dollars in thousands) | ||||||||
Accrued fees receivable | $ | 3,683 | $ | 3,509 | ||||
Prepaid expenses | 2,853 | 2,872 | ||||||
Income taxes receivable(1) | 6,877 | — | ||||||
Federal Reserve Bank Stock | 1,711 | 1,711 | ||||||
Other | 2,341 | 2,361 | ||||||
|
|
|
| |||||
| $ | 17,465 | $ | 10,453 | |||||
|
|
|
| |||||
|
-28-
| Scheduled Maturities | ||||
| (Dollars in thousands) | ||||
Period Ending December 31, | ||||
Remainder of 2020 | $ | 387,922 | ||
2021 | 265,743 | |||
2022 | 134,233 | |||
2023 | 66,915 | |||
2024 | 28,046 | |||
Thereafter | 6,927 | |||
|
| |||
Total | $ | 889,786 | ||
|
| |||
Short-Term
Long-term Borrowings
issuance costs
The balance of long-term borrowings consisted of the following:
| March 31, 2020 | December 31, 2019 | |||||||
| (Dollars in thousands) | ||||||||
Term securitization2018-1 | $ | 62,555 | $ | 76,563 | ||||
Unamortized debt issuance costs | (362 | ) | (472 | ) | ||||
|
|
|
| |||||
| $ | 62,193 | $ | 76,091 | |||||
|
|
|
| |||||
-29-
TheJuly 27, 2018 term note securitization is summarized below:
| Outstanding Balance as of | Notes | Final | Original | |||||||||||||||||
| March 31, 2020 | December 31, 2019 | Originally Issued | Maturity Date | Coupon Rate | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
2018 — 1 | ||||||||||||||||||||
Class A-1 | $ | — | $ | — | $ | 77,400 | July, 2019 | 2.55 | % | |||||||||||
Class A-2 | — | 8,013 | 55,700 | October, 2020 | 3.05 | |||||||||||||||
Class A-3 | 30,915 | 36,910 | 36,910 | April, 2023 | 3.36 | |||||||||||||||
Class B | 10,400 | 10,400 | 10,400 | May, 2023 | 3.54 | |||||||||||||||
Class C | 11,390 | 11,390 | 11,390 | June, 2023 | 3.70 | |||||||||||||||
Class D | 5,470 | 5,470 | 5,470 | July, 2023 | 3.99 | |||||||||||||||
Class E | 4,380 | 4,380 | 4,380 | May, 2025 | 5.02 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
Total Term Note Securitizations | $ | 62,555 | $ | 76,563 | $ | 201,650 | 3.05 | %(1)(2) | ||||||||||||
|
|
|
|
|
| |||||||||||||||
Outstanding Balance as of Notes Final Original March 31, December 31, Originally Maturity Coupon 2021 2020 Issued Date Rate (Dollars in thousands) 2018 — 1 Class A-1 $ 0 $ 0 $ 77,400 July, 2019 2.55 % Class A-2 0 0 55,700 October, 2020 3.05 Class A-3 0 0 36,910 April, 2023 3.36 Class B 2,534 9,560 10,400 May, 2023 3.54 Class C 11,390 11,390 11,390 June, 2023 3.70 Class D 5,470 5,470 5,470 July, 2023 3.99 Class E 4,380 4,380 4,380 May, 2025 5.02 Total TermNote Securitizations $ 23,774 $ 30,800 $ 201,650 3.05 % (1)(2) __________________ (1) Represents the original weighted average initial interest, |
interest expense. (2) The weighted average coupon rate of the 2018-1 term note securitizationwill approximate 3.99 % over the remaining term of the borrowing. Federal Funds Line of Credit with CorrespondentBank MBB has established a federal funds line of credit with a correspondentbank. This line allows for both selling and purchasing of federal funds. The amount that can be drawn against the line is limited to $ 25.0 million. As of March 31, 2021 and December 31, 2020, there were 0 balances outstanding on this line of credit. -27- Federal Reserve Discount Window In addition, MBB has received approval to borrow from the Federal ReserveDiscount Window based on the amount of assets MBB chooses to pledge. MBB had $ 49.7 million in unused, secured borrowing capacity at the Federal Reserve DiscountWindow,based on $ 55.2 million of net investment in leases pledged at March 31, 2021. Maturities Based on current expected cashflows of leases underlying our term notesecuritization, |
Scheduled principal and interest payments on outstanding borrowings are estimated
| Principal | Interest | |||||||
| (Dollars in thousands) | ||||||||
Period Ending December 31, | ||||||||
Remainder of 2020 | $ | 30,344 | $ | 1,342 | ||||
2021 | 23,629 | 813 | ||||||
2022 | 8,582 | 159 | ||||||
|
|
|
| |||||
| $ | 62,555 | $ | 2,314 | |||||
|
|
|
| |||||
-30-
| March 31, 2020 Fair Value Measurements Using | December 31, 2019 Fair Value Measurements Using | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
ABS | $ | — | $ | 4,135 | $ | — | $ | — | $ | 4,332 | $ | — | ||||||||||||
Municipal securities | — | 2,653 | — | — | 3,129 | — | ||||||||||||||||||
Mutual fund | 3,692 | — | — | 3,615 | — | — | ||||||||||||||||||
-31-
| March 31, 2020 | December 31, 2019 | |||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Financial Assets | ||||||||||||||||
Cash and cash equivalents | $ | 211,070 | $ | 211,070 | $ | 123,096 | $ | 123,096 | ||||||||
Time deposits with banks | 13,664 | 13,094 | 12,927 | 12,970 | ||||||||||||
Restricted interest-earning deposits with banks | 6,474 | 6,474 | 6,931 | 6,931 | ||||||||||||
Loans, net of allowance | 580,244 | 558,584 | 588,688 | 593,406 | ||||||||||||
Federal Reserve Bank Stock | 1,711 | 1,711 | 1,711 | 1,711 | ||||||||||||
Financial Liabilities | ||||||||||||||||
Deposits | $ | 941,996 | $ | 952,958 | $ | 839,132 | $ | 846,304 | ||||||||
Long-term borrowings | 62,193 | 62,841 | 76,091 | 76,781 | ||||||||||||
-32-
2020.
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Dollars in thousands, exceptper-share data) | ||||||||
Basic EPS | ||||||||
Net (loss) income | $ | (11,821 | ) | $ | 5,141 | |||
Less: net income allocated to participating securities | — | (72 | ) | |||||
|
|
|
| |||||
Net (loss) income allocated to common stock | $ | (11,821 | ) | $ | 5,069 | |||
|
|
|
| |||||
Weighted average common shares outstanding | 12,014,396 | 12,337,730 | ||||||
Less: Unvested restricted stock awards considered participating securities | (138,249 | ) | (172,084 | ) | ||||
|
|
|
| |||||
Adjusted weighted average common shares used in computing basic EPS | 11,876,147 | 12,165,646 | ||||||
|
|
|
| |||||
Basic (loss) earnings per share | $ | (1.00 | ) | $ | 0.42 | |||
|
|
|
| |||||
Diluted EPS | ||||||||
Net (loss) income allocated to common stock | $ | (11,821 | ) | $ | 5,069 | |||
|
|
|
| |||||
Adjusted weighted average common shares used in computing basic EPS | 11,876,147 | 12,165,646 | ||||||
Add: Effect of dilutive stock-based compensation awards | — | 86,470 | ||||||
|
|
|
| |||||
Adjusted weighted average common shares used in computing diluted EPS | 11,876,147 | 12,252,116 | ||||||
|
|
|
| |||||
Diluted (loss) earnings per share | $ | (1.00 | ) | $ | 0.41 | |||
|
|
|
| |||||
-33-
Agreement and Plan of Merger dated as of April 18, 2021 by and
among the Company, Madeira Holdings,LLC and Madeira MergerAs of March 31, 2021,
MBB has the capacity under 12 CFR 208.5 to pay dividends to the-34-
by a three-year transition period to phase out the aggregate amount of
capital benefit, or a five-year transition in total. The Company| Actual | Minimum Capital Requirement | Well-Capitalized Capital Requirement | ||||||||||||||||||||||
| Ratio | Amount | Ratio | Amount | Ratio | Amount | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
Tier 1 Leverage Capital | ||||||||||||||||||||||||
Marlin Business Services Corp. | 16.18 | % | $ | 194,700 | 4 | % | $ | 48,137 | 5 | % | $ | 60,171 | ||||||||||||
Marlin Business Bank | 13.27 | % | $ | 139,242 | 4 | % | $ | 41,961 | 5 | % | $ | 52,451 | ||||||||||||
Common Equity Tier 1 Risk-Based Capital | ||||||||||||||||||||||||
Marlin Business Services Corp. | 18.64 | % | $ | 194,700 | 4.5 | % | $ | 47,004 | 6.5 | % | $ | 67,894 | ||||||||||||
Marlin Business Bank | 14.86 | % | $ | 139,242 | 4.5 | % | $ | 42,163 | 6.5 | % | $ | 60,902 | ||||||||||||
Tier 1 Risk-based Capital | ||||||||||||||||||||||||
Marlin Business Services Corp. | 18.64 | % | $ | 194,700 | 6 | % | $ | 62,672 | 8 | % | $ | 83,562 | ||||||||||||
Marlin Business Bank | 14.86 | % | $ | 139,242 | 6 | % | $ | 56,217 | 8 | % | $ | 74,957 | ||||||||||||
Total Risk-based Capital | ||||||||||||||||||||||||
Marlin Business Services Corp. | 19.94 | % | $ | 208,238 | 8 | % | $ | 83,562 | 10 | % | $ | 104,453 | ||||||||||||
Marlin Business Bank | 16.16 | % | $ | 151,425 | 8 | % | $ | 74,957 | 10 | % | $ | 93,696 | ||||||||||||
2021.
-35-
-36-
Company is subject to various regulatory requirements, including
Title 12 part 208 of the Code of Federal Regulations (12 CFRAwards for Stock-Based Compensation are governed by the Company’s 2003 Equity Compensation Plan, as amended (the “2003 Plan”), the Company’s 2014 Equity Compensation Plan (approved by the Company’s shareholders on June 3, 2014) (the “2014 Plan”) and the Company’s 2019 Equity Compensation Plan (approved by the Company’s shareholders on May 30, 2019) (the “2019 Plan” and, together with the 2014 Plan and the 2003 Plan, the “Equity Compensation Plans”). Under the terms of the Equity Compensation Plans, employees, certain consultants and advisors andnon-employee members of the Company’s Board of Directors have the opportunity to receive incentive and nonqualified grants of stock options, stock appreciation rights, restricted stock and other equity-based awards as approved by the Company’s Board of Directors. These award programs are used to attract, retain and motivate employees and to encourage individuals in key management roles to retain stock. The Company has a policy of issuing new shares to satisfy awards under the Equity Compensation Plans. The aggregate number of shares under the 2019 Plan that may be issued for Grants is 826,036. There were 573,981 shares available for future grants under the 2019 Plan as of March 31, 2020.
Total stock-based compensation expense was $0.5 million and $0.9 million for the three-month periods ended March 31, 2020 and
March 31, 2019, respectively. Excess tax deficit for the three-month period ended March 31, 2020 was $0.4 million. Excess tax benefits for the three-month period ended March 31, 2019 was less than $0.1 million.
Stock Options
Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of the grant and have 7 year contractual terms. All options issued contain service conditions based on the participant’s continued service withSubsequent Events
There were no stock options granted during the three-month periods ended March 31, 2020 and March 31, 2019, respectively.
A summary of option activity for the three-month period ended March 31, 2020 follows:
Options | Number of Shares | Weighted Average Exercise Price Per Share | ||||||
Outstanding, December 31, 2019 | 135,159 | $ | 26.79 | |||||
Granted | — | — | ||||||
Exercised | — | — | ||||||
Forfeited | (3,929 | ) | 27.31 | |||||
Expired | (7,097 | ) | 26.36 | |||||
|
| |||||||
Outstanding, March 31, 2020 | 124,133 | 26.80 | ||||||
|
| |||||||
During each three-month period ended March 31, 2020 and March 31, 2019, the Company recognized compensation expense related to options of $0.1 million.
There were no stock options exercised during the three-month periods ended March 31, 2020 and March 31, 2019.
-37-
The following table summarizes information about the stock options outstanding and exercisable as of March 31, 2020.
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Life (Years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (In thousands) | Number Exercisable | Weighted Average Remaining Life (Years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (In thousands) | ||||||||||||||||||||||||
| $25.75 | 71,766 | 4.0 | $ | 25.75 | $ | — | 71,766 | 4.0 | $ | 25.75 | — | |||||||||||||||||||||
| $28.25 | 52,367 | 5.0 | $ | 28.25 | $ | — | 35,317 | 5.0 | $ | 28.25 | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 124,133 | 4.4 | $ | 26.80 | $ | — | 107,083 | 4.3 | $ | 26.57 | $ | — | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $11.17 as of March 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.
As of March 31, 2020, there was $0.1 million of unrecognized compensation cost related tonon-vested stock options not yet recognized in the Consolidated Statements of Operations scheduled to be recognized over a weighted average period of 1.0 year.
Restricted Stock Awards
The Company’s restricted stock awards provide that, during the applicable vesting periods, the outstanding
The vesting of certain restricted shares may be accelerated to a minimum of three years based on achievement of various individual performance measures. Acceleration of expense for awards based on individual performance factors occurs when the achievement of the performance criteria is determined.
Vesting was accelerated in 2019 on certain awards based on the achievement of certain performance criteria determined annually, as described below.
The Company also issues restricted stock tonon-employee independent directors. These shares generally vest in seven years from the grant date or six months following the director’s termination from Board of Directors service.
-38-
The following table summarizes the activity of thenon-vested restricted stock during the three-month period ended March 31, 2020:
Non-vested restricted stock | Shares | Weighted Average Grant-Date Fair Value | ||||||
Outstanding at December 31, 2019 | 143,935 | $ | 21.88 | |||||
Granted | — | 0.00 | ||||||
Vested | (11,973 | ) | 18.83 | |||||
Forfeited | (550 | ) | 25.88 | |||||
|
| |||||||
Outstanding at March 31, 2020 | 131,412 | 22.14 | ||||||
|
| |||||||
During the three-month period ended March 31, 2020 there were no restricted stock awards granted. During the three-month period ended March 31, 2019, the Company granted restricted stock awards with a grant date fair values totaling less than $0.1 million.
As vesting occurs, or is deemed likely to occur, compensation expense is recognized over the requisite service period and additionalpaid-in capital is increased. The Company recognized $0.1 million and $0.3 million of compensation expense related to restricted stock for the three-month periods ended March 31, 2020 and March 31, 2019, respectively.
Of the $0.1 million total compensation expense related to restricted stock for the three-month period ended March 31, 2020, no expense was related to accelerated vesting based on achievement of certain performance criteria determined annually. Of the $0.3 million total compensation expense related to restricted stock for the three-month period ended March 31, 2019, approximately $0.1 million related to accelerated vesting based on the achievement of certain performance criteria determined annually.
As of March 31, 2020, there was $1.3 million of unrecognized compensation cost related tonon-vested restricted stock compensation scheduled to be recognized over a weighted average period of 4.3 years.
The fair value of shares that vested during the three-month periods ended March 31, 2020 and March 31, 2019 was $0.2 million and $0.7 million, respectively.
Restricted Stock Units
Restricted stock units (“RSUs”) are granted with vesting conditions based on fulfillment of a service condition (generally three to four years from the grant date) and may also require achievement of certain operating performance criteria or achievement of certain market-based targets associated with the Company’s stock price. For those awards subject to achievement of certain market performance criteria, the market based target measurement period begins one year from the grant date and ends three years from the grant date. Expense for equity based awards with market and service conditions is recognized over the service period based on the grant-date fair value of the award.
-39-
The following tables summarize restricted stock unit activity for the three-month period ended March 31, 2020:
Performance-based & market-based RSUs | Number of RSUs | Weighted Average Grant-Date Fair Value | ||||||
Outstanding at December 31, 2019 | 257,476 | $ | 18.00 | |||||
Granted | 95,758 | 17.55 | ||||||
Forfeited | (5,081 | ) | 23.99 | |||||
Converted | (13,810 | ) | 25.75 | |||||
Cancelled due tonon-achievement of performance condition | (30,390 | ) | 25.65 | |||||
|
| |||||||
Outstanding at March 31, 2020 | 303,953 | 16.64 | ||||||
|
| |||||||
Service-based RSUs | ||||||||
Outstanding at December 31, 2019 | 99,951 | $ | 23.59 | |||||
Granted | 69,422 | 20.43 | ||||||
Forfeited | (4,480 | ) | 23.69 | |||||
Converted | (39,879 | ) | 24.30 | |||||
|
| |||||||
Outstanding at March 31, 2020 | 125,014 | 21.61 | ||||||
|
| |||||||
There were no RSUs with vesting conditions based solely on market conditions granted during the three-month periods ended March 31, 2020 and March 31, 2019, respectively. The weighted average grant-date fair value of RSUs with both performance and market based vesting conditions granted during the three-month periods ended March 31, 2020 and March 31, 2019 was $12.90 and 12.91 per unit, respectively. The weighted average grant date fair value of these market based RSUs was estimated using a Monte Carlo simulation valuation model with the following assumptions:
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
Grant date stock price | $ | 20.43 | $ | 21.50 | ||||
Risk-free interest rate | 1.40 | % | 2.16 | % | ||||
Expected volatility | 26.18 | % | 26.68 | % | ||||
The risk free interest rate reflected the yield on zero coupon Treasury securities with a term approximating the expected life of the RSUs. The expected volatility was based on historical volatility of the Company’s common stock. Dividend yield was assumed at zero as
-40-
DuringCompany with and into the three month periods ended March 31, 2020HPS Merger Sub, with the Company
NOTE 15 – Subsequent Events
as “De-banking”).
-41-
◾20192020 filed with “may“may affect,” “may “if”“if” and similar words and phrases that constitute “forward-looking“forward-(b)(c) ourprojected operating results; (c)(d) our ability to obtain(d)(e) our understanding of our competition; and (e)(f) industry and market trends. The Company’sactualwithout limitation:to complete the De-banking within
◾
◾
◾
◾
◾
-42-
We fund
our business primarily through the issuance of fixed and variable-rate FDIC-insureddeposits and money market demandEXECUTIVE SUMMARY
Summary
TheCOVID-19 pandemic rapidly escalated
Origination volumes for both equipment finance and working capital loans declined significantly through March, and we ended the quarter with $157.4 million origination volume, a 22.6% decline from the first quarter of 2019. Our assets sales in the first quarter of 2020 were $22.9 million, which is considerably lower than recent prior quarters, due in part to weaker overall investor demand. As we observe the impactall outstanding shares of the slowing economy on small businesses, through the end of March we tightened our underwriting standards for both our equipment finance and working capital products. We expect our origination volumes for the second quarter of 2020Company’s
We implemented a payment deferral program to assist our customers who, during this period of economic decline, are current under their existing obligations and can demonstrate that their ability to repay has been impacted by the COVID-19 crisis. The program generally provides for 90 day deferrals for equipment finance customers, and 60 days deferrals for working capital loans. Through March 31, we processed modifications representing $19.5 million net investment in leases and loans, and subsequent toquarter-end, through April 24, we have approved the modification application for contracts representing an additional $134.5 million net investment in leases and loans. A portion of these modifications are subject to the completionterms and conditions of final processingthe Merger Agreement,
converted into the merger consideration
Our estimate of credit losses is based on our assessment of the risks to our portfolio, including certain economic assumptions driven by forecasted unemployment and business bankruptcy levels, our expectations regarding the performance of our portfolio under these economic conditions, and such estimates are driven by limited information regarding the extent and timeline of impacts fromCOVID-19. All of the assumptions and expectations underlying our estimate of credit loss depend largely on future developments, and these estimates are highly uncertain. We may experience significant credit losses in future periods as we refine our estimates or realize the actual performance of our portfolio.
Our modification program, the adoption of CECL, the provision for credit losses, and the elevated risks to our portfolio are discussed further below under “—Finance Receivables and Asset Quality”.
In addition, see further discussion of the risks to our business from theCOVID-19 pandemic in “–De-banking.
Capital Update
On March 25,
-43-
bonuses. The additional capital released by the terminationlevels, originations grew sequentially during each month of the CMLA Agreement is held at MBBquarter
Rules governing our regulatory capital requirements give entities the option of delaying for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of capital benefit, or a five-year transition in total. We have elected to avail ourselves of the five-year transition option. See our current measurements of capital and further discussion of the measurements of regulatory capital during the delay and transition periods in Note 14, Stockholders’ Equity in the accompanying condensed consolidated financial statements. Atthree months ended March 31, 2020, Marlin Business Service Corp and MBB’s Tier 1 leverage ratio, common equity Tier 1 risk-based ratio, Tier 1 risk-based capital ratio and total risk-based capital ratios exceeded the requirements for well-capitalized status.
-44-
FINANCE RECEIVABLESAND ASSET QUALITY
The following table summarizes certain portfolio statistics for the periods presented:
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2019 | ||||||||||
| (Dollars in thousands) | ||||||||||||
Finance receivables: | ||||||||||||
End of period(1) | $ | 1,022,135 | $ | 1,019,311 | $ | 1,007,706 | ||||||
Average for the period(1) | $ | 1,008,823 | $ | 999,432 | $ | 1,028,617 | ||||||
Origination Volume | $ | 157,391 | $ | 208,355 | $ | 877,913 | ||||||
Assets Sold | $ | 22,929 | $ | 52,867 | $ | 310,415 | ||||||
Allowance for credit losses : | ||||||||||||
End of period | $ | 52,060 | $ | 16,882 | $ | 21,695 | ||||||
As a % of end of period receivables(1) | 5.09 | % | 1.66 | % | 2.15 | % | ||||||
Loans modified, in payment deferral: | ||||||||||||
End of period | $ | 19,518 | $ | — | $ | — | ||||||
As a % of end of period receivables(1) | 1.91 | % | — | — | ||||||||
Delinquencies, end of period:(2) | ||||||||||||
Equipment Finance and CVG: | ||||||||||||
Greater than 60 days past due, $ | $ | 10,156 | $ | 8,112 | $ | 6,518 | ||||||
Greater than 60 days past due, % | 1.05 | % | 0.86 | % | 0.67 | % | ||||||
Working Capital: | ||||||||||||
Greater than 30 days past due, $ | $ | 673 | $ | 855 | $ | 284 | ||||||
Greater than 30 days past due, % | 1.14 | % | 1.42 | % | 0.66 | % | ||||||
Other Renegotiated leases and loans, end of period(3) | $ | 3,095 | $ | 3,008 | $ | 2,668 | ||||||
Annualized net charge-offs to average total finance receivables(1) | 3.11 | % | 1.83 | % | 2.18 | % | ||||||
|
|
|
-45-
Loan Modification Program.
In response toCOVID-19, starting inmid-March 2020,2021, we instituted a payment deferral program in order to assist our small-business customers that request relief who are current under their existing obligations and can demonstrate that their ability to repay has been impacted by the COVID-19 crisis. Through March 31, 2020, we processed payment deferral modifications for 520 contracts, or $19.5 million net investment ingenerated 3,687
Subsequent
Changes in Portfolio.
three-month period ended
March 31, 2020.During
In response to the potential impacts of theCOVID-19 pandemic and the slowing economyin 2020. The provision release in the latter part of the
-46-
Portfolio Concentration.
The following table summarizeswhich the concentrations of ourreserve
Top 10 Industries, by Borrower SIC Code | Top 10 States | |||||||||||||||||
| Equipment Finance and CVG | Working Capital | Equipment Finance and CVG | Working Capital | |||||||||||||||
Medical | 12.7 | % | 8.5 | % | CA | 13.8 | % | 11.6 | % | |||||||||
Misc. Services | 12.4 | 8.0 | TX | 11.7 | 11.0 | |||||||||||||
Retail | 10.3 | 12.8 | FL | 9.8 | 9.1 | |||||||||||||
Construction | 8.5 | 13.5 | NY | 6.8 | 5.2 | |||||||||||||
Restaurants | 7.7 | 7.6 | NJ | 4.5 | 6.2 | |||||||||||||
Professional Services | 6.5 | 5.0 | PA | 3.6 | 4.6 | |||||||||||||
Manufacturing | 5.8 | 8.3 | GA | 3.4 | 4.7 | |||||||||||||
Transportation | 5.3 | 3.3 | IL | 3.3 | 3.9 | |||||||||||||
Trucking | 4.5 | 2.4 | NC | 3.1 | 2.9 | |||||||||||||
Auto Repair Shops | 3.3 | 6.6 | MA | 3.0 | 2.3 | |||||||||||||
All Other | 23.0 | 24.0 | All Other | 37.0 | 38.5 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total | 100 | % | 100 | % | Total | 100 | % | 100 | % | |||||||||
|
|
|
|
|
|
|
| |||||||||||
As a result of theCOVID-19 pandemic, we have been continually assessing the risks to our portfolio, including consideration of high-risk industries and geographic locations that are being more significantly impacted by the spread ofCOVID-19.
While we are attempting to mitigate the impact of theCOVID-19 pandemic on our portfolio, by tightening underwriting standards for areas of elevated risk and by assisting borrowers that have been negatively impacted, the extent of the impacts ofCOVID-19 on our portfolio remains uncertain.
-47-
Allowance for credit losses.
The following table provides a rollforward of our Allowance for credit loss:
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2019 | ||||||||||
| (Dollars in thousands) | ||||||||||||
Allowance for credit losses, December 31, 2019 | $ | 21,695 | ||||||||||
Adoption of ASU2016-13 (CECL) | 11,908 | |||||||||||
|
| |||||||||||
Allowance for credit losses, beginning of period | 33,603 | $ | 16,100 | $ | 16,100 | |||||||
Provision for credit losses | 25,150 | 5,363 | 28,036 | |||||||||
Net Charge-offs: | ||||||||||||
Equipment Finance | (5,959 | ) | (3,599 | ) | (18,164 | ) | ||||||
Working Capital | (1,243 | ) | (654 | ) | (2,531 | ) | ||||||
CVG | (644 | ) | (328 | ) | (1,746 | ) | ||||||
|
|
|
|
|
| |||||||
Net Charge-offs | (7,846 | ) | (4,581 | ) | (19,811 | ) | ||||||
|
|
|
|
|
| |||||||
Realized cashflows from Residual Income | 1,153 | — | — | |||||||||
|
|
|
|
|
| |||||||
Allowance for credit losses, end of period | $ | 52,060 | $ | 16,882 | $ | 21,695 | ||||||
|
|
|
|
|
| |||||||
The allowance for credit losses as a percentage of total finance
Adoptionend of ASU2016-13 / CECL.
Effective January 1, 2020, we adopted new guidance for accounting for our allowance, or ASU2016-13, Financial Instruments—Credit Losses (Topic 326): Measurementperiod receivables
The impact of adopting CECL effective January 1, 2020 included a $11.9 million increase to the allowance, an $8.9 million decrease to Retained earnings and $3.0 million impact to our Net deferred income tax liability.
See Note 2 –Summary of Significant Accounting Policies, for further discussion of the adoption of this accounting standard, and see Note 6 –Allowance for Credit Losses, for further discussion of the Company’s methodology for measuring its allowance as of the adoption date.
-48-
See –Executive Summary and Note 13 –Stockholders’ Equity, for discussion of our election to delay fortwo-years the effect of CECL on regulatory capital, followed by a three-yearphase-in, or a five-year total transition.
Provision for credit losses.
For 2020, the provision for credit losses recognized under CECL is primarily driven by origination volumes, offset by the reversal of the allowance for any contracts sold, plus adjustments for changes in estimate each subsequent reporting period. In contrast, the allowance estimate recognized under the probable, incurred model was based on the current estimate of probable net credit losses inherent in the portfolio.
For the three months ended March 31, 2020, the $25.2 million provision for credit losses recognized was $19.8 million greater than the $5.4 million provision recognized for the three months ended March 31, 2019. The provision for the first quarter of 2020 included $19.1 million of additions to the provision driven by updates to the Company’s estimate driven by changes in economic conditions related toCOVID-19. In particular, the Company’s estimate of increased losses in its Equipment Finance portfolio is driven by updates to a reasonable and supportable forecast based on the modeled correlation of changes in the loss experience of the Company’s portfolio to certain economic statistics, specifically changes in the unemployment rate and changes in the number of business bankruptcies. For the CVG and Working Capital portfolio segments, the Company’s estimate of increased losses was based on qualitative adjustments, taking into consideration alternative scenarios to determine the Company’s estimate of the probable impact of the economic shutdown.
TheCOVID-19 pandemic, and related business shutdowns, is still ongoing, and the extent of the effects of the pandemic on our portfolio depends on future developments, which are highly uncertain and are difficult to predict. The qualitative and economic adjustments to our allowance take into consideration information and our judgments as of March 31, 2020, and are based in part on an expectation for the extent and timing of impacts from COVID-19 on unemployment rates and business bankruptcies, and are based on our current expectations of the performance of our portfolio in the current environment. We may recognize credit losses in excess of our reserve, or increases to our credit loss estimate, in the future, and such increases may be significant, based on future developments.
Net Charge-offs.
(2)
Total portfoliodue, $
As discussed above, we implemented a payment deferral modification program in March 2020, to respond to our borrower’s needs related to the impacts ofCOVID-19. There can be no assurances that such efforts to modify contracts will be successful in mitigating any risk of credit loss or futurecharge-off of such contracts.
Residual Income.
Residual income includes income from lease renewals and gains and losses on the realization of residual values of leased equipment disposed at the end of term In 2019 and prior years, the Company had previously recognized residual income within Fee Income in its Consolidated Statements of Operations; the adoption of CECL results in any realized amounts of residual income being captured as a component of the activity of (i)
Our recorded allowance reflects
-49-
measurement date. Actualtheir performance of our portfolio and updates to other information involved in our assessment may drive changes in modeled assumptions, may cause management to adjust the allowance estimate through qualitative adjustments and/or may result in actual losses that vary significantly from of our current estimate.
Non-Accrual.
The following table summarizesnon-accrual leases and loans in the Company’s portfolio:
| Three Months Ended March 31, | Year Ended December 31, 2019 | |||||||||||
| 2020 | 2019 | |||||||||||
| (Dollars in thousands) | ||||||||||||
Equipment finance | $ | 5,357 | $ | 3,494 | $ | 4,256 | ||||||
Working capital | 755 | 284 | 946 | |||||||||
CVG | 593 | 199 | 389 | |||||||||
CRA | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Totalnon-accrual leases and loans | $ | 6,705 | $ | 3,977 | $ | 5,591 | ||||||
|
|
|
|
|
| |||||||
Net investments in finance receivables are generallycharged-off when they are contractually past due for 120 days or more. Income recognition is discontinued on Equipment Finance against their modified terms.
Working Capital Loans are generally placed innon-accrual status when they are 30 days past due. The loan is removed fromnon-accrual status once sufficient payments are made to bring the loan current and evidence definition
The Company has no loans 90 days or more past due that were still accruing interest for any of the periods presented above.
-50-
2020 portfolio; markets during this current economic environment; cost reduction measures; Interest-earning assets: Interest-earning deposits with banks Time Deposits Restricted interest-earning deposits with banks Securities available for sale Net investment in leases(3) Loans receivable(3) Total interest-earning assets Non-interest-earning assets: Cash and due from banks Intangible assets Goodwill Operating leaseright-of-use assets Property and equipment, net Property tax receivables Other assets(4) Totalnon-interest-earning assets Total assets Interest-bearing liabilities: Certificate of Deposits(5) Money Market Deposits(5) Long-term borrowings(5) Total interest-bearing liabilities Non-interest-bearing liabilities: Sales and property taxes payable Operating lease liabilities Accounts payable and accrued expenses Net deferred income tax liability Totalnon-interest-bearing liabilities Total liabilities Stockholders’ equity Total liabilities and stockholders’ equity Net interest income Interest rate spread(6) Net interest margin(7) Ratio of average interest-earning assets to average interest-bearing liabilities Interest income: Interest-earning deposits with banks Time Deposits Restricted interest-earning deposits with banks Securities available for sale Net investment in leases Loans receivable Total interest income Interest expense: Certificate of Deposits Money Market Deposits Long-term borrowings Total interest expense Net interest income Interest income Fee income Interest and fee income Interest expense Net interest and fee income Average total finance receivables(1) Annualized percent of average total finance receivables: Interest income Fee income Interest and fee income Interest expense Net interest and fee margin 2020. 2020. lease and loans. and lower insurancepolicy and Salary, benefits and payroll taxes Incentive compensation Commissions Total expense 80 employees. Property taxes Occupancy and depreciation Professional fees Information technology Marketing FDIC Insurance Other G&A Total 2020 as a result of our . balance in the three-monthsended March 31, 2020. 2020. in the 2020. Federal funds purchased Term note securitizations(4) Revolving line of credit 2021. 2021. 2021 2, Time Period January 1, 2020 to January 31, 2020 February 1, 2020 to February 29, 2020 March 1, 2020 to March 31, 2020 Total for the quarter ended March 31, 2020 20202021 and March 31, 2019was reportedand diluted Loss per Shareof $1.00 for the three-month period ended March 31, 2020, resulting in diluted loss per share of $1.00, compared to net income of $5.12020.and diluted EPS of $0.41 for the three-month period ended March 31, 2019. This $16.9 million decreaseincrease in Net income was primarily driven by:•($19.7 million) increase primarily driven by updates to the Company’s estimate, reflecting forecasted economic conditions fromCOVID-19 pandemic. The Company adopted CECL on January 1, 2020 which substantially changed its methodology for measuring the estimate of credit loss. See further discussion of the Provision and the change in measurement in the prior section “—Finance Receivables and Asset Quality”;($6.7 million) impairment of Goodwill, driven primarilydeclinesan improvement in economic conditions during thefair valuesize of its reporting unit;our finance receivable3.22.3 million benefit recognizeddecrease in Income tax (benefit) gains on lease and loans sold due to a decrease in assets sold resultingfrom disruptions in the remeasurement of the federal net operating losses driven by provisions of the CARES Act;capital1.93.5 million decrease in Salaries and benefits, and General and administrativeexpensesdriven primarily by lowerIncentives as a result of Company performance.the Company’sinterest-earninginterest-earning assets and interest-bearing liabilities for the three-monththree-20202021 and March 31, 2019.-51- Three Months Ended March 31, 2020 2019 (Dollars in thousands) Average
Balance(1) Interest Average
Yields/
Rates(2) Average
Balance(1) Interest Average
Yields/
Rates(2) $ 100,582 $ 327 1.30 % $ 126,798 $ 773 2.44 % 13,507 63 1.88 10,466 61 2.35 8,033 9 0.44 15,620 30 — 10,778 58 2.14 10,720 69 2.56 904,548 20,269 8.96 918,655 20,934 9.12 104,275 5,739 22.02 80,776 4,016 19.89 1,141,723 26,465 9.27 1,163,035 25,883 8.90 5,470 5,600 7,392 7,852 6,663 7,340 8,776 3,903 8,094 4,282 8,886 6,614 1,811 17,002 47,092 52,593 $ 1,188,815 $ 1,215,628 $ 814,178 $ 4,856 2.39 % 793,665 $ 4,447 2.24 % 24,322 85 1.40 23,236 142 2.44 69,751 739 4.24 140,500 1,373 3.91 908,251 5,680 2.51 957,401 5,962 2.49 5,890 5,380 9,644 5,890 27,726 27,185 29,468 22,947 72,728 61,402 980,979 1,018,803 207,836 196,825 $ 1,188,815 $ 1,215,628 $ 20,785 $ 19,921 6.76 % 6.41 % 7.28 % 6.85 % 125.71 % 121.48 % -52-(1)Average balances were calculated using average daily balances.(2)Annualized.(3)Average balances of leases and loans includenon-accrual leases and loans, and are presented net of unearned income. The average balances of leases and loans do not include the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred.(4)Includes operating leases.(5)Includes effect of transaction costs. Amortization of transaction costs is on a straight-line basis, resulting in an increased average rate whenever average portfolio balances are at reduced levels.(6)Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.(7)Net interest margin represents net interest income as an annualized percentage of average interest-earning assets. Three Months Ended March 31, 2020 Compared To
Three Months Ended March 31, 2019 Increase (Decrease) Due To: Volume(1) Rate(1) Total (Dollars in thousands) $ (137 ) $ (309 ) $ (446 ) 16 (14 ) 2 (11 ) (10 ) (21 ) — (11 ) (11 ) (319 ) (346 ) (665 ) 1,260 463 1,723 (480 ) 1,062 582 117 292 409 6 (63 ) (57 ) (741 ) 107 (634 ) (307 ) 25 (282 ) (370 ) 1,233 863 (1)Changes due to volume and rate are calculated independently for each line item presented rather than presenting vertical subtotals for the individual volume and rate columns. Changes attributable to changes in volume represent changes in average balances multiplied by the prior period’s average rates. Changes attributable to changes in rate represent changes in average rates multiplied by the prior year’s average balances. Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate.-53-20202021 and March 31, 2019. Three Months Ended March 31, 2020 2019 (Dollars in thousands) $ 26,465 $ 25,883 2,766 4,042 29,231 29,925 5,680 5,962 $ 23,551 $ 23,963 $ 1,008,823 $ 999,432 10.49 % 10.36 % 1.10 1.62 11.59 11.98 2.25 2.39 9.34 % 9.59 % (1)Total finance receivables include net investment in leases and loans. For the calculations above, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees deferred are excluded.$0.4$6.1 million, or 1.7%25.8%, to $23.6 $17.5million for the three months ended March 31, 20202021 from $24.0 $23.62019. 2020.The annualized net interest and fee margin decreased 2595 basis points to 9.34% 8.39%in20202021 from 9.59%9.34% for thecorresponding period in 2019.$26.5 $18.3million and $25.9$26.5 million for the three-month periods ended and March 31, 2019, respectively. Averagetotal finance receivables increased $9.4decreased $175.3 million, or 0.9%17.4%, to $833.5 from $999.4 million at March 31, 2019. .The increasedecrease in average total finance receivables was primarilyexceeding lease andalong with the customary loan repayments sales and charge-offs. The average yield on the portfolio increased 1310.49%8.78% from 10.36%10.49% in the prior year quarter. quarter.The weighted average implicit interest rate on new12.45%primarily driven by a decrease of 531 basis points for12.76% $2.8 million for the three-month periodsended March 31, 2021 and March 31, 2020,respectively,2020,2021 and March 31, 2019, respectively. As our origination volumes have been negatively impacted by theCOVID-19 pandemic, our portfolio of finance receivables and related incomes may decline in the second quarter of 2020. Any returns to normal levels of origination activity, and our ability to replenish or grow our portfolio, remains uncertain.Fee income was $2.8 million and $4.0 million for the three-month periods ended and March 31, 2019, respectively. Fee income included approximately $1.0 million of net residual income for the three-month period ended March 31, 2019. For 2020, after the adoption of CECL, all future cashflows from the Company’s pools of loans are included in the measurement of the allowance, including future cashflows from net residual income. Amounts of residual income are presented within the rollforward of the Allowance, as discussed further in “—Finance Receivables and Asset Quality”Fee income also included approximately $2.1 million and $2.3 million in late fee income for the three-month periods ended March 31, 2020 and March 31, 2019, 0.85%0.63% as an annualizedpercentage of2020, 2021,compared to 0.94%0.86% for the three-month period2019.-54-$0.3$2.4 million to $3.3 million for the three-monthperiod ended March 31, 2021 from $5.7 million for the three-month period ended March 31, 2020 from $6.0 million for the 2019, 2020,primarily due to a decrease in interest expense of $0.6$1.9 million on lower outstandingdeposit balancesas well as a decrease of $0.4borrowings offset by an increase of $0.3 million on higher deposit balances. debt.Interest expense, as an annualized percentage of average total finance1468 basis points to 2.25%1.57% for the three-month periodended March 31, 2020, 2021,from 2.39%2.25% for the corresponding2019. 2020.The average balance of deposits was $838.5$701.3 million and $816.9$838.5 million for the three-monththree-month periods ended March 31, 20202019, 2020,respectively.2020, 2021,average term securitization borrowings outstanding were $27.3 million at a For the three-month period ended March 31, 2019, average term securitization borrowings outstanding were $140.5 million at a weighted average coupon of 3.91%.variable-ratevariable-rate FDIC-insured 2020, 52%54% oftotal deposits, while approximately 42% 38%of total deposits6%8% were in the brokeredMMDA Product.Gain on sale of leases and loans was $2.3 million2020, compared to $3.62021as we retained all of2019. Assets sold decreased to $22.92020for the first quartergain on sale of 2020 compared to $52.9 million for the first quarter of 2019, a 57% decrease. The amount of gain recognized declined by only 35%, reflecting a stronger margin realized on sales executed in the first quarter of 2020.and earned increased $0.2declined slightly to $ 2.0 million for the three-monthperiod$2.3$ 2.3 million for the three-month period ended March 31, 2020, from $2.12020.period periodsended March 31, 2019, primarily due to an increase in the number of contracts enrolled in the insurance program as well as higher average ticket size driving higher premiums.Other income. Other income was $7.6 million and $7.2 million for the three-month periods ended March 31, 20202021 and March 31, 2019, increasedecrease in otherincome was primarily driven by a $0.3 million increase inlower servicing income, driven by a higher portfolio serviced for others.expense. The following table summarizes the Company’s Salary and benefits expense: Three Months Ended March 31, 2020 2019 (Dollars in thousands) $ 7,555 $ 7,352 905 2,438 1,059 1,661 $ 9,519 $ 11,451 $2.0$1.1 million, or 17.4%12.0%, to$8.4 million for the three-monththree-month period ended March 31, 2020 from $11.5 million for the corresponding periodin 2019. Total personnel decreased2020 as a result of our efforts to 339 at March 31, 2020 from 352 at March 31, 2019. Incentive compensation decreased $1.5 million, driventighten our expenselower recognized bonus and share-based compensation amounts primarily drivenreducing our work force by the Company’s operating results. Commissions decreased $0.6 million, or 36% primarily driven by a 24% decrease in origination volume.-55-As previously announced, subsequent to quarter end, in April 2020, the Company temporarily reduced the salaries of certain executives and furloughed approximately 120 employees as part of a plan to adjust the Company’s expense base and ensure operating efficiency during theCOVID-19 crisis. The furlough period began on April 13, 2020 and is currently expected to continue through May 31, 2020. Three Months Ended March 31, 2020 2019 (Dollars in thousands) $ 6,012 $ 6,241 1,320 1,232 1,219 1,300 986 1,059 502 597 274 130 3,292 2,795 $ 13,605 $ 13,354 increased $0.2decreased $2.3 million, or 1.5%17.3%,to $13.6$11.2 million for the three months ended March31, 2020 2021$13.4$13.6 million for the corresponding period in 2019. compared to 5.34% for the three-month period ended March 31, 2019.current events related to theCOVID-19economic shutdown, the Company’s market capitalization falling below book value and other related impacts, the Company we its goodwill for impairment. The CompanyWe concludedthat the implied fair value of goodwill was less than it’sits carrying amount, andbalance.benefitexpense of $7.4$2.5 million was recorded for the three-month period endedMarch 31, 2020, 2021,expensea benefit of $1.6$7.4 million for the three-month period endedMarch 31, 2019. 2020.For the three-month period ended March 31,includesincluded a $3.2 million discrete benefit,related to remeasuring our federal net operating losses, driven byOur statutoryFor the three months ended March31, 2021 our effective tax rate which is a combination of federal was 26.9%state income tax rates, was approximately 23.9% for both periods. However,the threefor the three-month period ended March 31, 2020, drivenby the recognition of the discreteaforementioned benefit.-56- (all capital capabilities30, 2020. 28, 2021.The quarterly dividend was paid on February 20, 202018, 2021 to shareholders10, 2020,8, 2021, which resulted ina dividend payment of approximately $1.7 million. Itthirty-fourththirty-eighth consecutive quarterly cash dividend.2020, 2021,we had approximately $25.0 million of available borrowing capacityfrom a federal funds line of credit with a$211.1$110.6 million. This amount excludesadditional liquidity that5.333.48 to 1 at March 31, 20202021 and 4.263.87 to 1 atDecember 31, 2019.wasof $5.2 million for the three-month period endedMarch 31, 2020, compared to net cash used in investing activities of $29.8 million for the three-month period ended March 31, 2019. 2020.The decreaseincrease in cash outflows from investing$41.0$70.6 million for purchasesof equipment for lease contracts partially offset by a reduction reductionsof $24.0investment. investmentand $17.1 million in principal collections on leasesand loans.primarily driven by lower originationvolumes for the three months ended March 31, 2020 20212019,the corresponding period of 2020, and the reduction inproceeds from sales was driven by lower volumesthe absence of asset sales driven primarily by our execution decisions.wasof $82.5 million for the three-month periodended March 31, 2020, compared to net cash provided by financing activities of $60.3 million for the three-month period ended March 31, 2019.2020. The increasedecrease in cash flows from financingan increase of $18.5 million in deposits and a decrease of $7.1$154.1 million in the net changedeposits partially offset by a decrease of $7.0 million ofrepayments offset by $3.4 million of additional repurchases of common stock.repayments. Financing activities also include transactionsrelated to the Company’s payment ofdividends.2020, compared2020.Adjustments to reconcile net cash provided by operating activities of $12.5 million for the three-month period ended March 31, 2019. Transactions affecting-57-20202021 totaled $211.1$110.6 million,compared to $123.1$135.7 million at December 31, 2019.20202021 and December 31, 20192020 totaled $13.7$4.5 million and $12.9 $6.020202021 and December 31, 2019, 2020,we had $6.5$4.4 million and $6.9 $4.7banks. banks.Restricted interest-earning deposits$62.6$23.7 million at March 31, 20202021 and $76.6$30.7 million at December 31, 2019. 2020. For the Three Months Ended March 31, 2020 As of March 31, 2020 Maximum
Facility
Amount Maximum
Month End
Amount
Outstanding Average
Amount
Outstanding Weighted
Average
Rate(3) Amount
Outstanding Weighted
Average
Rate(2) Unused
Capacity(1) (Dollars in thousands) $ 25,000 $ — $ — — % $ — — % $ 25,000 — 71,721 69,751 4.24 % 62,555 3.62 % — 5,000 — — — % — — % 5,000 $ 30,000 $ 71,721 $ 69,751 4.24 % $ 62,555 3.62 % $ 30,000 (1)Does not include MBB’s access to the Federal Reserve Discount Window, which is based on the amount of assets MBB chooses to pledge. Based on assets pledged at March 31, 2020, MBB had $47.8 million in unused, secured borrowing capacity at the Federal Reserve Discount Window. Additional liquidity that may be provided by the issuance of insured deposits is also excluded from this table.(2)Does not include transaction costs.(3)Includes transaction costs.(4)Our term note securitizations areone-time fundings that pay down over time without any ability for us to draw down additional amounts.-58-$47.8$49.7 million in unused, secured borrowingcapacity at the Federal Reserve Discount Window,based on $55.12020. Collateral in excess of our borrowings under the securitization transaction represents our maximum loss exposure and there is no further recourse to our general credit. At March 31, 20202021 and December 31, 20192020 outstanding term securitizations amountedto $62.2$23.8 million and $76.1 $30.8of Philadelphia even ifnot otherwise regulated by the Federal Reserve Board.We andisare also subject to comprehensive federal and state regulations dealingwith a wide variety of subjects, including minimumits operations.These regulations generally have been adopted to protect depositors and2020, 2021,Marlin Business Service Corp and MBB’sTier 1 leverage ratio, common equity Tier1 risk-based ratio, Tier 1MDA—“Management’sDiscussion andAnalysis of FinancialCondition andResults of Operations—Executive Summary Summary”for discussionfive-yearfive-2020.2020$0.140.14 per share on April 30, 2020. 29, 2021.The quarterly dividend, which is expected to result in a$1.71.7 million, is scheduled to be paidon May 21, 202020, 2021 to shareholders of record on the close of11, 2020. 10, 2021.It represents the Company’s thirty-fifththirty-ninth consecutive quarterly cash dividend. The payment of future-59-2019, other than as discussed below.Allowance for credit losses.For 2019 and prior, we maintained an allowance for credit losses at an amount sufficient to absorb losses inherent in our existing lease and loan portfolios as of the reporting dates based on our estimate of probable incurred net credit losses in accordance with the Contingencies Topic of the FASB ASC. See further discussion of our policy under the incurred model in the “Critical Accounting Policy” section of our 2019 Form10-K.Effective January 1, 2020, we adopted ASU2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”), which changed our accounting policy and estimated allowance. CECL replaces the probable, incurred loss model with a measurement of expected credit losses for the contractual term of the Company’s current portfolio of loans and leases. After the adoption of CECL, an allowance, or estimate of credit losses, will be recognized immediately upon the origination of a loan or lease, and will be adjusted in each subsequent reporting periodWe maintain an allowance for credit losses at an amount that takes into consideration all future cashflows that we expect to receive or derive from the pools of contracts, including recoveries aftercharge-off, amounts related to initial direct cost and origination costs net of fees deferred, and certain future cashflows from residual assets. 2020. provision is charged against earnings to maintain the allowance for credit losses at the appropriate level.We developed a consistent, systematic methodology to measure our estimate of the credit losses inherent in our current portfolio, over the entire life of the contracts. We made certain key decisions that underly our methodology, including our decisions of how to aggregate our portfolio into pools for analysis based on similar risk characteristics, the selection of appropriate historical loss data to reference in the model, our selection of a model to calculate the estimate, a reasonable and supportable forecast, and the length of our forecast and approach to reverting to historical loss data.For our Equipment Finance segment, we determine our reasonable and supportable forecast based on certain economic variables that were selected based on a statistical analysis of our own historical loss experience, going back to 2004. We selected unemployment rate and changes in the number of business bankruptcies as our economic variables, based on an analysis of the correlation of changes in those variables to our loss experience over time.As part of our estimate of expected credit losses, specific to each measurement date, management considers relevant qualitative and quantitative factors to assess whether the historical loss experience being referenced should be adjusted to better reflect the risk characteristics of the current portfolio and the expected future loss experience for the life of these contracts. This assessment incorporates all available information relevant to considering the collectability of our current portfolio, including considering economic and business conditions, default trends, changes in portfolio composition, changes in lending policies and practices, among other internal and external factors. Further, each measurement period we determine whether to separate any loans from their current pool for individual analysis based on their unique risk characteristics. Our approach to estimating qualitative adjustments takes into consideration all significant current information we believe appropriate to reflect the changes and risks in the portfolio or environment and involves significant judgment.-60-Our estimates of expected net credit losses are inherently uncertain, and as a result we cannot predict with certainty the amount of such losses. We may recognize credit losses in excess of our reserve, or a significant increase to our credit loss estimate, in the future, driven by the update of assumptions and information underlying our estimate and/or driven by the actual amount of realized losses. Our estimate of credit losses will be revised each period to reflect current information, including current forecasts of economic conditions, changes in the risk characteristics and composition of the portfolio, and emerging trends in our portfolio, among other factors, and these updates for current information could drive a significant adjustment to our reserve. Further, actual credit losses may exceed our estimated reserve, and such excess may be significant, if the actual performance of our portfolio differs significantly from the current assumptions and judgements, including those underlying our forecast and qualitative adjustments, as of any given measurement date.RECENTLY ADOPTED ACCOUNTINGadoptedissued accounting pronouncementsand the expected impact on our financial statements is provided in Note-61- Disclosures SEC’sCompany’sCompany's first fiscal quarter of 2020 2021that have materially affected, or are reasonably likely to2019, 2020,The ongoingCOVID-19 pandemic measures intendeduncertainties related to prevent its spread couldthe consummation of the Merger may have afinancial condition,cash flows, and such effectsnegatively impact the price ofdepend on future developments, which are highly uncertainsubject to the terms and are difficultconditions of the Merger Agreement,be cancelled and converted into thepredict.Global health concernsthe Merger.theCOVID-19 pandemic and related government actions taken to reducealternative businessspread MergerAgreement. The Merger Agreement provides that, upon terminationvirus have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty and reduced economic activity. The pandemic has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, Merger Agreement under certain specified circumstances,including the passageacceptance of a Superior Proposal (as defined in the CARES Act, but there cansuch stepsthe merger will be effective occur on the terms andtimeline as set forth in the Merger Agreement and currentlyachieve their desired results-62-in a timely fashion. We continue to evaluate newly enactedat all. Potential risks and monitor proposed government and banking regulations issued in response to theCOVID-19 pandemic; further changes in regulation that impact our business or that impact our customers could have a significant impact on our future operations and business strategies.Our operations and financial results have already been negatively impacted as a result ofCOVID-19 pandemic, as discussed further in“ MDA – Overview” andMDA—Results of Operations”. The pandemic, reduction in economic activity, and current business limitations and shutdowns have increased risks to our business thatuncertainties include, but are not limited to:Credit Risk.●extend credit primarilycould besubject to smalllitigation related to the proposed Merger,which could result in significant costs andmid-sized businesses, expenses. Incustomerscommon stock may be particularly susceptible to business limitations, shutdowns and possible recessions and may be unable to make scheduled lease or loan payments during these periods and may be at risk of discontinuing their operations. As a result, our delinquencies and credit losses may substantially increase. Our risk and exposure to future losses may be amplifieddecline,including to the extent economic activity remains shutdown forthat the current market price ofextended period, or toassumption that the extent businesses have limited operations or are unable to return to normal levels of activity after the restrictions are lifted.MergerOur estimate of expected future credit losses recognized within our allowance as of March 31, 2020 is based on certain assumptions, forecasts and estimates about the impact of current economic conditions on our portfolio of receivables based on information known as of March 31, 2020, including certain expectations about the extent and timing of impacts fromCOVID-19. If those assumptions, forecasts or estimates underlying our financial statements are incorrect, we may experience significant losses as the ultimate realization of value, or revisions to our estimates, may be materially different than the amounts reflected in our consolidated statement of financial position as of any particular date.Portfolio Risk. We are currently experiencing a significant decrease in demand for our lease and loan products as a result of theCOVID-19 pandemic, and we have limited visibility to the future recovery of such demand.We have shifted the focus of portions of our operations and certain personnel to implement specific programs and new products in response to the pandemic. In particular, we have focused efforts on loan modifications and a payment deferral program, implemented a new PPP loan product, and increased customer service efforts to respond to our borrower’s needs. There can be no assurances that such efforts will be successful in mitigating any risk of credit loss.Liquidity and Capital Risk.As of March 31, 2020, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements. While we currently have sufficient capital, our reported and regulatory capital ratios could be adversely impacted by further credit losses and otherCOVID-19 related impacts on our operations. We are managing the evolving risks of our business while closely monitoring and forecasting the potential impacts ofCOVID-19 on our future operations and financial position, including capital levels. However, given the uncertainty about future developments and the extent and durationAll of the impacts ofCOVID-19 on our businessforegoing could materially and future operations, we face elevated risks to our ability to forecast and estimate future capital levels. If we fail to meet capital requirements in the future, our business, financial condition or results of operations may be adversely affected.We have historically returned capital to shareholders through normal dividends, special dividends and share repurchases. There can be no assurances that these forms of capital returns are the optimal use of our capital or that they will continue in the future.Operational Risk.The spread ofCOVID-19 has caused us to modify our business practices (including implementing certain business continuity plans, and developing work from home and social distancing plans for our employees), and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees, customers and business partners. We face increased risk of any operational or procedural failures due to changes in our normal business practices necessitated by the pandemic.These factors may remain prevalent for a significant period of time and may continue to adversely affect ourfinancial condition even after theCOVID-19 pandemic has subsided.The extent to which the coronavirus pandemic impacts our business, results cash flows. operations financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after theCOVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.-63-There are no comparable recent events that provide guidance as to the effect the spread ofCOVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form10-K for the year ended December 31, 2019.-64-On May 30, 2017, the Company’s Board of Directors approved a stock repurchase plan (the “2017 Repurchase Plan”) under which the Company was authorized to repurchase up to $10 million in value of its outstanding shares of common stock. At September 30, 2019, there was no balance remaining in the 2017 Repurchase Plan.Company’sCompany's discretion. The repurchasesare funded using the Company’sworking capital.2020, 2021,theThe following table sets forth information regarding PursuantCompany’s repurchasesMerger Agreement, the Company may not its common stock during the three months ended March 31, 2020. Number of
Shares
Purchased Average Price
Paid Per
Share(1) Maximum Approximate
Dollar Value of Shares that
May Yet be Purchased
Under the Plans or
Programs 62,512 $ 21.27 $ 7,618,055 66,289 $ 20.34 $ 6,269,949 135,669 $ 11.63 $ 4,691,747 264,470 $ 16.09 (1)Average price paid per share includes commissions and is rounded to the nearest two decimal places.In addition(pursuant to the repurchases described above, pursuant2019 Repurchase21,12316,038 shares repurchased to cover incometax withholding in connection with the shares granted2020, 2021,$ 13.38$14.01 per share.(1)Previously filed with the SEC as an exhibit to the Registrant’s Annual Report on Form10-K for the fiscal year ended December 31, 2007 filed on March 5, 2008, and incorporated by reference herein.(2)Previously filed with the SEC as an exhibit to the Registrant’s Current Report on Form8-K filed on October 20, 2016, and incorporated by reference herein.(3)Previously filed with the SEC as an exhibit to the Registrant’s Current Report on Form8-K filed on April 24, 2020, and incorporated by reference herein.-67-MARLIN BUSINESS SERVICES CORP. (Registrant)By:/s/ Jeff HilzingerChief Executive OfficerJeff Hilzinger(Principal Executive Officer)By:/s/ Michael R. BoganskyMichael R. BoganskyChief Financial Officer & Senior VicePresident(Principal Financial Officer) May 1, 2020-68-