MRLN - Earnings call transcript Q2 2018 | Marlin Business Services Corp

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Operator

Greetings, and welcome to Marlin Business Services Corp Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen.

Lasse Glassen

you XXXX us call. second thank Business for and Corp's Services quarter morning for today joining Marlin Good results conference

the Vice Jeff Officer; is Senior Vice Officer; call and Chief Kamp, On Executive Financial and Chief Officer. and Hilzinger, Taylor Lou and President President Senior President Chief Risk Maslowe, today

you of today may Private now risks let and are forward-looking the SEC materially call, that my today's that Securities beginning projected the call pleasure due refer condition. Marlin's operating for the be Reform remind the you or filings impact results financial of future some to to of under will and the Jeff? company's XXXX. of from those turn discussion Before Marlin's a me Hilzinger. the differ to to factors. CEO, Litigation Jeff could Act results over recent statements it's more President that, Actual made implied with and detailed made With We variety

Jeff Hilzinger

credit past Officer excellent by our financial Once Chief strong Financial origination Maslowe, you, our this aimed our XXXX earnings company and quarter and Thank with progress Marlin discuss with results. Kamp, quarter will business I Officer highlights outlook. credit will follow the us Risk details quarter products a and an stable lessor Chief strategy on solid delivered our Lou again, second comment on thank for a begin quality growth. joining to equipment our broader small highlighted a recent from Lasse. X.X into and volume, Taylor along services you of second at to credit and with performance the everyone quality transforming our morning, overview results from the businesses. Good micro-ticket provider Marlin on will of additional

driven to existing million by in with year-over-year referral $XXX.X was total for our in direct the XX%. increase continued which of Growth volume, resulting focuses $XXX.X the quarter our volume a origination customers. year providing quarter origination last channel financing million Excluding compared was traction in on

During the a XX%. year-over-year direct compared million with year increased of volume $XX.X origination quarter, $XX.X resulting last million in increase to

In to of and loan or leases in products. capital an part origination ago referred a both $XXX.X of and capital and to these growth from year net increase of type, in in the originations markets XX% we terms by markets million total equipment and to activities, also capital and working XX% Due our quarter double-digit loans million year Also activities, our of from billion investments sold enjoyed as approximately up product $X.X assets grew a our loans. leases managed Marlin's expanded $XX.X we ago.

maintaining disciplined during and remains we quarter. underwriting expectations our keenly performance, Importantly, remain within focused evidenced portfolio stable standards which our by on as the

is share X.X net move to now the diluted reconciliation an ago. per a GAAP $X.X of on to $X.XX of earnings recorded profitability, diluted we at per million share Looking diluted quarter of earnings per basis, GAAP reported $X.XX $X.X share, non-GAAP with $X.XX year our update non-GAAP I'd transformation like last second available quarter we or release for to non-GAAP or second income compared On our a per with afternoon. year. of yesterday share million $X.XX diluted Marlin initiatives. we A earnings published press in also compared the business

base costs and origination drive we and by growth fixed As equity returns may company's market, portfolio growth. capital leveraging second, recall, on our strategically expanding through expect Marlin through better the to improve you and X.X, first target

made share improvements managing Third, appetite. with our costs. consistent reduce like risk we've to and And of I'd with call. on cost improving these operating risk last scale our proactively processing fixed fourth, areas progress since be profile each our by efficiency through better company's to operational the leveraging to you unit the through

ourselves market an to respect we rather to financing our strategic to Marlin expansion, focused solutions X.X end-user broadened of this, vendor thinking than with have strategy, businesses also and directly multiple our not only with equipment the solely on lessor, but our strategy market by developing providing as under products First, we through grow. Along originate small help also partners with continuing customers. are equipment our go-to

in finance our XXXX. equipment to continue product, working the was of business, traditional with we performance our which capital pleased be loan very Beyond introduced

at our loan to risk $XX.X overall million the a meaningful Further, nearly origination During by expectations, to which and profitability. year-over-year returns XX% end way rates adjusted loan capital the portfolio million. volume increased our of continues exceed working capital second working to strong contributing quarter performance $XX quarter, the delivering in

direct plus to including We customers. directly new financing also customer their these with small objective is to the business meeting opportunities a end-user our multiple pleased solutions with by our leveraging financing month. by with to X,XXX existing create customers to needs. customers efforts approximately set active The end-user financing customers relationships strategy relationships ongoing additional our each broader with X.X originate under remain aspect and of these key our offering A we Marlin and customers provide identify our our products XX,XXX is relationships of

and this build. in well to earlier my is As continues I remarks, momentum initiative mentioned working

through quarter leveraging on fixed capital We priority, focuses which our Marlin's second on good progress the made also growth. costs and during key

our continued equity the we quarter. sheet continue XX.X% prior Our composition markets and to origination solid from the manage activities. to ratio quarter portfolio to XX% allowed our to further and the assets Moreover, balance in our volume through reduce capital during size us of growth

During investor portfolio these strong. optimize another in funding, of of with returns, in and risk classes. asset providing remained sold industries, terms source demand assets Along million and exposure transactions we its levels to the Marlin product credit composition overall we and way a managing geographies, and view Marlin's with by to XX better size for as particular second quarter, our

for the by expectations achieved into subsequent of the completed on to Bank, diversify this we terms the earnings and very successfully advanced we earlier assets our we in against made achieved, a higher rate wholly Marlin's comments to being million sources and comments, to two of Business ABS And funding issuing exceeded approximately update transaction the to advanced primary for were and capital this was market the growth to what cost The as since in securitized end Taylor our demand of notes. our and the than in an his rate asset-backed was call successful depository. foray This Marlin an the of various last quarter, strategic discuss securitization institutional transaction funds, objectives As week overall announced $XXX term financing in release XXXX. will investors. achieving notes further first as was our

funds of allowing higher deeper the than of grow against depository securitized returns capital our cost funds, in a our our to base. to releasing capital cost continue the securitization approximately existing the transaction This on through substantially by $XX While higher us lead efficiency was advanced improved million equity within capital of by assets. and our rate to ultimately will scale

depository funding, future to over also capital markets credit wholesale funding issuer While of asset-backed remain in time problematic and of cycles. as important the use to we we we and mix expect Business part structure to an capital activities funding, of a across expect be strategy, optimize our securities future Marlin Bank our

average XX.X% improved operating area XX.X% commissions, from to percentage progress to third of related better for growth from ratio by also efficiency our process to the on fix expense cost the leveraging renewal quarter in X.X% improving And efficiencies focus, year. company's and of we for our year. for through making initiatives. the adjusted quarter finance After sales acquisition are operational X.X% non-interest managed adjusting through last receivables our our adjusted as a improved Moving temporary last

renewal in initiatives automating business to in also for make good teams better to process company the modernizing restructuring progress future identifying growth. Our position and and continued processes our and implementing

Our fourth appetite. to with proactively area focus is in risk line our be key the and risk managing profile final company's of

to to strategic enterprise fine assume risk of continue wide that risk aggregate the our willing achieve to level our and objectives. management tune Marlin types program We is defines

this ongoing our yielding will work results. effort, While is be an good

charge-off Lou an performing his portfolio performance Over in portfolio's enjoyed trends In through details strong second of our the the on the we have first-half pleased is performance several remarks. stabilized. range. additional summary, within quarters, delinquency provide a and with quarter last XXXX. are acceptable will And our and

detail. past remains quarter. would the executing Lou through With focus the Our Lou? while this portfolio to I on to the strategic call X.X Officer, Risk make progress on against to continuing Marlin that, our now our in performance our transaction over our securitization Maslowe, Chief discuss initiatives turn of to like like more plan objectives key

Lou Maslowe

morning, Thank you, and good everyone. Jeff,

charge-offs. modest X Marlin's up sequential were basis X down remained quarter year. in XX-days first which last basis delinquencies XX points, quarter are second improvement points finance observed platforms. expectations from Equipment in pleased over with demonstrated year-over-year. a XX delinquent of with first Marlin's points, XX-days and points basis We down in and delinquent the origination many basis the finance of The basis with receivables XX the were over Equipment improved portfolio performance quarter from up receivables points basis and from points second line our XX uptick

seen second it our the range experienced minor the on quarter-over-quarter end quarter finance year-over-year separately. XXXX. and in noted points and historical to the and prior basis our receivables to average performance we consistent quarter points XXXX. The result increased quarter the on a working loan had second of is quarter second in were XXX the basis standard second points second the XXX in an year-over-year. points from of of first average basis products charge-offs the level in of was increased finance by XXXX XXX Charge-offs of with of loan charge-offs last we basis the in finance and in the quarter to increased the points. economic losses. finance our of X basis for Equipment within that annualized a delinquency year. portfolio second highest the higher basis which were in capital respectively. XXX as XXXX to the the finance XXX seen XXX we basis points And year-over-year second on at quarter points of As charge-offs quarter charge-offs I finance credit receivables Increased over XX deviation of XXX in the and equipment line net we we first Aggregate remain range expectations address and call, level basis the with since and points increase both the will XX an And is the quarter have XXXX, which since XXXX the a trend of return first the within compared representing anticipate first blip. the we quarter. points returned with losses of have annualized basis quarterly remain will equipment of normal with Overall, good of The and evident Equipment comfortable quarter that environment. average in past basis capital working quarter of quarterly more charge-offs product quarter basis

As rate we XXX you points may however, product. an targeted annual this of charge-off have for recall, basis

satisfied the remain charge-offs XXX very points. past quarterly average we has So basis been quarters performance over the portfolio's five that with the especially considering

since greater in quarterly Given XXX XXXX. evidenced the size to loan and and loan to as capital second by working $XX,XXX points $XX,XXX be tends of in working average standard finance, charge-offs capital contract there basis equipment deviation as quarter that the of portfolio the portfolio compared the is volatility

the the having X been target. fully Looking performed product's exceeding cohorts better quarterly X at of inception than a paid only of perspective, XX from out have with the X vantage target performance with cohorts and since

on portfolio, from results the growth improved quarter. satisfied to in performed to call On with of finance equipment reduction the Taylor losses allowance more we customers. and performance. of finance underwriting. our losses QX continues a remain to a Contributing an prior support driven Kamp $XXX,XXX This for our expect was to these The allowance investment second further risk committee better We our migration first projects several over for example be management down allowance to closing, I'll the basis, for We $X.X enhance of on target. existing is key of The to primarily has which the one remain than credit in by perform due offset with credit consistent X.XX% allowance in flat risk credit of portfolio underway loss remain Marlin's a focused efficiency criteria reduction the at quarter which discussion our Taylor? from new $XX.X Marlin hurricane remaining In for optimized confident for modification finance the including that million. which is our delinquency projects effectiveness a that, allowance risk to of absolute approved our equipment An proposal percentage hurricane recently Marlin's to expected underwriting transaction losses by This exposure based detailed reward. and largely the With quarter. $XXX,XXX customers net of well. direct credit quality the in was was have strategy appetite with receivables, a in to sufficient CFO, key address the is pricing. factors underwriting and the charge-offs. related second changes repayment hurricane which there was increase Marlin's of were to as score, customers with optimizes million several restructured are an example the portfolio portfolio. existing customers. allowance to performance history our designed improvement was of our turn and credit the average QX for loss And numerous company customer's team quarter remaining to initiatives in will to identifying X.XX% existing strategy.

Taylor Kamp

stable Thank while and string in growth and continued strong second results was quarter. of by the performance. This you, resulting record all good in portfolio earnings morning. expansion, Lou and and Marlin size attractive excellent originations in Jeff, growth ROE maintaining driven portfolio its

last diluted was or $X.X for diluted share $X.XX quarter or share net with compared million $X.X per million second per income $X.XX year. quarter the Second

quarter net share. an year diluted a was Second ago basis on income $X.XX million or adjusted per $X.X

net year from to share. effective One a of due diluted the per adjusted rate, rate. When approximately tax adjusting earnings last in XXXX been have the lower main drivers would of quarter second new the increase for was income $X.XX tax

X total quarter, the price XXXX. the through prior the quarter originations second passed from For up yield points XX.XX% from of was of down quarter and successfully of on XX basis points basis and last in change basis in increase due respectively, product the to capital points, equipment products yield working second points and the quarter XX XXX mix. in was decline during basis primarily the quarter loan from Having

stepped open working our During implement originated enhancements amount account decline of balance the from customer designed series efforts sheet. increased channels, leases Horizon by vehicle the of the and work continued indirect positions, the XXXX. origination in of loan to up majority targeted made model better focus and further increase to several initiatives $X.X now $X.X lead initiatives improve the we was have accelerated on activity second program, for decrease was million quarter, second fill product score accelerated yields a new of Marlin's vendor of These early including transitioned sales to million national included a and we and to quarter initiated volume in Horizon volume. vocational simplify and quarter, the projects, from and quality pricing year-over-year our phase-in experience, of an finally direct million a card risk-based growth to This credit referrals prior due as generation. Referral we Keystone down up the $X.X a on capital to

During leases. the than focused on This the loans syndicated total was ABS as quarter, deal. less normal and little completing $XX.X a we million of were we a in

our markets couple the quarter normal on Other net activity at in approximately selling next resume likely gain the will immediate quarters. recorded sale $XXX,XXX pre-tax This of in was capital We that pace an Income. of over generated

assets the life. service over and fees servicing to recognize will continue sold We their

these us for customers partners, our almost allows an which strategy. servicing maintain support relationship million in direct in currently of ongoing funding are to assets our $XXX with We

last approximately managed ago $X.X in increased XX% and year Total and loans XX% year-over-year assets $XXX.X all-time to from investment leases Our grew X% million, to quarter, billion. record. a approximately from

by to As held programs assets sheet expand, continue off total our to flow on grow captures will faster our and balance continue portfolio. which syndication and serviced both than forward portfolio the managed Marlin

the decrease of from quarter are lower or product net lag base down with XX.XX%, second quarter the percentage XX in XX the primarily a was The margin, For due experiencing XXXX. in increases we points quarter, the was basis basis through from interest rates mix to and margin NIM, yields. interest in and prior passing points

and our historical ultimately market rate points compared to rates, aggressively base expect basis basis We XXX allow, price and for basis with expect will quarter, to base points pricing the increases I rising. second through previous are we to increasing as increased will as we the quarter of subside. XXX lag the indicated to expense base continue normalize NIM for as points but the levels passing previously rates XXX as long price in are increases increase increases XXXX. Interest as

the which last year. due Second second incentives both quarter increase sales as quarter, compared and incentives non-interest the were to million long-term long-term commissions, almost the non-interest and due tax in annual totaled The of in $XXX,XXX. costs, totaling almost increases from payroll the $XXX,XXX. primarily primarily million, The prior in $XX.X from to in million seasonal highs in $XX all with is $XX.X expenses of as last was capping and well decreases quarter, quarter year-over-year acquisition-related prior expense quarter decrease

commissions, the was around for the for previously $XX we quarterly expect As level we was expenses. operating year which of reflects better core communicated, expense per the company's the efficiency ratio XX.X%, The million second the company's sales temporary non-interest for to After adjusting efficiency have rest quarter. XX.X%. of remain continuing quarter ratio acquisition-related

and growth through core this as various more operate in to initiatives. continue renewal continue we the portfolio future through We fixed process ratio to expect our cost efficiency improve leverage to efficiently

efficiency, to the assets. productivity ratio another total Jeff, to expenses we're new by average which operating of our way improving metric is a non-interest as measure noted As introducing managed

For X.X% believe our this capturing impact second period. improved year the the of the in from portfolio. efficiency operating by metric quarter, this X.X% metric in managed to better We growth the complements faster prior the

Our After new points approximately forma adjusting the have XXXX with ratio ratio basis basis capital position XX prior pro equity-to-assets decreased equity quarter, the of rate remained second XX an quarter basis, a balance equity-to-assets year. XX%, strong above would on tax by last the points. year in for

investors which diverse As Marlin transaction ABS rate transaction. Leasing to Corp. a Jeff fixed million first The fixed asset-backed was of years. rated, seven have successfully had were institutional notes, XXth, This to issued mentioned, July top were a issued a eight classes, in notes $XXX.X from the Marlin's of private on rates mix of securitization of in with three in X.XX%. X.XX% X.XX%, which AAA interest ranging rate average weighted interest

advance a share little August less of of future of which to Board of XXXX per declared we million all will on value that funding almost released to to finally, payable provides our and rate improve effective XXth, against drive advance as regular consolidated with ABS demand expansion transaction. pleased this of that our funding were financing quarterly as was bank I of And Considering were able investor financing am Overall, collateral. record this XXrd As of on XXXX. happy XX%, to dividend the very Directors capital, rate August will XX% $X.XX the net of shareholders prior leverage ROE. our recorded the terms of an be initial an $XX including a than our a term significantly with report securitizations, achieve, balance allow sheet us excellent. we book

to XX expected Now, is between scale. to XX%. expected be and lastly, as be above is outlook expected total percentage for $X.XX the turning approximately the margin X.XX% to volume, continue XX% EPS and results AFR And to is over to operating of XX% months. Net in remain XXXX referral between in Portfolio is including improve XXXX, the interest to with expected a is share. levels. as our per to performance origination company last continues observed volume, to line finish business XXXX to ROE improve expected $X.XX

underlying of volume sales restructuring origination our to growth impact of to within our original positions XX% we've force change position first-half is XX% updated Given our the that a future near-term growth. better this XXXX, range The sales implemented XX% the growth. of open of primary we've resulting to for driver through it several from guidance initiatives

the margin range lag in recent we a is In of adjusted net to, passing to based in the guidance, addition, three, product interest This increases to range expect we've and to regarding a of increased decision as a the execution, experiencing range finally, to assumptions had of updated the equally per on year bottom we of a first-half EPS full-year XXXX. primarily rates. we quarter Two, XX% result are due the and our through better-than-expected In And XX.XX%, one, our our and conclusion, base $X.XX, $X.XX performance strong of our X.XX% to in interest first-half we securitization guidance during upsize XX%. earnings now have strong mix. second by of impressive $X.XX share. of

And to the we questions. beyond. with call the open remarks. and look Our Operator? our as let's ahead build the momentum to prepared to that, That rest concludes continues of year,

Operator

we At first Instructions] Please proceed from a conducting the question-and-answer Our comes your [Operator this will of Chris from question with Securities. question. session. JMP line time, York be

Chris York

my Morning, guys. thanks for taking And questions.

Jeff Hilzinger

Morning, Chris.

Chris York

in bit go description on to equipment confused the on on you mean the originations. the begin fill Could a and the have origination reduction elaborate driver in let are I'm today? sales that I'll Does trying finance guidance? the some So, employees, you description. positions

Jeff Hilzinger

It's the of restructuring, and more have. No, of a Chris. used We've probably actions. shouldn't repositioning term set

recruit systematic we way of profile for that exactly sell. repositioning And things approach part is that and are is way clarifying the terms is in the on the working those candidates want mostly to positions result that lag a So on the the more those the teams an year to natural actions And a we're we was conscious what a came one of our that positions that of we sales as open because - force effort the within choice of of filling we or and over that one part, it's of were identifying turnover. create the recruiting. course

And make sense as so us might before if we creating teams that recruited done working while it was that profile, because for the had fit didn't on didn't people people recruit new find that well were as ourselves to having we waited.

we conscious choice clarity a was the to what slow trying that it around for had until was we profile just recruitment exactly us So to the attract. were

Chris York

that I Okay, How more commission, much much makes sales a on of and bit reoccurring? non-interest - was the little noticed expense, the is acquisition-related this sense. this quarter how in

Jeff Hilzinger

Chris, can you say that again or ask that again?

Chris York

Yes.

You for call in to out efficiency commissions ratio. acquisition-related sales regards adjusting your core

Jeff Hilzinger

Right. cease. Yes, our commissions expenses those those will based related to to targets are when on Horizon certain purchase Horizon And they're are paid hit special so and volume. volume

those so adjusting view those as temporary. we And for somewhat we're because

Chris York

Okay. leasing Getting any us so production. regards update to in and the then July the provide originations, could on with maybe volume, monthly equipment to you back

Jeff Hilzinger

terms monthly volume? of In average origination

Chris York

just for leasing. understand equipment the to I'm trying trends origination in in QX the down

a trying Just then like understand July? the in May, rebounded trends it better? bit has and June, So, to little April,

Jeff Hilzinger

that in the second of take the our Yes, we as below build as I fourth quarter mean, July's we of better well. of come our than get begin and And volume quarter. back through sales origination positions And expect effect. still the course, to guidance from the to as benefits normal sort there's open repositioning the to plan. level seasonality kind actions was and trends these quarter in the third were we'll whole they But more

of a year. last-half annual naturally total the having the in our we're towards volume portion occur of greater XX% biased than So

Chris York

of And originations XXXX? then either reduction Okay. impact guidance view the loans on lease size origination for your longer-term the the the does volume or by portfolio in here in

Jeff Hilzinger

continuing original mentioned growth things HKF, opportunities feel the second-half the improving still we've guidance And a that the have regain in three the looking pursue also I this there that through over the traction believe continued we've before, well. with aggressively supplement time, terms of year. or we And business. augment we themselves other of reasons about as we to But that that'll in that sort for been be good No, to to present will at. as opportunities organic of interesting of inorganic number

Chris York

okay. Great,

securitization, Turning Marlin nice and story to leverage the help financial the to of see obviously begin X.X.

conceivable some So the that will you you is have deal, funding for some quarters? upsized it excess

Jeff Hilzinger

Yes, it's saw part, Chris. bit, in NIM compressed you that been a facility. question, good of our has a because the And ABS

question, had to off it of of carrying XX yield. ramp up days the paying if additional next We deposits next had over are cover that in so. deposits with has paid to we'll do off And Some bit. or so the a short-term be course very that. additional maturity and the those our we some deposits, that's in to We June, deposits over to XX some be will a the issue had little But days.

or that. the that plan next targeted on yields expenses, of some some little assets is on have back up how balance didn't the then non-interest that. it So levels sheet, NIM. for sales. associated of that to we sort go I of with the increasing around reduce we anticipate guidance Obviously we we our been will elsewhere have will a we on we here initiatives have tax guidance lateral our our benefits get stable also picking in continued normal some purpose this And And original on bit We'll the have they're to And to We'll on back that elsewhere credit P&L on expenses. EPS, performance. is NIM your sort line. because The - question discussed our call double debt. help got and EPS then I'll just,

really that's making NIM - that's difference. we're so how up And the

Chris York

A some so yes, rate. clearly And on out couple appreciate knocked you touched follow-up, Okay. - I you and I more, have so the tax that. a

- so and XX was XX, guidance to Your didn't you -

Jeff Hilzinger

at the Yes, of low we'll be that, Chris. end

Chris York

then on some that rate for advance capital, cleared potentially using the on Okay. any securitization, thoughts the up And buyback?

Jeff Hilzinger

good a question that's well, Yes, Chris. as

about DTL the law the bit million December. $XX the a as release million a securitization, quite when months. we of - change so of result released of So capital revalued the released tax capital last we in obviously $XX of over between capital six in And we

with conversation of the board topic that. to exactly use active best an how been it's So about

a it believe excess use. a be Inorganic extent is at would like that is share share best opportunity growth a So then, have to the as that, use. go beyond we we we capital a on was feel $XX the depending not that share. the probably growth, best buyback to the except attractive logical it's place as next probably organic at $XX And

shareholders. So capital to opportunity more working to release is environment growth best get with capital a of continue sense the funding. to excess remain between given that given and wholesale our And we're how mix normalized is organic we going return ABS as depository our way credit in to to on we're the as Board the understand much issuer, what given opportunities, and we're a trying there, still to that of pipeline and we and programmatic

that's released thinking also So that just million about it's being mix thinking the the we about depository. as change not it's subsequent in capital last away the will releases $XX months, occur been the from six completely

Chris York

and don't hog last one, lot of a want I thoughtful then very all And your Jeff, answer. sense, to Makes comprehensive time.

you're bit seeing you there. answer us little the number opportunities, what update talked opportunities? in You inorganic on regards to Could about a your two in

Jeff Hilzinger

levels. about about think product two we level. M&A talked development be Yes, of about, the in corporate we've broadly we think the would sort more at or as past, One at

was probably sufficiently order within HKF company of acquire level, lot product And is ability of least have at level So more capital. and like there - rationale. deliver same to of equipment entire the an seeing that. And to would an the extension, other to that not if we we're and that either levels, kind example acquisition capital originate us the but it opportunities the products than we that really in working product. finance a seeing both require different have the at at down or to kind finance. that the [indiscernible] have And a be other able opportunities would are are we're and two and platform, already acquire product extension basic equipment working more then to

that it use as to with three but standpoint for because these be give likely markets it be our we to one, would like is day trouble access have are that accretive that be criteria targets within an that would our incumbents. And a want these extending EPS to it's we the we ROE accretive that across, from to from years. can we it leverage So, have current to markets to had of products infrastructure access result filled into accessing us we but want

think that's we product at it about the So extension of level. least the kind way at

Chris York

it guys. me. Perfect. back thanks the Thanks from That's for hop in I'll that. queue,

Jeff Hilzinger

Thanks, Chris.

Taylor Kamp

Thank you.

Operator

of from William Please next the question question. with Hogan proceed your Our from Brian comes line Blair.

Brian Hogan

Good morning.

Jeff Hilzinger

Brian. Good morning,

Brian Hogan

your on you able pass beta have increases rates? the on increases, base been more than to pricing question the on in A

Taylor Kamp

we Yes, rates, we're the using basically through increase can. as increase price in as to pass excuse Brian, much base as an

is increases said They a bit know, think the that's you last would. deposits definitely the know, and occurred increase didn't a competitors quarter, bank at capital. than are that basis I we finance price that excess recapture had the equipment point we year. through end us a XXX little because see But a - they of then lag lagging on working points And some had in was last our we we have so because at XX what would probably already price in as allow were the more you And of view and increases our reason many for the low increases that thought basically basis coming that cost. originally probably to

are rate were banks pricing all of increase and we're continue as base long to interest pre-base rise. period the a quarterly able of to sustain a so seeing to their to time. on their their companies pricing pre-pricing - same be basically And specialty now do so raising they for their we're rates going But cadence thing everybody, and previous sort - finance

Brian Hogan

All the That's you right. you My because like? environment pricing? competitive said but actually question increase of a to the seeing Are more segue. you what's What are banks being on competitive competitive nice the the Obviously, pricing environment. deposit just starting they're too seeing? is

Taylor Kamp

would it I Yes, stratify transaction size. by

competing get really are and to definitely we're same seeing for same Above below range, seeing see XX, way kind banks the not you the So the starting in you're decline much there, XX of move the start are change we as pricing there there low into same yet, above to credit into to we XX. appetite. see up the credit the XXX of And folks quality. banks' definitely tightening fewer there don't It's XX. end are we quality but than

within So finance have for to equipment we Marlin us financial compete the base, transaction because us But reasons average strata with around in a just while room seeing be band average - material an that the I effectively. for transaction in. on again, XX of break of size equipment the want in to of become XX, larger ticket increase why staying for the that's sort pricing still don't to there's raw sense and the one competitive don't it we size player occur think to at the to try the makes

Brian Hogan

your How Sure. XX? is business above much of

Taylor Kamp

off number not my don't of it's much. but head, I the have the top

Brian Hogan

All right.

you've loan nice step a seeing it sequential - what's are competitive, Your originations back it like quarter-over-quarter, in some or been down having - increases - just quarter demand, every you is

Taylor Kamp

XX that I trends, market origination see it mean, that in doesn't experience the to of above know, I'm you with XX had is do fragmented, hasn't the it XX. big, have I lots is No, has market. really below it it's our more we continues than opportunity, just to - think below it to we've become competitive more anything it continue be competitive not more less above competitive saying it's either, definitely not XX and

can backend standpoint. we more we infrastructure the our the origination front is did by as to of the business we grow an like business from trying impact ourselves last with of are I end going that reposition a and year the leverage of can we caused so think have we through that our process

it's going So through actions set on back a to guidance part to be to more normalized conscious that position able get our choice forward. a us origination our to on go of

Brian Hogan

loans of origination you volume be to or… X%-X% Do expect

Taylor Kamp

we bad lead do for but direct, characteristics is on than our faster risk-reward a the like the kind In that's And the of and like product very new of direct loans. more capital but it's XX% product. growing to and the of working really business have well. working to as direct we loan working a guideline around selection well, more because equipment in Yes, business, origination nicely, effort process. would equipment know, capital thing, working like volume, growing necessarily you And generation finance us is our we capital finance originate constantly, capital a lead we not but would we're evaluating

that of the think we equipment than working take-up capital. and because than working working the did One think had rate faster I with equipment and is reasons higher quality loan credit so we finance in growing the capital capital the product less resonated them a than selected product quarter during that higher is customers marketed I equipment finance finances to we

learning a bullet we're our one that and lead points initiatives process. generation of the working that's So and in the evolving talked about on. Taylor that of iterating we're

So how our a that marketing curve how we a finance get we're do and working - figure our approach for do capital works product to in that us. out between equipment in in to trying and we best definitely on lead a so dial dial of can terms mix mix learning generation we

Brian Hogan

right. All

on year? and decrease was tied On obviously because it this that a you your with a rebound There's lower the little what are yields, that what of of gain run volume forward. rate? but to syndication expect to the X.X% securitization, and I expectations going quarter, yield do a like the a mean, about is that then for quarter, I you the second kind And sale volume, are in calculated seeing that

Taylor Kamp

good question. thanks, Brian, Yes,

there bit leading So for assets the syndication. we those selecting were ABS - were as the up we assets of little collateralizing was were with we clearly that deal, to through pool overlapping a

that, amount didn't syndication of than muck so up quarter decreased that the our selection. so And complicate the we we for rather

It's the to Our the a the quarter gain. quarter. isn't for and targets about back year quarter. million maybe little for quarter year by - higher, in X% like of something lower, third net the We'll little $XX a a that the go rest to more little that a bad are depending been a X% a on

Brian Hogan

mean, from an see pretty across What are seeing are do you strong geographies? economic and perspective, all demand I it's and you All that equipment types right. indications good your still

Jeff Hilzinger

Yes.

portfolio, little strong - going investing of think and we I indicates, of I general there's psychology when that investing at demand from in of the And to business, customers, it's think at I speak know, lot be think in let of I the you but the small business you think, end-user look look and that well. our terms well, when I'm portfolio, as our the external is I think I validation in as our a the from you in health interest demand you the to also something business which Lou think some and look their small continues dealers their a it growth, performance at here. bit to hear

Lou Maslowe

Jeff. thanks, Yes,

Index well They the independent that and or the Reuters a index, some high other a we and it's as like we lending of One PayNet publicly, at is businesses. monitor also - index national high. with small indexes federation do indexes a high. business at small near-record record of at available look a It's record business

the are indications So, very positive. that all environment remains

Brian Hogan

it how you get And for sub-XX do long efficiency past me, Where and been couple Is going of obviously Right. modest a there? see flat remind year? years, this you the And to it's ratio, you in and been one has get us last did of improvement, couple quarter. have it - years pretty there? does going modest improvement can take a from it how your back maybe you

Jeff Hilzinger

cost scaling, get by the there by and fixed of we bulk way scale. leveraging is The our

on I because to we financial, path So, initiatives processes the get put we partially new the scale flow capacity the for our objective. a the towards in of have think only place lot that that has are release

growth a volume, the a So, - get of as above is released the we our leverage scale are as X.X And X.X That increases cost benefit or always a as was had. that on of really scale couple billion-X.X that because so we portfolio average our get modeling X.X bigger, in level. at from portfolio earnings X sort imply years we that asset to a of sort bulk level. to know, X.X years X.X our with originations benefits ago we shows the of billion becomes that have to that gets billion, we about XXX you origination growth, there origination billion-X.X to billion we on believe year XXX life a we of then billion but are get And the the more couple lot couple probably to company's path million billion. point, X.X in weighted the X is million billion we linear to would or billion a fixed of what annual range, volume

high So when I are mid so… think is XXs fully we where to efficiency ratio in the get to scaled, we somewhere then

Taylor Kamp

should exit above year quarter we a XX. hair fourth the the just And in

Brian Hogan

Yes.

Taylor Kamp

our just over origination size, Brian, XX,XXX volume. And than point back on your the about transaction of less X% is

really are… we So

Jeff Hilzinger

Of the portfolio.

Taylor Kamp

Excuse the me; Yes. of portfolio.

Brian Hogan

it. appreciate I thanks. Okay,

Jeff Hilzinger

you. Thank

Operator

are would time. at There Jeff questions remarks. Instructions] like this closing for to turn [Operator call no Hilzinger I to further the back

Jeff Hilzinger

today's for your on you call. and support us joining Thank for

again. strong we hard Thanks the ensure to we you Overall, future a of about We couldn't results with more again. November. speaking opportunity Thanks drive early excited our are be we working report first-half quarter year. the in to in XXXX second-half now when third of our the XXXX to value. and With look of front now, forward behind shareholder us

Operator

conference. today's concludes This

may You lines you your disconnect at for time. Thank participation. this your

Marlin Business Services (MRLN) 3 Aug 182018 Q2 Earnings call transcript