MRLN - Earnings call transcript Q3 2020 | Marlin Business Services Corp

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Operator

[00:00:05] Greetings and welcome to the Marlin Capital Solutions, go to 2020 and conference call. At this time, all participants are in listen only write a brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please pay staff and then zero on a telephone keypad.

As a reminder, this conference is being recorded. It is my pleasure to introduce your host, Mr Glassen, from ADDO Investor Relations. sir. you, Thank

begin. You may

Lasse Glassen

morning from and results joining Good you call. thank Business Service. today Marlin quarter us Korps [XX:XX:XX] for XXXX conference third

On financial risk officer, and Mike Bogansky Hilzinger, Maslowe, is President vice and the and Vice Officer chief senior chief Executive Lou President and president Senior call today officer. Chief Jeff

in and to available looking forward not quarterly the in on reliance cautioned investor reports company's Exchange report differ not In of Act may a the and earnings Investors of of which the the events Securities today will posted current undue events future with are including, made and Marland or factors. the Before projected factors, call, statements me such let and the are Solutions reports in periodic statements also Securities described Commission, results beliefs Private further beginning section including as form company's factors company's of variety on not the which at and due on implied performance Q, or guarantees and the remind but looking looking or forward or statements XXXX the under only statements. are investor the performance Capital looking to XXK most section annual in today's Litigation of recent looking under under of results, Reform forward you United are submental that company's presentations some in the Form to two the risk is website. described forward made be actual Dotcom. slide headings regarding place from filed presentation, States Marlen's limited quarterly XX. materially dot such Www But of website represent statements those the

these well and With most and Jeff measures for per of refer this non-GAAP of a Marlin over measures, to to measures, financial financial a earnings gap to Hillinger other measures. it's our as release CEO, that, my president call, call efficiency share reconciliation Jeff. including pleasure adjusted the as and Marlen's discuss Please the may operating such now description adjusted to direct, financial comparable turn During earnings various non-cash ratio.

Jeff Hilzinger

our Thank to morning everyone, our of overview key to My XXXX and Good update pandemic from the our you, the and an performance [XX:XX:XX] Lou quarter details joining on on mitigate of Michael our comments impact third follow Gansky, highlights our financial Lisa. with us risk you, quarter will for chief quarter the thank continuing on business. of portfolio. Mazzello, this on provide third additional efforts financial chief focus results. discuss will Marlins past today our will And results. an covid-XX officer, officer, the

year, performance half the the diluted per share pandemic, we the diluted challenges and quarter to our earlier of first Coupled five as diluted to improved and third cost generated cents outlook. sixty portfolio net in nine loss significant very with quarter a to net third per improve well. year and has or and of million four with the last income million fourth implemented of in share, or significantly the resiliency share cents point the quarter. the of I'm seven or continued return throughout with arising two due we profitability improving million point the the performance faced the net benefits from we pleased Given XXXX seven of reductions per our cents from business XX in into XX ago income quarter compared point Portfolio

capital five our share XX dollars our percent, a reserve ratio six with cents. reserves based more two coverage of informed fifteen of have capital recent position twenty become seventy four per by and value risk nine ratio loss book percent in strong, experience, Assumptions remains of point and underlying a point total our

believe them we balance us economy working the priority crisis to to has and beginning weather covid-XX and the of to origination recovers. position ahead, protect the strong with customers since full to a case value better increased has a serve our look company shareholder in of our great the crisis, portfolio in we financing small future digital our that top have capital. been existing [XX:XX:XX] sheet been of erosion business making limiting our the as This As the and the platform for in of customers put the health in help investments our demand for partners advantage while the we're this the take

provided past XXXX the have our over lease substantial months, loan customers modification over six requests. completing assistance We and to

working As consisting total point of XX the XXX quarter, third the end percent fourteen total XXX receivables, of modified of capital of or of loans. of of the contracts three equipment and finance million, million contracts million

remarks, performance in his been the the quarter. will non performance in modified during both each with expectations we've with exceeding discuss we significantly pleased detail our As portfolios, of more and the very modified

With related plan. fourth were total covid impact the improving that during In fact, the [XX:XX:XX] with continued underlying levels net working during plus charge our the much This delinquencies, value we reserves and which quarter, end to strong. pretty delinquencies emphasize quarter to capital incorporated continue charge range. approaching while the also high covid is our XX assumptions than of fourth offs portfolio, I the particularly will our elevated. quarter As current with net net remains expectations. of want delinquencies off true our to as the loss position also have in better the date, We're that expect quarter experienced portfolio, have visibility improve very began consistent the actual quarter. our improve charge to loan during experience the our And our offs third of our to capital during end day pre on covid-XX of the of

to reflected in we credit our include As dollars for losses point in current of you per XX will lifetime is million estimate credit one allowance XX our sixty under cents estimated book required our and value of three share XXth. losses of September as our and Sisso, recall, are

of percent the four Additionally, of twenty two at total bank point more than well quarter, remained holding nine of based the the consolidated for ratio our end capitalized company. risk capital as a double requirement

year anticipated, point due which sixty Turning below now third total to results, was as was of several ago well factors. five activity to origination origination Schorsch volume eight our quarter million

end was to implementation better second reduce the both digital of First, much initiative. our facilitate volume the directly of attributable third the costs of quarters our business actions the and to to took restructure front in lower we to and

actions negatively have we origination much the While us knew we that near position in these impact competitive actions stronger for believe a longer in also put volume term. the would term, these

markets again. performance due late business during by our our booking Next, lower during by in record tighter the quarter and the third said, approaching we underwriting in facing from criteria are the in approval the good rates business impacted shift progress opening observed That underwriting to our improving response the from priorities quarter. for during continuing levels, allowed restructuring stemming currently made the protecting portfolio our our and And quarter small approval to was to borrowers initial many we've growing up and us quarter recently rates the financing challenges industries. volume [XX:XX:XX] to soft pandemic, demand finally, although origination

I at third income over to Looking pleased quarter with the bottom achieve able improvement the the net we very am quarter. line, in were quarter that in

the by driven earlier, improved I second reduction primarily in to our return this compared to was quarter. portfolio regarding losses noted profitability As with for led provision credit performance that a sharp the outlook

began in to a operating and the reductions cost expenses XX the quarters, the as year resulting period. to also were realize from implemented the percent benefits reduction We during third during quarter the initial prior compared second that in

in portfolio additional cost our will details will remarks. in and Mike discuss We structure leaner provide his remarks about his the

generally Before been becoming turning would part of are longer on quick has we over I accelerate by to term the the [XX:XX:XX] as efficiently our accelerated strategic origination the easier own more call being actions to and partner roadmap. our an platform of and experience has us more a provided accelerate the and pivot. The the more to offer automation digital our to tools while of digital taking economy to and update designed customer is opportunity scale use convenient platform pandemic digitization digital Our has always to like digital also provide recovers. with us Lou, allowing

advantage question, allow look and of second results express to from we past partners We of roll from financing the the are our of emerge funding, the beginning pivot the are accelerating challenges summary, crisis a take first customers. out We currently platform, platform key forward updates XXXX customers quarter and remains In XXXX. the calls. calling of providing through on us expect the offer implementation for corporate half many to and during will that initial quarter initiative on on digital phase application future welcome of to our which during digital provide The Our will a which our we this adoption evidence digital schedule. progress partners to by completely Marland express is remain. this experience process without

take of is quarter full business to volume more to adapt to However, profitability believe the company we and positioned now ahead in and like our to Lou. performance as fourth sustained I the partners believe the our effects returned chief and future, the advantage officer, of economy risk that, we shows Mazzello, a I continues looking discuss opportunities the recover position our serve have turn growth and the our in and for resilience in restore the portfolio to of small pandemic. profitability Marland customers With call to and have to from origination over to to I'd detail the Lou now in its beyond.

Lou Maslowe

[XX:XX:XX] morning, you, Good everyone. Thank Jeff.

we the mentioned, with quarter pleased As performance to from are begin emerge Jeff the crisis. as third very the we in portfolio

and to modified better better the historically. on this And to par vintage that towards trending underwriting early delinquency normal the after rates to pandemic the non This and resiliency near approval I delinquency drive adjust levels. Before covered portfolio what that is charge the experienced why I and pre to of portfolio was standards we due delinquency expected we the total much are applies and for are modified details of performance shortly pandemic. the beginning than expectations than to of the or would to in both note the portfolio of pandemic. are underwriting originations improving attribute stronger vintage early motivating performance. regarding our credit post implemented the our quality have Marvins stage confidence first get restrictive explain better gaining our portfolios. into rates I would performance are we the more was performing like than our to willingness

have industries restaurants we positive has on increasing strong resurgence Although prominent stress to on Marland the economy. such concentrations, a return watch, as could federal factors cause be as factors macro will where pandemic's and stimulus will remains the there that shutdowns experienced lead The trends, of portfolio. pandemic's health critical risk market and to could the Labor retail. trajectory on mandated

compared quarter in payments. elevated the of that one top the year, three didn't the the point as of been five finally, point retail, basis percent percent down end, largest of point nine non offs, by the highest percent, portfolio. seven second working one twenty portfolio. point nine quarter. miscellaneous ninety one prior receivables XXth the scheduled quarter driven nineteen. to Working of The eighty six decreased offs five modified four five improvement We XX delinquent, increase while on Miscellaneous the the percent repair and which two of points four for expected quarter at six five four point with down sectors, point was forty charge third the make industry third equipment increased of of and of prior XX point capital forty point over elevated percent, basis modification loans, three the from at quarter extraordinary and discussed dollars. the from quarter percent to equipment modified offs services, remains points nineteen, has nine for XXX on consummate metrics, June three, an percent five the charge an working delinquency third key capital nine portfolio Transitioning restaurants finance monitor XX concentration and twenty in for was in days second percent basis working third of percent to basis related for since benefited of the two basis average recovery proactively, now annualized and as portfolio. request seventy receivables during of quarter four one were Less [XX:XX:XX] SAIC of overall. equity percent and which points of percent developments offs point by all charge be payments at point capital to services, modified four Equipment year percent, Thirty decrease quarter point these the loans point which exceeding XX percent require quarter percent leasing. point fifty four average two for eighty modified dollars five portfolio stage up portfolio, third where performance QX hundred book two services thirty from QX to as seven in portfolio percent. an XXth. onset one business had partial days the of two portfolio, industry two point to day quarter points is greater in sectors, discuss third two seven the to comprised plus offs percent Better XX or two Nineteen representing over will increased and zero From delinquency capital XX three delinquency had quarter quarter we've four in percent [XX:XX:XX] percent percent on or seven these deferral compared quarter was the four seven charge earnings from June point modifications three delinquent five capital two and basis, prior percent, service working points total twenty elevated an five annualized point total thousand up important point services, to to XXth compared approximately the points of finance approximately an [XX:XX:XX] asset customers the in from perspective, act plus one a as from points that offs that in annualized sectors one point delinquency including from the quality almost one XXth, five offs either hundred each finance of done XXX point of of than as percent and latter delinquent QX Aggregate unwilling The delinquency sector the XXXX. proved end. September percent amalgamation at four percent note from seven looking with QX of unable from and miscellaneous over We of forty four the would in than XXXX. days four in this percent charge the below while that in continue modified offs approved an medical came As three than the hundred and one net pandemic. the equipment is of are rental by basis restaurants, to XXX increased the percent charge Services retail. modified, charge was of quarter which rest codes, in and non percent point at receivables basis anticipated XX nine call. It the total net be plus as four finance charge closely the Marlen's four basis Marlen's to September as period. over four three receivables, quarter was finance points just the fail prior quarter quarter, one on or Now, plus sector basis plus nine quarter when on six

anticipated. approximately a continues which it with to XXX the of And better modifications continue product. this compared working finance extended as activity performance be extremely be diminished to seven than pleased is thousand Modification sixty downturn quarter, time capital received we We significantly during working profitable the highly performed five first and in and hundred the to approximately capital or equipment second the as third respectively. we for XXX quarter, requests eight through portfolio,

individual surrounding facts have customer. the discontinued to and still requests are modifications based evaluating largely but customers, We offering circumstances pandemic the on related our

As of percent payment of XX this cohort for equipment to of million percent one period, September remaining Still, payments XX original according four delinquency capital is schedule. of paying seventy and to XXth, in and remaining XX normal period, of dollars. percent most deferral approximately have XX finance modify scheduled modifications their this point payments deferral their equipment, plus the customers finance the the [XX:XX:XX] percent out the completely are resumed before the four XXst year. of partial only The of required to XX totaling finance equipment resume contracts are modifications working December All make were substantially.

the portfolio will industry geographic capital working since began. I'd clusters the performance as for closing, a highest improved adjustments model financing on remain third made each both this rates each and fourth the provide inherent QX industry Lastly, during industries. they risk well differentiates experienced highly in elevated like to compared as have levels. that those covid our pre specific based to while for to data the we of impacted the the quarter the to This fourth an geographic quarter the from call, strategy, result defined. underwriting should performance approval that Marland on decline as in underwriting borrower, and portfolio in a In discussed charge for segment earnings in and quarter, the for we assign each equipment as risks or offs Utilizing will moderate low, model equipment, finance the developed outlook levels model we fourth for quarter our anticipate pandemic to the update

I'll discussed Bodansky, resilient financial Mike? With proven more earlier, be diversification prudent discussion call detailed As risks third over CFO, pandemic forward to has but our and the economic significant Mike remain, that, a given underwriting. our related for quarter our to portfolio our of performance. turn

Mike Bogansky

and Lou, good everyone. you, Thank [XX:XX:XX] morning,

was income two cents adjusted net a third share, an four for three or third basis adjusted seven or with on year diluted income two compared with Our Net seven an compared cents per diluted share point was income cents the sixty of of point point net million four diluted quarter share, point per XX or share year. per million quarter sixty last on net basis seven million cents or income ago. million XX per diluted

but expected, return am reflects I ongoing performance our to quarter impact with As third profitability. covid-XX, pleased from the our

costs, continuity We implemented operational financial portfolio have year stability. and we earlier and our the to measures ensure benefited from this protect business proactively reduce

origination notable to from impacted repayment took the status. prior portfolio resumed purposeful experienced as portfolio continued the the with the weakness a effects our ongoing modified in in the performance. activity our delinquency origination our portfolio reduce factors, a actions mentioned, to pandemic. the improved we Jeff by was business, and of reposition Counterbalancing including quarter well decrease quarter as as As several stabilize in We activity end the front the adversely workforce and of the

loss substantially this of our results. a remains as recognize compared quarters for the first provisions driver of credit financial significant year, we lower losses with to our trends, provisions encouraging Consistent of half XXXX. and first these second the Given

loss historical forecasting the recorded peak key the million provisions the and our levels. and significantly its business noted, that it As third while quarter, determining the is bankruptcy remain are quarter, credit for economic the our and and continued revise [XX:XX:XX] reflect quarter third standard, outlook a from from above two As key crisis. the recent in economic has of quarter point we We macroeconomic declined conditions unemployment reserve impact Business have prior quarter, forecasts million forward eight compared second in million we in model. factors bankruptcies previously point covid-XX Under the point input of expected rates a the ongoing we to assumptions eighteen seven Cecil unemployment into for looking losses factor challenging rate to two credit to allowance the XXXX. through increase continued economic in persisted in seven the XXXX, to the credit seven losses. the is third in quarter to third

included for was component relating of economic forecast approximately three provision the new four economic from loss and and factors. Our XXXX activity qualitative third million provision million changing conditions of expense approximately origination from the to The quarter updated were previously of second slightly much business quarters for losses less only than our were the from quarter. the covid-XX the Furthermore, the first for and the as and allowance in second impacts credit reflected end rates at revised. forecast bankruptcies unemployment

continue outlook will and our closely and evaluate accordingly. our to economic the refine reserves environment We and loss evolving monitor update

originations tightened standards crisis. working percent, loan was financial, attributable from three the quarter increase capital the reduction Turning quarter over basis we the down basis points yields, in the to of XX of during the almost the down that on prior year sequential relatively underwriting third The seven points covid-XX year yield total to seventy in point eight quarter second points quarter. XXXX. the third from quarter however, point volume three as is [XX:XX:XX] from decline significant XXX were percent, modest, entirely Equipment, four wake the the basis was up nine third and quarter

and in in the of deposit second and For the resulting XX and was percentage the in in eighty decrease year margin in quarter, basis marginal rates. lower percent, decline sequential over increase points funds change from the increase by year primarily origination was our decrease fee new to The The yields an of income, coupled seven was margin, less interest primarily point a quarter basis XXXX. with cost quarter alone eight a related sixty prior net the up driven NIM points down eight from from quarter or the with by The in lower a the of from by presentation of driven receivables basis points average as XXXX. was third long the quarter decrease prior income residual of basis in expense expense the decrease and quarter of debt third at of seasonal basis that total were partially XXXX, in XXX was This compared finance higher result interest of a lower quarter the interest company's paid adoption and for term points for offset XXX percent a deposit shift mix rate, points XXX rates. down. rates

to due the million the in partially fleet in salaries liquidity year our that uncollectable expenses headcount reduction with four XX and was levels to point decrease associated million return also third from to and to XXXX. an reorganization one acquisition in levels of intangible the gain point benefits year to compensation to due acquisition the to prior the the in million third a dollar expect benefit financing quarter from charge [XX:XX:XX] two increase and higher four prior period. of incentive prior of the The with our is compared end and earn four primarily with ten million tax out with point associated and quarter year as pre third Noninterest point non-interest noninterest We lower in decrease employees were in Included lower to continue year thirteen of year. our the of and decline non-interest was six of offset from decrease prior million liability. over furlough. sequential quarter a by fourteen due third third by expense normalize and resources quarter employees is The primarily our two Expenses million the were reflect expenses one adjustment in point compared property quarter pandemic three million primarily quarter back Moving asset for commission a five sale XXX expense a benefits from point eight over due one and the dollars million quarter in million, expenses. was in income expenses, point four the to year expenses and quarter expenses salaries income XXXX, of impairment million assets.

As proactively last we expenses. we discussed reduced operating quarter,

to actions administrative headcount our and front realize cost meaningful and saving. general our reduce to office, we lower reorganize expenses, have Following begun

result, precrisis approximately to nine an normalized a As rate origination run savings seven annualized to based million levels. on achieve cost we dollars expect of

pretax our tax to loss recognition full year ended months tax due the September income percent. our quarterly relative XXXX [XX:XX:XX] taxes, tax low nine Moving rate to from thirty last sixteen of on the point may prior expectations. rate was between as requirements This to one recall, due income third tax as six timing the quarterly only to that This tax unusually relates you gap XXth, our reporting effective quarters benefit at for our for effective was five was point limit quarter, interim to percent quarter.

board should very our ability as occur. capital on of any as share Xth, strength remain payable declared XX We withstand directors balance potential of record sheet as confident cents the future November dividend of they and shareholders XXXX. well quarterly per XXth, regular Our of losses to a position, in our to of November XXXX

position We capital evaluate will continue monitor requirements. and to potential closely our liquidity and

developments impact the to we on positive be economic sector however, as The quarter. We results the had are impacts measures seen that pandemic continue felt this profitability pleased with earlier quarter the quarter. have to third U.S., financial into business year fourth we third small our the the of in the the across return and by throughout the covid-XX operational taken have

That decline we in with Assuming quarter portfolio financial in following. remain ahead. let's call maximize the for growth the supporting delinquencies, continued our in from concludes questions. to that Operator. the modest be volume well economic committed cost initiatives safety our expect profitable, current ultimately origination from impact improvement that, results and benefit partners, [XX:XX:XX] this the on up and to further prioritizing our to quarter sequential from We a covid-XX crisis we our A in drive and a from look customers the open value positioned as with and shareholders. further US basis, fourth health does and deteriorate remarks, for emerging marked by sustainable our and reduction prepared charge employees, levels, offs growth not of

Jeff Hilzinger

Thank you time your speaking our fourth you Thank quarter And We on stay January. please [XX:XX:XX] attention to your this again for XXXX for we look when healthy. morning. you results in for report late call. safe again us today's forward and with joining and support

Operator

participation. lines. [XX:XX:XX] now your your teleconference, This today's disconnect Thank you for concludes you may

Marlin Business Services (MRLN) 30 Oct 202020 Q3 Earnings call transcript