10-Q

UNITED STATES SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

QUARTERLY REPORT

 PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended

September 30, 2020

Commission file number

000-50448

MARLIN BUSINESS SERVICES CORP.

(Exact name of registrant as specified in its charter) 

Pennsylvania

38-3686388

 (State of incorporation) (I.R.S. Employer Identification Number)

300 Fellowship Road

,

Mount Laurel

,

NJ

08054

(Address of principal executive offices) 

(Zip code) 

(

888

)

479-9111

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 per share

MRLN

NASDAQ

 Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.

Yes

☑

No

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that

registrant was required to submit such files.) 

Yes

☑

No

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company or an emerging growth company. See the definitions of "large accelerated filer,” “accelerated filer", “smaller

reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

 Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of

the Exchange Act

.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes

☐

No

☒

At October 23, 2020,

11,974,548

 shares of Registrant’s common stock, $.01 par value, were outstanding.

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

for the Quarter Ended September 30, 2020

TABLE OF CONTENTS

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-3-

PART I. Financial Information

Item 1. Consolidated Financial Statements

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,

2020

2019

(Dollars in thousands, except per-share data)

ASSETS

Cash and due from banks

$

5,436

$

4,701

Interest-earning deposits with banks 

189,696

118,395

 Total cash and cash equivalents

195,132

123,096

Time deposits with banks

8,456

12,927

Restricted interest-earning deposits related to consolidated VIEs

5,771

6,931

Investment securities (amortized cost of $

10.6

 million and $

11.1

 million at 

September 30, 2020 and December 31, 2019, respectively)

10,761

11,076

Net investment in leases and loans:

 Leases

357,500

426,608

 Loans

550,553

601,607

Net investment in leases and loans, excluding allowance for credit losses (includes $

39.3

 million and

$

76.1

 million at September 30, 2020 and December 31, 2019, respectively, related to consolidated

VIEs)

908,053

1,028,215

Allowance for credit losses

(61,325)

(21,695)

 Total net investment in leases and loans

846,728

1,006,520

Intangible assets

5,846

7,461

Goodwill

—

6,735

Operating lease right-of-use assets

7,729

8,863

Property and equipment, net

8,422

7,888

Property tax receivables, net of allowance

8,580

5,493

Other assets

8,526

10,453

 Total assets

$

1,105,951

$

1,207,443

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits

$

823,707

$

839,132

Long-term borrowings related to consolidated VIEs

39,833

76,091

Operating lease liabilities

8,790

9,730

Other liabilities:

 Sales and property taxes payable

5,706

2,678

 Accounts payable and accrued expenses

25,533

34,028

 Net deferred income tax liability

20,032

30,828

 Total liabilities

923,601

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;

11,974,651

 and

12,113,585

 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

120

121

 Additional paid-in capital

75,893

79,665

 Accumulated other comprehensive income

93

58

 Retained earnings

106,244

135,112

 Total stockholders’ equity

182,350

214,956

 Total liabilities and stockholders’ equity

$

1,105,951

$

1,207,443

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-4-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands, except per-share data)

Interest income

$

22,398

$

27,708

$

73,111

$

80,673

Fee income

2,803

3,869

8,019

11,418

Interest and fee income

25,201

31,577

81,130

92,091

Interest expense

4,694

6,561

15,802

18,931

Net interest and fee income

20,507

25,016

65,328

73,160

Provision for credit losses

7,204

7,662

51,160

17,781

Net interest and fee income after provision for credit losses

13,303

17,354

14,168

55,379

Non-interest income:

 Gain on leases and loans sold

87

6,456

2,426

13,400

 Insurance premiums written and earned

2,082

2,230

6,612

6,538

 Other income 

2,044

1,676

11,172

10,573

 Non-interest income 

4,213

10,362

20,210

30,511

Non-interest expense:

 Salaries and benefits

8,515

10,897

25,702

34,817

 General and administrative

4,717

6,092

24,169

25,514

 Goodwill impairment

—

—

6,735

—

 Intangible assets impairment

1,016

—

1,016

—

 Non-interest expense

14,248

16,989

57,622

60,331

 Income (loss) before income taxes

3,268

10,727

(23,244)

25,559

Income tax expense (benefit)

525

3,281

(8,284)

6,857

 Net income (loss)

$

2,743

$

7,446

$

(14,960)

$

18,702

Basic earnings (loss) per share

$

0.23

$

0.61

$

(1.27)

$

1.52

Diluted earnings (loss) per share

$

0.23

$

0.60

$

(1.27)

$

1.51

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-5-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Net income (loss)

$

2,743

$

7,446

$

(14,960)

$

18,702

Other comprehensive income:

 Increase in fair value of debt securities available for sale

10

55

47

179

 Tax effect

(3)

(14)

(12)

(46)

Total other comprehensive income

7

41

35

133

 Comprehensive income (loss)

$

2,750

$

7,487

$

(14,925)

$

18,835

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-6-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

Accumulated

Common

Additional

Other

Total

Common

Stock

Paid-In

Comprehensive

Retained

Stockholders’

Shares

Amount 

Capital 

Income (Loss)

Earnings 

Equity 

(Dollars in thousands)

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

 Issuance of common stock

14,891

—

120

—

—

120

 Repurchase of common stock

(1,897)

—

(12)

—

—

(12)

 Stock issued in connection with restricted

 stock and RSUs, net of forfeitures

44,780

—

—

—

—

—

 Stock-based compensation recognized

—

—

(149)

—

—

(149)

 Net change in unrealized gain/loss on 

 securities available for sale, net of tax

—

—

—

66

—

66

 Net loss

—

—

—

—

(5,882)

(5,882)

Cash dividends paid ($

0.14

 per share)

—

—

—

—

(1,629)

(1,629)

Balance, June 30, 2020

11,942,247

119

75,606

86

105,193

181,004

 Repurchase of common stock

(18,446)

—

(149)

—

—

(149)

 Stock issued in connection with restricted

 stock and RSUs, net of forfeitures

50,850

1

(1)

—

—

—

 Stock-based compensation recognized

—

—

437

—

—

437

 Net change in unrealized gain/loss on 

 securities available for sale, net of tax

—

—

—

7

—

7

 Net income

—

—

—

—

2,743

2,743

Cash dividends paid ($

0.14

 per share)

—

—

—

—

(1,692)

(1,692)

Balance, September 30, 2020

11,974,651

$

120

$

75,893

$

93

$

106,244

$

182,350

(1) 

Represents the impact of Accounting Standards Update ("ASU") 2016-13 and related ASUs collectively referred to as "CECL". See Note 2.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-7-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

Accumulated

Common

Additional

Stock

Other

Total

Common

Stock

Paid-In

Subscription

Comprehensive

Retained

Stockholders’

Shares

Amount 

Capital 

Receivable 

Income (Loss)

Earnings 

Equity 

(Dollars in thousands)

Balance, December 31, 2018

12,367,724

$

124

$

83,498

$

(2)

$

(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

83,215

(2)

(4)

118,318

201,650

 Issuance of common stock

10,298

—

240

—

—

—

240

 Repurchase of common stock

(73,360)

—

(1,719)

—

—

—

(1,719)

 Stock issued in connection with restricted

 stock and RSUs, net of forfeitures

(450)

—

—

—

—

—

—

 Stock-based compensation recognized

—

—

990

—

—

—

990

 Net change in unrealized gain/loss on 

 securities available for sale, net of tax

—

—

—

—

52

—

52

 Net income

—

—

—

—

—

6,115

6,115

Cash dividends paid ($

0.14

 per share)

—

—

—

—

—

(1,774)

(1,774)

Balance, June 30, 2019

12,285,564

123

82,726

(2)

48

122,659

205,554

 Repurchase of common stock

(147,383)

(2)

(3,391)

—

—

—

(3,393)

 Stock issued in connection with restricted

 stock and RSUs, net of forfeitures

16,480

1

(1)

—

—

—

—

 Stock-based compensation recognized

—

—

894

—

—

—

894

 Net change in unrealized gain/loss on 

 securities available for sale, net of tax

—

—

—

—

41

—

41

 Net income

—

—

—

—

—

7,446

7,446

Cash dividends paid ($

0.14

 per share)

—

—

—

—

—

(1,755)

(1,755)

Balance, September 30, 2019

12,154,661

$

122

$

80,228

$

(2)

$

89

$

128,350

$

208,787

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-8-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Cash flows from operating activities:

Net (loss) income

$

(14,960)

$

18,702

 Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 Depreciation and amortization

2,996

3,632

 Stock-based compensation

806

2,745

 Impairment of goodwill and intangible assets

7,751

—

 Change in fair value of equity securities

(89)

(121)

 Provision for credit losses

51,160

17,781

 Change in net deferred income tax liability

(7,777)

6,883

 Amortization of deferred initial direct costs and fees

9,244

11,008

 Loss on equipment disposed

116

1,331

 Gain on leases sold

(2,426)

(13,400)

 Leases originated for sale

(4,882)

(46,038)

 Proceeds from sale of leases originated for sale

5,123

47,771

 Noncash lease expense

1,365

857

 Adjustment to value of contingent consideration

(1,435)

—

 Effect of changes in other operating items:

 Other assets

(1,642)

(3,465)

 Other liabilities

(311)

(3,142)

 Net cash provided by operating activities

45,039

44,544

Cash flows from investing activities:

 Net change in time deposits with banks

4,471

(5,260)

 Purchases of equipment for lease contracts and funds used to originate loans

(298,244)

(594,831)

 Principal collections on leases and loans

356,133

380,345

 Proceeds from sale of leases originated for investment

25,663

161,566

 Security deposits collected, net of refunds

(176)

(175)

 Proceeds from the sale of equipment

1,567

2,065

 Acquisitions of property and equipment

(2,266)

(3,492)

 Principal payments received on securities available for sale

432

1,015

 Net cash provided by (used in) investing activities 

87,580

(58,767)

Cash flows from financing activities:

 Net change in deposits

(15,425)

113,481

 Term securitization repayments

(36,538)

(58,887)

 Business combinations earn-out consideration payments

(180)

(349)

 Issuances of common stock 

120

240

 Repurchases of common stock

(4,699)

(6,257)

 Dividends paid

(5,021)

(5,169)

 Net cash (used in) provided by financing activities

(61,743)

43,059

Net increase in total cash, cash equivalents and restricted cash

70,876

28,836

Total cash, cash equivalents and restricted cash, beginning of period 

130,027

111,201

Total cash, cash equivalents and restricted cash, end of period

$

200,903

$

140,037

The accompanying notes are an integral part of the unaudited consolidated financial statements.

-9-

MARLIN BUSINESS SERVICES CORP.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Supplemental disclosures of cash flow information:

 Cash paid for interest on deposits and borrowings

$

17,308

$

17,610

 Net cash (received)/paid for income taxes

(5,005)

2,736

 Leases and loans transferred into held for sale from investment

23,460

149,895

Supplemental disclosures of non cash investing activities:

 Business combinations assets acquired

$

—

$

146

 Purchase of equipment for lease contracts and loans originated

2,253

8,432

Reconciliation of Cash, cash equivalents and restricted cash to 

the Consolidated Balance Sheets:

Cash and cash equivalents

$

195,132

$

132,461

Restricted interest-earning deposits

5,771

7,576

Cash, cash equivalents and restricted cash at end of period

$

200,903

$

140,037

-10-

MARLIN BUSINESS SERVICES CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – The Company

Marlin Business Services Corp. (the “Company”) is a nationwide provider of credit products and services to small businesses. The

products and services we provide to our customers include loans and leases for the acquisition of commercial equipment (including

Commercial Vehicle Group (“CVG”) assets which now incorporates Transportation Finance Group (“TFG”)) and working capital

loans. The Company was incorporated in the Commonwealth of Pennsylvania on August 5, 2003. In May 2000, we established

AssuranceOne, Ltd., a Bermuda-based, wholly-owned captive insurance subsidiary (“Assurance One”), which enables us to reinsure

the property insurance coverage for the equipment financed by Marlin Leasing Corporation (“MLC”) and Marlin Business Bank

(“MBB”) for our small business customers. Effective March 12, 2008, the Company opened MBB, a commercial bank chartered by

the State of Utah and a member of the Federal Reserve System. MBB serves as the Company’s primary funding source through its

issuance of Federal Deposit Insurance Corporation (“FDIC”)-insured deposits. In January 2017, we completed the acquisition of

Horizon Keystone Financial (“HKF”), an equipment leasing company which primarily identifies and sources lease and loan contracts

for investor partners for a fee. On September 19, 2018, the Company completed the acquisition of Fleet Financing Resources

(“FFR”), a leading provider of equipment finance credit products specializing in the leasing and financing of both new and used

commercial vehicles, with an emphasis on livery equipment and other types of commercial vehicles used by small businesses. 

References to the “Company,” “Marlin,” “Registrant,” “we,” “us” and “our” herein refer to Marlin Business Services Corp. and its

wholly-owned subsidiaries, unless the context otherwise requires.

NOTE 2 – Summary of Significant Accounting Policies

Basis of financial statement presentation.

 The unaudited consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries. MLC and MBB are managed together as a single business segment and are aggregated for financial

reporting purposes as they exhibit similar economic characteristics, share the same leasing and loan portfolio and have a single

consolidated product offering platform. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements present the Company’s financial position at September 30, 2020 and

the results of operations for the three- and nine -month periods ended September 30, 2020 and 2019, and cash flows for the nine-

month periods ended September 30, 2020 and 2019. In management’s opinion, the unaudited consolidated financial statements

contain all adjustments, which include normal and recurring adjustments, necessary for a fair presentation of the financial position and

results of operations for the interim periods presented. These unaudited consolidated financial statements should be read in

conjunction with the consolidated financial statements and note disclosures included in the Company’s Form 10-K for the year ended

December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020. The consolidated results and

statements of cash flows for these interim financial statements are not necessarily indicative of the results of operations or cash flows

for the respective full years or any other period.

Use of Estimates.

 These unaudited consolidated financial statements require management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expense s during the reporting period. Estimates are used when accounting for

income recognition, the residual values of leased equipment, the allowance for credit losses, deferred initial direct costs and fees, late

fee receivables, the fair value of financial instruments, estimated losses from insurance program, and income taxes. Actual results

could differ from those estimates.

Income taxes.

Our statutory tax rate was

25.4

% for the three months ended September 30, 2020. For the three-month period ended September 30,

2020, the effective tax rate was

16.1

%, driven by partial recognition of the prior quarter’s interim reporting limitation on the amount

of tax benefits that can be recognized under Accounting Standards Codification (“ASC”) 740,

Income Taxes

. 

For the nine-month period ended September 30, 2020, the effective tax rate in recognizing our benefit was

35.6

%, driven by a $

3.2

million discrete benefit, resulting from certain provisions in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

that allow for a remeasurement of our federal net operating losses. The Company filed for a refund of carryback net operating losses

-11-

as permitted under the CARES act and that refund was received in July 2020. The impact to our effective rate from that benefit was

partially offset by the limitation on interim tax benefits, as discussed above.

For the three and nine-month periods ended September 30, 2019, our effective tax rates were

30.6

% and

26.8

%, respectively.

The Company is currently under examination by the IRS for tax years ending December 31, 2013 to 2018, and the Company remains

subject to examination for the year ended December 31, 2019.

Significant Accounting Policies. 

There have been no significant changes to our Significant Accounting Policies as described in our

Annual Report on Form 10-K for the year ended December 31, 2019, other than the adoption of ASU 2016-13 as described below.

Recently Adopted Accounting Standards

. 

Credit Losses.

 In June 2016, the FASB issued ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of

Credit Losses on Financial Instruments

, which changes the methodology for evaluating impairment of most financial instruments.

This guidance was subsequently amended by ASU 2018-19,

Codification Improvements,

 ASU 2019-04,

Codification Improvements

,

ASU 2019-05,

Targeted Transition Relief,

ASU 2019-10,

Effective Dates,

and ASU 2019-11,

Codification Improvements

. These

ASUs are referred to collectively as “CECL”.

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. Under CECL, an allowance, or estimate of credit losses, is 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 after

charge-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, and non-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 and Paycheck Protection loans. 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. 

-12-

The Company adopted the guidance in these ASUs, effective January 1, 2020, applying changes resulting from the application of the

new standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in

which the guidance is effective (i.e., modified retrospective approach). 

The adoption of this standard resulted in the following adjustment to the Company’s Consolidated Balance Sheets:

Balance as of

Balance as of

December 31,

Adoption

January 1, 

2019

Impact

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 – Allowance for Credit Losses, for further discussion of the January 1, 2020 measurement of allowance under CECL, as

well as discussion of the Company’s new Accounting Policy governing its Allowance. 

See Note 13 – Stockholders’ Equity, for discussion of the Company’s election to delay for two-years the effect of CECL on regulatory

capital, followed by a three-year phase-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 of the adoption date to our investment securities.

-13-

NOTE 3 – Non-Interest Income

The following table summarizes non-interest income for the periods presented:

Three Months Ended

Nine Months Ended 

September 30,

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Insurance premiums written and earned

$

2,082

$

2,230

$

6,612

$

6,538

Property tax (loss) income

123

(42)

5,247

5,680

Servicing income

462

395

1,517

1,021

Gain on sale of leases and loans

87

6,456

2,426

13,400

Net gains recognized during the period on equity securities 

—

27

89

121

Non-interest income - other than from contracts with customers

2,754

9,066

15,891

26,760

Insurance policy fees

819

688

2,610

2,021

Property tax administrative fees on leases

243

272

713

801

ACH payment fees

35

78

143

238

Referral fees

15

129

123

448

Other

347

129

730

243

Non-interest income from contracts with customers

1,459

1,296

4,319

3,751

Total non-interest income

$

4,213

$

10,362

$

20,210

$

30,511

-14-

NOTE 4 - Investment Securities 

The Company had the following investment securities as of the dates presented:

September 30,

December 31,

(Dollars in thousands)

2020

2019

Equity Securities

Mutual fund

$

3,756

$

3,615

Debt Securities, Available for Sale:

Asset-backed securities ("ABS")

3,836

4,332

Municipal securities

3,169

3,129

 Total investment securities

$

10,761

$

11,076

The following schedule summarizes changes in fair value of equity securities and the portion of unrealized gains and losses for each

period presented:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

2020

2019

2020

2019

Net gains recognized during the period on equity securities 

$

—

$

27

$

89

$

121

Less: Net gains recognized during the period

 on equity securities sold during the period

—

—

—

—

Unrealized gains recognized during the reporting period

 on equity securities still held at the reporting date

$

—

$

27

$

89

$

121

-15-

Available for Sale

The following schedule is a summary of available for sale investments as of the dates presented:

September 30, 2020

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

Fair Value

(Dollars in thousands)

ABS

$

3,776

$

60

$

—

$

3,836

Municipal securities

3,082

88

(1)

3,169

 Total Debt Securities, Available for Sale

$

6,858

$

148

$

(1)

$

7,005

December 31, 2019

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

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

The Company evaluates its available for sale securities in an unrealized loss position for other than temporary impairment on at least a

quarterly basis. The Company did not recognize any other than temporary impairment to earnings for each of the periods ended

September 30, 2020 and September 30, 2019.

The following tables present the aggregate amount of unrealized losses on available for sale securities in the Company’s investment

securities classified according to the amount of time those securities have been in a continuous loss position as of September 30, 2020

and December 31, 2019:

September 30, 2020

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

Municipal securities

(1)

$

—

$

142

$

—

$

—

$

—

$

142

Total available for sale investment

securities

$

—

$

142

$

—

$

—

$

—

$

142

(1) The unrealized loss is immaterial

December 31, 2019

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

ABS

$

—

$

—

$

(3)

$

430

$

(3)

$

430

Total available for sale investment

securities

$

—

$

—

$

(3)

$

430

$

(3)

$

430

-16-

The following table presents the amortized cost, fair value, and weighted average yield of available for sale investments at September

30, 2020, based on estimated average life. Receipt of cash flows may differ from those estimated maturities because borrowers may

have the right to call or prepay obligations with or without penalties:

Distribution of Maturities

1 Year 

 Over 1 to

 Over 5 to

Over 10

or Less

5 Years

10 Years

Years

Total

(Dollars in thousands)

Amortized Cost:

ABS

$

—

$

2,271

$

1,505

$

—

$

3,776

Municipal securities

15

302

2,623

142

3,082

Total available for sale investments

$

15

$

2,573

$

4,128

$

142

$

6,858

Estimated fair value

$

15

$

2,625

$

4,223

$

142

$

7,005

Weighted-average yield, GAAP basis

4.75%

1.98%

1.99%

2.10%

1.99%

-17-

NOTE 5 – Net Investment in Leases and Loans 

Net investment in leases and loans consists of the following:

September 30, 2020

December 31, 2019

(Dollars in thousands)

Minimum lease payments receivable

$

376,649

$

457,602

Estimated residual value of equipment

27,974

29,342

Unearned lease income, net of initial direct costs and fees deferred

(46,708)

(59,746)

Security deposits

(415)

(590)

Total leases

357,500

426,608

Commercial loans, net of origination costs and fees deferred

Working Capital Loans

26,472

60,942

CRA

(1)

1,114

1,398

Equipment loans

(2)

457,627

464,655

CVG

65,340

74,612

Total commercial loans

550,553

601,607

Net investment in leases and loans, excluding allowance

908,053

1,028,215

Allowance for credit losses

(61,325)

(21,695)

Total net investment in leases and loans

$

846,728

$

1,006,520

________________________ 

(1)

CRA loans are comprised of loans originated under a line of credit to satisfy its obligations under the Community Reinvestment Act of 1977

(“CRA”).

(2)

Equipment loans are comprised of Equipment Finance Agreements, Installment Purchase Agreements and other loans.

In response to COVID-19, starting in mid-March 2020, the Company instituted a payment deferral contract modification program in

order to assist our small-business customers. See Note 6, “Allowance for Credit Losses” for discussion of that program.

At September 30, 2020, $

42.8

 million in net investment in leases were pledged as collateral for the Company’s outstanding asset-

backed securitization balance and $

55.0

 million in net investment in leases were pledged as collateral for the secured borrowing

capacity at the Federal Reserve Discount Window. 

The amount of deferred initial direct costs and origination costs net of fees deferred were $

16.1

 million and $

20.5

 million as of

September 30, 2020 and December 31, 2019, respectively. Initial direct costs are netted in unearned income and are amortized to

income using the effective interest method. ASU 2016 -02 limited the types of costs that qualify for deferral as initial direct costs for

leases, which reduced the deferral of unit lease costs and resulted in an increase in current period expense. Origination costs are netted

in commercial loans and are amortized to income using the effective interest method. At September 30, 2020 and December 31, 2019,

$

22.2

 million and $

23.4

 million, respectively, of the estimated residual value of equipment retained on our Consolidated Balance

Sheets was related to copiers.

-18-

Maturities of lease receivables under lease contracts and the amortization of unearned lease income, including initial direct costs and

fees deferred, were as follows as of September 30, 2020:

Minimum Lease

Payments

Net Income

Receivable

(1)

Amortization

(2)

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

40,682

$

7,503

2021

144,561

20,557

2022

98,671

11,212

2023

57,414

5,177

2024

27,063

1,749

Thereafter

8,258

510

$

376,649

$

46,708

________________________ 

(1)

Represents the undiscounted cash flows of the lease payments receivable.

(2)

Represents the difference between the undiscounted cash flows and the discounted cash flows.

Portfolio Sales

The Company originates certain lease and loans for sale to third parties, based on their underwriting criteria and specifications. In

addition, the Company may periodically enter into agreements to sell certain leases and loans that were originated for investment to

third parties. 

For agreements that qualify as a sale where the Company has continuing involvement through servicing, the Company recognizes a

servicing liability at its initial fair value, and then amortizes the liability over the expected servicing period based on the effective yield

method, within Other income in the Consolidated Statements of Operations. The Company’s sale agreements typically do not contain

a stated servicing fee, so the initial value recognized as a servicing liability is a reduction of the proceeds received and is based on an

estimate of the fair value attributable to that obligation. The Company’s servicing liability was $

1.5

 million and $

2.5

 million as of

September 30, 2020, and December 31, 2019, respectively, and is recognized within Accounts payable and accrued expenses in the

Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, the portfolio of leases and loans serviced for others

was $

261

 million and $

340

 million, respectively. 

In addition, the Company may have continuing involvement in contracts sold through any recourse obligations that may include

customary representations and warranties or specific recourse provisions. The Company’s reserve for expected losses from recourse

obligations was $

0.9

 million as of September 30, 2020 and $

0.4

 million as of December 31, 2019. 

In 2020, the Company was a participating lender, offering loans to its customers that are guaranteed under the Small Business

Administration’s (SBA’s) Paycheck Protection Program (“PPP”). In the three months ended September 30, 2020, the Company sold

its PPP receivable portfolio and recognized an insignificant gain on sale; the Company will have no continuing involvement with

those receivables.

The following table summarizes information related to portfolio sales for the periods presented:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Sales of leases and loans 

$

4,286

$

85,425

$

28,342

$

195,932

Gain on sale of leases and loans

87

6,456

2,426

13,400

-19-

NOTE 6 – 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. 

Effective January 1, 2020, we

 adopted

ASU 2016-13,

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, is recognized immediately upon

the origination of a loan or lease and will be adjusted in each subsequent reporting period. 

See further discussion of the adoption of

this accounting standard and a summary of the Company’s revised Accounting Policy for Allowance for Credit Losses in Note 2,

Summary of Significant Accounting Policies. Detailed discussion of our measurement of allowance under CECL as of the adoption

date and September 30, 2020 is below.

The following tables summarize activity in the allowance for credit losses

:

Three Months Ended September 30, 2020

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

48,550

$

7,962

$

7,132

$

—

$

63,644

 Charge-offs

(10,509)

(633)

(524)

—

(11,666)

 Recoveries

983

101

94

—

1,178

Net charge-offs

(9,526)

(532)

(430)

—

(10,488)

Realized cashflows from Residual Income

965

—

—

—

965

 Provision for credit losses

7,226

(3,974)

3,952

—

7,204

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Three Months Ended September 30, 2019

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

13,416

$

1,940

$

1,421

$

—

$

16,777

 Charge-offs

(5,023)

(417)

(526)

—

(5,966)

 Recoveries

457

227

54

—

738

 Net charge-offs

(4,566)

(190)

(472)

—

(5,228)

 Provision for credit losses

6,799

346

517

—

7,662

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

-20-

Nine Months Ended September 30, 2020

(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 ASU 2016-13 (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

(24,723)

(2,598)

(2,157)

—

(29,478)

 Recoveries

2,237

156

257

—

2,650

Net charge-offs

(22,486)

(2,442)

(1,900)

—

(26,828)

Realized cashflows from Residual Income

3,390

—

—

—

3,390

 Provision for credit losses

38,713

4,002

8,445

—

51,160

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Nine Months Ended September 30, 2019

(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

(13,863)

(1,692)

(1,200)

—

(16,755)

 Recoveries

1,671

298

116

—

2,085

 Net charge-offs

(12,192)

(1,394)

(1,084)

—

(14,670)

 Provision for credit losses

14,310

2,023

1,448

—

17,781

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

__________________

(1)

 The Company adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on

Financial Instruments

, which changed our accounting policy and estimated allowance, effective January 1, 2020. See further

discussion in Note 2, “Summary of Significant Accounting Policies”, and below.

Estimate of Current Expected Credit Losses (CECL)

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 after charge-off, amounts related to initial direct cost and origination costs net of fees deferred, accrued interest receivable

and certain future cashflows from residual assets. 

-21-

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. As part of the 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.

Current Measurement 

The Company selected a vintage loss model as the approach to estimate and measure its expected credit losses for all portfolio

segments and for all pools, primarily because the timing of the losses realized has been consistent across historical vintages, such that

the company is able to develop a predictable and reliable loss curve for each separate portfolio segment. The vintage model assigns

loans to vintages by origination date, measures our historical average actual loss and recovery experience within that vintage, develops

a loss curve based on the averages of all vintages, and predicts (or forecasts) the remaining expected net losses of the current portfolio

by applying the expected net loss rates to the remaining life of each open vintage.

Additional detail specific to the measurement of each portfolio segment under CECL as of January 1, 2020 and September 30, 2020, is

summarized below. 

Equipment Finance:

Equipment Finance consists of Equipment Finance Agreements, Installment Purchase Agreements and other leases and loans. 

The risk characteristics referenced to develop pools of Equip ment Finance leases and loans are based on internally developed

credit score ratings, 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. In addition, the Company separately

measured a pool of true leases so that any future cashflows from residuals could be used to partially offset the allowance for

that pool. 

The Company’s measurement of Equipment Finance pools is based on its own historical loss experience. The Company

analyzed the correlation of its own loss data from 2004 to 2019 against various economic variables in order to determine an

approach for reasonable and supportable forecast. The Company then selected certain economic variables to reference for its

forecast about the future, specifically the unemployment rate and growth in business bankruptcy. The Company’s

methodology reverts from the forecast data to its own loss data adjusted for the long-term average of the referenced economic

variables, on a straight-line basis.

At each reporting date, the Company considers current conditions, including changes in portfolio composition or the business

environment, when determining the appropriate measurement of current expected credit losses for the remaining life of its

portfolio. As of the January 1, 2020 adoption date, the Company utilized a 12 -month forecast period and 12-month straight-

line reversion period, based on its initial assessment of the appropriate timing. 

However, starting with the March 31, 2020 measurement, the Company adjusted its model to reference a 6-month forecast

period and 12-month straight line reversion period. The change in the length of the reasonable and supportable forecast was

based on observed market volatility in late March, and the Company continues to reference a 6-month forecast period at

September 30, 2020 due to continuing uncertainty of the duration and level of impact of the COVID-19 virus on the

macroeconomic environment and the Company’s portfolio, including uncertainty about the forecasted impact of COVID -19

that was underlying its economic forecasted variables beyond a 6-month period. The forecast adjustment to the Equipment

Finance portfolio segment resulted in the recognition of provision of $

1.2

 million and $

22.2

 million for the three- and nine -

months ended September 30, 2020, respectively. 

After completing the forecast adjustment, the Company assessed the output of the Equipment Finance reserve estimate and

increased the reserve for a $

0.9

 million qualitative adjustment as of September 30, 2020, primarily based on an analysis that

incorporates the current forecasted peak levels of unemployment and business bankruptcy.

-22-

Working Capital:

The risk characteristics referenced to develop pools of Working Capital loans is based on origination channel, separately

considering an estimation of loss for direct-sourced loans versus loans that were sourced from a broker. The Company’s

historical relationship with its direct-sourced customers typically results in a lower level of credit risk than loans sourced

from brokers where the Company has no prior credit relationship with the customer. 

The Company’s measurement of Working Capital pools is based on its own historical loss experience. The Company’s

Working Capital loans typically range from 6 – 12 months of duration. For this portfolio segment, due to the short contract

duration, the Company did not define a standard methodology to adjust its loss estimate based on a forecast of economic

conditions. However, the Company will continually assess through a qualitative adjustment whether there are changes in

conditions and the environment that will impact the performance of these loans that should be considered for qualitative

adjustment.

At each reporting date, the Company considers current conditions, inclu ding changes in portfolio composition or the business

environment, when determining the appropriate measurement of current expected credit losses for the remaining life of its

portfolio. As of the January 1, 2020 adoption date, there was no qualitative adjustment to the Working Capital portfolio. 

However, starting with its March 31, 2020 measurement, driven by the elevated risk of credit loss driven by market

conditions due to COVID-19, the Company developed alternate scenarios for credit loss based on an analysis of the

characteristics of its portfolio, considering different timing and magnitudes of potential exposures. 

During the third quarter, the Company updated its expectation for credit losses for the Working Capital segment based on the

favorable actual portfolio performance during the quarter and a revised forecast based on its current assessment of risks in the

portfolio. Based on that analysis, the Company recognized a reserve reduction of $

3.9

 million for the three months ended

September 30, 2020, bringing the provision associated with qualitative adjustments to $

3.1

 million for the nine months ended

September 30, 2020.

Commercial Vehicle Group (CVG):

Transportation-related equipment leases and loans are analyzed as a single pool, as the Company did not consider any risk

characteristics to be significant enough to warrant disaggregating this population. 

The Company’s measurement of CVG is based on a combination of its own historical loss experience and industry loss data

from an external source. The Company has limited history of this product, and therefore the Company determined it was

appropriate to develop an estimate based on a combination of internal and industry data. Due to the Company’s limited

history of performance of this segment, and the limited size of the portfolio, the Company did not develop a standard

methodology to adjust its loss estimate based on a forecast of economic conditions. However, the Company will continually

assess through a qualitative adjustment whether there are changes in conditions and the environment that will impact the

performance of these loans that should be considered for qualitative adjustment.

At each reporting date, the Company considers current conditions, including changes in portfolio composition or the business

environment, when determining the appropriate measurement for the remaining life of the current portfolio. As of the

January 1, 2020 adoption date, there were no qualitative adjustment to the CVG portfolio. However, starting with the March

31, 2020 measurement, driven by the elevated risk of credit loss driven by market conditions due to COVID-19, the

Company developed alternate scenarios for expected credit loss for this segment, considering different timing and

magnitudes of potential exposures. 

During the third quarter, the Company updated its expectation for credit losses for the CVG segment, including separately

assessing the elevated risks of a population of motor coach industry contracts that are facing prolonged impacts from

COVID-19. Primarily driven by that population, the Company recognized provision related to CVG for the third quarter of

$

3.8

 million, which increased the year to date qualitative adjustments for COVID-19 related risks to $

7.0

 million for this

portfolio segment.

-23-

Community Reinvestment Act (CRA) Loans:

CRA loans are comprised of loans originated under a line of credit to satisfy the Company’s obligations under the CRA. The

Company does not measure an allowance specific to this population because the exposure to credit loss is nominal.

For the three- and nine - months ended September 30, 2020, the Company has recognized $

1.9

 million and $

36.6

 million of provision,

respectively, driven by increasing the allowance for qualitative and forecast adjustments as a result of conditions driven by the

COVID-19 pandemic. The COVID-19 pandemic, business shutdowns and impacts to our customers, 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. 

Further, the Company instituted a Loan modification payment deferral program, as discussed further below, to give payment relief to

customers during this period. As of September 30, 2020, the ultimate performance of loans modified under that program remains

uncertain, due to the timing of the modified loans resuming payment. 

Our reserve as of September 30, 2020, and the qualitative and economic adjustments discussed above, were calculated referencing our

historical loss experience, including loss experience through the 2008 economic cycle, and our adjustments to that experience based

on our judgements about the extent of the impact of the COVID -19 pandemic. Those judgements include certain expectations 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 revise our estimate of credit losses in the future, and such amounts may be significant, based on (i) the actual performance of our

portfolio, including the performance of the modified portfolio, (ii) any further changes in the economic environment, or (iii) other

developments or unforeseen circumstances that impact our portfolio.

Loan Modification Program:

In response to COVID-19, starting in mid-March 2020, the Company instituted a payment deferral program in order to assist its small-

business customers that requested relief and were current under their existing agreement. The payment deferral program allows for up

to 6 months of fully deferred or reduced payments. 

The below table outlines certain data on the modified population with details of count and net investment balance, with all information

as of September 30, 2020.

-24-

Equipment

Working

(Dollars in thousands)

Finance

CVG

Capital

Total

Modified leases and loans receivable

4,437

431

369

5,237

Resolved (payoff, chargeoff)

(1)

230

20

122

372

Total Program, number of contracts

4,667

451

491

5,609

Current Quarter Population Changes:

Q3 - New modification

$

6,689

$

2,468

$

286

$

9,443

Q3 - Extended modification

5,547

8,412

2,458

16,417

Last Modified in Q2 or Q1

79,664

14,892

9,466

104,022

Total Modifications, Net investment receivable

$

91,900

$

25,772

$

12,210

$

129,882

% of total segment receivables

11.4%

33.6%

46.1%

14.3%

Deferral Status:

Out of deferral

$

82,978

$

16,649

$

9,489

$

109,116

In deferral period - partial payment during deferral

6,372

3,163

2,721

12,256

In deferral period - full deferral of payment

2,550

5,960

—

8,510

Total Modifications, Net investment receivable

(2)

$

91,900

$

25,772

$

12,210

$

129,882

Modifications 30+ Days Delinquent:

Out of deferral

$

3,352

$

1,367

$

320

$

5,039

In deferral period, with partial payment during

deferral

639

462

99

1,200

_________________

(1)

Total resolved modifications include

41

 contracts charged off where $

574

 thousand credit loss was realized, and

331

contracts that paid in full.

(2)

Out of the deferral period represents the month in which the contract returns to its regular contract schedule for the entire

month. For loans in deferral period, the deferral may either be full, with zero payment owed during the deferral period, or

partial, with reduced payments during deferral that are primarily

25

%-

50

% of schedule, or the deferral period payment may

be a nominal amount. In all cases, information is presented with respect to the contracts’ current deferral terms as of

September 30, 2020.

As of September 30, 2020, $

109.1

 million, or

84

% of our total modified contracts are out of the deferral period, and the current

deferral period will expire for substantially all of the remaining modified contracts before December 31, 2020. We are closely

monitoring the performance of the modified contracts as their deferral period expires. As of the end of the third quarter we have

stopped taking new applications for modifications, although we may consider offering extensions in select cases as part of our loss

mitigation strategies. 

TDRs are restructurings of leases and loans in which, due to the borrower's financial difficulties, a lender grants a concession that it

would not otherwise consider for borrowers of similar credit quality. In accordance with the interagency guidance as updated in April

2020, that the FASB concurred with, loans modified under the Company’s payment deferral program are not considered TDRs. As of

September 30, 2020 and December 31, 2019, the Company did

no

t have any TDRs.

-25-

Credit Quality

At origination, the Company utilizes an internally developed credit score ratings as part of its underwriting assessment and pricing

decisions for new contracts. The internal credit score 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. The internal credit score is

used to create pools of loans for analysis in the Company’s Equipment Finance portfolio segment, as discussed further above. We

believe this segmentation allows our loss modeling to properly reflect changes in portfolio mix driven by sales activity and

adjustments to underwriting standards. However, this score is not updated after origination date for analyzing the Company’s

provision.

On an ongoing basis, to monitor the credit quality of its portfolio, the Company primarily reviews the current delinquency of the

portfolio and delinquency migration to monitor risk and default trends. We believe that delinquency is the best factor to use to monitor

the credit quality of our portfolio on an ongoing basis because it reflects the current condition of the portfolio, and is a good predictor

of near term charge-offs and can help with identifying trends and emerging risks to the portfolio. 

The following tables provide information about delinquent leases and loans in the Company’s portfolio based on the contract’s status

as-of the dates presented. In particular, contracts that are part of the Loan Modification Program discussed above are presented in the

below delinquency table and the non-accrual information for September 30, 2020 based on their status with respect to the modified

terms. See Loan Modification section above for delinquency data specific to the modified portfolio.

-26-

Portfolio by Origination Year as of September 30, 2020

Total

2020

2019

2018

2017

2016

Prior

Receivables

(Dollars in thousands)

Equipment Finance

30-59

$

837

$

2,103

$

1,387

$

740

$

316

$

71

$

5,454

60-89

520

1,692

1,182

748

315

39

4,496

90+

334

2,789

1,444

1,220

294

42

6,123

Total Past Due

1,691

6,584

4,013

2,708

925

152

16,073

Current

214,104

306,024

158,593

79,064

26,424

3,407

787,616

Total

215,795

312,608

162,606

81,772

27,349

3,559

803,689

Working Capital

30-59

71

328

—

—

—

—

399

60-89

133

18

—

—

—

—

151

90+

6

222

—

—

—

—

228

Total Past Due

210

568

—

—

—

—

778

Current

11,521

13,996

139

38

—

—

25,694

Total

11,731

14,564

139

38

—

—

26,472

CVG

30-59

90

467

73

92

26

—

748

60-89

588

307

336

—

—

—

1,231

90+

—

56

584

50

11

—

701

Total Past Due

678

830

993

142

37

—

2,680

Current

13,971

34,922

15,342

7,447

2,364

52

74,098

Total

14,649

35,752

16,335

7,589

2,401

52

76,778

CRA

Total Past Due

—

—

—

—

—

—

—

Current

1,114

—

—

—

—

—

1,114

Total

1,114

—

—

—

—

—

1,114

Net investment in leases

and loans, before allowance

$

243,289

$

362,924

$

179,080

$

89,399

$

29,750

$

3,611

$

908,053

-27-

Portfolio by Origination Year as of December 31, 2019

Total

2019

2018

2017

2016

2015

Prior

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

Net investments in Equipment Finance and CVG leases and loans are generally charged-off when they are contractually past due for

120 days or more. Income recognition is discontinued when a default on monthly payment exists for a period of 90 days or more.

Income recognition resumes when a lease or loan becomes less than 90 days delinquent. At September 30, 2020 and December 31,

2019, there were

no

 finance receivables past due 90 days or more and still accruing. 

-28-

Working Capital Loans are generally placed in non-accrual status when they are 30 days past due and generally charged-off at 60 days

past due. The loan is removed from non-accrual status once sufficient payments are made to bring the loan current and reviewed by

management. At September 30, 2020 and December 31, 2019, there were

no

 Working Capital Loans past due 30 days or more and still

accruing.

The following tables provide information about non-accrual leases and loans:

September 30,

December 31,

(Dollars in thousands)

2020

2019

Equipment Finance

$

6,345

$

4,256

Working Capital Loans

1,144

946

CVG

886

389

Total Non-Accrual

$

8,375

$

5,591

NOTE 7 - Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance of $

6.7

 million at December 31, 2019 included $

1.2

 million from the Company’s acquisition of

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. 

The Company assigns its goodwill to a single, consolidated reporting unit, Marlin Business Services Corp. In the first quarter of 2020,

events or circumstances indicated that it was more likely than not that the fair value of its reporting unit was less than its carrying

amount, driven in part by market capitalization of the Company falling below its book value, and negative current events that impact

the Company related to the COVID-19 economic shutdown. The Company calculated the fair value of the reporting unit, by taking

the average stock price over a reasonable period of time multiplied by shares outstanding as of March 31, 2020 and then further

applying a control premium, and compared it to its carrying amount, including goodwill. The Company concluded that the implied

fair value of goodwill was less than its carrying amount, and recognized impairment equal to the $

6.7

 million balance in the

Consolidated Statements of Operations. 

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2020 are as follows:

(Dollars in thousands)

Total Company

Balance at December 31, 2019

$

6,735

Impairment of Goodwill

(6,735)

Balance at September 30, 2020

$

—

Intangible assets

The following table presents details of the Company’s intangible assets:

-29-

(Dollars in thousands)

Gross Carrying

Accumulated

Net

Amount

Amortization

Value

As of September 30, 2020

Vendor relationships

$

7,290

$

1,472

$

5,818

Corporate trade name

60

32

28

 Total

$

7,350

$

1,504

$

5,846

As of December 31, 2019

Useful Life

Lender relationships

3

 to 

10

years

$

1,630

$

519

$

1,111

Vendor relationships

11

years

7,290

974

6,316

Corporate trade name

7

years

60

26

34

 Total

$

8,980

$

1,519

$

7,461

(Dollars in thousands)

FFR

HKF

Total

Beginning Balance, December 31, 2019

$

6,758

$

703

$

7,461

Amortization Expense

(530)

(69)

(599)

Impairment

(1,016)

—

(1,016)

Ending Balance, September 30, 2020

$

5,212

$

634

$

5,846

The Company’s intangible assets consist of definite-lived assets in connection with the January 2017 acquisition of HKF, and definite-

lived intangible assets in connection with the September 2018 acquisition of FFR. The Company has

no

 indefinite-lived intangible

assets. 

In the three months ended September 30, 2020, the Company determined that a decrease in projected volumes for its FFR business

and a decrease in the sales team that supports that business resulted in a triggering event that warranted a review of the recoverability

of the related vendor relationship and lender relationship intangible assets. Those assets were evaluated as separate asset groups, as

they generate independent cashflows, such that the vendor relationships relate to the origination of contracts and the lend er

relationships relate to the sale or syndication of contracts. The estimate of fair value was modeled based on an expected cashflow

analysis. As a result of those analyses, there was no impairment related to the FFR vendor relationship intangible, and the Company

recognized $

1.0

 million of impairment for the FFR lender relationship intangible. This impairment is reflected in Intangible

impairment in the Consolidated Statement of Operations.

Amortization related to the Company’s definite lived intangible assets was $

0.6

 million and $

0.7

 million for the nine-month periods

ended September 30, 2020 and September 30, 2019, respectively.

The Company expects the amortization expense for the next five years will be as follows:

Amortization

(Dollars in thousands)

Expense

Remainder of 2020

$

168

2021

671

2022

671

2023

671

2024

663

-30-

NOTE 8 – Other Assets

Other assets are comprised of the following:

September 30,

December 31,

2020

2019

(Dollars in thousands)

Accrued fees receivable

$

2,816

$

3,509

Prepaid expenses

2,393

2,872

Federal Reserve Bank Stock

1,711

1,711

Other 

1,606

2,361

$

8,526

$

10,453

NOTE 9 – Deposits

MBB serves as the Company’s primary funding source. MBB issues fixed-rate FDIC-insured certificates of deposit raised nationally

through various brokered deposit relationships and fixed-rate FDIC-insured deposits received from direct sources. MBB offers FDIC-

insured money market deposit accounts (the “MMDA Product”) through participation in a partner bank’s insured savings account

product. This brokered deposit product has a variable rate, no maturity date and is offered to the clients of the partner bank and

recorded as a single deposit account at MBB. As of September 30, 2020, money market deposit accounts totaled $

52.7

 million.

As of September 30, 2020, the scheduled maturities of certificates of deposits are as follows:

Scheduled

Dollars in thousands

Maturities

Period Ending December 31,

Remainder of 2020

$

166,820

2021

312,968

2022

154,949

2023

76,924

2024

42,181

Thereafter

17,934

Total

$

771,776

Certificates of deposits issued by MBB are time deposits and are generally issued in denominations of $

250,000

 or less. The MMDA

Product is also issued to customers in amounts less than $

250,000

. The FDIC insures deposits up to $

250,000

 per depositor. The

weighted average all-in interest rate of deposits at September 30, 2020 was

1.92

%.

NOTE 10 – Debt and Financing Arrangements

Short-Term Borrowings

The Company had a secured, variable rate revolving line of credit in the amount of $

5.0

 million that was scheduled to expire on

November 20, 2020

. The line of credit was terminated by mutual agreement with the line of credit provider in July 2020.

Long-term Borrowings

On July 27, 2018, the Company completed a $

201.7

 million asset-backed term securitization. Each tranche of the term note

securitization has a fixed term, fixed interest rate and fixed principal amount. At September 30, 2020, outstanding term securitizations

amounted to $

40.0

 million and are collateralized by $

42.8

 million of minimum lease and loan payments receivable and $

5.8

 million of

restricted interest-earning deposits. The Company’s term note securitizations are classified as long-term borrowings.

-31-

The balance of long-term borrowings consisted of the following:

September 30,

December 31,

2020

2019

(Dollars in thousands)

Term securitization 2018 -1

$

40,031

$

76,563

Unamortized debt issuance costs

(198)

(472)

$

39,833

$

76,091

The term note securitization is summarized below:

Outstanding Balance as of

Notes

Final

Original 

September 30,

December 31,

Originally 

Maturity 

Coupon 

2020

2019

Issued

Date

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 

8,391

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

$

40,031

$

76,563

$

201,650

3.05

%

(1)(2)

__________________

(1)

Represents the original weighted average initial coupon rate for all tranches of the securitization. In addition to this coupon

interest, term note securitizations have other transaction costs which are amortized over the life of the borrowings as additional

interest expense.

 (2)

The weighted average coupon rate of the 2018-1 term note securitization will approximate

3.77

% over the remaining term of the

borrowing.

Scheduled principal and interest payments on outstanding borrowings as of September 30, 2020 are as follows:

Principal

Interest

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

7,820

$

358

2021

23,629

813

2022

8,582

159

$

40,031

$

1,330

-32-

NOTE 11 – Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments

Fair Value Measurements

Fair value is defined in GAAP as the price that would be received to sell an asset or the price that would be paid to transfer a liability

on the measurement date. GAAP focuses on the exit price in the principal or most advantageous market for the asset or liability in an

orderly transaction between market participants. A three-level valuation hierarchy is required for disclosure of fair value

measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The fair value

hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the

lowest priority to unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its

entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

The Company’s balances measured at fair value on a recurring basis include the following as of September 30, 2020 and December

31, 2019:

September 30, 2020

December 31, 2019

Fair Value Measurements Using

Fair Value Measurements Using

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

(Dollars in thousands)

Assets

ABS

$

—

$

3,836

$

—

$

—

$

4,332

$

—

Municipal securities

—

3,169

—

—

3,129

—

Mutual fund

3,756

—

—

3,615

—

—

At this time, the Company has not elected to report any assets and liabilities using the fair value option. There have been no transfers

between Level 1 and Level 2 of the fair value hierarchy for any of the periods presented.

Non-Recurring Measurements

Non-recurring fair value measurements include assets and liabilities that are periodically remeasured or assessed for impairment using

Fair value measurements. Non-recurring measurements include the Company’s evaluation of goodwill and residual assets for

impairment, and the Company’s remeasurement of contingent consideration and assessment of the carrying amount of its servicing

liability. 

For the nine months ended September 30, 2020, the Company recognized $

6.7

 million for the impairment of goodwill and in the three-

and nine-months ended September 30, 2020, $

1.0

 million for the impairment of intangible assets, as discussed further in Note 7,

Goodwill and Intangible Assets. In addition, in the three-and nine-months ended September 30, 2020 the Company updated its fair

value measurement of contingent consideration liability in connection with the 2018 FFR acquisition due to lower forecasted volumes

for that business, resulting in a $

1.4

 million reduction in that liability which was recognized as a reduction in General and

administrative expense.

For the nine months ended September 30, 2019, there were no significant amounts recognized in the Consolidated Statements of

Operations in connection with non-recurring fair value measurements.

Fair Value of Other Financial Instruments 

The following summarizes the carrying amount and estimated fair value of the Company’s other financial instruments, including those

not measured at fair value on a recurring basis:

-33-

September 30, 2020

December 31, 2019

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

$

195,132

$

195,132

$

123,096

$

123,096

Time deposits with banks

8,456

8,515

12,927

12,970

Restricted interest-earning deposits with banks

5,771

5,771

6,931

6,931

Loans, net of allowance

509,936

517,269

588,688

593,406

Federal Reserve Bank Stock

1,711

1,711

1,711

1,711

Financial Liabilities

 Deposits

$

823,707

$

787,478

$

839,132

$

846,304

 Long-term borrowings

39,833

40,344

76,091

76,781

There have been no significant changes in the methods and assumptions used in estimating the fair values of financial instruments, as

outlined in our consolidated financial statements and note disclosures in the Company’s Form 10-K for the year ended December 31,

2019.

-34-

NOTE 12 – Earnings Per Share 

The Company’s restricted stock awards are paid non-forfeitable common stock dividends and thus meet the criteria of participating

securities. Accordingly, earnings per share (“EPS”) has been calculated using the two-class method, under which earnings are

allocated to both common stock and participating securities. 

Basic EPS has been computed by dividing net income or loss allocated to common stock by the weighted average common shares

used in computing basic EPS. For the computation of basic EPS, all shares of restricted stock have been deducted from the weighted

average shares outstanding. 

Diluted EPS has been computed by dividing net income or loss allocated to common stock by the weighted average number of

common shares used in computing basic EPS, further adjusted by including the dilutive impact of the exercise or conversion of

common stock equivalents, such as stock options, into shares of common stock as if those securities were exercised or converted.

The following table provides net income and shares used in computing basic and diluted EPS:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands, except per-share data)

Basic EPS

Net income (loss)

$

2,743

$

7,446

$

(14,960)

$

18,702

Less: net income allocated to participating securities

(36)

(89)

—

(237)

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Weighted average common shares outstanding 

11,946,549

12,203,086

11,951,375

12,290,906

Less: Unvested restricted stock awards considered participating

securities

(155,408)

(148,142)

(142,186)

(156,116)

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Basic EPS

$

0.23

$

0.61

$

(1.27)

$

1.52

Diluted EPS

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Add: Effect of dilutive stock-based compensation awards

41,272

113,018

—

94,186

Adjusted weighted average common shares used in computing

diluted EPS

11,832,413

12,167,962

11,809,189

12,228,976

Diluted EPS

$

0.23

$

0.60

$

(1.27)

$

1.51

For the three-month periods ended September 30, 2020 and September 30, 2019, weighted average outstanding stock-based

compensation awards in the amount of

230,428

 and

157,952

, respectively, were considered antidilutive and therefore were not

considered in the computation of potential common shares for purposes of diluted EPS. 

For the nine-month periods ended September 30, 2020 and September 30, 2019, weighted average outstanding stock-based

compensation awards in the amount of

286,349

 and

172,473

, respectively, were considered antidilutive and therefore were not

considered in the computation of potential common shares for purposes of diluted EPS.

-35-

NOTE 13 – Stockholders’ Equity 

Share Repurchases

During the three-month period ended September 30, 2020, the Company did

no

t purchase any shares of its common stock under any

stock repurchase plan. During the nine-month period ended September 30, 2020, the Company purchased

264,470

 shares of its

common stock under a stock repurchase plan approved by the Company’s Board of Directors on August 1, 2019 (the “2019

Repurchase Plan”) at an average cost of $

16.09

 per share.

During the three-month period ended September 30, 2019, the Company purchased

144,729

 shares of its common stock in the open

market under a stock repurchase plan approved by the Company’s Board of Directors on May 30, 2017 (the “2017 Repurchase Plan”)

at an average cost of $

23.00

 per share. During the nine-month period ended September 30, 2019, the Company purchased

247,500

shares of its common stock under the 2017 Repurchase Plan at an average cost of $

23.24

 per share.

At September 30, 2020, the Company had $

4.7

 million of remaining authorizations under the 2019 Repurchase Plan. 

In addition to the repurchases described above, participants in the Company’s 2014 Equity Compensation Plan (approved by the

Company’s shareholders on June 3, 2014) (the “2014 Plan”) may have shares withheld to cover income taxes. During the three-month

periods ended September 30, 2020 and September 30, 2019, there were

18,446

 shares and

2,654

 shares repurchased to cover income

tax withholding under the 2014 Plan at an average cost of $

8.06

 per share and $

23.80

 per share, respectively. During the nine-month

periods ended September 30, 2020 and September 30, 2019, there were

41,466

 and

22,100

 shares repurchased to cover income tax

withholding in connection with shares granted under the 2014 Plan at average per-share costs of $

10.70

 and $

22.87

, respectively.

Regulatory Capital Requirements

Through its issuance of FDIC-insured deposits, MBB serves as the Company’s primary funding source. Over time, MBB may offer

other products and services to the Company’s customer base. MBB operates as a Utah state-chartered, Federal Reserve member

commercial bank, insured by the FDIC. As a state-chartered Federal Reserve member bank, MBB is supervised by both the Federal

Reserve Bank of San Francisco and the Utah Department of Financial Institutions.

The Company and MBB are subject to capital adequacy regulations issued jointly by the federal bank regulatory agencies. These risk-

based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among

banking organizations and consider off -balance sheet exposures in determining capital adequacy. The federal bank regulatory agencies

and/or the U.S. Congress may determine to increase capital requirements in the future due to the current economic environment.

Under the capital adequacy regulation, at least half of a banking organization’s total capital is required to be "Tier 1 Capital" as

defined in the regulations, comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual

preferred stock. The remaining capital, "Tier 2 Capital," as defined in the regulations, may consist of other preferred stock, a limited

amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The regulations establish minimum

leverage ratios for banking organizations, which are calculated by dividing Tier 1 Capital by total average assets. Recognizing that the

risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banking

organizations are expected to maintain capital in excess of the minimum standards. 

The Company and MBB operate under the Basel III capital adequacy standards. These standards require a minimum for Tier 1

leverage ratio of

4

%, minimum Tier 1 risk-based ratio of

6

%, and a total risk-based capital ratio of

8

%. The Basel III capital adequacy

standards established a new common equity Tier 1 risk-based capital ratio with a required

4.5

% minimum (

6.5

% to be considered

well-capitalized). The Company is required to have a level of regulatory capital in excess of the regulatory minimum and to have a

capital buffer above

2.5

%. If a banking organization does not maintain capital above the minimum plus the capital conservation buffer

it may be subject to restrictions on dividends, share buybacks, and certain discretionary payments such as bonus payments. 

CMLA Agreement. 

On March 25, 2020, MBB received notice from the FDIC that it had approved MBB’s request to rescind certain

nonstandard conditions in the FDIC’s order granting federal deposit insurance issued on March 20, 2007. Furthermore, effective

March 26, 2020, the FDIC, the Company and certain of the Company’s subsidiaries terminated the Capital Maintenance and Liquidity

Agreement (the “CMLA Agreement”) and the Parent Company Agreement, each entered into by and among the Company, certain of

its subsidiaries and the FDIC in conjunction with the opening of MBB. As a result of these actions, MBB is no longer required

-36-

pursuant to the CMLA Agreement to maintain a total risk-based capital ratio above

15

%. Rather, MBB must continue to maintain a

total risk-based capital ratio above 10% in order to maintain “well-capitalized” status as defined by banking regulations, while the

Company must continue to maintain a total risk-based capital ratio as discussed in the immediately preceding paragraph. The

additional capital released by the termination of the CMLA Agreement is held at MBB and is subject to the restrictions outlined in

Title 12 part 208 of the Code of Federal Regulations (12 CFR 208.5), which places limitations on bank dividends, including restricting

dividends for any year to the earnings from the current and prior two calendar years. Any dividends declared above that amount and

any return of permanent capital would require prior approval of the Federal Reserve Board of Governors. As of September 30, 2020,

MBB does not have the capacity to pay dividends to the Company without explicit approval from the Federal Reserve Board of

Governors because of the current period losses and the amount of cumulative dividends paid over the past two years.

MBB’s Tier 1 Capital balance at September 30, 2020 was $

139.4

 million, which met all capital requirements to which MBB is subject

and qualified MBB for “well-capitalized” status. At September 30, 2020, the Company also exceeded its regulatory capital

requirements and was considered “well-capitalized” as defined by federal banking regulations and as required by the FDIC

Agreement. 

CECL Capital Transition. 

The Company adopted CECL, or a new measurement methodology for the allowance estimate, on January

1, 2020, as discussed further in Note 2—Summary of Significant Accounting Policies. Rules governing the Company’s 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. The Company

has elected to avail itself of the five-year transition. For measurements of regulatory capital in 2020 and 2021 , under the two year

delay the Company shall prepare: (i) a measurement of its estimated allowance for credit losses under CECL, as reported in its balance

sheets; and (ii) a measurement of its estimated allowance under the historical incurred loss methodology, as prescribed by the

regulatory calculation. Any amount of provisions under CECL that is in excess of the incurred estimate will be an adjustment the

Company’s capital during the two-year delay. The three-year transition, starting in 2022, will phase in that adjustment straight-line,

such that

25

 percent of the transitional amounts will be included in the first year, and an additional

25

% over each of the next two

years, such that we will have phased in

75

% of the adjustment during year three. At the beginning of year 6 (2025) the Company will

have completely reflected the effects of CECL in its regulatory capital.

-37-

The following table sets forth the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio

and total risk-based capital ratio for Marlin Business Services Corp. and MBB at September 30, 2020.

Minimum Capital

Well-Capitalized Capital

Actual

Requirement

Requirement

Ratio

Amount

Ratio

Amount

Ratio

Amount

(Dollars in thousands)

Tier 1 Leverage Capital

 Marlin Business Services Corp.

16.92%

$

192,218

4.00%

$

45,443

5.00%

$

56,804

 Marlin Business Bank

13.26%

$

139,365

4.00%

$

42,053

5.00%

$

52,566

Common Equity Tier 1 Risk-Based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

4.50%

$

40,860

6.50%

$

59,019

 Marlin Business Bank

16.88%

$

139,365

4.50%

$

37,147

6.50%

$

53,657

Tier 1 Risk-based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

6.00%

$

54,479

8.00%

$

72,639

 Marlin Business Bank

16.88%

$

139,365

6.00%

$

49,530

8.00%

$

66,040

Total Risk-based Capital

 Marlin Business Services Corp.

22.49%

$

204,185

8.00%

$

72,639

10.00%

$

90,799

 Marlin Business Bank

18.21%

$

150,285

8.00%

$

66,040

10.00%

$

82,550

Prompt Corrective Action

. The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal

regulators to take prompt corrective action against any undercapitalized institution. Five capital categories have been established

under federal banking regulations: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and

critically undercapitalized. Well-capitalized institutions significantly exceed the required minimum level for each relevant capital

measure. Adequately capitalized institutions include depository institutions that meet but do not significantly exceed the required

minimum level for each relevant capital measure. Undercapitalized institutions consist of those that fail to meet the required minimum

level for one or more relevant capital measures. Significantly undercapitalized characterizes depository institutions with capital levels

significantly below the minimum requirements for any relevant capital measure. Critically undercapitalized refers to depository

institutions with minimal capital and at serious risk for government seizure.

Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the

institution were in the next lower capital category. A depository institution is generally prohibited from making capital distributions,

including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. 

Institutions that are adequately capitalized but not well-capitalized cannot accept, renew or roll over brokered deposits except with a

waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized

institutions may not accept, renew or roll over brokered deposits.

The federal bank regulatory agencies are permitted or, in certain cases, required to take certain actions with respect to institutions

falling within one of the three undercapitalized categories. Depending on the level of an institution’s capital, the agency’s corrective

powers include, among other things: 

• prohibiting the payment of principal and interest on subordinated debt;

• prohibiting the holding company from making distributions without prior regulatory approval;

• placing limits on asset growth and restrictions on activities;

• placing additional restrictions on transactions with affiliates;

• restricting the interest rate the institution may pay on deposits;

-38-

• prohibiting the institution from accepting deposits from correspondent banks; and

• in the most severe cases, appointing a conservator or receiver for the institution.

A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted

unless, among other things, the banking institution’s holding company guarantees the plan up to a certain specified amount. Any such

guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. 

MBB’s total risk-based capital ratio of

18.21

% at September 30, 2020 exceeded the threshold for “well capitalized” status under the

applicable laws and regulations.

Dividends

. The Federal Reserve Board has issued policy statements requiring insured banks and bank holding companies to have an

established assessment process for maintaining capital comm ensurate with their overall risk profile. Such assessment process may

affect the ability of the organizations to pay dividends. Although generally organizations may pay dividends only out of current

operating earnings, dividends may be paid if the distribution is prudent relative to the organization’s financial position and risk profile,

after consideration of current and prospective economic conditions. As mentioned above, MBB’s ability to pay dividends to the

Company is subject to various regulatory requirements, including Title 12 part 208 of the Code of Federal Regulations (12 CFR

208.5), which places limitations on bank dividends. Furthermore, as a bank holding company, the Company’s ability to pay dividends

to its shareholders is also subject to various regulatory requirements, including Supervisory Letter SR 09-4,

Applying Supervisory

Guidance and Regulations on the Payment of Dividends, Stock Redemptions and Stock Repurchases at Bank Holding Companies

.

NOTE 14 – Stock-Based Compensation

Awards 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 and non-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

546,070

 shares available for future awards under the 2019 Plan as of September 30, 2020.

Total stock-based compensation expense was $

0.4

 million and $

0.9

 million for the three-month periods ended September 30, 2020 and

September 30, 2019, respectively. Total stock-based compensation expense was $

0.8

 million and $

2.8

 million for the nine-month

periods ended September 30, 2020 and September 30, 2019, respectively. Excess tax deficits from stock-based payment arrangements

were $

0.6

 million and $

0.1

 million for the nine-month periods ended September 30, 2020 and 2019, respectively.

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 with the

Company and provide for accelerated vesting if there is a change in control as defined in the Equity Compensation Plans. Employee

stock options generally vest over

three

 to

four years

.

There were

no

 stock options granted during the three-month and nine periods ended September 30, 2020 and September 30, 2019,

respectively.

The expected life for options is estimated based on their vesting and contractual terms and was determined by applying the simplified

method as defined by the SEC’s Staff Accounting Bulletin No. 107 (“SAB 107”). The risk-free interest rate reflected the yield on

zero-coupon Treasury securities with a term approximating the expected life of the stock options. The expected volatility was

determined using historical volatilities based on historical stock prices

-39-

.

A summary of option activity for the nine-month period ended September 30, 2020 follows:

Weighted

Average

Number of

Exercise Price

Options

Shares

Per Share

Outstanding, December 31, 2019

135,159

$

26.79

 Granted

—

—

 Exercised

—

—

 Forfeited

(3,929)

27.31

 Expired

(16,648)

26.19

Outstanding, September 30, 2020

114,582

26.87

The Company recognized $

0.1

 million of compensation expense related to options during the three and nine-month periods ended

September 30, 2020. The Company recognized $

0.1

 million and $

0.3

 million of compensation expense related to options during the

three and nine-month periods ended September 30, 2019. 

There were

no

 stock options exercised during the three or nine-month periods ended September 30, 2020 and September 30, 2019.

The following table summarizes information about the stock options outstanding and exercisable as of September 30, 2020:

Options Outstanding

 Options Exercisable

Weighted

Weighted

Aggregate

Weighted

Weighted

 Aggregate

Average

Average

Intrinsic

Average

Average

 Intrinsic

Range of 

Number

Remaining 

Exercise

Value

Number 

Remaining 

Exercise

 Value

Exercise Prices 

Outstanding 

Life (Years

)

Price

(In thousands)

Exercisable 

Life (Years

)

Price

(In thousands)

$

25.75

63,440

3.5

$

25.75

$

—

63,440

3.5

$

25.75

—

$

28.25

51,142

4.5

$

28.25

$

—

34,092

4.5

$

28.25

$

—

114,582

3.9

$

26.87

$

—

97,532

3.8

$

26.62

$

—

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock

price of $

7.05

 as of September 30, 2020, which would have been received by the option holders had all option holders exercised their

options as of that date.

As of September 30, 2020, there was $

0.1

 million of unrecognized compensation cost related to non-vested stock options not yet

recognized in the Consolidated Statements of Operations scheduled to be recognized over a weighted average period of

0.5

 year.

Restricted Stock Awards

The Company’s restricted stock awards provide that, during the applicable vesting periods, the shares awarded may not be sold or

transferred by the participant. The vesting period for restricted stock awards generally ranges from

three

 to

seven years

. All awards

issued contain service conditions based on the participant’s continued service with the Company and may provide for accelerated

vesting if there is a change in control as defined in the Equity Compensation Plans. 

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

-40-

described below. 

The Company also issues restricted stock to non-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.

The following table summarizes the activity of non-vested restricted stock for the nine-month period ended September 30, 2020:

Weighted

Average

Grant-Date

Non-vested restricted stock

Shares 

 Fair Value

Outstanding at December 31, 2019

143,935

$

21.88

 Granted

45,830

8.64

 Vested

(37,734)

23.04

 Forfeited

(2,750)

25.84

Outstanding at September 30, 2020

149,281

17.45

During the three-month period ended September 30, 2020, the Company did

no

t grant any restricted stock awards. During the three-

month period ended September 30, 2019, the Company granted restricted stock awards with grant-date fair values totaling $

0.4

million. During the nine-month periods ended September 30, 2020 and September 30, 2019, the Company granted restricted stock

awards with grant-date fair values totaling $

0.4

 million and $

0.4

 million, respectively. 

As vesting occurs, or is deemed likely to occur, compensation expense is recognized over the requisite service period and additional

paid-in capital is increased. The Company recognized $

0.1

 million and $

0.2

 million of compensation expense related to restricted

stock for the three-month periods ended September 30, 2020 and September 30, 2019, respectively. The Company recognized $

0.3

million and $

0.7

 million of compensation expense related to restricted stock for the nine-month periods ended September 30, 2020 and

September 30, 2019, respectively.

Of the $

0.3

 million total compensation expense related to restricted stock for the nine-month period ended September 30, 2020,

no

expense was related to accelerated vesting based on achievement of certain performance criteria determined annually. Of the $

0.7

million total compensation expense related to restricted stock for the nine-month period ended September 30, 2019 , approximately

$

0.1

 million related to accelerated vesting during the first quarter of 2019, which was also based on the achievement of certain

performance criteria determined annually.

As of September 30, 2020, there was $

1.4

 million of unrecognized compensation cost related to non-vested restricted stock

compensation scheduled to be recognized over a weighted average period of

4.8

 years. 

The fair value of shares that vested during the three-month periods ended September 30, 2020 and September 30, 2019 was $

0.1

million and $

0.2

 million, respectively. The fair value of shares that vested during the nine-month periods ended September 30, 2020

and September 30, 2019 was $

0.4

 million and $

1.3

 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, achievement of certain market-

based targets associated with the Company’s stock price or relative total shareholder return, or a combination of both performance

criteria and market-based targets.

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 performance conditions is recognized over the performance period based on the grant-date fair value of the

award for those awards which are expected to be earned.

-41-

The following tables summarize restricted stock unit activity for the nine-month period ended September 30, 2020:

Weighted

Average

Number of

Grant-Date

Performance-based & market-based RSUs

RSUs

 Fair Value

Outstanding at December 31, 2019

257,476

$

18.00

Granted

95,758

17.55

Forfeited

(5,081)

23.99

Converted

(65,810)

12.89

Cancelled due to non-achievement of market condition

(56,390)

18.19

Outstanding at September 30, 2020

225,953

19.12

Service-based RSUs

Outstanding at December 31, 2019

99,951

$

23.59

Granted

69,422

20.43

Forfeited

(24,016)

22.07

Converted

(39,879)

24.30

Outstanding at September 30, 2020

105,478

21.59

There were

no

 RSUs with vesting conditions based solely on market conditions granted during the nine-month periods ended

September 30, 2020 and September 30, 2019, respectively. 

The weighted average grant-date fair value of RSUs with both performance and market-based vesting conditions granted during the

nine-month periods ended September 30, 2020 and September 30, 2019 was $

12.90

 and $

12.91

 per unit, respectively. The weighted

average grant date fair value of these performance and market-based RSUs was estimated using a Monte Carlo simulation valuation

model with the following assumptions:

Nine Months Ended September 30,

2020

2019

Grant date stock price

$

20.43

$

21.50

Risk-free interest rate

1.40

%

2.16

Expected volatility

26.18

%

26.68

Dividend yield

—

—

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 the grant assumes dividends distributed during the performance period are reinvested. When valuing the grant, we have assumed a

dividend yield of zero, which is mathematically equivalent to reinvesting dividends in the issuing entity.

There were

no

 RSUs granted during the three-month periods ended September 30, 2020 and September 30, 2019, respectively. 

During the nine-month periods ended September 30, 2020 and September 30, 2019, the Company granted RSUs with grant-date fair

values totaling $

3.1

 million and $

3.4

 million, respectively. The fair value of restricted stock units that converted to shares of common

stock during the nine-month periods ended September 30, 2020 and September 30, 2019 was $

1.1

 million and $

0.8

 million,

respectively.

-42-

The Company recognized $

0.3

 million and $

0.6

 million of compensation expense related to RSUs for the three-month periods ended

September 30, 2020 and September 30, 2019, respectively. The Company recognized $

0.3

 million and $

1.7

 million of compensation

expense related to RSUs for the nine-month periods September 30, 2020 and September 30, 2019, respectively. During the nine-month

period ended September 30, 2020 the Company reversed $

0.7

 million of previously recognized compensation expense related to RSUs

based on the adjustment of the most probable performance assumptions related to certain non-market performance awards. As of

September 30, 2020, there was $

1.7

 million of unrecognized compensation cost related to RSUs scheduled to be recognized over a

weighted average period of

1.4

 years based on the most probable performance assumptions. In the event maximum performance

targets are achieved, an additional $

8.1

 million of compensation cost would be recognized over a weighted average period of

1.5

years. As of September 30, 2020,

3,960

 performance units are expected to convert to shares of common stock based on the most

probable performance assumptions. In the event maximum performance targets are achieved,

428,917

 performance units would

convert to shares of common stock.

NOTE 15 – Subsequent Events 

The Company declared a dividend of $

0.14

 per share on October 29, 2020. The quarterly dividend, which is expected to result in a

dividend payment of approximately $

1.7

 million, is scheduled to be paid on

November 19, 2020

 to shareholders of record on the close

of business on

November 9, 2020

. It represents the Company’s thirty-seventh consecutive quarterly cash dividend. The payment of

future dividends will be subject to satisfaction of regulatory requirements applicable to bank holding companies and approval by the

Company’s Board of Directors.

-43-

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our

Consolidated Financial Statements and the related notes thereto in our Form 10-K for the year ended December 31, 2019 filed with

the SEC.

This discussion contains certain statements of a forward -looking nature that involve risks and uncertainties.

F

ORWARD

-L

OOKING

S

TATEMENTS

Certain statements in this document may include the words or phrases “can be,” “expects,” “plans,” “may,” “may affect,” “may

depend,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “if” and similar words and phrases that constitute “forward-

looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”), and Section 21E

of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Investors are cautioned not to place undue reliance on these

forward-looking statements. Forward-looking statements are subject to various known and unknown risks and uncertainties and the

Company cautions that any forward-looking information provided by or on its behalf is not a guarantee of future performance.

Statements regarding the following subjects are forward-looking by their nature: (a) our business strategy; (b) our projected operating

results; (c) our ability to obtain external deposits or financing; (d) our understanding of our competition; and (e) industry and market

trends. The Company’s actual results could differ materially from those anticipated by such forward-looking statements due to a

number of factors, some of which are beyond the Company’s control, including, without limitation: 

◾

availability, terms and deployment of funding and capital; 

◾

changes in our industry, interest rates, the regulatory environment or the general economy resulting in changes to our

business strategy;

◾

the degree and nature of our competition;

◾

availability and retention of qualified personnel;

◾

general volatility of the capital markets;

◾

the effects of the COVID-19 pandemic; and

◾

the factors set forth in the section captioned “Risk Factors” in Item 1 of our Form 10-K for the year ended December 31,

2019 and in Part II—Item 1A of this Form 10-Q.

Forward-looking statements apply only as of the date made and the Company is not required to update forward-looking statements for

subsequent or unanticipated events or circumstances.

For any forward-looking statements contained in any document, we claim the

protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. As

used herein, the terms “Company,” “Marlin,” “Registrant,” “we,” “us” or “our” refer to Marlin Business Services Corp. and its

subsidiaries. 

O

VERVIEW

Founded in 1997, we are a nationwide provider of credit products and services to small and mid-sized businesses. The products and

services we provide to our customers include loans and leases for the acquisition of commercial equipment (including Commercial

Vehicle Group (“CVG”) assets) and working capital loans. In May 2000, we established AssuranceOne, Ltd., a Bermuda-based,

wholly-owned captive insurance subsidiary (“Assurance One”), which enables us to reinsure the property insurance coverage for the

equipment financed by Marlin Leasing Corporation (“MLC”) and Marlin Business Bank (“MBB”) for our small business customers.

In 2008, we opened MBB, a commercial bank chartered by the State of Utah and a member of the Federal Reserve System. MBB

serves as the Company’s primary funding source through its issuance of Federal Deposit Insurance Corporation (“FDIC”)-insured

deposits. In January 2017, we completed the acquisition of Horizon Keystone Financial (“HKF”), an equipment leasing company

which primarily identifies and sources lease and loan contracts for investor partners for a fee, and in September 2018, we completed

the acquisition of Fleet Financing Resources (“FFR”), an company specializing in the leasing and financing of both new and used

commercial vehicles, with an emphasis on livery equipment and other types of commercial vehicles used by small businesses.

We access our end user customers primarily through origination sources consisting of independent commercial equipment dealers,

various national account programs, through direct solicitation of our end user customers and through relationships with select lease

and loan brokers. We use both a telephonic direct sales model and, for strategic larger accounts, outside sales executives to market to

our origination sources and end user customers. Through these origination sources, we are able to cost-effectively access end user

customers while also helping our origination sources obtain financing for their customers.

-44-

We fund our business primarily through the issuance of fixed and variable-rate FDIC-insured deposits and money market demand

accounts raised nationally by MBB, sales of pools of leases or loans, as well as, from time to time, fixed-rate asset backed

securitization transactions. 

E

XECUTIVE

S

UMMARY

Through the third quarter, the impacts of the COVID-19 pandemic continued to be experienced by our business. We recognized $ 2.7

million Net income for the third quarter, returning to profitability after Net losses of $11.8 million and $5.9 million in the first and

second quarters of 2020, respectively. For the third quarter, our provision for credit losses related to the changing economic

conditions was $1.9 million, whereas we had significant reserve building in the first and second quarters of 2020 related to changing

economic conditions primarily resulting from the effects of COVID-19 of $19.2 million and $15.5 million, respectively. Our third

quarter results also reflected the positive effects of our cost reduction efforts, as we reduced Salary and benefits expense by $2.4

million and General and administrative expenses by $1.4 million as compared to the third quarter of 2019. We continue to assess all

other aspects of our expense base in order to stabilize our operations and minimize the negative impacts of the ongoing pandemic.

As has been the case since the beginning of the COVID-19 crisis, one primary operational priority has been working with existing

customers to protect the value of our portfolio and limiting the erosion of shareholder capital. As such, we have been intentionally

operating out of a more defensive position since the pandemic began. As anticipated, third quarter total sourced origination volume of

$68.5 million was well below our volume from last year due to a variety of factors, which include: (i) the purposeful actions we took

in the second and third quarters to reduce our workforce and re-position the frontend of our business; (ii) the continuing soft demand

for financing by the small business community due to challenges facing many industries resulting from the continued economic fallout

of COVID-19 across much of the United States; and (iii) lower approval rates stemming from our tighter underwriting criteria. We

expect our origination volumes for the remainder of 2020 will be negatively impacted as the effects of the pandemic continue and this

period of uncertainty continues to impact the macroeconomic environment. Given the ongoing health crisis in the United States, any

return to pre-pandemic levels of activity remains uncertain.

As of September 30, 2020, $129.9 million of net investment, or 14.3%, have been part of our payment deferral contract modification

program that was instituted in March to assist our customers who have experienced difficulty from the economic impacts of COVID-

19. In the third quarter, we completed new modifications or extended modified terms for 725 contracts totaling $25.9 million net

investment, bringing our total modified portfolio to $129.8 million, or 14.3% of our net investment at the end of the third quarter. As

of the end of the third quarter we have stopped taking new applications for modifications, although we may consider offering

extensions in select cases as part of our loss mitigation strategies.

As of September 30, 2020 84% of our modified contracts are out of the deferral period, and the current deferral period will expire for

substantially all of the remaining modified contracts before December 31, 2020. We are closely monitoring the payment performance

of our customers as their post-deferral obligations become due. 

Our allowance as a percent of receivables has increased for Equipment Finance to 6.57% from 2.09% at December 31, 2019, and

increased for Working Capital to 13.06% from 3.14% at December 31, 2019. Our total Allowance of $ 61.3 million as of September

30, 2020 incorporates all of our current judgments about the impact of the COVID-19 pandemic on our portfolio. We remain very

confident in the strength of our balance sheet and capital position, as well as our ability to withstand any future potential losses, should

they occur. We will continue to closely monitor and evaluate our capital position and potential liquidity requirements as economic

conditions continue to change. See further information about this estimate in “—Portfolio and Asset Quality” below. 

Through the third quarter, our employees continue to work remotely, and we have not experienced any significant interruption to our

operations from that transition. We continue to assess how to best evolve our operations and how to best serve our customers in this

changing environment.

-45-

F

INANCE

R

ECEIVABLES AND

A

SSET

Q

UALITY

The following table summarizes certain portfolio statistics for the periods presented:

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

(Dollars in thousands)

Finance receivables:

End of period

$

908,053

$

974,679

$

1,007,706

(1)

$

1,032,868

(1)

Average for the quarter

(1)

924,635

979,313

1,034,464

1,048,798

Origination Volume - three months

(6)

67,117

65,419

218,161

181,028

Origination Volume - nine months, through Sept. 30

284,117

—

—

583,785

Assets Sold - three months

4,286

1,127

114,483

85,425

Assets Sold - nine months, through Sept. 30

28,342

—

—

195,932

Leases and Loans Modified:

(3)

Payment deferral program

(2)

End of period

$

129,882

$

133,817

—

—

As a % of end of period receivables

(1)

14.3%

13.7%

—

—

Other Restructured leases and loans, end of period

$

1,035

$

1,751

$

2,668

$

2,323

Allowance for credit losses :

(4)

End of period

$

61,325

$

63,644

$

21,695

$

19,211

As a % of end of period receivables

(1)

6.75%

6.53%

2.15%

1.86%

Annualized net charge-offs 

 to average total finance receivables (quarter)

(1)

4.54%

3.47%

3.00%

1.99%

Delinquencies, end of period:

(3)(5)

Equipment Finance and CVG:

Greater than 60 days past due, $

$

12,551

$

23,353

$

8,112

$

8,515

Greater than 60 days past due, %

1.43%

2.52%

0.86%

0.87%

Working Capital: 

Greater than 30 days past due, $

$

777

$

1,130

$

855

$

740

Greater than 30 days past due, %

2.94%

2.68%

1.42%

1.34%

__________________

(1)

For purposes of asset quality and allowance calculations, the effects of (i) the allowance for credit losses and (ii) initial direct costs and fees

deferred are excluded.

(2)

Contracts that are part of our Payment-deferral modification program , that allows for either full or partial payment deferral, will appear in our

Delinquency and Non-Accrual measures based on their performance against their modified terms. See further discussion of our Loan modification

program below. 

(3)

No renegotiated leases or loans met the definition of a Troubled Debt Restructuring for any period presented, including our payment deferral

modifications, as discussed further below.

(4)

The December 31, 2019 end of period allowance and % of receivables were $33,603 and 3.27% after the January 1, 2020 adoption of CECL. See

further discussion below.

(5)

Calculated as a percentage of net investment in leases and loans. 

(6)

Amount of originations for the three months ended September 30, 2020 and June 30, 2020 presented above exclude $0.2 million and $4.2 million,

respectively, of loans originated under the Paycheck Protection Program (PPP). In the third quarter of 2020, the Company sold the PPP portfolio

and will have no continuing involvement with those receivables.

-46-

For three and nine-months ended September 30, 2020, we have recognized $ 7.2 and $ 51.2 of provision for credit losses, respectively,

primarily driven by qualitative and forecast adjustments to the allowance for credit losses as a result of the economic impact of the

COVID-19 pandemic. The COVID-19 pandemic, business shutdowns and impacts to our customers, are 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. 

Further, we instituted a Loan modification payment deferral program, as discussed further below, to give payment relief to customers

during this period. 

Our reserve as of September 30, 2020, and the qualitative and economic adjustments outlined below in our Provision discussion, were

calculated referencing our historical loss experience, including loss experience through the 2008 economic cycle, and our adjustments

to that experience based on our judgements about the expected impact of the COVID-19 pandemic. Those judgements include certain

expectations 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 revise our estimate of expected credit losses in the future, and such amounts may be significant, based on: (i) the actual

performance of our portfolio, including the performance of the modified portfolio; (ii) any further changes in the economic

environment; or (iii) other developments or unforeseen circumstances that impact our portfolio.

Loan Modification Program. 

In response to COVID-19, starting in mid-March 2020, we instituted a payment deferral program in order to assist our small -business

customers that request relief who are current under their existing obligations. Our COVID-19 modification program allows for up to 6

months of deferred payments. 

The below table outlines certain data on the modified population based on the net investment balance and status as of September 30,

2020. 

-47-

Equip.Fin

Working

and CVG

Capital

Total

(Dollars in thousands)

Number of Modifications:

Modified leases and loans receivable

4,868

369

5,237

Resolved modifications

(2)

250

122

372

Total Program, number of contracts

5,118

491

5,609

Current Quarter Population Changes:

Q3 - New modification

$

9,157

$

286

$

9,443

Q3 - Extended modification

13,959

2,458

16,417

Last Modified in Q1 or Q2

94,556

9,466

104,022

Total Modifications, Net investment receivable

$

117,672

$

12,210

$

129,882

% of total segment receivables

13.0%

46.1%

14.3%

Deferral Status:

Out of deferral

$

99,627

$

9,489

$

109,116

In deferral period - partial payment during deferral

9,535

2,721

12,256

In deferral period - full deferral of payment

8,510

—

8,510

Total Modifications, Net investment receivable

(3)

$

117,672

$

12,210

$

129,882

Total Interest income recognized on modified loans:

Third quarter of 2020

(1)

$

2,588

$

1,190

$

3,778

Second and third quarters of 2020

4,883

2,823

7,706

_________________

(1)

We did not account for these modifications as TDR, as allowed by interagency guidance issued in April 2020. As such these loans were

not put on non-accrual upon modification. The amount presented for interest income reflects total income recognized for the three months,

for any loan that was modified in the quarter. 

(2)

Resolved population through September 30, 2020 includes: for Equipment Finance, 230 loans paid in full and 20 charge-offs with $91

thousand realized loss, and for Working Capital, 101 loans paid in full and 21 charge-offs with $483 thousand realized loss.

(3)

Out of the deferral period represents the month in which the contract returns to its regular contract schedule for the entire month. For loans

in deferral period, the deferral may either be full, with zero payment owed during the deferral period, or partial, with reduced payments

during deferral that are primarily 25%-50% of schedule, or the payment during deferral may be a nominal amount. In all cases, information

is presented with respect to the contracts’ current deferral terms as of September 30, 2020.

As of September 30, 2020, $109.1 million, or 84%, of our total modified contracts are out of the deferral period, and the current

deferral period will expire for substantially all of the remaining modified contracts before December 31, 2020. We are closely

monitoring the performance of the modified contracts as thei r deferral period expires.

As of September 30, 2020, the Company is not actively taking new applications for modifications under its COVID deferral program. 

However, the Company is continuing to assess a population of receivables that have prolonged industry - specific risk resulting from

COVID. As part of our loss mitigation strategies, we may process select deferrals beyond 6 months, which may be categorized as

TDRs. The total receivables that are currently part of that risk assessment are approximately $13 million net investment, and the

Company evaluated the estimate of credit loss for the population separately when establishing its allowance at the end of the third

quarter.

-48-

Portfolio Trends 

During the three months ended September 30, 2020 , we generated 3,410 new Equipment Finance leases and loans with equipment

costs of $65.8 million, compared to 6,836 new Equipment Finance leases and loans with equipment costs of $154.8 million generated

for the three months ended September 30, 2019. Working Capital loan originations were $1.3 million during the three-month period

ended September 30, 2020, compared to $26.2 million for the three-month period ended September 30, 2019. 

Overall, our average net investment in total finance receivables for the three-month period ended September 30, 2020 decreased

11.8% to $924.6 million, compared to $1,048.8 million for the three-month period ended September 30, 2019. Our origination

volumes in the three months ended September 30, 2020 were lower than our historical norms, primarily driven by decreased demand

attributable to COVID-19 related business shutdowns and other macroeconomic factors, as well as our actions to reduce the workforce

in the second and third quarters of this year. We expect our origination volumes for the fourth quarter of 2020 will continue to be

negatively impacted by these factors, and our portfolio of receivables may continue to decline as long as our origination volumes are

less than portfolio runoff. Given the ongoing health crisis in the United States, any returns to pre-pandemic levels of activity remains

uncertain.

The following table outlines the delinquency status of the Company’s portfolio as of September 30, 2020, including information on

the population of restructured contracts, and contracts with restructure requests:

Net Investment (in thousands)

Delinquency Rate by population

30

60

90+

Current

Total

30

60

90+

Current

Total

Equipment Finance

Out of deferral period

(1)

$1,402

$1,646

$1,672

$94,905

$99,625

1.41%

1.65%

1.68%

95.26%

100%

In deferral period

371

733

—

16,943

18,047

2.06%

4.06%

—

93.88%

100%

Restructured Portfolio

1,773

2,379

1,672

111,848

117,672

1.51%

2.02%

1.42%

95.05%

100%

Non-Restructured

4,430

3,348

5,148

749,869

762,795

0.58%

0.44%

0.67%

98.31%

100%

Total Equipment Finance

$6,203

$5,727

$6,820

$861,717

$880,467

0.70%

0.65%

0.77%

97.87%

100%

Net Investment (in thousands)

Delinquency Rate by population

15

30

60+

Current

Total

15

30

60+

Current

Total

Working Capital 

Out of deferral period

(1)

$185

$207

$276

$8,820

$9,488

1.95%

2.18%

2.91%

92.96%

100%

In deferral period

(1)

38

65

34

2,585

2,722

1.40%

2.39%

1.25%

94.96%

100%

Restructured Portfolio

223

272

310

11,405

12,210

1.83%

2.23%

2.54%

93.40%

100%

Non-Restructured

41

127

68

14,026

14,262

0.29%

0.89%

0.48%

98.34%

100%

Total Working Capital

$264

$399

$378

$25,431

$26,472

1.00%

1.51%

1.43%

96.06%

100%

_________________

(1)

Out of modification period represents loans that have resumed their regular payment schedule for at least 1 month prior to September 30,

2020.

Contracts that are part of the payment deferral modification program will be reflected in our Delinquency and Non-Accrual measures

based on their performance against their modified terms. 

-49-

Equipment Finance receivables over 30 days delinquent were 213 basis points as of September 30, 2020, down 177 basis points from

June 30, 2020, but up 86 basis points from September 30, 2019. Working Capital receivables over 15 days delinquent were 393 basis

points as of September 30, 2020, down 45 basis points from June 30, 2020, but up 204 basis points from September 30, 2019. 

Equipment Finance leases and loans are generally charged -off when they are contractually past due for 120 days or more. Working

Capital loans are generally charged-off at 60 days past due. Annualized second quarter total net charge -offs were 4.54% of average

total finance receivables versus 3.47% in the second quarter of 2020 and 1.99% a year ago. 

In accordance with interagency guidance as amended in April 2020, as affirmed by the FASB, we are not accounting for our payment-

deferral modified loans as TDRs, and we are continuing to accrue interest on those loans. For the three months ended September 30,

2020, we recognized total Interest income of $3.8 million on loans in our COVID-19 loan modification program. 

The following table summarizes non-accrual leases and loans in the Company’s portfolio:

September 30,

June 30,

December 31

September 30,

2020

2020

2019

2019

(Dollars in thousands)

 Equipment finance

$

6,345

$

9,205

$

4,256

$

3,494

 Working capital

1,144

1,189

946

284

 CVG

886

637

389

199

 Total non-accrual leases and loans

$

8,375

$

11,031

$

5,591

$

3,977

Through September 30, 2020, the increase in leases and loans on non-accrual reflects the growth in delinquencies in our portfolio. 

Income recognition is discontinued on Equipment Finance leases or loans, including CVG loans, when a default on monthly payment

exists for a period of 90 days or more. Income recognition resumes when the lease or loan becomes less than 90 days delinquent. 

Working Capital Loans are generally placed in non-accrual status when they are 30 days past due. The loan is removed from non-

accrual status once sufficient payments are made to bring the loan current and evidence of a sustained performance period as reviewed

by management. The Company has no loans 90 days or more past due that were still accruing interest for any of the periods

presented.

Portfolio Concentration. 

The following table summarizes the concentrations of our portfolio of net investment in leases and loans as of September 30, 2020 by

state and industry: 

-50-

Top 10 Industries, by Borrower SIC Code

Top 10 States

Equipment

Equipment

Finance

Working

Finance

Working

and CVG

Capital

and CVG

Capital

Medical

13.5

%

8.6

%

CA

14.1

%

10.5

%

Misc. Services

12.0

8.2

TX

11.6

11.3

Retail

10.2

13.6

FL

9.5

8.7

Construction

8.7

11.2

NY

6.9

5.8

Restaurants

7.1

7.8

NJ

4.6

7.1

Professional Services

6.6

6.3

PA

3.5

5.4

Manufacturing

5.9

9.9

GA

3.4

4.2

Transportation

5.4

3.2

IL

3.3

4.6

Trucking

4.3

2.3

NC

3.1

2.3

Automotive

3.3

6.1

MA

3.1

2.1

All Other

23.0

22.8

All Other

36.9

38.0

Total

100

%

100

%

Total

100

%

100

%

As a result of the COVID-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 of COVID-19. 

While we are attempting to mitigate the impact of the COVID -19 pandemic on our portfolio, by tightening underwriting standards for

areas of elevated risk and by assisting borrowers that have been negative ly impacted, the extent of the impacts of COVID-19 on our

portfolio remains uncertain.

Allowance for credit losses. 

The following table provides a rollforward of our Allowance for credit loss:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

(Dollars in thousands)

Allowance for credit losses, December 31, 2019

$

21,695

Adoption of ASU 2016-13 (CECL)

11,908

Allowance for credit losses, beginning of period

$

63,644

$

16,777

33,603

$

16,100

Provision for credit losses

7,204

7,662

51,160

17,781

Net Charge-offs:

Equipment Finance

(9,526)

(4,566)

(22,486)

(12,192)

Working Capital

(532)

(190)

(2,442)

(1,394)

CVG

(430)

(472)

(1,900)

(1,084)

 Net Charge-offs

(10,488)

(5,228)

(26,828)

(14,670)

Realized cashflows from Residual Income

965

—

3,390

—

Allowance for credit losses, end of period

$

61,325

$

19,211

$

61,325

$

19,211

-51-

The allowance for credit losses as a percentage of total finance receivables increased to 6.75% as of September 30, 2020 , from 2.15%

as of December 31, 2019. This increase in reserve coverage is primarily driven by an $11.9 million increase from the January 1, 2020

adoption of CECL, and $36.6 million of Provision for credit losses recognized as a result of qualitative and forecast adjustments in the

nine-months ended September 30, 2020 as a result of the estimated impact to the portfolio from the COVID-19 pandemic, as discussed

further below. 

Provision for credit losses

. 

The provision for credit losses recognized after the adoption of 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. For

2020, given the wide changes in the macroeconomic environment driven by COVID-19, the changes in estimate is the most

significant driver of provision. In contrast, the allowance estimate recognized in 2019 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 September 30, 2020 the $ 7.2 million provision for credit losses recognized was $ 0.5 million less

than the $ 7.7 million provision recognized for the three months ended September 30, 2019. Provision for the three months ended

September 30, 2020 includes $2.0 million related to COVID from updates to both the economic forecast and qualitative

adjustments to incorporate timing adjustments, $4.2 million from originations, and $1.0 million for other updates, primarily

driven by updating the model loss curves. 

For the nine-months ended September 30, 2020, the $ 51.2 million provision for credit losses recognized was $ 33.4 million

greater than the $ 17.8 million provision recognized for same period of 2019. Provision for the nine-months ended September

30, 2020 includes $36.6 million related to COVID from updates to both the economic forecast and qualitative adjustments to

incorporate timing adjustments, $13.0 million from originations, and $1. 6 million for other updates, primarily driven by updating

the model loss curves.

For the Equipment Finance portfolio, our estimate of elevated COVID-related losses is primarily driven by updates to a

reasonable and supportable forecast based on the modeled correlation of changes in the loss experience of the our portfolio to

certain economic statistics, specifically changes in the unemployment rate and changes in the number of business bankruptcies. 

Starting in the first quarter, we are using a 6-month period for applying the economic statistics due to the uncertainty in the

current economic environment. For Equipment Finance, we recognized forecast and qualitative adjustments for the three and

nine-months ended September 30, 2020 of $2.1 million and $26.5 million, respectively, related to COVID based on applying the

economic forecast adjustment, and from incorporating timing adjustments.

For the CVG and Working Capital portfolio segments, our estimate of increased losses is based on qualitative adjustments, taking

into consideration alternative scenarios to determine the Company’s estimate of the probable impact of the economic shutdown. 

For CVG, we recognized qualitative provision for the three and nine-months ended September 30, 2020 of $3.7 million and $7.0

million, respectively. For the third quarter, qualitative adjustments primarily are driven by sub-segmenting a population of motor

coach receivables that have prolonged industry-specific risks. For both periods of 2020, the reserve includes adjustments to

incorporate economic risk. For Working Capital, we recognized qualitative provision based on our risk assessment of the

expected performance of this segment in the current economic environment. For the three ended September 30, 2020 that

includes a credit, or provision reversal, of $3.9 million related to refining our risk assessment of this portfolio segment due to

positive performance in the third quarter. That credit brings the Working Capital qualitative provision for the nine-months ended

September 30, 2020 to $3.1 million.

The qualitative and economic adjustments to our allowance take into consideration information and our judgments as of

September 30, 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. The COVID-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. 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.

Equipment Finance and TFG receivables are generally charged -off when they are contractually past due for 120 days or more. 

Working Capital receivables are generally charged-off at 60 days past due. 

-52-

Total portfolio net charge-offs for the three months ended September 30, 2020 were $10.5 million (4.54%) of average total

finance receivables on an annualized basis), compared to $8.5 million (3.47%) for the quarter ended June 30, 2020, and $5.2

million (1.99%) for the three months ended September 30, 2019. Compared to the same quarter of the prior year, the Company is

experiencing elevated net charge-offs, due primarily to the economic impacts resulting from the COVID -19 pandemic.

As of September 30, 2020, our portfolio delinquency rates have improved to 2.15% for 30+ past due, compared to 3.83% at June

30, 2020, but still elevated compared to 1.27% in the same quarter of 2019. 

A large portion of our portfolio was part of the payment deferral modification program, as discussed above. While 84% of those

contracts are back to full scheduled payment levels by September 30, 2020, the performance of the modified portfolio remains

uncertain. We are continually monitoring the performance of our portfolio and assessing all related risks to ensure that our

allowance estimate is sufficient to cover the expected losses from COVID-19. See further discussion with the Provision above

about the risks to our reserve estimate, and discussion with Portfolio Trends above about current delinquency levels.

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, t

he 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 the allowance because the Company’s estimate of credit losses under

CECL takes into consideration all cashflows the Company expects to receive or derive from the pools of contracts.

Adoption of ASU 2016-13 / CECL.

Effective January 1, 2020, we adopted new guidance for accounting for our allowance, or ASU 2016-13, Financial Instruments -

Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). CECL replaces the probable/

incurred loss model that we historically used to measure our allowance, with a measurement of expected credit losses for the

contractual term of our current portfolio of loans and leases. Under 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 remaining cashflows the Company expects to receive or derive from the pools

of contracts, including recoveries after charge-off, accrued interest receivable and certain future cashflows from residual assets. 

The provision for credit losses recognized in our Consolidated Statements of Operations under CECL, starting in 2020, will be

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, including adjustments for economic forecasts within a reasonable and

supportable time period.

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. Also,

see –

Executive Summary

 and Note 13 –

Stockholders’ Equity

, for discussion of our election to delay for two-years the effect of

CECL on regulatory capital, followed by a three-year phase -in, or a five-year total transition. 

Our recorded allowance reflects our current estimate of the expected credit losses of all contracts currently in portfolio based on our

current assessment of information regarding the risks of our current portfolio, default and collection trends, a reasonable and

supportable forecast of economic factors, qualitative adjustments based on our best estimate of expected losses for certain portfolio

segments, among other internal and external factors. Our allowance measurement is an estimate, is inherently uncertain, and is

reassessed at each measurement date. Actual 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.

-53-

R

ESULTS OF

O

PERATIONS

Comparison of the Three-Month Periods Ended September 30, 2020 and September 30, 2019 

Net income.

Net income of $2.7 million was reported for the three-month period ended September 30, 2020, resulting in diluted EPS per share of

$0.23, compared to net income of $7.4 million and diluted EPS of $0.60 for the three-month period ended September 30, 2019. This

$4.7 million decrease in Net income was primarily driven by:

-

$6.4 million decrease in Interest and fee income, driven primarily by a decline in the size of our finance receivable portfolio

;

-

$6.4 million decrease in gains on leases and loans sold due to a decrease in assets sold resulting from disruptions in the

capital markets during this current economic environment;

-

$1.9 million decrease in interest expense due to a decline in the deposit balance as well as continuing reduction of long-term

debt;

-

$2.4 million decrease in Salaries and benefits, driven primarily by lower Commissions, Incentives and the Company’s

proactive cost reduction measures.

Average balances and net interest margin.

The following table summarizes the Company’s average balances, interest income,

interest expense and average yields and rates on major categories of interest-earning assets and interest-bearing liabilities for the three-

month periods ended September 30, 2020 and September 30, 2019.

-54-

Three Months Ended September 30,

2020

2019

(Dollars in thousands)

Average

Average

Average

Yields/

Average

Yields/

Balance

(1)

Interest

Rates

(2)

Balance

(1)

Interest

Rates

(2)

Interest-earning assets:

Interest-earning deposits with banks

$

165,257

$

30

0.07

%

$

135,262

$

793

2.35

%

Time Deposits

10,069

42

1.72

12,815

83

2.59

Restricted interest-earning deposits with banks

6,487

-

0.01

9,898

23

0.91

Securities available for sale

10,755

50

1.85

10,405

65

2.48

Net investment in leases

(3)

851,683

19,010

8.93

951,309

21,513

9.05

Loans receivable

(3)

72,952

3,266

17.91

97,490

5,231

21.46

 Total interest-earning assets

1,117,203

22,398

8.02

1,217,179

27,708

9.11

Non-interest-earning assets:

Cash and due from banks

5,515

5,592

Allowance for loan and lease losses

(61,470)

(17,567)

Intangible assets

6,982

7,841

Goodwill

-

6,735

Operating lease right-of-use assets

8,070

8,834

Property and equipment, net

8,580

5,006

Property tax receivables

8,949

6,924

Other assets

(4)

28,390

31,754

 Total non-interest-earning assets

5,016

55,120

 Total assets

$

1,122,219

$

1,272,299

Interest-bearing liabilities:

Certificate of Deposits

(5)

$

784,056

$

4,149

2.12

%

875,904

$

5,398

2.47

%

Money Market Deposits

(5)

51,563

38

0.30

21,664

126

2.33

Long-term borrowings

(5)

45,594

507

4.45

101,594

1,037

4.08

 Total interest-bearing liabilities

881,213

4,694

2.13

999,162

6,561

2.63

Non-interest-bearing liabilities:

Sales and property taxes payable

6,340

6,912

Operating lease liabilities

9,015

9,373

Accounts payable and accrued expenses

20,893

24,864

Net deferred income tax liability

21,865

27,711

 Total non-interest-bearing liabilities

58,113

68,860

 Total liabilities

939,326

1,068,022

Stockholders’ equity

182,893

204,277

 Total liabilities and stockholders’ equity

$

1,122,219

$

1,272,299

Net interest income

$

17,705

$

21,147

Interest rate spread

(6)

5.89

%

6.48

%

Net interest margin

(7)

6.34

%

6.95

%

Ratio of average interest-earning assets to

 average interest-bearing liabilities

126.78

%

121.82

%

__________________

(1)

Average balances were calculated using average daily balances. 

-55-

(2)

Annualized.

(3)

Average balances of leases and loans include non-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.

Changes due to volume and rate.

The following table presents the components of the changes in net interest income by volume and

rate.

Three Months Ended September 30, 2020 Compared To

Three Months Ended September 30, 2019

Increase (Decrease) Due To: 

Volume

(1)

Rate

(1)

Total

(Dollars in thousands)

Interest income:

Interest-earning deposits with banks

$

144

$

(907)

$

(763)

Time Deposits

(15)

(25)

(40)

Restricted interest-earning deposits with banks

(6)

(17)

(23)

Securities available for sale

2

(17)

(15)

Net investment in leases

(2,227)

(276)

(2,503)

Loans receivable

(1,185)

(780)

(1,965)

 Total interest income

(2,165)

(3,144)

(5,309)

Interest expense:

Certificate of Deposits

(532)

(717)

(1,249)

Money Market Deposits

81

(169)

(88)

Long-term borrowings

(615)

85

(530)

 Total interest expense

(718)

(1,149)

(1,867)

Net interest income

(1,663)

(1,779)

(3,442)

__________________

(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.

-56-

Net interest and fee margin.

The following table summarizes the Company’s net interest and fee income as an annualized percentage

of average total finance receivables for the three-month periods ended September 30, 2020 and September 30, 2019.

Three Months Ended September 30,

2020

2019

(Dollars in thousands)

Interest income 

$

22,398

$

27,708

Fee income 

2,803

3,869

 Interest and fee income 

25,201

31,577

Interest expense 

4,694

6,561

 Net interest and fee income 

$

20,507

$

25,016

Average total finance receivables

(1)

$

924,635

$

1,048,798

Annualized percent of average total finance receivables:

Interest income 

9.69

%

10.57

%

Fee income 

1.21

1.48

 Interest and fee income 

10.90

12.05

Interest expense 

2.03

2.50

 Net interest and fee margin 

8.87

%

9.55

%

__________________

(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. 

Net interest and fee income decreased $4.5 million, or 18.0%, to $20.5 million for the three months ended September 30, 2020 from

$25.0 million for the three months ended September 30, 2019. The annualized net interest and fee margin decreased 68 basis points to

8.87% in the three-month period ended September 30, 2020 from 9.55% for the corresponding period in 2019. 

Interest income, net of amortized initial direct costs and fees, was $22.4 million and $27.7 million for the three-month periods ended

September 30, 2020 and September 30, 2019, respectively. Average total finance receivables decreased $124.2 million, or 11.8%, to

$924.6 million at September 30, 2020 from $1,048.8 million at September 30, 2019. The decrease in average total finance receivables

was primarily due to lower origination volume along with the customary loan repayments and charge-offs. The average yield on the

portfolio decreased 88 basis points to 9.69% from 10.57% in the prior year quarter. The weighted average implicit interest rate on

new finance receivables originated decreased 404 basis points to 9.34% for the three-month period ended September 30, 2020

compared to 13.38% for the three-month period ended September 30, 2019. That decrease was primarily driven by a shift in the mix

of originations as higher-yield Working Capital originations comprised 2% of our originations for the three months ended September

30, 2020, compared to 15% in 2019. The reduction in Working Capital volume is driven by our tightening of underwriting standards

in the third quarter in response to the uncertain macroeconomic environment . Given the ongoing health crisis in the United States,

especially the COVID-19 flare-ups in the south and west, any returns to pre-pandemic levels of origination activity, and our ability to

replenish or grow our portfolio, remains uncertain.

Fee income was $2.8 million and $3.9 million for the three-month periods ended September 30, 2020 and September 30, 2019,

respectively. Fee income included approximately $1.0 million of net residual income for the three-month period ended September 30,

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 $1.7 million and $2.0 million in late fee income for the three-month periods ended September

30, 2020 and September 30, 2019, respectively. Late fees remained the largest component of fee income at 0.68% as an annualized

percentage of average total finance receivables for the three-month period ended September 30, 2020, compared to 0.81% for the

three-month period ended September 30, 2019. 

-57-

Interest expense decreased $1.9 million to $4.7 million for the three-month period ended September 30, 2020 from $6.6 million for the

corresponding period in 2019, primarily due to a decrease of $1.2 million on lower deposit balances as well as a decrease of $0.5

million due to the continuing reduction of long-term debt. Interest expense, as an annualized percentage of average total finance

receivables, decreased 47 basis points to 2.03% for the three -month period ended September 30, 2020, from 2.50% for the

corresponding period in 2019. The average balance of deposits was $835.6 million and $897.6 million for the three-month periods

ended September 30, 2020 and September 30, 2019, respectively.

For the three-month period ended September 30, 2020 , average term securitization borrowings outstanding were $45.6 million at a

weighted average coupon of 4.45%. For the three-month period ended September 30, 2019, average term securitization borrowings

outstanding were $101.6 million at a weighted average coupon of 4.08%.

Our wholly-owned subsidiary, MBB, serves as our primary funding source. MBB raises fixed -rate and variable-rate FDIC-insured

deposits via the brokered certificates of deposit market, on a direct basis, and through the brokered MMDA Product. At September 30,

2020, brokered certificates of deposit represented approximately 53% of total deposits, while approximately 41% of total deposits

were obtained from direct channels, and 6% were in the brokered MMDA Product. 

Gain on Sale of Leases and Loans.

Gain on sale of leases and loans was $ 0.1 million for the three -month period ended September

30, 2020, compared to $ 6.5 million for the three-month period ended September 30, 2019. Assets sold decreased to $4.3 million for

the three months ended September 30, 2020, compared to $85.4 million for the three months ended September 30, 2019. In the third

quarter of 2020, we continue to see a lack of buyer demand in the syndication market and we retained substantially all of our

origination volume on our balance sheet. Our sales for the three months ended September 30, 2020 consisted primarily of our PPP

Loan portfolio; we will not have continuing involvement in servicing those receivables. 

Our sales execution decisions, including the timing, volume and frequency of such sales, depend on many factors including our

origination volumes, the characteristics of our contracts versus market requirements, our current assessment of our balance sheet

composition and capital levels, and current market conditions, among other factors. In the current slowing economy resulting from the

COVID-19 pandemic, we may have difficulty accessing the capital market and may find decreased interest and ability of

counterparties to purchase our contracts, or we may be unable to negotiate terms acceptable to us.

Insurance premiums written and earned.

Insurance premiums written declined slightly to $ 2.1 million for the three -month period

ended September 30, 2020, compared to $ 2.2 million for the three-month period ended September 30, 2019.

Other income.

 Other income was $ 2.0 million and $ 1.7 million for the three-month periods ended September 30, 2020 and

September 30, 2019, respectively. The increase in other income was primarily driven by increased insurance policy and other

miscellaneous fees.

Salaries and benefits expense.

 The following table summarizes the Company's Salary and benefits expense:

Three Months Ended September 30,

2020

2019

(Dollars in thousands)

Salary, benefits and payroll taxes

$

6,825

$

7,204

Incentive compensation

1,632

2,144

Commissions

58

1,549

 Total

$

8,515

$

10,897

Salaries and benefits expense decreased $ 2.4 million, or 21.9%, to $ 8.5 million for the three-month period ended September 30, 2020

from $ 10.9 million for the corresponding period in 2019 . In June and July 2020, as part of our efforts to tighten our expense base in

response COVID-19, we took steps to permanently reduce our work force by approximately 80 employees, which reduced our

headcount to approximately 250 employees at the end of September, down from approximately 350 employees as of September 30,

2019. As such, our salary, benefits and payroll tax expense was $ 0.4 million lower than the three months ended September 30, 2019,

primarily driven by reduced headcount, partially offset by $0.8 million of additional severance recognized in the third quarter of 202 0.

-58-

Incentive compensation decreased $ 0.5 million, driven by lower recognized bonus and share-based compensation amounts driven by

the Company’s operating results. The decrease in Commissions for the three months ended September 30, 2020 reflects a lower

amount of commission earned driven by 63% lower origination volumes, along with a reduction in Commission driven by an update

to our commission program structure.

General and administrative expense.

 The following table summarizes General and administrative expense:

Three Months Ended September 30,

2020

2019

(Dollars in thousands)

Occupancy and depreciation

$

1,483

$

1,405

Professional fees

910

861

Information technology

972

909

Marketing

162

280

Acquisition-related contingent payment fair value adjustment

(1,435)

—

Other G&A

2,625

2,637

 Total

$

4,717

$

6,092

General and administrative expense decreased $ 1.4 million, or 22.6%, to $ 4.7 million for the three months ended September 30, 2020

from $ 6.1 million for the corresponding period in 2019 . The primary driver of the change was a $1.4 million reduction to the fair

value of the contingent consideration earn out liability related to our 2018 acquisition of the FFR business, driven by a forecasted

decrease in projected volumes, which decreases the liability for estimated payments. In addition, the Company recognized $0.2

million in Occupancy expense in the three months ended September 30, 2020 in connection with a planned facility exit.

General and administrative expense as an annualized percentage of average total finance receivables was 2.04% for the three-month

period ended September 30, 2020, compared to 2.32% for the three-month period ended September 30, 2019. 

balance.

Intangible impairment.

In the third quarter of 2020, driven by an update to forecasted volumes of its FFR business, combined with

reductions in headcount in its salesforce, we determined we had a triggering event that required us to compare the book value of FFR

vendor and lender intangibles against their current fair value. As a result of that analysis, we fully impaired the lender intangibles,

recognizing $1.0 million of expense. The vendor intangibles were not impaired.

Provision for income taxes.

Income tax expense of $0.5 million was recorded for the three-month period ended September 30, 2020,

compared to expense of $3.3 million for the three-month period ended September 30, 2019. Our effective tax rate was 16.1 % for the

three-month period ended September 30, 2020, driven by partial recognition of prior quarter’s interim reporting limitation on the

amount of tax benefits that can be recognized under Accounting Standards Codification (“ASC”) 740,

Income Taxes

. 

-59-

Comparison of the Nine-Month Periods Ended September 30, 2020 and September 30, 2019

Net income/loss.

Net loss of $15.0 million was reported for the nine-month period ended September 30, 2020, resulting in diluted loss per share of

$1.27, compared to net income of $18.7 million and diluted EPS of $1.51 for the nine-month period ended September 30, 2019. This

$33.7 million decrease in Net income was primarily driven by:

-

($33.4 million) increase in Provision for credit losses, primarily driven by updates to the Company’s estimate, reflecting

forecasted economic conditions from COVID-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 by declines in the fair value of its reporting unit;

-

$11.0 million decrease in gains on leases and loans sold due to a decrease in assets sold resulting from the negative impact of

the COVID-19 pandemic on capital markets activity;

-

3.2 million benefit recognized in Income tax (benefit) from the remeasurement of the federal net operating losses driven by

provisions of the CARES Act;

-

$9.1 million decrease in Salaries and benefits, driven primarily by lower Commissions, Incentives and the Company’s

proactive cost reduction measures.

Average balances and net interest margin.

The following table summarizes the Company’s average balances, interest income,

interest expense and average yields and rates on major categories of interest-earning assets and interest-bearing liabilities for the nine-

month periods ended September 30, 2020 and September 30, 2019.

-60-

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Average

Average

Average

Yields/

Average

Yields/

Balance

(1)

Interest

Rates

(2)

Balance

(1)

Interest

Rates

(2)

Interest-earning assets:

Interest-earning deposits with banks

$

161,528

$

388

0.32

%

$

129,144

$

2,318

2.39

%

Time Deposits

11,942

167

1.87

11,665

216

2.47

Restricted interest-earning deposits with banks

7,189

9

0.17

13,396

81

0.81

Securities available for sale

10,671

159

1.99

10,600

207

2.60

Net investment in leases

(3)

880,571

58,515

8.86

937,494

64,004

9.10

Loans receivable

(3)

90,353

13,873

20.47

89,174

13,847

20.70

 Total interest-earning assets

1,162,254

73,111

8.39

1,191,473

80,673

9.02

Non-interest-earning assets:

Cash and due from banks

5,547

5,503

Allowance for loan and lease losses

(47,253)

(17,031)

Intangible assets

7,189

7,921

Goodwill

2,221

6,937

Operating lease right-of-use assets

8,459

6,557

Property and equipment, net

8,387

4,428

Property tax receivables

9,270

7,339

Other assets

(4)

31,276

33,137

 Total non-interest-earning assets

25,096

54,791

 Total assets

$

1,187,350

$

1,246,264

Interest-bearing liabilities:

Certificate of Deposits

(5)

$

829,792

$

13,747

2.21

%

$

834,727

$

14,887

2.38

%

Money Market Deposits

(5)

42,883

196

0.61

22,842

425

2.48

Long-term borrowings

(5)

57,434

1,859

4.32

120,834

3,619

3.99

 Total interest-bearing liabilities

930,109

15,802

2.27

978,402

18,931

2.58

Non-interest-bearing liabilities:

Sales and property taxes payable

6,435

6,835

Operating lease liabilities

9,354

8,119

Accounts payable and accrued expenses

22,079

26,452

Net deferred income tax liability

25,959

25,088

 Total non-interest-bearing liabilities

63,827

66,494

 Total liabilities

993,936

1,044,897

Stockholders’ equity

193,414

201,367

 Total liabilities and stockholders’ equity

$

1,187,350

$

1,246,264

Net interest income

$

57,309

$

61,742

Interest rate spread

(6)

6.12

%

6.44

%

Net interest margin

(7)

6.57

%

6.91

%

Ratio of average interest-earning assets to

 average interest-bearing liabilities

124.96

%

121.78

%

-61-

_________________

(1)

Average balances were calculated using average daily balances.

(2)

Annualized.

(3)

Average balances of leases and loans include non-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.

The following table presents the components of the changes in net interest income by volume and rate.

Nine Months Ended September 30, 2020 Compared To

Nine Months Ended September 30, 2019

Increase (Decrease) Due To: 

Volume

(1)

Rate

(1)

Total

(Dollars in thousands)

Interest income:

Interest-earning deposits with banks

$

468

$

(2,398)

$

(1,930)

Time Deposits

5

(54)

(49)

Restricted interest-earning deposits with banks

(27)

(45)

(72)

Securities available for sale

1

(49)

(48)

Net investment in leases

(3,814)

(1,675)

(5,489)

Loans receivable

182

(156)

26

 Total interest income

(1,942)

(5,620)

(7,562)

Interest expense:

Certificate of Deposits

(88)

(1,052)

(1,140)

Money Market Deposits

222

(451)

(229)

Long-term borrowings

(2,032)

272

(1,760)

 Total interest expense

(902)

(2,227)

(3,129)

Net interest income

(1,489)

(2,944)

(4,433)

__________________

(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.

-62-

Net interest and fee margin.

The following table summarizes the Company’s net interest and fee income as an annualized percentage

of average total finance receivables for the nine-month periods ended September 30, 2020 and 2019.

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Interest income 

$

73,111

$

80,673

Fee income 

8,019

11,418

 Interest and fee income 

81,130

92,091

Interest expense 

15,802

18,931

 Net interest and fee income 

$

65,328

$

73,160

Average total finance receivables

(1)

$

970,924

$

1,026,668

Percent of average total finance receivables:

Interest income 

10.04

%

10.48

%

Fee income 

1.10

1.48

 Interest and fee income 

11.14

11.96

Interest expense 

2.17

2.46

 Net interest and fee margin 

8.97

%

9.50

%

__________________

(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. 

Net interest and fee income decreased $7.9 million, or 10.8%, to $65.3 million for the nine-month period ended September 30, 2020

from $73.2 million for the nine-month period ended September 30, 2019. The annualized net interest and fee margin decreased 53

basis points to 8.97% in the nine-month period ended September 30, 2020 from 9.50% for the corresponding period in 2019 . 

Interest income, net of amortized initial direct costs and fees, decreased $7.6 million, or 9.4%, to $73.1 million for the nine -month

period ended September 30, 2020 from $80.7 million for the nine-month period ended September 30, 2019. The decrease in interest

income was principally due to a decrease in average yield of 44 basis points and by a 5.4% decrease in average total finance

receivables, which decreased $55.8 million to $970.9 million for the nine-months ended September 30, 2020 from $1,026.7 million for

the nine-months ended September 30, 2019. The decrease in average total finance receivables was primarily due to lower origination

volume along with the customary loan repayments and charge -offs. The weighted average implicit interest rate on new finance

receivables originated decreased 206 basis points to 10.96% for the nine-month period ended September 30, 2020 , compared to

13.02% for the nine-month period ended September 30, 2019. That decrease was primarily driven by a shift in the mix of originations

as higher-yield Working Capital originations comprised 9% of our originations for the nine months ended September 30, 2020,

compared to 13% in 2019. As our origination volumes have been negatively impacted by the COVID -19 pandemic, our portfolio of

finance receivables and related incomes may continue to decline. Any returns to normal levels of origination activity, and our ability

to replenish or grow our portfolio, remains uncertain.

Fee income was $8.0 million and $11.4 for the nine-month periods ended September 30, 2020 and September 30, 2019, respectively.

Fee income included approximately $2.9 million of residual income for the nine-month period ended September 30, 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”.

-63-

Fee income also included approximately $5.6 million in late fee income for the nine-month period ended September 30, 2020 , which

decreased 11.1% from $6.3 million for the nine -month period ended September 30, 2019. Late fees remained the largest component of

fee income at 0.74% as an annualized percentage of average total finance receivables for the nine-month period ended September 30,

2020, compared to 0.85% for the nine-month period ended September 30, 2019.

Interest expense decreased $3.1 million to $15.8 million for the nine -month period ended September 30, 2020 from $18.9 for the

corresponding period in 2019. The decrease of $3.1 million was primarily due to a $1.5 million decrease in term securitization interest,

and a $1.1 million decrease in interest on lower deposit balances. Interest expense, as an annualized percentage of average total

finance receivables, decreased 29 basis points to 2.17% for the nine-month period ended September 30, 2020, from 2.46% for the

corresponding period in 2019. The average balance of deposits was $872.7 million and $857.6 million for the nine-month periods

ended September 30, 2020 and September 30, 2019, respectively.

For the nine-month period ended September 30, 2020, average term securitization borrowings outstanding were $57.4 million at a

weighted average coupon of 4.32%. For the nine-month period ended September 30, 2019, average term securitization borrowings

outstanding were $120.8 million at a weighted average coupon of 3.99%

Our wholly-owned subsidiary, MBB, serves as our primary funding source. MBB raises fixed -rate and variable-rate FDIC-insured

deposits via the brokered certificates of deposit market, on a direct basis, and through the brokered MMDA Product. At September 30,

2020, brokered certificates of deposit represented approximately 53% of total deposits, while approximately 41% of total deposits

were obtained from direct channels, and 6% were in the brokered MMDA Product. 

Gain on Sale of Leases and Loans.

Gain on sale of leases and loans was $ 2.4 million for the nine -month period ended September

30, 2020, compared to $ 13.4 million for the nine-month period ended September 30, 2019, due to a decline in assets sold to $28.3 

million for the nine-month period ended September 30, 2020 from $195.9 million for the same period of 2019. Our sales in 2020

primarily occurred in the first quarter; for the second and third quarters, we have experienced a lack of buyer demand in the

syndication market and we retained substantially all of our origination volume on our balance sheet. Our sales execution decisions,

including the timing, volume and frequency of such sales, depend on many factors including our origination volumes, the

characteristics of our contracts versus market requirements, our current assessment of our balance sheet composition and capital

levels, and current market conditions, among other factors. In the current slowing economy resulting from the COVID-19 pandemic,

we may have difficulty accessing the capital market and may find decreased interest and ability of counterparties to purchase our

contracts, or we may be unable to negotiate terms acceptable to us.

Insurance premiums written and earned.

Insurance premiums written and earned remained relatively consistent, at $ 6.6 million for

the nine-month period ended September 30, 2020, from $ 6.5 million for the same period of 2019.

Other income.

 Other income was $ 11.2 million and $ 10.6 million for the nine-month periods ended September 30, 2020 and

September 30, 2019, respectively. The increase in other income was driven by $0.6 million increase in insurance policy fees.

Salaries and benefits expense.

 The following table summarizes the Company's Salary and benefits expense:

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Salary, benefits and payroll taxes

$

21,248

$

22,196

Incentive compensation

3,343

7,365

Commissions

1,111

5,256

 Total

$

25,702

$

34,817

Salaries and benefits expense decreased $ 9.1 million, or 26.2%, to $ 25.7 million for the nine-month period ended September 30,

2020 from $ 34.8 million for the corresponding period in 2019 . In mid-April 2020, we began efforts to tighten our expense base in

response COVID-19, putting approximately 120 employees on furlough. In June and July 2020, we took steps to permanently reduce

our work force by approximately 80 employees, which reduced our headcount to approximately 250 employees at the end of

September, down from approximately 350 employees as of September 30, 2019. Our salary, benefits and payroll tax expense was $

-64-

1.0 million lower for the nine-months ended September 30, 2020 than for the same period of 2019, primarily driven by reduced

headcount from the furlough and headcount reductions, partially offset by $1.3 million higher severance recognized in 2020 as

compared to 2019.

Incentive compensation decreased $ 4.1 million, driven by lower recognized bonus and share-based compensation amounts driven by

the Company’s operating results, including reversing $0.7 million of expense associated with performance -based RSU awards that are

now assessed as not probable of achievement. Commissions decreased $ 4.2 million primarily driven by a 51 % decrease in

origination volume.

General and administrative expense.

 The following table summarizes General and administrative expense:

Nine Months Ended September 30,

2020

2019

(Dollars in thousands)

Property taxes

$

6,178

$

6,273

Occupancy and depreciation

4,218

3,860

Professional fees

2,994

3,092

Information technology

2,953

2,869

Marketing

870

1,375

FDIC Insurance

1,089

380

Acquisition-related contingent payment fair value adjustment

(1,435)

—

Other G&A

7,302

7,665

 Total

$

24,169

$

25,514

General and administrative expense of $ 24.2 million for the nine-months ended September 30, 2020 was a decrease of $ 1.3 million

from the same period in 2019. In 2020, the Company recognized a $1.4 million reduction to the fair value of the contingent

consideration earn out liability related to our 2018 acquisition of the FFR business, driven by a forecasted decrease in projected

volumes, which decreases the liability for estimated payments. In addition, the Company recognized $0.4 million in Occupancy

expense in the nine-months ended September 30, 2020 in connection the planned exits of two facilities. FDIC Insurance was $0.7

million lower for the nine-months ended September 30, 2019 due to a one-time adjustment to true-up that balance.

Goodwill impairment. 

In the first quarter of 2020, driven by negative current events related to the COVID-19 economic shutdown,

our market capitalization falling below book value and other related impacts, we analyzed goodwill for impairment. We concluded

that the implied fair value of goodwill was less than it’s carrying amount, and recognized impairment equal to the entire $6.7 million

balance in the nine-months ended September 30, 2020 .

Intangible impairment.

In the third quarter of 2020, driven by an update to forecasted volumes of its FFR business, combined with

reductions in headcount in its salesforce, we determined we had a triggering event that required us to check the book value of FFR

vendor and lender intangibles against their current fair value. As a result of that analysis, we fully impaired the lender intangibles,

recognizing $1.0 million of expense. The vendor intangibles were not impaired.

Provision for income taxes.

Income tax benefit of 8.3 million was recorded for the nine-month period ended September 30, 2020,

compared to expense of $6.9 million for the nine-month period ended September 30, 2019. 

Our effective tax rate from measuring our benefit for the nine months ended September 30, 2020 was 35.6%, driven by a $3.2 million

discrete benefit from certain provisions in the CARES Act that allowed for remeasuring our federal net operating losses. The impact to

our effective rate from that benefit was partially offset by a limitation on the amount of tax benefits that can be recognized in an

interim period under ASC 740.

-65-

L

IQUIDITY AND

C

APITAL

R

ESOURCES

Our business requires a substantial amount of liquidity and capital to operate and grow. Our primary liquidity need is to fund new

originations; however, we also utilize liquidity for our financing needs (including our deposits and long term deposits), to fund

infrastructure and technology investment, to pay dividends and to pay administrative and other non-interest expenses. 

As a result of the uncertainties surrounding the actual and potential impacts of COVID-19 on our business and financial condition, in

the first quarter of 2020 we raised additional liquidity through the issua nce of FDIC-insured deposits and we increased our borrowing

capacity at the Federal Reserve Discount Window. 

We are dependent upon the availability of financing from a variety of funding sources to satisfy these liquidity needs. Historically, we

have relied upon five principal types of external funding sources for our operations: 

•

FDIC-insured deposits issued by our wholly-owned subsidiary, MBB; 

 • borrowings under various bank facilities; 

 • financing of leases and loans in various warehouse facilities (all of which have since been repaid in full);

 • financing of leases through term note securitizations; and

 • sale of leases and loans through our capital markets capabilities.

Deposits issued by MBB represent our primary funding source for new originations, primarily through the issuance of FDIC insured

deposits. 

MBB also offers an FDIC-insured MMDA Product as another source of deposit funding. This product is offered through participation

in a partner bank’s insured savings account product to clients of that bank. It is a brokered account with a variable interest rate,

recorded as a single deposit account at MBB. Over time, MBB may offer other products and services to the Company’s customer base.

MBB is a Utah state-chartered, Federal Reserve member commercial bank. As such, MBB is supervised by both the Federal Reserve

Bank of San Francisco and the Utah Department of Financial Institutions.

We declared a dividend of $0.14 per share on July 30, 2020. The quarterly dividend was paid on August 20, 2020 to shareholders of

record on the close of business on August 10, 2020 , which resulted in a dividend payment of approximately $1.7 million. It

represented the Company’s thirty -sixth consecutive quarterly cash dividend. 

At September 30, 2020, we had approximately $25.0 million of available borrowing capacity from a federal funds line of credit with a

correspondent bank in addition to available cash and cash equivalents of $195.1 million. This amount excludes additional liquidity that

may be provided by the issuance of insured deposits through MBB.

Our debt to equity ratio was 4.74 to 1 at September 30, 2020 and 4.26 to 1 at December 31, 2019.

Net cash provided by investing activities was $87.6 million for the nine-month period ended September 30, 2020, compared to net

cash used in investing activities of $58.8 million for the nine -month period ended September 30, 2019. The increase in cash from

investing activities is primarily due to a decrease of $296.6 million for purchases of equipment for lease contracts partially offset by a

reduction of $135.9 million in proceeds from sales of leases originated for investment. The decrease in purchases of equipment was

driven by lower origination volumes for the nine months ended September 30, 2020 compared to the corresponding period of 2019,

and the reduction in proceeds from sales was driven by lower volumes of sales.

Net cash used financing activities was $61.7 million for the nine-month period ended September 30, 2020, compared to net cash

provided by financing activities of $43.1 million for the nine -month period ended September 30, 2019. The decrease in cash flows

from financing activities is primarily due to a decrease of $128.9 million in deposits partially offset by a decrease of $22.3 million of

term securitization repayments. Financing activities also include transactions related to the Company’s payment of dividends. 

Net cash provided by operating activities was $45.0 million for the nine-month period ended September 30, 2020, compared to net

cash provided by operating activities of $44.5 million for the nine-month period ended September 30, 2019. Adjustments to reconcile

net income or loss to net cash provided by operating activities including goodwill impairment, provision for credit losses, changes in

deferred income tax liability and leases originated for sale and proceeds thereof are discussed in detail in the notes to the Consolidated

Financial Statements.

-66-

We expect cash from operations, additional borrowings on existing and future credit facilities and funds from deposits issued through

brokers, direct deposit sources, and the MMDA Product to be adequate to support our operations and projected growth for the next 12

months and the foreseeable future. 

Total Cash and Cash Equivalents.

Our objective is to maintain an adequate level of cash, investing any free cash in leases and loans.

We primarily fund our originations and growth using FDIC-insured deposits issued through MBB. Total cash and cash equivalents

available as of September 30, 2020 totaled $195.1 million, compared to $123.1 million at December 31, 2019. 

Time Deposits with Banks. 

Time deposits with banks are primarily composed of FDIC-insured certificates of deposits that have

original maturity dates of greater than 90 days. Generally, the certificates of deposits have the ability to redeem early, however, early

redemption penalties may be incurred. Total time deposits as of September 30, 2020 and December 31, 2019 totaled $8.5 million and

$12.9 million, respectively.

Restricted Interest-Earning Deposits with Banks

. As of September 30, 2020 and December 31, 2019, we had $5.8 million and $6.9

million, respectively, of cash that was classified as restricted interest-earning deposits with banks. Restricted interest-earning deposits

with banks consist primarily of various trust accounts related to our secured debt facilities. Therefore, these balances generally decline

as the term securitization borrowings are repaid. 

Borrowings.

Our primary borrowing relationship requires the pledging of eligible lease and loan receivables to secure amounts

advanced. Our secured borrowings amounted to $40.0 million at September 30, 2020 and $76.6 million at December 31, 2019. 

Information pertaining to our borrowing facilities is as follows:

For the Nine Months Ended September 30, 2020

As of September 30, 2020

Maximum

Maximum

Month End

Average

Weighted

Weighted

Facility

Amount

Amount

Average

Amount

Average

Unused

Amount 

Outstanding 

Outstanding 

Rate

(3)

Outstanding 

Rate

(2)

Capacity

(1)

(Dollars in thousands)

Federal funds purchased

$

25,000

$

—

$

—

—

%

$

—

—

%

$

25,000

Term note securitizations

(4)

—

71,721

69,751

4.24

%

40,031

3.77

%

—

Revolving line of credit

(5)

—

—

—

—

%

—

—

%

—

$

25,000

$

71,721

$

69,751

4.24

%

$

40,031

3.77

%

$

25,000

__________________

(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 September 30, 2020, MBB had $49.3 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 are one-time fundings that pay down over time without any ability for us to draw down additional amounts.

 (5) The revolving line of credit was terminated by mutual agreement with the line of credit provider in July 2020.

-67-

Federal Funds Line of Credit with Correspondent Bank

MBB has established a federal funds line of credit with a correspondent bank. 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. 

Federal Reserve Discount Window 

In addition, MBB has received approval to borrow from the Federal Reserve Discount Window based on the amount of assets MBB

chooses to pledge. MBB had $49.3 million in unused, secured borrowing capacity at the Federal Reserve Discount Window , based on

$55.0 million of net investment in leases pledged at September 30, 2020.

Term Note Securitizations

On July 27, 2018 we completed a $201.7 million asset-backed term securitization. It provides the company with fixed-cost borrowing

with the objective of diversifying its funding sources and is recorded in long-term borrowings in the Consolidated Balance Sheet.

In connection with this securitization transaction, we transferred leases to our bankruptcy remote special purpose wholly-owned

subsidiary (“SPE”) and issued term debt collateralized by such commercial leases to institutional investors in a private securities

offering. The SPE is considered variable interest entit y (“VIE”) under U.S. GAAP. We continue to service the assets of our VIE and

retain equity and/or residual interests. Accordingly, assets and related debt of the VIE is included in the accompanying Consolidated

Balance Sheets. At September 30, 2020 and December 31, 2019 outstanding term securitizations amounted to $ 39.8 million and $

76.1 million, respectively and the Company was in compliance with terms of the term note securitization agreement. See Note 10 –

Debt and Financing Arrangements in the accompanying Consolidated Financial Statements for detailed information regarding of our

term note securitization

Bank Capital and Regulatory Oversight

We are subject to regulation under the Bank Holding Company Act and we and all of our subsidiaries may be subject to examination

by the Federal Reserve Board and the Federal Reserve Bank even if not otherwise regulated by the Federal Reserve Board. We and

MBB are also subject to comprehensive federal and state regulations dealing with a wide variety of subjects, including minimum

capital standards, reserve requirements, terms on which a bank may engage in transactions with its affiliates, restrictions as to dividend

payments and numerous other aspects of operations. These regulations generally have been adopted to protect depositors and

creditors rather than shareholders. 

At September 30, 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.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Executive Summary” for discussion

of updates to our capital requirements driven by the termination of the CMLA Agreement and driven by our election to utilize the five-

year transition related to the adoption of the CECL accounting standard. In addition, see Note 13—Stockholders’ Equity in the Notes

to Consolidated Financial Statements for additional information regarding these ratios and our levels at September 30, 2020.

Information on Stock Repurchases

Information on Stock Repurchases is provided in “Part II. Other Information, Item 2, Unregistered Sales of Equity Securities and Use

of Proceeds” herein.

Items Subsequent to September 30, 2020

The Company declared a dividend of 0.14 per share on October 29, 2020. The quarterly dividend, which is expected to result in a

dividend payment of approximately 1.7 million, is scheduled to be paid on November 19, 2020 to shareholders of record on the close

of business on November 9, 2020. It represents the Company’s thirty -seventh consecutive quarterly cash dividend. The payment of

future dividends will be subject to satisfaction of regulatory requirements applicable to bank holding companies and approval by the

Company’s Board of Directors.

-68-

MARKET INTEREST RATE RISK AND SENSITIVITY 

Market risk is the risk of losses arising from changes in values of financial instruments. We engage in transactions in the normal

course of business that expose us to market risks. We attempt to mitigate such risks through prudent management practices and

strategies such as attempting to match the expected cash flows of our assets and liabilities.

We are exposed to market risks associated with changes in interest rates and our earnings may fluctuate with changes in interest rates. 

The lease and loan assets we originate are almost entirely fixed -rate. Accordingly, we generally seek to finance these assets primarily

with fixed interest certificates of deposit issued by MBB, and to a lesser extent through the variable rate MMDA Product at MBB. 

C

RITICAL

A

CCOUNTING

P

OLICIES

There have been no significant changes to our Critical Accounting Policies as described in our Form 10-K for the year ended

December 31, 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 Form 10-K.

Effective January 1, 2020, we adopted ASU 2016 -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 period

We 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 after charge-off, amounts related to initial direct cost and origination costs net

of fees deferred, and certain future cashflows from residual assets. A 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 underlie 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.

-69-

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 increa se 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. 

R

ECENTLY

I

SSUED

A

CCOUNTING

S

TANDARDS

Information on recently issued accounting pronouncements and the expected impact on our financial statements is provided in Note 2,

Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements.

R

ECENTLY

A

DOPTED

A

CCOUNTING

S

TANDARDS

Information on recently adopted accounting pronouncements and the expected impact on our financial statements is provided in Note

2, Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements.

-70-

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information appearing in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of

Operations – Market Interest Rate Risk and Sensitivity” under Item 2 of Part I of this Form 10-Q is incorporated herein by reference.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the

effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. 

Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered

by this report are designed and operating effectively to provide reasonable assurance that the information required to be disclosed by

us in reports filed under the 1934 Act is (i) recorded, processed, summarized and reported within the time periods specified in the

SEC's rules and forms and (ii) accumulated and communicated to our management, including the CEO and CFO, as appropriate to

allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with management’s

evaluation that occurred during the Company's third fiscal quarter of 2020 that have materially affected, or are reasonably likely to

materially affect, the Company’s internal control over financial reporting. 

PART II. Other Information

Item 1. Legal Proceedings 

We are party to various legal proceedings, which include claims and litigation arising in the ordinary course of business. In the

opinion of management, these actions will not have a material impact on our business, financial condition, results of operations or

cash flows.

Item 1A. Risk Factors 

There have been no material changes in the risk factors disclosed in the Company’s Form 10-K for the year ended December 31, 2019,

other than as discussed below.

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our

business, results of operations and financial condition, and such effects will depend on future developments, which are highly

uncertain and are difficult to predict.

Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus

have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty and

-71-

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,

including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results

in a timely fashion. We continue to monitor and evaluate newly enacted and proposed government and banking regulations issued in

response to the COVID-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 of COVID-19 pandemic, as discussed further in

“Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview” and ”—

Results of Operations”. The pandemic, reduction in economic activity, and current business limitations and shutdowns have increased

risks to our business that include, but are not limited to:

●

Credit Risk.

 We extend credit primarily to small and mid-sized businesses, and many of our customers 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 amplified to the extent economic activity

remains shutdown for an extended period, or to the extent businesses have limited operations or are unable to return to

normal levels of activity after the restrictions are lifted.

Our estimate of expected future credit losses recognized within our allowance as of September 30, 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 September 30, 2020, including certain expectations about the extent and timing of impacts from

COVID-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

the COVID-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 September 30, 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 other COVID-19 related impacts on our operations. We are

managing the evolving risks of our business while closely monitoring and forecasting the potential impacts of COVID-19 on

our future operations and financial position, including capital levels. However, given the uncertainty about future

developments and the extent and duration of the impacts of COVID -19 on our business 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 of COVID-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 our business, results of

operations and financial condition even after the COVID-19 pandemic has subsided. 

-72-

The extent to which the coronavirus pandemic impacts our business, results of operations and 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 of

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 the COVID-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. 

There are no comparable recent events that provide guidance as to the effect the spread of COVID-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 Form

10-K for the year ended December 31, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Information on Stock Repurchases

On August 1, 2019, the Company’s Board of Directors approved a stock repurchase plan (the “2019 Repurchase Plan”) under which

the Company is authorized to repurchase up to $10 million in value of its outstanding shares of common stock. This authority may be

exercised from time to time and in such amounts as market conditions warrant. Any shares purchased under this plan are returned to

the status of authorized but unissued shares of common stock. The repurchases may be made on the open market, in block trades or

otherwise. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it

may be suspended at any time at the Company's discretion. The repurchases are funded using the Company’s working capital. 

The Company did not repurchase any of its common stock during the three months ended September 30, 2020. As of September 30,

2020, the Company had $4.7 million remaining in the 2019 Repurchase Plan.

Pursuant to the 2014 Equity Compensation Plan, participants may have shares withheld to cover income taxes. There were 18,446

shares repurchased to cover income tax withholding in connection with the shares granted under the 2014 Equity Compensation Plan

during the three-month period ended September 30, 2020 , at an average cost of $8.06 per share.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None

-73-

 Item 6. Exhibits

Exhibit

Number

Description 

3.1

Amended and Restated Articles of Incorporation

(1)

3.2

Amended and Restated Bylaws

(2)

3.3

Amendment to Amended and Restated Bylaws, effective as of April 20, 2020

(3)

31.1 

Certification of the Chief Executive Officer of Marlin Business Services Corp. required by Rule 13a-14(a) under the

Securities Exchange Act of 1934, as amended.

 (Filed herewith) 

31.2 

Certification of the Chief Financial Officer of Marlin Business Services Corp. required by Rule 13a-14(a) under the

Securities Exchange Act of 1934, as amended.

 (Filed herewith)

32.1 

Certification of the Chief Executive Officer and Chief Financial Officer of Marlin Business Services Corp. required by

Rule 13a -14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that

section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities

Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

 (Furnished herewith) 

101 Financial statements from the Quarterly Report on Form 10-Q of Marlin Business Services Corp. for the period ended

September 30, 2020, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of

Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of

Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudi ted Consolidated

Financial Statements. (Submitted electronically with this report)

__________________

(1)

Previo

usly filed with the SEC as an exhibit to the Registrant’s Annual Report on Form 10-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 Form 8-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 Form 8-K filed on April 24, 2020, and incorporated by

reference herein.

-74-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf

by the undersigned thereunto duly authorized. 

MARLIN BUSINESS SERVICES CORP.

(Registrant)

By: /s/ Jeff Hilzinger

Chief Executive Officer

 Jeff Hilzinger 

(Principal Executive Officer) 

By:

/s/ Michael R. Bogansky 

Michael R. Bogansky 

Chief Financial Officer & Senior Vice 

President 

 (Principal Financial Officer)

Date: October 30, 2020

EX-31.1

Exhibit 31.1

CERTIFICATION REQUIRED BY RULE 13a-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jeff Hilzinger, certify that: 

1. I have reviewed this quarterly report on Form 10-Q of Marlin Business Services Corp.; 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading

with respect to the periods covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods

presented in this report; 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed

under our supervision, to ensure that material information relating to the registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly during the periods in which this report

is being prepared; 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with generally accepted accounting

principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures as of the end of the periods covered by

this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that

has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial

reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons

performing the equivalent functions): 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and

report financial information; and 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting. 

Date: October 30, 2020 

/s/

Jeff Hilzinger 

 Jeff Hilzinger

 Chief Executive Officer

Principal Executive Officer

EX-31.2

Exhibit 31.2 

CERTIFICATION REQUIRED BY RULE 13a-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Michael R. Bogansky, certify that: 

1. I have reviewed this quarterly report on Form 10-Q of Marlin Business Services Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading

with respect to the periods covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods

presented in this report; 

4. The registrant’s other certifying officer(s ) and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed

under our supervision, to ensure that material information relating to the registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly during the periods in which this report

is being prepared; 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with generally accepted accounting

principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures as of the end of the periods covered by

this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that

has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial

reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons

performing the equivalent functions): 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and

report financial information; and 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting. 

Date: October 30, 2020

 /s/ Michael R. Bogansky 

 Michael R. Bogansky

 Chief Financial Officer and Senior Vice President

Principal Financial Officer

EX-32.1

Exhibit 32.1 

CERTIFICATION PURSUANT TO 

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q of Marlin Business Services Corp. for the quarter ended

September 30, 2020 (the “Quarterly Report”), Jeff Hilzinger, as Chief Executive Officer, and Michael R. Bogansky, Chief Financial

Officer of the Company, each hereby certifies, that pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: 

(1) The Quarterly Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results

of operations of Marlin Business Services Corp. 

Date:

October 30, 2020

/s/ Jeff Hilzinger 

 Jeff Hilzinger

 Chief Executive Officer

 (Principal Executive Officer)

 /s/ Michael R. Bogansky

 Michael R. Bogansky

 Chief Financial Officer & Senior Vice President

 (Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Oct. 23, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document transition report	false
Entity File Number	000-50448
Entity registrant name	MARLIN BUSINESS SERVICES CORP.
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	38-3686388
Address Line 1	300 Fellowship Road
Name of the City or Town	Mount Laurel
Entity Address, State or Province	NJ
Postal or zip code	08054
Area code	888
Phone number	479-9111
Entity current reporting status	Yes
Entity Interactive Data Current	Yes
Security 12b Title	Common Stock, $.01 per share
Entity filer category	Accelerated Filer
Trading Symbol	MRLN
Security Exchange Name	NASDAQ
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity common stock shares outstanding		11,974,548
Document Fiscal Year Focus	2020
Entity central index key	0001260968
Amendment flag	false
Document Fiscal Period Focus	Q3
Current fiscal year end date	--12-31
Document period end date	Sep. 30, 2020

XML

Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
ASSETS
Cash and due from banks	$ 5,436,000	$ 4,701,000
Interest-earning deposits with banks	189,696,000	118,395,000
Total cash and cash equivalents	195,132,000	123,096,000
Time deposits with banks	8,456,000	12,927,000
Restricted interest-earning deposits related to consolidated VIEs	5,771,000	6,931,000
Investment securities (amortized cost of $10.6 million and $11.1 million at September 30, 2020 and December 31, 2019, respectively)	10,761,000	11,076,000
Net investment in leases and loans [abstract]
Leases	357,500,000	426,608,000
Loans	550,553,000	601,607,000
Net investment in leases and loans, excluding allowance for credit losses (includes $39.3 million and $76.1 million at September 30, 2020 and December 31, 2019, respectively, related to consolidated VIEs)	908,053,000	1,028,215,000
Allowance for credit losses	(61,325,000)	(21,695,000)
Total net investment in leases and loans	846,728,000	1,006,520,000
Intangible assets	5,846,000	7,461,000
Goodwill	0	6,735,000
Operating lease right-of-use assets	7,729,000	8,863,000
Property and equipment, net	8,422,000	7,888,000
Property tax receivable, net of allowance	8,580,000	5,493,000
Other assets	8,526,000	10,453,000
Total assets	1,105,951,000	1,207,443,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	823,707,000	839,132,000
Operating lease liabilities	8,790,000	9,730,000
Other liabilities:
Sales and property taxes payable	5,706,000	2,678,000
Accounts payable and accrued expenses	25,533,000	34,028,000
Net deferred income tax liability	20,032,000	30,828,000
Total liabilities	923,601,000	992,487,000
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; none issued	0	0
Common Stock, $0.01 par value;75,000,000 shares authorized; 11,974,651 and 12,113,585 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	120,000	121,000
Additional paid-in capital	75,893,000	79,665,000
Accumulated other comprehensive income	93,000	58,000
Retained earnings	106,244,000	135,112,000
Total stockholders' equity	182,350,000	214,956,000
Total liabilities and stockholders' equity	1,105,951,000	1,207,443,000
Variable Interest Entity, Primary Beneficiary [Member]
Net investment in leases and loans [abstract]
Net investment in leases and loans, excluding allowance for credit losses (includes $39.3 million and $76.1 million at September 30, 2020 and December 31, 2019, respectively, related to consolidated VIEs)	39,300,000	76,100,000
Long-term borrowings related to consolidated VIEs	$ 39,833,000	$ 76,091,000

XML

Consolidated Balance Sheets (Parentheticals) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Consolidated Balance Sheets [Abstract]
Investment securities at amortized cost	$ 10,600	$ 11,100
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock - par or stated value	$ 0.01	$ 0.01
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	75,000,000	75,000,000
Common stock shares outstanding	11,974,651	12,113,585
Common stock shares issued	11,974,651	12,113,585
Variable Interest Entity [Line Items]
Net investment in leases and loans, excluding allowance for credit losses	$ 908,053	$ 1,028,215
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Net investment in leases and loans, excluding allowance for credit losses	$ 39,300	$ 76,100

XML

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Consolidated Statements of Operations (Unaudited)
Interest income	$ 22,398	$ 27,708	$ 73,111	$ 80,673
Fee income	2,803	3,869	8,019	11,418
Interest and fee income	25,201	31,577	81,130	92,091
Interest expense	4,694	6,561	15,802	18,931
Net interest and fee income	20,507	25,016	65,328	73,160
Provision for credit losses	7,204	7,662	51,160	17,781
Net interest and fee income after provision for credit losses	13,303	17,354	14,168	55,379
Non-interest income:
Gain on leases and loans sold	87	6,456	2,426	13,400
Insurance premiums written and earned	2,082	2,230	6,612	6,538
Other income	2,044	1,676	11,172	10,573
Total non-interest income	4,213	10,362	20,210	30,511
Non-interest expense:
Salaries and benefits	8,515	10,897	25,702	34,817
General and administrative	4,717	6,092	24,169	25,514
Goodwill impairment	0	0	6,735	0
Intangible assets impairment	1,016	0	1,016	0
Non-interest expense	14,248	16,989	57,622	60,331
Income (loss) before income taxes	3,268	10,727	(23,244)	25,559
Income tax expense (benefit)	525	3,281	(8,284)	6,857
Net income (loss)	$ 2,743	$ 7,446	$ (14,960)	$ 18,702
Basic earnings (loss) per share	$ 0.23	$ 0.61	$ (1.27)	$ 1.52
Diluted earnings (loss) per share	$ 0.23	$ 0.60	$ (1.27)	$ 1.51

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Comprehensive Income
Net income (loss)	$ 2,743	$ 7,446	$ (14,960)	$ 18,702
Other Comprehensive Income:
Increase in fair value of debt securities available for sale	10	55	47	179
Tax effect	(3)	(14)	(12)	(46)
Total other comprehensive income	7	41	35	133
Comprehensive income (loss)	$ 2,750	$ 7,487	$ (14,925)	$ 18,835

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)		Total	Revision of Prior Period, Accounting Standards Update, Adjustment [Member}	Common Stock [Member]	Common Stock [Member] Revision of Prior Period, Accounting Standards Update, Adjustment [Member}	Additional Paid-In Capital [Member]	Additional Paid-In Capital [Member] Revision of Prior Period, Accounting Standards Update, Adjustment [Member}	Stock subscription receivable [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated Other Comprehensive Income (Loss) [Member] Revision of Prior Period, Accounting Standards Update, Adjustment [Member}	Retained Earnings [Member]	Retained Earnings [Member] Revision of Prior Period, Accounting Standards Update, Adjustment [Member}
Balance at Dec. 31, 2018		$ 198,511,000		$ 124,000		$ 83,498,000		$ (2,000)	$ (44,000)		$ 114,935,000
Repurchase of common stock		(1,145,000)		(1,000)		(1,144,000)		0	0		0
Stock-based compensation recognized		861,000		0		861,000		0	0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		40,000		0		0		0	40,000		0
Net income (loss)		5,141,000		0		0		0	0		5,141,000
Cash dividends paid ($0.14 per share)		(1,758,000)		0		0		0	0		(1,758,000)
Balance at Mar. 31, 2019		201,650,000		$ 123,000		83,215,000		(2,000)	(4,000)		118,318,000
Balance, Shares at Dec. 31, 2018				12,367,724
Repurchase of common stock, shares				(48,857)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				30,209
Balance, Shares at Mar. 31, 2019				12,349,076
Balance at Dec. 31, 2018		198,511,000		$ 124,000		83,498,000		(2,000)	(44,000)		114,935,000
Stock-based compensation recognized		2,800,000
Net income (loss)		18,702,000
Balance at Sep. 30, 2019		208,787,000		$ 122,000		80,228,000		(2,000)	89,000		128,350,000
Balance, Shares at Dec. 31, 2018				12,367,724
Balance, Shares at Sep. 30, 2019				12,154,661
Balance at Mar. 31, 2019		201,650,000		$ 123,000		83,215,000		(2,000)	(4,000)		118,318,000
Issuance of common stock		240,000		0		240,000		0	0		0
Repurchase of common stock		(1,719,000)		0		(1,719,000)		0	0		0
Stock-based compensation recognized		990,000		0		990,000		0	0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		52,000		0		0		0	52,000		0
Net income (loss)		6,115,000		0		0		0	0		6,115,000
Cash dividends paid ($0.14 per share)		(1,774,000)		0		0		0	0		(1,774,000)
Balance at Jun. 30, 2019		205,554,000		$ 123,000		82,726,000		(2,000)	48,000		122,659,000
Balance, Shares at Mar. 31, 2019				12,349,076
Issuance of common stock, shares				10,298
Repurchase of common stock, shares				(73,360)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				(450)
Balance, Shares at Jun. 30, 2019				12,285,564
Repurchase of common stock		(3,393,000)		$ (2,000)		(3,391,000)		0	0		0
Stock issued in connection with restricted stock and RSUs, net of forfeitures		0		1,000		(1,000)		0	0		0
Stock-based compensation recognized		894,000		0		894,000		0	0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		41,000		0		0		0	41,000		0
Net income (loss)		7,446,000		0		0		0	0		7,446,000
Cash dividends paid ($0.14 per share)		(1,755,000)		0		0		0	0		(1,755,000)
Balance at Sep. 30, 2019		208,787,000		$ 122,000		80,228,000		$ (2,000)	89,000		128,350,000
Repurchase of common stock, shares				(147,383)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				16,480
Balance, Shares at Sep. 30, 2019				12,154,661
Balance at Dec. 31, 2019		214,956,000		$ 121,000		79,665,000			58,000		135,112,000
Repurchase of common stock		(4,538,000)		(3,000)		(4,535,000)			0		0
Stock issued in connection with restricted stock and RSUs, net of forfeitures		0		1,000		(1,000)			0		0
Stock-based compensation recognized		518,000		0		518,000			0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		(38,000)		0		0			(38,000)		0
Net income (loss)		(11,821,000)		0		0			0		(11,821,000)
Impact of adopting of new accounting standards	[1]		$ (8,877,000)		$ 0		$ 0			$ 0		$ (8,877,000)
Cash dividends paid ($0.14 per share)		(1,710,000)		0		0			0		(1,710,000)
Balance at Mar. 31, 2020		$ 188,490,000		$ 119,000		75,647,000			20,000		112,704,000
Balance, Shares at Dec. 31, 2019		12,113,585		12,113,585
Repurchase of common stock, shares				(285,593)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				56,481
Balance, Shares at Mar. 31, 2020				11,884,473
Balance at Dec. 31, 2019		$ 214,956,000		$ 121,000		79,665,000			58,000		135,112,000
Stock-based compensation recognized		800,000
Net income (loss)		(14,960,000)
Balance at Sep. 30, 2020		$ 182,350,000		$ 120,000		75,893,000			93,000		106,244,000
Balance, Shares at Dec. 31, 2019		12,113,585		12,113,585
Exercise of stock options, shares		0
Balance, Shares at Sep. 30, 2020		11,974,651		11,974,651
Balance at Mar. 31, 2020		$ 188,490,000		$ 119,000		75,647,000			20,000		112,704,000
Issuance of common stock		120,000		0		120,000			0		0
Repurchase of common stock		(12,000)		0		(12,000)			0		0
Stock-based compensation recognized		(149,000)		0		(149,000)			0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		66,000		0		0			66,000		0
Net income (loss)		(5,882,000)		0		0			0		(5,882,000)
Cash dividends paid ($0.14 per share)		(1,629,000)		0		0			0		(1,629,000)
Balance at Jun. 30, 2020		181,004,000		$ 119,000		75,606,000			86,000		105,193,000
Balance, Shares at Mar. 31, 2020				11,884,473
Issuance of common stock, shares				14,891
Repurchase of common stock, shares				(1,897)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				44,780
Balance, Shares at Jun. 30, 2020				11,942,247
Repurchase of common stock		(149,000)		$ 0		(149,000)			0		0
Stock issued in connection with restricted stock and RSUs, net of forfeitures		0		1,000		(1,000)			0		0
Stock-based compensation recognized		437,000		0		437,000			0		0
Net change in unrealized gain/loss on securities available for sale, net of tax		7,000		0		0			7,000		0
Net income (loss)		2,743,000		0		0			0		2,743,000
Cash dividends paid ($0.14 per share)		(1,692,000)		0		0			0		(1,692,000)
Balance at Sep. 30, 2020		$ 182,350,000		$ 120,000		$ 75,893,000			$ 93,000		$ 106,244,000
Repurchase of common stock, shares				(18,446)
Stock issued in connection with restricted, stock and RSU's, net of forfeitures				50,850
Balance, Shares at Sep. 30, 2020		11,974,651		11,974,651

[1] Represents the impact of Accounting Standards Update ("ASU")   2016-13 and related ASUs collectively referred to as "CECL".   See Note 2.

XML

Consolidated Statements of Stockholders' Equity (Parenthetical) (Unaudited) - $ / shares	3 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Statements Of Stockholders Equity [Abstract]
Cash dividends declared and paid per share	$ 0.14	$ 0.14	$ 0.14	$ 0.14	$ 0.14	$ 0.14

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net income (loss)	$ (14,960)	$ 18,702
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	2,996	3,632
Stock-based compensation	806	2,745
Impairment of goodwill and intangible assets	7,751	0
Change in fair value of equity securities	(89)	(121)
Provision for credit losses	51,160	17,781
Change in net deferred income tax liability	(7,777)	6,883
Amortization of deferred initial direct costs and fees	9,244	11,008
Loss on equipment disposed	116	1,331
Gain on leases sold	(2,426)	(13,400)
Leases originated for sale	(4,882)	(46,038)
Proceeds from sale of leases originated for sale	5,123	47,771
Noncash lease expense	1,365	857
Adjustment to value of contingent consideration	(1,435)	0
Effect of changes in other operating items:
Other assets	(1,642)	(3,465)
Other liabilities	(311)	(3,142)
Net cash provided by operating activities	45,039	44,544
Cash flows from investing activities:
Net change in time deposits with banks	4,471	(5,260)
Purchases of equipment for lease contracts and funds used to originate loans	(298,244)	(594,831)
Principal collections on leases and loans	356,133	380,345
Proceeds from sale of leases originated for investment	25,663	161,566
Security deposits collected, net of refunds	(176)	(175)
Proceeds from the sale of equipment	1,567	2,065
Acquisitions of property and equipment	(2,266)	(3,492)
Principle payments received on securities available for sale	432	1,015
Net cash provided by (used in) investing activities	87,580	(58,767)
Cash flows from financing activities:
Net change in deposits	(15,425)	113,481
Term securitization repayments	(36,538)	(58,887)
Business combinations earn-out consideration payments	(180)	(349)
Issuances of common stock	120	240
Repurchases of common stock	(4,699)	(6,257)
Dividends paid	(5,021)	(5,169)
Net cash (used in) provided by financing activities	(61,743)	43,059
Net increase in total cash, cash equivalents and restricted cash	70,876	28,836
Total cash, cash equivalents and restricted cash, beginning of period	130,027	111,201
Total cash, cash equivalents and restricted cash, end of period	200,903	140,037
Supplemental disclosures of cash flow information:
Cash paid for interest on deposits and borrowings	17,308	17,610
Net cash (received)/paid for income taxes	(5,005)	2,736
Leases transferred into held for sale from investment	23,460	149,895
Supplemental disclosures of non cash investing activities:
Business combinations assets acquired	0	146
Purchase of equipment for lease contracts and loans originated	2,253	8,432
Reconciliation of Cash, cash equivalents and restricted cash to the Consolidated Balance Sheets
Cash and Cash Equivalents	195,132	132,461
Restricted interest-earning deposits	5,771	7,576
Total cash, cash equivalents and restricted cash, end of period	$ 200,903	$ 140,037

XML

The Company

9 Months Ended

Sep. 30, 2020

The Company [Abstract]

The company

NOTE 1 – The Company

Marlin Business Services Corp. (the “Company”) is a nationwide provider of credit products and services to small businesses. The

products and services we provide to our customers include loans and leases for the acquisition of commercial equipment (including

Commercial Vehicle Group (“CVG”) assets which now incorporates Transportation Finance Group (“TFG”)) and working capital

loans. The Company was incorporated in the Commonwealth of Pennsylvania on August 5, 2003. In May 2000, we established

AssuranceOne, Ltd., a Bermuda-based, wholly-owned captive insurance subsidiary (“Assurance One”), which enables us to reinsure

the property insurance coverage for the equipment financed by Marlin Leasing Corporation (“MLC”) and Marlin Business Bank

(“MBB”) for our small business customers. Effective March 12, 2008, the Company opened MBB, a commercial bank chartered by

the State of Utah and a member of the Federal Reserve System. MBB serves as the Company’s primary funding source through its

issuance of Federal Deposit Insurance Corporation (“FDIC”)-insured deposits. In January 2017, we completed the acquisition of

Horizon Keystone Financial (“HKF”), an equipment leasing company which primarily identifies and sources lease and loan contracts

for investor partners for a fee. On September 19, 2018, the Company completed the acquisition of Fleet Financing Resources

(“FFR”), a leading provider of equipment finance credit products specializing in the leasing and financing of both new and used

commercial vehicles, with an emphasis on livery equipment and other types of commercial vehicles used by small businesses. 

References to the “Company,” “Marlin,” “Registrant,” “we,” “us” and “our” herein refer to Marlin Business Services Corp. and its

wholly-owned subsidiaries, unless the context otherwise requires.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 – Summary of Significant Accounting Policies

Basis of financial statement presentation.

 The unaudited consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries. MLC and MBB are managed together as a single business segment and are aggregated for financial

reporting purposes as they exhibit similar economic characteristics, share the same leasing and loan portfolio and have a single

consolidated product offering platform. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements present the Company’s financial position at September 30, 2020 and

the results of operations for the three- and nine -month periods ended September 30, 2020 and 2019, and cash flows for the nine-

month periods ended September 30, 2020 and 2019. In management’s opinion, the unaudited consolidated financial statements

contain all adjustments, which include normal and recurring adjustments, necessary for a fair presentation of the financial position and

results of operations for the interim periods presented. These unaudited consolidated financial statements should be read in

conjunction with the consolidated financial statements and note disclosures included in the Company’s Form 10-K for the year ended

December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020. The consolidated results and

statements of cash flows for these interim financial statements are not necessarily indicative of the results of operations or cash flows

for the respective full years or any other period.

Use of Estimates.

 These unaudited consolidated financial statements require management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expense s during the reporting period. Estimates are used when accounting for

income recognition, the residual values of leased equipment, the allowance for credit losses, deferred initial direct costs and fees, late

fee receivables, the fair value of financial instruments, estimated losses from insurance program, and income taxes. Actual results

could differ from those estimates.

Income taxes.

Our statutory tax rate was

25.4

% for the three months ended September 30, 2020. For the three-month period ended September 30,

2020, the effective tax rate was

16.1

%, driven by partial recognition of the prior quarter’s interim reporting limitation on the amount

of tax benefits that can be recognized under Accounting Standards Codification (“ASC”) 740,

Income Taxes

. 

For the nine-month period ended September 30, 2020, the effective tax rate in recognizing our benefit was

35.6

%, driven by a $

3.2

million discrete benefit, resulting from certain provisions in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

that allow for a remeasurement of our federal net operating losses. The Company filed for a refund of carryback net operating losses

as permitted under the CARES act and that refund was received in July 2020. The impact to our effective rate from that benefit was

partially offset by the limitation on interim tax benefits, as discussed above.

For the three and nine-month periods ended September 30, 2019, our effective tax rates were

30.6

% and

26.8

%, respectively.

The Company is currently under examination by the IRS for tax years ending December 31, 2013 to 2018, and the Company remains

subject to examination for the year ended December 31, 2019.

Significant Accounting Policies. 

There have been no significant changes to our Significant Accounting Policies as described in our

Annual Report on Form 10-K for the year ended December 31, 2019, other than the adoption of ASU 2016-13 as described below.

Recently Adopted Accounting Standards

. 

Credit Losses.

 In June 2016, the FASB issued ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of

Credit Losses on Financial Instruments

, which changes the methodology for evaluating impairment of most financial instruments.

This guidance was subsequently amended by ASU 2018-19,

Codification Improvements,

 ASU 2019-04,

Codification Improvements

,

ASU 2019-05,

Targeted Transition Relief,

ASU 2019-10,

Effective Dates,

and ASU 2019-11,

Codification Improvements

. These

ASUs are referred to collectively as “CECL”.

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. Under CECL, an allowance, or estimate of credit losses, is 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 after

charge-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, and non-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 and Paycheck Protection loans. 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. 

The Company adopted the guidance in these ASUs, effective January 1, 2020, applying changes resulting from the application of the

new standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in

which the guidance is effective (i.e., modified retrospective approach). 

The adoption of this standard resulted in the following adjustment to the Company’s Consolidated Balance Sheets:

Balance as of

Balance as of

December 31,

Adoption

January 1, 

2019

Impact

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 – Allowance for Credit Losses, for further discussion of the January 1, 2020 measurement of allowance under CECL, as

well as discussion of the Company’s new Accounting Policy governing its Allowance. 

See Note 13 – Stockholders’ Equity, for discussion of the Company’s election to delay for two-years the effect of CECL on regulatory

capital, followed by a three-year phase-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 of the adoption date to our investment securities.

XML

Non-Interest Income

9 Months Ended

Sep. 30, 2020

Non-interest Income [Abstract]

Non-interest Income [Text Block]

NOTE 3 – Non-Interest Income

The following table summarizes non-interest income for the periods presented:

Three Months Ended

Nine Months Ended 

September 30,

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Insurance premiums written and earned

$

2,082

$

2,230

$

6,612

$

6,538

Property tax (loss) income

123

(42)

5,247

5,680

Servicing income

462

395

1,517

1,021

Gain on sale of leases and loans

87

6,456

2,426

13,400

Net gains recognized during the period on equity securities 

—

27

89

121

Non-interest income - other than from contracts with customers

2,754

9,066

15,891

26,760

Insurance policy fees

819

688

2,610

2,021

Property tax administrative fees on leases

243

272

713

801

ACH payment fees

35

78

143

238

Referral fees

15

129

123

448

Other

347

129

730

243

Non-interest income from contracts with customers

1,459

1,296

4,319

3,751

Total non-interest income

$

4,213

$

10,362

$

20,210

$

30,511

XML

Investments securities

9 Months Ended

Sep. 30, 2020

Investment securities [Abstract]

Investment securities [Text Block]

NOTE 4 - Investment Securities 

The Company had the following investment securities as of the dates presented:

September 30,

December 31,

(Dollars in thousands)

2020

2019

Equity Securities

Mutual fund

$

3,756

$

3,615

Debt Securities, Available for Sale:

Asset-backed securities ("ABS")

3,836

4,332

Municipal securities

3,169

3,129

 Total investment securities

$

10,761

$

11,076

The following schedule summarizes changes in fair value of equity securities and the portion of unrealized gains and losses for each

period presented:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

2020

2019

2020

2019

Net gains recognized during the period on equity securities 

$

—

$

27

$

89

$

121

Less: Net gains recognized during the period

 on equity securities sold during the period

—

—

—

—

Unrealized gains recognized during the reporting period

 on equity securities still held at the reporting date

$

—

$

27

$

89

$

121

Available for Sale

The following schedule is a summary of available for sale investments as of the dates presented:

September 30, 2020

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

Fair Value

(Dollars in thousands)

ABS

$

3,776

$

60

$

—

$

3,836

Municipal securities

3,082

88

(1)

3,169

 Total Debt Securities, Available for Sale

$

6,858

$

148

$

(1)

$

7,005

December 31, 2019

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

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

The Company evaluates its available for sale securities in an unrealized loss position for other than temporary impairment on at least a

quarterly basis. The Company did not recognize any other than temporary impairment to earnings for each of the periods ended

September 30, 2020 and September 30, 2019.

The following tables present the aggregate amount of unrealized losses on available for sale securities in the Company’s investment

securities classified according to the amount of time those securities have been in a continuous loss position as of September 30, 2020

and December 31, 2019:

September 30, 2020

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

Municipal securities

(1)

$

—

$

142

$

—

$

—

$

—

$

142

Total available for sale investment

securities

$

—

$

142

$

—

$

—

$

—

$

142

(1) The unrealized loss is immaterial

December 31, 2019

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

ABS

$

—

$

—

$

(3)

$

430

$

(3)

$

430

Total available for sale investment

securities

$

—

$

—

$

(3)

$

430

$

(3)

$

430

The following table presents the amortized cost, fair value, and weighted average yield of available for sale investments at September

30, 2020, based on estimated average life. Receipt of cash flows may differ from those estimated maturities because borrowers may

have the right to call or prepay obligations with or without penalties:

XML

Net Investment in Leases and Loans

9 Months Ended

Sep. 30, 2020

Net Investment in Leases and Loans [Abstract]

Net Investment in Leases and Loans

NOTE 5 – Net Investment in Leases and Loans 

Net investment in leases and loans consists of the following:

September 30, 2020

December 31, 2019

(Dollars in thousands)

Minimum lease payments receivable

$

376,649

$

457,602

Estimated residual value of equipment

27,974

29,342

Unearned lease income, net of initial direct costs and fees deferred

(46,708)

(59,746)

Security deposits

(415)

(590)

Total leases

357,500

426,608

Commercial loans, net of origination costs and fees deferred

Working Capital Loans

26,472

60,942

CRA

(1)

1,114

1,398

Equipment loans

(2)

457,627

464,655

CVG

65,340

74,612

Total commercial loans

550,553

601,607

Net investment in leases and loans, excluding allowance

908,053

1,028,215

Allowance for credit losses

(61,325)

(21,695)

Total net investment in leases and loans

$

846,728

$

1,006,520

CRA loans are comprised of loans originated under a line of credit to satisfy its obligations under the Community Reinvestment Act of 1977

(“CRA”).

(2)

Equipment loans are comprised of Equipment Finance Agreements, Installment Purchase Agreements and other loans.

In response to COVID-19, starting in mid-March 2020, the Company instituted a payment deferral contract modification program in

order to assist our small-business customers. See Note 6, “Allowance for Credit Losses” for discussion of that program.

At September 30, 2020, $

42.8

 million in net investment in leases were pledged as collateral for the Company’s outstanding asset-

backed securitization balance and $

55.0

 million in net investment in leases were pledged as collateral for the secured borrowing

capacity at the Federal Reserve Discount Window. 

The amount of deferred initial direct costs and origination costs net of fees deferred were $

16.1

 million and $

20.5

 million as of

September 30, 2020 and December 31, 2019, respectively. Initial direct costs are netted in unearned income and are amortized to

income using the effective interest method. ASU 2016 -02 limited the types of costs that qualify for deferral as initial direct costs for

leases, which reduced the deferral of unit lease costs and resulted in an increase in current period expense. Origination costs are netted

in commercial loans and are amortized to income using the effective interest method. At September 30, 2020 and December 31, 2019,

$

22.2

 million and $

23.4

 million, respectively, of the estimated residual value of equipment retained on our Consolidated Balance

Sheets was related to copiers.

Maturities of lease receivables under lease contracts and the amortization of unearned lease income, including initial direct costs and

fees deferred, were as follows as of September 30, 2020:

Minimum Lease

Payments

Net Income

Receivable

(1)

Amortization

(2)

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

40,682

$

7,503

2021

144,561

20,557

2022

98,671

11,212

2023

57,414

5,177

2024

27,063

1,749

Thereafter

8,258

510

$

376,649

$

46,708

Represents the undiscounted cash flows of the lease payments receivable.

(2)

Represents the difference between the undiscounted cash flows and the discounted cash flows.

Portfolio Sales

The Company originates certain lease and loans for sale to third parties, based on their underwriting criteria and specifications. In

addition, the Company may periodically enter into agreements to sell certain leases and loans that were originated for investment to

third parties. 

For agreements that qualify as a sale where the Company has continuing involvement through servicing, the Company recognizes a

servicing liability at its initial fair value, and then amortizes the liability over the expected servicing period based on the effective yield

method, within Other income in the Consolidated Statements of Operations. The Company’s sale agreements typically do not contain

a stated servicing fee, so the initial value recognized as a servicing liability is a reduction of the proceeds received and is based on an

estimate of the fair value attributable to that obligation. The Company’s servicing liability was $

1.5

 million and $

2.5

 million as of

September 30, 2020, and December 31, 2019, respectively, and is recognized within Accounts payable and accrued expenses in the

Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, the portfolio of leases and loans serviced for others

was $

261

 million and $

340

 million, respectively. 

In addition, the Company may have continuing involvement in contracts sold through any recourse obligations that may include

customary representations and warranties or specific recourse provisions. The Company’s reserve for expected losses from recourse

obligations was $

0.9

 million as of September 30, 2020 and $

0.4

 million as of December 31, 2019. 

In 2020, the Company was a participating lender, offering loans to its customers that are guaranteed under the Small Business

Administration’s (SBA’s) Paycheck Protection Program (“PPP”). In the three months ended September 30, 2020, the Company sold

its PPP receivable portfolio and recognized an insignificant gain on sale; the Company will have no continuing involvement with

those receivables.

The following table summarizes information related to portfolio sales for the periods presented:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Sales of leases and loans 

$

4,286

$

85,425

$

28,342

$

195,932

Gain on sale of leases and loans

87

6,456

2,426

13,400

XML

Allowance for Credit Losses

9 Months Ended

Sep. 30, 2020

Allowance For Credit Losses [Abstract]

Allowance For Credit Losses

NOTE 6 – 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. 

Effective January 1, 2020, we

 adopted

ASU 2016-13,

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, is recognized immediately upon

the origination of a loan or lease and will be adjusted in each subsequent reporting period. 

See further discussion of the adoption of

this accounting standard and a summary of the Company’s revised Accounting Policy for Allowance for Credit Losses in Note 2,

Summary of Significant Accounting Policies. Detailed discussion of our measurement of allowance under CECL as of the adoption

date and September 30, 2020 is below.

The following tables summarize activity in the allowance for credit losses

Three Months Ended September 30, 2020

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

48,550

$

7,962

$

7,132

$

—

$

63,644

 Charge-offs

(10,509)

(633)

(524)

—

(11,666)

 Recoveries

983

101

94

—

1,178

Net charge-offs

(9,526)

(532)

(430)

—

(10,488)

Realized cashflows from Residual Income

965

—

—

—

965

 Provision for credit losses

7,226

(3,974)

3,952

—

7,204

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Three Months Ended September 30, 2019

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

13,416

$

1,940

$

1,421

$

—

$

16,777

 Charge-offs

(5,023)

(417)

(526)

—

(5,966)

 Recoveries

457

227

54

—

738

 Net charge-offs

(4,566)

(190)

(472)

—

(5,228)

 Provision for credit losses

6,799

346

517

—

7,662

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

Nine Months Ended September 30, 2020

(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 ASU 2016-13 (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

(24,723)

(2,598)

(2,157)

—

(29,478)

 Recoveries

2,237

156

257

—

2,650

Net charge-offs

(22,486)

(2,442)

(1,900)

—

(26,828)

Realized cashflows from Residual Income

3,390

—

—

—

3,390

 Provision for credit losses

38,713

4,002

8,445

—

51,160

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Nine Months Ended September 30, 2019

(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

(13,863)

(1,692)

(1,200)

—

(16,755)

 Recoveries

1,671

298

116

—

2,085

 Net charge-offs

(12,192)

(1,394)

(1,084)

—

(14,670)

 Provision for credit losses

14,310

2,023

1,448

—

17,781

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

(1)

 The Company adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on

Financial Instruments

, which changed our accounting policy and estimated allowance, effective January 1, 2020. See further

discussion in Note 2, “Summary of Significant Accounting Policies”, and below.

Estimate of Current Expected Credit Losses (CECL)

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 after charge-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. As part of the 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.

Current Measurement 

The Company selected a vintage loss model as the approach to estimate and measure its expected credit losses for all portfolio

segments and for all pools, primarily because the timing of the losses realized has been consistent across historical vintages, such that

the company is able to develop a predictable and reliable loss curve for each separate portfolio segment. The vintage model assigns

loans to vintages by origination date, measures our historical average actual loss and recovery experience within that vintage, develops

a loss curve based on the averages of all vintages, and predicts (or forecasts) the remaining expected net losses of the current portfolio

by applying the expected net loss rates to the remaining life of each open vintage.

Additional detail specific to the measurement of each portfolio segment under CECL as of January 1, 2020 and September 30, 2020, is

summarized below. 

Equipment Finance:

Equipment Finance consists of Equipment Finance Agreements, Installment Purchase Agreements and other leases and loans. 

The risk characteristics referenced to develop pools of Equip ment Finance leases and loans are based on internally developed

credit score ratings, 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. In addition, the Company separately

measured a pool of true leases so that any future cashflows from residuals could be used to partially offset the allowance for

that pool. 

The Company’s measurement of Equipment Finance pools is based on its own historical loss experience. The Company

analyzed the correlation of its own loss data from 2004 to 2019 against various economic variables in order to determine an

approach for reasonable and supportable forecast. The Company then selected certain economic variables to reference for its

forecast about the future, specifically the unemployment rate and growth in business bankruptcy. The Company’s

methodology reverts from the forecast data to its own loss data adjusted for the long-term average of the referenced economic

variables, on a straight-line basis.

At each reporting date, the Company considers current conditions, including changes in portfolio composition or the business

environment, when determining the appropriate measurement of current expected credit losses for the remaining life of its

portfolio. As of the January 1, 2020 adoption date, the Company utilized a 12 -month forecast period and 12-month straight-

line reversion period, based on its initial assessment of the appropriate timing. 

However, starting with the March 31, 2020 measurement, the Company adjusted its model to reference a 6-month forecast

period and 12-month straight line reversion period. The change in the length of the reasonable and supportable forecast was

based on observed market volatility in late March, and the Company continues to reference a 6-month forecast period at

September 30, 2020 due to continuing uncertainty of the duration and level of impact of the COVID-19 virus on the

macroeconomic environment and the Company’s portfolio, including uncertainty about the forecasted impact of COVID -19

that was underlying its economic forecasted variables beyond a 6-month period. The forecast adjustment to the Equipment

Finance portfolio segment resulted in the recognition of provision of $

1.2

 million and $

22.2

 million for the three- and nine -

months ended September 30, 2020, respectively. 

After completing the forecast adjustment, the Company assessed the output of the Equipment Finance reserve estimate and

increased the reserve for a $

0.9

 million qualitative adjustment as of September 30, 2020, primarily based on an analysis that

incorporates the current forecasted peak levels of unemployment and business bankruptcy.

Working Capital:

The risk characteristics referenced to develop pools of Working Capital loans is based on origination channel, separately

considering an estimation of loss for direct-sourced loans versus loans that were sourced from a broker. The Company’s

historical relationship with its direct-sourced customers typically results in a lower level of credit risk than loans sourced

from brokers where the Company has no prior credit relationship with the customer. 

The Company’s measurement of Working Capital pools is based on its own historical loss experience. The Company’s

Working Capital loans typically range from 6 – 12 months of duration. For this portfolio segment, due to the short contract

duration, the Company did not define a standard methodology to adjust its loss estimate based on a forecast of economic

conditions. However, the Company will continually assess through a qualitative adjustment whether there are changes in

conditions and the environment that will impact the performance of these loans that should be considered for qualitative

adjustment.

At each reporting date, the Company considers current conditions, inclu ding changes in portfolio composition or the business

environment, when determining the appropriate measurement of current expected credit losses for the remaining life of its

portfolio. As of the January 1, 2020 adoption date, there was no qualitative adjustment to the Working Capital portfolio. 

However, starting with its March 31, 2020 measurement, driven by the elevated risk of credit loss driven by market

conditions due to COVID-19, the Company developed alternate scenarios for credit loss based on an analysis of the

characteristics of its portfolio, considering different timing and magnitudes of potential exposures. 

During the third quarter, the Company updated its expectation for credit losses for the Working Capital segment based on the

favorable actual portfolio performance during the quarter and a revised forecast based on its current assessment of risks in the

portfolio. Based on that analysis, the Company recognized a reserve reduction of $

3.9

 million for the three months ended

September 30, 2020, bringing the provision associated with qualitative adjustments to $

3.1

 million for the nine months ended

September 30, 2020.

Commercial Vehicle Group (CVG):

Transportation-related equipment leases and loans are analyzed as a single pool, as the Company did not consider any risk

characteristics to be significant enough to warrant disaggregating this population. 

The Company’s measurement of CVG is based on a combination of its own historical loss experience and industry loss data

from an external source. The Company has limited history of this product, and therefore the Company determined it was

appropriate to develop an estimate based on a combination of internal and industry data. Due to the Company’s limited

history of performance of this segment, and the limited size of the portfolio, the Company did not develop a standard

methodology to adjust its loss estimate based on a forecast of economic conditions. However, the Company will continually

assess through a qualitative adjustment whether there are changes in conditions and the environment that will impact the

performance of these loans that should be considered for qualitative adjustment.

At each reporting date, the Company considers current conditions, including changes in portfolio composition or the business

environment, when determining the appropriate measurement for the remaining life of the current portfolio. As of the

January 1, 2020 adoption date, there were no qualitative adjustment to the CVG portfolio. However, starting with the March

31, 2020 measurement, driven by the elevated risk of credit loss driven by market conditions due to COVID-19, the

Company developed alternate scenarios for expected credit loss for this segment, considering different timing and

magnitudes of potential exposures. 

During the third quarter, the Company updated its expectation for credit losses for the CVG segment, including separately

assessing the elevated risks of a population of motor coach industry contracts that are facing prolonged impacts from

COVID-19. Primarily driven by that population, the Company recognized provision related to CVG for the third quarter of

$

3.8

 million, which increased the year to date qualitative adjustments for COVID-19 related risks to $

7.0

 million for this

portfolio segment.

Community Reinvestment Act (CRA) Loans:

CRA loans are comprised of loans originated under a line of credit to satisfy the Company’s obligations under the CRA. The

Company does not measure an allowance specific to this population because the exposure to credit loss is nominal.

For the three- and nine - months ended September 30, 2020, the Company has recognized $

1.9

 million and $

36.6

 million of provision,

respectively, driven by increasing the allowance for qualitative and forecast adjustments as a result of conditions driven by the

COVID-19 pandemic. The COVID-19 pandemic, business shutdowns and impacts to our customers, 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. 

Further, the Company instituted a Loan modification payment deferral program, as discussed further below, to give payment relief to

customers during this period. As of September 30, 2020, the ultimate performance of loans modified under that program remains

uncertain, due to the timing of the modified loans resuming payment. 

Our reserve as of September 30, 2020, and the qualitative and economic adjustments discussed above, were calculated referencing our

historical loss experience, including loss experience through the 2008 economic cycle, and our adjustments to that experience based

on our judgements about the extent of the impact of the COVID -19 pandemic. Those judgements include certain expectations 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 revise our estimate of credit losses in the future, and such amounts may be significant, based on (i) the actual performance of our

portfolio, including the performance of the modified portfolio, (ii) any further changes in the economic environment, or (iii) other

developments or unforeseen circumstances that impact our portfolio.

Loan Modification Program:

In response to COVID-19, starting in mid-March 2020, the Company instituted a payment deferral program in order to assist its small-

business customers that requested relief and were current under their existing agreement. The payment deferral program allows for up

to 6 months of fully deferred or reduced payments. 

The below table outlines certain data on the modified population with details of count and net investment balance, with all information

as of September 30, 2020.

Equipment

Working

(Dollars in thousands)

Finance

CVG

Capital

Total

Modified leases and loans receivable

4,437

431

369

5,237

Resolved (payoff, chargeoff)

(1)

230

20

122

372

Total Program, number of contracts

4,667

451

491

5,609

Current Quarter Population Changes:

Q3 - New modification

$

6,689

$

2,468

$

286

$

9,443

Q3 - Extended modification

5,547

8,412

2,458

16,417

Last Modified in Q2 or Q1

79,664

14,892

9,466

104,022

Total Modifications, Net investment receivable

$

91,900

$

25,772

$

12,210

$

129,882

% of total segment receivables

11.4%

33.6%

46.1%

14.3%

Deferral Status:

Out of deferral

$

82,978

$

16,649

$

9,489

$

109,116

In deferral period - partial payment during deferral

6,372

3,163

2,721

12,256

In deferral period - full deferral of payment

2,550

5,960

—

8,510

Total Modifications, Net investment receivable

(2)

$

91,900

$

25,772

$

12,210

$

129,882

Modifications 30+ Days Delinquent:

Out of deferral

$

3,352

$

1,367

$

320

$

5,039

In deferral period, with partial payment during

deferral

639

462

99

1,200

Total resolved modifications include

41

 contracts charged off where $

574

 thousand credit loss was realized, and

331

contracts that paid in full.

(2)

Out of the deferral period represents the month in which the contract returns to its regular contract schedule for the entire

month. For loans in deferral period, the deferral may either be full, with zero payment owed during the deferral period, or

partial, with reduced payments during deferral that are primarily

25

%-

50

% of schedule, or the deferral period payment may

be a nominal amount. In all cases, information is presented with respect to the contracts’ current deferral terms as of

September 30, 2020.

As of September 30, 2020, $

109.1

 million, or

84

% of our total modified contracts are out of the deferral period, and the current

deferral period will expire for substantially all of the remaining modified contracts before December 31, 2020. We are closely

monitoring the performance of the modified contracts as their deferral period expires. As of the end of the third quarter we have

stopped taking new applications for modifications, although we may consider offering extensions in select cases as part of our loss

mitigation strategies. 

TDRs are restructurings of leases and loans in which, due to the borrower's financial difficulties, a lender grants a concession that it

would not otherwise consider for borrowers of similar credit quality. In accordance with the interagency guidance as updated in April

2020, that the FASB concurred with, loans modified under the Company’s payment deferral program are not considered TDRs. As of

September 30, 2020 and December 31, 2019, the Company did

no

t have any TDRs.

Credit Quality

At origination, the Company utilizes an internally developed credit score ratings as part of its underwriting assessment and pricing

decisions for new contracts. The internal credit score 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. The internal credit score is

used to create pools of loans for analysis in the Company’s Equipment Finance portfolio segment, as discussed further above. We

believe this segmentation allows our loss modeling to properly reflect changes in portfolio mix driven by sales activity and

adjustments to underwriting standards. However, this score is not updated after origination date for analyzing the Company’s

provision.

On an ongoing basis, to monitor the credit quality of its portfolio, the Company primarily reviews the current delinquency of the

portfolio and delinquency migration to monitor risk and default trends. We believe that delinquency is the best factor to use to monitor

the credit quality of our portfolio on an ongoing basis because it reflects the current condition of the portfolio, and is a good predictor

of near term charge-offs and can help with identifying trends and emerging risks to the portfolio. 

The following tables provide information about delinquent leases and loans in the Company’s portfolio based on the contract’s status

as-of the dates presented. In particular, contracts that are part of the Loan Modification Program discussed above are presented in the

below delinquency table and the non-accrual information for September 30, 2020 based on their status with respect to the modified

terms. See Loan Modification section above for delinquency data specific to the modified portfolio.

Portfolio by Origination Year as of September 30, 2020

Total

2020

2019

2018

2017

2016

Prior

Receivables

(Dollars in thousands)

Equipment Finance

30-59

$

837

$

2,103

$

1,387

$

740

$

316

$

71

$

5,454

60-89

520

1,692

1,182

748

315

39

4,496

90+

334

2,789

1,444

1,220

294

42

6,123

Total Past Due

1,691

6,584

4,013

2,708

925

152

16,073

Current

214,104

306,024

158,593

79,064

26,424

3,407

787,616

Total

215,795

312,608

162,606

81,772

27,349

3,559

803,689

Working Capital

30-59

71

328

—

—

—

—

399

60-89

133

18

—

—

—

—

151

90+

6

222

—

—

—

—

228

Total Past Due

210

568

—

—

—

—

778

Current

11,521

13,996

139

38

—

—

25,694

Total

11,731

14,564

139

38

—

—

26,472

CVG

30-59

90

467

73

92

26

—

748

60-89

588

307

336

—

—

—

1,231

90+

—

56

584

50

11

—

701

Total Past Due

678

830

993

142

37

—

2,680

Current

13,971

34,922

15,342

7,447

2,364

52

74,098

Total

14,649

35,752

16,335

7,589

2,401

52

76,778

CRA

Total Past Due

—

—

—

—

—

—

—

Current

1,114

—

—

—

—

—

1,114

Total

1,114

—

—

—

—

—

1,114

Net investment in leases

and loans, before allowance

$

243,289

$

362,924

$

179,080

$

89,399

$

29,750

$

3,611

$

908,053

Portfolio by Origination Year as of December 31, 2019

Total

2019

2018

2017

2016

2015

Prior

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

Net investments in Equipment Finance and CVG leases and loans are generally charged-off when they are contractually past due for

120 days or more. Income recognition is discontinued when a default on monthly payment exists for a period of 90 days or more.

Income recognition resumes when a lease or loan becomes less than 90 days delinquent. At September 30, 2020 and December 31,

2019, there were

no

 finance receivables past due 90 days or more and still accruing. 

Working Capital Loans are generally placed in non-accrual status when they are 30 days past due and generally charged-off at 60 days

past due. The loan is removed from non-accrual status once sufficient payments are made to bring the loan current and reviewed by

management. At September 30, 2020 and December 31, 2019, there were

no

 Working Capital Loans past due 30 days or more and still

accruing.

The following tables provide information about non-accrual leases and loans:

XML

Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets [Text Block]

NOTE 7 - Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance of $

6.7

 million at December 31, 2019 included $

1.2

 million from the Company’s acquisition of

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. 

The Company assigns its goodwill to a single, consolidated reporting unit, Marlin Business Services Corp. In the first quarter of 2020,

events or circumstances indicated that it was more likely than not that the fair value of its reporting unit was less than its carrying

amount, driven in part by market capitalization of the Company falling below its book value, and negative current events that impact

the Company related to the COVID-19 economic shutdown. The Company calculated the fair value of the reporting unit, by taking

the average stock price over a reasonable period of time multiplied by shares outstanding as of March 31, 2020 and then further

applying a control premium, and compared it to its carrying amount, including goodwill. The Company concluded that the implied

fair value of goodwill was less than its carrying amount, and recognized impairment equal to the $

6.7

 million balance in the

Consolidated Statements of Operations. 

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2020 are as follows:

(Dollars in thousands)

Total Company

Balance at December 31, 2019

$

6,735

Impairment of Goodwill

(6,735)

Balance at September 30, 2020

$

—

Intangible assets

The following table presents details of the Company’s intangible assets:

(Dollars in thousands)

Gross Carrying

Accumulated

Net

Amount

Amortization

Value

As of September 30, 2020

Vendor relationships

$

7,290

$

1,472

$

5,818

Corporate trade name

60

32

28

 Total

$

7,350

$

1,504

$

5,846

As of December 31, 2019

Useful Life

Lender relationships

3

 to 

10

years

$

1,630

$

519

$

1,111

Vendor relationships

11

years

7,290

974

6,316

Corporate trade name

7

years

60

26

34

 Total

$

8,980

$

1,519

$

7,461

(Dollars in thousands)

FFR

HKF

Total

Beginning Balance, December 31, 2019

$

6,758

$

703

$

7,461

Amortization Expense

(530)

(69)

(599)

Impairment

(1,016)

—

(1,016)

Ending Balance, September 30, 2020

$

5,212

$

634

$

5,846

The Company’s intangible assets consist of definite-lived assets in connection with the January 2017 acquisition of HKF, and definite-

lived intangible assets in connection with the September 2018 acquisition of FFR. The Company has

no

 indefinite-lived intangible

assets. 

In the three months ended September 30, 2020, the Company determined that a decrease in projected volumes for its FFR business

and a decrease in the sales team that supports that business resulted in a triggering event that warranted a review of the recoverability

of the related vendor relationship and lender relationship intangible assets. Those assets were evaluated as separate asset groups, as

they generate independent cashflows, such that the vendor relationships relate to the origination of contracts and the lend er

relationships relate to the sale or syndication of contracts. The estimate of fair value was modeled based on an expected cashflow

analysis. As a result of those analyses, there was no impairment related to the FFR vendor relationship intangible, and the Company

recognized $

1.0

 million of impairment for the FFR lender relationship intangible. This impairment is reflected in Intangible

impairment in the Consolidated Statement of Operations.

Amortization related to the Company’s definite lived intangible assets was $

0.6

 million and $

0.7

 million for the nine-month periods

ended September 30, 2020 and September 30, 2019, respectively.

The Company expects the amortization expense for the next five years will be as follows:

Amortization

(Dollars in thousands)

Expense

Remainder of 2020

$

168

2021

671

2022

671

2023

671

2024

663

XML

Other Assets

9 Months Ended

Sep. 30, 2020

Other Assets [Abstract]

Other Assets

NOTE 8 – Other Assets

Other assets are comprised of the following:

September 30,

December 31,

2020

2019

(Dollars in thousands)

Accrued fees receivable

$

2,816

$

3,509

Prepaid expenses

2,393

2,872

Federal Reserve Bank Stock

1,711

1,711

Other 

1,606

2,361

$

8,526

$

10,453

XML

Deposits

9 Months Ended

Sep. 30, 2020

Deposits [Abstract]

Deposits

NOTE 9 – Deposits

MBB serves as the Company’s primary funding source. MBB issues fixed-rate FDIC-insured certificates of deposit raised nationally

through various brokered deposit relationships and fixed-rate FDIC-insured deposits received from direct sources. MBB offers FDIC-

insured money market deposit accounts (the “MMDA Product”) through participation in a partner bank’s insured savings account

product. This brokered deposit product has a variable rate, no maturity date and is offered to the clients of the partner bank and

recorded as a single deposit account at MBB. As of September 30, 2020, money market deposit accounts totaled $

52.7

 million.

As of September 30, 2020, the scheduled maturities of certificates of deposits are as follows:

Scheduled

Dollars in thousands

Maturities

Period Ending December 31,

Remainder of 2020

$

166,820

2021

312,968

2022

154,949

2023

76,924

2024

42,181

Thereafter

17,934

Total

$

771,776

Certificates of deposits issued by MBB are time deposits and are generally issued in denominations of $

250,000

 or less. The MMDA

Product is also issued to customers in amounts less than $

250,000

. The FDIC insures deposits up to $

250,000

 per depositor. The

weighted average all-in interest rate of deposits at September 30, 2020 was

1.92

%.

XML

Debt and Financing Arrangements

9 Months Ended

Sep. 30, 2020

Debt and Financing Arrangements [Abstract]

Debt and Financing Arrangements [Text Block]

NOTE 10 – Debt and Financing Arrangements

Short-Term Borrowings

The Company had a secured, variable rate revolving line of credit in the amount of $

5.0

 million that was scheduled to expire on

November 20, 2020

. The line of credit was terminated by mutual agreement with the line of credit provider in July 2020.

Long-term Borrowings

On July 27, 2018, the Company completed a $

201.7

 million asset-backed term securitization. Each tranche of the term note

securitization has a fixed term, fixed interest rate and fixed principal amount. At September 30, 2020, outstanding term securitizations

amounted to $

40.0

 million and are collateralized by $

42.8

 million of minimum lease and loan payments receivable and $

5.8

 million of

restricted interest-earning deposits. The Company’s term note securitizations are classified as long-term borrowings.

The balance of long-term borrowings consisted of the following:

September 30,

December 31,

2020

2019

(Dollars in thousands)

Term securitization 2018 -1

$

40,031

$

76,563

Unamortized debt issuance costs

(198)

(472)

$

39,833

$

76,091

The term note securitization is summarized below:

Outstanding Balance as of

Notes

Final

Original 

September 30,

December 31,

Originally 

Maturity 

Coupon 

2020

2019

Issued

Date

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 

8,391

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

$

40,031

$

76,563

$

201,650

3.05

%

(1)(2)

(1)

Represents the original weighted average initial coupon rate for all tranches of the securitization. In addition to this coupon

interest, term note securitizations have other transaction costs which are amortized over the life of the borrowings as additional

interest expense.

 (2)

The weighted average coupon rate of the 2018-1 term note securitization will approximate

3.77

% over the remaining term of the

borrowing.

Scheduled principal and interest payments on outstanding borrowings as of September 30, 2020 are as follows:

Principal

Interest

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

7,820

$

358

2021

23,629

813

2022

8,582

159

$

40,031

$

1,330

XML

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Measurements And Disclosures About Fair Value Of Financial Instruments [Abstract]

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments

NOTE 11 – Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments

Fair Value Measurements

Fair value is defined in GAAP as the price that would be received to sell an asset or the price that would be paid to transfer a liability

on the measurement date. GAAP focuses on the exit price in the principal or most advantageous market for the asset or liability in an

orderly transaction between market participants. A three-level valuation hierarchy is required for disclosure of fair value

measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The fair value

hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the

lowest priority to unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its

entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

The Company’s balances measured at fair value on a recurring basis include the following as of September 30, 2020 and December

31, 2019:

September 30, 2020

December 31, 2019

Fair Value Measurements Using

Fair Value Measurements Using

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

(Dollars in thousands)

Assets

ABS

$

—

$

3,836

$

—

$

—

$

4,332

$

—

Municipal securities

—

3,169

—

—

3,129

—

Mutual fund

3,756

—

—

3,615

—

—

At this time, the Company has not elected to report any assets and liabilities using the fair value option. There have been no transfers

between Level 1 and Level 2 of the fair value hierarchy for any of the periods presented.

Non-Recurring Measurements

Non-recurring fair value measurements include assets and liabilities that are periodically remeasured or assessed for impairment using

Fair value measurements. Non-recurring measurements include the Company’s evaluation of goodwill and residual assets for

impairment, and the Company’s remeasurement of contingent consideration and assessment of the carrying amount of its servicing

liability. 

For the nine months ended September 30, 2020, the Company recognized $

6.7

 million for the impairment of goodwill and in the three-

and nine-months ended September 30, 2020, $

1.0

 million for the impairment of intangible assets, as discussed further in Note 7,

Goodwill and Intangible Assets. In addition, in the three-and nine-months ended September 30, 2020 the Company updated its fair

value measurement of contingent consideration liability in connection with the 2018 FFR acquisition due to lower forecasted volumes

for that business, resulting in a $

1.4

 million reduction in that liability which was recognized as a reduction in General and

administrative expense.

For the nine months ended September 30, 2019, there were no significant amounts recognized in the Consolidated Statements of

Operations in connection with non-recurring fair value measurements.

Fair Value of Other Financial Instruments 

The following summarizes the carrying amount and estimated fair value of the Company’s other financial instruments, including those

not measured at fair value on a recurring basis:

September 30, 2020

December 31, 2019

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

$

195,132

$

195,132

$

123,096

$

123,096

Time deposits with banks

8,456

8,515

12,927

12,970

Restricted interest-earning deposits with banks

5,771

5,771

6,931

6,931

Loans, net of allowance

509,936

517,269

588,688

593,406

Federal Reserve Bank Stock

1,711

1,711

1,711

1,711

Financial Liabilities

 Deposits

$

823,707

$

787,478

$

839,132

$

846,304

 Long-term borrowings

39,833

40,344

76,091

76,781

There have been no significant changes in the methods and assumptions used in estimating the fair values of financial instruments, as

outlined in our consolidated financial statements and note disclosures in the Company’s Form 10-K for the year ended December 31,

2019.

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 12 – Earnings Per Share 

The Company’s restricted stock awards are paid non-forfeitable common stock dividends and thus meet the criteria of participating

securities. Accordingly, earnings per share (“EPS”) has been calculated using the two-class method, under which earnings are

allocated to both common stock and participating securities. 

Basic EPS has been computed by dividing net income or loss allocated to common stock by the weighted average common shares

used in computing basic EPS. For the computation of basic EPS, all shares of restricted stock have been deducted from the weighted

average shares outstanding. 

Diluted EPS has been computed by dividing net income or loss allocated to common stock by the weighted average number of

common shares used in computing basic EPS, further adjusted by including the dilutive impact of the exercise or conversion of

common stock equivalents, such as stock options, into shares of common stock as if those securities were exercised or converted.

The following table provides net income and shares used in computing basic and diluted EPS:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands, except per-share data)

Basic EPS

Net income (loss)

$

2,743

$

7,446

$

(14,960)

$

18,702

Less: net income allocated to participating securities

(36)

(89)

—

(237)

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Weighted average common shares outstanding 

11,946,549

12,203,086

11,951,375

12,290,906

Less: Unvested restricted stock awards considered participating

securities

(155,408)

(148,142)

(142,186)

(156,116)

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Basic EPS

$

0.23

$

0.61

$

(1.27)

$

1.52

Diluted EPS

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Add: Effect of dilutive stock-based compensation awards

41,272

113,018

—

94,186

Adjusted weighted average common shares used in computing

diluted EPS

11,832,413

12,167,962

11,809,189

12,228,976

Diluted EPS

$

0.23

$

0.60

$

(1.27)

$

1.51

For the three-month periods ended September 30, 2020 and September 30, 2019, weighted average outstanding stock-based

compensation awards in the amount of

230,428

 and

157,952

, respectively, were considered antidilutive and therefore were not

considered in the computation of potential common shares for purposes of diluted EPS. 

For the nine-month periods ended September 30, 2020 and September 30, 2019, weighted average outstanding stock-based

compensation awards in the amount of

286,349

 and

172,473

, respectively, were considered antidilutive and therefore were not

considered in the computation of potential common shares for purposes of diluted EPS.

XML

Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Stockholders' Equity [Abstract]

Stockholders' Equity

NOTE 13 – Stockholders’ Equity 

Share Repurchases

During the three-month period ended September 30, 2020, the Company did

no

t purchase any shares of its common stock under any

stock repurchase plan. During the nine-month period ended September 30, 2020, the Company purchased

264,470

 shares of its

common stock under a stock repurchase plan approved by the Company’s Board of Directors on August 1, 2019 (the “2019

Repurchase Plan”) at an average cost of $

16.09

 per share.

During the three-month period ended September 30, 2019, the Company purchased

144,729

 shares of its common stock in the open

market under a stock repurchase plan approved by the Company’s Board of Directors on May 30, 2017 (the “2017 Repurchase Plan”)

at an average cost of $

23.00

 per share. During the nine-month period ended September 30, 2019, the Company purchased

247,500

shares of its common stock under the 2017 Repurchase Plan at an average cost of $

23.24

 per share.

At September 30, 2020, the Company had $

4.7

 million of remaining authorizations under the 2019 Repurchase Plan. 

In addition to the repurchases described above, participants in the Company’s 2014 Equity Compensation Plan (approved by the

Company’s shareholders on June 3, 2014) (the “2014 Plan”) may have shares withheld to cover income taxes. During the three-month

periods ended September 30, 2020 and September 30, 2019, there were

18,446

 shares and

2,654

 shares repurchased to cover income

tax withholding under the 2014 Plan at an average cost of $

8.06

 per share and $

23.80

 per share, respectively. During the nine-month

periods ended September 30, 2020 and September 30, 2019, there were

41,466

 and

22,100

 shares repurchased to cover income tax

withholding in connection with shares granted under the 2014 Plan at average per-share costs of $

10.70

 and $

22.87

, respectively.

Regulatory Capital Requirements

Through its issuance of FDIC-insured deposits, MBB serves as the Company’s primary funding source. Over time, MBB may offer

other products and services to the Company’s customer base. MBB operates as a Utah state-chartered, Federal Reserve member

commercial bank, insured by the FDIC. As a state-chartered Federal Reserve member bank, MBB is supervised by both the Federal

Reserve Bank of San Francisco and the Utah Department of Financial Institutions.

The Company and MBB are subject to capital adequacy regulations issued jointly by the federal bank regulatory agencies. These risk-

based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among

banking organizations and consider off -balance sheet exposures in determining capital adequacy. The federal bank regulatory agencies

and/or the U.S. Congress may determine to increase capital requirements in the future due to the current economic environment.

Under the capital adequacy regulation, at least half of a banking organization’s total capital is required to be "Tier 1 Capital" as

defined in the regulations, comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual

preferred stock. The remaining capital, "Tier 2 Capital," as defined in the regulations, may consist of other preferred stock, a limited

amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The regulations establish minimum

leverage ratios for banking organizations, which are calculated by dividing Tier 1 Capital by total average assets. Recognizing that the

risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banking

organizations are expected to maintain capital in excess of the minimum standards. 

The Company and MBB operate under the Basel III capital adequacy standards. These standards require a minimum for Tier 1

leverage ratio of

4

%, minimum Tier 1 risk-based ratio of

6

%, and a total risk-based capital ratio of

8

%. The Basel III capital adequacy

standards established a new common equity Tier 1 risk-based capital ratio with a required

4.5

% minimum (

6.5

% to be considered

well-capitalized). The Company is required to have a level of regulatory capital in excess of the regulatory minimum and to have a

capital buffer above

2.5

%. If a banking organization does not maintain capital above the minimum plus the capital conservation buffer

it may be subject to restrictions on dividends, share buybacks, and certain discretionary payments such as bonus payments. 

CMLA Agreement. 

On March 25, 2020, MBB received notice from the FDIC that it had approved MBB’s request to rescind certain

nonstandard conditions in the FDIC’s order granting federal deposit insurance issued on March 20, 2007. Furthermore, effective

March 26, 2020, the FDIC, the Company and certain of the Company’s subsidiaries terminated the Capital Maintenance and Liquidity

Agreement (the “CMLA Agreement”) and the Parent Company Agreement, each entered into by and among the Company, certain of

its subsidiaries and the FDIC in conjunction with the opening of MBB. As a result of these actions, MBB is no longer required

pursuant to the CMLA Agreement to maintain a total risk-based capital ratio above

15

%. Rather, MBB must continue to maintain a

total risk-based capital ratio above 10% in order to maintain “well-capitalized” status as defined by banking regulations, while the

Company must continue to maintain a total risk-based capital ratio as discussed in the immediately preceding paragraph. The

additional capital released by the termination of the CMLA Agreement is held at MBB and is subject to the restrictions outlined in

Title 12 part 208 of the Code of Federal Regulations (12 CFR 208.5), which places limitations on bank dividends, including restricting

dividends for any year to the earnings from the current and prior two calendar years. Any dividends declared above that amount and

any return of permanent capital would require prior approval of the Federal Reserve Board of Governors. As of September 30, 2020,

MBB does not have the capacity to pay dividends to the Company without explicit approval from the Federal Reserve Board of

Governors because of the current period losses and the amount of cumulative dividends paid over the past two years.

MBB’s Tier 1 Capital balance at September 30, 2020 was $

139.4

 million, which met all capital requirements to which MBB is subject

and qualified MBB for “well-capitalized” status. At September 30, 2020, the Company also exceeded its regulatory capital

requirements and was considered “well-capitalized” as defined by federal banking regulations and as required by the FDIC

Agreement. 

CECL Capital Transition. 

The Company adopted CECL, or a new measurement methodology for the allowance estimate, on January

1, 2020, as discussed further in Note 2—Summary of Significant Accounting Policies. Rules governing the Company’s 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. The Company

has elected to avail itself of the five-year transition. For measurements of regulatory capital in 2020 and 2021 , under the two year

delay the Company shall prepare: (i) a measurement of its estimated allowance for credit losses under CECL, as reported in its balance

sheets; and (ii) a measurement of its estimated allowance under the historical incurred loss methodology, as prescribed by the

regulatory calculation. Any amount of provisions under CECL that is in excess of the incurred estimate will be an adjustment the

Company’s capital during the two-year delay. The three-year transition, starting in 2022, will phase in that adjustment straight-line,

such that

25

 percent of the transitional amounts will be included in the first year, and an additional

25

% over each of the next two

years, such that we will have phased in

75

% of the adjustment during year three. At the beginning of year 6 (2025) the Company will

have completely reflected the effects of CECL in its regulatory capital.

The following table sets forth the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio

and total risk-based capital ratio for Marlin Business Services Corp. and MBB at September 30, 2020.

Minimum Capital

Well-Capitalized Capital

Actual

Requirement

Requirement

Ratio

Amount

Ratio

Amount

Ratio

Amount

(Dollars in thousands)

Tier 1 Leverage Capital

 Marlin Business Services Corp.

16.92%

$

192,218

4.00%

$

45,443

5.00%

$

56,804

 Marlin Business Bank

13.26%

$

139,365

4.00%

$

42,053

5.00%

$

52,566

Common Equity Tier 1 Risk-Based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

4.50%

$

40,860

6.50%

$

59,019

 Marlin Business Bank

16.88%

$

139,365

4.50%

$

37,147

6.50%

$

53,657

Tier 1 Risk-based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

6.00%

$

54,479

8.00%

$

72,639

 Marlin Business Bank

16.88%

$

139,365

6.00%

$

49,530

8.00%

$

66,040

Total Risk-based Capital

 Marlin Business Services Corp.

22.49%

$

204,185

8.00%

$

72,639

10.00%

$

90,799

 Marlin Business Bank

18.21%

$

150,285

8.00%

$

66,040

10.00%

$

82,550

Prompt Corrective Action

. The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal

regulators to take prompt corrective action against any undercapitalized institution. Five capital categories have been established

under federal banking regulations: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and

critically undercapitalized. Well-capitalized institutions significantly exceed the required minimum level for each relevant capital

measure. Adequately capitalized institutions include depository institutions that meet but do not significantly exceed the required

minimum level for each relevant capital measure. Undercapitalized institutions consist of those that fail to meet the required minimum

level for one or more relevant capital measures. Significantly undercapitalized characterizes depository institutions with capital levels

significantly below the minimum requirements for any relevant capital measure. Critically undercapitalized refers to depository

institutions with minimal capital and at serious risk for government seizure.

Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the

institution were in the next lower capital category. A depository institution is generally prohibited from making capital distributions,

including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. 

Institutions that are adequately capitalized but not well-capitalized cannot accept, renew or roll over brokered deposits except with a

waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized

institutions may not accept, renew or roll over brokered deposits.

The federal bank regulatory agencies are permitted or, in certain cases, required to take certain actions with respect to institutions

falling within one of the three undercapitalized categories. Depending on the level of an institution’s capital, the agency’s corrective

powers include, among other things: 

• prohibiting the payment of principal and interest on subordinated debt;

• prohibiting the holding company from making distributions without prior regulatory approval;

• placing limits on asset growth and restrictions on activities;

• placing additional restrictions on transactions with affiliates;

• restricting the interest rate the institution may pay on deposits;

• prohibiting the institution from accepting deposits from correspondent banks; and

• in the most severe cases, appointing a conservator or receiver for the institution.

A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted

unless, among other things, the banking institution’s holding company guarantees the plan up to a certain specified amount. Any such

guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. 

MBB’s total risk-based capital ratio of

18.21

% at September 30, 2020 exceeded the threshold for “well capitalized” status under the

applicable laws and regulations.

Dividends

. The Federal Reserve Board has issued policy statements requiring insured banks and bank holding companies to have an

established assessment process for maintaining capital comm ensurate with their overall risk profile. Such assessment process may

affect the ability of the organizations to pay dividends. Although generally organizations may pay dividends only out of current

operating earnings, dividends may be paid if the distribution is prudent relative to the organization’s financial position and risk profile,

after consideration of current and prospective economic conditions. As mentioned above, MBB’s ability to pay dividends to the

Company is subject to various regulatory requirements, including Title 12 part 208 of the Code of Federal Regulations (12 CFR

208.5), which places limitations on bank dividends. Furthermore, as a bank holding company, the Company’s ability to pay dividends

to its shareholders is also subject to various regulatory requirements, including Supervisory Letter SR 09-4,

Applying Supervisory

Guidance and Regulations on the Payment of Dividends, Stock Redemptions and Stock Repurchases at Bank Holding Companies

.

XML

Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 14 – Stock-Based Compensation

Awards 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 and non-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

546,070

 shares available for future awards under the 2019 Plan as of September 30, 2020.

Total stock-based compensation expense was $

0.4

 million and $

0.9

 million for the three-month periods ended September 30, 2020 and

September 30, 2019, respectively. Total stock-based compensation expense was $

0.8

 million and $

2.8

 million for the nine-month

periods ended September 30, 2020 and September 30, 2019, respectively. Excess tax deficits from stock-based payment arrangements

were $

0.6

 million and $

0.1

 million for the nine-month periods ended September 30, 2020 and 2019, respectively.

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 with the

Company and provide for accelerated vesting if there is a change in control as defined in the Equity Compensation Plans. Employee

stock options generally vest over

three

 to

four years

.

There were

no

 stock options granted during the three-month and nine periods ended September 30, 2020 and September 30, 2019,

respectively.

The expected life for options is estimated based on their vesting and contractual terms and was determined by applying the simplified

method as defined by the SEC’s Staff Accounting Bulletin No. 107 (“SAB 107”). The risk-free interest rate reflected the yield on

zero-coupon Treasury securities with a term approximating the expected life of the stock options. The expected volatility was

determined using historical volatilities based on historical stock prices

A summary of option activity for the nine-month period ended September 30, 2020 follows:

Weighted

Average

Number of

Exercise Price

Options

Shares

Per Share

Outstanding, December 31, 2019

135,159

$

26.79

 Granted

—

—

 Exercised

—

—

 Forfeited

(3,929)

27.31

 Expired

(16,648)

26.19

Outstanding, September 30, 2020

114,582

26.87

The Company recognized $

0.1

 million of compensation expense related to options during the three and nine-month periods ended

September 30, 2020. The Company recognized $

0.1

 million and $

0.3

 million of compensation expense related to options during the

three and nine-month periods ended September 30, 2019. 

There were

no

 stock options exercised during the three or nine-month periods ended September 30, 2020 and September 30, 2019.

The following table summarizes information about the stock options outstanding and exercisable as of September 30, 2020:

Options Outstanding

 Options Exercisable

Weighted

Weighted

Aggregate

Weighted

Weighted

 Aggregate

Average

Average

Intrinsic

Average

Average

 Intrinsic

Range of 

Number

Remaining 

Exercise

Value

Number 

Remaining 

Exercise

 Value

Exercise Prices 

Outstanding 

Life (Years

)

Price

(In thousands)

Exercisable 

Life (Years

)

Price

(In thousands)

$

25.75

63,440

3.5

$

25.75

$

—

63,440

3.5

$

25.75

—

$

28.25

51,142

4.5

$

28.25

$

—

34,092

4.5

$

28.25

$

—

114,582

3.9

$

26.87

$

—

97,532

3.8

$

26.62

$

—

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock

price of $

7.05

 as of September 30, 2020, which would have been received by the option holders had all option holders exercised their

options as of that date.

As of September 30, 2020, there was $

0.1

 million of unrecognized compensation cost related to non-vested stock options not yet

recognized in the Consolidated Statements of Operations scheduled to be recognized over a weighted average period of

0.5

 year.

Restricted Stock Awards

The Company’s restricted stock awards provide that, during the applicable vesting periods, the shares awarded may not be sold or

transferred by the participant. The vesting period for restricted stock awards generally ranges from

three

 to

seven years

. All awards

issued contain service conditions based on the participant’s continued service with the Company and may provide for accelerated

vesting if there is a change in control as defined in the Equity Compensation Plans. 

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 to non-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.

The following table summarizes the activity of non-vested restricted stock for the nine-month period ended September 30, 2020:

Weighted

Average

Grant-Date

Non-vested restricted stock

Shares 

 Fair Value

Outstanding at December 31, 2019

143,935

$

21.88

 Granted

45,830

8.64

 Vested

(37,734)

23.04

 Forfeited

(2,750)

25.84

Outstanding at September 30, 2020

149,281

17.45

During the three-month period ended September 30, 2020, the Company did

no

t grant any restricted stock awards. During the three-

month period ended September 30, 2019, the Company granted restricted stock awards with grant-date fair values totaling $

0.4

million. During the nine-month periods ended September 30, 2020 and September 30, 2019, the Company granted restricted stock

awards with grant-date fair values totaling $

0.4

 million and $

0.4

 million, respectively. 

As vesting occurs, or is deemed likely to occur, compensation expense is recognized over the requisite service period and additional

paid-in capital is increased. The Company recognized $

0.1

 million and $

0.2

 million of compensation expense related to restricted

stock for the three-month periods ended September 30, 2020 and September 30, 2019, respectively. The Company recognized $

0.3

million and $

0.7

 million of compensation expense related to restricted stock for the nine-month periods ended September 30, 2020 and

September 30, 2019, respectively.

Of the $

0.3

 million total compensation expense related to restricted stock for the nine-month period ended September 30, 2020,

no

expense was related to accelerated vesting based on achievement of certain performance criteria determined annually. Of the $

0.7

million total compensation expense related to restricted stock for the nine-month period ended September 30, 2019 , approximately

$

0.1

 million related to accelerated vesting during the first quarter of 2019, which was also based on the achievement of certain

performance criteria determined annually.

As of September 30, 2020, there was $

1.4

 million of unrecognized compensation cost related to non-vested restricted stock

compensation scheduled to be recognized over a weighted average period of

4.8

 years. 

The fair value of shares that vested during the three-month periods ended September 30, 2020 and September 30, 2019 was $

0.1

million and $

0.2

 million, respectively. The fair value of shares that vested during the nine-month periods ended September 30, 2020

and September 30, 2019 was $

0.4

 million and $

1.3

 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, achievement of certain market-

based targets associated with the Company’s stock price or relative total shareholder return, or a combination of both performance

criteria and market-based targets.

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 performance conditions is recognized over the performance period based on the grant-date fair value of the

award for those awards which are expected to be earned.

The following tables summarize restricted stock unit activity for the nine-month period ended September 30, 2020:

Weighted

Average

Number of

Grant-Date

Performance-based & market-based RSUs

RSUs

 Fair Value

Outstanding at December 31, 2019

257,476

$

18.00

Granted

95,758

17.55

Forfeited

(5,081)

23.99

Converted

(65,810)

12.89

Cancelled due to non-achievement of market condition

(56,390)

18.19

Outstanding at September 30, 2020

225,953

19.12

Service-based RSUs

Outstanding at December 31, 2019

99,951

$

23.59

Granted

69,422

20.43

Forfeited

(24,016)

22.07

Converted

(39,879)

24.30

Outstanding at September 30, 2020

105,478

21.59

There were

no

 RSUs with vesting conditions based solely on market conditions granted during the nine-month periods ended

September 30, 2020 and September 30, 2019, respectively. 

The weighted average grant-date fair value of RSUs with both performance and market-based vesting conditions granted during the

nine-month periods ended September 30, 2020 and September 30, 2019 was $

12.90

 and $

12.91

 per unit, respectively. The weighted

average grant date fair value of these performance and market-based RSUs was estimated using a Monte Carlo simulation valuation

model with the following assumptions:

Nine Months Ended September 30,

2020

2019

Grant date stock price

$

20.43

$

21.50

Risk-free interest rate

1.40

%

2.16

Expected volatility

26.18

%

26.68

Dividend yield

—

—

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 the grant assumes dividends distributed during the performance period are reinvested. When valuing the grant, we have assumed a

dividend yield of zero, which is mathematically equivalent to reinvesting dividends in the issuing entity.

There were

no

 RSUs granted during the three-month periods ended September 30, 2020 and September 30, 2019, respectively. 

During the nine-month periods ended September 30, 2020 and September 30, 2019, the Company granted RSUs with grant-date fair

values totaling $

3.1

 million and $

3.4

 million, respectively. The fair value of restricted stock units that converted to shares of common

stock during the nine-month periods ended September 30, 2020 and September 30, 2019 was $

1.1

 million and $

0.8

 million,

respectively.

The Company recognized $

0.3

 million and $

0.6

 million of compensation expense related to RSUs for the three-month periods ended

September 30, 2020 and September 30, 2019, respectively. The Company recognized $

0.3

 million and $

1.7

 million of compensation

expense related to RSUs for the nine-month periods September 30, 2020 and September 30, 2019, respectively. During the nine-month

period ended September 30, 2020 the Company reversed $

0.7

 million of previously recognized compensation expense related to RSUs

based on the adjustment of the most probable performance assumptions related to certain non-market performance awards. As of

September 30, 2020, there was $

1.7

 million of unrecognized compensation cost related to RSUs scheduled to be recognized over a

weighted average period of

1.4

 years based on the most probable performance assumptions. In the event maximum performance

targets are achieved, an additional $

8.1

 million of compensation cost would be recognized over a weighted average period of

1.5

years. As of September 30, 2020,

3,960

 performance units are expected to convert to shares of common stock based on the most

probable performance assumptions. In the event maximum performance targets are achieved,

428,917

 performance units would

convert to shares of common stock.

XML

Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Events Subsequent to Year-End

NOTE 15 – Subsequent Events 

The Company declared a dividend of $

0.14

 per share on October 29, 2020. The quarterly dividend, which is expected to result in a

dividend payment of approximately $

1.7

 million, is scheduled to be paid on

November 19, 2020

 to shareholders of record on the close

of business on

November 9, 2020

. It represents the Company’s thirty-seventh consecutive quarterly cash dividend. The payment of

future dividends will be subject to satisfaction of regulatory requirements applicable to bank holding companies and approval by the

Company’s Board of Directors.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies [Abstract]

Basis of financial statement presentation

Basis of financial statement presentation.

 The unaudited consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries. MLC and MBB are managed together as a single business segment and are aggregated for financial

reporting purposes as they exhibit similar economic characteristics, share the same leasing and loan portfolio and have a single

consolidated product offering platform. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements present the Company’s financial position at September 30, 2020 and

the results of operations for the three- and nine -month periods ended September 30, 2020 and 2019, and cash flows for the nine-

month periods ended September 30, 2020 and 2019. In management’s opinion, the unaudited consolidated financial statements

contain all adjustments, which include normal and recurring adjustments, necessary for a fair presentation of the financial position and

results of operations for the interim periods presented. These unaudited consolidated financial statements should be read in

conjunction with the consolidated financial statements and note disclosures included in the Company’s Form 10-K for the year ended

December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020. The consolidated results and

statements of cash flows for these interim financial statements are not necessarily indicative of the results of operations or cash flows

for the respective full years or any other period.

Use of Estimates

Use of Estimates.

 These unaudited consolidated financial statements require management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expense s during the reporting period. Estimates are used when accounting for

income recognition, the residual values of leased equipment, the allowance for credit losses, deferred initial direct costs and fees, late

fee receivables, the fair value of financial instruments, estimated losses from insurance program, and income taxes. Actual results

could differ from those estimates.

Income taxes

Income taxes.

Our statutory tax rate was

25.4

% for the three months ended September 30, 2020. For the three-month period ended September 30,

2020, the effective tax rate was

16.1

%, driven by partial recognition of the prior quarter’s interim reporting limitation on the amount

of tax benefits that can be recognized under Accounting Standards Codification (“ASC”) 740,

Income Taxes

. 

For the nine-month period ended September 30, 2020, the effective tax rate in recognizing our benefit was

35.6

%, driven by a $

3.2

million discrete benefit, resulting from certain provisions in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

that allow for a remeasurement of our federal net operating losses. The Company filed for a refund of carryback net operating losses

as permitted under the CARES act and that refund was received in July 2020. The impact to our effective rate from that benefit was

partially offset by the limitation on interim tax benefits, as discussed above.

For the three and nine-month periods ended September 30, 2019, our effective tax rates were

30.6

% and

26.8

%, respectively.

The Company is currently under examination by the IRS for tax years ending December 31, 2013 to 2018, and the Company remains

subject to examination for the year ended December 31, 2019.

Credit Losses

Credit Losses.

 In June 2016, the FASB issued ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of

Credit Losses on Financial Instruments

, which changes the methodology for evaluating impairment of most financial instruments.

This guidance was subsequently amended by ASU 2018-19,

Codification Improvements,

 ASU 2019-04,

Codification Improvements

,

ASU 2019-05,

Targeted Transition Relief,

ASU 2019-10,

Effective Dates,

and ASU 2019-11,

Codification Improvements

. These

ASUs are referred to collectively as “CECL”.

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. Under CECL, an allowance, or estimate of credit losses, is 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 after

charge-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, and non-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 and Paycheck Protection loans. 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. 

The Company adopted the guidance in these ASUs, effective January 1, 2020, applying changes resulting from the application of the

new standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in

which the guidance is effective (i.e., modified retrospective approach). 

The adoption of this standard resulted in the following adjustment to the Company’s Consolidated Balance Sheets:

Balance as of

Balance as of

December 31,

Adoption

January 1, 

2019

Impact

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 – Allowance for Credit Losses, for further discussion of the January 1, 2020 measurement of allowance under CECL, as

well as discussion of the Company’s new Accounting Policy governing its Allowance. 

See Note 13 – Stockholders’ Equity, for discussion of the Company’s election to delay for two-years the effect of CECL on regulatory

capital, followed by a three-year phase-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 of the adoption date to our investment securities.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Adoption of standard resulted in adjustment to Company's Balance Sheets

Balance as of

Balance as of

December 31,

Adoption

January 1, 

2019

Impact

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

XML

Non-Interest Income (Tables)

9 Months Ended

Sep. 30, 2020

Non-interest Income [Abstract]

Summary of non-interest income

Three Months Ended

Nine Months Ended 

September 30,

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Insurance premiums written and earned

$

2,082

$

2,230

$

6,612

$

6,538

Property tax (loss) income

123

(42)

5,247

5,680

Servicing income

462

395

1,517

1,021

Gain on sale of leases and loans

87

6,456

2,426

13,400

Net gains recognized during the period on equity securities 

—

27

89

121

Non-interest income - other than from contracts with customers

2,754

9,066

15,891

26,760

Insurance policy fees

819

688

2,610

2,021

Property tax administrative fees on leases

243

272

713

801

ACH payment fees

35

78

143

238

Referral fees

15

129

123

448

Other

347

129

730

243

Non-interest income from contracts with customers

1,459

1,296

4,319

3,751

Total non-interest income

$

4,213

$

10,362

$

20,210

$

30,511

XML

Investment Securties (Tables)

9 Months Ended

Sep. 30, 2020

Investment securities [Abstract]

Investment Securities Summary [Table Text Block]

September 30,

December 31,

(Dollars in thousands)

2020

2019

Equity Securities

Mutual fund

$

3,756

$

3,615

Debt Securities, Available for Sale:

Asset-backed securities ("ABS")

3,836

4,332

Municipal securities

3,169

3,129

 Total investment securities

$

10,761

$

11,076

Equity Securities, FV-NI [Table Text Block]

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

2020

2019

2020

2019

Net gains recognized during the period on equity securities 

$

—

$

27

$

89

$

121

Less: Net gains recognized during the period

 on equity securities sold during the period

—

—

—

—

Unrealized gains recognized during the reporting period

 on equity securities still held at the reporting date

$

—

$

27

$

89

$

121

Summary of available for sale investments [Table Text Block]

September 30, 2020

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

Fair Value

(Dollars in thousands)

ABS

$

3,776

$

60

$

—

$

3,836

Municipal securities

3,082

88

(1)

3,169

 Total Debt Securities, Available for Sale

$

6,858

$

148

$

(1)

$

7,005

December 31, 2019

Gross 

Gross

Amortized

Unrealized 

Unrealized

Estimated

Cost

Gains

Losses

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

Schedule of Unrealized Loss on Investments [Table Text Block]

September 30, 2020

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

Municipal securities

(1)

$

—

$

142

$

—

$

—

$

—

$

142

Total available for sale investment

securities

$

—

$

142

$

—

$

—

$

—

$

142

(1) The unrealized loss is immaterial

December 31, 2019

Less than 12 months

12 months or longer

Total

Gross 

Gross

Gross

Unrealized 

Fair

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

Losses

Value

(Dollars in thousands)

ABS

$

—

$

—

$

(3)

$

430

$

(3)

$

430

Total available for sale investment

securities

$

—

$

—

$

(3)

$

430

$

(3)

$

430

XML

Net Investment in Leases and Loans (Tables)

9 Months Ended

Sep. 30, 2020

Net Investment in Leases and Loans [Abstract]

Net investment in leases and loans

September 30, 2020

December 31, 2019

(Dollars in thousands)

Minimum lease payments receivable

$

376,649

$

457,602

Estimated residual value of equipment

27,974

29,342

Unearned lease income, net of initial direct costs and fees deferred

(46,708)

(59,746)

Security deposits

(415)

(590)

Total leases

357,500

426,608

Commercial loans, net of origination costs and fees deferred

Working Capital Loans

26,472

60,942

CRA

(1)

1,114

1,398

Equipment loans

(2)

457,627

464,655

CVG

65,340

74,612

Total commercial loans

550,553

601,607

Net investment in leases and loans, excluding allowance

908,053

1,028,215

Allowance for credit losses

(61,325)

(21,695)

Total net investment in leases and loans

$

846,728

$

1,006,520

CRA loans are comprised of loans originated under a line of credit to satisfy its obligations under the Community Reinvestment Act of 1977

(“CRA”).

(2)

Equipment loans are comprised of Equipment Finance Agreements, Installment Purchase Agreements and other loans.

In response to COVID-19, starting in mid-March 2020, the Company instituted a payment deferral contract modification program in

order to assist our small-business customers. See Note 6, “Allowance for Credit Losses” for discussion of that program.

At September 30, 2020, $

42.8

 million in net investment in leases were pledged as collateral for the Company’s outstanding asset-

backed securitization balance and $

55.0

 million in net investment in leases were pledged as collateral for the secured borrowing

capacity at the Federal Reserve Discount Window. 

The amount of deferred initial direct costs and origination costs net of fees deferred were $

16.1

 million and $

20.5

 million as of

September 30, 2020 and December 31, 2019, respectively. Initial direct costs are netted in unearned income and are amortized to

income using the effective interest method. ASU 2016 -02 limited the types of costs that qualify for deferral as initial direct costs for

leases, which reduced the deferral of unit lease costs and resulted in an increase in current period expense. Origination costs are netted

in commercial loans and are amortized to income using the effective interest method. At September 30, 2020 and December 31, 2019,

$

22.2

 million and $

23.4

 million, respectively, of the estimated residual value of equipment retained on our Consolidated Balance

Sheets was related to copiers.

Maturities of lease receivables under lease contracts and the amortization of unearned lease income

Minimum Lease

Payments

Net Income

Receivable

(1)

Amortization

(2)

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

40,682

$

7,503

2021

144,561

20,557

2022

98,671

11,212

2023

57,414

5,177

2024

27,063

1,749

Thereafter

8,258

510

$

376,649

$

46,708

Represents the undiscounted cash flows of the lease payments receivable.

(2)

Represents the difference between the undiscounted cash flows and the discounted cash flows.

Summary of information related to portfolio sales

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Sales of leases and loans 

$

4,286

$

85,425

$

28,342

$

195,932

Gain on sale of leases and loans

87

6,456

2,426

13,400

XML

Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2020

Allowance For Credit Losses [Abstract]

Summary of activity in the allowance for credit losses

Three Months Ended September 30, 2020

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

48,550

$

7,962

$

7,132

$

—

$

63,644

 Charge-offs

(10,509)

(633)

(524)

—

(11,666)

 Recoveries

983

101

94

—

1,178

Net charge-offs

(9,526)

(532)

(430)

—

(10,488)

Realized cashflows from Residual Income

965

—

—

—

965

 Provision for credit losses

7,226

(3,974)

3,952

—

7,204

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Three Months Ended September 30, 2019

(Dollars in thousands)

Equipment

Finance

Working

Capital

Loans

CVG

CRA

Total

Allowance for credit losses, beginning of period

$

13,416

$

1,940

$

1,421

$

—

$

16,777

 Charge-offs

(5,023)

(417)

(526)

—

(5,966)

 Recoveries

457

227

54

—

738

 Net charge-offs

(4,566)

(190)

(472)

—

(5,228)

 Provision for credit losses

6,799

346

517

—

7,662

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

Nine Months Ended September 30, 2020

(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 ASU 2016-13 (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

(24,723)

(2,598)

(2,157)

—

(29,478)

 Recoveries

2,237

156

257

—

2,650

Net charge-offs

(22,486)

(2,442)

(1,900)

—

(26,828)

Realized cashflows from Residual Income

3,390

—

—

—

3,390

 Provision for credit losses

38,713

4,002

8,445

—

51,160

Allowance for credit losses, end of period

$

47,215

$

3,456

$

10,654

$

—

$

61,325

Net investment in leases and loans, before allowance

$

803,689

$

26,472

$

76,778

$

1,114

$

908,053

Nine Months Ended September 30, 2019

(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

(13,863)

(1,692)

(1,200)

—

(16,755)

 Recoveries

1,671

298

116

—

2,085

 Net charge-offs

(12,192)

(1,394)

(1,084)

—

(14,670)

 Provision for credit losses

14,310

2,023

1,448

—

17,781

Allowance for credit losses, end of period

$

15,649

$

2,096

$

1,466

$

—

$

19,211

Net investment in leases and loans, before allowance

$

910,046

$

55,794

$

86,415

$

1,454

$

1,053,709

(1)

 The Company adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on

Financial Instruments

, which changed our accounting policy and estimated allowance, effective January 1, 2020. See further

discussion in Note 2, “Summary of Significant Accounting Policies”, and below.

Summary of data on the modified population based on the balance and status

Equipment

Working

(Dollars in thousands)

Finance

CVG

Capital

Total

Modified leases and loans receivable

4,437

431

369

5,237

Resolved (payoff, chargeoff)

(1)

230

20

122

372

Total Program, number of contracts

4,667

451

491

5,609

Current Quarter Population Changes:

Q3 - New modification

$

6,689

$

2,468

$

286

$

9,443

Q3 - Extended modification

5,547

8,412

2,458

16,417

Last Modified in Q2 or Q1

79,664

14,892

9,466

104,022

Total Modifications, Net investment receivable

$

91,900

$

25,772

$

12,210

$

129,882

% of total segment receivables

11.4%

33.6%

46.1%

14.3%

Deferral Status:

Out of deferral

$

82,978

$

16,649

$

9,489

$

109,116

In deferral period - partial payment during deferral

6,372

3,163

2,721

12,256

In deferral period - full deferral of payment

2,550

5,960

—

8,510

Total Modifications, Net investment receivable

(2)

$

91,900

$

25,772

$

12,210

$

129,882

Modifications 30+ Days Delinquent:

Out of deferral

$

3,352

$

1,367

$

320

$

5,039

In deferral period, with partial payment during

deferral

639

462

99

1,200

Total resolved modifications include

41

 contracts charged off where $

574

 thousand credit loss was realized, and

331

contracts that paid in full.

(2)

Out of the deferral period represents the month in which the contract returns to its regular contract schedule for the entire

month. For loans in deferral period, the deferral may either be full, with zero payment owed during the deferral period, or

partial, with reduced payments during deferral that are primarily

25

%-

50

% of schedule, or the deferral period payment may

be a nominal amount. In all cases, information is presented with respect to the contracts’ current deferral terms as of

September 30, 2020.

Information about delinquent leases and loans in the Company's portfolio

Portfolio by Origination Year as of September 30, 2020

Total

2020

2019

2018

2017

2016

Prior

Receivables

(Dollars in thousands)

Equipment Finance

30-59

$

837

$

2,103

$

1,387

$

740

$

316

$

71

$

5,454

60-89

520

1,692

1,182

748

315

39

4,496

90+

334

2,789

1,444

1,220

294

42

6,123

Total Past Due

1,691

6,584

4,013

2,708

925

152

16,073

Current

214,104

306,024

158,593

79,064

26,424

3,407

787,616

Total

215,795

312,608

162,606

81,772

27,349

3,559

803,689

Working Capital

30-59

71

328

—

—

—

—

399

60-89

133

18

—

—

—

—

151

90+

6

222

—

—

—

—

228

Total Past Due

210

568

—

—

—

—

778

Current

11,521

13,996

139

38

—

—

25,694

Total

11,731

14,564

139

38

—

—

26,472

CVG

30-59

90

467

73

92

26

—

748

60-89

588

307

336

—

—

—

1,231

90+

—

56

584

50

11

—

701

Total Past Due

678

830

993

142

37

—

2,680

Current

13,971

34,922

15,342

7,447

2,364

52

74,098

Total

14,649

35,752

16,335

7,589

2,401

52

76,778

CRA

Total Past Due

—

—

—

—

—

—

—

Current

1,114

—

—

—

—

—

1,114

Total

1,114

—

—

—

—

—

1,114

Net investment in leases

and loans, before allowance

$

243,289

$

362,924

$

179,080

$

89,399

$

29,750

$

3,611

$

908,053

Portfolio by Origination Year as of December 31, 2019

Total

2019

2018

2017

2016

2015

Prior

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

XML

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets [Abstract]

Schedule Of Goodwill

(Dollars in thousands)

Total Company

Balance at December 31, 2019

$

6,735

Impairment of Goodwill

(6,735)

Balance at September 30, 2020

$

—

Schedule of Finite Lived Intangible Assets

(Dollars in thousands)

Gross Carrying

Accumulated

Net

Amount

Amortization

Value

As of September 30, 2020

Vendor relationships

$

7,290

$

1,472

$

5,818

Corporate trade name

60

32

28

 Total

$

7,350

$

1,504

$

5,846

As of December 31, 2019

Useful Life

Lender relationships

3

 to 

10

years

$

1,630

$

519

$

1,111

Vendor relationships

11

years

7,290

974

6,316

Corporate trade name

7

years

60

26

34

 Total

$

8,980

$

1,519

$

7,461

(Dollars in thousands)

FFR

HKF

Total

Beginning Balance, December 31, 2019

$

6,758

$

703

$

7,461

Amortization Expense

(530)

(69)

(599)

Impairment

(1,016)

—

(1,016)

Ending Balance, September 30, 2020

$

5,212

$

634

$

5,846

Schedule of amortization expense for the next five years

The Company expects the amortization expense for the next five years will be as follows:

Amortization

(Dollars in thousands)

Expense

Remainder of 2020

$

168

2021

671

2022

671

2023

671

2024

663

XML

Other Assets (Tables)

9 Months Ended

Sep. 30, 2020

Other Assets [Abstract]

Schedule of Other Assets

September 30,

December 31,

2020

2019

(Dollars in thousands)

Accrued fees receivable

$

2,816

$

3,509

Prepaid expenses

2,393

2,872

Federal Reserve Bank Stock

1,711

1,711

Other 

1,606

2,361

$

8,526

$

10,453

XML

Deposits (Tables)

9 Months Ended

Sep. 30, 2020

Deposits [Abstract]

Schedule of maturities of certificates of deposits

Scheduled

Dollars in thousands

Maturities

Period Ending December 31,

Remainder of 2020

$

166,820

2021

312,968

2022

154,949

2023

76,924

2024

42,181

Thereafter

17,934

Total

$

771,776

XML

Debt and Financing Arrangements (Tables)

9 Months Ended

Sep. 30, 2020

Debt and Financing Arrangements [Abstract]

Schedule of balance of long-term borrowings

September 30,

December 31,

2020

2019

(Dollars in thousands)

Term securitization 2018 -1

$

40,031

$

76,563

Unamortized debt issuance costs

(198)

(472)

$

39,833

$

76,091

Schedule of term note securitization

The term note securitization is summarized below:

Outstanding Balance as of

Notes

Final

Original 

September 30,

December 31,

Originally 

Maturity 

Coupon 

2020

2019

Issued

Date

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 

8,391

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

$

40,031

$

76,563

$

201,650

3.05

%

(1)(2)

(1)

Represents the original weighted average initial coupon rate for all tranches of the securitization. In addition to this coupon

interest, term note securitizations have other transaction costs which are amortized over the life of the borrowings as additional

interest expense.

 (2)

The weighted average coupon rate of the 2018-1 term note securitization will approximate

3.77

% over the remaining term of the

borrowing.

Scheduled principal and interest payments on outstanding borrowings

Scheduled principal and interest payments on outstanding borrowings as of September 30, 2020 are as follows:

Principal

Interest

(Dollars in thousands)

Period Ending December 31,

Remainder of 2020

$

7,820

$

358

2021

23,629

813

2022

8,582

159

$

40,031

$

1,330

XML

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Measurements And Disclosures About Fair Value Of Financial Instruments [Abstract]

Schedule of balances measured at fair value on a recurring basis

September 30, 2020

December 31, 2019

Fair Value Measurements Using

Fair Value Measurements Using

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

(Dollars in thousands)

Assets

ABS

$

—

$

3,836

$

—

$

—

$

4,332

$

—

Municipal securities

—

3,169

—

—

3,129

—

Mutual fund

3,756

—

—

3,615

—

—

Schedule of Carrying Amount and Estimated Fair Value of Financial Instruments

September 30, 2020

December 31, 2019

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

$

195,132

$

195,132

$

123,096

$

123,096

Time deposits with banks

8,456

8,515

12,927

12,970

Restricted interest-earning deposits with banks

5,771

5,771

6,931

6,931

Loans, net of allowance

509,936

517,269

588,688

593,406

Federal Reserve Bank Stock

1,711

1,711

1,711

1,711

Financial Liabilities

 Deposits

$

823,707

$

787,478

$

839,132

$

846,304

 Long-term borrowings

39,833

40,344

76,091

76,781

XML

Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Schedule of net income and shares used in computing basic and diluted EPS

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands, except per-share data)

Basic EPS

Net income (loss)

$

2,743

$

7,446

$

(14,960)

$

18,702

Less: net income allocated to participating securities

(36)

(89)

—

(237)

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Weighted average common shares outstanding 

11,946,549

12,203,086

11,951,375

12,290,906

Less: Unvested restricted stock awards considered participating

securities

(155,408)

(148,142)

(142,186)

(156,116)

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Basic EPS

$

0.23

$

0.61

$

(1.27)

$

1.52

Diluted EPS

Net income (loss) allocated to common stock

$

2,707

$

7,357

$

(14,960)

$

18,465

Adjusted weighted average common shares used in computing

basic EPS

11,791,141

12,054,944

11,809,189

12,134,790

Add: Effect of dilutive stock-based compensation awards

41,272

113,018

—

94,186

Adjusted weighted average common shares used in computing

diluted EPS

11,832,413

12,167,962

11,809,189

12,228,976

Diluted EPS

$

0.23

$

0.60

$

(1.27)

$

1.51

XML

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2020

Stockholders' Equity [Abstract]

Schedule of Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio

Minimum Capital

Well-Capitalized Capital

Actual

Requirement

Requirement

Ratio

Amount

Ratio

Amount

Ratio

Amount

(Dollars in thousands)

Tier 1 Leverage Capital

 Marlin Business Services Corp.

16.92%

$

192,218

4.00%

$

45,443

5.00%

$

56,804

 Marlin Business Bank

13.26%

$

139,365

4.00%

$

42,053

5.00%

$

52,566

Common Equity Tier 1 Risk-Based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

4.50%

$

40,860

6.50%

$

59,019

 Marlin Business Bank

16.88%

$

139,365

4.50%

$

37,147

6.50%

$

53,657

Tier 1 Risk-based Capital

 Marlin Business Services Corp.

21.17%

$

192,218

6.00%

$

54,479

8.00%

$

72,639

 Marlin Business Bank

16.88%

$

139,365

6.00%

$

49,530

8.00%

$

66,040

Total Risk-based Capital

 Marlin Business Services Corp.

22.49%

$

204,185

8.00%

$

72,639

10.00%

$

90,799

 Marlin Business Bank

18.21%

$

150,285

8.00%

$

66,040

10.00%

$

82,550

XML

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Stock-Based Compensation [Abstract]

Schedule of Stock Options Activity

A summary of option activity for the nine-month period ended September 30, 2020 follows:

Weighted

Average

Number of

Exercise Price

Options

Shares

Per Share

Outstanding, December 31, 2019

135,159

$

26.79

 Granted

—

—

 Exercised

—

—

 Forfeited

(3,929)

27.31

 Expired

(16,648)

26.19

Outstanding, September 30, 2020

114,582

26.87

Schedule of information about the stock options outstanding and exercisable

The following table summarizes information about the stock options outstanding and exercisable as of September 30, 2020:

Options Outstanding

 Options Exercisable

Weighted

Weighted

Aggregate

Weighted

Weighted

 Aggregate

Average

Average

Intrinsic

Average

Average

 Intrinsic

Range of 

Number

Remaining 

Exercise

Value

Number 

Remaining 

Exercise

 Value

Exercise Prices 

Outstanding 

Life (Years

)

Price

(In thousands)

Exercisable 

Life (Years

)

Price

(In thousands)

$

25.75

63,440

3.5

$

25.75

$

—

63,440

3.5

$

25.75

—

$

28.25

51,142

4.5

$

28.25

$

—

34,092

4.5

$

28.25

$

—

114,582

3.9

$

26.87

$

—

97,532

3.8

$

26.62

$

—

Schedule of activity of non-vested restricted stock

The following table summarizes the activity of non-vested restricted stock for the nine-month period ended September 30, 2020:

Weighted

Average

Grant-Date

Non-vested restricted stock

Shares 

 Fair Value

Outstanding at December 31, 2019

143,935

$

21.88

 Granted

45,830

8.64

 Vested

(37,734)

23.04

 Forfeited

(2,750)

25.84

Outstanding at September 30, 2020

149,281

17.45

Schedule of restricted stock unit activity

The following tables summarize restricted stock unit activity for the nine-month period ended September 30, 2020:

Weighted

Average

Number of

Grant-Date

Performance-based & market-based RSUs

RSUs

 Fair Value

Outstanding at December 31, 2019

257,476

$

18.00

Granted

95,758

17.55

Forfeited

(5,081)

23.99

Converted

(65,810)

12.89

Cancelled due to non-achievement of market condition

(56,390)

18.19

Outstanding at September 30, 2020

225,953

19.12

Service-based RSUs

Outstanding at December 31, 2019

99,951

$

23.59

Granted

69,422

20.43

Forfeited

(24,016)

22.07

Converted

(39,879)

24.30

Outstanding at September 30, 2020

105,478

21.59

Schedule of Monte Carlo Valuation Assumptions

Nine Months Ended September 30,

2020

2019

Grant date stock price

$

20.43

$

21.50

Risk-free interest rate

1.40

%

2.16

Expected volatility

26.18

%

26.68

Dividend yield

—

—

XML

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Summary of Significant Accounting Policies [Abstract]
Other income tax, discrete (benefit)			$ 3.2
Statutory tax rate	25.40%
Effective Income Tax Rate Reconciliation, Percent	16.10%	30.60%	35.60%	26.80%

XML

Summary of Significant Accounting Policies - Recently Adopted Accounting Standards (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net investment in leases and loans	$ 908,053		$ 1,028,215	$ 1,053,709
Allowance for credit losses	(61,325)	$ (63,644)	(21,695)	$ (19,211)	$ (16,777)	$ (16,100)
Total net investment in leases and loans	846,728		1,006,520
Net deferred income tax liability	20,032		30,828
Retained earnings	$ 106,244		135,112
Accounting Standards Update 2016-13 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net investment in leases and loans			1,028,215
Allowance for credit losses			(33,603)
Total net investment in leases and loans			994,612
Net deferred income tax liability			27,797
Retained earnings			126,235
Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net investment in leases and loans			0
Allowance for credit losses			(11,908)
Net deferred income tax liability			(3,031)
Retained earnings			$ (8,877)

XML

Non-Interest Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Non-interest Income [Abstract]
Insurance premiums written and earned	$ 2,082	$ 2,230	$ 6,612	$ 6,538
Property tax (loss) income	123	(42)	5,247	5,680
Servicing income	462	395	1,517	1,021
Gain on sale of leases and loans	87	6,456	2,426	13,400
Net gains recognized during the period on equity securities	0	27	89	121
Non-interest income - other than from contracts with customers	2,754	9,066	15,891	26,760
Insurance policy fees	819	688	2,610	2,021
Property tax administrative fees on leases	243	272	713	801
ACH payment fees	35	78	143	238
Referral fees	15	129	123	448
Other	347	129	730	243
Non-interest income from contracts with customers	1,459	1,296	4,319	3,751
Total non-interest income	$ 4,213	$ 10,362	$ 20,210	$ 30,511

XML

Investment Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities Available-for-sale [Line Items]
Investment securities	$ 10,761	$ 11,076
Mutual Fund [Member]
Debt Securities Available-for-sale [Line Items]
Investment securities	3,756	3,615
Asset Backed Securities [Member]
Debt Securities Available-for-sale [Line Items]
Investment securities	3,836	4,332
Municipal Securities [Member]
Debt Securities Available-for-sale [Line Items]
Investment securities	$ 3,169	$ 3,129

XML

Investment Securities - Schedule of changes in fair value of Equity securities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Equity Securities, FV-NI, Gain (Loss) [Abstract]
Net gains recognized during the period on equity securities	$ 0	$ 27	$ 89	$ 121
Less: Net gains recognized during the period on equity securities sold during the period	0	0	0	0
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$ 0	$ 27	$ 89	$ 121

XML

Investment Securities - Schedule of available for sale investments (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities Available-for-sale [Line Items]
Amortized cost	$ 6,858
Estimated Fair Value	10,761	$ 11,076
Debt Securities [Member]
Debt Securities Available-for-sale [Line Items]
Amortized cost	6,858	7,360
Gross Unrealized Gains	148	104
Gross Unrealized Loss	(1)	(3)
Estimated Fair Value	7,005	7,461
ABS [Member]
Debt Securities Available-for-sale [Line Items]
Amortized cost	3,776	4,302
Gross Unrealized Gains	60	33
Gross Unrealized Loss	0	(3)
Estimated Fair Value	3,836	4,332
Municipal Securities [Member]
Debt Securities Available-for-sale [Line Items]
Amortized cost	3,082	3,058
Gross Unrealized Gains	88	71
Gross Unrealized Loss	(1)	0
Estimated Fair Value	$ 3,169	$ 3,129

XML

Investment Securities - Gross Unrealized Loss and Fair Value of Securities Available for Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities Available-for-sale [Line Items]
Gross Unrealized Losses, Less than 12 months	$ 0	$ 0
Fair Value, Less than 12 months	142	0
Gross Unrealized Losses, 12 months or longer	0	(3)
Fair Value, 12 months or longer	0	430
Gross Unrealized Losses, Total	0	(3)
Fair Value, Total	142	430
ABS [Member]
Debt Securities Available-for-sale [Line Items]
Gross Unrealized Losses, Less than 12 months		0
Fair Value, Less than 12 months		0
Gross Unrealized Losses, 12 months or longer		(3)
Fair Value, 12 months or longer		430
Gross Unrealized Losses, Total		(3)
Fair Value, Total		$ 430
Municipal Securities [Member]
Debt Securities Available-for-sale [Line Items]
Gross Unrealized Losses, Less than 12 months	0
Fair Value, Less than 12 months	142
Gross Unrealized Losses, 12 months or longer	0
Fair Value, 12 months or longer	0
Gross Unrealized Losses, Total	0
Fair Value, Total	$ 142

XML

Investment Securities - Contractual Maturity of Debt Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities Available-for-sale [Line Items]
Amortized cost, 1 year or less	$ 15
Amortized Cost, Over 1 to 5 Years	2,573
Amortized Cost, Over 5 to 10 Years	4,128
Amortized Cost, Over 10 Years	142
Amortized Cost Basis, Total	6,858
Estimated fair value, 1 Year or Less	15
Estimated fair value, Over 1 to 5 Years	2,625
Estimated fair value, Over 5 to 10 Years	4,223
Estimated fair value, Over 10 Years	142
Estimated Fair Value, Total	$ 7,005
Weighted-average yield, GAAP basis, 1 Year or Less	4.75%
Weighted-average yield, GAAP basis, Over 1 to 5 years	1.98%
Weighted-average yield, GAAP basis, Over 5 to10 Years	1.99%
Weighted-average yield, GAAP basis, Over 10 Years	2.10%
Weighted-average yield, GAAP basis, Total	1.99%
Debt Securities [Member]
Debt Securities Available-for-sale [Line Items]
Amortized Cost Basis, Total	$ 6,858	$ 7,360
ABS [Member]
Debt Securities Available-for-sale [Line Items]
Amortized cost, 1 year or less	0
Amortized Cost, Over 1 to 5 Years	2,271
Amortized Cost, Over 5 to 10 Years	1,505
Amortized Cost, Over 10 Years	0
Amortized Cost Basis, Total	3,776	4,302
Municipal Securities [Member]
Debt Securities Available-for-sale [Line Items]
Amortized cost, 1 year or less	15
Amortized Cost, Over 1 to 5 Years	302
Amortized Cost, Over 5 to 10 Years	2,623
Amortized Cost, Over 10 Years	142
Amortized Cost Basis, Total	$ 3,082	$ 3,058

XML

Net Investment in Leases and Loans - Narratives (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Net Investment in Leases and Loans [Abstract]
Initial direct costs and origination costs	$ 16,100	$ 20,500
Servicing liability	1,500	2,500
Portfolio of leases and loans serviced for others	261,000	340,000
(Losses) from recourse obligations	(900)	(400)
Net investments [Line Items]
Estimated Residual Value of Equipment	27,974	29,342
Asset Backed Securities [Member]
Net investments [Line Items]
Net investment in leases are pledged as collateral	42,800
Secured borrowing capacity at the Federal Reserve Discount Window [Member]
Net investments [Line Items]
Net investment in leases are pledged as collateral	55,000
Copier Product [Member]
Net investments [Line Items]
Estimated Residual Value of Equipment	$ 22,200	$ 23,400

XML

Net Investment in Leases and Loans - Net investment in leases and loans (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Net Investment in Leases and Loans [Abstract]
Minimum lease payments receivable	$ 376,649		$ 457,602
Estimated Residual Value of Equipment	27,974		29,342
Unearned Lease Income, Net Of Initial Direct Costs and Fees Deferred	(46,708)		(59,746)
Security Deposits	(415)		(590)
Total leases	357,500		426,608
Allowance for Credit Losses [Line Items]
Total commercial loans	550,553		601,607
Net investment in leases and loans, excluding allowance for credit losses	908,053		1,028,215	$ 1,053,709
Allowance for credit losses	(61,325)	$ (63,644)	(21,695)	(19,211)	$ (16,777)	$ (16,100)
Total net investment in leases and loans	846,728		1,006,520
Working capital Loans [Member]
Allowance for Credit Losses [Line Items]
Total commercial loans	26,472		60,942
Net investment in leases and loans, excluding allowance for credit losses	26,472			55,794
Allowance for credit losses	(3,456)	(7,962)	(1,899)	(2,096)	(1,940)	(1,467)
CRA [Member]
Allowance for Credit Losses [Line Items]
Total commercial loans	1,114		1,398
Net investment in leases and loans, excluding allowance for credit losses	1,114			1,454
Allowance for credit losses	0	0	0	0	0	0
Equipment Finance [Member]
Allowance for Credit Losses [Line Items]
Total commercial loans	457,627		464,655
Net investment in leases and loans, excluding allowance for credit losses	803,689			910,046
Allowance for credit losses	(47,215)	(48,550)	(18,334)	(15,649)	(13,416)	(13,531)
CVG [Member]
Allowance for Credit Losses [Line Items]
Total commercial loans	65,340		74,612
Net investment in leases and loans, excluding allowance for credit losses	76,778			86,415
Allowance for credit losses	(10,654)	$ (7,132)	(1,462)	$ (1,466)	$ (1,421)	$ (1,102)
PPP Loans [Member]
Allowance for Credit Losses [Line Items]
Total commercial loans	$ 0		$ 0

XML

Net Investment in Leases and Loans - Maturities of lease receivables under lease contracts and the amortization of unearned lease income (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Future Minimum Lease Payments Receivable Schedule [Abstract]
Remaining part of 2020	$ 40,682
2021	144,561
2022	98,671
2023	57,414
2024	27,063
Thereafter	8,258
Minimum Lease Payments Receivable	376,649	$ 457,602
Future Scheduled Income Amortization [Abstract]
Remaing part of 2020	7,503
2021	20,557
2022	11,212
2023	5,177
2024	1,749
Thereafter	510
Net income amortization	$ 46,708	$ 59,746

XML

Net Investment in Leases and Loans - Summary of information related to portfolio sales (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Sales of leases and loans	$ 4,286	$ 85,425	$ 28,342	$ 195,932
Gain on sale of leases and loans	$ 87	$ 6,456	$ 2,426	$ 13,400

XML

Allowance for Credit Losses - Narratives (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) Contracts	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Allowance For Credit Losses [Abstract]
Finance Receivables 90 Days or More Past Due and Still Accruing	$ 0		$ 0
Working Capital Loans past due 30 days or more and still accruing	0		0		$ 0
Financing Receivable, Troubled Debt Restructuring	$ 0		$ 0		0
Percentage of modified contracts resumed regular payment schedule	84.00%		84.00%
Allowance for Credit Losses [Line Items]
Provision for credit losses	$ 7,204,000	$ 7,662,000	$ 51,160,000	$ 17,781,000
Notes Receivable Gross	908,053,000		$ 908,053,000		1,028,215,000
Financing Receivable, Modifications, Number of Contracts charged off | Contracts			41
Accounts Receivable, Allowance for Credit Loss, Writeoff			$ 574,000
Financing Receivable, Modifications, Number of Contracts Paid In Full | Contracts			331
Maximum [Member]
Allowance for Credit Losses [Line Items]
Percentange of reduced payment of deferral schedule			50.00%
Minimum [Member]
Allowance for Credit Losses [Line Items]
Percentange of reduced payment of deferral schedule			25.00%
Loan Modification Program [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	129,882,000		$ 129,882,000
Loan Modification Program [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	109,116,000		109,116,000
Adjustments related to Covid 19 [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	1,900,000		36,600,000
Equipment Finance [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	7,226,000	6,799,000	38,713,000	14,310,000
Notes Receivable Gross	803,689,000		803,689,000		881,252,000
Equipment Finance [Member] | Loan Modification Program [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	91,900,000		91,900,000
Equipment Finance [Member] | Loan Modification Program [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	82,978,000		82,978,000
Equipment Finance [Member] | Total Past Due [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	16,073,000		16,073,000		12,219,000
Equipment Finance [Member] | Adjustments related to Covid 19 [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	1,200,000		22,200,000
Increase (Decrease) in reserve			900,000
Working capital Loans [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	(3,974,000)	346,000	4,002,000	2,023,000
Notes Receivable Gross	26,472,000		26,472,000		60,942,000
Working capital Loans [Member] | Loan Modification Program [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	12,210,000		12,210,000
Working capital Loans [Member] | Loan Modification Program [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	9,489,000		9,489,000
Working capital Loans [Member] | Total Past Due [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	778,000		778,000		855,000
Working capital Loans [Member] | Adjustments related to Covid 19 [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses			3,100,000
Increase (Decrease) in reserve	(3,900,000)
CVG [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	3,952,000	517,000	8,445,000	1,448,000
Notes Receivable Gross	76,778,000		76,778,000		84,623,000
CVG [Member] | Loan Modification Program [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	25,772,000		25,772,000
CVG [Member] | Loan Modification Program [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	16,649,000		16,649,000
CVG [Member] | Total Past Due [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	2,680,000		2,680,000		1,008,000
CVG [Member] | Adjustments related to Covid 19 [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	3,800,000		7,000,000.0
CRA [Member]
Allowance for Credit Losses [Line Items]
Provision for credit losses	0	$ 0	0	$ 0
Notes Receivable Gross	1,114,000		1,114,000		1,398,000
CRA [Member] | Total Past Due [Member]
Allowance for Credit Losses [Line Items]
Notes Receivable Gross	$ 0		$ 0		$ 0

XML

Allowance for Credit Losses - Activity in the allowance for credit losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period	$ 63,644	$ 16,777	$ 21,695	$ 16,100
Charge-offs	(11,666)	(5,966)	(29,478)	(16,755)
Recoveries	1,178	738	2,650	2,085
Net charge-offs	(10,488)	(5,228)	(26,828)	(14,670)
Realized cashflows from Residual Income	965		3,390
Provision for credit losses	7,204	7,662	51,160	17,781
Allowance for credit losses, end of period	61,325	19,211	61,325	19,211
Net investment in leases and loans, before allowance	908,053	1,053,709	908,053	1,053,709	$ 1,028,215
Accounting Standards Update 2016-13 [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			33,603
Net investment in leases and loans, before allowance					1,028,215
Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			11,908
Net investment in leases and loans, before allowance					$ 0
Equipment Finance [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period	48,550	13,416	18,334	13,531
Charge-offs	(10,509)	(5,023)	(24,723)	(13,863)
Recoveries	983	457	2,237	1,671
Net charge-offs	(9,526)	(4,566)	(22,486)	(12,192)
Realized cashflows from Residual Income	965		3,390
Provision for credit losses	7,226	6,799	38,713	14,310
Allowance for credit losses, end of period	47,215	15,649	47,215	15,649
Net investment in leases and loans, before allowance	803,689	910,046	803,689	910,046
Equipment Finance [Member] | Accounting Standards Update 2016-13 [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			27,598
Equipment Finance [Member] | Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			9,264
Working capital Loans [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period	7,962	1,940	1,899	1,467
Charge-offs	(633)	(417)	(2,598)	(1,692)
Recoveries	101	227	156	298
Net charge-offs	(532)	(190)	(2,442)	(1,394)
Realized cashflows from Residual Income	0		0
Provision for credit losses	(3,974)	346	4,002	2,023
Allowance for credit losses, end of period	3,456	2,096	3,456	2,096
Net investment in leases and loans, before allowance	26,472	55,794	26,472	55,794
Working capital Loans [Member] | Accounting Standards Update 2016-13 [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			1,896
Working capital Loans [Member] | Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			(3)
CVG [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period	7,132	1,421	1,462	1,102
Charge-offs	(524)	(526)	(2,157)	(1,200)
Recoveries	94	54	257	116
Net charge-offs	(430)	(472)	(1,900)	(1,084)
Realized cashflows from Residual Income	0		0
Provision for credit losses	3,952	517	8,445	1,448
Allowance for credit losses, end of period	10,654	1,466	10,654	1,466
Net investment in leases and loans, before allowance	76,778	86,415	76,778	86,415
CVG [Member] | Accounting Standards Update 2016-13 [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			4,109
CVG [Member] | Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			2,647
CRA [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period	0	0	0	0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Net charge-offs	0	0	0	0
Realized cashflows from Residual Income	0		0
Provision for credit losses	0	0	0	0
Allowance for credit losses, end of period	0	0	0	0
Net investment in leases and loans, before allowance	$ 1,114	$ 1,454	1,114	$ 1,454
CRA [Member] | Accounting Standards Update 2016-13 [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			0
CRA [Member] | Accounting Standards Update 2016-13 [Member] | Adoption Impact [Member]
Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of period			$ 0

XML

Allowance for Credit Losses - Loan modification program (Details) $ in Thousands	Sep. 30, 2020 USD ($) Contracts	Dec. 31, 2019 USD ($)
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 908,053	$ 1,028,215
Equipment Finance [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	803,689	881,252
CVG [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	76,778	84,623
Working capital Loans [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 26,472	$ 60,942
Loan Modification Program [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	5,609
Total Active Modifications, Net investment	$ 129,882
% of total segment receivables	14.30%
Loan Modification Program [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 109,116
Loan Modification Program [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	12,256
Loan Modification Program [Member] | In deferral period - full deferral of payment [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	8,510
Loan Modification Program [Member] | Q3 - New modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	9,443
Loan Modification Program [Member] | Q3 - Extended modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	16,417
Loan Modification Program [Member] | Modified in Q2 or Q1 [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 104,022
Loan Modification Program [Member] | Modified leases and loans receivable [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	5,237
Loan Modification Program [Member] | Resolved modifications [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	372
Loan Modification Program [Member] | Modifications 30+ Days Delinquent [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 5,039
Loan Modification Program [Member] | Modifications 30+ Days Delinquent [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 1,200
Loan Modification Program [Member] | Equipment Finance [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	4,667
Total Active Modifications, Net investment	$ 91,900
% of total segment receivables	11.40%
Loan Modification Program [Member] | Equipment Finance [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 82,978
Loan Modification Program [Member] | Equipment Finance [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	6,372
Loan Modification Program [Member] | Equipment Finance [Member] | In deferral period - full deferral of payment [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	2,550
Loan Modification Program [Member] | Equipment Finance [Member] | Q3 - New modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	6,689
Loan Modification Program [Member] | Equipment Finance [Member] | Q3 - Extended modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	5,547
Loan Modification Program [Member] | Equipment Finance [Member] | Modified in Q2 or Q1 [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 79,664
Loan Modification Program [Member] | Equipment Finance [Member] | Modified leases and loans receivable [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	4,437
Loan Modification Program [Member] | Equipment Finance [Member] | Resolved modifications [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	230
Loan Modification Program [Member] | Equipment Finance [Member] | Modifications 30+ Days Delinquent [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 3,352
Loan Modification Program [Member] | Equipment Finance [Member] | Modifications 30+ Days Delinquent [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 639
Loan Modification Program [Member] | CVG [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	451
Total Active Modifications, Net investment	$ 25,772
% of total segment receivables	33.60%
Loan Modification Program [Member] | CVG [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 16,649
Loan Modification Program [Member] | CVG [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	3,163
Loan Modification Program [Member] | CVG [Member] | In deferral period - full deferral of payment [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	5,960
Loan Modification Program [Member] | CVG [Member] | Q3 - New modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	2,468
Loan Modification Program [Member] | CVG [Member] | Q3 - Extended modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	8,412
Loan Modification Program [Member] | CVG [Member] | Modified in Q2 or Q1 [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 14,892
Loan Modification Program [Member] | CVG [Member] | Modified leases and loans receivable [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	431
Loan Modification Program [Member] | CVG [Member] | Resolved modifications [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	20
Loan Modification Program [Member] | CVG [Member] | Modifications 30+ Days Delinquent [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 1,367
Loan Modification Program [Member] | CVG [Member] | Modifications 30+ Days Delinquent [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 462
Loan Modification Program [Member] | Working capital Loans [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	491
Total Active Modifications, Net investment	$ 12,210
% of total segment receivables	46.10%
Loan Modification Program [Member] | Working capital Loans [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 9,489
Loan Modification Program [Member] | Working capital Loans [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	2,721
Loan Modification Program [Member] | Working capital Loans [Member] | In deferral period - full deferral of payment [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	0
Loan Modification Program [Member] | Working capital Loans [Member] | Q3 - New modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	286
Loan Modification Program [Member] | Working capital Loans [Member] | Q3 - Extended modification [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	2,458
Loan Modification Program [Member] | Working capital Loans [Member] | Modified in Q2 or Q1 [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 9,466
Loan Modification Program [Member] | Working capital Loans [Member] | Modified leases and loans receivable [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	369
Loan Modification Program [Member] | Working capital Loans [Member] | Resolved modifications [Member]
Allowance for Credit Losses [Line Items]
Total Program, number of contracts | Contracts	122
Loan Modification Program [Member] | Working capital Loans [Member] | Modifications 30+ Days Delinquent [Member] | Out of deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 320
Loan Modification Program [Member] | Working capital Loans [Member] | Modifications 30+ Days Delinquent [Member] | In deferral period - partial payment during deferral [Member]
Allowance for Credit Losses [Line Items]
Total Active Modifications, Net investment	$ 99

XML

Allowance for Credit Losses - Portfolio by origination year- current year (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Amount of portfolio [Line Items]
2020	$ 243,289	$ 530,429
2019	362,924	265,663
2018	179,080	152,045
2017	89,399	61,640
2016	29,750	17,003
Prior	3,611	1,435
Total Receivables	908,053	1,028,215
Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	215,795	427,949
2019	312,608	240,400
2018	162,606	138,129
2017	81,772	56,466
2016	27,349	16,873
Prior	3,559	1,435
Total Receivables	803,689	881,252
Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	11,731	58,491
2019	14,564	2,413
2018	139	38
2017	38	0
2016	0	0
Prior	0	0
Total Receivables	26,472	60,942
CVG [Member]
Amount of portfolio [Line Items]
2020	14,649	42,591
2019	35,752	22,850
2018	16,335	13,878
2017	7,589	5,174
2016	2,401	130
Prior	52	0
Total Receivables	76,778	84,623
CRA [Member]
Amount of portfolio [Line Items]
2020	1,114	1,398
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	1,114	1,398
30-59 [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	837	1,420
2019	2,103	1,755
2018	1,387	935
2017	740	454
2016	316	169
Prior	71	17
Total Receivables	5,454	4,750
30-59 [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	71	566
2019	328	18
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	399	584
30-59 [Member] | CVG [Member]
Amount of portfolio [Line Items]
2020	90	50
2019	467	126
2018	73	90
2017	92	99
2016	26	0
Prior	0	0
Total Receivables	748	365
60-89 [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	520	1,023
2019	1,692	1,055
2018	1,182	685
2017	748	366
2016	315	80
Prior	39	4
Total Receivables	4,496	3,213
60-89 [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	133	16
2019	18	52
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	151	68
60-89 [Member] | CVG [Member]
Amount of portfolio [Line Items]
2020	588	5
2019	307	15
2018	336	188
2017	0	46
2016	0	0
Prior	0	0
Total Receivables	1,231	254
90+ [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	334	947
2019	2,789	1,522
2018	1,444	1,090
2017	1,220	527
2016	294	163
Prior	42	7
Total Receivables	6,123	4,256
90+ [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	6	203
2019	222	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	228	203
90+ [Member] | CVG [Member]
Amount of portfolio [Line Items]
2020	0	0
2019	56	178
2018	584	158
2017	50	53
2016	11	0
Prior	0	0
Total Receivables	701	389
Total Past Due [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	1,691	3,390
2019	6,584	4,332
2018	4,013	2,710
2017	2,708	1,347
2016	925	412
Prior	152	28
Total Receivables	16,073	12,219
Total Past Due [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	210	785
2019	568	70
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	778	855
Total Past Due [Member] | CVG [Member]
Amount of portfolio [Line Items]
2020	678	55
2019	830	319
2018	993	436
2017	142	198
2016	37	0
Prior	0	0
Total Receivables	2,680	1,008
Total Past Due [Member] | CRA [Member]
Amount of portfolio [Line Items]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	0	0
Current [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2020	214,104	424,559
2019	306,024	236,068
2018	158,593	135,419
2017	79,064	55,119
2016	26,424	16,461
Prior	3,407	1,407
Total Receivables	787,616	869,033
Current [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2020	11,521	57,706
2019	13,996	2,343
2018	139	38
2017	38	0
2016	0	0
Prior	0	0
Total Receivables	25,694	60,087
Current [Member] | CVG [Member]
Amount of portfolio [Line Items]
2020	13,971	42,536
2019	34,922	22,531
2018	15,342	13,442
2017	7,447	4,976
2016	2,364	130
Prior	52	0
Total Receivables	74,098	83,615
Current [Member] | CRA [Member]
Amount of portfolio [Line Items]
2020	1,114	1,398
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Total Receivables	$ 1,114	$ 1,398

XML

Allowance for Credit Losses - Non-accrual leases and loans in the company's portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual leases and loans, end of period	$ 8,375	$ 5,591
Equipment Finance [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual leases and loans, end of period	6,345	4,256
Working capital Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual leases and loans, end of period	1,144	946
CVG [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual leases and loans, end of period	$ 886	$ 389

XML

Allowance for Credit Losses - Portfolio by origination year - previous year (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Amount of portfolio [Line Items]
2019	$ 243,289	$ 530,429
2018	362,924	265,663
2017	179,080	152,045
2016	89,399	61,640
2015	29,750	17,003
Prior	3,611	1,435
Total Receivables	908,053	1,028,215
Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	215,795	427,949
2018	312,608	240,400
2017	162,606	138,129
2016	81,772	56,466
2015	27,349	16,873
Prior	3,559	1,435
Total Receivables	803,689	881,252
Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	11,731	58,491
2018	14,564	2,413
2017	139	38
2016	38	0
2015	0	0
Prior	0	0
Total Receivables	26,472	60,942
CVG [Member]
Amount of portfolio [Line Items]
2019	14,649	42,591
2018	35,752	22,850
2017	16,335	13,878
2016	7,589	5,174
2015	2,401	130
Prior	52	0
Total Receivables	76,778	84,623
CRA [Member]
Amount of portfolio [Line Items]
2019	1,114	1,398
2018	0	0
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	1,114	1,398
30-59 [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	837	1,420
2018	2,103	1,755
2017	1,387	935
2016	740	454
2015	316	169
Prior	71	17
Total Receivables	5,454	4,750
30-59 [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	71	566
2018	328	18
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	399	584
30-59 [Member] | CVG [Member]
Amount of portfolio [Line Items]
2019	90	50
2018	467	126
2017	73	90
2016	92	99
2015	26	0
Prior	0	0
Total Receivables	748	365
60-89 [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	520	1,023
2018	1,692	1,055
2017	1,182	685
2016	748	366
2015	315	80
Prior	39	4
Total Receivables	4,496	3,213
60-89 [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	133	16
2018	18	52
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	151	68
60-89 [Member] | CVG [Member]
Amount of portfolio [Line Items]
2019	588	5
2018	307	15
2017	336	188
2016	0	46
2015	0	0
Prior	0	0
Total Receivables	1,231	254
90+ [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	334	947
2018	2,789	1,522
2017	1,444	1,090
2016	1,220	527
2015	294	163
Prior	42	7
Total Receivables	6,123	4,256
90+ [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	6	203
2018	222	0
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	228	203
90+ [Member] | CVG [Member]
Amount of portfolio [Line Items]
2019	0	0
2018	56	178
2017	584	158
2016	50	53
2015	11	0
Prior	0	0
Total Receivables	701	389
Total Past Due [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	1,691	3,390
2018	6,584	4,332
2017	4,013	2,710
2016	2,708	1,347
2015	925	412
Prior	152	28
Total Receivables	16,073	12,219
Total Past Due [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	210	785
2018	568	70
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	778	855
Total Past Due [Member] | CVG [Member]
Amount of portfolio [Line Items]
2019	678	55
2018	830	319
2017	993	436
2016	142	198
2015	37	0
Prior	0	0
Total Receivables	2,680	1,008
Total Past Due [Member] | CRA [Member]
Amount of portfolio [Line Items]
2019	0	0
2018	0	0
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	0	0
Current [Member] | Equipment Finance [Member]
Amount of portfolio [Line Items]
2019	214,104	424,559
2018	306,024	236,068
2017	158,593	135,419
2016	79,064	55,119
2015	26,424	16,461
Prior	3,407	1,407
Total Receivables	787,616	869,033
Current [Member] | Working capital Loans [Member]
Amount of portfolio [Line Items]
2019	11,521	57,706
2018	13,996	2,343
2017	139	38
2016	38	0
2015	0	0
Prior	0	0
Total Receivables	25,694	60,087
Current [Member] | CVG [Member]
Amount of portfolio [Line Items]
2019	13,971	42,536
2018	34,922	22,531
2017	15,342	13,442
2016	7,447	4,976
2015	2,364	130
Prior	52	0
Total Receivables	74,098	83,615
Current [Member] | CRA [Member]
Amount of portfolio [Line Items]
2019	1,114	1,398
2018	0	0
2017	0	0
2016	0	0
2015	0	0
Prior	0	0
Total Receivables	$ 1,114	$ 1,398

XML

Goodwill and Intangible Assets - Narratives (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Sep. 30, 2018	Jan. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 0		$ 0		$ 6,735,000
Amortization of Intangible Assets			599,000	$ 700,000
Goodwill Impairment Loss	0	$ 0	6,735,000	0
Impairment of Intangible Assets	1,016,000	$ 0	1,016,000	$ 0
Indefinite-lived Intangible Assets	$ 0		0
HKF [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill							$ 1,200,000
Amortization of Intangible Assets			69,000
Impairment of Intangible Assets			0
FFR [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill						$ 5,500,000
Amortization of Intangible Assets			530,000
Impairment of Intangible Assets			$ 1,016,000

XML

Goodwill and Intangible Assets - Summary of changes In carrying amount of goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Goodwill and Intangible Assets [Abstract]
Goodwill, Beginning Balance			$ 6,735
Impairment of Goodwill	$ 0	$ 0	(6,735)	$ 0
Goodwill, Ending Balance	$ 0		$ 0

XML

Goodwill and Intangible Assets - Intangible assets (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount		$ 7,350	$ 8,980
Accumulated Amortization		1,504	1,519
Net Value	$ 7,461	5,846	7,461
Lender Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount			1,630
Accumulated Amortization			519
Net Value			1,111
Lender Relationships [Member] | Minimum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life	3 years
Lender Relationships [Member] | Maximum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life	10 years
Vendor Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life	11 years
Gross Carrying Amount		7,290	7,290
Accumulated Amortization		1,472	974
Net Value		5,818	6,316
Corporate Trade Name [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life	7 years
Gross Carrying Amount		60	60
Accumulated Amortization		32	26
Net Value		$ 28	$ 34

XML

Goodwill and Intangible Assets - Intangible assets by acquisitions (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Finite Lived Intangible Assets [Line Items]
Beginning Balance			$ 7,461
Amortization Expense			(599)	$ (700)
Impairment	$ (1,016)	$ 0	(1,016)	0
Ending Balance	5,846	$ 7,461	5,846	$ 7,461
FFR [Member]
Finite Lived Intangible Assets [Line Items]
Beginning Balance			6,758
Amortization Expense			(530)
Impairment			(1,016)
Ending Balance	5,212		5,212
HKF [Member]
Finite Lived Intangible Assets [Line Items]
Beginning Balance			703
Amortization Expense			(69)
Impairment			0
Ending Balance	$ 634		$ 634

XML

Goodwill and Intangible Assets - Amortization expense (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Amortization expense for the next five years [Abstract]
Remainder of 2020	$ 168
2021	671
2022	671
2023	671
2024	$ 663

XML

Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Other Assets [Abstract]
Accrued fees receivable	$ 2,816	$ 3,509
Prepaid expenses	2,393	2,872
Federal Reserve Bank Stock	1,711	1,711
Other	1,606	2,361
Other assets, total	$ 8,526	$ 10,453

XML

Deposits (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Contractual Maturities of Time Deposits [Abstract]
Remainder of 2020	$ 166,820,000
2021	312,968,000
2022	154,949,000
2023	76,924,000
2024	42,181,000
Thereafter	17,934,000
Total	771,776,000	$ 839,132,000
Cash and Cash Equivalents [Line Items]
Money market deposit accounts	52,700,000
Cash FDIC Insured Amount	$ 250,000
Weighted average all-in interest rate of all deposit liabilities outstanding	1.92%
MBB Certificate of Deposit [Member]
Cash and Cash Equivalents [Line Items]
Maximum time deposit liability denomination	$ 250,000
MMDA [Member]
Cash and Cash Equivalents [Line Items]
Maximum time deposit liability denomination	$ 250,000

XML

Debt and Financing Arrangements - Narratives (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Jul. 27, 2018
Debt and Financing Arrangements [Abstract]
Term note securitization 2018-1	$ 40,031	$ 76,563	$ 201,650
Debt collateralized	42,800
Debt instrument collateralized by restricted deposits	5,800
Revolving line of credit [Member]
Debt Instrument Terms [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000
Final maturity date	Nov. 20, 2020

XML

Debt and Financing Arrangements - Long-term borrowings (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019	Jul. 27, 2018
Variable Interest Entity [Line Items]
Term note securitization 2018-1	$ 40,031,000	$ 76,563,000	$ 201,650,000
Unamortized debt issuance costs	(198,000)	(472,000)
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Long-term borrowings related to consolidated VIEs	$ 39,833,000	$ 76,091,000

XML

Debt and Financing Arrangements - Term note securitization (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Jul. 27, 2018
Debt Instrument [Line Items]
Term note securitization	$ 40,031	$ 76,563	$ 201,650
Term Note Securitizations [Member]
Debt Instrument [Line Items]
Original coupon rate	3.05%
Class A-1 [Member]
Debt Instrument [Line Items]
Term note securitization	$ 0	0	77,400
Final maturity date	Jul. 31, 2019
Original coupon rate	2.55%
Class A-2 [Member]
Debt Instrument [Line Items]
Term note securitization	$ 0	8,013	55,700
Final maturity date	Oct. 31, 2020
Original coupon rate	3.05%
Class A-3 [Member]
Debt Instrument [Line Items]
Term note securitization	$ 8,391	36,910	36,910
Final maturity date	Apr. 30, 2023
Original coupon rate	3.36%
Class B [Member]
Debt Instrument [Line Items]
Term note securitization	$ 10,400	10,400	10,400
Final maturity date	May 31, 2023
Original coupon rate	3.54%
Class C [Member]
Debt Instrument [Line Items]
Term note securitization	$ 11,390	11,390	11,390
Final maturity date	Jun. 30, 2023
Original coupon rate	3.70%
Class D [Member]
Debt Instrument [Line Items]
Term note securitization	$ 5,470	5,470	5,470
Final maturity date	Jul. 31, 2023
Original coupon rate	3.99%
Class E [Member]
Debt Instrument [Line Items]
Term note securitization	$ 4,380	$ 4,380	$ 4,380
Final maturity date	May 31, 2025
Original coupon rate	5.02%
2018-1 [Member]
Debt Instrument [Line Items]
Weighted average coupon rate	3.77%

XML

Debt and Financing Arrangements - Scheduled principal and interest payments (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Jul. 27, 2018
Scheduled principal and interest payments on outstanding borrowings [Abstract]
Remainder of 2020	$ 7,820
Principal, 2021	23,629
Principal, 2022	8,582
Scheduled principal payments	40,031	$ 76,563	$ 201,650
Interest, Remainder of 2020	358
Interest, 2021	813
Interest, 2022	159
Scheduled interest payments	$ 1,330

XML

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
Goodwill Impairment Loss	$ 0	$ 0	$ 6,735	$ 0
Impairment of Intangible Assets	$ 1,016	$ 0	1,016	$ 0
Reduction to expenses from earnout adjustments			$ 1,400

XML

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments - Balances Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 10,761	$ 11,076
Asset Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,836	4,332
Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,169	3,129
Mutual Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,756	3,615
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Asset Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,756	3,615
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Asset Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,836	4,332
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	3,169	3,129
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Asset Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Mutual Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 0	$ 0

XML

Fair Value Measurements and Disclosures about the Fair Value of Financial Instruments - Carrying amount and estimated fair value (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jul. 27, 2018
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents	$ 195,132	$ 123,096	$ 132,461
Time deposits with banks	8,456	12,927
Restricted interest-earning deposits with banks	5,771	6,931	$ 7,576
Loans, net of allowance	550,553	601,607
Federal Reserve Bank Stock	1,711	1,711
Liabilities, Fair Value Disclosure [Abstract]
Deposits	823,707	839,132
Long-term borrowings	40,031	76,563		$ 201,650
Carrying Amount [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents	195,132	123,096
Time deposits with banks	8,456	12,927
Restricted interest-earning deposits with banks	5,771	6,931
Loans, net of allowance	509,936	588,688
Federal Reserve Bank Stock	1,711	1,711
Liabilities, Fair Value Disclosure [Abstract]
Deposits	823,707	839,132
Long-term borrowings	39,833	76,091
Fair Value [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents	195,132	123,096
Time deposits with banks	8,515	12,970
Restricted interest-earning deposits with banks	5,771	6,931
Loans, net of allowance	517,269	593,406
Federal Reserve Bank Stock	1,711	1,711
Liabilities, Fair Value Disclosure [Abstract]
Deposits	787,478	846,304
Long-term borrowings	$ 40,344	$ 76,781

XML

Earnings Per Share - EPS Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share, Basic [Abstract]
Net (loss) income	$ 2,743	$ (5,882)	$ (11,821)	$ 7,446	$ 6,115	$ 5,141	$ (14,960)	$ 18,702
Less: net income allocated to participating securities	(36)			(89)			0	(237)
Net (loss) income allocated to common stock	$ 2,707			$ 7,357			$ (14,960)	$ 18,465
Weighted average common shares outstanding	11,946,549			12,203,086			11,951,375	12,290,906
Less: Unvested restricted stock awards considered participating securities	(155,408)			(148,142)			(142,186)	(156,116)
Adjusted weighted average common shares used in computing basic EPS	11,791,141			12,054,944			11,809,189	12,134,790
Basic EPS	$ 0.23			$ 0.61			$ (1.27)	$ 1.52
Earnings Per Share, Diluted [Abstract]
Net (loss) income allocated to common stock	$ 2,707			$ 7,357			$ (14,960)	$ 18,465
Adjusted weighted average common shares used in computing basic EPS	11,791,141			12,054,944			11,809,189	12,134,790
Add: Effect of dilutive stock-based compensation awards	41,272			113,018			0	94,186
Adjusted weighted average common shares used in computing diluted EPS	11,832,413			12,167,962			11,809,189	12,228,976
Diluted EPS	$ 0.23			$ 0.60			$ (1.27)	$ 1.51
Antidilutive securities excluded from computation of earnings per share amount	230,428			157,952			286,349	172,473

XML

Stockholders' Equity - Narratives (Details) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 $ / shares shares	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 $ / shares shares
Regulatory Capital Requirements Miscellaneous Information [Abstract]
Percentage of transitional amounts for measurment of estimated allowance year one	25.00%
Percentage of transitional amounts for measurment of estimated allowance next two years	25.00%
Percentage of transitional amounts for measurment of estimated allowance during year three	75.00%
Marlin Business Services Corp. [Member]
Regulatory Capital Requirements Miscellaneous Information [Abstract]
Total stockholders equity (regulatory) | $	$ 192,218		$ 192,218
Total Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.0800		0.0800
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	0.0400		0.0400
Total Risk Based Capital to Risk Weighted Assets	0.2249		0.2249
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.0600		0.0600
Total Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.1000		0.1000
Common Equity Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	4.50%		4.50%
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized To Risk Weighted Assets	6.50%		6.50%
Marlin Business Bank [Member]
Regulatory Capital Requirements Miscellaneous Information [Abstract]
Total stockholders equity (regulatory) | $	$ 139,365		$ 139,365
Total Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.08		0.08
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	0.04		0.04
FDIC Agreement Capital Required To Be Well Capitalized To Risk Weighted Assets	15.00%		15.00%
Total Risk Based Capital to Risk Weighted Assets	0.1821		0.1821
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.06		0.06
Total Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.1000		0.1000
Common Equity Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	4.50%		4.50%
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized To Risk Weighted Assets	6.50%		6.50%
New Capital Conservation Buffer	2.50%		2.50%
2017 Stock Repurchase Plan [Member]
Stock Repurchase [Abstract]
Stock Repurchased During Period, Average Cost Per Share | $ / shares				$ 23.24
Stock Repurchased During Period, Shares | shares				247,500
2014 Stock Repurchase Plan [Member]
Stock Repurchase [Abstract]
Stock Repurchased During Period, Average Cost Per Share | $ / shares	$ 8.06	$ 23.80	$ 10.70	$ 22.87
Stock Repurchased During Period, Shares | shares	18,446	2,654	41,466	22,100
2019 Stock Repurchase Plan [Member]
Stock Repurchase [Abstract]
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $	$ 4,700		$ 4,700
Stock Repurchased During Period, Average Cost Per Share | $ / shares		$ 23.00	$ 16.09
Stock Repurchased During Period, Shares | shares	0	144,729	264,470

XML

Stockholders' Equity - Regulatory Capital Ratios (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Marlin Business Services Corp. [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier One Leverage Capital	$ 192,218
Tier One Leverage Capital Required for Capital Adequacy	45,443
Tier One Leverage Capital Required to be Well Capitalized	56,804
Common Equity Tier One Risk Based Capital	192,218
Common Equity Tier One Risk Based Capital Required For Capital Adequacy	40,860
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized	59,019
Tier One Risk Based Capital	192,218
Tier One Risk Based Capital Required for Capital Adequacy	54,479
Tier One Risk Based Capital Required to be Well Capitalized	72,639
Total Risk Based Capital	204,185
Total Risk Based Capital Required for Capital Adequacy	72,639
Total Risk Based Capital Required to be Well Capitalized	$ 90,799
Tier One Leverage Capital to Average Assets	0.1692
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	0.0400
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	0.0500
Common Equity Tier One Risk Based Capital To Risk Weighted Assets	21.17%
Common Equity Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	4.50%
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized To Risk Weighted Assets	6.50%
Tier One Risk Based Capital to Risk Weighted Assets	0.2117
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.0600
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.0800
Total Risk Based Capital to Risk Weighted Assets	0.2249
Total Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.0800
Total Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.1000
Marlin Business Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier One Leverage Capital	$ 139,365
Tier One Leverage Capital Required for Capital Adequacy	42,053
Tier One Leverage Capital Required to be Well Capitalized	52,566
Common Equity Tier One Risk Based Capital	139,365
Common Equity Tier One Risk Based Capital Required For Capital Adequacy	37,147
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized	53,657
Tier One Risk Based Capital	139,365
Tier One Risk Based Capital Required for Capital Adequacy	49,530
Tier One Risk Based Capital Required to be Well Capitalized	66,040
Total Risk Based Capital	150,285
Total Risk Based Capital Required for Capital Adequacy	66,040
Total Risk Based Capital Required to be Well Capitalized	$ 82,550
Tier One Leverage Capital to Average Assets	0.1326
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	0.04
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	0.0500
Common Equity Tier One Risk Based Capital To Risk Weighted Assets	16.88%
Common Equity Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	4.50%
Common Equity Tier One Risk Based Capital Required To Be Well Capitalized To Risk Weighted Assets	6.50%
Tier One Risk Based Capital to Risk Weighted Assets	0.1688
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.06
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.0800
Total Risk Based Capital to Risk Weighted Assets	0.1821
Total Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.08
Total Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.1000

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Stock-Based Compensation - Narratives (Details) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock-based Compensation Arrangements [Line Items]
Number of Shares, Stock Options Granted							0
Stock-based compensation recognized	$ 437,000	$ (149,000)	$ 518,000	$ 894,000	$ 990,000	$ 861,000	$ 800,000	$ 2,800,000
Stock Options Exercised, Number of Shares							0
Excess tax benefits from stock-based payment arrangements							$ 600,000	$ 100,000
2019 Plan [Member]
Stock-based Compensation Arrangements [Line Items]
Equity Compensation Plan, Aggregate Number of Shares Authorized	826,036						826,036
Equity Compensation Plan, Number of Shares Available for Grant	546,070						546,070
Stock Options [Member]
Stock-based Compensation Arrangements [Line Items]
Number of Shares, Stock Options Granted	0			0			0	0
Stock-based compensation recognized	$ 100,000			$ 100,000			$ 100,000	$ 300,000
Stock Options Exercised, Number of Shares	0			0			0	0
Total Compensation Cost Not yet Recognized on Nonvested Stock-based Awards	$ 100,000						$ 100,000
Compensation Cost Not yet Recognized on Nonvested Stock-based Awards, Period for Recognition in Years							6 months
Stock-based Awards, Vesting Period in Years	7 years
Common Stock Closing Price Per Share	$ 7.05						$ 7.05
Stock Options [Member] | Minimum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							3 years
Stock Options [Member] | Maximum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							4 years
Restricted Stock [Member]
Stock-based Compensation Arrangements [Line Items]
Number of Shares, Stock Options Granted	0
Stock-based compensation recognized	$ 100,000			$ 200,000			$ 300,000	$ 700,000
Total Compensation Cost Not yet Recognized on Nonvested Stock-based Awards	1,400,000						$ 1,400,000
Compensation Cost Not yet Recognized on Nonvested Stock-based Awards, Period for Recognition in Years							4 years 9 months 18 days
Stock-based Awards, Grants in Period, Aggregate Grant Date Fair Value	0			400,000			$ 400,000	400,000
Stock-based Compensation Expense Due to Performance Acceleration	0			100,000
Stock-based Awards Other than Options, Vested in Period, Total Fair Value	100,000			$ 200,000			$ 400,000	1,300,000
Restricted Stock [Member] | Minimum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							3 years
Stock-based Awards, Accelerated Vesting Period in Years							3 years
Restricted Stock [Member] | Minimum [Member] | Director [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							6 months
Restricted Stock [Member] | Maximum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							7 years
Restricted Stock [Member] | Maximum [Member] | Director [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards, Vesting Period in Years							7 years
Performance-Based and Market-Based RSUs [Member]
Stock-based Compensation Arrangements [Line Items]
Number of Shares, Stock Options Granted				0
Stock-based compensation recognized	300,000			$ 600,000			$ 300,000	1,700,000
Total Compensation Cost Not yet Recognized on Nonvested Stock-based Awards	1,700,000						$ 1,700,000
Compensation Cost Not yet Recognized on Nonvested Stock-based Awards, Period for Recognition in Years							1 year 4 months 24 days
Total Compensation Cost Not yet Recognized on Nonvested Stock-based Awards, Incremental Cost at Maximum Performance	$ 8,100,000						$ 8,100,000
Total Compensation Cost Not yet Recognized on Nonvested Stock-based Awards, Period for Recognition of Incremental Cost at Maximum Performance in Years							1 year 6 months
Stock-based Awards Other Than Options, Contingent on Performance, Grants in Period							428,917
Stock-based Awards, Grants in Period, Aggregate Grant Date Fair Value							$ 3,100,000	3,400,000
Stock-based Compensation Expense Due to Performance Acceleration							$ (700,000)
Stock-based Awards Other Than Options, Additional Grants Contingently Issuable							3,960
Fair value of stock converted to shares of common stock							$ 1,100,000	$ 800,000
Performance-Based and Market-Based RSUs [Member] | Minimum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock based awards market-based target measurement period							1 year
Performance-Based and Market-Based RSUs [Member] | Maximum [Member]
Stock-based Compensation Arrangements [Line Items]
Stock based awards market-based target measurement period							3 years
Market Based RSUs [Member]
Stock-based Compensation Arrangements [Line Items]
Stock-based Awards Other Than Options, Contingent on Performance, Grants in Period							0	0
Share-based Awards, Grants in Period, Weighted Average Grant Date Fair Value Per Share							$ 12.90	$ 12.91

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Stock-Based Compensation - Summary of Option Activity (Details)	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Stock-based Compensation Arrangements, Options, Outstanding [Roll Forward]
Number of Shares Outstanding, Beginning of Period | shares	135,159
Number of Shares, Stock Options Granted | shares	0
Number of Shares, Stock Options Exercised | shares	0
Number of Shares, Forfeited | shares	(3,929)
Number of Shares, Expired | shares	(16,648)
Number of Shares Outstanding, End of Period | shares	114,582
Weighted Average Exercise Price Per Share, Outstanding at Beginning of Period | $ / shares	$ 26.79
Weighted Average Exercise Price Per Share, Granted | $ / shares	0
Weighted Average Exercise Price Per Share, Exercised | $ / shares	0
Weighted Average Exercise Price Per Share, Forfeitures | $ / shares	27.31
Weighted Average Exercise Price Per Share, Expired | $ / shares	26.19
Weighted Average Exercise Price Per Share, Outstanding at End of Period | $ / shares	$ 26.87

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Stock-Based Compensation - Summary of Stock Options Outstanding and Exercisable (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding and Exercisable, Lower Price in Range Category	$ 25.75
Options Outstanding and Exercisable, Upper Price in Range Category	$ 28.25
Options Outstanding, Number of Shares	114,582	135,159
Options Outstanding, Weighted Average Remaining Life (Years)	3 years 10 months 24 days
Options Outstanding, Weighted Average Exercise Price	$ 26.87	$ 26.79
Options Outstanding, Aggregate Intrinsic Value	$ 0
Options Exercisable, Number of Shares	97,532
Options Exercisable, Weighted Average Remaining Life (Years)	3 years 9 months 18 days
Options Exercisable, Weighted Average Exercise Price	$ 26.62
Options Exercisable, Aggregate Intrinsic Value	$ 0
$25.75 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number of Shares	63,440
Options Outstanding, Weighted Average Remaining Life (Years)	3 years 6 months
Options Outstanding, Weighted Average Exercise Price	$ 25.75
Options Outstanding, Aggregate Intrinsic Value	$ 0
Options Exercisable, Number of Shares	63,440
Options Exercisable, Weighted Average Remaining Life (Years)	3 years 6 months
Options Exercisable, Weighted Average Exercise Price	$ 25.75
Options Exercisable, Aggregate Intrinsic Value	$ 0
$28.25 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number of Shares	51,142
Options Outstanding, Weighted Average Remaining Life (Years)	4 years 6 months
Options Outstanding, Weighted Average Exercise Price	$ 28.25
Options Outstanding, Aggregate Intrinsic Value	$ 0
Options Exercisable, Number of Shares	34,092
Options Exercisable, Weighted Average Remaining Life (Years)	4 years 6 months
Options Exercisable, Weighted Average Exercise Price	$ 28.25
Options Exercisable, Aggregate Intrinsic Value	$ 0

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Stock-Based Compensation - Summary of Non-Vested Restricted Stock Activity (Details) - $ / shares	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Stock-based Compensation Arrangements, Restricted Stock, Nonvested [Roll Forward]
Shares Outstanding, Beginning of Period	143,935
Shares, Granted	45,830
Shares, Vested	(37,734)
Shares, Forfeited	(2,750)
Shares Outstanding, End of Period	149,281
Weighted Average Grant-Date Fair Value, Outstanding at Beginning of Period	$ 21.88
Weighted Average Grant-Date Fair Value, Granted	8.64
Weighted Average Grant-Date Fair Value, Vested	23.04
Weighted Average Grant-Date Fair Value, Forfeited	25.84
Outstanding at End of Period	$ 17.45
Performance-Based and Market-Based RSUs [Member]
Stock-based Compensation Arrangements, Restricted Stock, Nonvested [Roll Forward]
Shares Outstanding, Beginning of Period	257,476
Shares, Granted	95,758
Shares, Forfeited	(5,081)
Shares, Converted	(65,810)
Cancelled due to non-achievement of market condition	(56,390)
Shares Outstanding, End of Period	225,953
Weighted Average Grant-Date Fair Value, Outstanding at Beginning of Period	$ 18.00
Weighted Average Grant-Date Fair Value, Granted	17.55
Weighted Average Grant-Date Fair Value, Forfeited	23.99
Weighted Average Grant-Date Fair Value, Converted	12.89
Weighted Average Grant-Date Fair Value, Cancelled due to non-achievement of market condition	18.19
Outstanding at End of Period	19.12
Stock-based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions And Methodology [Abstract]
Grant date stock price	$ 20.43	$ 21.50
Risk-free interest rate	1.40%	2.16%
Expected volatility	26.18%	26.68%
Dividend yield	0.00%	0.00%
Service-Based RSUs [Member]
Stock-based Compensation Arrangements, Restricted Stock, Nonvested [Roll Forward]
Shares Outstanding, Beginning of Period	99,951
Shares, Granted	69,422
Shares, Forfeited	(24,016)
Shares, Converted	(39,879)
Shares Outstanding, End of Period	105,478
Weighted Average Grant-Date Fair Value, Outstanding at Beginning of Period	$ 23.59
Weighted Average Grant-Date Fair Value, Granted	20.43
Weighted Average Grant-Date Fair Value, Forfeited	22.07
Weighted Average Grant-Date Fair Value, Converted	24.30
Outstanding at End of Period	$ 21.59

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Subsequent Events - Narratives (Details) - Subsequent Event [Member] $ / shares in Units, $ in Millions	Oct. 29, 2020 USD ($) $ / shares
Subsequent Event [Line Items]
Cash dividend declared on common stock, payable date	Nov. 19, 2020
Cash dividend declared on common stock, date of record	Nov. 09, 2020
Dividends Payable, Amount Per Share | $ / shares	$ 0.14
Dividends Payable | $	$ 1.7