Exhibit 99.1

 

The Bancorp, Inc. Reports Second Quarter 2020 Financial Results

 

Wilmington, DE – July 30, 2020 – The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter of 2020.

 

Highlights

 

·

For the quarter ended June 30, 2020, The Bancorp earned net income of $20.3 million from continuing operations, and $0.35 diluted earnings per share from combined continuing and discontinued operations.

 

·

Return on assets and equity for the quarter ended June 30, 2020 increased to 1.3% and 15.6%, respectively, compared to 1.0% and 10.2% for the quarter ended June 30, 2019.

 

·

Net interest margin increased to 3.53% for the quarter ended June 30, 2020, compared to 3.41% for the quarter ended June 30, 2019 and 3.34% for the quarter ended March 31, 2020.

 

·

Net interest income increased 45% to $50.2 million for the quarter ended June 30, 2020, compared to $34.5 million for the quarter ended June 30, 2019.

 

·

Average loans and leases, including loans held for sale, increased 76% to $3.93 billion for the quarter ended June 30, 2020, compared to $2.23 billion for the quarter ended June 30, 2019.

 

·

Prepaid, debit card and related fees increased 18% to $18.7 million for the quarter ended June 30, 2020, compared to $15.8 million for the quarter ended June 30, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 43%.

 

·

SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 54% year over year and 11% quarter over quarter to $1.3 billion at June 30, 2020.

 

·

Small Business Loans, including those held-for-sale, increased 16% year over year to $601.4 million at June 30, 2020, exclusive of $208 million of Paycheck Protection Program loans.

 

·

As of June 30, 2020, we have originated approximately 1,250 Paycheck Protection Program loans, totaling approximately $208 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized over eleven months, beginning in April 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.

 

·

The average rate on $5.4 billion of average deposits and interest-bearing liabilities in the second quarter of 2020 was 0.12%. Average prepaid and debit card account deposits of $3.9 billion for second quarter 2020, reflected an increase of 56% over the $2.5 billion for the quarter ended June 30, 2019.

 

·

Consolidated leverage ratio was 8.48% at June 30, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

 

·

Book value per common share at June 30, 2020 was $9.28 per share compared to $8.07 at June 30, 2019, an increase of 15%.

 

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings driven by higher interest income with falling interest expense, increased loan balances and higher payment volumes. In the second quarter of 2020, the Bancorp earned 35 cents a share from both increased fee and spread revenue. While the pandemic continues to be a significant source of market uncertainty, we have been able to achieve better revenue productivity and operating efficiency during this time, while also making investments in our platform. Our earnings guidance for full year 2020 continues to be $1.25 per share.”

 

 

 

The Bancorp reported net income of $20.1 million, or $0.35 per diluted share, for the quarter ended June 30, 2020, compared to net income of $11.4 million, or $0.20 per diluted share, for the quarter ended June 30, 2019. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.48%, 14.84%, 15.27% and 14.84%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

 

Conference Call Webcast

 

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 31, 2020 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 2755988. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, August 7, 2020 by dialing 855.859.2056, access code 2755988.

 

The Bancorp, Inc. (NASDAQ: TBBK) is dedicated to serving the unique needs of non-bank financial service companies, ranging from entrepreneurial start-ups to those on the Fortune 500. The company’s only subsidiary, The Bancorp Bank (Member FDIC, Equal Housing Lender), has been repeatedly recognized in the payments industry as the Top Issuer of Prepaid Cards (US), a top merchant sponsor bank and a top ACH originator. Specialized lending distinctions include National Preferred SBA Lender, a leading provider of securities-backed lines of credit, and one of the few bank-owned commercial vehicle leasing groups in the nation. For more information please visit www.thebancorp.com.

 

Forward-Looking Statements

 

Statements in this earnings release regarding The Bancorp’s business which are not historical facts are "forward-looking statements." These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “estimate,” “continue,” or similar words , and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. These risks and uncertainties include those relating to the on-going COVID-19 pandemic, the impact it will have on our business and the industry as a whole, and the resulting governmental and societal responses. For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see The Bancorp’s filings with the Securities Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. The forward-looking statements speak only as of the date of this press release. The Bancorp does not undertake to publicly revise or update forward-looking statements in this press release to reflect events or circumstances that arise after the date of this earnings release, except as may be required under applicable law.

 

The Bancorp, Inc. Contact

Andres Viroslav

Director, Investor Relations

215-861-7990

aviroslav@thebancorp.com

 

 

The Bancorp, Inc.
Financial highlights
(unaudited)
		Three months ended								Six months ended
		June 30,								June 30,
Condensed income statement		2020				2019				2020				2019
		(dollars in thousands except per share data)
Net interest income		$	50,246			$	34,539			$	93,157			$	68,549
Provision for loan and lease losses			922				600				4,501				2,300
Non-interest income
Service fees on deposit accounts			5				14				15				61
ACH, card and other payment processing fees			1,707				2,521				3,553				4,824
Prepaid, debit card and related fees			18,673				15,840				37,213				32,003
Net realized and unrealized gains (losses) on commercial loans originated for sale			(940	)			(148	)			(6,096	)			10,615
Change in value of investment in unconsolidated entity			—				—				(45	)			—
Leasing related income			443				1,027				1,276				1,722
Other non-interest income			478				495				1,049				889
Total non-interest income			20,366				19,749				36,965				50,114
Non-interest expense
Salaries and employee benefits			25,492				21,826				48,233				45,666
Data processing expense			1,177				1,223				2,346				2,492
Legal expense			2,229				1,534				3,142				2,858
FDIC Insurance			2,918				2,095				5,507				4,024
Software			3,386				3,060				6,863				5,981
Lease termination expense			—				908				—				908
Other non-interest expense			7,418				8,873				14,947				16,819
Total non-interest expense			42,620				39,519				81,038				78,748
Income from continuing operations before income taxes			27,070				14,169				44,583				37,615
Income tax expense			6,787				3,575				11,139				9,610
Net income from continuing operations			20,283				10,594				33,444				28,005
Discontinued operations
Income (loss) from discontinued operations before income taxes			(274	)			919				(1,049	)			1,724
Income tax expense (benefit)			(59	)			163				(264	)			449
Net income (loss) from discontinued operations, net of tax			(215	)			756				(785	)			1,275
Net income		$	20,068			$	11,350			$	32,659			$	29,280
Net income per share from continuing operations - basic		$	0.35			$	0.19			$	0.58			$	0.50
Net income (loss) per share from discontinued operations - basic		$	—			$	0.01			$	(0.01	)		$	0.02
Net income per share - basic		$	0.35			$	0.20			$	0.57			$	0.52
Net income per share from continuing operations - diluted		$	0.35			$	0.19			$	0.58			$	0.49
Net income (loss) per share from discontinued operations - diluted		$	—			$	0.01			$	(0.01	)		$	0.02
Net income per share - diluted		$	0.35			$	0.20			$	0.57			$	0.51
Weighted average shares - basic			57,489,719				56,702,182				57,355,282				56,612,596
Weighted average shares - diluted			57,800,115				57,197,433				57,856,791				57,031,206

 

 

 

Balance sheet		June 30,				March 31,				December 31,				June 30,
		2020				2020				2019				2019
		(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks		$	5,094			$	13,610			$	19,928			$	27,450
Interest earning deposits at Federal Reserve Bank			475,627				105,978				924,544				284,823
Total cash and cash equivalents			480,721				119,588				944,472				312,273
Investment securities, available-for-sale, at fair value			1,324,447				1,353,278				1,320,692				1,361,779
Investment securities, held-to-maturity, at cost			—				—				84,387				84,414
Commercial loans held for sale, at fair value			1,807,630				1,716,450				1,180,546				934,452
Loans, net of deferred fees and costs			2,322,737				1,985,755				1,824,245				1,561,451
Allowance for credit losses			(14,625	)			(14,883	)			(10,238	)			(9,989	)
Loans, net			2,308,112				1,970,872				1,814,007				1,551,462
Federal Home Loan Bank & Atlantic Community Bancshares stock			1,368				1,142				5,342				6,342
Premises and equipment, net			16,701				17,148				17,538				17,380
Accrued interest receivable			18,897				15,660				13,619				14,567
Intangible assets, net			2,710				2,857				2,315				3,081
Deferred tax asset, net			7,921				12,797				12,538				14,574
Investment in unconsolidated entity			34,064				34,273				39,154				58,012
Assets held for sale from discontinued operations			128,463				134,118				140,657				169,109
Other assets			83,003				79,925				81,696				76,123
Total assets		$	6,214,037			$	5,458,108			$	5,656,963			$	4,603,568
Liabilities:
Deposits
Demand and interest checking		$	5,089,741			$	4,512,949			$	4,402,740			$	3,964,905
Savings and money market			455,458				178,174				174,290				26,841
Time deposits			—				—				475,000				—
Total deposits			5,545,199				4,691,123				5,052,030				3,991,746
Securities sold under agreements to repurchase			42				42				82				93
Short-term borrowings			—				140,000				—				45,000
Subordinated debenture			13,401				13,401				13,401				13,401
Long-term borrowings			40,639				40,813				40,991				41,334
Other liabilities			81,677				74,625				65,962				53,862
Total liabilities		$	5,680,958			$	4,960,004			$	5,172,466			$	4,145,436
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,555,308 and 56,874,956 shares issued and outstanding at June 30, 2020 and 2019, respectively			57,555				57,426				56,941				56,875
Treasury stock (100,000 shares)			(866	)			(866	)			(866	)			(866	)
Additional paid-in capital			374,578				372,984				371,633				368,771
Retained earnings			81,028				60,960				50,742				28,463
Accumulated other comprehensive income			20,784				7,600				6,047				4,889
Total shareholders' equity			533,079				498,104				484,497				458,132
Total liabilities and shareholders' equity		$	6,214,037			$	5,458,108			$	5,656,963			$	4,603,568

 

 

 

 

Average balance sheet and net interest income		Three months ended June 30, 2020												Three months ended June 30, 2019
		(dollars in thousands)
		Average								Average				Average								Average
Assets:		Balance				Interest				Rate				Balance				Interest				Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	3,925,515			$	41,448				4.22	%		$	2,216,935			$	29,737				5.37	%
Leases - bank qualified*			9,217				162				7.03	%			15,446				268				6.94	%
Investment securities-taxable			1,334,368				10,188				3.05	%			1,443,671				11,634				3.22	%
Investment securities-nontaxable*			4,402				35				3.18	%			6,610				54				3.27	%
Interest earning deposits at Federal Reserve Bank			426,174				107				0.10	%			420,153				2,455				2.34	%
Net interest earning assets			5,699,676				51,940				3.65	%			4,102,815				44,148				4.30	%
Allowance for credit losses			(14,822	)											(9,963	)
Assets held for sale from discontinued operations			130,530				1,094				3.35	%			154,057				1,659				4.31	%
Other assets			228,443												283,036
		$	6,043,827											$	4,529,945
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	5,140,167			$	1,390				0.11	%		$	3,847,623			$	8,783				0.91	%
Savings and money market			234,201				120				0.20	%			26,497				40				0.60	%
Total deposits			5,374,368				1,510				0.11	%			3,874,120				8,823				0.91	%
Short-term borrowings			16,428				15				0.37	%			80,242				526				2.62	%
Securities sold under agreements to repurchase			41				—				0.00	%			92				—				0.00	%
Subordinated debentures			13,401				128				3.82	%			13,401				192				5.73	%
Total deposits and liabilities			5,404,238				1,653				0.12	%			3,967,855				9,541				0.96	%
Other liabilities			123,997												115,634
Total liabilities			5,528,235												4,083,489
Shareholders' equity			515,592												446,456
		$	6,043,827											$	4,529,945
Net interest income on tax equivalent basis*						$	51,381											$	36,266
Tax equivalent adjustment							41												68
Net interest income						$	51,340											$	36,198
Net interest margin *											3.53	%											3.41	%
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.
** Includes loans held for sale.

 

 

Average balance sheet and net interest income		Six months ended June 30, 2020												Six months ended June 30, 2019
		(dollars in thousands)
		Average								Average				Average								Average
Assets:		Balance				Interest				Rate				Balance				Interest				Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	3,593,921			$	80,607				4.49	%		$	2,241,746			$	59,898				5.34	%
Leases - bank qualified*			10,096				362				7.17	%			16,613				695				8.37	%
Investment securities-taxable			1,364,956				20,683				3.03	%			1,374,019				22,164				3.23	%
Investment securities-nontaxable*			4,788				75				3.13	%			7,075				114				3.22	%
Interest earning deposits at Federal Reserve Bank			460,025				1,730				0.75	%			421,580				4,957				2.35	%
Net interest earning assets			5,433,786				103,457				3.81	%			4,061,033				87,828				4.33	%
Allowance for credit losses			(12,532	)											(9,305	)
Assets held for sale from discontinued operations			133,903				2,368				3.54	%			163,874				3,684				4.50	%
Other assets			233,088												272,922
		$	5,788,245											$	4,488,524
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	4,746,928			$	8,085				0.34	%		$	3,838,868			$	17,616				0.92	%
Savings and money market			203,888				170				0.17	%			28,931				77				0.53	%
Time			159,752				1,483				1.86	%			—				—				—
Total deposits			5,110,568				9,738				0.38	%			3,867,799				17,693				0.91	%
Short-term borrowings			36,620				180				0.98	%			77,330				1,029				2.66	%
Securities sold under agreements to repurchase			57				—				0.00	%			91				—				0.00	%
Subordinated debentures			13,401				290				4.33	%			13,401				387				5.78	%
Total deposits and liabilities			5,160,646				10,208				0.40	%			3,958,621				19,109				0.97	%
Other liabilities			118,811												97,449
Total liabilities			5,279,457												4,056,070
Shareholders' equity			508,788												432,454
		$	5,788,245											$	4,488,524
Net interest income on tax equivalent basis*						$	95,617											$	72,403
Tax equivalent adjustment							92												170
Net interest income						$	95,525											$	72,233
Net interest margin *											3.43	%											3.43	%
* Full taxable equivalent basis, using a statutory rate of 21% for 2020 and 2019.
** Includes loans held for sale.

 

 

Allowance for loan and lease losses:		Six months ended								Year ended
		June 30,				June 30,				December 31,
		2020				2019				2019
		(dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of period (1)		$	12,874			$	8,653			$	8,653
Loans charged-off:
SBA non-real estate			1,048				893				1,362
Direct lease financing			1,552				185				528
Other consumer loans			—				2				1,103
Total			2,600				1,080				2,993
Recoveries:
SBA non-real estate			54				100				125
Direct lease financing			90				16				51
Other consumer loans			—				—				2
Total			144				116				178
Net charge-offs			2,456				964				2,815
Provision credited to allowance, excluding commitment provision			4,207				2,300				4,400
Balance in allowance for loan and lease losses at end of period		$	14,625			$	9,989			$	10,238
Net charge-offs/average loans			0.06	%			0.04	%			0.12	%
Net charge-offs/average loans (annualized)			0.12	%			0.09	%			0.12	%
Net charge-offs/average assets			0.04	%			0.02	%			0.06	%
(1) Excludes activity from assets held for sale from discontinued operations.

 

Loan portfolio:		June 30,				March 31,				December 31,				June 30,
		2020				2020				2019				2019
		(in thousands)
SBL non-real estate		$	293,692			$	84,946			$	84,579			$	75,475
SBL commercial mortgage			259,020				233,220				218,110				189,427
SBL construction			33,193				48,823				45,310				29,298
Small business loans *			585,905				366,989				347,999				294,200
Direct lease financing			422,505				445,967				434,460				407,907
SBLOC / IBLOC**			1,287,350				1,156,433				1,024,420				837,672
Advisor financing ***			15,529				—				—				—
Other specialty lending			2,706				2,711				3,055				3,432
Other consumer loans ****			4,003				4,023				4,554				7,898
			2,317,998				1,976,123				1,814,488				1,551,109
Unamortized loan fees and costs			4,739				9,632				9,757				10,342
Total loans, net of unamortized fees and costs		$	2,322,737			$	1,985,755			$	1,824,245			$	1,561,451
Small business portfolio:			June 30, 2020				March 31, 2020				December 31, 2020				June 30, 2020
			(in thousands)
SBL, including unamortized fees and costs			583,935				371,072				352,214				301,502
SBL, included in held-for-sale			225,401				223,987				220,358				215,064
Total small business loans		$	809,336			$	595,059			$	572,572			$	516,566

 

* The preceding table shows small business loans and small business loans held-for-sale, which consist of the government guaranteed portion of SBA loans at the dates indicated (in thousands).

** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies.

*** In 2020 we began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession.  Maximum loan amounts are subject to loan to value ratios of 70%, based on third party business appraisals, but may be increased depending upon the debt service coverage ratio.  Personal guarantees and blanket business liens are obtained as appropriate.

**** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $361,000 and $882,000 at June 30, 2020 and December 31, 2019, respectively.  Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

 

Small business loans as of June 30, 2020
		Loan principal
		(in millions)
U.S. government guaranteed portion of SBA loans (a)		$	306
Paycheck Protection Program Loans (PPP) (a)			208
Commercial mortgage SBA (b)			165
Construction SBA (c)			16
Unguaranteed portion of U.S. government guaranteed loans (d)			89
Non-SBA small business loans (e)			22
Total principal		$	806
Fair value adjustment (f)			5
Unamortized fees			(2	)
Total small business loans		$	809

 

(a)   This is the portion of SBA 7a loans (7a) and PPP which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.

(b)   Substantially all of these loans are made under the SBA 504 Fixed Asset Financing program (504) which dictates origination date loan to value percentages (LTV), generally 50-60%, to which the bank adheres.

(c)   Of the $16 million Construction SBA loans, $12 million are 504 first mortgages with an origination date LTV of 50-60% and $4 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d)  The $89 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government.  7a loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates.  In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners.

(e)   Of the $22 million in non-SBA loans, $3 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an 80% origination date LTV and $17 million consist of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators and are considered seasoned and have performed as agreed. A $2 million guaranty by the seller, for an 11% first loss piece, is in place until August 2021.

(f)   The fair value adjustment applies to the U.S. government guaranteed portion of SBA loans.

Additionally, the recently passed CARES Act of 2020 has provided significant support for SBA loans including funding intended to provide six months of interest payments on SBA loans, as well as other accommodations to provide for the payment of payroll and other operating expenses.

 

Type as of June 30, 2020
(Excludes government guaranteed portion of SBA 7a and PPP loans)
		SBL commercial mortgage*				SBL construction*				SBL non-real estate				Total				% Total
		(in millions)
Hotels		$	68			$	7			$	—			$	75				26	%
Professional services offices			22				—				2				24				8	%
Full-service restaurants			15				1				5				21				7	%
Child day care and youth services			15				—				1				16				6	%
Bakeries			4				—				12				16				6	%
Fitness/rec centers and instruction			8				—				4				12				4	%
General warehousing and storage			11				—				—				11				4	%
Limited-service restaurants and catering			7				—				4				11				4	%
Elderly assisted living facilities			2				7				2				11				4	%
Amusement and recreation industries			5				1				1				7				2	%
Car washes			3				3				—				6				2	%
Funeral homes			5				—				—				5				2	%
New and used car dealers			4				—				—				4				1	%
Automotive servicing			3				—				1				4				1	%
Other			45				1				23				69				23	%
Total		$	217			$	20			$	55			$	292				100	%

 

* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

 

 

State diversification as of June 30, 2020
(Excludes government guaranteed portion of SBA 7a and PPP loans)
		SBL commercial mortgage*				SBL construction*				SBL non-real estate				Total				% Total
		(in millions)
Florida		$	33			$	7			$	7			$	47				16	%
California			34				2				5				41				14	%
Pennsylvania			30				—				4				34				11	%
Illinois			28				—				4				32				11	%
North Carolina			24				1				3				28				10	%
Texas			11				—				5				16				6	%
New York			10				1				5				16				5	%
Tennessee			7				6				1				14				5	%
New Jersey			2				1				7				10				4	%
Virginia			8				1				2				11				4	%
Georgia			5				—				2				7				2	%
Michigan			3				—				1				4				2	%
Colorado			2				—				1				3				1	%
Ohio			3				—				—				3				1	%
Other states			17				1				8				26				8	%
Total		$	217			$	20			$	55			$	292				100	%

 

* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

.

Top 10 loans as of June 30, 2020
Type*		State		SBL commercial mortgage*				SBL construction*				Total
		(in millions)
Professional services office		CA		$	9			$	—			$	9
Hotel		FL			9				—				9
General warehouse		PA			8				—				8
Hotel		NC			6				—				6
Assisted living facility		FL			—				5				5
Hotel		NC			5				—				5
Fitness and rec center		PA			4				—				4
Hotel		PA			4				—				4
Hotel		TN			—				4				4
Gas Station		VA			3				—				3
Total				$	48			$	9			$	57

 

* All of the top 10 loans are SBA and with the rest of the commercial real estate portfolio were originated with an approximate loan to value ratio between 50% and 60% at origination .

 

 

Commercial real estate loans held for sale which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination:

 

Type as of June 30, 2020
Type		# Loans				Balance				Origination date LTV				Weighted average minimum interest rate
		(dollars in millions)
Multifamily (apartments)			181			$	1,450				76	%			4.77	%
Hospitality (hotels and lodging)*			11				60				65	%			5.70	%
Retail			7				52				72	%			4.96	%
Other			8				25				69	%			5.20	%
			207			$	1,587				75	%			4.82	%
Fair value adjustment *							(5	)
Total						$	1,582

 

*Of the total $5 million fair value adjustment, $2 million was related to hospitality loans.

 

State diversification as of June 30, 2020										15 Largest loans (all multifamily) as of June 30, 2020
State			Balance				Origination date LTV			State			Balance				Origination date LTV
			(in millions)										(in millions)
Texas		$	407				77	%		North Carolina		$	43				78	%
Georgia			234				78	%		Texas			37				79	%
Arizona			121				76	%		Texas			35				80	%
North Carolina			109				78	%		Pennsylvania			31				77	%
Nevada			56				80	%		Georgia			31				80	%
Alabama			54				76	%		Nevada			28				80	%
Other states each <$50 million			606				73	%		Texas			28				75	%
Total		$	1,587				75	%		Texas			27				77	%
										Arizona			26				79	%
										Mississippi			25				79	%
										Texas			24				77	%
										North Carolina			24				77	%
										Texas			24				77	%
										California			23				65	%
										Georgia			23				79	%
										15 Largest loans		$	429				77	%

 

 

Institutional banking loans outstanding at June 30, 2020
Type						Principal		% of total
						(in millions)
Securities backed lines of credit (SBLOC)						$1,003		77%
Insurance backed lines of credit (IBLOC)						284		22%
Advisor financing						16		1%
Total						$1,303		100%

 

For SBLOC, we generally lend up to 50% of the value of equities and 80% for investment grade securities. While equities have fallen in excess of 30% in recent periods, the reduction in collateral value of brokerage accounts collateralizing SBLOCs generally has been less, for two reasons. First, many collateral accounts are “balanced” and accordingly have a component of debt securities, which have either not decreased in value as much as equities, or in some cases may have increased in value. Secondly, many of these accounts have the benefit of professional investment advisors who provided some protection against market downturns, through diversification and other means. Additionally, borrowers often utilize only a portion of collateral value, which lowers the % principal to collateral. As a result, the accounts monitored by management and related information as of June 30, 2020 were as follows:

 

Top 10 SBLOC loans
	Principal amount					% Principal to collateral
	(in millions)
		$	33				31	%
			19				44	%
			14				23	%
			11				29	%
			11				80	%
			10				49	%
			10				27	%
			9				75	%
			8				22	%
			8				71	%
Total		$	133				42	%

 

Insurance backed lines of credit (IBLOC)
IBLOC loans are backed by the cash value of life insurance policies which have been assigned to us.  We lend up to 100% of such cash value. Our underwriting standards require approval of the insurance companies which carry the policies backing these loans. Currently, seven insurance companies have been approved and, as of January 21, 2020 all were rated Superior (A+ or better) by AM BEST. Moody’s ratings were at least A rated, and ranged from A3 to Aa2.

 

Direct lease financing* by type as of June 30, 2020
	Principal balance						% Total
			(in millions)
Government agencies and public institutions**		$	77				18	%
Construction			74				18	%
Waste management and remediation services			61				15	%
Retail trade			39				9	%
Transportation and warehousing			39				9	%
Real estate, rental and leasing			33				8	%
Health care and social assistance			26				6	%
Professional, scientific, and technical services			19				5	%
Manufacturing			13				3	%
Wholesale trade			13				3	%
Educational services			10				2	%
Arts, entertainment, and recreation			5				1	%
Other			14				3	%
Total		$	423				100	%

 

* Of the total $423 million of direct lease financing, $388 million consisted of vehicle leases with the remaining balance consisting of equipment leases.

** Includes public universities and school districts

 

Direct lease financing by state as of June 30, 2020
State		Principal balance				% Total
			(in millions)
Florida		$	99				23	%
New Jersey			30				7	%
Pennsylvania			27				6	%
New York			27				6	%
North Carolina			26				6	%
Maryland			24				6	%
California			21				5	%
Utah			19				4	%
Washington			16				4	%
Georgia			15				4	%
Connecticut			11				3	%
Alabama			11				3	%
Illinois			11				3	%
Texas			10				2	%
Missouri			7				2	%
Other states			69				16	%
Total		$	423				100	%

 

 

Capital ratios:		Tier 1 capital				Tier 1 capital				Total capital				Common equity
		to average				to risk-weighted				to risk-weighted				tier 1 to risk
		assets ratio				assets ratio				assets ratio				weighted assets
As of June 30, 2020
The Bancorp, Inc.			8.48	%			14.84	%			15.27	%			14.84	%
The Bancorp Bank			8.34	%			14.56	%			14.98	%			14.56	%
"Well capitalized" institution (under FDIC regulations-Basel III)			5.00	%			8.00	%			10.00	%			6.50	%
As of December 31, 2019
The Bancorp, Inc.			9.63	%			19.04	%			19.45	%			19.04	%
The Bancorp Bank			9.46	%			18.71	%			19.11	%			18.71	%
"Well capitalized" institution (under FDIC regulations-Basel III)			5.00	%			8.00	%			10.00	%			6.50	%

 

		Three months ended								Six months ended
		June 30,								June 30,
		2020				2019				2020				2019
Selected operating ratios:
Return on average assets (1)			1.33	%			1.00	%			1.13	%			1.32	%
Return on average equity (1)			15.61	%			10.20	%			12.87	%			13.65	%
Net interest margin			3.53	%			3.41	%			3.43	%			3.43	%
(1) Annualized

 

 

Book value per share table:		June 30,				March 31,				December 31,				June 30,
		2020				2020				2019				2019
Book value per share		$	9.28			$	8.69			$	8.52			$	8.07
Loan quality table:			June 30,				March 31,				December 31,				June 30,
			2020				2020				2019				2019
Nonperforming loans to total loans			0.44	%			0.40	%			0.50	%			0.57	%
Nonperforming assets to total assets			0.17	%			0.14	%			0.16	%			0.19	%
Allowance for loan and lease losses to total loans			0.63	%			0.75	%			0.56	%			0.64	%
Nonaccrual loans		$	9,957			$	5,645			$	5,796			$	6,456
Loans 90 days past due still accruing interest			352				2,245				3,264				2,373
Other real estate owned			—				—				—				—
Total nonperforming assets		$	10,309			$	7,890			$	9,060			$	8,829
	Three months ended
			June 30, 2020				March 31, 2020				December 31, 2019				June 30, 2019
	(in thousands)
Gross dollar volume (GDV) (2):
Prepaid and debit card GDV		$	23,680,749			$	22,982,188			$	19,104,327			$	16,611,551
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.

 

Business line quarterly summary:
Quarter ended June 30, 2020
(dollars in millions)
						Balances
										% Growth
Major business lines		Average approximate rates *				Balances **				Year over year				Linked quarter annualized
Loans
Institutional banking ***			2.5	%		$	1,303				56	%			51	%
Small Business Lending****			5.0	%			601				16	%			4	%
Leasing			5.8	%			422				4	%			nm
Commercial real estate securitization			4.8	%			1,582				nm				nm
Weighted average yield			4.2	%		$	3,908												Non-interest income
																					% Growth
Deposits																			Current quarter		Year over year
Payment solutions (prepaid and debit card issuance)			0.1	%		$	3,908				56	%			nm			$	18.7				18	%
Card payment and ACH processing			0.3	%			723				-27	%			nm				1.7				nm

* Average rates are for the quarter ended June 30, 2020
** Loan and deposit categories are respectively based on period-end and average quarterly balances.
*** Institutional Banking loans are comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities, Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies, and Advisor financing
**** Small Business Lending is substantially comprised of SBA loans.  The balance above excludes $208M Paycheck Protection Program loans.

Analysis of Walnut Street* marks:
	Loan activity	Marks
	(dollars in millions)
Original Walnut Street loan balance, December 31, 2014	$                     267
Marks through December 31, 2014 sale date	(58)	$                      (58)
Sales price of Walnut Street	209
Equity investment from independent investor	(16)
December 31, 2014 Bancorp book value	193
Additional marks 2015 - 2019	(46)	(46)
2020 Marks	-
Payments received	(113)
June 30, 2020 Bancorp book value**	$                       34
Total marks		$                    (104)
Divided by:
Original Walnut Street loan balance		$                      267
Percentage of total mark to original balance		39%

 

* Walnut Street is the investment in unconsolidated entity on the balance sheet which reflects the investment in a securitization of certain loans from the bank's discontinued loan portfolio.

** Approximately 33% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of June 30, 2020.

 

Walnut Street portfolio composition as of June 30, 2020
Collateral type	% of Portfolio
Commercial real estate non-owner occupied
Retail	58.0%
Office	-
Other	5.2%
Construction and land	28.1%
First mortgage residential owner occupied	7.4%
First mortgage residential non-owner occupied	1.3%
Total	100.0%

 

 

Cumulative analysis of marks on discontinued commercial loan principal as of June 30, 2020
		Discontinued				Cumulative				% to original
		loan principal				marks				principal
		(dollars in millions)
Commercial loan discontinued principal before marks		$	67
Florida mall held in discontinued other real estate owned			42				(27	)
Previous mark charges			10				(10	)
Mark at June 30, 2020							(4	)
Cumulative mark at June 30, 2020		$	119			$	(41	)			34	%

 

Analysis of discontinued commercial loan relationships as of June 30, 2020

 

		Performing loan principal				Nonperforming loan principal				Total loan principal				Performing loan marks				Nonperforming loan marks				Total marks
		(in millions)
5 loan relationships > $6 million		$	45			$	—			$	45			$	(3	)		$	—			$	(3	)
Loan relationships < $6 million			14				4				18				—				(1	)			(1	)
		$	59			$	4			$	63			$	(3	)		$	(1	)		$	(4	)

 

Quarterly activity for commercial loan discontinued principal
	Commercial
	loan principal
		(in millions)
Commercial loan discontinued principal March 31, 2020 before marks	$	72
Quarterly paydowns and other reductions		(5	)
Commercial loan discontinued principal June 30, 2020 before marks	$	67
Marks June 30, 2020		(4	)
Net commercial loan exposure June 30, 2020	$	63
Residential mortgages		39
Net loans	$	102
Florida mall in other real estate owned		15
11 properties in other real estate owned		11
Total discontinued assets at June 30, 2020	$	128

 

 

Discontinued commercial loan composition as of June 30, 2020

Collateral type		Unpaid principal balance				Mark June 30, 2020				Mark as % of portfolio
		(in millions)
Commercial real estate - non-owner occupied:
Retail		$	4			$	(0.6	)			15	%
Office			2				—				0	%
Other			19				(0.1	)			1	%
Construction and land			11				(0.1	)			1	%
Commercial non-real estate and industrial			2				—				—
1 to 4 family construction			11				(2.8	)			25	%
First mortgage residential non-owner occupied			9				—				0	%
Commercial real estate owner occupied:
Retail			7				—				—
Office			—				—				—
Other			—				—				—
Residential junior mortgage			1				—				—
Other			1				—				—
Total		$	67			$	(3.6	)			5	%
Less: mark			(4	)
Net commercial loan exposure June 30, 2020		$	63			$	(3.6	)

 

Loan payment deferrals as of June 30, 2020
			Principal for loans with deferrals				Total principal by loan category				% of total loan principal with deferrals
							(in millions)
Commercial real estate loans held for sale (excluding SBA loans)		$	31			$	1,587				2	%
Securities backed lines of credit, insurance backed lines of credit & advisor financing			2				1,303				<1	%
Small business lending, substantially all SBA loans			187				806				23	%
Direct lease financing			80				422				19	%
Discontinued operations			18				106				17	%
Other consumer loans and specialty lending			—				7				0	%
Total		$	318			$	4,231				7.5	%