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The Bancorp, Inc. Reports Second Quarter 2020 Financial Results

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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.

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,

March 31,

December 31,

June 30,

2020

2020

2019

2019

(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

40

%

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,

March 31,

December 31,

June 30,

2020

2020

2019

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

Nonperforming

Total

Performing

Nonperforming

Total

loan principal

loan principal

loan principal

loan marks

loan marks

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%

Contacts

The Bancorp, Inc.
Andres Viroslav
Director, Investor Relations
215-861-7990
aviroslav@thebancorp.com

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,

March 31,

December 31,

June 30,

2020

2020

2019

2019

(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

40

%

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,

March 31,

December 31,

June 30,

2020

2020

2019

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

Nonperforming

Total

Performing

Nonperforming

Total

loan principal

loan principal

loan principal

loan marks

loan marks

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%

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005952/en/

Contacts

The Bancorp, Inc.
Andres Viroslav
Director, Investor Relations
215-861-7990
aviroslav@thebancorp.com