The Bancorp, Inc. Reports Third 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 third quarter of 2020.

Highlights

  • For the quarter ended September 30, 2020, The Bancorp earned net income of $23.1 million from continuing operations, and $0.40 diluted earnings per share from combined continuing and discontinued operations.

  • Return on assets and equity for the quarter ended September 30, 2020 amounted to 1.5% and 17% (annualized), respectively, compared to 1.3% and 16% for the quarter ended June 30, 2020.

  • Net interest margin amounted to 3.37% for the quarter ended September 30, 2020, compared to 3.35% for the quarter ended September 30, 2019 and 3.53% for the quarter ended June 30, 2020.

  • Net interest income increased 33% to $50.0 million for the quarter ended September 30, 2020, compared to $37.6 million for the quarter ended September 30, 2019.

  • Average loans and leases, including loans at fair value, increased 61% to $4.21 billion for the quarter ended September 30, 2020, compared to $2.62 billion for the quarter ended September 30, 2019.

  • Prepaid, debit card and related fees increased 20% to $19.4 million for the quarter ended September 30, 2020, compared to $16.1 million for the quarter ended September 30, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 39%.

  • SBLOC (securities-backed lines of credit), IBLOC (insurance backed lines of credit) and advisor financing loans increased 58% year over year and 12% quarter over quarter to $1.5 billion at September 30, 2020.

  • Small Business Loans, including those held at fair value, increased 13% year over year to $633 million at September 30, 2020, exclusive of $208 million of Paycheck Protection Program loans.

  • As of September 30, 2020, The Bancorp originated approximately 1,250 Paycheck Protection Program loans, totaling approximately $208 million, which it expects will generate approximately $5.5 million of fees and interest. That income is being 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 $5.6 billion of average deposits and interest-bearing liabilities in the third quarter of 2020 was 0.18%. Average prepaid and debit card account deposits of $4.0 billion for third quarter 2020, reflected an increase of 62% over the $2.5 billion for the quarter ended September 30, 2019.

  • Consolidated leverage ratio was 8.62% at September 30, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the "Bank"), remain well capitalized.

  • Book value per common share at September 30, 2020 was $9.71 per share compared to $8.52 at September 30, 2019, an increase of 14%, primarily as a result of retained earnings per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, "We continued to add new card programs into our payments ecosystem in the 3rd quarter, as well as adding several new direct rapid funds partners. These new relationships will be announced as new products and services enter the marketplace. Our pipelines continue to be very robust and significantly above historic norms suggesting continued growth in transaction volumes. In the 3rd quarter, we made a strategic determination as to our securitization business. We have been evaluating our securitization platform and its loan portfolio. After assessing its current profitability, market conditions and credit risk, we have decided to discontinue future securitization activity. The loan portfolio, comprised almost entirely of multi-family loans that have experienced few deferrals and delinquencies, will amortize over the next 3-5 years and be replaced by loans originated in other areas. We expect income from the portfolio to be stable over the first 2 years. A portion of the portfolio may be sold as whole loans as space is needed on our balance sheet for other lending activities. Our real estate team in our commercial SBA business will continue to originate select transactions. For full year 2020, we believe we will achieve at least $1.25 earnings per share. We now believe we have enough information to issue preliminary guidance for 2021. We expect to earn between $1.65 and $1.70 per share. $1.70 per share or approximately $100 million in net income is our current company budget for 2021."

The Bancorp reported net income of $23.3 million, or $0.40 per diluted share, for the quarter ended September 30, 2020, compared to net income of $20.4 million, or $0.36 per diluted share, for the quarter ended September 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 8.62%, 14.26%, 14.68% and 14.26%, 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, October 30, 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 5682938. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, November 6, 2020 by dialing 855.859.2056, access code 5682938.

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," "plan," "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

Nine months ended

September 30,

September 30,

Condensed income statement

2020

2019

2020

2019

(dollars in thousands except per share data)

Net interest income

$

49,996

$

37,560

$

143,153

$

106,109

Provision for credit losses

1,297

650

5,798

2,950

Non-interest income

Service fees on deposit accounts

8

8

23

69

ACH, card and other payment processing fees

1,760

2,590

5,313

7,414

Prepaid, debit card and related fees

19,434

16,134

56,647

48,137

Net realized and unrealized gains (losses) on commercial loans originated for sale

684

13,704

(5,412

)

24,319

Change in value of investment in unconsolidated entity

-

-

(45

)

-

Leasing related income

1,519

589

2,795

2,311

Other non-interest income

947

490

1,996

1,379

Total non-interest income

24,352

33,515

61,317

83,629

Non-interest expense

Salaries and employee benefits

26,417

24,526

74,650

70,192

Data processing expense

1,192

1,192

3,538

3,684

Legal expense

994

1,466

4,136

4,324

FDIC Insurance

2,180

860

7,687

4,884

Software

3,595

3,199

10,458

9,180

SEC settlement

-

1,400

-

1,400

Lease termination expense

-

-

-

908

Other non-interest expense

7,648

9,408

22,595

26,227

Total non-interest expense

42,026

42,051

123,064

120,799

Income from continuing operations before income taxes

31,025

28,374

75,608

65,989

Income tax expense

7,894

7,975

19,033

17,585

Net income from continuing operations

23,131

20,399

56,575

48,404

Discontinued operations

Income (loss) from discontinued operations before income taxes

(1,671

)

151

(2,720

)

1,875

Income tax expense (benefit)

(1,794

)

125

(2,058

)

574

Net income (loss) from discontinued operations, net of tax

123

26

(662

)

1,301

Net income

$

23,254

$

20,425

$

55,913

$

49,705

Net income per share from continuing operations - basic

$

0.40

$

0.36

$

0.98

$

0.85

Net income (loss) per share from discontinued operations - basic

$

-

$

-

$

(0.01

)

$

0.02

Net income per share - basic

$

0.40

$

0.36

$

0.97

$

0.87

Net income per share from continuing operations - diluted

$

0.40

$

0.36

$

0.97

$

0.85

Net income (loss) per share from discontinued operations - diluted

$

-

$

-

$

(0.01

)

$

0.02

Net income per share - diluted

$

0.40

$

0.36

$

0.96

$

0.87

Weighted average shares - basic

57,588,168

56,907,815

57,433,477

56,712,084

Weighted average shares - diluted

58,471,192

57,413,297

58,051,833

57,152,371

Balance sheet

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

(dollars in thousands)

Assets:

Cash and cash equivalents

Cash and due from banks

$

6,220

$

5,094

$

19,928

$

24,068

Interest earning deposits at Federal Reserve Bank

294,758

475,627

924,544

932,440

Total cash and cash equivalents

300,978

480,721

944,472

956,508

Investment securities, available-for-sale, at fair value

1,264,903

1,324,447

1,320,692

1,382,437

Investment securities, held-to-maturity, at cost

-

-

84,387

84,399

Commercial loans, at fair value

1,849,947

1,807,630

1,180,546

489,240

Loans, net of deferred fees and costs

2,488,760

2,322,737

1,824,245

1,683,377

Allowance for credit losses

(15,727

)

(14,625

)

(10,238

)

(10,360

)

Loans, net

2,473,033

2,308,112

1,814,007

1,673,017

Federal Home Loan Bank & Atlantic Community Bancshares stock

1,368

1,368

5,342

4,342

Premises and equipment, net

15,849

16,701

17,538

17,857

Accrued interest receivable

18,852

18,897

13,619

13,898

Intangible assets, net

2,563

2,710

2,315

2,698

Deferred tax asset, net

7,952

7,921

12,538

13,006

Investment in unconsolidated entity

31,783

34,064

39,154

49,431

Assets held for sale from discontinued operations

122,253

128,463

140,657

162,098

Other assets

79,821

83,003

81,696

94,605

Total assets

$

6,169,302

$

6,214,037

$

5,656,963

$

4,943,536

Liabilities:

Deposits

Demand and interest checking

$

4,882,834

$

5,089,741

$

4,402,740

$

3,844,747

Savings and money market

505,928

455,458

174,290

25,950

Time deposits

-

-

475,000

475,000

Total deposits

5,388,762

5,545,199

5,052,030

4,345,697

Securities sold under agreements to repurchase

42

42

82

93

Senior debt

98,222

-

-

-

Subordinated debenture

13,401

13,401

13,401

13,401

Other long-term borrowings

40,462

40,639

40,991

41,166

Other liabilities

69,954

81,677

65,962

59,005

Total liabilities

$

5,610,843

$

5,680,958

$

5,172,466

$

4,459,362

Shareholders' equity:

Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,590,874 and 56,940,521 shares issued and outstanding at September 30, 2020 and 2019, respectively

57,591

57,555

56,941

56,911

Treasury stock (100,000 shares)

(866

)

(866

)

(866

)

(866

)

Additional paid-in capital

376,751

374,578

371,633

370,113

Retained earnings

104,282

81,028

50,742

48,888

Accumulated other comprehensive income

20,701

20,784

6,047

9,128

Total shareholders' equity

558,459

533,079

484,497

484,174

Total liabilities and shareholders' equity

$

6,169,302

$

6,214,037

$

5,656,963

$

4,943,536

Average balance sheet and net interest income

Three months ended

September 30, 2020

Three months ended

September 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 **

$

4,202,054

$

44,318

4.22

%

$

2,608,427

$

35,103

5.38

%

Leases - bank qualified*

8,026

146

7.28

%

14,067

252

7.17

%

Investment securities-taxable

1,300,191

7,911

2.43

%

1,429,222

10,485

2.93

%

Investment securities-nontaxable*

4,041

35

3.46

%

6,172

54

3.50

%

Interest earning deposits at Federal Reserve Bank

413,259

106

0.10

%

474,499

2,545

2.15

%

Net interest earning assets

5,927,571

52,516

3.54

%

4,532,387

48,439

4.27

%

Allowance for credit losses

(14,587

)

(9,988

)

Assets held for sale from discontinued operations

124,916

890

2.85

%

145,347

1,609

4.43

%

Other assets

195,125

298,191

$

6,233,025

$

4,965,937

Liabilities and Shareholders' Equity:

Deposits:

Demand and interest checking

$

5,079,711

$

1,591

0.13

%

$

3,829,457

$

7,644

0.80

%

Savings and money market

484,323

139

0.11

%

26,444

52

0.79

%

Time

-

-

0.00

%

269,464

1,338

1.99

%

Total deposits

5,564,034

1,730

0.12

%

4,125,365

9,034

0.88

%

Short-term borrowings

3,260

1

0.12

%

256,945

1,595

2.48

%

Securities sold under agreements to repurchase

41

-

0.00

%

93

-

0.00

%

Subordinated debentures

13,401

118

3.52

%

13,401

186

5.55

%

Senior debt

53,260

633

4.75

%

-

-

0.00

%

Total deposits and liabilities

5,633,996

2,482

0.18

%

4,395,804

10,815

0.98

%

Other liabilities

53,260

98,980

Total liabilities

5,687,256

4,494,784

Shareholders' equity

545,769

471,153

$

6,233,025

$

4,965,937

Net interest income on tax equivalent basis*

$

50,924

$

39,233

Tax equivalent adjustment

38

64

Net interest income

$

50,886

$

39,169

Net interest margin *

3.37

%

3.35

%

* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.

** Includes loans held at fair value.

Average balance sheet and net interest income

Nine months ended

September 30, 2020

Nine months ended

September 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 **

$

3,798,104

$

124,924

4.39

%

$

2,365,317

$

95,001

5.36

%

Leases - bank qualified*

9,401

509

7.22

%

15,755

947

8.01

%

Investment securities-taxable

1,343,211

28,594

2.84

%

1,394,234

32,649

3.12

%

Investment securities-nontaxable*

4,537

110

3.23

%

6,771

168

3.31

%

Interest earning deposits at Federal Reserve Bank

444,323

1,836

0.55

%

439,414

7,502

2.28

%

Net interest earning assets

5,599,576

155,973

3.71

%

4,221,491

136,267

4.30

%

Allowance for credit losses

(13,225

)

(9,537

)

Assets held for sale from discontinued operations

130,880

3,259

3.32

%

157,630

5,293

4.48

%

Other assets

243,629

285,843

$

5,960,860

$

4,655,427

Liabilities and Shareholders' Equity:

Deposits:

Demand and interest checking

$

4,858,666

$

9,676

0.27

%

$

3,840,141

$

25,260

0.88

%

Savings and money market

298,049

309

0.14

%

28,073

129

0.61

%

Time

106,113

1,483

1.86

%

90,808

1,338

1.96

%

Total deposits

5,262,828

11,468

0.29

%

3,959,022

26,727

0.90

%

Short-term borrowings

25,419

181

0.95

%

137,860

2,624

2.54

%

Securities sold under agreements to repurchase

51

-

0.00

%

92

-

0.00

%

Subordinated debentures

13,401

408

4.06

%

13,401

573

5.70

%

Senior debt

17,883

633

4.72

%

-

-

0.00

%

Total deposits and liabilities

5,319,582

12,690

0.32

%

4,110,375

29,924

0.97

%

Other liabilities

119,961

99,577

Total liabilities

5,439,543

4,209,952

Shareholders' equity

521,317

445,475

$

5,960,860

$

4,655,427

Net interest income on tax equivalent basis*

$

146,542

$

111,636

Tax equivalent adjustment

130

234

Net interest income

$

146,412

$

111,402

Net interest margin *

3.41

%

3.40

%

* Full taxable equivalent basis, using a statutory rate of 21% for 2020 and 2019.

** Includes loans held at fair value.

Allowance for credit losses:

Nine months ended

Year ended

September 30,

September 30,

December 31,

2020

2019

2019

(dollars in thousands)

Balance in the allowance for loan and lease losses at beginning of period (1)

$

12,875

$

8,653

$

8,653

Loans charged-off:

SBA non-real estate

1,350

995

1,362

Direct lease financing

2,178

391

528

Other consumer loans

-

3

1,103

Total

3,528

1,389

2,993

Recoveries:

SBA non-real estate

82

94

125

Direct lease financing

502

51

51

Other consumer loans

-

1

2

Total

584

146

178

Net charge-offs

2,944

1,243

2,815

Provision credited to allowance, excluding commitment provision

5,796

2,950

4,400

Balance in allowance for credit losses at end of period

$

15,727

$

10,360

$

10,238

Net charge-offs/average loans

0.08

%

0.05

%

0.12

%

Net charge-offs/average loans (annualized)

0.10

%

0.06

%

0.12

%

Net charge-offs/average assets

0.05

%

0.03

%

0.06

%

(1) Excludes activity from assets held for sale from discontinued operations.

Loan portfolio:

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

(in thousands)

SBL non-real estate

$

293,488

$

293,692

$

84,579

$

84,181

SBL commercial mortgage

270,264

259,020

218,110

209,008

SBL construction

27,169

33,193

45,310

38,116

Small business loans *

590,921

585,905

347,999

331,305

Direct lease financing

430,675

422,505

434,460

412,755

SBLOC / IBLOC**

1,428,253

1,287,350

1,024,420

920,463

Advisor financing ***

26,600

15,529

-

-

Other specialty lending

2,194

2,706

3,055

3,167

Other consumer loans ****

3,809

4,003

4,554

6,388

2,482,452

2,317,998

1,814,488

1,674,078

Unamortized loan fees and costs

6,308

4,739

9,757

9,299

Total loans, net of unamortized fees and costs

$

2,488,760

$

2,322,737

$

1,824,245

$

1,683,377

Small business portfolio:

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

(in thousands)

SBL, including unamortized fees and costs

590,314

583,935

352,214

337,440

SBL, included in commercial loans held at fair value

250,958

225,401

220,358

222,007

Total small business loans

$

841,272

$

809,336

$

572,572

$

559,447

* The preceding table shows small business loans and small business loans held at fair value, 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 $151,000 and $882,000 at September 30, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses.

Small business loans as of September 30, 2020

Loan principal

(in millions)

U.S. government guaranteed portion of SBA loans (a)

$

334

Paycheck Protection Program Loans (PPP) (a)

208

Commercial mortgage SBA (b)

165

Construction SBA (c)

13

Unguaranteed portion of U.S. government guaranteed loans (d)

98

Non-SBA small business loans (e)

18

Total principal

$

836

Fair value adjustment (f)

6

Unamortized fees

(1

)

Total small business loans

$

841

(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 $13 million Construction SBA loans, $10 million are 504 first mortgages with an origination date LTV of 50-60% and $3 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $98 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) The $18 million non-SBA loans are mainly comprised 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 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. This support is expiring in the fourth quarter of 2020.

Type as of September 30, 2020

(Excludes government guaranteed portion of SBA 7a and PPP loans)

SBL commercial mortgage*

SBL construction*

SBL non-real estate

Total

% Total

(dollars in millions)

Hotels

$

66

$

2

$

-

$

68

24

%

Professional services offices

21

-

3

24

8

%

Full-service restaurants

15

1

4

20

7

%

Child day care and youth services

15

-

1

16

5

%

Bakeries

4

-

12

16

5

%

Elderly assisted living facilities

2

8

2

12

4

%

General warehousing and storage

11

-

-

11

4

%

Limited-service restaurants and catering

7

-

3

10

3

%

Fitness/rec centers and instruction

7

-

2

9

3

%

Amusement and recreation industries

4

2

3

9

3

%

Car washes

5

3

-

8

3

%

Funeral homes

7

-

-

7

2

%

New and used car dealers

4

-

-

4

1

%

Automotive servicing

3

-

-

3

1

%

Other

51

-

26

77

27

%

Total

$

222

$

16

$

56

$

294

100

%

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

State diversification as of September 30, 2020

(Excludes government guaranteed portion of SBA 7a and PPP loans)

SBL commercial mortgage*

SBL construction*

SBL non-real estate

Total

% Total

(dollars in millions)

Florida

$

35

$

8

$

8

$

51

17

%

California

36

2

5

43

15

%

Pennsylvania

30

-

4

34

12

%

Illinois

26

-

3

29

10

%

North Carolina

19

3

3

25

9

%

New York

10

2

5

17

6

%

Texas

11

-

5

16

5

%

Tennessee

11

-

1

12

4

%

New Jersey

3

1

7

11

4

%

Virginia

9

-

2

11

4

%

Georgia

5

-

2

7

2

%

Colorado

3

-

1

4

1

%

Michigan

3

-

1

4

1

%

Washington

3

-

-

3

1

%

Ohio

2

-

1

3

1

%

Other states

16

-

8

24

8

%

Total

$

222

$

16

$

56

$

294

100

%

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

Top 10 loans as of September 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

7

-

7

Hotel

NC

6

-

6

Assisted living facility

FL

-

5

5

Hotel

NC

5

-

5

Fitness and rec center

PA

5

-

5

Hotel

PA

4

-

4

Hotel

TN

4

-

4

Gas Station

VA

3

-

3

Total

$

52

$

5

$

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 at fair value which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination:

Type as of September 30, 2020

Type

# Loans

Balance

Origination

date LTV

Weighted average

minimum interest rate

(dollars in millions)

Multifamily (apartments)

173

$

1,463

76

%

4.77

%

Hospitality (hotels and lodging)

11

63

65

%

5.73

%

Retail

8

52

70

%

4.62

%

Other

7

25

70

%

5.21

%

199

$

1,603

75

%

4.81

%

Fair value adjustment

(4

)

Total

$

1,599

State diversification as of September 30, 2020

15 Largest loans (all multifamily) as of September 30, 2020

State

Balance

Origination

date LTV

State

Balance

Origination

date LTV

(dollars in millions)

(dollars in millions)

Texas

$

396

76

%

North Carolina

$

43

78

%

Georgia

252

78

%

Texas

38

79

%

Arizona

123

76

%

Texas

35

80

%

North Carolina

111

77

%

Pennsylvania

32

77

%

Nevada

56

80

%

Georgia

31

80

%

Alabama

54

76

%

Nevada

28

80

%

Other states each <$50 million

611

73

%

Texas

28

75

%

Total

$

1,603

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

$

431

77

%

Institutional banking loans outstanding at September 30, 2020

Type

Principal

% of total

(dollars in millions)

Securities backed lines of credit (SBLOC)

$

1,069

73

%

Insurance backed lines of credit (IBLOC)

359

25

%

Advisor financing

27

2

%

Total

$

1,455

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.

Top 10 SBLOC loans at September 30, 2020

Principal amount

% Principal to collateral

(dollars in millions)

$

33

30

%

17

39

%

14

22

%

12

33

%

10

47

%

10

31

%

9

23

%

9

75

%

9

49

%

8

22

%

Total

$

131

35

%

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 September 30, 2020

Principal balance

% Total

(dollars in millions)

Government agencies and public institutions**

$

76

18

%

Construction

74

18

%

Waste management and remediation services

61

14

%

Real estate, rental and leasing

44

10

%

Retail trade

36

8

%

Transportation and warehousing

35

8

%

Health care and social assistance

26

6

%

Professional, scientific, and technical services

19

4

%

Wholesale trade

14

3

%

Manufacturing

14

3

%

Educational services

9

2

%

Arts, entertainment, and recreation

5

1

%

Other

18

5

%

Total

$

431

100

%

* Of the total $431 million of direct lease financing, $401 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 September 30, 2020

State

Principal balance

% Total

(dollars in millions)

Florida

$

92

20

%

California

30

7

%

New Jersey

29

7

%

Pennsylvania

26

6

%

New York

25

6

%

North Carolina

22

5

%

Utah

21

5

%

Maryland

20

5

%

Washington

16

4

%

Georgia

12

3

%

Missouri

12

3

%

Connecticut

12

3

%

Texas

12

3

%

Alabama

11

3

%

South Carolina

9

2

%

Other states

82

18

%

Total

$

431

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 September 30, 2020

The Bancorp, Inc.

8.62

%

14.26

%

14.68

%

14.26

%

The Bancorp Bank

8.50

%

14.04

%

14.45

%

14.04

%

"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

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Selected operating ratios:

Return on average assets (1)

1.48

%

1.63

%

1.25

%

1.41

%

Return on average equity (1)

16.90

%

17.20

%

14.29

%

14.92

%

Net interest margin

3.37

%

3.35

%

3.41

%

3.40

%

(1) Annualized

Book value per share table:

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

Book value per share

$

9.71

$

9.28

$

8.52

$

8.52

Loan quality table:

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

Nonperforming loans to total loans

0.49

%

0.44

%

0.50

%

0.55

%

Nonperforming assets to total assets

0.20

%

0.17

%

0.16

%

0.19

%

Allowance for loan and lease losses to total loans

0.63

%

0.63

%

0.56

%

0.62

%

Nonaccrual loans

$

12,275

$

9,957

$

5,796

$

6,420

Loans 90 days past due still accruing interest

24

352

3,264

2,788

Other real estate owned

-

-

-

-

Total nonperforming assets

$

12,299

$

10,309

$

9,060

$

9,208

Three months ended

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

(in thousands)

Gross dollar volume (GDV) (2):

Prepaid and debit card GDV

$

23,963,508

$

23,680,749

$

19,104,327

$

17,264,690

(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 September 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

%

$

1,455

58%

47%

Small Business Lending****

4.9

%

633

13%

21%

Leasing

6.3

%

431

4%

8%

Commercial real estate (non SBA at fair value)

4.8

%

1,603

nm

nm

Weighted average yield

4.2

%

$

4,122

Non-interest income

% Growth

Deposits

Current

quarter

Year

over year

Payment solutions (prepaid and debit card issuance)

0.1

%

$

4,038

62%

nm

$

19.4

20%

Card payment and ACH processing

0.3

%

834

(14%)

nm

1.8

nm

* Average rates are for the quarter ended September 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 $208 million of 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

(115

)

September 30, 2020 Bancorp book value**

$

32

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 34% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of September 30, 2020.