EX-99.1 2 ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

The Bancorp, Inc. Reports First Quarter 2020 Financial Results

 

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

 

Highlights

 

·For the quarter ended March 31, 2020, The Bancorp earned net income of $13.2 million from continuing operations, and $0.22 diluted earnings per share from combined continuing and discontinued operations.

 

·Net interest margin increased to 3.34% for the quarter ended March 31, 2020, compared to 3.12% for the quarter ended December 31, 2019.

 

·Net interest income increased 26% to $42.9 million for the quarter ended March 31, 2020, compared to $34.0 million for the quarter ended March 31, 2019.

 

·Average loans and leases, including loans held for sale, increased 43% to $3.3 billion for the quarter ended March 31, 2020, compared to $2.3 billion for the quarter ended March 31, 2019.

 

·Prepaid, debit card and related fees increased 15% to $18.5 million for the quarter ended March 31, 2020, compared to $16.2 million for the quarter ended March 31, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 36%.

 

·SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 46% year over year and 13% quarter over quarter to $1.2 billion at March 31, 2020.

 

·Small Business Loans, including those held-for-sale, increased 21% year over year to $595.1 million at March 31, 2020.

 

·As of April 28, 2020 we have originated approximately 1250 Paycheck Protection Program loans, totaling in excess of $200 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized primarily in the second quarter of 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.

 

·Direct lease financing, the vast majority of which consist of vehicles, increased 16% year over year, to $446 million.

 

·The average rate on $4.9 billion of average deposits and interest-bearing liabilities in the first quarter of 2020 was 0.70%. Average prepaid and debit card account deposits of $3.2 billion for first quarter 2020, reflecting an increase of 24% over the $2.5 billion for the quarter ended March 31, 2019.

 

·Consolidated leverage ratio was 8.90% at March 31, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

 

·Book value per common share at March 31, 2020 was $8.69 per share compared to $7.70 a year earlier, an increase of 13%.

 

The following additional matters are notable:

 

·A planned sale by the Bank of approximately $825 million of commercial real estate loans scheduled for April 2020 was not consummated by the purchaser.  The purchaser had deposited $12.5 million with the Bank, which was to be forfeited should they not consummate the purchase.  We have been advised and have concluded that, under the relevant circumstances, the Bank is entitled to retain the deposit. The Bank intends to recognize the deposit as income in a time and manner consistent with applicable accounting rules.

 

 

 

 

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·We implemented Current Expected Credit Loss (“CECL”) accounting as of January 1, 2020. As a result, we booked a $2.6 million cumulative increase to the allowance for loan and lease losses and $569,000 to other liabilities for unfunded commitments. The $3.2 million combined total of these items was offset through retained earnings, net of their future tax benefit. The provision as determined through the CECL model resulted in a $3.6 million provision for credit losses for the quarter ended March 31, 2020.

 

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings despite the current COVID-19 developments. While the pandemic continues to be fast-developing and could be prolonged, we have evaluated the impact of lower interest rates and potential lower business volumes on our profitability for 2020. We believe that the previously announced $1.25 minimum earnings per share guidance for 2020 is still attainable, while $1.34 earnings per share has become less likely.  Accordingly, the $1.25 earnings per share now constitutes our guidance for full year 2020.  We have removed the range of earnings performance and made $1.25 our target. We have also provided additional tables and other disclosures in this press release related to credit exposures.”

 

The Bancorp reported net income of $12.6 million, or $0.22 per diluted share, for the quarter ended March 31, 2020, compared to net income of $17.9 million, or $0.32 per diluted share, for the quarter ended March 31, 2019. Results for 2020 reflected $5.2 million of unrealized losses on loans held for sale, which may or may not be realized depending on future market conditions. The prior year comparable quarter reflected $10.8 million of gains on such loans, which consisted primarily of realized gains. Pre-tax income excluding these items, which are dependent on market conditions, amounted to $22.7 for first quarter 2020 compared to $12.7 million for first quarter 2019, or an increase of 79%. 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 8.90%, 16.99%, 17.41% and 16.99%, 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, May 1, 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 8676348. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, May 8, 2020 by dialing 855.859.2056, access code 8676348.

 

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.

 

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The Bancorp, Inc. Contact

Andres Viroslav

Director, Investor Relations

215-861-7990

aviroslav@thebancorp.com

 

 

 

 

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The Bancorp, Inc.
Financial highlights
(unaudited)
          
   Three months ended  Year ended
   March 31,  December 31,
Condensed income statement  2020  2019  2019
   (dollars in thousands except per share data)
          
Net interest income  $42,911   $34,010   $141,288 
Provision for loan and lease losses   3,579    1,700    4,400 
Non-interest income               
Service fees on deposit accounts   10    47    75 
ACH, card and other payment processing fees   1,846    2,303    9,376 
Prepaid, debit card and related fees   18,540    16,163    65,141 
Net realized and unrealized gains (losses) on commercial loans originated for sale   (5,156)   10,763    24,072 
Change in value of investment in unconsolidated entity   (45)   —      —   
Leasing related income   833    695    3,243 
Other non-interest income   571    394    2,220 
Total non-interest income   16,599    30,365    104,127 
Non-interest expense               
Salaries and employee benefits   22,741    23,840    94,259 
Data processing expense   1,169    1,269    4,894 
Legal expense   913    1,324    5,319 
FDIC Insurance   2,589    1,929    7,025 
Software   3,477    2,921    12,731 
Civil money penalties   —      —      8,900 
Lease termination expense   —      —      908 
Other non-interest expense   7,529    7,946    34,485 
Total non-interest expense   38,418    39,229    168,521 
Income from continuing operations before income taxes   17,513    23,446    72,494 
Income tax expense   4,352    6,035    21,226 
Net income from continuing operations   13,161    17,411    51,268 
Discontinued operations               
Income (loss) from discontinued operations before income taxes   (775)   805    510 
Income tax expense (benefit)   (205)   286    219 
Net income (loss)  from discontinued operations, net of tax   (570)   519    291 
Net income  $12,591   $17,930   $51,559 
                
Net income per share from continuing operations - basic  $0.23   $0.31   $0.90 
Net income (loss) per share from discontinued operations - basic  $(0.01)  $0.01   $0.01 
Net income per share - basic  $0.22   $0.32   $0.91 
                
Net income per share from continuing operations - diluted  $0.23   $0.31   $0.89 
Net income (loss) per share from discontinued operations - diluted  $(0.01)  $0.01   $0.01 
Net income per share - diluted  $0.22   $0.32   $0.90 
Weighted average shares - basic   57,220,844    56,522,015    56,765,635 
Weighted average shares - diluted   57,926,785    56,876,662    57,338,985 

 

 

 

 

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Balance sheet  March 31,  December 31,  September 30,  March 31,
   2020  2019  2019  2019
   (dollars in thousands)
Assets:            
Cash and cash equivalents                    
Cash and due from banks  $13,610   $19,928   $24,068   $11,678 
Interest earning deposits at Federal Reserve Bank   105,978    924,544    932,440    714,514 
     Total cash and cash equivalents   119,588    944,472    956,508    726,192 
                     
Investment securities, available-for-sale, at fair value   1,353,278    1,320,692    1,382,437    1,368,602 
Investment securities, held-to-maturity, at cost   —      84,387    84,399    84,428 
Commercial loans held for sale, at fair value   1,716,450    1,180,546    489,240    570,426 
Loans, net of deferred fees and costs   1,985,755    1,824,245    1,683,377    1,510,395 
Allowance for loan and lease losses   (14,883)   (10,238)   (10,360)   (9,954)
Loans, net   1,970,872    1,814,007    1,673,017    1,500,441 
Federal Home Loan Bank & Atlantic Community Bancshares stock   1,142    5,342    4,342    1,113 
Premises and equipment, net   17,148    17,538    17,857    18,056 
Accrued interest receivable   15,660    13,619    13,898    13,907 
Intangible assets, net   2,857    2,315    2,698    3,463 
Deferred tax asset, net   12,797    12,538    13,006    18,423 
Investment in unconsolidated entity   34,273    39,154    49,431    58,258 
Assets held for sale from discontinued operations   134,118    140,657    162,098    188,025 
Other assets   79,925    81,696    94,605    75,642 
     Total assets  $5,458,108   $5,656,963   $4,943,536   $4,626,976 
                     
Liabilities:                    
Deposits                    
Demand and interest checking  $4,512,949   $4,402,740   $3,844,747   $3,993,828 
Savings and money market   178,174    174,290    25,950    31,470 
Time deposits   —      475,000    475,000    —   
     Total deposits   4,691,123    5,052,030    4,345,697    4,025,298 
                     
Securities sold under agreements to repurchase   42    82    93    93 
Short-term borrowings   140,000    —      —      —   
Subordinated debenture   13,401    13,401    13,401    13,401 
Long-term borrowings   40,813    40,991    41,166    41,499 
Other liabilities   74,625    65,962    59,005    111,905 
     Total liabilities  $4,960,004   $5,172,466   $4,459,362   $4,192,196 
                     
Shareholders' equity:                    
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,425,556 and 56,568,004 shares issued and outstanding at March 31, 2020 and 2019, respectively   57,426    56,941    56,911    56,568 
Treasury stock (100,000 shares)   (866)   (866)   (866)   (866)
Additional paid-in capital   372,984    371,633    370,113    367,483 
Accumulated earnings   60,960    50,742    48,888    17,113 
Accumulated other comprehensive income (loss)   7,600    6,047    9,128    (5,518)
Total shareholders' equity   498,104    484,497    484,174    434,780 
                     
     Total liabilities and shareholders' equity  $5,458,108   $5,656,963   $4,943,536   $4,626,976 

 

 

 

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Average balance sheet and net interest income  Three months ended March 31, 2020  Three months ended March 31, 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 **  $3,262,378   $39,159    4.80%  $2,266,834   $30,161    5.32%
Leases - bank qualified*   10,975    200    7.29%   17,793    428    9.62%
Investment securities-taxable   1,395,545    10,495    3.01%   1,303,491    10,530    3.23%
Investment securities-nontaxable*   5,174    39    3.02%   7,546    59    3.13%
Interest earning deposits at Federal Reserve Bank   493,876    1,623    1.31%   423,024    2,502    2.37%
Net interest earning assets   5,167,948    51,516    3.99%   4,018,688    43,680    4.35%
                               
Allowance for loan and lease losses   (10,176)             (8,638)          
Loans held for sale from discontinued operations   137,286    1,275    3.71%   173,800    2,025    4.66%
Other assets   226,881              234,174           
   $5,521,939             $4,418,024           
                               
Liabilities and Shareholders' Equity:                              
Deposits:                              
Demand and interest checking  $4,353,690   $6,695    0.62%  $3,798,837   $8,833    0.93%
Savings and money market   173,575    50    0.12%   31,392    37    0.47%
Time   319,505    1,483    1.86%   —      —      —   
Total deposits   4,846,770    8,228    0.68%   3,830,229    8,870    0.93%
                               
Short-term borrowings   56,813    165    1.16%   74,386    503    2.70%
Securities sold under agreements to repurchase   72    —      0.00%   90    —      0.00%
Subordinated debentures   13,401    162    4.84%   13,401    195    5.82%
Total deposits and liabilities   4,917,056    8,555    0.70%   3,918,106    9,568    0.98%
                               
Other liabilities   113,582              79,140           
Total liabilities   5,030,638              3,997,246           
                               
Shareholders' equity   491,301              420,778           
   $5,521,939             $4,418,024           
Net interest income on tax equivalent basis*       $44,236             $36,137      
                               
Tax equivalent adjustment        50              102      
                               
Net interest income       $44,186             $36,035      
Net interest margin *             3.34%             3.41%
                               
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.  
** Includes loans held for sale.  

 

 

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Allowance for loan and lease losses:  Three months ended  Year ended
   March 31,  March 31,  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   264    322    1,362 
Direct lease financing   1,194    106    529 
Other consumer loans   —      —      1,102 
Total   1,458    428    2,993 
                
Recoveries:               
SBA non-real estate   19    17    125 
Direct lease financing   84    12    51 
Other consumer loans   —      —      2 
Total   103    29    178 
Net charge-offs   1,355    399    2,815 
Provision credited to allowance, excluding commitment provision   3,364    1,700    4,400 
                
Balance in allowance for loan and lease losses at end of period  $14,883   $9,954   $10,238 
Net charge-offs/average loans   0.04%   0.02%   0.12%
Net charge-offs/average loans (annualized)   0.17%   0.07%   0.12%
Net charge-offs/average assets   0.02%   0.01%   0.06%
(1) Excludes activity from assets held for sale from discontinued operations.

 

Loan portfolio:  March 31,  December 31,  September 30,  March 31,
   2020  2019  2019  2019
   (in thousands)
             
SBL non-real estate  $84,946   $84,579   $84,181   $76,112 
SBL commercial mortgage   233,220    218,110    209,008    179,397 
SBL construction   48,823    45,310    38,116    23,979 
Small business loans *   366,989    347,999    331,305    279,488 
Direct lease financing   445,967    434,460    412,755    384,930 
SBLOC / IBLOC**   1,156,433    1,024,420    920,463    791,986 
Other specialty lending   2,711    3,055    3,167    34,425 
Other consumer loans ***   4,023    4,554    6,388    9,301 
    1,976,123    1,814,488    1,674,078    1,500,130 
Unamortized loan fees and costs   9,632    9,757    9,299    10,265 
Total loans, net of unamortized fees and costs  $1,985,755   $1,824,245   $1,683,377   $1,510,395 
                     
Small business portfolio:   March 31,     December 31,    September 30,    March 31, 
    2020    2019    2019    2019 
    (in thousands) 
                     
SBL, including unamortized fees and costs   371,072    352,214    337,440    286,814 
SBL, included in held-for-sale   223,987    220,358    222,007    206,901 
Total small business loans  $595,059   $572,572   $559,447   $493,715 

 

* 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.  At March 31, 2020 and December 31, 2019, respectively, IBLOC loans amounted to $228.8 million and $144.6 million.
*** Included in the table above under other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $455,000 and $882,000 at March 31, 2020 and December 31, 2019, respectively.  Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

 

 

 

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Small business loans as of March 31, 2020   
    
   Loan principal
    (in millions) 
U.S. government guaranteed portion of SBA loans (a)  $304 
Commercial mortgage SBA (b)   147 
Construction SBA (c)   29 
Unguaranteed portion of U.S. government guaranteed loans (d)   85 
Non-SBA small business loans (e)   21 
Total principal  $586 
Fair value adjustment   5 
Unamortized fees   4 
Total small business loans  $595 

 

(a)   This is the portion of SBA 7a loans (7a) which have been granted guarantees by the U.S. government, and therefore 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 $29 million Construction SBA loans, $21 million are 504 first mortgages with an origination date LTV of 50-60% and $8 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

 

(d)  The $85 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 $21 million in non-SBA loans, $2 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an  origination date LTV of 80% 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.

 

Additionally, the CARES Act of 2020, recently approved by Congress 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 March 31, 2020

(Excludes government guaranteed portion of SBA 7a loans) 

   SBL commercial mortgage* 

SBL

construction*

 

SBL non-real

estate

  Total  % Total
   (in millions)
Hotels  $62   $17   $—     $79    28%
Professional services offices   17    —      5    22    8%
Full-service restaurants   15    1    5    21    8%
Child day care and youth services   18    1    1    20    7%
Bakeries   4    —      12    16    6%
Fitness/rec centers and instruction   8    —      5    13    4%
General warehousing and storage   11    —      —      11    4%
Limited-service restaurants and catering   7    —      3    10    4%
Elderly assisted living facilities   —      7    3    10    4%
Amusement and recreation industries   5    1    —      6    2%
Car washes   3    2    —      5    2%
Funeral homes   5    —      —      5    2%
New and used car dealers   4    —      —      4    1%
Automotive servicing   2    —      1    3    1%
Other   34    5    18    57    20%
Total  $195   $34   $53   $282    100%

  

* Substantially all are SBA loans which had 50-60% LTV ratios at their origination.

 

 

 

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State diversification as of March 31, 2020
(Excludes government guaranteed portion of SBA 7a loans)
             
   SBL commercial mortgage*  SBL construction*  SBL non-real estate  Total  % Total
   (in millions)
Florida  $33   $14   $7   $54    19%
Pennsylvania   29    —      3    32    11%
Illinois   26    —      5    31    11%
California   25    1    5    31    11%
North Carolina   16    9    2    27    10%
New York   13    1    5    19    7%
Texas   10    1    5    16    6%
Tennessee   8    5    1    14    5%
New Jersey   1    2    7    10    4%
Virginia   8    1    2    11    4%
Georgia   3    —      1    4    1%
Michigan   3    —      1    4    1%
Colorado   2    —      1    3    1%
Ohio   2    —      1    3    1%
Other states   16    —      7    23    8%
Total  $195   $34   $53   $282    100%

 

* Substantially all are SBA loans with 50-60% LTV ratios at origination.

 

Top 10 loans as of March 31, 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 
Hotel  FL   5    —      5 
Hotel  NC   5    —      5 
Assisted living facility  FL   —      5    5 
Fitness and rec center  PA   5    —      5 
Hotel  PA   4    —      4 
Hotel  NY   3    —      3 
Total     $47   $11   $58 

 

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

 

 

 

 

9 
 

 

Commercial real estate loans held for sale which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination. The vast majority of these loans were originated in the past nine months:

 

Type as of March 31, 2020
Type  # Loans  Balance  Origination date LTV  Weighted average minimum interest rate
   (dollars in millions)
Multifamily (apartments)   175   $1,364    77%   4.75%
Hospitality (hotels and lodging) *   11    58    62%   5.69%
Retail   7    51    72%   4.94%
Other   8    24    69%   5.18%
    201   $1,497    76%   4.80%
Fair value adjustment        (4)          
Total       $1,493           

 

*Of the total $4 million fair value adjustment, $1.8 million was related to hospitality loans

 

State diversification as of March 31, 2020  15 Largest loans (all multifamily) as of March 31, 2020
                
State   Balance    Origination date LTV   State   Balance    Origination date LTV 
    (in millions)            (in millions)      
Texas  $375    77%  North Carolina  $43    78%
Georgia   230    78%  Texas   36    79%
Arizona   117    76%  Texas   34    80%
North Carolina   108    77%  Pennsylvania   31    77%
Nevada   56    80%  Georgia   31    80%
Alabama   53    76%  Nevada   28    80%
Other states each <$50 million   558    76%  Texas   27    75%
Total  $1,497    76%  Texas   26    77%
             Arizona   25    79%
             Mississippi   25    79%
             Texas   24    77%
             North Carolina   24    77%
             Texas   24    77%
             Georgia   23    79%
             Alabama   22    77%
             15 Largest loans  $423    78%

 

 

 

 

10 
 

 

Institutional banking loans outstanding at March 31, 2020
 
Type   Principal    % of total 
    (in millions)      
Securities backed lines of credit (SBLOC)  $927    80%
Insurance backed lines of credit (IBLOC)   229    20%
Total  $1,156    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 ratio of principal to collateral. As a result, the accounts monitored by management and related information as of March 31, 2020 were as follows:

 

Assessment of SBLOC collateral market value
   Number of loans  Principal balances  Market value of collateral  % Principal to collateral
   (in millions)
0-5%   7   $4   $5    79%
5-10%   19    24    32    75%
10-15%   40    26    36    71%
15%+   85    50    79    63%
Subtotal*   151   $104   $152    69%
Remaining portfolio   4,498    823    3,598    23%
Total   4,649   $927   $3,750    25%

 

* Of the 4,649 SBLOC loans with principal balances of $927 million, 151 loans with principal of $104 million at March 31, 2020 were being monitored at that date, as they had exceeded the desired threshold for the percent principal to market value of collateral. The first column reflects the percentage increase in that ratio before additional collateral or paydown of debt would be required. As of April 23, 2020, the number of loans requiring monitoring had decreased to 80 loans, with principal balances of $57 million.

 

 Top 10 SBLOC loans
   Principal amount 

% Principal

to collateral

   (in millions)
   $22    22%
    19    47%
    15    29%
    11    82%
    10    57%
    9    31%
    9    76%
    8    22%
    8    20%
    8    23%
Total  $119    40%

 

 

 

 

11 
 

 

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 March 31, 2020
    
    Principal balance    % Total 
    (in millions)      
Government agencies and public institutions**  $79    18%
Construction   75    17%
Waste management and remediation services   62    14%
Real estate, rental and leasing   44    10%
Retail trade   40    9%
Transportation and warehousing   29    6%
Health care and social assistance   26    6%
Professional, scientific, and technical services   20    5%
Manufacturing   15    3%
Wholesale trade   14    3%
Educational services   11    2%
Arts, entertainment, and recreation   5    1%
Other   26    6%
Total  $446    100%

 

* Of the total $446 million of direct lease financing, $411 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 March 31, 2020
       
State  Principal balance  % Total
    (in millions)      
Florida  $116    26%
New Jersey   27    6%
New York   25    6%
Pennsylvania   27    6%
North Carolina   22    5%
Maryland   21    5%
California   21    5%
Utah   20    4%
Washington   16    4%
South Carolina   14    3%
Texas   14    3%
Georgia   13    3%
Alabama   12    3%
Connecticut   9    2%
Missouri   7    2%
Other states   82    18%
Total  $446    100%

 

 

 

 

12 
 

 

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 March 31, 2020                    
The Bancorp, Inc.   8.90%   16.99%   17.50%   16.99%
The Bancorp Bank   8.76%   16.70%   17.22%   16.70%
"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   Year ended
    March 31,   December 31,
    2020   2019   2019
Selected operating ratios:            
Return on average assets (1)   0.91%   1.65%   1.09%
Return on average equity (1)   10.28%   17.28%   11.57%
Net interest margin   3.34%   3.41%   3.32%
(1) Annualized            

 

 

NOTE: Excluding the net of tax impact of the $5.2 million of unrealized losses, return on assets for the quarter ended March 31, 2020 was 1.19% and return on equity was 13.35%.

 

Book value per share table:  March 31,  December 31,  September 30,  March 31,
   2020  2019  2019  2019
Book value per share  $8.69   $8.52   $8.52   $7.70 
                     
Loan quality table:   March 31,    December 31,    September 30,    March 31, 
    2020    2019    2019    2019 
Nonperforming loans to total loans   0.40%   0.50%   0.55%   0.55%
Nonperforming assets to total assets   0.14%   0.16%   0.19%   0.18%
Allowance for loan and lease losses to total loans   0.75%   0.56%   0.62%   0.66%
                     
Nonaccrual loans  $5,645   $5,796   $6,420   $5,863 
Loans 90 days past due still accruing interest   2,245    3,264    2,788    2,483 
Other real estate owned   —      —      —      —   
     Total nonperforming assets  $7,890   $9,060   $9,208   $8,346 
                     
NOTE: Because SBLOC and IBLOC loans are respectively collateralized by marketable securities and the cash value of life insurance, management excludes those loans from the ratio of the allowance to total loans in its internal analysis. Accordingly, the adjusted ratio is 1.79%. 

 

    Three months ended 
    March 31,    December 31,    September 30,    March 31, 
    2020    2019    2019    2019 
    (in thousands)
Gross dollar volume (GDV) (2):                    
Prepaid and debit card GDV  $22,982,188   $19,104,327   $17,264,890   $16,937,325 
                     
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.
                     

 

 

 

 

13 
 

 

Business line quarterly summary:
Quarter ended March 31, 2020
(dollars in millions)
                   
      Balances      
         % Growth      
Major business lines  Average approximate rates *  Balances **  Year over year  Linked quarter annualized      
Loans                  
Institutional banking ***   3.5%  $1,156    46%   51%          
SBA   5.6%   595    21%   16%          
Leasing   6.3%   446    16%   11%          
Commercial real estate securitization   5.0%   1,495    nm    nm           
Weighted average yield   4.8%  $3,692              Non-interest income 
                             % Growth  
Deposits                       Current quarter    Year over year 
Payment solutions (prepaid and debit card issuance)   0.5%  $3,152    24%   nm   $18.5    15%
Card payment and ACH processing   0.9%   792    -11%   nm    1.8    nm 

 

* Average rates are for the quarter ended March 31, 2020
** Loan categories are based on period end balance and deposits are based on average quarterly balances.
*** Comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities and Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies.  

 

 

 

 

 

14 
 

 

 

Analysis of Walnut Street* marks:      
       
   Loan activity  Marks
   (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)     
March 31, 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 Bank's investment in a securitization of certain loans from the banks discontinued loan portfolio.
** Approximately 32% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of March 31, 2020.

 

Walnut Street portfolio composition as of March 31, 2020   
    
Collateral type  % of Portfolio
Commercial real estate non-owner occupied     
Retail   58.2%
Office   —   
Other   5.2%
Construction and land   25.2%
Commercial non real estate and industrial   —   
First mortgage residential owner occupied   9.7%
First mortgage residential non-owner occupied   1.7%
Total   100.0%

 

 

15 
 

 

Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2020   
          
   Discontinued  Cumulative  % to original
   loan principal  marks  principal
   (dollars in millions)
          
Commercial loan discontinued principal before marks  $72           
Florida mall held in discontinued other real estate owned   42    (27)     
Previous mark charges   10    (10)     
Mark at March 31, 2020        (4)     
Total  $124   $(41)   33%

 

Analysis of discontinued commercial loan relationships as of March 31, 2020

 

   Performing loan principal  Nonperforming loan principal  Total loan principal  Performing loan marks  Nonperforming loan marks  Total marks
   (in millions)
                   
5 loan relationships > $6 million  $45   $—     $45   $(3)  $—     $(3)
Loan relationships < $6 million   16    7    23    (1)   —      (1)
   $61   $7   $68   $(4)  $—     $(4)

 

Quarterly activity for commercial loan discontinued principal
    
   Commercial
   loan principal
    (in millions) 
      
Commercial loan discontinued principal December 31, 2019 before marks  $75 
Quarterly paydowns and other reductions   (3)
Commercial loan discontinued principal March 31, 2020 before marks  $72 
Marks March 31, 2020   (4)
Net commercial loan exposure March 31, 2020  $68 
Residential mortgages   43 
Net loans  $111 
Florida mall in other real estate owned   15 
10 properties in other real estate owned   8 
Total discontinued assets at March 31, 2020  $134 

 

 

16 
 

 

Discontinued commercial loan composition as of March 31, 2020

 

Collateral type  Unpaid principal balance  Mark
March 31, 2020		  Mark as % of portfolio
   (in millions)
Commercial real estate - non-owner occupied:               
Retail  $4   $(0.6)   13%
Office   3    —      —   
Other   23    (0.3)   1%
Construction and land   11    —      —   
Commercial non-real estate and industrial   2    —      —   
1 to 4 family construction   11    (2.5)   23%
First mortgage residential non-owner occupied   9    (0.2)   2%
Commercial real estate owner occupied:               
Retail   7    —      —   
Office   —      —      —   
Other   —      —      —   
Residential junior mortgage   1    —      —   
Other   1    —      —   
Total  $72    —        
Less: mark   (4)   —        
Net commercial loan exposure March 31, 2020  $68   $(3.6)   5%

 

 

Loan payment deferral requests as of April 23, 2020
       
    Principal for loans with deferral requests    Total principal by loan category    % of total loan principal with deferral requests 
         (in millions)      
Commercial real estate loans held for sale (excluding SBA loans)  $10   $1,497    <1% 
Securities backed lines of credit & insurance backed lines of credit   10    1,156    1%
Small business lending, substantially all SBA loans   127    586    22%
Direct lease financing   80    446    18%
Discontinued operations   18    115    15%
Other consumer loans and specialty lending   1    7    17%
Total  $246   $3,807    6%

 

 

 

 

17