July 22, 2024

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The Bancorp, Inc. Reports Third Quarter 2020 Financial Results

12 min read
The Bancorp, Inc. Reports Third Quarter 2020 Financial Results
The Bancorp, Inc. Reports Third Quarter 2020 Financial Results

WILMINGTON, Del.–(BUSINESS WIRE)–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.

 

Walnut Street portfolio composition as of September 30, 2020

 

Collateral type

% of Portfolio

Commercial real estate non-owner occupied

Retail

61.1%

Office

Other

5.5%

Construction and land

29.6%

First mortgage residential owner occupied

2.4%

First mortgage residential non-owner occupied

1.4%

Total

100.0%

 
 

Cumulative analysis of marks on discontinued commercial loan principal as of September 30, 2020

 

Discontinued

Cumulative

% to original

loan principal

marks

principal

(dollars in millions)

 

Commercial loan discontinued principal before marks

$

66

Florida mall held in discontinued other real estate owned

 

42

 

(27

)

Mark at September 30, 2020

 

(4

)

Cumulative mark at September 30, 2020

$

108

$

(31

)

29

%

 

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

 

Performing

Nonperforming

Total

Performing

Nonperforming

Total

loan principal

loan principal

loan principal

loan marks

loan marks

marks

(in millions)

 

5 loan relationships > $5 million

$

44

$

$

44

$

(3

)

$

 

$

(3

)

Loan relationships < $5 million

 

9

 

9

 

18

 

 

 

(1

)

 

(1

)

$

53

$

9

$

62

$

(3

)

$

(1

)

$

(4

)

 
 

Quarterly activity for commercial loan discontinued principal

 

Commercial

loan principal

(in millions)

 

Commercial loan discontinued principal June 30, 2020 before marks

$

67

 

Quarterly paydowns and other reductions

 

(1

)

Commercial loan discontinued principal September 30, 2020 before marks

$

66

 

Marks September 30, 2020

 

(4

)

Net commercial loan exposure September 30, 2020

$

62

 

Residential mortgages

 

37

 

Net loans

$

99

 

Florida mall in other real estate owned

 

15

 

8 properties in other real estate owned

 

8

 

Total discontinued assets at September 30, 2020

$

122

 

 

Discontinued commercial loan composition as of September 30, 2020

Collateral type

 

Unpaid principal

balance

Mark

September 30,

2020

Mark as %

of portfolio

 

(dollars in millions)

Commercial real estate – non-owner occupied:

Retail

$

4

 

$

(0.6

)

15

%

Office

 

2

 

 

 

 

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

 

 

(2.7

)

25

%

First mortgage residential non-owner occupied

 

8

 

 

 

 

Commercial real estate owner occupied:

Retail

 

7

 

 

(0.6

)

9

%

Residential junior mortgage

 

1

 

 

 

 

Other

 

1

 

 

 

 

Total

$

66

 

$

(4.1

)

6

%

Less: mark

 

(4

)

 

Net commercial loan exposure September 30, 2020

$

62

 

$

(4.1

)

 
 

Loan payment deferrals as of September 30, 2020

 

Principal for

loans with

deferrals

Total principal

by loan category

% of total loan

principal with

deferrals

 

(dollars in millions)

 

Commercial real estate loans held at fair value (excluding SBA loans)

$

30

$

1,603

2

%

Securities backed lines of credit, insurance backed lines of credit & advisor financing

 

 

1,455

0

%

Small business lending, substantially all SBA loans

 

18

 

836

2

%

Direct lease financing

 

4

 

430

1

%

Discontinued operations

 

2

 

103

2

%

Other consumer loans and specialty lending

 

 

6

0

%

Total

$

54

$

4,433

1.2

%

 

Note: At September 30, 2020, SBA 7a loans, included in Small business lending above, totaled $433 million, of which $98 million was not U.S. government guaranteed. The CARES Act of 2020, or CARES ACT, provides support to SBA borrowers through six months of principal and interest payments. A large percentage of these payments will expire in fourth quarter 2020 which could lead to an increase in deferrals and relief provided to these borrowers.

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