Press Release

The Bancorp, Inc. Reports First Quarter 2020 Financial Results

Company Release - 4/30/2020 4:05 PM ET

WILMINGTON, Del.--(BUSINESS WIRE)-- 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 1,250 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.
  • 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 theon-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

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

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

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.

 

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.

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.

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.

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%

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%

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%

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.

 

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.

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%

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

 

Nonperforming

 

Total

 

Performing

 

Nonperforming

 

Total

loan principal

 

loan principal

 

loan principal

 

loan marks

 

loan marks

 

marks

(in millions)

 

5 loan relationships > $6 million

$

45

$

-

$

45

$

(3)

$

-

$

(3)

Loan relationships < $6 million

 

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

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%

 

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

Source: The Bancorp, Inc.