Press Release

The Bancorp, Inc. Reports Second Quarter 2020 Financial Results

Company Release - 7/30/2020 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 second quarter of 2020.

Highlights

  • For the quarter ended June 30, 2020, The Bancorp earned net income of $20.3 million from continuing operations, and $0.35 diluted earnings per share from combined continuing and discontinued operations.
  • Return on assets and equity for the quarter ended June 30, 2020 increased to 1.3% and 15.6%, respectively, compared to 1.0% and 10.2% for the quarter ended June 30, 2019.
  • Net interest margin increased to 3.53% for the quarter ended June 30, 2020, compared to 3.41% for the quarter ended June 30, 2019 and 3.34% for the quarter ended March 31, 2020.
  • Net interest income increased 45% to $50.2 million for the quarter ended June 30, 2020, compared to $34.5 million for the quarter ended June 30, 2019.
  • Average loans and leases, including loans held for sale, increased 76% to $3.93 billion for the quarter ended June 30, 2020, compared to $2.23 billion for the quarter ended June 30, 2019.
  • Prepaid, debit card and related fees increased 18% to $18.7 million for the quarter ended June 30, 2020, compared to $15.8 million for the quarter ended June 30, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 43%.
  • SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 54% year over year and 11% quarter over quarter to $1.3 billion at June 30, 2020.
  • Small Business Loans, including those held-for-sale, increased 16% year over year to $601.4 million at June 30, 2020, exclusive of $208 million of Paycheck Protection Program loans.
  • As of June 30, 2020, we have originated approximately 1,250 Paycheck Protection Program loans, totaling approximately $208 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized over eleven months, beginning in April 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.
  • The average rate on $5.4 billion of average deposits and interest-bearing liabilities in the second quarter of 2020 was 0.12%. Average prepaid and debit card account deposits of $3.9 billion for second quarter 2020, reflected an increase of 56% over the $2.5 billion for the quarter ended June 30, 2019.
  • Consolidated leverage ratio was 8.48% at June 30, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.
  • Book value per common share at June 30, 2020 was $9.28 per share compared to $8.07 at June 30, 2019, an increase of 15%.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings driven by higher interest income with falling interest expense, increased loan balances and higher payment volumes. In the second quarter of 2020, the Bancorp earned 35 cents a share from both increased fee and spread revenue. While the pandemic continues to be a significant source of market uncertainty, we have been able to achieve better revenue productivity and operating efficiency during this time, while also making investments in our platform. Our earnings guidance for full year 2020 continues to be $1.25 per share.”

The Bancorp reported net income of $20.1 million, or $0.35 per diluted share, for the quarter ended June 30, 2020, compared to net income of $11.4 million, or $0.20 per diluted share, for the quarter ended June 30, 2019. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.48%, 14.84%, 15.27% and 14.84%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 31, 2020 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 2755988. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, August 7, 2020 by dialing 855.859.2056, access code 2755988.

The Bancorp, Inc. (NASDAQ: TBBK) is dedicated to serving the unique needs of non-bank financial service companies, ranging from entrepreneurial start-ups to those on the Fortune 500. The company’s only subsidiary, The Bancorp Bank (Member FDIC, Equal Housing Lender), has been repeatedly recognized in the payments industry as the Top Issuer of Prepaid Cards (US), a top merchant sponsor bank and a top ACH originator. Specialized lending distinctions include National Preferred SBA Lender, a leading provider of securities-backed lines of credit, and one of the few bank-owned commercial vehicle leasing groups in the nation. For more information please visit www.thebancorp.com.

Forward-Looking Statements

Statements in this earnings release regarding The Bancorp’s business which are not historical facts are "forward-looking statements." These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “estimate,” “continue,” or similar words , and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. These risks and uncertainties include those relating to 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

Six months ended

June 30,

June 30,

Condensed income statement

2020

2019

2020

2019

(dollars in thousands except per share data)

 

Net interest income

$

50,246

 

$

34,539

 

$

93,157

 

$

68,549

Provision for loan and lease losses

 

922

 

 

600

 

 

4,501

 

 

2,300

Non-interest income

Service fees on deposit accounts

 

5

 

 

14

 

 

15

 

 

61

ACH, card and other payment processing fees

 

1,707

 

 

2,521

 

 

3,553

 

 

4,824

Prepaid, debit card and related fees

 

18,673

 

 

15,840

 

 

37,213

 

 

32,003

Net realized and unrealized gains (losses) on commercial

loans originated for sale

 

(940

)

 

(148

)

 

(6,096

)

 

10,615

Change in value of investment in unconsolidated entity

 

-

 

 

-

 

 

(45

)

 

-

Leasing related income

 

443

 

 

1,027

 

 

1,276

 

 

1,722

Other non-interest income

 

478

 

 

495

 

 

1,049

 

 

889

Total non-interest income

 

20,366

 

 

19,749

 

 

36,965

 

 

50,114

Non-interest expense

Salaries and employee benefits

 

25,492

 

 

21,826

 

 

48,233

 

 

45,666

Data processing expense

 

1,177

 

 

1,223

 

 

2,346

 

 

2,492

Legal expense

 

2,229

 

 

1,534

 

 

3,142

 

 

2,858

FDIC Insurance

 

2,918

 

 

2,095

 

 

5,507

 

 

4,024

Software

 

3,386

 

 

3,060

 

 

6,863

 

 

5,981

Lease termination expense

 

-

 

 

908

 

 

-

 

 

908

Other non-interest expense

 

7,418

 

 

8,873

 

 

14,947

 

 

16,819

Total non-interest expense

 

42,620

 

 

39,519

 

 

81,038

 

 

78,748

Income from continuing operations before income taxes

 

27,070

 

 

14,169

 

 

44,583

 

 

37,615

Income tax expense

 

6,787

 

 

3,575

 

 

11,139

 

 

9,610

Net income from continuing operations

 

20,283

 

 

10,594

 

 

33,444

 

 

28,005

Discontinued operations

Income (loss) from discontinued operations before income taxes

 

(274

)

 

919

 

 

(1,049

)

 

1,724

Income tax expense (benefit)

 

(59

)

 

163

 

 

(264

)

 

449

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

 

(215

)

 

756

 

 

(785

)

 

1,275

Net income

$

20,068

 

$

11,350

 

$

32,659

 

$

29,280

 

Net income per share from continuing operations - basic

$

0.35

 

$

0.19

 

$

0.58

 

$

0.50

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

$

-

 

$

0.01

 

$

(0.01

)

$

0.02

Net income per share - basic

$

0.35

 

$

0.20

 

$

0.57

 

$

0.52

 

Net income per share from continuing operations - diluted

$

0.35

 

$

0.19

 

$

0.58

 

$

0.49

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

$

-

 

$

0.01

 

$

(0.01

)

$

0.02

Net income per share - diluted

$

0.35

 

$

0.20

 

$

0.57

 

$

0.51

Weighted average shares - basic

 

57,489,719

 

 

56,702,182

 

 

57,355,282

 

 

56,612,596

Weighted average shares - diluted

 

57,800,115

 

 

57,197,433

 

 

57,856,791

 

 

57,031,206

Balance sheet

June 30,

March 31,

December 31,

June 30,

2020

2020

2019

2019

(dollars in thousands)

Assets:

Cash and cash equivalents

Cash and due from banks

$

5,094

 

$

13,610

 

$

19,928

 

$

27,450

 

Interest earning deposits at Federal Reserve Bank

 

475,627

 

 

105,978

 

 

924,544

 

 

284,823

 

Total cash and cash equivalents

 

480,721

 

 

119,588

 

 

944,472

 

 

312,273

 

 

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

 

1,324,447

 

 

1,353,278

 

 

1,320,692

 

 

1,361,779

 

Investment securities, held-to-maturity, at cost

 

-

 

 

-

 

 

84,387

 

 

84,414

 

Commercial loans held for sale, at fair value

 

1,807,630

 

 

1,716,450

 

 

1,180,546

 

 

934,452

 

Loans, net of deferred fees and costs

 

2,322,737

 

 

1,985,755

 

 

1,824,245

 

 

1,561,451

 

Allowance for credit losses

 

(14,625

)

 

(14,883

)

 

(10,238

)

 

(9,989

)

Loans, net

 

2,308,112

 

 

1,970,872

 

 

1,814,007

 

 

1,551,462

 

Federal Home Loan Bank & Atlantic Community Bancshares stock

 

1,368

 

 

1,142

 

 

5,342

 

 

6,342

 

Premises and equipment, net

 

16,701

 

 

17,148

 

 

17,538

 

 

17,380

 

Accrued interest receivable

 

18,897

 

 

15,660

 

 

13,619

 

 

14,567

 

Intangible assets, net

 

2,710

 

 

2,857

 

 

2,315

 

 

3,081

 

Deferred tax asset, net

 

7,921

 

 

12,797

 

 

12,538

 

 

14,574

 

Investment in unconsolidated entity

 

34,064

 

 

34,273

 

 

39,154

 

 

58,012

 

Assets held for sale from discontinued operations

 

128,463

 

 

134,118

 

 

140,657

 

 

169,109

 

Other assets

 

83,003

 

 

79,925

 

 

81,696

 

 

76,123

 

Total assets

$

6,214,037

 

$

5,458,108

 

$

5,656,963

 

$

4,603,568

 

 

Liabilities:

Deposits

Demand and interest checking

$

5,089,741

 

$

4,512,949

 

$

4,402,740

 

$

3,964,905

 

Savings and money market

 

455,458

 

 

178,174

 

 

174,290

 

 

26,841

 

Time deposits

 

-

 

 

-

 

 

475,000

 

 

-

 

Total deposits

 

5,545,199

 

 

4,691,123

 

 

5,052,030

 

 

3,991,746

 

 

Securities sold under agreements to repurchase

 

42

 

 

42

 

 

82

 

 

93

 

Short-term borrowings

 

-

 

 

140,000

 

 

-

 

 

45,000

 

Subordinated debenture

 

13,401

 

 

13,401

 

 

13,401

 

 

13,401

 

Long-term borrowings

 

40,639

 

 

40,813

 

 

40,991

 

 

41,334

 

Other liabilities

 

81,677

 

 

74,625

 

 

65,962

 

 

53,862

 

Total liabilities

$

5,680,958

 

$

4,960,004

 

$

5,172,466

 

$

4,145,436

 

 

Shareholders' equity:

Common stock - authorized, 75,000,000 shares of $1.00 par value;
57,555,308 and 56,874,956 shares issued and outstanding at
June 30, 2020 and 2019, respectively

 

57,555

 

 

57,426

 

 

56,941

 

 

56,875

 

Treasury stock (100,000 shares)

 

(866

)

 

(866

)

 

(866

)

 

(866

)

Additional paid-in capital

 

374,578

 

 

372,984

 

 

371,633

 

 

368,771

 

Retained earnings

 

81,028

 

 

60,960

 

 

50,742

 

 

28,463

 

Accumulated other comprehensive income

 

20,784

 

 

7,600

 

 

6,047

 

 

4,889

 

Total shareholders' equity

 

533,079

 

 

498,104

 

 

484,497

 

 

458,132

 

 

Total liabilities and shareholders' equity

$

6,214,037

 

$

5,458,108

 

$

5,656,963

 

$

4,603,568

 

Average balance sheet and net interest income

Three months ended June 30, 2020

Three months ended June 30, 2019

(dollars in thousands)

Average

Average

Average

Average

Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest earning assets:

Loans net of deferred fees and costs **

$

3,925,515

 

$

41,448

4.22

%

$

2,216,935

 

$

29,737

5.37

%

Leases - bank qualified*

 

9,217

 

 

162

7.03

%

 

15,446

 

 

268

6.94

%

Investment securities-taxable

 

1,334,368

 

 

10,188

3.05

%

 

1,443,671

 

 

11,634

3.22

%

Investment securities-nontaxable*

 

4,402

 

 

35

3.18

%

 

6,610

 

 

54

3.27

%

Interest earning deposits at Federal Reserve Bank

 

426,174

 

 

107

0.10

%

 

420,153

 

 

2,455

2.34

%

Net interest earning assets

 

5,699,676

 

 

51,940

3.65

%

 

4,102,815

 

 

44,148

4.30

%

 

Allowance for credit losses

 

(14,822

)

 

(9,963

)

Assets held for sale from discontinued operations

 

130,530

 

 

1,094

3.35

%

 

154,057

 

 

1,659

4.31

%

Other assets

 

228,443

 

 

283,036

 

$

6,043,827

 

$

4,529,945

 

 

Liabilities and Shareholders' Equity:

Deposits:

Demand and interest checking

$

5,140,167

 

$

1,390

0.11

%

$

3,847,623

 

$

8,783

0.91

%

Savings and money market

 

234,201

 

 

120

0.20

%

 

26,497

 

 

40

0.60

%

Total deposits

 

5,374,368

 

 

1,510

0.11

%

 

3,874,120

 

 

8,823

0.91

%

 

Short-term borrowings

 

16,428

 

 

15

0.37

%

 

80,242

 

 

526

2.62

%

Securities sold under agreements to repurchase

 

41

 

 

-

0.00

%

 

92

 

 

-

0.00

%

Subordinated debentures

 

13,401

 

 

128

3.82

%

 

13,401

 

 

192

5.73

%

Total deposits and liabilities

 

5,404,238

 

 

1,653

0.12

%

 

3,967,855

 

 

9,541

0.96

%

 

Other liabilities

 

123,997

 

 

115,634

 

Total liabilities

 

5,528,235

 

 

4,083,489

 

 

Shareholders' equity

 

515,592

 

 

446,456

 

$

6,043,827

 

$

4,529,945

 

Net interest income on tax equivalent basis*

$

51,381

$

36,266

 

Tax equivalent adjustment

 

41

 

68

 

Net interest income

$

51,340

$

36,198

Net interest margin *

3.53

%

3.41

%

__________________________________

 

 

 

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

** Includes loans held for sale.

Average balance sheet and net interest income

Six months ended June 30, 2020

Six months ended June 30, 2019

(dollars in thousands)

Average

Average

Average

Average

Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest earning assets:

Loans net of deferred fees and costs **

$

3,593,921

 

$

80,607

4.49

%

$

2,241,746

 

$

59,898

5.34

%

Leases - bank qualified*

 

10,096

 

 

362

7.17

%

 

16,613

 

 

695

8.37

%

Investment securities-taxable

 

1,364,956

 

 

20,683

3.03

%

 

1,374,019

 

 

22,164

3.23

%

Investment securities-nontaxable*

 

4,788

 

 

75

3.13

%

 

7,075

 

 

114

3.22

%

Interest earning deposits at Federal Reserve Bank

 

460,025

 

 

1,730

0.75

%

 

421,580

 

 

4,957

2.35

%

Net interest earning assets

 

5,433,786

 

 

103,457

3.81

%

 

4,061,033

 

 

87,828

4.33

%

 

Allowance for credit losses

 

(12,532

)

 

(9,305

)

Assets held for sale from discontinued operations

 

133,903

 

 

2,368

3.54

%

 

163,874

 

 

3,684

4.50

%

Other assets

 

233,088

 

 

272,922

 

$

5,788,245

 

$

4,488,524

 

 

Liabilities and Shareholders' Equity:

Deposits:

Demand and interest checking

$

4,746,928

 

$

8,085

0.34

%

$

3,838,868

 

$

17,616

0.92

%

Savings and money market

 

203,888

 

 

170

0.17

%

 

28,931

 

 

77

0.53

%

Time

 

159,752

 

 

1,483

1.86

%

 

-

 

 

-

-

 

Total deposits

 

5,110,568

 

 

9,738

0.38

%

 

3,867,799

 

 

17,693

0.91

%

 

Short-term borrowings

 

36,620

 

 

180

0.98

%

 

77,330

 

 

1,029

2.66

%

Securities sold under agreements to repurchase

 

57

 

 

-

0.00

%

 

91

 

 

-

0.00

%

Subordinated debentures

 

13,401

 

 

290

4.33

%

 

13,401

 

 

387

5.78

%

Total deposits and liabilities

 

5,160,646

 

 

10,208

0.40

%

 

3,958,621

 

 

19,109

0.97

%

 

Other liabilities

 

118,811

 

 

97,449

 

Total liabilities

 

5,279,457

 

 

4,056,070

 

 

Shareholders' equity

 

508,788

 

 

432,454

 

$

5,788,245

 

$

4,488,524

 

Net interest income on tax equivalent basis*

$

95,617

$

72,403

 

Tax equivalent adjustment

 

92

 

170

 

Net interest income

$

95,525

$

72,233

Net interest margin *

3.43

%

3.43

%

__________________________________

 

 

 

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

** Includes loans held for sale.

 

Allowance for loan and lease losses:

Six months ended

Year ended

June 30,

June 30,

December 31,

2020

2019

2019

(dollars in thousands)

 

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

$

12,874

 

$

8,653

 

$

8,653

 

 

Loans charged-off:

SBA non-real estate

 

1,048

 

 

893

 

 

1,362

 

Direct lease financing

 

1,552

 

 

185

 

 

528

 

Other consumer loans

 

-

 

 

2

 

 

1,103

 

Total

 

2,600

 

 

1,080

 

 

2,993

 

 

Recoveries:

SBA non-real estate

 

54

 

 

100

 

 

125

 

Direct lease financing

 

90

 

 

16

 

 

51

 

Other consumer loans

 

-

 

 

-

 

 

2

 

Total

 

144

 

 

116

 

 

178

 

Net charge-offs

 

2,456

 

 

964

 

 

2,815

 

Provision credited to allowance, excluding commitment provision

 

4,207

 

 

2,300

 

 

4,400

 

 

Balance in allowance for loan and lease losses at end of period

$

14,625

 

$

9,989

 

$

10,238

 

Net charge-offs/average loans

 

0.06

%

 

0.04

%

 

0.12

%

Net charge-offs/average loans (annualized)

 

0.12

%

 

0.09

%

 

0.12

%

Net charge-offs/average assets

 

0.04

%

 

0.02

%

 

0.06

%

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

Loan portfolio:

June 30,

March 31,

December 31,

June 30,

2020

2020

2019

2019

(in thousands)

 

SBL non-real estate

$

293,692

$

84,946

$

84,579

$

75,475

SBL commercial mortgage

 

259,020

 

233,220

 

218,110

 

189,427

SBL construction

 

33,193

 

48,823

 

45,310

 

29,298

Small business loans *

 

585,905

 

366,989

 

347,999

 

294,200

Direct lease financing

 

422,505

 

445,967

 

434,460

 

407,907

SBLOC / IBLOC**

 

1,287,350

 

1,156,433

 

1,024,420

 

837,672

Advisor financing ***

 

15,529

 

-

 

-

 

-

Other specialty lending

 

2,706

 

2,711

 

3,055

 

3,432

Other consumer loans ****

 

4,003

 

4,023

 

4,554

 

7,898

 

2,317,998

 

1,976,123

 

1,814,488

 

1,551,109

Unamortized loan fees and costs

 

4,739

 

9,632

 

9,757

 

10,342

Total loans, net of unamortized fees and costs

$

2,322,737

$

1,985,755

$

1,824,245

$

1,561,451

 

Small business portfolio:

June 30,

March 31,

December 31,

June 30,

2020

2020

2019

2019

(in thousands)

 

SBL, including unamortized fees and costs

 

583,935

 

371,072

 

352,214

 

301,502

SBL, included in held-for-sale

 

225,401

 

223,987

 

220,358

 

215,064

Total small business loans

$

809,336

$

595,059

$

572,572

$

516,566

* The preceding table shows small business loans and small business loans held-for-sale, which consist of the government guaranteed portion of SBA loans at the dates indicated (in thousands).

** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies.

*** In 2020 we began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan to value ratios of 70%, based on third party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

**** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $361,000 and $882,000 at June 30, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

Small business loans as of June 30, 2020

 

Loan principal

(in millions)

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

$

306

Paycheck Protection Program Loans (PPP) (a)

 

208

Commercial mortgage SBA (b)

 

165

Construction SBA (c)

 

16

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

 

89

Non-SBA small business loans (e)

 

22

Total principal

$

806

Fair value adjustment (f)

 

5

Unamortized fees

 

(2)

Total small business loans

$

809

(a) This is the portion of SBA 7a loans (7a) and PPP which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.

(b) Substantially all of these loans are made under the SBA 504 Fixed Asset Financing program (504) which dictates origination date loan to value percentages (LTV), generally 50-60%, to which the bank adheres.

(c) Of the $16 million Construction SBA loans, $12 million are 504 first mortgages with an origination date LTV of 50-60% and $4 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $89 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government. 7a loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners.

(e) Of the $22 million in non-SBA loans, $3 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an 80% origination date LTV and $17 million consist of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators and are considered seasoned and have performed as agreed. A $2 million guaranty by the seller, for an 11% first loss piece, is in place until August 2021.

(f) The fair value adjustment applies to the U.S. government guaranteed portion of SBA loans.

Additionally, the recently passed CARES Act of 2020 has provided significant support for SBA loans including funding intended to provide six months of interest payments on SBA loans, as well as other accommodations to provide for the payment of payroll and other operating expenses.

Type as of June 30, 2020

 

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

 

 

 

SBL commercial mortgage*

 

SBL construction*

 

SBL non-real estate

 

Total

 

% Total

(in millions)

Hotels

$

68

$

7

$

-

$

75

26%

Professional services offices

 

22

 

-

 

2

 

24

8%

Full-service restaurants

 

15

 

1

 

5

 

21

7%

Child day care and youth services

 

15

 

-

 

1

 

16

6%

Bakeries

 

4

 

-

 

12

 

16

6%

Fitness/rec centers and instruction

 

8

 

-

 

4

 

12

4%

General warehousing and storage

 

11

 

-

 

-

 

11

4%

Limited-service restaurants and catering

 

7

 

-

 

4

 

11

4%

Elderly assisted living facilities

 

2

 

7

 

2

 

11

4%

Amusement and recreation industries

 

5

 

1

 

1

 

7

2%

Car washes

 

3

 

3

 

-

 

6

2%

Funeral homes

 

5

 

-

 

-

 

5

2%

New and used car dealers

 

4

 

-

 

-

 

4

1%

Automotive servicing

 

3

 

-

 

1

 

4

1%

Other

 

 

45

 

 

1

 

 

23

 

 

69

 

23%

Total

$

217

$

20

$

55

$

292

100%

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

State diversification as of June 30, 2020

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

 

 

 

SBL commercial mortgage*

 

SBL construction*

 

SBL non-real estate

 

Total

 

% Total

(in millions)

Florida

$

33

$

7

$

7

$

47

16%

California

 

34

 

2

 

5

 

41

14%

Pennsylvania

 

30

 

-

 

4

 

34

11%

Illinois

 

28

 

-

 

4

 

32

11%

North Carolina

 

24

 

1

 

3

 

28

10%

Texas

 

11

 

-

 

5

 

16

6%

New York

 

10

 

1

 

5

 

16

5%

Tennessee

 

7

 

6

 

1

 

14

5%

New Jersey

 

2

 

1

 

7

 

10

4%

Virginia

 

8

 

1

 

2

 

11