The Bancorp, Inc. : Reports Fourth Quarter 2020 Financial Results

The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the fourth quarter of 2020.

Highlights

• For the quarter ended December 31, 2020, The Bancorp earned net income of $24.0 million from continuing operations, and $0.41 diluted earnings per share from combined continuing and discontinued operations.

• Annualized return on assets and equity for the quarter ended December 31, 2020 amounted to 1.6% and 17%, respectively, compared to 1.5% and 17% (annualized), respectively, for the quarter ended September 30, 2020.

• Net interest margin amounted to 3.58% for the quarter ended December 31, 2020, compared to 3.12% for the quarter ended December 31, 2019 and 3.37% for the quarter ended September 30, 2020.

• Net interest income increased 47% to $51.7 million for the quarter ended December 31, 2020, compared to $35.2 million for the quarter ended December 31, 2019.

• Average loans and leases, including loans at fair value, increased 72% to $4.34 billion for the quarter ended December 31, 2020, compared to $2.53 billion for the quarter ended December 31, 2019.

• Prepaid, debit card and related fees increased 5% to $17.8 million for the quarter ended December 31, 2020, compared to $17.0 million for the quarter ended December 31, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 18% between those periods.

• SBLOC (securities-backed lines of credit), IBLOC (insurance backed lines of credit) and advisor financing loans increased 56% year over year and 10% quarter over quarter to $1.6 billion at December 31, 2020.

• Small Business Loans, including those held at fair value, increased 14% year over year to $654 million at December 31, 2020, exclusive of $166 million of Paycheck Protection Program balances.

• The average interest rate on $5.40 billion of average deposits and interest-bearing liabilities in the fourth quarter of 2020 was 0.24%. Average prepaid and debit card account deposits of $3.59 billion for fourth quarter 2020, reflected an increase of 33% over the $2.70 billion for the quarter ended December 31, 2019.

• Consolidated leverage ratio was 9.20% at December 31, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

• Book value per common share at December 31, 2020 was $10.10 per share compared to $8.52 at December 31, 2019, an increase of 19%, primarily as a result of retained earnings per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have completed our strategic business plan, strategic agenda and budget for 2021. The main focus continues to be product and platform expansion with a rigorous focus on building the best payments ecosystem in the financial services industry. Our plan includes a comprehensive and integrated analysis of the market and competitors, and the needed investments to build towards the future and create scalable core competencies that our partners can use to innovate and grow. We also continue to invest heavily in anti-money laundering and compliance to have best-in-class capabilities to meet regulatory guidance and expectations. Our guidance target for 2021 is $1.70 a share or approximately $100 million in net income, which does not include the impact of planned share repurchases.”

The Bancorp reported net income of $24.2 million, or $0.41 per diluted share, for the quarter ended December 31, 2020, compared to net income of $1.9 million, or $0.03 per diluted share, for the quarter ended December 31, 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 9.20%, 14.43%, 14.84% and 14.43%, 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, January 29, 2021 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 8952947. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, February 5, 2021 by dialing 855.859.2056, access code 8952947.

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								Year ended
		December 31,								December 31,
Condensed income statement		2020				2019				2020				2019
			(dollars in thousands except per share data)
Net interest income		$	51,713				35,179			$	194,866			$	141,288
Provision for credit losses			554				1,450				6,352				4,400
Non-interest income
Service fees on deposit accounts			7				6				30				75
ACH, card and other payment processing fees			1,788				1,962				7,101				9,376
Prepaid, debit card and related fees			17,818				17,004				74,465				65,141
Net realized and unrealized gains (losses) on commercial
loans originated for sale			1,538				(247	)			(3,874	)			24,072
Change in value of investment in unconsolidated entity			—				—				(45	)			—
Leasing related income			499				932				3,294				3,243
Other non-interest income			1,650				841				3,646				2,220
Total non-interest income			23,300				20,498				84,617				104,127
Non-interest expense
Salaries and employee benefits			27,087				24,067				101,737				94,259
Data processing expense			1,174				1,210				4,712				4,894
Legal expense			1,005				995				5,141				5,319
FDIC insurance			2,121				2,141				9,808				7,025
Software			3,570				3,551				14,028				12,731
SEC settlement			—				7,500				—				8,900
Lease termination expense			—				—				—				908
Other non-interest expense			6,826				8,258				29,421				34,485
Total non-interest expense			41,783				47,722				164,847				168,521
Income from continuing operations before income taxes			32,676				6,505				108,284				72,494
Income tax expense			8,655				3,641				27,688				21,226
Net income from continuing operations			24,021				2,864				80,596				51,268
Discontinued operations
Income (loss) from discontinued operations before income taxes			(1,096	)			(1,365	)			(3,816	)			510
Income tax expense (benefit)			(1,246	)			(355	)			(3,304	)			219
Net income (loss) from discontinued operations, net of tax			150				(1,010	)			(512	)			291
Net income		$	24,171			$	1,854			$	80,084			$	51,559
Net income per share from continuing operations - basic		$	0.42			$	0.05			$	1.40			$	0.90
Net income (loss) per share from discontinued operations - basic		$	—			$	(0.02	)		$	(0.01	)		$	0.01
Net income per share - basic		$	0.42			$	0.03			$	1.39			$	0.91
Net income per share from continuing operations - diluted		$	0.41			$	0.05			$	1.38			$	0.89
Net income (loss) per share from discontinued operations - diluted		$	—			$	(0.02	)		$	(0.01	)		$	0.01
Net income per share - diluted		$	0.41			$	0.03			$	1.37			$	0.90
Weighted average shares - basic			57,597,124				56,924,543				57,474,612				56,765,635
Weighted average shares - diluted			59,146,222				57,847,509				58,411,222				57,338,985

Balance sheet		December 31,				September 30,				June 30,				December 31,
		2020				2020				2020				2019
			(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks		$	5,984			$	6,220			$	5,094			$	19,928
Interest earning deposits at Federal Reserve Bank			339,531				294,758				475,627				924,544
Total cash and cash equivalents			345,515				300,978				480,721				944,472
Investment securities, available-for-sale, at fair value			1,206,164				1,264,903				1,324,447				1,320,692
Investment securities, held-to-maturity, at cost			—				—				—				84,387
Commercial loans, at fair value (held-for-sale at June 30, 2020 and December 31, 2019			1,810,812				1,849,947				1,807,630				1,180,546
Loans, net of deferred fees and costs			2,652,323				2,488,760				2,322,737				1,824,245
Allowance for credit losses			(16,082	)			(15,727	)			(14,625	)			(10,238	)
Loans, net			2,636,241				2,473,033				2,308,112				1,814,007
Federal Home Loan Bank & Atlantic Community Bancshares stock			1,368				1,368				1,368				5,342
Premises and equipment, net			17,608				15,849				16,701				17,538
Accrued interest receivable			20,458				18,852				18,897				13,619
Intangible assets, net			2,447				2,563				2,710				2,315
Deferred tax asset, net			10,611				7,952				7,921				12,538
Investment in unconsolidated entity			31,294				31,783				34,064				39,154
Assets held for sale from discontinued operations			113,650				122,253				128,463				140,657
Other assets			81,265				79,821				83,003				81,696
Total assets		$	6,277,433			$	6,169,302			$	6,214,037			$	5,656,963
Liabilities:
Deposits
Demand and interest checking		$	5,205,010			$	4,882,834			$	5,089,741			$	4,402,740
Savings and money market			257,050				505,928				455,458				174,290
Time deposits			—				—				—				475,000
Total deposits			5,462,060				5,388,762				5,545,199				5,052,030
Securities sold under agreements to repurchase			42				42				42				82
Senior debt			98,314				98,222				—				—
Subordinated debenture			13,401				13,401				13,401				13,401
Other long-term borrowings			40,277				40,462				40,639				40,991
Other liabilities			82,175				69,954				81,677				65,962
Total liabilities		$	5,696,269			$	5,610,843			$	5,680,958			$	5,172,466
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,650,629 and 56,940,521 shares issued and outstanding at December 31, 2020 and 2019, respectively			57,651				57,591				57,555				56,941
Treasury stock (100,000 shares)			(866	)			(866	)			(866	)			(866	)
Additional paid-in capital			378,218				376,751				374,578				371,633
Retained earnings			128,453				104,282				81,028				50,742
Accumulated other comprehensive income			17,708				20,701				20,784				6,047
Total shareholders' equity			581,164				558,459				533,079				484,497
Total liabilities and shareholders' equity		$	6,277,433			$	6,169,302			$	6,214,037			$	5,656,963

Average balance sheet and net interest income		Three months ended December 31, 2020											Three months ended December 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		$	4,329,794			$	45,524			4.21	%		$	2,514,401			$	31,177		4.96	%
Leases - bank qualified*			7,346				138			7.51	%			12,633				229		7.25	%
Investment securities-taxable			1,239,062				9,229			2.98	%			1,441,895				9,636		2.67	%
Investment securities-nontaxable*			4,041				35			3.46	%			5,825				47		3.23	%
Interest earning deposits at Federal Reserve Bank			193,560				48			0.10	%			569,804				2,505		1.76	%
Net interest earning assets			5,773,803				54,974			3.81	%			4,544,558				43,594		3.84	%
Allowance for credit losses			(15,804	)										(10,162	)
Assets held for sale from discontinued operations			117,482				965			3.29	%			149,301				1,416		3.79	%
Other assets			220,595											254,809
		$	6,096,076										$	4,938,506
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	4,978,562			$	1,679			0.13	%		$	3,749,860			$	5,405		0.58	%
Savings and money market			270,820				134			0.20	%			66,151				51		0.31	%
Time			—				—			—	%			406,730				2,217		2.18	%
Total deposits			5,249,382				1,813			0.14	%			4,222,741				7,673		0.73	%
Short-term borrowings			32,989				17			0.21	%			102,832				507		1.97	%
Securities sold under agreements to repurchase			41				—			—	%			84				—		—	%
Subordinated debentures			13,401				116			3.46	%			13,401				177		5.28	%
Senior debt			100,031				1,279			5.12	%			—				—		—	%
Total deposits and liabilities			5,395,844				3,225			0.24	%			4,339,058				8,357		0.77	%
Other liabilities			130,420											115,112
Total liabilities			5,526,264											4,454,170
Shareholders' equity			569,812											484,336
		$	6,096,076										$	4,938,506
Net interest income on tax equivalent basis*						$	52,714										$	36,653
Tax equivalent adjustment							36											58
Net interest income						$	52,678										$	36,595
Net interest margin *										3.58	%									3.12	%
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.

Average balance sheet and net interest income		Year ended December 31, 2020											Year ended December 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		$	3,931,758			$	170,449			4.34	%		$	2,402,686			$	126,176		5.25	%
Leases - bank qualified*			8,885				647			7.28	%			14,968				1,177		7.86	%
Investment securities-taxable			1,317,031				37,822			2.87	%			1,406,247				42,286		3.01	%
Investment securities-nontaxable*			4,412				145			3.29	%			6,533				215		3.29	%
Interest earning deposits at Federal Reserve Bank			381,290				1,885			0.49	%			472,279				10,007		2.12	%
Net interest earning assets			5,643,376				210,948			3.74	%			4,302,713				179,861		4.18	%
Allowance for credit losses			(13,878	)										(9,696	)
Assets held for sale from discontinued operations			127,519				4,222			3.31	%			169,986				6,710		3.95	%
Other assets			226,210											254,674
		$	5,983,227										$	4,717,677
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	4,864,236			$	11,356			0.23	%		$	3,817,176			$	30,664		0.80	%
Savings and money market			291,204				442			0.15	%			37,671				181		0.48	%
Time			79,439				1,483			1.87	%			170,438				3,555		2.09	%
Total deposits			5,234,879				13,281			0.25	%			4,025,285				34,400		0.85	%
Short-term borrowings			27,322				198			0.72	%			129,031				3,131		2.43	%
Securities sold under agreements to repurchase			49				–			—	%			90				–		—	%
Subordinated debentures			13,401				524			3.91	%			13,401				750		5.60	%
Senior debt			38,532				1,913			4.96	%			–				–		—	%
Total deposits and liabilities			5,314,183				15,916			0.30	%			4,167,807				38,281		0.92	%
Other liabilities			137,983											104,233
Total liabilities			5,452,166											4,272,040
Shareholders' equity			531,061											445,637
		$	5,983,227										$	4,717,677
Net interest income on tax equivalent basis*						$	199,254										$	148,290
Tax equivalent adjustment							166											292
Net interest income						$	199,088										$	147,998
Net interest margin *										3.45	%									3.32	%
* Full taxable equivalent basis, using a statutory rate of 21% for 2020 and 2019.

Allowance for credit losses:		Year ended
		December 31,				December 31,
		2020				2019
		(dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of period (1)		$	12,875			$	8,653
Loans charged-off:
SBA non-real estate			1,350				1,362
Direct lease financing			2,243				528
Other consumer loans			–				1,103
Total			3,593				2,993
Recoveries:
SBA non-real estate			103				125
Direct lease financing			570				51
Other consumer loans			–				2
Total			673				178
Net charge-offs			2,920				2,815
Provision credited to allowance, excluding commitment provision			6,127				4,400
Balance in allowance for credit losses at end of period		$	16,082			$	10,238
Net charge-offs/average loans			0.07	%			0.12	%
Net charge-offs/average assets			0.05	%			0.06	%
(1) Excludes activity from assets held for sale from discontinued operations. The beginning balance for the 2020 activity differs from the December 31, 2019 balance as a result of the implementation of Current Expected Credit Loss accounting.

Loan portfolio:		December 31,			September 30,			June 30,			December 31,
		2020			2020			2020			2019
		(in thousands)
SBL non-real estate		$	255,318		$	293,488		$	293,692			84,579
SBL commercial mortgage			300,817			270,264			259,020			218,110
SBL construction			20,273			27,169			33,193			45,310
Small business loans *			576,408			590,921			585,905			347,999
Direct lease financing			462,182			430,675			422,505			434,460
SBLOC / IBLOC**			1,550,086			1,428,253			1,287,350			1,024,420
Advisor financing ***			48,282			26,600			15,529			–
Other specialty lending			2,179			2,194			2,706			3,055
Other consumer loans ****			4,247			3,809			4,003			4,554
			2,643,384			2,482,452			2,317,998			1,814,488
Unamortized loan fees and costs			8,939			6,308			4,739			9,757
Total loans, net of unamortized fees and costs		$	2,652,323		$	2,488,760		$	2,322,737			1,824,245

Small business portfolio:		December 31,			September 30,			June 30,			December 31,
		2020			2020			2020			2019
			(in thousands)
SBL, including unamortized fees and costs			577,944			590,314			583,935			352,214
SBL, included in commercial loans held at fair value			243,562			250,958			225,401			220,358
Total small business loans		$	821,506		$	841,272		$	809,336		$	572,572

* The preceding table shows small business loans and small business loans held at fair value. The small business loans held at fair value are comprised of the government guaranteed portion of SBA 7a loans at the dates indicated (in thousands). A reduction in SBL non-real estate from $293.5 million to $255.3 million in the fourth quarter resulted from the commencement of U.S. treasury repayments of PPP loans which totaled $42.1 million in fourth quarter 2020.

** 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 $663,000 and $882,000 at December 31, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial.

Small business loans as of December 31, 2020
		Loan principal
		(in millions)
U.S. government guaranteed portion of SBA loans (a)		$	338
Paycheck Protection Program Loans (PPP) (a)			168
Commercial mortgage SBA (b)			176
Construction SBA (c)			14
Unguaranteed portion of U.S. government guaranteed loans (d)			101
Non-SBA small business loans (e)			18
Total principal		$	815
Unamortized fees and costs			7
Total small business loans		$	822

(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 $14 million Construction SBA loans, $11 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 $101 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.

Additionally, the CARES Act of 2020 provided six months of principal and interest payments on 7a loans which generally ended in fourth quarter 2020 or in first quarter 2021. The Consolidated Appropriations Act, 2021, became law in December 2020 and provided for at least an additional three months of such payments on 7a loans, with up to eight months of payments on hotel and restaurant loans. Unlike the six months of CARES Act payments, these additional payments will be capped at $9,000 per month.

Small business loans by type as of December 31, 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		$	66		$	3		$	—		$	69			22%
Full-service restaurants			12			1			3			16			5%
Baked goods stores			4			—			12			16			5%
Child day care services			14			1			1			16			5%
Car washes			10			1			—			11			4%
Offices of lawyers			10			—			—			10			3%
Assisted living facilities for the elderly			1			8			—			9			3%
Limited-service restaurants			4			—			4			8			2%
Funeral homes and funeral services			8			—			—			8			3%
Fitness and recreational sports centers			5			1			2			8			3%
General warehousing and storage			7			—			—			7			2%
All other amusement and recreation industries			5			—			1			6			2%
Outpatient mental health and substance abuse centers			5			—			—			5			2%
Gasoline stations with convenience stores			5			—			—			5			2%
Caterers			4			—			—			4			1%
Offices of dentists			4			—			—			4			1%
Other warehousing and storage			3			—			—			3			1%
New car dealers			3			—			—			3			1%
Drinking places (alcoholic beverages)			2			—			1			3			1%
Other**			66			—			32			98			32%
Total		$	238		$	15		$	56		$	309			100%

* Of the SBL commercial mortgage and SBL construction loans, $63.3 million represents the total of the non-guaranteed portion of SBA 7a loans and non-SBA loans. The balance of those categories represents SBA 504 loans with 50%-60% origination date loan-to-values.

**Loan types less than $2 million are spread over a hundred different classifications such as Commercial Printing, Pet and Pet Supplies Stores, Securities Brokerage, etc.

State diversification as of December 31, 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		$	45		$	8		$	8		$	61			20%
California			37			1			5			43			14%
Pennsylvania			30			—			4			34			11%
Illinois			25			1			3			29			9%
North Carolina			22			1			3			26			9%
New York			10			3			5			18			6%
Texas			12			—			5			17			6%
Tennessee			11			—			1			12			4%
New Jersey			4			—			7			11			4%
Virginia			9			—			2			11			4%
Georgia			5			—			2			7			2%
Colorado			3			1			2			6			2%
Michigan			3			—			1			4			1%
Ohio			3			—			1			4			1%
Washington			3			—			—			3			1%
Other States			16			—			7			23			6%
Total		$	238		$	15		$	56		$	309			100%

* Of the SBL commercial mortgage and SBL construction loans, $63.3 million represents the total of the non-guaranteed portion of SBA 7a loans and non-SBA loans. The balance of those categories represents SBA 504 loans with 50%-60% origination date loan-to-values.

Top 10 loans as of December 31, 2020
Type*		State		SBL commercial mortgage*			SBL construction*			Total
		(in millions)
Lawyers office		CA		$	9		$	—		$	9
Hotel		FL			9			—			9
General warehouse and storage		PA			7			—			7
Hotel		NC			6			—			6
Assisted living facility for the elderly		FL			—			5			5
Outpatient mental health and substance abuse center		FL			5			—			5
Hotel		NC			5			—			5
Fitness and recreation sports center		PA			4			—			4
Hotel		PA			4			—			4
Hotel		TN			4			—			4
Total				$	53		$	5		$	58

* All of the top 10 loans are 504 SBA loans with 50%-60% origination date loan-to-value. The top 10 loan table above does not include loans to the extent that they are U.S. government guaranteed.

Commercial real estate loans, at fair value, excluding SBA loans, are as follows including LTV at origination:

Type as of December 31, 2020
Type			# Loans			Balance			Origination date LTV			Weighted average minimum interest rate
			(dollars in millions)
Multifamily (apartments)			161		$	1,427			76	%		4.77	%
Hospitality (hotels and lodging)			11			68			65	%		5.75	%
Retail			8			52			70	%		4.62	%
Other			7			25			70	%		5.22	%
			187		$	1,572			76	%		4.82	%
Fair value adjustment						(5	)
Total					$	1,567

State diversification as of December 31, 2020									15 largest loans (all multifamily) as of December 31, 2020
State			Balance			Origination date LTV			State			Balance			Origination date LTV
(in millions)									(in millions)
Texas		$	419			77%			North Carolina		$	44			78%
Georgia			215			77%			Texas			38			79%
Arizona			123			76%			Texas			36			80%
North Carolina			114			77%			Pennsylvania			32			77%
Ohio			56			69%			Texas			29			75%
Alabama			55			76%			Nevada			28			80%
Other states			590			73%			Texas			27			77%
Total		$	1,572			76%			Arizona			27			79%
									Mississippi			26			79%
									North Carolina			25			77%
									Texas			25			77%
									Texas			24			77%
									Georgia			23			79%
									California			23			65%
									Alabama			21			77%
									15 Largest loans		$	428			77%

Institutional banking loans outstanding at December 31, 2020
Type		Principal			% of total
		(in millions)
Securities backed lines of credit (SBLOC)		$	1,113		70%
Insurance backed lines of credit (IBLOC)			437		27%
Advisor financing			48		3%
Total		$	1,598		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 percentage of principal to collateral.

Top 10 SBLOC loans at December 31, 2020
		Principal amount			% Principal to collateral
		(in millions)
		$	49		37%
			17		38%
			14		31%
			12		25%
			12		30%
			10		42%
			10		21%
			9		28%
			9		35%
			8		73%
Total		$	150		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 August 14, 2020, all were rated Superior (A+ or better) by AM BEST.

Direct lease financing* by type as of December 31, 2020
			Principal balance		% Total
			(in millions)
Government agencies and public institutions**		$	84		18%
Construction			77		17%
Waste management and remediation services			64		14%
Real estate, rental and leasing			52		11%
Retail trade			41		9%
Health care and social assistance			27		6%
Transportation and Warehousing			24		5%
Professional, scientific, and technical services			20		4%
Manufacturing			16		4%
Wholesale trade			16		3%
Educational services			9		2%
Arts, entertainment, and recreation			6		1%
Other			26		6%
Total		$	462		100%

* Of the total $462 million of direct lease financing, $421 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 December 31, 2020
State			Principal balance		% Total
			(in millions)
Florida		$	94		20%
California			36		8%
New Jersey			33		7%
New York			32		7%
Pennsylvania			30		6%
North Carolina			25		5%
Maryland			24		5%
Utah			23		5%
Washington			16		4%
Connecticut			15		3%
Texas			13		3%
Missouri			13		3%
Georgia			11		2%
Alabama			10		2%
Idaho			9		2%
Other states			78		18%
Total		$	462		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 December 31, 2020
The Bancorp, Inc.		9.20%		14.43%		14.84%		14.43%
The Bancorp Bank		9.11%		14.27%		14.68%		14.27%
"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
		December 31, (1)				December 31,
		2020		2019		2020		2019
Selected operating ratios:
Return on average assets		1.57%		0.15%		1.34%		1.09%
Return on average equity		16.83%		1.52%		15.08%		11.57%
Net interest margin		3.58%		3.12%		3.45%		3.32%
(1) Annualized

Book value per share table:	December 31,			September 30,			June 30,			December 31,
	2020			2020			2020			2019
Book value per share	$	10.10		$	9.71		$	9.28		$	8.52

Loan quality table:	December 31,			September 30,			June 30,			December 31,
	2020			2020			2020			2019
Nonperforming loans to total loans		0.48%			0.49%			0.44%			0.50%
Nonperforming assets to total assets		0.20%			0.20%			0.17%			0.16%
Allowance for credit losses		0.61%			0.63%			0.63%			0.56%
Nonaccrual loans	$	12,227		$	12,275		$	9,957		$	5,796
Loans 90 days past due still accruing interest		497			24			352			3,264
Other real estate owned		—			—			—			—
Total nonperforming assets	$	12,724		$	12,299		$	10,309		$	9,060

	Three months ended
	December 31,			September 30,			June 30,			December 31,
	2020			2020			2020			2019
	(in thousands)
Gross dollar volume (GDV) (2):
Prepaid and debit card GDV	$	22,523,855		$	23,964,508		$	23,680,749		$	19,104,327
(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 December 31, 2020
(dollars in millions)
				Balances
							% Growth
Major business lines		Average approximate rates *		Balances **			Year over year		Linked quarter annualized
Loans
Institutional banking ***		2.5%		$	1,598		56%		39%
Small Business Lending****		4.9%			822		14%		13%
Leasing		6.4%			462		6%		29%
Commercial real estate (non SBA at fair value)		4.8%			1,567		nm		nm
Weighted average yield		4.2%		$	4,449						Non-interest income
														% Growth
Deposits											Current quarter			Year over year
Payment solutions (prepaid and debit card issuance)		0.1%		$	3,586		33%		nm		$	17.8		5%
Card payment and ACH processing		0.3%		$	1,037		41%		nm		$	1.8		nm

* Average rates are for the quarter ended December 31, 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. Loan growth percentages exclude short-term PPP 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			(116	)
December 31, 2020 Bancorp book value**		$	31
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 December 31, 2020.

Walnut Street portfolio composition as of December 31, 2020
Collateral type		% of Portfolio
Commercial real estate non-owner occupied - Retail		67.4	%
Construction and land		24.3	%
Other		8.3	%
Total		100.0	%

Cumulative analysis of marks on discontinued commercial loan principal as of December 31, 2020
		Discontinued			Cumulative				% to original
		loan principal			marks				principal
			(dollars in millions)
Commercial loan discontinued principal before marks		$	64
Florida mall held in discontinued other real estate owned			42			(27	)
Mark at December 31, 2020						(5	)
Cumulative mark at December 31, 2020		$	106		$	(32	)		30	%

Analysis of discontinued commercial loan relationships as of December 31, 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		$	42		$	—		$	42		$	(3	)		$	—			$	(3	)
Loan relationships < $5 million			9			9			18			—				(1	)			(1	)
		$	51		$	9		$	60		$	(3	)		$	(1	)		$	(4	)

Quarterly activity for commercial loan discontinued principal
		Commercial
		loan principal
		(in millions)
Commercial loan discontinued principal September 30, 2020 before marks		$	66
Quarterly paydowns and other reductions			(2	)
Commercial loan discontinued principal December 31, 2020 before marks		$	64
Marks December 31, 2020			(4	)
Net commercial loan exposure December 31, 2020		$	60
Residential mortgages			32
Net loans		$	92
Florida mall in other real estate owned			15
7 properties in other real estate owned			7
Total discontinued assets at December 31, 2020		$	114

Discontinued commercial loan composition as of December 31, 2020
Collateral type		Unpaid principal balance				Mark December 31, 2020				Mark as % of portfolio
		(in millions)
Commercial real estate - non-owner occupied:
Retail		$	4			$	(0.6	)		15	%
Office			2				—			—	%
Other			18				(0.1	)		1	%
Construction and land			11				(0.1	)		1	%
Commercial non-real estate and industrial			3				(0.1	)		3	%
1 to 4 family construction			9				(2.5	)		28	%
First mortgage residential non-owner occupied			8				—			—	%
Commercial real estate owner occupied:
Retail			7				(0.7	)		10	%
Residential junior mortgage			1				—			—	%
Other			1				—			—	%
Total			64			$	(4.1	)		6	%
Less: mark			(4	)
Net commercial loan exposure December 31, 2020		$	60			$	(4.1	)

Loan payment deferrals as of December 31, 2020
		Cumulative		Total			Total			% of
		months		loan			loan			loan balances
		deferred (1)		balance deferrals			balances			with deferrals
		(dollars in millions)
Commercial real estate loans held at fair value (excluding SBA loans shown below)		6.8		$	50		$	1,572		3.2	%
Securities backed lines of credit, insurance backed lines of credit & advisor financing		—			—			1,598		—	%
SBL commercial mortgage		5.6			67			419		16.0	%
SBL construction		—			—			20		—	%
SBL non-real estate and PPP		4.5			24			382		6.3	%
Direct lease financing		3.0			1			462		0.2	%
Discontinued operations		6.2			6			96		6.3	%
Other consumer loans and specialty lending		—			—			7		—	%
Total		5.8		$	148		$	4,556		3.2	%
(1) Weighted average of cumulative months deferred for loans currently on deferral

Note: At December 31, 2020, SBA 7a loans, included in the three SBL loan balance categories above, totaled $439.0 million of which $101.0 million was not U.S. government guaranteed. The CARES Act of 2020, or (“the CARES Act”), provided SBA 7a borrowers six months of principal and interest payments. The Consolidated Appropriations Act, 2021, became law in December 2020 and provided for an additional three months of payments on SBA 7a loans which begin on February 1, 2021. Accordingly, we expect deferrals to decrease when those payments are reinstituted at that date.

SBA 7a deferral distribution by type as of December 31, 2020
(comprised of the unguaranteed portion of SBA 7a loans)
		Total			% Total
		(in thousands)
Hotels*		$	4,924		34	%
Sports and recreation instruction			1,157		8	%
Offices of dentists			1,096		7	%
Car washes			861		6	%
Child and youth services			810		5	%
Full-service restaurants*			763		5	%
Limited-service restaurants*			512		3	%
Sporting and athletic goods manufacturing			476		3	%
All other miscellaneous food manufacturing			434		3	%
Coin-operated laundries and drycleaners			405		3	%
Administrative management and general management consulting services			333		2	%
Commercial printing (except screen and books)			332		2	%
Pet care (except veterinary) services			308		2	%
Funeral homes and funeral services			308		2	%
Industrial machinery and equipment merchant wholesalers			302		2	%
Other			1,755		13	%
Total		$	14,776		100	%

* At December 31, 2020, SBA 7a loans, included in SBL, totaled $439.0 million of which $101.0 million was not U.S. government guaranteed. The CARES Act of 2020, or (“the CARES Act”), provided SBA 7a borrowers six months of principal and interest payments. The Consolidated Appropriations Act, 2021, became law in December 2020 and provided for an additional three months of payments on SBA 7a loans which begin on February 1, 2021. Accordingly, we expect deferrals to decrease when those payments are reinstituted at that date.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210128005982/en/