The Bancorp, Inc. Reports Third Quarter 2020 Financial Results

WILMINGTON, Del.–(BUSINESS WIRE)–The Bancorp, Inc. (“The Bancorp”) (NASDAQ: TBBK), a financial holding company, today reported financial results for the third quarter of 2020.

Highlights

• For the quarter ended September 30, 2020, The Bancorp earned net income of $23.1 million from continuing operations, and $0.40 diluted earnings per share from combined continuing and discontinued operations.

• Return on assets and equity for the quarter ended September 30, 2020 amounted to 1.5% and 17% (annualized), respectively, compared to 1.3% and 16% for the quarter ended June 30, 2020.

• Net interest margin amounted to 3.37% for the quarter ended September 30, 2020, compared to 3.35% for the quarter ended September 30, 2019 and 3.53% for the quarter ended June 30, 2020.

• Net interest income increased 33% to $50.0 million for the quarter ended September 30, 2020, compared to $37.6 million for the quarter ended September 30, 2019.

• Average loans and leases, including loans at fair value, increased 61% to $4.21 billion for the quarter ended September 30, 2020, compared to $2.62 billion for the quarter ended September 30, 2019.

• Prepaid, debit card and related fees increased 20% to $19.4 million for the quarter ended September 30, 2020, compared to $16.1 million for the quarter ended September 30, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 39%.

• SBLOC (securities-backed lines of credit), IBLOC (insurance backed lines of credit) and advisor financing loans increased 58% year over year and 12% quarter over quarter to $1.5 billion at September 30, 2020.

• Small Business Loans, including those held at fair value, increased 13% year over year to $633 million at September 30, 2020, exclusive of $208 million of Paycheck Protection Program loans.

• As of September 30, 2020, The Bancorp originated approximately 1,250 Paycheck Protection Program loans, totaling approximately $208 million, which it expects will generate approximately $5.5 million of fees and interest. That income is being recognized over eleven months, beginning in April 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.

• The average rate on $5.6 billion of average deposits and interest-bearing liabilities in the third quarter of 2020 was 0.18%. Average prepaid and debit card account deposits of $4.0 billion for third quarter 2020, reflected an increase of 62% over the $2.5 billion for the quarter ended September 30, 2019.

• Consolidated leverage ratio was 8.62% at September 30, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

• Book value per common share at September 30, 2020 was $9.71 per share compared to $8.52 at September 30, 2019, an increase of 14%, primarily as a result of retained earnings per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We continued to add new card programs into our payments ecosystem in the 3rd quarter, as well as adding several new direct rapid funds partners. These new relationships will be announced as new products and services enter the marketplace. Our pipelines continue to be very robust and significantly above historic norms suggesting continued growth in transaction volumes. In the 3rd quarter, we made a strategic determination as to our securitization business. We have been evaluating our securitization platform and its loan portfolio. After assessing its current profitability, market conditions and credit risk, we have decided to discontinue future securitization activity. The loan portfolio, comprised almost entirely of multi-family loans that have experienced few deferrals and delinquencies, will amortize over the next 3-5 years and be replaced by loans originated in other areas. We expect income from the portfolio to be stable over the first 2 years. A portion of the portfolio may be sold as whole loans as space is needed on our balance sheet for other lending activities. Our real estate team in our commercial SBA business will continue to originate select transactions. For full year 2020, we believe we will achieve at least $1.25 earnings per share. We now believe we have enough information to issue preliminary guidance for 2021. We expect to earn between $1.65 and $1.70 per share. $1.70 per share or approximately $100 million in net income is our current company budget for 2021.”

The Bancorp reported net income of $23.3 million, or $0.40 per diluted share, for the quarter ended September 30, 2020, compared to net income of $20.4 million, or $0.36 per diluted share, for the quarter ended September 30, 2019. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.62%, 14.26%, 14.68% and 14.26%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp’s Quarterly Earnings Conference Call at 8:00 AM ET Friday, October 30, 2020 by clicking on the webcast link on The Bancorp’s homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 5682938. You may listen to the replay of the webcast following the live call on The Bancorp’s investor relations website or telephonically until Friday, November 6, 2020 by dialing 855.859.2056, access code 5682938.

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

Forward-Looking Statements

Statements in this earnings release regarding The Bancorp’s business which are not historical facts are “forward-looking statements.” These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “plan,” “estimate,” “continue,” or similar words , and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. These risks and uncertainties include those relating to the on-going COVID-19 pandemic, the impact it will have on our business and the industry as a whole, and the resulting governmental and societal responses. For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see The Bancorp’s filings with the Securities Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. The forward-looking statements speak only as of the date of this press release. The Bancorp does not undertake to publicly revise or update forward-looking statements in this press release to reflect events or circumstances that arise after the date of this earnings release, except as may be required under applicable law.

The Bancorp, Inc.
Financial highlights
(unaudited)
		Three months ended							Nine months ended
		September 30,							September 30,
Condensed income statement		2020				2019			2020				2019
		(dollars in thousands except per share data)
Net interest income		$	49,996			$	37,560		$	143,153			$	106,109
Provision for credit losses			1,297				650			5,798				2,950
Non-interest income
Service fees on deposit accounts			8				8			23				69
ACH, card and other payment processing fees			1,760				2,590			5,313				7,414
Prepaid, debit card and related fees			19,434				16,134			56,647				48,137
Net realized and unrealized gains (losses) on commercial loans originated for sale			684				13,704			(5,412	)			24,319
Change in value of investment in unconsolidated entity			–				–			(45	)			–
Leasing related income			1,519				589			2,795				2,311
Other non-interest income			947				490			1,996				1,379
Total non-interest income			24,352				33,515			61,317				83,629
Non-interest expense
Salaries and employee benefits			26,417				24,526			74,650				70,192
Data processing expense			1,192				1,192			3,538				3,684
Legal expense			994				1,466			4,136				4,324
FDIC Insurance			2,180				860			7,687				4,884
Software			3,595				3,199			10,458				9,180
SEC settlement			–				1,400			–				1,400
Lease termination expense			–				–			–				908
Other non-interest expense			7,648				9,408			22,595				26,227
Total non-interest expense			42,026				42,051			123,064				120,799
Income from continuing operations before income taxes			31,025				28,374			75,608				65,989
Income tax expense			7,894				7,975			19,033				17,585
Net income from continuing operations			23,131				20,399			56,575				48,404
Discontinued operations
Income (loss) from discontinued operations before income taxes			(1,671	)			151			(2,720	)			1,875
Income tax expense (benefit)			(1,794	)			125			(2,058	)			574
Net income (loss) from discontinued operations, net of tax			123				26			(662	)			1,301
Net income		$	23,254			$	20,425		$	55,913			$	49,705
Net income per share from continuing operations – basic		$	0.40			$	0.36		$	0.98			$	0.85
Net income (loss) per share from discontinued operations – basic		$	–			$	–		$	(0.01	)		$	0.02
Net income per share – basic		$	0.40			$	0.36		$	0.97			$	0.87
Net income per share from continuing operations – diluted		$	0.40			$	0.36		$	0.97			$	0.85
Net income (loss) per share from discontinued operations – diluted		$	–			$	–		$	(0.01	)		$	0.02
Net income per share – diluted		$	0.40			$	0.36		$	0.96			$	0.87
Weighted average shares – basic			57,588,168				56,907,815			57,433,477				56,712,084
Weighted average shares – diluted			58,471,192				57,413,297			58,051,833				57,152,371

Balance sheet		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
		(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks		$	6,220			$	5,094			$	19,928			$	24,068
Interest earning deposits at Federal Reserve Bank			294,758				475,627				924,544				932,440
Total cash and cash equivalents			300,978				480,721				944,472				956,508
Investment securities, available-for-sale, at fair value			1,264,903				1,324,447				1,320,692				1,382,437
Investment securities, held-to-maturity, at cost			–				–				84,387				84,399
Commercial loans, at fair value			1,849,947				1,807,630				1,180,546				489,240
Loans, net of deferred fees and costs			2,488,760				2,322,737				1,824,245				1,683,377
Allowance for credit losses			(15,727	)			(14,625	)			(10,238	)			(10,360	)
Loans, net			2,473,033				2,308,112				1,814,007				1,673,017
Federal Home Loan Bank & Atlantic Community Bancshares stock			1,368				1,368				5,342				4,342
Premises and equipment, net			15,849				16,701				17,538				17,857
Accrued interest receivable			18,852				18,897				13,619				13,898
Intangible assets, net			2,563				2,710				2,315				2,698
Deferred tax asset, net			7,952				7,921				12,538				13,006
Investment in unconsolidated entity			31,783				34,064				39,154				49,431
Assets held for sale from discontinued operations			122,253				128,463				140,657				162,098
Other assets			79,821				83,003				81,696				94,605
Total assets		$	6,169,302			$	6,214,037			$	5,656,963			$	4,943,536
Liabilities:
Deposits
Demand and interest checking		$	4,882,834			$	5,089,741			$	4,402,740			$	3,844,747
Savings and money market			505,928				455,458				174,290				25,950
Time deposits			–				–				475,000				475,000
Total deposits			5,388,762				5,545,199				5,052,030				4,345,697
Securities sold under agreements to repurchase			42				42				82				93
Senior debt			98,222				–				–				–
Subordinated debenture			13,401				13,401				13,401				13,401
Other long-term borrowings			40,462				40,639				40,991				41,166
Other liabilities			69,954				81,677				65,962				59,005
Total liabilities		$	5,610,843			$	5,680,958			$	5,172,466			$	4,459,362
Shareholders’ equity:
Common stock – authorized, 75,000,000 shares of $1.00 par value; 57,590,874 and 56,940,521 shares issued and outstanding at September 30, 2020 and 2019, respectively			57,591				57,555				56,941				56,911
Treasury stock (100,000 shares)			(866	)			(866	)			(866	)			(866	)
Additional paid-in capital			376,751				374,578				371,633				370,113
Retained earnings			104,282				81,028				50,742				48,888
Accumulated other comprehensive income			20,701				20,784				6,047				9,128
Total shareholders’ equity			558,459				533,079				484,497				484,174
Total liabilities and shareholders’ equity		$	6,169,302			$	6,214,037			$	5,656,963			$	4,943,536

Average balance sheet and net interest income		Three months ended September 30, 2020										Three months ended September 30, 2019
		(dollars in thousands)
		Average							Average			Average							Average
Assets:		Balance				Interest			Rate			Balance				Interest			Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	4,202,054			$	44,318		4.22	%		$	2,608,427			$	35,103		5.38	%
Leases – bank qualified*			8,026				146		7.28	%			14,067				252		7.17	%
Investment securities-taxable			1,300,191				7,911		2.43	%			1,429,222				10,485		2.93	%
Investment securities-nontaxable*			4,041				35		3.46	%			6,172				54		3.50	%
Interest earning deposits at Federal Reserve Bank			413,259				106		0.10	%			474,499				2,545		2.15	%
Net interest earning assets			5,927,571				52,516		3.54	%			4,532,387				48,439		4.27	%
Allowance for credit losses			(14,587	)									(9,988	)
Assets held for sale from discontinued operations			124,916				890		2.85	%			145,347				1,609		4.43	%
Other assets			195,125										298,191
		$	6,233,025									$	4,965,937
Liabilities and Shareholders’ Equity:
Deposits:
Demand and interest checking		$	5,079,711			$	1,591		0.13	%		$	3,829,457			$	7,644		0.80	%
Savings and money market			484,323				139		0.11	%			26,444				52		0.79	%
Time			–				–		0.00	%			269,464				1,338		1.99	%
Total deposits			5,564,034				1,730		0.12	%			4,125,365				9,034		0.88	%
Short-term borrowings			3,260				1		0.12	%			256,945				1,595		2.48	%
Securities sold under agreements to repurchase			41				–		0.00	%			93				–		0.00	%
Subordinated debentures			13,401				118		3.52	%			13,401				186		5.55	%
Senior debt			53,260				633		4.75	%			–				–		0.00	%
Total deposits and liabilities			5,633,996				2,482		0.18	%			4,395,804				10,815		0.98	%
Other liabilities			53,260										98,980
Total liabilities			5,687,256										4,494,784
Shareholders’ equity			545,769										471,153
		$	6,233,025									$	4,965,937
Net interest income on tax equivalent basis*						$	50,924									$	39,233
Tax equivalent adjustment							38										64
Net interest income						$	50,886									$	39,169
Net interest margin *									3.37	%									3.35	%
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.
** Includes loans held at fair value.

Average balance sheet and net interest income		Nine months ended September 30, 2020										Nine months ended September 30, 2019
		(dollars in thousands)
		Average							Average			Average							Average
Assets:		Balance				Interest			Rate			Balance				Interest			Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	3,798,104			$	124,924		4.39	%		$	2,365,317			$	95,001		5.36	%
Leases – bank qualified*			9,401				509		7.22	%			15,755				947		8.01	%
Investment securities-taxable			1,343,211				28,594		2.84	%			1,394,234				32,649		3.12	%
Investment securities-nontaxable*			4,537				110		3.23	%			6,771				168		3.31	%
Interest earning deposits at Federal Reserve Bank			444,323				1,836		0.55	%			439,414				7,502		2.28	%
Net interest earning assets			5,599,576				155,973		3.71	%			4,221,491				136,267		4.30	%
Allowance for credit losses			(13,225	)									(9,537	)
Assets held for sale from discontinued operations			130,880				3,259		3.32	%			157,630				5,293		4.48	%
Other assets			243,629										285,843
		$	5,960,860									$	4,655,427
Liabilities and Shareholders’ Equity:
Deposits:
Demand and interest checking		$	4,858,666			$	9,676		0.27	%		$	3,840,141			$	25,260		0.88	%
Savings and money market			298,049				309		0.14	%			28,073				129		0.61	%
Time			106,113				1,483		1.86	%			90,808				1,338		1.96	%
Total deposits			5,262,828				11,468		0.29	%			3,959,022				26,727		0.90	%
Short-term borrowings			25,419				181		0.95	%			137,860				2,624		2.54	%
Securities sold under agreements to repurchase			51				–		0.00	%			92				–		0.00	%
Subordinated debentures			13,401				408		4.06	%			13,401				573		5.70	%
Senior debt			17,883				633		4.72	%			–				–		0.00	%
Total deposits and liabilities			5,319,582				12,690		0.32	%			4,110,375				29,924		0.97	%
Other liabilities			119,961										99,577
Total liabilities			5,439,543										4,209,952
Shareholders’ equity			521,317										445,475
		$	5,960,860									$	4,655,427
Net interest income on tax equivalent basis*						$	146,542									$	111,636
Tax equivalent adjustment							130										234
Net interest income						$	146,412									$	111,402
Net interest margin *									3.41	%									3.40	%
* Full taxable equivalent basis, using a statutory rate of 21% for 2020 and 2019.
** Includes loans held at fair value.

Allowance for credit losses:		Nine months ended								Year ended
		September 30,				September 30,				December 31,
		2020				2019				2019
		(dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of period (1)		$	12,875			$	8,653			$	8,653
Loans charged-off:
SBA non-real estate			1,350				995				1,362
Direct lease financing			2,178				391				528
Other consumer loans			–				3				1,103
Total			3,528				1,389				2,993
Recoveries:
SBA non-real estate			82				94				125
Direct lease financing			502				51				51
Other consumer loans			–				1				2
Total			584				146				178
Net charge-offs			2,944				1,243				2,815
Provision credited to allowance, excluding commitment provision			5,796				2,950				4,400
Balance in allowance for credit losses at end of period		$	15,727			$	10,360			$	10,238
Net charge-offs/average loans			0.08	%			0.05	%			0.12	%
Net charge-offs/average loans (annualized)			0.10	%			0.06	%			0.12	%
Net charge-offs/average assets			0.05	%			0.03	%			0.06	%
(1) Excludes activity from assets held for sale from discontinued operations.
Loan portfolio:		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
		(in thousands)
SBL non-real estate		$	293,488			$	293,692			$	84,579			$	84,181
SBL commercial mortgage			270,264				259,020				218,110				209,008
SBL construction			27,169				33,193				45,310				38,116
Small business loans *			590,921				585,905				347,999				331,305
Direct lease financing			430,675				422,505				434,460				412,755
SBLOC / IBLOC**			1,428,253				1,287,350				1,024,420				920,463
Advisor financing ***			26,600				15,529				–				–
Other specialty lending			2,194				2,706				3,055				3,167
Other consumer loans ****			3,809				4,003				4,554				6,388
			2,482,452				2,317,998				1,814,488				1,674,078
Unamortized loan fees and costs			6,308				4,739				9,757				9,299
Total loans, net of unamortized fees and costs		$	2,488,760			$	2,322,737			$	1,824,245			$	1,683,377
Small business portfolio:		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
		(in thousands)
SBL, including unamortized fees and costs			590,314				583,935				352,214				337,440
SBL, included in commercial loans held at fair value			250,958				225,401				220,358				222,007
Total small business loans		$	841,272			$	809,336			$	572,572			$	559,447

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

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

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

**** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $151,000 and $882,000 at September 30, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses.

Small business loans as of September 30, 2020
		Loan principal
		(in millions)
U.S. government guaranteed portion of SBA loans (a)		$	334
Paycheck Protection Program Loans (PPP) (a)			208
Commercial mortgage SBA (b)			165
Construction SBA (c)			13
Unguaranteed portion of U.S. government guaranteed loans (d)			98
Non-SBA small business loans (e)			18
Total principal		$	836
Fair value adjustment (f)			6
Unamortized fees			(1	)
Total small business loans		$	841

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

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

(c) Of the $13 million Construction SBA loans, $10 million are 504 first mortgages with an origination date LTV of 50-60% and $3 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $98 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government. 7a loans are not made on the basis of real estate LTV; however, they are subject to SBA’s “All Available Collateral” rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners.

(e) The $18 million non-SBA loans are mainly comprised of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators and are considered seasoned and have performed as agreed. A $2 million guaranty by the seller, for an 11% first loss piece, is in place until August 2021.

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

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

Type as of September 30, 2020
(Excludes government guaranteed portion of SBA 7a and PPP loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total			% Total
		(dollars in millions)
Hotels		$	66		$	2		$	–		$	68		24	%
Professional services offices			21			–			3			24		8	%
Full-service restaurants			15			1			4			20		7	%
Child day care and youth services			15			–			1			16		5	%
Bakeries			4			–			12			16		5	%
Elderly assisted living facilities			2			8			2			12		4	%
General warehousing and storage			11			–			–			11		4	%
Limited-service restaurants and catering			7			–			3			10		3	%
Fitness/rec centers and instruction			7			–			2			9		3	%
Amusement and recreation industries			4			2			3			9		3	%
Car washes			5			3			–			8		3	%
Funeral homes			7			–			–			7		2	%
New and used car dealers			4			–			–			4		1	%
Automotive servicing			3			–			–			3		1	%
Other			51			–			26			77		27	%
Total		$	222		$	16		$	56		$	294		100	%
* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

State diversification as of September 30, 2020
(Excludes government guaranteed portion of SBA 7a and PPP loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total			% Total
		(dollars in millions)
Florida		$	35		$	8		$	8		$	51		17	%
California			36			2			5			43		15	%
Pennsylvania			30			–			4			34		12	%
Illinois			26			–			3			29		10	%
North Carolina			19			3			3			25		9	%
New York			10			2			5			17		6	%
Texas			11			–			5			16		5	%
Tennessee			11			–			1			12		4	%
New Jersey			3			1			7			11		4	%
Virginia			9			–			2			11		4	%
Georgia			5			–			2			7		2	%
Colorado			3			–			1			4		1	%
Michigan			3			–			1			4		1	%
Washington			3			–			–			3		1	%
Ohio			2			–			1			3		1	%
Other states			16			–			8			24		8	%
Total		$	222		$	16		$	56		$	294		100	%
* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

Top 10 loans as of September 30, 2020
Type*		State		SBL commercial mortgage*			SBL construction*			Total
		(in millions)
Professional services office		CA		$	9		$	–		$	9
Hotel		FL			9			–			9
General warehouse		PA			7			–			7
Hotel		NC			6			–			6
Assisted living facility		FL			–			5			5
Hotel		NC			5			–			5
Fitness and rec center		PA			5			–			5
Hotel		PA			4			–			4
Hotel		TN			4			–			4
Gas Station		VA			3			–			3
Total				$	52		$	5		$	57

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

Commercial real estate loans held at fair value which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination:

Type as of September 30, 2020
Type		# Loans		Balance				Origination date LTV			Weighted average minimum interest rate
		(dollars in millions)
Multifamily (apartments)		173		$	1,463			76	%		4.77	%
Hospitality (hotels and lodging)		11			63			65	%		5.73	%
Retail		8			52			70	%		4.62	%
Other		7			25			70	%		5.21	%
		199		$	1,603			75	%		4.81	%
Fair value adjustment					(4	)
Total				$	1,599

State diversification as of September 30, 2020										15 Largest loans (all multifamily) as of September 30, 2020
State		Balance			Origination date LTV					State		Balance			Origination date LTV
		(dollars in millions)										(dollars in millions)
Texas		$	396		76	%				North Carolina		$	43		78	%
Georgia			252		78	%				Texas			38		79	%
Arizona			123		76	%				Texas			35		80	%
North Carolina			111		77	%				Pennsylvania			32		77	%
Nevada			56		80	%				Georgia			31		80	%
Alabama			54		76	%				Nevada			28		80	%
Other states each <$50 million			611		73	%				Texas			28		75	%
Total		$	1,603		75	%				Texas			27		77	%
										Arizona			26		79	%
										Mississippi			25		79	%
										Texas			24		77	%
										North Carolina			24		77	%
										Texas			24		77	%
										California			23		65	%
										Georgia			23		79	%
										15 Largest loans		$	431		77	%

Institutional banking loans outstanding at September 30, 2020
Type		Principal			% of total
		(dollars in millions)
Securities backed lines of credit (SBLOC)		$	1,069		73	%
Insurance backed lines of credit (IBLOC)			359		25	%
Advisor financing			27		2	%
Total		$	1,455		100	%

For SBLOC, we generally lend up to 50% of the value of equities and 80% for investment grade securities. While equities have fallen in excess of 30% in recent periods, the reduction in collateral value of brokerage accounts collateralizing SBLOCs generally has been less, for two reasons. First, many collateral accounts are “balanced” and accordingly have a component of debt securities, which have either not decreased in value as much as equities, or in some cases may have increased in value. Secondly, many of these accounts have the benefit of professional investment advisors who provided some protection against market downturns, through diversification and other means. Additionally, borrowers often utilize only a portion of collateral value, which lowers the % principal to collateral.

Top 10 SBLOC loans at September 30, 2020
		Principal amount			% Principal to collateral
		(dollars in millions)
		$	33		30	%
			17		39	%
			14		22	%
			12		33	%
			10		47	%
			10		31	%
			9		23	%
			9		75	%
			9		49	%
			8		22	%
Total		$	131		35	%

Insurance backed lines of credit (IBLOC)

IBLOC loans are backed by the cash value of life insurance policies which have been assigned to us. We lend up to 100% of such cash value. Our underwriting standards require approval of the insurance companies which carry the policies backing these loans. Currently, seven insurance companies have been approved and, as of January 21, 2020 all were rated Superior (A+ or better) by AM BEST. Moody’s ratings were at least A rated, and ranged from A3 to Aa2.

Direct lease financing* by type as of September 30, 2020
		Principal balance			% Total
		(dollars in millions)
Government agencies and public institutions**		$	76		18	%
Construction			74		18	%
Waste management and remediation services			61		14	%
Real estate, rental and leasing			44		10	%
Retail trade			36		8	%
Transportation and warehousing			35		8	%
Health care and social assistance			26		6	%
Professional, scientific, and technical services			19		4	%
Wholesale trade			14		3	%
Manufacturing			14		3	%
Educational services			9		2	%
Arts, entertainment, and recreation			5		1	%
Other			18		5	%
Total		$	431		100	%

* Of the total $431 million of direct lease financing, $401 million consisted of vehicle leases with the remaining balance consisting of equipment leases.

** Includes public universities and school districts

Direct lease financing by state as of September 30, 2020
State		Principal balance			% Total
		(dollars in millions)
Florida		$	92		20	%
California			30		7	%
New Jersey			29		7	%
Pennsylvania			26		6	%
New York			25		6	%
North Carolina			22		5	%
Utah			21		5	%
Maryland			20		5	%
Washington			16		4	%
Georgia			12		3	%
Missouri			12		3	%
Connecticut			12		3	%
Texas			12		3	%
Alabama			11		3	%
South Carolina			9		2	%
Other states			82		18	%
Total		$	431		100	%

Capital ratios:		Tier 1 capital			Tier 1 capital			Total capital			Common equity
		to average			to risk-weighted			to risk-weighted			tier 1 to risk
		assets ratio			assets ratio			assets ratio			weighted assets
As of September 30, 2020
The Bancorp, Inc.		8.62	%		14.26	%		14.68	%		14.26	%
The Bancorp Bank		8.50	%		14.04	%		14.45	%		14.04	%
“Well capitalized” institution (under FDIC regulations-Basel III)		5.00	%		8.00	%		10.00	%		6.50	%
As of December 31, 2019
The Bancorp, Inc.		9.63	%		19.04	%		19.45	%		19.04	%
The Bancorp Bank		9.46	%		18.71	%		19.11	%		18.71	%
“Well capitalized” institution (under FDIC regulations-Basel III)		5.00	%		8.00	%		10.00	%		6.50	%

		Three months ended								Nine months ended
		September 30,								September 30,
		2020				2019				2020				2019
Selected operating ratios:
Return on average assets (1)			1.48	%			1.63	%			1.25	%			1.41	%
Return on average equity (1)			16.90	%			17.20	%			14.29	%			14.92	%
Net interest margin			3.37	%			3.35	%			3.41	%			3.40	%
(1) Annualized
Book value per share table:		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
Book value per share		$	9.71			$	9.28			$	8.52			$	8.52
Loan quality table:		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
Nonperforming loans to total loans			0.49	%			0.44	%			0.50	%			0.55	%
Nonperforming assets to total assets			0.20	%			0.17	%			0.16	%			0.19	%
Allowance for loan and lease losses to total loans			0.63	%			0.63	%			0.56	%			0.62	%
Nonaccrual loans		$	12,275			$	9,957			$	5,796			$	6,420
Loans 90 days past due still accruing interest			24				352				3,264				2,788
Other real estate owned			–				–				–				–
Total nonperforming assets		$	12,299			$	10,309			$	9,060			$	9,208
		Three months ended
		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
		(in thousands)
Gross dollar volume (GDV) (2):
Prepaid and debit card GDV		$	23,963,508			$	23,680,749			$	19,104,327			$	17,264,690
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.

Business line quarterly summary:
Quarter ended September 30, 2020
(dollars in millions)
					Balances
								% Growth
Major business lines		Average approximate rates *			Balances **			Year over year		Linked quarter annualized
Loans
Institutional banking ***		2.5	%		$	1,455		58%		47%
Small Business Lending****		4.9	%			633		13%		21%
Leasing		6.3	%			431		4%		8%
Commercial real estate (non SBA at fair value)		4.8	%			1,603		nm		nm
Weighted average yield		4.2	%		$	4,122						Non-interest income
															% Growth
Deposits												Current quarter			Year over year
Payment solutions (prepaid and debit card issuance)		0.1	%		$	4,038		62%		nm		$	19.4		20%
Card payment and ACH processing		0.3	%			834		(14%)		nm			1.8		nm

* Average rates are for the quarter ended September 30, 2020

** Loan and deposit categories are respectively based on period-end and average quarterly balances.

*** Institutional Banking loans are comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities, Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies, and Advisor financing.

**** Small Business Lending is substantially comprised of SBA loans. The balance above excludes $208 million of Paycheck Protection Program loans.

Analysis of Walnut Street* marks:
		Loan activity				Marks
		(dollars in millions)
Original Walnut Street loan balance, December 31, 2014		$	267
Marks through December 31, 2014 sale date			(58	)		$	(58	)
Sales price of Walnut Street			209
Equity investment from independent investor			(16	)
December 31, 2014 Bancorp book value			193
Additional marks 2015 – 2019			(46	)			(46	)
2020 Marks			–
Payments received			(115	)
September 30, 2020 Bancorp book value**		$	32
Total marks						$	(104	)
Divided by:
Original Walnut Street loan balance						$	267
Percentage of total mark to original balance							39	%

* Walnut Street is the investment in unconsolidated entity on the balance sheet which reflects the investment in a securitization of certain loans from the bank’s discontinued loan portfolio.

** Approximately 34% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of September 30, 2020.

Walnut Street portfolio composition as of September 30, 2020
Collateral type		% of Portfolio
Commercial real estate non-owner occupied
Retail		61.1%
Office		–
Other		5.5%
Construction and land		29.6%
First mortgage residential owner occupied		2.4%
First mortgage residential non-owner occupied		1.4%
Total		100.0%

Cumulative analysis of marks on discontinued commercial loan principal as of September 30, 2020
		Discontinued			Cumulative				% to original
		loan principal			marks				principal
		(dollars in millions)
Commercial loan discontinued principal before marks		$	66
Florida mall held in discontinued other real estate owned			42			(27	)
Mark at September 30, 2020						(4	)
Cumulative mark at September 30, 2020		$	108		$	(31	)		29	%

Analysis of discontinued commercial loan relationships as of September 30, 2020
		Performing			Nonperforming			Total			Performing				Nonperforming				Total
		loan principal			loan principal			loan principal			loan marks				loan marks				marks
		(in millions)
5 loan relationships > $5 million		$	44		$	–		$	44		$	(3	)		$	–			$	(3	)
Loan relationships < $5 million			9			9			18			–				(1	)			(1	)
		$	53		$	9		$	62		$	(3	)		$	(1	)		$	(4	)

Quarterly activity for commercial loan discontinued principal
		Commercial
		loan principal
		(in millions)
Commercial loan discontinued principal June 30, 2020 before marks		$	67
Quarterly paydowns and other reductions			(1	)
Commercial loan discontinued principal September 30, 2020 before marks		$	66
Marks September 30, 2020			(4	)
Net commercial loan exposure September 30, 2020		$	62
Residential mortgages			37
Net loans		$	99
Florida mall in other real estate owned			15
8 properties in other real estate owned			8
Total discontinued assets at September 30, 2020		$	122

Discontinued commercial loan composition as of September 30, 2020
Collateral type		Unpaid principal balance				Mark September 30, 2020				Mark as % of portfolio
		(dollars in millions)
Commercial real estate – non-owner occupied:
Retail		$	4			$	(0.6	)		15	%
Office			2				–			–
Other			19				(0.1	)		1	%
Construction and land			11				(0.1	)		1	%
Commercial non-real estate and industrial			2				–			–
1 to 4 family construction			11				(2.7	)		25	%
First mortgage residential non-owner occupied			8				–			–
Commercial real estate owner occupied:
Retail			7				(0.6	)		9	%
Residential junior mortgage			1				–			–
Other			1				–			–
Total		$	66			$	(4.1	)		6	%
Less: mark			(4	)
Net commercial loan exposure September 30, 2020		$	62			$	(4.1	)

Loan payment deferrals as of September 30, 2020
		Principal for loans with deferrals			Total principal by loan category			% of total loan principal with deferrals
					(dollars in millions)
Commercial real estate loans held at fair value (excluding SBA loans)		$	30		$	1,603		2	%
Securities backed lines of credit, insurance backed lines of credit & advisor financing			–			1,455		0	%
Small business lending, substantially all SBA loans			18			836		2	%
Direct lease financing			4			430		1	%
Discontinued operations			2			103		2	%
Other consumer loans and specialty lending			–			6		0	%
Total		$	54		$	4,433		1.2	%

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