The Bancorp, Inc. Reports First Quarter 2020 Financial Results

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

Highlights

• For the quarter ended March 31, 2020, The Bancorp earned net income of $13.2 million from continuing operations, and $0.22 diluted earnings per share from combined continuing and discontinued operations.

• Net interest margin increased to 3.34% for the quarter ended March 31, 2020, compared to 3.12% for the quarter ended December 31, 2019.

• Net interest income increased 26% to $42.9 million for the quarter ended March 31, 2020, compared to $34.0 million for the quarter ended March 31, 2019.

• Average loans and leases, including loans held for sale, increased 43% to $3.3 billion for the quarter ended March 31, 2020, compared to $2.3 billion for the quarter ended March 31, 2019.

• Prepaid, debit card and related fees increased 15% to $18.5 million for the quarter ended March 31, 2020, compared to $16.2 million for the quarter ended March 31, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 36%.

• SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 46% year over year and 13% quarter over quarter to $1.2 billion at March 31, 2020.

• Small Business Loans, including those held-for-sale, increased 21% year over year to $595.1 million at March 31, 2020.

• As of April 28, 2020, we have originated approximately 1,250 Paycheck Protection Program loans, totaling in excess of $200 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized primarily in the second quarter of 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.

• Direct lease financing, the vast majority of which consist of vehicles, increased 16% year over year, to $446 million.

• The average rate on $4.9 billion of average deposits and interest-bearing liabilities in the first quarter of 2020 was 0.70%. Average prepaid and debit card account deposits of $3.2 billion for first quarter 2020, reflecting an increase of 24% over the $2.5 billion for the quarter ended March 31, 2019.

• Consolidated leverage ratio was 8.90% at March 31, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

• Book value per common share at March 31, 2020 was $8.69 per share compared to $7.70 a year earlier, an increase of 13%.

The following additional matters are notable:

• A planned sale by the Bank of approximately $825 million of commercial real estate loans scheduled for April 2020 was not consummated by the purchaser. The purchaser had deposited $12.5 million with the Bank, which was to be forfeited should they not consummate the purchase. We have been advised and have concluded that, under the relevant circumstances, the Bank is entitled to retain the deposit. The Bank intends to recognize the deposit as income in a time and manner consistent with applicable accounting rules.

• We implemented Current Expected Credit Loss (“CECL”) accounting as of January 1, 2020. As a result, we booked a $2.6 million cumulative increase to the allowance for loan and lease losses and $569,000 to other liabilities for unfunded commitments. The $3.2 million combined total of these items was offset through retained earnings, net of their future tax benefit. The provision as determined through the CECL model resulted in a $3.6 million provision for credit losses for the quarter ended March 31, 2020.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings despite the current COVID-19 developments. While the pandemic continues to be fast-developing and could be prolonged, we have evaluated the impact of lower interest rates and potential lower business volumes on our profitability for 2020. We believe that the previously announced $1.25 minimum earnings per share guidance for 2020 is still attainable, while $1.34 earnings per share has become less likely. Accordingly, the $1.25 earnings per share now constitutes our guidance for full year 2020. We have removed the range of earnings performance and made $1.25 our target. We have also provided additional tables and other disclosures in this press release related to credit exposures.”

The Bancorp reported net income of $12.6 million, or $0.22 per diluted share, for the quarter ended March 31, 2020, compared to net income of $17.9 million, or $0.32 per diluted share, for the quarter ended March 31, 2019. Results for 2020 reflected $5.2 million of unrealized losses on loans held for sale, which may or may not be realized depending on future market conditions. The prior year comparable quarter reflected $10.8 million of gains on such loans, which consisted primarily of realized gains. Pre-tax income excluding these items, which are dependent on market conditions, amounted to $22.7 for first quarter 2020 compared to $12.7 million for first quarter 2019, or an increase of 79%. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.90%, 16.99%, 17.41% and 16.99%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, May 1, 2020 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 8676348. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, May 8, 2020 by dialing 855.859.2056, access code 8676348.

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

Forward-Looking Statements

Statements in this earnings release regarding The Bancorp’s business which are not historical facts are "forward-looking statements." These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “estimate,” “continue,” or similar words , and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. These risks and uncertainties include those relating to 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
		March 31,						December 31,
Condensed income statement		2020			2019			2019
		(dollars in thousands except per share data)
Net interest income		$	42,911		$	34,010		$	141,288
Provision for loan and lease losses			3,579			1,700			4,400
Non-interest income
Service fees on deposit accounts			10			47			75
ACH, card and other payment processing fees			1,846			2,303			9,376
Prepaid, debit card and related fees			18,540			16,163			65,141
Net realized and unrealized gains (losses) on commercial loans originated for sale			(5,156)			10,763			24,072
Change in value of investment in unconsolidated entity			(45)			-			-
Leasing related income			833			695			3,243
Other non-interest income			571			394			2,220
Total non-interest income			16,599			30,365			104,127
Non-interest expense
Salaries and employee benefits			22,741			23,840			94,259
Data processing expense			1,169			1,269			4,894
Legal expense			913			1,324			5,319
FDIC Insurance			2,589			1,929			7,025
Software			3,477			2,921			12,731
Civil money penalties			-			-			8,900
Lease termination expense			-			-			908
Other non-interest expense			7,529			7,946			34,485
Total non-interest expense			38,418			39,229			168,521
Income from continuing operations before income taxes			17,513			23,446			72,494
Income tax expense			4,352			6,035			21,226
Net income from continuing operations			13,161			17,411			51,268
Discontinued operations
Income (loss) from discontinued operations before income taxes			(775)			805			510
Income tax expense (benefit)			(205)			286			219
Net income (loss) from discontinued operations, net of tax			(570)			519			291
Net income		$	12,591		$	17,930		$	51,559
Net income per share from continuing operations - basic		$	0.23		$	0.31		$	0.90
Net income (loss) per share from discontinued operations - basic		$	(0.01)		$	0.01		$	0.01
Net income per share – basic		$	0.22		$	0.32		$	0.91
Net income per share from continuing operations - diluted		$	0.23		$	0.31		$	0.89
Net income (loss) per share from discontinued operations - diluted		$	(0.01)		$	0.01		$	0.01
Net income per share – diluted		$	0.22		$	0.32		$	0.90
Weighted average shares – basic			57,220,844			56,522,015			56,765,635
Weighted average shares – diluted			57,926,785			56,876,662			57,338,985

Balance sheet		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
		(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks		$	13,610		$	19,928		$	24,068		$	11,678
Interest earning deposits at Federal Reserve Bank			105,978			924,544			932,440			714,514
Total cash and cash equivalents			119,588			944,472			956,508			726,192
Investment securities, available-for-sale, at fair value			1,353,278			1,320,692			1,382,437			1,368,602
Investment securities, held-to-maturity, at cost			-			84,387			84,399			84,428
Commercial loans held for sale, at fair value			1,716,450			1,180,546			489,240			570,426
Loans, net of deferred fees and costs			1,985,755			1,824,245			1,683,377			1,510,395
Allowance for loan and lease losses			(14,883)			(10,238)			(10,360)			(9,954)
Loans, net			1,970,872			1,814,007			1,673,017			1,500,441
Federal Home Loan Bank & Atlantic Community Bancshares stock			1,142			5,342			4,342			1,113
Premises and equipment, net			17,148			17,538			17,857			18,056
Accrued interest receivable			15,660			13,619			13,898			13,907
Intangible assets, net			2,857			2,315			2,698			3,463
Deferred tax asset, net			12,797			12,538			13,006			18,423
Investment in unconsolidated entity			34,273			39,154			49,431			58,258
Assets held for sale from discontinued operations			134,118			140,657			162,098			188,025
Other assets			79,925			81,696			94,605			75,642
Total assets		$	5,458,108		$	5,656,963		$	4,943,536		$	4,626,976
Liabilities:
Deposits
Demand and interest checking		$	4,512,949		$	4,402,740		$	3,844,747		$	3,993,828
Savings and money market			178,174			174,290			25,950			31,470
Time deposits			-			475,000			475,000			-
Total deposits			4,691,123			5,052,030			4,345,697			4,025,298
Securities sold under agreements to repurchase			42			82			93			93
Short-term borrowings			140,000			-			-			-
Subordinated debenture			13,401			13,401			13,401			13,401
Long-term borrowings			40,813			40,991			41,166			41,499
Other liabilities			74,625			65,962			59,005			111,905
Total liabilities		$	4,960,004		$	5,172,466		$	4,459,362		$	4,192,196
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,425,556 and 56,568,004 shares issued and outstanding at March 31, 2020 and 2019, respectively			57,426			56,941			56,911			56,568
Treasury stock (100,000 shares)			(866)			(866)			(866)			(866)
Additional paid-in capital			372,984			371,633			370,113			367,483
Accumulated earnings			60,960			50,742			48,888			17,113
Accumulated other comprehensive income (loss)			7,600			6,047			9,128			(5,518)
Total shareholders' equity			498,104			484,497			484,174			434,780
Total liabilities and shareholders' equity		$	5,458,108		$	5,656,963		$	4,943,536		$	4,626,976

Average balance sheet and net interest income		Three months ended March 31, 2020								Three months ended March 31, 2019
		(dollars in thousands)
		Average						Average		Average						Average
Assets:		Balance			Interest			Rate		Balance			Interest			Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	3,262,378		$	39,159		4.80%		$	2,266,834		$	30,161		5.32%
Leases - bank qualified*			10,975			200		7.29%			17,793			428		9.62%
Investment securities-taxable			1,395,545			10,495		3.01%			1,303,491			10,530		3.23%
Investment securities-nontaxable*			5,174			39		3.02%			7,546			59		3.13%
Interest earning deposits at Federal Reserve Bank			493,876			1,623		1.31%			423,024			2,502		2.37%
Net interest earning assets			5,167,948			51,516		3.99%			4,018,688			43,680		4.35%
Allowance for loan and lease losses			(10,176)								(8,638)
Loans held for sale from discontinued operations			137,286			1,275		3.71%			173,800			2,025		4.66%
Other assets			226,881								234,174
		$	5,521,939							$	4,418,024
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	4,353,690		$	6,695		0.62%		$	3,798,837		$	8,833		0.93%
Savings and money market			173,575			50		0.12%			31,392			37		0.47%
Time			319,505			1,483		1.86%			-			-		-
Total deposits			4,846,770			8,228		0.68%			3,830,229			8,870		0.93%
Short-term borrowings			56,813			165		1.16%			74,386			503		2.70%
Securities sold under agreements to repurchase			72			-		0.00%			90			-		0.00%
Subordinated debentures			13,401			162		4.84%			13,401			195		5.82%
Total deposits and liabilities			4,917,056			8,555		0.70%			3,918,106			9,568		0.98%
Other liabilities			113,582								79,140
Total liabilities			5,030,638								3,997,246
Shareholders' equity			491,301								420,778
		$	5,521,939							$	4,418,024
Net interest income on tax equivalent basis*					$	44,236							$	36,137
Tax equivalent adjustment						50								102
Net interest income					$	44,186							$	36,035
Net interest margin *								3.34%								3.41%
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.
** Includes loans held for sale.

Allowance for loan and lease losses:		Three months ended						Year ended
		March 31,			March 31,			December 31,
		2020			2019			2019
		(dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of period (1)		$	12,874		$	8,653		$	8,653
Loans charged-off:
SBA non-real estate			264			322			1,362
Direct lease financing			1,194			106			529
Other consumer loans			-			-			1,102
Total			1,458			428			2,993
Recoveries:
SBA non-real estate			19			17			125
Direct lease financing			84			12			51
Other consumer loans			-			-			2
Total			103			29			178
Net charge-offs			1,355			399			2,815
Provision credited to allowance, excluding commitment provision			3,364			1,700			4,400
Balance in allowance for loan and lease losses at end of period		$	14,883		$	9,954		$	10,238
Net charge-offs/average loans			0.04%			0.02%			0.12%
Net charge-offs/average loans (annualized)			0.17%			0.07%			0.12%
Net charge-offs/average assets			0.02%			0.01%			0.06%
(1) Excludes activity from assets held for sale from discontinued operations.

Loan portfolio:		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
		(in thousands)
SBL non-real estate		$	84,946		$	84,579		$	84,181		$	76,112
SBL commercial mortgage			233,220			218,110			209,008			179,397
SBL construction			48,823			45,310			38,116			23,979
Small business loans *			366,989			347,999			331,305			279,488
Direct lease financing			445,967			434,460			412,755			384,930
SBLOC / IBLOC**			1,156,433			1,024,420			920,463			791,986
Other specialty lending			2,711			3,055			3,167			34,425
Other consumer loans ***			4,023			4,554			6,388			9,301
			1,976,123			1,814,488			1,674,078			1,500,130
Unamortized loan fees and costs			9,632			9,757			9,299			10,265
Total loans, net of unamortized fees and costs		$	1,985,755		$	1,824,245		$	1,683,377		$	1,510,395
Small business portfolio:		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
		(in thousands)
SBL, including unamortized fees and costs			371,072			352,214			337,440			286,814
SBL, included in held-for-sale			223,987			220,358			222,007			206,901
Total small business loans		$	595,059		$	572,572		$	559,447		$	493,715

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

** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies. At March 31, 2020 and December 31, 2019, respectively, IBLOC loans amounted to $228.8 million and $144.6 million.

*** Included in the table above under other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $455,000 and $882,000 at March 31, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

Small business loans as of March 31, 2020
		Loan principal
		(in millions)
U.S. government guaranteed portion of SBA loans (a)		$	304
Commercial mortgage SBA (b)			147
Construction SBA (c)			29
Unguaranteed portion of U.S. government guaranteed loans (d)			85
Non-SBA small business loans (e)			21
Total principal		$	586
Fair value adjustment			5
Unamortized fees			4
Total small business loans		$	595

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

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

(c) Of the $29 million Construction SBA loans, $21 million are 504 first mortgages with an origination date LTV of 50-60% and $8 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $85 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government. 7a loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners.

(e) Of the $21 million in non-SBA loans, $2 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an origination date LTV of 80% and $17 million consist of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators and are considered seasoned and have performed as agreed. A $2 million guaranty by the seller, for an 11% first loss piece, is in place until August 2021.

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

Type as of March 31, 2020
(Excludes government guaranteed portion of SBA 7a loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total			% Total
		(in millions)
Hotels		$	62		$	17		$	-		$	79		28%
Professional services offices			17			-			5			22		8%
Full-service restaurants			15			1			5			21		8%
Child day care and youth services			18			1			1			20		7%
Bakeries			4			-			12			16		6%
Fitness/rec centers and instruction			8			-			5			13		4%
General warehousing and storage			11			-			-			11		4%
Limited-service restaurants and catering			7			-			3			10		4%
Elderly assisted living facilities			-			7			3			10		4%
Amusement and recreation industries			5			1			-			6		2%
Car washes			3			2			-			5		2%
Funeral homes			5			-			-			5		2%
New and used car dealers			4			-			-			4		1%
Automotive servicing			2			-			1			3		1%
Other			34			5			18			57		20%
Total		$	195		$	34		$	53		$	282		100%

* Substantially all are SBA loans which had 50-60% LTV ratios at their origination.

State diversification as of March 31, 2020
(Excludes government guaranteed portion of SBA 7a loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total			% Total
		(in millions)
Florida		$	33		$	14		$	7		$	54		19%
Pennsylvania			29			-			3			32		11%
Illinois			26			-			5			31		11%
California			25			1			5			31		11%
North Carolina			16			9			2			27		10%
New York			13			1			5			19		7%
Texas			10			1			5			16		6%
Tennessee			8			5			1			14		5%
New Jersey			1			2			7			10		4%
Virginia			8			1			2			11		4%
Georgia			3			-			1			4		1%
Michigan			3			-			1			4		1%
Colorado			2			-			1			3		1%
Ohio			2			-			1			3		1%
Other states			16			-			7			23		8%
Total		$	195		$	34		$	53		$	282		100%

* Substantially all are SBA loans with 50-60% LTV ratios at origination.

Top 10 loans as of March 31, 2020
Type*		State		SBL commercial mortgage*			SBL construction*			Total
		(in millions)
Professional services office		CA		$	9		$	-		$	9
Hotel		FL			9			-			9
General warehouse		PA			7			-			7
Hotel		NC			-			6			6
Hotel		FL			5			-			5
Hotel		NC			5			-			5
Assisted living facility		FL			-			5			5
Fitness and rec center		PA			5			-			5
Hotel		PA			4			-			4
Hotel		NY			3			-			3
Total				$	47		$	11		$	58

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

Commercial real estate loans held for sale which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination. The vast majority of these loans were originated in the past nine months:

Type as of March 31, 2020
Type		# Loans		Balance			Origination date LTV		Weighted average minimum interest rate
		(dollars in millions)
Multifamily (apartments)		175		$	1,364		77%		4.75%
Hospitality (hotels and lodging) *		11			58		62%		5.69%
Retail		7			51		72%		4.94%
Other		8			24		69%		5.18%
		201		$	1,497		76%		4.80%
Fair value adjustment					(4)
Total				$	1,493

*Of the total $4 million fair value adjustment, $1.8 million was related to hospitality loans

State diversification as of March 31, 2020									15 Largest loans (all multifamily) as of March 31, 2020
State		Balance			Origination date LTV				State		Balance			Origination date LTV
(in millions)									(in millions)
Texas		$	375		77%				North Carolina		$	43		78%
Georgia			230		78%				Texas			36		79%
Arizona			117		76%				Texas			34		80%
North Carolina			108		77%				Pennsylvania			31		77%
Nevada			56		80%				Georgia			31		80%
Alabama			53		76%				Nevada			28		80%
Other states each <$50 million			558		76%				Texas			27		75%
Total		$	1,497		76%				Texas			26		77%
									Arizona			25		79%
									Mississippi			25		79%
									Texas			24		77%
									North Carolina			24		77%
									Texas			24		77%
									Georgia			23		79%
									Alabama			22		77%
									15 Largest loans		$	423		78%

Institutional banking loans outstanding at March 31, 2020
Type		Principal			% of total
		(in millions)
Securities backed lines of credit (SBLOC)		$	927		80%
Insurance backed lines of credit (IBLOC)			229		20%
Total		$	1,156		100%

For SBLOC, we generally lend up to 50% of the value of equities and 80% for investment grade securities. While equities have fallen in excess of 30% in recent periods, the reduction in collateral value of brokerage accounts collateralizing SBLOCs generally has been less, for two reasons. First, many collateral accounts are “balanced” and accordingly have a component of debt securities, which have either not decreased in value as much as equities, or in some cases may have increased in value. Secondly, many of these accounts have the benefit of professional investment advisors who provided some protection against market downturns, through diversification and other means. Additionally, borrowers often utilize only a portion of collateral value, which lowers the ratio of principal to collateral. As a result, the accounts monitored by management and related information as of March 31, 2020 were as follows:

Assessment of SBLOC collateral market value
		Number of loans		Principal balances			Market value of collateral			% Principal to collateral
		(in millions)
0-5%		7		$	4		$	5		79%
5-10%		19			24			32		75%
10-15%		40			26			36		71%
15%+		85			50			79		63%
Subtotal*		151		$	104		$	152		69%
Remaining portfolio		4,498			823			3,598		23%
Total		4,649		$	927		$	3,750		25%

* Of the 4,649 SBLOC loans with principal balances of $927 million, 151 loans with principal of $104 million at March 31, 2020 were being monitored at that date, as they had exceeded the desired threshold for the percent principal to market value of collateral. The first column reflects the percentage increase in that ratio before additional collateral or paydown of debt would be required. As of April 23, 2020, the number of loans requiring monitoring had decreased to 80 loans, with principal balances of $57 million.

Top 10 SBLOC loans
		Principal amount			% Principal to collateral
		(in millions)
		$	22		22%
			19		47%
			15		29%
			11		82%
			10		57%
			9		31%
			9		76%
			8		22%
			8		20%
			8		23%
Total		$	119		40%

Insurance backed lines of credit (IBLOC)

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

Direct lease financing* by type as of March 31, 2020
		Principal balance			% Total
		(in millions)
Government agencies and public institutions**		$	79		18%
Construction			75		17%
Waste management and remediation services			62		14%
Real estate, rental and leasing			44		10%
Retail trade			40		9%
Transportation and warehousing			29		6%
Health care and social assistance			26		6%
Professional, scientific, and technical services			20		5%
Manufacturing			15		3%
Wholesale trade			14		3%
Educational services			11		2%
Arts, entertainment, and recreation			5		1%
Other			26		6%
Total		$	446		100%

* Of the total $446 million of direct lease financing, $411 million consisted of vehicle leases with the remaining balance consisting of equipment leases

** Includes public universities and school districts

Direct lease financing by state as of March 31, 2020
State		Principal balance			% Total
		(in millions)
Florida		$	116		26%
New Jersey			27		6%
New York			25		6%
Pennsylvania			27		6%
North Carolina			22		5%
Maryland			21		5%
California			21		5%
Utah			20		4%
Washington			16		4%
South Carolina			14		3%
Texas			14		3%
Georgia			13		3%
Alabama			12		3%
Connecticut			9		2%
Missouri			7		2%
Other states			82		18%
Total		$	446		100%

Capital ratios:		Tier 1 capital		Tier 1 capital		Total capital		Common equity
		to average		to risk-weighted		to risk-weighted		tier 1 to risk
		assets ratio		assets ratio		assets ratio		weighted assets
As of March 31, 2020
The Bancorp, Inc.		8.90%		16.99%		17.50%		16.99%
The Bancorp Bank		8.76%		16.70%		17.22%		16.70%
"Well capitalized" institution (under FDIC regulations-Basel III)		5.00%		8.00%		10.00%		6.50%
As of December 31, 2019
The Bancorp, Inc.		9.63%		19.04%		19.45%		19.04%
The Bancorp Bank		9.46%		18.71%		19.11%		18.71%
"Well capitalized" institution (under FDIC regulations-Basel III)		5.00%		8.00%		10.00%		6.50%

		Three months ended				Year ended
		March 31,				December 31,
		2020		2019		2019
Selected operating ratios:
Return on average assets (1)		0.91%		1.65%		1.09%
Return on average equity (1)		10.28%		17.28%		11.57%
Net interest margin		3.34%		3.41%		3.32%
(1) Annualized

NOTE: Excluding the net of tax impact of the $5.2 million of unrealized losses, return on assets for the quarter ended March 31, 2020 was 1.19% and return on equity was 13.35%.

Book value per share table:		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
Book value per share		$	8.69		$	8.52		$	8.52		$		7.70
Loan quality table:		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
Nonperforming loans to total loans			0.40%			0.50%			0.55%				0.55%
Nonperforming assets to total assets			0.14%			0.16%			0.19%				0.18%
Allowance for loan and lease losses to total loans			0.75%			0.56%			0.62%				0.66%
Nonaccrual loans		$	5,645		$	5,796		$	6,420		$		5,863
Loans 90 days past due still accruing interest			2,245			3,264			2,788				2,483
Other real estate owned			-			-			-				-
Total nonperforming assets		$	7,890		$	9,060		$	9,208		$		8,346
NOTE: Because SBLOC and IBLOC loans are respectively collateralized by marketable securities and the cash value of life insurance, management excludes those loans from the ratio of the allowance to total loans in its internal analysis. Accordingly, the adjusted ratio is 1.79%.
		Three months ended
		March 31,			December 31,			September 30,			March 31,
		2020			2019			2019			2019
		(in thousands)
Gross dollar volume (GDV) (2):
Prepaid and debit card GDV		$	22,982,188		$	19,104,327		$	17,264,890		$		16,937,325
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.

Business line quarterly summary:
Quarter ended March 31, 2020
(dollars in millions)
				Balances
							% Growth
Major business lines		Average approximate rates *		Balances **			Year over year		Linked quarter annualized
Loans
Institutional banking ***		3.5%		$	1,156		46%		51%
SBA		5.6%			595		21%		16%
Leasing		6.3%			446		16%		11%
Commercial real estate securitization		5.0%			1,495		nm		nm
Weighted average yield		4.8%		$	3,692						Non-interest income
														% Growth
Deposits											Current quarter			Year over year
Payment solutions (prepaid and debit card issuance)		0.5%		$	3,152		24%		nm		$	18.5		15%
Card payment and ACH processing		0.9%			792		-11%		nm			1.8		nm

* Average rates are for the quarter ended March 31, 2020
** Loan categories are based on period end balance and deposits are based on average quarterly balances.
*** Comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities and Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies.

Analysis of Walnut Street* marks:
		Loan activity			Marks
		(in millions)
Original Walnut Street loan balance, December 31, 2014		$	267
Marks through December 31, 2014 sale date			(58)		$	(58)
Sales price of Walnut Street			209
Equity investment from independent investor			(16)
December 31, 2014 Bancorp book value			193
Additional marks 2015 - 2019			(46)			(46)
2020 Marks			-
Payments received			(113)
March 31, 2020 Bancorp book value**		$	34
Total marks					$	(104)
Divided by:
Original Walnut Street loan balance					$	267
Percentage of total mark to original balance						39%

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

** Approximately 32% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of March 31, 2020.

Walnut Street portfolio composition as of March 31, 2020
Collateral type		% of Portfolio
Commercial real estate non-owner occupied
Retail		58.2%
Office		-
Other		5.2%
Construction and land		25.2%
Commercial non real estate and industrial		-
First mortgage residential owner occupied		9.7%
First mortgage residential non-owner occupied		1.7%
Total		100.0%

Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2020
		Discontinued			Cumulative			% to original
		loan principal			marks			principal
		(dollars in millions)
Commercial loan discontinued principal before marks		$	72
Florida mall held in discontinued other real estate owned			42			(27)
Previous mark charges			10			(10)
Mark at March 31, 2020						(4)
Total		$	124		$	(41)		33%

Analysis of discontinued commercial loan relationships as of March 31, 2020
		Performing			Nonperforming			Total			Performing			Nonperforming			Total
		loan principal			loan principal			loan principal			loan marks			loan marks			marks
		(in millions)
5 loan relationships > $6 million		$	45		$	-		$	45		$	(3)		$	-		$	(3)
Loan relationships < $6 million			16			7			23			(1)			-			(1)
		$	61		$	7		$	68		$	(4)		$	-		$	(4)

Quarterly activity for commercial loan discontinued principal
		Commercial
		loan principal
		(in millions)
Commercial loan discontinued principal December 31, 2019 before marks		$	75
Quarterly paydowns and other reductions			(3)
Commercial loan discontinued principal March 31, 2020 before marks		$	72
Marks March 31, 2020			(4)
Net commercial loan exposure March 31, 2020		$	68
Residential mortgages			43
Net loans		$	111
Florida mall in other real estate owned			15
10 properties in other real estate owned			8
Total discontinued assets at March 31, 2020		$	134

Discontinued commercial loan composition as of March 31, 2020
Collateral type		Unpaid principal balance			Mark March 31, 2020			Mark as % of portfolio
		(in millions)
Commercial real estate - non-owner occupied:
Retail		$	4		$	(0.6)		13%
Office			3			-		-
Other			23			(0.3)		1%
Construction and land			11			-		-
Commercial non-real estate and industrial			2			-		-
1 to 4 family construction			11			(2.5)		23%
First mortgage residential non-owner occupied			9			(0.2)		2%
Commercial real estate owner occupied:
Retail			7			-		-
Office			-			-		-
Other			-			-		-
Residential junior mortgage			1			-		-
Other			1			-		-
Total		$	72			-
Less: mark			(4)			-
Net commercial loan exposure March 31, 2020		$	68		$	(3.6)		5%

Loan payment deferral requests as of April 23, 2020
		Principal for loans with deferral requests			Total principal by loan category			% of total loan principal with deferral requests
		(in millions)
Commercial real estate loans held for sale (excluding SBA loans)		$	10		$	1,497		<1%
Securities backed lines of credit & insurance backed lines of credit			10			1,156		1%
Small business lending, substantially all SBA loans			127			586		22%
Direct lease financing			80			446		18%
Discontinued operations			18			115		15%
Other consumer loans and specialty lending			1			7		17%
Total		$	246		$	3,807		6%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200430005942/en/