The Bancorp, Inc. Reports Second Quarter 2021 Financial Results

The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter of 2021.

Highlights

• For the quarter ended June 30, 2021, The Bancorp earned net income of $29.2 million from continuing operations, and $0.50 diluted earnings per share from combined continuing and discontinued operations.
• Return on assets and equity for the quarter ended June 30, 2021 amounted to 1.7% and 19%, respectively, compared to 1.3% and 16%, respectively, for the quarter ended June 30, 2020 (all percentages “annualized.”)
• Net interest margin amounted to 3.19% for the quarter ended June 30, 2021, compared to 3.53% for the quarter ended June 30, 2020 and 3.34% for the quarter ended March 31, 2021.
• Net interest income increased 8% to $54.1 million for the quarter ended June 30, 2021, compared to $50.2 million for the quarter ended June 30, 2020.
• Average loans and leases, including loans at fair value, increased 16% to $4.58 billion for the quarter ended June 30, 2021, compared to $3.93 billion for the quarter ended June 30, 2020.
• Prepaid, debit card and other payment related fees increased 5% to $21.4 million for the quarter ended June 30, 2021, compared to $20.4 million for the quarter ended June 30, 2020.
• Gross dollar volume (GDV), representing the total amounts spent on prepaid and debit cards, increased 15% for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020.
• SBLOC (securities backed lines of credit), IBLOC (insurance backed lines of credit) and advisor financing loans collectively increased 38% year over year and 7% quarter over quarter to $1.80 billion at June 30, 2021.
• Small Business Loans, including those held at fair value, increased 15% year over year to $689.5 million at June 30, 2021. That growth is exclusive of Paycheck Protection Program (PPP) loan balances of $129.4 million and $207.9 million, respectively, at June 30, 2021 and June 30, 2020.
• Direct lease financing balances increased 20% year over year to $506.4 million at June 30, 2021.
• The average interest rate on $6.38 billion of average deposits and interest-bearing liabilities during the second quarter of 2021 was 0.18%. Average deposits of $6.26 billion for the second quarter 2021, reflected an increase of 17% over the $5.37 billion in average deposits for the quarter ended June 30, 2020.
• Of the $48 million of loan balances with Covid related payment deferrals at March 31, 2021, only borrowers representing $2.6 million of balances had not made their payments due on July 5, 2021, with an additional $968,000 remaining in deferral as of that date. Those amounts represent .08% of total loans at June 30, 2021 compared to 1.0% at March 31, 2021.
• Consolidated and The Bancorp Bank (“the Bank”) leverage ratios were 8.52% and 8.73%, respectively, at June 30, 2021. The Bancorp and its subsidiary, The Bank, remain well capitalized.
• Book value per common share at June 30, 2021 was $10.77 per share compared to $9.28 per share at June 30, 2020, an increase of 16%, primarily as a result of retained earnings per share.
• The Bancorp repurchased 449,315 shares of its common stock at an average cost of $22.26 per share during the quarter ended June 30, 2021.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We had another strong quarter in both growth and profitability. Growth continues to be supported by the acquisition of new clients and the expansion of our capabilities and solutions in our payments ecosystem. Based on our year-to-date performance of $0.94 a share and our 2021 outlook, we are raising our guidance to $1.78 a share. The $1.78 does not include the impact of buybacks in the 3rd and 4th quarters. We continue to see tailwinds that should drive continued growth in 2021 earnings and beyond. We will issue preliminary 2022 per share guidance in our 3rd quarter earnings release. Current trends would suggest income growth for 2022 of 20% or more over our revised 2021 guidance.”

The Bancorp reported net income of $29.4 million, or $0.50 per diluted share, for the quarter ended June 30, 2021, compared to net income of $20.1 million, or $0.35 per diluted share, for the quarter ended June 30, 2020. 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 8.52%, 15.39%, 15.78% and 15.39%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 30, 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 2868852. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, August 6, 2021 by dialing 855.859.2056, access code 2868852.

The Bancorp, Inc. (NASDAQ: TBBK), headquartered in Wilmington, Delaware, through its subsidiary, The Bancorp Bank, provides non-bank financial companies with the people, processes, and technology to meet their unique banking needs. Through its Fintech Solutions, Institutional Banking, Commercial Lending, and Real Estate Bridge Lending businesses, The Bancorp provides partner-focused solutions paired with cutting-edge technology for companies that range from entrepreneurial startups to Fortune 500 companies. With over 20 years of experience, The Bancorp has become a leader in the financial services industry, earning recognition as the #1 issuer of prepaid cards in the U.S., a nationwide provider of bridge financing for real estate capital improvement plans, an SBA National Preferred Lender, a leading provider of securities-backed lines of credit, with one of the few bank-owned commercial vehicle leasing groups. By its company-wide commitment to excellence, The Bancorp has also been ranked as one of the 100 Fastest-Growing Companies by Fortune, a Top 50 Employer by Equal Opportunity Magazine, and was selected to be included in the S&P Small Cap 600. For more about The Bancorp, visit https://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. 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 and 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 press release, except as may be required under applicable law.

The Bancorp, Inc. Financial highlights (unaudited)
	Three months ended June 30,								Six months ended June 30,
Condensed income statement	2021				2020				2021				2020
	(dollars in thousands, except per share data)
Net interest income	$	54,069			$	50,246			$	107,826			$	93,157
Provision for credit losses		(951	)			922				(129	)			4,501
Non-interest income
ACH, card and other payment processing fees		1,904				1,707				3,700				3,553
Prepaid, debit card and related fees		19,447				18,673				38,655				37,213
Net realized and unrealized gains (losses) on commercial
loans, at fair value		2,579				(940	)			4,575				(6,096	)
Change in value of investment in unconsolidated entity		—				—				—				(45	)
Leasing related income		1,767				443				2,732				1,276
Other non-interest income		164				483				273				1,064
Total non-interest income		25,861				20,366				49,935				36,965
Non-interest expense
Salaries and employee benefits		27,087				25,492				52,745				48,233
Data processing expense		1,146				1,177				2,272				2,346
Legal expense		2,044				2,229				4,098				3,142
FDIC insurance		2,589				2,918				4,969				5,507
Software		3,706				3,386				7,390				6,863
Other non-interest expense		7,311				7,418				14,292				14,947
Total non-interest expense		43,883				42,620				85,766				81,038
Income from continuing operations before income taxes		36,998				27,070				72,124				44,583
Income tax expense		7,840				6,787				16,906				11,139
Net income from continuing operations		29,158				20,283				55,218				33,444
Discontinued operations
Income (loss) from discontinued operations before income taxes		361				(274	)			237				(1,049	)
Income tax expense (benefit)		84				(59	)			55				(264	)
Net income (loss) from discontinued operations, net of tax		277				(215	)			182				(785	)
Net income	$	29,435			$	20,068			$	55,400			$	32,659
Net income per share from continuing operations - basic	$	0.51			$	0.35			$	0.96			$	0.58
Net income (loss) per share from discontinued operations - basic	$	—			$	—			$	0.01			$	(0.01	)
Net income per share - basic	$	0.51			$	0.35			$	0.97			$	0.57
Net income per share from continuing operations - diluted	$	0.49			$	0.35			$	0.93			$	0.58
Net income (loss) per share from discontinued operations - diluted	$	0.01			$	—			$	0.01			$	(0.01	)
Net income per share - diluted	$	0.50			$	0.35			$	0.94			$	0.57
Weighted average shares - basic		57,230,576				57,489,719				57,232,557				57,355,282
Weighted average shares - diluted		59,022,925				57,800,115				59,086,956				57,856,791

Note: Compared to higher rates in recent periods, the effective tax rate in the second quarter of 2021 approximated 21% as a result of the impact of excess tax deductions related to stock-based compensation, recorded as a discrete item in the second quarter. The large deductions and tax benefit resulted from the increase in the Company’s stock price as compared to the original grant date.

Balance sheet	June 30, 2021 (unaudited)				March 31, 2021 (unaudited)				December 31, 2020				June 30, 2020 (unaudited)
	(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks	$	5,470			$	7,838			$	5,984			$	5,094
Interest earning deposits at Federal Reserve Bank		583,498				1,738,749				339,531				475,627
Total cash and cash equivalents		588,968				1,746,587				345,515				480,721
Investment securities, available-for-sale, at fair value		1,106,075				1,128,459				1,206,164				1,324,447
Commercial loans, at fair value (held-for-sale at June 30, 2020)		1,690,216				1,780,762				1,810,812				1,807,630
Loans, net of deferred fees and costs		2,915,344				2,827,076				2,652,323				2,322,737
Allowance for credit losses		(15,292	)			(16,419	)			(16,082	)			(14,625	)
Loans, net		2,900,052				2,810,657				2,636,241				2,308,112
Federal Home Loan Bank and Atlantic Central Bankers Bank stock		1,667				1,368				1,368				1,368
Premises and equipment, net		17,392				17,196				17,608				16,701
Accrued interest receivable		18,668				20,164				20,458				18,897
Intangible assets, net		2,646				2,746				2,845				2,710
Deferred tax asset, net		10,923				10,900				9,757				7,921
Investment in unconsolidated entity, at fair value		24,988				31,047				31,294				34,064
Assets held-for-sale from discontinued operations		97,496				106,925				113,650				128,463
Other assets		91,516				90,530				81,129				83,003
Total assets	$	6,550,607			$	7,747,341			$	6,276,841			$	6,214,037
Liabilities:
Deposits
Demand and interest checking	$	5,225,024			$	6,231,220			$	5,205,010			$	5,089,741
Savings and money market		459,688				690,281				257,050				455,458
Total deposits		5,684,712				6,921,501				5,462,060				5,545,199
Securities sold under agreements to repurchase		42				42				42				42
Senior debt		98,498				98,406				98,314				—
Subordinated debenture		13,401				13,401				13,401				13,401
Other long-term borrowings		39,901				40,085				40,277				40,639
Other liabilities		94,944				77,142				81,583				81,677
Total liabilities	$	5,931,498			$	7,150,577			$	5,695,677			$	5,680,958
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,458,287 and 57,455,308 shares issued and outstanding at June 30, 2021 and 2020, respectively		57,458				57,248				57,551				57,455
Additional paid-in capital		363,241				370,481				377,452				373,812
Retained earnings		183,853				154,418				128,453				81,028
Accumulated other comprehensive income		14,557				14,617				17,708				20,784
Total shareholders' equity		619,109				596,764				581,164				533,079
Total liabilities and shareholders' equity	$	6,550,607			$	7,747,341			$	6,276,841			$	6,214,037

Average balance sheet and net interest income	Three months ended June 30, 2021										Three months ended June 30, 2020
	(dollars in thousands; unaudited)
Assets:	Average Balance				Interest			Average Rate			Average Balance				Interest			Average Rate
Interest earning assets:
Loans, net of deferred fees and costs**	$	4,572,712			$	49,378		4.32	%		$	3,925,515			$	41,448		4.22	%
Leases-bank qualified*		5,783				96		6.64	%			9,217				162		7.03	%
Investment securities-taxable		1,081,419				7,201		2.66	%			1,334,368				10,188		3.05	%
Investment securities-nontaxable*		3,878				32		3.30	%			4,402				35		3.18	%
Interest earning deposits at Federal Reserve Bank		1,120,039				300		0.11	%			426,174				107		0.10	%
Net interest earning assets		6,783,831				57,007		3.36	%			5,699,676				51,940		3.65	%
Allowance for credit losses		(16,406	)									(14,822	)
Assets held-for-sale from discontinued operations		98,895				781		3.16	%			130,530				1,094		3.35	%
Other assets		201,539										228,443
	$	7,067,859									$	6,043,827
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	5,736,776			$	1,327		0.09	%		$	5,140,167			$	1,390		0.11	%
Savings and money market		526,112				192		0.15	%			234,201				120		0.20	%
Total deposits		6,262,888				1,519		0.10	%			5,374,368				1,510		0.11	%
Short-term borrowings		—				—		—				16,428				15		0.37	%
Repurchase agreements		41				—		—				41				—		—
Subordinated debentures		13,401				112		3.34	%			13,401				128		3.82	%
Senior debt		100,239				1,280		5.11	%			—				—		—
Total deposits and liabilities		6,376,569				2,911		0.18	%			5,404,238				1,653		0.12	%
Other liabilities		83,353										123,997
Total liabilities		6,459,922										5,528,235
Shareholders' equity		607,937										515,592
	$	7,067,859									$	6,043,827
Net interest income on tax equivalent basis*					$	54,877									$	51,381
Tax equivalent adjustment						27										41
Net interest income					$	54,850									$	51,340
Net interest margin *								3.19	%									3.53	%

* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2021 and 2020.
** Includes commercial loans, at fair value for 2021 previously classified as held-for-sale at June 30, 2020. All periods include non-accrual loans.

NOTE: In the table above, the 2021 interest on loans reflects $3.0 million of fees which were earned on a short-term line of credit to another institution to initially fund PPP loans, which did not significantly increase average loans or assets. These fees are not expected to recur. Interest on loans also includes $1.3 million of interest and fees on PPP loans. In 2020 the table above includes comparable PPP interest and fees of $1.6 million. Increases in interest earning deposits at the Federal Reserve Bank reflect increased deposits resulting from stimulus payments distributed to a large segment of the population, resulting from December 2020 federal legislation.

Average balance sheet and net interest income	Six months ended June 30, 2021										Six months ended June 30, 2020
	(dollars in thousands; unaudited)
Assets:	Average Balance				Interest			Average Rate			Average Balance				Interest			Average Rate
Interest earning assets:
Loans, net of deferred fees and costs**	$	4,524,911			$	97,189		4.30	%		$	3,593,921			$	80,607		4.49	%
Leases - bank qualified*		6,379				214		6.71	%			10,096				362		7.17	%
Investment securities-taxable		1,136,631				16,009		2.82	%			1,364,956				20,683		3.03	%
Investment securities-nontaxable*		3,960				67		3.38	%			4,788				75		3.13	%
Interest earning deposits at Federal Reserve Bank		935,239				483		0.10	%			460,025				1,730		0.75	%
Net interest earning assets		6,607,120				113,962		3.45	%			5,433,786				103,457		3.81	%
Allowance for credit losses		(16,241	)									(12,532	)
Assets held for sale from discontinued operations		103,983				1,634		3.14	%			133,903				2,368		3.54	%
Other assets		203,821										233,088
	$	6,898,683									$	5,788,245
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	5,619,608			$	2,944		0.10	%		$	4,746,928			$	8,085		0.34	%
Savings and money market		466,978				341		0.15	%			203,888				170		0.17	%
Time deposits		—				—		—				159,752				1,483		1.86	%
Total deposits		6,086,586				3,285		0.11	%			5,110,568				9,738		0.38	%
Short-term borrowings		6,491				8		0.25	%			36,620				180		0.98	%
Repurchase agreements		41				—		—				57				—		—
Subordinated debentures		13,401				225		3.36	%			13,401				290		4.33	%
Senior debt		100,190				2,559		5.11	%			—				—		—
Total deposits and liabilities		6,206,709				6,077		0.20	%			5,160,646				10,208		0.40	%
Other liabilities		91,837										118,811
Total liabilities		6,298,546										5,279,457
Shareholders' equity		600,137										508,788
	$	6,898,683									$	5,788,245
Net interest income on tax equivalent basis*					$	109,519									$	95,617
Tax equivalent adjustment						59										92
Net interest income					$	109,460									$	95,525
Net interest margin *								3.26	%									3.43	%

* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2021 and 2020.
** Includes commercial loans, at fair value for 2021 previously classified as held-for-sale at June 30, 2020. All periods include non-accrual loans.

NOTE: In the table above, the 2021 interest on loans reflects $4.5 million of fees which were earned on a short-term line of credit to another institution to initially fund PPP loans, which did not significantly increase average loans or assets. These fees are not expected to recur. Interest on loans also includes $3.7 million of interest and fees on PPP loans. In 2020 the table above includes comparable PPP interest and fees of $1.6 million. Increases in interest earning deposits at the Federal Reserve Bank reflect increased deposits resulting from stimulus payments distributed to a large segment of the population, resulting from December 2020 federal legislation.

Allowance for credit losses	Six months ended								Year ended
	June 30, 2021 (unaudited)				June 30, 2020 (unaudited)				December 31, 2020
	(dollars in thousands)
Balance in the allowance for credit losses at beginning of period (1)	$	16,082			$	12,875			$	12,875
Loans charged-off:
SBA non-real estate		321				1,048				1,350
SBA commercial mortgage		23				–				–
Direct lease financing		193				1,552				2,243
SBLOC		15				–				–
Total		552				2,600				3,593
Recoveries:
SBA non-real estate		15				60				103
Direct lease financing		7				84				570
Total		22				144				673
Net charge-offs		530				2,456				2,920
(Reversal of) provision credited to allowance, excluding commitment provision		(260	)			4,206				6,127
Balance in allowance for credit losses at end of period	$	15,292			$	14,625			$	16,082
Net charge-offs/average loans		0.02	%			0.06	%			0.07	%
Net charge-offs/average assets		0.01	%			0.04	%			0.05	%

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

Loan portfolio	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
	(in thousands)
SBL non-real estate	$	228,958		$	305,446		$	255,318		$	293,692
SBL commercial mortgage		343,487			320,013			300,817			259,020
SBL construction		18,494			20,692			20,273			33,193
Small business loans *		590,939			646,151			576,408			585,905
Direct lease financing		506,424			484,316			462,182			422,505
SBLOC / IBLOC**		1,729,628			1,622,359			1,550,086			1,287,350
Advisor financing ***		72,190			58,919			48,282			15,529
Other specialty lending		2,092			2,251			2,179			2,706
Other consumer loans ****		3,748			4,201			4,247			4,003
		2,905,021			2,818,197			2,643,384			2,317,998
Unamortized loan fees and costs		10,323			8,879			8,939			4,739
Total loans, net of unamortized fees and costs	$	2,915,344		$	2,827,076		$	2,652,323		$	2,322,737

Small business portfolio	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
	(in thousands)
SBL, including unamortized fees and costs	$	593,401		$	647,445		$	577,944		$	583,935
SBL, included in commercial loans, at fair value		225,534			234,908			243,562			225,401
Total small business loans	$	818,935		$	882,353		$	821,506		$	809,336

* 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. A reduction in SBL non-real estate loans from $305.4 million at March 31, 2021 to $229.0 million at June 30, 2021 resulted from U.S. government repayments of $60.8 million of PPP loans authorized by The Consolidated Appropriations Act, 2021 and the repayment of $19.7 million of a line of credit to another institution related to PPP loans. PPP loans totaled $129.4 million at June 30, 2021 and $165.7 million at December 31, 2020, respectively.
** 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 $424,000 and $663,000 at June 30, 2021 and December 31, 2020, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial.

Small business loans as of June 30, 2021
	Loan principal (in millions)
U.S. government guaranteed portion of SBA loans (a)	$	358
Paycheck Protection Program Loans (PPP) (a)		129
Commercial mortgage SBA (b)		189
Construction SBA (c)		9
Non-guaranteed portion of U.S. government guaranteed 7a loans (d)		106
Non-SBA small business loans (e)		18
Total principal	$	809
Unamortized fees and costs		10
Total small business loans	$	819

(a) This is the portion of SBA 7a loans (7a) and PPP loans which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.
(b) Substantially all 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 $9 million in Construction SBA loans, $8 million are 504 first mortgages with an origination date LTV of 50-60% and $1 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.
(d) The $106 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 of non-SBA loans is comprised of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators, 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 (“the CARES Act”) provided for 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 provides for at least an additional two months of such payments on SBA 7a loans, with up to five months of payments on hotel, restaurant, and other more highly impacted loans. Unlike the six months of CARES Act payments, these additional payments are capped at $9,000 per month.

Small business loans by type as of June 30, 2021
(Excludes government guaranteed portion of SBA 7a loans, PPP loans, and a line of credit to initially fund PPP loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total				% Total
		(in millions)
Hotels (except casino hotels) and motels		$	66		$	3		$	—		$	69			22	%
Full-service restaurants			16			1			3			20			6	%
Child day care services			16			—			1			17			5	%
Baked goods stores			4			—			11			15			5	%
Car washes			10			2			—			12			4	%
Assisted living facilities for the elderly			10			—			—			10			3	%
Offices of lawyers			9			—			—			9			3	%
Lessors of nonresidential buildings (except miniwarehouses)			9			—			—			9			3	%
Funeral homes and funeral services			8			—			—			8			2	%
Limited-service restaurants			2			1			5			8			2	%
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	%
Other spectator sports			5			—			—			5			1	%
Fitness and recreational sports centers			—			2			2			4			1	%
Gasoline stations with convenience stores			4			—			—			4			1	%
Offices of dentists			3			—			—			3			1	%
Other warehousing and storage			3			—			—			3			1	%
New car dealers			3			—			—			3			1	%
All other miscellaneous wood product manufacturing			3			—			—			3			1	%
Offices of physicians (except mental health specialists)			3			—			—			3			1	%
All other miscellaneous general purpose machinery manufacturing			3			—			—			3			1	%
Pet care (except veterinary) services			2			—			—			2			1	%
Automotive body, paint, and interior repair and maintenance			2			—			—			2			1	%
Sewing, needlework, and piece goods stores			2			—			—			2			1	%
Caterers			2			—			—			2			1	%
Amusement arcades			2			—			—			2			1	%
Lessors of other real estate property			2			—			—			2			1	%
Plumbing, heating, and air-conditioning contractors			2			—			—			2			1	%
Landscaping services			—			—			2			2			1	%
Offices of real estate agents and brokers			2			—			—			2			1	%
Independent artists, writers, and performers			2			—			—			2			1	%
Other**			46			2			28			76			20	%
Total		$	258		$	11		$	53		$	322			100	%

* Of the SBL commercial mortgage and SBL construction loans, $61.0 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 $2.0 million are spread over a hundred different classifications such as Commercial Printing, Pet and Pet Supplies Stores, Securities Brokerage, etc.

State diversification as of June 30, 2021
(Excludes government guaranteed portion of SBA 7a loans, PPP loans, and a line of credit to initially fund PPP loans)
		SBL commercial mortgage*			SBL construction*			SBL non-real estate			Total				% Total
		(in millions)
Florida		$	54		$	—		$	8		$	62			19	%
California			42			1			4			47			15	%
North Carolina			23			2			3			28			9	%
Pennsylvania			23			—			3			26			8	%
New York			17			3			5			25			8	%
Illinois			22			—			3			25			8	%
Texas			12			—			5			17			5	%
New Jersey			7			—			6			13			4	%
Virginia			9			—			2			11			3	%
Tennessee			10			—			1			11			3	%
Georgia			7			—			2			9			3	%
Colorado			3			4			2			9			3	%
Michigan			3			—			2			5			2	%
Washington			3			—			—			3			1	%
Ohio			3			—			—			3			1	%
Other states			20			1			7			28			8	%
Total		$	258		$	11		$	53		$	322			100	%

* Of the SBL commercial mortgage and SBL construction loans, $61.0 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 June 30, 2021
Type*		State		SBL commercial mortgage*
		(in millions)
Lawyers' office		CA		$	9
Hotel		FL			9
General warehouse and storage		PA			7
Hotel		NC			6
Assisted living facility		FL			5
Outpatient mental health and substance abuse center		FL			5
Hotel		NC			5
Hotel		PA			4
Hotel		TN			4
Gasoline station		VA			4
Total				$	58

* All of the top 10 loans are 504 SBA loans with 50%-60% origination date loan-to-value and are in the commercial mortgage category. 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 June 30, 2021
Type			# Loans		Balance				Weighted average origination date LTV			Weighted average minimum interest rate
			(dollars in millions)
Multifamily (apartments)			136		$	1,323			76	%		4.75	%
Hospitality (hotels and lodging)			11			75			65	%		5.74	%
Retail			6			44			71	%		4.65	%
Other			7			28			70	%		5.24	%
			160		$	1,470			75	%		4.81	%
Fair value adjustment						(5	)
Total					$	1,465

State diversification as of June 30, 2021										15 largest loans (all multifamily) as of June 30, 2021
State		Balance				Origination date LTV				State			Balance			Origination date LTV
(in millions)										(in millions)
Texas		$	427			77	%			North Carolina			$	44		78	%
Georgia			174			77	%			Texas				38		79	%
Arizona			108			76	%			Texas				36		80	%
North Carolina			69			78	%			Pennsylvania				33		77	%
Alabama			56			76	%			Texas				30		75	%
Ohio			57			69	%			Nevada				28		80	%
Other states each <$55 million			579			73	%			Texas				27		77	%
Total		$	1,470			75	%			Arizona				27		79	%
										Mississippi				27		79	%
										North Carolina				25		77	%
										Texas				25		77	%
										Texas				24		77	%
										Alabama				23		77	%
										Georgia				21		79	%
										Texas				21		79	%
										15 Largest loans			$	429		78	%

Institutional banking loans outstanding at June 30, 2021
Type	Principal			% of total
	(in millions)
Securities backed lines of credit (SBLOC)	$	1,133		63	%
Insurance backed lines of credit (IBLOC)		597		33	%
Advisor financing		72		4	%
Total	$	1,802		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 years, 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 June 30, 2021
	Principal amount			% Principal to collateral
	(in millions)
	$	60		41	%
		17		37	%
		16		54	%
		14		26	%
		12		29	%
		10		38	%
		9		30	%
		8		71	%
		8		23	%
		8		51	%
Total and weighted average	$	162		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 April 17, 2021, all were rated Superior (A+ or better) by AM BEST.

Direct lease financing* by type as of June 30, 2021
	Principal balance			% Total
	(in millions)
Construction	$	83		16	%
Government agencies and public institutions**		77		15	%
Real estate and rental and leasing		66		13	%
Waste management and remediation services		63		12	%
Retail trade		48		10	%
Wholesale trade		40		8	%
Transportation and warehousing		28		6	%
Health care and social assistance		25		5	%
Professional, scientific, and technical services		19		4	%
Educational services		16		3	%
Manufacturing		15		3	%
Finance and insurance		7		1	%
Other		19		4	%
Total	$	506		100	%

* Of the total $506 million of direct lease financing, $465 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 June 30, 2021
State	Principal balance			% Total
	(in millions)
Florida	$	92		18	%
California		53		11	%
New Jersey		37		7	%
New York		33		6	%
Pennsylvania		31		6	%
Utah		31		6	%
Maryland		24		5	%
North Carolina		24		5	%
Texas		17		3	%
Connecticut		16		3	%
Washington		16		3	%
Missouri		14		3	%
Georgia		11		2	%
Idaho		9		2	%
Alabama		9		2	%
Other states		89		18	%
Total	$	506		100	%

Capital ratios	Tier 1 capital to average assets ratio			Tier 1 capital to risk-weighted assets ratio			Total capital to risk-weighted assets ratio			Common equity tier 1 to risk weighted assets
As of June 30, 2021
The Bancorp, Inc.	8.52	%		15.39	%		15.78	%		15.39	%
The Bancorp Bank	8.73	%		15.75	%		16.14	%		15.75	%
"Well capitalized" institution (under FDIC regulations-Basel III)	5.00	%		8.00	%		10.00	%		6.50	%
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	%

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Selected operating ratios
Return on average assets (1)	1.67	%		1.33	%		1.62	%		1.13	%
Return on average equity (1)	19.42	%		15.61	%		18.62	%		12.87	%
Net interest margin	3.19	%		3.53	%		3.26	%		3.43	%

⁽¹⁾ Annualized

Book value per share table	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
Book value per share	$	10.77		$	10.42		$	10.10		$	9.28

Loan quality table	June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
	(dollars in thousands)
Nonperforming loans to total loans		0.31	%			0.49	%			0.48	%			0.44	%
Nonperforming assets to total assets		0.14	%			0.18	%			0.20	%			0.17	%
Allowance for credit losses		0.52	%			0.58	%			0.61	%			0.63	%
Nonaccrual loans	$	7,346			$	11,961			$	12,227			$	9,957
Loans 90 days past due still accruing interest		1,550				1,762				497				352
Other real estate owned		—				—				—				—
Total nonperforming assets	$	8,896			$	13,723			$	12,724			$	10,309

Gross dollar volume (GDV) (1)	Three months ended
	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
	(in thousands)
Prepaid and debit card GDV	$	27,106,763		$	28,094,930		$	22,523,855		$	23,539,694

⁽¹⁾ 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 June 30, 2021 (dollars in millions)
					Balances
								% Growth
Major business lines		Average approximate rates *			Balances **			Year over year			Linked quarter annualized
Loans
Institutional banking ***		2.5	%		$	1,802		38	%		29	%
Small Business Lending****		5.0	%			819		15	%		10	%
Leasing		6.0	%			506		20	%		18	%
Commercial real estate (non-SBA at fair value)		4.8	%			1,465		nm			nm
Weighted average yield		4.1	%		$	4,592								Non-interest income
																	% Growth
Deposits: Fintech solutions group														Current quarter			Year over year
Prepaid and debit card issuance		0.1	%		$	4,836		24	%		nm			$	19.4		4	%
Card payment and ACH processing		0.2	%		$	885		22	%		nm			$	1.9		nm

* Average rates are for the quarter ended June 30, 2021.
** 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. The linked quarter annualized percentage excludes a short-term line of credit to another institution to fund PPP loans, with a balance of $19.7 million at March 31, 2021, which was repaid in the second quarter.

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 - 2020		(46	)			(46	)
2021 Marks		—
Payments received		(122	)
June 30, 2021 Bancorp book value**	$	25
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 21% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of June 30, 2021.

Walnut Street portfolio composition as of June 30, 2021
Collateral type	% of Portfolio
Commercial real estate non-owner occupied - Retail	80.0%
Construction and land	13.3%
Other	6.7%
Total	100.0%

 

Cumulative analysis of marks on discontinued commercial loan principal as of June 30, 2021
	Discontinued loan principal			Cumulative marks				% to original principal
	(dollars in millions)
Commercial loan discontinued principal before marks	$	53
Florida mall held in discontinued other real estate owned		42		$	(27	)
Mark at June 30, 2021					(4	)
Cumulative mark at June 30, 2021	$	95		$	(31	)		33	%

Analysis of discontinued commercial loan relationships as of June 30, 2021
	Performing loan principal			Nonperforming loan principal			Total loan principal			Performing loan marks				Nonperforming loan marks				Total marks
	(in millions)
4 loan relationships > $5 million	$	33		$	—		$	33		$	(2	)		$	—			$	(2	)
Loan relationships < $5 million		12			4			16			(1	)			(1	)			(2	)
	$	45		$	4		$	49		$	(3	)		$	(1	)		$	(4	)

Quarterly activity for commercial loan discontinued principal
	Commercial loan principal
	(in millions)
Commercial loan discontinued principal March 31, 2021 before marks	$	61
Quarterly paydowns and other reductions		(8	)
Commercial loan discontinued principal June 30, 2021 before marks		53
Marks June 30, 2021		(4	)
Net commercial loan exposure June 30, 2021		49
Residential mortgages		27
Net loans		76
Florida mall in other real estate owned		15
5 properties in other real estate owned		6
Total discontinued assets at June 30, 2021	$	97

Discontinued commercial loan composition as of June 30, 2021
Collateral type	Unpaid principal balance				Mark at June 30, 2021				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		10				(0.1	)		1	%
Commercial non-real estate and industrial		3				(0.1	)		3	%
1 to 4 family construction		7				(2.6	)		37	%
First mortgage residential non-owner occupied		5				—			—
Commercial real estate owner occupied:
Retail		2				—			—
Residential junior mortgage		1				—			—
Other		1				—			—
Total	$	53			$	(3.5	)		7	%
Less: mark		(4	)
Net commercial loan exposure June 30, 2021	$	49			$	(3.5	)

Loan payment deferrals related to Covid-19

Total non-U.S. guaranteed loan balances for borrowers with Covid-19 payment deferrals amounted to $48 million as of March 31, 2021. The vast majority of these borrowers had begun making their payments as of July 5, 2021. As of that date, $968,000 of discontinued operations loans were still in deferral, and small business (SBA) borrowers with unguaranteed principal balances totaling $2.6 million, have not made their payments due on that date. Of the $2.6 million, we are considering further deferrals for borrowers with unguaranteed balances of $1.7 million.

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