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Section 1: 8-K (THE BANCORP, INC. FORM 8-K)


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  10/25/2018
 
The Bancorp, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  000-51018
 
Delaware
  
23-3016517
(State or other jurisdiction of
  
(IRS Employer
incorporation)
  
Identification No.)
 
409 Silverside Road
Wilmington, DE 19809
(Address of principal executive offices, including zip code)
 
302-385-5000
(Registrant’s telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[  ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [ ]
 

 

 
  
Item 2.02.    Results of Operations and Financial Condition
 
On October 25, 2018, The Bancorp, Inc. (the "Company") issued a press release regarding its earnings for the three and nine months ended September 30, 2018. A copy of this press release is furnished with this report as exhibit 99.1. The information in this Current Report, including the exhibit hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
  
Item 9.01.    Financial Statements and Exhibits
 
(d) Exhibits
 
The exhibit furnished as part of this Current Report on Form 8-K is identified in the Exhibit Index immediately following the signature page of this report. Such Exhibit Index is incorporated herein by reference.
 
 

 
 
 EXHIBIT INDEX
 
Exhibit No.
  
Description
 
EX-99.1
  

 


 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
The Bancorp, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date: October 25, 2018
 
 
 
By:
 
/s/Paul Frenkiel                                                    
 
 
 
 
 
 
 
 
Paul Frenkiel
 
 
 
 
 
 
 
 
Chief Financial Officer and Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 
The Bancorp, Inc. Reports Third Quarter 2018 Financial Results

Wilmington, DE – October 25, 2018 – The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the third quarter of 2018.

Highlights

Pretax income from continuing operations increased to $83.2 million for the quarter ended September 30, 2018 compared to $12.2 million for the quarter ended September 30, 2017. The increase reflected a $65.0 million gain on the sale of the Company’s Individual Retirement Account portfolio.

Diluted earnings per share for the quarter ended September 30, 2018 were $1.07 and $0.23, excluding the tax effected impact of the gain on sale of the IRA portfolio. That compares to $0.13 diluted earnings per share for the quarter ended September 30, 2017.

Net interest income increased 10% to $30.6 million for the quarter ended September 30, 2018, compared to $27.9 million for the quarter ended September 30, 2017.

Interest income on security backed lines of credit (“SBLOC”) loans increased 30% to $7.7 million for the quarter ended September 30, 2018, compared to $5.9 million for the quarter ended September 30, 2017.

Net interest margin increased to 3.22% for the quarter ended September 30, 2018, compared to 3.11% for the quarter ended June 30, 2018.

Total payments revenue, consisting of prepaid card fees and card payment and Automated Clearing House processing fees for the quarter ended September 30, 2018 increased to $15.5 million, or 10%, compared to the quarter ended September 30, 2017.  Of that total, prepaid fees for the quarter ended September 30, 2018 increased to $13.2 million, or 6%, and ACH, card and other processing fees increased to $2.3 million, or 46% compared to the quarter ended September 30, 2017, respectively.

Loans increased 9% to $1.50 billion at September 30, 2018, compared to $1.37 billion at September 30, 2017.

SBLOC loans increased 8% to $778.6 million at September 30, 2018, compared to $720.3 million at September 30, 2017.

Small Business Administration (“SBA”) loans increased 19% to $459.8 million at September 30, 2018, compared to $386.8 million at September 30, 2017.

Direct lease financing increased 7% to $396.0 million at September 30, 2018, compared to $368.7 million at September 30, 2017.

The rate on $3.88 billion of average deposits and interest-bearing liabilities in the third quarter of 2018 was 0.83% with a rate of 0.94% for $2.11 billion of average prepaid card deposits.

Non-interest expense decreased to $37.3 million for the quarter ended September 30, 2018, a 15% decrease from the third quarter of 2017. Year-to-date non-interest expense was $113.7 million compared to $119.0 million for year-to-date 2017, a decrease of 5%.

The benefit of the lower federal tax rate in 2018 compared to 2017 was increased in the third quarter, as the lower federal statutory rate of 21% (compared to 34% in 2017) was applied to the $65 million gain on sale of IRA portfolio.

Consolidated leverage ratio was 9.61% at September 30, 2018. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

Book value per common share at September 30, 2018 was $6.95 per share.
 
 
1

 

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “As previously announced, we sold our Safe Harbor IRA portfolio that generated $6 million in 2017 fees. The sale price was $65 million and added 84 cents a share to book value. The sale of our Safe Harbor IRA portfolio concludes our divestiture of non-core assets started when our new business plan was approved by our board in the third quarter of 2016.  Like our European and Health Savings Accounts franchises, our safe harbor IRA portfolio was sub-scale, carried regulatory risks and was unlikely to deliver longer-term growth or innovation to our business model.  Therefore, its sale for $65 million, or over 10 times 2017 fees, allowed us to complete the process of focusing and de-risking our institution, while significantly enhancing our capital position without diluting the equity ownership of our shareholders.”

The Bancorp reported net income of $61.3 million, or $1.07 income per diluted share, for the quarter ended September 30, 2018, compared to net income of $7.3 million, or $0.13 income per diluted share, for the quarter ended September 30, 2017. Pretax income from continuing operations for third quarter 2018 increased to $83.2 million compared to $12.2 million reported for third quarter 2017.  Income from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales or repayment of the remaining assets in The Bancorp’s discontinued operations.  Tier one capital to assets, tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 ratios were 9.64%, 24.05%, 24.53% and 24.05%, 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 26, 2018 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 9061088.  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 2, 2018 by dialing 855.859.2056, access code 9061088.

About The Bancorp

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" that involve risks and uncertainties. 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.  For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see The Bancorp’s filings with the SEC, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. These risks and uncertainties could cause actual results to differ materially from those projected in the forward-looking statements. 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 presentation, except as may be required under applicable law.

The Bancorp, Inc. Contact
Andres Viroslav
215-861-7990
[email protected]
 
2

 

The Bancorp, Inc.
 
Financial highlights
 
(unaudited)
 
                         
   
Three months ended
   
Nine months ended
 
   
September 30,
   
September 30,
 
Condensed income statement
 
2018
   
2017
   
2018
   
2017
 
   
(dollars in thousands except per share data)
 
                         
Net interest income
 
$
30,632
   
$
27,901
   
$
90,240
   
$
79,993
 
Provision for loan and lease losses
   
1,060
     
800
     
2,660
     
2,150
 
Non-interest income
                               
Service fees on deposit accounts
   
402
     
1,700
     
3,624
     
4,895
 
Card payment and ACH processing fees
   
2,281
     
1,564
     
6,275
     
4,596
 
Prepaid card fees
   
13,204
     
12,491
     
41,559
     
39,272
 
Gain on sale of loans
   
8,999
     
11,394
     
20,274
     
17,535
 
Gain on sale of investment securities
   
15
     
506
     
41
     
1,595
 
Change in value of investment in unconsolidated entity
   
(78
)
   
(4
)
   
(2,981
)
   
(20
)
Leasing income
   
758
     
705
     
2,353
     
2,088
 
Affinity fees
   
84
     
275
     
271
     
1,445
 
Gain on sale of IRA portfolio
   
65,000
     
-
     
65,000
     
-
 
Gain on sale of health savings accounts
   
-
     
-
     
-
     
2,538
 
Loss from sale of European prepaid card operations
   
-
     
-
     
-
     
(3,437
)
Other non-interest income
   
305
     
376
     
689
     
892
 
Total non-interest income
   
90,970
     
29,007
     
137,105
     
71,399
 
Non-interest expense
                               
Salaries and employee benefits
   
19,243
     
21,788
     
59,213
     
57,902
 
Data processing expense
   
1,380
     
1,926
     
4,741
     
8,047
 
Legal expense
   
1,610
     
2,744
     
5,811
     
5,909
 
FDIC Insurance
   
2,241
     
2,063
     
7,389
     
7,586
 
Software
   
3,593
     
3,088
     
9,879
     
9,328
 
Losses and write downs on other real estate owned
   
-
     
-
     
45
     
19
 
Civil money penalty
   
-
     
2,500
     
(290
)
   
2,500
 
Lease termination expense
   
-
     
-
     
395
     
-
 
Other non-interest expense
   
9,232
     
9,774
     
26,475
     
27,738
 
Total non-interest expense
   
37,299
     
43,883
     
113,658
     
119,029
 
Income from continuing operations before income taxes
   
83,243
     
12,225
     
111,027
     
30,213
 
Income tax expense (benefit)
   
21,942
     
5,455
     
29,550
     
(457
)
Net income from continuing operations
   
61,301
     
6,770
     
81,477
     
30,670
 
Discontinued operations
                               
Income (loss) from discontinued operations before income taxes
   
(370
)
   
829
     
(264
)
   
5,488
 
Income tax expense (benefit)
   
(346
)
   
318
     
(345
)
   
2,050
 
Net income (loss) from discontinued operations, net of tax
   
(24
)
   
511
     
81
     
3,438
 
Net income available to common shareholders
 
$
61,277
   
$
7,281
   
$
81,558
   
$
34,108
 
                                 
Net income per share from continuing operations - basic
 
$
1.09
   
$
0.12
   
$
1.45
   
$
0.55
 
Net income per share from discontinued operations - basic
 
$
-
   
$
0.01
   
$
-
   
$
0.06
 
Net income per share - basic
 
$
1.09
   
$
0.13
   
$
1.45
   
$
0.61
 
                                 
Net income per share from continuing operations - diluted
 
$
1.07
   
$
0.12
   
$
1.43
   
$
0.55
 
Net income per share from discontinued operations - diluted
 
$
-
   
$
0.01
   
$
-
   
$
0.06
 
Net income per share - diluted
 
$
1.07
   
$
0.13
   
$
1.43
   
$
0.61
 
Weighted average shares - basic
   
56,442,222
     
55,758,433
     
56,309,390
     
55,661,538
 
Weighted average shares - diluted
   
57,103,301
     
56,312,838
     
57,084,844
     
56,043,909
 
 
 
3

 

 
Balance sheet
 
September 30,
   
June 30,
   
December 31,
   
September 30,
 
   
2018
   
2018
   
2017
   
2017
 
    
(dollars in thousands)
 
Assets:
                       
Cash and cash equivalents
                       
Cash and due from banks
 
$
2,245
   
$
3,052
   
$
3,152
   
$
5,813
 
Interest earning deposits at Federal Reserve Bank
   
710,816
     
373,782
     
841,471
     
328,023
 
Securities sold under agreements to resell
   
64,518
     
64,216
     
64,312
     
65,095
 
     Total cash and cash equivalents
   
777,579
     
441,050
     
908,935
     
398,931
 
                                 
Investment securities, available-for-sale, at fair value
   
1,274,417
     
1,305,494
     
1,294,484
     
1,196,956
 
Investment securities, held-to-maturity
   
84,433
     
86,354
     
86,380
     
86,402
 
Commercial loans held for sale, at fair value
   
308,470
     
447,997
     
503,316
     
380,272
 
Loans, net of deferred fees and costs
   
1,496,773
     
1,506,812
     
1,392,228
     
1,374,060
 
Allowance for loan and lease losses
   
(8,092
)
   
(8,014
)
   
(7,096
)
   
(7,283
)
Loans, net
   
1,488,681
     
1,498,798
     
1,385,132
     
1,366,777
 
Federal Home Loan Bank & Atlantic Community Bancshares stock
   
1,113
     
1,113
     
991
     
991
 
Premises and equipment, net
   
17,686
     
18,275
     
20,051
     
21,087
 
Accrued interest receivable
   
11,621
     
11,810
     
10,900
     
10,131
 
Intangible assets, net
   
4,229
     
4,612
     
5,377
     
5,185
 
Other real estate owned
   
405
     
405
     
450
     
-
 
Deferred tax asset, net
   
40,991
     
39,779
     
34,802
     
53,017
 
Investment in unconsolidated entity
   
64,212
     
67,994
     
74,473
     
107,711
 
Assets held for sale from discontinued operations
   
226,026
     
241,694
     
304,313
     
314,994
 
Other assets
   
60,337
     
56,499
     
78,543
     
51,164
 
     Total assets
 
$
4,360,200
   
$
4,221,874
   
$
4,708,147
   
$
3,993,618
 
                                 
Liabilities:
                               
Deposits
                               
Demand and interest checking
 
$
3,540,605
   
$
3,287,682
   
$
3,806,965
   
$
3,113,212
 
Savings and money market
   
317,453
     
511,598
     
453,877
     
452,183
 
     Total deposits
   
3,858,058
     
3,799,280
     
4,260,842
     
3,565,395
 
                                 
Securities sold under agreements to repurchase
   
158
     
161
     
217
     
180
 
Subordinated debenture
   
13,401
     
13,401
     
13,401
     
13,401
 
Long-term borrowings
   
41,841
     
42,000
     
42,323
     
42,482
 
Other liabilities
   
54,868
     
34,485
     
67,215
     
32,699
 
     Total liabilities
 
$
3,968,326
   
$
3,889,327
   
$
4,383,998
   
$
3,654,157
 
                                 
Shareholders' equity:
                               
Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,446,088 and 55,859,660 shares issued at September 30, 2018 and 2017, respectively
   
56,446
     
56,411
     
55,861
     
55,860
 
Treasury stock (100,000 shares)
   
(866
)
   
(866
)
   
(866
)
   
(866
)
Additional paid-in capital
   
365,749
     
364,460
     
363,196
     
362,340
 
Accumulated deficit
   
(7,936
)
   
(69,213
)
   
(89,485
)
   
(77,850
)
Accumulated other comprehensive loss
   
(21,519
)
   
(18,245
)
   
(4,557
)
   
(23
)
Total shareholders' equity
   
391,874
     
332,547
     
324,149
     
339,461
 
                                 
     Total liabilities and shareholders' equity
 
$
4,360,200
   
$
4,221,874
   
$
4,708,147
   
$
3,993,618
 
 
 
4


 

Average balance sheet and net interest income
 
Three months ended September 30, 2018
   
Three months ended September 30, 2017
 
   
(dollars in thousands)
 
       
   
Average
         
Average
   
Average
         
Average
 
Assets:
 
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
 
Interest earning assets:
                                   
Loans net of unearned fees and costs **
 
$
1,980,814
   
$
24,708
     
4.99
%
 
$
1,816,751
   
$
21,147
     
4.66
%
Leases - bank qualified*
   
19,343
     
346
     
7.16
%
   
20,787
     
419
     
8.06
%
Investment securities-taxable
   
1,362,529
     
10,906
     
3.20
%
   
1,235,615
     
8,847
     
2.86
%
Investment securities-nontaxable*
   
8,145
     
63
     
3.09
%
   
13,238
     
133
     
4.02
%
Interest earning deposits at Federal Reserve Bank
   
445,765
     
2,239
     
2.01
%
   
366,724
     
1,190
     
1.30
%
Federal funds sold and securities purchased under agreement to resell
   
64,186
     
480
     
2.99
%
   
65,008
     
371
     
2.28
%
Net interest earning assets
   
3,880,782
     
38,742
     
3.99
%
   
3,518,123
     
32,107
     
3.65
%
                                                 
Allowance for loan and lease losses
   
(7,971
)
                   
(6,961
)
               
Assets held for sale from discontinued operations
   
233,732
     
2,295
     
3.93
%
   
325,912
     
3,098
     
3.80
%
Other assets
   
141,204
                     
235,070
                 
    
$
4,247,747
                   
$
4,072,144
                 
                                                 
Liabilities and Shareholders' Equity:
                                               
Deposits:
                                               
Demand and interest checking
 
$
3,418,878
   
$
6,224
     
0.73
%
 
$
3,224,167
   
$
3,136
     
0.39
%
Savings and money market
   
419,121
     
1,466
     
1.40
%
   
439,688
     
552
     
0.50
%
Total deposits
   
3,837,999
     
7,690
     
0.80
%
   
3,663,855
     
3,688
     
0.40
%
                                                 
Short-term borrowings
   
25,602
     
148
     
2.31
%
   
51,413
     
175
     
1.36
%
Securities sold under agreements to repurchase
   
160
     
-
     
0.00
%
   
189
     
-
     
0.00
%
Subordinated debentures
   
13,401
     
186
     
5.55
%
   
13,401
     
150
     
4.48
%
Total deposits and liabilities
   
3,877,162
     
8,024
     
0.83
%
   
3,728,858
     
4,013
     
0.43
%
                                                 
Other liabilities
   
8,374
                     
8,046
                 
Total liabilities
   
3,885,536
                     
3,736,904
                 
                                                 
Shareholders' equity
   
362,211
                     
335,240
                 
    
$
4,247,747
                   
$
4,072,144
                 
Net interest income on tax equivalent basis*
         
$
33,013
                   
$
31,192
         
                                                 
Tax equivalent adjustment
           
86
                     
193
         
                                                 
Net interest income
         
$
32,927
                   
$
30,999
         
Net interest margin *
                   
3.22
%
                   
3.26
%
 
                                         
* Full taxable equivalent basis, using a statutory rate of 21% for 2018 and 35% for 2017.
 
** Includes loans held for sale.
 
 
 
5


 
Average balance sheet and net interest income
 
Nine months ended September 30, 2018
   
Nine months ended September 30, 2017
 
   
(dollars in thousands)
 
       
   
Average
         
Average
   
Average
         
Average
 
Assets:
 
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
 
Interest earning assets:
                                   
Loans net of unearned fees and costs **
 
$
1,918,950
   
$
69,451
     
4.83
%
 
$
1,740,655
   
$
58,266
     
4.46
%
Leases - bank qualified*
   
20,192
     
1,017
     
6.72
%
   
21,167
     
1,231
     
7.75
%
Investment securities-taxable
   
1,391,175
     
31,375
     
3.01
%
   
1,269,922
     
26,990
     
2.83
%
Investment securities-nontaxable*
   
8,907
     
201
     
3.01
%
   
14,423
     
351
     
3.24
%
Interest earning deposits at Federal Reserve Bank
   
468,691
     
6,166
     
1.75
%
   
532,223
     
3,961
     
0.99
%
 Federal funds sold and securities purchased under agreement to resell
   
64,234
     
1,369
     
2.84
%
   
60,119
     
931
     
2.06
%
Net interest earning assets
   
3,872,149
     
109,579
     
3.77
%
   
3,638,509
     
91,730
     
3.36
%
                                                 
Allowance for loan and lease losses
   
(7,378
)
                   
(6,793
)
               
Assets held for sale from discontinued operations
   
269,857
     
6,888
     
3.40
%
   
337,102
     
9,594
     
3.79
%
Other assets
   
197,114
                     
251,629
                 
    
$
4,331,742
                   
$
4,220,447
                 
                                                 
Liabilities and Shareholders' Equity:
                                               
Deposits:
                                               
Demand and interest checking
 
$
3,463,756
   
$
15,547
     
0.60
%
 
$
3,433,027
   
$
8,836
     
0.34
%
Savings and money market
   
469,511
     
2,751
     
0.78
%
   
434,768
     
1,718
     
0.53
%
Total deposits
   
3,933,267
     
18,298
     
0.62
%
   
3,867,795
     
10,554
     
0.36
%
                                                 
Short-term borrowings
   
17,367
     
261
     
2.00
%
   
19,498
     
197
     
1.35
%
Securities sold under agreements to repurchase
   
178
     
-
     
0.00
%
   
245
     
-
     
0.00
%
Subordinated debentures
   
13,401
     
524
     
5.21
%
   
13,401
     
432
     
4.30
%
Total deposits and liabilities
   
3,964,213
     
19,083
     
0.64
%
   
3,900,939
     
11,183
     
0.38
%
                                                 
Other liabilities
   
9,517
                     
431
                 
Total liabilities
   
3,973,730
                     
3,901,370
                 
                                                 
Shareholders' equity
   
358,012
                     
319,077
                 
    
$
4,331,742
                   
$
4,220,447
                 
Net interest income on tax equivalent basis*
         
$
97,384
                   
$
90,141
         
                                                 
Tax equivalent adjustment
           
256
                     
554
         
                                                 
Net interest income
         
$
97,128
                   
$
89,587
         
Net interest margin *
                   
3.15
%
                   
3.02
%
 
                                         
* Full taxable equivalent basis, using a statutory rate of 21% for 2018 and 35% for 2017.
 
** Includes loans held for sale.
 
 
 
 
6


 
Allowance for loan and lease losses:
 
Nine months ended
   
Year ended
       
    
September 30,
   
September 30,
   
December 31,
       
   
2018
   
2017
   
2017
       
    
(dollars in thousands)
       
                         
Balance in the allowance for loan and lease losses at beginning of period (1)
 
$
7,096
   
$
6,332
   
$
6,332
       
                               
Loans charged-off:
                             
SBA non-real estate
   
1,081
     
344
     
1,171
       
SBA commercial mortgage
   
157
     
-
     
-
       
Direct lease financing
   
531
     
779
     
926
       
Other consumer loans
   
19
     
113
     
110
       
Total
   
1,788
     
1,236
     
2,207
       
                               
Recoveries:
                             
SBA non-real estate
   
46
     
12
     
18
       
SBA commercial mortgage
   
13
     
-
     
-
       
Direct lease financing
   
64
     
-
     
7
       
Other consumer loans
   
1
     
25
     
26
       
Total
   
124
     
37
     
51
       
Net charge-offs
   
1,664
     
1,199
     
2,156
       
Provision charged to operations
   
2,660
     
2,150
     
2,920
       
                               
Balance in allowance for loan and lease losses at end of period
 
$
8,092
   
$
7,283
   
$
7,096
       
Net charge-offs/average loans
   
0.09
%
   
0.07
%
   
0.12
%
     
Net charge-offs/average loans (annualized)
   
0.11
%
   
0.09
%
   
0.12
%
     
Net charge-offs/average assets
   
0.04
%
   
0.03
%
   
0.05
%
     
(1) Excludes activity from assets held for sale from discontinued operations.
                             
                               
Loan portfolio:
 
September 30,
   
June 30,
   
December 31,
   
September 30,
 
     
2018
     
2018
     
2017
     
2017
 
    
(in thousands)
 
                                 
SBA non-real estate
 
$
74,408
   
$
75,141
   
$
70,379
   
$
71,094
 
SBA commercial mortgage
   
166,432
     
156,268
     
142,086
     
132,997
 
SBA construction
   
17,978
     
17,781
     
16,740
     
14,205
 
Total SBA loans
   
258,818
     
249,190
     
229,205
     
218,296
 
Direct lease financing
   
395,976
     
389,387
     
377,660
     
368,662
 
SBLOC
   
778,552
     
795,823
     
730,462
     
720,279
 
Other specialty lending
   
40,799
     
48,253
     
30,720
     
36,664
 
Other consumer loans
   
12,172
     
13,174
     
14,133
     
20,107
 
     
1,486,317
     
1,495,827
     
1,382,180
     
1,364,008
 
Unamortized loan fees and costs
   
10,456
     
10,985
     
10,048
     
10,052
 
Total loans, net of deferred loan fees and costs
 
$
1,496,773
   
$
1,506,812
   
$
1,392,228
   
$
1,374,060
 
                                 
Small business lending portfolio:
 
September 30,
   
June 30,
   
December 31,
   
September 30,
 
     
2018
     
2018
     
2017
     
2017
 
    
(in thousands)
 
                                 
SBA loans, including deferred fees and costs
   
266,433
     
257,412
     
236,724
     
225,909
 
SBA loans included in HFS
   
193,372
     
182,072
     
165,177
     
160,855
 
Total SBA loans
 
$
459,805
   
$
439,484
   
$
401,901
   
$
386,764
 

 
7


 
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, 2018
                       
The Bancorp, Inc.
   
9.64
%
   
24.05
%
   
24.53
%
   
24.05
%
The Bancorp Bank
   
9.19
%
   
23.47
%
   
23.94
%
   
23.47
%
"Well capitalized" institution (under FDIC regulations)
   
5.00
%
   
8.00
%
   
10.00
%
   
6.50
%
                                 
As of December 31, 2017
                               
The Bancorp, Inc.
   
7.90
%
   
16.73
%
   
17.09
%
   
16.73
%
The Bancorp Bank
   
7.61
%
   
16.23
%
   
16.59
%
   
16.23
%
"Well capitalized" institution (under FDIC regulations)
   
5.00
%
   
8.00
%
   
10.00
%
   
6.50
%
 
   
Three months ended
   
Nine months ended
 
   
September 30,
   
September 30,
 
   
2018
   
2017
   
2018
   
2017
 
Selected operating ratios:
                       
Return on average assets (1)
   
5.72
%
   
0.71
%
   
2.52
%
   
1.08
%
Return on average equity (1)
   
67.12
%
   
8.62
%
   
30.46
%
   
14.29
%
Net interest margin
   
3.22
%
   
3.26
%
   
3.15
%
   
3.02
%
                                 
(1) Annualized
                               
                                 
Book value per share table:
 
September 30,
   
June 30,
   
December 31,
   
September 30,
 
     
2018
     
2018
     
2017
     
2017
 
Book value per share
 
$
6.95
   
$
5.91
   
$
5.81
   
$
6.09
 
                                 
                                 
Loan quality table:
 
September 30,
   
June 30,
   
December 31,
   
September 30,
 
     
2018
     
2018
     
2017
     
2017
 
Nonperforming loans to total loans (2)
   
0.35
%
   
0.42
%
   
0.30
%
   
0.39
%
Nonperforming assets to total assets (2)
   
0.13
%
   
0.16
%
   
0.10
%
   
0.13
%
Allowance for loan and lease losses to total loans
   
0.54
%
   
0.53
%
   
0.51
%
   
0.53
%
                                 
Nonaccrual loans
 
$
4,234
   
$
4,915
   
$
3,996
   
$
4,953
 
Other real estate owned
   
405
     
405
     
450
     
-
 
     Total nonperforming assets
 
$
4,639
   
$
5,320
   
$
4,446
   
$
4,953
 
                                 
Loans 90 days past due still accruing interest
 
$
1,015
   
$
1,459
   
$
227
   
$
354
 
                                 
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
 
                                 
   
Three months ended
 
   
September 30,
   
June 30,
   
December 31,
   
September 30,
 
     
2018
     
2018
     
2017
     
2017
 
   
(in thousands)
 
Gross dollar volume (GDV) (3):
                               
Prepaid card GDV
 
$
12,525,527
   
$
12,799,531
   
$
10,963,456
   
$
10,970,085
 
                                 
(3) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.
 
 

 
8


Business line quarterly summary:
                                   
Quarter ended September 30, 2018
                                   
(dollars in millions)
                                   
                                     
         
Balances
   
Non interest income
 
               
% Growth
         
% Growth
 
Major business lines
 
Average
approximate
rates
   
Balances*
   
Year
over year
   
Linked
quarter
annualized
   
Current
quarter
   
Year
over year
 
Loans
                                   
Institutional banking **
     
4.1
%
   
$
779
       
8
%
     
-9
%
 
nm
   
nm
 
SBA
     
5.4
%
     
460
       
19
%
     
18
%
 
na
   
na
 
Leasing
     
6.2
%
     
396
       
7
%
     
7
%
     
0.8
       
8
%
Commercial real estate securitization
     
5.9
%
     
115
   
nm
   
nm
       
9.0
   
nm
 
Weighted average yield
     
5.0
%
   
$
1,750
                                         
                                                             
Deposits
                                                           
Payment solutions (primarily prepaid)
     
0.9
%
   
$
2,114
       
10
%
 
nm
     
$
13.2
       
6
%
Card payment and ACH processing
     
0.7
%
     
876
       
2
%
 
nm
       
2.3
       
46
%
                                                             
* Loan categories based on period end balance and Payment Solutions based on average quarterly balances.
 
** Comprised of SBLOC loans.
 
 
 
9


 
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 - 2017
   
(42
)
   
(42
)
2018 Marks
   
(3
)
   
(3
)
Payments received
   
(84
)
       
September 30, 2018 Bancorp book value**
 
$
64
         
                 
Total marks
         
$
(103
)
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 Bank’s discontinued loan portfolio.
 
** Approximately 45% of expected principal recoveries are from loans and properties pending liquidation or other resolution as of September 30, 2018.
 
                 
Walnut Street portfolio composition as of September 30, 2018
         
                 
Collateral type
 
% of Portfolio
         
Commercial real estate non-owner occupied
               
Retail
   
49.3
%
       
Office
   
12.8
%
       
Other
   
3.8
%
       
Construction and land
   
23.0
%
       
Commercial non real estate and industrial
   
0.6
%
       
First mortgage residential owner occupied
   
6.2
%
       
First mortgage residential non-owner occupied
   
3.5
%
       
Other
   
0.8
%
       
Total
   
100.0
%
       
                 
 
 
10


 

Cumulative analysis of marks on discontinued commercial loan principal as of September 30, 2018
 
                    
   
Discontinued
   
Cumulative
 
% to original
 
   
loan principal
   
marks
 
principal
 
   
(dollars in millions)
 
                    
Commercial loan discontinued principal before marks
 
$
149
   
$
-
     
Florida mall held in discontinued other real estate owned
   
42
     
27
     
Previous mark charges
   
14
     
14
     
Commercial loan mark at September 30, 2018
   
-
     
8
     
Total
 
$
205
   
$
49
 
24%
 


Analysis of discontinued commercial loan relationships as of September 30, 2018
                   
   
 
 
 
 
 
   
 
 
 
 
 
 
     
Performing
loan principal
     
Nonperforming
loan principal
     
Total
loan principal
       
Performing
loan marks
     
Nonperforming
loan marks
     
Total
marks
 
    (in millions)  
                                                     
7 loan relationships > $7 million
   
$
80
   
$
23
   
$
103
     
$
3
   
$
2
   
$
5
 
Loan relationships < $7 million
     
35
     
3
     
38
       
2
     
1
     
3
 
     
$
115
   
$
26
   
$
141
     
$
5
   
$
3
   
$
8
 

Quarterly activity for discontinued commercial loan principal
 
       
   
Commercial
 
   
loan principal
 
   
(in millions)
 
       
Commercial loan discontinued principal, June 30, 2018 before marks
 
$
167
 
Quarterly paydowns
   
(10
)
Quarterly charge downs
   
(8
)
Commercial loan discontinued principal, September 30, 2018 before marks
 
$
149
 
Marks, September 30, 2018
   
(8
)
Net commercial loan exposure, September 30, 2018
 
$
141
 
Residential mortgages
   
55
 
Net loans
 
$
196
 
Florida mall in other real estate owned
   
15
 
Other 21 properties in other real estate owned
   
14
 
Other assets related to discontinued operations
   
1
 
Total discontinued assets at September 30, 2018
 
$
226
 
 
11


 
Discontinued commercial loan composition September 30, 2018
 
                   
Collateral type
 
Unpaid
principal
balance
   
Mark
September 30,
2018
   
Mark as %
of portfolio
 
   
(dollars in millions)
 
Commercial real estate - non-owner occupied:
                 
Retail
 
$
7
   
$
0.6
     
9
%
Office
   
5
     
0.1
     
2
%
Other
   
38
     
1.7
     
5
%
Construction and land
   
43
     
0.2
     
-
 
Commercial non-real estate and industrial
   
11
     
0.7
     
6
%
1 to 4 family construction
   
22
     
3.5
     
16
%
First mortgage residential non-owner occupied
   
12
     
0.4
     
3
%
Commercial real estate owner occupied:
                       
Retail
   
9
     
0.3
     
-
 
Office
   
-
     
-
     
-
 
Other
   
-
     
-
     
-
 
Residential junior mortgage
   
1
     
-
     
-
 
Other
   
1
     
-
     
-
 
Total
 
$
149
                 
Less: mark
   
(8
)
               
Net commercial loan exposure, September 30, 2018
 
$
141
   
$
7.5
     
5
%

 
 
12
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