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

 

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):  July 30, 2020

 

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class  

Trading

Symbol(s)

  Name of each exchange on which registered
Common Stock, par value $1.00 per share   TBBK   Nasdaq Global Select

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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 July 30, 2020, The Bancorp, Inc. (the "Company") issued a press release regarding its earnings for the three and six months ended June 30, 2020. A copy of this press release is furnished with this report as Exhibit 99.1.

 

 

Item 7.01. Regulation FD Disclosure.

 

The information being furnished pursuant to Item 2.02 in this Current Report, including the exhibit hereto, is to be considered “furnished” pursuant to Form 8-K 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

 

99.1       Press Release

 

 

 
 

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.

 

Date:  July 30, 2020 The Bancorp, Inc.
     
  By: /s/ Paul Frenkiel
  Name: Paul Frenkiel
  Title: Chief Financial Officer and Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

The Bancorp, Inc. Reports Second Quarter 2020 Financial Results

 

Wilmington, DE – July 30, 2020 – The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter of 2020.

 

Highlights

 

·For the quarter ended June 30, 2020, The Bancorp earned net income of $20.3 million from continuing operations, and $0.35 diluted earnings per share from combined continuing and discontinued operations.

 

·Return on assets and equity for the quarter ended June 30, 2020 increased to 1.3% and 15.6%, respectively, compared to 1.0% and 10.2% for the quarter ended June 30, 2019.

 

·Net interest margin increased to 3.53% for the quarter ended June 30, 2020, compared to 3.41% for the quarter ended June 30, 2019 and 3.34% for the quarter ended March 31, 2020.

 

·Net interest income increased 45% to $50.2 million for the quarter ended June 30, 2020, compared to $34.5 million for the quarter ended June 30, 2019.

 

·Average loans and leases, including loans held for sale, increased 76% to $3.93 billion for the quarter ended June 30, 2020, compared to $2.23 billion for the quarter ended June 30, 2019.

 

·Prepaid, debit card and related fees increased 18% to $18.7 million for the quarter ended June 30, 2020, compared to $15.8 million for the quarter ended June 30, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 43%.

 

·SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 54% year over year and 11% quarter over quarter to $1.3 billion at June 30, 2020.

 

·Small Business Loans, including those held-for-sale, increased 16% year over year to $601.4 million at June 30, 2020, exclusive of $208 million of Paycheck Protection Program loans.

 

·As of June 30, 2020, we have originated approximately 1,250 Paycheck Protection Program loans, totaling approximately $208 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized over eleven months, beginning in April 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.

 

·The average rate on $5.4 billion of average deposits and interest-bearing liabilities in the second quarter of 2020 was 0.12%. Average prepaid and debit card account deposits of $3.9 billion for second quarter 2020, reflected an increase of 56% over the $2.5 billion for the quarter ended June 30, 2019.

 

·Consolidated leverage ratio was 8.48% at June 30, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.

 

·Book value per common share at June 30, 2020 was $9.28 per share compared to $8.07 at June 30, 2019, an increase of 15%.

 

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings driven by higher interest income with falling interest expense, increased loan balances and higher payment volumes. In the second quarter of 2020, the Bancorp earned 35 cents a share from both increased fee and spread revenue. While the pandemic continues to be a significant source of market uncertainty, we have been able to achieve better revenue productivity and operating efficiency during this time, while also making investments in our platform. Our earnings guidance for full year 2020 continues to be $1.25 per share.”

 

 

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The Bancorp reported net income of $20.1 million, or $0.35 per diluted share, for the quarter ended June 30, 2020, compared to net income of $11.4 million, or $0.20 per diluted share, for the quarter ended June 30, 2019. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.48%, 14.84%, 15.27% and 14.84%, 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 31, 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 2755988. 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 7, 2020 by dialing 855.859.2056, access code 2755988.

 

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. Contact

Andres Viroslav

Director, Investor Relations

215-861-7990

aviroslav@thebancorp.com

 

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The Bancorp, Inc.   
Financial highlights   
(unaudited)   
             
   Three months ended  Six months ended
   June 30,  June 30,
Condensed income statement  2020  2019  2020  2019
   (dollars in thousands except per share data)
             
Net interest income  $50,246   $34,539   $93,157   $68,549 
Provision for loan and lease losses   922    600    4,501    2,300 
Non-interest income                    
Service fees on deposit accounts   5    14    15    61 
ACH, card and other payment processing fees   1,707    2,521    3,553    4,824 
Prepaid, debit card and related fees   18,673    15,840    37,213    32,003 
Net realized and unrealized gains (losses) on commercial loans originated for sale   (940)   (148)   (6,096)   10,615 
Change in value of investment in unconsolidated entity   —      —      (45)   —   
Leasing related income   443    1,027    1,276    1,722 
Other non-interest income   478    495    1,049    889 
Total non-interest income   20,366    19,749    36,965    50,114 
Non-interest expense                    
Salaries and employee benefits   25,492    21,826    48,233    45,666 
Data processing expense   1,177    1,223    2,346    2,492 
Legal expense   2,229    1,534    3,142    2,858 
FDIC Insurance   2,918    2,095    5,507    4,024 
Software   3,386    3,060    6,863    5,981 
Lease termination expense   —      908    —      908 
Other non-interest expense   7,418    8,873    14,947    16,819 
Total non-interest expense   42,620    39,519    81,038    78,748 
Income from continuing operations before income taxes   27,070    14,169    44,583    37,615 
Income tax expense   6,787    3,575    11,139    9,610 
Net income from continuing operations   20,283    10,594    33,444    28,005 
Discontinued operations                    
Income (loss) from discontinued operations before income taxes   (274)   919    (1,049)   1,724 
Income tax expense (benefit)   (59)   163    (264)   449 

Net income (loss) from discontinued operations, net of tax

   (215)   756    (785)   1,275 
Net income  $20,068   $11,350   $32,659   $29,280 
                     
Net income per share from continuing operations - basic  $0.35   $0.19   $0.58   $0.50 
Net income (loss) per share from discontinued operations - basic  $—     $0.01   $(0.01)  $0.02 
Net income per share - basic  $0.35   $0.20   $0.57   $0.52 
                     
Net income per share from continuing operations - diluted  $0.35   $0.19   $0.58   $0.49 
Net income (loss) per share from discontinued operations - diluted  $—     $0.01   $(0.01)  $0.02 
Net income per share - diluted  $0.35   $0.20   $0.57   $0.51 
Weighted average shares - basic   57,489,719    56,702,182    57,355,282    56,612,596 
Weighted average shares - diluted   57,800,115    57,197,433    57,856,791    57,031,206 

 

 

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Balance sheet  June 30,  March 31,  December 31,  June 30,
   2020  2020  2019  2019
   (dollars in thousands)
Assets:            
Cash and cash equivalents                    
Cash and due from banks  $5,094   $13,610   $19,928   $27,450 
Interest earning deposits at Federal Reserve Bank   475,627    105,978    924,544    284,823 
     Total cash and cash equivalents   480,721    119,588    944,472    312,273 
                     
Investment securities, available-for-sale, at fair value   1,324,447    1,353,278    1,320,692    1,361,779 
Investment securities, held-to-maturity, at cost   —      —      84,387    84,414 
Commercial loans held for sale, at fair value   1,807,630    1,716,450    1,180,546    934,452 
Loans, net of deferred fees and costs   2,322,737    1,985,755    1,824,245    1,561,451 
Allowance for credit losses   (14,625)   (14,883)   (10,238)   (9,989)
Loans, net   2,308,112    1,970,872    1,814,007    1,551,462 
Federal Home Loan Bank & Atlantic Community Bancshares stock   1,368    1,142    5,342    6,342 
Premises and equipment, net   16,701    17,148    17,538    17,380 
Accrued interest receivable   18,897    15,660    13,619    14,567 
Intangible assets, net   2,710    2,857    2,315    3,081 
Deferred tax asset, net   7,921    12,797    12,538    14,574 
Investment in unconsolidated entity   34,064    34,273    39,154    58,012 
Assets held for sale from discontinued operations   128,463    134,118    140,657    169,109 
Other assets   83,003    79,925    81,696    76,123 
     Total assets  $6,214,037   $5,458,108   $5,656,963   $4,603,568 
                     
Liabilities:                    
Deposits                    
Demand and interest checking  $5,089,741   $4,512,949   $4,402,740   $3,964,905 
Savings and money market   455,458    178,174    174,290    26,841 
Time deposits   —      —      475,000    —   
     Total deposits   5,545,199    4,691,123    5,052,030    3,991,746 
                     
Securities sold under agreements to repurchase   42    42    82    93 
Short-term borrowings   —      140,000    —      45,000 
Subordinated debenture   13,401    13,401    13,401    13,401 
Long-term borrowings   40,639    40,813    40,991    41,334 
Other liabilities   81,677    74,625    65,962    53,862 
     Total liabilities  $5,680,958   $4,960,004   $5,172,466   $4,145,436 
                     
Shareholders' equity:                    
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,555,308 and 56,874,956 shares issued and outstanding at June 30, 2020 and 2019, respectively   57,555    57,426    56,941    56,875 
Treasury stock (100,000 shares)   (866)   (866)   (866)   (866)
Additional paid-in capital   374,578    372,984    371,633    368,771 
Retained earnings   81,028    60,960    50,742    28,463 
Accumulated other comprehensive income   20,784    7,600    6,047    4,889 
Total shareholders' equity   533,079    498,104    484,497    458,132 
                     
     Total liabilities and shareholders' equity  $6,214,037   $5,458,108   $5,656,963   $4,603,568 

 

 

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Average balance sheet and net interest income  Three months ended June 30, 2020  Three months ended June 30, 2019
   (dollars in thousands)
   Average     Average  Average     Average
Assets:  Balance  Interest  Rate  Balance  Interest  Rate
Interest earning assets:                                
Loans net of deferred fees and costs **  $ 3,925,515   $41,448    4.22%  $ 2,216,935   $29,737    5.37%
Leases - bank qualified*    9,217    162    7.03%    15,446    268    6.94%
Investment securities-taxable    1,334,368    10,188    3.05%    1,443,671    11,634    3.22%
Investment securities-nontaxable*    4,402    35    3.18%    6,610    54    3.27%
Interest earning deposits at Federal Reserve Bank    426,174    107    0.10%    420,153    2,455    2.34%
Net interest earning assets    5,699,676    51,940    3.65%    4,102,815    44,148    4.30%
                                 
Allowance for credit losses    (14,822)              (9,963)          
Assets held for sale from discontinued operations    130,530    1,094    3.35%    154,057    1,659    4.31%
Other assets    228,443               283,036           
   $ 6,043,827             $ 4,529,945           
                                 
Liabilities and Shareholders' Equity:                                
Deposits:                                
Demand and interest checking  $ 5,140,167   $1,390    0.11%  $ 3,847,623   $8,783    0.91%
Savings and money market    234,201    120    0.20%    26,497    40    0.60%
Total deposits    5,374,368    1,510    0.11%    3,874,120    8,823    0.91%
                                 
Short-term borrowings    16,428    15    0.37%    80,242    526    2.62%
Securities sold under agreements to repurchase    41    —      0.00%    92    —      0.00%
Subordinated debentures    13,401    128    3.82%    13,401    192    5.73%
Total deposits and liabilities    5,404,238    1,653    0.12%    3,967,855    9,541    0.96%
                                 
Other liabilities    123,997               115,634           
Total liabilities    5,528,235               4,083,489           
                                 
Shareholders' equity    515,592               446,456           
   $ 6,043,827             $ 4,529,945           
Net interest income on tax equivalent basis*        $51,381              $36,266      
                                 
Tax equivalent adjustment         41               68      
                                 
Net interest income        $51,340              $36,198      
Net interest margin *              3.53%              3.41%
                                 
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019.                                
** Includes loans held for sale.                                

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Average balance sheet and net interest income  Six months ended June 30, 2020  Six months ended June 30, 2019
   (dollars in thousands)
   Average     Average  Average     Average
Assets:  Balance  Interest  Rate  Balance  Interest  Rate
Interest earning assets:                              
Loans net of deferred fees and costs **  $3,593,921   $80,607    4.49%  $2,241,746   $59,898    5.34%
Leases - bank qualified*   10,096    362    7.17%   16,613    695    8.37%
Investment securities-taxable   1,364,956    20,683    3.03%   1,374,019    22,164    3.23%
Investment securities-nontaxable*   4,788    75    3.13%   7,075    114    3.22%
Interest earning deposits at Federal Reserve Bank   460,025    1,730    0.75%   421,580    4,957    2.35%
Net interest earning assets   5,433,786    103,457    3.81%   4,061,033    87,828    4.33%
                               
Allowance for credit losses   (12,532)             (9,305)          
Assets held for sale from discontinued operations   133,903    2,368    3.54%   163,874    3,684    4.50%
Other assets   233,088              272,922           
   $5,788,245             $4,488,524           
                               
Liabilities and Shareholders' Equity:                              
Deposits:                              
Demand and interest checking  $4,746,928   $8,085    0.34%  $3,838,868   $17,616    0.92%
Savings and money market   203,888    170    0.17%   28,931    77    0.53%
Time   159,752    1,483    1.86%   —      —      —   
Total deposits   5,110,568    9,738    0.38%   3,867,799    17,693    0.91%
                               
Short-term borrowings   36,620    180    0.98%   77,330    1,029    2.66%
Securities sold under agreements to repurchase   57    —      0.00%   91    —      0.00%
Subordinated debentures   13,401    290    4.33%   13,401    387    5.78%
Total deposits and liabilities   5,160,646    10,208    0.40%   3,958,621    19,109    0.97%
                               
Other liabilities   118,811              97,449           
Total liabilities   5,279,457              4,056,070           
                               
Shareholders' equity   508,788              432,454           
   $5,788,245             $4,488,524           
Net interest income on tax equivalent basis*       $95,617             $72,403      
                               
Tax equivalent adjustment        92              170      
                               
Net interest income       $95,525             $72,233      
Net interest margin *             3.43%             3.43%
                               
* Full taxable equivalent basis, using a statutory rate of 21% for 2020 and 2019.                              
** Includes loans held for sale.                              

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Allowance for loan and lease losses:  Six months ended  Year ended
   June 30,  June 30,  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   1,048    893    1,362 
Direct lease financing   1,552    185    528 
Other consumer loans   —      2    1,103 
Total   2,600    1,080    2,993 
                
Recoveries:               
SBA non-real estate   54    100    125 
Direct lease financing   90    16    51 
Other consumer loans   —      —      2 
Total   144    116    178 
Net charge-offs   2,456    964    2,815 
Provision credited to allowance, excluding commitment provision   4,207    2,300    4,400 
                
Balance in allowance for loan and lease losses at end of period  $14,625   $9,989   $10,238 
Net charge-offs/average loans   0.06%   0.04%   0.12%
Net charge-offs/average loans (annualized)   0.12%   0.09%   0.12%
Net charge-offs/average assets   0.04%   0.02%   0.06%
(1) Excludes activity from assets held for sale from discontinued operations.

 

Loan portfolio:  June 30,  March 31,  December 31,  June 30,
   2020  2020  2019  2019
   (in thousands)
SBL non-real estate  $293,692   $84,946   $84,579   $75,475 
SBL commercial mortgage   259,020    233,220    218,110    189,427 
SBL construction   33,193    48,823    45,310    29,298 
Small business loans *   585,905    366,989    347,999    294,200 
Direct lease financing   422,505    445,967    434,460    407,907 
SBLOC / IBLOC**   1,287,350    1,156,433    1,024,420    837,672 
Advisor financing ***   15,529    —      —      —   
Other specialty lending   2,706    2,711    3,055    3,432 
Other consumer loans ****   4,003    4,023    4,554    7,898 
    2,317,998    1,976,123    1,814,488    1,551,109 
Unamortized loan fees and costs   4,739    9,632    9,757    10,342 
Total loans, net of unamortized fees and costs  $2,322,737   $1,985,755   $1,824,245   $1,561,451 
                     
Small business portfolio:   

 June 30,

2020

     March 31, 2020    

December 31,

2020 

    

 June 30,

2020

 
    (in thousands)
                     
SBL, including unamortized fees and costs   583,935    371,072    352,214    301,502 
SBL, included in held-for-sale   225,401    223,987    220,358    215,064 
Total small business loans  $809,336   $595,059   $572,572   $516,566 

 

* 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.
*** 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 $361,000 and $882,000 at June 30, 2020 and December 31, 2019, respectively.  Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.
 

7 

 

 

Small business loans as of June 30, 2020   
  Loan principal
  (in millions)
U.S. government guaranteed portion of SBA loans (a)  $306 
Paycheck Protection Program Loans (PPP) (a)   208 
Commercial mortgage SBA (b)   165 
Construction SBA (c)   16 
Unguaranteed portion of U.S. government guaranteed loans (d)   89 
Non-SBA small business loans (e)   22 
Total principal  $806 
Fair value adjustment (f)   5 
Unamortized fees   (2)
Total small business loans  $809 

 

(a)   This is the portion of SBA 7a loans (7a) and PPP which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.
 
(b)   Substantially all of these loans are made under the SBA 504 Fixed Asset Financing program (504) which dictates origination date loan to value percentages (LTV), generally 50-60%, to which the bank adheres.
 
(c)   Of the $16 million Construction SBA loans, $12 million are 504 first mortgages with an origination date LTV of 50-60% and $4 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.
 
(d)  The $89 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 $22 million in non-SBA loans, $3 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an 80% origination date LTV 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.
 
(f)   The fair value adjustment applies to the U.S. government guaranteed portion of SBA loans.
 
Additionally, the recently passed CARES Act of 2020 has provided significant support for SBA loans including funding intended to provide six months of interest payments on SBA loans, as well as other accommodations to provide for the payment of payroll and other operating expenses.

 

Type as of June 30, 2020               
                
(Excludes government guaranteed portion of SBA 7a and PPP loans)         
                
   SBL commercial mortgage*  SBL construction*  SBL non-real estate  Total  % Total
   (in millions)
Hotels  $68   $7   $—     $75    26%
Professional services offices   22    —      2    24    8%
Full-service restaurants   15    1    5    21    7%
Child day care and youth services   15    —      1    16    6%
Bakeries   4    —      12    16    6%
Fitness/rec centers and instruction   8    —      4    12    4%
General warehousing and storage   11    —      —      11    4%
Limited-service restaurants and catering   7    —      4    11    4%
Elderly assisted living facilities   2    7    2    11    4%
Amusement and recreation industries   5    1    1    7    2%
Car washes   3    3    —      6    2%
Funeral homes   5    —      —      5    2%
New and used car dealers   4    —      —      4    1%
Automotive servicing   3    —      1    4    1%
Other   45    1    23    69    23%
Total  $217   $20   $55   $292    100%

 

* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

 

8 

 

 

State diversification as of June 30, 2020            
(Excludes government guaranteed portion of SBA 7a and PPP loans)         
                
   SBL commercial mortgage*  SBL construction*  SBL non-real estate  Total  % Total
   (in millions)
Florida  $33   $7   $7   $47    16%
California   34    2    5    41    14%
Pennsylvania   30    —      4    34    11%
Illinois   28    —      4    32    11%
North Carolina   24    1    3    28    10%
Texas   11    —      5    16    6%
New York   10    1    5    16    5%
Tennessee   7    6    1    14    5%
New Jersey   2    1    7    10    4%
Virginia   8    1    2    11    4%
Georgia   5    —      2    7    2%
Michigan   3    —      1    4    2%
Colorado   2    —      1    3    1%
Ohio   3    —      —      3    1%
Other states   17    1    8    26    8%
Total  $217   $20   $55   $292    100%

 

* Substantially all are SBA loans with 50-60% loan to value ratios at their origination.

.

Top 10 loans as of June 30, 2020         
             
Type*  State  SBL commercial mortgage*  SBL construction*  Total
   (in millions)
Professional services office  CA  $9   $—     $9 
Hotel  FL   9    —      9 
General warehouse  PA   8    —      8 
Hotel  NC   6    —      6 
Assisted living facility  FL   —      5    5 
Hotel  NC   5    —      5 
Fitness and rec center  PA   4    —      4 
Hotel  PA   4    —      4 
Hotel  TN   —      4    4 
Gas Station  VA   3    —      3 
Total     $48   $9   $57 

 

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

 

9 

 

 

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

 

Type as of June 30, 2020            
             
Type  # Loans  Balance  Origination date LTV  Weighted average minimum interest rate
   (dollars in millions)
Multifamily (apartments)   181   $1,450    76%   4.77%
Hospitality (hotels and lodging)*   11    60    65%   5.70%
Retail   7    52    72%   4.96%
Other   8    25    69%   5.20%
    207   $1,587    75%   4.82%
Fair value adjustment *        (5)          
Total       $1,582           

 

*Of the total $5 million fair value adjustment, $2 million was related to hospitality loans.

 

State diversification as of June 30, 2020     15 Largest loans (all multifamily) as of June 30, 2020
                
State   Balance    Origination date LTV   State   Balance    Origination date LTV 
    (in millions)            (in millions)      
Texas  $407    77%  North Carolina  $43    78%
Georgia   234    78%  Texas   37    79%
Arizona   121    76%  Texas   35    80%
North Carolina   109    78%  Pennsylvania   31    77%
Nevada   56    80%  Georgia   31    80%
Alabama   54    76%  Nevada   28    80%
Other states each <$50 million   606    73%  Texas   28    75%
Total  $1,587    75%  Texas   27    77%
             Arizona   26    79%
             Mississippi   25    79%
             Texas   24    77%
             North Carolina   24    77%
             Texas   24    77%
             California   23    65%
             Georgia   23    79%
             15 Largest loans  $429    77%

 

10 

 

 

Institutional banking loans outstanding at June 30, 2020
 
 
Type  Principal  % of total
(in millions)   
Securities backed lines of credit (SBLOC)        $1,003  77%
Insurance backed lines of credit (IBLOC)        284  22%
Advisor financing        16  1%
Total        $1,303  100%

 

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

 

Top 10 SBLOC loans      
       
 Principal amount  % Principal to collateral
 (in millions)      
   $33    31%
    19    44%
    14    23%
    11    29%
    11    80%
    10    49%
    10    27%
    9    75%
    8    22%
    8    71%
Total  $133    42%

 

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.  
               

11 

 

 

Direct lease financing* by type as of June 30, 2020      
    
 Principal balance% Total 
    (in millions)      
Government agencies and public institutions**  $77    18%
Construction   74    18%
Waste management and remediation services   61    15%
Retail trade   39    9%
Transportation and warehousing   39    9%
Real estate, rental and leasing   33    8%
Health care and social assistance   26    6%
Professional, scientific, and technical services   19    5%
Manufacturing   13    3%
Wholesale trade   13    3%
Educational services   10    2%
Arts, entertainment, and recreation   5    1%
Other   14    3%
Total  $423    100%

 

* Of the total $423 million of direct lease financing, $388 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, 2020      
       
State  Principal balance  % Total
    (in millions)      
Florida  $99    23%
New Jersey   30    7%
Pennsylvania   27    6%
New York   27    6%
North Carolina   26    6%
Maryland   24    6%
California   21    5%
Utah   19    4%
Washington   16    4%
Georgia   15    4%
Connecticut   11    3%
Alabama   11    3%
Illinois   11    3%
Texas   10    2%
Missouri   7    2%
Other states   69    16%
Total  $423    100%

 

12 

 

 

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 June 30, 2020                    
The Bancorp, Inc.   8.48%   14.84%   15.27%   14.84%
The Bancorp Bank   8.34%   14.56%   14.98%   14.56%
"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  Six months ended
   June 30,  June 30,
   2020  2019  2020  2019
Selected operating ratios:                    
Return on average assets (1)   1.33%   1.00%   1.13%   1.32%
Return on average equity (1)   15.61%   10.20%   12.87%   13.65%
Net interest margin   3.53%   3.41%   3.43%   3.43%
                     
(1) Annualized                    

 

 

Book value per share table:  June 30,  March 31,  December 31,  June 30,
   2020  2020  2019  2019
Book value per share  $9.28   $8.69   $8.52   $8.07 
                     
Loan quality table:   June 30,    March 31,    December 31,    June 30, 
    2020    2020    2019    2019 
Nonperforming loans to total loans   0.44%   0.40%   0.50%   0.57%
Nonperforming assets to total assets   0.17%   0.14%   0.16%   0.19%
Allowance for loan and lease losses to total loans   0.63%   0.75%   0.56%   0.64%
                     
Nonaccrual loans  $9,957   $5,645   $5,796   $6,456 
Loans 90 days past due still accruing interest   352    2,245    3,264    2,373 
Other real estate owned   —      —      —      —   
     Total nonperforming assets  $10,309   $7,890   $9,060   $8,829 
                     
                     
                     
 Three months ended
    

June 30,

2020

    

March 31,

2020

    

December 31,

2019

    

June 30,

2019

 
 (in thousands)
  
Gross dollar volume (GDV) (2):                    
Prepaid and debit card GDV  $23,680,749   $22,982,188   $19,104,327   $16,611,551 
                     
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.
 

13 

 

 
Business line quarterly summary:                  
Quarter ended June 30, 2020                  
(dollars in millions)                  
                   
      Balances      
         % Growth      
Major business lines  Average approximate rates *  Balances **  Year over year  Linked quarter annualized      
Loans                  
Institutional banking ***   2.5%  $1,303    56%   51%          
Small Business Lending****   5.0%   601    16%   4%          
Leasing   5.8%   422    4%   nm           
Commercial real estate securitization   4.8%   1,582    nm    nm           
Weighted average yield   4.2%  $3,908              Non-interest income  
                         
                          % Growth
Deposits                       Current quarter 

Year

over year

Payment solutions (prepaid and debit card issuance)   0.1%  $3,908    56%   nm   $18.7    18%
Card payment and ACH processing   0.3%   723    -27%   nm    1.7    nm 
                               
* Average rates are for the quarter ended June 30, 2020
** Loan and deposit categories are respectively based on period-end and average quarterly balances.
*** Institutional Banking loans are comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities, Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies, and Advisor financing  
**** Small Business Lending is substantially comprised of SBA loans.  The balance above excludes $208M Paycheck Protection Program loans.  
 

14 

 

Analysis of Walnut Street* marks:    
     
  Loan activity Marks
  (dollars in millions)
     
Original Walnut Street loan balance, December 31, 2014  $                     267  
Marks through December 31, 2014 sale date                          (58)  $                      (58)
Sales price of Walnut Street                         209  
Equity investment from independent investor                          (16)  
December 31, 2014 Bancorp book value                         193  
Additional marks 2015 - 2019                          (46)                          (46)
2020 Marks  -  
Payments received                        (113)  
June 30, 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 investment in a securitization of certain loans from the bank's discontinued loan portfolio.
** Approximately 33% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of June 30, 2020.

 

Walnut Street portfolio composition as of June 30, 2020  
   
Collateral type % of Portfolio
Commercial real estate non-owner occupied  
Retail 58.0%
Office -
Other 5.2%
Construction and land 28.1%
First mortgage residential owner occupied 7.4%
First mortgage residential non-owner occupied 1.3%
Total 100.0%

 

15 

 

 

Cumulative analysis of marks on discontinued commercial loan principal as of June 30, 2020   
          
   Discontinued  Cumulative  % to original
   loan principal  marks  principal
   (dollars in millions)
          
Commercial loan discontinued principal before marks  $67           
Florida mall held in discontinued other real estate owned   42    (27)     
Previous mark charges   10    (10)     
Mark at June 30, 2020        (4)     
Cumulative mark at June 30, 2020  $119   $(41)   34%

 

Analysis of discontinued commercial loan relationships as of June 30, 2020

 

   Performing loan principal  Nonperforming loan principal  Total loan principal  Performing loan marks  Nonperforming loan marks  Total marks
   (in millions)
                   
5 loan relationships > $6 million  $45   $—     $45   $(3)  $—     $(3)
Loan relationships < $6 million   14    4    18    —      (1)   (1)
   $59   $4   $63   $(3)  $(1)  $(4)

 

Quarterly activity for commercial loan discontinued principal  
   
  Commercial
  loan principal
   (in millions) 
     
Commercial loan discontinued principal March 31, 2020 before marks $72 
Quarterly paydowns and other reductions  (5)
Commercial loan discontinued principal June 30, 2020 before marks $67 
Marks June 30, 2020  (4)
Net commercial loan exposure June 30, 2020 $63 
Residential mortgages  39 
Net loans $102 
Florida mall in other real estate owned  15 
11 properties in other real estate owned  11 
Total discontinued assets at June 30, 2020 $128 

 

16 

 

 

Discontinued commercial loan composition as of June 30, 2020

Collateral type  Unpaid principal balance  Mark
June 30, 2020
  Mark as % of portfolio
   (in millions)
Commercial real estate - non-owner occupied:               
Retail  $4   $(0.6)   15%
Office   2    —      0%
Other   19    (0.1)   1%
Construction and land   11    (0.1)   1%
Commercial non-real estate and industrial   2    —      —   
1 to 4 family construction   11    (2.8)   25%
First mortgage residential non-owner occupied   9    —      0%
Commercial real estate owner occupied:               
Retail   7    —      —   
Office   —      —      —   
Other   —      —      —   
Residential junior mortgage   1    —      —   
Other   1    —      —   
Total  $67   $(3.6)   5%
Less: mark   (4)          
Net commercial loan exposure June 30, 2020  $63   $(3.6)     

 

Loan payment deferrals as of June 30, 2020         
       
    Principal for loans with deferrals    Total principal by loan category    % of total loan principal with deferrals 
         (in millions)      
Commercial real estate loans held for sale (excluding SBA loans)  $31   $1,587    2%
Securities backed lines of credit, insurance backed lines of credit & advisor financing   2    1,303    <1%
Small business lending, substantially all SBA loans   187    806    23%
Direct lease financing   80    422    19%
Discontinued operations   18    106    17%
Other consumer loans and specialty lending   —      7    0%
Total  $318   $4,231    7.5%

 

17 

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