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Section 1: 10-Q (10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2020

o

TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____ to _____

Commission file number: 00-51018

THE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

23-3016517

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

409 Silverside Road, Wilmington, DE 19809

(302) 385-5000

(Address of principal executive offices and zip code)

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

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 

As of July 31, 2020, there were 57,590,874 outstanding shares of common stock, $1.00 par value.

2


THE BANCORP, INC

Form 10-Q Index

Page

Part I Financial Information

Item 1

Financial Statements:

4

Consolidated Balance Sheets – June 30, 2020 (unaudited) and December 31, 2019

4

Unaudited Consolidated Statements of Operations – Three and six months ended June 30, 2020 and 2019

5

Unaudited Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2020 and 2019

7

Unaudited Consolidated Statements of Changes in Shareholders’ Equity – Six months ended June 30, 2020 and 2019

8

Unaudited Consolidated Statements of Cash Flows – Six months ended June 30, 2020 and 2019

10

Notes to Unaudited Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

46

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

73

Item 4.

Controls and Procedures

73

Part II Other Information

Item 1.

Legal Proceedings

74

Item 1A.

Risk Factors

74

Item 6.

Exhibits

77

Signatures

78


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

THE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

2020

2019

(unaudited)

(in thousands)

ASSETS

Cash and cash equivalents

Cash and due from banks

$                    5,094 

$                  19,928 

Interest earning deposits at Federal Reserve Bank

475,627 

924,544 

Total cash and cash equivalents

480,721 

944,472 

Investment securities, available-for-sale, at fair value

1,324,447 

1,320,692 

Investment securities, held-to-maturity (fair value $83,002 at December 31, 2019)

-

84,387 

Commercial loans held-for-sale, at fair value

1,807,630 

1,180,546 

Loans, net of deferred loan fees and costs

2,322,737 

1,824,245 

Allowance for credit losses

(14,625)

(10,238)

Loans, net

2,308,112 

1,814,007 

Federal Home Loan Bank and Atlantic Central Bankers Bank stock

1,368 

5,342 

Premises and equipment, net

16,701 

17,538 

Accrued interest receivable

18,897 

13,619 

Intangible assets, net

2,710 

2,315 

Deferred tax asset, net

7,921 

12,538 

Investment in unconsolidated entity, at fair value

34,064 

39,154 

Assets held-for-sale from discontinued operations

128,463 

140,657 

Other assets

83,003 

81,696 

Total assets

$             6,214,037 

$             5,656,963 

LIABILITIES

Deposits

Demand and interest checking

$             5,089,741 

$             4,402,740 

Savings and money market

455,458 

174,290 

Time deposits

-

475,000 

Total deposits

5,545,199 

5,052,030 

Securities sold under agreements to repurchase

42 

82 

Subordinated debentures

13,401 

13,401 

Long-term borrowings

40,639 

40,991 

Other liabilities

81,677 

65,962 

Total liabilities

5,680,958 

5,172,466 

SHAREHOLDERS' EQUITY

Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,555,308 and 56,940,521

shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

57,555 

56,941 

Treasury stock, at cost (100,000 shares)

(866)

(866)

Additional paid-in capital

374,578 

371,633 

Retained earnings

81,028 

50,742 

Accumulated other comprehensive income

20,784 

6,047 

Total shareholders' equity

533,079 

484,497 

Total liabilities and shareholders' equity

$             6,214,037 

$             5,656,963 

The accompanying notes are an integral part of these consolidated statements.


4


THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended June 30,

For the six months ended June 30,

2020

2019

2020

2019

(in thousands, except per share data)

Interest income

Loans, including fees

$              41,577 

$              29,948 

$                80,893 

$              60,447 

Investment securities:

Taxable interest

10,188 

11,634 

20,683 

22,164 

Tax-exempt interest

27 

43 

59 

90 

Interest earning deposits

107 

2,455 

1,730 

4,957 

51,899 

44,080 

103,365 

87,658 

Interest expense

Deposits

1,510 

8,823 

9,738 

17,693 

Short-term borrowings

15 

526 

180 

1,029 

Subordinated debentures

128 

192 

290 

387 

1,653 

9,541 

10,208 

19,109 

Net interest income

50,246 

34,539 

93,157 

68,549 

Provision for credit losses

922 

600 

4,501 

2,300 

Net interest income after provision for credit losses

49,324 

33,939 

88,656 

66,249 

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

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 

Depreciation and amortization

828 

966 

1,672 

1,940 

Rent and related occupancy cost

1,396 

1,444 

2,815 

2,872 

Data processing expense

1,177 

1,223 

2,346 

2,492 

Printing and supplies

168 

202 

326 

342 

Audit expense

407 

396 

808 

863 

Legal expense

2,229 

1,534 

3,142 

2,858 

Amortization of intangible assets

147 

383 

294 

766 

FDIC insurance

2,918 

2,095 

5,507 

4,024 

Software

3,386 

3,060 

6,863 

5,981 

Insurance

695 

617 

1,318 

1,211 

Telecom and IT network communications

402 

318 

794 

643 

Consulting

346 

1,007 

601 

1,642 

Lease termination expense

-

908 

-

908 

Other

3,029 

3,540 

6,319 

6,540 

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 

Income (loss) from discontinued operations, net of tax

(215)

756 

(785)

1,275 

Net income

$              20,068 

$              11,350 

$                32,659 

$              29,280 

5


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

$                        -