WILMINGTON, Del.--(BUSINESS WIRE)--The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the first quarter of 2020.
Highlights
- For the quarter ended March 31, 2020, The Bancorp earned net income of $13.2 million from continuing operations, and $0.22 diluted earnings per share from combined continuing and discontinued operations.
- Net interest margin increased to 3.34% for the quarter ended March 31, 2020, compared to 3.12% for the quarter ended December 31, 2019.
- Net interest income increased 26% to $42.9 million for the quarter ended March 31, 2020, compared to $34.0 million for the quarter ended March 31, 2019.
- Average loans and leases, including loans held for sale, increased 43% to $3.3 billion for the quarter ended March 31, 2020, compared to $2.3 billion for the quarter ended March 31, 2019.
- Prepaid, debit card and related fees increased 15% to $18.5 million for the quarter ended March 31, 2020, compared to $16.2 million for the quarter ended March 31, 2019. Gross dollar volume (GDV), representing total spend on cards, increased 36%.
- SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 46% year over year and 13% quarter over quarter to $1.2 billion at March 31, 2020.
- Small Business Loans, including those held-for-sale, increased 21% year over year to $595.1 million at March 31, 2020.
- As of April 28, 2020, we have originated approximately 1,250 Paycheck Protection Program loans, totaling in excess of $200 million, which we expect will generate approximately $5.5 million of fees and interest. We believe that income will be recognized primarily in the second quarter of 2020. The average loan size was approximately $165,000 with 92% of the loans under $350,000.
- Direct lease financing, the vast majority of which consist of vehicles, increased 16% year over year, to $446 million.
- The average rate on $4.9 billion of average deposits and interest-bearing liabilities in the first quarter of 2020 was 0.70%. Average prepaid and debit card account deposits of $3.2 billion for first quarter 2020, reflecting an increase of 24% over the $2.5 billion for the quarter ended March 31, 2019.
- Consolidated leverage ratio was 8.90% at March 31, 2020. The Bancorp and its subsidiary, The Bancorp Bank (the “Bank”), remain well capitalized.
- Book value per common share at March 31, 2020 was $8.69 per share compared to $7.70 a year earlier, an increase of 13%.
The following additional matters are notable:
- A planned sale by the Bank of approximately $825 million of commercial real estate loans scheduled for April 2020 was not consummated by the purchaser. The purchaser had deposited $12.5 million with the Bank, which was to be forfeited should they not consummate the purchase. We have been advised and have concluded that, under the relevant circumstances, the Bank is entitled to retain the deposit. The Bank intends to recognize the deposit as income in a time and manner consistent with applicable accounting rules.
- We implemented Current Expected Credit Loss (“CECL”) accounting as of January 1, 2020. As a result, we booked a $2.6 million cumulative increase to the allowance for loan and lease losses and $569,000 to other liabilities for unfunded commitments. The $3.2 million combined total of these items was offset through retained earnings, net of their future tax benefit. The provision as determined through the CECL model resulted in a $3.6 million provision for credit losses for the quarter ended March 31, 2020.
Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We have continued to experience momentum in our core earnings despite the current COVID-19 developments. While the pandemic continues to be fast-developing and could be prolonged, we have evaluated the impact of lower interest rates and potential lower business volumes on our profitability for 2020. We believe that the previously announced $1.25 minimum earnings per share guidance for 2020 is still attainable, while $1.34 earnings per share has become less likely. Accordingly, the $1.25 earnings per share now constitutes our guidance for full year 2020. We have removed the range of earnings performance and made $1.25 our target. We have also provided additional tables and other disclosures in this press release related to credit exposures.”
The Bancorp reported net income of $12.6 million, or $0.22 per diluted share, for the quarter ended March 31, 2020, compared to net income of $17.9 million, or $0.32 per diluted share, for the quarter ended March 31, 2019. Results for 2020 reflected $5.2 million of unrealized losses on loans held for sale, which may or may not be realized depending on future market conditions. The prior year comparable quarter reflected $10.8 million of gains on such loans, which consisted primarily of realized gains. Pre-tax income excluding these items, which are dependent on market conditions, amounted to $22.7 for first quarter 2020 compared to $12.7 million for first quarter 2019, or an increase of 79%. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 8.90%, 16.99%, 17.41% and 16.99%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.
Conference Call Webcast
You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, May 1, 2020 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 8676348. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, May 8, 2020 by dialing 855.859.2056, access code 8676348.
The Bancorp, Inc. (NASDAQ: TBBK) is dedicated to serving the unique needs of non-bank financial service companies, ranging from entrepreneurial start-ups to those on the Fortune 500. The company’s only subsidiary, The Bancorp Bank (Member FDIC, Equal Housing Lender), has been repeatedly recognized in the payments industry as the Top Issuer of Prepaid Cards (US), a top merchant sponsor bank and a top ACH originator. Specialized lending distinctions include National Preferred SBA Lender, a leading provider of securities-backed lines of credit, and one of the few bank-owned commercial vehicle leasing groups in the nation. For more information please visit www.thebancorp.com.
Forward-Looking Statements
Statements in this earnings release regarding The Bancorp’s business which are not historical facts are "forward-looking statements." These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “estimate,” “continue,” or similar words , and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. These risks and uncertainties include those relating to the on-going COVID-19 pandemic, the impact it will have on our business and the industry as a whole, and the resulting governmental and societal responses. For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see The Bancorp’s filings with the Securities Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. The forward-looking statements speak only as of the date of this press release. The Bancorp does not undertake to publicly revise or update forward-looking statements in this press release to reflect events or circumstances that arise after the date of this earnings release, except as may be required under applicable law.
The Bancorp, Inc. |
|||||||||
Financial highlights |
|||||||||
(unaudited) |
|||||||||
Three months ended |
Year ended |
||||||||
March 31, |
December 31, |
||||||||
Condensed income statement |
2020 |
2019 |
2019 |
||||||
(dollars in thousands except per share data) |
|||||||||
Net interest income |
$ |
42,911 |
$ |
34,010 |
$ |
141,288 |
|||
Provision for loan and lease losses |
|
3,579 |
|
1,700 |
|
4,400 |
|||
Non-interest income |
|||||||||
Service fees on deposit accounts |
|
10 |
|
47 |
|
75 |
|||
ACH, card and other payment processing fees |
|
1,846 |
|
2,303 |
|
9,376 |
|||
Prepaid, debit card and related fees |
|
18,540 |
|
16,163 |
|
65,141 |
|||
Net realized and unrealized gains (losses) on commercial loans originated for sale |
|
(5,156) |
|
10,763 |
|
24,072 |
|||
Change in value of investment in unconsolidated entity |
|
(45) |
|
- |
|
- |
|||
Leasing related income |
|
833 |
|
695 |
|
3,243 |
|||
Other non-interest income |
|
571 |
|
394 |
|
2,220 |
|||
Total non-interest income |
|
16,599 |
|
30,365 |
|
104,127 |
|||
Non-interest expense |
|||||||||
Salaries and employee benefits |
|
22,741 |
|
23,840 |
|
94,259 |
|||
Data processing expense |
|
1,169 |
|
1,269 |
|
4,894 |
|||
Legal expense |
|
913 |
|
1,324 |
|
5,319 |
|||
FDIC Insurance |
|
2,589 |
|
1,929 |
|
7,025 |
|||
Software |
|
3,477 |
|
2,921 |
|
12,731 |
|||
Civil money penalties |
|
- |
|
- |
|
8,900 |
|||
Lease termination expense |
|
- |
|
- |
|
908 |
|||
Other non-interest expense |
|
7,529 |
|
7,946 |
|
34,485 |
|||
Total non-interest expense |
|
38,418 |
|
39,229 |
|
168,521 |
|||
Income from continuing operations before income taxes |
|
17,513 |
|
23,446 |
|
72,494 |
|||
Income tax expense |
|
4,352 |
|
6,035 |
|
21,226 |
|||
Net income from continuing operations |
|
13,161 |
|
17,411 |
|
51,268 |
|||
Discontinued operations |
|||||||||
Income (loss) from discontinued operations before income taxes |
|
(775) |
|
805 |
|
510 |
|||
Income tax expense (benefit) |
|
(205) |
|
286 |
|
219 |
|||
Net income (loss) from discontinued operations, net of tax |
|
(570) |
|
519 |
|
291 |
|||
Net income |
$ |
12,591 |
$ |
17,930 |
$ |
51,559 |
|||
Net income per share from continuing operations - basic |
$ |
0.23 |
$ |
0.31 |
$ |
0.90 |
|||
Net income (loss) per share from discontinued operations - basic |
$ |
(0.01) |
$ |
0.01 |
$ |
0.01 |
|||
Net income per share – basic |
$ |
0.22 |
$ |
0.32 |
$ |
0.91 |
|||
Net income per share from continuing operations - diluted |
$ |
0.23 |
$ |
0.31 |
$ |
0.89 |
|||
Net income (loss) per share from discontinued operations - diluted |
$ |
(0.01) |
$ |
0.01 |
$ |
0.01 |
|||
Net income per share – diluted |
$ |
0.22 |
$ |
0.32 |
$ |
0.90 |
|||
Weighted average shares – basic |
|
57,220,844 |
|
56,522,015 |
|
56,765,635 |
|||
Weighted average shares – diluted |
|
57,926,785 |
|
56,876,662 |
57,338,985 |
Balance sheet |
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
|||||
2020 |
|
2019 |
|
2019 |
|
2019 |
||||||
(dollars in thousands) |
||||||||||||
Assets: |
||||||||||||
Cash and cash equivalents |
||||||||||||
Cash and due from banks | $ |
13,610 |
$ |
19,928 |
$ |
24,068 |
$ |
11,678 |
||||
Interest earning deposits at Federal Reserve Bank |
|
105,978 |
|
924,544 |
|
932,440 |
|
714,514 |
||||
Total cash and cash equivalents |
|
119,588 |
|
944,472 |
|
956,508 |
|
726,192 |
||||
Investment securities, available-for-sale, at fair value |
|
1,353,278 |
|
1,320,692 |
|
1,382,437 |
|
1,368,602 |
||||
Investment securities, held-to-maturity, at cost |
|
- |
|
84,387 |
|
84,399 |
|
84,428 |
||||
Commercial loans held for sale, at fair value |
|
1,716,450 |
|
1,180,546 |
|
489,240 |
|
570,426 |
||||
Loans, net of deferred fees and costs |
|
1,985,755 |
|
1,824,245 |
|
1,683,377 |
|
1,510,395 |
||||
Allowance for loan and lease losses |
|
(14,883) |
|
(10,238) |
|
(10,360) |
|
(9,954) |
||||
Loans, net |
|
1,970,872 |
|
1,814,007 |
|
1,673,017 |
|
1,500,441 |
||||
Federal Home Loan Bank & Atlantic Community Bancshares stock |
|
1,142 |
|
5,342 |
|
4,342 |
|
1,113 |
||||
Premises and equipment, net |
|
17,148 |
|
17,538 |
|
17,857 |
|
18,056 |
||||
Accrued interest receivable |
|
15,660 |
|
13,619 |
|
13,898 |
|
13,907 |
||||
Intangible assets, net |
|
2,857 |
|
2,315 |
|
2,698 |
|
3,463 |
||||
Deferred tax asset, net |
|
12,797 |
|
12,538 |
|
13,006 |
|
18,423 |
||||
Investment in unconsolidated entity |
|
34,273 |
|
39,154 |
|
49,431 |
|
58,258 |
||||
Assets held for sale from discontinued operations |
|
134,118 |
|
140,657 |
|
162,098 |
|
188,025 |
||||
Other assets |
|
79,925 |
|
81,696 |
|
94,605 |
|
75,642 |
||||
Total assets | $ |
5,458,108 |
$ |
5,656,963 |
$ |
4,943,536 |
$ |
4,626,976 |
||||
Liabilities: |
||||||||||||
Deposits |
||||||||||||
Demand and interest checking | $ |
4,512,949 |
$ |
4,402,740 |
$ |
3,844,747 |
$ |
3,993,828 |
||||
Savings and money market |
|
178,174 |
|
174,290 |
|
25,950 |
|
31,470 |
||||
Time deposits |
|
- |
|
475,000 |
|
475,000 |
|
- |
||||
Total deposits |
|
4,691,123 |
|
5,052,030 |
|
4,345,697 |
|
4,025,298 |
||||
Securities sold under agreements to repurchase |
|
42 |
|
82 |
|
93 |
|
93 |
||||
Short-term borrowings |
|
140,000 |
|
- |
|
- |
|
- |
||||
Subordinated debenture |
|
13,401 |
|
13,401 |
|
13,401 |
|
13,401 |
||||
Long-term borrowings |
|
40,813 |
|
40,991 |
|
41,166 |
|
41,499 |
||||
Other liabilities |
|
74,625 |
|
65,962 |
|
59,005 |
|
111,905 |
||||
Total liabilities | $ |
4,960,004 |
$ |
5,172,466 |
$ |
4,459,362 |
$ |
4,192,196 |
||||
Shareholders' equity: |
||||||||||||
Common stock - authorized, 75,000,000 shares of $1.00 par value; 57,425,556 and 56,568,004 shares issued and outstanding at March 31, 2020 and 2019, respectively |
|
57,426 |
|
56,941 |
|
56,911 |
|
56,568 |
||||
Treasury stock (100,000 shares) |
|
(866) |
|
(866) |
|
(866) |
|
(866) |
||||
Additional paid-in capital |
|
372,984 |
|
371,633 |
|
370,113 |
|
367,483 |
||||
Accumulated earnings |
|
60,960 |
|
50,742 |
|
48,888 |
|
17,113 |
||||
Accumulated other comprehensive income (loss) |
|
7,600 |
|
6,047 |
|
9,128 |
|
(5,518) |
||||
Total shareholders' equity |
|
498,104 |
|
484,497 |
|
484,174 |
|
434,780 |
||||
Total liabilities and shareholders' equity | $ |
5,458,108 |
$ |
5,656,963 |
$ |
4,943,536 |
$ |
4,626,976 |
Average balance sheet and net interest income |
Three months ended March 31, 2020 |
|
Three months ended March 31, 2019 |
|||||||||||||
(dollars in thousands) |
||||||||||||||||
Average |
|
|
|
Average |
|
Average |
|
|
|
Average |
||||||
Assets: |
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|||||
Interest earning assets: |
||||||||||||||||
Loans net of deferred fees and costs ** | $ |
3,262,378 |
$ |
39,159 |
4.80% |
$ |
2,266,834 |
$ |
30,161 |
5.32% |
||||||
Leases - bank qualified* |
|
10,975 |
|
200 |
7.29% |
|
17,793 |
|
428 |
9.62% |
||||||
Investment securities-taxable |
|
1,395,545 |
|
10,495 |
3.01% |
|
1,303,491 |
|
10,530 |
3.23% |
||||||
Investment securities-nontaxable* |
|
5,174 |
|
39 |
3.02% |
|
7,546 |
|
59 |
3.13% |
||||||
Interest earning deposits at Federal Reserve Bank |
|
493,876 |
|
1,623 |
1.31% |
|
423,024 |
|
2,502 |
2.37% |
||||||
Net interest earning assets |
|
5,167,948 |
|
51,516 |
3.99% |
|
4,018,688 |
|
43,680 |
4.35% |
||||||
Allowance for loan and lease losses |
|
(10,176) |
|
(8,638) |
||||||||||||
Loans held for sale from discontinued operations |
|
137,286 |
|
1,275 |
3.71% |
|
173,800 |
|
2,025 |
4.66% |
||||||
Other assets |
|
226,881 |
|
234,174 |
||||||||||||
$ |
5,521,939 |
$ |
4,418,024 |
|||||||||||||
Liabilities and Shareholders' Equity: |
||||||||||||||||
Deposits: |
||||||||||||||||
Demand and interest checking | $ |
4,353,690 |
$ |
6,695 |
0.62% |
$ |
3,798,837 |
$ |
8,833 |
0.93% |
||||||
Savings and money market |
|
173,575 |
|
50 |
0.12% |
|
31,392 |
|
37 |
0.47% |
||||||
Time |
|
319,505 |
|
1,483 |
1.86% |
|
- |
|
- |
- |
||||||
Total deposits |
|
4,846,770 |
|
8,228 |
0.68% |
|
3,830,229 |
|
8,870 |
0.93% |
||||||
Short-term borrowings |
|
56,813 |
|
165 |
1.16% |
|
74,386 |
|
503 |
2.70% |
||||||
Securities sold under agreements to repurchase |
|
72 |
|
- |
0.00% |
|
90 |
|
- |
0.00% |
||||||
Subordinated debentures |
|
13,401 |
|
162 |
4.84% |
|
13,401 |
|
195 |
5.82% |
||||||
Total deposits and liabilities |
|
4,917,056 |
|
8,555 |
0.70% |
|
3,918,106 |
|
9,568 |
0.98% |
||||||
Other liabilities |
|
113,582 |
|
79,140 |
||||||||||||
Total liabilities |
|
5,030,638 |
|
3,997,246 |
||||||||||||
Shareholders' equity |
|
491,301 |
|
420,778 |
||||||||||||
$ |
5,521,939 |
$ |
4,418,024 |
|||||||||||||
Net interest income on tax equivalent basis* | $ |
44,236 |
$ |
36,137 |
||||||||||||
Tax equivalent adjustment |
|
50 |
|
102 |
||||||||||||
Net interest income | $ |
44,186 |
$ |
36,035 |
||||||||||||
Net interest margin * | 3.34% |
3.41% |
||||||||||||||
|
|
|
|
|||||||||||||
* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2020 and 2019. |
||||||||||||||||
** Includes loans held for sale. |
|
Allowance for loan and lease losses: |
Three months ended |
|
Year ended |
||||||
March 31, |
|
March 31, |
|
December 31, |
|||||
2020 |
|
2019 |
|
2019 |
|||||
(dollars in thousands) |
|||||||||
Balance in the allowance for loan and lease losses at beginning of period (1) |
$ |
12,874 |
$ |
8,653 |
$ |
8,653 |
|||
Loans charged-off: |
|||||||||
SBA non-real estate |
|
264 |
|
322 |
|
1,362 |
|||
Direct lease financing |
|
1,194 |
|
106 |
|
529 |
|||
Other consumer loans |
|
- |
|
- |
|
1,102 |
|||
Total |
|
1,458 |
|
428 |
|
2,993 |
|||
Recoveries: |
|||||||||
SBA non-real estate |
|
19 |
|
17 |
|
125 |
|||
Direct lease financing |
|
84 |
|
12 |
|
51 |
|||
Other consumer loans |
|
- |
|
- |
|
2 |
|||
Total |
|
103 |
|
29 |
|
178 |
|||
Net charge-offs |
|
1,355 |
|
399 |
|
2,815 |
|||
Provision credited to allowance, excluding commitment provision |
|
3,364 |
|
1,700 |
|
4,400 |
|||
Balance in allowance for loan and lease losses at end of period |
$ |
14,883 |
$ |
9,954 |
$ |
10,238 |
|||
Net charge-offs/average loans |
|
0.04% |
|
0.02% |
|
0.12% |
|||
Net charge-offs/average loans (annualized) |
|
0.17% |
|
0.07% |
|
0.12% |
|||
Net charge-offs/average assets |
|
0.02% |
|
0.01% |
|
0.06% |
|||
(1) Excludes activity from assets held for sale from discontinued operations. |
Loan portfolio: |
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
|||||
2020 |
|
2019 |
|
2019 |
|
2019 |
||||||
(in thousands) |
||||||||||||
SBL non-real estate |
$ |
84,946 |
$ |
84,579 |
$ |
84,181 |
$ |
76,112 |
||||
SBL commercial mortgage |
|
233,220 |
|
218,110 |
|
209,008 |
|
179,397 |
||||
SBL construction |
|
48,823 |
|
45,310 |
|
38,116 |
|
23,979 |
||||
Small business loans * |
|
366,989 |
|
347,999 |
|
331,305 |
|
279,488 |
||||
Direct lease financing |
|
445,967 |
|
434,460 |
|
412,755 |
|
384,930 |
||||
SBLOC / IBLOC** |
|
1,156,433 |
|
1,024,420 |
|
920,463 |
|
791,986 |
||||
Other specialty lending |
|
2,711 |
|
3,055 |
|
3,167 |
|
34,425 |
||||
Other consumer loans *** |
|
4,023 |
|
4,554 |
|
6,388 |
|
9,301 |
||||
|
1,976,123 |
|
1,814,488 |
|
1,674,078 |
|
1,500,130 |
|||||
Unamortized loan fees and costs |
|
9,632 |
|
9,757 |
|
9,299 |
|
10,265 |
||||
Total loans, net of unamortized fees and costs |
$ |
1,985,755 |
$ |
1,824,245 |
$ |
1,683,377 |
$ |
1,510,395 |
||||
Small business portfolio: |
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
|||||
2020 |
|
2019 |
|
2019 |
|
2019 |
||||||
(in thousands) |
||||||||||||
SBL, including unamortized fees and costs |
|
371,072 |
|
352,214 |
|
337,440 |
|
286,814 |
||||
SBL, included in held-for-sale |
|
223,987 |
|
220,358 |
|
222,007 |
|
206,901 |
||||
Total small business loans |
$ |
595,059 |
$ |
572,572 |
$ |
559,447 |
$ |
493,715 |
* The preceding table shows small business loans and small business loans held-for-sale, which consist of the government guaranteed portion of SBA loans at the dates indicated (in thousands). |
** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies. At March 31, 2020 and December 31, 2019, respectively, IBLOC loans amounted to $228.8 million and $144.6 million. |
*** Included in the table above under other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $455,000 and $882,000 at March 31, 2020 and December 31, 2019, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses. |
Small business loans as of March 31, 2020 |
|||
Loan principal |
|||
(in millions) |
|||
U.S. government guaranteed portion of SBA loans (a) |
$ |
304 |
|
Commercial mortgage SBA (b) |
|
147 |
|
Construction SBA (c) |
|
29 |
|
Unguaranteed portion of U.S. government guaranteed loans (d) |
|
85 |
|
Non-SBA small business loans (e) |
|
21 |
|
Total principal |
$ |
586 |
|
Fair value adjustment |
|
5 |
|
Unamortized fees |
|
4 |
|
Total small business loans |
$ |
595 |
(a) This is the portion of SBA 7a loans (7a) which have been granted guarantees by the U.S. government, and therefore assumed to have no credit risk. |
(b) Substantially all of these loans are made under the SBA 504 Fixed Asset Financing program (504) which dictates origination date loan to value percentages (LTV), generally 50-60%, to which the bank adheres. |
(c) Of the $29 million Construction SBA loans, $21 million are 504 first mortgages with an origination date LTV of 50-60% and $8 million are SBA interim loans with an approved SBA post-construction full takeout/payoff. |
(d) The $85 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government. 7a loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners. |
(e) Of the $21 million in non-SBA loans, $2 million are bridge loans with permanent lender takeout commitments, $2 million is a secured conventional loan with an origination date LTV of 80% and $17 million consist of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators and are considered seasoned and have performed as agreed. A $2 million guaranty by the seller, for an 11% first loss piece, is in place until August 2021. |
Additionally, the CARES Act of 2020, recently approved by Congress has provided significant support for SBA loans including funding intended to provide six months of interest payments on SBA loans, as well as other accommodations to provide for the payment of payroll and other operating expenses. |
Type as of March 31, 2020 |
||||||||||||||
(Excludes government guaranteed portion of SBA 7a loans) |
||||||||||||||
|
SBL commercial
|
|
SBL
|
|
SBL non-real
|
|
Total |
|
% Total |
|||||
(in millions) |
||||||||||||||
Hotels |
$ |
62 |
$ |
17 |
$ |
- |
$ |
79 |
28% |
|||||
Professional services offices |
|
17 |
|
- |
|
5 |
|
22 |
8% |
|||||
Full-service restaurants |
|
15 |
|
1 |
|
5 |
|
21 |
8% |
|||||
Child day care and youth services |
|
18 |
|
1 |
|
1 |
|
20 |
7% |
|||||
Bakeries |
|
4 |
|
- |
|
12 |
|
16 |
6% |
|||||
Fitness/rec centers and instruction |
|
8 |
|
- |
|
5 |
|
13 |
4% |
|||||
General warehousing and storage |
|
11 |
|
- |
|
- |
|
11 |
4% |
|||||
Limited-service restaurants and catering |
|
7 |
|
- |
|
3 |
|
10 |
4% |
|||||
Elderly assisted living facilities |
|
- |
|
7 |
|
3 |
|
10 |
4% |
|||||
Amusement and recreation industries |
|
5 |
|
1 |
|
- |
|
6 |
2% |
|||||
Car washes |
|
3 |
|
2 |
|
- |
|
5 |
2% |
|||||
Funeral homes |
|
5 |
|
- |
|
- |
|
5 |
2% |
|||||
New and used car dealers |
|
4 |
|
- |
|
- |
|
4 |
1% |
|||||
Automotive servicing |
|
2 |
|
- |
|
1 |
|
3 |
1% |
|||||
Other |
|
34 |
|
5 |
|
18 |
|
57 |
20% |
|||||
Total |
$ |
195 |
$ |
34 |
$ |
53 |
$ |
282 |
100% |
* Substantially all are SBA loans which had 50-60% LTV ratios at their origination.
State diversification as of March 31, 2020 |
||||||||||||||
(Excludes government guaranteed portion of SBA 7a loans) |
||||||||||||||
|
SBL commercial
|
|
SBL
|
|
SBL non-real
|
|
Total |
|
% Total |
|||||
(in millions) |
||||||||||||||
Florida |
$ |
33 |
$ |
14 |
$ |
7 |
$ |
54 |
19% |
|||||
Pennsylvania |
|
29 |
|
- |
|
3 |
|
32 |
11% |
|||||
Illinois |
|
26 |
|
- |
|
5 |
|
31 |
11% |
|||||
California |
|
25 |
|
1 |
|
5 |
|
31 |
11% |
|||||
North Carolina |
|
16 |
|
9 |
|
2 |
|
27 |
10% |
|||||
New York |
|
13 |
|
1 |
|
5 |
|
19 |
7% |
|||||
Texas |
|
10 |
|
1 |
|
5 |
|
16 |
6% |
|||||
Tennessee |
|
8 |
|
5 |
|
1 |
|
14 |
5% |
|||||
New Jersey |
|
1 |
|
2 |
|
7 |
|
10 |
4% |
|||||
Virginia |
|
8 |
|
1 |
|
2 |
|
11 |
4% |
|||||
Georgia |
|
3 |
|
- |
|
1 |
|
4 |
1% |
|||||
Michigan |
|
3 |
|
- |
|
1 |
|
4 |
1% |
|||||
Colorado |
|
2 |
|
- |
|
1 |
|
3 |
1% |
|||||
Ohio |
|
2 |
|
- |
|
1 |
|
3 |
1% |
|||||
Other states |
|
16 |
|
- |
|
7 |
|
23 |
8% |
|||||
Total |
$ |
195 |
$ |
34 |
$ |
53 |
$ |
282 |
100% |
* Substantially all are SBA loans with 50-60% LTV ratios at origination.
Top 10 loans as of March 31, 2020 |
|||||||||||
Type* |
State |
SBL
|
SBL
|
Total |
|||||||
(in millions) |
|||||||||||
Professional services office |
CA |
$ |
9 |
$ |
- |
$ |
9 |
||||
Hotel |
FL |
|
9 |
|
- |
|
9 |
||||
General warehouse |
PA |
|
7 |
|
- |
|
7 |
||||
Hotel |
NC |
|
- |
|
6 |
|
6 |
||||
Hotel |
FL |
|
5 |
|
- |
|
5 |
||||
Hotel |
NC |
|
5 |
|
- |
|
5 |
||||
Assisted living facility |
FL |
|
- |
|
5 |
|
5 |
||||
Fitness and rec center |
PA |
|
5 |
|
- |
|
5 |
||||
Hotel |
PA |
|
4 |
|
- |
|
4 |
||||
Hotel |
NY |
|
3 |
|
- |
|
3 |
||||
Total |
$ |
47 |
$ |
11 |
$ |
58 |
* All of the top 10 loans are SBA and with the rest of the commercial real estate portfolio are originated with an approximate loan to value ratio between 50% and 60% at origination.
Commercial real estate loans held for sale which were originated for sale or securitization, excluding SBA loans, are as follows including LTV at origination. The vast majority of these loans were originated in the past nine months:
Type as of March 31, 2020 |
|||||||||
Type |
# Loans |
|
Balance |
|
Origination
|
|
Weighted average
|
||
(dollars in millions) |
|||||||||
Multifamily (apartments) |
175 |
$ |
1,364 |
77% |
4.75% |
||||
Hospitality (hotels and lodging) * |
11 |
|
58 |
62% |
5.69% |
||||
Retail |
7 |
|
51 |
72% |
4.94% |
||||
Other |
8 |
|
24 |
69% |
5.18% |
||||
201 |
$ |
1,497 |
76% |
4.80% |
|||||
Fair value adjustment |
|
(4) |
|||||||
Total |
$ |
1,493 |
*Of the total $4 million fair value adjustment, $1.8 million was related to hospitality loans
State diversification as of March 31, 2020 |
|
|
15 Largest loans (all multifamily) as of March 31, 2020 |
|||||||||||
State |
|
Balance |
|
Origination
|
State |
|
Balance |
|
Origination
|
|||||
(in millions) |
(in millions) |
|||||||||||||
Texas |
$ |
375 |
77% |
North Carolina |
$ |
43 |
78% |
|||||||
Georgia |
|
230 |
78% |
Texas |
|
36 |
79% |
|||||||
Arizona |
|
117 |
76% |
Texas |
|
34 |
80% |
|||||||
North Carolina |
|
108 |
77% |
Pennsylvania |
|
31 |
77% |
|||||||
Nevada |
|
56 |
80% |
Georgia |
|
31 |
80% |
|||||||
Alabama |
|
53 |
76% |
Nevada |
|
28 |
80% |
|||||||
Other states each <$50 million |
|
558 |
76% |
Texas |
|
27 |
75% |
|||||||
Total |
$ |
1,497 |
76% |
Texas |
|
26 |
77% |
|||||||
Arizona |
|
25 |
79% |
|||||||||||
Mississippi |
|
25 |
79% |
|||||||||||
Texas |
|
24 |
77% |
|||||||||||
North Carolina |
|
24 |
77% |
|||||||||||
Texas |
|
24 |
77% |
|||||||||||
Georgia |
|
23 |
79% |
|||||||||||
Alabama |
|
22 |
77% |
|||||||||||
15 Largest loans |
$ |
423 |
78% |
Institutional banking loans outstanding at March 31, 2020 |
|||||
Type |
Principal |
% of total |
|||
(in millions) |
|||||
Securities backed lines of credit (SBLOC) |
$ |
927 |
80% |
||
Insurance backed lines of credit (IBLOC) |
|
229 |
20% |
||
Total |
$ |
1,156 |
100% |
For SBLOC, we generally lend up to 50% of the value of equities and 80% for investment grade securities. While equities have fallen in excess of 30% in recent periods, the reduction in collateral value of brokerage accounts collateralizing SBLOCs generally has been less, for two reasons. First, many collateral accounts are “balanced” and accordingly have a component of debt securities, which have either not decreased in value as much as equities, or in some cases may have increased in value. Secondly, many of these accounts have the benefit of professional investment advisors who provided some protection against market downturns, through diversification and other means. Additionally, borrowers often utilize only a portion of collateral value, which lowers the ratio of principal to collateral. As a result, the accounts monitored by management and related information as of March 31, 2020 were as follows:
Assessment of SBLOC collateral market value |
||||||||||
|
Number of
|
|
Principal
|
|
Market
|
|
%
|
|||
(in millions) |
||||||||||
0-5% |
7 |
$ |
4 |
$ |
5 |
79% |
||||
5-10% |
19 |
|
24 |
|
32 |
75% |
||||
10-15% |
40 |
|
26 |
|
36 |
71% |
||||
15%+ |
85 |
|
50 |
|
79 |
63% |
||||
Subtotal* |
151 |
$ |
104 |
$ |
152 |
69% |
||||
Remaining portfolio |
4,498 |
|
823 |
|
3,598 |
23% |
||||
Total |
4,649 |
$ |
927 |
$ |
3,750 |
25% |
* Of the 4,649 SBLOC loans with principal balances of $927 million, 151 loans with principal of $104 million at March 31, 2020 were being monitored at that date, as they had exceeded the desired threshold for the percent principal to market value of collateral. The first column reflects the percentage increase in that ratio before additional collateral or paydown of debt would be required. As of April 23, 2020, the number of loans requiring monitoring had decreased to 80 loans, with principal balances of $57 million.
Top 10 SBLOC loans |
|||||
Principal
|
|
%
|
|||
(in millions) |
|||||
$ |
22 |
22% |
|||
|
19 |
47% |
|||
|
15 |
29% |
|||
|
11 |
82% |
|||
|
10 |
57% |
|||
|
9 |
31% |
|||
|
9 |
76% |
|||
|
8 |
22% |
|||
|
8 |
20% |
|||
|
8 |
23% |
|||
Total |
$ |
119 |
40% |
Insurance backed lines of credit (IBLOC)
IBLOC loans are backed by the cash value of life insurance policies which have been assigned to us. We lend up to 100% of such cash value. Our underwriting standards require approval of the insurance companies which carry the policies backing these loans. Currently, seven insurance companies have been approved and, as of January 21, 2020 all were rated Superior (A+ or better) by AM BEST. Moody’s ratings were at least A rated, and ranged from A3 to Aa2.
Direct lease financing* by type as of March 31, 2020 |
|||||
|
Principal
|
|
% Total |
||
(in millions) |
|
|
|||
Government agencies and public institutions** |
$ |
79 |
18% |
||
Construction |
|
75 |
17% |
||
Waste management and remediation services |
|
62 |
14% |
||
Real estate, rental and leasing |
|
44 |
10% |
||
Retail trade |
|
40 |
9% |
||
Transportation and warehousing |
|
29 |
6% |
||
Health care and social assistance |
|
26 |
6% |
||
Professional, scientific, and technical services |
|
20 |
5% |
||
Manufacturing |
|
15 |
3% |
||
Wholesale trade |
|
14 |
3% |
||
Educational services |
|
11 |
2% |
||
Arts, entertainment, and recreation |
|
5 |
1% |
||
Other |
|
26 |
6% |
||
Total |
$ |
446 |
100% |
||
* Of the total $446 million of direct lease financing, $411 million consisted of vehicle leases with the remaining balance consisting of equipment leases |
** Includes public universities and school districts |
Direct lease financing by state as of March 31, 2020 |
|||||
State |
Principal balance |
|
% Total |
||
(in millions) |
|
|
|||
Florida |
$ |
116 |
26% |
||
New Jersey |
|
27 |
6% |
||
New York |
|
25 |
6% |
||
Pennsylvania |
|
27 |
6% |
||
North Carolina |
|
22 |
5% |
||
Maryland |
|
21 |
5% |
||
California |
|
21 |
5% |
||
Utah |
|
20 |
4% |
||
Washington |
|
16 |
4% |
||
South Carolina |
|
14 |
3% |
||
Texas |
|
14 |
3% |
||
Georgia |
|
13 |
3% |
||
Alabama |
|
12 |
3% |
||
Connecticut |
|
9 |
2% |
||
Missouri |
|
7 |
2% |
||
Other states |
|
82 |
18% |
||
Total |
$ |
446 |
100% |
Capital ratios: |
Tier 1 capital |
|
Tier 1 capital |
|
Total capital |
|
Common equity |
|
to average |
|
to risk-weighted |
|
to risk-weighted |
|
tier 1 to risk |
||
assets ratio |
|
assets ratio |
|
assets ratio |
|
weighted assets |
||
As of March 31, 2020 |
||||||||
The Bancorp, Inc. |
8.90% |
16.99% |
17.50% |
16.99% |
||||
The Bancorp Bank |
8.76% |
16.70% |
17.22% |
16.70% |
||||
"Well capitalized" institution (under FDIC regulations-Basel III) |
5.00% |
8.00% |
10.00% |
6.50% |
||||
As of December 31, 2019 |
||||||||
The Bancorp, Inc. |
9.63% |
19.04% |
19.45% |
19.04% |
||||
The Bancorp Bank |
9.46% |
18.71% |
19.11% |
18.71% |
||||
"Well capitalized" institution (under FDIC regulations-Basel III) |
5.00% |
8.00% |
10.00% |
6.50% |
Three months ended |
|
Year ended |
||||
March 31, |
|
December 31, |
||||
2020 |
|
2019 |
|
2019 |
||
Selected operating ratios: |
||||||
Return on average assets (1) |
0.91% |
1.65% |
1.09% |
|||
Return on average equity (1) |
10.28% |
17.28% |
11.57% |
|||
Net interest margin |
3.34% |
3.41% |
3.32% |
|||
(1) Annualized |
NOTE: Excluding the net of tax impact of the $5.2 million of unrealized losses, return on assets for the quarter ended March 31, 2020 was 1.19% and return on equity was 13.35%.
Book value per share table: |
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
||||||
2020 |
|
2019 |
|
2019 |
|
2019 |
|||||||
Book value per share |
$ |
8.69 |
$ |
8.52 |
$ |
8.52 |
$ |
7.70 |
|||||
Loan quality table: |
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
||||||
2020 |
|
2019 |
|
2019 |
|
2019 |
|||||||
Nonperforming loans to total loans |
|
0.40% |
|
0.50% |
|
0.55% |
|
0.55% |
|||||
Nonperforming assets to total assets |
|
0.14% |
|
0.16% |
|
0.19% |
|
0.18% |
|||||
Allowance for loan and lease losses to total loans |
|
0.75% |
|
0.56% |
|
0.62% |
|
0.66% |
|||||
Nonaccrual loans |
$ |
5,645 |
$ |
5,796 |
$ |
6,420 |
$ |
5,863 |
|||||
Loans 90 days past due still accruing interest |
|
2,245 |
|
3,264 |
|
2,788 |
|
2,483 |
|||||
Other real estate owned |
|
- |
|
- |
|
- |
|
- |
|||||
Total nonperforming assets |
$ |
7,890 |
$ |
9,060 |
$ |
9,208 |
$ |
8,346 |
|||||
NOTE: Because SBLOC and IBLOC loans are respectively collateralized by marketable securities and the cash value of life insurance, management excludes those loans from the ratio of the allowance to total loans in its internal analysis. Accordingly, the adjusted ratio is 1.79%. |
|||||||||||||
|
|||||||||||||
|
Three months ended |
||||||||||||
March 31, |
|
December 31, |
|
September 30, |
|
March 31, |
|||||||
2020 |
|
2019 |
|
2019 |
|
2019 |
|||||||
(in thousands) |
|||||||||||||
Gross dollar volume (GDV) (2): |
|||||||||||||
Prepaid and debit card GDV |
$ |
22,982,188 |
$ |
19,104,327 |
$ |
17,264,890 |
$ |
16,937,325 |
|||||
(2) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank. |
|||||||||||||
|
Business line quarterly summary: |
|||||||||||||||
Quarter ended March 31, 2020 |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
|
|
Balances |
|||||||||||||
|
|
|
|
% Growth |
|||||||||||
Major business lines |
Average
|
|
Balances ** |
|
Year
|
|
Linked
|
||||||||
Loans |
|||||||||||||||
Institutional banking *** |
3.5% |
$ |
1,156 |
46% |
51% |
||||||||||
SBA |
5.6% |
|
595 |
21% |
16% |
||||||||||
Leasing |
6.3% |
|
446 |
16% |
11% |
||||||||||
Commercial real estate securitization |
5.0% |
|
1,495 |
nm |
nm |
||||||||||
Weighted average yield |
4.8% |
|
$ |
3,692 |
Non-interest income |
||||||||||
|
|
% Growth |
|||||||||||||
Deposits |
Current
|
|
Year
|
||||||||||||
Payment solutions (prepaid and debit card issuance) |
0.5% |
$ |
3,152 |
24% |
nm |
$ |
18.5 |
15% |
|||||||
Card payment and ACH processing |
0.9% |
|
792 |
-11% |
nm |
|
1.8 |
nm |
* Average rates are for the quarter ended March 31, 2020 |
|
** Loan categories are based on period end balance and deposits are based on average quarterly balances. |
|
*** Comprised of Securities Backed Lines of Credit (SBLOC), collateralized by marketable securities and Insurance Backed Lines of Credit (IBLOC), collateralized by the cash surrender value of insurance policies. |
Analysis of Walnut Street* marks: |
||||||
Loan activity |
|
Marks |
||||
(in millions) |
||||||
Original Walnut Street loan balance, December 31, 2014 |
$ |
267 |
||||
Marks through December 31, 2014 sale date |
|
(58) |
$ |
(58) |
||
Sales price of Walnut Street |
|
209 |
||||
Equity investment from independent investor |
|
(16) |
||||
December 31, 2014 Bancorp book value |
|
193 |
||||
Additional marks 2015 - 2019 |
|
(46) |
|
(46) |
||
2020 Marks |
|
- |
||||
Payments received |
|
(113) |
||||
March 31, 2020 Bancorp book value** |
$ |
34 |
||||
|
||||||
Total marks |
$ |
(104) |
||||
Divided by: |
||||||
Original Walnut Street loan balance |
$ |
267 |
||||
Percentage of total mark to original balance |
|
39% |
* Walnut Street is the investment in unconsolidated entity on the balance sheet which reflects the Bank's investment in a securitization of certain loans from the banks discontinued loan portfolio. |
** Approximately 32% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of March 31, 2020. |
Walnut Street portfolio composition as of March 31, 2020 |
||
Collateral type |
% of Portfolio |
|
Commercial real estate non-owner occupied |
||
Retail |
58.2% |
|
Office |
- |
|
Other |
5.2% |
|
Construction and land |
25.2% |
|
Commercial non real estate and industrial |
- |
|
First mortgage residential owner occupied |
9.7% |
|
First mortgage residential non-owner occupied |
1.7% |
|
Total |
100.0% |
Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2020 |
||||||||
Discontinued |
|
Cumulative |
|
% to original |
||||
loan principal |
|
marks |
|
principal |
||||
(dollars in millions) |
||||||||
Commercial loan discontinued principal before marks |
$ |
72 |
||||||
Florida mall held in discontinued other real estate owned |
|
42 |
|
(27) |
||||
Previous mark charges |
|
10 |
|
(10) |
||||
Mark at March 31, 2020 |
|
(4) |
||||||
Total |
$ |
124 |
$ |
(41) |
33% |
Analysis of discontinued commercial loan relationships as of March 31, 2020 |
||||||||||||||||||
Performing |
|
Nonperforming |
|
Total |
|
Performing |
|
Nonperforming |
|
Total |
||||||||
loan principal |
|
loan principal |
|
loan principal |
|
loan marks |
|
loan marks |
|
marks |
||||||||
(in millions) |
||||||||||||||||||
5 loan relationships > $6 million |
$ |
45 |
$ |
- |
$ |
45 |
$ |
(3) |
$ |
- |
$ |
(3) |
||||||
Loan relationships < $6 million |
|
16 |
|
7 |
|
23 |
|
(1) |
|
- |
|
(1) |
||||||
$ |
61 |
$ |
7 |
$ |
68 |
$ |
(4) |
$ |
- |
$ |
(4) |
Quarterly activity for commercial loan discontinued principal |
|||
Commercial |
|||
loan principal |
|||
(in millions) |
|||
Commercial loan discontinued principal December 31, 2019 before marks |
$ |
75 |
|
Quarterly paydowns and other reductions |
|
(3) |
|
Commercial loan discontinued principal March 31, 2020 before marks |
$ |
72 |
|
Marks March 31, 2020 |
|
(4) |
|
Net commercial loan exposure March 31, 2020 |
$ |
68 |
|
Residential mortgages |
|
43 |
|
Net loans |
$ |
111 |
|
Florida mall in other real estate owned |
|
15 |
|
10 properties in other real estate owned |
|
8 |
|
Total discontinued assets at March 31, 2020 |
$ |
134 |
Discontinued commercial loan composition as of March 31, 2020 |
||||||||
Collateral type |
|
Unpaid principal
|
|
Mark
|
|
Mark as %
|
||
(in millions) |
||||||||
Commercial real estate - non-owner occupied: |
||||||||
Retail |
$ |
4 |
$ |
(0.6) |
13% |
|||
Office |
|
3 |
|
- |
- |
|||
Other |
|
23 |
|
(0.3) |
1% |
|||
Construction and land |
|
11 |
|
- |
- |
|||
Commercial non-real estate and industrial |
|
2 |
|
- |
- |
|||
1 to 4 family construction |
|
11 |
|
(2.5) |
23% |
|||
First mortgage residential non-owner occupied |
|
9 |
|
(0.2) |
2% |
|||
Commercial real estate owner occupied: |
||||||||
Retail |
|
7 |
|
- |
- |
|||
Office |
|
- |
|
- |
- |
|||
Other |
|
- |
|
- |
- |
|||
Residential junior mortgage |
|
1 |
|
- |
- |
|||
Other |
|
1 |
|
- |
- |
|||
Total |
$ |
72 |
|
- |
||||
Less: mark |
|
(4) |
|
- |
||||
Net commercial loan exposure March 31, 2020 |
$ |
68 |
$ |
(3.6) |
5% |
Loan payment deferral requests as of April 23, 2020 |
||||||||
Principal for
|
|
Total principal
|
|
% of total loan
|
||||
(in millions) |
||||||||
Commercial real estate loans held for sale (excluding SBA loans) |
$ |
10 |
$ |
1,497 |
<1% |
|||
Securities backed lines of credit & insurance backed lines of credit |
|
10 |
|
1,156 |
1% |
|||
Small business lending, substantially all SBA loans |
|
127 |
|
586 |
22% |
|||
Direct lease financing |
|
80 |
|
446 |
18% |
|||
Discontinued operations |
|
18 |
|
115 |
15% |
|||
Other consumer loans and specialty lending |
|
1 |
|
7 |
17% |
|||
Total |
$ |
246 |
$ |
3,807 |
6% |