EX-99.1 2 ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

The Bancorp, Inc. Reports Second Quarter Financial Results

 

Wilmington, DE – July 25, 2024 – The Bancorp, Inc. ("The Bancorp" “the Company” or “we” or “our”) (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter of 2024.

 

Recent Developments

 

The Company entered into a purchase and sale agreement for an apartment property acquired by The Bancorp Bank through foreclosure in connection with a real estate bridge lending (“REBL”) loan. At June 30, 2024, the related $39.4 million balance, comprised the majority of our other real estate owned. The purchaser made an earnest money deposit of $125,000 in July 2024, with additional required deposits projected to total $500,000 prior to the December 31, 2024, closing deadline.  The sales price is expected to cover the Company’s current other real estate owned balance plus the forecasted cost of improvements to the property. There can be no assurance that the purchaser will consummate the sale of the property, but if not consummated, earnest money deposits would accrue to the Company.

 

One of the accounting estimates as described in the notes to our financial statements, is the allowance for credit losses (“ACL”), which is sensitive to a variety of inherent portfolio and external factors. REBL may be one of the more sensitive portfolios to such factors. In the second quarter of 2024, REBL loans classified as either special mention or substandard increased to $177.1 million from $165.2 million at March 31, 2024. Each classified loan was evaluated for a potential increase in the ACL on the basis of third-party appraisals of related apartment building collateral. On the basis of “as is” and “as stabilized” loan to values (“LTV’s”), increases to the allowance for specific loans was not required. The respective weighted average “as is” and “as stabilized” LTVs were 81% and 69%, based on third party appraisals, the majority of which were performed in 2024. The current allowance for credit losses for REBL, is primarily based upon historical industry losses for multi-family loans, in the absence of significant historical losses within the Company’s REBL portfolio. However, as a result of increasing amounts of loans classified as special mention and substandard, the Company will evaluate potential related sensitivity of that factor for REBL. This evaluation is inherently subjective as it requires material estimates that may be susceptible to change as more information becomes available.

 

The Company has a single $12.6 million par value security in its investment portfolio, which is the only security remaining from its securitization business, which was exited in 2020. As a result of appraisals received from the servicer in the second quarter of 2024, the Company placed the security into non-accrual status, notwithstanding that those appraisals, with lower values than prior appraisals, exceeded principal and accrued interest. The following table reflects the related non-GAAP second quarter impact.

 

  Net Income (000’s) EPS
GAAP $53,686 $1.05
Interest income impact of legacy security transferred to nonaccrual, net of tax

 

1,009

 

0.02

As adjusted, non-GAAP $54,695 $1.07

 

In the second quarter of 2024, the Company initiated its measured entry into consumer fintech lending, by which the Company makes consumer loans with the marketing and servicing assistance of its existing and planned new fintech relationships. While the $72.4 million of such loans at June 30, 2024 did not significantly impact income during the quarter, such lending is expected to meaningfully impact both the balance sheet and income in the future. We expect that impact will be reflected in a lower cost of funds for related deposits and increased transaction fees.

 

Highlights

 

·The Bancorp reported net income of $53.7 million, or $1.05 per diluted share (“EPS”), for the quarter ended June 30, 2024, compared to net income of $49.0 million, or $0.89 per diluted share, for the quarter ended June 30, 2023, or an EPS increase of 18%. While net income increased 10% between these periods, outstanding shares were decreased as a result of common share repurchases which were significantly increased in 2024.

 

·Return on assets and equity for the quarter ended June 30, 2024, amounted to 2.8% and 27%, respectively, compared to 2.6% and 27%, respectively, for the quarter ended June 30, 2023 (all percentages “annualized”).

 

·Net interest income increased 8% to $93.8 million for the quarter ended June 30, 2024, compared to $87.2 million for the quarter ended June 30, 2023.

 

·Net interest margin amounted to 4.97% for the quarter ended June 30, 2024, compared to 4.83% for the quarter ended June 30, 2023, and 5.15% for the quarter ended March 31, 2024.

 

1 
 
·Loans, net of deferred fees and costs were $5.61 billion at June 30, 2024, compared to $5.36 billion at December 31, 2023 and $5.27 billion at June 30, 2023. Those changes reflected an increase of 3% quarter over linked quarter and an increase of 6% year over year.

 

·Gross dollar volume (“GDV”), representing the total amounts spent on prepaid and debit cards, increased $4.36 billion, or 13%, to $37.14 billion for the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. The increase reflects continued organic growth with existing partners and the impact of clients added within the past year. Total prepaid, debit card, ACH, and other payment fees increased 13% to $27.8 million for the second quarter of 2024 compared to the second quarter of 2023.

 

·Small business loans (“SBL”), including those held at fair value, amounted to $964.4 million at June 30, 2024, or 16% higher year over year, and 4% higher quarter over linked quarter, excluding the impact of $28.6 million of loans with related secured borrowings.

 

·Direct lease financing balances increased 8% year over year to $711.4 million at June 30, 2024, and 1% over March 31, 2024.

 

·At June 30, 2024, real estate bridge loans of $2.12 billion had grown 1% compared to a $2.10 billion balance at March 31, 2024, and 16% compared to the June 30, 2023 balance of $1.83 billion. These real estate bridge loans consist entirely of rehabilitation loans for apartment buildings.

 

·Security backed lines of credit (“SBLOC”), insurance backed lines of credit (“IBLOC”), and investment advisor financing loans collectively decreased 13% year over year and increased 1% quarter over linked quarter to $1.80 billion at June 30, 2024.

 

·The average interest rate on $6.96 billion of average deposits and interest-bearing liabilities during the second quarter of 2024 was 2.50%. Average deposits of $6.72 billion for the second quarter of 2024 increased $213 million over first quarter 2024, while historically, average deposits have tended to decrease between those periods, as tax refund related balances decline.

 

·As of June 30, 2024, 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 10.07%, 14.13%, 14.68% and 14.13%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively. The Bancorp Bank, National Association, remains well capitalized under banking regulations.

 

·Book value per common share at June 30, 2024 was $15.77 compared to $13.74 per common share at June 30, 2023, an increase of 15%.

 

·The Bancorp repurchased 3,018,405 shares of its common stock at an average cost of $33.13 per share during the quarter ended June 30, 2024. As a result of the increase in the share repurchase in the second quarter of 2024, from $50.0 million to $100.0 million, outstanding shares at June 30, 2024 amounted to 49.3 million, compared to 53.2 million shares at December 31, 2023, or a reduction of 7.4%

 

·The Bancorp emphasizes safety and soundness and its balance sheet has a risk profile enhanced by the special nature of the collateral supporting its loan niches, related underwriting, and the characteristics of its funding sources, including those highlighted in the bullets below. Those loan niches and funding sources have contributed to increased earnings levels, even during periods in which markets have experienced various economic stresses.

 

·The vast majority of The Bancorp’s funding is comprised of FDIC-insured and/or small balance accounts, which adjust to only a portion of changes in rates. The Bancorp also has lines of credit with U.S. government sponsored agencies totaling approximately $3.1 billion as of June 30, 2024, as well as access to other forms of liquidity.

 

·In its real estate bridge lending portfolio, The Bancorp has minimal exposure to non-multifamily commercial real estate such as office buildings, and instead has a portfolio largely comprised of rehabilitation bridge loans for apartment buildings. These loans generally have three year terms with two one-year extensions to allow for the rehabilitation work to be completed and rentals stabilized for an extended period, before being refinanced at lower rates through U.S. Government Sponsored Entities or other lenders. The rehabilitation real estate lending portfolio consists primarily of workforce housing, which we consider to be working class apartments at more affordable rental rates. Related collateral values should accordingly be more stable than higher rent properties, even in stressed economies. While the macro-economic environment has challenged the multifamily bridge space, the stability of The Bancorp’s rehabilitation bridge loan portfolio is evidenced by the estimated values of underlying collateral. The Bancorp’s $2.1 billion apartment
2 
 

bridge lending portfolio at June 30, 2024 has a weighted average origination date “as is” LTV of 70%, based on third party appraisals.  Further, the weighted average origination date “as stabilized” LTV, which measures the estimated value of the apartments after the rehabilitation is complete may provide even greater protection.

 

·As part of the underwriting process, The Bancorp reviews borrowers’ previous rehabilitation experience in addition to overall financial wherewithal. These transactions also include significant borrower equity contributions with required performance metrics. Underwriting generally includes, but is not limited to, assessment of local market information relating to vacancy and rental rates, review of post rehabilitation rental rate assumptions against geo-specific affordability indices, negative news and lien searches, visitations by bank personnel and/or designated engineers, and other information sources.

 

·Rehabilitation progress is monitored through ongoing draw requests and financial reporting covenants.  This generally allows for early identification of potential issues, and expedited action to address on a timely basis.

 

·Operations and ongoing loan evaluation are overseen by multiple levels of management, in addition to the real estate bridge lending team’s experienced professional staff and third-party consultants utilized during the underwriting and asset management process.  This oversight includes a separate loan committee specific to real estate bridge lending, which is comprised of seasoned and experienced lending professionals who do not directly report to anyone on the real estate bridge lending team.  There is also a separate loan review department, a surveillance committee and additional staff which evaluate potential losses under the current expected credit losses methodology (“CECL”), all of which similarly do not report to anyone on the real estate bridge lending team.

 

·SBLOC and IBLOC portfolios are respectively secured by marketable securities and the cash value of life insurance. The majority of SBA 7(a) loans are government guaranteed, while SBA 504 loans are made with 50-60% LTV’s.

 

·Additional details regarding our loan portfolios are included in the related tables in this press release, as is the summarization of the earnings contributions of our payments businesses, which further enhances The Bancorp’s risk profile. The Company’s risk profile inherent in its loan portfolios, funding and earnings levels, may present opportunities to further increase shareholder value, while still prudently maintaining capital levels. Such opportunities include the recently increased planned stock repurchases noted above.

 

·In the second quarter of 2024, the Company purchased approximately $900 million of fixed rate government sponsored entity backed commercial and residential mortgage securities of varying maturities, with an approximate 5.11% weighted average yield, and estimated weighted average lives of eight years, to reduce its exposure to lower levels of net interest income, should the Federal Reserve begin decreasing rates. Such purchases would also reduce the additional net interest income which will result if the Federal Reserve increases rates. While there are many variables and limitations to estimating exposure to changes in rates, such purchases and continuing fixed rate loan originations are projected to reduce such exposure to modest levels. In prior years, The Bancorp deferred adding fixed rate securities when yields were particularly low, which has afforded the flexibility to benefit from, and secure, more advantageous securities and loan rates.

 

“The second quarter, which usually reflects greater tax refund related runoff, instead showed continued broad based momentum in deposit volumes, and deposit stability,” said Damian Kozlowski CEO and President of The Bancorp.” Growth trends and the reduction of shares through buybacks should support continued strong EPS growth in 2024 and beyond. We are lifting our 2024 guidance to $4.35 a share from $4.25 a share without including the impact of $50 million of quarterly share buybacks. We intend to issue preliminary 2025 guidance in our 3rd quarter press release.”

 

Conference Call Webcast

 

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 26, 2024 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or you may dial 1.800.225.9448, conference code BANCORP. 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 2, 2024, by dialing 1.800.934.5153.

 

About The Bancorp

 

The Bancorp, Inc. (NASDAQ: TBBK), headquartered in Wilmington, Delaware, through its subsidiary, The Bancorp Bank, National Association, (or “The Bancorp Bank, N.A.”) provides non-bank financial companies with the people, processes, and technology to meet their unique banking needs. Through its Fintech Solutions, Institutional Banking, Commercial Lending, and Real Estate Bridge Lending businesses, The Bancorp provides partner-focused solutions paired with cutting-edge technology for companies that range from entrepreneurial startups to Fortune 500 companies. With over 20 years of experience, The Bancorp has become a leader in the

3 
 

financial services industry, earning recognition as the #1 issuer of prepaid cards in the U.S., a nationwide provider of bridge financing for real estate capital improvement plans, an SBA National Preferred Lender, a leading provider of securities-backed lines of credit, with one of the few bank-owned commercial vehicle leasing groups. By its company-wide commitment to excellence, The Bancorp has also been ranked as one of the 100 Fastest-Growing Companies by Fortune, a Top 50 Employer by Equal Opportunity Magazine and was selected to be included in the S&P Small Cap 600. For more about The Bancorp, visit https://thebancorp.com/.

 

Forward-Looking Statements

 

Statements in this earnings release regarding The Bancorp’s business which are not historical facts are "forward-looking statements." These statements may be identified by the use of forward-looking terminology, including but not limited to the words “intend,” “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “plan,” “estimate,” “continue,” or similar words, and are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results, events or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see The Bancorp’s filings with the Securities and Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. The forward-looking statements speak only as of the date of this press release. The Bancorp does not undertake to publicly revise or update forward-looking statements in this press release to reflect events or circumstances that arise after the date of this press release, except as may be required under applicable law.

 

The Bancorp, Inc. Contact

Andres Viroslav

Director, Investor Relations

215-861-7990

andres.viroslav@thebancorp.com

 

Source: The Bancorp, Inc.  

 

 

The Bancorp, Inc.

Financial highlights

(unaudited)

 

 

                       
    Three months ended   Six months ended
    June 30,   June 30,
Consolidated condensed income statements 2024     2023    2024    2023 
  (Dollars in thousands, except per share and share data)      
                       
Net interest income $  93,795    $  87,195    $  188,213    $  173,011 
Provision for credit losses on loans    1,252       361       3,421       2,264 
Non-interest income                      
ACH, card and other payment processing fees    3,000       2,429       5,964       4,600 
Prepaid, debit card and related fees    24,755       22,177       49,041       45,500 
Net realized and unrealized gains on commercial                      
   loans, at fair value    503       1,921       1,599       3,646 
Leasing related income    1,429       1,511       1,817       3,001 
Consumer credit fintech fees    140       —      140       —
Other non-interest income    895       1,298       1,543       1,578 
Total non-interest income    30,722       29,336       60,104       58,325 
Non-interest expense                      
Salaries and employee benefits    33,863       33,167       64,143       62,952 
Data processing expense    1,423       1,398       2,844       2,719 
Legal expense    633       949       1,454       1,907 
FDIC insurance    869       472       1,714       1,427 
Software    4,637       4,317       9,126       8,554 
Other non-interest expense    10,021       9,640       18,877       20,414 
Total non-interest expense    51,446       49,943       98,158       97,973 
Income before income taxes    71,819       66,227       146,738       131,099 
Income tax expense    18,133       17,218       36,623       32,968 
Net income    53,686       49,009       110,115       98,131 
                       
Net income per share - basic $  1.05    $  0.89    $  2.12    $  1.78 
                       
Net income per share - diluted $  1.05    $  0.89    $  2.10    $  1.76 
Weighted average shares - basic    50,937,055       54,871,681       51,842,097       55,160,642 
Weighted average shares - diluted    51,337,491       55,269,640       52,327,122       55,653,950 

 

 

4 
 

 

 

                       
Condensed consolidated balance sheets June 30,   March 31,   December 31,   June 30,
  2024 (unaudited)   2024 (unaudited)   2023   2023 (unaudited)
    (Dollars in thousands, except share data)
Assets:                      
Cash and cash equivalents                      
Cash and due from banks $  5,741    $  9,105    $  4,820    $  6,496 
Interest earning deposits at Federal Reserve Bank    399,853       1,241,363       1,033,270       874,050 
     Total cash and cash equivalents    405,594       1,250,468       1,038,090       880,546 
                       
Investment securities, available-for-sale, at fair value, net of $10.0 million allowance for credit loss effective December 31, 2023    1,581,006       718,247       747,534       776,410 
Commercial loans, at fair value    265,193       282,998       332,766       396,581 
Loans, net of deferred fees and costs    5,605,727       5,459,344       5,361,139       5,267,574 
Allowance for credit losses    (28,575)      (28,741)      (27,378)      (23,284)
Loans, net    5,577,152       5,430,603       5,333,761       5,244,290 
Federal Home Loan Bank, Atlantic Central Bankers Bank, and Federal Reserve Bank stock    15,642       15,642       15,591       20,157 
Premises and equipment, net    28,038       27,482       27,474       26,408 
Accrued interest receivable    43,720       37,861       37,534       34,062 
Intangible assets, net    1,452       1,552       1,651       1,850 
Other real estate owned    57,861       19,559       16,949       20,952 
Deferred tax asset, net    20,556       21,764       21,219       19,215 
Other assets    149,187       109,680       133,126       122,435 
     Total assets $  8,145,401    $  7,915,856    $  7,705,695    $  7,542,906 
                       
Liabilities:                      
Deposits                      
Demand and interest checking $  7,095,391    $  6,828,159    $  6,630,251    $  6,554,967 
Savings and money market    60,297       62,597       50,659       68,084 
     Total deposits    7,155,688       6,890,756       6,680,910       6,623,051 
                       
Securities sold under agreements to repurchase    —      —      42       42 
Senior debt    96,037       95,948       95,859       95,682 
Subordinated debenture    13,401       13,401       13,401       13,401 
Other long-term borrowings    38,283       38,407       38,561       9,917 
Other liabilities    65,001       60,579       69,641       51,646 
     Total liabilities $  7,368,410    $  7,099,091    $  6,898,414    $  6,793,739 
                       
Shareholders' equity:                      
Common stock - authorized, 75,000,000 shares of $1.00 par value; 49,267,403 and 54,542,284 shares issued and outstanding at June 30, 2024 and 2023, respectively    49,268       52,253       53,203       54,542 
Additional paid-in capital    72,171       166,335       212,431       256,115 
Retained earnings    671,730       618,044       561,615       467,450 
Accumulated other comprehensive loss    (16,178)      (19,867)      (19,968)      (28,940)
Total shareholders' equity    776,991       816,765       807,281       749,167 
                       
     Total liabilities and shareholders' equity $  8,145,401    $  7,915,856    $  7,705,695    $  7,542,906 

 

 

5 
 

 

 

Average balance sheet and net interest income   Three months ended June 30, 2024     Three months ended June 30, 2023
    (Dollars in thousands; unaudited)
    Average           Average     Average         Average
Assets:   Balance     Interest     Rate     Balance     Interest   Rate
                                 
Interest earning assets:                                
Loans, net of deferred fees and costs(1) $  5,749,565    $  114,970       8.00%   $  5,730,384    $  107,299     7.49%
Leases-bank qualified(2)    4,621       117       10.13%      3,801       100     10.52%
Investment securities-taxable    1,454,393       17,520       4.82%      778,100       9,873     5.08%
Investment securities-nontaxable(2)    2,895       50       6.91%      3,234       53     6.56%
Interest earning deposits at Federal Reserve Bank    341,863       4,677       5.47%      701,057       8,997     5.13%
Net interest earning assets    7,553,337       137,334       7.27%      7,216,576       126,322     7.00%
                                 
Allowance for credit losses    (28,568)                  (23,895)          
Other assets    266,061                   231,035           
  $  7,790,830                $  7,423,716           
                                 
Liabilities and Shareholders' Equity:                                
Deposits:                                
Demand and interest checking $  6,657,386    $  39,542       2.38%   $  6,399,750    $  36,688     2.29%
Savings and money market    60,212       457       3.04%      78,252       728     3.72%
Total deposits    6,717,598       39,999       2.38%      6,478,002       37,416     2.31%
                                 
Short-term borrowings    92,412       1,295       5.61%      —      —    —
Repurchase agreements    —      —      —      41       —    —
Long-term borrowings    38,362       685       7.14%      9,949       128     5.15%
Subordinated debentures    13,401       291       8.69%      13,401       271     8.09%
Senior debt    95,984       1,234       5.14%      96,890       1,280     5.28%
Total deposits and liabilities    6,957,757       43,504       2.50%      6,598,283       39,095     2.37%
                                 
Other liabilities    36,195                   88,276           
Total liabilities    6,993,952                   6,686,559           
                                 
Shareholders' equity    796,878                   737,157           
  $  7,790,830                $  7,423,716           
Net interest income on tax equivalent basis(2)       $  93,830                $  87,227     
                                 
Tax equivalent adjustment          35                   32     
                                 
Net interest income       $  93,795                $  87,195     
Net interest margin(2)                4.97%                4.83%

 

 

 
(1) Includes commercial loans, at fair value. All periods include non-accrual loans.
(2) Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2024 and 2023.

 

6 
 

 

 

                                 
Average balance sheet and net interest income Six months ended June 30, 2024   Six months ended June 30, 2023
    (Dollars in thousands; unaudited)
  Average           Average   Average         Average
Assets: Balance   Interest     Rate   Balance   Interest   Rate
                                 
Interest earning assets:                                
Loans, net of deferred fees and costs(1) $  5,733,413    $  229,130       7.99%   $  5,858,040    $  213,503     7.29%
Leases-bank qualified(2)    4,683       233       9.95%      3,582       169     9.44%
Investment securities-taxable    1,093,996       27,154       4.96%      776,089       19,173     4.94%
Investment securities-nontaxable(2)    2,895       100       6.91%      3,288       94     5.72%
Interest earning deposits at Federal Reserve Bank    607,968       16,561       5.45%      640,864       15,582     4.86%
Net interest earning assets    7,442,955       273,178       7.34%      7,281,863       248,521     6.83%
                                 
Allowance for credit losses    (27,862)                  (23,215)          
Other assets    323,244                   234,037           
  $  7,738,337                $  7,492,685           
                                 
Liabilities and Shareholders' Equity:                                
Deposits:                                
Demand and interest checking $  6,553,107    $  78,256       2.39%   $  6,401,678    $  69,071     2.16%
Savings and money market    55,591       904       3.25%      105,105       1,947     3.70%
Time deposits    —      —      —      41,933       858     4.09%
Total deposits    6,608,698       79,160       2.40%      6,548,716       71,876     2.20%
                                 
Short-term borrowings    46,892       1,314       5.60%      10,193       234     4.59%
Repurchase agreements    6       —      —      41       —    —
Long-term borrowings    38,439       1,371       7.13%      9,973       254     5.09%
Subordinated debentures    13,401       583       8.70%      13,401       532     7.94%
Senior debt    95,939       2,467       5.14%      97,985       2,559     5.22%
Total deposits and liabilities    6,803,375       84,895       2.50%      6,680,309       75,455     2.26%
                                 
Other liabilities    142,826                   90,777           
Total liabilities    6,946,201                   6,771,086           
                                 
Shareholders' equity    792,136                   721,599           
  $  7,738,337                $  7,492,685           
Net interest income on tax equivalent basis(2)       $  188,283                $  173,066     
                                 
Tax equivalent adjustment          70                   55     
                                 
Net interest income       $  188,213                $  173,011     
Net interest margin(2)                5.06%                4.75%

 

 

 
(1) Includes commercial loans, at fair value. All periods include non-accrual loans.
(2) Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2024 and 2023.

 

 

7 
 

 

                 
Allowance for credit losses   Six months ended   Year ended
  June 30,   June 30,   December 31,
  2024 (unaudited)   2023 (unaudited)   2023 
  (Dollars in thousands)
                 
Balance in the allowance for credit losses at beginning of period $  27,378    $  22,374    $  22,374 
                 
Loans charged-off:                
SBA non-real estate    417       871       871 
SBA commercial mortgage    —      —      76 
Direct lease financing    2,301       1,439       3,666 
IBLOC    —      —      24 
Consumer - home equity    10       —      —
Other loans    6       3       3 
Total    2,734       2,313       4,640 
                 
Recoveries:                
SBA non-real estate    32       298       475 
SBA commercial mortgage    —      75       75 
Direct lease financing    59       175       330 
Consumer - home equity    —      49       299 
Total    91       597       1,179 
Net charge-offs    2,643       1,716       3,461 
Provision for credit losses, excluding commitment provision    3,840       2,626       8,465 
                 
Balance in allowance for credit losses at end of period $  28,575    $  23,284    $  27,378 
Net charge-offs/average loans    0.05%      0.03%      0.07%
Net charge-offs/average assets    0.03%      0.02%      0.05%

 

 

                       
8 
 

 

   
Loan portfolio June 30,   March 31,   December 31,   June 30,
  2024 (unaudited)   2024 (unaudited)   2023   2023 (unaudited)
  (Dollars in thousands)
                       
SBL non-real estate $  171,893    $  140,956    $  137,752    $  117,621 
SBL commercial mortgage    647,894       637,926       606,986       515,008 
SBL construction    30,881       27,290       22,627       32,471 
Small business loans    850,668       806,172       767,365       665,100 
Direct lease financing    711,403       702,512       685,657       657,316 
SBLOC / IBLOC(1)    1,558,095       1,550,313       1,627,285       1,883,607 
Advisor financing(2)    238,831       232,206       221,612       173,376 
Real estate bridge loans    2,119,324       2,101,896       1,999,782       1,826,227 
Consumer fintech(3)    70,081       —      —      —
Other loans(4)    46,592       56,163       50,638       55,644 
     5,594,994       5,449,262       5,352,339       5,261,270 
Unamortized loan fees and costs    10,733       10,082       8,800       6,304 
Total loans, including unamortized fees and costs $  5,605,727    $  5,459,344    $  5,361,139    $  5,267,574 
                         

 

                       
                       
Small business portfolio   June 30,     March 31,     December 31,     June 30,
    2024 (unaudited)     2024 (unaudited)     2023     2023 (unaudited)
    (Dollars in thousands)
                       
SBL, including unamortized fees and costs $  860,226   $  816,151   $  776,867   $  673,667
SBL, included in loans, at fair value    104,146      109,131      119,287      134,131
Total small business loans(5) $  964,372   $  925,282   $  896,154   $  807,798

 

(1) SBLOC are collateralized by marketable securities, while IBLOC are collateralized by the cash surrender value of insurance policies. At June 30, 2024 and December 31, 2023, IBLOC loans amounted to $582.8 million and $646.9 million, respectively.

(2) In 2020 The Bancorp began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value (“LTV”) ratios of 70% of the business enterprise value based on a third-party valuation, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

(3) Consumer fintech loans consist primarily of secured credit card loans.

(4) Includes demand deposit overdrafts reclassified as loan balances totaling $279,000 and $1.7 million at June 30, 2024 and December 31, 2023, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and are immaterial.

(5) The SBLs held at fair value are comprised of the government guaranteed portion of 7(a) Program loans at the dates indicated.

 

 

Small business loans as of June 30, 2024

       
       
    Loan principal
    (Dollars in millions)
U.S. government guaranteed portion of SBA loans(1)   $  400
PPP loans(1)     2
Commercial mortgage SBA(2)      336
Construction SBA(3)     14
Non-guaranteed portion of U.S. government guaranteed 7(a) Program loans(4)      117
Non-SBA SBLs      56
Other(5)      28
Total principal   $  953
Unamortized fees and costs      11
Total SBLs   $  964

 

(1) Includes the portion of SBA 7(a) Program loans and PPP loans which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.

(2) Substantially all these loans are made under the 504 Program, which dictates origination date LTV percentages, generally 50-60%, to which The Bancorp adheres.

(3) Includes $6 million in 504 Program first mortgages with an origination date LTV of 50-60%, and $8 million in SBA interim loans with an approved SBA post-construction full takeout/payoff.

(4) Includes the unguaranteed portion of 7(a) Program loans which are 70% or more guaranteed by the U.S. government. SBA 7(a) Program 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 7(a) Program loans and 504 Program loans require the personal guaranty of all 20% or greater owners.

(5) Comprised of $29 million of loans sold that do not qualify for true sale accounting.

9 
 

Small business loans by type as of June 30, 2024

 

(Excludes government guaranteed portion of SBA 7(a) Program and PPP loans)

                               
    SBL commercial mortgage(1)   SBL construction(1)   SBL non-real estate   Total     % Total
      (Dollars in millions)
Hotels and motels   $  76   $ —   $ —   $  76      15%
Funeral homes and funeral services      22      —      25      47      9%
Full-service restaurants      29      5      2      36      7%
Child day care services      23      1      2      26      5%
Car washes      17      1      —      18      3%
General line grocery merchant wholesalers      17     —     —      17      3%
Homes for the elderly      16     —     —      16      3%
Outpatient mental health and substance abuse centers      15     —     —      15      3%
Gasoline stations with convenience stores      15     —      —      15      3%
Fitness and recreational sports centers      8     —      2     10      2%
Nursing care facilities      9     —      —      9      2%
Lawyer's office      9      —      —      9      2%
Limited-service restaurants      4      1      3      8      2%
Caterers      7     —      —      7      1%
All other specialty trade contractors      7      —      —      7      1%
General warehousing and storage      6     —      —      6      1%
Plumbing, heating, and air-conditioning contractors     5     —      1      6      1%
Other accounting services      5      —     —     5      1%
Offices of real estate agents and brokers     5     —     —     5      1%
Other miscellaneous durable goods merchant      5     —     —      5      1%
Other technical and trade schools      5      —     —      5      1%
Packaged frozen food merchant wholesalers      5     —     —      5      1%
Lessors of nonresidential buildings (except miniwarehouses)      5      —     —      5      1%
All other amusement and recreation industries      4      —     —      4      1%
Other(2)      122      10      29      161      30%
Total   $  441   $  18   $  64   $  523      100%

 

 

(1) Of the SBL commercial mortgage and SBL construction loans, $109 million represents the total of the non-guaranteed portion of SBA 7(a) Program loans and non-SBA loans. The balance of those categories represents SBA 504 Program loans with 50%-60% origination date LTVs. SBL Commercial excludes $29 million of loans sold that do not qualify for true sale accounting.

(2) Loan types of less than $4 million are spread over approximately one hundred different business types.

 

State diversification as of June 30, 2024

 

(Excludes government guaranteed portion of SBA 7(a) Program loans and PPP loans)

 

    SBL commercial mortgage(1)   SBL construction(1)   SBL non-real estate   Total     % Total
      (Dollars in millions)
California   $  117   $  3   $  5   $  125      24%
Florida      76      4     3      83      16%
North Carolina      38     1      5      44      8%
Pennsylvania      21     —      14      35      7%
New York      28     2     2      32      6%
Texas      22      2      6      30      6%
Georgia      26      1      1      28      5%
New Jersey      21      3      3      27      5%
Other States      92      2      25      119      23%
Total   $  441   $  18   $  64   $  523      100%
                               

 

(1) Of the SBL commercial mortgage and SBL construction loans, $109 million represents the total of the non-guaranteed portion of SBA 7(a) Program loans and non-SBA loans. The balance of those categories represents SBA 504 Program loans with 50%-60% origination date LTVs. SBL Commercial excludes $29 million of loans that do not qualify for true sale accounting.

 

10 
 

 

Top 10 loans as of June 30, 2024

               
Type(1)   State   SBL commercial mortgage  
      (Dollars in millions)
General line grocery merchant wholesalers     CA   $  13   
Funeral homes and funeral services     PA      13   
Outpatient mental health and substance abuse center     FL      10   
Funeral homes and funeral services     ME      9   
Hotel     FL      8   
Lawyer's office     CA      8   
Hotel     NC      7   
General warehousing and storage     PA      6   
Hotel     FL      6   
Hotel     NY      6   
Total         $  86   

 

(1) The table above does not include loans to the extent that they are U.S. government guaranteed.

 

11 
 

 

Commercial real estate loans, excluding SBA loans, are as follows including LTV at origination:

 

Type as of June 30, 2024

                     
Type     # Loans     Balance   Weighted average origination date LTV   Weighted average interest rate
      (Dollars in millions)
Real estate bridge loans (multifamily apartment loans recorded at amortized cost)(1)     160   $  2,119     70%    9.19%
                     
Non-SBA commercial real estate loans, at fair value:                    
Multifamily (apartment bridge loans)(1)      7    $  116     76%    9.20%
Hospitality (hotels and lodging)      2       27     65%    9.82%
Retail      2       12     72%    8.19%
Other      2       9     73%    5.10%
       13       164     74%    9.18%
Fair value adjustment            (3)        
Total non-SBA commercial real estate loans, at fair value            161         
Total commercial real estate loans         $  2,280     70%    9.19%

 

 

(1) In the third quarter of 2021, we resumed the origination of bridge loans for multi-family apartment rehabilitation which comprise these categories. Such loans held at fair value were originally intended for sale, but are now being retained on the balance sheet. In addition to “as is” origination date appraisals, on which the weighted average origination date LTVs are based, third party appraisers also estimated “as stabilized” values, which represents additional potential collateral value as rehabilitation progresses, and units are re-leased at stabilized rental rates. The weighted average origination date “as stabilized” LTV was estimated at 61%.

 

 

                               
State diversification as of June 30, 2024     15 largest loans as of June 30, 2024
                               
State     Balance     Origination date LTV     State       Balance   Origination date LTV
(Dollars in millions)     (Dollars in millions)
Texas   $  778     71%     Texas     $  47    72%
Georgia      259     69%     Texas        46    75%
Florida      245     69%     Tennessee        40    72%
Michigan      132     68%     Michigan        38    62%
Indiana      105     70%     Texas        37    80%
Ohio      73     67%     Texas        36    67%
New Jersey      71     68%     Florida        35    72%
Other States each <$60 million      617     71%     Pennsylvania        34    63%
Total   $  2,280     70%     Indiana        34    76%
                  Texas        33    62%
                  New Jersey        32    62%
                  Michigan        32    79%
                  Oklahoma        31    78%
                  Texas        31    77%
                  Michigan        29    66%
                  15 largest commercial real estate loans     $  535    71%
12 
 

 

Institutional banking loans outstanding at June 30, 2024

 

         
Type Principal   % of total
    (Dollars in millions)    
SBLOC $  975   54%
IBLOC    583   32%
Advisor financing    239   14%
Total $  1,797    100%

 

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

 

Top 10 SBLOC loans at June 30, 2024

 

         
  Principal amount   % Principal to collateral
  (Dollars in millions)
  $  11    17%
     9    48%
     8    36%
     8    68%
     8    65%
     8    80%
     8    24%
     8    34%
     7    22%
     7    44%
Total and weighted average $  82    43%

 

Insurance backed lines of credit (IBLOC)

 

IBLOC loans are backed by the cash value of eligible life insurance policies which have been assigned to us.  We generally lend up to 95% of such cash value. Our underwriting standards require approval of the insurance companies which carry the policies backing these loans. Currently, fifteen insurance companies have been approved and, as of April 17, 2024, all were rated A- (Excellent) or better by AM BEST.

13 
 

 

Direct lease financing by type as of June 30, 2024

 

         
    Principal balance(1)   % Total
    (Dollars in millions)    
Government agencies and public institutions(2) $  129     18%
Construction    111     16%
Waste management and remediation services    98     14%
Real estate and rental and leasing    82     12%
Health care and social assistance    28     4%
Other services (except public administration)    23     3%
Professional, scientific, and technical services    23     3%
General freight trucking    21     3%
Finance and insurance    13     2%
Transit and other transportation    13     2%
Wholesale trade    10     1%
Educational services    7     1%
Other    153     21%
Total $  711     100%

 

(1) Of the total $711 million of direct lease financing, $642 million consisted of vehicle leases with the remaining balance consisting of equipment leases.

(2) Includes public universities and school districts.

 

 

Direct lease financing by state as of June 30, 2024

 

         
State   Principal balance   % Total
    (Dollars in millions)    
Florida $  106    15%
New York    66    9%
Utah    60    8%
California    52    7%
Pennsylvania    43    6%
Connecticut    41    6%
New Jersey    39    5%
North Carolina    36    5%
Maryland    34    5%
Texas    28    4%
Idaho    18    3%
Washington    15    2%
Georgia    15    2%
Ohio    13    2%
Alabama    12    2%
Other States    133    19%
Total $  711    100%

 

 

14 
 

 

               
               
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, 2024              
The Bancorp, Inc.  10.07%    14.13%    14.68%    14.13%
The Bancorp Bank, National Association  11.21%    15.69%    16.24%    15.69%
"Well capitalized" institution (under federal regulations-Basel III)  5.00%    8.00%    10.00%    6.50%
               
As of December 31, 2023              
The Bancorp, Inc.  11.19%    15.66%    16.23%    15.66%
The Bancorp Bank, National Association  12.37%    17.35%    17.92%    17.35%
"Well capitalized" institution (under federal regulations-Basel III)  5.00%    8.00%    10.00%    6.50%

 

 

                       
  Three months ended   Six months ended
  June 30,   June 30,
  2024   2023   2024   2023
Selected operating ratios                      
Return on average assets(1)    2.77%      2.65%      2.86%      2.64%
Return on average equity(1)    27.10%      26.67%      27.95%      27.42%
Net interest margin    4.97%      4.83%      5.06%      4.75%

 

(1) Annualized

 

                         
                         
Book value per share table June 30,   March 31,   December 31,   June 30,  
  2024   2024   2023   2023  
Book value per share $  15.77   $  15.63   $  15.17   $  13.74  
                         

 

                                         
Loan delinquency and other real estate owned June 30, 2024
 

30-59 days

past due

  

60-89 days

past due

  

90+ days

still accruing

   Non-accrual  

Total

past due

   Current  

Total

loans

SBL non-real estate $  78    $  311    $  764    $  2,448    $  3,601    $  168,292    $  171,893 
SBL commercial mortgage    —      336       —      5,211       5,547       642,347       647,894 
SBL construction    —      —      —      3,385       3,385       27,496       30,881 
Direct lease financing    4,575       4,415       2,224       3,870       15,084       696,319       711,403 
SBLOC / IBLOC    12,448       2,101       1,284       —      15,833       1,542,262       1,558,095 
Advisor financing    —      —      —      —      —      238,831       238,831 
Real estate bridge loans(1)    —      12,300       —      —      12,300       2,107,024       2,119,324 
Consumer fintech    —      —      —      —      —      70,081       70,081 
Other loans    96       —      4       —      100       46,492       46,592 
Unamortized loan fees and costs    —      —      —      —      —      10,733       10,733 
  $  17,197    $  19,463    $  4,276    $  14,914    $  55,850    $  5,549,877    $  5,605,727 

 

(1) The $12.3 million shown in the 60-89 days past due column for real estate bridge loans is collateralized by apartment building property with 72% and 56% “as is” and “as stabilized” LTVs, respectively, based upon a May 2024 appraisal. “As stabilized” LTVs represent additional potential collateral value as rehabilitation progresses, and units are re-leased at stabilized rental rates. See footnote (2) to the tables directly below for additional information on this loan.

 

 

 

15 
 

Other real estate owned year to date activity

 

     
  June 30, 2024
Beginning balance $  16,949 
Transfer from loans, net    40,032 
Transfer from commercial loans, at fair value    880 
Ending balance $  57,861 

 

 

 

    June 30,     March 31,     December 31,     June 30,
    2024     2024     2023     2023
    (Dollars in thousands)
Asset quality ratios:                      
Nonperforming loans to total loans(1)    0.34%      1.05%      0.25%      0.28%
Nonperforming assets to total assets(1)    0.95%      0.97%      0.39%      0.47%
Allowance for credit losses to total loans    0.51%      0.53%      0.51%      0.44%

 

(1) In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan was transferred to nonaccrual status. On April 2, 2024, the same loan was transferred from nonaccrual status to other real estate owned. We intend to complete the improvements, which have already begun, on the underlying apartment building. During the time that improvements are being completed, the Company intends to have a property manager lease improved units as they become available, prior to the sale of the property. The $39.4 million loan balance compares to a September 2023 third party “as is” appraisal of $47.8 million, or an 82% “as is” LTV, with additional potential collateral value as construction progresses, and units are re-leased at stabilized rental rates.

(2) Borrowers for a $12.3 million apartment property real estate bridge loan which had a six month payment deferral granted in the fourth quarter of 2023 have not resumed payments, and are reflected in the 60-89 days past due column in the table above. The related “as is” and “as stabilized” LTVs based on a May 2024 appraisal were respectively 72% and 56%. The “as stabilized” loan to value measures the apartment property’s value after renovations have been completed and units have generally been released. The Company originated a new loan with a new borrower for a previously reported $9.5 million REBL loan that was 60 to 89 days delinquent at March 31, 2024. The new borrower has greater financial capacity to complete the related project and negotiated three quarters of payment deferrals and a lower rate. The “as stabilized” LTV is approximately 85% after considering additional estimated future fundings to complete renovations. The aforementioned LTVs are based on third party appraisals performed within the past year.

 

 

 

                      
Gross dollar volume (GDV)(1) Three months ended
  June 30,   March 31,   December 31,   June 30,
  2024   2024   2023   2023
    (Dollars in thousands)
Prepaid and debit card GDV $  37,139,200   $  37,943,338   $  33,292,350   $  32,776,154

 

(1) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank, N.A.

 

16 
 

 

Business line quarterly summary                          
Quarter ended June 30, 2024                          
(Dollars in millions)                          
                           
        Balances          
            % Growth          
Major business lines   Average approximate rates(1)   Balances(2)   Year over year   Linked quarter annualized          
Loans                          
Institutional banking(3)   6.8%    $   1,797   (13%)   3%          
Small business lending(4)   7.4%   964   16%   17%          
Leasing   8.0%   711   8%   5%          
Commercial real estate (non-SBA loans, at fair value)   9.0%         161   nm   nm          
Real estate bridge loans (recorded at book value)   9.2%   2,119   16%   3%          
Weighted average yield   8.0%    $   5,752           Non-interest income(5)
                        % Growth
Deposits: Fintech Solutions group                   Current quarter   Year over year  
Prepaid and debit card issuance, and other payments 2.4%    $    6,441   8%   nm    $     27.8   13%  

 

(1) Average rates are for the three months ended June 30, 2024.

(2) Loan and deposit categories are based on period-end and average quarterly balances, respectively.

(3) Institutional Banking loans are comprised of security backed lines of credit (SBLOC), collateralized by marketable securities, insurance backed lines of credit (IBLOC), collateralized by the cash surrender value of eligible life insurance policies, and investment advisor financing.

(4) Small Business Lending is substantially comprised of SBA loans. Growth rates exclude $29 million of loans that do not qualify for true sale accounting.

(5) Growth rate excludes Q1 2023 adjustments of $600,000 of fees related to a prior period and a $1.4 million termination fee from a client which formed its own bank.

 

Summary of credit lines available

 

Notwithstanding that the vast majority of The Bancorp’s funding is comprised of insured and small balance accounts, The Bancorp maintains lines of credit exceeding potential liquidity requirements as follows. The Bancorp also has access to other substantial sources of liquidity.

 

     
  June 30, 2024
    (Dollars in thousands)
Federal Reserve Bank $  1,936,240 
Federal Home Loan Bank    1,116,765 
Total lines of credit available $  3,053,005 

 

 

 

Estimated insured vs uninsured deposits

 

The vast majority of The Bancorp’s deposits are insured and low balance and accordingly do not constitute the liquidity risk experienced by certain institutions. Accordingly, the deposit base is comprised as follows.

 

     
  June 30, 2024
Insured   93%
Low balance accounts   4%
Other uninsured   3%
Total deposits   100%

 

 

Calculation of efficiency ratio(1)

 

 

                 
  Three months ended   Year ended
  June 30,   June 30,   December 31,
  2024   2023   2023
  (Dollars in thousands)
Net interest income $  93,795    $  87,195    $  354,052 
Non-interest income    30,722       29,336       112,094 
Total revenue $  124,517    $  116,531    $  466,146 
Non-interest expense $  51,446    $  49,943    $  191,042 
                 
Efficiency ratio    41%      43%      41%

 

 

(1) The efficiency ratio is calculated by dividing GAAP total non-interest expense by the total of GAAP net interest income and non-interest income.  This ratio compares revenues generated with the amount of expense required to generate such revenues and may be used as one measure of overall efficiency.

 

17