The Bancorp, Inc. Reports First Quarter 2020 Financial Results

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.

* Substantially all are SBA loans which had 50-60% LTV ratios at their origination.

* Substantially all are SBA loans with 50-60% LTV ratios at origination.

* 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:

*Of the total $4 million fair value adjustment, $1.8 million was related to hospitality loans

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:

* 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.

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.

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%.