The Bancorp, Inc. Reports Second Quarter 2021 Financial Results

The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter of 2021.

Highlights

• For the quarter ended June 30, 2021, The Bancorp earned net income of $29.2 million from continuing operations, and $0.50 diluted earnings per share from combined continuing and discontinued operations.
• Return on assets and equity for the quarter ended June 30, 2021 amounted to 1.7% and 19%, respectively, compared to 1.3% and 16%, respectively, for the quarter ended June 30, 2020 (all percentages “annualized.”)
• Net interest margin amounted to 3.19% for the quarter ended June 30, 2021, compared to 3.53% for the quarter ended June 30, 2020 and 3.34% for the quarter ended March 31, 2021.
• Net interest income increased 8% to $54.1 million for the quarter ended June 30, 2021, compared to $50.2 million for the quarter ended June 30, 2020.
• Average loans and leases, including loans at fair value, increased 16% to $4.58 billion for the quarter ended June 30, 2021, compared to $3.93 billion for the quarter ended June 30, 2020.
• Prepaid, debit card and other payment related fees increased 5% to $21.4 million for the quarter ended June 30, 2021, compared to $20.4 million for the quarter ended June 30, 2020.
• Gross dollar volume (GDV), representing the total amounts spent on prepaid and debit cards, increased 15% for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020.
• SBLOC (securities backed lines of credit), IBLOC (insurance backed lines of credit) and advisor financing loans collectively increased 38% year over year and 7% quarter over quarter to $1.80 billion at June 30, 2021.
• Small Business Loans, including those held at fair value, increased 15% year over year to $689.5 million at June 30, 2021. That growth is exclusive of Paycheck Protection Program (PPP) loan balances of $129.4 million and $207.9 million, respectively, at June 30, 2021 and June 30, 2020.
• Direct lease financing balances increased 20% year over year to $506.4 million at June 30, 2021.
• The average interest rate on $6.38 billion of average deposits and interest-bearing liabilities during the second quarter of 2021 was 0.18%. Average deposits of $6.26 billion for the second quarter 2021, reflected an increase of 17% over the $5.37 billion in average deposits for the quarter ended June 30, 2020.
• Of the $48 million of loan balances with Covid related payment deferrals at March 31, 2021, only borrowers representing $2.6 million of balances had not made their payments due on July 5, 2021, with an additional $968,000 remaining in deferral as of that date. Those amounts represent .08% of total loans at June 30, 2021 compared to 1.0% at March 31, 2021.
• Consolidated and The Bancorp Bank (“the Bank”) leverage ratios were 8.52% and 8.73%, respectively, at June 30, 2021. The Bancorp and its subsidiary, The Bank, remain well capitalized.
• Book value per common share at June 30, 2021 was $10.77 per share compared to $9.28 per share at June 30, 2020, an increase of 16%, primarily as a result of retained earnings per share.
• The Bancorp repurchased 449,315 shares of its common stock at an average cost of $22.26 per share during the quarter ended June 30, 2021.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “We had another strong quarter in both growth and profitability. Growth continues to be supported by the acquisition of new clients and the expansion of our capabilities and solutions in our payments ecosystem. Based on our year-to-date performance of $0.94 a share and our 2021 outlook, we are raising our guidance to $1.78 a share. The $1.78 does not include the impact of buybacks in the 3rd and 4th quarters. We continue to see tailwinds that should drive continued growth in 2021 earnings and beyond. We will issue preliminary 2022 per share guidance in our 3rd quarter earnings release. Current trends would suggest income growth for 2022 of 20% or more over our revised 2021 guidance.”

The Bancorp reported net income of $29.4 million, or $0.50 per diluted share, for the quarter ended June 30, 2021, compared to net income of $20.1 million, or $0.35 per diluted share, for the quarter ended June 30, 2020. 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 8.52%, 15.39%, 15.78% and 15.39%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 30, 2021 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 2868852. 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 6, 2021 by dialing 855.859.2056, access code 2868852.

The Bancorp, Inc. (NASDAQ: TBBK), headquartered in Wilmington, Delaware, through its subsidiary, The Bancorp Bank, 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 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 “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.

Note: Compared to higher rates in recent periods, the effective tax rate in the second quarter of 2021 approximated 21% as a result of the impact of excess tax deductions related to stock-based compensation, recorded as a discrete item in the second quarter. The large deductions and tax benefit resulted from the increase in the Company’s stock price as compared to the original grant date.

* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2021 and 2020.

** Includes commercial loans, at fair value for 2021 previously classified as held-for-sale at June 30, 2020. All periods include non-accrual loans.

NOTE: In the table above, the 2021 interest on loans reflects $3.0 million of fees which were earned on a short-term line of credit to another institution to initially fund PPP loans, which did not significantly increase average loans or assets. These fees are not expected to recur. Interest on loans also includes $1.3 million of interest and fees on PPP loans. In 2020 the table above includes comparable PPP interest and fees of $1.6 million. Increases in interest earning deposits at the Federal Reserve Bank reflect increased deposits resulting from stimulus payments distributed to a large segment of the population, resulting from December 2020 federal legislation.

* Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2021 and 2020.

** Includes commercial loans, at fair value for 2021 previously classified as held-for-sale at June 30, 2020. All periods include non-accrual loans.

NOTE: In the table above, the 2021 interest on loans reflects $4.5 million of fees which were earned on a short-term line of credit to another institution to initially fund PPP loans, which did not significantly increase average loans or assets. These fees are not expected to recur. Interest on loans also includes $3.7 million of interest and fees on PPP loans. In 2020 the table above includes comparable PPP interest and fees of $1.6 million. Increases in interest earning deposits at the Federal Reserve Bank reflect increased deposits resulting from stimulus payments distributed to a large segment of the population, resulting from December 2020 federal legislation.

(1) Excludes activity from assets held-for-sale from discontinued operations.

* The preceding table shows small business loans and small business loans held at fair value. The small business loans held at fair value are comprised of the government guaranteed portion of SBA 7a loans at the dates indicated. A reduction in SBL non-real estate loans from $305.4 million at March 31, 2021 to $229.0 million at June 30, 2021 resulted from U.S. government repayments of $60.8 million of PPP loans authorized by The Consolidated Appropriations Act, 2021 and the repayment of $19.7 million of a line of credit to another institution related to PPP loans. PPP loans totaled $129.4 million at June 30, 2021 and $165.7 million at December 31, 2020, respectively.

** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies.

*** In 2020, we began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan to value ratios of 70%, based on third party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

**** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $424,000 and $663,000 at June 30, 2021 and December 31, 2020, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial.

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

(b) Substantially all 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 $9 million in Construction SBA loans, $8 million are 504 first mortgages with an origination date LTV of 50-60% and $1 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $106 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) The $18 million of non-SBA loans is comprised of approximately 20 conventional coffee/doughnut/carryout franchisee note purchases. The majority of purchased notes were made to multi-unit operators, 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 (“the CARES Act”) provided for six months of principal and interest payments on 7a loans which generally ended in fourth quarter 2020 or in first quarter 2021. The Consolidated Appropriations Act, 2021, became law in December 2020 and provides for at least an additional two months of such payments on SBA 7a loans, with up to five months of payments on hotel, restaurant, and other more highly impacted loans. Unlike the six months of CARES Act payments, these additional payments are capped at $9,000 per month.

* Of the SBL commercial mortgage and SBL construction loans, $61.0 million represents the total of the non-guaranteed portion of SBA 7a loans and non-SBA loans. The balance of those categories represents SBA 504 loans with 50%-60% origination date loan-to-values.

**Loan types less than $2.0 million are spread over a hundred different classifications such as Commercial Printing, Pet and Pet Supplies Stores, Securities Brokerage, etc.