The Bancorp, Inc. Reports its Third Quarter Financial Results

Business Wire

Thu, Oct 24, 2024, 2:05 PM 20 min read

As explained under recent developments below, a new CECL factor was added which increased the provision for credit losses and resulted in an after-tax reduction in net income of $1.5 million.
Prior period interest income reversals on real estate bridge loans transferred to nonaccrual or modified, resulted in an after-tax reduction in net income of $1.2 million.
A loss resulting from a transaction processing delay increased non-interest expense and resulted in an after-tax reduction in net income of approximately $900,000.

Recent Developments

As noted in our second quarter press release, the Company entered into a purchase and sale agreement for an apartment property acquired by its wholly-owned subsidiary The Bancorp Bank, National Association, (the "Bank") through foreclosure in connection with a real estate bridge lending ("REBL") loan. At September 30, 2024, the related $40.3 million balance, comprised the majority of our other real estate owned. Subsequent to the previously reported $125,000 earnest money deposit in July 2024, the purchaser has made additional earnest money deposits of $250,000 bringing the total of such deposits to $375,000 in 2024. Additional required deposits are 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.

While real estate bridge loans classified as either special mention or substandard increased during the quarter, we believe that such classifications are at or near their peak. That conclusion is based, at least in part, on an independent review of a significant portion of the REBL portfolio performed during the third quarter by a firm specializing in such analysis. Additionally, the 50 basis point Federal Reserve rate reduction may provide immediate cash flow benefits to borrowers, while the further declining forward yield curve should support further liquidity benefits, as fixed rates decline. Moreover, respective weighted average "as is" and "as stabilized" loan-to-values ratios ("LTVs") of 77% and 68%, respectively, based upon appraisals in the past twelve months, continue to provide significant protection against loss. Underlying property values as supported by such independent LTVs, continue to facilitate the recapitalization of certain loans from borrowers experiencing cash flow issues, to borrowers with greater financial capacity. At September 30, 2024, real estate bridge loans classified as special mention and substandard respectively amounted to $84.4 million and $155.4 million compared to $96.0 million and $80.4 million at June 30, 2024. Each classified loan was evaluated for a potential increase in the allowance for credit losses ("ACL") on the basis of the aforementioned third-party appraisals of apartment building collateral. On the basis of "as is" and "as stabilized" LTVs, increases to the allowance were not required. The current allowance for credit losses for REBL, is primarily based upon historical industry losses for multi-family loans, in the absence of significant charge-offs within the Company’s REBL portfolio. However, as noted in our second quarter press release, as a result of increasing amounts of loans classified as special mention and substandard, the Company evaluated potential related sensitivity for REBL in the third quarter. Such evaluation is inherently subjective as it requires material estimates that may be susceptible to change as more information becomes available. As a result, the Company added the aforementioned new qualitative factor to its quarterly ACL with a cumulative after-tax impact of approximately $1.5 million ($2.0 million pre-tax).

Highlights

The Bancorp reported net income of $51.5 million, or $1.04 per diluted share ("EPS"), for the quarter ended September 30, 2024, compared to net income of $50.1 million, or $0.92 per diluted share, for the quarter ended September 30, 2023, or an EPS increase of 13%. While net income increased 3% between these periods, outstanding shares were decreased as a result of common share repurchases, which significantly increased in 2024.

Return on assets and return on equity for the quarter ended September 30, 2024, amounted to 2.5% and 26%, respectively, compared to 2.7% and 26%, respectively, for the quarter ended September 30, 2023 (all percentages "annualized").

Net interest income increased 5% to $93.7 million for the quarter ended September 30, 2024, compared to $88.9 million for the quarter ended September 30, 2023. Third quarter 2024 net interest income was reduced by the reversal of $1.6 million ($1.2 million, net of tax) of prior period interest related to both real estate bridge loans transferred to non-accrual status during the quarter and loan modifications with retroactive rate reductions.

Net interest margin amounted to 4.78% for the quarter ended September 30, 2024, compared to 5.07% for the quarter ended September 30, 2023, and 4.97% for the quarter ended June 30, 2024. Net interest margin for third quarter 2024 was reduced by the prior period interest reversals noted directly above.

Loans, net of deferred fees and costs were $5.91 billion at September 30, 2024, compared to $5.36 billion at December 31, 2023 and $5.20 billion at September 30, 2023. Those changes reflected an increase of 5% quarter over linked quarter and an increase of 14% year over year.

Gross dollar volume ("GDV"), representing the total amounts spent on prepaid and debit cards, increased $4.93 billion, or 15%, to $37.90 billion for the quarter ended September 30, 2024, compared to the quarter ended September 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 16% to $27.8 million for the third quarter of 2024 compared to the third quarter of 2023. Consumer credit fintech fees amounted to $1.6 million for the third quarter 2024, as a result of our initial entry into credit sponsorship in 2024.

Small business loans ("SBLs"), including those held at fair value, amounted to $979.2 million at September 30, 2024, or 14% higher year over year, and 2% higher quarter over linked quarter, excluding the impact of $28.5 million of loans with related secured borrowings.

Direct lease financing balances increased 6% year over year to $711.8 million at September 30, 2024, and less than 1% over June 30, 2024.

At September 30, 2024, real estate bridge loans of $2.19 billion had grown 3% compared to a $2.12 billion balance at June 30, 2024, and 18% compared to the September 30, 2023 balance of $1.85 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 7% year over year and less than 1% quarter over linked quarter to $1.79 billion at September 30, 2024.

The average interest rate on $7.23 billion of average deposits and interest-bearing liabilities during the third quarter of 2024 was 2.54%. Average deposits of $7.01 billion for the third quarter of 2024 increased $720.9 million, or 11% over third quarter 2023.

As of September 30, 2024, tier 1 capital to average assets (leverage), tier 1 capital to risk-weighted assets, total capital to risk-weighted assets and common equity tier 1 to risk-weighted assets ratios were 9.86%, 13.62%, 14.19% and 13.62%, 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 September 30, 2024 was $16.90 compared to $14.36 per common share at September 30, 2023, an increase of 18%.

The Bancorp repurchased 1,037,069 shares of its common stock at an average cost of $48.21 per share during the quarter ended September 30, 2024. As a result of share repurchases, outstanding shares at September 30, 2024 amounted to 48.2 million, compared to 53.2 million shares at December 31, 2023, or a reduction of 9%.

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 Company also has lines of credit with U.S. government sponsored agencies totaling approximately $3.1 billion as of September 30, 2024, as well as access to other forms of liquidity.

In its REBL portfolio, the Company 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 REBL 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 Company’s REBL portfolio is evidenced by the estimated values of the underlying collateral. The Company’s $2.2 billion apartment bridge lending portfolio at September 30, 2024, has a weighted average origination date "as is" loan-to-value ratio 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 prospective 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 searches, 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 REBL 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 REBL, which is comprised of seasoned and experienced lending professionals who do not directly report to anyone on the REBL 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 REBL 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% LTVs.

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 stockholder value, while still prudently maintaining capital levels.

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. 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.

"We saw strong growth in the third quarter across our Fintech Solutions activities with a robust pipeline," said Damian Kozlowski, CEO of The Bancorp. "We expect this growth to support an increase in profitability in 2025 and continued gains in EPS. We are issuing preliminary guidance of $5.25 a share for 2025. This 2025 guidance does not include the impact of planned stock buybacks of $150 million. Guidance for 2024 remains $4.35, which includes the positive impact of buybacks during the year. Planned stock buybacks are being reduced in 2025 by $100 million from 2024 levels of $250 million to facilitate the currently planned repayment of senior secured debt of $96 million."

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, October 25, 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 (archived for one year) or telephonically until Friday, November 1, 2024, by dialing 1.800.839.1162.

About The Bancorp

The Bancorp, Inc. (NASDAQ: TBBK), headquartered in Wilmington, Delaware, through its subsidiary, The Bancorp Bank, National Association provides a variety of services including providing 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 that 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. Forward-looking statements include, but are not limited to, statements regarding our annual fiscal 2024 results, our anticipated 2025 profitability, increased growth and the impact of stock buybacks, relate to our current assumptions, projections and expectations about our business and future events, including current expectations about important economic, political, and technological factors, among other factors, 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. Factors that could cause results to differ from those expressed in the forward-looking statements also include, but are not limited to the risks and uncertainties referenced or described in 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Quarterly Reports on Forms 10-Q for the periods ended March 31, 2024 and June 30, 2024, and other documents that the Company files from time to time with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. The Bancorp does not undertake any duty 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. Financial highlights (unaudited)

		Three months ended			Nine months ended
		September 30,			September 30,
Consolidated condensed income statements	2024		2023		2024		2023
	(Dollars in thousands, except per share and share data)

Net interest income	$	93,732	$	88,882	$	281,945	$	261,893
Provision for credit losses on loans		3,476		1,783		7,316		4,409
Provision (reversal) for unfunded commitments		79		(31)		(340)		(393)
Non-interest income
Fintech fees
ACH, card and other payment processing fees		3,892		2,553		9,856		7,153
Prepaid, debit card and related fees		23,907		21,513		72,948		67,013
Consumer credit fintech fees		1,600		—		1,740		—
Total fintech fees		29,399		24,066		84,544		74,166
Net realized and unrealized gains on commercial
loans, at fair value		606		525		2,205		4,171
Leasing related income		1,072		1,767		2,889		4,768
Other non-interest income		1,031		422		2,574		2,000
Total non-interest income		32,108		26,780		92,212		85,105
Non-interest expense
Salaries and employee benefits		33,821		30,475		97,964		93,427
Data processing expense		1,408		1,404		4,252		4,123
Legal expense		1,055		1,203		2,509		3,110
FDIC insurance		904		806		2,618		2,233
Software		4,561		4,427		13,687		12,981
Other non-interest expense		11,506		9,144		30,383		29,558
Total non-interest expense		53,255		47,459		151,413		145,432
Income before income taxes		69,030		66,451		215,768		197,550
Income tax expense		17,513		16,314		54,136		49,282
Net income		51,517		50,137		161,632		148,268

Net income per share - basic	$	1.06	$	0.93	$	3.18	$	2.70

Net income per share - diluted	$	1.04	$	0.92	$	3.15	$	2.68
Weighted average shares - basic		48,759,369		54,175,184		50,807,021		54,828,547
Weighted average shares - diluted		49,478,236		54,738,610		51,361,104		55,336,354



Condensed consolidated balance sheets	September 30,		June 30,		December 31,		September 30,
	2024 (unaudited)		2024 (unaudited)		2023		2023 (unaudited)
		(Dollars in thousands, except share data)
Assets:
Cash and cash equivalents
Cash and due from banks	$	8,660	$	5,741	$	4,820	$	4,881
Interest earning deposits at Federal Reserve Bank		47,105		399,853		1,033,270		898,533
Total cash and cash equivalents		55,765		405,594		1,038,090		903,414

Investment securities, available-for-sale, at fair value, net of $10.0 million allowance for credit loss		1,588,289		1,581,006		747,534		756,636
Commercial loans, at fair value		252,004		265,193		332,766		379,603
Loans, net of deferred fees and costs		5,906,616		5,605,727		5,361,139		5,198,972
Allowance for credit losses		(31,004)		(28,575)		(27,378)		(24,145)
Loans, net		5,875,612		5,577,152		5,333,761		5,174,827
Federal Home Loan Bank, Atlantic Central Bankers Bank, and Federal Reserve Bank stock		21,717		15,642		15,591		20,157
Premises and equipment, net		28,091		28,038		27,474		28,978
Accrued interest receivable		42,915		43,720		37,534		34,159
Intangible assets, net		1,353		1,452		1,651		1,751
Other real estate owned		61,739		57,861		16,949		18,756
Deferred tax asset, net		9,604		20,556		21,219		20,379
Other assets		157,501		149,187		133,126		127,107
Total assets	$	8,094,590	$	8,145,401	$	7,705,695	$	7,465,767

Liabilities:
Deposits
Demand and interest checking	$	6,844,128	$	7,095,391	$	6,630,251	$	6,455,043
Savings and money market		81,624		60,297		50,659		49,428
Total deposits		6,925,752		7,155,688		6,680,910		6,504,471

Securities sold under agreements to repurchase		—		—		42		42
Short-term borrowings		135,000		—		—		—
Senior debt		96,125		96,037		95,859		95,771
Subordinated debenture		13,401		13,401		13,401		13,401
Other long-term borrowings		38,157		38,283		38,561		9,861
Other liabilities		70,829		65,001		69,641		68,533
Total liabilities	$	7,279,264	$	7,368,410	$	6,898,414	$	6,692,079

Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 48,230,334 and 53,867,129 shares issued and outstanding at September 30, 2024 and 2023, respectively		48,231		49,268		53,203		53,867
Additional paid-in capital		26,573		72,171		212,431		234,320
Retained earnings		723,247		671,730		561,615		517,587
Accumulated other comprehensive income (loss)		17,275		(16,178)		(19,968)		(32,086)
Total shareholders' equity		815,326		776,991		807,281		773,688

Total liabilities and shareholders' equity	$	8,094,590	$	8,145,401	$	7,705,695	$	7,465,767



Average balance sheet and net interest income		Three months ended September 30, 2024					Three months ended September 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⁾	$	6,017,911	$	116,367	7.73%	$	5,603,514	$	110,506	7.89%
Leases-bank qualified⁽²⁾		5,151		146	11.34%		4,585		110	9.60%
Investment securities-taxable		1,575,091		19,767	5.02%		768,364		9,647	5.02%
Investment securities-nontaxable⁽²⁾		2,927		55	7.52%		3,005		50	6.66%
Interest earning deposits at Federal Reserve Bank		247,344		3,387	5.48%		639,946		8,689	5.43%
Net interest earning assets		7,848,424		139,722	7.12%		7,019,414		129,002	7.35%

Allowance for credit losses		(28,254)					(23,147)
Other assets		222,646					338,085
	$	8,042,816				$	7,334,352

Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	6,942,029	$	42,149	2.43%	$	6,229,668	$	37,913	2.43%
Savings and money market		65,079		549	3.37%		56,538		518	3.66%
Total deposits		7,007,108		42,698	2.44%		6,286,206		38,431	2.45%

Short-term borrowings		73,480		1,030	5.61%		—		—	—
Repurchase agreements		—		—	—		41		—	—
Long-term borrowings		38,235		689	7.21%		9,889		128	5.18%
Subordinated debentures		13,401		297	8.87%		13,401		293	8.75%
Senior debt		96,071		1,234	5.14%		95,714		1,234	5.16%
Total deposits and liabilities		7,228,295		45,948	2.54%		6,405,251		40,086	2.50%

Other liabilities		18,362					167,673
Total liabilities		7,246,657					6,572,924

Shareholders' equity		796,159					761,428
	$	8,042,816				$	7,334,352
Net interest income on tax equivalent basis⁽²⁾			$	93,774				$	88,916

Tax equivalent adjustment				42					34

Net interest income			$	93,732				$	88,882
Net interest margin⁽²⁾					4.78%					5.07%

⁽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.



Average balance sheet and net interest income	Nine months ended September 30, 2024					Nine months ended September 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⁾	$	5,828,938	$	345,497	7.90%	$	5,772,266	$	324,009	7.48%
Leases-bank qualified⁽²⁾		4,840		379	10.44%		3,920		279	9.49%
Investment securities-taxable		1,255,532		46,921	4.98%		773,485		28,820	4.97%
Investment securities-nontaxable⁽²⁾		2,905		155	7.11%		3,193		144	6.01%
Interest earning deposits at Federal Reserve Bank		486,883		19,948	5.46%		640,554		24,271	5.05%
Net interest earning assets		7,579,098		412,900	7.26%		7,193,418		377,523	7.00%

Allowance for credit losses		(27,993)					(23,192)
Other assets		280,733					269,072
	$	7,831,838				$	7,439,298

Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	6,684,671	$	120,405	2.40%	$	6,343,711	$	106,984	2.25%
Savings and money market		58,777		1,453	3.30%		88,738		2,465	3.70%
Time deposits		—		—	—		27,802		858	4.11%
Total deposits		6,743,448		121,858	2.41%		6,460,251		110,307	2.28%

Short-term borrowings		55,820		2,344	5.60%		6,758		234	4.62%
Repurchase agreements		4		—	—		41		—	—
Long-term borrowings		38,371		2,060	7.16%		9,945		382	5.12%
Subordinated debentures		13,401		880	8.76%		13,401		825	8.21%
Senior debt		95,983		3,701	5.14%		97,220		3,793	5.20%
Total deposits and liabilities		6,947,027		130,843	2.51%		6,587,616		115,541	2.34%

Other liabilities		73,507					117,822
Total liabilities		7,020,534					6,705,438

Shareholders' equity		811,304					733,860
	$	7,831,838				$	7,439,298
Net interest income on tax equivalent basis⁽²⁾			$	282,057				$	261,982

Tax equivalent adjustment				112					89

Net interest income			$	281,945				$	261,893
Net interest margin⁽²⁾					4.96%					4.86%

⁽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.


Allowance for credit losses		Nine months ended			Year ended
	September 30,		September 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		431		871		871
SBA commercial mortgage		—		—		76
Direct lease financing		3,625		2,804		3,666
IBLOC		—		—		24
Consumer - home equity		10		—		—
Other loans		6		3		3
Total		4,072		3,678		4,640

Recoveries:
SBA non-real estate		102		446		475
SBA commercial mortgage		—		75		75
Direct lease financing		279		220		330
Consumer - home equity		1		299		299
Total		382		1,040		1,179
Net charge-offs		3,690		2,638		3,461
Provision for credit losses on loans		7,316		4,409		8,465

Balance in allowance for credit losses at end of period	$	31,004	$	24,145	$	27,378
Net charge-offs/average loans		0.07%		0.05%		0.07%
Net charge-offs/average assets		0.05%		0.04%		0.05%



Loan portfolio	September 30,		June 30,		December 31,		September 30,
	2024 (unaudited)		2024 (unaudited)		2023		2023 (unaudited)
	(Dollars in thousands)

SBL non-real estate	$	179,915	$	171,893	$	137,752	$	130,579
SBL commercial mortgage		665,608		647,894		606,986		547,107
SBL construction		30,158		30,881		22,627		19,204
Small business loans		875,681		850,668		767,365		696,890
Direct lease financing		711,836		711,403		685,657		670,208
SBLOC / IBLOC⁽¹⁾		1,543,215		1,558,095		1,627,285		1,720,513
Advisor financing⁽²⁾		248,422		238,831		221,612		199,442
Real estate bridge loans		2,189,761		2,119,324		1,999,782		1,848,224
Consumer fintech⁽³⁾		280,092		70,081		—		—
Other loans⁽⁴⁾		46,586		46,592		50,638		55,800
		5,895,593		5,594,994		5,352,339		5,191,077
Unamortized loan fees and costs		11,023		10,733		8,800		7,895
Total loans, including unamortized fees and costs	$	5,906,616	$	5,605,727	$	5,361,139	$	5,198,972



Small business portfolio		September 30,		June 30,		December 31,		September 30,
		2024 (unaudited)		2024 (unaudited)		2023		2023 (unaudited)
		(Dollars in thousands)

SBL, including unamortized fees and costs	$	885,263	$	860,226	$	776,867	$	705,790
SBL, included in loans, at fair value		93,888		104,146		119,287		126,543
Total small business loans⁽⁵⁾	$	979,151	$	964,372	$	896,154	$	832,333

⁽¹⁾SBLOC loans are collateralized by marketable securities, while IBLOC are collateralized by the cash surrender value of insurance policies. At September 30, 2024 and December 31, 2023, IBLOC loans amounted to $554.0 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 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 $960,000 and $1.7 million at September 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 September 30, 2024

	Loan principal
	(Dollars in millions)
U.S. government guaranteed portion of SBA loans⁽¹⁾	$	392
PPP loans⁽¹⁾		2
Commercial mortgage SBA⁽²⁾		349
Construction SBA⁽³⁾		10
Non-guaranteed portion of U.S. government guaranteed 7(a) Program loans⁽⁴⁾		114
Non-SBA SBLs		73
Other⁽⁵⁾		28
Total principal	$	968
Unamortized fees and costs		11
Total SBLs	$	979

⁽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 $9 million in 504 Program first mortgages with an origination date LTV of 50%-60%, and $1 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 $28 million of loans sold that do not qualify for true sale accounting.

Small business loans by type as of September 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 (except casino hotels) and motels	$	88	$	—	$	—	$	88	16%
Funeral homes and funeral services		20		—		28		48	9%
Full-service restaurants		29		2		2		33	6%
Child day care services		23		1		1		25	5%
Car washes		16		4		—		20	4%
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		14		—		—		14	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	1%
Caterers		7		—		—		7	1%
All other specialty trade contractors		7		—		—		7	1%
General warehousing and storage		6		—		—		6	1%
Appliance repair and maintenance		6		—		—		6	1%
Other accounting services		5		—		—		5	1%
Plumbing, heating, and air-conditioning contractors		5		—		1		6	1%
Other miscellaneous durable goods merchant		5		—		—		5	1%
Packaged frozen food merchant wholesalers		5		—		—		5	1%
Lessors of nonresidential buildings (except miniwarehouses)		5		—		—		5	1%
Other technical and trade schools		5		—		—		5	1%
All other amusement and recreation industries		4		—		—		4	1%
Other⁽²⁾		136		8		29		173	30%
Total	$	464	$	16	$	66	$	546	100%

⁽¹⁾Of the SBL commercial mortgage and SBL construction loans, $121 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 $28 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 September 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	$	126	$	3	$	5	$	134	25%
Florida		76		5		4		85	16%
North Carolina		45		1		5		51	9%
New York		32		—		2		34	6%
Pennsylvania		20		—		13		33	6%
Texas		21		3		6		30	5%
New Jersey		21		—		7		28	5%
Georgia		25		2		1		28	5%
Other States		98		2		23		123	23%
Total	$	464	$	16	$	66	$	546	100%

Top 10 loans as of September 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		8
Hotel		FL		8
Lawyer's office		CA		8
Hotel		VA		7
Hotel		NC		7
General warehousing and storage		PA		6
Appliance repair and maintenance		NY		6
Total			$	86

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

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

Type as of September 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⁾	172	$	2,190	70%	9.13%

Non-SBA commercial real estate loans, at fair value:
Multifamily (apartment bridge loans)⁽¹⁾	7	$	113	74%	7.98%
Hospitality (hotels and lodging)	2		27	65%	9.82%
Retail	2		12	72%	8.19%
Other	2		9	72%	5.01%
	13		161	72%	8.14%
Fair value adjustment			(3)
Total non-SBA commercial real estate loans, at fair value			158
Total commercial real estate loans		$	2,348	70%	9.07%

⁽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 September 30, 2024				15 largest loans as of September 30, 2024

State		Balance	Origination date LTV	State		Balance	Origination date LTV
(Dollars in millions)				(Dollars in millions)
Texas	$	735	71%	Texas	$	46	75%
Georgia		262	70%	Tennessee		40	72%
Florida		230	68%	Michigan		38	62%
Michigan		136	68%	Texas		37	64%
Indiana		108	70%	Texas		36	67%
New Jersey		107	69%	Florida		35	72%
Ohio		92	66%	Pennsylvania		34	63%
Other States each <$65 million		678	71%	Indiana		34	76%
Total	$	2,348	70%	New Jersey		34	62%
				Texas		33	62%
				Michigan		33	79%
				Oklahoma		31	78%
				Texas		31	77%
				New Jersey		31	71%
				Michigan		29	66%
				15 largest commercial real estate loans	$	522	70%

Institutional banking loans outstanding at September 30, 2024

Type	Principal		% of total
		(Dollars in millions)
SBLOC	$	989	55%
IBLOC		554	31%
Advisor financing		249	14%
Total	$	1,792	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 SBLOC loans 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 September 30, 2024

	Principal amount		% Principal to collateral
	(Dollars in millions)
	$	9	41%
		8	84%
		8	62%
		8	63%
		7	44%
		5	57%
		5	65%
		5	58%
		5	56%
		5	43%
Total and weighted average	$	65	58%

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 October 17, 2024, all were rated A- (Excellent) or better by AM BEST.

Direct lease financing by type as of September 30, 2024

		Principal balance⁽¹⁾	% Total
		(Dollars in millions)
Government agencies and public institutions⁽²⁾	$	131	18%
Construction		112	16%
Waste management and remediation services		97	14%
Real estate and rental and leasing		86	12%
Health care and social assistance		29	4%
Other services (except public administration)		22	3%
Professional, scientific, and technical services		22	3%
General freight trucking		21	3%
Finance and insurance		14	2%
Transit and other transportation		13	2%
Wholesale trade		10	1%
Educational services		7	1%
Other		148	21%
Total	$	712	100%

⁽¹⁾Of the total $712 million of direct lease financing, $648 million consisted of vehicle leases with the remaining balance consisting of equipment leases.

⁽²⁾Includes public universities as well as school districts.

Direct lease financing by state as of September 30, 2024

State		Principal balance	% Total
		(Dollars in millions)
Florida	$	108	15%
New York		70	10%
Utah		58	8%
California		49	7%
Connecticut		45	6%
Pennsylvania		42	6%
New Jersey		39	5%
North Carolina		36	5%
Maryland		36	5%
Texas		26	4%
Idaho		19	3%
Washington		16	2%
Ohio		14	2%
Georgia		14	2%
Alabama		13	2%
Other States		127	18%
Total	$	712	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 September 30, 2024
The Bancorp, Inc.	9.86%	13.62%	14.19%	13.62%
The Bancorp Bank, National Association	10.94%	15.11%	15.67%	15.11%
"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				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Selected operating ratios
Return on average assets⁽¹⁾		2.55%		2.71%		2.76%		2.66%
Return on average equity⁽¹⁾		25.74%		26.12%		26.61%		27.01%
Net interest margin		4.78%		5.07%		4.96%		4.86%

⁽¹⁾ Annualized



Book value per share table	September 30,		June 30,			December 31,	September 30,
	2024		2024		2023		2023
Book value per share	$	16.90	$	15.77	$	15.17	$	14.36



Loan delinquency and other real estate owned	September 30, 2024
	30-59 days		60-89 days		90+ days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	72	$	322	$	758	$	3,047	$	4,199	$	175,716	$	179,915
SBL commercial mortgage		—		—		336		4,898		5,234		660,374		665,608
SBL construction		—		—		—		1,585		1,585		28,573		30,158
Direct lease financing		5,791		12,883		1,260		3,919		23,853		687,983		711,836
SBLOC / IBLOC		10,251		2,014		2,383		—		14,648		1,528,567		1,543,215
Advisor financing		—		—		—		—		—		248,422		248,422
Real estate bridge loans⁽¹⁾		—		—		—		12,300		12,300		2,177,461		2,189,761
Consumer fintech		4,021		4		—		—		4,025		276,067		280,092
Other loans		—		—		—		—		—		46,586		46,586
Unamortized loan fees and costs		—		—		—		—		—		11,023		11,023
	$	20,135	$	15,223	$	4,737	$	25,749	$	65,844	$	5,840,772	$	5,906,616

⁽¹⁾ The $12.3 million shown in the non-accrual column for real estate bridge loans is collateralized by apartment building property with respective 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. This loan had a prior six-month payment deferral granted in the fourth quarter of 2024 and did not resume making payments. The table above does not include an $11.2 million loan accounted for at fair value, and, as such, not reflected in delinquency tables. In third quarter 2024, the borrower notified the Company that he would no longer be making payments on the loan, which is collateralized by a vacant retail property. Based upon a July 2024 appraisal, the "as is" LTV is 84% and the "as stabilized" LTV is 62%. Since 2021, real estate bridge lending originations have consisted of apartment buildings, while this loan was originated previously.

Other loan information

Of the $84.4 million special mention and $155.4 million substandard loans at September 30, 2024, $55.3 million were modified in the third quarter of 2024 and received reductions in interest rates and payment deferrals. Included in that total was $26.9 million which had been modified in first quarter 2024 with a six-month payment deferral. The third quarter additional modification was for an additional three-month payment deferral and a partial nine-month payment deferral. Not included in that modification total were $19.3 million which was recapitalized with a new borrower, who negotiated a partial interest deferral and rate reduction, and $37.3 million which is accounted for at fair value, and as such, not reflected in modification totals. While payment deferrals have generally been for three to twelve months, that loan was granted a 15-month payment deferral, followed by a nine-month partial payment deferral, in addition to an interest rate reduction. Going forward, the Company will not be accruing interest on this loan. The weighted average "as is" and "as stabilized" LTVs for the $19.3 million balance were 72% and 68%, respectively, while those LTVs for the $37.3 million were 73% and 65%, respectively. Those respective LTVs for the $26.9 million loan were 65% and 61%. These LTVs are based upon appraisals performed within the past twelve months.

Other real estate owned year to date activity

	September 30, 2024
Beginning balance	$	16,949
Transfer from loans, net		42,120
Transfer from commercial loans, at fair value		1,744
Advances		926
Ending balance	$	61,739



	September 30,	June 30,	December 31,	September 30,
	2024	2024	2023	2023
	(Dollars in thousands)
Asset quality ratios:
Nonperforming loans to total loans⁽¹⁾	0.52%	0.34%	0.25%	0.30%
Nonperforming assets to total assets⁽¹⁾	1.14%	0.95%	0.39%	0.46%
Allowance for credit losses to total loans	0.52%	0.51%	0.51%	0.46%

⁽¹⁾In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan with a September 30, 2024 balance of $40.3 million 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 $40.3 million loan balance compares to a September 2023 third-party "as is" appraisal of $47.8 million, or an 84% "as is" LTV, with additional potential collateral value as construction progresses, and units are re-leased at stabilized rental rates. Please see "Recent Developments" which summarizes the agreement of sale for this property.


Gross dollar volume (GDV)⁽¹⁾	Three months ended
	September 30,		June 30,		December 31,		September 30,
	2024		2024		2023		2023
		(Dollars in thousands)
Prepaid and debit card GDV	$	37,898,006	$	37,139,200	$	33,292,350	$	32,972,249

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



Business line quarterly summary
Quarter ended September 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⁾	6.9%	$ 1,792	(7%)	(1%)
Small business lending⁽⁴⁾	7.5%	979	14%	6%
Leasing	8.1%	712	6%	—
Commercial real estate (non-SBA loans, at fair value)	8.1%	158	nm	nm
Real estate bridge loans (recorded at book value)	9.1%	2,189	18%	13%
Consumer fintech loans - interest bearing	5.5%	10	nm	nm
Consumer fintech loans - non-interest bearing⁽⁵⁾	—	270	nm	nm
Weighted average yield	7.6%	$ 6,110			Non-interest income
						% Growth
Deposits: Fintech Solutions group					Current quarter	Year over year
Prepaid and debit card issuance, and other payments	2.5%	$ 6,649	11%	nm	$ 27.8	16%

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

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

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

⁽⁴⁾Small Business Lending is substantially comprised of SBA-guaranteed loans. Growth rates exclude $28 million of loans that do not qualify for true sale accounting.

⁽⁵⁾Income related to non-interest-bearing balances is included in non-interest income.

Summary of credit lines available

The Bancorp maintains lines of credit exceeding potential liquidity requirements as follows. The Bancorp also has access to other substantial sources of liquidity.


	September 30, 2024
		(Dollars in thousands)
Federal Reserve Bank	$	1,974,022
Federal Home Loan Bank		1,106,517
Total lines of credit available	$	3,080,539

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.


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

Calculation of efficiency ratio⁽¹⁾

	Three months ended				Year ended
	September 30,		September 30,		December 31,
	2024		2023		2023
	(Dollars in thousands)
Net interest income	$	93,732	$	88,882	$	354,052
Non-interest income		32,108		26,780		112,094
Total revenue	$	125,840	$	115,662	$	466,146
Non-interest expense	$	53,255	$	47,459	$	191,042

Efficiency ratio		42%		41%		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.

Segment Reporting

	For the nine months ended September 30, 2024
		Payments			REBL	Institutional Banking			Commercial	Corporate		Total

Interest income		$	33	$	157,010	$	91,987	$	92,316	$	71,442	$	412,788
Interest allocation			196,251		(73,570)		(53,111)		(52,499)		(17,071)		—
Interest expense			117,884		—		2,607		25		10,327		130,843
Net interest income			78,400		83,440		36,269		39,792		44,044		281,945
Provision for credit losses			—		2,555		166		4,427		(172)		6,976
Non-interest income			84,639		2,646		214		4,251		462		92,212
Direct non-interest expense
Salaries and employee benefits			11,433		2,917		6,784		13,653		63,177		97,964
Data processing expense			1,155		125		1,771		5		1,196		4,252
Software			364		78		2,253		1,343		9,649		13,687
Other			6,728		2,601		1,663		5,836		18,682		35,510
Income before non-interest expense allocations			143,359		77,810		23,846		18,779		(48,026)		215,768
Non-interest expense allocations
Risk, financial crimes, and compliance			20,150		1,621		2,248		3,665		(27,684)		—
Information technology and operations			10,151		539		4,449		5,533		(20,672)		—
Other allocated expenses			11,830		2,244		4,904		5,266		(24,244)		—
Total non-interest expense allocations			42,131		4,404		11,601		14,464		(72,600)		—
Income before taxes			101,228		73,406		12,245		4,315		24,574		215,768
Income tax expense			25,398		18,418		3,072		1,083		6,165		54,136
Net income		$	75,830	$	54,988	$	9,173	$	3,232	$	18,409	$	161,632

View source version on businesswire.com: https://www.businesswire.com/news/home/20241022908019/en/

Contacts

The Bancorp, Inc. Contact
Andres Viroslav
Director, Investor Relations
215-861-7990
andres.viroslav@thebancorp.com

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