The Bancorp, Inc. Reports Second Quarter Financial Results

Rhea-AI Summary

The Bancorp, Inc. (NASDAQ: TBBK) reported net income of $53.7 million, or $1.05 per diluted share, for Q2 2024, an 18% EPS increase year-over-year. Key highlights include:

- Net interest income increased 8% to $93.8 million
- Net interest margin rose to 4.97%
- Loans grew 6% year-over-year to $5.61 billion
- Gross dollar volume increased 13% to $37.14 billion
- Total prepaid, debit card, ACH, and other payment fees increased 13% to $27.8 million

The company raised its 2024 EPS guidance to $4.35 from $4.25, excluding the impact of $50 million quarterly share buybacks. The Bancorp's strong performance is attributed to its diverse loan portfolio and stable funding sources.

Positive

• Net income increased 10% year-over-year to $53.7 million
• EPS grew 18% to $1.05 per diluted share
• Net interest income rose 8% to $93.8 million
• Net interest margin improved to 4.97% from 4.83% year-over-year
• Loans increased 6% year-over-year to $5.61 billion
• Gross dollar volume grew 13% to $37.14 billion
• Total prepaid, debit card, ACH, and other payment fees increased 13%
• Small business loans grew 16% year-over-year
• Real estate bridge loans increased 16% year-over-year
• Book value per common share increased 15% year-over-year
• Company raised 2024 EPS guidance to $4.35 from $4.25

Negative

• REBL loans classified as special mention or substandard increased to $177.1 million from $165.2 million in Q1 2024
• A $12.6 million par value security was placed into non-accrual status
• SBLOC, IBLOC, and investment advisor financing loans collectively decreased 13% year-over-year

Insights

Financial Analyst

The Bancorp's Q2 2024 results demonstrate solid financial performance and strategic positioning. Net income increased 10% year-over-year to $53.7 million, with EPS rising 18% to $1.05 due to significant share repurchases. The company's return on assets and equity remained strong at 2.8% and 27% respectively.

Key highlights include:

• Net interest income grew 8% to $93.8 million
• Net interest margin improved to 4.97% from 4.83% year-over-year
• Loan portfolio expanded 6% year-over-year to $5.61 billion
• Gross dollar volume increased 13% to $37.14 billion
• Payment fees rose 13% to $27.8 million

The company's focus on niche lending segments, such as real estate bridge loans and small business loans, has contributed to its growth. However, the increase in special mention and substandard loans in the real estate bridge lending portfolio warrants attention, although current loan-to-value ratios appear manageable.

The Bancorp's strong capital ratios and diverse funding sources, including FDIC-insured deposits, provide a solid foundation for future growth. The company's proactive approach to managing interest rate risk through fixed-rate security purchases is prudent given the uncertain rate environment.

With the upgraded 2024 EPS guidance of $4.35 and continued share repurchases, The Bancorp appears well-positioned for sustained growth. However, investors should monitor the real estate bridge lending portfolio and the company's entry into consumer fintech lending for potential risks and opportunities.

Risk Management Specialist

The Bancorp's Q2 2024 results reveal a nuanced risk profile that merits careful consideration. While overall performance is strong, there are several risk factors to monitor:

• The increase in real estate bridge loans (REBL) classified as special mention or substandard to $177.1 million from $165.2 million in the previous quarter signals potential credit quality deterioration in this portfolio.
• The company's entry into consumer fintech lending, while potentially lucrative, introduces new risks associated with this less familiar market segment.
• The placement of a $12.6 million security into non-accrual status, though not materially impacting current results, highlights ongoing legacy risks from the company's former securitization business.

On the positive side, The Bancorp's risk mitigation strategies are noteworthy:

• The REBL portfolio's weighted average 'as is' LTV of 81% and 'as stabilized' LTV of 69% provide some cushion against potential losses.
• The company's focus on workforce housing in its REBL portfolio may offer more stability compared to higher-end properties in a stressed economy.
• Strong capital ratios and diverse funding sources, including $3.1 billion in credit lines with government-sponsored agencies, enhance the bank's resilience.

The purchase of $900 million in fixed-rate securities demonstrates proactive interest rate risk management. However, this strategy could limit upside potential if rates continue to rise.

Overall, while The Bancorp's risk profile appears manageable, ongoing vigilance is crucial, particularly in monitoring the REBL portfolio and the performance of the new consumer fintech lending initiative.

WILMINGTON, Del.--(BUSINESS WIRE)-- 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.

• 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 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 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. 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

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

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.

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.

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%

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, 2024 (unaudited)			March 31, 2024 (unaudited)			December 31, 2023			June 30, 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.

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.

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.

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%

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.

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%

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			60-89 days			90+ days						Total						Total
	past due			past due			still accruing			Non-accrual			past due			Current			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.

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.

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.

 

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andres.viroslav@thebancorp.com

Source: The Bancorp, Inc.

FAQ

What was The Bancorp's (TBBK) net income for Q2 2024?

The Bancorp reported net income of $53.7 million for Q2 2024.

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The Bancorp's EPS increased by 18%, from $0.89 in Q2 2023 to $1.05 in Q2 2024.

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The Bancorp's net interest margin was 4.97% for Q2 2024.

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The Bancorp's loan portfolio grew 6% year-over-year to $5.61 billion as of Q2 2024.

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The Bancorp raised its 2024 EPS guidance to $4.35 from $4.25, excluding the impact of $50 million quarterly share buybacks.