The Bancorp, Inc. Reports First Quarter Financial Results

The Bancorp, Inc. (“The Bancorp” or “the Company” or “we” or “our”) (NASDAQ: TBBK), a financial holding company, today reported financial results for the first quarter of 2024.

Recent Developments

• The Bancorp has increased its share repurchase authorization for the second quarter of 2024 from $50.0 million to $100.0 million.

• In April 2024, the Company began purchasing additional fixed rate agency 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 would result should the Federal Reserve increase rates. Through April 26, 2024, the Company purchased approximately $900 million of such securities. 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.

• We are pleased to announce Block, Inc. (“Block”) as a new partner to our fintech solutions ecosystem. The addition of this new relationship as well as the continued organic growth of the current portfolio should result in meaningful increases to the ACH, card and other processing fees line item.

Highlights

• The Bancorp reported net income of $56.4 million, or $1.06 per diluted share (“EPS”), for the quarter ended March 31, 2024, compared to net income of $49.1 million, or $0.88 per diluted share, for the quarter ended March 31, 2023, or an EPS increase of 20%. While net income increased 15% between these periods, outstanding shares were decreased as a result of common stock share repurchases which have been significantly increased in 2024.

• Return on assets and equity for the quarter ended March 31, 2024, amounted to 3.0% and 28%, respectively, compared to 2.6% and 28%, respectively, for the quarter ended March 31, 2023 (all percentages “annualized”).

• Net interest income increased 10% to $94.4 million for the quarter ended March 31, 2024, compared to $85.8 million for the quarter ended March 31, 2023. Net interest income increases reflected the impact of Federal Reserve rate increases on The Bancorp’s variable rate loans and securities.

• Net interest margin amounted to 5.15% for the quarter ended March 31, 2024, compared to 4.67% for the quarter ended March 31, 2023, and 5.26% for the quarter ended December 31, 2023. As noted above, the Company has begun purchasing fixed rate securities to reduce margin exposure to lower rate environments.

• Loans, net of deferred fees and costs were $5.46 billion at March 31, 2024, compared to $5.36 billion at December 31, 2023 and $5.35 billion at March 31, 2023. Those changes reflected an increase of 2% quarter over linked quarter and an increase of 2% year over year.

• Gross dollar volume (“GDV”), representing the total amounts spent on prepaid and debit cards, increased $3.93 billion, or 12%, to $37.94 billion for the quarter ended March 31, 2024, compared to the quarter ended March 31, 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 7% to $27.3 million for the first quarter of 2024 compared to the first quarter of 2023. After adjusting first quarter 2023 for $600,000 of fees related to a prior period and a $1.4 million termination fee from a client which formed its own bank, those fees increased 16%.

• Small business loans (“SBL”), including those held at fair value, amounted to $925.3 million at March 31, 2024, or 14% higher year over year, and 3% quarter over linked quarter, excluding the impact of $28.7 million of loans with related secured borrowings.

• Direct lease financing balances increased 8% year over year to $702.5 million at March 31, 2024, and 2% over December 31, 2023.

• At March 31, 2024, real estate bridge loans of $2.10 billion had grown 5% compared to the $2.00 billion balance at December 31, 2023, and 20% compared to the March 31, 2023 balance of $1.75 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 21% year over year and decreased 4% quarter over linked quarter to $1.78 billion at March 31, 2024.

• The average interest rate on $6.65 billion of average deposits and interest-bearing liabilities during the first quarter of 2024 was 2.49%. Average deposits of $6.50 billion for the first quarter of 2024 reflected a decrease of 2% from the $6.62 billion of average deposits for the quarter ended March 31, 2023. The decreases reflected the planned exit of $200 million of higher cost funds on July 1, 2023 and other planned exits of higher cost funds throughout the year.

• As of March 31, 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 10.87%, 15.76%, 16.35% and 15.76%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively. The Bancorp and its wholly-owned subsidiary, The Bancorp Bank, National Association, each remain well capitalized under banking regulations.

• Book value per common share at March 31, 2024 was $15.63 compared to $13.11 per common share at March 31, 2023, an increase of 19%.

• The Bancorp repurchased 1,262,212 shares of its common stock at an average cost of $39.61 per share during the quarter ended March 31, 2024.

• 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 agencies totaling approximately $2.7 billion as of March 31, 2024, as well as access to other forms of liquidity.

• 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 $2.1 billion apartment bridge lending portfolio 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.

• 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 collateral for loans that have been classified as substandard. Recent third party appraisals of those loans reflect a weighted average “as is” loan to value ratio (“LTV”) of 79% and an “as stabilized” LTV of 76%. Accordingly, even with a higher interest rate environment and other stresses, LTVs for these loans have been significantly sustained and continue to provide protection against potential loss.

• 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.

CEO and President Damian Kozlowski commented, “We had another quarter of continued progress and a strong start to 2024 with earnings of $1.06 a share and an ROE of 28%,” said Damian Kozlowski CEO and President of The Bancorp. “We expect continued increases in volumes and profitability throughout 2024 and beyond as we continue to invest and build our capabilities for the future, while adding new business partners and expanding our current client relationships. We are also reaffirming our 2024 guidance of $4.25 a share without the impact of $50 million per quarter of share buybacks and the additional $50 million buyback in the second quarter.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, April 26, 2024 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or you may dial 1.800.267.6316, 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, May 3, 2024 by dialing 1.800.938.2241, access code BANCORP.

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. These statements, including, without limitation, statements regarding our annual fiscal 2024 results, profitability, and increased volumes, 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 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 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 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.

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

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.