The Bancorp, Inc. Reports Third Quarter 2022 Financial Results and Updates Full Year 2022 and 2023 Guidance

The Bancorp, Inc. ("The Bancorp" or “we”) (NASDAQ: TBBK), a financial holding company, today reported financial results for the third quarter of 2022.

Highlights

• The Bancorp reported net income of $30.6 million, or $0.54 per diluted share, for the quarter ended September 30, 2022, compared to net income of $28.3 million, or $0.48 per diluted share, for the quarter ended September 30, 2021. The $0.54 was impacted by a reduction of approximately $0.03 per share resulting from a non-deductible $1.75 million SEC civil money penalty. Additionally, a $3.3 million net unrealized fair value loss was reflected in “Net realized and unrealized gains on commercial loans, at fair value”, which reduced diluted net income per share by approximately $0.04. The loss resulted primarily from the only movie theater loan in the Company’s portfolios. That loan was originated in 2015 and was a legacy loan from the initial entry into the CMBS securitization business which was subsequently discontinued in 2016. After discontinuance, non-SBA loan originations were primarily comprised of apartment building loans. Of the $2.15 billion of non-SBA commercial loans, at fair value and real estate bridge loans (“REBL”) which together comprise the non-SBA CRE portfolio, $2.05 billion are comprised of apartment building loans.
  
  
  
  

• For the quarter ended September 30, 2022, The Bancorp earned pre-tax income of $42.4 million, which reflected the aforementioned $1.75 million civil money penalty, compared to $36.5 million for the quarter ended September 30, 2021, which included $1.2 million of Payroll Protection Program (“PPP”) related interest and fees, which did not recur in the current year quarter.
  
  

• Return on assets and equity for the quarter ended September 30, 2022 amounted to 1.7% and 18%, respectively, compared to 1.8% and 18%, respectively, for the quarter ended September 30, 2021 (all percentages “annualized”).
  
  

• Net interest margin amounted to 3.69% for the quarter ended September 30, 2022, compared to 3.35% for the quarter ended September 30, 2021 and 3.17% for the quarter ended June 30, 2022.
  
  

• Net interest income increased 27% to $64.7 million for the quarter ended September 30, 2022, compared to $50.9 million for the quarter ended September 30, 2021. The 2021 quarter included $1.2 million of PPP related interest and fees, which did not recur in the current year quarter.
  
  

• Excluding commercial loans, at fair value, which were originally generated for sale, total loans increased to $5.27 billion at September 30, 2022, compared to $4.75 billion at June 30, 2022 and $3.14 billion at September 30, 2021. Those increases reflected growth of 11% quarter over quarter and 66% year over year. Those percentage increases exclude the impact of $54.2 million of September 30, 2022 balances previously included in discontinued assets which were reclassified to loans in the first quarter of 2022.
  
  

• Gross dollar volume (“GDV”), representing the total amounts spent on prepaid and debit cards, increased $3.73 billion, or 15%, to $28.12 billion for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021. Total prepaid, debit card, ACH and other payment fees increased 6% to $21.4 million for third quarter 2022 compared to third quarter 2021.
  
  

• SBLOC (securities backed lines of credit), IBLOC (insurance backed lines of credit) and investment advisor financing loans collectively increased 32% year over year and 4% quarter over quarter to $2.54 billion at September 30, 2022.
  
  

• Small Business Loans, including those held at fair value, grew 3% year over year to $732.4 million at September 30, 2022, and 0.4% quarter over quarter. That growth is exclusive of PPP loan balances which amounted to $6.7 million and $71.3 million, respectively, at September 30, 2022 and September 30, 2021.
  
  

• Direct lease financing balances increased 17% year over year to $599.8 million at September 30, 2022, and 3% quarter over quarter.
  
  

• We resumed non-SBA commercial real estate bridge lending in the third quarter of 2021. At September 30, 2022, the balance of such real estate bridge loans was $1.49 billion compared to $1.11 billion at June 30, 2022, reflecting quarter over quarter growth of 34%.
  
  

• The average interest rate on $6.46 billion of average deposits and interest-bearing liabilities during the third quarter of 2022 was 1.19%. Average deposits of $6.11 billion for third quarter 2022, reflected an increase of 10.5% from the $5.53 billion of average deposits for the quarter ended September 30, 2021.
  
  

• As of September 30, 2022, 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 9.66%, 13.13%, 13.56% and 13.13%, 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 September 30, 2022 was $11.81 per share compared to $11.13 per share at September 30, 2021, an increase of 6%. Increases resulting from retained earnings were partially offset by reductions in the market value of securities, which are recognized through equity.
  
  

• The Bancorp repurchased 663,934 shares of its common stock at an average cost of $22.59 per share during the quarter ended September 30, 2022.

CEO Damian Kozlowski stated “Revenue growth continues across our platform as lending volumes steadily increase and new payment partners are added to our ecosystem. The expansion of both net interest margin due to rising rates and payment fees across our verticals should support significantly increased profitability in 2023. We are issuing preliminary guidance for 2023 of $3.20 per share excluding the net impact of future share buybacks but including the expected impact of rate increases based on fed funds futures. We also reiterate $2.25 to $2.30 guidance for 2022. The $3.20 guidance for 2023 would represent approximately a 40% increase in earnings per share over 2022 and would result in an ROE percentage in the mid-20s and an ROA above 2%. We expect to increase our share repurchases to $25 million per quarter, or $100 million in 2023, from $15 million a quarter, or $60 million, in 2022.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, October 28, 2022 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or you may dial 1.866.652.5200 and ask to join The Bancorp, Inc. call. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, November 4, 2022 by dialing 1.877.344.7529, access code 5997176.

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.

* Includes commercial loans, at fair value. All periods include non-accrual loans.

** Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2022 and 2021.

NOTE: In the table above, interest on loans for 2022 and 2021 includes $21,000 and $1.2 million, respectively, of interest and fees on PPP loans.

* Includes commercial loans, at fair value. All periods include non-accrual loans.

** Full taxable equivalent basis, using a statutory Federal tax rate of 21% for 2022 and 2021.

NOTE: In the table above, the 2021 interest on loans reflects $4.6 million of interest and fees which were earned on a short-term line of credit to another institution to initially fund PPP loans, which did not significantly increase average loans or assets and which are not expected to recur. Interest on loans for 2022 and 2021 includes $502,000 and $4.9 million, respectively, of interest and fees on PPP loans.

⁽¹⁾ Excludes activity from discontinued operations.

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

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

*** Includes demand deposit overdrafts reclassified as loan balances totaling $1.0 million and $322,000 at September 30, 2022 and December 31, 2021, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial.

****The small business loans held at fair value are comprised of the government guaranteed portion of certain SBA loans at the dates indicated.

Small business loans as of September 30, 2022

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

(b) Substantially all these loans are made under the SBA 504 Fixed Asset Financing program (504) which dictates origination date loan-to-value percentages (“LTV”), generally 50-60%, to which The Bancorp Bank N.A. adheres.

(c) Of the $10 million in Construction SBA loans, $9 million are 504 first mortgages with an origination date LTV of 50-60% and $1 million are SBA interim loans with an approved SBA post-construction full takeout/payoff.

(d) The $99 million represents the unguaranteed portion of 7a loans which are 70% or more guaranteed by the U.S. government. 7a loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7a and 504 loans require the personal guaranty of all 20% or greater owners.

Small business loans by type as of September 30, 2022

(Excludes government guaranteed portion of SBA 7a loans and PPP loans)