Slide 1: The Bancorp Investor Presentation
August 2020 THE BANCORP INVESTOR PRESENTATION
Slide 2: Forward-looking statements
Statements in this presentation regarding The Bancorp, Inc.’s business that are not historical facts are “forward - looking statements”. These statements may be identified by the use of forward - looking terminology, including the words “may,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “
Slide 3: Overview of Today's Presenters and Experienced Management Team
3 OVERVIEW OF TODAY’S PRESENTERS AND EXPERIENCED MANAGEMENT TEAM • CEO of Modern Bank N.A. • CEO of Citigroup Private Bank • Managing Director at Bank of America Securities Damian Kozlowski Chief Executive Officer Years at The Bancorp – 4 Years of Banking Experience – 23 CEO Dianne Bjork EVP, Co - H
Slide 4: Specialized, Branchless Banking Platform Centered on Payments Business
WE HAVE BUILT A SPECIALIZED, BRANCHLESS BANKING PLATFORM CENTERED ON A WELL POSITIONED PAYMENTS BUSINESS INVESTMENT HIGHLIGHTS Note: Financial data as of June 30, 2020 1 Stock price of $8.85; shares outstanding as of June 30, 2020 2 Annualized for the three months ended June 30, 2020 3 Calculated fr
Slide 5: Payments Business Generates Non-Interest Income and Stable, Lower Cost Deposits
PAYMENTS BUSINESS GENERATES NON - INTEREST INCOME AND COLLECTS STABLE, LOWER COST DEPOSITS Note: Financial data as of June 30, 2020 PAYMENT ACCEPTANCE GROUP Merchant acquiring and ACH services PAYMENT SOLUTIONS GROUP Issuing bank for leading prepaid card and debit programs DEPOSITS Market - leading
Slide 6: Deposits
DEPOSITS PAYMENTS BUSINESS GENERATES NON - INTEREST INCOME AND STABLE, LOWER COST DEPOSITS 6
Slide 7: Payments Business: Stable, Lower Cost Deposit Generator
7 PAYMENTS BUSINESS: STABLE, LOWER COST DEPOSIT GENERATOR CONSISTENT DEPOSIT GROWTH FROM PAYMENTS BUSINESSES $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000 2016 2017 2018 2019 Q2 2020 Payment Solutions Group (Debit and Prepaid Issuance) Payment Acceptance Group
Slide 8: Business Overview: Payments
8 BUSINESS OVERVIEW:PAYMENTS PAYMENT SOLUTIONS GROUP Issuing bank for leading prepaid card and debit programs BUSINESS OVERVIEW: ISSUANCE • Sponsorship of products and services across the payments space • Sponsorship of private label banking (e.g., checking account with a debit card) • 2Q’2020 Finan
Slide 9: Payments Business: Payment Solutions Group
9 PAYMENTS BUSINESS: PAYMENT SOLUTIONS GROUP 1 Per Nilsen Ratings and measured by Gross Dollar Volume CHALLENGER BANKS GOVERNMENT HEALTHCARE CORPORATE SERVICES (e.g. payroll) GIFT GROSS DOLLAR VOLUME GROWTH IS ACCELERATING WITHIN OUR PREPAID & DEBIT OFFERINGS PAYMENT SOLUTIONS GROUP Issuing bank for
Slide 10: Payments Business: Payment Acceptance Group
10 PAYMENTS BUSINESS: PAYMENT ACCEPTANCE GROUP WE’RE EXPANDING ON OUR EARLY SUCCESS & adding new partners across various use cases 1 “Direct” is comprised of corporations with which The Bancorp contracts directly 2 Independent sales organization LAUNCHED IN LATE 2017, RAPID FUNDS HAS GATHERED STRONG
Slide 11: Loans & Leases
LOANS & LEASES HIGHLY SPECIALIZED LENDING WITH LOW LOSS HISTORIES 11
Slide 12: Balance Sheet Shift into Lower Risk Lending Businesses
12 BALANCE SHEET SHIFT INTO LOWER RISK LENDING BUSINESSES 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2014 2015 2016 2017 2018 2019 Q2 2020 Other Leasing Institutional Banking 2 Disc Ops Discontinued Philadelphia Community Bank 12 REDUCED PHILADELPHIA COMMUNITY BANK EXPOSURE TO ~3% OF TOTAL LOA
Slide 13: Financial Review: Pandemic Response
13 FINANCIAL REVIEW: PANDEMIC RESPONSE WE ARE WORKING CLOSELY WITH OUR BORROWERS TO MEET THEIR NEEDS AS THE PANDEMIC UNFOLDS HIGHLIGHTS • Implemented procedures to support employees working from home • Team members deemed worksite essential continue to operate from our physical locations, while effe
Slide 14: Loans & Leases: Strong Collateral and Government Guarantees Lower Credit Risk
14 LOANS & LEASES: STRONG COLLATERAL AND GOVERNMENT GUARANTEES LOWER CREDIT RISK LOAN PORTFOLIO BUSINESS LINE BALANCE SHEET CATEGORY Q2 2020 PRINCIPAL BALANCE ($ MILLIONS) % OF TOTAL PORTFOLIO Real Estate Capital Markets Multifamily - commercial real estate A $ 1,450 35% Hospitality - commercial rea
Slide 15: Loans & Leases: Real Estate Capital Markets
15 LOANS & LEASES : REAL ESTATE CAPITAL MARKETS BUSINESS OVERVIEW : • Origination focused primarily on apartments in primary and secondary markets • Focus on floating rate commercial loans to be sold in private securitizations or bulk loan sales • No new RECM originations at this time due to planned
Slide 16: Loans & Leases: Institutional Banking
BUSINESS OVERVIEW : • Automated loan application platform, Talea, provides industry leading speed and delivery • Securities - backed lines of credit provide fast and flexible liquidity for investment portfolios • Insurance - backed lines of credit provide fast and flexible borrowing against the cash
Slide 17: Loans & Leases: Institutional Banking Loan Portfolio
17 LOANS & LEASES: INSTITUTIONAL BANKING LOAN PORTFOLIO INSTITUTIONAL BANKING PRIMARILY COMPRISED OF SECURITIES AND CASH VALUE LIFE INSURANCE LENDING LOAN TYPE Q2 2020 PRINCIPAL BALANCE %OF PORTFOLIO Securities backed lines of credit (SBLOC) $1,003 77% Insurance backed lines of credit (IBLOC) 284 22
Slide 18: Loans & Leases: Small Business Lending
BUSINESS OVERVIEW : • Established a distinct platform within the fragmented SBA market – National portfolio approach allows pricing and client flexibility – Solid credit performance demonstrated over time – Client segment strategy tailored by market 18 LOANS & LEASES : SMALL BUSINESS LENDING ~$700K
Slide 19: Loans & Leases: Small Business Lending Loan Portfolio
19 LOANS & LEASES: SMALL BUSINESS LENDING LOAN PORTFOLIO SMALL BUSINESS LENDING TYPE SBL COMMERCIAL MORTGAGE SBL CONSTRUCTION SBL NON - REAL ESTATE TOTAL Hotels $68 $7 $ - $75 Professional services offices 22 - 2 24 Full - service restaurants 15 1 5 21 Child day care and youth services 15 - 1 16 Bak
Slide 20: Loans & Leases: Commercial Fleet Leasing
20 LOANS & LEASES : COMMERCIAL FLEET LEASING BUSINESS OVERVIEW : • Niche provider of vehicle leasing solutions – Focus on smaller fleets (less that 150 vehicles) – Direct lessor (The Bancorp Bank sources opportunities directly and provides value - add services such as outfitting police cars) – Histo
Slide 21: Loans & Leases: Commercial Fleet Leasing Loan Portfolio
21 LOANS & LEASES: COMMERCIAL FLEET LEASING LOAN PORTFOLIO COMMERCIAL FLEET LEASING TYPE PRINCIPAL BALANCE % TOTAL Government agencies and public institutions $ 77 18% Construction 74 18% Waste management and remediation services 61 15% Retail trade 39 9% Transportation and warehousing 39 9% Real es
Slide 22: Financial Review
FINANCIAL REVIEW The Bancorp"
Slide 23: Financial Review: 2Q 2020 Financial Highlights
23 FINANCIAL REVIEW: 2Q 2020 FINANCIAL HIGHLIGHTS 2Q 2020 Financial Highlights 1 Reflects respective $7.5 million and $1.4 million non - deductible civil money penalties in Q4 2019 and Q3 2019, excluded from eff iciency ratio 2 ROAA and ROAE annualized 3 Increase in Q1 2020 reflects adoption of CECL
Slide 24: Financial Review: Interest Rate Sensitivity
24 3.5% NIM AND SIGNIFICANT NET INTEREST INCOME GROWTH IN Q2 DESPITE 0% FRB RATE ENVIRONMENT 1 24 FINANCIAL REVIEW: INTEREST RATE SENSITIVITY Real Estate Capital Markets $1,587 HIGHLIGHTS x Floating rate lending businesses include Real Estate Capital Markets, SBLOC, IBLOC and Small Business x Deposi
Slide 25: Financial Review: Earnings and Profitability
25 FINANCIAL REVIEW: EARNINGS AND PROFITABILITY 1 Core revenue is net interest income plus non - interest income excluding gains/losses from sales of securities, changes in valuati on to Walnut Street and the sales of Health Savings Accounts, the European payments business, and the IRA portfolio $0
Slide 26: Financial Review: Keys to Achieving Financial Targets
26 FINANCIAL REVIEW: EARNINGS AND PROFITABILITY KEYS TO ACHIEVING FINANCIAL TARGETS x Established a new Payments Ecosystem 2.0 which satisfies regulators and is scalable x Invested in technology/innovation x Maintained an industry leading compliance & risk function x Expanded salesforce and marketin
Slide 27: Financial Review: Credit – Historical Losses and Loan Loss Reserve
27 FINANCIAL REVIEW: CREDIT – HISTORICAL LOSSES AND LOAN LOSS RESERVE $0 $2 $4 $6 $8 $10 $12 $14 $16 2015 2016 2017 2018 2019 Q2 2020 0.4% 0.5% 0.6% Allowance for credit losses as % of loan balance Allowance for credit losses as % of loan balance (excluding SBLOC & IBLOC ) 0.7% 1.0% 1.2% 0.5% 1.0% 0
Slide 28: Financial Review: Capital Position
28 FINANCIAL REVIEW: CAPITAL CAPITAL POSITION TCE/ TA Tier 1 Leverage Ratio 7.1% 7.2% 11% 14% 11% 14% 13% 13% 16% 17% 6.9% 7.9% Tier 1 Capital Ratio 19% 19% 9.6% 20% 21% 10.1% Total Risk - based Capital Ratio 17% 17% 8.9% Tier1 Capital Ratio (8% - Well - capitalized minimum) HIGHLIGHTS • Corporate g
Slide 29: Financial Review: Liquidity Above Peer
29 FINANCIAL REVIEW: LIQUIDITY ABOVE PEER LIQUIDITY POSITION TYPE BOOK VALUE AFS GAIN/LOSS BOOK YIELD Adjustable Rate Agency $ 105.5 $ 1.2 1.4% Fixed Rate Agency 633.8 28.1 2.7% Fixed Rate Municipal 57.6 3.7 3.9% Fixed Rate Non - Agency 19.8 0.0 2.4% Fixed Rate Non - Agency 479.3 (4.5) 4.2% Total $
Slide 30: Offering Summary
OFFERING SUMMARY The Bancorp"
Slide 31: Offering Summary
OFFERING SUMMARY Issuer: The Bancorp, Inc. Security Offered: [•]% Senior Notes due [•], 2025 Rating: Kroll BBB Maturity Date: [•], 2025 Offering Size: $100 million Interest Rate: [•]% annually Interest Payment Dates: Each [•], and [•], commencing [•], 2020 Form: Fully - registered global notes in bo
Slide 32: Offering Summary: Pro Forma Capital Position with $100M Senior Debt Offering
1 OFFERING SUMMARY 1 For illustrative purposes, assumes $100 million of gross proceeds from the senior notes invested in assets with an average ri sk - weighting of 50% PRO FORMA CAPITAL POSITION WITH $100M SENIOR DEBT OFFERING 32 Pro Forma Actual Senior Debt For Senior Debt ($000's) 6/30/2020 Adjus
Slide 33: Offering Summary: Double Leverage & Bank Interest Coverage Ratio
OFFERING SUMMARY DOUBLE LEVERAGE & BANK INTEREST COVERAGE RATIO 1 Assumes $100 million of gross proceeds from the senior notes with an illustrative coupon of [5.00]% Components may not sum to totals due to rounding differences 33 ($000s) Assumptions % of Senior Debt Downstreamed to Bank 100% Senior
Slide 34: Appendix
APPENDIX The Bancorp"
Slide 35: Appendix: Historical Income Statement
APPENDIX Historical Income Statement 35 1 Includes gain (loss) from investment securities and investment in unconsolidated entity (Walnut Street) ($ in thousands) 2017 FY 2018 FY 2019 FY 2020 FQ1 2020 FQ2 Interest Income 122,020 147,960 179,569 51,466 51,899 Interest Expense 15,340 27,111 38,281 8,5
Slide 36: Appendix: Historical Balance Sheet
APPENDIX Historical Balance Sheet 36 1 Other Assets includes investment in unconsolidated entity, and assets held - for - sale from discontinued operations ($ in thousands) 2017 FY 2018 FY 2019 FY 2020 FQ1 2020 FQ2 Assets: Cash and Cash Equivalents 908,935 554,302 944,472 119,588 480,721 Securities