The Bancorp, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Quarter 3, 2020, the Bancorp Incorporated earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star zero. As a reminder, this conference call is being recorded. I would like to turn the conference over to your host, Mr. Andres Farsab. You may begin.

Thank you, Operator. Good morning, and thank you for joining us today for the Bancorp's third quarter 2020 financial results conference call. On the call with me today are Damian Kozlowski, Chief Executive Officer, and Paul Frankel, our Chief Financial Officer. This morning's call is being webcast on our website at www.thebancorp.com. There will be a replay of the call beginning at approximately 12 p.m. Eastern time today. The dial-in for the replay is 855-859-2056 with a confirmation code of 568-2938. Before I turn the call over to Damian, I would like to remind everyone that when using this conference call, the words believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, which could cause actual results, performance, or achievements to differ materially from those anticipated or suggested by such statements. For further discussion of these risks and uncertainties, please see the Bank Corp's filings with the SEC. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. Now I'd like to turn the call over to the Bancorp's Chief Executive Officer, Damian Kozlowski. Damian?

Thank you, Andres. Good morning, everyone. The Bancorp earned $0.40 a share on revenue of $0.74 and expenses of $42 million. Revenue climbed 28%, driven by a 33% year-over-year increase in net interest income and fee growth of 19% after removing our third quarter 2019 securitization gain. The fee growth was supported by 20% growth year-over-year on card fees. Cost of funds was down 77% year-over-year, illustrating the benefits of our payments funding model. Expenses were flat year-over-year, and cost control and efficiency continued to be a main focus of management. Net income from continual operations grew 13%, besting 2019 third quarter even without securitization gain revenue. Loan deferrals for our total loan portfolio dropped to 1.2% from 7.5%, driven by our leasing business that saw a drop to 1% of the portfolio from 19% at the end of the second quarter. In the third quarter, we saw continued business momentum led by gross dollar volume, GDV, and our cards business of 39%. We also added assets led by 58% year-over-year growth in our securities, insurance, and advisor financing lending platforms. Additionally, our commercial business has renewed momentum with SBA and leasing respectively growing 5% and 2% quarter-over-quarter. In this quarter, we raised approximately $98 million net of fees and new senior secured debt at the holding company to support the continued growth of our company. This debt can be applied to the bank as equity to support regulatory ratios. We continue to add new card programs into our payments ecosystem in the third quarter, as well as adding several new direct rapid funds partners. These new relationships will be announced as products and services enter the marketplace. Our pipelines continue to be very robust and significantly above historic norms, suggesting continued growth in transaction volumes. In the third quarter, we made a strategic determination as to our securitization business. As discussed in previous calls, we have been evaluating our securitization platform and its loan portfolio. After assessing its current profitability, market conditions, and credit risk, we have decided to continue future securitization activity. The loan portfolio comprised almost entirely of multifamily loans that have experienced few deferrals and delinquencies will amortize over the next three to five years and be replaced by loans originated in other areas. We expect income from the portfolio to be stable over the first two years. A portion of the portfolio may be sold as whole loans as space is needed on our balance sheet for other lending activities. Our real estate team and our commercial SBA business will continue to originate select transactions. Lastly, we now believe we have enough information to issue preliminary guidance for 2021. We expect to earn between $165 and $170 a share. $170 a share, or approximately $100 million in net income, is currently our company budget for 2021. I now turn over the call to Paul Frankel, our CFO, to give you more color on the third quarter.