We are a Delaware financial holding company and our primary subsidiary, wholly
owned, is The Bancorp Bank, which we refer to as the Bank. The vast majority
of our revenue and income is currently generated through the Bank. In our continuing
operations, we have four primary lines of specialty lending: securities backed
lines of credit, or SBLOC, automobile fleet and other equipment leasing, Small
Business Administration, or SBA, loans and loans generated for sale into capital
markets primarily through both commercial mortgage backed securities, or CMBS
and collateralized loan obligations, or CLOs. SBLOCs are loans which are generated
through institutional banking affinity groups and are collateralized by marketable
securities. SBLOCs are typically offered in conjunction with brokerage accounts
and are offered nationally. Automobile fleet and other equipment leases are
generated in a number of Atlantic Coast and other states.
For our institutional banking, including SBLOC and our other deposit generating
activities, we focus on providing our services to organizations with a pre-existing
customer base who can use one or more selected banking services tailored to
support or complement the services provided by these organizations to their
customers. These services include private label banking for investment advisory
companies through our institutional banking department; credit and debit card
processing for merchants affiliated with independent service organizations;
and prepaid cards for general purpose card sponsors, insurers, incentive plans,
large retail chains, consumer service organizations and others. We typically
provide these services under the name and through the facilities of each organization
with whom we develop a relationship. We refer to this, generally, as affinity
group banking. Our prepaid card, private label banking for investment advisory
companies and card payment processing are our primary sources of deposits. The
vast majority of our services are provided in the United States although we
have limited prepaid card operations in Europe.
Fund our Loan and Investment Portfolio Growth through Low-cost Deposits and
Generate Noninterest Income from Prepaid Cards and Other Areas. Our principal
focus is to grow our specialty lending operations and investment portfolio,
and fund the loans and investments through a variety of sources that provide
low cost and stable deposits. Funding sources include prepaid cards, institutional
banking money market accounts and card payment processing. The largest component
of our deposits is prepaid cards and the largest component of our noninterest
income is derived from prepaid cards.
Develop Relationships with Affinity Groups to Gain Sponsored Access to their
Membership, Client or Customer Bases to Market our Services. We seek to develop
relationships with organizations with established membership, client or customer
bases. Through these affinity group relationships, we gain access to an organization’s
members, clients and customers under the organization’s sponsorship. We
believe that by marketing targeted products and services to these constituencies
through their pre-existing relationships with the organizations, we will continue
to generate lower cost deposits, generate fee income and, with respect to private
label banking, lower our customer acquisition costs and build close customer
relationships.
Use Our Existing Infrastructure as a Platform for Growth. We have made significant
investments in our banking infrastructure to support our growth. We believe
that this infrastructure can accommodate significant additional growth without
proportionate increases in expense. We believe that this infrastructure enables
us to maximize efficiencies through economies of scale as we grow without adversely
affecting our relationships with our customers.
We offer a range of products and services to our affinity groups and their
client bases, including:
checking accounts;
savings accounts;
money market accounts;
commercial accounts; and
various types of prepaid and payroll cards.
Private Label Banking. For our private label banking, we create unique banking
websites for each affinity group, enabling the affinity group to provide its
members with the banking services and products we offer or just those banking
services and products it believes will be of interest to its members. We design
each website to carry the brand of the affinity group and carry the “look
and feel” of the affinity group’s own website. Each such website,
however, indicates that we are the provider of banking services. To facilitate
the creation of these individualized banking websites, we have packaged our
products and services into a series of modules, with each module providing a
specific service, such as deposit products, electronic payment systems and loans.
Each affinity group selects from our menu of service modules those that it wants
to offer its members or customers. We and the affinity group also may create
products and services, or modify products and services already on our menu,
that specifically relate to the needs and interests of the affinity group’s
members or customers. We pay fees to certain affinity groups based upon deposits
and loans they generate. These fees vary, and certain fees increase as market
interest rates increase, while other fee rates are fixed. We include these fees
as a component of interest expense in calculating our net interest margin.
