Press Release

The Bancorp, Inc. Reports Second Quarter 2016 Financial Results

Company Release - 7/28/2016 6:00 PM ET

WILMINGTON, Del.--(BUSINESS WIRE)-- The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter 2016.

Highlights

  • Net interest income increased 23% to $20.9 million for the quarter ended June 30, 2016 compared to $17.0 million for the quarter ended June 30, 2015.
  • Net interest margin increased to 2.73% for the quarter ended June 30, 2016 compared to 2.23% for the quarter ended June 30, 2015.
  • Loans and continuing operations loans held for sale increased 30% to $1.62 billion at June 30, 2016 compared to $1.25 billion at June 30, 2015.
  • Small Business Administration (“SBA”) loans increased 40% to $334.2 million from $239.2 million at June 30, 2015.
  • Security backed lines of credit (“SBLOC”) increased 18% to $607.0 million from $512.3 million at June 30, 2015.
  • Direct lease financing increased 42% to $315.6 million from $222.2 million at June 30, 2015.
  • Prepaid card fee income increased 21% to $13.5 million for the quarter ended June 30, 2016 from $11.1 million for the quarter ended June 30, 2015.
  • Gross dollar volume (“GDV”) (1) increased 14% to $11.4 billion for Q2 2016 from $10.0 billion for Q2 2015.
  • Assets held for sale from discontinued operations decreased 17% from December 31, 2015 and 25% from June 30, 2015.
  • The rate payable by us for average deposits and interest bearing liabilities of $3.77 billion in Q2 2016 was 0.32% with a rate of 0.11% for $1.87 billion of average prepaid card deposits.
  • Book value per common share at June 30, 2016 of $7.67 per share. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

The Bancorp reported a net loss of $31.4 million, or $0.83 loss per diluted share, for the quarter ended June 30, 2016 compared to net income of $174,000, or $0.00 net income per share, for the quarter ended June 30, 2015. Net loss from continuing operations for the quarter ended June 30, 2016 was $17.8 million or a loss of $0.47 per diluted share compared to net loss from continuing operations of $2.5 million or a loss of $0.07 per diluted share for the quarter ended June 30, 2015. Loss from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales of the remaining $471.1 million of commercial and residential loans in The Bancorp’s discontinued operations. Tier one capital to assets, tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 ratios were 6.78%, 12.72%, 12.97% and 12.72% compared to well capitalized minimums of 5%, 8%, 10% and 6.5%.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “Upon joining Bancorp, I immediately began a process to create a new business plan that will sustain our revenue growth, lower our expenses, increase productivity and reduce earnings volatility from our portfolio. In addition, the plan will also be squarely focused on resolving any issues with our regulators and managing the overall risk of our institution. We hope to complete the plan by the end of the 3rd quarter and implement many parts of it by the end of 2016. Strong revenue growth continued this quarter, and our core lending businesses drove a 23% increase over prior year quarter net interest income. Our non-interest income reflected 21% growth in prepaid card fees to $13.5 million. Earnings were negatively impacted by continued high regulatory lookback expenses, as expected, and were further negatively impacted by loan charges on discontinued operations and charges relating to our retained interest in an unconsolidated entity. Lookback expenses totaled $13.4 million for the quarter. However, the lookback is substantially complete and we expect that lookback expense will be substantially less in the third quarter. Loan charges on discontinued operations were based on quarterly loan valuations by third party loan review companies and totaled $17 million in the quarter. Additional charges of $15 million against the investment in unconsolidated entity were also taken on the basis of third party review. That entity, in which we have a substantial retained interest, represents the financing of a portion of the sale of certain discontinued loans to an independent investor. Loan charges during the quarter partially reflected strategies to liquidate certain unique collateral and properties to expedite resolution as we continue to pursue sales of other discontinued loans. Credit losses in our continuing operations which we believe to be lower risk lines of business, continue to be very low.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 29, 2016 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 47292256. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, August 5, 2016 by dialing 855.859.2056, access code 47292256.

About The Bancorp

With operations in the US and Europe, The Bancorp, Inc. (NASDAQ: TBBK) is dedicated to serving the unique needs of non-bank financial service companies, ranging from entrepreneurial start-ups to those on the Fortune 500. The company’s chief financial institution, The Bancorp Bank (Member FDIC, Equal Housing Lender), has been repeatedly recognized in the payments industry as the Top Issuer of Prepaid Cards (US), a top merchant sponsor bank, and a top ACH originator. Specialized lending distinctions include National Preferred SBA Lender, a leading provider of securities-backed lines of credit, and one of the few bank-owned commercial leasing groups in the nation. For more information please visit www.thebancorp.com.

Forward-Looking Statements

Statements in this earnings release regarding Bancorp’s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. These statements may be identified by the use of forward-looking terminology, including but not limited to the words “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “estimate,” “continue,” or similar words. For further discussion of the risks and uncertainties to which these forward-looking statements may be subject, see Bancorp’s filings with the SEC, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those filings. These risks and uncertainties could cause actual results to differ materially from those projected in the forward-looking statements. 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 presentation, except as may be required under applicable law.

 
The Bancorp, Inc.
Financial highlights
(unaudited)
   
Three months ended Six months ended
June 30, June 30,
Condensed income statement 2016   2015 2016   2015
(dollars in thousands except per share data)
 
Net interest income $ 20,890 $ 17,037 $ 41,446 $ 33,551
Provision for loan and lease losses   1,060   510   1,060   1,175
Non-interest income
Service fees on deposit accounts 978 1,900 1,825 3,660
Card payment and ACH processing fees 1,457 1,496 2,724 2,749
Prepaid card fees 13,510 11,128 27,084 24,260
Gain (loss) on sale of loans 1,339 5,901 (94) 7,577
Gain on sale of investment securities 124 193 2,150 273
Change in value of investment in unconsolidated entity (13,936) 1,056 (13,124) 2,101
Leasing income 464 656 868 1,175
Debit card income (65) 471 (157) 931
Affinity fees 1,322 896 2,416 1,308
Other non-interest income   4,347   1,027   4,536   1,467
Total non-interest income 9,540 24,724 28,228 45,501
Non-interest expense
Bank Secrecy Act and lookback consulting expenses 13,421 9,212 27,736 14,956
Other non-interest expense   43,715   37,222   84,538   72,338
Total non-interest expense   57,136   46,434   112,274   87,294
Loss from continuing operations before income tax expense (27,766) (5,183) (43,660) (9,417)
Income tax benefit   (10,004)   (2,684)   (15,276)   (5,111)
Net loss from continuing operations

(17,762)

(2,499) (28,384) (4,306)
Net income (loss) from discontinued operations, net of tax   (13,598)   2,673   (13,888)   4,694
Net income (loss) available to common shareholders $ (31,360) $ 174 $ (42,272) $ 388
 
Net loss per share from continuing operations - basic $ (0.47) $ (0.07) $ (0.75) $ (0.11)
Net income (loss) per share from discontinued operations - basic $ (0.36) $ 0.07 $ (0.37) $ 0.12
Net income (loss) per share - basic $ (0.83) $ - $ (1.12) $ 0.01
 
Net loss per share from continuing operations - diluted $ (0.47) $ (0.07) $ (0.75) $ (0.11)
Net income (loss) per share from discontinued operations - diluted $ (0.36) $ 0.07 $ (0.37) $ 0.12
Net income (loss) per share - diluted $ (0.83) $ - $ (1.12) $ 0.01
Common stock shares outstanding 37,945,323 37,858,237 37,945,323 37,858,237
 
(a) For loss periods the weighted averages shares - basic is used in both the basic and diluted computations.
 
       
Balance sheet June 30, March 31, December 31, June 30,
2016 2016 2015 2015
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 4,006 $ 8,542 $ 7,643 $ 13,269
Interest earning deposits at Federal Reserve Bank 528,094 757,773 1,147,519 936,989
Securities sold under agreements to resell   39,360   10,208   -   40,068
Total cash and cash equivalents   571,460   776,523   1,155,162   990,326
 
Investment securities, available-for-sale, at fair value 1,328,693 1,252,754 1,070,098 1,370,027
Investment securities, held-to-maturity 93,537 93,550 93,590 93,649
Loans held for sale, at fair value 441,593 313,595 489,938 284,501
Loans, net of deferred fees and costs 1,182,106 1,114,053 1,078,077 968,033
Allowance for loan and lease losses   (5,398)   (4,378)   (4,400)   (4,352)
Loans, net   1,176,708   1,109,675   1,073,677   963,681
Federal Home Loan Bank & Atlantic Community Bancshares stock 12,289 1,063 1,062 1,063
Premises and equipment, net 22,429 21,692 21,631 19,271
Accrued interest receivable 10,271 9,172 9,471 11,526
Intangible assets, net 6,074 4,672 4,929 5,541
Deferred tax asset, net 28,870 32,462 36,207 35,874
Investment in unconsolidated entity 162,275 177,211 178,520 187,186
Assets held for sale from discontinued operations 487,373 536,548 583,909 651,158
Other assets   60,203   50,802   47,629   43,804
Total assets $ 4,401,775 $ 4,379,719 $ 4,765,823 $ 4,657,607
 
Liabilities:
Deposits
Demand and interest checking $ 3,569,669 $ 3,610,003 $ 3,602,376 $ 3,993,393
Savings and money market 389,851 388,953 383,832 321,264
Time deposits   101,160   -   428,549   1,400
Total deposits   4,060,680   3,998,956   4,414,757   4,316,057
 
Securities sold under agreements to repurchase 318 671 925 2,357
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   37,093   51,102   16,739   10,038
Total liabilities $ 4,111,492 $ 4,064,130 $ 4,445,822 $ 4,341,853
 
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 37,945,323 and 37,858,237 shares issued at June 30, 2016 and 2015, respectively 37,945 37,945 37,861 37,858
Treasury stock (100,000 shares) (866) (866) (866) (866)
Additional paid-in capital 301,680 301,018 300,549 298,978
Accumulated deficit (57,720) (26,361) (15,449) (27,854)
Accumulated other comprehensive income (loss)   9,244   3,853   (2,094)   7,638
Total shareholders' equity   290,283   315,589   320,001   315,754
 
Total liabilities and shareholders' equity $ 4,401,775 $ 4,379,719 $ 4,765,823 $ 4,657,607
 
   
Average balance sheet and net interest income Three months ended June 30, 2016 Three months ended June 30, 2015
(dollars in thousands)
Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 1,458,980 $ 15,080 4.13 % $ 1,240,932 $ 11,258 3.63 %
Leases - bank qualified* 20,603 435 8.45 % 24,023 424 7.06 %
Investment securities-taxable 1,317,902 7,900 2.40 % 982,332 4,906 2.00 %
Investment securities-nontaxable* 55,271 270 1.95 % 523,843 4,674 3.57 %
Interest earning deposits at Federal Reserve Bank 348,150 378 0.43 % 950,019 557 0.23 %
Federal funds sold and securities purchased under agreement to resell   35,297     128 1.45 %   44,280     158 1.43 %
Net interest earning assets 3,236,203 24,191 2.99 % 3,765,429 21,977 2.33 %
 
Allowance for loan and lease losses (4,313 ) (4,234 )
Assets held for sale from discontinued operations 537,252 5,327 3.97 % 679,581 7,397 4.35 %
Other assets   326,407     302,973  
$ 4,095,549   $ 4,743,749  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,264,909 $ 2,397 0.29 % $ 4,080,804 $ 2,835 0.28 %
Savings and money market 390,889 379 0.39 % 313,142 374 0.48 %
Time   27,842     39 0.56 %   1,400     6 1.71 %
Total deposits 3,683,640 2,815 0.31 % 4,395,346 3,215 0.29 %
 
Short-term borrowings 71,440 110 0.62 % - - 0.00 %
Repurchase agreements 1,210 1 0.33 % 5,167 4 0.31 %
Subordinated debt   13,401     128 3.82 %   13,401     116 3.46 %
Total deposits and interest bearing liabilities 3,769,691 3,054 0.32 % 4,413,914 3,335 0.30 %
 
Other liabilities   22,922     10,933  
Total liabilities 3,792,613 4,424,847
 
Shareholders' equity   302,936     318,902  
$ 4,095,549   $ 4,743,749  
Net interest income on tax equivalent basis* $ 26,464 $ 26,039
 
Tax equivalent adjustment   247   1,784
 
Net interest income $ 26,217 $ 24,255
Net interest margin * 2.73 % 2.23 %
       
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
 
   
Average balance sheet and net interest income Six months ended June 30, 2016 Six months ended June 30, 2015
(dollars in thousands)
Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 1,471,327 $ 30,636 4.16 % $ 1,227,728 $ 21,765 3.55 %
Leases - bank qualified* 20,422 916 8.97 % 20,807 716 6.88 %
Investment securities-taxable 1,233,639 14,432 2.34 % 1,005,397 10,066 2.00 %
Investment securities-nontaxable* 65,558 765 2.33 % 528,060 9,680 3.67 %
Interest earning deposits at Federal Reserve Bank 573,595 1,280 0.45 % 1,023,112 1,179 0.23 %
Federal funds sold and securities purchased under agreement to resell   21,360     155 1.45 %   45,259     322 1.42 %
Net interest-earning assets 3,385,901 48,184 2.85 % 3,850,363 43,728 2.27 %
 
Allowance for loan and lease losses (4,356 ) (3,938 )
Assets held for sale 562,860 11,146 3.96 % 718,630 15,931 4.43 %
Other assets   312,405     288,981  
$ 4,256,810   $ 4,854,036  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,373,084 $ 4,839 0.29 % $ 4,185,239 $ 5,442 0.26 %
Savings and money market 389,270 604 0.31 % 315,943 860 0.54 %
Time   117,117     343 0.59 %   1,400     12 1.71 %
Total deposits 3,879,471 5,786 0.30 % 4,502,582 6,314 0.28 %
 
Short-term borrowings 35,720 110 0.62 % - - 0.00 %
Repurchase agreements 1,033 1 0.19 % 9,135 13 0.28 %
Subordinated debt   13,401     252 3.76 %   13,401     211 3.15 %
Total deposits and interest bearing liabilities 3,929,625 6,149 0.31 % 4,525,118 6,538 0.29 %
 
Other liabilities   22,043     9,976  
Total liabilities 3,951,668 4,535,094
 
Shareholders' equity   305,142     318,942  
$ 4,256,810   $ 4,854,036  
Net interest income on tax equivalent basis*   53,181   53,121
 
Tax equivalent adjustment   589   3,638
 
Net interest income $ 52,592 $ 49,483
Net interest margin * 2.56 % 2.23 %
       
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
 
     
Allowance for loan and lease losses: Six months ended Year ended
June 30,   June 30, December 31,
2016 2015 2015
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period (1) $ 4,400 $ 3,638 $ 3,638
 
Loans charged-off:
SBA non real estate - 65 111
Direct lease financing 50 9 30
Other consumer loans   28   393   1,220
Total   78   467   1,361
 
Recoveries:
SBA non real estate 1 - -
Direct lease financing 10 - -
Other consumer loans   5   6   23
Total   16   6   23
Net charge-offs 62 461 1,338
Provision charged to operations   1,060   1,175   2,100
 
Balance in allowance for loan and lease losses at end of period $ 5,398 $ 4,352 $ 4,400
Net charge-offs/average loans 0.00% 0.04% 0.11%
Net charge-offs/average loans (annualized) 0.01% 0.07% 0.11%
Net charge-offs/average assets 0.00% 0.01% 0.03%
(1) Excludes activity from assets held for sale
 
Loan portfolio: June 30, March 31, December 31, June 30,
2016 2016 2015 2015
(dollars in thousands)
 
SBA non real estate $ 71,596 $ 71,220 $ 68,887 $ 63,390
SBA commercial mortgage 116,617 120,415 114,029 85,234
SBA construction   3,751   9,736   6,977   16,977
Total SBA loans 191,964 201,371 189,893 165,601
Direct lease financing 315,639 240,670 231,514 222,169
SBLOC 607,017 592,656 575,948 512,269
Other specialty lending 40,543 48,153 48,315 32,118
Other consumer loans   20,005   21,782   23,180   27,044
1,175,168 1,104,632 1,068,850 959,201
Unamortized loan fees and costs   6,938   9,421   9,227   8,832
Total loans, net of deferred loan fees and costs $ 1,182,106 $ 1,114,053 $ 1,078,077 $ 968,033
 
Small business lending portfolio: June 30, March 31, December 31, June 30,
2016 2016 2015 2015
(dollars in thousands)
 
SBA loans, including deferred fees and costs 197,544 209,605 197,966 173,357
SBA loans included in HFS   136,660   124,763   109,174   65,885
Total SBA loans $ 334,204 $ 334,368 $ 307,140 $ 239,242
 
       
Capital Ratios Tier 1 capital Tier 1 capital Total capital Common equity
to average to risk-weighted to risk-weighted tier 1 to risk
assets ratio assets ratio assets ratio weighted assets
As of June 30, 2016
The Bancorp, Inc. 6.78% 12.72% 12.97% 12.72%
The Bancorp Bank 6.35% 11.87% 12.12% 11.87%
"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
 
As of December 31, 2015
The Bancorp, Inc. 7.17% 14.67% 14.88% 14.67%
The Bancorp Bank 6.90% 13.98% 14.18% 13.98%
"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
 
   
Three months ended Six months ended
June 30, June 30,
2016   2015 2016   2015
Selected operating ratios:
Return on average assets (annualized) nm 0.01 % nm 0.02 %
Return on average equity (annualized) nm 0.22 % nm nm
Net interest margin 2.73 % 2.23 % 2.56 % 2.23 %
Book value per share $ 7.67 $ 8.36 $ 7.67 $ 8.36
 
June 30, March 31, December 31, June 30,
2016 2016 2015 2015
Asset quality ratios:
Nonperforming loans to total loans (2) 0.53 % 0.24 % 0.22 % 0.34 %
Nonperforming assets to total assets (2) 0.14 % 0.06 % 0.05 % 0.07 %
Allowance for loan and lease losses to total loans 0.46 % 0.39 % 0.41 % 0.45 %
 
Nonaccrual loans $ 3,147 $ 1,908 $ 1,927 $ 2,666
Other real estate owned   -     -     -     -  
Total nonperforming assets $ 3,147   $ 1,908   $ 1,927   $ 2,666  
 
Loans 90 days past due still accruing interest $ 3,172   $ 787   $ 403   $ 620  
 
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
 
Three months ended
June 30, March 31, December 31, June 30,
2016 2016 2015 2015
(in thousands)
Gross dollar volume (GDV) (1):
Prepaid card GDV $ 11,442,294   $ 13,512,319   $ 9,839,782   $ 10,006,333  
 
(1) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.
 

The Bancorp, Inc.
Andres Viroslav, 215-861-7990
aviroslav@thebancorp.com

Source: The Bancorp, Inc.