Press Release

The Bancorp, Inc. Reports Fourth Quarter and Fiscal 2016 Financial Results

Company Release - 2/9/2017 4:30 PM ET

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

Highlights

  • Net interest income increased 34% to $25.0 million for the quarter ended December 31, 2016 compared to $18.6 million for the quarter ended December 31, 2015. Year over year, net interest income increased 29% to $90.0 million from $69.9 million.
  • Net interest margin increased to 2.84% for the quarter ended December 31, 2016 compared to 2.52% for the quarter ended December 31, 2015. Year over year, the net interest margin was 2.74% compared to 2.37%.
  • Loans, excluding loans held for sale, increased 14% to $1.23 billion at December 31, 2016 compared to $1.08 billion at December 31, 2015.
  • Direct lease financing increased 50% to $346.6 million from $231.5 million at December 31, 2015.
  • Small Business Administration (“SBA”) loans increased 20% to $369.8 million from $307.1 million at December 31, 2015.
  • Security backed lines of credit (“SBLOC”) increased 9% to $630.4 million from $575.9 million at December 31, 2015.
  • Prepaid card fee income increased 2% to $12.0 million for the quarter ended December 31, 2016 from $11.7 million for the quarter ended December 31, 2015. Year over year, prepaid card fee income increased 8% to $51.3 million.
  • Gross dollar volume on prepaid cards (“GDV”) (1) increased 8% to $10.6 billion for Q4 2016 from $9.8 billion for Q4 2015. Year over year, GDV increased over 12%.
  • Assets held for sale from discontinued operations decreased 38% from $583.9 million at December 31, 2015 to $360.7 million at December 31, 2016.
  • The rate on our average deposits and interest bearing liabilities of $3.88 billion in Q4 2016 was 0.30% with a rate of 0.14% for $1.86 billion of average prepaid card deposits.
  • The $1.86 billion of average Q4 2016 prepaid card deposits, which are among the lowest cost of our deposits, reflected a 16% increase over fourth quarter 2015.
  • Book value per common share at December 31, 2016 of $5.40 per share. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

(1) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.

The Bancorp reported a net loss of $29.0 million, or $0.52 loss per diluted share, for the quarter ended December 31, 2016 compared to net income of $18.6 million, or $0.49 income per diluted share for the quarter ended December 31, 2015. Net loss from continuing operations for the quarter ended December 31, 2016 was $24.0 million or a loss of $0.43 per diluted share compared to net income from continuing operations of $17.3 million or income of $0.46 per diluted share for the quarter ended December 31, 2015. Loss from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales of the remaining assets 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 7.06%, 13.84%, 14.13% and 13.84% compared to well capitalized minimums of 5%, 8%, 10% and 6.5%.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “Discontinued operations and Walnut Street were reevaluated with updated values, which resulted in a significant charge during the fourth quarter. We’ve reviewed the related loan processes and enhanced related governance. A commercial credit, in the discontinued loan portfolio, was impacted by suspected fraud leading to a write-down and loss in discontinued operations. We’ve added additional details in this release on our credits from discontinued operations including a chart detailing the types of assets and other related information. Our goal, as stated before, is to reduce risk in the portfolios and complete an orderly wind-down with the least amount of future volatility. Our continuing operations results, excluding the charge to Walnut Street which resulted from the 2014 financing of the sale of certain discontinued operations loans, showed improvement this quarter. This improvement reflected the elimination of the BSA lookback expense which terminated in the prior quarter. It also reflected continuing revenue growth, while expense cuts and restructuring are also beginning to have an impact on profitability. While certain of the expense cuts are not immediate, we have targeted total 2017 expense reductions of $20 million.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, February 10, 2017 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 51403334. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, February 17, 2017 by dialing 855.859.2056, access code 51403334.

About The Bancorp

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   Year ended
December 31, December 31,
Condensed income statement 2016   2015 2016   2015
(dollars in thousands except per share data)
 
Net interest income $ 24,978   $ 18,582   $ 89,966   $ 69,931
Provision for loan and lease losses   1,550     300     3,360     2,100
Non-interest income
Service fees on deposit accounts 1,789 1,889 5,124 7,468
Card payment and ACH processing fees 1,343 1,489 5,526 5,731
Prepaid card fees 11,993 11,744 51,326 47,496
Gain (loss) on sale of loans 2,092 3,333 2,901 10,080
Gain on sale of investment securities 40 14,497 3,171 14,435
Gain on sale of health savings portfolio - 33,531 - 33,531
Change in value of investment in unconsolidated entity (24,720 ) (1,412 ) (37,033 ) 1,729
Leasing income 551 564 2,007 2,291
Debit card income 202 253 - 1,611
Affinity fees 1,056 967 4,563 3,358
Other non-interest income   508     3,412     5,401     5,337
Total non-interest income (5,146 ) 70,267 42,986 133,067
Non-interest expense
Bank Secrecy Act and lookback consulting expenses 5 14,801 29,081 41,444
Other non-interest expense   42,123     44,198     169,492     152,644
Total non-interest expense   42,128     58,999     198,573     194,088
Income (loss) from continuing operations before income tax expense (23,846 ) 29,550 (68,981 ) 6,810
Income tax expense (benefit)   153     12,267     (15,171 )   1,450
Net income (loss) from continuing operations (23,999 ) 17,283 (53,810 ) 5,360
Net income (loss) from discontinued operations, net of tax   (5,044 )   1,336     (42,953 )   8,072
Net income (loss) available to common shareholders $ (29,043 ) $ 18,619   $ (96,763 ) $ 13,432
 
Net income (loss) per share from continuing operations - basic $ (0.43 ) $ 0.46   $ (1.21 ) $ 0.14
Net income (loss) per share from discontinued operations - basic $ (0.09 ) $ 0.03   $ (0.96 ) $ 0.21
Net income (loss) per share - basic $ (0.52 ) $ 0.49   $ (2.17 ) $ 0.35
 
Net income (loss) per share from continuing operations - diluted $ (0.43 ) $ 0.46   $ (1.21 ) $ 0.14
Net income (loss) per share from discontinued operations - diluted $ (0.09 ) $ 0.03   $ (0.96 ) $ 0.21
Net income (loss) per share - diluted $ (0.52 ) $ 0.49   $ (2.17 ) $ 0.35
Weighted average shares - basic 55,419,204 37,759,975 44,567,357 37,755,588
Weighted average shares - diluted 55,790,543 37,813,345 44,776,138 38,074,218
 
(a) For loss periods the weighted averages shares - basic is used in both the basic and diluted computations.
Balance sheet   December 31,   September 30,   June 30,   December 31,
  2016 2016 2016 2015
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 4,127 $ 4,061 $ 4,006 $ 7,643
Interest earning deposits at Federal Reserve Bank 955,733 312,605 528,094 1,147,519
Securities sold under agreements to resell   39,199     39,463     39,360     -  
Total cash and cash equivalents   999,059     356,129     571,460     1,155,162  
 
Investment securities, available-for-sale, at fair value 1,248,613 1,334,927 1,328,693 1,070,098
Investment securities, held-to-maturity 93,467 93,495 93,537 93,590
Loans held for sale, at fair value 663,140 562,957 441,593 489,938
Loans, net of deferred fees and costs 1,222,911 1,198,237 1,182,106 1,078,077
Allowance for loan and lease losses   (6,332 )   (6,058 )   (5,398 )   (4,400 )
Loans, net   1,216,579     1,192,179     1,176,708     1,073,677  
Federal Home Loan Bank & Atlantic Community Bancshares stock 1,614 11,014 12,289 1,062
Premises and equipment, net 24,125 21,797 22,429 21,631
Accrued interest receivable 10,589 10,496 10,271 9,471
Intangible assets, net 6,906 5,682 6,074 4,929
Other real estate owned 104 - - -
Deferred tax asset, net 37,862 29,765 28,870 36,207
Investment in unconsolidated entity 127,430 157,396 162,275 178,520
Assets held for sale from discontinued operations 360,711 386,155 487,373 583,909
Other assets   50,683     55,519     60,203     47,629  
Total assets $ 4,840,882   $ 4,217,511   $ 4,401,775   $ 4,765,823  
 
Liabilities:
Deposits
Demand and interest checking $ 3,816,524 $ 3,364,103 $ 3,569,669 $ 3,602,376
Savings and money market 421,780 402,832 389,851 383,832
Time deposits   -     -     101,160     428,549  
Total deposits   4,238,304     3,766,935     4,060,680     4,414,757  
 
Securities sold under agreements to repurchase 274 353 318 925
Short-term borrowings - 70,000 - -
Long-term borrowings 263,099 - - -
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   27,112     27,744     37,094     16,739  
Total liabilities $ 4,542,190   $ 3,878,433   $ 4,111,493   $ 4,445,822  
 
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 55,419,204 and 37,861,303 shares issued at December 31, 2016 and 2015, respectively 55,419 55,419 37,945 37,861
Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 )
Additional paid-in capital 360,564 359,793 301,680 300,549
Accumulated deficit (112,212 ) (83,169 ) (57,721 ) (15,449 )
Accumulated other comprehensive income (loss)   (4,213 )   7,901     9,244     (2,094 )
Total shareholders' equity   298,692     339,078     290,282     320,001  
 
Total liabilities and shareholders' equity $ 4,840,882   $ 4,217,511   $ 4,401,775   $ 4,765,823  
Average balance sheet and net interest income   Three months ended December 31, 2016   Three months ended December 31, 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 ** $ 1,717,927 $ 18,374 4.28 % $ 1,416,176 $ 14,502 4.10 %
Leases - bank qualified* 21,018 414 7.88 % 28,658 487 6.80 %
Investment securities-taxable 1,371,209 8,437 2.46 % 1,022,914 5,290 2.07 %
Investment securities-nontaxable* 37,529 156 1.66 % 248,662 2,203 3.54 %
Interest earning deposits at Federal Reserve Bank 403,834 560 0.55 % 751,126 595 0.32 %
Federal funds sold and securities purchased under agreement to resell 39,485   151 1.53 % 31,406   112 1.43 %
Net interest earning assets 3,591,002 28,092 3.13 % 3,498,942 23,189 2.65 %
 
Allowance for loan and lease losses (5,781 ) (4,178 )
Assets held for sale from discontinued operations 377,044 3,238 3.44 % 617,983 6,650 4.30 %
Other assets 257,469   321,170  
$ 4,219,734   $ 4,433,917  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,405,296 $ 2,182 0.26 % $ 3,518,223 $ 2,689 0.31 %
Savings and money market 407,039 498 0.49 % 378,301 581 0.61 %
Time -   - 0.00 % 174,530   263 0.60 %
Total deposits 3,812,335 2,680 0.28 % 4,071,054 3,533 0.35 %
 
Short-term borrowings 55,913 96 0.69 % 18,152 12 0.00 %
Repurchase agreements 304 - 0.00 % 1,148 1 0.35 %
Subordinated debt 13,401   137 4.09 % 13,401   120 3.58 %
Total deposits and interest bearing liabilities 3,881,953 2,913 0.30 % 4,103,755 3,666 0.36 %
 
Other liabilities 18,896   13,313  
Total liabilities 3,900,849 4,117,068
 
Shareholders' equity 318,885   316,849  
$ 4,219,734   $ 4,433,917  
Net interest income on tax equivalent basis* $ 28,417 $ 26,173
 
Tax equivalent adjustment 200 942
 
Net interest income $ 28,217 $ 25,231
Net interest margin * 2.84 % 2.52 %
             
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
Average balance sheet and net interest income   Year ended December 31, 2016   Year ended December 31, 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 ** $ 1,587,306 $ 66,436 4.19% $ 1,245,189 $ 48,733 3.91%
Leases - bank qualified* 20,718 1,748 8.44% 25,126 1,734 6.90%
Investment securities-taxable 1,303,445 31,219 2.40% 989,705 19,918 2.01%
Investment securities-nontaxable* 54,271 1,139 2.10% 452,526 16,646 3.68%
Interest earning deposits at Federal Reserve Bank 466,728 2,237 0.48% 935,093 2,354 0.25%
Federal funds sold and securities purchased under agreement to resell 30,448 450 1.48% 40,402 578 1.43%
Net interest-earning assets 3,462,916 103,229 2.98% 3,688,041 89,963 2.44%
 
Allowance for loan and lease losses (4,741) (4,111)
Assets held for sale 490,115 18,275 3.73% 715,116 28,925 4.04%
Other assets 266,777 311,501
$ 4,215,067 $ 4,710,547
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,347,191 $ 9,399 0.28% $ 3,975,475 $ 10,982 0.28%
Savings and money market 394,434 1,526 0.39% 337,168 1,867 0.55%
Time 77,576 447 0.58% 44,789 275 0.61%
Total deposits 3,819,201 11,372 0.30% 4,357,432 13,124 0.30%
 
Short-term borrowings 57,517 359 0.62% 4,575 12 0.26%
Repurchase agreements 685 2 0.29% 5,224 15 0.29%
Subordinated debt 13,401 520 3.88% 13,401 448 3.34%
Total deposits and interest bearing liabilities 3,890,804 12,253 0.31% 4,380,632 13,599 0.31%
 
Other liabilities 14,916 10,403
Total liabilities 3,905,720 4,391,035
 
Shareholders' equity 309,347 319,512
$ 4,215,067 $ 4,710,547
Net interest income on tax equivalent basis* 109,251 105,289
 
Tax equivalent adjustment 1,010 6,433
 
Net interest income $ 108,241 $ 98,856
Net interest margin * 2.74% 2.37%
             
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
Allowance for loan and lease losses:   Year ended    
  December 31,   December 31,
2016 2015
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period (1) $ 4,400   $ 3,638  
 
Loans charged-off:
SBA non real estate 128 111
SBA commercial mortgage - -
Direct lease financing 119 30
Other consumer loans   1,211     1,220  
Total   1,458     1,361  
 
Recoveries:
SBA non real estate 1 -
Direct lease financing 17 -
Other consumer loans   12     23  
Total   30     23  
Net charge-offs 1,428 1,338
Provision charged to operations   3,360     2,100  
 
Balance in allowance for loan and lease losses at end of period $ 6,332   $ 4,400  
Net charge-offs/average loans 0.09 % 0.11 %
Net charge-offs/average assets 0.03 % 0.03 %
(1) Excludes activity from assets held for sale
 
Loan portfolio: December 31, September 30, June 30, December 31,
2016 2016 2016 2015
(dollars in thousands)
 
SBA non real estate $ 74,644 $ 74,262 $ 71,596 $ 68,887
SBA commercial mortgage 126,159 117,053 116,617 114,029
SBA construction   8,826     6,317     3,751   6,977
Total SBA loans 209,629 197,632 191,964 189,893
Direct lease financing 346,645 332,632 315,639 231,514
SBLOC 630,400 621,456 607,017 575,948
Other specialty lending 11,073 20,076 40,543 48,315
Other consumer loans   17,374     19,375     20,005   23,180
1,215,121 1,191,171 1,175,168 1,068,850
Unamortized loan fees and costs   7,790     7,066     6,938   9,227
Total loans, net of deferred loan fees and costs $ 1,222,911   $ 1,198,237   $ 1,182,106 $ 1,078,077
 
Small business lending portfolio: December 31, September 30, June 30, December 31,
2016 2016 2016 2015
(dollars in thousands)
 
SBA loans, including deferred fees and costs 215,786 203,196 197,544 197,966
SBA loans included in HFS   154,016     146,450     136,660   109,174
Total SBA loans $ 369,802   $ 349,646   $ 334,204 $ 307,140
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 December 31, 2016
The Bancorp, Inc. 7.06 % 13.84 % 14.13 % 13.84 %
The Bancorp Bank 6.83 % 13.31 % 13.60 % 13.31 %
"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   Year ended
December 31, December 31,
2016   2015 2016   2015
Selected operating ratios:
Return on average assets (annualized) nm 1.67 % nm 0.28 %
Return on average equity (annualized) nm 23.31 % nm 4.19 %
Net interest margin 2.84 % 2.52 % 2.74 % 2.37 %
Book value per share $ 5.40 $ 8.47 $ 5.40 $ 8.47
 
December 31, September 30, June 30, December 31,
2016 2016 2016 2015
Asset quality ratios:
Nonperforming loans to total loans (2) 0.30 % 0.58 % 0.53 % 0.22 %
Nonperforming assets to total assets (2) 0.08 % 0.16 % 0.14 % 0.05 %
Allowance for loan and lease losses to total loans 0.52 % 0.51 % 0.46 % 0.41 %
 
Nonaccrual loans $ 2,972 $ 4,021 $ 3,147 $ 1,927
Other real estate owned   104     -     -     -  
Total nonperforming assets $ 3,076   $ 4,021   $ 3,147   $ 1,927  
 
Loans 90 days past due still accruing interest $ 661   $ 2,933   $ 3,172   $ 403  
 
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
 
Three months ended
December 31, September 30, June 30, December 31,
2016 2016 2016 2015
(in thousands)
Gross dollar volume (GDV) (1):
Prepaid card GDV $ 10,647,520   $ 10,459,097   $ 11,442,294   $ 9,839,782  
 
(1) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.
Cumulative analysis of marks on discontinued commercial loan principal    
(dollars in millions)            
 
Commercial Cumulative Mark
loan principal marks chargedowns Cumulative
12.31.16 12.31.16   6.30.16   marks   % to principal
12 loan relationships >$8 million $ 232 $ 232
Add back mark chargedowns to principal   20
Total principal to compare to cumulative marks $ 252 $ 40 $ 20 $ 60 24 %
 
Other loans   92       10   -   10   11 %
Total discontinued loan principal * $ 324 $ 50 $ 20 $ 70
 
* Of the $324 million commercial loan principal at 12.31.16, $93.5 million was non performing.
Discontinued operations portfolio composition 12/31/2016:    
 
Collateral type  

Unpaid principal
balance

  Mark 12.31.16  

Mark as % of
portfolio

(dollars in millions)
Commercial real estate - non-owner occupied:
Retail $ 60 $ 24.5 41 %
Other 51 0.2 -
Office 15 0.2 1 %
Construction and land 83 2.1 3 %

Commercial non-real estate and industrial

38 15.5 41 %
1 to 4 family construction 31 1.3 4 %
First mortgage residential non-owner occupied 21 5.2 25 %
Commercial real estate owner occupied:
Retail 11 0.2 2 %
Other 2 -

-

Office - -

-

First mortgage residential owner occupied 4 0.2 5 %
Multifamily 3 - -
Residential junior mortgage 3 0.1 3 %
Other     2     -   -  
Total $ 324 $ 49.5 15 %
Analysis of Walnut Street marks:    
 
Loan activity   Marks
(dollars in millions)
 
Original Walnut Street loan balance 12.31.14 $ 267
Marks through 12.31.14 sale date   (58 ) $ (58 )
Sales price of Walnut Street 209
Equity investment from independent investor   (16 )
12.31.2014 Bancorp book value 193
Additional marks 2015 and 2016 (42 ) (42 )
Payments received   (24 )
12.31.2016 Bancorp book value* $ 127
 
Total marks $ (100 )
Divided by:
Original Walnut Street loan balance $ 267
Percentage of total mark to original balance 37 %
 
* Approximately 21% of expected principal recoveries were classified as non performing as of 12.31.16.
Walnut Street portfolio composition 12/31/2016:  
 
Collateral type   % of Portfolio
Commercial real estate non-owner occupied
Retail 25.2 %
Other 23.4 %
Office 19.7 %
Construction and land 19.7 %
Commercial non real estate and industrial 4.7 %
First mortgage residential owner occupied 3.5 %
First mortgage residential non-owner occupied 2.7 %
Other   1.1 %
Total 100.0 %

The Bancorp Investor Relations
Andres Viroslav, Director, Investor Relations
215-861-7990
aviroslav@thebancorp.com
or
The Bancorp Media Relations
Rob Tacey, Director, Public Relations
302-385-1418
rtacey@thebancorp.com

Source: The Bancorp, Inc.