Press Release

The Bancorp, Inc. Reports Second Quarter 2017 Financial Results

Company Release - 7/27/2017 4:02 PM ET

WILMINGTON, Del.--(BUSINESS WIRE)-- The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for second quarter 2017.

Highlights

  • Net income of $18.9 million and earnings per diluted share of $0.34 which includes an approximate $12.0 million tax benefit resulting primarily from reversal of valuation allowances.
  • Net interest income increased 30% to $27.2 million for the quarter ended June 30, 2017, compared to $20.9 million for the quarter ended June 30, 2016.
  • Net interest margin increased to 3.10% for the quarter ended June 30, 2017, compared to 2.73% for the quarter ended June 30, 2016.
  • Loans and loans held for sale from continuing operations increased 18% to $1.91 billion at June 30, 2017, compared to $1.62 billion at June 30, 2016.
  • Direct lease financing increased 18% to $371.0 million at June 30, 2017 from $315.6 million at June 30, 2016.
  • Small Business Administration (“SBA”) loans increased 13% to $376.6 million at June 30, 2017, from $334.2 million at June 30, 2016.
  • The rate on our average deposits and interest bearing liabilities of $3.90 billion in the second quarter of 2017 was 0.37% with a rate of 0.40% for $2.06 billion of average prepaid card deposits.
  • Assets held for sale from discontinued operations decreased 31% to $336.1 million at June 30, 2017, from $487.4 million at June 30, 2016.
  • Non-interest expense was reduced by $6.4 million, to $37.4 million for the quarter ended June 30, 2017, compared to $43.7 million for the quarter ended June 30, 2016, excluding Bank Secrecy Act lookback expense for 2016.
  • Consolidated leverage ratio increased to 7.75% at June 30, 2017.
  • Book value per common share at June 30, 2017, of $5.94 per share. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

The Bancorp reported net income of $18.9 million, or $0.34 earnings per diluted share, for the quarter ended June 30, 2017, compared to a net loss of $31.4 million, or $0.83 loss per diluted share for the quarter ended June 30, 2016. Net income from continuing operations for the quarter ended June 30, 2017, was $17.6 million, or $0.32 earnings per diluted share, compared to a net loss of $17.8 million from continuing operations, or $0.47 loss per diluted share, for the quarter ended June 30, 2016. Income from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales or repayment 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 7.75%, 15.54%, 15.89% and 15.54% respectively, compared to well capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “The first quarter of 2017 was a turning point for our company and our second quarter demonstrates that we have turned the corner on our financial performance. Our run-rate earnings continue to improve, reflecting further revenue momentum and the positive results from our on-going restructuring and expense management efforts.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 28, 2017 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 51244121. 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 4, 2017 by dialing 855.859.2056, access code 51244121.

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 Six months ended
June 30, June 30,
Condensed income statement   2017       2016     2017       2016  
(dollars in thousands except per share data)
 
Net interest income $ 27,215   $ 20,890   $ 52,092   $ 41,446  
Provision for loan and lease losses   350     1,060     1,350     1,060  
Non-interest income
Service fees on deposit accounts 1,520 978 3,195 1,825
Card payment and ACH processing fees 1,504 1,457 3,032 2,724
Prepaid card fees 13,234 13,510 26,781 27,084
Gain (loss) on sale of loans 758 1,339 6,141 (94 )
Gain on sale of investment securities 586 124 1,089 2,150
Change in value of investment in unconsolidated entity 3 (13,936 ) (16 ) (13,124 )
Leasing income 832 464 1,383 868
Affinity fees 149 1,322 1,170 2,416
Gain on sale of health savings accounts 2,538 - 2,538 -

Loss from sale of European prepaid operations

(3,437 ) - (3,437 ) -
Other non-interest income   486     4,282     516     4,379  
Total non-interest income 18,173 9,540 42,392 28,228
Non-interest expense
Bank Secrecy Act and lookback consulting expenses - 13,421 - 27,736
Other non-interest expense   37,363     43,715     75,146     84,538  
Total non-interest expense   37,363     57,136     75,146     112,274  
Income (loss) from continuing operations before income tax expense 7,675 (27,766 ) 17,988 (43,660 )
Income tax benefit   (9,923 )   (10,004 )   (5,912 )   (15,276 )
Net income (loss) from continuing operations 17,598 (17,762 ) 23,900 (28,384 )
Net income (loss) from discontinued operations, net of tax   1,266     (13,598 )   2,927     (13,888 )
Net income (loss) available to common shareholders $ 18,864   $ (31,360 ) $ 26,827   $ (42,272 )
 
Net income (loss) per share from continuing operations - basic $ 0.32   $ (0.47 ) $ 0.43   $ (0.75 )
Net income (loss) per share from discontinued operations - basic $ 0.02   $ (0.36 ) $ 0.05   $ (0.37 )
Net income (loss) per share - basic $ 0.34   $ (0.83 ) $ 0.48   $ (1.12 )
 
Net income (loss) per share from continuing operations - diluted $ 0.32   $ (0.47 ) $ 0.43   $ (0.75 )
Net income (loss) per share from discontinued operations - diluted $ 0.02   $ (0.36 ) $ 0.05   $ (0.37 )
Net income (loss) per share - diluted $ 0.34   $ (0.83 ) $ 0.48   $ (1.12 )
Weighted average shares - basic 55,689,439 37,745,250 55,612,288 37,824,996
Weighted average shares - diluted 56,030,035 37,910,575 55,889,985 37,934,548
 
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,
  2017     2017     2016     2016  
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 6,458 $ 4,671 $ 4,127 $ 4,006
Interest earning deposits at Federal Reserve Bank 475,387 669,042 955,733 528,094
Securities sold under agreements to resell   65,076     65,248     39,199     39,360  
Total cash and cash equivalents   546,921     738,961     999,059     571,460  
 
Investment securities, available-for-sale, at fair value 1,149,116 1,215,892 1,248,614 1,328,693
Investment securities, held-to-maturity 93,419 93,443 93,467 93,537
Loans held for sale, at fair value 542,819 480,913 663,140 441,593
Loans, net of deferred fees and costs 1,370,263 1,264,127 1,222,911 1,182,106
Allowance for loan and lease losses   (7,353 )   (7,294 )   (6,332 )   (5,398 )
Loans, net   1,362,910     1,256,833     1,216,579     1,176,708  
Federal Home Loan Bank & Atlantic Community Bancshares stock 6,211 2,589 1,613 12,289
Premises and equipment, net 22,004 22,993 24,125 22,429
Accrued interest receivable 10,880 10,296 10,589 10,271
Intangible assets, net 5,515 5,844 6,906 6,074
Other real estate owned 104 104 104 -
Deferred tax asset, net 53,226 54,155 55,666 28,870
Investment in unconsolidated entity 120,862 125,982 126,930 162,275
Assets held for sale from discontinued operations 336,142 341,286 360,711 487,373
Other assets   53,563     55,351     50,611     60,203  
Total assets $ 4,303,692   $ 4,404,642   $ 4,858,114   $ 4,401,775  
 
Liabilities:
Deposits
Demand and interest checking $ 3,437,482 $ 3,607,076 $ 3,816,524 $ 3,569,669
Savings and money market 438,602 428,723 421,780 389,851
Time deposits   -     -     -     101,160  
Total deposits   3,876,084     4,035,799     4,238,304     4,060,680  
 
Securities sold under agreements to repurchase 273 273 274 318
Subordinated debenture 13,401 13,401 13,401 13,401
Long-term borrowings 42,680 - 263,099 -
Other liabilities  

40,235

    45,400     44,073     37,094  
Total liabilities $

3,972,673

  $ 4,094,873   $ 4,559,151   $ 4,111,493  
 
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 55,857,645 and 37,945,323 shares issued at June 30, 2017 and 2016, respectively 55,858 55,758 55,419 37,945
Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 )
Additional paid-in capital 361,478 360,801 360,564 301,680
Accumulated deficit

(85,114

) (103,978 ) (111,941 ) (57,721 )
Accumulated other comprehensive income (loss)   (337 )   (1,946 )   (4,213 )   9,244  
Total shareholders' equity  

331,019

    309,769     298,963     290,282  
 
Total liabilities and shareholders' equity $

4,303,692

  $ 4,404,642   $ 4,858,114   $ 4,401,775  
   
Average balance sheet and net interest income Three months ended June 30, 2017 Three months ended June 30, 2016
(dollars in thousands)
Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 1,770,226 $ 19,748 4.46% $ 1,458,980 $ 15,080 4.13%
Leases - bank qualified* 21,539 415 7.71% 20,603 435 8.45%
Investment securities-taxable 1,249,890 9,138 2.92% 1,317,902 7,900 2.40%
Investment securities-nontaxable* 14,632 107 2.93% 55,271 270 1.95%
Interest earning deposits at Federal Reserve Bank 480,417 1,255 1.04% 348,150 378 0.43%
Federal funds sold and securities purchased under agreement to resell 65,355 333 2.04% 35,297 128 1.45%
Net interest earning assets 3,602,059 30,996 3.44% 3,236,203 24,191 2.99%
 
Allowance for loan and lease losses (7,190) (4,313)
Assets held for sale from discontinued operations 348,452 3,135 3.60% 537,252 5,327 3.97%
Other assets 274,335 326,407
$ 4,217,656 $ 4,095,549
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,437,845 $ 2,912 0.34% $ 3,264,909 $ 2,397 0.29%
Savings and money market 434,792 520 0.48% 390,889 379 0.39%
Time - - 0.00% 27,842 39 0.56%
Total deposits 3,872,637 3,432 0.35% 3,683,640 2,815 0.31%
 
Short-term borrowings 6,516 22 1.35% 71,440 110 0.62%
Repurchase agreements 273 - 0.00% 1,210 1 0.33%
Subordinated debt 13,401 144 4.30% 13,401 128 3.82%
Total deposits and interest bearing liabilities 3,892,827 3,598 0.37% 3,769,691 3,054 0.32%
 
Other liabilities 4,434 22,922
Total liabilities 3,897,261 3,792,613
 
Shareholders' equity 320,395 302,936
$ 4,217,656 $ 4,095,549
Net interest income on tax equivalent basis* $ 30,533 $ 26,464
 
Tax equivalent adjustment 183 247
 
Net interest income $ 30,350 $ 26,217
Net interest margin * 3.10% 2.73%
 
* 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, 2017 Six months ended June 30, 2016
(dollars in thousands)
Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 1,700,508 $ 37,119 4.37 % $ 1,471,327 $ 30,636 4.16 %
Leases - bank qualified* 21,361 811 7.59 % 20,422 916 8.97 %
Investment securities-taxable 1,287,360 18,143 2.82 % 1,233,639 14,432 2.34 %
Investment securities-nontaxable* 15,025 218 2.90 % 65,558 765 2.33 %
Interest earning deposits at Federal Reserve Bank 616,345 2,771 0.90 % 573,595 1,280 0.45 %
Federal funds sold and securities purchased under agreement to resell 57,635   560 1.94 % 21,360   155 1.45 %
Net interest-earning assets 3,698,234 59,622 3.22 % 3,385,901 48,184 2.85 %
 
Allowance for loan and lease losses (6,708 ) (4,356 )
Assets held for sale 340,900 6,496 3.81 % 562,860 11,146 3.96 %
Other assets 285,428   312,405  
$ 4,317,854   $ 4,256,810  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,547,820 $ 5,699 0.32 % $ 3,373,084 $ 4,839 0.29 %
Savings and money market 432,267 1,167 0.54 % 389,270 604 0.31 %
Time -   - 0.00 % 117,117   343 0.59 %
Total deposits 3,980,087 6,866 0.35 % 3,879,471 5,786 0.30 %
 
Short-term borrowings 3,276 22 1.34 % 35,720 110 0.62 %
Repurchase agreements 274 - 0.00 % 1,033 1 0.19 %
Subordinated debt 13,401   282 4.21 % 13,401   252 3.76 %
Total deposits and interest bearing liabilities 3,997,038 7,170 0.36 % 3,929,625 6,149 0.31 %
 
Other liabilities 5,824   22,043  
Total liabilities 4,002,862 3,951,668
 
Shareholders' equity 314,992   305,142  
$ 4,317,854   $ 4,256,810  
Net interest income on tax equivalent basis* 58,948 53,181
 
Tax equivalent adjustment 360 589
 
Net interest income $ 58,588 $ 52,592
Net interest margin * 2.90 % 2.56 %
 
* 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,
2017 2016 2016
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period (1) $6,332 $4,400 $4,400
 
Loans charged-off:
SBA non real estate 136 - 128
Direct lease financing 202 50 119
Other consumer loans 16 28 1,211
Total 354 78 1,458
 
Recoveries:
SBA non real estate 2 1 1
Direct lease financing - 10 17
Other consumer loans 23 5 12
Total 25 16 30
Net charge-offs 329 62 1,428
Provision charged to operations 1,350 1,060 3,360
 
Balance in allowance for loan and lease losses at end of period $7,353 $5,398 $6,332
Net charge-offs/average loans 0.02% 0.00% 0.09%
Net charge-offs/average loans (annualized) 0.04% 0.01% 0.09%
Net charge-offs/average assets 0.01% 0.00% 0.03%
(1) Excludes activity from assets held for sale.
 
 
Loan portfolio: June 30, March 31, December 31, June 30,
2017 2017 2016 2016
(dollars in thousands)
 
SBA non real estate $74,511 $75,800 $74,644 $71,596
SBA commercial mortgage 126,224 114,703 126,159 116,617
SBA construction 11,057 12,985 8,826 3,751
Total SBA loans 211,792 203,488 209,629 191,964
Direct lease financing 371,002 363,172 346,645 315,639
SBLOC 718,707 660,423 630,400 607,017
Other specialty lending 44,389 12,443 11,073 40,543
Other consumer loans 15,858 16,318 17,374 20,005
1,361,748 1,255,844 1,215,121 1,175,168
Unamortized loan fees and costs 8,515 8,283 7,790 6,938
Total loans, net of deferred loan fees and costs $1,370,263 $1,264,127 $1,222,911 $1,182,106
 
 
Small business lending portfolio: June 30, March 31, December 31, June 30,
2017 2017 2016 2016
(dollars in thousands)
 
SBA loans, including deferred fees and costs 218,391 209,980 215,786 197,544
SBA loans included in HFS 158,252 159,831 154,016 136,660
Total SBA loans $376,643 $369,811 $369,802 $334,204
 
 
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, 2017
The Bancorp, Inc. 7.75% 15.54% 15.89% 15.54%
The Bancorp Bank

7.62%

15.29%

15.64%

15.29%

"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
 
As of December 31, 2016
The Bancorp, Inc. 6.90% 13.34% 13.63% 13.34%
The Bancorp Bank 6.84% 13.24% 13.53% 13.24%
"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
   
Three months ended Six months ended
June 30, June 30,
  2017       2016     2017       2016  
Selected operating ratios:
Return on average assets (annualized) 1.79 % nm 1.25 % nm
Return on average equity (annualized)

23.62

% nm

17.17

% nm
Net interest margin 3.10 % 2.73 % 2.90 % 2.56 %
Book value per share $ 5.94 $ 7.67 $ 5.94 $ 7.67
 
 
June 30, March 31, December 31, June 30,
  2017     2017     2016     2016  
Asset quality ratios:
Nonperforming loans to total loans (1) 0.41 % 0.55 % 0.30 % 0.53 %
Nonperforming assets to total assets (1) 0.13 % 0.16 % 0.08 % 0.14 %
Allowance for loan and lease losses to total loans 0.54 % 0.58 % 0.52 % 0.46 %
 
Nonaccrual loans $ 5,115 $ 5,369 $ 2,972 $ 3,147
Other real estate owned   104     104     104     -  
Total nonperforming assets $ 5,219   $ 5,473   $ 3,076   $ 3,147  
 
Loans 90 days past due still accruing interest $ 494   $ 1,534   $ 661   $ 3,172  
 
(1) 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,
  2017     2017     2016     2016  
(in thousands)
Gross dollar volume (GDV) (1):
Prepaid card GDV $ 11,894,601   $ 13,342,180   $ 10,647,520   $ 11,442,294  
 
(1) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.
   
Analysis of Walnut Street marks:
 
Loan activity   Marks
(dollars in millions)
 
Original Walnut Street loan balance, December 31, 2014 $ 267
Marks through December 31, 2014 sale date   (58 ) $ (58 )
Sales price of Walnut Street 209
Equity investment from independent investor   (16 )
December 31, 2014 Bancorp book value 193
Additional marks 2015 and 2016 (42 ) (42 )
Payments received   (30 )
June 30, 2017 Bancorp book value* $ 121
 
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 6/30/17.
 
 
Walnut Street portfolio composition as of June 30, 2017
 
Collateral type   % of Portfolio
Commercial real estate non-owner occupied
Retail 26.1 %
Office 22.8 %
Other 19.1 %
Construction and land 20.7 %
Commercial non real estate and industrial 3.8 %
First mortgage residential owner occupied 3.5 %
First mortgage residential non-owner occupied 3.3 %
Other     0.7 %
Total 100.0 %
 
Cumulative analysis of marks on discontinued commercial loan principal as of June 30, 2017
     
Discontinued Cumulative % to original
loan principal   marks   principal
(dollars in millions)
 
Commercial loan discontinued principal before marks $ 261
Florida mall held in discontinued OREO 42 24
Previous mark charges 25 25
Mark at June 30, 2017       22  
Total $ 328   $ 71   22 %
 
Analysis of large loan relationship principal, non performing loans and distribution of marks as of June 30, 2017
         
Performing Non performing Total Performing Non performing Total
loan principal   loan principal   loan principal   loan marks   loan marks   marks
(in millions)
 
12 loan relationships > $8 million $ 159 $ 25 $ 184 $ 3 $ 8 $ 11
Loan relationships < $8 million   34     21     55   5     6     11
$ 193   $ 46   $ 239 $ 8   $ 14   $ 22
 
Quarterly activity for commercial loan discontinued principal
 
Commercial
loan principal
(in millions)
 
Commercial loan discontinued principal December 31, 2016 before marks $ 324
Transfer of Florida mall to other real estate owned (42 )
Net paydowns (16 )
Mark charges   (5 )
Commercial loan discontinued principal June 30, 2017 before marks $ 261
Marks at June 30, 2017   (22 )
Net commercial loan exposure June 30, 2017 $ 239
Residential mortgages   64  
Net loans $ 303
Florida mall in other real estate owned 18
Other 28 properties in other real estate owned   15  
Total discontinued assets at June 30, 2017 $ 336  
   
Discontinued commercial loan composition as of June 30, 2017
 
Collateral type

Unpaid
principal
balance

 

Mark June 30,
2017

 

Mark as % of
portfolio

(dollars in millions)
Commercial real estate - non-owner occupied:
Retail $ 16 $ 0.8 5 %
Office 14 0.2 1 %
Other 50 0.1 -
Construction and land 82 2.7 3 %
Commercial non-real estate and industrial 32 11.7 37 %
1 to 4 family construction 28 1.3 5 %
First mortgage residential non-owner occupied 20 4.7 24 %
Commercial real estate owner occupied:
Retail 10 0.1 1 %
Office - - -
Other 2 0.1 5 %
First mortgage residential owner occupied 4 0.2 5 %
Residential junior mortgage 1 0.1 10 %
Other   2     - -
Total $ 261 $ 22.0 8 %

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

Source: The Bancorp, Inc.