Press Release

The Bancorp, Inc. Reports First Quarter 2019 Financial Results

Company Release - 4/25/2019 4:06 PM ET

WILMINGTON, Del.--(BUSINESS WIRE)-- The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the first quarter 2019.

Highlights

  • Diluted earnings per share increased to $0.32 for the quarter ended March 31, 2019, compared to $0.25 for the quarter ended March 31, 2018, an increase of 27%.
  • Net income increased to $17.9 million for the quarter ended March 31, 2019, compared to $14.1 million for the quarter ended March 31, 2018, an increase of 27%.
  • Net interest margin increased to 3.41% for the quarter ended March 31, 2019, compared to 3.12% for the quarter ended March 31, 2018.
  • Net interest income increased 13% to $34.0 million for the quarter ended March 31, 2019, compared to $30.1 million for the quarter ended March 31, 2018.
  • Average loans and leases, including loans held for sale, increased 16% to $2.28 billion for the quarter ended March 31, 2019, compared to $1.97 billion for the quarter ended March 31, 2018.
  • Prepaid card fees increased to $16.2 million for the quarter ended March 31, 2019, or 13%, compared to $14.3 million for the quarter ended March 31, 2018.
  • ACH (Automated Clearing House), card and other payment processing fees increased 36%, to $2.3 million for the quarter ended March 31, 2019, compared to $1.7 million for the quarter ended March 31, 2018.
  • Small Business Administration (“SBA”) loans increased 16% to $493.7 million at March 31, 2019, compared to $424.5 million at March 31, 2018.
  • The rate on $3.92 billion of average deposits and interest-bearing liabilities in the first quarter of 2019 was 0.98%. Average prepaid deposits of $2.54 billion for first quarter 2019 reflected an increase of 14.7% compared to $2.22 billion for the quarter ended March 31, 2018.
  • Consolidated leverage ratio was 9.9% at March 31, 2019. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.
  • Book value per common share at March 31, 2019 was $7.70 per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “Our strategic agenda in 2019 encompasses nine items that should further position our institution for revenue growth and profitability. Most of the initiatives focus on new products or reengineering of our platform to be best in class and highly efficient. The balance of initiatives include finishing our remediation process with our regulators and building a stronger community with all our Bancorp partners. Impact from all these initiatives should mostly be felt in increased revenue growth as expenses remain rigorously managed and reengineering has improved productivity and reduced unit costs in many areas.”

The Bancorp reported net income of $17.9 million, or $0.32 income per diluted share, for the quarter ended March 31, 2019, compared to net income of $14.1 million, or $0.25 income per diluted share, for the quarter ended March 31, 2018. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 9.90%, 23.61%, 24.15% and 23.61%, respectively, compared to well-capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, April 26, 2019 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 1496107. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, May 3, 2019 by dialing 855.859.2056, access code 1496107.

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 only subsidiary, 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 vehicle leasing groups in the nation. For more information please visit www.thebancorp.com.

Forward-Looking Statements

Statements in this earnings release regarding The 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 The 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.

 
Financial highlights
(unaudited)
     
Three months ended Year ended
March 31, December 31,
Condensed income statement 2019 2018 2018
(dollars in thousands except per share data)
 
Net interest income $ 34,010 $ 30,074 $ 120,849
Provision for loan and lease losses   1,700   700   3,585
Non-interest income
Service fees on deposit accounts 47 1,576 3,622
ACH, card and other payment processing fees 2,303 1,692 8,653
Prepaid card fees 16,163 14,282 54,627

Net realized and unrealized gains on commercial loans originated for sale

10,763 11,729 20,498
Gain on sale of investment securities - 26 41
Change in value of investment in unconsolidated entity - (1,171) (3,689)
Leasing income 695 487 3,071
Affinity fees - 102 281
Gain on sale of IRA portfolio - - 65,000
Other non-interest income   394   372   1,691
Total non-interest income 30,365 29,095 153,795
Non-interest expense
Salaries and employee benefits 23,840 21,073 79,816
Data processing expense 1,269 2,005 6,187
Legal expense 1,324 2,431 7,845
FDIC Insurance 1,929 2,219 8,819
Software 2,921 3,291 13,304
Losses and write downs on other real estate owned - 45 -
Civil money penalty - (290) (290)
Prepaid relationship exit expense - - 672
Lease termination expense - - 395
Other non-interest expense   7,946   8,275   34,530
Total non-interest expense   39,229   39,049   151,278
Income from continuing operations before income taxes 23,446 19,420 119,781
Income tax expense   6,035   5,399   32,241
Net income from continuing operations 17,411 14,021 87,540
Discontinued operations
Income from discontinued operations before income taxes 805 156 1,491
Income tax expense   286   37   354
Net income from discontinued operations, net of tax   519   119   1,137
Net income available to common shareholders $ 17,930 $ 14,140 $ 88,677
 
Net income per share from continuing operations - basic $ 0.31 $ 0.25 $ 1.55
Net income per share from discontinued operations - basic $ 0.01 $ - $ 0.02
Net income per share - basic $ 0.32 $ 0.25 $ 1.57
 
Net income per share from continuing operations - diluted $ 0.31 $ 0.25 $ 1.53
Net income per share from discontinued operations - diluted $ 0.01 $ - $ 0.02
Net income per share - diluted $ 0.32 $ 0.25 $ 1.55
Weighted average shares - basic 56,522,015 56,141,830 56,343,845
Weighted average shares - diluted 56,876,662 57,023,121 57,068,306
 
       
Balance sheet March 31, December 31, September 30, March 31,
2019 2018 2018 2018
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 11,678 $ 2,440 $ 2,245 $ 1,999
Interest earning deposits at Federal Reserve Bank 714,514 551,862 710,816 508,847
Securities sold under agreements to resell   -   -   64,518   64,312
Total cash and cash equivalents   726,192   554,302   777,579   575,158
 
Investment securities, available-for-sale, at fair value 1,368,602 1,236,324 1,274,417 1,381,020
Investment securities, held-to-maturity 84,428 84,432 84,433 86,370
Commercial loans held for sale, at fair value 570,426 688,471 308,470 349,806
Loans, net of deferred fees and costs 1,510,395 1,501,976 1,493,932 1,459,881
Allowance for loan and lease losses   (9,954)   (8,653)   (8,092)   (7,285)
Loans, net   1,500,441   1,493,323   1,485,840   1,452,596
Federal Home Loan Bank & Atlantic Community Bancshares stock 1,113 1,113 1,113 991
Premises and equipment, net 18,056 18,895 17,686 19,052
Accrued interest receivable 13,907 12,753 11,621 11,778
Intangible assets, net 3,463 3,846 4,229 4,995
Other real estate owned - - 405 405
Deferred tax asset, net 18,423 21,622 40,991 38,139
Investment in unconsolidated entity 58,258 59,273 64,212 70,016
Assets held for sale from discontinued operations 188,025 197,831 226,026 289,038
Other assets   75,642   65,726   63,178   89,736
Total assets $ 4,626,976 $ 4,437,911 $ 4,360,200 $ 4,369,100
 
Liabilities:
Deposits
Demand and interest checking $ 3,993,828 $ 3,904,638 $ 3,540,605 $ 3,461,881
Savings and money market   31,470   31,076   317,453   493,288
Total deposits   4,025,298   3,935,714   3,858,058   3,955,169
 
Securities sold under agreements to repurchase 93 93 158 182
Subordinated debenture 13,401 13,401 13,401 13,401
Long-term borrowings 41,499 41,674 41,841 42,157
Other liabilities   111,905   40,253   54,868   28,299
Total liabilities $ 4,192,196 $ 4,031,135 $ 3,968,326 $ 4,039,208
 
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,568,004 and 56,307,088 shares issued and outstanding at March 31, 2019 and 2018, respectively 56,568 56,446 56,446 56,307
Treasury stock (100,000 shares) (866) (866) (866) (866)
Additional paid-in capital 367,483 366,181 365,749 363,605
Accumulated earnings (deficit) 17,113 (817) (7,936) (75,345)
Accumulated other comprehensive loss   (5,518)   (14,168)   (21,519)   (13,809)
Total shareholders' equity   434,780   406,776   391,874   329,892
 
Total liabilities and shareholders' equity $ 4,626,976 $ 4,437,911 $ 4,360,200 $ 4,369,100
 
   
Average balance sheet and net interest income Three months ended March 31, 2019 Three months ended March 31, 2018
(dollars in thousands)
Average       Average Average       Average
Assets: Balance Interest Rate Balance Interest Rate
Interest earning assets:
Loans net of deferred fees and costs ** $ 2,266,834 $ 30,161 5.32 % $ 1,947,320 $ 23,039 4.73 %
Leases - bank qualified* 17,793 428 9.62 % 21,036 334 6.35 %
Investment securities-taxable 1,303,491 10,530 3.23 % 1,375,568 9,699 2.82 %
Investment securities-nontaxable* 7,546 59 3.13 % 9,893 75 3.03 %
Interest earning deposits at Federal Reserve Bank 423,024 2,502 2.37 % 502,233 1,832 1.46 %

Federal funds sold and securities purchased under agreement to resell

-   - - 64,216   414 2.58 %
Net interest earning assets 4,018,688 43,680 4.35 % 3,920,266 35,393 3.61 %
 
Allowance for loan and lease losses (8,638 ) (6,976 )
Loans held for sale from discontinued operations 173,800 2,025 4.66 % 276,370 2,527 3.66 %
Other assets 234,174   221,433  
$ 4,418,024   $ 4,411,093  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,798,837 $ 8,833 0.93 % $ 3,535,791 $ 4,301 0.49 %
Savings and money market 31,392   37 0.47 % 487,380   668 0.55 %
Total deposits 3,830,229 8,870 0.93 % 4,023,171 4,969 0.49 %
 
Short-term borrowings 74,386 503 2.70 % 24,844 104 1.67 %
Securities sold under agreements to repurchase 90 - 0.00 % 205 - 0.00 %
Subordinated debentures 13,401   195 5.82 % 13,401   160 4.78 %
Total deposits and liabilities 3,918,106 9,568 0.98 % 4,061,621 5,233 0.52 %
 
Other liabilities 79,140   22,452  
Total liabilities 3,997,246 4,084,073
 
Shareholders' equity 420,778   327,020  
$ 4,418,024   $ 4,411,093  
Net interest income on tax equivalent basis* $ 36,137 $ 32,687
 
Tax equivalent adjustment 102 86
 
Net interest income $ 36,035 $ 32,601
Net interest margin * 3.41 % 3.12 %
           
* Full taxable equivalent basis, using a statutory rate of 21% for 2019 and 2018.
** Includes loans held for sale.
     
Allowance for loan and lease losses: Three months ended Year ended
March 31,   March 31, December 31,
2019 2018 2018
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period (1) $ 8,653 $ 7,096 $ 7,096
 
Loans charged-off:
SBA non-real estate 322 388 1,348
SBA commercial mortgage - 157 157
Direct lease financing 106 56 637
Other consumer loans   -   14   21
Total   428   615   2,163
 
Recoveries:
SBA non-real estate 17 40 57
SBA commercial mortgage - 6 13
Direct lease financing 12 58 64
Other consumer loans   -   -   1
Total   29   104   135
Net charge-offs 399 511 2,028
Provision charged to operations   1,700   700   3,585
 
Balance in allowance for loan and lease losses at end of period $ 9,954 $ 7,285 $ 8,653
Net charge-offs/average loans 0.02% 0.03% 0.10%
Net charge-offs/average loans (annualized) 0.07% 0.11% 0.10%
Net charge-offs/average assets 0.01% 0.01% 0.05%
(1) Excludes activity from assets held for sale from discontinued operations.
 
Loan portfolio: March 31, December 31, September 30, March 31,
2019 2018 2018 2018
(in thousands)
 
SBA non-real estate $ 76,112 $ 76,340 $ 74,408 $ 75,225
SBA commercial mortgage 179,397 165,406 166,432 149,227
SBA construction   23,979   21,636   17,978   20,143
Total SBA loans 279,488 263,382 258,818 244,595
Direct lease financing 384,930 394,770 393,135 382,284
SBLOC 791,986 785,303 778,552 759,369
Other specialty lending 34,425 31,836 40,799 45,729
Other consumer loans   9,301   16,302   12,172   17,416
1,500,130 1,491,593 1,483,476 1,449,393
Unamortized loan fees and costs   10,265   10,383   10,456   10,488
Total loans, net of deferred fees and costs $ 1,510,395 $ 1,501,976 $ 1,493,932 $ 1,459,881
 
Small business lending portfolio: March 31, December 31, September 30, March 31,
2019 2018 2018 2018
(in thousands)
 
SBA loans, including deferred fees and costs 286,814 270,860 266,433 252,457
SBA loans included in HFS   206,901   199,977   193,372   172,030
Total SBA loans $ 493,715 $ 470,837 $ 459,805 $ 424,487
 
       
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 March 31, 2019
The Bancorp, Inc. 9.90% 23.64% 24.18% 23.64%
The Bancorp Bank 9.63% 23.17% 23.71% 23.17%
"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
 
As of December 31, 2018
The Bancorp, Inc. 10.11% 20.64% 21.07% 20.64%
The Bancorp Bank 9.70% 20.18% 20.61% 20.18%
"Well capitalized" institution (under FDIC regulations) 5.00% 8.00% 10.00% 6.50%
 
     
Three months ended Year ended
March 31, December 31,
2019   2018 2018
Selected operating ratios:
Return on average assets (1) 1.65% 1.30% 2.07%
Return on average equity (1) 17.28% 17.54% 24.26%
Net interest margin 3.41% 3.12% 3.19%
 
(1) Annualized
 
Book value per share table: March 31, December 31, September 30, March 31,
2019 2018 2018 2018
Book value per share $ 7.70 $ 7.22 $ 6.95 $ 5.87
 
 
Loan quality table: March 31, December 31, September 30, March 31,
2019 2018 2018 2018
Nonperforming loans to total loans (2) 0.55% 0.36% 0.35% 0.42%
Nonperforming assets to total assets (2) 0.18% 0.12% 0.13% 0.15%
Allowance for loan and lease losses to total loans 0.66% 0.58% 0.54% 0.50%
 
Nonaccrual loans $ 5,863 $ 4,516 $ 4,234 $ 3,516
Other real estate owned   -   -   405   405
Total nonperforming assets $ 5,863 $ 4,516 $ 4,639 $ 3,921
 
Loans 90 days past due still accruing interest $ 2,483 $ 954 $ 1,015 $ 2,643
 
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
 
Three months ended
March 31, December 31, September 30, March 31,
2019 2018 2018 2018
(in thousands)
Gross dollar volume (GDV) (3):
Prepaid card GDV $ 16,937,325 $ 13,526,647 $ 12,525,527 $ 13,402,496
 
(3) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.
 
           
Business line quarterly summary:
Quarter ended March 31, 2019
(dollars in millions)
 
Balances Non interest income
% Growth % Growth
Major business lines

Average
approximate
rates

Balances*

Year
over year

 

Linked
quarter
annualized

Current
quarter

Year
over year

Loans

Institutional banking ** 4.4% $ 792 4% 4% na na
SBA 5.6% 494 16% 19% na na
Leasing 6.3% 395 - - $ 0.7 43%
Commercial real estate securitization 5.9%   364 nm nm 10.8 -
Weighted average yield 5.3% $ 2,045

 

Deposits

Payment solutions (primarily prepaid) *** 1.2% $ 2,542 15% nm $ 16.2 13%
Card payment and ACH processing 0.8% 893 - nm 2.3 36%
 
* Loan categories based on period end balance and Payment Solutions based on average quarterly balances.
** Comprised of SBLOC loans.
*** Includes $900,000 of fee income related to 2018 incentives.
 
       
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 - 2018 (46 ) (46 )
2019 Marks - -
Payments received   (89 )
March 31, 2019 Bancorp book value** $ 58
 
Total marks $ (104 )
Divided by:
Original Walnut Street loan balance $ 267
Percentage of total mark to original balance 39 %
 
* Walnut Street is the investment in unconsolidated entity on the balance sheet which reflects the Bank's investment in a securitization of certain loans from the Bank's discontinued loan portfolio.
** Approximately 44% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of March 31, 2019.
 
Walnut Street portfolio composition as of March 31, 2019
 
Collateral type       % of Portfolio
Commercial real estate non-owner occupied
Retail 52.2 %
Office 13.2 %
Other 5.9 %
Construction and land 18.4 %
Commercial non real estate and industrial 0.5 %
First mortgage residential owner occupied 6.1 %
First mortgage residential non-owner occupied 2.8 %
Other         0.9 %
Total 100.0 %
 
 
Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2019
     
Discontinued Cumulative % to original
loan principal   marks   principal
(dollars in millions)
 
Commercial loan discontinued principal before marks $ 115
Florida mall held in discontinued other real estate owned 42 $ 27
Previous mark charges 14 14
Mark at March 31, 2019       7
Total $ 171   $ 48 28%
 
 

Analysis of discontinued loan relationships as of March 31, 2019

           
Performing Nonperforming Total Performing Nonperforming Total
loan principal   loan principal   loan principal   loan marks   loan marks   marks
(in millions)
 
6 loan relationships > $7 million $ 61 $ 14 $ 75 $ 3 $ 2 $ 5
Loan relationships < $7 million  

28

   

5

    33   2     -     2
$

89

  $

19

  $ 108 $ 5   $ 2   $ 7
 
 
Quarterly activity for discontinued commercial loan principal
 
Commercial
loan principal
(in millions)
 
Commercial loan discontinued principal December 31, 2018 before marks $ 125
Quarterly paydowns   (10)
Commercial loan discontinued principal March 31, 2019 before marks $ 115
Marks March 31, 2019   (7)
Net commercial loan exposure March 31, 2019 $ 108
Residential mortgages   51
Net loans $ 159
Florida Mall in other real estate owned 15
18 Properties in other real estate owned   14
Total discontinued assets at March 31, 2019 $ 188
 
 
Discontinued commercial loan composition March 31, 2019
     
Collateral type

Unpaid
principal
balance

 

Mark
March 31,
2019

 

Mark as %
of portfolio

(dollars in millions)
Commercial real estate - non-owner occupied:
Retail $ 4 $ 0.6 14%
Office 4 0.0 -
Other 38 1.9 5%
Construction and land 24 0.1 -
Commercial non-real estate and industrial 10 0.5 4%
1 to 4 family construction 13 3.8 30%
First mortgage residential non-owner occupied 12 0.4 4%
Commercial real estate owner occupied:
Retail 8 - -
Office - - 4%
Other - - 1%
Residential junior mortgage 1 - -
Other     1 - -
Total $ 115
Less: mark   (7)    
Net commercial loan exposure March 31, 2019 $ 108 $ 7.3 6%
 

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

Source: The Bancorp, Inc.