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The Bancorp, Inc. Reports Third Quarter 2011 Financial Results

October 20, 2011

WILMINGTON, Del.--(BUSINESS WIRE)-- The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial holding company, today reported results for the quarter ended September 30, 2011.

Financial Highlights

  • Core operating earnings for third quarter 2011 increased by 40% to $8.6 million over third quarter 2010. For those respective periods, GAAP diluted earnings per share increased to $0.07 from $0.02 based on 33.2 million and 26.6 million shares outstanding respectively. For the nine month period ended September 30, 2011 diluted earnings per share amounted to $0.18 compared to a loss per share of $0.12 in the comparable prior year period.

Key factors driving these results were:

  • Tax equivalent net interest income increased 15% in third quarter 2011 to $19.9 million from $17.3 million in third quarter 2010.
  • The provision for loan and lease losses increased $1.6 million year to date, over the prior year to date but decreased $1.9 million from the quarter ended June 30, 2011.
  • Year to date prepaid card fee income increased 62% to $13.2 million from $8.1 million in 2010, reflecting a 45% increase in third quarter 2011 over third quarter 2010.
  • Year to date non-interest income, excluding security gains and OTTI but including prepaid card fee income, increased 53% to $21.6 million compared to $14.2 million in 2010, reflecting a 35% increase in third quarter 2011 over third quarter 2010.
  • At September 30, 2011 the portfolio of loans and securities had grown to $2.2 billion, an increase of $294 million, or 16% over the prior year. Outstanding loans increased 8% year over year.
  • Year to date average deposits for 2011 totaled $2.5 billion, an increase of $525 million or 27% over 2010, reflecting a 20% increase in third quarter 2011 over third quarter 2010. The interest paid on deposits between those respective periods decreased to 0.45% from 0.68%.

Betsy Z. Cohen, Bancorp’s Chief Executive Officer, said, “The third quarter saw a continuation of the growth in operating leverage as expressed by the 40% increase in core operating earnings and the 5.5 point decrease or 8% improvement in the efficiency ratio. Loans and securities grew by an aggregate of 16% over the prior year including growth in our SBA loan initiative and our pipeline for new SBA loans continues to increase. Another initiative, vehicle leasing, also exhibited strong growth of 25% on a year over year basis. These are areas in which we are comfortable in a difficult lending environment. Our focus on increasing non-interest income is also evident, especially for prepaid cards for which fee income increased 62% on a year to date basis over the prior year. Our positioning as a leader in providing services in the prepaid card space continues to drive the increase. Book value per share increased from $7.69 at September 30, 2010 to $8.09, or an increase of 5%, while outstanding shares increased to 33 million from 26 million.”

Financial Results

Bancorp reported net income available to common shareholders for the three months ended September 30, 2011 of $2.3 million or diluted earnings per share of $0.07, based on 33,203,662 weighted average shares outstanding, compared to net income available to common shareholders of $588,000 or diluted earnings per share of $0.02, based on 26,569,565 weighted average shares outstanding, for the three months ended September 30, 2010. Core operating earnings, a non-GAAP measure, increased to $8.6 million for the three months ended September 30, 2011 compared to $6.1 million for the three months ended September 30, 2010. The following is a reconciliation of core operating earnings to net income available to common shareholders (for the three month period):

  September 30,   September 30,

2011

2010

 
Net income available to common shareholders $ 2,282 $ 588
Income tax expense 1,209 156
Gains on sales of investment securities (20) (2)
Other than temporary impairment in securities - 135
Losses on other real estate owned 64 22
Provision for loan and lease losses and other credit costs   5,019   5,219
Core operating earnings (1) $ 8,554 $ 6,118
 
(1)   As a supplement to GAAP, Bancorp has provided this non-GAAP performance result. The Bancorp believes that this non-GAAP financial measure is useful because it allows investors to assess its operating performance. Management utilizes core operating earnings to measure the combined impact of changes in net interest income, non-interest income and certain other expenses. Other companies may calculate core earnings differently. Although this non-GAAP financial measure is intended to enhance investors’ understanding of Bancorp’s business and performance, it should not be considered, and is not intended to be, a substitute for GAAP.
 

Capital Ratios

      
Tier 1 capital Tier 1 capital Total capital
to average to risk-weighted to risk-weighted
assets ratio assets ratio assets ratio
 
As of September 30, 2011
The Company 9.60% 14.90% 16.16%
The Bancorp Bank 6.76% 10.52% 11.77%
"Well capitalized" institution (under FDIC regulations) 5.00% 6.00% 10.00%
 
As of December 31, 2010
The Company 8.37% 11.99% 13.24%
The Bancorp Bank 7.39% 10.60% 11.85%
"Well capitalized" institution (under FDIC regulations) 5.00% 6.00% 10.00%
 

Balance Sheet Summary

At September 30, 2011, Bancorp's total assets were $3.4 billion, an increase of $733 million or 28% over total assets at September 30, 2010. During that period, investments increased to $440 million, an increase of $169 million or 62%; loans increased to $1.7 billion, an increase of $125 million or 8%; and deposits increased to $3.1 billion, an increase of $651 million or 27%. Total assets increased compared to June 30, 2011, primarily as a result of seasonal deposit variations.

Conference Call Webcast

You may access the LIVE webcast of Bancorp's Quarterly Earnings Conference Call at 8:30 AM EDT Friday, October 21, 2011 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 888.396.2369 using access code 74604081. You may listen to the replay of the webcast following the live call on Bancorp's investor relations website or telephonically until Friday, October 28, 2011 by dialing 888.286.8010, access code 91908919.

About Bancorp

The Bancorp, Inc. is a financial holding company that operates The Bancorp Bank, an FDIC-insured commercial bank that delivers a full array of financial services both directly and through private-label affinity programs nationwide. The Bancorp Bank’s regional community bank operations serve the needs of small and mid-size businesses and their principals in the Philadelphia-Wilmington region.

Forward Looking Statements

Statements in this earnings release regarding The Bancorp, Inc.’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, Inc.’s filings with the SEC, including the “Risk Factors” sections of The Bancorp Inc.’s 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 presentation. The Bancorp, Inc. does not undertake to publicly revise or update forward-looking statements in this presentation 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   Nine months ended
September 30, September 30,
2011   2010 2011   2010
 
(dollars in thousands except per share data)
Condensed income statement
Net interest income $19,595$17,050   $56,050   $50,019  
Provision for loan and lease losses   5,019   5,121     16,654     15,075  
Non-interest income
Gain on sales of investment securities 20 2 623 1,221
Other than temporary impairment of investment securities - (135 ) (75 ) (135 )
Other non-interest income   6,653   4,918     21,595     14,152  
Total non-interest income 6,673 4,785 22,143 15,238
Non-interest expense
Loss on other real estate owned 64 22 555 22
Other non-interest expense   17,694   15,948     52,425     45,393  
Total non-interest expense   17,758   15,970     52,980     45,415  
Net income before income tax expense 3,491 744 8,559 4,767
Income tax expense   1,209   156     2,929     1,586  
Net income 2,282 588 5,630 3,181
Less preferred stock dividends - - - (433 )
Less preferred stock accretion   -   -     -     (5,809)
Net income (loss) available to common shareholders $2,282$588   $5,630   $(3,061)
 
Basic earnings (loss) per share $0.07$0.02   $0.18   $(0.12)
 
Diluted earnings (loss) per share $0.07$0.02   $0.18   $(0.12)
Weighted average shares - basic 33,196,281 26,181,281 31,500,347 26,181,281
Weighted average shares - diluted 33,203,662 26,569,565 31,506,808 26,181,281
 
Balance sheet  

September 30,

  June 30,   December 31,   September 30,
2011   2011   2010   2010
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 259,116 $ 168,957 $ 157,411 $ 164,948
Interest bearing deposits   932,152     199,866     314,908     584,857  
Total cash and cash equivalents   1,191,268     368,823     472,319     749,805  
 
Investment securities, available-for-sale, at fair value 421,716 353,099 231,165 249,342
Investment securities, held-to-maturity 18,095 18,102 21,364 21,354
Loans, net of deferred costs 1,715,648 1,678,660 1,619,195 1,590,507
Allowance for loan and lease losses   (27,671)   (27,685)   (24,063)   (21,798)
Loans, net of deferred costs   1,687,977     1,650,975     1,595,132     1,568,709  
Premises and equipment, net 8,307 8,296 8,767 8,602
Accrued interest receivable 8,541 7,839 8,878 8,396
Intangible assets, net 8,254 8,504 9,005 9,255
Other real estate owned 6,415 3,764 2,115 225
Deferred tax asset, net 19,902 21,960 24,365 19,434
Other assets   22,538     24,477     22,613     24,554  
Total assets $3,393,013   $2,465,839   $2,395,723   $2,659,676  
 
Liabilities:
Deposits
Demand (non-interest bearing) $ 1,866,259 $ 1,073,228 $ 945,605 $ 1,402,538
Savings, money market and interest checking 1,171,349 1,076,654 975,973 1,001,959
Time deposits 25,552 1,394 90,862 9,218
Time deposits, $100,000 and over   10,341     11,427     11,657     8,672  
Total deposits   3,073,501     2,162,703     2,024,097     2,422,387  
 
Securities sold under agreements to repurchase 25,057 20,258 14,383 9,429
Short-term borrowings - - 87,000 -
Federal funds purchased - - 49,000 -
Accrued interest payable 113 131 124 109
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   12,262     7,109     8,812     12,918  
Total liabilities $3,124,334   $2,203,602   $2,196,817   $2,458,244  
 
Shareholders' equity:
Common stock - authorized, 50,000,000 shares of $1.00 par value; 33,196,281 and 26,181,281 shares issued and outstanding at September 30, 2011 and 2010, respectively 33,196 33,196 26,181 26,181
Additional paid-in capital 241,473 241,011 192,711 192,492
Accumulated deficit (12,565 ) (14,847 ) (18,195 ) (20,236 )
Accumulated other comprehensive (loss) gain   6,575     2,877     (1,791)   2,995  
Total shareholders' equity 268,679 262,237 198,906 201,432
 
Total liabilities and shareholders' equity $3,393,013   $2,465,839   $2,395,723   $2,659,676  
 
Average balance sheet and net interest income   Three months ended September 30, 2011   Three months ended September 30, 2010
(dollars in thousands) Average     Average Average     Average
Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest-earning assets:
Loans net of unearned discount $ 1,693,500 $ 18,927 4.47 % $ 1,581,924 $ 18,406 4.65 %
Leases - bank qualified* 5,328 128 9.61 % 1,284 14 4.36 %
Investment securities-taxable 320,239 2,732 3.41 % 159,617 1,641 4.11 %
Investment securities-nontaxable* 70,049 1,003 5.73 % 55,819 784 5.62 %
Interest earning deposits at Federal Reserve Bank   456,260     296 0.26 %   325,513     176 0.22 %
Net interest-earning assets 2,545,376 23,086 3.63 % 2,124,157 21,021 3.96 %
 
Allowance for loan and lease losses (28,415 ) (23,003 )
Other assets   253,171     198,534  
$ 2,770,132   $ 2,299,688  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand (non-interest bearing)** $ 1,321,031 $ 314 0.10 % $ 992,474 $ 395 0.16 %
Interest bearing deposits
Interest checking 757,087 1,553 0.82 % 660,094 2,055 1.25 %
Savings and money market 354,189 822 0.93 % 294,171 878 1.19 %
Time   29,690     94 1.27 %   105,197     142 0.54 %
Total interest bearing deposits 1,140,966 2,469 0.87 % 1,059,462 3,075 1.16 %
Total deposits 2,461,997 2,783 0.45 % 2,051,936 3,470 0.68 %
 
Short-term borrowings - - 0.00 % 11,576 17 0.59 %
Repurchase agreements 23,271 96 1.65 % 9,424 5 0.21 %
Subordinated debt   13,401     216 6.45 %   13,401     218 6.51 %
Net interest bearing liabilities 1,177,638 2,781 0.94 % 1,093,863 3,315 1.21 %
Total deposits and interest bearing liabilities 2,498,669 3,095 0.50 % 2,086,337 3,710 0.71 %
 
Other liabilities   7,757     9,617  
Total liabilities 2,506,426 2,095,954
 
Shareholders' equity   263,706    

203,734

  
$ 2,770,132   $

2,299,688

  
Net interest income on tax equivalent basis* $ 19,991 $ 17,311
 
Tax equivalent adjustment 396 261
 
Net interest income $ 19,595 $ 17,050
Net interest margin * 3.14%3.26%
         
* Full taxable equivalent basis to be comparable to the interest income of all other categories, using a 35% statutory tax rate
** Interest includes fees paid to affinity groups.
 
Average balance sheet and net interest income   Nine months ended September 30, 2011   Nine months ended September 30, 2010
(Dollars in thousands) Average     Average Average     Average
Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest-earning assets:
Loans net of unearned discount $ 1,655,013 $ 55,252 4.45 % $ 1,557,950 $ 54,693 4.68 %
Leases - bank qualified* 4,174 302 9.65 % 497 15 4.02 %
Investment securities-taxable 259,301 6,629 3.41 % 154,632 4,651 4.01 %
Investment securities-nontaxable* 74,560 3,066 5.48 % 39,649 1,890 6.36 %
Interest earning deposits at Federal Reserve Bank   558,333     1,041 0.25 %   326,562     610 0.25 %
Net interest-earning assets 2,551,381 66,290 3.46 % 2,079,290 61,859 3.97 %
 
Allowance for loan and lease losses (26,597 ) (21,335 )
Other assets   270,301     182,135  
$ 2,795,085   $ 2,240,090  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand (non-interest bearing)** $ 1,396,438 $ 1,047 0.10 % $ 982,437 $ 894 0.12 %
Interest bearing deposits
Interest checking 742,087 4,536 0.81 % 601,011 6,075 1.35 %
Savings and money market 337,422 2,414 0.95 % 313,779 3,098 1.32 %
Time   29,608     241 1.09 %   82,544     394 0.64 %
Total interest bearing deposits 1,109,117 7,191 0.86 % 997,334 9,567 1.28 %
Total deposits 2,505,555 8,238 0.44 % 1,979,771 10,461 0.70 %
 
Short-term borrowings 996 3 0.40 % 16,562 81 0.65 %
Repurchase agreements 20,067 173 1.15 % 7,461 19 0.34 %
Subordinated debt   13,401     647 6.44 %   13,211     648 6.54 %
Net interest bearing liabilities 1,143,581 8,014 0.93 % 1,034,568 10,315 1.33 %
Total deposits and interest bearing liabilities 2,540,019 9,061 0.48 % 2,017,005 11,209 0.74 %
 
Other liabilities   8,944     9,916  
Total liabilities 2,548,963 2,026,921
 
Shareholders' equity   246,122     213,169  
 
$ 2,795,085   $ 2,240,090  
Net interest income on tax equivalent basis*   57,229   50,650
 
Tax equivalent adjustment 1,179 631
 
Net interest income $ 56,050 $ 50,019
Net interest margin * 2.99%3.25%
         
* Full taxable equivalent basis to be comparable to the interest income of all other categories, using a 35% statutory tax rate
** Interest includes fees paid to affinity groups.
 
    For year
Allowance for loan and lease losses: Nine months ended ended
September 30,   September 30, December 31,
2011 2010 2010
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period $ 24,063   $ 19,123   $19,123  
 
Loans charged-off:
Commercial 7,371 12,260 13,513
Construction 3,003 - -
Lease financing - - 3
Residential mortgage 1,876 760 1,254
Consumer 815   372     618  
Total 13,065   13,392     15,388  
 
Recoveries:
Commercial 16 230 279
Construction 3 4 4
Lease financing - 10 10
Residential mortgage - 742 742
Consumer -   6     6  
Total 19   992     1,041  
Net charge-offs 13,046 12,400 14,347
Provision charged to operations 16,654   15,075     19,287  
 
Balance in allowance for loan and lease losses at end of period $ 27,671   $ 21,798   $24,063  
Net charge-offs/average loans 0.79 % 0.80 % 0.92 %
 
       

Loan portfolio:

September 30,

June 30, December 31, September 30,
  2011   2011   2010   2010
(dollars in thousands)
 
Commercial $ 461,679 $ 450,916 $ 441,799 $ 409,697
Commercial mortgage (1) 577,237 593,842 580,780 580,491
Construction   242,806   205,730   203,120   206,551
Total commercial loans 1,281,722 1,250,488 1,225,699 1,196,739
Direct financing leases 129,400 127,016 103,289 103,278
Residential mortgage 96,139 98,113 93,004 93,833
Consumer loans and others   205,243   200,132   194,320   193,968
1,712,504 1,675,749 1,616,312 1,587,818
Unamortized costs (fees)   3,144   2,911   2,883   2,689
Total loans, net of deferred loan costs $1,715,648$1,678,660$1,619,195$1,590,507
 
Supplemental loan data:
Construction 1-4 family $ 91,783 $ 93,422 $ 92,190 $ 100,848
Construction commercial, acquisition and development   151,023   112,308   110,930   105,703
  $242,806$205,730$203,120$206,551

(1) At September 30, 2011 our owner-occupied loans amounted to $128 million, or 22.1% of commercial mortgages.

  September 30,  

June 30,

 

December 31,

 

September 30,

2011   2011 2010   2010
Asset quality ratios:
Nonperforming loans to total loans (1) 1.33% 1.43% 1.08% 1.51%
Nonperforming assets to total assets (1) 0.86% 1.12% 0.82% 0.91%
Allowance for loan and lease losses to total loans 1.61% 1.65% 1.49% 1.37%
 
Nonaccrual loans $17,201$19,526$15,298$19,640
Total nonperforming loans 17,201 19,526 15,298 19,640
Other real estate owned 6,415 3,764 2,115 225
Total nonperforming assets $23,616$23,290$17,413$19,865
 
Loans 90 days past due still accruing interest $5,550$4,397$2,219$4,352
(1) Nonperforming loans are defined as nonaccrual loans and restructure loans. Loans 90 days past due and still accruing interest are also included in these ratios.
 
  Three months ended   Nine months ended
September 30, September 30,

2011

  

2010

2011

  

2010

Selected operating ratios:
Return on average assets 0.33%

0.10%

0.27% 0.19%
Return on average equity 3.47% 1.15% 3.06% 1.98%
Net interest margin 3.14% 3.26% 2.99% 3.25%
Efficiency ratio 67.65% 73.21% 68.30% 70.95%
Book value per share $ 8.09 $ 7.69 $ 8.09 $ 7.69

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

Source: The Bancorp, Inc.

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