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The Bancorp, Inc. Reports Third Quarter 2012 Financial Results

October 23, 2012

WILMINGTON, Del.--(BUSINESS WIRE)-- The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the third quarter of 2012.

Net income for the third quarter of 2012 increased to $3.6 million compared to $2.3 million in the third quarter of 2011, an increase of 56%.

Financial Highlights

  • 21% increase in total revenues to $35.6 million compared to $29.4 million in third quarter 2011.
  • 57% increase in diluted earnings per share to $0.11 for the third quarter of 2012 versus $0.07 for the third quarter of 2011. Diluted earnings per share amounted to $0.34 for the nine months ended September 30, 2012 compared to diluted earnings per share of $0.18 for the nine months ended September 30, 2011.
  • 85% increase in quarterly prepaid card fees to $7.5 million compared to $4.0 million in third quarter 2011.
  • 67% increase in quarterly non-interest income (including prepaid card fees) to $11.1 million compared to $6.7 million in third quarter 2011 excluding security gains and other than temporary impairment (OTTI).
  • 10% increase in quarterly net interest income to $21.6 million compared to $19.6 million in third quarter 2011. On a linked quarter basis, net interest income grew at an annualized 13% rate, primarily reflecting higher loan income.
  • The linked quarter net interest margin increased to 2.90% from 2.59%.
  • At September 30, 2012 the portfolio of loans and securities had grown to $2.5 billion, an increase of $372 million, or 17% over third quarter 2011. Outstanding loans increased 9% over that period.
  • Average deposits for third quarter 2012 totaled $2.8 billion, an increase of $295 million or 12% over 2011, reflecting growth in all major deposit categories. The interest paid on deposits between those respective periods decreased to 0.37% from 0.45%.

Betsy Z. Cohen, Bancorp’s Chief Executive Officer, said, “Third quarter 2012 saw a continuation in our earnings growth as a result of significant increases in both our non-interest and net interest income. Adjusted operating earnings, a non-GAAP measure, increased to $11.3 million, a $2.8 million, or 32% increase over the comparable prior year period. Our position as a leader in the prepaid card space continues to drive the increase in non-interest income. On the asset side, we grew our loans 9% over the year in a difficult lending environment. We continue to target what we believe to be lower risk assets including Small Business Administration (SBA) loans, security backed lines of credit and vehicle fleet leasing. Consumer loans, primarily security backed lines of credit, grew 35% over the past year, to $276 million. Due to the historically demonstrated strength of related collateral, losses on security backed loans have been virtually non-existent. The Company is well capitalized, and book value per share increased from $8.09 at September 30, 2011 to $8.73 at September 30, 2012, or an increase of 8%.”

Financial Results

Bancorp reported net income available to common shareholders for the three months ended September 30, 2012 of $3.6 million or diluted earnings per share of $0.11, based on 33,172,852 weighted average shares outstanding, compared to net income available to common shareholders of $2.3 million or diluted earnings per share of $0.07, based on 33,203,662 weighted average shares outstanding, for the three months ended September 30, 2011. Adjusted operating earnings, a non-GAAP measure, increased to $11.3 million for the three months ended September 30, 2012 compared to $8.6 million for the three months ended September 30, 2011. The following is a reconciliation of adjusted operating earnings to net income available to common shareholders (for the three month period):

       
Quarter ended Nine months ended
September 30,     September 30, September 30,     September 30,

2012

2011

2012

2011

 
Net income available to common shareholders $ 3,561 $ 2,282 $ 11,387 $ 5,630
Income tax expense 1,795 1,209 6,172 2,929
Gains on sales of investment securities (107 ) (20 ) (107 ) (623 )
Other than temporary impairment in securities - - 126 75
Losses and writedowns on other real estate owned 533 64 2,405 555
Provision for loan and lease losses   5,540     5,019     15,047     16,654  
Adjusted operating earnings (1) $11,322   $8,554   $35,030   $25,220  
 
 

(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 adjusted operating earnings to measure the combined impact of changes in net interest income, non-interest income and certain other expenses. Other companies may calculate adjusted operating 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.

 

Balance Sheet Summary

At September 30, 2012, Bancorp's total assets amounted to $3.1 billion, a decrease of $280 million or 8% over total assets at September 30, 2011. During the year ended September 30, 2012, Bancorp terminated two large balance deposit relationships which totaled $1.1 billion at September 30, 2011. The relationships were terminated to eliminate certain seasonal deposit fluctuations and reduce interest expense. During that period, investments increased to $658 million, an increase of $223 million or 51%; loans increased to $1.9 billion, an increase of $149 million or 9%; and deposits decreased to $2.8 billion, a decrease of $292 million or 10%.

Conference Call Webcast

You may access the LIVE webcast of Bancorp's Quarterly Earnings Conference Call at 8:30 AM EDT Wednesday, October 24, 2012 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 866.700.7101, access code 85269151. You may listen to the replay of the webcast following the live call on Bancorp's investor relations website or telephonically until Wednesday, October 31, 2012 by dialing 888.286.8010, access code 85079916.

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.

       
Three months ended Nine months ended
September 30, September 30,
2012     2011 2012     2011
(dollars in thousands except per share data)
Condensed income statement
Net interest income $21,561$19,595$63,358   $56,050  
Provision for loan and lease losses   5,540   5,019   15,047     16,654  
Non-interest income
Gain on sales of investment securities 107 20 107 623
Other than temporary impairment of investment securities - - (126 ) (75 )
Other non-interest income   11,126   6,653   33,991     21,595  
Total non-interest income 11,233 6,673 33,972 22,143
Non-interest expense
Losses and write downs on other real estate owned 533 64 2,405 555
Other non-interest expense   21,365   17,694   62,319     52,425  
Total non-interest expense   21,898   17,758   64,724     52,980  
Net income before income tax expense 5,356 3,491 17,559 8,559
Income tax expense   1,795   1,209   6,172     2,929  
Net income available to common shareholders $3,561$2,282$11,387   $5,630  
 
Basic earnings per share $0.11$0.07$0.34   $0.18  
 
Diluted earnings per share $0.11$0.07$0.34   $0.18  
Weighted average shares - basic 33,105,194 33,196,281 33,101,281 31,500,347
Weighted average shares - diluted 33,172,852 33,203,662 33,133,307 31,506,808
 
               
Balance sheetSeptember 30, June 30, December 31, September 30,
2012 2012 2011 2011
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 4,648 $ 5,560 $ 96,228 $ 259,116
Interest earning deposits at Federal Reserve Bank   540,010     692,582     652,946     932,152  
Total cash and cash equivalents   544,658     698,142     749,174     1,191,268  
 
Investment securities, available-for-sale, at fair value 634,894 582,219 448,204 416,362
Investment securities, held-to-maturity 22,707 17,796 18,044 18,095
Federal Home Loan Bank & Atlantic Central Bankers Bank stock 4,160 4,596 5,088 5,354
Loans held for sale, at fair value 7,970 - - -
Loans, net of deferred costs 1,856,992 1,804,312 1,744,828 1,715,648
Allowance for loan and lease losses   (33,071)   (31,171)   (29,568)   (27,671)
Loans, net   1,823,921     1,773,141     1,715,260     1,687,977  
Premises and equipment, net 9,802 8,694 8,358 8,307
Accrued interest receivable 10,061 9,297 8,476 8,541
Intangible assets, net 7,254 7,504 8,004 8,254
Other real estate owned 3,065 4,919 7,405 6,415
Deferred tax asset, net 19,708 20,716 21,941 19,902
Other assets   24,925     23,178     20,727     22,538  
Total assets $3,113,125   $3,150,202   $3,010,681   $3,393,013  
 
Liabilities:
Deposits
Demand and interest checking $ 2,300,025 $ 2,335,960 $ 2,192,938 $ 2,649,005
Savings and money market 459,725 456,614 454,343 388,603
Time deposits 12,606 20,619 25,528 25,552
Time deposits, $100,000 and over   8,819     9,104     9,742     10,341  
Total deposits   2,781,175     2,822,297     2,682,551     3,073,501  
 
Securities sold under agreements to repurchase 18,802 21,948 33,177 25,057
Accrued interest payable 100 127 123 113
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   10,662     9,555     9,950     12,262  
Total liabilities $2,824,140   $2,867,328   $2,739,202   $3,124,334  
 
Shareholders' equity:
Common stock - authorized, 50,000,000 shares of $1.00 par value; 33,208,781 and 33,196,281 shares issued at September 30, 2012 and 2011, respectively 33,209 33,201 33,196 33,196
Treasury stock (100,000 shares) (866 ) (866 ) (866 ) -
Additional paid-in capital 243,954 243,284 241,997 241,473
Retained earnings (accumulated deficit) 2,110 (1,451 ) (9,277 ) (12,565 )
Accumulated other comprehensive gain   10,578     8,706     6,429     6,575  
Total shareholders' equity 288,985 282,874 271,479 268,679
 
Total liabilities and shareholders' equity $3,113,125   $3,150,202   $3,010,681   $3,393,013  
 
       
Average balance sheet and net interest income Three months ended September 30, 2012 Three months ended September 30, 2011
(dollars in thousands) Average         Average Average         Average
Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest-earning assets:
Loans net of unearned discount ** $ 1,827,348 $ 19,646 4.30 % $ 1,693,500 $ 18,927 4.47 %
Leases - bank qualified* 15,012 217 5.78 % 5,328 128 9.61 %
Investment securities-taxable 519,377 3,507 2.70 % 314,800 2,732 3.47 %
Investment securities-nontaxable* 105,918 1,091 4.12 % 70,049 1,003 5.73 %
Interest earning deposits at Federal Reserve Bank   570,667     356 0.25 %   456,260     296 0.26 %
Net interest earning assets 3,038,322 24,817 3.27 % 2,539,937 23,086 3.64 %
 
Allowance for loan and lease losses (32,385 ) (28,415 )
Other assets   78,241     258,610  
$ 3,084,178   $ 2,770,132  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 2,296,193 $ 1,884 0.33 % $ 2,078,118 $ 1,993 0.38 %
Savings and money market 436,484 574 0.53 % 354,189 696 0.79 %
Time   24,042     98 1.63 %   29,690     94 1.27 %
Total deposits 2,756,719 2,556 0.37 % 2,461,997 2,783 0.45 %
 
Repurchase agreements 20,489 24 0.47 % 23,271 96 1.65 %
Subordinated debt   13,401     218 6.51 %   13,401     216 6.45 %
Total deposits and interest bearing liabilities 2,790,609 2,798 0.40 % 2,498,669 3,095 0.50 %
 
Other liabilities   8,462     7,757  
Total liabilities 2,799,071 2,506,426
 
Shareholders' equity   285,107     263,706  
$ 3,084,178   $ 2,770,132  
Net interest income on tax equivalent basis* $ 22,019 $ 19,991
 
Tax equivalent adjustment 458 396
 
Net interest income $ 21,561 $ 19,595
Net interest margin * 2.90%3.15%
 
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
 
   
Nine months ended September 30,
2012     2011
Average         Average Average         Average

Balance

Interest

Rate

Balance

Interest

Rate

(dollars in thousands) (dollars in thousands)
Assets:
Interest earning assets:
Loans net of unearned discount ** $ 1,780,565 $ 57,594 4.31 % $ 1,655,013 $ 55,252 4.45 %
Leases - bank qualified* 13,081 614 6.26 % 4,174 302 9.65 %
Investment securities-taxable 442,043 10,068 3.04 % 253,507 6,629 3.49 %
Investment securities-nontaxable* 102,736 3,252 4.22 % 74,560 3,066 5.48 %
Interest earning deposits at Federal Reserve Bank   1,073,305     2,014 0.25 %   558,333     1,041 0.25 %
Net interest earning assets 3,411,730 73,542 2.87 % 2,545,587 66,290 3.47 %
 
Allowance for loan and lease losses (31,728 ) (26,597 )
Other assets   143,839     276,095  
$3,523,841   $2,795,085  
 
Liabilities and shareholders' equity:
Deposits:
Demand and interest checking $ 2,721,620 $ 5,971 0.29 % $ 2,138,525 $ 5,991 0.37 %
Savings and money market 447,596 1,832 0.55 % 337,422 2,006 0.79 %
Time   28,403     301 1.41 %   29,608     241 1.09 %
Total deposits 3,197,619 8,104 0.34 % 2,505,555 8,238 0.44 %
 
Short term borrowings - - 0.00 % 996 3 0.40 %
Repurchase agreements 23,656 75 0.42 % 20,067 173 1.15 %
Subordinated debt   13,401     652 6.49 %   13,401     647 6.44 %
Total deposits and interest bearing liabilities 3,234,676 8,831 0.36 % 2,540,019 9,061 0.48 %
 
Other liabilities   9,526     8,944  
Total liabilities 3,244,202 2,548,963
 
Shareholders' equity   279,639     246,122  
$3,523,841   $2,795,085  
 
Net interest income on tax equivalent basis * $64,711$57,229
 
Tax equivalent adjustment   1,353   1,179
 
Net interest income $63,358$56,050
 
Net interest margin * 2.53 % 3.00 %
 
* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
 
           
Allowance for loan and lease losses: Nine months ended
September 30,     September 30,
2012     2011
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period $29,568   $24,063  
 
Loans charged-off:
Commercial 5,953 7,371
Construction 6,931 3,003
Lease financing 87 -
Residential mortgage - 1,876
Consumer   299     815  

Total

  13,270     13,065  
 
Recoveries:
Commercial 1,533 16
Construction 95 3
Lease financing 13 -
Residential mortgage 85 -
Consumer   -     -  
Total   1,726     19  
Net charge-offs 11,544 13,046
Provision charged to operations   15,047     16,654  
 
Balance in allowance for loan and lease losses at end of period $33,071   $27,671  
Net charge-offs/average loans 0.64 % 0.79 %
 
 
Loan portfolio:September 30, June 30, December 31, September 30,
2012 2012 2011 2011
(dollars in thousands)
 
Commercial $ 453,444 $ 441,167 $ 450,411 $ 461,679
Commercial mortgage (1) 614,410 596,639 609,487 577,237
Construction   263,726     269,636     246,611   242,806
Total commercial loans 1,331,580 1,307,442 1,306,509 1,281,722
Direct lease financing 146,728 140,012 129,682 129,400
Residential mortgage 97,589 97,226 96,110 96,139
Consumer loans and others   276,427     255,769     209,041   205,243
1,852,324 1,800,449 1,741,342 1,712,504
Unamortized loan costs   4,668     3,863     3,486   3,144
Total loans, net of deferred loan costs $1,856,992   $1,804,312   $1,744,828$1,715,648
 
Supplemental loan data:
Construction 1-4 family $ 71,599 $ 79,546 $ 85,189 $ 91,783
Commercial construction, acquisition and development   192,127     190,090     161,422   151,023
  $263,726   $269,636   $246,611$242,806
(1) At September 30, 2012 our owner-occupied loans amounted to $157 million, or 25.6% of commercial mortgages.
 
           

Capital Ratios

Tier 1 capital Tier 1 capital Total capital
to average assets to risk-weighted assets to risk-weighted assets
 
As of September 30, 2012
The Company 9.20 % 14.51 % 15.77 %
The Bancorp Bank 7.58 % 11.98 % 13.24 %
"Well capitalized" institution (under FDIC regulations) 5.00 % 6.00 % 10.00 %
 
As of December 31, 2011
The Company 8.69 % 14.64 % 15.89 %
The Bancorp Bank 6.13 % 10.34 % 11.60 %
"Well capitalized" institution (under FDIC regulations) 5.00 % 6.00 % 10.00 %
 
               
Three months ended Nine months ended
September 30, September 30,

2012

2011

2012

2011

Selected operating ratios:
Return on average assets 0.46 % 0.33 % 0.43 % 0.27 %
Return on average equity 4.97 % 3.43 % 5.44 % 3.06 %
Net interest margin 2.90 % 3.15 % 2.53 % 3.00 %
Efficiency ratio 66.99 % 67.65 % 66.49 % 68.23 %
Book value per share $ 8.73 $ 8.09 $ 8.73 $ 8.09
 
 
 
 
September 30, June 30, December 31, September 30,
2012 2012 2011 2011
Asset quality ratios:
Nonperforming loans to total loans (1) 1.63 % 1.55 % 1.24 % 1.33 %
Nonperforming assets to total assets (1) 1.07 % 1.04 % 0.97 % 0.86 %
Allowance for loan and lease losses to total loans 1.78 % 1.73 % 1.69 % 1.61 %
 
Nonaccrual loans $ 26,454 $ 24,815 $ 17,587 $ 17,201
Other real estate owned   3,065     4,919     7,405     6,415  
Total nonperforming assets $29,519   $29,734   $24,992   $23,616  
 
Loans 90 days past due still accruing interest $3,861   $3,105   $4,101   $5,550  
 
(1) Nonperforming loans are defined as nonaccrual loans and restructured loans. Loans 90 days past due and still accruing interest are also included in these ratios.
 

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

Source: The Bancorp, Inc.

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