The Bancorp, Inc. Reports Fourth Quarter and Fiscal 2012 Financial Results

WILMINGTON, Del.--()--The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the fourth quarter and fiscal 2012.

Net income for the fourth quarter of 2012 increased to $5.2 million compared to $3.3 million in the fourth quarter of 2011, an increase of 59%.

Financial Highlights

  • 50% increase in diluted earnings per share to $0.15 for the fourth quarter of 2012 versus $0.10 for the fourth quarter of 2011. Diluted earnings per share amounted to $0.50 for the year ended December 31, 2012 compared to diluted earnings per share of $0.28 for the year ended December 31, 2011, an increase of 79%.
  • 27% increase in total quarterly revenues to $40.3 million compared to $31.7 million in fourth quarter 2011
  • 84% increase in quarterly non-interest income, primarily prepaid card fees, to $15.1 million compared to $8.2 million in fourth quarter 2011, excluding security gains and other than temporary impairment (OTTI) charges.
  • 8% increase in quarterly net interest income to $22.1 million compared to $20.4 million in fourth quarter 2011. On a linked quarter basis, net interest income grew at an annualized 10% rate, primarily reflecting higher loan income.
  • At December 31, 2012 our portfolio of loans and securities had grown to $2.7 billion, an increase of $466 million, or 21% over fourth quarter 2011. Outstanding loans increased 10% over that period.
  • Average deposits for fourth quarter 2012 totaled $3.0 billion, an increase of $274 million or 10% over 2011, reflecting growth in all major deposit categories. The interest paid on deposits between those respective periods decreased to 0.31% from 0.40%.
  • Issued $45 million of common stock accretive to book value.

Betsy Z. Cohen, Bancorp’s Chief Executive Officer, said, “Fourth quarter 2012 saw a significant earnings increase as a result of increases in both our non-interest and net interest income. Adjusted operating earnings, a non-GAAP measure, increased to $13.9 million, a $4.5 million, or 48% increase over the comparable prior year period. Notwithstanding increased loan loss provisions, our net income and earnings per share increased 59% and 50%, respectively. The increases in non-interest and net interest income also resulted in an efficiency ratio, a non-GAAP measure, of 63% for the quarter compared to 67% for the prior year quarter. Our leadership position in the prepaid card space continues as the major driver of the increase in non-interest income. On the asset side, we grew our loans 10% 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 42% over the past year, to $297 million, while leases grew 21%. The SBA loan portfolio will very shortly exceed $100 million. All three of these categories have demonstrated low levels of losses. During the quarter, we successfully completed a $45 million capital raise, accretive to book value. While we were not in immediate need of capital, our transaction account deposit growth continues to exceed our expectations and we decided to be proactive in building our capital to support that trend. We strategically exited two higher cost deposit relationships in 2012 which averaged over $800 million in deposits in fourth quarter 2011, to focus on lower cost deposits. If we exclude the impact of those changes, average fourth quarter deposits actually grew in excess of 57% year over year. The Company is well capitalized, and book value per share increased from $8.18 at December 31, 2011 to $9.06 at December 31, 2012, or an increase of 11%.”

Financial Results

Bancorp reported net income available to common shareholders for the three months ended December 31, 2012 of $5.2 million or diluted earnings per share of $0.15, based on 33,921,763 weighted average shares outstanding, compared to net income available to common shareholders of $3.3 million or diluted earnings per share of $0.10, based on 33,202,761 weighted average shares outstanding, for the three months ended December 31, 2011. Adjusted operating earnings, a non-GAAP measure, increased to $13.9 million for the three months ended December 31, 2012 compared to $9.4 million for the three months ended December 31, 2011. The following is a reconciliation of adjusted operating earnings to net income available to common shareholders:

   
Quarter ended Year ended
December 31,   December 31, December 31,   December 31,

2012

2011

2012

2011

 
Net income available to common shareholders $ 5,237 $ 3,288 $ 16,624 $ 8,918
Income tax expense 1,622 1,382 7,794 4,311
Gains on sales of investment securities (554 ) (136 ) (661 ) (759 )
Other than temporary impairment in securities 76 - 202 75
Losses and writedowns on other real estate owned 103 - 2,508 555
Provision for loan and lease losses   7,391     4,844     22,438     21,498  
Adjusted operating earnings (1) $ 13,875   $ 9,378   $ 48,905   $ 34,598  
 

(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 net income calculated pursuant to GAAP.

 

Balance Sheet Summary

At December 31, 2012, Bancorp's total assets amounted to $3.7 billion, an increase of $689 million or 23% over total assets at December 31, 2011. During that period, investments increased to $763 million, an increase of $297 million or 64%; loans increased to $1.9 billion, an increase of $169 million or 10%; and deposits increased to $3.3 billion, an increase of $631 million or 24%. During the year ended December 31, 2012, Bancorp strategically exited two large balance deposit relationships which totaled $455 million at December 31, 2011. The relationships were terminated to eliminate certain seasonal deposit fluctuations and reduce interest expense.

Conference Call Webcast

You may access the LIVE webcast of Bancorp's Quarterly Earnings Conference Call at 8:30 AM EDT Thursday, January 24, 2013 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 866.510.0676, access code 88069381. You may listen to the replay of the webcast following the live call on Bancorp's investor relations website or telephonically until Thursday, January 31, 2013 by dialing 888.286.8010, access code 81909498.

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 Year ended
December 31, December 31,
2012   2011 2012   2011
(dollars in thousands except per share data)
Condensed income statement
Net interest income $ 22,086   $ 20,356 $ 85,444   $ 76,406  
Provision for loan and lease losses   7,391     4,844   22,438     21,498  
Non-interest income
Gain on sales of investment securities 554 136 661 759
Other than temporary impairment of investment securities (76 ) - (202 ) (75 )
Other non-interest income   15,147     8,246   49,138     29,841  
Total non-interest income 15,625 8,382 49,597 30,525
Non-interest expense
Losses and write downs on other real estate owned 103 - 2,508 555
Other non-interest expense   23,358     19,224   85,677     71,649  
Total non-interest expense   23,461     19,224   88,185     72,204  
Net income before income tax expense 6,859 4,670 24,418 13,229
Income tax expense   1,622     1,382   7,794     4,311  
Net income available to common shareholders $ 5,237   $ 3,288 $ 16,624   $ 8,918  
 
Basic earnings per share $ 0.15   $ 0.10 $ 0.50   $ 0.28  
 
Diluted earnings per share $ 0.15   $ 0.10 $ 0.50   $ 0.28  
Weighted average shares - basic 33,603,879 33,196,281 33,227,755 31,927,815
Weighted average shares - diluted 33,921,763 33,202,761 33,288,278 31,933,592
 
       

Balance sheet

December 31,

September 30,

June 30, December 31,
2012 2012 2012 2011
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 19,982 $ 4,648 $ 5,560 $ 96,228
Interest earning deposits at Federal Reserve Bank   948,111     540,010     692,582     652,946  
Total cash and cash equivalents   968,093     544,658     698,142     749,174  
 
Investment securities, available-for-sale, at fair value 718,065 634,894 582,219 448,204
Investment securities, held-to-maturity 45,179 22,707 17,796 18,044
Federal Home Loan Bank & Atlantic Central Bankers Bank stock 3,621 4,160 4,596 5,088
Loans held for sale, at fair value 11,341 7,970 - -
Loans, net of deferred costs 1,902,854 1,856,992 1,804,312 1,744,828
Allowance for loan and lease losses   (33,040 )   (33,071 )   (31,171 )   (29,568 )
Loans, net   1,869,814     1,823,921     1,773,141     1,715,260  
Premises and equipment, net 10,368 9,802 8,694 8,358
Accrued interest receivable 9,857 10,061 9,297 8,476
Intangible assets, net 7,004 7,254 7,504 8,004
Other real estate owned 4,241 3,065 4,919 7,405
Deferred tax asset, net 22,789 19,708 20,716 21,941
Other assets   29,287     24,925     23,178     20,727  
Total assets $ 3,699,659   $ 3,113,125   $ 3,150,202   $ 3,010,681  
 
Liabilities:
Deposits
Demand and interest checking $ 2,775,207 $ 2,300,025 $ 2,335,960 $ 2,192,938
Savings and money market 517,098 459,725 456,614 454,343
Time deposits 12,582 12,606 20,619 25,528
Time deposits, $100,000 and over   8,334     8,819     9,104     9,742  
Total deposits   3,313,221     2,781,175     2,822,297     2,682,551  
 
Securities sold under agreements to repurchase 18,548 18,802 21,948 33,177
Accrued interest payable 103 100 127 123
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   17,709     10,662     9,555     9,950  
Total liabilities $ 3,362,982   $ 2,824,140   $ 2,867,328   $ 2,739,202  
 
Shareholders' equity:
Common stock - authorized, 50,000,000 shares of $1.00 par value; 37,246,655 and 33,196,281 shares issued at December 31, 2012 and 2011, respectively 37,247 33,209 33,201 33,196
Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 )
Additional paid-in capital 282,708 243,954 243,284 241,997
Retained earnings (accumulated deficit) 7,347 2,110 (1,451 ) (9,277 )
Accumulated other comprehensive gain   10,241     10,578     8,706     6,429  
Total shareholders' equity 336,677 288,985 282,874 271,479
 
Total liabilities and shareholders' equity $ 3,699,659   $ 3,113,125   $ 3,150,202   $ 3,010,681  
 
   
Average balance sheet and net interest income

Three months ended December 31, 2012

Three months ended December 31, 2011
(dollars in thousands) Average     Average Average     Average
Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest-earning assets:
Loans net of unearned discount ** $ 1,888,755 $ 20,091 4.25 % $ 1,722,161 $ 19,082 4.43 %
Leases - bank qualified* 15,030 211 5.62 % 7,356 149 8.10 %
Investment securities-taxable 602,749 3,310 2.20 % 377,071 3,054 3.24 %
Investment securities-nontaxable* 107,370 1,078 4.02 % 86,259 1,044 4.84 %
Interest earning deposits at Federal Reserve Bank 681,272 419 0.25 % 678,768 420 0.25 %
Federal funds sold/securities purchased under agreement to resell   1,689     7 1.65 %   -     - 0.00 %
Net interest earning assets 3,296,865 25,116 3.05 % 2,871,615 23,749 3.31 %
 
Allowance for loan and lease losses (34,018 ) (28,166 )
Other assets   78,755     211,356  
$ 3,341,602   $ 3,054,805  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 2,502,314 $ 1,719 0.27 % $ 2,287,085 $ 2,046 0.36 %
Savings and money market 480,473 569 0.47 % 407,536 544 0.53 %
Time   21,323    

55

1.03 %   35,390     113 1.28 %
Total deposits 3,004,110 2,343 0.31 % 2,730,011 2,703 0.40 %
 
Repurchase agreements 19,090 20 0.42 % 32,150 57 0.71 %
Subordinated debt   13,401     216 6.45 %   13,401     216 6.45 %
Total deposits and interest bearing liabilities 3,036,601 2,579 0.34 % 2,775,562 2,976 0.43 %
 
Other liabilities   9,157     9,712  
Total liabilities 3,045,758 2,785,274
 
Shareholders' equity   295,844     269,531  
$ 3,341,602   $ 3,054,805  
Net interest income on tax equivalent basis* $ 22,537 $ 20,773
 
Tax equivalent adjustment 451 417
 
Net interest income $ 22,086 $ 20,356
Net interest margin * 2.73 % 2.89 %
 
* 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, 2012 Year ended December 31, 2011
(Dollars in thousands) Average     Average Average     Average
Assets:

Balance

Interest

Rate

Balance

Interest

Rate

Interest-earning assets:
Loans net of unearned discount ** $ 1,807,770 $ 77,685 4.30 % $ 1,671,940 $ 74,347 4.45 %
Leases - bank qualified* 13,571 826 6.09 % 4,976 438 8.80 %
Investment securities-taxable 482,463 13,378 2.77 % 289,002 9,682 3.35 %
Investment securities-nontaxable* 103,901 4,331 4.17 % 77,509 4,111 5.30 %
Interest earning deposits at Federal Reserve Bank 974,762 2,433 0.25 % 588,689 1,461 0.25 %
Federal funds sold/securities purchased under agreement to resell   425     7 1.65 %   -     - 0.00 %
Net interest-earning assets 3,382,892 98,660 2.92 % 2,632,116 90,039 3.42 %
 
Allowance for loan and lease losses (32,320 ) (26,999 )
Other assets   127,486     255,444  
$ 3,478,058   $ 2,860,561  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 2,666,493 $ 7,691 0.29 % $ 2,175,972 $ 8,035 0.37 %
Savings and money market 455,860 2,401 0.53 % 355,094 2,550 0.72 %
Time   26,624     356 1.34 %   31,066     354 1.14 %
Total deposits 3,148,977 10,448 0.33 % 2,562,132 10,939 0.43 %
 
Short-term borrowings - - 0.00 % 745 3 0.40 %
Repurchase agreements 22,508 95 0.42 % 23,113 231 1.00 %
Subordinated debt   13,401     869 6.48 %   13,401     863 6.44 %
Total deposits and interest bearing liabilities 3,184,886 11,412 0.36 % 2,599,391 12,036 0.46 %
 
Other liabilities   9,440     9,138  
Total liabilities 3,194,326 2,608,529
 
Shareholders' equity   283,732     252,032  
 
$ 3,478,058   $ 2,860,561  
Net interest income on tax equivalent basis*   87,248   78,003
 
Tax equivalent adjustment 1,804 1,597
 
Net interest income $ 85,444 $ 76,406
Net interest margin * 2.58 % 2.96 %
 

* Full taxable equivalent basis to be comparable to the interest income of all other categories, using a 35% statutory tax rate

** Includes loans held for sale.
 
     
Allowance for loan and lease losses: Year ended
December 31,   December 31,
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 9,508 8,651
Construction 11,318 3,254
Lease financing 87 39
Residential mortgage - 2,870
Consumer   340   1,280
Total   21,253   16,094
 
Recoveries:
Commercial 2,093 91
Construction 96 4
Lease financing 13 -
Residential mortgage 85 -
Consumer   -   6
Total   2,287   101
Net charge-offs 18,966 15,993
Provision charged to operations   22,438   21,498
 
Balance in allowance for loan and lease losses at end of period $ 33,040 $ 29,568
 
 
 
Loan portfolio: December 31, September 30, June 30, December 31,
2012 2012 2012 2011
(dollars in thousands)
 
Commercial $ 470,109 $ 453,444 $ 441,167 $ 450,411
Commercial mortgage (1) 617,069 614,410 596,639 609,487
Construction   258,684   263,726   269,636   246,611
Total commercial loans 1,345,862 1,331,580 1,307,442 1,306,509
Direct lease financing 156,697 146,728 140,012 129,682
Residential mortgage 97,717 97,589 97,226 96,110
Consumer loans and others   296,915   276,427   255,769   209,041
1,897,191 1,852,324 1,800,449 1,741,342
Unamortized loan costs   5,663   4,668   3,863   3,486
Total loans, net of deferred loan costs $ 1,902,854 $ 1,856,992 $ 1,804,312 $ 1,744,828
 
Supplemental loan data:
Construction 1-4 family $ 60,343 $ 71,599 $ 79,546 $ 85,189
Commercial construction, acquisition and development   198,341   192,127   190,090   161,422
  $ 258,684 $ 263,726 $ 269,636 $ 246,611
(1) At December 31, 2012 our owner-occupied loans amounted to $173 million, or 28.0% 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 December 31, 2012
The Company 9.99% 16.39% 17.65%
The Bancorp Bank 7.24% 11.91% 13.16%
"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 Year ended
December 31, December 31,

2012

 

2011

2012

 

2011

Selected operating ratios:
Return on average assets 0.62 % 0.43 % 0.48 % 0.31 %
Return on average equity 7.04 % 4.84 % 5.86 % 3.54 %
Net interest margin 2.73 % 2.89 % 2.58 % 2.96 %
Efficiency ratio (1) 63.01 % 67.21 % 65.53 % 67.96 %
Book value per share $ 9.06 $ 8.18 $ 9.06 $ 8.18
 
 
 
December 31, September 30, June 30, December 31,
2012 2012 2012 2011
Asset quality ratios:
Nonperforming loans to total loans (2) 1.56 % 1.63 % 1.55 % 1.24 %
Nonperforming assets to total assets (2) 0.92 % 1.07 % 1.04 % 0.97 %
Allowance for loan and lease losses to total loans 1.74 % 1.78 % 1.73 % 1.69 %
Net charge-offs/average loans 1.04 % 0.64 % 0.45 % 0.96 %
 
Nonaccrual loans $ 25,190 $ 26,454 $ 24,815 $ 17,587
Other real estate owned   4,241     3,065     4,919     7,405  
Total nonperforming assets $ 29,431   $ 29,519   $ 29,734   $ 24,992  
 
Loans 90 days past due still accruing interest $ 4,435   $ 3,861   $ 3,105   $ 4,101  

 

(1) Non-GAAP measure

 
Reconciliation of the efficiency ratio:
Non-interest expense $ 23,461 $ 19,224 $ 88,185 $ 72,204
 
Net interest income 22,086 20,356 85,444 76,406
Non-interest income 15,625 8,382 49,597 30,525
Less: Gain on sale of securities (554 ) (136 ) (661 ) (759 )
Less: Other than temporary impairment   76     -     202     75  
37,233 28,602 134,582 106,247
 
63.01 % 67.21 % 65.53 % 67.96 %
 
(2) 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.
 

Contacts

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

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Contacts

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