The Bancorp, Inc. Reports Second Quarter 2014 Financial Results

WILMINGTON, Del.--()--The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the second quarter 2014.

The Bancorp, Inc. reported a net loss of $5.5 million for the second quarter of 2014 compared to net income of $5.6 million in second quarter 2013, or a loss per share of $0.15 in 2014 compared to $0.15 earnings per share in the comparable prior year period. An 18% effective income tax rate was utilized in second quarter 2014, based upon an estimated annualized tax rate. With a statutory 35% tax rate which approximates the Company’s historical tax rate, the loss per share would have been approximately $0.12.

Financial Highlights

  • 18% increase in net interest income to $27.9 million compared to $23.6 million in second quarter 2013.
  • 12% increase in prepaid card fees to $12.9 million compared to $11.5 million in second quarter 2013.
  • Increases over prior year targeted loan balances as follows: SBA lending 69%, SBLOC 53%, Leasing 8%.
  • An increase in the net interest margin to 2.69% from 2.46% in second quarter 2013.

Betsy Z. Cohen, Bancorp’s Chief Executive Officer, said, “During the quarter, we received an order from the FDIC which specified additional enhanced controls related to BSA. We have acted to address those and engaged consultants to implement such controls. During the second quarter approximately $9.2 million of related one-time consulting and other expenses were accrued. The Bank’s provision for loan losses amounted to $15.5 million reflecting the impact of certain loan relationships in its commercial loan portfolios. We continue to emphasize loan growth in Small Business Administration (SBA), Security Backed Lines of Credit (SBLOC) and vehicle leasing portfolios, for which historical losses are lower than our other commercial lines of business. SBA and SBLOC exhibited year over year growth rates of 69% and 53% respectively. The total of those three targeted portfolios now amounts to approximately $745 million. Net interest income grew 18% or $4.3 million over second quarter 2013, reflecting growth in those targeted loan portfolios and the investment portfolio, which is also targeted for growth. At June 30, 2014 our total loans and securities amounted to $3.8 billion, or 20% higher than June 30, 2013. Additionally we have made progress in lowering excess deposit balances maintained at the Federal Reserve Bank, and as a result of these factors, our net interest margin improved to 2.69% from 2.46% in second quarter 2013. Our prepaid card fees increased 12%, and our card payment and ACH increased 26%, representing continued growth in these two areas. Book value per share at June 30, 2014 was $9.72 compared to $9.21 at June 30, 2013.”

Financial Results

Bancorp reported a net loss available to common shareholders for the three months ended June 30, 2014 of $5.5 million, or a loss per share of $0.15, based on 37,706,491 weighted average shares outstanding, compared to net income available to common shareholders of $5.6 million, or diluted earnings per share of $0.15, based on 37,974,814 weighted average diluted shares outstanding, for the three months ended June 30, 2013.

Conference Call Webcast

You may access the LIVE webcast of Bancorp's Quarterly Earnings Conference Call at 8:00 AM EDT Thursday, July 24, 2014 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 866.318.8612, access code 72448153. You may listen to the replay of the webcast following the live call on Bancorp's investor relations website or telephonically until Thursday, July 31, 2014 by dialing 888.286.8010, access code 81705798.

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. 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 Six months ended
June 30, June 30,
2014   2013 2014   2013
(dollars in thousands except per share data)
Condensed income statement
Net interest income $ 27,915 $ 23,579 $ 54,483 $ 46,263
Provision for loan and lease losses   15,500   9,500   32,800   15,000
Non-interest income
Service fees on deposit accounts 1,377 1,084 2,587 2,144
Card payment and ACH processing fees 1,317 1,046 2,620 1,913
Prepaid card fees 12,898 11,531 26,366 23,505
Gain on sale of loans 5,212 5,748 10,696 7,926
Gain on sales of investment securities 159 476 400 743
Other than temporary impairment of investment securities - - - (20)
Leasing income 1,015 642 1,396 1,229
Debit card income 456 201 882 397
Affinity fees 668 850 1,202 1,706
Other non-interest income   608   784   1,716   1,951
Total non-interest income 23,710 22,362 47,865 41,494
Non-interest expense
Losses and write downs on other real estate owned (92) 815 (30) 1,066

BSA and lookback consulting expenses

9,204 - 9,204 -
Other non-interest expense   33,753   26,772   66,648   51,000
Total non-interest expense   42,865   27,587   75,822   52,066
Net income (loss) before income tax expense (6,740) 8,854 (6,274) 20,691
Income tax (benefit) expense   (1,194)   3,262   (1,026)   7,693
Net income (loss) available to common shareholders $ (5,546) $ 5,592 $ (5,248) $ 12,998
 
Basic earnings (loss) per share $ (0.15) $ 0.15 $ (0.14) $ 0.35
 
Diluted earnings (loss) per share $ (0.15) $ 0.15 $ (0.14) $ 0.34
Weighted average shares - basic 37,706,491 37,343,396 37,693,624 37,317,750
Weighted average shares - diluted 37,706,491 37,974,814 37,693,624 37,877,712
 
       
Balance sheet June 30, March 31, December 31, June 30,
2014   2014   2013   2013
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 15,192 $ 15,298 $ 33,883 $ 21,560
Interest earning deposits at Federal Reserve Bank 441,422 796,385 1,196,515 622,989
Securities sold under agreements to resell   15,906   24,926  

7,544

  40,240
Total cash and cash equivalents   472,520   836,609   1,237,942   684,789
 
Investment securities, available-for-sale, at fair value

1,459,626

1,411,708 1,253,117 1,021,848
Investment securities, held-to-maturity

97,130

97,149 97,205 95,662
Loans held for sale, at fair value 154,474 222,024 69,904 49,355
Loans, net of deferred fees and costs 2,049,561 2,044,004 1,958,445 1,967,382
Allowance for loan and lease losses   (46,945)   (46,409)   (38,182)   (40,274)
Loans, net   2,002,616   1,997,595   1,920,263   1,927,108
Federal Home Loan Bank & Atlantic Central Bankers Bank stock 3,409 3,209 3,209 3,209
Premises and equipment, net 16,236 15,692 15,659 13,709
Accrued interest receivable 14,508 14,715 13,131 12,360
Intangible assets, net 6,988 7,407 7,612 6,503
Other real estate owned 26,781 27,763 26,295 6,308
Deferred tax asset, net 24,606 27,451 30,415 27,613
Other assets   36,270   38,301   31,313   28,031
Total assets $ 4,315,164 $ 4,699,623 $ 4,706,065 $ 3,876,495
 
Liabilities:
Deposits
Demand and interest checking $ 3,563,447 $ 3,842,569 $ 3,722,602 $ 2,963,170
Savings and money market 307,927 393,329 536,162 469,238
Time deposits 8,962 9,115 9,773 12,502
Time deposits, $100,000 and over   1,474   2,195   4,452   5,747
Total deposits   3,881,810   4,247,208   4,272,989   3,450,657
 
Securities sold under agreements to repurchase 17,481 16,491 21,221 19,059
Accrued Interest Payable - - - 95
Subordinated debenture 13,401 13,401 13,401 13,401
Other liabilities   35,862   56,353   38,850   49,091
Total liabilities $ 3,948,554 $ 4,333,453 $ 4,346,461 $ 3,532,303
 
Shareholders' equity:
Common stock - authorized, 50,000,000 shares of $1.00 par value; 37,708,777 and 37,462,939 shares issued at June 30, 2014 and 2013, respectively 37,809 37,805 37,721 37,463
Treasury stock (100,000 shares) (866) (866) (866) (866)
Additional paid-in capital 296,523 295,824 294,576 286,321
Retained earnings 21,878 27,424 27,615 19,993
Accumulated other comprehensive income   11,266   5,983   558   1,281
Total shareholders' equity   366,610   366,170   359,604   344,192
 
Total liabilities and shareholders' equity $ 4,315,164 $ 4,699,623 $ 4,706,065 $ 3,876,495
 
   
Average balance sheet and net interest income Three months ended June 30, 2014 Three months ended June 30, 2013
(dollars in thousands) Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 2,177,072 $ 21,767 4.00% $ 1,991,622 $ 20,774 4.17%
Leases - bank qualified* 18,293 244 5.34% 13,800 208 6.03%
Investment securities-taxable 1,062,951 5,356 2.02% 836,299 3,801 1.82%
Investment securities-nontaxable* 459,164 4,548 3.96% 206,629 1,342 2.60%
Interest earning deposits at Federal Reserve Bank 651,002 411 0.25% 841,315 505 0.24%
Federal funds sold/securities purchased under agreement to resell 24,133 85 1.41% 33,761 98 1.16%
Net interest earning assets 4,392,615 32,411 2.95% 3,923,426 26,728 2.72%
 
Allowance for loan and lease losses (49,193) (36,596)
Other assets 132,332 85,476
$ 4,475,754 $ 3,972,306
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,698,142 $ 2,298 0.25% $ 3,083,831 $ 1,901 0.25%
Savings and money market 332,973 364 0.44% 482,722 528 0.44%
Time 10,844 33 1.22% 18,310 47 1.03%
Total deposits 4,041,959 2,695 0.27% 3,584,863 2,476 0.28%
 
Repurchase agreements 16,620 11 0.26% 17,057 12 0.28%
Subordinated debt 13,401 113 3.37% 13,401 118 3.52%
Total deposits and interest bearing liabilities 4,071,980 2,819 0.28% 3,615,321 2,606 0.29%
 
Other liabilities 15,007 9,379
Total liabilities 4,086,987 3,624,700
 
Shareholders' equity 388,767 347,606
$ 4,475,754 $ 3,972,306
Net interest income on tax equivalent basis* $ 29,592 $ 24,122
 
Tax equivalent adjustment 1,677 543
 
Net interest income $ 27,915 $ 23,579
Net interest margin * 2.69% 2.46%
     
* 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, 2014 Six months ended June 30, 2013
(dollars in thousands) Average     Average Average     Average
Assets: Balance Interest Rate Balance Interest Rate
Interest-earning assets:
Loans net of unearned fees and costs ** $ 2,159,727 $ 42,987 3.98% $ 1,960,399 $ 40,964 4.18%
Leases - bank qualified* 18,290 490 5.36% 14,096 407 5.77%
Investment securities-taxable 1,041,218 10,493 2.02% 759,899 7,288 1.92%
Investment securities-nontaxable* 425,512 7,756 3.65% 166,648 2,460 2.95%
Interest earning deposits at Federal Reserve Bank 951,983 1,175 0.25% 1,091,219 1,343 0.25%
Federal funds sold/securities purchased under agreement to resell 27,321 191 1.40% 27,107 122 0.90%
Net interest-earning assets 4,624,051 63,092 2.73% 4,019,368 52,584 2.62%
 
Allowance for loan and lease losses (43,900) (35,722)
Other assets 137,776 85,102
$ 4,717,927 $ 4,068,748
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,857,839 $ 4,535 0.24% $ 3,170,543 $ 3,767 0.24%
Savings and money market 415,122 868 0.42% 494,383 1,106 0.45%
Time 12,086 69 1.14% 19,607 101 1.03%
Total deposits 4,285,047 5,472 0.26% 3,684,533 4,974 0.27%
 
Short-term borrowings 11 - 0.00% - - 0.00%
Repurchase agreements 16,686 23 0.28% 16,413 26 0.32%
Subordinated debt 13,401 228 3.40% 13,401 318 4.75%
Total deposits and interest bearing liabilities 4,315,145 5,723 0.27% 3,714,347 5,318 0.29%
 
Other liabilities 18,593 10,455
Total liabilities 4,333,738 3,724,802
 
Shareholders' equity 384,189 343,946
$ 4,717,927 $ 4,068,748
Net interest income on tax equivalent basis* 57,369 47,266
 
Tax equivalent adjustment 2,886 1,003
 
Net interest income $ 54,483 $ 46,263
Net interest margin * 2.48% 2.35%
     
* Fully 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,
2014   2013 2013
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period $ 38,182 $ 33,040 $ 33,040
 
Loans charged-off:
Commercial 15,218 3,733 14,771
Construction 8,546 4,382 10,295
Lease financing 1 - 30
Residential mortgage 108 54 54
Consumer   561   186   488
Total   24,434   8,355   25,638
 
Recoveries:
Commercial 61 51 180
Construction 317 481 1,019
Lease financing - 8 8
Residential mortgage - - -
Consumer   19   49   73
Total   397   589   1,280
Net charge-offs 24,037 7,766 24,358
Provision charged to operations   32,800   15,000   29,500
 
Balance in allowance for loan and lease losses at end of period $ 46,945 $ 40,274 $ 38,182
Net charge-offs/average loans 1.10% 0.39% 1.21%
Net charge-offs/average loans (annualized) 2.21% 0.79% 1.21%
Net charge-offs/average assets 0.51% 0.19% 0.59%
 
Loan portfolio: June 30, March 31, December 31, June 30,
2014 2014 2013 2013
(dollars in thousands)
 
Commercial $ 476,799 $ 489,574 $ 450,113 $ 481,537
Commercial mortgage (1) 593,622 610,990 625,810 651,034
Construction   264,667   283,928   258,889   266,911
Total commercial loans 1,335,088 1,384,492 1,334,812 1,399,482
Direct lease financing 185,878 181,007 175,610 172,250
Residential mortgage 96,009 95,397 94,850 93,960
Consumer and other loans   422,835   375,818   346,334   295,576
2,039,810 2,036,714 1,951,606 1,961,268
Unamortized loan fees and costs   9,751   7,290   6,839   6,114
Total loans, net of deferred loan fees and costs $ 2,049,561 $ 2,044,004 $ 1,958,445 $ 1,967,382
 
Supplemental loan data:
Construction 1-4 family $ 40,226 $ 47,521 $ 48,394 $ 64,144
Commercial construction, acquisition and development   224,441   236,407   210,495   202,767
  $ 264,667 $ 283,928 $ 258,889 $ 266,911
 
(1) At June 30, 2014 our owner-occupied loans amounted to $219 million, or 36.9% 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 June 30, 2014
Bancorp 8.08% 13.17% 14.43%
The Bancorp Bank 6.73% 10.91% 12.17%
"Well capitalized" institution (under FDIC regulations) 5.00% 6.00% 10.00%
 
As of December 31, 2013
Bancorp 8.58% 14.57% 15.83%
The Bancorp Bank 6.72% 11.40% 12.66%
"Well capitalized" institution (under FDIC regulations) 5.00% 6.00% 10.00%
 
     
Three months ended Six months ended
June 30, June 30,
2014   2013 2014   2013
Selected operating ratios:

Return on average assets (annualized)

N/A 0.56 % N/A 0.64 %
Return on average equity (annualized) N/A 6.45 % N/A 7.62 %
Net interest margin 2.69 % 2.46 % 2.48 % 2.35 %
Efficiency ratio (1) 65.40 % 60.68 % 65.35 % 59.84 %
Book value per share $ 9.72 $ 9.21 $ 9.72 $ 9.21
 
June 30, March 31, December 31, June 30,
2014 2014 2013 2013
Asset quality ratios:
Nonperforming loans to total loans (2) 1.94 % 2.20 % 2.08 % 2.16 %
Nonperforming assets to total assets (2) 1.54 % 1.55 % 1.42 % 1.26 %
Allowance for loan and lease losses to total loans 2.29 % 2.27 % 1.95 % 2.05 %
 
Nonaccrual loans $ 38,714 $ 44,701 $ 40,551 $ 41,743
Other real estate owned   26,781     27,763     26,295     6,308  
Total nonperforming assets $ 65,495   $ 72,464   $ 66,846   $ 48,051  
 
Loans 90 days past due still accruing interest $ 1,031   $ 189   $ 110   $ 755  
 
Three months ended
June 30, March 31, December 31, June 30,
2014 2014 2013 2013
Gross dollar volume (GDV):
Prepaid card GDV $ 10,025,213   $ 11,791,386   $ 7,720,554   $ 7,651,849  
 

(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 the efficiency ratio to measure overhead as a percentage of revenue. Other companies may calculate the efficiency ratio 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.

 
   
Three months ended Six months ended
June 30, June 30,
2014   2013 2014   2013
Reconciliation of the efficiency ratio, a non-GAAP measure:
Non-interest expense $ 42,865 $ 27,587 $ 75,822 $ 52,066

Less: BSA and lookback consulting expenses

  (9,204)   -   (9,204)   -
Adjusted non-interest expense (a) 33,661 27,587 66,618 52,066
 
Net interest income 27,915 23,579 54,483 46,263
Non-interest income 23,710 22,362 47,865 41,494
Less: Gain on sale of securities   (159)   (476)   (400)   (743)
Adjusted net interest and non-interest income (b) $ 51,466 $ 45,465 $ 101,948 $ 87,014
 
(a) divided by (b) 65.40% 60.68% 65.35% 59.84%
 
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
 

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