The Bancorp, Inc. Reports First Quarter 2018 Financial Results

WILMINGTON, Del.--()--The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the first quarter of 2018.

Highlights

  • Net income from continuing operations rose 122% to $14.0 million for the quarter ended March 31, 2018 compared to the quarter ended March 31, 2017 and net income overall rose 78% to $14.1 million between those periods.
  • Return on Average Equity annualized for the quarter was 17.54% and Return on Average Assets was 1.30%.
  • Net interest income increased 21% to $30.1 million for the quarter ended March 31, 2018, compared to $24.9 million for the quarter ended March 31, 2017.
  • Interest income on security backed lines of credit (“SBLOC”) loans increased 48% to $6.5 million for the quarter ended March 31, 2018, compared to $4.4 million for the quarter ended March 31, 2017.
  • Net interest margin increased to 3.12% for the quarter ended March 31, 2018, compared to 2.70% for the quarter ended March 31, 2017.
  • Prepaid fees for the quarter ended March 31, 2018 increased to $14.3 million, or 5%, compared to the quarter ended March 31, 2017. Card payment and ACH processing fees increased 11% to $1.7 million during the same period.
  • Loans increased 16% to $1.46 billion at March 31, 2018, compared to $1.26 billion at March 31, 2017.
  • SBLOC loans increased 15% to $759.4 million at March 31, 2018, compared to $660.4 million at March 31, 2017.
  • Small Business Administration (“SBA”) loans increased 15% to $424.5 million at March 31, 2018, compared to $369.8 million at March 31, 2017.
  • Direct lease financing increased 6% to $385.5 million at March 31, 2018, compared to $362.7 million at March 31, 2017.
  • The rate on $4.06 billion of average deposits and interest bearing liabilities in the first quarter of 2018 was 0.52% with a rate of 0.66% for $2.22 billion of average prepaid card deposits.
  • Consolidated leverage ratio was 7.69% at March 31, 2018. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.
  • Book value per common share at March 31, 2018 was $5.87 per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “The first quarter was a great start to a new year. Bancorp earned $0.25 cents a share on net revenue of $59.0 million and expenses of $39.0 million. The commitment of our team to execute on our business plan is having an impact on our operating performance and we continue to show momentum in our results. Along with revenue and client progress in each of our business lines, we have continued to strengthen our overall platform with the goal of greater efficiency and productivity enhanced by a higher level of risk management across our enterprise.”

The Bancorp reported net income of $14.1 million, or $0.25 earnings per diluted share, for the quarter ended March 31, 2018, compared to net income of $8.0 million, or $0.14 income per diluted share, for the quarter ended March 31, 2017. Income from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales or repayment of the remaining assets in The Bancorp’s discontinued operations. Tier one capital to assets, tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 ratios were 7.69%, 18.43%, 18.82% and 18.43%, 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 27, 2018 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 4846178. 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 4, 2018 by dialing 855.859.2056, access code 4846178.

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 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 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.

 
The Bancorp, Inc.
Financial highlights
(unaudited)
  Three months ended   Year ended
March 31, December 31,
Condensed income statement 2018   2017 2017
(dollars in thousands except per share data)
 
Net interest income $ 30,074   $ 24,877   $ 106,680  
Provision for loan and lease losses   700     1,000     2,920  
Non-interest income
Service fees on deposit accounts 1,576 1,675 6,788
Card payment and ACH processing fees 1,692 1,528 6,318
Prepaid card fees 14,282 13,547 53,367
Gain on sale of loans 11,729 5,383 17,919
Gain on sale of investment securities 26 503 2,231
Change in value of investment in unconsolidated entity (1,171 ) (19 ) (20 )
Leasing income 487 551 2,663
Affinity fees 102 1,021 1,545
Gain on sale of health savings accounts - - 2,538
Loss from sale of European prepaid card operations - - (3,437 )
Other non-interest income   372     30     1,636  
Total non-interest income 29,095 24,219 91,548
Non-interest expense
Salaries and employee benefits 21,073 18,006 75,832
Data processing expense 2,005 3,480 10,159
One time fee to exit data processing contract - - 1,136
Legal expense 2,431 1,738 8,072
FDIC Insurance 2,219 2,065 10,097
Software 3,291 3,228 12,597
Losses and write downs on other real estate owned 45 - -
Civil money penalty (290 ) - 2,290
Other non-interest expense   8,275     9,266     34,731  
Total non-interest expense   39,049     37,783     154,914  
Income from continuing operations before income tax expense 19,420 10,313 40,394
Income tax expense   5,399     4,011     23,056  
Net income from continuing operations 14,021 6,302 17,338
Discontinued operations
Income from discontinued operations before income taxes 156 2,667 4,059
Income tax expense (benefit)   37     1,006     (276 )
Net income from discontinued operations, net of tax   119     1,661     4,335  
Net income available to common shareholders $ 14,140   $ 7,963   $ 21,673  
 
Net income per share from continuing operations - basic $ 0.25   $ 0.11   $ 0.31  
Net income per share from discontinued operations - basic $ -   $ 0.03   $ 0.08  
Net income per share - basic $ 0.25   $ 0.14   $ 0.39  
 
Net income per share from continuing operations - diluted $ 0.25   $ 0.11   $ 0.31  
Net income per share from discontinued operations - diluted $ -   $ 0.03   $ 0.08  
Net income per share - diluted $ 0.25   $ 0.14   $ 0.39  
Weighted average shares - basic 56,141,830 55,534,279 55,686,507
Weighted average shares - diluted 57,023,121 55,752,496 56,176,269
 
       
Balance sheet March 31, December 31, September 30, March 31,
2018 2017 2017 2017
(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks $ 1,999 $ 3,152 $ 5,813 $ 4,671
Interest earning deposits at Federal Reserve Bank 508,847 841,471 328,023 669,042
Securities sold under agreements to resell   64,312     64,312     65,095     65,248  
Total cash and cash equivalents   575,158     908,935     398,931     738,961  
 
Investment securities, available-for-sale, at fair value 1,381,020 1,294,484 1,196,956 1,215,892
Investment securities, held-to-maturity 86,370 86,380 86,402 93,443
Loans held for sale, at fair value 349,806 503,316 380,272 480,913
Loans, net of deferred fees and costs 1,463,064 1,392,228 1,374,060 1,264,127
Allowance for loan and lease losses   (7,285 )   (7,096 )   (7,283 )   (7,294 )
Loans, net   1,455,779     1,385,132     1,366,777     1,256,833  
Federal Home Loan Bank & Atlantic Community Bancshares stock 991 991 991 2,589
Premises and equipment, net 19,052 20,051 21,087 22,993
Accrued interest receivable 11,778 10,900 10,131 10,296
Intangible assets, net 4,995 5,377 5,185 5,844
Other real estate owned 405 450 - 104
Deferred tax asset, net 38,139 34,802 53,017 54,155
Investment in unconsolidated entity 70,016 74,473 107,711 125,982
Assets held for sale from discontinued operations 289,038 304,313 314,994 341,286
Other assets   86,553     78,543     51,164     55,351  
Total assets $ 4,369,100   $ 4,708,147   $ 3,993,618   $ 4,404,642  
 
Liabilities:
Deposits
Demand and interest checking $ 3,461,881 $ 3,806,965 $ 3,113,212 $ 3,607,076
Savings and money market   493,288     453,877     452,183     428,723  
Total deposits   3,955,169     4,260,842     3,565,395     4,035,799  
 
Securities sold under agreements to repurchase 182 217 180 273
Subordinated debenture 13,401 13,401 13,401 13,401
Long-term borrowings 42,157 42,323 42,482 -
Other liabilities   28,299     67,215     32,699     45,400  
Total liabilities $ 4,039,209   $ 4,383,998   $ 3,654,157   $ 4,094,873  
 
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,307,088 and 55,757,559 shares issued at March 31, 2018 and 2017, respectively 56,307 55,861 55,860 55,758
Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 )
Additional paid-in capital 363,605 363,196 362,340 360,801
Accumulated deficit (75,345 ) (89,485 ) (77,850 ) (103,978 )
Accumulated other comprehensive loss   (13,809 )   (4,557 )   (23 )   (1,946 )
Total shareholders' equity   329,891     324,149     339,461     309,769  
 
Total liabilities and shareholders' equity $ 4,369,100   $ 4,708,147   $ 3,993,618   $ 4,404,642  
 
 
Average balance sheet and net interest income Three months ended March 31, 2018 Three months ended March 31, 2017
  (dollars in thousands)
Average   Average Average   Average
Assets: Balance Interest Rate Balance Interest Rate
Interest earning assets:
Loans net of unearned fees and costs ** $ 1,947,320 $ 23,039 4.73 % $ 1,634,136 $ 17,371 4.25 %
Leases - bank qualified* 21,036 334 6.35 % 21,180 396 7.48 %
Investment securities-taxable 1,375,568 9,699 2.82 % 1,325,247 9,005 2.72 %
Investment securities-nontaxable* 9,893 75 3.03 % 15,423 111 2.88 %
Interest earning deposits at Federal Reserve Bank 502,233 1,832 1.46 % 771,529 1,516 0.79 %
Federal funds sold and securities purchased under agreement to resell 64,216   414 2.58 % 49,829   227 1.82 %
Net interest earning assets 3,920,266 35,393 3.61 % 3,817,344 28,626 3.00 %
 
Allowance for loan and lease losses (6,976 ) (6,221 )
Assets held for sale from discontinued operations 294,708 2,527 3.43 % 335,929 3,361 4.00 %
Other assets 203,095   280,505  
$ 4,411,093   $ 4,427,557  
 
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking $ 3,535,791 $ 4,301 0.49 % $ 3,657,413 $ 2,787 0.30 %
Savings and money market 487,380   668 0.55 % 429,713   647 0.60 %
Total deposits 4,023,171 4,969 0.49 % 4,087,126 3,434 0.34 %
 
Short-term borrowings 24,844 104 1.67 % - - 0.00 %
Securities sold under agreements to repurchase 205 - 0.00 % 275 - 0.00 %
Subordinated debentures 13,401   160 4.78 % 13,401   138 4.12 %
Total deposits and interest bearing liabilities 4,061,621 5,233 0.52 % 4,100,802 3,572 0.35 %
 
Other liabilities 22,452   20,234  
Total liabilities 4,084,073 4,121,036
 
Shareholders' equity 327,020   306,521  
$ 4,411,093   $ 4,427,557  
Net interest income on tax equivalent basis* $ 32,687 $ 28,415
 
Tax equivalent adjustment 86 177
 
Net interest income $ 32,601 $ 28,238
Net interest margin * 3.12 % 2.70 %
           
* Full taxable equivalent basis, using a 21% statutory tax rate.
** Includes loans held for sale.
 
     
Allowance for loan and lease losses: Three months ended Year ended
March 31,   March 31, December 31,
2018 2017 2017
(dollars in thousands)
 
Balance in the allowance for loan and lease losses at beginning of period (1) $ 7,096   $ 6,332   $ 6,332  
 
Loans charged-off:
SBA non-real estate 388 - 1,171
SBA commercial mortgage 157 - -
Direct lease financing 56 35 926
Other consumer loans   13     12     110  
Total   614     47     2,207  
 
Recoveries:
SBA non-real estate 40 - 18
SBA commercial mortgage 5 - -
Direct lease financing 58 - 7
Other consumer loans   -     9     26  
Total   103     9     51  
Net charge-offs 511 38 2,156
Provision charged to operations   700     1,000     2,920  
 
Balance in allowance for loan and lease losses at end of period $ 7,285   $ 7,294   $ 7,096  
Net charge-offs/average loans 0.03 % 0.00 % 0.12 %
Net charge-offs/average loans (annualized) 0.11 % 0.01 % 0.12 %
Net charge-offs/average assets 0.01 % 0.00 % 0.05 %
(1) Excludes activity from assets held for sale.
 
Loan portfolio: March 31, December 31, September 30, March 31,
2018 2017 2017 2017
(dollars in thousands)
 
SBA non-real estate $ 75,225 $ 70,379 $ 71,094 $ 74,699
SBA commercial mortgage 149,227 142,086 132,997 114,703
SBA construction   20,143     16,740     14,205     12,985
Total SBA loans 244,595 229,205 218,296 202,387
Direct lease financing 385,467 377,660 368,661 362,688
SBLOC 759,369 730,462 720,279 660,423
Other specialty lending 45,729 30,720 36,664 12,443
Other consumer loans   17,416     14,133     20,107     16,318
1,452,576 1,382,180 1,364,008 1,254,259
Unamortized loan fees and costs   10,488     10,048     10,052     9,868
Total loans, net of deferred loan fees and costs $ 1,463,064   $ 1,392,228   $ 1,374,060   $ 1,264,127
 
Small business lending portfolio: March 31, December 31, September 30, March 31,
2018 2017 2017 2017
(dollars in thousands)
 
SBA loans, including deferred fees and costs 252,457 236,724 225,909 209,980
SBA loans included in HFS   172,030     165,177     160,855     159,831
Total SBA loans $ 424,487   $ 401,901   $ 386,764   $ 369,811
 
       
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, 2018
The Bancorp, Inc. 7.69 % 18.43 % 18.82 % 18.43 %
The Bancorp Bank 7.31 % 17.84 % 18.23 % 17.84 %
"Well capitalized" institution (under FDIC regulations) 5.00 % 8.00 % 10.00 % 6.50 %
 
As of December 31, 2017
The Bancorp, Inc. 7.90 % 16.73 % 17.09 % 16.73 %
The Bancorp Bank 7.61 % 16.23 % 16.59 % 16.23 %
"Well capitalized" institution (under FDIC regulations) 5.00 % 8.00 % 10.00 % 6.50 %
 
  Three months ended   Year ended  
March 31, December 31,
2018   2017 2017
Selected operating ratios:
Return on average assets (1) 1.30 % 0.73 % 0.52 %
Return on average equity (1) 17.54 % 10.54 % 6.96 %
Net interest margin 3.12 % 2.70 % 3.04 %
Book value per share $ 5.87 $ 5.57 $ 5.81
 
(1) Annualized
 
March 31, December 31, September 30, March 31,
2018 2017 2017 2017
Nonperforming loans to total loans (2) 0.42 % 0.30 % 0.39 % 0.55 %
Nonperforming assets to total assets (2) 0.15 % 0.10 % 0.13 % 0.16 %
Allowance for loan and lease losses to total loans 0.50 % 0.51 % 0.53 % 0.58 %
 
Nonaccrual loans $ 3,516 $ 3,996 $ 4,953 $ 5,369
Other real estate owned   405     450     -     104  
Total nonperforming assets $ 3,921   $ 4,446   $ 4,953   $ 5,473  
 
Loans 90 days past due still accruing interest (3) $ 2,643   $ 227   $ 354   $ 1,534  

(2)

 

Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.

(3)

An uptick in delinquencies less than 90 days delinquent at March 31, 2018 reflected the maturity of a note for an $8 million loan in New York City which matured in January 2018. We are in the process of accumulating information for potential renewal or to otherwise address disposition. The estimated loan to value for this loan is 78% based upon a first quarter 2018 appraisal.

 
Three months ended
March 31,   December 31,   September 30,   March 31,
2018 2017 2017 2017
(in thousands)
Gross dollar volume (GDV) (4):
Prepaid card GDV $ 13,402,496 $ 10,963,456 $ 10,970,085 $ 13,342,180
 

(4)

 

Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.

           
Business line quarterly summary:
Quarter ended March 31, 2018
(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

 

Linked
quarter
annualized

Loans

Institutional banking** 3.50 % $ 759 15 % 16 % $ 1.5 16 % nm
SBA 5.10 % 424 15 % 22 % - - -
Leasing 5.80 % 385 6 % 8 % 0.5 -12 % nm
Commercial real estate securitization 5.65 %     178 nm nm 11.7 118 % nm
Weighted average yield 4.61 % $ 1,746
 

Deposits

Payment solutions (primarily prepaid) 0.66 % $ 2,216 2 % 12 % $ 14.3 5 % 5 %
Card payment and ACH processing 0.33 % 900 3 % 28 % 1.7 11 % nm
 
* Loan categories based on period end balance and deposit categories based on average quarterly balances.
** Includes SBLOC loans and IRA fees.
 
   
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 and 2016 (42 ) (42 )
2018 marks (1 ) (1 )
Payments received   (80 )
March 31, 2018 Bancorp book value** $ 70
 
Total marks $ (101 )
Divided by:
Original Walnut Street loan balance $ 267
Percentage of total mark to original balance 38 %
 
* 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 26% of expected principal recoveries were from loans and properties pending liquidation or other resolutions.

 
Walnut Street portfolio composition as of March 31, 2018
     
Collateral type       % of Portfolio
Commercial real estate non-owner occupied
Retail 47.2 %
Office 15.1 %
Other 3.5 %
Construction and land 23.1 %
Commercial non real estate and industrial 0.5 %
First mortgage residential owner occupied 5.6 %
First mortgage residential non-owner occupied 4.2 %
Other       0.8 %
Total 100.0 %
 
Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2018
     
Discontinued Cumulative % to original
loan principal   marks   principal
(dollars in millions)
 
Commercial loan discontinued principal before marks $ 210
Florida mall held in discontinued other real estate owned 42 27
Previous mark charges 33 33
Mark at March 31, 2018       15
Total $ 285   $ 75 26 %
Analysis of discontinued loan relationships of March 31, 2018          
 
Performing Nonperforming Total Performing Nonperforming Total
loan principal(1)   loan principal(2)   loan principal   loan marks   loan marks   marks
(in millions)
 
8 loan relationships > $8 million $ 100 $ 45 $ 145 $ 5 $ - $ 5
Loan relationships < $8 million   40     10     50   4     6     10
$ 140   $ 55   $ 195 $ 9   $ 6   $ 15
 

 

 

(1)

 

Performing discontinued loans included a $17 million loan which was delinquent 60 days as of March 31, 2018. The loan is secured by multiple commercial real estate properties which cumulatively have a 95% loan to value.

(2)

The vast majority of the increase to $55 million in non-performing discontinued loans at March 31, 2018 from $16 million at year end 2017 resulted from the Bank’s largest credit exposure. The loan has unpaid principal of $36.9 million and is collateralized by a hotel under construction and parking lot in the southeastern United States. Based upon an independent first quarter 2018 appraisal, the loan to value is approximately 80% on an as is basis, with personal guarantees of certain of the borrower’s principals. The loan became delinquent in the first quarter of 2018 and the borrower, a development corporation, subsequently declared bankruptcy. The Bank is pursuing collection and we currently believe that there will be no loss of principal.

 
Quarterly activity for commercial loan discontinued principal
 
Commercial
loan principal
(in millions)
 
Commercial loan discontinued principal December 31, 2017 before marks $ 225
2018 net paydowns   (15 )
Commercial loan discontinued principal March 31, 2018 before marks $ 210
Marks March 31, 2018   (15 )
Net commercial loan exposure March 31, 2018 $ 195
Residential mortgages   59  
Net loans $ 254
Florida mall in other real estate owned 15
Other 29 properties in other real estate owned 19
Other assets related to discontinued operations   1  
Total discontinued assets at March 31, 2018 $ 289  
 
Discontinued commercial loan composition March 31, 2018
     
Collateral type

Unpaid principal
balance

 

Mark March 31,
2018

 

Mark as % of
portfolio

(dollars in millions)
Commercial real estate - non-owner occupied:
Retail $ 11 $ 0.7 6 %
Office 8 0.7 9 %
Other 42 0.7 2 %
Construction and land 80 1.3 2 %
Commercial non-real estate and industrial 14 1.9 13 %
1 to 4 family construction 25 4.4 18 %
First mortgage residential non-owner occupied 18 4.5 25 %
Commercial real estate owner occupied:
Retail 9 0.4 4 %
Office - - -
Other 1 - 0 %
Residential junior mortgage 1 - 0 %
Other     1   - 0 %
Total $ 210
Less: mark   (15 )    
Net commercial loan exposure March 31, 2018 $ 195 $ 14.6 7 %

Contacts

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

Contacts

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