TBBK Bancorp Inc

The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for third quarter 2014.

Bancorp reported net income from continuing operations of $1.5 million for third quarter 2014 compared to net income of $2.2 million from continuing operations in third quarter 2013, and respective diluted earnings per share of $.04 and $.06. Pretax income from continuing operations amounted to $1.5 million for third quarter 2014, and reflected $2.7 million of Bank Secrecy Act and look back consulting expenses. Income from continuing operations does not include any income which would result upon the reinvestment of the proceeds of the planned sale of $1.2 billion of commercial loans as explained in the chief executive officer’s comments below. As a result of discontinued operations in third quarter 2014, Bancorp recorded a loss of $16.8 million or $.45 diluted loss per share for that period, compared to net income of $4.8 million or $.13 diluted earnings per share in third quarter 2013.

Financial Highlights

Discontinued Operations:

• Bancorp has decided to discontinue its commercial lending operations. The loans which constitute that portfolio are in the process of disposition. This represents a strategic continuation of the shift to a focus on Bancorp’s specialty lending including small fleet leasing, security backed lines of credit (“SBLOC”), CMBS origination and SBA lending. The discontinuance resulted in a charge to earnings of $18.3 million, net of tax.

Continuing Operations:

• 44% increase in net interest income to $15.4 million compared to $10.7 million in third quarter 2013.
• 21% increase in prepaid card fees to $12.3 million compared to $10.2 million in third quarter 2013.
• 33% increase in card processing and ACH fees to $1.4 million.
• Increases over prior year targeted loan balances: SBA lending 65%, SBLOC 44%, Leasing 14%.Loans in continuing operations and loans held for sale totaled $1.0 billion at September 30, 2014.
• Tax equivalent yield on earning assets increased to 2.65% compared to 2.19% in third quarter 2013.
• Tier one capital to assets, tier one capital to risk assets and total capital to risk assets were 8.10%, 12.95% and 13.11% , compared to well capitalized minimums of 5%, 6% and 10%.

Betsy Z. Cohen, Bancorp’s Chief Executive Officer, said, “As part of our strategic evaluation of the asset composition of the bank, we have decided to replace our commercial lending with a greater emphasis on the specialty lending segments which we have been describing over the last 12 months - small fleet leasing, security backed lines of credit and SBA lending. As a result of our greater emphasis on these targeted specialty lending segments, they have experienced substantial 12 month over 12 month growth rates as follows: SBA 65%, SBLOC (Security Backed Lines of Credit) 44% and leasing 14%. At September 30, 2014, the total outstanding for these continuing lines and the CMBS loans held for sale, on which we also earn a spread, exceeded one billion dollars. Our decision was based upon our expectation that the specialty lending segments will provide better risk adjusted yields, greater granularity compared to various types of commercial lending and, thus, a more predictable earnings stream. During the transition of our commercial lending operation to our targeted specialty lending operations, we expect that, on an interim basis, our investment securities portfolio will expand.

"In connection with the discontinuance of our commercial loan portfolio and the resulting charge to earnings, an independent third party expert has provided a fair value analysis of the commercial loan portfolio for purposes of reflecting discontinued assets on our balance sheet. This analysis resulted in a valuation of the approximate $1.2 billion discontinued portfolio, and the related valuation adjustment and the operations of this segment are reflected in the quarterly loss of $16.8 million. This valuation is an estimate only, based on current circumstances and the actual sales price could be significantly greater or lesser than the estimate, which could materially affect results of operations in future quarters. We have commenced the process of seeking buyers for our commercial loan portfolio. The income and other financial statements segregate discontinued operations from continuing operations. While continuing operations exclude interest income on the commercial loan portfolio, that line item does not include any income from reinvestment of proceeds from the sale of the commercial loan portfolio. Based upon the current interest rate environment, our investment advisor has modeled portfolio reinvestment at a 1.75% yield; however, that yield could be materially more or less at the actual time of reinvestment, as a result of the then-current interest rate environment, the sectors in which we invest or other economic factors. Book value at September 30, 2014 amounted to $9.45 compared to $9.39 at September 30, 2013. The Bank remains well capitalized.”

Financial Results

Bancorp reported net income from continuing operations of $1.5 million for third quarter 2014 compared to net income of $2.2 million from continuing operations in third quarter 2013, and respective diluted earnings per share of $.04 and $.06. After discontinued operations, Bancorp reported net loss to common shareholders for the three months ended September 30, 2014 of $16.8 million, or loss per share of $0.45, based on 37,708,862 weighted average shares outstanding, compared to net income available to common shareholders of $4.8 million, or diluted earnings per share of $0.13, based on 38,283,317 weighted average diluted shares outstanding, for the three months ended September 30, 2013. The $16.8 million loss reflected a 51% effective income tax benefit based upon an estimated annualized tax rate. That tax rate exceeds the 35% statutory tax rate primarily due to the impact of tax exempt municipal bond interest.

Conference Call Webcast

You may access the LIVE webcast of Bancorp's Quarterly Earnings Conference Call at 8:00 AM EDT Friday, October 31, 2014 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 877.280.4962, access code 69319357. You may listen to the replay of the webcast following the live call on Bancorp's investor relations website or telephonically until Friday, November 7, 2014 by dialing 888.286.8010, access code 19205886.

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.

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, 2014   2013 2014   2013 (dollars in thousands except per share data) Condensed income statement Net interest income $ 15,380   $ 10,676 $ 44,118   $ 29,370   Provision for loan and lease losses   965     379   3,420     461   Non-interest income Service fees on deposit accounts 1,640 1,238 4,146 3,296 Card payment and ACH processing fees 1,369 1,027 3,989 2,940 Prepaid card fees 12,307 10,177 38,673 33,682 Gain on sale of loans 2,772 4,739 13,468 12,665 Gain (loss) on sales of investment securities (35 ) 42 365 785 Other than temporary impairment of investment securities - - - (20 ) Leasing income 840 624 2,236 1,853 Debit card income 414 158 1,296 555 Affinity fees 649 722 1,851 2,428 Other non-interest income   299     449   1,217     1,936   Total non-interest income 20,255 19,176 67,241 60,120 Non-interest expense Bank Secrecy Act and lookback consulting expenses 2,749 - 4,918 - Other non-interest expense   30,386     26,384   93,437     74,686   Total non-interest expense   33,135     26,384   98,355     74,686   Income from continuing operations before income tax expense 1,535 3,089 9,584 14,343 Income tax expense   45     935   282     4,344   Net income from continuing operations 1,490 2,154 9,302 9,999

Net income (loss) from discontinued operations, net of tax

  (18,295 )   2,634   (25,471 )   7,787   Net income (loss) available to common shareholders $ (16,805 ) $ 4,788 $ (16,169 ) $ 17,786     Net income per share from continuing operations - basic $ 0.04   $ 0.06 $ 0.25   $ 0.27   Net income (loss) per share from discontinued operations - basic $ (0.49 ) $ 0.07 $ (0.68 ) $ 0.21   Net income (loss) per share - basic $ (0.45 ) $ 0.13 $ (0.43 ) $ 0.48     Net income per share from continuing operations - diluted $ 0.04   $ 0.06 $ 0.25   $ 0.26   Net income (loss) per share from discontinued operations - diluted $ (0.49 ) $ 0.07 $ (0.68 ) $ 0.21   Net income (loss) per share - diluted $ (0.45 ) $ 0.13 $ (0.43 ) $ 0.47   Weighted average shares - basic 37,708,862 37,440,838 37,698,759 37,359,230 Weighted average shares - diluted 37,708,862 38,283,317 37,698,759 37,978,108           Balance sheet September 30, June 30, December 31, September 30, 2014 2014 2013 2013 (dollars in thousands) Assets: Cash and cash equivalents Cash and due from banks $ 9,913 $ 13,288 $ 31,890 $ 30,056 Interest earning deposits at Federal Reserve Bank 430,117 441,422 1,196,515 657,618 Securities sold under agreements to resell   55,450     15,906     7,544     40,811   Total cash and cash equivalents   495,480     470,616     1,235,949     728,485     Investment securities, available-for-sale, at fair value 1,442,049 1,459,626 1,253,117 1,083,154 Investment securities, held-to-maturity 96,951 97,130 97,205 97,459 Loans held for sale, at fair value 136,115 154,474 69,904 25,557 Loans, net of deferred fees and costs 866,765 812,164 655,320 636,038 Allowance for loan and lease losses   (4,390 )   (4,082 )   (2,164 )   (2,516 ) Loans, net   862,375     808,082     653,156     633,522   Federal Home Loan Bank & Atlantic Central Bankers Bank stock 3,409 3,409 3,209 3,209 Premises and equipment, net 17,536 16,236 15,659 14,252 Accrued interest receivable 11,272 10,692 8,747 8,157 Intangible assets, net 6,573 6,988 7,612 6,253 Other real estate owned 725 - - - Deferred tax asset, net 41,601 24,606 30,415 26,434 Assets held for sale 1,143,380 1,227,215 1,299,914 1,345,530 Other assets   39,046     36,089     31,178     28,271   Total assets $ 4,296,512   $ 4,315,163   $ 4,706,065   $ 4,000,283     Liabilities: Deposits Demand and interest checking $ 3,412,593 $ 3,424,719 $ 3,585,241 $ 2,923,591 Savings and money market 241,518 226,085 434,834 407,179 Time deposits 24 24 142 142 Time deposits, $100,000 and over   -     -     100     101   Total deposits   3,654,135     3,650,828     4,020,317     3,331,013     Securities sold under agreements to repurchase 21,496 17,481 21,221 22,057 Accrued interest payable - - - 73 Subordinated debenture 13,401 13,401 13,401 13,401 Liabilities held for sale 227,898 231,587 253,203 238,614 Other liabilities   23,194     29,371     38,319     41,792   Total liabilities $ 3,940,124   $ 3,942,668   $ 4,346,461   $ 3,646,950     Shareholders' equity: Common stock - authorized, 50,000,000 shares of $1.00 par value; 37,808,862 and 37,720,945 shares issued at September 30, 2014 and 2013, respectively 37,809 37,809 37,721 37,721 Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 ) Additional paid-in capital 297,122 296,523 294,576 292,715 Retained earnings 10,955 27,763 27,615 20,291 Accumulated other comprehensive income   11,368     11,266     558     3,472   Total shareholders' equity   356,388     372,495     359,604     353,333     Total liabilities and shareholders' equity $ 4,296,512   $ 4,315,163   $ 4,706,065   $ 4,000,283         Average balance sheet and net interest income Three months ended September 30, 2014 Three months ended September 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 ** $ 907,691 $ 9,032 3.98 % $ 658,139 $ 7,058 4.29 % Leases - bank qualified* 16,706 218 5.22 % 17,894 260 5.81 % Investment securities-taxable 1,029,544 5,311 2.06 % 837,700 4,057 1.94 % Investment securities-nontaxable* 526,393 4,858 3.69 % 297,301 2,040 2.74 % Interest earning deposits at Federal Reserve Bank 477,609 285 0.24 % 702,492 438 0.25 % Federal funds sold/securities purchased under agreement to resell   31,153     105 1.35 %   44,289     157 1.42 % Net interest earning assets 2,989,096 19,809 2.65 % 2,557,815 14,010 2.19 %   Allowance for loan and lease losses (8,473 ) (4,850 ) Assets held for sale 1,227,796 12,689 4.13 % 1,355,442 13,618 4.02 % Other assets   85,541     76,321   $ 4,293,960   $ 3,984,728     Liabilities and Shareholders' Equity: Deposits: Demand and interest checking $ 3,389,692 $ 2,233 0.26 % $ 2,881,927 $ 1,999 0.28 % Savings and money market   221,604     290 0.52 %   352,831     402 0.46 % Total deposits 3,611,296 2,523 0.28 % 3,234,758 2,401 0.30 %   Repurchase agreements 18,396 13 0.28 % 19,771 13 0.26 % Subordinated debt   13,401     116 3.46 %   13,401     115 3.43 % Total deposits and interest bearing liabilities 3,643,093 2,652 0.29 % 3,267,930 2,529 0.31 %   Liabilities held for sale 272,220 112 0.16 % 369,576 177 0.19 % Other liabilities   14,585     2,896   Total liabilities 3,929,898 3,640,402   Shareholders' equity   364,062     344,326   $ 4,293,960   $ 3,984,728   Net interest income on tax equivalent basis* $ 29,734 $ 24,922   Tax equivalent adjustment   1,776   805   Net interest income $ 27,958 $ 24,117 Net interest margin * 2.81 % 2.53 %   * Full taxable equivalent basis using a 35% statutory tax rate. ** Includes loans held for sale.       Average balance sheet and net interest income Nine months ended September 30, 2014 Nine months ended September 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 ** $ 858,829 $ 25,977 4.03 % $ 611,251 $ 20,025 4.37 % Leases - bank qualified* 17,756 708 5.32 % 15,376 668 5.79 % Investment securities-taxable 1,037,344 15,804 2.03 % 785,973 11,345 1.92 % Investment securities-nontaxable* 459,508 12,613 3.66 % 210,678 4,499 2.85 % Interest earning deposits at Federal Reserve Bank 793,560 1,460 0.25 % 960,220 1,781 0.25 % Federal funds sold/securities purchased under agreement to resell   28,612     296 1.38 %   32,897     279 1.13 % Net interest-earning assets 3,195,609 56,858 2.37 % 2,616,395 38,597 1.97 %   Allowance for loan and lease losses (3,492 ) (2,359 ) Assets held for sale 1,285,922 38,732 4.02 % 1,350,838 41,615 4.11 % Other assets   96,627     75,955   $ 4,574,666   $ 4,040,829     Liabilities and Shareholders' Equity: Deposits: Demand and interest checking $ 3,569,670 $ 6,721 0.25 % $ 2,933,218 $ 5,725 0.26 % Savings and money market   271,621     976 0.48 %   349,437     1,222 0.47 % Total deposits 3,841,291 7,697 0.27 % 3,282,655 6,947 0.28 %   Short-term borrowings 7 - 0.00 % - - 0.00 % Repurchase agreements 17,262 37 0.29 % 17,545 39 0.30 % Subordinated debt   13,401     344 3.42 %   13,401     433 4.31 % Total deposits and interest bearing liabilities 3,871,961 8,078 0.28 % 3,313,601 7,419 0.30 %   Liabilities held for sale 308,465 410 0.18 % 375,131 605 0.22 % Other liabilities   16,839     7,963   Total liabilities 4,197,265 3,696,695   Shareholders' equity   377,401     344,134   $ 4,574,666   $ 4,040,829   Net interest income on tax equivalent basis*   87,102   72,188   Tax equivalent adjustment   4,662   1,808   Net interest income $ 82,440 $ 70,380 Net interest margin * 2.59 % 2.41 %   * Fully taxable equivalent basis using a 35% statutory tax rate ** Includes loans held for sale.         Allowance for loan and lease losses: Nine months ended Year ended September 30,   September 30, December 31, 2014 2013 2013 (dollars in thousands)   Balance in the allowance for loan and lease losses at beginning of period (1) $ 2,163   $ 2,381   $ 2,381     Loans charged-off: SBA non real estate, student loan commercial and commercial mortgage 42 2 44 SBA construction - - - Direct lease financing 323 - 30 SBLOC and other consumer loans   846     354     446   Total   1,211     356     520     Recoveries: SBA non real estate, student loan commercial and commercial mortgage - - - SBA construction - - - Direct lease financing - 8 8 SBLOC and other consumer loans   18     22     53   Total   18     30     61   Net charge-offs 1,193 326 459 Provision charged to operations   3,420     461     241     Balance in allowance for loan and lease losses at end of period $ 4,390   $ 2,516   $ 2,163   Net charge-offs/average loans 0.14 % 0.05 % 0.07 % Net charge-offs/average loans (annualized) 0.18 % 0.07 % 0.07 % Net charge-offs/average assets 0.03 % 0.01 % 0.01 % (1) Excludes activity from assets held for sale   Loan portfolio: September 30, June 30, December 31, September 30, 2014 2014 2013 2013 (dollars in thousands)   SBA non real estate and student loan commercial $ 96,079 $ 97,445 $ 53,391 $ 59,325 SBA commercial mortgage 95,492 90,316 75,666 62,911 SBA construction   16,472     9,936     51     - Total commercial loans 208,043 197,697 129,108 122,236 Direct lease financing 201,825 185,877 175,610 177,797 SBLOC and other consumer loans   448,497     420,421     345,703     331,697 858,365 803,995 650,421 631,730 Unamortized loan fees and costs   8,400     8,169     4,899     4,308 Total loans, net of deferred loan fees and costs $ 866,765   $ 812,164   $ 655,320   $ 636,038

(1) Security backed lines of credit

      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, 2014 Bancorp 8.10 % 12.95 % 13.11 % The Bancorp Bank 7.51 % 12.03 % 12.19 % "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 Nine months ended September 30, September 30, 2014   2013 2014   2013 Selected operating ratios: Return on average assets (annualized) nm 0.48 % nm 0.59 % Return on average equity (annualized) nm 5.52 % nm 6.91 % Net interest margin 2.81 % 2.53 % 2.59 % 2.41 % Book value per share $ 9.45 $ 9.39 $ 9.45 $ 9.39   September 30, June 30, December 31, September 30, 2014 2014 2013 2013 Asset quality ratios: Nonperforming loans to total loans (1) 0.55 % 0.43 % 0.25 % 0.28 % Nonperforming assets to total assets (1) 0.13 % 0.08 % 0.03 % 0.05 % Allowance for loan and lease losses to total loans 0.51 % 0.50 % 0.33 % 0.40 %   Nonaccrual loans $ 4,495 $ 3,413 $ 1,524 $ 1,602 Other real estate owned   725     -     -     -   Total nonperforming assets $ 5,220   $ 3,413   $ 1,524   $ 1,602     Loans 90 days past due still accruing interest $ 264   $ 119   $ 110   $ 204     Three months ended September 30, June 30, December 31, September 30, 2014 2014 2013 2013 Gross dollar volume (GDV): Prepaid card GDV $ 9,323,312   $ 10,025,213   $ 7,720,554   $ 7,178,533     (1) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.  

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