The Bancorp, Inc. ("Bancorp") (NASDAQ: TBBK), a financial
holding company, today reported financial results for third quarter
2015.
Bancorp reported net loss of $5.6 million or diluted loss per
share of $0.15 for third quarter 2015 compared to net income of
$25.0 million or $0.66 earnings per diluted share in third quarter
2014. Net loss from continuing operations for third quarter 2015
was $7.4 million or $0.20 per diluted share compared to net income
of $5.8 million or $0.15 per diluted share in third quarter 2014.
The third quarter 2015 net loss in continuing operations reflected
$11.7 million of pretax Bank Secrecy Act (“BSA”) and lookback
consulting expenses and variability in Bancorp’s non-interest
income from the sale of loans into secondary commercial mortgage
backed securities markets (“CMBS”). Lookback expenses are being
incurred to analyze historical transactions for compliance with
suspicious activity reporting requirements. Income from continuing
operations does not include any income which may result upon the
reinvestment of the proceeds of sales we are pursuing from the
approximately $588.7 million of commercial and residential loans in
the Bancorp’s discontinued operations.
Financial Highlights
Continuing Operations:
- Gain of $34.4 million, prior to
disposition and transaction expenses, upon the October 22, 2015
sale of the majority of the health savings account (“H.S.A.”)
portfolio is not reflected in third quarter 2015 results.
- Increases over prior year loan balances
in security-backed lines of credit (“SBLOC”) 35%, Small Business
Administration (“SBA”) 35% and Leasing 11%.
- 17% increase in net interest income to
$17.8 million compared to $15.3 million in third quarter 2014.
- Loans and CMBS loans held for sale in
continuing operations totaled $1.35 billion at September 30, 2015
compared to $992.5 million at September 30, 2014, a 36%
increase.
- Tier one capital to assets, tier one
capital to risk-weighted assets, total capital to
risk-weighted assets and common equity-tier 1 were 6.27%, 14.14%,
14.35% and 14.14%, compared to well capitalized minimums of 5%, 8%,
10% and 6.5%.
Frank M. Mastrangelo, Bancorp’s Chief Executive Officer, said,
“The third quarter continued to show progress in the transition to
what we believe, and our historical results evidence, are better
performing lines of business. Growth in our SBLOC, SBA, and Leasing
portfolios drove a net interest income increase of 17% to $17.8
million for the quarter. Prepaid and Payment Sponsorship fee
income, our principal non-interest income driver, showed a
narrowing in its decrease to the prior year third quarter, compared
to the reduction in second quarter 2015 versus second quarter 2014.
We believe that positive trends in growth will continue and year
over year increases will result in 2016. Subsequent to September
30, 2015, we executed on a strategy to exit the majority of our
H.S.A. administration business. Those deposits were among those
with the highest projected deposit costs, while related overhead
largely offset profitability. Those client relationships were sold
at a gain of $34.4 million, prior to disposition and transaction
expenses, which will improve our capital ratios at December 31,
2015 and the bank’s tax position relative to the utilization of its
deferred tax assets. A December 2015 transfer date for the
approximate $400 million of H.S.A. deposits related to the sale,
will reduce excess balances maintained at the Federal Reserve Bank.
Such excess balances increase average assets and lower capital
ratios. Additionally, approximately $485 million of other higher
cost deposit relationships, without adequate offsetting fee income
or loan production potential, were exited in early October 2015.
Those exits will further reduce excess Federal Reserve Bank
balances.
"While the lookback consultant has continued to make progress
toward final completion, costs continue to be in excess of
estimates and were higher in the third quarter compared to prior
quarters. Additionally, while the sale of loans into secondary CMBS
markets contributes to annual profitability, quarterly results vary
significantly. That variability and the lookback expenses were
primary determinants in the continuing operations loss for the
third quarter. In coming quarters we look forward to the end of the
lookback expenses and believe that the CMBS sales will return to
profitability as previously demonstrated. Those improvements, the
expected prepaid card fee trends, as well as the loan and
corresponding net interest income growth described earlier should
be the primary drivers toward additional progress.
"Book value at September 30, 2015 amounted to $8.31 compared to
$7.88 at September 30, 2014. The Bancorp and its subsidiary, The
Bancorp Bank, remain well capitalized.”
Non-Recurring Expense During Period:
(dollars in thousands)
Three months ended Nine months
ended
September 30, 2015 September 30,
2015 Continuing operations: BSA consultant and lookback
fees: $ 11,687 $ 26,643 Regulatory related legal fees 413 1,689
Discontinued operations: Restatement related audit fees 1,035 2,560
Other real estate owned expense 731 1,855 Pre-tax loss- continuing
operations (13,073 ) (22,490 ) Pre-tax income- discontinued
operations 2,747 9,943 Pre-tax income
after analysis of non-recurring fees $ 3,540 $ 20,200
Conference Call Webcast
You may access the LIVE webcast of Bancorp's Quarterly Earnings
Conference Call at 8:00 AM EDT Friday, October 30, 2015 by clicking
on the webcast link on Bancorp's homepage at www.thebancorp.com.
Or, you may dial 877.787.4143, access code 58529199. You may listen
to the replay of the webcast following the live call on Bancorp's
investor relations website or telephonically until Friday, November
6, 2015 by dialing 855.859.2056, access code 58529199.
About Bancorp
The Bancorp, a leading provider of private-label banking and
technology solutions for non-bank companies in the U.S., delivers a
wide range of banking services to its customers, including the
issuance of prepaid and debit cards, ACH payments, private label
banking and merchant payment processing. The Bancorp also engages
in specialty lending, such as automobile-fleet leasing, the
origination and sale of commercial real estate loans, SBA lending
and SBLOCs. With operations in the U.S. and now in Europe, The
Bancorp is dedicated to setting a new standard in financial
services and payments innovation. Since its formation in 2000, The
Bancorp has become the leading issuer of prepaid cards, a National
Preferred SBA Lender, a top ACH Originator, and one of the nation’s
largest credit card transaction acquirers. 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 Nine months ended September 30,
September 30, 2015 2014 2015 2014 (dollars in thousands except per
share data)
Condensed income statement Net interest income $
17,798 $ 15,268 $ 51,349 $ 43,710
Provision for loan and lease losses 625 158
1,800 2,606 Non-interest income
Service fees on deposit accounts 1,919 1,692 5,579 4,279 Card
payment and ACH processing fees 1,493 1,369 4,242 3,989 Prepaid
card fees 11,492 12,307 35,752 38,673 Gain (loss) on sale of loans
(830 ) 2,772 6,747 13,468 Gain (loss) on sales of investment
securities (335 ) (35 ) (62 ) 365 Leasing income 552 840 1,727
2,236 Debit card income 427 414 1,358 1,296 Affinity fees 1,083 649
2,391 1,851 Other non-interest income 1,498
299 5,066 1,217 Total
non-interest income 17,299 20,307 62,800 67,374 Non-interest
expense Bank Secrecy Act and lookback consulting expenses 11,687
2,749 26,643 4,918 Other non-interest expense 35,858
30,386 108,196 93,434
Total non-interest expense 47,545 33,135
134,839 98,352 Income (loss)
from continuing operations before income tax expense (13,073 )
2,282 (22,490 ) 10,126 Income tax benefit (5,706 )
(3,560 ) (10,817 ) (594 ) Net income (loss) from
continuing operations (7,367 ) 5,842 (11,673 ) 10,720 Net income
from discontinued operations, net of tax 1,792
19,127 6,486 26,198 Net income
(loss) available to common shareholders $ (5,575 ) $ 24,969
$ (5,187 ) $ 36,918 Net income (loss) per share from
continuing operations - basic $ (0.20 ) $ 0.15 $ (0.31 ) $
0.28 Net income per share from discontinued operations -
basic $ 0.05 $ 0.51 $ 0.17 $ 0.70 Net
income (loss) per share - basic $ (0.15 ) $ 0.66 $ (0.14 ) $
0.98 Net income (loss) per share from continuing
operations - diluted $ (0.20 ) $ 0.15 $ (0.31 ) $ 0.28
Net income per share from discontinued operations - diluted
$ 0.05 $ 0.51 $ 0.17 $ 0.68 Net income
(loss) per share - diluted $ (0.15 ) $ 0.66 $ (0.14 ) $ 0.96
Weighted average shares - basic 37,758,322 37,608,862
37,754,110 37,698,759 Weighted average shares - diluted (a)
37,758,322 38,002,639 37,754,110 38,429,202 (a) For loss
periods the weighted averages shares - basic is used in both the
basic and diluted computations.
Balance sheet September 30, June
30, March 31, September 30, 2015 2015 2015 2014 (dollars in
thousands)
Assets: Cash and cash equivalents Cash and due
from banks $ 4,002 $ 13,269 $ 18,636 $ 9,913 Interest earning
deposits at Federal Reserve Bank 995,441 936,989 994,400 430,117
Securities sold under agreements to resell 37,970
40,068 46,250 55,450
Total cash and cash equivalents 1,037,413
990,326 1,059,286 495,480
Investment securities, available-for-sale, at fair value 1,316,706
1,370,027 1,442,665 1,442,049 Investment securities,
held-to-maturity 93,604 93,649 93,662 96,951 Loans held for sale,
at fair value 354,600 284,501 239,820 136,115 Loans, net of
deferred fees and costs 994,518 968,033 870,901 856,428 Allowance
for loan and lease losses (4,194 ) (4,352 )
(4,243 ) (5,300 ) Loans, net 990,324
963,681 866,658 851,128 Federal
Home Loan Bank & Atlantic Central Bankers Bank stock 1,062
1,063 1,003 3,409 Premises and equipment, net 18,893 19,271 19,158
17,536 Accrued interest receivable 11,232 11,526 11,290 11,061
Intangible assets, net 5,248 5,541 5,791 6,573 Other real estate
owned - - - 725 Deferred tax asset, net 33,857 35,874 32,025 71,021
Investment in unconsolidated entity 186,656 187,186 190,783 -
Assets held for sale 611,729 651,158 842,574 1,066,029 Other assets
53,123 43,804 43,734
39,046 Total assets $ 4,714,447 $ 4,657,607
$ 4,848,449 $ 4,237,123
Liabilities: Deposits Demand and interest checking $
4,002,638 $ 3,993,393 $ 4,182,656 $ 3,554,484 Savings and money
market 376,577 321,264 307,988 324,015 Time deposits - 1,400 1,400
231 Time deposits, $100,000 and over - -
- 2,895 Total deposits
4,379,215 4,316,057 4,492,044
3,881,625 Securities sold under agreements to
repurchase 1,034 2,357 7,959 21,496 Subordinated debenture 13,401
13,401 13,401 13,401 Other liabilities 7,100
10,038 12,992 23,603 Total
liabilities $ 4,400,750 $ 4,341,853 $ 4,526,396
$ 3,940,125
Shareholders' equity:
Common stock - authorized, 50,000,000 shares of $1.00 par value;
37,858,322 and 37,808,777 shares issued at September 30, 2015 and
2014, respectively 37,858 37,858 37,858 37,809 Treasury stock
(100,000 shares) (866 ) (866 ) (866 ) (866 ) Additional paid-in
capital 299,470 298,978 298,402 297,122 Retained earnings (33,429 )
(27,854 ) (28,029 ) (48,435 ) Accumulated other comprehensive
income 10,664 7,638 14,688
11,368 Total shareholders' equity
313,697 315,754 322,053
296,998 Total liabilities and shareholders' equity $
4,714,447 $ 4,657,607 $ 4,848,449 $ 4,237,123
Average balance sheet and net
interest income Three months ended September 30, 2015 Three
months ended September 30, 2014 (dollars in thousands) (restated)
Average Average Average Average
Assets: Balance Interest
Rate Balance Interest Rate Interest-earning assets: Loans net of
unearned fees and costs ** $ 1,292,533 $ 12,466 3.86 % $ 907,691 $
9,032 3.98 % Leases - bank qualified* 30,091 530 7.05 % 16,706 218
5.22 % Investment securities-taxable 940,590 4,562 1.94 % 1,029,544
5,311 2.06 % Investment securities-nontaxable* 518,691 4,765 3.67 %
526,393 4,858 3.69 % Interest earning deposits at Federal Reserve
Bank 957,078 580 0.24 % 477,609 285 0.24 % Federal funds sold and
securities purchased under agreement to resell 40,705
143 1.41 % 31,153 105 1.35 % Net
interest earning assets 3,779,688 23,046 2.44 % 2,989,096 19,809
2.65 % Allowance for loan and lease losses (4,385 ) (8,473 )
Assets held for sale 627,806 6,343 4.04 % 1,227,796 12,689 4.13 %
Other assets 286,839 5,642 $ 4,689,948
$ 4,214,061
Liabilities and Shareholders'
Equity: Deposits: Demand and interest checking $ 3,998,798 $
2,850 0.29 % $ 3,565,814 $ 2,260 0.25 % Savings and money market
337,793 426 0.50 % 312,890 361 0.46 % Time 410
1 0.98 % 4,781 14 1.17 % Total deposits
4,337,001 3,277 0.30 % 3,883,485 2,635 0.27 % Repurchase
agreements 1,606 1 0.25 % 18,396 14 0.30 % Subordinated debt
13,401 117 3.49 % 13,401 116
3.46 % Total deposits and interest bearing liabilities 4,352,008
3,395 0.31 % 3,915,282 2,765 0.28 % Other liabilities
12,957 14,615 Total liabilities 4,364,965
3,929,897 Shareholders' equity 324,983
284,164 $ 4,689,948 $ 4,214,061 Net interest
income on tax equivalent basis* $ 25,994 $ 29,733 Tax
equivalent adjustment 1,853 1,776 Net interest
income $ 24,141 $ 27,957 Net interest margin * 2.34 % 2.81 %
* 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, 2015 Nine
months ended September 30, 2014 (dollars in thousands) (restated)
Average Average Average Average
Assets: Balance Interest
Rate Balance Interest Rate Interest-earning assets: Loans net of
unearned fees and costs ** $ 1,192,939 $ 34,231 3.83 % $ 858,829 $
25,979 4.03 % Leases - bank qualified* 23,936 1,247 6.95 % 17,756
708 5.32 % Investment securities-taxable 983,557 14,628 1.98 %
1,037,344 15,804 2.03 % Investment securities-nontaxable* 524,913
14,443 3.67 % 459,508 12,613 3.66 % Interest earning deposits at
Federal Reserve Bank 1,001,027 1,759 0.23 % 793,560 1,460 0.25 %
Federal funds sold and securities purchased under agreement to
resell 43,724 465 1.42 % 28,612
296 1.38 % Net interest-earning assets 3,770,096 66,773 2.36
% 3,195,609 56,860 2.37 % Allowance for loan and lease
losses (4,089 ) (3,492 ) Assets held for sale 743,594 22,275 3.99 %
1,285,922 38,732 4.02 % Other assets 293,561
27,237 $ 4,803,162 $ 4,505,276
Liabilities and Shareholders' Equity: Deposits: Demand and
interest checking $ 4,122,409 $ 8,293 0.27 % $ 3,759,427 $ 6,795
0.24 % Savings and money market 323,307 1,286 0.53 % 380,671 1,229
0.43 % Time 1,066 12 1.50 % 9,624
83 1.15 % Total deposits 4,446,782 9,591 0.29 %
4,149,722 8,107 0.26 % Short-term borrowings - - 0.00 % 7 -
0.00 % Repurchase agreements 6,598 14 0.28 % 17,262 37 0.29 %
Subordinated debt 13,401 328 3.26 %
13,401 344 3.42 % Total deposits and interest bearing
liabilities 4,466,781 9,933 0.30 % 4,180,392 8,488 0.27 %
Other liabilities 9,702 16,873 Total
liabilities 4,476,483 4,197,265 Shareholders' equity
326,679 308,011 $ 4,803,162 $ 4,505,276
Net interest income on tax equivalent basis* 79,115
87,104 Tax equivalent adjustment 5,491
4,662 Net interest income $ 73,624 $ 82,442 Net interest
margin * 2.32 % 2.59 % *
Full 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, 2015 2014 2014 (dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of
period (1) $ 3,638 $ 3,881 $ 3,881
Loans charged-off: SBA non real estate 66 42 307 Direct lease
financing 9 323 323 SBLOC - - 3 Other consumer loans 1,176
847 871 Total 1,251
1,212 1,504 Recoveries:
SBA non real estate - - 12 Direct lease financing - - 25 Other
consumer loans 7 25 22
Total 7 25 59 Net
charge-offs 1,244 1,187 1,445 Provision charged to operations
1,800 2,606 1,202
Balance in allowance for loan and lease losses at end of period $
4,194 $ 5,300 $ 3,638 Net charge-offs/average
loans 0.10 % 0.14 % 0.16 % Net charge-offs/average loans
(annualized) 0.14 % 0.18 % 0.16 % Net charge-offs/average assets
0.03 % 0.03 % 0.03 % (1) Excludes activity from assets held for
sale
Loan portfolio: September 30, June 30, March 31,
September 30, 2015 2015 2015 2014 (dollars in thousands) SBA
non real estate $ 64,988 $ 63,390 $ 62,385 $ 56,773 SBA commercial
mortgage 116,545 85,234 84,430 95,492 SBA construction 5,191
16,977 15,181 16,472
Total SBA loans 186,724 165,601 161,996 168,737 Direct lease
financing 223,929 222,169 220,559 201,825 SBLOC 539,240 512,269
447,649 399,365 Other specialty lending 12,119 32,118 1,862 36,247
Other consumer loans 23,502 27,044
30,120 41,854 985,514 959,201 862,186 848,028
Unamortized loan fees and costs 9,004 8,832
8,715 8,400 Total loans, net of
deferred loan fees and costs $ 994,518 $ 968,033 $
870,901 $ 856,428
Small business lending
portfolio: September 30, June 30, March 31, September 30, 2015
2015 2015 2014 (dollars in thousands) SBA loans, including
deferred fees and costs 194,612 173,357 169,721 176,401 SBA loans
included in HFS 86,245 65,885
52,219 31,332 Total SBA loans $ 280,857 $
239,242 $ 221,940 $ 207,734
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 September 30,
2015 The Bancorp 6.27% 14.14% 14.35% 14.14% The Bancorp Bank 5.97%
13.47% 13.67% 13.47% "Well capitalized" institution (under FDIC
regulations) 5.00% 6.00% 10.00% 6.50% As of December 31,
2014 The Bancorp 7.07% 11.54% 11.67% n/a The Bancorp Bank 6.46%
10.46% 10.59% n/a "Well capitalized" institution (under FDIC
regulations) 5.00% 6.00% 10.00% n/a
Three months ended Nine months
ended September 30, September 30, 2015 2014 2015 2014
Selected
operating ratios: Net interest margin 2.34 % 2.81 % 2.32 % 2.59
% Book value per share $ 8.31 $ 7.88 $ 8.31 $ 7.88 September
30, June 30, March 31, September 30, 2015 2015 2015 2014
Asset
quality ratios: Nonperforming loans to total loans (1) 0.25 %
0.34 % 0.52 % 0.56 % Nonperforming assets to total assets (1) 0.05
% 0.07 % 0.09 % 0.13 % Allowance for loan and lease losses to total
loans 0.42 % 0.45 % 0.49 % 0.62 % Nonaccrual loans $ 2,157 $
2,666 $ 3,744 $ 4,495 Other real estate owned -
- - 725 Total
nonperforming assets $ 2,157 $ 2,666 $ 3,744 $
5,220 Loans 90 days past due still accruing interest
$ 294 $ 620 $ 769 $ 264 (1)
Nonperforming loan and asset ratios include nonaccrual loans and
loans 90 days past due still accruing interest. Three months
ended September 30, June 30, March 31, September 30, 2015 2015 2015
2014
Gross dollar volume (GDV): Prepaid card GDV $ 9,465,687
$ 10,006,333 $ 11,712,072 $ 9,323,312
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151029006861/en/
The Bancorp, Inc.Andres Viroslav,
215-861-7990aviroslav@thebancorp.com
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