The Bancorp, Inc. Reports First Quarter 2019 Financial Results

The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for the first quarter 2019.

Highlights

• Diluted earnings per share increased to $0.32 for the quarter ended March 31, 2019, compared to $0.25 for the quarter ended March 31, 2018, an increase of 27%.
• Net income increased to $17.9 million for the quarter ended March 31, 2019, compared to $14.1 million for the quarter ended March 31, 2018, an increase of 27%.
• Net interest margin increased to 3.41% for the quarter ended March 31, 2019, compared to 3.12% for the quarter ended March 31, 2018.
• Net interest income increased 13% to $34.0 million for the quarter ended March 31, 2019, compared to $30.1 million for the quarter ended March 31, 2018.
• Average loans and leases, including loans held for sale, increased 16% to $2.28 billion for the quarter ended March 31, 2019, compared to $1.97 billion for the quarter ended March 31, 2018.
• Prepaid card fees increased to $16.2 million for the quarter ended March 31, 2019, or 13%, compared to $14.3 million for the quarter ended March 31, 2018.
• ACH (Automated Clearing House), card and other payment processing fees increased 36%, to $2.3 million for the quarter ended March 31, 2019, compared to $1.7 million for the quarter ended March 31, 2018.
• Small Business Administration (“SBA”) loans increased 16% to $493.7 million at March 31, 2019, compared to $424.5 million at March 31, 2018.
• The rate on $3.92 billion of average deposits and interest-bearing liabilities in the first quarter of 2019 was 0.98%. Average prepaid deposits of $2.54 billion for first quarter 2019 reflected an increase of 14.7% compared to $2.22 billion for the quarter ended March 31, 2018.
• Consolidated leverage ratio was 9.9% at March 31, 2019. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.
• Book value per common share at March 31, 2019 was $7.70 per share.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “Our strategic agenda in 2019 encompasses nine items that should further position our institution for revenue growth and profitability. Most of the initiatives focus on new products or reengineering of our platform to be best in class and highly efficient. The balance of initiatives include finishing our remediation process with our regulators and building a stronger community with all our Bancorp partners. Impact from all these initiatives should mostly be felt in increased revenue growth as expenses remain rigorously managed and reengineering has improved productivity and reduced unit costs in many areas.”

The Bancorp reported net income of $17.9 million, or $0.32 income per diluted share, for the quarter ended March 31, 2019, compared to net income of $14.1 million, or $0.25 income per diluted share, for the quarter ended March 31, 2018. Tier one capital to assets (leverage), tier one capital to risk-weighted assets, total capital to risk-weighted assets and common equity-tier 1 to risk-weighted assets ratios were 9.90%, 23.61%, 24.15% and 23.61%, 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 26, 2019 by clicking on the webcast link on The Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 1496107. 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 3, 2019 by dialing 855.859.2056, access code 1496107.

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 The 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 The 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.

Financial highlights
(unaudited)
		Three months ended						Year ended
		March 31,						December 31,
Condensed income statement		2019			2018			2018
		(dollars in thousands except per share data)
Net interest income		$	34,010		$	30,074		$	120,849
Provision for loan and lease losses			1,700			700			3,585
Non-interest income
Service fees on deposit accounts			47			1,576			3,622
ACH, card and other payment processing fees			2,303			1,692			8,653
Prepaid card fees			16,163			14,282			54,627
Net realized and unrealized gains on commercial loans originated for sale			10,763			11,729			20,498
Gain on sale of investment securities			-			26			41
Change in value of investment in unconsolidated entity			-			(1,171)			(3,689)
Leasing income			695			487			3,071
Affinity fees			-			102			281
Gain on sale of IRA portfolio			-			-			65,000
Other non-interest income			394			372			1,691
Total non-interest income			30,365			29,095			153,795
Non-interest expense
Salaries and employee benefits			23,840			21,073			79,816
Data processing expense			1,269			2,005			6,187
Legal expense			1,324			2,431			7,845
FDIC Insurance			1,929			2,219			8,819
Software			2,921			3,291			13,304
Losses and write downs on other real estate owned			-			45			-
Civil money penalty			-			(290)			(290)
Prepaid relationship exit expense			-			-			672
Lease termination expense			-			-			395
Other non-interest expense			7,946			8,275			34,530
Total non-interest expense			39,229			39,049			151,278
Income from continuing operations before income taxes			23,446			19,420			119,781
Income tax expense			6,035			5,399			32,241
Net income from continuing operations			17,411			14,021			87,540
Discontinued operations
Income from discontinued operations before income taxes			805			156			1,491
Income tax expense			286			37			354
Net income from discontinued operations, net of tax			519			119			1,137
Net income available to common shareholders		$	17,930		$	14,140		$	88,677
Net income per share from continuing operations - basic		$	0.31		$	0.25		$	1.55
Net income per share from discontinued operations - basic		$	0.01		$	-		$	0.02
Net income per share - basic		$	0.32		$	0.25		$	1.57
Net income per share from continuing operations - diluted		$	0.31		$	0.25		$	1.53
Net income per share from discontinued operations - diluted		$	0.01		$	-		$	0.02
Net income per share - diluted		$	0.32		$	0.25		$	1.55
Weighted average shares - basic			56,522,015			56,141,830			56,343,845
Weighted average shares - diluted			56,876,662			57,023,121			57,068,306

Balance sheet		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
		(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks		$	11,678		$	2,440		$	2,245		$	1,999
Interest earning deposits at Federal Reserve Bank			714,514			551,862			710,816			508,847
Securities sold under agreements to resell			-			-			64,518			64,312
Total cash and cash equivalents			726,192			554,302			777,579			575,158
Investment securities, available-for-sale, at fair value			1,368,602			1,236,324			1,274,417			1,381,020
Investment securities, held-to-maturity			84,428			84,432			84,433			86,370
Commercial loans held for sale, at fair value			570,426			688,471			308,470			349,806
Loans, net of deferred fees and costs			1,510,395			1,501,976			1,493,932			1,459,881
Allowance for loan and lease losses			(9,954)			(8,653)			(8,092)			(7,285)
Loans, net			1,500,441			1,493,323			1,485,840			1,452,596
Federal Home Loan Bank & Atlantic Community Bancshares stock			1,113			1,113			1,113			991
Premises and equipment, net			18,056			18,895			17,686			19,052
Accrued interest receivable			13,907			12,753			11,621			11,778
Intangible assets, net			3,463			3,846			4,229			4,995
Other real estate owned			-			-			405			405
Deferred tax asset, net			18,423			21,622			40,991			38,139
Investment in unconsolidated entity			58,258			59,273			64,212			70,016
Assets held for sale from discontinued operations			188,025			197,831			226,026			289,038
Other assets			75,642			65,726			63,178			89,736
Total assets		$	4,626,976		$	4,437,911		$	4,360,200		$	4,369,100
Liabilities:
Deposits
Demand and interest checking		$	3,993,828		$	3,904,638		$	3,540,605		$	3,461,881
Savings and money market			31,470			31,076			317,453			493,288
Total deposits			4,025,298			3,935,714			3,858,058			3,955,169
Securities sold under agreements to repurchase			93			93			158			182
Subordinated debenture			13,401			13,401			13,401			13,401
Long-term borrowings			41,499			41,674			41,841			42,157
Other liabilities			111,905			40,253			54,868			28,299
Total liabilities		$	4,192,196		$	4,031,135		$	3,968,326		$	4,039,208
Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,568,004 and 56,307,088 shares issued and outstanding at March 31, 2019 and 2018, respectively			56,568			56,446			56,446			56,307
Treasury stock (100,000 shares)			(866)			(866)			(866)			(866)
Additional paid-in capital			367,483			366,181			365,749			363,605
Accumulated earnings (deficit)			17,113			(817)			(7,936)			(75,345)
Accumulated other comprehensive loss			(5,518)			(14,168)			(21,519)			(13,809)
Total shareholders' equity			434,780			406,776			391,874			329,892
Total liabilities and shareholders' equity		$	4,626,976		$	4,437,911		$	4,360,200		$	4,369,100

Average balance sheet and net interest income			Three months ended March 31, 2019											Three months ended March 31, 2018
			(dollars in thousands)
			Average							Average				Average							Average
Assets:			Balance				Interest			Rate				Balance				Interest			Rate
Interest earning assets:
Loans net of deferred fees and costs **		$	2,266,834			$	30,161			5.32	%		$	1,947,320			$	23,039			4.73	%
Leases - bank qualified*			17,793				428			9.62	%			21,036				334			6.35	%
Investment securities-taxable			1,303,491				10,530			3.23	%			1,375,568				9,699			2.82	%
Investment securities-nontaxable*			7,546				59			3.13	%			9,893				75			3.03	%
Interest earning deposits at Federal Reserve Bank			423,024				2,502			2.37	%			502,233				1,832			1.46	%
Federal funds sold and securities purchased under agreement to resell			-				-			-				64,216				414			2.58	%
Net interest earning assets			4,018,688				43,680			4.35	%			3,920,266				35,393			3.61	%
Allowance for loan and lease losses			(8,638	)										(6,976	)
Loans held for sale from discontinued operations			173,800				2,025			4.66	%			276,370				2,527			3.66	%
Other assets			234,174											221,433
		$	4,418,024										$	4,411,093
Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking		$	3,798,837			$	8,833			0.93	%		$	3,535,791			$	4,301			0.49	%
Savings and money market			31,392				37			0.47	%			487,380				668			0.55	%
Total deposits			3,830,229				8,870			0.93	%			4,023,171				4,969			0.49	%
Short-term borrowings			74,386				503			2.70	%			24,844				104			1.67	%
Securities sold under agreements to repurchase			90				-			0.00	%			205				-			0.00	%
Subordinated debentures			13,401				195			5.82	%			13,401				160			4.78	%
Total deposits and liabilities			3,918,106				9,568			0.98	%			4,061,621				5,233			0.52	%
Other liabilities			79,140											22,452
Total liabilities			3,997,246											4,084,073
Shareholders' equity			420,778											327,020
		$	4,418,024										$	4,411,093
Net interest income on tax equivalent basis*						$	36,137										$	32,687
Tax equivalent adjustment							102											86
Net interest income						$	36,035										$	32,601
Net interest margin *										3.41	%										3.12	%
* Full taxable equivalent basis, using a statutory rate of 21% for 2019 and 2018.
** Includes loans held for sale.

Allowance for loan and lease losses:		Three months ended						Year ended
		March 31,			March 31,			December 31,
		2019			2018			2018
		(dollars in thousands)
Balance in the allowance for loan and lease losses at beginning of period (1)		$	8,653		$	7,096		$	7,096
Loans charged-off:
SBA non-real estate			322			388			1,348
SBA commercial mortgage			-			157			157
Direct lease financing			106			56			637
Other consumer loans			-			14			21
Total			428			615			2,163
Recoveries:
SBA non-real estate			17			40			57
SBA commercial mortgage			-			6			13
Direct lease financing			12			58			64
Other consumer loans			-			-			1
Total			29			104			135
Net charge-offs			399			511			2,028
Provision charged to operations			1,700			700			3,585
Balance in allowance for loan and lease losses at end of period		$	9,954		$	7,285		$	8,653
Net charge-offs/average loans			0.02%			0.03%			0.10%
Net charge-offs/average loans (annualized)			0.07%			0.11%			0.10%
Net charge-offs/average assets			0.01%			0.01%			0.05%
(1) Excludes activity from assets held for sale from discontinued operations.
Loan portfolio:		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
		(in thousands)
SBA non-real estate		$	76,112		$	76,340		$	74,408		$	75,225
SBA commercial mortgage			179,397			165,406			166,432			149,227
SBA construction			23,979			21,636			17,978			20,143
Total SBA loans			279,488			263,382			258,818			244,595
Direct lease financing			384,930			394,770			393,135			382,284
SBLOC			791,986			785,303			778,552			759,369
Other specialty lending			34,425			31,836			40,799			45,729
Other consumer loans			9,301			16,302			12,172			17,416
			1,500,130			1,491,593			1,483,476			1,449,393
Unamortized loan fees and costs			10,265			10,383			10,456			10,488
Total loans, net of deferred fees and costs		$	1,510,395		$	1,501,976		$	1,493,932		$	1,459,881
Small business lending portfolio:		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
		(in thousands)
SBA loans, including deferred fees and costs			286,814			270,860			266,433			252,457
SBA loans included in HFS			206,901			199,977			193,372			172,030
Total SBA loans		$	493,715		$	470,837		$	459,805		$	424,487

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, 2019
The Bancorp, Inc.		9.90%		23.64%		24.18%		23.64%
The Bancorp Bank		9.63%		23.17%		23.71%		23.17%
"Well capitalized" institution (under FDIC regulations)		5.00%		8.00%		10.00%		6.50%
As of December 31, 2018
The Bancorp, Inc.		10.11%		20.64%		21.07%		20.64%
The Bancorp Bank		9.70%		20.18%		20.61%		20.18%
"Well capitalized" institution (under FDIC regulations)		5.00%		8.00%		10.00%		6.50%

		Three months ended						Year ended
		March 31,						December 31,
		2019			2018			2018
Selected operating ratios:
Return on average assets (1)			1.65%			1.30%			2.07%
Return on average equity (1)			17.28%			17.54%			24.26%
Net interest margin			3.41%			3.12%			3.19%
(1) Annualized
Book value per share table:		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
Book value per share		$	7.70		$	7.22		$	6.95		$	5.87
Loan quality table:		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
Nonperforming loans to total loans (2)			0.55%			0.36%			0.35%			0.42%
Nonperforming assets to total assets (2)			0.18%			0.12%			0.13%			0.15%
Allowance for loan and lease losses to total loans			0.66%			0.58%			0.54%			0.50%
Nonaccrual loans		$	5,863		$	4,516		$	4,234		$	3,516
Other real estate owned			-			-			405			405
Total nonperforming assets		$	5,863		$	4,516		$	4,639		$	3,921
Loans 90 days past due still accruing interest		$	2,483		$	954		$	1,015		$	2,643
(2) Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.
		Three months ended
		March 31,			December 31,			September 30,			March 31,
		2019			2018			2018			2018
		(in thousands)
Gross dollar volume (GDV) (3):
Prepaid card GDV		$	16,937,325		$	13,526,647		$	12,525,527		$	13,402,496
(3) Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp Bank.

Business line quarterly summary:
Quarter ended March 31, 2019
(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
Loans
Institutional banking **		4.4%		$	792		4%		4%		na			na
SBA		5.6%			494		16%		19%		na			na
Leasing		6.3%			395		-		-		$	0.7		43%
Commercial real estate securitization		5.9%			364		nm		nm			10.8		-
Weighted average yield		5.3%		$	2,045
Deposits
Payment solutions (primarily prepaid) ***		1.2%		$	2,542		15%		nm		$	16.2		13%
Card payment and ACH processing		0.8%			893		-		nm			2.3		36%
* Loan categories based on period end balance and Payment Solutions based on average quarterly balances.
** Comprised of SBLOC loans.
*** Includes $900,000 of fee income related to 2018 incentives.

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 - 2018					(46	)			(46	)
2019 Marks					-				-
Payments received					(89	)
March 31, 2019 Bancorp book value**				$	58
Total marks								$	(104	)
Divided by:
Original Walnut Street loan balance								$	267
Percentage of total mark to original balance									39	%
* 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 44% of expected principal recoveries were from loans and properties pending liquidation or other resolution as of March 31, 2019.
Walnut Street portfolio composition as of March 31, 2019
Collateral type				% of Portfolio
Commercial real estate non-owner occupied
Retail					52.2	%
Office					13.2	%
Other					5.9	%
Construction and land					18.4	%
Commercial non real estate and industrial					0.5	%
First mortgage residential owner occupied					6.1	%
First mortgage residential non-owner occupied					2.8	%
Other					0.9	%
Total					100.0	%

Cumulative analysis of marks on discontinued commercial loan principal as of March 31, 2019
		Discontinued			Cumulative			% to original
		loan principal			marks			principal
		(dollars in millions)
Commercial loan discontinued principal before marks		$	115
Florida mall held in discontinued other real estate owned			42		$	27
Previous mark charges			14			14
Mark at March 31, 2019						7
Total		$	171		$	48		28%

Analysis of discontinued loan relationships as of March 31, 2019
		Performing			Nonperforming			Total			Performing			Nonperforming			Total
		loan principal			loan principal			loan principal			loan marks			loan marks			marks
		(in millions)
6 loan relationships > $7 million		$	61		$	14		$	75		$	3		$	2		$	5
Loan relationships < $7 million			28			5			33			2			-			2
		$	89		$	19		$	108		$	5		$	2		$	7

Quarterly activity for discontinued commercial loan principal
		Commercial
		loan principal
		(in millions)
Commercial loan discontinued principal December 31, 2018 before marks		$	125
Quarterly paydowns			(10)
Commercial loan discontinued principal March 31, 2019 before marks		$	115
Marks March 31, 2019			(7)
Net commercial loan exposure March 31, 2019		$	108
Residential mortgages			51
Net loans		$	159
Florida Mall in other real estate owned			15
18 Properties in other real estate owned			14
Total discontinued assets at March 31, 2019		$	188

Discontinued commercial loan composition March 31, 2019
Collateral type		Unpaid principal balance			Mark March 31, 2019			Mark as % of portfolio
		(dollars in millions)
Commercial real estate - non-owner occupied:
Retail		$	4		$	0.6		14%
Office			4			0.0		-
Other			38			1.9		5%
Construction and land			24			0.1		-
Commercial non-real estate and industrial			10			0.5		4%
1 to 4 family construction			13			3.8		30%
First mortgage residential non-owner occupied			12			0.4		4%
Commercial real estate owner occupied:
Retail			8			-		-
Office			-			-		4%
Other			-			-		1%
Residential junior mortgage			1			-		-
Other			1			-		-
Total		$	115
Less: mark			(7)
Net commercial loan exposure March 31, 2019		$	108		$	7.3		6%

View source version on businesswire.com: https://www.businesswire.com/news/home/20190425005875/en/