The Bancorp, Inc. Reports Second Quarter 2017 Financial Results - Bancorp (NASDAQ:TBBK)

The Bancorp, Inc. ("The Bancorp") TBBK, a financial holding company, today reported financial results for second quarter 2017.

Highlights

Net income of $18.9 million and earnings per diluted share of $0.34 which includes an approximate $12.0 million tax benefit resulting primarily from reversal of valuation allowances.
Net interest income increased 30% to $27.2 million for the quarter ended June 30, 2017, compared to $20.9 million for the quarter ended June 30, 2016.
Net interest margin increased to 3.10% for the quarter ended June 30, 2017, compared to 2.73% for the quarter ended June 30, 2016.
Loans and loans held for sale from continuing operations increased 18% to $1.91 billion at June 30, 2017, compared to $1.62 billion at June 30, 2016.
Direct lease financing increased 18% to $371.0 million at June 30, 2017 from $315.6 million at June 30, 2016.
Small Business Administration ("SBA") loans increased 13% to $376.6 million at June 30, 2017, from $334.2 million at June 30, 2016.
The rate on our average deposits and interest bearing liabilities of $3.90 billion in the second quarter of 2017 was 0.37% with a rate of 0.40% for $2.06 billion of average prepaid card deposits.
Assets held for sale from discontinued operations decreased 31% to $336.1 million at June 30, 2017, from $487.4 million at June 30, 2016.
Non-interest expense was reduced by $6.4 million, to $37.4 million for the quarter ended June 30, 2017, compared to $43.7 million for the quarter ended June 30, 2016, excluding Bank Secrecy Act lookback expense for 2016.
Consolidated leverage ratio increased to 7.75% at June 30, 2017.
Book value per common share at June 30, 2017, of $5.94 per share. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

The Bancorp reported net income of $18.9 million, or $0.34 earnings per diluted share, for the quarter ended June 30, 2017, compared to a net loss of $31.4 million, or $0.83 loss per diluted share for the quarter ended June 30, 2016. Net income from continuing operations for the quarter ended June 30, 2017, was $17.6 million, or $0.32 earnings per diluted share, compared to a net loss of $17.8 million from continuing operations, or $0.47 loss per diluted share, for the quarter ended June 30, 2016. 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 7.75%, 15.54%, 15.89% and 15.54% respectively, compared to well capitalized minimums of 5%, 8%, 10% and 6.5%, respectively.

Damian Kozlowski, The Bancorp's Chief Executive Officer, said, "The first quarter of 2017 was a turning point for our company and our second quarter demonstrates that we have turned the corner on our financial performance. Our run-rate earnings continue to improve, reflecting further revenue momentum and the positive results from our on-going restructuring and expense management efforts."

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, July 28, 2017 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 51244121. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, August 4, 2017 by dialing 855.859.2056, access code 51244121.

About The Bancorp

The Bancorp, Inc. 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 chief financial institution, 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 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						Six months ended
	June 30,						June 30,
Condensed income statement		2017			2016			2017			2016
	(dollars in thousands except per share data)

Net interest income	$	27,215		$	20,890		$	52,092		$	41,446
Provision for loan and lease losses		350			1,060			1,350			1,060
Non-interest income
Service fees on deposit accounts		1,520			978			3,195			1,825
Card payment and ACH processing fees		1,504			1,457			3,032			2,724
Prepaid card fees		13,234			13,510			26,781			27,084
Gain (loss) on sale of loans		758			1,339			6,141			(94	)
Gain on sale of investment securities		586			124			1,089			2,150
Change in value of investment in unconsolidated entity		3			(13,936	)		(16	)		(13,124	)
Leasing income		832			464			1,383			868
Affinity fees		149			1,322			1,170			2,416
Gain on sale of health savings accounts		2,538			-			2,538			-
Loss from sale of European prepaid operations		(3,437	)		-			(3,437	)		-
Other non-interest income		486			4,282			516			4,379
Total non-interest income		18,173			9,540			42,392			28,228
Non-interest expense
Bank Secrecy Act and lookback consulting expenses		-			13,421			-			27,736
Other non-interest expense		37,363			43,715			75,146			84,538
Total non-interest expense		37,363			57,136			75,146			112,274
Income (loss) from continuing operations before income tax expense		7,675			(27,766	)		17,988			(43,660	)
Income tax benefit		(9,923	)		(10,004	)		(5,912	)		(15,276	)
Net income (loss) from continuing operations		17,598			(17,762	)		23,900			(28,384	)
Net income (loss) from discontinued operations, net of tax		1,266			(13,598	)		2,927			(13,888	)
Net income (loss) available to common shareholders	$	18,864		$	(31,360	)	$	26,827		$	(42,272	)

Net income (loss) per share from continuing operations - basic	$	0.32		$	(0.47	)	$	0.43		$	(0.75	)
Net income (loss) per share from discontinued operations - basic	$	0.02		$	(0.36	)	$	0.05		$	(0.37	)
Net income (loss) per share - basic	$	0.34		$	(0.83	)	$	0.48		$	(1.12	)

Net income (loss) per share from continuing operations - diluted	$	0.32		$	(0.47	)	$	0.43		$	(0.75	)
Net income (loss) per share from discontinued operations - diluted	$	0.02		$	(0.36	)	$	0.05		$	(0.37	)
Net income (loss) per share - diluted	$	0.34		$	(0.83	)	$	0.48		$	(1.12	)
Weighted average shares - basic		55,689,439			37,745,250			55,612,288			37,824,996
Weighted average shares - diluted		56,030,035			37,910,575			55,889,985			37,934,548

For loss periods the weighted averages shares - basic is used in both the basic and diluted computations.


Balance sheet	June 30,			March 31,			December 31,			June 30,
		2017			2017			2016			2016
	(dollars in thousands)
Assets:
Cash and cash equivalents
Cash and due from banks	$	6,458		$	4,671		$	4,127		$	4,006
Interest earning deposits at Federal Reserve Bank		475,387			669,042			955,733			528,094
Securities sold under agreements to resell		65,076			65,248			39,199			39,360
Total cash and cash equivalents		546,921			738,961			999,059			571,460

Investment securities, available-for-sale, at fair value		1,149,116			1,215,892			1,248,614			1,328,693
Investment securities, held-to-maturity		93,419			93,443			93,467			93,537
Loans held for sale, at fair value		542,819			480,913			663,140			441,593
Loans, net of deferred fees and costs		1,370,263			1,264,127			1,222,911			1,182,106
Allowance for loan and lease losses		(7,353	)		(7,294	)		(6,332	)		(5,398	)
Loans, net		1,362,910			1,256,833			1,216,579			1,176,708
Federal Home Loan Bank & Atlantic Community Bancshares stock		6,211			2,589			1,613			12,289
Premises and equipment, net		22,004			22,993			24,125			22,429
Accrued interest receivable		10,880			10,296			10,589			10,271
Intangible assets, net		5,515			5,844			6,906			6,074
Other real estate owned		104			104			104			-
Deferred tax asset, net		53,226			54,155			55,666			28,870
Investment in unconsolidated entity		120,862			125,982			126,930			162,275
Assets held for sale from discontinued operations		336,142			341,286			360,711			487,373
Other assets		53,563			55,351			50,611			60,203
Total assets	$	4,303,692		$	4,404,642		$	4,858,114		$	4,401,775

Liabilities:
Deposits
Demand and interest checking	$	3,437,482		$	3,607,076		$	3,816,524		$	3,569,669
Savings and money market		438,602			428,723			421,780			389,851
Time deposits		-			-			-			101,160
Total deposits		3,876,084			4,035,799			4,238,304			4,060,680

Securities sold under agreements to repurchase		273			273			274			318
Subordinated debenture		13,401			13,401			13,401			13,401
Long-term borrowings		42,680			-			263,099			-
Other liabilities		40,235			45,400			44,073			37,094
Total liabilities	$	3,972,673		$	4,094,873		$	4,559,151		$	4,111,493

Shareholders' equity:
Common stock - authorized, 75,000,000 shares of $1.00 par value; 55,857,645 and 37,945,323 shares issued at June 30, 2017 and 2016, respectively		55,858			55,758			55,419			37,945
Treasury stock (100,000 shares)		(866	)		(866	)		(866	)		(866	)
Additional paid-in capital		361,478			360,801			360,564			301,680
Accumulated deficit		(85,114	)		(103,978	)		(111,941	)		(57,721	)
Accumulated other comprehensive income (loss)		(337	)		(1,946	)		(4,213	)		9,244
Total shareholders' equity		331,019			309,769			298,963			290,282

Total liabilities and shareholders' equity	$	4,303,692		$	4,404,642		$	4,858,114		$	4,401,775


Average balance sheet and net interest income		Three months ended June 30, 2017					Three months ended June 30, 2016
		(dollars in thousands)
		Average			Average		Average			Average
Assets:		Balance		Interest	Rate		Balance		Interest	Rate
Interest-earning assets:
Loans net of unearned fees and costs **	$	1,770,226	$	19,748	4.46%	$	1,458,980	$	15,080	4.13%
Leases - bank qualified*		21,539		415	7.71%		20,603		435	8.45%
Investment securities-taxable		1,249,890		9,138	2.92%		1,317,902		7,900	2.40%
Investment securities-nontaxable*		14,632		107	2.93%		55,271		270	1.95%
Interest earning deposits at Federal Reserve Bank		480,417		1,255	1.04%		348,150		378	0.43%
Federal funds sold and securities purchased under agreement to resell		65,355		333	2.04%		35,297		128	1.45%
Net interest earning assets		3,602,059		30,996	3.44%		3,236,203		24,191	2.99%

Allowance for loan and lease losses		(7,190)					(4,313)
Assets held for sale from discontinued operations		348,452		3,135	3.60%		537,252		5,327	3.97%
Other assets		274,335					326,407
	$	4,217,656				$	4,095,549

Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	3,437,845	$	2,912	0.34%	$	3,264,909	$	2,397	0.29%
Savings and money market		434,792		520	0.48%		390,889		379	0.39%
Time		-		-	0.00%		27,842		39	0.56%
Total deposits		3,872,637		3,432	0.35%		3,683,640		2,815	0.31%

Short-term borrowings		6,516		22	1.35%		71,440		110	0.62%
Repurchase agreements		273		-	0.00%		1,210		1	0.33%
Subordinated debt		13,401		144	4.30%		13,401		128	3.82%
Total deposits and interest bearing liabilities		3,892,827		3,598	0.37%		3,769,691		3,054	0.32%

Other liabilities		4,434					22,922
Total liabilities		3,897,261					3,792,613

Shareholders' equity		320,395					302,936
	$	4,217,656				$	4,095,549
Net interest income on tax equivalent basis*			$	30,533				$	26,464

Tax equivalent adjustment				183					247

Net interest income			$	30,350				$	26,217
Net interest margin *					3.10%					2.73%

* 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, 2017							Six months ended June 30, 2016
		(dollars in thousands)
		Average				Average			Average				Average
Assets:		Balance			Interest	Rate			Balance			Interest	Rate
Interest-earning assets:
Loans net of unearned fees and costs **	$	1,700,508		$	37,119	4.37	%	$	1,471,327		$	30,636	4.16	%
Leases - bank qualified*		21,361			811	7.59	%		20,422			916	8.97	%
Investment securities-taxable		1,287,360			18,143	2.82	%		1,233,639			14,432	2.34	%
Investment securities-nontaxable*		15,025			218	2.90	%		65,558			765	2.33	%
Interest earning deposits at Federal Reserve Bank		616,345			2,771	0.90	%		573,595			1,280	0.45	%
Federal funds sold and securities purchased under agreement to resell		57,635			560	1.94	%		21,360			155	1.45	%
Net interest-earning assets		3,698,234			59,622	3.22	%		3,385,901			48,184	2.85	%

Allowance for loan and lease losses		(6,708	)						(4,356	)
Assets held for sale		340,900			6,496	3.81	%		562,860			11,146	3.96	%
Other assets		285,428							312,405
	$	4,317,854						$	4,256,810

Liabilities and Shareholders' Equity:
Deposits:
Demand and interest checking	$	3,547,820		$	5,699	0.32	%	$	3,373,084		$	4,839	0.29	%
Savings and money market		432,267			1,167	0.54	%		389,270			604	0.31	%
Time		-			-	0.00	%		117,117			343	0.59	%
Total deposits		3,980,087			6,866	0.35	%		3,879,471			5,786	0.30	%

Short-term borrowings		3,276			22	1.34	%		35,720			110	0.62	%
Repurchase agreements		274			-	0.00	%		1,033			1	0.19	%
Subordinated debt		13,401			282	4.21	%		13,401			252	3.76	%
Total deposits and interest bearing liabilities		3,997,038			7,170	0.36	%		3,929,625			6,149	0.31	%

Other liabilities		5,824							22,043
Total liabilities		4,002,862							3,951,668

Shareholders' equity		314,992							305,142
	$	4,317,854						$	4,256,810
Net interest income on tax equivalent basis*					58,948							53,181

Tax equivalent adjustment					360							589

Net interest income				$	58,588						$	52,592
Net interest margin *						2.90	%						2.56	%

* Full 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,
	2017	2016	2016
	(dollars in thousands)

Balance in the allowance for loan and lease losses at beginning of period (1)	$6,332	$4,400	$4,400

Loans charged-off:
SBA non real estate	136	-	128
Direct lease financing	202	50	119
Other consumer loans	16	28	1,211
Total	354	78	1,458

Recoveries:
SBA non real estate	2	1	1
Direct lease financing	-	10	17
Other consumer loans	23	5	12
Total	25	16	30
Net charge-offs	329	62	1,428
Provision charged to operations	1,350	1,060	3,360

Balance in allowance for loan and lease losses at end of period	$7,353	$5,398	$6,332
Net charge-offs/average loans	0.02%	0.00%	0.09%
Net charge-offs/average loans (annualized)	0.04%	0.01%	0.09%
Net charge-offs/average assets	0.01%	0.00%	0.03%
(1) Excludes activity from assets held for sale.


Loan portfolio:	June 30,	March 31,	December 31,	June 30,
	2017	2017	2016	2016
	(dollars in thousands)

SBA non real estate	$74,511	$75,800	$74,644	$71,596
SBA commercial mortgage	126,224	114,703	126,159	116,617
SBA construction	11,057	12,985	8,826	3,751
Total SBA loans	211,792	203,488	209,629	191,964
Direct lease financing	371,002	363,172	346,645	315,639
SBLOC	718,707	660,423	630,400	607,017
Other specialty lending	44,389	12,443	11,073	40,543
Other consumer loans	15,858	16,318	17,374	20,005
	1,361,748	1,255,844	1,215,121	1,175,168
Unamortized loan fees and costs	8,515	8,283	7,790	6,938
Total loans, net of deferred loan fees and costs	$1,370,263	$1,264,127	$1,222,911	$1,182,106


Small business lending portfolio:	June 30,	March 31,	December 31,	June 30,
	2017	2017	2016	2016
	(dollars in thousands)

SBA loans, including deferred fees and costs	218,391	209,980	215,786	197,544
SBA loans included in HFS	158,252	159,831	154,016	136,660
Total SBA loans	$376,643	$369,811	$369,802	$334,204


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 June 30, 2017
The Bancorp, Inc.	7.75%	15.54%	15.89%	15.54%
The Bancorp Bank	7.62%	15.29%	15.64%	15.29%
"Well capitalized" institution (under FDIC regulations)	5.00%	8.00%	10.00%	6.50%

As of December 31, 2016
The Bancorp, Inc.	6.90%	13.34%	13.63%	13.34%
The Bancorp Bank	6.84%	13.24%	13.53%	13.24%
"Well capitalized" institution (under FDIC regulations)	5.00%	8.00%	10.00%	6.50%


	Three months ended						Six months ended
	June 30,						June 30,
		2017			2016			2017			2016
Selected operating ratios:
Return on average assets (annualized)		1.79	%	nm				1.25	%	nm
Return on average equity (annualized)		23.62	%	nm				17.17	%	nm
Net interest margin		3.10	%		2.73	%		2.90	%		2.56	%
Book value per share	$	5.94		$	7.67		$	5.94		$	7.67


	June 30,			March 31,			December 31,			June 30,
		2017			2017			2016			2016
Asset quality ratios:
Nonperforming loans to total loans⁽¹⁾		0.41	%		0.55	%		0.30	%		0.53	%
Nonperforming assets to total assets ⁽¹⁾		0.13	%		0.16	%		0.08	%		0.14	%
Allowance for loan and lease losses to total loans		0.54	%		0.58	%		0.52	%		0.46	%

Nonaccrual loans	$	5,115		$	5,369		$	2,972		$	3,147
Other real estate owned		104			104			104			-
Total nonperforming assets	$	5,219		$	5,473		$	3,076		$	3,147

Loans 90 days past due still accruing interest	$	494		$	1,534		$	661		$	3,172

⁽¹⁾ Nonperforming loan and asset ratios include nonaccrual loans and loans 90 days past due still accruing interest.

	Three months ended
	June 30,			March 31,			December 31,			June 30,
		2017			2017			2016			2016
	(in thousands)
Gross dollar volume (GDV) ⁽¹⁾:
Prepaid card GDV	$	11,894,601		$	13,342,180		$	10,647,520		$	11,442,294

⁽¹⁾Gross dollar volume represents the total dollar amount spent on prepaid and debit cards issued by The Bancorp.


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	)
Payments received		(30	)
June 30, 2017 Bancorp book value*	$	121

Total marks				$	(100	)
Divided by:
Original Walnut Street loan balance				$	267
Percentage of total mark to original balance					37	%

* Approximately 21% of expected principal recoveries were classified as non performing as of 6/30/17.


Walnut Street portfolio composition as of June 30, 2017

Collateral type	% of Portfolio
Commercial real estate non-owner occupied
Retail		26.1	%
Office		22.8	%
Other		19.1	%
Construction and land		20.7	%
Commercial non real estate and industrial		3.8	%
First mortgage residential owner occupied		3.5	%
First mortgage residential non-owner occupied		3.3	%
Other		0.7	%
Total		100.0	%


Cumulative analysis of marks on discontinued commercial loan principal as of June 30, 2017

	Discontinued		Cumulative		% to original
	loan principal		marks		principal
	(dollars in millions)

Commercial loan discontinued principal before marks	$	261
Florida mall held in discontinued OREO		42		24
Previous mark charges		25		25
Mark at June 30, 2017				22
Total	$	328	$	71	22	%


Analysis of large loan relationship principal, non performing loans and distribution of marks as of June 30, 2017

	Performing		Non performing		Total		Performing		Non performing		Total
	loan principal		loan principal		loan principal		loan marks		loan marks		marks
	(in millions)

12 loan relationships > $8 million	$	159	$	25	$	184	$	3	$	8	$	11
Loan relationships < $8 million		34		21		55		5		6		11
	$	193	$	46	$	239	$	8	$	14	$	22


Quarterly activity for commercial loan discontinued principal

	Commercial
	loan principal
	(in millions)

Commercial loan discontinued principal December 31, 2016 before marks	$	324
Transfer of Florida mall to other real estate owned		(42	)
Net paydowns		(16	)
Mark charges		(5	)
Commercial loan discontinued principal June 30, 2017 before marks	$	261
Marks at June 30, 2017		(22	)
Net commercial loan exposure June 30, 2017	$	239
Residential mortgages		64
Net loans	$	303
Florida mall in other real estate owned		18
Other 28 properties in other real estate owned		15
Total discontinued assets at June 30, 2017	$	336


Discontinued commercial loan composition as of June 30, 2017

Collateral type	Unpaid principal balance		Mark June 30, 2017		Mark as % of portfolio
	(dollars in millions)
Commercial real estate - non-owner occupied:
Retail	$	16	$	0.8	5	%
Office		14		0.2	1	%
Other		50		0.1	-
Construction and land		82		2.7	3	%
Commercial non-real estate and industrial		32		11.7	37	%
1 to 4 family construction		28		1.3	5	%
First mortgage residential non-owner occupied		20		4.7	24	%
Commercial real estate owner occupied:
Retail		10		0.1	1	%
Office		-		-	-
Other		2		0.1	5	%
First mortgage residential owner occupied		4		0.2	5	%
Residential junior mortgage		1		0.1	10	%
Other		2		-	-
Total	$	261	$	22.0	8	%

View source version on businesswire.com: http://www.businesswire.com/news/home/20170727006506/en/

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