TBBK Bancorp Inc

The Bancorp, Inc. ("The Bancorp") (NASDAQ: TBBK), a financial holding company, today reported financial results for third quarter 2016.

Highlights

• Net interest income increased 32% to $23.5 million for the quarter ended September 30, 2016 compared to $17.8 million for the quarter ended September 30, 2015.
• Net interest margin increased to 2.69% for the quarter ended September 30, 2016 compared to 2.34% for the quarter ended September 30, 2015.
• Loans and continuing operations loans held for sale increased 31% to $1.76 billion at September 30, 2016 compared to $1.35 billion at September 30, 2015.
• Direct lease financing increased 49% to $332.6 million from $223.9 million at September 30, 2015.
• Small Business Administration (“SBA”) loans increased 24% to $349.6 million from $280.9 million at September 30, 2015.
• Security backed lines of credit (“SBLOC”) increased 15% to $621.5 million from $539.2 million at September 30, 2015.
• Prepaid card fee income increased 7% to $12.2 million for the quarter ended September 30, 2016 from $11.5 million for the quarter ended September 30, 2015.
• Gross dollar volume (“GDV”) (1) increased 11% to $10.5 billion for Q3 2016 from $9.5 billion for Q3 2015.
• Assets held for sale from discontinued operations decreased 34% from December 31, 2015 reflecting a $64 million sale of discontinued loans during the quarter.
• The rate on our average deposits and interest bearing liabilities of $3.83 billion in Q3 2016 was 0.33% with a rate of 0.12% for $1.81 billion of average prepaid card deposits.
• Average prepaid card deposits, which are among the lowest cost of our deposits, grew 18% in third quarter 2016 compared to third quarter 2015.
• Completion of the BSA lookback consultant engagement.
• Reduction in staff positions by approximately 20% at the end of the quarter.
• Consummation of common equity offering of approximately $75 million.
• Book value per common share at September 30, 2016 of $6.13 per share. The Bancorp and its subsidiary, The Bancorp Bank, remain well capitalized.

The Bancorp reported a net loss of $25.5 million, or $0.54 loss per diluted share, for the quarter ended September 30, 2016 compared to net loss of $5.6 million, or $0.15 loss per diluted share, for the quarter ended September 30, 2015. Net loss from continuing operations for the quarter ended September 30, 2016 was $1.5 million or a loss of $0.03 per diluted share compared to net loss from continuing operations of $7.6 million or a loss of $0.20 per diluted share for the quarter ended September 30, 2015. Loss from continuing operations does not include any income which may result from the reinvestment of the proceeds from sales 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 7.81%, 15.12%, 15.40% and 15.12% compared to well capitalized minimums of 5%, 8%, 10% and 6.5%.

Damian Kozlowski, The Bancorp’s Chief Executive Officer, said, “Last quarter on my first earnings call, I committed to the completion of a business plan which would emphasize continuing revenue growth and expense reductions, and thereby support increased earnings and reduced volatility. We have completed that integrated and comprehensive business plan and are focused on accelerating related expense reductions while supporting continued strong revenue growth. We are moving ahead in multiple areas to achieve the related goal of a 20 to 25% reduction in non interest expense. In the fourth quarter, we should see the impact of the end of third quarter staff reductions. The business plan also comprehensively addresses the completion of resolving regulatory requirements and expectations. We made related progress with our regulatory issues with the completion of the BSA lookback which will no longer impact earnings. Strong revenue growth continued this quarter, and our core lending businesses drove a 32% increase over prior year quarter net interest income. Our non-interest income reflected 7% growth in prepaid card fees to $12.2 million. Credit losses in our continuing operations which we believe to be lower risk lines of business, continue to be low. We were extremely disappointed that an issue arose with a large lending relationship in discontinued operations which resulted in a third quarter loss. The results of the third quarter reflected a fair value mark in connection with a secured commercial real estate loan held in discontinued operations. That loan, in the principal amount of $41.9 million, became non-performing after quarter end due to the failure to make required principal payments. Based on a preliminary estimate of the collateral value by an independent certified appraiser, the fair value was reduced by $23.9 million and that amount was recorded as a charge to earnings. The appraisal estimate is preliminary, possibly subject to change based upon a full appraisal which is in process. The appraiser is considering recent market changes and pending lease renewals.”

Conference Call Webcast

You may access the LIVE webcast of The Bancorp's Quarterly Earnings Conference Call at 8:00 AM ET Friday, October 28, 2016 by clicking on the webcast link on Bancorp's homepage at www.thebancorp.com. Or, you may dial 844.775.2543, access code 96088598. You may listen to the replay of the webcast following the live call on The Bancorp's investor relations website or telephonically until Friday, November 4, 2016 by dialing 855.859.2056, access code 96088598.

About The Bancorp

With operations in the US and Europe, 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 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   Nine months ended September 30, September 30, Condensed income statement 2016   2015 2016   2015 (dollars in thousands except per share data)   Net interest income $ 23,542   $ 17,798   $ 64,988   $ 51,349   Provision for loan and lease losses   750     625     1,810     1,800   Non-interest income Service fees on deposit accounts 1,510 1,919 3,335 5,579 Card payment and ACH processing fees 1,459 1,493 4,183 4,242 Prepaid card fees 12,249 11,492 39,333 35,752 Gain (loss) on sale of loans 903 (830 ) 809 6,747 Gain on sale of investment securities 981 (335 ) 3,131 (62 ) Change in value of investment in unconsolidated entity 811 1,040 (12,313 ) 3,141 Leasing income 588 552 1,456 1,727 Debit card income (45 ) 427 (202 ) 1,358 Affinity fees 1,091 1,083 3,507 2,391 Other non-interest income   886     458     5,422     1,925   Total non-interest income 20,433 17,299 48,661 62,800 Non-interest expense Bank Secrecy Act and lookback consulting expenses 1,340 11,687 29,076 26,643 Other non-interest expense   43,370     36,108     127,908     108,446   Total non-interest expense   44,710     47,795     156,984     135,089   Loss from continuing operations before income tax expense (1,485 ) (13,323 ) (45,145 ) (22,740 ) Income tax expense (benefit)   55     (5,706 )   (15,324 )   (10,817 ) Net loss from continuing operations (1,540 ) (7,617 ) (29,821 ) (11,923 ) Net income (loss) from discontinued operations, net of tax   (23,993 )   2,042     (37,984 )   6,736   Net loss available to common shareholders $ (25,533 ) $ (5,575 ) $ (67,805 ) $ (5,187 )   Net loss per share from continuing operations - basic $ (0.03 ) $ (0.20 ) $ (0.73 ) $ (0.32 ) Net income (loss) per share from discontinued operations - basic $ (0.51 ) $ 0.05   $ (0.93 ) $ 0.18   Net loss per share – basic $ (0.54 ) $ (0.15 ) $ (1.66 ) $ (0.14 )   Net loss per share from continuing operations - diluted $ (0.03 ) $ (0.20 ) $ (0.73 ) $ (0.32 ) Net income (loss) per share from discontinued operations - diluted $ (0.51 ) $ 0.05   $ (0.93 ) $ 0.18   Net loss per share - diluted $ (0.54 ) $ (0.15 ) $ (1.66 ) $ (0.14 ) Common stock shares outstanding 55,319,204 37,758,322 55,319,204 37,758,322   (a)   For loss periods the weighted averages shares - basic is used in both the basic and diluted computations.           Balance sheet September 30, June 30, December 31, September 30, 2016 2016 2015 2015 (dollars in thousands) Assets: Cash and cash equivalents Cash and due from banks $ 4,061 $ 4,006 $ 7,643 $ 4,002 Interest earning deposits at Federal Reserve Bank 312,605 528,094 1,147,519 995,441 Securities sold under agreements to resell   39,463     39,360     -     37,970   Total cash and cash equivalents   356,129     571,460     1,155,162     1,037,413     Investment securities, available-for-sale, at fair value 1,334,927 1,328,693 1,070,098 1,316,705 Investment securities, held-to-maturity 93,495 93,537 93,590 93,604 Loans held for sale, at fair value 562,957 441,593 489,938 354,600 Loans, net of deferred fees and costs 1,198,237 1,182,106 1,078,077 994,518 Allowance for loan and lease losses   (6,058 )   (5,398 )   (4,400 )   (4,194 ) Loans, net   1,192,179     1,176,708     1,073,677     990,324   Federal Home Loan Bank & Atlantic Community Bancshares stock 11,014 12,289 1,062 1,063 Premises and equipment, net 21,797 22,429 21,631 18,893 Accrued interest receivable 10,496 10,271 9,471 11,232 Intangible assets, net 5,682 6,074 4,929 5,248 Deferred tax asset, net 29,765 28,870 36,207 33,857 Investment in unconsolidated entity 157,396 162,275 178,520 186,656 Assets held for sale from discontinued operations 386,155 487,373 583,909 611,729 Other assets   55,435     60,203     47,629     53,123   Total assets $ 4,217,427   $ 4,401,775   $ 4,765,823   $ 4,714,447     Liabilities: Deposits Demand and interest checking $ 3,364,103 $ 3,569,669 $ 3,602,376 $ 4,002,638 Savings and money market 402,832 389,851 383,832 376,577 Time deposits   -     101,160     428,549     -   Total deposits   3,766,935     4,060,680     4,414,757     4,379,215     Securities sold under agreements to repurchase 353 318 925 1,034 Short-term borrowings 70,000 - - - Subordinated debenture 13,401 13,401 13,401 13,401 Other liabilities   27,744     37,094     16,739     7,100   Total liabilities $ 3,878,433   $ 4,111,493   $ 4,445,822   $ 4,400,750     Shareholders' equity: Common stock - authorized, 75,000,000 shares of $1.00 par value; 55,419,204 and 37,858,237 shares issued at September 30, 2016 and 2015, respectively 55,419 37,945 37,861 37,858 Treasury stock (100,000 shares) (866 ) (866 ) (866 ) (866 ) Additional paid-in capital 359,793 301,680 300,549 299,470 Accumulated deficit (83,253 ) (57,721 ) (15,449 ) (33,429 ) Accumulated other comprehensive income (loss)   7,901     9,244     (2,094 )   10,664   Total shareholders' equity   338,994     290,282     320,001     313,697     Total liabilities and shareholders' equity $ 4,217,427   $ 4,401,775   $ 4,765,823   $ 4,714,447                   Average balance sheet and net interest income Three months ended September 30, 2016 Three months ended September 30, 2015 (dollars in thousands) Average Average Average Average Assets: Balance Interest Rate Balance Interest Rate Interest-earning assets: Loans net of unearned fees and costs ** $ 1,661,807 $ 17,425 4.19 % $ 1,292,533 $ 12,466 3.86 % Leases - bank qualified* 21,006 418 7.96 % 30,091 530 7.05 % Investment securities-taxable 1,373,776 8,350 2.43 % 940,590 4,562 1.94 % Investment securities-nontaxable* 48,683 218 1.79 % 518,691 4,765 3.67 % Interest earning deposits at Federal Reserve Bank 324,179 397 0.49 % 957,078 580 0.24 % Federal funds sold and securities purchased under agreement to resell   39,392     146 1.48 %   40,705     143 1.41 % Net interest earning assets 3,468,843 26,954 3.11 % 3,779,688 23,046 2.44 %   Allowance for loan and lease losses (5,267 ) (4,385 ) Assets held for sale from discontinued operations 459,400 3,891 3.39 % 627,806 6,343 4.04 % Other assets   259,375     286,839   $ 4,182,351   $ 4,689,948     Liabilities and Shareholders' Equity: Deposits: Demand and interest checking $ 3,249,801 $ 2,379 0.29 % $ 3,998,798 $ 2,850 0.29 % Savings and money market 392,045 423 0.43 % 337,793 426 0.50 % Time   76,931     104 0.54 %   410     1 0.98 % Total deposits 3,718,777 2,906 0.31 % 4,337,001 3,277 0.30 %   Short-term borrowings 102,243 153 0.60 % - - 0.00 % Repurchase agreements 376 - 0.00 % 1,606 1 0.25 % Subordinated debt   13,401     131 3.91 %   13,401     117 3.49 % Total deposits and interest bearing liabilities 3,834,797 3,190 0.33 % 4,352,008 3,395 0.31 %   Other liabilities   19,670     12,957   Total liabilities 3,854,467 4,364,965   Shareholders' equity   327,884     324,983   $ 4,182,351   $ 4,689,948   Net interest income on tax equivalent basis* $ 27,655 $ 25,994   Tax equivalent adjustment   222   1,853   Net interest income $ 27,433 $ 24,141 Net interest margin * 2.69 % 2.34 %         * 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, 2016 Nine months ended September 30, 2015 (dollars in thousands) Average Average Average Average Assets: Balance Interest Rate Balance Interest Rate Interest-earning assets: Loans net of unearned fees and costs ** $ 1,543,448 $ 48,061 4.15 % $ 1,192,939 $ 34,231 3.83 % Leases - bank qualified* 20,618 1,334 8.63 % 23,936 1,247 6.95 % Investment securities-taxable 1,280,692 22,782 2.37 % 983,557 14,628 1.98 % Investment securities-nontaxable* 59,892 983 2.19 % 524,913 14,443 3.67 % Interest earning deposits at Federal Reserve Bank 490,037 1,677 0.46 % 1,001,027 1,759 0.23 % Federal funds sold and securities purchased under agreement to resell   27,414     301 1.46 %   43,724     465 1.42 % Net interest-earning assets 3,422,101 75,138 2.93 % 3,770,096 66,773 2.36 %   Allowance for loan and lease losses (4,538 ) (4,089 ) Assets held for sale 528,168 15,037 3.80 % 743,594 22,275 3.99 % Other assets   291,973     293,561   $ 4,237,704   $ 4,803,162     Liabilities and Shareholders' Equity: Deposits: Demand and interest checking $ 3,325,047 $ 7,217 0.29 % $ 4,122,409 $ 8,293 0.27 % Savings and money market 390,202 1,028 0.35 % 323,307 1,286 0.53 % Time   103,624     447 0.58 %   1,066     12 1.50 % Total deposits 3,818,873 8,692 0.30 % 4,446,782 9,591 0.29 %   Short-term borrowings 58,056 263 0.60 % - - 0.00 % Repurchase agreements 812 1 0.16 % 6,598 14 0.28 % Subordinated debt   13,401     383 3.81 %   13,401     328 3.26 % Total deposits and interest bearing liabilities 3,891,142 9,339 0.32 % 4,466,781 9,933 0.30 %   Other liabilities   21,306     9,702   Total liabilities 3,912,448 4,476,483   Shareholders' equity   325,256     326,679   $ 4,237,704   $ 4,803,162   Net interest income on tax equivalent basis*   80,836   79,115   Tax equivalent adjustment   811   5,491   Net interest income $ 80,025 $ 73,624 Net interest margin * 2.57 % 2.32 %         * 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,   2016     2015     2015   (dollars in thousands)   Balance in the allowance for loan and lease losses at beginning of period (1) $ 4,400   $ 3,638   $ 3,638     Loans charged-off: SBA non real estate - 65 111 SBA commercial mortgage 76 - - Direct lease financing 63 9 30 Other consumer loans   39     1,177     1,220   Total   178     1,251     1,361     Recoveries: SBA non real estate 1 - - Direct lease financing 17 - - Other consumer loans   8     7     23   Total   26     7     23   Net charge-offs 152 1,244 1,338 Provision charged to operations   1,810     1,800     2,100     Balance in allowance for loan and lease losses at end of period $ 6,058   $ 4,194   $ 4,400   Net charge-offs/average loans 0.01 % 0.10 % 0.11 % Net charge-offs/average loans (annualized) 0.01 % 0.14 % 0.11 % Net charge-offs/average assets 0.00 % 0.03 % 0.03 % (1) Excludes activity from assets held for sale   Loan portfolio: September 30, June 30, December 31, September 30,   2016     2016     2015     2015   (dollars in thousands)   SBA non real estate $ 74,262 $ 71,596 $ 68,887 $ 64,988 SBA commercial mortgage 117,053 116,617 114,029 116,545 SBA construction   6,317     3,751     6,977     5,191   Total SBA loans 197,632 191,964 189,893 186,724 Direct lease financing 332,632 315,639 231,514 223,929 SBLOC 621,456 607,017 575,948 539,240 Other specialty lending 20,076 40,543 48,315 12,119 Other consumer loans   19,375     20,005     23,180     23,502   1,191,171 1,175,168 1,068,850 985,514 Unamortized loan fees and costs   7,066     6,938     9,227     9,004   Total loans, net of deferred loan fees and costs $ 1,198,237   $ 1,182,106   $ 1,078,077   $ 994,518       Small business lending portfolio: September 30, June 30, December 31, September 30,   2016     2016     2015     2015   (dollars in thousands)   SBA loans, including deferred fees and costs 203,196 197,544 197,966 194,612 SBA loans included in HFS   146,450     136,660     109,174     86,245   Total SBA loans $ 349,646   $ 334,204   $ 307,140   $ 280,857           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, 2016 The Bancorp, Inc. 7.81 % 15.12 % 15.40 % 15.12 % The Bancorp Bank 7.41 % 14.56 % 14.83 % 14.56 % "Well capitalized" institution (under FDIC regulations) 5.00 % 8.00 % 10.00 % 6.50 %   As of December 31, 2015 The Bancorp, Inc. 7.17 % 14.67 % 14.88 % 14.67 % The Bancorp Bank 6.90 % 13.98 % 14.18 % 13.98 % "Well capitalized" institution (under FDIC regulations) 5.00 % 8.00 % 10.00 % 6.50 %     Three months ended Nine months ended September 30, September 30,   2016       2015     2016       2015   Selected operating ratios: Return on average assets (annualized) nm nm nm nm Return on average equity (annualized) nm nm nm nm Net interest margin 2.69 % 2.34 % 2.57 % 2.32 % Book value per share $ 6.13 $ 8.31 $ 6.13 $ 8.31   September 30, June 30, December 31, September 30,   2016     2016     2015     2015   Asset quality ratios: Nonperforming loans to total loans (2) 0.58 % 0.53 % 0.22 % 0.25 % Nonperforming assets to total assets (2) 0.16 % 0.14 % 0.05 % 0.05 % Allowance for loan and lease losses to total loans 0.51 % 0.46 % 0.41 % 0.42 %   Nonaccrual loans $ 4,021 $ 3,147 $ 1,927 $ 2,157 Other real estate owned   -     -     -     -   Total nonperforming assets $ 4,021   $ 3,147   $ 1,927   $ 2,157     Loans 90 days past due still accruing interest $ 2,933   $ 3,172   $ 403   $ 294    

(2)

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

  Three months ended September 30,   June 30,   December 31,   September 30, 2016 2016 2015 2015 (in thousands) Gross dollar volume (GDV) (1): Prepaid card GDV $ 10,459,097 $ 11,442,294 $ 9,839,782 $ 9,465,687  

(1)

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

      Cumulative Analysis of Marks on Discontinued Commercial Loan Principal (dollars in millions)           Commercial Mark Loan Principal Cumulative Chargedowns Cumulative 9.30.16 Marks   6.30.16   Marks   % to Principal 16 Largest relationships $ 248 $ 248 Add back mark chargedowns to principal     35     Total principal to compare to cumulative marks $ 283 $ 38 $ 35 $ 73 26 %   Other loans   92           7     -     7   8 % Total discontinued loan principal $ 340 $ 45 $ 35 $ 80  

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